UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NUMBER 1
FORM 10-K/A-1
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 01-14358
Harborside Healthcare Corporation
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3307188
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(State or other jurisdiction of (IRS Employer incorporation or
organization) Identification No.)
470 Atlantic Avenue, Boston, Massachusetts 02210
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 556-1515
--------------
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
At March 31, 1998, the registrant had 8,010,664 shares of Common Stock
outstanding. The aggregate market value
<PAGE>
on February 28, 1998 of the registrant's Common Stock held by non-affiliates of
the registrant was $80,978,000 (based on the closing price of these shares as
quoted on such date on the New York Stock Exchange and 3,608,665 shares of
common stock held by non-affiliates).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, including information set forth under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations," constitute "Forward-Looking Statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The
registrant ("the Company") Company desires to take advantage of certain "safe
harbor" provisions of the Reform Act and is including this special note to
enable the Company to do so. Forward-looking statements included in this Form
10-K, or hereafter included in other publicly available documents filed with the
Securities and Exchange Commission (the "Commission"), reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties, and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ materially from the future results, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements. The Company believes the following important factors
could cause such a material difference to occur:
1. The Company's ability to grow through the acquisition and development of
long-term care facilities or the acquisition of ancillary businesses.
2. The Company's ability to identify suitable acquisition candidates, to
consummate or complete construction projects, or to profitably operate or
successfully integrate enterprises into the Company's other operations.
3. The occurrence of changes in the mix of payment sources utilized by the
Company's patients to pay for the Company's services.
4. The adoption of cost containment measures by private pay sources such as
commercial insurers and managed care organizations, as well as efforts by
governmental reimbursement sources to impose cost containment measures.
5. Changes in the United States healthcare system, including changes in
reimbursement levels under Medicaid and Medicare, and other changes in
applicable government regulations that might affect the profitability of
the Company.
6. The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a
number of potentially adverse consequences, such as the imposition of
fines, temporary suspension of admission of patients, restrictions on the
ability to acquire new facilities, suspension or decertification from
Medicaid or Medicare programs, and in extreme cases, revocation of a
facility's license or the closure of a facility, including as a result of
unauthorized activities by employees.
7. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through acquisition and
development, as well as internal growth.
8. Changes in certificate of need laws that might increase competition in the
Company's industry, including, particularly, in the states in which the
Company currently operates or anticipates operating in the future.
9. The Company's ability to staff its facilities appropriately with qualified
healthcare personnel, including in times of shortages of such personnel and
to maintain a satisfactory relationship with labor unions.
10. The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers of
assisted and independent living and providers of home healthcare and
changes in the regulatory system in the state in which the Company operates
that facilitate such competition.
11. The continued availability of insurance for the inherent risks of liability
in the healthcare industry.
12. Price increases in pharmaceuticals, durable medical equipment and other
items.
13. The Company's reputation for delivering high-quality care and its ability
to attract and retain patients, including patients with relatively high
acuity levels.
2
<PAGE>
14. Changes in general economic conditions, including changes that pressure
governmental reimbursement sources to reduce the amount and scope of
healthcare coverage.
The foregoing review of significant factors should not be construed as
exhaustive or as an admission regarding the adequacy of disclosures previously
made by the Company.
EXPLANATORY NOTE
THIS AMENDMENT IS BEING FILED TO AMEND AND RESTATE THE COVER PAGE AND THE
FOLLOWING ITEMS IN THEIR ENTIRETY: PART 1, ITEM 4; PART III, ITEMS 10, 11, 12
AND 13.
3
<PAGE>
PART I
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the
last quarter of the Company's fiscal year ended December 31, 1997.
ITEM 4.1 EXECUTIVE MANAGEMENT OF THE REGISTRANT
Intentionally deleted.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following table sets forth the names and ages of each Director of
the Company, their principal offices with the Company, their term of office as a
Director and any periods during which they have served as such:
<TABLE>
<CAPTION>
Name and Principal Offices with the Company Age Class Term Expires No. of Years
Director
--------
<S> <C> <C> <C> <C>
Robert M. Bretholtz, Director 53 II 1998 2
Sally W. Crawford, Director 44 II 1998 2
Robert T. Barnum, Director 52 III 1999 2
Douglas Krupp, Director 51 III 1999 2
David F. Benson, Director 48 I 2000 2
Stephen L. Guillard, President, Chief Executive
Officer and Director 48 I 2000 2
</TABLE>
Robert M. Bretholtz, a Director of the Company since June 11, 1996, was
President and a Director of Madison Cable Corp., a privately held manufacturing
company, from 1976 to 1995. Mr. Bretholtz is the Chairman of the Board of
Trustees of Brigham and Women's Hospital in Boston and a Corporator for Partners
Healthcare System, Inc., the parent organization of the hospital.
Sally W. Crawford, a Director of the Company since June 11, 1996 served
from 1985 through 1996 as Chief Operating Officer of Healthsource, Inc., a
publicly held managed care organization headquartered in New Hampshire. Ms.
Crawford's responsibilities at Healthsource, Inc. included leading that
company's Northern Region operations and marketing efforts. Ms. Crawford
currently is acting as a consultant. She is a director of Yankee Publishing,
publisher of Yankee Magazine and The Old Farmers Almanac. Ms. Crawford became a
Director of CYTYC Corporation , a publicly traded company located in Foxborough,
Massachusetts that develops, manufactures and markets medical diagnostic
systems.
