SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MIM CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
- - ------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MIM CORPORATION
100 Clearbrook Road
Elmsford, New York 10523
(914) 460-1600
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on July 13, 2000
---------------------------
To Our Stockholders:
The 2000 Annual Meeting of Stockholders of MIM Corporation will be held
at 10:00 a.m., local time, on July 13, 2000 at the Trumbull Marriott Merritt
Parkway, 180 Hawley Lane, Trumbull, Connecticut 06611, for the following
purposes:
1. To elect six (6) Directors to the Board of Directors (the
"Board"), each to hold office for a term of one (1) year or until
their respective successors shall have been duly elected and
qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on Thursday, May
18, 2000 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and any adjournments or postponements
thereof. All stockholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend, please promptly sign, date and mail
the enclosed proxy card in the enclosed return envelope, which requires no
postage if mailed in the United States. Returning your proxy card does not
deprive you of your right to attend the meeting and vote your shares in person.
By order of the Board of Directors,
/s/ Barry A. Posner
Elmsford, New York Barry A. Posner
June 2, 2000 Vice President, Secretary and General
Counsel
MIM CORPORATION
100 Clearbrook Road
Elmsford, New York 10523
(914) 460-1600
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PROXY STATEMENT
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This proxy statement (this "Proxy Statement"), which is being sent to
stockholders on or about June 2, 2000, is furnished in connection with the
solicitation of proxies by the Board of Directors of MIM Corporation (the
"Company"), a Delaware corporation, for use at the 2000 Annual Meeting of
Stockholders (the "Meeting") to be held on July 13, 2000 at 10:00 a.m., local
time, at the Trumbull Marriott Merritt Parkway, 180 Hawley Lane, Trumbull,
Connecticut 06611, and at any adjournments or postponements thereof.
Proposals; Record Date
At the Meeting, the Company's stockholders will be asked:
1. To elect six (6) Directors to the Board of Directors (the
"Board"), each to hold office for a term of one (1) year or until
their respective successors shall have been duly elected and
qualified.
2. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
At the close of business on May 18, 2000 the record date (the "Record
Date") set by the Board of Directors for the determination of stockholders
entitled to notice of, and to vote at the Meeting, there were issued and
outstanding an aggregate of 18,931,706 shares of Common Stock, which constitute
the only outstanding securities of the Company entitled to vote. On the Record
Date, the outstanding shares of Common Stock were held by approximately 109
holders of record in addition to approximately 3,412 stockholders whose shares
were held in nominee name.
Voting
Each holder of Common Stock on the Record Date is entitled to cast one
vote per share at the Meeting on each matter properly brought before the
Meeting, exercisable in person or by properly executed proxy. The presence of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Meeting, in person or by properly executed proxy, is necessary to
constitute a quorum. A quorum is necessary for any action to be taken at the
Meeting.
With respect to Proposal 1 (the election of six directors), the six
nominees receiving the highest number of votes duly cast at the Meeting will be
elected. If a proxy is marked "withhold authority" or "abstain" on any such
matter, or if specific instructions are given that no vote be cast on any
specific matter (a "Specified Non-Vote"), the shares represented by such proxy
will not be voted on such matter.
Proxies
Your proxy may be revoked at any time prior to its exercise by giving written
notice to the Secretary of the Company at the offices of the Company set forth
above, by presenting a duly executed proxy bearing a later date or by voting in
person at the Meeting, but your attendance at the Meeting alone will not revoke
your proxy. Your proxy, when properly executed, will be voted in accordance with
the specific instructions indicated on your proxy card. Unless contrary
instructions are given, your proxy will be voted (1) FOR the election of the six
nominees for director, as described in greater detail in Proposal 1 below and;
(2) to the
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extent permitted by applicable rules of the Securities and Exchange Commission
(the "Commission"), in accordance with the judgment of the persons voting the
proxies upon such other matters as may properly come before the Meeting and any
adjournments or postponements thereof.
Other Business; Adjournments
The Board is not currently aware of any business to be acted upon at the Meeting
other than as described in this Proxy Statement. If other matters are properly
brought before the Meeting, or any adjournments or postponements thereof, the
persons appointed as proxies will, to the extent permitted by applicable rules
of the Commission, have discretion to vote or act thereon according to their
judgment. Adjournments may be made for the purpose of, among other things,
soliciting additional proxies. Any adjournment may be made from time to time by
approval of the holders of a majority of the shares present in person or by
proxy at the Meeting (whether or not a quorum exists) without further notice
other than by an announcement made at the Meeting. The Company does not
currently intend to seek an adjournment of the Meeting.
PROPOSAL 1.
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the number of directors shall
be such number, currently six, as shall be designated from time to time by
resolution of the Board of Directors. Each director shall hold office until his
successor is elected at the next annual meeting and duly qualified or until his
earlier death, resignation or removal. The Board of Directors has nominated and
recommends the election of Richard H. Friedman, Scott R. Yablon, Dr. Louis A.
Luzzi, Richard A. Cirillo, Dr. Louis DiFazio and Michael Kooper, all of whom
currently serve as directors of the Company.
Although the Board of Directors has no reason to believe that any of
the nominees will be unable to serve, if such event should occur, proxies will
be voted (unless marked to the contrary) for such person or persons, if any, as
shall be recommended by the Board of Directors. However, proxies will not be
voted for the election of more than six directors.
The following table sets forth, as of June 1, 2000 certain information
with respect to each nominee for director, including biographical data for at
least the last five years.
Name Age Position
- ---- --- --------
Richard H. Friedman 49 Chairman of the Board and Chief Executive Officer
Scott R. Yablon 48 President, Chief Operating Officer and Director
Louis A. Luzzi, Ph.D. 67 Director
Richard A. Cirillo 49 Director
Louis DiFazio, Ph.D. 62 Director
Michael Kooper 64 Director
Richard H. Friedman is currently the Chairman and Chief Executive
Officer of the Company. He joined the Company in April 1996 and was elected a
director of the Company and appointed Chief Financial Officer and Chief
Operating Officer in May 1996. Mr. Friedman also served as the Company's
Treasurer from April 1996 until February 1998. Prior to joining the Company, Mr.
Friedman served in numerous capacities, including Chief Financial Officer, of
Zenith Laboratories Inc. ("Zenith"), which was
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acquired by IVAX Corporation, an international healthcare company and major
multi-source general pharmaceutical manufacturer and marketer.
Scott R. Yablon joined the Company in May 1998 and was appointed
President, Chief Financial Officer, Chief Operating Officer and Treasurer. He
relinquished the positions of Chief Financial Officer and Treasurer on March 22,
1999, upon the promotion of Mr. Edward J. Sitar to those positions at that time.
Mr. Yablon has served as a director of the Company since July 1996. Prior to
joining the Company, he held the position of Vice President - Finance and
Administration at Forbes, Inc.
Louis A. Luzzi, Ph.D. has served as a director of the Company since
July 1996. Dr. Luzzi is the Dean of Pharmacy and Provost for Health Science
Affairs of the University of Rhode Island College of Pharmacy. He has been a
Professor of Pharmacy at the University of Rhode Island since 1981.
Richard A. Cirillo has served as a director of the Company since April
1998. Since June 21, 1999, Mr. Cirillo has been a partner of the law firm of
King & Spalding. From 1975 until June, 1999, Mr. Cirillo was a member of the law
firm Rogers and Wells LLP, with which he had been associated since 1975. Until
Mr. Cirillo's departure, Rogers and Wells LLP had served as outside general
counsel to the Company.
