<PAGE>
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
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
Karrington Health, Inc.
------------------------------------------------------------------
(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:
-------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
(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):
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------
(5) Total fee paid:
----------------------------------------------------
[ ] 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:
-------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------
(3) Filing Party:
-----------------------------------------------------
(4) Date Filed:
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<PAGE>
KARRINGTON HEALTH, INC.
919 Old Henderson Road
Columbus, Ohio 43220
April 11, 1997
Dear Fellow Shareholders:
The Annual Meeting of the Shareholders (the "Annual Meeting") of Karrington
Health, Inc., an Ohio corporation (the "Company"), will be held at 11:00 a.m.,
local time, on Tuesday, May 13, 1997, at the Da Vinci Ristorante, 4740 Reed
Road, Columbus, Ohio. The enclosed Notice of Annual Meeting of Shareholders and
Proxy Statement contain detailed information about the business to be transacted
at the Annual Meeting.
The Board of Directors has nominated three directors, each for a term to expire
at the Annual Meeting in the year 2000. The Board of Directors recommends that
you vote FOR the nominees.
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, the prompt return of your proxy in the enclosed return envelope will
save the Company additional expenses of solicitation and will help ensure that
as many shares as possible are represented.
Sincerely,
/s/ Richard R. Slager
Richard R. Slager
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
<PAGE>
KARRINGTON HEALTH, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Tuesday, May 13, 1997
NOTICE IS HEREBY GIVEN that the First Annual Meeting of Shareholders (the
"Annual Meeting") of Karrington Health, Inc., an Ohio corporation (the
"Company"), will be held at the Da Vinci Ristorante, 4740 Reed Road, Columbus,
Ohio, on Tuesday, May 13, 1997, at 11:00 a.m., local time, for the following
purposes:
1. To elect three directors, each for a term to expire at the Annual
Meeting of Shareholders in the year 2000; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on April 8, 1997, as
the record date for determining the shareholders entitled to notice of, and to
vote at, the Annual Meeting and at any adjournment or postponement thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you may insure your representation by
completing, signing, dating and promptly returning the enclosed proxy card. A
return envelope, which requires no postage if mailed in the United States, has
been provided for your use. If you attend the Annual Meeting and inform the
Secretary of the Company in writing that you wish to vote your shares in person,
your proxy will not be used.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Annual Meeting, you must obtain a letter from the broker,
bank or other nominee confirming your beneficial ownership of the shares and
bring it to the meeting. In order to vote your shares at the Annual Meeting, you
must obtain from the record holder a proxy issued in your name.
By Order of the Board of Directors,
/s/ Charles H. McCreary
Charles H. McCreary,
SECRETARY
Karrington Health, Inc.
919 Old Henderson Road
Columbus, Ohio 43220
April 11, 1997
<PAGE>
KARRINGTON HEALTH, INC.
919 OLD HENDERSON ROAD
COLUMBUS, OHIO 43220
-------------------
PROXY STATEMENT
-------------------
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors and management of Karrington Health, Inc., an
Ohio corporation (the "Company"), of proxies for use at the 1997 Annual Meeting
of Shareholders of the Company (the "Annual Meeting") to be held at the Da Vinci
Ristorante, 4740 Reed Road, Columbus, Ohio, on Tuesday, May 13, 1997, at 11:00
a.m., local time, and at any and all postponements or adjournments thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
This Proxy Statement and the accompanying form of proxy are first being
mailed to shareholders on or about April 11, 1997.
GENERAL
Only holders of record of the Company's common shares (the "Common
Shares"), on April 8, 1997 (the "Record Date"), are entitled to notice of and to
vote at the Annual Meeting or any postponements or adjournments thereof. As of
the Record Date, there were 6,700,000 Common Shares outstanding. Each Common
Share entitles the holder thereof to one vote. A quorum for the Annual Meeting
is a majority of the voting shares outstanding. There is no cumulative voting.
Other than the Common Shares, there are no other voting securities of the
Company outstanding.
If the accompanying proxy card is properly signed and returned to the
Company prior to the Annual Meeting and not revoked, it will be voted in
accordance with the instructions contained therein. If no instructions are
given, the persons designated as proxies in the accompanying proxy card will
vote FOR the election as directors of those persons named below.
