SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Castle Dental Centers, 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)(4) 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:
-------------------------------------------------------------------
<PAGE>
[Castle Dental Letterhead/Logo]
April 27, 1998
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite all stockholders
to attend the Annual Meeting of Castle Dental Centers, Inc. to be held on
Thursday, May 28, 1998, at 10 a.m. at The Houstonian, 111 North Post Oak Lane,
Houston, Texas 77024. Proxy materials, which include a Notice of the Meeting,
Proxy Statement and proxy card, are enclosed with this letter. The Company's
1997 Annual Report, which is not a part of the proxy materials, is also enclosed
and provides additional information regarding the financial results of the
Company in 1997.
We hope that you will be able to attend the Annual Meeting. Your vote is
important. Whether you plan to attend or not, please execute and return the
proxy card in the enclosed envelope so that your shares will be represented. If
you are able to attend the meeting in person, you may revoke your proxy and vote
your shares in person. If your shares are not registered in your own name and
you would like to attend the meeting, please ask the broker, trust, bank or
other nominee that holds the shares to provide you with evidence of your share
ownership. We look forward to seeing you at the meeting.
Sincerely,
Jack H. Castle, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE>
Castle Dental Centers, Inc.
1360 Post Oak Boulevard, Suite 1300
Houston, Texas 77056
-------------------------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
-------------------------------------
TO THE STOCKHOLDERS:
The 1998 Annual Meeting of Stockholders of Castle Dental Centers, Inc.,
(the "Company"), will be held at The Houstonian, 111 North Post Oak Lane,
Houston, Texas 77024 at 10 a.m. on Thursday, May 28, 1998, for the following
purposes:
(1) To elect six directors of the Company to serve on the Board of
Directors until the 1999 annual meeting of stockholders and until
their respective successors shall have been duly elected and
qualified.
(2) To consider and act upon a proposal of the Board of Directors of
the Company to amend the Company's Omnibus Stock and Incentive
Plan to increase the number of shares of Common Stock of the
Company subject thereto by 300,000;
(3) To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent certified public accountants to audit the
Company's consolidated financial statements for the year ending
December 31, 1998.
(4) To transact such other business as may properly be brought before
the meeting or any adjournment thereof.
The holders of record of the Company's common stock and series B
convertible preferred stock at the close of business on April 3, 1998 are
entitled to notice of and to vote at the meeting with respect to all proposals.
We urge you to sign and date the enclosed proxy and return it promptly by mail
in the enclosed envelope, whether or not you plan to attend the meeting in
person. No postage is required if mailed in the United States. If you do attend
the meeting in person, you may withdraw your proxy and vote personally on all
matters brought before the meeting.
By Order of the Board of Directors,
John M. Slack
Vice President, Chief Financial Officer
and Secretary
Houston, Texas
April 27, 1998
<PAGE>
Castle Dental Centers, Inc.
1360 Post Oak Boulevard, Suite 1300
Houston, Texas 77056
---------------------------
PROXY STATEMENT
---------------------------
MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Castle Dental Centers, Inc., a Delaware
corporation (the "Company"), for use at the Company's Annual Meeting of
Stockholders or any postponement or adjournment thereof (the "Annual Meeting")
to be held at The Houstonian, 111 North Post Oak Lane, Houston, Texas 77024 at
10 a.m. on Thursday, May 28, 1998 for those purposes set forth in the notice
attached hereto. This Proxy Statement and the accompanying proxy card are being
mailed to stockholders on or about April 27, 1998.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 3, 1998
as the record date ("Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had outstanding and entitled to vote
6,237,581 shares of common stock, par value $.001 per share ("Common Stock"),
and 119,231 shares of Series B Convertible Preferred Stock ("Preferred Stock")
held by John G. Goodman, D.D.S. There are no other classes of voting securities
of the Company outstanding. Each share of Common Stock and Preferred Stock
entitles the holder to one vote on each matter presented at the Annual Meeting.