Louis DiFazio, Ph.D., has served as a director of the Company since May
1998. From 1990 through March 1997, Dr. DiFazio served as President of Technical
Operations for the Pharmaceutical Group of Bristol-Myers Squibb and from March
1997 until his retirement in June 1998 served as Group Senior Vice President.
Dr. DiFazio also serves as a member of the Board of Trustees of Rutgers
University and the University of Rhode Island. Dr. DiFazio received his B.S. in
Pharmacy at Rutgers University and his Ph.D. in Pharmaceutical Chemistry from
the University of Rhode Island.
Martin ("Michael") Kooper has served as a Director of the Company since
April 1998. Mr. Kooper has served as the President of Kooper Group since
December 1997, a successor to Michael Kooper Enterprises, an insurance and risk
management consultant firm. From 1980 through December 1997, Mr. Kooper served
as President of Michael Kooper Enterprises.
Information Concerning Meetings and Certain Committees
The Company has standing Audit, Nominating and Compensation Committees
of the Board of Directors. The Audit Committee, currently comprised of Messrs.
Yablon and Cirillo and Dr. DiFazio, makes recommendations to the Board of
Directors regarding the selection of independent auditors, reviews the results
and scope of the audit and other services provided by the Company's independent
auditors, reviews and evaluates the Company's internal accounting controls and
performs such other functions as directed by the Board of Directors. The
Compensation Committee, currently comprised of Mr. Cirillo and Drs. DiFazio and
Louis A. Luzzi, administers the Company's Amended and Restated 1996 Stock
Incentive Plan and the Company's 1996 Non-Employee Directors Stock Option Plan
(the "Directors Plan"), makes recommendations to the Board of Directors
concerning executive compensation matters and performs such other duties as from
time to time are designated by the Board of Directors. The Nominating Committee,
currently comprised of Messrs. Friedman and Yablon and Dr. Luzzi, makes
recommendations from time to time, on the selection of nominees for directors.
During 1999, the Board of Directors held four meetings, and the Audit Committee
held two meetings. Each director attended all of the meetings of the Board of
Directors and all applicable committee meetings during the period that such
director served as a director in 1999, with the exception of Mr. Kooper, who
attended all but one meeting of the Board of Directors.
Compensation of Directors
Directors who are not officers or employees of the Company ("Outside
Directors") receive fees of $1,500 per month and $500 per meeting of the Board
and any committee thereof and are reimbursed for expenses incurred in connection
with attending such meetings. In addition, upon being elected to the Board, each
Outside Director receives options to purchase 20,000 shares of the Common Stock
under the Directors Plan. Directors who are also officers of the Company are not
paid any director fees or granted any options
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under the Directors Plan.
The Directors Plan provides for the automatic grant of non-qualified
stock options to purchase 20,000 shares of Common Stock to Outside Directors
joining the Company. The exercise price of such options is equal to the fair
market value of Common Stock on the date of grant. Options granted under the
Directors Plan vest over three years, in three equal annual installments
following the yearly anniversary dates from the grant date. The Company has
reserved 300,000 shares of Common Stock for issuance under the Directors Plan.
Through May 18, 2000, options to purchase 20,000 shares have been granted under
the Directors Plan to each of Dr. Luzzi and Mr. Yablon at an exercise price of
$13 per share, options to purchase 20,000 shares have been granted to Mr.
Cirillo at an exercise price of $4.35 per share and options to purchase 20,000
shares have been granted to each of Mr. Kooper and Dr. DiFazio at an exercise
price of $4.6875 per share.
Vote Required and Recommendation of the Board of Directors
The six nominees receiving the highest number of votes duly cast at the
Meeting will be elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" EACH OF THE ABOVE-NAMED NOMINEES.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action
at the Meeting other than those set forth in this Proxy statement and the
attached Notice and customary procedural matters. However, if any other matters
should properly come before the Meeting or any adjournments or postponements
thereof, the proxies solicited hereby will be voted on such other matters, to
the extent permitted by applicable rules of the Commission, in accordance with
the judgment of the persons voting such proxies.
ADDITIONAL INFORMATION
Executive Officers
The following table sets forth, as of June 1, 2000, certain information with
respect to each executive officer of the Company who is not also a director of
the Company. See proposal 1 for above information regarding those executive
officers who are also directors.
Name Age Position
---- --- --------
Barry A. Posner 36 Vice President, Secretary and General
Counsel. Mr. Posner joined the Company
in March 1997 as General Counsel and was
appointed as the Company's Secretary at
that time. On April 16, 1998, Mr. Posner
was appointed Vice President of the
Company. From September 1990 Through
March 1997, Mr. Posner was associated
with the Stamford, Connecticut law firm
of Finn Dixon & Herling LLP, where he
practiced Corporate law, specializing in
the areas of mergers and acquisitions
and securities law, and commercial real
estate law.
Edward J. Sitar 40 Chief Financial Officer and Treasurer.
Mr. Sitar joined the Company in August
1998 as Vice President of Finance. On
March 22, 1999, Mr. Sitar was appointed
Chief Financial Officer and Treasurer,
Relinquishing the position of Vice
President of Finance. From May
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1996 to August 1998, Mr. Sitar was the
Vice President of Finance for Vital
Signs, Inc., a publicly traded
manufacturer and distributor of single
use medical products. From June 1993 to
April 1996, Mr. Sitar was the Controller
of Zenith.
Recie Bomar 52 President of Sales and Marketing. Mr.
Bomar joined the Company in March 1999
as Vice President of Sales and Marketing
of the Company's principal pharmacy
benefit management operating subsidiary,
MIM Health Plans, Inc. From 1997 through
1999, Mr. Bomar was a Vice President for
PharmaCare, a subsidiary of CVS
Corporation. Mr. Bomar was a National
Director of Sales & Services for RX
Connections from 1996 to 1997. Prior to
that, Mr. Bomar held several positions
with Revco Managed Care, a division of
Revco D.S., Inc., a national retail
pharmacy chain.
James J. Jones 48 President of MIMRx.com, the Company's
principal e-commerce operating
subsidiary. Mr. Jones joined the Company
in his current capacity in March 2000.
From 1998 to January 2000, Mr. Jones
served as Vice President of Business
Development and Sales for CVS.com, the
on-line pharmacy division of CVS
Corporation. Prior to CVS.com, from 1997
to 1998, Mr. Jones was one of the
founding executives of Soma.com, which
was acquired by CVS Corporation in 1997.
From 1972 through 1996, Mr. Jones served
in various capacities with the United
States Navy and retired with the rank of
Naval Commander in 1996.
Executive officers are appointed by, and serve at the pleasure of, the Board
of Directors, subject to the terms of their respective employment agreements
with the Company, which among other things, provide for each of them to serve in
the executive positions listed above. See "Employment Agreements" below.
Common Stock Ownership by Certain Beneficial Owners and Management
Except as otherwise set forth below, the following table lists, to the
Company's knowledge, as of June 1, 2000, the beneficial ownership of the
Company's Common Stock by (1) each person or entity known to the Company to own
beneficially five percent (5%) or more of the Company's Common Stock; (2) each
of the Company's directors; (3) each of the Named Executive Officers of the
Company; and (4) all directors and executive officers of the Company as a group.
