SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
x Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1996
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to ___________
Commission File No. 0-28752
KAPSON SENIOR QUARTERS CORP.
_______________________________
(Exact name of registrant as specified in its charter)
Delaware 11-3323503
_____________________________ ________________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification)
organization)
242 Crossways Park West
Woodbury, New York 11797
______________________________ _________
(Address of principal (Zip Code)
executive offices)
(516) 921-8900
_______________________
(Registrant's telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, par value $.01 per share
_______________________________________
(Title of Class)
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 X No _____
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/A or any amendment to
this Form 10-K/A. X
Aggregate market value of voting stock held by non-affiliates of
registrant as of March 1, 1997: $35,550,000
Number of shares of Common Stock outstanding as of March 1, 1997:
7,750,000
KAPSON SENIOR QUARTERS CORP.
ANNUAL REPORT ON FORM 10-K/A
____________________________
TABLE OF CONTENTS
PART III
Item No. Page
10. Directors and Executive Officers of the
Registrant 3
11. Executive Compensation 8
12. Security Ownership of Certain Beneficial
Owners and Management 12
13. Certain Relationships and Related
Transactions 14
Signatures 17
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth information regarding the
executive officers and directors of the Company as of April 30,
1997. Glenn Kaplan, Wayne L. Kaplan and Evan A. Kaplan (the
"Kaplans") are brothers. There are no other family relationships
among any directors or officers of the Company. Each of the
directors of the Company has been a director since 1996.
Officers are appointed by and serve at the discretion of the
Board of Directors.
Name Age Position
Glenn Kaplan 44 Chairman of the Board of
Directors and Chief Executive
Officer
Wayne L. Kaplan 41 Vice Chairman of the Board of
Directors, Senior Executive
Vice President, Secretary and
General Counsel
Evan A. Kaplan 38 President, Chief Operating
Officer and Director
Raymond DioGuardi 41 Chief Financial Officer
Joseph G. Beck 42 Director
Bernard J. Korman 64 Director
Risa Lavizzo-Mourey, M.D. 41 Director
Gerald Schuster 66 Director
___________
Glenn Kaplan is the Chairman of the Board of Directors and
Chief Executive Officer of the Company. Prior to June 1996, he
was a partner and co-founder of The Kapson Group. Glenn received
a B.S. degree in Accounting from the University of Bridgeport.
Wayne L. Kaplan is the Vice Chairman of the Board of
Directors, Senior Executive Vice President, Secretary and General
Counsel of the Company. Prior to June 1996, he was a partner and
co-founder of The Kapson Group. Wayne is a member of the New
York State Bar, and was appointed by Governor Mario Cuomo to the
New York State Life Care Community Council. Additionally, he
serves on the board of directors of the Assisted Living
Federation of America, the Connecticut Assisted Living
Association, the Empire State Association of Adult Homes
(assisted living facilities in New York State) and the New Jersey
Assisted Living Association. Wayne received a B.S. degree in
Business from the University of Rhode Island and a J.D. degree
from the George Washington University School of Law.
Evan A. Kaplan is the President, Chief Operating Officer and
a director of the Company. Prior to June 1996, he was a partner
and co-founder of The Kapson Group. Evan received a B.A. degree
in Psychology from Syracuse University.
Raymond DioGuardi has been the Chief Financial Officer of
the Company since January 1997. From 1994 to January 1997, Mr.
DioGuardi was Senior Vice President of Finance and Chief
Financial Officer of Dataflex Corporation, a public company that
sells computer hardware and related services. From 1989 to 1994,
Mr. DioGuardi was Vice President of Finance, Chief Financial
Officer and Secretary of Nathan's Famous, Inc. From 1977 to
1989, Mr. DioGuardi was employed by the accounting firm of Price
Waterhouse, where he became a senior manager with responsibility
for planning, coordinating and executing financial audits and
special projects for major corporate clients. Mr. DioGuardi is a
certified public accountant and received a B.A. degree in
Business from Rutgers University.
Joseph G. Beck, director, is a founding principal and
executive committee member of Shattuck Hammond Partners Inc.
("Shattuck Hammond"), a specialty health care investment banking
firm based in New York. He directs Shattuck Hammond's activities
in the area of long-term care and related companies. Prior to
Shattuck Hammond, he was a Vice President (1987-1990) and
Principal (1990-1993) at Cain Brothers, Shattuck & Company, a
predecessor to Shattuck Hammond. From 1985 to 1987, he was a
Vice President at Chemical Bank where he eventually directed the
investment banking work with hospitals and other health care
companies. Prior thereto, he was a senior credit analyst at
Moody's Investors Services, Inc., a financial service company.
From 1978 to 1982, he held several positions in health care
regulation and policy analysis for various departments of the New
York State Government and for the New York State Senate. Mr.