The Board of Directors is not currently aware of any matters other than
those referred to herein which will come before the Annual Meeting. If any
other matter should be presented at the Annual Meeting for action, the persons
named in the accompanying proxy card will vote the proxy in their own
discretion.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company, by submitting a subsequently dated proxy or by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting will not, in
itself, constitute revocation of the proxy.
The expense of preparing, printing and mailing proxy materials to the
Company's shareholders will be borne by the Company. In addition, proxies may
be solicited personally or by telephone, mail or telegram. Officers or
employees of the Company may assist with personal or telephone solicitation and
will receive no additional compensation therefor. The Company will also
reimburse brokerage houses and other nominees for their reasonable expenses in
forwarding proxy materials to beneficial owners of the Common Shares.
<PAGE>
BENEFICIAL OWNERSHIP OF COMPANY SECURITIES
The following table sets forth certain information with respect to each
person known by the Company to own beneficially more than five percent of any
class of the Company's voting securities. The Company believes that each
individual or entity named has sole investment and voting power with respect to
the Common Shares indicated as beneficially owned by such individual or entity,
except as otherwise noted.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- -------------------- -----
JMAC, Inc. 2,250,000 33.6%
150 E. Wilson Bridge Road, Suite 230
Worthington, Ohio 43085
John H. McConnell 2,261,000(1)(2) 33.7%
150 E. Wilson Bridge Road, Suite 230
Worthington, Ohio 43085
Richard R. Slager 717,770(3) 10.7%
Karrington Health, Inc.
919 Old Henderson Road
Columbus, Ohio 43220
Alan B. Satterwhite 717,770 10.7%
Karrington Health, Inc.
919 Old Henderson Road
Columbus, Ohio 43220
Janus Capital Corporation 651,500(4)(5) 9.7%
Thomas H. Bailey
100 Fillmore Street
Denver, Colorado 80206-4923
Ohio PERS 600,000(4) 9.0%
277 East Town Street
Columbus, Ohio 43215
Scudder, Stevens & Clark, Inc. 534,800(4)(6) 8.0%
345 Park Avenue
New York, New York 10154
- -------------------
(1) Includes currently exercisable options to purchase 6,000 Common Shares.
(2) Includes all of the Common Shares held of record by JMAC, Inc. ("JMAC").
Mr. McConnell is the Chairman of the Board of JMAC, and the directors of
JMAC have given him sole voting and investment power in the Common Shares
of the Company held by it.
(3) Includes 200,000 Common Shares held of record by Mr. Slager's wife with
respect to which he disclaims beneficial ownership.
(4) Based upon filings with the Securities and Exchange Commission.
2
<PAGE>
(5) Janus Capital Corporation, a registered investment adviser, and Mr. Bailey,
its Chairman and President, report that they may be deemed to have shared
voting and dispositive power with respect to 651,500 Common Shares in
various managed portfolios. They disclaim beneficial ownership of such
Common Shares.
(6) The reporting person has sole voting power with respect to 81,000 Common
Shares, shared voting power as to 313,900 Common Shares and sole
dispositive power as to all of the 534,800 Common Shares.
The following table sets forth the number and percentage of outstanding
Common Shares beneficially owned as of the Record Date by (i) each director of
the Company; (ii) each executive officer of the Company included in the Summary
Compensation Table; and (iii) all directors and executive officers of the
Company as a group. The Company believes that each individual or entity named
has sole investment and voting power with respect to the Common Shares indicated
as beneficially owned by such individual or entity, except as otherwise noted.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class(1)
---------------- -------------------- -------
Richard R. Slager 717,770(2) 10.7%
Alan B. Satterwhite 717,770 10.7%
John K. Knutson 0 *
Stephen Lewis 300 *
Charles H. McCreary 8,670(3)(4) *
Michael H. Thomas 12,000(3) *
John S. Christie 8,700(3)(5) *
Bernadine P. Healy 7,300(3) *
David H. Hoag 8,000(3) *
John H. McConnell 2,261,000(3)(6) 33.7%
James V. Pickett 9,000(3)(7) *
Harold A. Poling 16,000(3) *
Robert D. Walter 26,000(3) *
All directors and executive
officers as a group (16 persons) 3,794,060(2)(4)(5)(6)(7)(8) 56.2%
- -----------------------
* Less than 1%.