Such information is based upon information provided to the Company by such
persons.
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Name and/or Address Number of Shares Percent of
of Beneficial Owner Beneficially Owned(1)(2) Class
Richard H. Friedman 1,500,000 (3) 7.9%
100 Clearbrook Road
Elmsford, NY 10523
Scott R. Yablon 1,220,000 (4) 6.1%
100 Clearbrook Road
Elmsford, NY 10523
Barry A. Posner 161,601 (5) *
100 Clearbrook Road
Elmsford, NY 10523
Edward J. Sitar 48,334 (6) *
100 Clearbrook Road
Elmsford, NY 10523
Recie Bomar 50,000 (7) *
100 Clearbrook Road
Elmsford, NY 10523
Richard A. Cirillo 13,334 (8) *
c/o King & Spalding
1185 Avenue of the Americas
New York, NY 10036
E. David Corvese 1,762,106 9.3%
25 North Road
Peace Dale, RI 02883
Louis DiFazio, Ph.D. 15,834 (9) *
Route 206
Princeton, NJ 08542
Michael R. Erlenbach 1,135,699 (10) 6.0%
6438 Huntington
Solon, OH 44139
Michael Kooper 13,334 (11) *
770 Lexington Avenue
New York, NY 10021
Louis A. Luzzi, Ph.D. 21,800 (12) *
University of Rhode Island
College of Pharmacy
Forgerty Hall
Kingston, RI 02881
All directors and executive officers as a group 3,044,237 (13) 14.9%
(10 persons)
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* Less than 1%.
(1) The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership of those shares. Except as
otherwise indicated, each person has sole voting power and sole investment
power with respect to all shares beneficially owned by such person.
(2) Shares deemed beneficially owned by virtue of the right of an individual to
acquire them within 60 days after May 18, 2000, upon the exercise of an
option and shares with restrictions on transfer and encumbrance, with
respect to which the owner has voting power, are treated as outstanding for
purposes of determining beneficial ownership and the percentage
beneficially owned by such individual.
(3) Excludes 250,000 shares subject to the unvested portion of options held by
Mr. Friedman.
(4) Includes 1,020,000 shares issuable upon exercise of the vested portion of
options and 200,000 shares of Common Stock subject to restrictions on
transfer and encumbrance through December 31, 2006, with respect to which
Mr. Yablon possesses voting rights. See "Long Term Incentive Plan - Awards
in Last Fiscal Year" in this Proxy Statement for a description of terms and
conditions relating to these restricted shares.
(5) Includes (i) 83,334 shares issuable upon exercise of the vested portion of
options, (ii) 16,667 shares issuable upon the exercise of options scheduled
to vest on July 6, 2000 and (iii) 60,000 shares of Common Stock subject to
restrictions on transfer and encumbrance through December 31, 2006, with
respect to which Mr. Posner possesses voting rights. See "Long Term
Incentive Plan - Awards in Last Fiscal Year" in this Proxy Statement for a
description of terms and conditions relating to these restricted shares.
Excludes 99,999 shares subject to the unvested portion of options held by
Mr. Posner.
(6) Includes 33,334 shares issuable upon exercise of the vested portion of
options and 15,000 shares of Common Stock subject to restrictions on
transfer and encumbrance through December 31, 2006, with respect to which
Mr. Sitar possesses voting rights. See "Long Term Incentive Plan - Awards
in Last Fiscal Year" in this Proxy Statement for a description of terms and
conditions relating to these restricted shares. Excludes 66,666 shares
subject to the unvested portion of options held by Mr. Sitar.
(7) Includes 25,000 shares issuable upon exercise of the vested portion of
options and 25,000 shares of Common Stock subject to restrictions on
transfer and encumbrance through December 31, 2006, with respect to which
Mr. Bomar possesses voting rights. See "Long Term Incentive Plan - Awards
in Last Fiscal Year" in this Proxy Statement for a description of terms and
conditions relating to these restricted shares. Excludes 50,000 shares
subject to the unvested portion of options held by Mr. Bomar.
(8) Consists of 13,334 shares issuable upon exercise of the vested portion of
options. Excludes 6,666 shares subject to the unvested portion of options.
(9) Consists of 13,334 shares issuable upon exercise of the vested portion of
options and 2,500 shares owned directly by Dr. DiFazio. Excludes 6,666
shares subject to the unvested portion of options.
(10) The Michael R. Erlenbach Flint Trust holds 810,730 shares of Common Stock.
Mr. Erlenbach and John M. Slivka, as trustee, share voting and dispositive
power with respect to these shares. In addition, Mr. Erlenbach beneficially
owns an additional 324,969 shares of Common Stock.
(11) Consists of 13,334 shares issuable upon exercise of the vested portion of
options. Excludes 6,666 shares subject to the unvested portion of options.
(12) Includes 20,000 shares issuable upon the exercise of the vested portion of
options. Dr. Luzzi and his wife share voting and investment power over
1,800 shares of Common Stock.
(13) Includes 1,238,337 shares issuable upon exercise of the vested portion of
options and 300,000 shares of Common Stock subject to restrictions on
transfer and encumbrance. See footnotes 2 through 12 above.
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Executive Compensation
The following table sets forth certain information concerning the annual,
long-term and other compensation of the Chief Executive Officers and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered in all capacities to the Company and
its subsidiaries during each of the years ended December 31, 1999, 1998 and
1997, respectively:
Summary Compensation Table
Long-term
Annual Compensation Compensation
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Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary (1) Bonus(2) Compensation (3) Options Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
Richard H. Friedman 1999 $425,097 - $36,930 250,000 $5,710 (4) (5)
Chief Executive Officer 1998 $333,462 $212,500 $33,134 - (6) $5,217 (4)
1997 $275,000 - $12,000 - $4,710 (4)
Scott R. Yablon (7) 1999 $354,828 - $28,494 - $4,710 (4)
President & Chief Operating 1998 $207,500 $162,500 $6,678 1,000,000 (8) $4,605 (4)
Officer 1997 - - - - -
Barry A. Posner 1999 $223,128 - $13,619 - $4,710 (4)
Vice President, General Counsel 1998 $191,346 $100,000 $10,828 50,000 (9) $5,890 (4)
& Secretary 1997 $127,366 - $4,166 150,000 (8) $4,710 (4)
Edward J. Sitar (10) 1999 $176,867 - $12,000 - $30,217 (4) (11)
Chief Financial Officer 1998 $54,083 $15,000 $3,000 100,000 (8) -
& Treasurer 1997 - - - - -
Recie Bomar (12) 1999 $150,198 $0 $5,000 75,000 (8) $50,000 (11) (13)
President of Sales 1998 - - - - -
and Marketing 1997 - - - - -
(1) The annualized base salaries of the Named Executive Officers for 1999 were
as follows: Mr. Friedman ($425,000), Mr. Yablon ($375,000), Mr. Posner
($230,000), Mr. Sitar ($180,000) and Mr. Bomar ($180,000).
(2) Please refer to the Long-Term Incentive Plan - Awards in the Last Fiscal
Year Table below for information on certain grants of Performance Units and
Performance Shares made during 1999.
(3) Represents automobile allowances, and for Messrs. Friedman, Yablon and
Posner reimbursement for club membership and related fees and expenses of
$18,930, $10,494 and $1,619, respectively in 1999.
