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 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHYMATRIX CORP.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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 the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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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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<PAGE>
[LOGO]
PHYMATRIX
777 South Flagler Drive, Suite 1000E
West Palm Beach, Florida 33401
NOTICE OF SPECIAL MEETING
IN LIEU OF ANNUAL MEETING TO BE HELD ON
JANUARY 26, 1999
The Special Meeting in lieu of Annual Meeting of Stockholders of PhyMatrix
Corp. (the "Company") will be held on Tuesday, January 26, 1999 at 10:00 a.m.
at the offices of Nutter, McClennen & Fish, LLP, One International Place, 16th
Floor, located in Boston, Massachusetts, for the following purposes:
1. To elect the directors of the class of the Board of Directors whose term
expires at this Special Meeting, which directors shall be elected to
serve until the annual meeting of stockholders to be held during the
fiscal year ended January 31, 2002 and until their successors are duly
elected and qualified.
2. To consider and act upon such other business and matters or proposals as
may properly come before said Special Meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on December 30,
1998 as the record date for determining the stockholders having the right to
receive notice of and to vote at said Special Meeting. The Proxy Statement and
Proxy concerning said Special Meeting was first mailed to stockholders on or
about January 12, 1999.
By Order of the Board of Directors
Denise Schumann, Secretary
West Palm Beach, Florida
January 7, 1999
- --------------------------------------------------------------------------------
Whether or not you plan to attend the Special Meeting, you are requested to
sign, date and mail promptly the enclosed Proxy, which is being solicited on
behalf of the Board of Directors. A return envelope, which requires no postage
if mailed in the United States, is enclosed for that purpose.
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
PHYMATRIX
------------
SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
------------
January 26, 1999
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of PhyMatrix Corp. (the "Company") of
proxies for use at the Special Meeting in lieu of Annual Meeting of
Stockholders of the Company to be held, pursuant to the accompanying Notice of
Special Meeting in lieu of Annual Meeting, on Tuesday, January 26, 1999 at
10:00 a.m., and at any adjournment or adjournments thereof (the "Special
Meeting"). Action will be taken at the Special Meeting to elect the directors
of the class of the Board of Directors whose terms expire at the Special
Meeting and to consider and act upon such other business and matters or
proposals as may properly come before the Special Meeting. The directors to be
elected at the Special Meeting shall be elected to serve until the annual
meeting of stockholders to be held during the fiscal year ending January 31,
2002 and until their successors are duly elected and qualified.
If a stockholder specifies in the proxy accompanying this Proxy Statement
(the "Proxy") how it is to be voted, it will be voted in accordance with such
specification. Any Proxy that is signed and returned and that does not specify
how it is to be voted will be voted "for" the election of the nominees for
directors named herein. Any stockholder that returns a Proxy retains the power
to revoke it at any time before it is exercised by delivering a written
revocation to the Secretary of the Company, by executing and returning to the
Company a Proxy bearing a later date or by attending the Special Meeting and
voting his or her shares in person. Stockholders who attend the Special Meeting
in person will not be deemed to have revoked their Proxy simply by attending
unless they affirmatively indicate at the Special Meeting their intention to
vote their shares in person.
The Company's principal executive offices are located at 777 South Flagler
Drive, Suite 1000E,West Palm Beach, Florida 33401. The Company expects to move
its principal executive offices to Providence, Rhode Island in 1999. Unless
otherwise indicated or required by the context, references to the "Company"
include its consolidated subsidiaries.
The Company mailed this Proxy Statement and the Proxy on or about January
12, 1999 to its stockholders of record at the close of business on December 30,
1998.
ANNUAL REPORT AND INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Annual Report to Stockholders for the fiscal year ended
January 31, 1998, including financial statements and the report of
PricewaterhouseCoopers LLP thereon, is being mailed herewith to each of the
Company's stockholders of record at the close of business on December 30, 1998.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Special Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
VOTING SECURITIES
The holders of record of shares of Common Stock, $.01 par value per share,
of the Company at the close of business on December 30, 1998 may vote at the
Special Meeting. On that date, there were outstanding and entitled to vote
32,929,970 shares of Common Stock. Each stockholder has one vote at the Special
Meeting for each share of Common Stock held of record on that date. As long as
a quorum (a majority of issued and outstanding shares of Common Stock) is
present in person or by Proxy at the Special Meeting, each of the nominees for
director shall be elected by a plurality of the votes cast at the Special
Meeting by the holders of shares entitled to vote thereat. Votes may be cast in
favor of the election of any of the nominees for director or withheld. If a
broker indicates on the Proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will be
considered as present and entitled to vote for purposes of determining the
presence of a quorum, but will not be treated as votes cast with respect to,
and will have no effect on, that matter.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
not less than three nor more than 15 directors, the exact number to be fixed by
the Board of Directors. The Board of Directors has currently fixed the number
of directors at nine. Immediately prior to the Special Meeting, the Board
intends to reduce the number of directors to eight. In the event that any of
the nominees becomes unavailable (which is not now anticipated by the Company),
the persons named as Proxies have discretionary authority to vote for a
substitute. The Board of Directors has no reason to believe that any of the
nominees will be unwilling or unable to serve if elected. The By-laws provide
that, within the limits above specified, the number of directors may at any
time be increased or decreased by the vote of the Board. No decrease in the
number of directors will affect the term of any director in office.