4
<PAGE>
Robert T. Barnum, a Director of the Company since June 11, 1996, was
President, Chief Operating Officer and a Director of American Savings Bank
("American") from 1992 until the sale of the bank in 1997. He joined American,
the largest privately held thrift in the United States, in 1989 as Chief
Financial Officer. Mr. Barnum is also a Director of Alexander Haagen Properties,
Inc., a publicly held real estate investment trust. He currently is acting as a
private investor.
Douglas Krupp, a Director of the Company and Chairman of the Executive
Committee since its formation, is Co-founder and Chairman of The Berkshire Group
Limited Partnership ("Berkshire"), an integrated real estate financial services
firm engaged in real estate acquisition and property management, mortgage
banking, healthcare facility ownership and financial management. Mr. Krupp
serves as Chairman of The Board of Directors of Berkshire Realty Company, Inc.
("BRI"), a billion dollar equity real estate investment trust that is publicly
traded on the New York Stock Exchange and he serves as Chairman of the Board of
Trustees for Krupp Government Income Trust and Krupp Government Income Trust II.
Since 1990, Douglas Krupp has been a trustee of Bryant College and he serves as
a Corporate Overseer for Brigham and Women's Hospital.
David F. Benson, a Director of the Company since June 11, 1996, has
been President of Meditrust, a real estate investment trust, since September
1991 and was Treasurer of Meditrust from June 1987 to May 1992. He was Treasurer
of The Mediplex Group, Inc. ("Mediplex"), a long -term care company, from
January 1986 through June 1987. He was previously associated with Coopers &
Lybrand L.L.P., from 1979 to 1985. Mr. Benson is a trustee of Mid-Atlantic
Realty Trust, a publicly-held shopping center real estate investment trust.
Stephen L. Guillard has served as President and Chief Executive Officer
of the Company since March 21, 1996 and of the predecessors of the Company since
May 1988 and as a Director and Chairman of the Board of the Company since its
incorporation. Mr. Guillard previously served as Chairman, President and Chief
Executive Officer of Diversified Health Services ("DHS"), a long-term care
company which Mr. Guillard co-founded in 1982. DHS operated approximately 7,500
long-term care and assisted living beds in five states. Mr. Guillard has a total
of 25 years of experience in the long-term care industry and is a licensed
Nursing Home Administrator.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company:
NAME AGE POSITION
Stephen L. Guillard 48 Chairman, President, Chief Executive Officer
and Director
Damian N. Dell'Anno 38 Executive Vice President of Operations
William H. Stephan 41 Senior Vice President and Chief Financial
Officer
Bruce J. Beardsley 34 Senior Vice President of Acquisitions
Michael E. Gomez, R.P.T. 36 Senior Vice President of Rehabilitation
Services
Kenneth Montgomery 39 Senior Vice President of Operations
Information on Mr. Guillard appears above.
Damian N. Dell'Anno has served as Executive Vice President of
Operations of the Company since March 21, 1996 and its predecessors since 1994.
From 1993 to 1994, he served as the head of the specialty
5
<PAGE>
services group for the predecessors of the Company and was instrumental in
developing the Company's rehabilitation therapy business. From 1989 to 1993, Mr.
Dell'Anno was Vice President of Reimbursement for the predecessors of the
Company. From 1988 to 1989, Mr. Dell'Anno served as Director of Budget,
Reimbursement and Cash Management for Mediplex. Mr. Dell'Anno has a total of 15
years of experience in the long-term care industry.
William H. Stephan has served as Senior Vice President and Chief
Financial Officer of the Company since March 21, 1996 and its predecessors since
1994. From 1986 to 1994, Mr. Stephan was a Manager in the health care practice
of Coopers & Lybrand L.L.P. His clients there included long-term care
facilities, continuing care retirement centers, physician practices and acute
care hospitals. Mr. Stephan is a Certified Public Accountant and a member of the
Healthcare Financial Management Association.
Bruce J. Beardsley has served as Senior Vice President of Acquisitions
of the Company since March 21, 1996 and its predecessors since 1994. From 1992
to 1994, he was Vice President of Planning and Development of the predecessors
of the Company with responsibility for the development of specialized services,
planning and engineering. From 1990 to 1992, he was an Assistant Vice President
of the predecessors of the Company responsible for risk management and
administrative services. From 1988 to 1990, Mr. Beardsley served as Special
Projects Manager of the predecessors of the Company. Prior to joining the
predecessors of the Company in 1988, Mr. Beardsley was a commercial and
residential real estate appraiser.
Michael E. Gomez, R.P.T. has served as Senior Vice President of
Rehabilitation Services of the Company since June 14, 1996 and its predecessors
since 1994. From 1993 to 1994, Mr. Gomez served as Director of Therapy Services
for the predecessors of the Company with responsibility for overseeing the
coordination and direction of physical, occupational and speech therapy
services. From 1991 to 1993, Mr. Gomez was Director of Rehabilitation Services
at Mary Washington Hospital in Fredericksburg, Virginia. From 1988 to 1990, he
was Physical Therapy State Manager for Pro-Rehab, a contract therapy company
based in Boone, North Carolina. Mr. Gomez is a licensed physical therapist.