A proxy will be voted in the manner specified on the proxy, or if no manner is
specified, it will be voted in favor of the proposals set forth in the notice
attached hereto.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock and Preferred Stock of the Company entitled to vote at
the Annual Meeting, either in person or represented by properly executed
proxies, is necessary to constitute a quorum for the transaction of business at
the Annual Meeting. If there are not sufficient shares represented in person or
by proxy at the Annual Meeting to constitute a quorum, the Annual Meeting may be
postponed or adjourned in order to permit further solicitation of proxies by the
Company.
The election of directors will be determined by a plurality of the votes
cast by holders of shares of Common Stock and Preferred Stock present in person
or represented by duly executed proxy at the Annual Meeting and entitled to vote
on the election of directors. Cumulative voting for the election of directors is
not permitted. The approval of all other matters will require the affirmative
vote of holders of a majority of the shares present in person or represented by
duly executed proxy at the Annual Meeting and entitled to vote on the subject
matter. Accordingly, abstentions will have no effect on the outcome of the
election of directors but with respect to any other proposal will operate to
prevent the approval of such proposal to the same extent as a vote against such
proposal.
REVOCATION OF PROXY
Stockholders submitting proxies may revoke them at any time before they
are voted on by (i) notifying John M. Slack, Secretary of the Company, in
writing of such revocation, (ii) by execution of a subsequent proxy sent to Mr.
Slack or (iii) by attending the Annual Meeting in person and giving notice of
revocation. Notices to Mr. Slack referenced in (i) and (ii) should be directed
to John M. Slack, Secretary, Castle Dental Centers, Inc., 1360 Post Oak
Boulevard, Suite 1300, Houston, Texas 77056.
<PAGE>
SOLICITATION EXPENSES
The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition to solicitation of proxies
by mail, certain directors, officers, representatives and employees of the
Company may solicit proxies by telephone and personal interview. Such
individuals will not receive additional compensation from the Company for
solicitation of proxies, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Banks, brokers and other
custodians, nominees and fiduciaries also will be reimbursed by the Company for
their reasonable expenses for sending proxy solicitation materials to the
beneficial owners of Common Stock.
The Company's Annual Report to Stockholders for the year ended December
31, 1997, including consolidated financial statements, is being mailed to all
stockholders entitled to vote at the Annual Meeting. The Annual Report does not
constitute a part of the proxy solicitation material.
-2-
<PAGE>
ELECTION OF DIRECTORS (Proposal 1)
The Company's Bylaws authorize the Board of Directors to determine, from
time to time, the number of directors which shall constitute the whole Board of
Directors. Presently, seven directors serve on the Board of Directors, each
director holding office for a term of one year and until such director's
successor shall have been elected and qualified or until such director's earlier
death, resignation, or removal. The directors whose terms will expire at the
1998 Annual Meeting are Jack H. Castle, Jr., Jack H. Castle, D.D.S., Robert J.
Cresci, G. Kent Kahle, Elizabeth A. Tilney, Emmett E. Moore, and Louis A.
Waters. All of these individuals, except Louis A. Waters, have been nominated to
stand for reelection at the 1998 Annual Meeting to hold office until the 1999
Annual Meeting and until their successors are elected and qualified. In
mid-April 1998, Louis A. Waters informed the Board of Directors that he would
not stand for reelection because of his time commitments at Tyler Corporation;
since the Board of Directors has not identified a candidate to fill Mr. Waters'
directorship, the number of directors composing the Board will decrease to six
at the end of this term. Nonetheless, it is expected that, following the Annual
Meeting, the Board of Directors will set the number of directors composing the
Board of Directors at seven and fill the vacancy accordingly.