(4) Represents life insurance premiums paid by the Named Executive Officer and
reimbursed by the Company.
(5) Represents tax return preparation expense paid by the Named Executive
Officer and reimbursed by the Company.
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(6) The annual report for fiscal 1998 reflected a grant of 800,000 options to
Mr. Friedman. Such grant was subject to shareholder approval, which was not
obtained at the 1999 Annual Meeting. As such, the grant of 800,000 options
was cancelled.
(7) Mr. Yablon joined the Company as President and Chief Operating Officer in
May 1998.
(8) Represents options to purchase shares of the Company Common Stock from the
Company at market price on the date of grant.
(9) Represents options with respect to which the exercise price was repriced to
$6.50 per share on July 6, 1998.
(10) Mr. Sitar joined the Company as Vice President - Finance in June 1998.
(11) Represents relocation reimbursement expense received by Messrs. Sitar and
Bomar of $25,000 each.
(12) Mr. Bomar joined the Company as Director of Sales and Marketing in March
1999.
(13) Represents signing bonus received by Mr. Bomar for $25,000.
The following table sets forth information concerning stock option grants
made during fiscal 1999 to the Named Executive Officers. These grants are also
reflected in the Summary Compensation Table. In accordance with the rules and
regulations of the Commission, the hypothetical gains or "option spreads" for
each option grant are shown assuming compound annual rates of stock price
appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the Commission and are for
illustrative purposes only; they are not intended to predict the future stock
prices, which will depend upon market conditions and the Company's future
performance, among other things.
Option Grants in Last Fiscal Year
Individual Grants Potential Realizable
--------------------------------------------------- Gain Assuming
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price Expiration ----------------------------
Name Granted 1999 ($/share) Date 5% 10%
- -----------------------------------------------------------------------------------------------------
Richard H. Friedman 42,194 (1) 6.75% $ 2.37 10/8/09 $ 46,051 $ 132,561
207,806 (1) 33.25% $ 2.16 10/8/09 $ 270,439 $ 696,504
Recie Bomar 75,000 (1) 12.00% $ 2.59 3/8/09 $ 122,342 $ 310,039
(1) Such options become exercisable on the first three anniversaries of the
date of grant (10/11/99 for Mr. Friedman and 3/8/99 for Mr. Bomar).
The following table sets forth for each Named Executive Officer the number
of shares covered by both exercisable and unexercisable stock options held as of
December 31, 1999. Also reported are the values for "in-the-money" options,
which represent the difference between the respective exercise prices of such
stock options and $2.4380, the per share closing price of the MIM Common Stock
on December 31, 1999.
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Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities(1) Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End (2)
Acquired on Value ---------------------------------------------------------------
Name Exercise # Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
Richard H. Friedman - - - 250,000 - $60,514.27
Scott R. Yablon - - 770,000 250,000 - -
Barry Posner - - 66,667 133,333 - -
Edward J. Sitar - - 33,334 66,666 - -
Recie Bomar - - - 75,000 - -
(1) Indicated options are to purchase shares of Common Stock from the Company.
(2) Except as indicated, none of the options were "in the money."
The following table sets forth for each Named Executive Officer the number
of performance units and restricted shares of Common Stock granted by the
Company during the year ended December 31, 1999. In addition, for each award,
the table also sets forth the related maturation period and future payments
expected to be made under varying circumstances.
Long-Term Incentive Plan -- Awards in Last Fiscal Year
Performance Estimated Future Payments Under
Number of or Period Non-Stock Price-Based Plans
Shares, Units Until Maturatio ------------------------------------------
Name or Rights or Payment Threshold Target Maximum
- -----------------------------------------------------------------------------------------------------
Richard Friedman 200,000 (1) 12/31/01 $ 2,000,000 $ 5,000,000 $ 8,000,000
Scott R. Yablon 150,000 (2) 12/31/01 $ 1,500,000 $ 3,750,000 $ 6,000,000
200,000 (3) 12/31/06 $ 512,500 $ 512,500 $ 512,500
Barry A. Posner 10,000 (4) 12/31/01 $ 100,000 $ 250,000 $ 400,000
60,000 (5) 12/31/06 $ 172,500 $ 172,500 $ 172,500
Edward J. Sitar 2,500 (4) 12/31/01 $ 25,000 $ 62,500 $ 100,000
15,000 (5) 12/31/06 $ 43,125 $ 43,125 $ 43,125
Recie Bomar 5,000 (2) 12/31/01 $ 50,000 $ 125,000 $ 200,000
25,000 (3) 12/31/06 $ 64,027 $ 64,027 $ 64,027
(1) Represents performance units granted to the indicated individual on October
11, 1999. The performance units vest and become payable upon the
achievement by the Company of certain specified levels of after-tax net
income in fiscal 2001. Upon vesting, the performance units are payable in
two equal installments after the earliest occurs (I) the individual's Date
of Termination and (II) a Change of Control (each as defined in his
Performance Units Agreement) as follows: (a) $10 per unit upon the
Company's achievement of a threshold level of after-tax net income in
fiscal 2001; (b) $25 per unit upon the Company's achievement of a target
level of after-tax net
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(2) income in fiscal 2001; and (c) $40 per unit upon the Company's achievement
of a maximum level of after-tax net income in fiscal 2001.
(3) Represents performance units granted to the indicated individual on June 1,
1999. The performance units vest and become payable upon the achievement by
the Company of certain specified levels of after-tax net income in fiscal
2001. Upon vesting, the performance units are payable in two equal
installments after the earliest occurs (I) the individual's Date of
Termination and (II) a Change of Control (each as defined in his
Performance Units Agreement) as follows: (a) $10 per unit upon the
Company's achievement of a threshold level of after-tax net income in
fiscal 2001; (b) $25 per unit upon the Company's achievement of a target
level of after-tax net income in fiscal 2001; and (c) $40 per unit upon the
Company's achievement of a maximum level of after-tax net income in fiscal
2001.
(4) Represents restricted shares of Common Stock issued by the Company to the
indicated individuals on June 1, 1999. The restricted shares are subject to
restrictions on transfer and encumbrance through December 31, 2006 and are
automatically forfeited to the Company upon termination of the grantee's
employment with the Company prior to December 31, 2006. The restrictions to
which the restricted shares are subject may lapse prior to December 31,
2006 in the event that the Company achieves certain specified levels of
earnings per share in fiscal 2001 or 2002. The indicated individual
possesses voting rights with respect to the restricted shares, but is not
entitled to receive dividend or other distributions, if any, paid with
respect to the restricted shares. The values shown in the table reflect the
value of shares based on the last sale price of the Common Stock on the
date of grant ($2.5625). The last sale price of the Common Stock on
December 31, 1999 was $2.4375 per share.
(5) Represents performance units granted to the indicated individual on March
1, 1999. The performance units vest and become payable upon the achievement
by the Company of certain specified levels of after-tax net income in
fiscal 2001. Upon vesting, the performance units are payable in two equal
installments after the earliest occurs (I) the individual's Date of
Termination and (II) a Change of Control (each as defined in his
Performance Units Agreement) as follows: (a) $10 per unit upon the
Company's achievement of a threshold level of after-tax net income in
fiscal 2001; (b) $25 per unit upon the Company's achievement of a target
level of after-tax net income in fiscal 2001; and (c) $40 per unit upon the
Company's achievement of a maximum level of after-tax net income in fiscal
2001.