Beck is a member of the Board of Trustees of The Lighthouse, a
not-for-profit vision rehabilitation, research and training
agency. He received a B.A. degree from LeMoyne College and a
Masters degree in Health Policy and Management from the Harvard
University School of Public Health.
Bernard J. Korman, director, has been Chairman of the Board
of Directors of The Graduate Health System, a Philadelphia-based,
not-for-profit health system with hospitals in Pennsylvania and
New Jersey, since December 1995. From 1983 to 1996, Mr. Korman
was Chairman of PCI Services, Inc., a publicly-traded company.
Since 1986, Mr. Korman has been Chairman and a director of
NutraMax Products, Inc., a publicly-traded consumer health care
products company. From 1983 until 1996, Mr. Korman was
President, CEO and a director of MEDIQ, Incorporated, a publicly-
traded health care services company. Mr. Korman is currently a
director of The New America High Income Fund, Pep Boys - Manny,
Moe & Jack, Today's Man, Inc., Omega Healthcare Investors, Inc.
and InnoServ Technologies, Inc. PCI Services, Inc. and NutraMax
Products are affiliates of MEDIQ, Incorporated. Mr. Korman
received a B.S. degree from the University of Pennsylvania and an
L.L.B. degree from the University of Pennsylvania School of Law.
Dr. Risa Lavizzo-Mourey, director, has been Director of the
Institute of Aging, Chief of the Division of Geriatric Medicine
and Associate Executive Vice President for Health Policy at the
University of Pennsylvania, Ralston-Penn Center, since 1994.
From 1992 to 1994, Dr. Lavizzo-Mourey served with the Agency for
Health Care Policy and Research, U.S. Public Health Service of
the Department of Health and Human Services. Dr. Lavizzo-Mourey
has been on the faculty of the University of Pennsylvania School
of Medicine since 1986, and is currently the Sylvan Eisman
Associate Professor of Medicine. Dr. Lavizzo-Mourey is a
director of Beverly Enterprises, Inc., Medicus Systems Corp.,
Managed Care Solutions, Inc. and Nellco Puritan Bennett Inc. Dr.
Lavizzo-Mourey received an M.D. degree from the Harvard Medical
School and an M.B.A. degree in Health Care Administration from
The Wharton School of Business, University of Pennsylvania.
Gerald Schuster, director, has been President and Chief
Executive Officer of Continental Wingate Company, Inc., a real
estate, health care and financial services company which is
engaged in commercial mortgage lending and servicing, development
and syndication of multi-family housing, and has developed and
operated eight long-term care and rehabilitation facilities with
1,100 beds in New York and Massachusetts, since 1971. Mr.
Schuster serves as Chairman of the Advisory Committee for the
Massachusetts Housing Finance Agency, a state authority for the
issuance of multi-family housing debt. Mr. Schuster received a
B.B.A. degree from Clark University.
Key Employees
William D. Burson has been Vice President of Marketing for
the Company since March 1996. From September 1991 to March 1996,
Mr. Burson was director of independent living operations for
Church Homes, Inc., a 500-bed congregate care community where he
directed general operations and marketing. From 1986 to
September 1991, Mr. Burson was Executive Vice President -
Marketing and Sales for Retirement Management Group, Inc., a
manager of nursing homes and retirement communities.
Marlynn B. Cohen has been Director of Human Resources for
the Company since January 1996. From September 1987 to August
1995, Ms. Cohen was Director of Administration and Human
Resources at Ernst & Young LLP, a public accounting firm, in
Melville, New York. At Ernst & Young, Ms. Cohen was responsible
for employee recruiting, benefit and salary administration,
financial budgeting, computer evaluation and support, and
facilities management for a branch office. Ms. Cohen received a
B.A. degree in Economics from New York University.
Dennis R. Cregan has been Project Manager for the Company
since October 1994. From January 1994 to June 1994, Mr. Cregan
worked for Hunter Real Estate Management where he was Project
Manager for a $12 million capital improvement project; from May
1990 to December 1993, Mr. Cregan was Manager - Plant Engineering
for Hazeltine Corporation, a subsidiary of ESCO Electronics
Corp., a publicly traded manufacturer of defense and electronics
equipment and systems, where he was responsible for facilities
management, construction budget administration, contractor
selection and compliance with local, state and federal
regulations. From 1982 to May 1990, Mr. Cregan served in several
project planning and administration positions for Hazeltine. Mr.
Cregan received a degree in Architectural Engineering from the
State University of New York at Farmingdale. Mr. Cregan is
certified by the International Facilities Management Association
and is a professional member of the National Fire Protection
Association and Construction Specifications Institute.
Paul M. Hannan has been Vice President of Development of the
Company since July 1994. From May 1991 to June 1994, Mr. Hannan
was Director of Finance for Genesis Health Ventures, Inc., a
publicly traded long-term health care company, where he analyzed
prospective acquisitions, managed the financial activities and
supervised the development and expansion of existing facilities.