The Board of Directors is divided into three classes, with staggered
three-year terms. The terms of Abraham D. Gosman and Hugh L. Carey will expire
at the Special Meeting; the terms of H. Loy Anderson, Jr., Michael T. Heffernan
and Stephen E. Ronai will expire at the Company's annual meeting to be held
during the fiscal year ending January 31, 2000; the terms of Joseph N. Cassese,
David M. Livingston, M.D. and Eric Moskow, M.D. will expire at the Company's
annual meeting to be held during the fiscal year ending January 31, 2001.
Successors to the directors whose terms expire at each annual meeting are
eligible for re-election for three-year terms. A director holds office until
the annual meeting for the year in which his term expires and until his
successor is elected and qualified. John T. Chay resigned from the Board on
January 2, 1999.
Nominees for Director
Each of the following directors has been nominated for re-election at the
Special Meeting.
Abraham D. Gosman, age 70, has served since June 1994 as an executive
officer of the Company and is presently the Chairman of the Board of Directors
and Chief Executive Officer of the Company. Mr. Gosman has served as Chairman
of the Board of CareMatrix Corporation, an assisted living development and
management company, since October 1996. Previously, Mr. Gosman was the Chief
Executive Officer of The Mediplex Group, Inc. ("Mediplex"), a diversified
health care company, from its inception in 1982 to September 1988 and from
August 1990 to June 1994. In addition, Mr. Gosman served as Chairman of the
Board of Meditrust Corporation and Chairman of the Board, Chief Executive
Officer and Treasurer of Meditrust Operating Company from November 1997 to
August 1998 and Chairman of the Board and Chief Executive Officer of their
predecessor, Meditrust, from its inception in 1985 until November 1997.
Hugh L. Carey, age 79, has served as a director of the Company since
February 1996. Currently, he is of counsel to the New York law firm of Whitman
Breed Abbott & Morgan. He served as an Executive Vice President of W.R. Grace &
Company from 1987 to December 1995. He was Governor of the State of New York
from 1975 to 1983 and a member of Congress from 1960 until 1975. He is
currently a director of Triarc Companies, Inc. and China Trust Bank.
Continuing Directors
The following individuals are directors of the Company whose terms will
expire at the Company's annual meeting of stockholders in the fiscal years
ending January 31, 2000 and 2001:
H. Loy Anderson, Jr., age 55, has served as a director of the Company
since December 1998. He has served as President, Chief Executive Officer and a
director of Palm Beach National Bank & Trust Company since June 1990. Mr.
Anderson is a director of CareMatrix Corporation.
Joseph N. Cassese, age 69, has served as a director of the Company since
January 1996. He also serves as a director of Liberty Healthcare Management
Company. Mr. Cassese was Vice President of Mediplex from January 1976 to March
1986 and the President of Mediplex from March 1986 to March 1988 and again from
August 1990 to December 1991. Mr. Cassese was also a Vice President of A.M.A.
Advisory Corp., an advisor to Meditrust, from April 1988 to August 1990. Mr.
Cassese has been retired since December 1991.
Michael T. Heffernan, age 34, has served as President of the Company since
December 1998 and as a director of the Company since February 1998. He also
serves as the Chief Executive Officer of the Company's subsidiary Clinical
Studies, Ltd. ("CSL"), a multitherapeutic site management organization acquired
by the Company in October 1997. Prior to the Company's acquisition of CSL, Mr.
Heffernan served as the President and Chief Executive Officer of CSL, a
position he held since 1994. From 1993 to 1994, Mr. Heffernan served as a
Regional Manager with Eli Lilly & Company.
David M. Livingston, M.D., age 57, has served as a director of the Company
since January 1996. Dr. Livingston has previously served as Director of
Dana-Farber Cancer Institute in Boston, Massachusetts and has been employed as
a physician at the Institute since 1973. He currently serves as Chairman of the
Institute's Executive Committee for Research and as a Trustee of the Institute.
He is also the Emil Frei Professor of Medicine and Genetics at Harvard Medical
School where he has taught since 1973.
2
<PAGE>
Eric Moskow, M.D., age 40, has served as a director of the Company since
September 1996 and has been Executive Vice President of Strategic Planning of
the Company since September 1996. He founded Physician's Choice Management, LLC
in October 1995 and served as its Executive Vice President from October 1995 to
October 1996. Prior to establishing Physician's Choice, he served as Medical
Director for Mediplex of Ridgefield from November 1994 to August 1996 and as
Associate Medical Director for US Healthcare in Connecticut from 1988 to 1992.
Dr. Moskow is board-certified in internal medicine and served as President of
the Family Medical Associates of Ridgefield for nine years.