NOMINEES FOR ELECTION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR JACK H. CASTLE, JR., JACK
H. CASTLE, D.D.S., ROBERT J. CRESCI, G. KENT KAHLE, ELIZABETH A. TILNEY, AND
EMMETT E. MOORE AS DIRECTORS TO HOLD OFFICE UNTIL THE 1999 ANNUAL MEETING AND
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED. THE SHARES OF COMMON STOCK AND
PREFERRED STOCK REPRESENTED BY RETURNED PROXY CARDS WILL BE VOTED FOR THE
ELECTION OF THESE NOMINEES UNLESS
OTHERWISE SPECIFIED.
Jack H. Castle, Jr., 43, became a director in December 1995. He was a
co-founder of the Company in 1981 and has served as Chief Executive Officer
since 1990. He became the Company's Chairman in August 1996. Mr. Castle received
a B.A. from Rollins College and a Masters of Business Administration from Wake
Forest University. Mr. Castle is the son of Jack H. Castle, D.D.S.
Jack H. Castle, D.D.S., 76, became a director in December 1995 and
served as Chairman of the Company from 1981 until August 1996. He is also the
sole owner of Jack H. Castle, D.D.S., P.C., a dental practice managed by the
Company. Prior to co-founding the Company, Dr. Castle operated a single location
dental practice. Dr. Castle graduated from the University of Houston in 1943 and
received a Doctorate of Dental Surgery from the University of Texas Health
Science Center in Houston in 1945. He served in the United States Navy from 1947
to 1949. Dr. Castle is the father of Jack H. Castle, Jr.
Robert J. Cresci, 54, became a director in December 1995. Mr. Cresci has
been a Managing Director of Pecks Management Partners Ltd., an investment
management firm, since September 1990. Mr. Cresci currently serves on the boards
of Bridgeport Machines, Inc., EIS International, Inc., Sepracor, Inc., Arcadia
Financial, Ltd., Hitox, Inc., Garnet Resources Corporation, HarCor Energy, Inc.,
Meris Laboratories, Inc., Film Roman, Inc., Educational Medical, Inc., Source
Media, Inc., Candlewood Hotel Co., Inc., SeraCare, Inc., and several private
companies.
G. Kent Kahle, 46, became a director in December 1995. He has been a
Managing Director of The GulfStar Group, Inc., an investment banking firm, since
1990. From 1982 to 1990 Mr. Kahle held various positions with Rotan Mosle, Inc.,
most recently as Senior Vice President and Director. Mr. Kahle has a Masters of
Business Administration from The Wharton School of the University of
Pennsylvania and an A.B. from Brown University. He currently serves on the
boards of Total Safety, Inc., Litigation Resources of America, Inc. and Chase
Telecommunications, Inc.
Elizabeth A. Tilney, 40, became a director in August 1996. Ms. Tilney
has been Senior Vice President, Marketing and Communications, of Enron Corp.
since March 1996, where she is responsible for corporate affairs, marketing,
advertising and public relations. From 1987 to 1996, Ms. Tilney held various
positions with Russell Reynolds
-3-
<PAGE>
Associates, an executive search firm, and was most recently an Executive
Director. Ms. Tilney was an account manager associated with Ogilvy & Mather
Advertising in New York and Houston from 1983 to 1987. Ms. Tilney has a Masters
of Business Administration from The Amos Tuck School of Business Administration
of Dartmouth College and a B.A. from the University of Virginia.
Emmett E. Moore, 55, became a director in September 1997. Until November
16, 1997, Mr. Moore was the Chairman of the Board and Chief Executive Officer of
Physicians Resource Group, Inc., a publicly-traded ophthalmology practice
management company ("PRG"), since September 1995, and served as the President
and a director of PRG since April 1995. Also, Mr. Moore served on the board of
PRG until he resigned in February 1998. Mr. Moore is currently developing a new
health care venture. From August 1983 to December 1994, Mr. Moore served in
various capacities with Medical Care America, Inc., a publicly-traded company
that owned and operated outpatient surgery centers and was acquired in September
1994 by Columbia/HCA Health care Corporation. Mr. Moore received B.B.S., J.D.
and M.P.A. degrees from the University of Texas, and is a certified public
accountant.