Mr. Hannan received an M.B.A. degree in Finance from Drexel
University and a B.S. degree in Business Administration from
Delaware Valley College.
June F. Heck has been the Controller for the Company since
November 1994. From December 1993 to November 1994, Ms. Heck
served as General Manager - Corporate Accounting for Synergy Gas
Corporation, a utility gas company. From April 1990 to November
1993, Ms. Heck was Accounting Manager of the Weight Watchers
International, Inc. division of H.J. Heinz & Co., a publicly
traded food products company. From August 1984 to April 1990,
Ms. Heck served as Controller for F. Robbins Corp., a commercial
heating and air conditioning company. From July 1981 to February
1984, Ms. Heck was an accountant for Price Waterhouse. Ms. Heck
received a B.S. degree from the School of Professional
Accountancy of the Long Island University - C.W. Post Campus.
Maryellen K. Pokowitz has been Vice President of Operations
of the Company since May 1996. Ms. Pokowitz was Head
Administrator for the Company from April 1989 to May 1996. Prior
to that, Ms. Pokowitz was employed in various operational
positions by the Company since 1977. Ms. Pokowitz was awarded
the "Administrator of the Year" award by the Empire State
Association of Adult Homes in 1990.
John Reilly has been corporate counsel for the Company since
February 1997. From 1994 to February 1997, Mr. Reilly served as
Vice President and General Counsel for Litchfield Healthcare
Finance, a firm specializing in equity placement and mortgage
financing for senior housing. From 1989 to 1994, Mr. Reilly was
a banking litigation associate with Squire, Sanders & Dempsey, a
law firm located in Washington, D.C. Mr. Reilly received a B.A.
degree from the University of Virginia and a J.D. degree from
Boston College Law School.
Robert Reilly has been Vice President of Finance since April
1997. From 1993 through 1997, Mr. Reilly was President of
Litchfield Healthcare Finance, a firm specializing in equity
placement and mortgage financing for senior housing. From 1984
to 1993, Mr. Reilly was President of Litchfield Venture Corp., a
real estate brokerage firm specializing in joint venture and
conventional financing for income properties. Mr. Reilly was
Vice President of a wholly owned subsidiary of Goldome Savings
Bank from 1977 to 1983.
Robert C. Rosenberg has been Vice President of Development
of the Company since March 1996. From January 1995 to March
1996, Mr. Rosenberg was Vice President - Development for the
Economic Development Corp. of the City of New York, where he was
responsible for financial analysis and due diligence for a broad
range of real estate projects. From December 1992 to August
1994, Mr. Rosenberg was Deputy Director of Real Estate for the
Metropolitan Transit Authority. From August 1987 to November
1992, Mr. Rosenberg worked in various development management
positions for Olympia & York Companies (USA). Mr. Rosenberg
received a B.A. in Urban Planning from Stanford University and an
M.B.A. degree in Finance from New York University.
Joann M. Sala has been Director of Home Care Services of the
Company since December 1996. From November 1990 through November
1996, Ms. Sala was Long Island Area Manager for HealthForce, a
division of Accustaff, where she directed marketing and
operations with annual revenue in excess of $20 million. From
1986 through 1990, Ms. Sala served as Administrator for
metropolitan New York offices of Upjohn HealthCare Services. Ms.
Sala received her B.A. degree from New York University and an
M.P.A. degree in Health Care Administration from Baruch College.
Committees of the Board of Directors
Audit Committee. The Audit Committee, which consists of a
majority of independent directors who are not affiliated with the
Kaplans ("Independent Directors"), makes recommendations
concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and
results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the
Company's internal accounting controls. Evan A. Kaplan, Bernard
J. Korman and Risa Lavizzo-Mourey are the members of the Audit
Committee. The Audit Committee did not hold any meetings in
1996.
Compensation Committee. The Compensation Committee, which
consists of a majority of Independent Directors, approves the
salaries and other benefits of the executive officers of the
Company and administers any non-stock based bonus or incentive
compensation plans of the Company (excluding any cash awards
intended to qualify for the exception for performance-based
compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code")). In addition, the Compensation
Committee consults with the Company's management regarding
pension and other benefit plans and compensation policies and
practices of the Company. Glenn Kaplan, Joseph G. Beck and
Gerald Schuster are the members of the Compensation Committee.
The Compensation Committee held one meeting in 1996.
Stock Option Committee. The Stock Option Committee,
consisting solely of directors who, to the extent legally
required, qualify as "outside directors" under Section 162(m) of
the Code and as "non-employee directors" under Rule 16b-3(c) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), administers any stock-based incentive plans of the
Company, including the Incentive Plan. In addition, the Stock
Option Committee is responsible for granting any cash awards
intended to qualify for the exception for performance-based
compensation under Section 162(m) of the Code. Bernard J.