Stephen E. Ronai, age 62, has served as a director of the Company since
January 1996. Mr. Ronai has been a partner in the Connecticut law firm of
Murtha, Cullina, Richter and Pinney since 1984 where he serves as Chairman of
the firm's Health Care Department. He is a member of the American Health
Lawyers Association. From 1989 to 1995, he served as a member of the Board of
Directors of the National Health Lawyers Association, which merged in 1998 with
the American Academy of Health Care Attorneys of the American Hospital
Association and was subsequently denominated as the American Health Lawyers
Association. He also has served as Chairman of the Board of Trustees of the
Connecticut Hospital Association. He is currently a director of CareMatrix
Corporation and also serves as a director of various non-profit tax-exempt
health care provider organizations.
Certain Information Regarding Directors
The Board of Directors of the Company has the following committees:
Executive Committee. The members of the Executive Committee of the
Company's Board of Directors are Messrs. Gosman, Cassese, Heffernan and
Anderson. The Executive Committee exercises all of the powers of the Board of
Directors between meetings of the Board of Directors, except such powers as are
reserved to the Board of Directors by law.
Audit and Compliance Committee. The members of the Audit and Compliance
Committee of the Company's Board of Directors are Messrs. Carey and Ronai and
Drs. Livingston and Moskow. The Audit and Compliance Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans for and results of
the audit, approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants,
considers the range of audit and non-audit fees and reviews the adequacy of the
Company's internal accounting controls. The Audit and Compliance Committee also
oversees the Company's Compliance Program and the implementation of and
adherence to the Company's Standards of Conduct, both of which are designed to
ensure maintenance of high ethical standards and compliance with all legal
(healthcare-related and other) requirements applicable to the Company.
Equity Incentive and Compensation Committee. The members of the Equity
Incentive and Compensation Committee of the Company's Board of Directors are
Messrs. Cassese and Carey. The Equity Incentive and Compensation Committee
establishes general compensation policies for the Company and approves
increases both in directors' fees and in salaries paid to officers and senior
employees of the Company. The Equity Incentive and Compensation Committee
administers all of the Company's employee benefit plans, including the Equity
Plan. The Equity Incentive and Compensation Committee determines, subject to
the provisions of the Company's plans, the directors, officers, employees and
consultants of the Company eligible to participate in any of the plans, the
extent of such participation and terms and conditions under which benefits may
be vested, received or exercised.
Nominating Committee. The members of the Nominating Committee are Dr.
Livingston and Mr. Ronai. The Nominating Committee may review and make
recommendations to the Board with regard to director nominees. Any stockholder
wishing to recommend a nominee to the Board should do so in writing addressed
to the Secretary of the Company.
During the fiscal year ended January 31, 1998, the Board of Directors met
ten times, the Executive Committee met five times, both the Audit and
Compliance Committee and the Equity Incentive and Compensation Committee met
two times, and the Nominating Committee did not meet. There are no family
relationships among any of the directors or executive officers of the Company.
Compensation of Directors
Officers who are members of the Board of Directors do not receive
compensation for serving on the Board. Each other member of the Board receives
annual compensation of $15,000 for serving on the Board, plus a fee of $1,000
for each Board of Directors' meeting attended. In addition, such directors
receive an additional fee of $500 for each committee meeting attended, except
that only one fee will be paid in the event that more than one such meeting is
held on a single day. All directors receive reimbursement of reasonable
expenses incurred in attending Board and committee meetings and otherwise
carrying out their duties. Each director who is a member of the Equity
Incentive and Compensation Committee on the first business day following each
annual meeting of the stockholders will receive an option to purchase 2,500
shares of Common Stock. Any of such options granted to a member of the Equity
Incentive and Compensation Committee under the Equity Plan will be exercisable
one year following the date of grant.
3
<PAGE>
MANAGEMENT AND EXECUTIVE COMPENSATION
Executive Officers
The following directors of the Company also serve as executive officers:
Abraham D. Gosman, Chief Executive Officer and Chairman of the Board; Michael
T. Heffernan, President; and Dr. Eric Moskow, Executive Vice President of
Strategic Planning. A biographical summary of the experience of each such
Executive Officer appears above. In addition, set forth below are biographical
summaries of the experience of the executive officers of the Company who do not
serve as directors of the Company. Officers are appointed by and serve at the
discretion of the Board of Directors.
Frederick R. Leathers, age 41, has served since June 1994 as the Chief
Financial Officer and Treasurer of the Company. Previously, he served as
Treasurer, Chief Financial Officer and Principal Accounting Officer of Mediplex
from October 1991 to June 1994. He was Treasurer of A.M.A. Advisory Corp. and
Controller of Meditrust from July 1988 to January 1991.
Gregory Gardner, age 43, has served since November 1996 as Executive Vice
President of Finance of the Company. Previously, he served as Senior Vice
President, Financial Operations of Good Samaritan & St. Mary's Medical Centers
from August 1995 to November 1996. From November 1990 to December 1993, Mr.
Gardner served as American Medical International, Inc.'s Corporate Director of
Finance and from January 1994 to July 1995 as its Corporate Director of
Development.
James M. Hogan, M.D., age 54, has served as Chief Medical Officer of the
Company since March 1997 and was elected an executive officer of the Company in
December 1998. Dr. Hogan was Corporate Medical Director of Health Insurance
Plan of Greater New York from July 1996 to April 1997 and its Senior Vice
President for Professional Affairs and Medical Director from October 1994 to
April 1997. Dr. Hogan served as Vice President of the Medical Division and
Medical Director of Health Insurance Plan of Florida from January 1994 to
October 1994 and as its Medical Director from May 1993 to January 1994.