Kenneth Montgomery has served as Senior Vice President of Operations
for the Company since 1996. Mr. Montgomery joined the Company's predecessors in
1991, originally as Administrator at the Company's Gulf Coast facility in New
Port Richey, Florida. He was promoted to Regional Director of Operations for the
Midwest Region in 1993, and served in that position until 1996. Mr. Montgomery
previously served as Administrator, Marketing Specialist and Regional Director
with a long-term care company based in Philadelphia, Pennsylvania, operating
facilities throughout the mid-Atlantic states. He holds a Bachelor's degree in
Marketing/Business Administration from St. Joseph's University, and is a
licensed Nursing Home Administrator in Pennsylvania and Florida.
Each officer of the Company is elected annually by the Board of
Directors for the ensuing year or until a successor is elected and qualified.
There are no family relationships amongst the Officers and Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires directors and executive officers of the Company, and
persons who own more than 10% of the issued and outstanding shares of Common
Stock, to file reports of beneficial ownership with the Commission. Directors,
executive officers and greater than 10% stockholders are required by Commission
regulation to furnish the Company copies of all Section 16(a) forms they file.
6
<PAGE>
Based on a review of the copies of the forms furnished to the Company
or representations by reporting persons, all of the filing requirements
applicable to its officers, directors and greater than 10% stockholders were met
for the year ended December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
Securities
Other Under-
Name and Annual Restricted lying LTIP All Other
Principal Bonus Compen- Stock Options/ Pay- Compen-
Position Year Salary ($) sation Award(s) SARs outs sation
($) (1) ($) (#) ($) ($) (2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen 1997 300,300 232,500 0 0 55,000 0 16,250
Guillard, 1996 310,802 548,000 0 0 80,000 0 15,927
Chairman, 1995 267,800 80,000 0 0 0 0 4,063
President and
Chief
Executive
Officer
Damian 1997 192,115 117,000 0 0 27,000 0 7,578
Dell'Anno, 1996 176,371 266,000 0 0 50,000 0 5,152
Executive 1995 159,326 32,000 0 0 0 0 1,573
Vice President
of Operations
Bruce 1997 151,153 70,000 0 0 17,000 0 8,178
Beardsley, 1996 131,905 237,333 0 0 40,000 0 7,385
Senior Vice 1995 117,192 37,306 0 0 0 0 3,191
President of
Acquisitions
William H. 1997 146,154 60,000 0 0 16,000 0 7,346
Stephan, 1996 127,605 180,250 0 0 40,000 0 6,423
Senior Vice 1995 120,000 24,000 0 0 0 0 5,954
President and
Chief
Financial
Officer
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth 1997 122,019 11,500 0 0 9,000 0 6,856
Montgomery, 1996 106,173 87,000 0 0 10,000 0 11,173
Senior Vice 1995 96,423 18,900 0 0 0 0 13,279
President of
Operations
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1996 amounts includes special bonuses paid to Messrs. Guillard and Dell'Anno
of $438,000 and $212,000, respectively and payments to Messrs. Beardsley,
Stephan and Montgomery in the amounts of $185,250, $150,250 and $67,000,
respectively, under the Executive Plan. See "Employment Agreements and Change of
Control Arrangements", below.
(2) Includes matching contributions made by the Company under its Supplemental
Executive Retirement Plan and 401(k) Plan.
Employment Agreements and Change of Control Arrangements
Upon completion of the Company's initial offering, the Company entered
into employment agreements with Messrs. Guillard, Dell'Anno, Beardsley and
Stephan, each of which has an initial term of two years, subject to automatic
renewal for successive one-year periods unless the Company or the employee gives
notice of non-renewal 60 days prior to expiration. The employment agreements
provide for an annual base salary of $310,000 for Mr. Guillard, $180,000 for Mr.
Dell'Anno, $135,000 for Mr. Beardsley and $130,000 for Mr. Stephan. Such
salaries may be increased, but not decreased, at the discretion of the
Compensation Committee. As of March, 1997, the annual base salaries of Messrs.
Dell'Anno, Beardsley, and Stephan were increased to $190,000, $155,000 and
$150,000, respectively. Each employee will be entitled to participate in all
benefits generally made available to senior executives of the Company and to
receive annual bonus compensation in such amounts and upon such conditions as
determined by the Compensation Committee, but not less than 15% of base salary
in a given year. If any of the employment agreements is terminated by the
Company other than for cause, the employee is entitled to receive all accrued
but unpaid salary and bonus amounts plus termination payments equal to the
employee's monthly base salary for each of the greater of (i) the number of
months remaining under the term of the agreement or (ii) 12 months (24 months in
the case of Mr. Guillard). In the event of an employee's termination due to
disability or death, the employee (or his designated beneficiary) will receive
monthly payments equal to the employee's monthly base salary for 12 months,
reduced by payments made under any disability insurance policy or program
maintained by the Company for the employee's benefit. If any of the employment
agreements is not renewed by the Company at the end of its initial or subsequent
term, the employee will be entitled to receive severance payments equal to the
employee's monthly base salary for 12 months (24 months in the case of Mr.
Guillard).