Korman, Risa Lavizzo-Mourey and Gerald Schuster are the members
of the Stock Option Committee. The Stock Option Committee held
one meeting in 1996.
The Company does not have a nominating committee of the
Board of Directors.
Meetings of Directors
The Board of Directors held three meetings and acted by
unanimous written consent several times in 1996. Each of the
directors of the Company attended more than 75% of the aggregate
of (i) the total number of meetings of the Board of Directors and
(ii) the total number of meetings held by all committees of the
Board of Directors on which such director served.
Item 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
the compensation earned for services rendered in all capacities
to the Company for the fiscal years ended December 31, 1996 and
December 31, 1995 by the Company's Chief Executive Officer and
each other executive officer whose salary and bonus for such
fiscal year was in excess of $100,000.
<TABLE>
Annual Long-Term
Compensation Compensation
_____________________ ___________________
Se-
Other curi-
Annual Re- ties
Com- stricted Under- All
Name and pensa- Stock lying Other
Principal tion Award(s) Options Compen-
Position Year Salary Bonus $ $ # sation
<S> <C> <C> <C> <C> <C> <C> <C>
Glenn Kaplan (1) 1996 90,645 26,500 83,924(4) 0 0 31,825(5)
Chairman of the (2) (3)
Board and Chief
Executive Officer 1995 67,177 0 10,789(4) 0 0 39,500(5)
Wayne L. Kaplan (1)
Vice Chairman of 1996 90,645 26,500 75,114(4) 0 0 31,825(5)
the Board, Senior (2) (3)
Executive Vice
President, Secretary
and General
Counsel 1995 67,177 0 2,113(4) 0 0 39,500(5)
Evan A. Kaplan (1)
President and 1996 90,645 26,500 75,114(4) 0 0 31,825(5)
Chief Operating (2) (3)
Officer 1995 67,177 0 1,982(4) 0 0 39,500(5)
</TABLE>
____________
(1) Each of the Kaplans entered into an employment agreement
(collectively, the "Employment Agreements") with the Company
effective October 1, 1996 and is compensated from that date
forward in accordance with the terms of that employment
agreement. See "Employment Agreements."
(2) Represents, in each case, $44,508 paid as salary by the
Predecessor of the Company, from January 1, 1996 through
September 30, 1996, plus $46,137 paid as salary from October
1, 1996 through December 31, 1996 pursuant to the Employment
Agreements.
(3) Pursuant to the Employment Agreements, the bonus amounts
were awarded by the Compensation Committee and paid in 1997
for services rendered from October 1, 1996 through December
31, 1996.
(4) For 1996, represents: (i) fees paid by the Company under the
Operating Agreements (as defined herein) from October 1,
1996 through December 31, 1996 ( $73,114 in each case); (ii)
personal use of a Predecessor (as defined herein)/Company
-paid automobile; and (iii) with respect to Glenn Kaplan
only, partial payment of club membership dues. For 1995,
represents: (i) personal use of a Predecessor-paid
automobile; and (ii) with respect to Glenn Kaplan only,
partial payment of club membership dues. See "Certain
Transactions."
(5) For 1996 and 1995, represents, in each case, the Company's
payment of premiums on a life insurance policy.
Stock Options
None of the executive officers of the Company named in the
Summary Compensation Table were granted any options or exercised
any options during the year ended December 31, 1996.
Employment Agreements
The Company has entered into substantially similar
employment agreements with each of Glenn Kaplan (as Chairman and
Chief Executive Officer), Wayne L. Kaplan (as Vice Chairman,
Senior Executive Vice President, Secretary and General Counsel) and
Evan A. Kaplan (as President and Chief Operating Officer)
(each individually, an "Executive").
Each agreement provides for an initial five-year
term which is automatically renewable for successive one-year
terms (the "Employment Term") unless either party gives written
notice to the other at least six months prior to the expiration
of the then Employment Term. During the Employment Term, the
Executive will be obligated to devote substantially all his
business time, energy, skill and efforts to the performance of
his duties under the agreement and shall faithfully serve the
Company, subject to his right to perform his obligations as
operator of one or more of the Company's facilities in his
individual capacity.
The agreement currently provides for an annual base salary
of $237,000 (as adjusted annually in the discretion of the
Compensation Committee and also for cost of living increases) and
a discretionary bonus. The Compensation Committee shall
determine the amount of the bonus to be awarded to the Kaplans,
taking into account the operating results of the Company as well
as such subjective factors as the Compensation Committee deems
appropriate and in the best interests of the Company and its
stockholders, which bonus amount will be shared equally by the
Kaplans. In addition, under the agreement the Executive will be
entitled to long-term disability coverage, use of an automobile
and club membership, and benefits generally provided to executive
employees.