(1) The percent of class is based upon the sum of (i) 6,700,000 Common Shares
outstanding on the Record Date and (ii) the number of Common Shares as to
which the named person has the right to acquire beneficial ownership upon
the exercise of options under the Karrington Health, Inc. 1996 Incentive
Stock Plan (the "Plan") which are exercisable within 60 days of the Record
Date.
(2) See Note 3 to preceding table.
(3) Includes currently exercisable options to purchase 6,000 Common Shares.
(4) Includes 1,700 Shares as to which Mr. McCreary has shared voting and
investment power with his wife and 670 Shares held by Mr. McCreary as
custodian for his minor children.
(5) Includes 500 shares to which Mr. Christie has shared voting and investment
power.
(6) See Note 2 to preceding table.
(7) Includes 3,000 shares as to which Mr. Pickett has shared voting and
investment power.
(8) Includes currently exercisable options to purchase 54,000 Common Shares.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations of the Company, the authorized number
of directors is eleven, divided into one class consisting of three directors and
two classes consisting of four directors each. At the Annual Meeting, three
directors will be elected, each for a term expiring at the Annual Meeting in the
year 2000 and until his or her successor is duly elected and qualified, or until
his or her earlier death, resignation or removal. The Board of Directors has no
reason to believe that any of the nominees will not serve if elected, but if any
of them should become unavailable to serve as a director, and if the Board
designates a substitute nominee, the persons named in the accompanying proxy
card will vote for the substitute nominee designated by the Board of Directors.
The following information, as of the Record Date, with respect to the
principal occupation or employment, other affiliations and business experience
of each director during the last five years has been furnished to the Company
by each director. References to "the Company" include the Company's
predecessors, DevelopMed Associates, Inc. and Karrington Operating Company.
Except where indicated, each director has had the same principal occupation for
the last five years.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
NOMINEES STANDING FOR ELECTION
TO THE BOARD OF DIRECTORS
Bernadine P. Healy 52 Director of the Company since July 1996.
Dr. Healy has served as Dean of Medicine
and as a Professor of Internal Medicine
at The Ohio State University since
October 1995. Prior thereto she was
Senior Policy Advisor of The Page
Center, The Cleveland Clinic Foundation.
From 1991 to 1993, Dr. Healy was the
Director of the National Institutes of
Health. Dr. Healy serves on the Board
of Directors of National City Corp.,
Invacare, Medronics and Somatogen.
Alan B. Satterwhite 49 Co-founder of the Company, Director
since April 1996 and Chief Operating
Officer and Chief Financial Officer
since the Company's formation in 1990.
Michael H. Thomas 47 Director of the Company since May 1996.
Mr. Thomas is a certified public
accountant and has been employed by JMAC
as its Executive Vice President and
Treasurer since 1980.
TERMS EXPIRING IN 1998
John S. Christie 47 Director of the Company since May 1996.
Since October 1, 1995, Mr. Christie has
been the President of JMAC. Prior to
1995, Mr. Christie was Senior Vice
President, Corporate Development, of The
Battelle Memorial Institute, the world's
largest private research organization,
based in Columbus, Ohio.
4
<PAGE>
David H. Hoag 57 Director of the Company since July 1996.
Mr. Hoag has served as the Chairman of
the Board, President and Chief Executive
Officer of The LTV Corporation since
June 1991. The LTV Corporation
completed a reorganization under Chapter
11 of the U.S. Bankruptcy Code in June
1993. Mr. Hoag serves on the Board of
Directors of The Chubb Corporation and
Lubrizol Corporation.
Charles H. McCreary 44 Secretary of the Company since May 1996;
director of the Company since July 1996.
Mr. McCreary is a partner in the law
firm of Bricker & Eckler, which firm has
represented the Company since its
formation.
James V. Pickett 55 Director of the Company since July 1996.
Mr. Pickett has served as Chairman of
Pickett Realty Advisors, a Dublin,
Ohio-based asset manager for a hotel
portfolio, since 1965, and, in addition,
has served as the Managing Director of
the real estate investment group of Banc
One Capital Corporation since 1993. Mr.
Pickett serves on the Board of Directors
of Wendy's International, Inc. and
Metatec Corporation.
TERMS EXPIRING IN 1999
John H. McConnell 73 Director of the Company since July 1996.