Executive Compensation
The following table sets forth certain information regarding compensation
paid or accrued by the Company during the years ended December 31, 1995,
January 31, 1997 and January 31, 1998, to the Company's Chief Executive Officer
and to the four most highly compensated executive officers of the Company (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation Awards
--------------------
Annual Securities
Compensation Underlying All Other
Name and Principal Position Year(1) Salary ($) Options (#) Compensation(2)($)
- ------------------------------------- --------- -------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Abraham D. Gosman ................... 1998 225,000 -- --
Chairman and Chief Executive 1997 225,000 -- --
Officer 1995 225,000 -- --
Robert A. Miller (3) ................ 1998 304,135 -- --
Former President 1997 304,171 -- --
1995 206,382 -- --
Bruce A. Rendina (4) ................ 1998 460,435 300,000(5) 81,207
Former Vice Chairman of the 1997 435,782 -- 53,948
Company and Former Chairman
and Chief Executive Officer of DASCO
Francis S. Tidikis (6) .............. 1998 287,698 -- --
Former Chief Operating Officer 1997 275,156 150,000(7) --
Michael T. Heffernan ................ 1998 275,295 300,000(8) 720
President of the Company 1997 348,871 -- --
and Chief Executive Officer of CSL 1995 156,896 -- --
</TABLE>
- ------------
(1) In January 1996, the Company changed its fiscal year end from December 31
to January 31.
(2) Amounts indicated are for life insurance premiums paid by the Company.
(3) Mr. Miller became an executive officer of the Company in June 1994 and
resigned from the Company in December 1998.
(4) Mr. Rendina became an executive officer of a subsidiary of the Company in
January 1996 and resigned from the Company in August 1998.
4
<PAGE>
(5) Represents options granted in September 1997. Mr. Rendina's options
terminated in September 1998.
(6) Mr. Tidikis became an executive officer of the Company in January 1996 and
resigned in April 1998.
(7) Represents options granted in January 1996. Mr. Tidikis' options terminate
in February 1999.
(8) Represents options granted in October 1997.
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding options
granted during the year ended January 31, 1998 by the Company to each of the
Named Executive Officers:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Rates
of Stock Price
Appreciation for
Individuals Grants Option Term (1)
- ----------------------------------------------------------------------------------------------------- ----------------------
Number of Securities % of Total Options Exercise or
Underlying Granted to Employees Base Price Expiration
Name Options Granted (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------------ ---------------------- ---------------------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Rendina ............. 300,000(2) 15% $ 14.625 9/25/07 2,759,275 6,992,545
Michael T. Heffernan ......... 300,000(2) 15% $ 16.250 10/14/07 3,065,861 7,769,494
</TABLE>
- ------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised. The Company has not granted stock appreciation
rights to date.
(2) Mr. Heffernan's option vests in three equal annual installments of 100,000
shares on October 14, 1998, 1999 and 2000. Although Mr. Rendina's option
had a similar vesting provision, he resigned in August 1998 and his option
terminated in September 1998.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The Named Executive Officers did not exercise any options during the
fiscal year ended January 31, 1998. As of such date, Mr. Rendina and Mr.
Heffernan each held options to purchase 300,000 shares of Common Stock, none of
which were exercisable, and Mr. Tidikis held options to purchase 150,000 shares
of Common Stock, 120,000 shares of which were exercisable. None of the options
held by Messrs. Rendina, Tidikis and Heffernan were in-the-money as of January
31, 1998, and none of the other Named Executive Officers held any options as of
such date.
Employment Agreements
In connection with the Company's acquisition of Clinical Studies, Ltd.
("CSL"), on October 14, 1997, the Company entered into an employment agreement
with Mr. Heffernan to be the Chief Executive Officer of CSL. The agreement
provides for an initial three-year term (expiring on October 14, 2000), which
may be renewed upon agreement of the parties. The base salary for Mr. Heffernan
under the agreement is $200,000 per year, plus a guaranteed bonus of $100,000
per year, payable in quarterly installments. The agreement also provides for
the grant of an option to purchase 300,000 shares of the Common Stock of the
Company at $16.25 per share (the price per share of the Common Stock as of the
date of the agreement), which option is exercisable in three annual
installments of 100,000 shares commencing on October 14, 1998. In addition, Mr.
Heffernan is entitled to receive other bonuses and benefits that may be offered
by the Company to its executive officers. The agreement may be terminated by
the Company without cause effective immediately upon delivery of written notice
by the Company to Mr. Heffernan. Mr. Heffernan may terminate the agreement upon
delivery of written notice to the Company if the Company (i) fails to pay any
sums due under the agreement, (ii) reassigns Mr. Heffernan from Providence,
Rhode Island without his consent, or (iii) materially changes his employment
duties without his consent. If the agreement is terminated by the Company
without cause or by Mr. Heffernan for one of the reasons noted in the preceding
sentence, Mr. Heffernan shall continue to receive his salary and guaranteed
bonus for a period of 18 months after such a termination or for the remainder
of the term of the agreement, whichever is longer. In the event of a "change in
control" (as defined in the agreement) of the Company or CSL during the term of
the agreement, Mr. Heffernan is entitled to receive a bonus payment from the
Company equal to 2.99 times the sum of his salary and guaranteed annual bonus.