The agreement also provides that, during the Employment Term
and thereafter, the Company will indemnify the Executive, to the
fullest extent permitted by law, in connection with any claim
against the Executive as a result of the Executive serving as an
officer or director of the Company or in any capacity at the
request of the Company in or with regard to any other entity,
employee benefit plan or enterprise. Following the Executive's
termination of employment, the Company will continue to cover the
Executive under the Company's directors' and officers' insurance
for the period during which the Executive may be subject to
potential liability for any claim, action or proceeding (whether
civil or criminal) as a result of his service as an officer or
director of the Company at the highest level then maintained for
any then or former officer or director.
Any dispute or controversy arising under or in connection
with the agreement (other than injunctive relief) shall be
settled exclusively by arbitration. Each party shall bear its
own legal fees except that, in the event the Executive prevails
on any material issue, the arbitrator shall award the Executive
his legal fees, except for those attributable to frivolous
positions.
The agreement may be terminated at any time by the Executive
for Good Reason (including a Change in Control of the Company) or
by the Company with or without Cause (as each capitalized term is
defined in the agreement). Good Reason also includes an event of
default or termination, other than in accordance with its terms,
by the Company or its subsidiaries without cause, of any
Operating Agreement between the Company and the Kaplans, as
operators of the Company's facilities, or any Management Services
Agreement between the Company's wholly-owned subsidiary and the
Kaplans. If the employment of the Executive is terminated for
any reason, he may withdraw as a licensed operator of certain of
the Company's facilities. Likewise, if the Executive is
terminated by the Company as an operator of one of its
facilities, he may resign his employment with the Company.
If the Executive terminates his employment with the Company
for Good Reason (including the Company giving notice of
non-renewal) or is terminated without Cause, he will receive
severance pay (i) in an amount equal to two years' Base Salary
and bonus, plus (ii) continued medical benefits for two years.
The agreement provides that the Executive will have no obligation
to mitigate the Company's financial obligations in the event of
his termination for Good Reason or without Cause and there will
be no offset against the Company's financial obligations for
other amounts earned by the Executive. If termination is the
result of Executive's death or disability, the Company will pay
to the Executive (or his estate), an amount equal to six months'
Base Salary at his then current rate of pay (reduced in the case
of disability by his long-term disability policy payments). If
the Executive's employment is terminated by him for Good Reason
or by the Company without Cause, he may also withdraw as an
operator of the Company's facilities; in such an event, he will
be entitled to receive twice his pro rata share of the operating
fees (net of fees payable under the applicable Management
Services Agreement) for the preceding twelve months.
Compensation Committee Report
Compensation Policies. The principal goal of the Company's
compensation program as administered by the Compensation
Committee is to help the Company attract, motivate and retain the
executive talent required to develop and achieve the Company's
strategic and operating goals with a view to maximizing
stockholder value.
CEO's Compensation; Compensation of the Kaplans.
Salary. The Company entered into employment agreements with
each of Glenn Kaplan, Wayne L. Kaplan and Evan A. Kaplan prior to
the formation of the Compensation Committee. Pursuant to such
agreements, the Company paid to each Kaplan an annualized base
salary of $213,000 from October 1, 1996 to December 31, 1996.
The Compensation Committee has determined that, in 1997, the
Kaplans will be paid an annualized base salary of $237,000.
These base salaries are competitive with those payable to
executives holding corresponding positions at corporations within
the Company's industry that are of comparable size. Individual
experience and performance is considered when setting salaries
within the range for each position, although the Employment
Agreements between the Company and each of the Kaplans provide
that each Kaplan shall receive equal compensation. Annual
reviews are held and adjustments are made based on attainment of
individual goals and in a manner consistent with the Company's
overall operating and financial performance.
Bonus. Each Kaplan also received a bonus of $26,500 for the
period from October 1, 1996 to December 31, 1996. In making its
determination of the bonus amounts, the Compensation Committee
reviewed a compensation survey prepared by Sibson & Co., a
compensation consulting firm. Several other factors were
considered in the decision to award 1996 bonuses to the Kaplans,
including the Company's performance in reaching or exceeding its
development and acquisition goals.
Compensation of Other Executive Officers and Key Employees.
Base Salary. Base salaries paid in 1996 to the Company's
executive officers and key employees are competitive with those
payable to executives holding corresponding positions at
corporations within the Company's industry that are of comparable
size. Individual experience and performance is considered when
setting salaries within the range for each position. Annual
reviews are held and adjustments are made based on attainment of
individual goals and in a manner consistent with the Company's
overall operating and financial performance.
Annual Bonus. The annual bonus is intended to motivate
individual and team performance by creating potential to earn
annual incentive awards that are contingent upon the performance
of the Company and that are comparable to those payable to
executives and key employees holding corresponding positions at
corporations within the Company's industry that are of comparable
size. Bonuses for 1996 were determined both by evaluations of
individual performance and by the Company's successful initial
public offering of its common stock and the successful execution
of the Company's growth strategy during the period.