Each employment agreement provides that neither the employee nor any
business enterprise in which he has an interest may (i) until the later of the
termination of the employee's employment with the Company and the expiration of
two years from the commencement of such employment, engage in activities which
compete with the Company's business, (ii) at any time during the employee's
employment and one year following his termination (two years in the case of Mr.
Guillard), manage or operate any long-term care facility managed or operated by
the Company and (iii) for a period of one year following termination (two years
in the case of Mr. Guillard), solicit or employ persons employed or retained as
a consultant by the Company.
8
<PAGE>
In January of 1998, the Company entered into change of control
agreements with Messrs. Guillard, Dell'Anno, Beardsley, Stephan and Raso. Each
agreement provides for the payment of a bonus equal to one times the Executive's
base salary (1.5 times the base salary in the case of Mr. Guillard) to be paid
upon the occurrence of a change of control of the Company. Also, the agreement
states that any loans made by the Company to the Executive for the purchase of
stock shall be forgiven as of the date that a change of control occurs. If any
Executive's employment with the Company is terminated by the Company for any
reason other than cause within twelve months following a change of control, the
employee is entitled to receive all accrued but unpaid salary and bonus amounts
plus a lump-sum cash payment equal to one times the amount of the Executive's
base salary (1.5 times the base salary in the case of Mr. Guillard) at the rate
in effect immediately prior to the date of termination or at the rate
immediately prior to the change of control, whichever is higher. Further, the
Company will take all steps necessary to fully vest the Executive in the
Supplemental Executive Retirement Plan dated as of September 15, 1995 and the
Company's 401(k) Plan and the Company will reimburse the Executive for
outplacement services up to a maximum reimbursement of $15,000.00.
In 1995, Mr. Guillard subscribed for equity interests in certain of the
Company's predecessors pursuant to an Executive Equity Purchase. The aggregate
subscription price of $438,000, equal to the fair market value of such interests
as of December 31, 1995, was paid by Mr. Guillard in 1996 with the proceeds of a
special bonus equal to such purchase price. To pay taxes due with respect to the
Executive Equity Purchase and this bonus, Mr. Guillard received a loan from the
Company, evidenced by a note maturing April 15, 2001, and bearing interest at
7.0% per annum. In connection with the reorganization pursuant to which the
Company ultimately completed its initial offering, the interests subject to the
Executive Equity Purchase and Messrs. Guillard's and Dell'Anno's interests in
Harborside Healthcare Limited Partnership were exchanged for an aggregate of
307,724 shares of Common Stock. Under his prior employment agreement, Mr.
Dell'Anno also received an additional 18,037 shares of Common Stock pursuant to
the Bonus Payment in connection with the offering (with a value of $212,000).
Mr. Dell'Anno also received a loan from the Company to pay income tax
liabilities that resulted from the Bonus Payment. The loan bears interest at 1%
over the prime rate and will mature on the earlier of three years or when
restrictions on sales of Common Stock under Rule 144 in respect of the Bonus
Payment terminate.
The Company adopted an Executive Long-Term Incentive Plan (the
"Executive Plan") effective July 1, 1995. Eligible participants, consisting of
the Company's department heads and regional directors, were entitled to receive
payment upon an initial public offering or sale of the Company above a baseline
valuation of $23,000,000 within two years of the effective date of the plan. The
Executive Plan terminated upon completion of the Offering. The payments to
Messrs. Beardsley, Stephan, and Montgomery totaled $185,250, $150,250, and
$67,000 respectively.
401(k) Plan
All Company employees with at least one year of service (defined as
1,000 working hours within a consecutive twelve-month period) are eligible to
participate in the Company's retirement savings program (the "401(k) Plan"),
which is designed to be tax deferred in accordance with the provisions of
Section 401(k) of the Internal Revenue Code of 1986 (the "Code"). The 401(k)
Plan provides that each participant may defer up to 15% of his or her total
compensation, subject to statutory limits, and the Company may also make a
discretionary matching contribution to the 401(k) Plan in an amount to be
determined by the Board of Directors at the end of each year. The Company may
also make additional discretionary contributions, in the Board's discretion, to
non-highly compensated participants.
9
<PAGE>
To be eligible for an allocation of Company matching or discretionary
contributions, an employee must be employed by the Company on the last day of
the year. Company matching or additional contributions vest 20% following the
participant's second year of service and an additional 20% annually thereafter.
Supplemental Executive Retirement Plan
Effective September 15, 1995, the Company established a Supplemental
Executive Retirement Plan ("SERP") to provide benefits for key employees of the
Company. Participants may defer up to 25% of their salary and bonus compensation
(100% for the period from September 16, 1995 to December 21, 1995) by making
contributions to the SERP. Amounts deferred by the participant are credited to
his or her account and are always fully vested. The Company matches 50% of
amounts contributed (up to an amount equal to 10% of base salary) which becomes
vested as of January 1 of the second year following the end of the plan year for
which contributions were credited, provided the employee is still employed with
the Company on that date. In addition, participants will be fully vested in such
matching contribution amounts in the case of death or permanent disability or at
the discretion of the Company.
Participants are eligible to receive benefits distributions upon
retirement or in certain predesignated years. Participants may not receive
distributions prior to a pre-designated year, except in the case of termination,
death or disability or demonstrated financial hardship. Only amounts contributed
by the employee may be distributed because of financial hardship.