(6) Represents restricted shares of Common Stock issued by the Company to the
indicated individuals on March 1, 1999. The restricted shares are subject
to restrictions on transfer and encumbrance through December 31, 2006 and
are automatically forfeited to the Company upon termination of the
grantee's employment with the Company prior to December 31, 2006. The
restrictions to which the restricted shares are subject may lapse prior to
December 31, 2006 in the event that the Company achieves certain specified
levels of earnings per share in fiscal 2001 or 2002. The indicated
individual possesses voting rights with respect to the restricted shares,
but is not entitled to receive dividend or other distributions, if any,
paid with respect to the restricted shares. The values shown in the table
reflect the value of shares based on the last sale price of the Common
Stock on the date of grant ($2.8750). The last sale price of the Common
Stock on December 31, 1999 was $2.4375 per share.
Compensation of Directors
Directors who are not officers of the Company ("Outside Directors") receive
fees of $1,500 per month and $500 per in person meeting of the Company's Board
and any committee thereof and are reimbursed for expenses incurred in connection
with attending such meetings. In addition, each Outside Director joining the
Company since the adoption of the Directors Plan receives options to purchase
20,000 shares of the Company Common Stock under that Plan. Directors who are
also officers of the Company are not paid any director fees.
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The Directors Plan was adopted in July 1996 to attract and retain qualified
individuals to serve as non-employee directors of the Company, to provide
incentives and rewards to such directors and to associate more closely the
interests of such directors with those of the Company's stockholders. The
Directors Plan provides for the automatic grant of non-qualified stock options
to purchase 20,000 shares of Common Stock to non-employee directors joining the
Company since the adoption of the Directors Plan. The exercise price of such
options is equal to the fair market value of Common Stock on the date of grant.
Options granted under the Directors Plan generally vest over three years. A
reserve of 300,000 shares of the Company Common Stock has been established for
issuance under the Directors Plan, which includes the original 100,000 shares
plus 200,000 that were approved at the Company's 1999 Annual Meeting of
Stockholders.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board administers the Company's
stock incentive plans and makes recommendations to the Company's Board regarding
executive officer compensation matters, including policies regarding the
relationship of corporate performance and other factors to executive
compensation. During 1999, the following persons served as members of the
Committee: Messrs. Cirillo, Luzzi and DiFazio, none of whom is or ever has been
an officer or employee of the Company. Until June 1999, Mr. Cirillo was a
partner with the law firm of Rogers & Wells, LLP, which served as the Company's
outside counsel. Mr. Cirillo became a partner with the law firm of King &
Spalding in June 1999 and King & Spalding began to serve as the Company's
outside general counsel at that time.
Compensation Committee Report On Executive Compensation
The Company believes that a strong link should exist between executive
compensation and management's success in maximizing shareholder value. This
belief was adhered to in 1999 by implementing both short-term and long-term
incentive executive compensation programs in order to provide competitive
compensation, strong incentives for the executives to stay with the Company and
deliver superior financial results, and significant potential rewards if the
Company achieves aggressive financial goals. The Compensation Committee's role
and responsibilities involve the development and administration of executive
compensation policies and programs that are consistent with, linked to, and
supportive of the basic strategic objective of maximizing shareholder value,
while taking into consideration the activities and responsibilities of
management.
Early in 1998, management of the Company dramatically changed with the
departure of the Company's then Vice-Chairman and of the then Chairman and Chief
Executive Officer, the appointment of Mr. Friedman as the new Chairman and Chief
Executive Officer, the recruitment of a new President, and the necessary
restructuring of the business to position the Company for the future. It became
a high priority of the entire Board to pursue two major objectives
simultaneously: (1) to secure a long-term agreement with the new Chief Executive
Officer, and (2) to develop an aggressive executive and key employee
compensation program for the remainder of the senior management.
The Board engaged the professional services of an outside consultant to
review the existing compensation programs and to assist in developing the
desired program. The consultant found that while some of the executive salaries
were within a competitive range, the executive bonus opportunities were below
the level that would be considered appropriate. The consultant further reported
that the long-term compensation portion of the program should have been a more
balanced combination of performance units, performance shares and stock options
instead of relying solely on stock options for long-term incentive as the
Company had done in the past.
The Board directed its Compensation Committee, consisting of Messrs.
Cirillo, DiFazio and Luzzi (none of whom is an officer or employee of the
Company), to work with that consultant and to develop and adopt a total
compensation program focused on maximizing shareholder value. At its meeting in
December 1998, the Compensation Committee adopted the substantive compensation
provisions of a new five-year
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employment agreement to be entered into with Mr. Friedman as well as the 1998
Total Compensation Program for Key Employees for other senior management. These
actions were based on the recommendation of the outside consultant and an
internal review of the Chief Executive Officer's recommendations regarding
participation and appropriate grants of units, shares and options. Grants
effecting the Chief Executive Officer's recommendations, as adopted by the
Compensation Committee were awarded in December 1998, March 1999 and June 1999.
A proposal requiring stockholder approval of the employment agreement with
Mr. Friedman was included in the Company's Proxy Statement with respect to its
1999 Annual Meeting of Stockholders (see "Employment Agreements" below). Such
proposal was withdrawn by the Board of Directors and was not approved. In
addition, the Total Compensation Program required certain changes to, and
additional authorized shares under, the Company's 1996 Amended and Restated
Stock Incentive Plan (the "Plan"). A proposal requesting stockholder approval of
the relevant amendments to the Plan was approved by the stockholders at the 1999
Annual Meeting of Stockholders.
Compensation Philosophy and Elements
The Compensation Committee adheres to four principles in discharging its
responsibilities, which have been applied through its adoption in December 1998
of the 1998 Total Compensation Program for Key Employees ("Program"). First, the
majority of the annual bonus and long-term compensation for management and key
employees should be in large part at risk, with actual compensation levels
corresponding to the Company's actual financial performance. Second, over time,
incentive compensation of the Company's executives should focus more heavily on
long-term rather than short-term accomplishments and results. Third,
equity-based compensation and equity ownership expectations should be used on an
increasing basis to provide management with clear and distinct links to
shareholder interests. Fourth, the overall compensation programs should be
structured to ensure the Company's ability to attract, retain, motivate, and
reward those individuals who are best suited to achieving the desired
performance results, both long and short-term, while taking into account the
duties and responsibilities of the individual.
The Program provides the Compensation Committee with the discretion to pay
cash bonuses and grant (i) performance unit payable in cash upon achievement of
certain performance criteria established by the Compensation Committee, (ii)
performance shares which are subject to restrictions on transfer and encumbrance
for a specified period of time, but which restrictions may lapse early upon
achievement of certain performance criteria established by the Compensation
Committee and (iii) both non-qualified and incentive stock options.
The Program provides management and employees with the opportunity for
significant cash bonuses and long-term rewards if the corporate, department and
individual objectives are achieved. Specifically, the key executives, may
receive significant bonuses if the Company's aggressive annual financial profit
plan and individual objectives are achieved. The maximum amount payable in any
given year to any one individual under the cash bonus and performance unit
portions of the Program is $1,000,000. Any amounts in excess of such threshold
will be deferred to later years. These outside limits are not expected awards
but are set pursuant to regulations concerning "performance-based" compensation
plans in Code Section 162(m) to enable the Compensation Committee "negative
discretion" in determining the actual bonus or performance unit awards.