Long-Term Incentives. The Company provides its executives
and key employees with long-term incentive compensation through
grants of stock options under the Company's stock option plans.
The grant of stock options aligns the executive's interests with
those of the Company's stockholders by providing the executive
with an opportunity to purchase and maintain an equity interest
in the Company and to share in the appreciation of the value of
the Company's Common Stock. The size of option grants is
comparable to grants by other corporations within the Company's
industry that are of comparable size.
The Compensation Committee
Glenn Kaplan
Joseph G. Beck
Gerald Schuster
Compensation Committee Interlocks and Insider Participation
Compensation policies and decisions, including those
relating to salary, bonuses and benefits of executive officers,
were set or made by the Board of Directors from the formation of
the Company to the time of the Initial Public Offering. The
Kaplans participated as members of the Board of Directors in
deliberations concerning executive officer compensation. Upon
consummation of the Initial Public Offering, the Board of
Directors created a Compensation Committee consisting of a
majority of Independent Directors, which recommends to the Board
the cash compensation to be paid to the Company's executive
officers. The members of the Compensation Committee are Glenn
Kaplan, Joseph Beck and Gerald Schuster. Glenn Kaplan is the
Chief Executive Officer of the Company, is party to certain
agreements by which he in his individual capacity is the licensed
operator of certain of the Company's New York facilities, and was
party to certain transactions with the Company in connection with
the formation of the Company. See "Certain Transactions." Glenn
Kaplan does not participate in discussions regarding compensation
to be paid to him or to Wayne Kaplan or Evan Kaplan.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table shows as of April 23, 1997 the
beneficial ownership of Common Stock with respect to (i) each
person who was known by the Company to own beneficially more than
5% of the outstanding shares of the Company's Common Stock, (ii)
each director and nominee for director, (iii) each executive
officer of the Company, and (iv) directors and executive officers
as a group.
Name and Shares of
Address of Positions and Common Stock
Beneficial Offices with Beneficially Percent
Owner (1) the Company Owned of Class
_______________ ____________ ____________ ________
Glenn Kaplan (2) Chairman of the 4,150,00 53.5
Board of
Directors and
Chief Executive
Officer
Wayne L. Kaplan (2) Vice Chairman of 4,150,000 53.5
the Board of
Directors, Senior
Executive Vice
President,
Secretary and
General Counsel
Evan A. Kaplan (2) President and 4,150,000 53.5
Chief Operating
Officer; Director
Raymond DioGuardi Chief Financial 0 0
Officer
Joseph G. Beck Director 0 0
Bernard J. Korman Director 0 0
Risa Lavizzo-
Mourey, M.D. Director 0 0
Gerald Schuster Director 2,500 0
All directors and
executive officers
as a group (8
persons) 4,152,500 53.6
Sirach Capital
Management, Inc.
600 University
Street Seattle,
WA 98101 (3) 730,300 9.4
Fusion Capital
Management, Inc.
237 Park Avenue
New York,
NY 10012 (4) 446,300 5.8
Thomson Hortsmann
& Bryant, Inc.
Park 80 West,
Plaza Two
Saddle Brook,
NJ 07663(5) 431,300 5.6
(1) Unless otherwise indicated, the address of the listed
persons is c/o Kapson Senior Quarters Corp., 242 Crossways
Park West, Woodbury, New York 11797.
(2) Includes shares owned of record by the Kaplans, each of whom
share voting and dispositive power over all of these shares,
and Herbert Kaplan, who has a pecuniary interest in, and has
shared voting and dispositive power over, 300,001 shares.
Herbert Kaplan is the father of the Kaplans.
(3) Information regarding Sirach Capital Management, Inc.
("Sirach") was obtained from a Schedule 13G filed by it with
the Securities and Exchange Commission on January 30, 1997.
Such Schedule 13G states that Sirach, a Washington
corporation, is an investment advisor that has sole voting
power and sole dispositive power over 730,300 shares of
Common Stock.
(4) Information regarding Fusion Capital Management Inc. was
obtained from a Schedule 13D, as amended, filed by it with
the Securities and Exchange Commission on April 10, 1997.
Such Schedule 13D states that Wayne M. Cooperman and Ricky
C. Sandler (the "Reporting Persons") are the general
partners of Fusion Partners, L.P., a Delaware limited
partnership that owns 388,800 shares of Common Stock, and
that the Reporting Persons own Fusion Capital Management,
Inc., which is the investment manager of Fusion Offshore
Fund Limited, a British Virgin Islands corporation that owns
27,500 shares of Common Stock. The Reporting Persons thus
have shared voting and shared dispositive power over 416,300
shares. In addition, Mr. Cooperman has sole voting and
dispositive power over 30,000 shares owned by a family
partnership.