Mr. McConnell is the founder and
Chairman Emeritus of Worthington
Industries, Inc. Mr. McConnell is
Chairman of the Board of U.S. Health,
Inc., a regional not-for-profit acute
care provider based in Columbus, Ohio.
Harold A. Poling 71 Director of the Company since July 1996.
Mr. Poling is the retired Chairman of
the Board of Ford Motor Company and also
serves on the Board of Directors of
Shell Oil Company, The LTV Corporation
and Kellogg Company.
Richard R. Slager 43 Co-founder of the Company; Chairman of
the Board of the Company since April
1996 and President and Chief Executive
Officer since the Company's formation in
1990.
Robert D. Walter 51 Director of the Company since July 1996.
Mr. Walter is the Chairman and Chief
Executive Officer of Cardinal Health,
Inc., a Dublin, Ohio based health care
service provider. Mr. Walter serves on
the Board of Directors of Banc One
Corporation and Westinghouse Electric
Corporation.
5
<PAGE>
RECOMMENDATION AND VOTE
Under Ohio law and the Company's Code of Regulations, the three nominees
for election to the Board of Directors receiving the greatest number of votes
will be elected.
Common Shares represented by the accompanying proxy card will be voted FOR
the election of the above nominees unless authority to vote for one or more
nominees is withheld. Shareholders may withhold authority to vote for the entire
slate as nominated or, by writing the name of one or more nominees in the space
provided in the proxy card, withhold the authority to vote for such nominee or
nominees. Common Shares as to which the authority to vote is withheld will be
counted for quorum purposes but will not be counted toward the election of
directors, or toward the election of the individual nominees specified on the
form of proxy.
Broker/dealers who hold their customers' shares in street name may, under
the applicable rules of the exchange and other self-regulatory organizations of
which the broker/dealers are members, sign and submit proxies for such shares
and may vote such shares on routine matters, which, under such rules, typically
include the election of directors, but broker/dealers may not vote such shares
on other matters, which typically include amendments to the articles of
incorporation of the Company and the approval of stock compensation plans,
without specific instructions from the customer who owns such shares. Proxies
signed and submitted by broker/dealers which have not been voted on certain
matters as described in the previous sentence are referred to as broker
non-votes. Shares as to which the authority to vote is withheld and broker
non-votes are not counted toward the election of directors or toward the
election of the individual nominees specified on the proxy card.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF ITS NOMINEES FOR DIRECTORS, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE
ENCLOSED PROXY CARD.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors held two regularly scheduled or special meetings
during 1996. The Board of Directors has a standing Audit Committee,
Compensation Committee and Executive Committee. During 1996, each member of the
Board except Mr. Hoag attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of the committees on which he or she
served.
AUDIT COMMITTEE. The Audit Committee (1) reviews the accounting and
financial reporting practices of the Company and the adequacy of its system of
internal controls, (2) reviews the scope and results of any outside audit of the
Company and the fees therefor and (3) makes recommendations to the Board of
Directors or management concerning auditing and accounting matters and the
selection of outside auditors. The Audit Committee met one time during 1996.
The members of the Audit Committee are James V. Pickett, Harold A. Poling,
Michael H. Thomas and Robert D. Walter.
COMPENSATION COMMITTEE. The Compensation Committee reviews, considers and
acts upon matters of salary and other compensation and benefits of all executive
officers of the Company and acts upon all matters concerning executive
compensation and exercises such authority as is delegated to it under the
provisions of the Plan. The Compensation Committee did not meet during 1996.
The members of the Compensation Committee are Bernadine P. Healy, John S.
Christie, John H. McConnell and David H. Hoag.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company receive no
additional compensation for their services as members of the Board of Directors
or as members of Board committees. Directors who are not officers or employees
of the Company are paid a quarterly fee of $3,000, as well as additional fees of
$1,000 for each meeting of the Board or of a Board committee attended by such
Director. The Company's Directors are reimbursed for their out-of-pocket
expenses incurred in connection with their service as directors, including
travel expenses. In addition, pursuant to the Plan, each Director who is not an
employee of the Company receives a grant of an option
6
<PAGE>
to purchase 6,000 Common Shares upon his or her election as a director and an
annual option thereafter to purchase 2,000 Common Shares.