Compensation of the Chief Executive Officer
In considering the appropriate salary, bonus opportunity, and long-term
incentive for the current Chief Executive Officer, the Compensation Committee
considered his unique role during 1998 and 1999 and his expected role over the
next four years. The Compensation Committee determined that in a very real
sense, the Company would have faced extreme difficulty in 1998 and 1999, were it
not for the fact that Mr. Friedman accepted the challenge to replace both the
former Vice-Chairman and the former Chairman and Chief Executive Officer and
give the investment community and the Company's stockholders reassurance that
the Company would overcome the problems faced in its primary market. The Board
further determined that Mr. Friedman's demonstrated commitment through the
purchase of a large block of stock,
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his active and effective involvement in restructuring the business, and his
recruitment and leadership of an aggressive team were assets that should be
protected by the Company. The Committee's negotiation of a new,
performance-driven, five year agreement was based on this recognition of his key
role in maximizing future shareholder value.
New employment agreements have also been entered into with the Vice
President and General Counsel and Chief Financial Officer reflecting their
participation in the new Program. The President and Chief Operating Officer was
recruited in May 1998 and his employment agreement was negotiated at that time
and is described, along with his participation in the Program, in "Employment
Agreements" below.
Code Section 162(m)
The Chief Executive Officer's total compensation package under his new
employment agreement is believed to qualify as "performance-based" compensation
with the meaning of Code Section 162(m). The Total Compensation Program was
adopted by a Compensation Committee composed entirely of outside directors and
Mr. Friedman's agreement was approved by the entire Board of Directors. In order
to qualify for favorable treatment under Code Section 162(m), Mr. Friedman's
amended Employment Agreement was structured such that he will not receive cash
compensation in excess of $1,000,000 in any one year under the cash bonus
portion of the Program. The performance units, performance shares and stock
options (other than Mr. Yablon's, as discussed above) for all persons were
granted from shares authorized under the plan, but the form of the awards
required certain amendments to the Plan and authorization of additional shares,
which were approved by the stockholders at the 1999 Annual Meeting of
Stockholders.
MIM CORPORATION COMPENSATION COMMITTEE
Richard A. Cirillo
Louis DiFazio, Ph.D.
Louis A. Luzzi, Ph.D.
Employment Agreements
In December 1998, Mr. Friedman entered in to an employment agreement with
the Company (the "1998 Agreement"). The 1998 Agreement did not receive the
required stockholder approval at the Company's 1999 Annual Meeting of
Stockholders. Under the 1998 Agreement, Mr. Friedman was granted options to
purchase 800,000 shares of Common Stock at an exercise price of $4.50 per share
(the market price on December 2, 1998, the date of grant), 200,000 performance
units and 300,000 restricted shares. Such grants were canceled upon the failure
to obtain stockholder approval. Based upon the recommendations of the
Compensation Committee, the 1998 Agreement was amended on October 11, 1999 (the
1998 Agreements as amended, the "Amended Agreement"). The Amended Agreement
provides for Mr. Friedman's employment as the Chairman and Chief Executive
Officer for a term of employment through November 30, 2003 (unless earlier
terminated) at an initial base annual salary of $425,000. Mr. Friedman is
entitled to receive certain fringe benefits, including an automobile allowance,
and is also eligible to participate in the Company's executive bonus program.
Under the Amended Agreement, Mr. Friedman was granted incentive stock options to
purchase 42,194 shares of Common Stock at an exercise price of $2.37 per share
and non-qualified stock options to purchase 207,806 shares of Common Stock at an
exercise price of $2.16 (the market price on October 8, 1999, the date of grant)
and 200,000 performance units. See "Long Term Incentive Plan - Awards in Last
Fiscal Year" above for a description of the terms and conditions applicable to
the performance units.
If Mr. Friedman's employment is terminated early due to his death or
disability, (i) all vested options may be exercised by his estate for one year
following termination, (ii) all performance units shall vest and become
immediately payable at the accrued value measured at the end of the fiscal year
following his termination; provided, however, that should Mr. Friedman remain
disabled for six months following his
-14-
termination for disability, he shall also be entitled to receive for a period of
two years following termination, his annual salary at the time of termination
and continuing coverage under all benefit plans and programs to which he was
previously entitled. If Mr. Friedman's employment is terminated early by the
Company without cause, (i) Mr. Friedman shall be entitled to receive, for the
longer of two years following termination or the period remaining in his term of
employment under the agreement, his annual salary at the time of termination
(less the net proceeds of any long term disability or workers' compensation
benefits) and continuing coverage under all benefit plans and programs to which
he was previously entitled, (ii) all unvested options shall become vested in any
other pension or deferred compensation plans, and (iii) any performance units to
which he would have been entitled at the time of his termination shall become
vested and immediately payable at the then applicable target rate. If the
Company terminates Mr. Friedman for cause, he shall be entitled to receive only
salary, bonus and other benefits earned and accrued through the date of
termination. If Mr. Friedman terminates his employment for good reason, (i) Mr.
Friedman shall be entitled to receive, for a period of two years following
termination, his annual salary at the time of termination and continuing
coverage under all benefit plans and programs to which he was previously
entitled, (ii) all unvested options shall become vested and immediately
exercisable in accordance with the terms of the options and Mr. Friedman shall
become vested in any other pension or deferred compensation plans, and (iii) all
performance units granted to Mr. Friedman shall become vested and immediately
payable at the then applicable maximum rate. Upon the company undergoing certain
specified changes of control which result in his termination by the Company or a
material reduction in his duties, (i) Mr. Friedman shall be entitled to receive,
for the longer of three years following termination or the period remaining in
his term of employment under the agreement, his annual salary at the time of
termination and continuing coverage under all benefits plans and programs to
which he was previously entitled, (ii) all unvested options shall become vested
and immediately exercisable in accordance with the terms of the options and Mr.
Friedman shall become vested in any other pension or deferred compensation
plans, and (iii) all performance units granted to Mr. Friedman shall become
vested and immediately payable at the then applicable maximum rate; provided
that if the change of control is approved by two-thirds of the Board of
Directors, the performance units shall become vested and payable at the accrued
value measured at the prior fiscal year end.
During the term of employment and for one year following the later of his
termination or his receipt of severance payments, Mr. Friedman may not directly
or indirectly (other than with the Company) participate in the United States in
any pharmacy benefit management business or other business which is at any time
a material part of the Company's overall business. Similarly, for a period of
two years following termination, Mr. Friedman may not solicit or otherwise
interfere with the Company's relationship with any present or former employee or
customer of the Company.