(5) Information regarding Thomson Horstmann & Bryant, Inc.
("THB") was obtained from a Schedule 13G filed by it with
the Securities and Exchange Commission on January 16, 1997.
Such Schedule 13G states that THB, a New York corporation,
is a registered investment advisor that has sole voting
power over 390,200 shares of Common Stock, shared voting
power over 27,000 shares of Common Stock, and sole
dispositive power over 431,300 shares of Common Stock.
Item 13. Certain Relationships and Related Transactions.
Consolidating Transactions. The Company was formed in order
to consolidate and expand the assisted living business of the
Kapson Group (the "Predecessor"). The Predecessor historically
operated its business through a number of partnerships, limited
liability companies and S corporations. In connection with the
Initial Public Offering, the Predecessor and the Company entered
into certain transactions pursuant to which the Company received
substantially all of the Predecessor's assets associated with its
assisted living business. In addition, a number of transactions
were entered into in connection with the operation of the
Company's facilities, largely in order to comply with applicable
law and regulations.
Conveyance of Assisted Living Business to the Company. Upon
the consummation of the Initial Public Offering, the Predecessor
transferred to the Company the following: (i) certain wholly-
owned subsidiaries of the Predecessor that owned the entire fee
in the land and building underlying six facilities (Town Gate
East, Town Gate Manor, Senior Quarters at Huntington Station,
Senior Quarters at Centereach I, Senior Quarters at Centereach II
and Senior Quarters at Stamford); (ii) certain wholly-owned
subsidiaries of the Predecessor that owned, directly or
indirectly, less than the entire fee in the land and building
underlying five facilities (23.75% of Change Bridge Inn, 50.1% of
Senior Quarters at Chestnut Ridge, 50% of Senior Quarters at East
Northport, 10% of Senior Quarters at Jamesburg and 11% of Senior
Quarters at Glen Riddle); (iii) two wholly-owned subsidiaries of
the Predecessor that provided management services for all the
foregoing facilities, in addition to four facilities in which the
Predecessor did not have an equity interest (Castle Gardens, The
Regency at Glen Cove, Senior Quarters at Lynbrook and Senior
Quarters at Cranford); (iv) the Predecessor's interest in
pre-construction development projects in seven facilities
(Patterson, NY; Albany, NY; Briarcliff Manor, NY; Tinton Falls,
NJ; Westchester County, NY; Riverdale, NY and Northampton County,
PA); and (v) all of its other assets relating to its assisted
living business. In consideration of the foregoing, the Company:
(i) issued to the Kaplans, as sole equal partners of the
Predecessor, 4,150,000 shares of Common Stock, and paid to them
the sum of $6.0 million (representing the approximate tax
liability incurred by the Kaplans in connection with transactions
pertaining to the transfer by the Predecessor of its facilities
to the Company); and (ii) agreed to pay all real estate transfer
taxes arising out of the foregoing transactions (approximately
$83,000). As a result of these transactions, the Company assumed
all indebtedness encumbering the facilities. The Kaplans had
guaranteed certain indebtedness incurred by the Predecessor with
respect to certain facilities, and the Kaplans were released from
such guarantees.
Arrangements Regarding Operation of Certain Facilities.
Because of New York law and regulations, the Kaplans individually
are the operators of substantially all the Company's assisted
living facilities located in New York. Of these facilities, the
Kaplans are or will be the operators of Town Gate East, Town Gate
Manor, Senior Quarters at Huntington Station, Senior Quarters at
Centereach I, Senior Quarters at Centereach II, Senior Quarters
at Chestnut Ridge and Senior Quarters at Lynbrook, either
pursuant to a separate operating agreement entered into by the
Company and the Kaplans (each, an "Operating Agreement") or the
pre-existing agreement with the unaffiliated owner of the
facility (that has been assigned to the Kaplans). Each Operating
Agreement has a term of 25 years and provides for an operating
fee equal to 5% of gross revenues of the facility. The
pre-existing agreements with third-party owners generally have a
term of five years and provide for an operating fee equal to 5%
of gross revenues or the greater of 5% of gross revenues and a
minimum fee (ranging from $96,000 to $150,000 per annum). In
some instances, the Company may also be entitled to an incentive
fee or may have an equity interest in the facility. The Kaplans,
as operators of each of these facilities, have engaged a wholly-
owned subsidiary of the Company to provide certain management
services in connection with the day-to-day operations of each
facility, in each case pursuant to a separate management
agreement (each, a "Management Agreement"). Each Management
Agreement is co-terminous with the underlying Operating Agreement
or pre-existing agreement with the third-party owner. The fee
payable to the Company's subsidiary under each Management
Agreement is 30% of the operator's fee, increasing to 96% of all
the fees generated by aggregate gross revenues of all facilities
operated under this fee structure exceeding $23.0 million. The
Kaplans have also agreed that, with respect to any other projects
for which the Company may not act as the licensed operator (such
as Senior Quarters at East Northport), they will act as licensed