Although amounts deferred and Company matching contributions are
deposited in a "rabbi trust," they are subject to risk of loss. If the Company
becomes insolvent, the rights of participants in the SERP would be those of an
unsecured general creditor of the Company.
1996 Long-Term Stock Incentive Plan
The Company has adopted, and the Company's stockholders approved, the
Harborside Healthcare Corporation 1996 Long-Term Stock Incentive Plan (the
"Stock Plan").
The Stock Plan is administered by the Stock Plan Committee, which is
comprised of two or more "Non-Employee Directors". Any officer or other key
employee or consultant to the Company or any of its subsidiaries who is not a
member of the Stock Plan Committee may be designated as a participant under the
Stock Plan. The Stock Plan Committee has the sole and complete authority to
determine the participants to whom awards will be granted under the Stock Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent
Total
Number of Options/
Securities SARs Exercise
underlying Granted to or
Name option/SARs Employees Base Grant Date
Granted in Fiscal Price Expiration Value ($)
(#) Year ($/Sh) Date (2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stephen Guillard(1) 55,000 25.8% 12.00 February 12, 2007 $294,250
Damian 27,000 12.7% 12.00 February 12, 2007 $144,450
Dell'Anno(1)
Bruce Beardsley(1) 17,000 8% 12.00 February 12, 2007 $ 90,950
William Stephan(1) 16,000 7.5% 12.00 February 12, 2007 $ 85,600
Kenneth 9,000 4.2% 12.00 February 12, 2007 $ 48,150
Montgomery(1)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Messrs. Guillard, Dell'Anno, Beardsley, Stephan and Montgomery received
options to purchase shares of the Company's Common Stock on February 12, 1997.
One third of these options become exercisable on the first, second and third
anniversary of their date of grant and terminate (with certain exceptions) on
the tenth anniversary of their date of grant.
(2) The fair value of each stock option is estimated on the date of grant using
the Black-Scholes pricing model with the following weighted-average assumptions:
an expected life of five years, expected volatility of 40%, no dividend yield
and a risk-free interest rate of 6.2%.
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised in-
Unexercised the Money
Shares Options/SARs Options/SARs at
Acquired at Fiscal Year-End Fiscal Year End
on Value (#) ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen Guillard 0 0 26,667/108,333 213,336/852,914
Damian Dell'Anno 0 0 16,667/60,333 133,336/475,914
Bruce Beardsley 0 0 13,333/43,667 154,663/441,087
William Stephan 0 0 13,333/42,667 154,663/433,337
Kenneth Montgomery 0 0 3,333/15,667 26,664/123,086
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Compensation of Directors
11
<PAGE>
Independent Directors of the Company are compensated at the rate of
$15,000 per year for their services plus $1,000 for each meeting of the Board of
Directors or committee of the Board of Directors that they attend and receive
reimbursement for their travel expenses. In addition each Independent Director
initially received an option to purchase 15,000 shares of common stock, and
commencing on January 1, 1997, each Independent Director as of each January 1
receives an option to purchase an additional 3,500 shares of common stock.
During 1997, each of Messrs. Barnum, Benson and Bretholtz, and Ms. Crawford
received grants under this plan. Each option grant vests after one year, has a
ten year term, and permits the holder to purchase shares at their fair market
value on the date of grant ($11.75 in the case of options granted in 1996 and
$11.69 in the case of options granted on January 1, 1997 ). Directors are
eligible to participate in the Company's Directors Retainer Fee Plan, pursuant
to which Independent Directors may elect to receive their retainer and meeting
fees currently in cash or Company stock, or may elect to defer receipt of some
or all of their fees in Company stock. Messrs. Barnum and Benson participated in
this plan throughout 1997 and elected to defer 100% of their fees for future
payment in Company Stock.
Compensation Committee Interlocks and Insider Participation
Messrs. Barnum, Benson and Ms. Crawford comprised the Compensation
Committee throughout 1997. Laurence Gerber was also a member of the Committee
until his resignation from the Board of Directors on October 8, 1997. Messrs.
Barnum and Benson and Ms. Crawford comprised the Stock Plan Committee throughout
1997. None of these directors is or has been an officer or employee of the
Company.