EXECUTIVE OFFICERS
The following table sets forth certain information as of the Record Date
regarding each of the Company's executive officers:
NAME AGE POSITION
- ---- --- --------
Richard R. Slager ............ 43 Chairman of the Board, President and
Chief Executive Officer
Alan B. Satterwhite .......... 49 Director, Chief Operating Officer and
Chief Financial Officer
Robin V. Holderman ........... 45 Executive Vice President, Corporate
Development
Anthony E. DiBlasi ........... 46 Senior Vice President, Construction
John K. Knutson .............. 54 Senior Vice President, Operations
Stephen Lewis ................ 51 Senior Vice President, Development,
General Counsel and Assistant Secretary
Mark N. Mace ................. 41 Senior Vice President, Finance and
Treasurer
Charles H. McCreary .......... 44 Director and Secretary
For additional information regarding Messrs. Slager, Satterwhite and
McCreary, see "Election of Directors."
Robin V. Holderman has served as Executive Vice President, Corporate
Development since October 1996. Prior to joining the Company, Mr. Holderman was
President of Ruscilli Development Co., Ltd., a real estate development company,
from May 1995 to November 1996. He served as Manager of Industrial Development
of Duke Realty Investments, Inc., a real estate development company, from April
1994 to May 1995, and prior thereto was President of ConQuest Corporation, a
commercial and industrial real estate development company located in Columbus,
Ohio, which was founded more than nine years ago. From 1990 through 1992, he
was the Director of Development for the Columbus office of the Miller-Valentine
Group, a Dayton, Ohio-based commercial real estate developer and design/build
contractor. Mr. Holderman is also a director of Cooker Restaurant Corporation.
Anthony E. DiBlasi has served as Senior Vice President, Construction since
April 1996. Prior to joining the Company, Mr. DiBlasi was Vice President,
Construction, for Heartland Food Systems, Inc., a major franchisee of Hardees
Restaurants, from 1992 to 1996. Prior thereto he was Vice President, Director
of Construction, for Trio Construction, a general contractor in Columbus, Ohio.
John K. Knutson has served as Senior Vice President, Operations since
February 1996. Prior to joining the Company, Mr. Knutson was Vice President of
Operations for LeisureCare, Inc., a senior housing company based in Bellevue,
Washington.
Stephen Lewis has served as Senior Vice President, Development and General
Counsel of the Company since November 1993. Prior to joining the Company, Mr.
Lewis was general counsel of VOCA Corporation, a multi-state operator of
residential centers for persons with mental retardation and other developmental
disabilities.
Mark N. Mace has served as Senior Vice President, Finance and Treasurer of
the Company since March 1996. Prior to joining the Company, Mr. Mace was a
Senior Manager with Deloitte & Touche LLP, a national accounting firm.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ended December 31, 1996 and 1995,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and the only other executive officers of the Company whose compensation
exceeded $100,000 (the "Named Executive Officers") for services rendered to the
Company and its predecessors.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------ ------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL OPTIONS/ COM-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) SARS(2) PENSATION(3)
- ------------------------------------ ------ -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Richard R. Slager.................. 1996 $191,154 $46,954 20,000 $5,417
Chairman of the Board, 1995 $146,923 $56,044 0 $2,665
President and Chief
Executive Officer
Alan B. Satterwhite................ 1996 $166,154 $46,954 20,000 $2,853
Chief Financial Officer and 1995 $123,846 $56,044 0 $1,435
Chief Operating Officer
John K. Knutson (4)................ 1996 $101,424 $15,000 7,500 $33,323
Senior Vice President,
Operations
Stephen Lewis...................... 1996 $90,380 $24,674 7,500 $0
Senior Vice President, 1995 $62,019 $10,697 0 $0
Development, General
Counsel and Assistant
Secretary
- ---------------------------------
</TABLE>
(1) The Named Executive Officers participate in the Company's profit sharing
plan together with substantially all the employees of the Company. For
residence employees, profit sharing is based on the operating profit of the
residence. For other employees, profit sharing is based on the
profitability of the Company. Cash payments are made quarterly.
(2) These numbers represent options for Common Shares granted pursuant to the
Plan. See the table under "Option Grants in Last Fiscal Year" for more
detailed information on such options.