The agreement contains restrictive covenants prohibiting Mr. Heffernan from
competing with the Company, or soliciting employees of the Company to leave,
during his employment and for a period equal to the longer of (i) one year
after termination of the agreement or (ii) the period during which Mr.
Heffernan is paid as a result of a termination of the agreement by the Company
without cause or by Mr. Heffernan for cause.
5
<PAGE>
The Company, through its subsidiary DASCO Development Corporation
("DASCO"), entered into an employment agreement with Mr. Rendina that provided
for an initial one-year term automatically renewable for successive one-year
periods until either party elects not to renew. The base salary for Mr. Rendina
under the agreement was $330,000 per year. In addition, he was entitled to
receive bonuses and benefits, including life, accident, health and dental
insurance. The agreement with Mr. Rendina was terminated in September 1998.
Severance Agreements
The Company has entered into a separation and settlement agreement with
Francis S. Tidikis, the Company's former Chief Operating Officer. Under the
agreement, Mr. Tidikis ceased to be an executive officer of the Company on
April 30, 1998, but will continue to be employed by the Company on a part-time
basis until April 30, 1999. The agreement provides a base salary of $98,000,
plus the payment of $192,000 as a one-time bonus and the payment of $9,728.60
to cover insurance premiums incurred during the term of the agreement. Under
the terms of the agreement, such payments represent a full, final and complete
satisfaction of any claims relating to Mr. Tidikis' employment prior to April
30, 1998.
In September 1998, Bruce A. Rendina entered into a Business Agreement (the
"Business Agreement") with the Company, DASCO and Mr. Gosman. The Business
Agreement was entered into to address the parties' future cooperation with
respect to the development of certain real estate projects. The Business
Agreement provides that the Company has the exclusive development rights to 27
separate projects located in 12 states, and Mr. Rendina has the exclusive
development rights to six projects in five states. In addition, the Company and
Mr. Rendina have agreed to share fees with respect to five asset conversion
projects and six medical facility development projects. Pursuant to the terms
of the Business Agreement, Mr. Rendina is entitled to the first 25% of the fees
received on any shared fee project. Thereafter, the Company and Mr. Rendina
evenly split the remaining portion of the fees for such projects.
In December 1998, the Company and Robert A. Miller, former President of
the Company entered into a Separation and Severance Agreement (the "Miller
Severance Agreement") and a Consulting Agreement for Physician Practice
Management Assets (the "Miller Consulting Agreement"). Pursuant to the Miller
Severance Agreement, the Company will pay to Mr. Miller a severance payment
equal to $617,528 less applicable taxes and deductions. Mr. Miller agreed not
to solicit any employees of the Company and not to compete against the
Company's site management and clinical trial related business for a period of
two years from the termination of the Miller Consulting Agreement. The Miller
Consulting Agreement provides for Mr. Miller to assist the Company in its
divestiture of its non-network physician practice management assets for the six
months following his resignation. In consideration for such services, the
Company will pay to Mr. Miller $390,000 over the term of contract.
Section 16(a) Beneficial Ownership Reporting Compliance
Edward E. Goldman filed a Form 4 with the Securities and Exchange
Commission ("SEC") on November 26, 1997 with respect to a transaction in
October 1997. John T. Chay filed Form 4's with the SEC on July 3, 1997 and
November 26, 1997 with respect to transactions in May 1997 and October 1997,
respectively. Eric Moskow filed a Form 4 with the SEC on January 14, 1998 with
respect to a transaction in December 1997. Bruce A. Rendina filed Form 4's with
the SEC on June 20, 1997 and January 13, 1998 with respect to transactions in
May, 1997 and December, 1997, respectively.
Equity Incentive and Compensation Committee Report
The Equity Incentive and Compensation Committee of the Board of Directors
(the "EICC") is made up of two non-employee directors. The EICC formulates and
manages the policies of the Company with regard to executive compensation
issues.
The Company believes that the salary levels of its executive officers
during the fiscal year ended January 31, 1998 were competitive with the salary
levels of similar positions at comparable companies in the health care
industry. During such time, the Company granted salary increases to certain of
its executive officers consistent with comparable levels in the health care
industry. The decision to provide these salary increases reflects the Company's
philosophy of making decisions with regard to executive compensation consistent
with the goal of retaining corporate managers, while at the same time rewarding
performance where appropriate. The salaries of the Chief Executive Officer and
the President of the Company were unchanged for the current year as compared to
the previous year.
The Company did not pay bonuses to the Chief Executive Officer or any of
the other Named Executive Officers during the fiscal year ended January 31,
1998. During the fiscal year ended January 31, 1998, the Company also did not
grant stock options or other equity incentive awards to the Chief Executive
Officer or other Named Executive Officers except Mr. Rendina and Mr. Heffernan.