The Company has historically entered into a number of financings and
lease arrangements with Meditrust. David F. Benson, the President of Meditrust,
is a Director. Fourteen of the Company's facilities are currently leased from
Meditrust. Total minimum rent payments under the Company's leases with Meditrust
are expected to be approximately $8.0 million for 1998 and were $7.8 million in
1997. Four of the Company's owned facilities are subject to mortgages in favor
of Meditrust.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 31, 1998, there were 8,010,664 shares of the Company's
common stock outstanding. The following table sets forth certain information
with respect to the beneficial ownership of certain voting securities of the
Company by all persons known by the Company to own beneficially more than 5% of
the shares of any class of the Company's stock, each of the Company's Directors,
the named executive officers and by all Directors and executive officers as a
group, as of March 31, 1998:
<TABLE>
<CAPTION>
CLASS OF STOCK NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER (1) BENEFICIAL INTEREST (2) OF CLASS(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock George Krupp (4) 3,382,305 shares 42.2%
Common Stock Douglas Krupp (4) 3,393,605 shares 42.4%
Common Stock The Berkshire Companies
Limited Partnership 2,696,903 direct 33.7%
Common Stock The Douglas Krupp 1994
Family Trust (5) 622,042 direct 7.8%
Common Stock The George Krupp 1994
Family Trust (5) 622,042 direct 7.8%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Brinson Partners, Inc.(6)
209 South Lasalle Street
Chicago, IL 60604-1295 424,800 direct 5.3%
Common Stock Dresdner Bank AG (7)
Jurgen-Ponton-Platz 1
60301 Frankfurt, Germany 857,400 direct 10.7%
Common Stock Dresdner RCM Global Investors LLC (8)
Four Embarcadero Center
San Francisco, CA 94111 857,400 direct 10.7%
Common Stock Nicholas Company, Inc. (9)
700 N. Water Street, Ste 1010
Milwaukee, WI 53202 452,200 direct 5.6%
Common Stock T. Rowe Price Associates, Inc. (10)
100 E. Pratt Street
Baltimore, MD 21202 419,300 direct 5.2%
Common Stock Robert T. Barnum(11) 33,500 shares +
Common Stock David F. Benson (12) 20,500 shares +
Common Stock Robert M. Bretholtz (13) 28,500 shares +
Common Stock Sally W. Crawford (14) 23,500 shares +
Common Stock Stephen L. Guillard (15) 309,211 shares 3.8%
Common Stock Damian N. Dell'Anno (16) 91,467 shares 1.1%
Common Stock Bruce J. Beardsley (17) 22,080 shares +
Common Stock William H. Stephan (18) 22,666 shares +
Common Stock Kenneth Montgomery (19) 6,833 shares +
Common Stock All Directors and Officers (20) 3,963,362 shares 48.3%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
+ The amount owned does not exceed one percent of the common stock of the
Company outstanding as of March 31, 1998.
(1) The address of each person, except as noted, is c/o Harborside Healthcare
Corporation, 470 Atlantic Avenue, Boston, Massachusetts 02210.
(2) Information relating to beneficial ownership is based upon information
furnished by each person using "beneficial ownership" concepts set forth in
rules of the Commission under Section 13 of the Exchange Act. Under those rules,
a person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power" which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose or to direct the disposition of such security. The person is also deemed
to be a beneficial owner of any security of which that person has a right to
acquire beneficial ownership (such as by exercise of options) within 60 days.
Under such rules, more than one person may be deemed to be a beneficial owner of
the same securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she may disclaim any beneficial interest. Except as
indicated in other notes to this table, directors and executive officers
possessed sole voting and investment power with respect to all shares of Common
Stock referred to in the table.
(3) Any Common Stock not outstanding which is subject to options which the
beneficial owner has the right to exercise as of March 31, 1998 or within 60
days thereof shall be deemed outstanding for purposes of computing the
percentage of Common Stock owned by such beneficial owner but shall not be
deemed to be outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by any other
13
<PAGE>
beneficial owner. However, for purposes of determining the percentage of Common
Stock owned by the Directors and Officers as a group, any Common Stock not
outstanding which is subject to options which a member of the group has the
right to exercise as of March 31, 1998 or within 60 days thereof shall be deemed
outstanding for purposes of computing the percentage of ownership of the group.
(4) Includes 2,696,903 shares of Common Stock received by The Berkshire
Companies Limited Partnership ("BCLP") and 63,360 shares of Common Stock
received by Krupp Enterprises Limited Partnership ("Enterprises"), in each case
in connection with the reorganization of the Company's predecessors that
occurred in connection with the Company's initial public offering (the
"Reorganization"). The general partners of BCLP are KGP-1, Inc. ("KGP-1") and
KGP-2, Inc. ("KGP-2") and the general partner of Enterprises is KGP-1. KGP-1 and
KGP-2 are both 50% owned by each of George Krupp and Douglas Krupp. By virtue of
their interests in the general partners of BCLP and Enterprises, George Krupp
and Douglas Krupp may each be deemed to beneficially own the 2,760,263 shares of
Common Stock held by BCLP and Enterprises. In addition, George Krupp and Douglas
Krupp may each be deemed to beneficially own the 622,042 shares of Common Stock
held by their respective family trusts. See Note 5, below. Also, Douglas Krupp
disclaims beneficial ownership of 11,300 shares owned by his wife.
(5) Includes 622,042 shares of Common Stock received in connection with the
Reorganization by each of The George Krupp 1994 Family Trust ("GKFT") and The
Douglas Krupp 1994 Family Trust ("DKFT"). Each of George Krupp and Douglas Krupp
may be deemed to beneficially own the 622,042 shares of Common Stock held by
GKFT and DKFT, respectively. The trustees of both GKFT and DKFT are Lawrence I.
Silverstein, Paul Krupp and M. Gordon Ehrlich (the "Trustees"). The Trustees
share control over the power to dispose of the assets of GKFT and DKFT and thus
each may be deemed to beneficially own the 622,042 shares of Common Stock held
by GKFT and DKFT; however, each of the Trustees disclaims beneficial ownership
of all of such shares which are or may be deemed to be beneficially owned by
George Krupp or Douglas Krupp.