(3) "All Other Compensation" for the Named Executive Officers consists of life
insurance premiums paid by the Company on behalf of Mr. Slager and Mr.
Satterwhite and moving and relocation expenses for Mr. Knutson.
(4) In February 1996, Mr. Knutson was hired as the Company's Senior Vice
President of Operations for an annual base salary of $120,000.
8
<PAGE>
GRANTS OF OPTIONS
The following table sets forth information concerning individual grants of
options made during 1996 to each of the Named Executive Officers. The Company
has never granted stock appreciation rights.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE LAST FISCAL YEAR
Individual Grants(1)
--------------------------------------------------------
Potential Realizable
% of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise for Option Term(2)
Options Employees in Price Expiration -----------------------
Name Granted(#) Fiscal Year ($/Share) Date 5%($) 10%($)
- ---- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Slager............. 20,000 17.4% $13 7/18/2006 $163,000 $414,400
Alan B. Satterwhite........... 20,000 17.4% $13 7/18/2006 $163,000 $414,400
John K. Knutson............... 7,500 6.5% $13 7/18/2006 $61,350 $155,400
Stephan Lewis................. 7,500 6.5% $13 7/18/2006 $61,350 $155,400
</TABLE>
- -------------------------
(1) All options are non-qualified options granted under the Company's 1996
Incentive Stock Plan as of July 18, 1996, at the initial public offering
price. All such options become exercisable in four equal annual portions
commencing on the second anniversary of the date of grant.
(2) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on option exercises will
be dependent on the actual appreciation of the Common Shares of the Company
over the term of the options. There can be no assurances that the Potential
Realizable Values reflected in this table will be achieved.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to unexercised
options held as of December 31, 1996, by each of the Named Executive Officers.
No options were exercised during 1996. The fair market value of the Company's
Common Shares on December 31, 1996 ($12.50) was less than the exercise price of
the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
NUMBER OF SECURITIES
UNDERLYING OPTIONS
AT FISCAL YEAR END (#)
--------------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
Richard R. Slager.......... 0 20,000
Alan B. Satterwhite........ 0 20,000
John K. Knutson............ 0 7,500
Stephen Lewis.............. 0 7,500
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In December, 1995, the Company entered into a loan agreement with JMAC, an
investment company owned by John H. McConnell and John P. McConnell, the founder
and Chairman, respectively, of Worthington Industries, Inc., pursuant to which
JMAC agreed to provide up to $8.0 million in loans to the Company during a
commitment period expiring December 31, 1996. Borrowings under the agreement
were subordinated to all obligations of the Company to financial institutions.
The loans bore interest at 15% per annum, payable annually.
9
<PAGE>
The purpose of the loans was to provide the Company with equity funds as
required by third party lenders for construction of Karrington residences. The
agreement contained customary representations and covenants of the Company and
certain conditions to JMAC's obligation to lend funds. The largest amount of
outstanding principal and accrued interest at any time during 1996 was
$5,710,000. On July 24, 1996, the aggregate amount due JMAC was repaid from the
net proceeds of the initial public offering, and the loan agreement was
terminated.
Charles H. McCreary, the Company's Secretary and a Director, is a partner
in the law firm of Bricker & Eckler, which provides legal services to the
Company in connection with a variety of business and organizational matters.
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
shareholder return against the cumulative return of the NASDAQ Stock Market-U.S.
Index and a peer group constructed by the Company for the period from July 19,
1996, the first day of trading for the Company's Common Shares, to December 31,
1996. The comparison assumes $100 was invested on July 19, 1996 in the
Company's Common Shares and in each of the foregoing indices and assumes
reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
JULY 19, 1996 TO DECEMBER 31, 1996
The performance graph contains the following information plotted in a
line graph with the December 31, 1996 values indicated beside the plotted
number.
7/19/96 8/30/96 9/30/96 10/31/96 11/29/96 12/31/96
------- ------- ------- -------- -------- --------
Karrington Health, Inc. $100 $100 $100 $121 $102 $ 96
Peer Group $100 $107 $106 $ 85 $ 87 $ 95
Nasdaq Stock Market-U.S. $100 $104 $112 $111 $118 $117
- --------------------
The peer group consists of seven companies involved in the provision of
assisted living services that were public on July 19, 1996. These companies are
Assisted Living Concepts, Inc., ARV Assisted Living, Inc., Emeritus Corporation,
Just Like Home, Inc., Regent Assisted Living, Inc., Sterling House Corporation
and Sunrise Assisted Living, Inc. The Standish Care Company was removed from
the peer group on October 21, 1996 as a result of its merger with CareMatrix
Corporation. All of the companies in the peer group are weighted by their
respective market capitalization.