The Company has granted equity incentives in the form of stock
6
<PAGE>
options under the Equity Plan to other executive officers and key employees.
The Company believes that granting such long-term incentive compensation will
allow the Company to retain and motivate such officers and employees.
Over the next year, the EICC intends to continue its review of the
Company's executive compensation practices concerning base compensation,
bonuses and long-term equity compensation to ensure the Company's ability to
retain qualified personnel while aligning the incentives of management with the
interests of the stockholders.
Respectfully submitted by,
Hugh L. Carey
Joseph N. Cassese
PERFORMANCE CHART
The following graph compares the relative performance of the Company's
Common Stock for the period commencing January 24, 1996 (the first trading day
of the Common Stock on the Nasdaq National Market) and ending January 31, 1998
(as measured by the cumulative total return per share), against the Nasdaq
Market Index (the "Nasdaq Index") and the Nasdaq CRSP Health Services Index
(the "Industry Index"). The chart assumes that the value of an investment in
shares of the Company's Common Stock, the Nasdaq Index and the Industry Index
was $100 on January 24, 1996 and that all dividends were reinvested.
[GRAPHIC--LINE CHART]
COMPARE CUMULATIVE TOTAL RETURN AMONG
PHYMATRIX CORP., MASDAQ MARKET INDEX
AND NASDAQ CRSP HEALTH SERVICES INDEX
<TABLE>
<CAPTION>
ASSUMES $100 INVESTED ON JANUARY 24, 1996
AND DIVIDENDS REINVESTED THROUGH
FISCAL YEAR ENDING JANUARY 31, 1998
------------------------------------------------------
PHYMATRIX NASDAQ CRSP NASDAQ
CORP. HEATLH SERVICES INDEX MARKET INDEX
---------- --------------------- ------------
<S> <C> <C> <C>
01/24/96 100 100 100
04/30/96 98.7 109.63 112.14
07/31/96 112.34 96.02 102.48
10/31/96 88.36 93.55 114.74
01/31/97 82.47 97.3 129.99
04/30/97 69.74 84.7 118.81
07/31/97 67.53 101.31 160.32
10/31/97 76.62 101.49 151.3
01/31/98 66.68 94.97 154.02
</TABLE>
[/GRAPHIC]
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During December 1995, the Company obtained a 43.75% interest in
Physician's Choice Management, LLC, a management services organization that
provides management services to an independent physician association based in
Connecticut ("Physician's Choice"). The Company acquired this interest in
exchange for a payment of $1.5 million to the stockholders of Physician's
Choice, including Dr. Moskow. During September 1996, the Company acquired the
remaining 46.25% interest from such stockholders for a payment of $1 million in
cash plus 363,442 shares of the Company's Common Stock. As of January 31, 1998,
the Company loaned the shareholders of Physician's Choice an aggregate of $2.7
million to pay the tax liability related to the sale of Physician's Choice,
including $448,000 directly to Dr. Moskow and approximately $1.6 million to
Physician's Choice. The loans are nonrecourse and are secured by a pledge of an
aggregate of 248,387 shares of Common Stock held by the former shareholders of
Physician's Choice and interest accrues at an adjustable interest rate equal to
the Applicable Federal Rate for Short Term Notes, which was 5.8% at January 31,
1998. The loans became due April 2004. In May 1998, the Company made a loan in
the original principal amount of $1 million to Dr. Moskow. The loan bears
interest at a rate of 5.56% per annum and becomes due in May 2005. Pursuant to
the terms of the note governing the loan, the balance due under the note will
be forgiven upon a change in control of the Company.
The Company occupies office space for offices in West Palm Beach, Florida
under the terms of a lease which the Company assumed from a company the
stockholders and executive officers of which include Messrs. Gosman and
Leathers. The terms of the assumed lease are the same as those to which such
affiliated company was obligated. As of January 31, 1998, the total amount of
lease payments to be made under the assumed lease through the end of the
current lease term was estimated to be approximately $843,000 and as of
December 31, 1998 was estimated to be approximately $440,000. As of January 31,
1998, the Company leased office space on behalf of certain of its affiliated
physicians from a limited partnership of which Mr. Gosman owns a controlling
interest in the limited partner and general partner. The aggregate base rent
under such leases is approximately $537,000. In January 1997, a privately-held
entity principally owned by Mr. Gosman assumed the Company's obligations as
lessee under a capital lease, which obligations then exceeded the fair market
value of the lease by $559,000.
DASCO provides development and other services in connection with the
establishment of health parks, medical malls and medical office buildings.