(6) According to its filing on Schedule 13G made with the Commission on February
11, 1998, Brinson Partners, Inc. ("BPI") is an Investment Adviser registered
under Section 203 of the Investment Advisers Act of 1940. BPI filed a joint
Schedule 13G filing with Brinson Holdings, Inc. ("BHI"), SBC Holding (USA),
Inc.("SBCUSA"), and Swiss Bank Corporation ("SBC"). The filing states that each
of BHI, SBCUSA, and SBC is a Parent Holding Company in accordance with section
240.13d-1(b) (1) (ii) (G). The filing further states that accounts managed on a
discretionary basis by BPI have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Harborside
Common Stock. The filing further states that no account holds more than 5% of
the outstanding Common Stock and each of BPI, BHI, SBCUSA, and SBC has shared
voting and dispositive power over the 424,800 shares deemed to be beneficially
owned.
(7) According to its filing on Schedule 13G made with the Commission on February
6, 1998, Dresdner Bank AG ("Dresdner") is an international banking organization
headquartered in Frankfurt, Germany. The filing states that Dresdner RCM Global
Investors LLC ("Dresdner RCM"), a wholly owned subsidiary of Dresdner, is an
investment adviser registered under Section 203 of the Investment Advisers Act
of 1940. Dresdner has stated that it has beneficial ownership of the Company's
stock only to the extent that Dresdner may be deemed to have beneficial
ownership of securities deemed to be beneficially owned by Dresdner RCM.
(8) According to its filing on Schedule 13G made with the Commission on February
6, 1998, Dresdner RCM Global Investors LLC ("Dresdner RCM") is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940.
Dresdner RCM filed a joint statement on Schedule 13G with RCM Limited L.P. ("RCM
Limited"), and RCM General Corporation ("RCM General"). RCM Limited
14
<PAGE>
is the Managing Agent of Dresdner RCM and filed a Schedule 13G pursuant to Rule
13d-1(b) (ii) (G). RCM Limited stated that it has beneficial ownership of the
Company's stock only to the extent that RCM Limited may be deemed to have
beneficial ownership of securities deemed to be beneficially owned by Dresdner
RCM. RCM General is the General Partner of RCM Limited, the Managing Agent of
Dresdner RCM and has filed a Schedule 13 G pursuant to Rule 13d-1(b) (ii) (G).
RCM General stated that it has beneficial ownership of the Company's stock only
to the extent that RCM General may be deemed to have beneficial ownership of
securities deemed to be beneficially owned by Dresdner RCM.
(9) According to its joint filing with Nicholas Limited Edition, Inc. ("NLE")
and Albert O. Nicholas on Schedule 13G made with the Commission on January 22,
1998, Nicholas Company, Inc. ("NCI") is an investment adviser registered under
the Investment Advisers Act of 1940. NCI states that one or more of its advisory
clients is the legal owner of the Company's common stock covered by the filing.
The filing states that pursuant to investment advisory agreements with its
advisory clients, NCI has the authority to direct the investments of its
advisory clients, and consequently to authorize the disposition of the common
stock. According to the filing, NLE is an open-end management investment company
registered under the Investment Act of 1940. NCI acts as the investment adviser
to NLE and as such retains dispositive control of the shares in which NLE
invests. NLE claims that it retains the beneficial ownership right to vote
shares purchased by NCI for its account. According to the filing, Albert O.
Nicholas is the president, a director, and majority shareholder of NCI, in which
capacity he exercises dispositive power over the securities reported by NCI and
NLE. The filing states that Mr. Nicholas, therefore, may be deemed to have
indirect beneficial ownership over such securities. The filing states that
except as otherwise indicated, Mr. Nicholas has no interest in dividends or
proceeds from the sale of such securities, owns no such securities for his own
account and disclaims beneficial ownership of all the securities reported herein
by NCI. According to the filing, the beneficial ownership reported by NCI, NLE,
and Albert O. Nicholas relates to the same shares of the Company in which each
such reporting person has a separate beneficial interest.
(10) According to its filing on Schedule 13G made with the Commission on
February 9, 1998, T. Rowe Price Associates, Inc. ("Price Associates") is an
investment adviser registered under Section 203 of the Investment Advisers Act
of 1940. The filing states that Price Associates does not serve as custodian of
the assets of any of its clients; accordingly each client or the client's
custodian or trustee bank has the right to receive dividends paid with respect
to, and proceeds from the sale of, such securities. According to the filing, (i)
the ultimate power to direct the receipt of dividends paid with respect to, and
the proceeds from the sale of, such securities, is vested in the individual and
institutional clients for whom Price Associates serves as investment adviser and
(ii) any and all discretionary authority which has been delegated to Price
Associates may be revoked in whole or in part at any time.
(11) Includes 15,000 shares of Common Stock which are directly owned and 18,500
shares of Common Stock which may be acquired pursuant to Options.
(12) Includes 2,000 shares of Common Stock which are directly owned and 18,500
shares of Common Stock which may be acquired pursuant to Options.
(13) Includes 10,000 shares of Common Stock which are directly owned and 18,500
shares of Common Stock which may be acquired pursuant to Options.
(14) Includes 5,000 shares of Common Stock which are directly owned and 18,500
shares of Common Stock which may be acquired pursuant to Options.
15
<PAGE>
(15) Includes 261,611 shares of Common Stock which are directly owned, and
45,000 shares of Common Stock which may be acquired pursuant to Options. Also
includes, 2,600 shares of Common Stock owned by Mr.