10
<PAGE>
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THIS REPORT AND THE GRAPH SET FORTH ABOVE UNDER "EXECUTIVE COMPENSATION -
PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is comprised of four outside directors, none of whom is or was
formerly an officer of the Company. During 1996, none of the Company's
executive officers served on the board of any entity of which a Committee member
was an executive officer or on the compensation committee of any entity of which
any director of the Company was an executive officer.
ROLE OF THE COMPENSATION COMMITTEE
Prior to the Company's initial public offering, which was consummated on
July 24, 1996, the Company had no Compensation Committee and decisions
concerning compensation of executive officers of the Company were made by the
Company's Chief Executive Officer. With respect to 1996, the executive
compensation packages of the Company's executive officers were subject to
arrangements and understandings made prior to the Company's initial public
offering. In general, the Company's compensation program for executive officers
consisted of three main elements: a base salary, a profit sharing plan and
periodic grants of stock options. The Named Executive Officers participate in
the Company's profit sharing plan together with substantially all the employees
of the Company. For residence employees, profit sharing is based on the
operating profit of the residence. For other employees, profit sharing is based
on the profitability of the Company. Cash payments are made quarterly.
Following the initial public offering, the Committee was formed and was
given the oversight responsibility for, and is in the process of evaluating, the
Company's executive compensation program for periods following January 1, 1997.
The Committee believes that it is important to pay competitive salaries but also
to make a high proportion of the executive officers' total compensation at risk
in order to cause the executive officers to focus on both the short and
long-term interests of the Company's shareholders.
BASE SALARY
Base salary is reviewed annually and may be adjusted on individual
performance, business unit performance and industry analysis and comparisons. To
date, the Committee has not utilized compensation consultants, but it may do so
in future years to assist the Committee with respect to industry analysis and
comparisons. With respect to 1996, no specific weight was assigned to any of
the factors mentioned above in determining 1996 base salaries for the Chief
Executive Officer and the other executive officers.
STOCK OPTIONS
The purpose of the Company's 1996 Incentive Stock Plan is to attract and
retain key personnel, including consultants and advisors to and directors of the
Company, and to enhance their interest in the Company's continued success and to
allow all employees an opportunity to have an ownership interest in the Company.
The maximum number of Common Shares with respect to which awards may be
granted under the Plan is 550,000. In connection with the initial public
offering, the Committee granted 169,000 non-qualified stock options to key
employees and directors , including the Named Executive Officers, as set forth
in the Option Grants in the Last Fiscal Year table. All of the options were
granted at the initial public offering price.
11
<PAGE>
SECTION 162(m) COMPLIANCE
Section 162(m) of the Internal Revenue Code places certain restrictions on
the amount of compensation in excess of $1,000,000 which may deducted for each
executive officer. The Company intends to satisfy the requirements of Section
162(m) should the need arise.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY:
John S. Christie
Bernadine P. Healy
David P. Hoag
John H. McConnell
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Common Shares of the Company by
executive officers, directors and persons who own more than 10% of the Common
Shares are required to be reported to the SEC pursuant to Section 16 of the
Securities Exchange Act of 1934. Based solely on a review of the copies of
reports furnished to the Company and representations of certain executive
officers and directors, the Company believes that during fiscal 1996 its
officers, directors and greater than 10% beneficial owners complied with such
filing requirements.
CHANGE IN ACCOUNTANTS
On November 7, 1995, the Company replaced Deloitte & Touche LLP with Ernst
& Young LLP as the Company's independent certified public accountants. The
reports of Deloitte & Touche LLP on the consolidated financial statements of the
Company as of December 31, 1994 and for each of the two years in the period then
ended did not contain an adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principle.
During the two years ended December 31, 1994 and the period between December 31,
1994 and the date on which Deloitte & Touche LLP was dismissed, there were no
disagreements between the Company and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Deloitte & Touche LLP would have caused Deloitte & Touche LLP to make reference
to the subject matter of such disagreements in connection with its reports.