In April 1998, Mr. Yablon entered into an employment agreement with the
Company which provides for his employment as the Company's President and Chief
Operating Officer for a term of employment through April 30, 2001 (unless
earlier terminated) at an initial base annual salary of $325,000. Under the
agreement, Mr. Yablon is entitled to receive certain fringe benefits, including
automobile and life insurance allowances and is also eligible to participate in
the Company's executive bonus program. Under the agreement, Mr. Yablon was
granted options to purchase 1,000,000 shares of Common Stock at an exercise
price of $4.50 (the market price on the date of grant). Options with respect to
500,000 shares vested immediately and the remaining options vest in two equal
installments on the first two anniversary dates of the date of grant. See "Long
Term Incentive Plan - Awards in Last Fiscal Year" above for a description of
certain grants of performance units and restricted shares to Mr. Yablon in June
1999 and a summary of the terms and conditions applicable to the performance
units and restricted shares. If Mr. Yablon's employment is terminated early due
to disability, or by the Company without cause, or by Mr. Yablon with cause, the
Company is obligated to continue to pay his salary and fringe benefits for one
year following such termination. Upon termination, Mr. Yablon is entitled to
substantially the same entitlements as described above with respect to
performance units as Mr. Friedman. In addition, Mr. Yablon's restricted shares
shall vest and become immediately transferable without restriction upon the
occurrence of the following termination events: (i) Mr. Yablon is terminated
early by the Company without cause, (ii) Mr. Yablon terminates his employment
for good reason, or (iii) after certain changes of control of the Company which
results in Mr. Yablon's termination by the Company or a material reduction of
his duties with the Company. During the term of employment and for one year
after the later of the termination of
-15-
employment or severance payments, Mr. Yablon is subject to substantially the
same restrictions on competition as described above with respect to Mr.
Friedman.
In March 1999, Mr. Posner entered into an employment agreement with the
Company which provides for his employment as the Company's Vice President and
General Counsel for a term of employment through February 28, 2004 (unless
earlier terminated) at an initial base annual salary of $230,000. Under the
agreement, Mr. Posner is entitled to receive certain fringe benefits, including
an automobile allowance, and is also eligible to participate in the Company's
executive bonus program. Under the agreement, Mr. Posner was granted options to
purchase 100,000 shares of Common Stock at an exercise price of $4.50 (the
market price on December 2, 1998, the date of grant). The options vest in three
equal installments on the first three anniversaries of the date of grant. See
"Long Term Incentive Plan - Awards in Last Fiscal Year" above for a description
of certain grants of performance units and restricted shares to Mr. Posner in
March 1999 and a summary of the terms and conditions applicable to the
performance units and restricted shares. Upon termination, Mr. Posner is
entitled to substantially the same entitlements as described above as Mr.
Friedman. In addition, Mr. Posner's restricted shares shall vest and become
immediately transferable without restriction upon the occurrence of the
following termination events: (i) Mr. Posner is terminated early by the Company
without cause, (ii) Mr. Posner terminates his employment for good reason, or
(iii) after certain changes of control of the Company which results in Mr.
Posner's termination by the Company or a material reduction of his duties with
the Company. In addition, Mr. Posner is subject to the same restrictions on
competition and non-interference as described above with respect to Mr.
Friedman.
In March 1999, Mr. Sitar entered into an employment agreement with the
Company, which provides for his employment as Chief Financial Officer for a term
of employment through February 28, 2004 (unless earlier terminated) at an
initial base annual salary of $180,000. Under the agreement, Mr. Sitar is
entitled to receive certain fringe benefits, including an automobile allowance,
and is also eligible to participate in the Company's executive bonus program.
Under the agreement, Mr. Sitar was granted options to purchase 50,000 shares of
Common Stock at an exercise price of $4.50 (the market price on the date of
grant). The options vest in three equal installments on the first three
anniversaries of the date of grant. See "Long Term Incentive Plan - Awards in
Last Fiscal Year" above for a description of certain grants of performance units
and restricted shares to Mr. Sitar in March 1999 and a summary of the terms and
conditions applicable to the performance units and restricted shares. Under the
agreement, upon termination, Mr. Sitar is entitled to substantially the same
entitlements as described above with respect to Messrs. Friedman and Posner. In
addition, Mr. Sitar is subject to the same restrictions on competition and
non-interference as described above with respect to Mr. Friedman.
In February 1999, Mr. Bomar entered in to an employment letter agreement
with the Company which provides for his employment as President - Sales and
Marketing until terminated by the Company or Mr. Bomar at an initial base annual
salary of $180,000. Under the agreement, Mr. Bomar is entitled to receive
certain fringe benefits, including automobile and life insurance allowances and
is also eligible to participate in the Company's executive bonus program. Under
the agreement, Mr. Bomar was granted options to purchase 75,000 shares of Common
Stock at an exercise price of $2.59 per share (the market price on the date of
grant). The options vest in three equal installments on the first three
anniversaries of the date of grant. See "Long Term Incentive Plan - Awards in
Last Fiscal Year" above for a description of certain grants of performance units
and restricted shares to Mr. Bomar in June 1999 and a summary of the terms and
conditions applicable to the performance units and restricted shares. Under the
agreement, if, within three months following certain changes of control, Mr.
Bomar is terminated by the Company or Mr. Bomar elects to terminate his
employment due to a material reduction in his duties with the Company, he is
entitled to receive an amount equal to six months salary and all outstanding
unvested options held by Mr. Bomar shall become immediately exercisable. In
addition, in the event that Mr. Bomar is terminated without cause or terminates
his employment for good reason following a change of control of the Company, (i)
all performance units granted to Mr. Bomar shall become vested and immediately
payable at the then applicable maximum rate and (ii) all restricted shares
issued to Mr. Bomar shall vest and become immediately payable. In addition. Mr.
Bomar is subject to the same restrictions on competition and non-interference as
described above with respect to Mr. Friedman.
-16-
Stockholder Return Performance Graph
The Company's Common Stock first commenced trading on the Nasdaq on August
15, 1996, in connection with the Company's Offering. The graph set forth below
compares, for the period of August 15, 1996 through December 31, 1999 (and
through March 3, 2000 for the Company), the total cumulative return to holders
of the Company's Common Stock with the cumulative total return of the Nasdaq
Stock Market (U.S.) Index.
COMPARISON OF 42 MONTH CUMULATIVE TOTAL RETURN*
AMONG MIM CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
[LINE GRAPH REPRESENTING THE FOLLOWING HAS BEEN OMITTED]
DOLLARS
MIM CORPORATION 100 112 38 49 111 75 37 31 37 24 26 18 19 16 19 60
NASDAQ STOCK MARKET (U.S.) 100 108 114 107 127 148 139 163 167 151 196 219 240 245 354 344
NASDAQ HEALTH SERVICES 100 104 92 86 96 105 94 103 94 71 81 71 89 66 66 65
8/15/96 9/96 12/96 3/97 6/97 9/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99 1/00 3/3/00
*$100 invested on 8/15/96 in stock or index-including reinvestment of dividends,
fiscal year ending December 31.
Certain Relationships and Related Transactions
In April 1999, the Company loaned to Mr. Friedman, its Chairman and Chief
Executive Officer, $1.7 million evidenced by a promissory note secured by a
pledge of 1.5 million shares of the Company's Common Stock. The note requires
repayment of principal and interest by March 31, 2004. Interest accrues monthly
at the "Prime Rate" (as defined in the note) then in effect. The loan was
approved by the Company's Board of Directors in order to provide funds with
which such executive officer could pay the Federal and state tax liability
associated with the exercise of stock options representing 1.5 million shares of
the Company's Common Stock in January 1998.
At December 31, 1999, Alchemie Properties, LLC, a Rhode Island limited
liability company of which Mr. E. David Corvese, the brother of Russel J.