operators in exchange for a fee equal to 5% of gross revenues and
pay the Company's wholly-owned subsidiary a servicing fee equal
to 96% of their operating fee. The Operating Agreements may be
terminated: (i) by either the Company or the licensed operators
upon the occurrence of certain events of default (such as failure
to timely pay the licensed operators' fees, failure to perform
any material term, provision or covenant, subject to certain cure
periods, or an event of default under the Management Agreement);
(ii) by the Company upon the death or disability of all the
licensed operators; (iii) by the licensed operators upon a change
of control in the Company or at any time after five years; or
(iv) by the Company in its discretion at any time, provided that
if the Operating Agreement is terminated by the Company other
than for an event of default by the licensed operators, the
licensed operators will be entitled to liquidated damages equal
to twice the licensed operators' fees under the applicable
Operating Agreement (net of fees payable under the applicable
Management Agreement) over the preceding twelve months. In
addition, the employment agreement with each Kaplan provides that
each Kaplan may withdraw as a licensed operator if he ceases to
be an employee of the Company for any reason, and that if his
employment is terminated by him for good reason or by the Company
without cause, he will be entitled to receive, in addition to the
severance payments provided for in his employment agreement,
either the liquidated damages provided for in the applicable
Operating Agreement or a lump sum equal to twice his share of the
licensed operators' fees (net of fees payable under the
applicable Management Agreement) for the preceding twelve months.
Good reason includes the termination of an Operating Agreement or
a Management Agreement by the Company or its wholly-owned
subsidiary, as the case may be, other than in accordance with its
terms or by a licensed operator because of an event of default.
This basic structure, and substantially similar agreements, are
used with respect to one New York facility (Senior Quarters at
Centereach II) that is not a licensed entity. Legislation has
been enacted in New York State that allows privately-owned
corporations to operate certain types of licensed facilities,
including ALP facilities. As a result, the Kaplans may form one
or more corporations to operate these facilities. The Kaplans
are entitled, pursuant to the Operating Agreements, to assign
such agreements to any corporation that is wholly owned by them.
Certain Transactions Regarding Sales of Common Stock
Restrictions on Transfer. Each Kaplan has agreed with the
Company that he shall not, for as long as he shall be the
licensed operator of any of the Company's facilities, transfer
any shares of Common Stock if it would result in his personally
owning fewer than 500,000 shares of Common Stock initially, or
250,000 shares of Common Stock after the fifth anniversary of the
consummation of the Initial Public Offering, in each case subject
to certain exceptions. In addition, a stockholders' agreement
between the Kaplans and the Company provides (i) each Kaplan with
a right of first refusal with respect to a transfer of the shares
of Common Stock of the other Kaplans, except for a limited
exception in the case of death, and (ii) that the Kaplans shall
vote all their shares of Common Stock as a unit.
Registration Rights. Each of the Kaplans, along with
Herbert Kaplan, who beneficially own in the aggregate 4,150,000
shares of Common Stock, is entitled to certain rights with
respect to the registration of such shares under the Securities
Act of 1933 (the "Securities Act"). Under the terms of the
agreement between the Company and the Kaplans, if the Company
proposes to register any of its securities under the Securities
Act, either for its own account or for the account of other
security holders exercising registration rights, each of the
Kaplans is entitled to notice of such registration and is
entitled to include shares of such Common Stock therein. The
stockholders benefitting from these rights may, acting jointly,
also require the Company on two separate occasions to file a
registration statement under the Securities Act at the Company's
expense with respect to shares of Common Stock beneficially owned
by them, and the Company is required to use its diligent
reasonable efforts to effect such registration. These rights are
subject to certain restrictions, conditions and limitations,
including the right of the underwriters of an offering to limit
the number of shares included in such registration.
Shattuck Hammond Fee. Upon consummation of the Initial
Public Offering, the Company paid its financial advisor, Shattuck
Hammond, approximately $887,500, as its fee for various
investment banking services rendered. Joseph G. Beck, a director
of the Company, is a founding principal, executive committee
member and shareholder of Shattuck Hammond.
Future Transactions. The Board of Directors of the Company
has adopted a policy that future transactions between the Company
and its officers, directors, principal stockholders and their
affiliates will be subject to the approval of a majority of the
Independent Directors, and will be on terms no less favorable to
the Company than could be obtained from unaffiliated third
parties.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
KAPSON SENIOR QUARTERS CORP.
By: /s/ Glenn Kaplan
Glenn Kaplan
Chairman of the Board and
Chief Executive Officer
Date: April 29, 1997