INDEPENDENT AUDITORS
Ernst & Young LLP, a certified public accounting firm, has served as the
Company's independent auditors since 1995. It is expected that Ernst & Young
LLP will be appointed as the Company's independent auditors for the 1997 fiscal
year following the Annual Meeting.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make such statements
as they may desire.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than December 10, 1997, to be included in the Company's proxy, notice of
meeting and proxy statement relating to such meeting and should be mailed to
Karrington Health, Inc., 919 Old Henderson Road, Columbus, Ohio 43220,
Attention: Secretary.
12
<PAGE>
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be presented
for action at the 1997 Annual Meeting. If any other matter requiring a vote of
the shareholders properly comes before the Annual Meeting, the persons
authorized under management proxies will vote and act according to their best
judgments in light of the conditions then prevailing.
ANNUAL REPORT
The Company's 1996 Annual Report to Shareholders containing audited
financial statements for the 1996 fiscal year is being mailed to all
shareholders of record with this Proxy Statement.
13
<PAGE>
MAP TO KARRINGTON HEALTH, INC.
ANNUAL MEETING OF SHAREHOLDERS
COLUMBUS, OHIO
A map of Columbus, Ohio including interstate highways and certain major
secondary roads indicating the location, address and phone number of the
Da Vinci Ristorante.
How to Find the Da Vinci Ristorante
The Da Vinci Ristorante is located at 4740 Reed Road just south of Henderson
Road.
Exit WEST from State Route 315 at Henderson Road. Drive WEST on Henderson to
Reed Road.
Turn LEFT (South). The parking lot entrance is only a short distance on your
LEFT.
Tuesday, May 13, 1997
Meeting begins at 11:00 a.m. Doors open at 10:45 a.m.
The Da Vinci Ristorante
4740 Reed Road, (614) 451-5147
For further information, call 1-800-451-5158 and ask for extension 258.
<PAGE>
KARRINGTON HEALTH, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Karrington Health, Inc. (the
"Company") hereby constitutes and appoints Richard R. Slager and Alan B.
Satterwhite, or either of them, the Proxy or Proxies of the undersigned, with
full power of substitution, to attend the Annual Meeting of Shareholders of the
Company to be held on Tuesday, May 13, 1997, at the Da Vinci Ristorante, 4740
Reed Road, Columbus, Ohio, at 11:00 A.M., local time, and any adjournment(s)
thereof, and to vote all of the common shares which the undersigned is entitled
to vote at such Annual Meeting or at any adjournment(s) thereof:
1. To elect three directors to serve for terms of three years each.
<TABLE>
<S> <C>
/ / FOR election as directors of the Company of all / / WITHHOLD AUTHORITY to vote for all of the
of the nominees listed below (except as marked nominees listed below.
to the contrary below.)*
</TABLE>
Bernadine P. Healy Alan B. Satterwhite Michael H. Thomas
*(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment(s)
thereof.
(CONTINUED, AND TO BE EXECUTED AND DATED ON THE REVERSE SIDE.)
<PAGE>
(CONTINUED FROM OTHER SIDE.)
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY. IF
ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) THEREOF OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE
PROXY STATEMENT IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE COMMON
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES
ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S) AS THE DIRECTORS MAY
RECOMMEND.
ALL PROXIES PREVIOUSLY GIVEN OR EXECUTED BY THE UNDERSIGNED ARE HEREBY
REVOKED. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement for the May 13, 1997 meeting
and Annual Report to Shareholders for the fiscal year ended December 31, 1996.
Dated _________________________, 1997
_____________________________________
Signature of Shareholder
_____________________________________
Signature of Shareholder
Please sign exactly as your name
appears hereon. When common shares
are registered in two names, both
shareholders should sign. When
signing as attorney, executor,
administrator, guardian or trustee,
please give full title as such. If
shareholder is a corporation, please
sign in full corporate name by
President or other authorized
officer. If shareholder is a
partnership, please sign in
partnership name by authorized
person. (Please note any change of
address on this proxy.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KARRINGTON
HEALTH, INC. PLEASE FILL IN, SIGN, DATE AND RETURN IT PROMPTLY USING THE
ENCLOSED ENVELOPE.