Guillard's immediate family for which he disclaims beneficial ownership.
(16) Includes 65,600 shares of Common Stock which are directly owned, and 25,667
shares of Common Stock which may be acquired pursuant to Options. Also includes
200 shares owned by Mr. Dell'Anno's spouse for which he disclaims beneficial
ownership.
(17) Includes 3,080 shares which are directly owned and 19,000 shares of Common
Stock which may be acquired pursuant to Options.
(18) Includes 4,000 shares of Common Stock which are directly owned and 18,666
shares of Common Stock which may be acquired pursuant to Options.
(19) Includes 500 shares of Common Stock which are directly owned and 6,333
shares of Common Stock which may be acquired pursuant to Options.
(20) Includes 3,763,696 shares of Common Stock which is directly or indirectly
owned and 199,666 shares of Common Stock which may be acquired pursuant to
Options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Berkshire Companies Limited Partnership ("BCLP"), is beneficially
owned by, among others, Douglas Krupp, a director of the Company and his brother
George Krupp. BCLP has historically had and expects to maintain certain
relationships with the Company. All such transactions with George or Douglas
Krupp or their affiliates, including BCLP, are and in the future will be
approved by disinterested directors.
Effective October 1, 1994, the Company entered into an agreement to
lease its Brevard facility from Rockledge T. Limited Partnership ("RTLP"), which
is beneficially owned by Douglas Krupp and George Krupp. The Brevard lease
agreement is for a period of ten years, plus up to two five-year renewals. Rent
was $551,250 for the initial twelve-month period and increases by 2.0% each year
thereafter. At the end of the initial lease term, the Company has the option to
exercise two consecutive five-year lease renewals. The Company also has the
right after the fifth anniversary of the commencement of the lease to purchase
the facility at its fair market value. RTLP is required to make capital
expenditures totaling $500,000 during the first three years of the lease. As of
December 31, 1997, all of such capital expenditures had been made.
In June, 1996 the Company and BCLP entered into an Administrative
Services Agreement (the "Agreement") pursuant to which BCLP provided office
space, legal, tax, data processing and other administrative services to the
Company in return for a monthly fee. The initial term of the Agreement ended on
December 31, 1996, and was automatically renewable annually thereafter. Total
service charges were $708,000 for the year ended December 31, 1997. Pursuant to
the terms of that agreement, the Company or BCLP had the ability to terminate
the agreement upon 120 days' prior written notice. Further, the Agreement
provided that the Company would indemnify BCLP, including its officers and
partners, to the fullest extent permitted by Delaware law, as if BCLP were an
agent of the Company in connection with the performance of its services under
the agreement. BCLP had agreed to indemnify the Company for losses arising from
BCLP's deliberate dishonesty or gross negligence or willful misconduct.
On April 15, 1998, the Agreement was amended and restated at the
request of the Company (the "Amended Agreement") to be effective as of January
1, 1998. Under the terms of the Amended Agreement,
16
<PAGE>
provision of certain services (office space, office administration and investor
services) terminates automatically on December 31, 1998. Either party may
terminate the other services provided thereunder upon prior written notice
ranging from a time period of 60 to 360 days depending on the service. In
addition, tax and data processing services may not be terminated before preset
dates ranging from March 31, 1999 to December 31, 2001 unless certain conditions
are met. Under the Amended Agreement, BCLP agreed to exercise the same care with
respect to rendering services to the Company as it exercises when it provides
services to Affiliates. The Company agreed that BCLP would in no event be liable
for special or consequential damages. The indemnification provisions otherwise
remained unchanged.
The Company's current Boston headquarters occupy office space leased
from BCLP, which is paid for pursuant to the Amended Agreement. The Company has
entered into a lease for new office space with an unaffiliated third party and
expects to relocate its offices during the third or fourth quarter of 1998. In
connection with such relocation the Company is considering subleasing excess
space at its new headquarters to BCLP on a short term basis. The Company expects
that any such sublease would be on an arms' length basis. Management believes
that the terms of the Amended Agreement are as favorable to the Company as could
be obtained from independent third parties.
In connection with the acquisition of the Company's Decatur facility, a
subsidiary of the Company assumed a first mortgage note from the facility's
prior owner. Douglas Krupp personally guaranteed the note which at the time had
a remaining balance of $1,775,000. As of March 31, 1998, the remaining
principal balance on the note is $1,571,666. The Company has agreed to indemnify
Mr. Krupp for liability under such guaranty.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 30th day of
April 1998.
HARBORSIDE HEALTHCARE
CORPORATION
By /s/ Stephen L. Guillard
--------------------------
Chairman of the Board,
President and
Chief Executive
Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated
/S/ Robert T. Barnum Director
- --------------------
Director
- --------------------
David F. Benson
/S/ Robert M. Bretholtz Director
- -----------------------
/S/ Sally W. Crawford Director
- ---------------------
/S/ Stephen L. Guillard President, Chief Executive Officer and Director
- ----------------------- (Principal Executive Officer)
/S/ Douglas Krupp Director
- -----------------
/S/ William H. Stephan Senior Vice President and Chief Financial Officer
- ---------------------- (Principal Financial and Accounting Officer)
18