Corvese, is the manager and principal owner ("Alchemie"), was indebted to the
Company in the amount of $280,629 represented a loan received from the Company
in 1994 in the original principal amount of $299,000. The loan bear interest at
a 10% per annum, with interest payable monthly and principal payable in full on
or before December 1, 2004, and secured by a lien on
-17-
Alchemie's rental income from the Company at one of its facilities.
During 1999, the Company paid $55,500 in rent to Alchemie pursuant to a
ten-year lease entered into in December 1994 for approximately 7,200 square feet
of office space in Peace Dale, Rhode Island.
At December 31, 1999, MIM Holdings was indebted to the Company in the amount
of $456,000 respecting loans received from the Company during 1995 in the
aggregate principal amount of $1,078,000. The Company holds a $456,000
promissory note from MIM Holdings due March 31, 2001 that bears interest at 10%
per annum. Interest generally is payable quarterly, although in December 1996
the note was amended to extend the due date to September 30, 1997, for all
interest accruing from January 1, 1996, to said date. This note is guaranteed by
Mr. E. David Corvese. The remaining $622,000 of indebtedness will not be repaid
and was recorded as a stockholder distribution during the first half of 1996.
Effective March 31, 1998, Mr. E. David Corvese terminated his employment and
resigned all of his positions with the Company and agreed not to stand for
election to the Board at the 1998 Annual Meeting of Stockholders. Pursuant to a
Separation Agreement dated March 31, 1998, the Company agreed to pay Mr. Corvese
an aggregate of $325,000 in 12 equal monthly installments and to continue to
provide Mr. Corvese and his dependents with medical and dental insurance
coverage for those 12 months. Under the Separation Agreement, Mr. Corvese is
restricted from competing with the company or soliciting its employees or
customers for one year from the last day he received severance payments from the
Company. During 1999, the Company paid Mr. Corvese a total of $91,250 in
severance. These payments and benefits terminated on March 31, 1999.
In connection with the Continental acquisition in August 1998, the three
largest shareholders of Continental ("Continental Shareholders"), including Mr.
Michael Erlenbach, a former beneficial owner of greater than 10% of the Company
Common Stock, entered into an indemnification agreement with the Company,
whereby the Continental Shareholders, severally and not jointly, agreed to
indemnify and hold the Company harmless from and against certain claims
threatened against Continental. Under the agreement, the Continental
Shareholders are responsible for all amounts payable in connection with the
threatened claims over and above $100,000. The indemnification obligations of
the Continental Shareholders terminated on December 31, 1999, except with
respect to certain indemnifiable claims that the Company previously notified
them. In addition, the Continental Shareholders entered into a pledge agreement
with the Company, whereby they granted the Company security interests in an
aggregate of 487,453 shares (in proportion to their respective ownership
percentages) of Common Stock received by them in connection with the Continental
acquisition in order to secure their respective obligations under the
indemnification agreement. In December 1999, the Company notified the
Continental Shareholders of the existence of certain potential indemnifiable
claims by the Company against the Continental Shareholders.
On February 9, 1999, the Company entered into an agreement with Mr. E.
David Corvese to purchase, in a private transaction not reported on NASDAQ,
100,000 shares of Common Stock from Mr. E. David Corvese at $3.375 per share.
The last sale price per share of the Common Stock on February 9, 1999, was
$3.50.
As discussed above, under Section 145 of the Delaware General Corporation
Law and the Company's By-Laws, under certain circumstances the Company may be
obligated to indemnify Mr. E. David Corvese as well as Michael J. Ryan, a former
officer of one of the Company's subsidiaries, in connection with their
respective involvement in the Federal and State of Tennessee investigation of
which they are the subject. In addition, until the Board determines as to
whether or not either or both Messrs. Corvese and Ryan are so entitled to
indemnification, the Company is obligated under Section 145 and its By-Laws to
advance the costs of defense to such persons; however, if the Board determines
that either or both of these former officers are not entitled to
indemnification, such individuals would be obligated to reimburse the Company
for all amounts so advanced. During 1999, the Company advanced $1,120,971 for
Messrs. Corvese and Ryan's and legal costs, in connection with the matter. The
Company is not presently in a position to assess the likelihood that either or
both of these former officers will be entitled to such indemnification and
advancement of defense costs or to estimate the total amount that it may have to
pay in connection with such obligations or the time period over which such
amounts may have to be advanced. No assurance can
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be given, however, that the Company's obligations to either or both of these
former officers would not have a material adverse effect on the Company's
results of operations or financial condition.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors and officers of the
Company and persons, or "groups" of persons, who own more than 10% of a
registered class of the Company's equity securities (collectively, "Covered
Persons") to file with the Commission and NASDAQ within specified time periods,
initial reports of beneficial ownership, and subsequent reports of changes in
ownership, of certain equity securities of the Company. Based solely on its
review of copies of such reports furnished to it and upon written
representations of Covered Persons that no other reports were required, other
than as described below, the Company believes that all such filing requirements
applicable to Covered Persons with respect to all reporting periods through the
end of fiscal 1999 have been complied with on a timely basis except for the
following: Mr. E. David Corvese, a former 10% beneficial owner, failed to file
timely one Statement of Changes in Beneficial Ownership on Form 4 reporting one
transaction. Richard Friedman failed to timely file one Annual Statement of
Changes in Beneficial Ownership on Form 5 covering fiscal 1998 reporting one
transaction which occurred in 1998. Each of Barry Posner and Edward J. Sitar,
failed to timely file one Annual Statement of Changes in Beneficial Ownership on
Form 5 covering fiscal 1998 reporting two transactions which occurred in
December 1998. Recie Bomar failed to timely file one Initial Statement of
Beneficial Ownership on Form 3 reporting his initial beneficial ownership upon
becoming an executive officer.
Independent Auditors
Arthur Anderson LLP served as the Company's independent public accountants
for fiscal 1999 and have been appointed by the Auditing Committee and the Board
of Directors to serve again in such capacity for fiscal 2000.
A representative of Arthur Anderson LLP is expected to be present at the
Meeting and available to respond to appropriate questions. The representative
also will have the opportunity to make a statement if he or she so desires.
Solicitation of Proxies
The cost of soliciting the proxies will be paid by the Company. Directors,
officers and employees of the Company may solicit proxies in person, by mail,
telephone or otherwise, but no such person will be specifically compensated for
such services. The Company will request banks, brokers and other nominees to
forward proxy materials to beneficial owners of stock held of record by them and
will reimburse them for their reasonable out-of-pocket expenses in so doing.
Stockholder Proposals
In order to be eligible for inclusion in the Company's proxy material for
the 2001 Annual Meeting of Stockholders, stockholders' proposals to take action
at such meeting must comply with applicable Commission rules and regulations,
must be directed to the Secretary of the Company at its principal executive
offices set forth on the cover page of this Proxy Statement, and must be
received by the Company not later than February 2, 2001. In addition, if a
stockholder fails to provide the Company notice of any stockholder proposal on
or before the 60th day prior to the date of the 2001 Annual Meeting of
Stockholders, then the persons appointed as proxies by the Company will be
entitled to use their discretionary voting authority if such stockholder
proposal is raised at the Annual Meeting of Stockholders without any discussion
of the matter in the proxy statement relating to the 2001 Annual Meeting.
Miscellaneous
A copy of the Company's 1999 Annual Report to Stockholders is enclosed but
is not to be regarded as proxy solicitation material.
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