The vote of a plurality of holders of the outstanding shares of Common
Stock and Preferred Stock present in person or represented by duly executed
proxy at the Annual Meeting for the election of a given nominee is necessary to
elect such nominee as a director of the Company (i.e., the six director nominees
receiving the greatest number of votes cast will be elected, regardless of the
number withheld from voting for the election of such director nominees).
GENERAL INFORMATION WITH RESPECT
TO THE BOARD OF DIRECTORS
MEETINGS
During the year ended December 31, 1997, the Board of Directors held
three meetings and acted two times by unanimous consent. During 1997, each
member of the Board of Directors, except Louis A. Waters, attended at least 75%
of all meetings of the Board of Directors and committees of the Board of
Directors of which such director was a member; Louis A. Waters attended 50% of
all such meetings. There are two standing committees of the Board of Directors,
the Audit Committee and the Compensation Committee. The Board of Directors does
not have a nominating committee.
COMMITTEES OF THE BOARD
Audit Committee. The Audit Committee consists of Robert J. Cresci
(Chairman) and G. Kent Kahle. The Audit Committee: (i) makes recommendations to
the Board of Directors concerning the engagement of independent public
accountants; (ii) reviews with the independent public accountants the plans for
and results of the audit; (iii) approves professional services provided by the
independent public accountants; (iv) reviews the independence of the independent
public accountants; (v) considers the range of audit and non-audit fees; (vi)
reviews the non-audit services performed by the independent public accountants;
and (vii) reviews the adequacy of the Company's internal accounting controls.
During 1997, the Audit Committee did not meet.
Compensation Committee. The Compensation Committee consists of Elizabeth
A. Tilney (Chairperson) and Robert J. Cresci. The Compensation Committee
periodically determines the amount and form of compensation and benefits payable
to all principal officers and certain other management personnel. This committee
also performs the duties of administration with respect to the Company's
incentive compensation plan. See "Report of Compensation Committee on Executive
Compensation." During 1997, the Compensation Committee held one meeting.
DIRECTORS' COMPENSATION
During 1997, each non-employee director was paid a fee of $1,000 for
each Board of Directors meeting attended in person and $500 for each telephonic
Board of Directors meeting in which the director participated. The Company paid
aggregate fees of $7,000 to non-employee directors of the Company in connection
with the Board of
-4-
<PAGE>
Directors' and committee meetings in 1997. The Company does not pay director
fees to directors who also are employees of the Company. No member of the Board
of Directors, except Jack H. Castle, D.D.S., was paid compensation during 1997
for his service as a director of the Company other than pursuant to the standard
compensation arrangement described above. See "Certain Relationships and Related
Transactions." Non-employee directors also receive stock option awards pursuant
to the Company's 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which was adopted by the Board of Directors and approved by the
Company's stockholders in August 1996.
The Directors' Plan, which is administered by the Compensation
Committee, provides for the automatic grant to each non-employee director of an
option to purchase 25,000 nonqualified stock options upon such person's initial
election as a director. The aggregate amount of Common Stock with respect to
which grants under the Directors' Plan may be made may not exceed 150,000
shares. Options will be exercisable during a ten-year period from the date of
grant of the Options and will vest based upon the number of full years of
service a non-employee director serves on the Board of Directors as follows: 20%
after one full year, 40% after two full years of service, 60% after three full
years of service, 80% after four full years of service and 100% after five full
years of service. No option will remain exercisable later than ten years after
the date of grant.
The exercise price for Options granted under the Directors' Plan may be
no less than the fair market value of the Common Stock on the date of grant.
Coincident with the completion of the initial public offering, the Company
granted options to acquire an aggregated 125,000 shares of Common Stock under
the Directors' Plan at the initial public offering price of $13.00 per share.
-5-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 31, 1998 with
respect to beneficial ownership of the Company's Common Stock by (i) each
director, (ii) each executive officer, (iii) the executive officers and
directors as a group, and (iv) each person known to the Company who beneficially
owns 5% or more of the outstanding shares of its Common Stock. The address of
all such persons, with the exception of The Capital Group Companies, Inc. and J.