DASCO provides these services to or for the benefit of the owners of the new
facilities, which owners are either corporations or limited partnerships. As of
January 31, 1998, Mr. Gosman, individually and as trustee for his two sons, and
Frederick R. Leathers had obtained equity interests in an aggregate of 17
facilities developed or being developed by DASCO, and had interests in five of
such facilities. The interest of Mr. Gosman (individually and as trustee) in
such facilities ranged from 6.0% to 40.1%. The interest of Mr. Leathers ranged
from 0.1% to 0.95%. The Company believes that Messrs. Gosman and Leathers could
continue to obtain equity interests in facilities developed by DASCO. During
the year ended January 31, 1998, DASCO recorded revenues in the amount of $19.2
million related to facilities developed by DASCO in which equity interests have
been obtained by related parties. Meditrust Corporation and Meditrust Operating
Company, a publicly traded paired-share real estate investment trust (the
"Meditrust Companies") of which Mr. Gosman served as Chairman of the Board and
Chief Executive Officer, respectively, until August 1998, had provided
financing to customers of DASCO in the aggregate amount of approximately $229
million as of January 31, 1998 for 25 facilities developed by DASCO. In January
1998, the Meditrust Companies acquired, at fair market value, 21 medical office
buildings developed by DASCO from the corporate or limited partnership owners
of such facilities for an aggregate purchase price of approximately $200
million. The Company received $9.1 million in these transactions from the
corporation or limited partnership owners of such facilities. As a result of
their ownership interests in the corporations or limited partnerships owning
the facilities sold to the Meditrust Companies, Messrs. Gosman (individually
and as trustee for his two sons) and Leathers received $4.7 million and
$116,000, respectively, from the sale of the facilities.
The Company provides construction management, development marketing and
consulting services to entities principally owned by Mr. Gosman in connection
with the development and operation by such entities of several healthcare
related facilities (including a medical office building and a retirement
community). During the year ended January 31, 1998, the Company recorded
revenues in the amount of $10.5 million related to such services and in October
1998, the Company advanced $3.1 million to a company principally owned by Mr.
Gosman relating to the development of a healthcare facility which advance has
been repaid in full. The Company provides these services to such affiliated
parties on terms no more or less favorable to the Company than those provided
to unaffiliated parties. Interest on the advance accrued at the prime rate. In
January 1998, the Company transferred to CareMatrix Corporation, of which Mr.
Gosman is the Chairman of the Board and a principal stockholder, its rights
under a management agreement with respect to a Florida skilled nursing facility
in exchange for $800,000.
Mr. Ronai is a partner in the Connecticut law firm of Murtha, Cullina,
Richter and Pinney which has been retained to perform certain legal services
for the Company.
8
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 10, 1998 (unless otherwise
indicated), certain information regarding the beneficial ownership of shares of
Common Stock by each person known by the Company to be the beneficial owner of
more than 5% of outstanding Common Stock, by each director and each of the
Named Executive Officers of the Company and by all directors and executive
officers as a group. Except as indicated in the footnotes, all of such shares
of Common Stock set forth in the following table are owned directly, and the
indicated person has sole voting and investment power with respect to all
Common Stock shown as beneficially owned by such person:
<TABLE>
<CAPTION>
Amount of Beneficial Ownership
--------------------------------------------
Shares Beneficially Percentage of Total
Name Owned Outstanding(1)
- ------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Abraham D. Gosman (2) ................................. 8,487,126 25.8%
Crabbe Huson Group, Inc. (3) .......................... 3,426,800 10.4
The WAB Family Limited Partnership (4) ................ 1,829,756 5.6
Robert A. Miller (5) .................................. 459,655 1.4
Bruce A. Rendina (6) .................................. 703,866 2.1
Francis S. Tidikis (7) ................................ 131,085 *
Hugh L. Carey ......................................... -- *
Joseph N. Cassese (8) ................................. 30,000 *
Michael T. Heffernan (9) .............................. 419,493 1.3
H. Loy Anderson, Jr. .................................. 315 *
David M. Livingston, M.D .............................. -- *
Eric Moskow (10) ...................................... 187,252 *
Stephen E. Ronai (11) ................................. 14,000 *
All current directors and executive officers as a group
(11 persons) (12) .................................... 9,709,690 29.2%
</TABLE>
- ------------
* Less than one percent.
(1) Based upon a total of 32,929,970 shares of Common Stock outstanding on
December 30, 1998.
(2) Includes (i) 4,018,707 shares held by Chancellor Partners Limited
Partnership I ("CPLP I"). The sole general partner of CPLP I is CLP, Inc.,
which has sole voting and dispositive powers as to the securities held by
CPLP I. Mr. Gosman is the sole stockholder and director of CLP, Inc. and
(ii) 2,000,000 shares held in a revocable trust. Mr. Gosman's business
address is PhyMatrix Corp., 777 South Flagler Drive, Suite 1000E, West Palm
Beach, Florida 33401.
(3) Crabbe Huson Group, Inc. ("CHG") disclaims beneficial ownership of all
shares owned by each of its clients and also disclaims that a "group"
within the meaning of Rule 13d-5(b) under the Securities Exchange Act of
1934 has been or will be formed. CHG asserts that it does not directly own
any shares of the Company, but shares voting and dispositive power with
respect to the 3,426,800 shares owned by approximately 74 of its clients.
The address of CHG is 121 SW Morrison, Suite 1400, Portland, OR 97204.
Based upon information contained in CHG's Schedule 13G/A filed with the SEC
on November 12, 1998.
(4) The partnership's address is 106 Driftwood Drive, Tiverton, RI 02878.
Walter A. Brown is the sole limited partner and general partner of the
partnership. Based upon information provided by Mr. Brown to the Company in
October 1998.
(5) Based upon information contained in Mr. Miller's most recent Form 4 filed
with the SEC for September 1996. Includes 150 shares held for the benefit
of three of Mr. Miller's children.
(6) Based upon information contained in Mr. Rendina's most recent Form 4 filed
with the SEC for February 1998.
(7) Based upon information contained in Mr. Tidikis' most recent Form 4 filed
with the SEC for October 1996. Includes 85 shares owned by Mr. Tidikis'
wife with respect to which Mr. Tidikis disclaims beneficial ownership and
130,000 shares which Mr. Tidikis has the right to acquire beneficial
ownership of upon exercise of an option.
(8) Includes 10,000 shares which Mr. Cassese has the right to acquire
beneficial ownership of upon exercise of an option.
(9) Includes 100,000 shares which Mr. Heffernan has the right to acquire
beneficial ownership of upon exercise of an option.
(10) Includes (i) 120,000 shares which Dr. Moskow has the right to acquire
beneficial ownership of upon exercise of an option and (ii) 12,101 shares
held of record by Physician's Choice Management, LLC.
(11) Includes 10,000 shares which Mr. Ronai has the right to acquire beneficial
ownership of upon exercise of an option.
(12) Includes 349,999 shares which the directors and executive officers have the
right to acquire beneficial ownership of upon exercise of options.
9
<PAGE>
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Company at its principal
executive offices by September 14, 1999 for inclusion in the proxy statement
and form of proxy relating to that meeting and must comply with the applicable
requirements of the federal securities laws.
The By-laws of the Company specify when a stockholder must submit
nominations for director or proposals for consideration at a stockholders'
meeting in order for those nominations or proposals to be considered at the
meeting. In order for the nominations or proposals to be considered at the
meeting, the stockholder making them must have given timely notice in writing
to the Secretary of the Company. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company, 777 South Flagler Drive, Suite 1000E, West Palm Beach, Florida 33401,
not less than 60 days nor more than 90 days prior to the meeting; except that
in the event that less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received no later that the close of business on the 10th
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made.
A stockholder's notice to the Secretary concerning nominations for
director shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such nominee that is required to be disclosed in solicitations of proxies for
the election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such nominee's written consent
to being named in the proxy statement as a nominee and to serve as a director
if elected); and (b) as to the stockholder giving notice (i) the stockholder's
name and address, as they appear on the Company's books and (ii) the class and
number of shares of the Company's stock that are beneficially owned by such
stockholder.
A stockholder's notice to the Secretary with respect to other proposals
shall set forth as to each matter the stockholder proposes to bring before the
meeting (a) a brief description of the business desired to be brought before
the meeting, (b) the stockholder's name and address, as they appear on the
Company's books, (c) the class and number of shares of the Company's stock that
are beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Special Meeting other than as shown above. However, if any
such other business should come before the Special Meeting, it is the intention
of the persons named in the enclosed Proxy to vote the Proxies in respect of
any such business in accordance with their best judgment.
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit Proxies otherwise than by use of
the mail, in that certain officers and regular employees of the Company,
without additional compensation, may use their personal efforts, by telephone
or otherwise, to obtain Proxies. Such assistance may take the form of personal,
telephonic or written solicitation or any combination thereof. The Company will
also request persons, firms and corporations holding shares in their names, or
in the names of their nominees, which shares are beneficially owned by others,
to send this proxy material to and obtain Proxies from such beneficial owners
and will reimburse such holders for their reasonable expenses in doing so.
By Order of the Board of Directors
Denise Schumann, Secretary
Janaury 7, 1999
4911-PS-99 10
<PAGE>
DETACH HERE
PROXY
PHYMATRIX CORP.
PROXY FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 1999
The undersigned, having received the Notice of the Special Meeting in lieu of
Annual Meeting of Stockholders and the Board of Directors' Proxy Statement (the
"Proxy Statement"), hereby appoint(s) Abraham D. Gosman and Frederick R.
Leathers, and each of them, Proxies of the undersigned (with full power of
substitution) to attend the Special Meeting in lieu of Annual Meeting of
Stockholders of PhyMatrix Corp. to be held January 26, 1999, and all
adjournments thereof (the "Meeting"), and there to vote all shares of Common
Stock of PhyMatrix Corp. that the undersigned would be entitled to vote, if
personally present, in regard to all matters which may come before the Meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority (I) to consider and act upon such business, matters or
proposals other than the business set forth on the reverse side as may properly
come before the Meeting and (II) with respect to the election of directors in
the event that any of the nominees is unable or unwilling to serve. The Proxy
when properly executed will be voted in the manner specified herein. If no
specification is made, the Proxies intend to vote FOR all nominees for director.
------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------- -------------
<PAGE>
DETACH HERE
[X] Please mark
votes as in
this sample.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. For the election of all nominees listed below (except as
otherwise indicated).
Nominees: Abraham D. Gosman and Hugh L. Carey
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
In signing, please write name(s) exactly as appearing in the imprint
on this card. For shares held jointly, each joint owner should sign. If
signing as executor, or in any other representative capacity, or as
an officer of a corporation, please indicate your full title as such.
Signature: _______________ Date: ______ Signature: _______________ Date: ______