& W. Seligman & Co. Incorporated, is c/o Castle Dental Centers, Inc., 1360 Post
Oak Boulevard, Suite 1300, Houston, Texas 77056. The address of The Capital
Group Companies, Inc. is 333 South Hope Street, Los Angeles, California 90071.
The address of J. & W. Seligman & Co. Incorporated is 100 Park Avenue, New York,
New York 10017. Unless otherwise indicated, each of the stockholders has sole
voting and investment power with respect to the shares beneficially owned.
Number of Percentage
Shares of Shares
Name and Address of Beneficially Beneficially
BENEFICIAL OWNER OWNED OWNED
---------------- ------------ ---------
Jack H. Castle, Jr. (1)(2)....................... 1,228,000 19.7%
Jack H. Castle, D.D.S. (2)....................... 871,000 14.0
Loretta Castle (2)............................... 871,000 14.0
Castle Interests, Ltd. (2)....................... 514,000 8.2
Pecks Management Partners, Ltd. (3).............. 948,243 15.2
Robert J. Cresci (4)............................. 948,243 15.2
The Capital Group Companies, Inc. ............... 488,000 7.8
J. &W. Seligman & Co. Incorporated............... 311,000 5.0
G. Kent Kahle (5)................................ 56,579 *
G. Daniel Siewert III (6)........................ 37,850 *
John M. Slack (7)................................ 18,000 *
Elizabeth A. Tilney (8).......................... 3,000 *
Emmett E. Moore (8).............................. --- ---
Louis A. Waters (8).............................. --- ---
All directors and executive officers as a
group (9 persons) (8)........................... 2,648,672 42.0%
* Less than 1%
(1) Includes 714,000 shares held by the Castle 1995 Gift Trust f/b/o Jack H.
Castle, Jr., of which Mr. Castle is Trustee. Excludes options to acquire
100,000 shares of Common Stock issued under the Castle Dental Centers,
Inc. Omnibus Stock and Incentive Plan (the "Plan").
-6-
<PAGE>
(2) Includes 514,000 shares of Common Stock owned of record by Castle
Interest, Ltd., a Texas limited partnership of which Dr. Castle, Mrs.
Castle and Mr. Castle are the three general partners. The general
partners of Castle Interests, Ltd. cannot act to vote or dispose of
shares of Common Stock held by Castle Interests, Ltd. without the
unanimous vote of all of the general partners. Loretta Castle is the
wife of Dr. Castle and the mother of Jack H. Castle, Jr. The mailing
address for each person or entity is 1360 Post Oak Boulevard, Suite
1300, Houston, Texas 77056.
(3) Includes 638,483, 126,433, and 183,327 shares of Common Stock owned of
record by Delaware State Employees' Retirement Fund, Declaration of
Trust for Defined Benefit Plans of ICI American Holdings Inc. and
Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc.,
respectively (the "Pecks Investors"). Pecks Management Partners Ltd.
("Pecks"), as investment manager for the Pecks Investors, has sole
investment and voting power with respect to such shares. Mr. Cresci, a
director of the Company, is a Managing Director of Pecks. The principal
business address of Pecks is One Rockefeller Plaza, New York, New York
10020. Pecks disclaims beneficial ownership of such shares.
(4) Includes all shares deemed to be beneficially owned by Pecks, of which
Mr. Cresci is a Managing Director, and excludes options to acquire
25,000 shares of Common Stock under the Directors' Plan. As a result,
Mr. Cresci may be deemed to share voting and investment power with
respect to such shares. Mr. Cresci disclaims beneficial ownership of
such shares. See note 3 above.
(5) Consists entirely of the beneficial ownership of shares of Common Stock
issuable on exercise of the GulfStar Warrant and excludes options to
acquire 35,000 shares of Common Stock, including 25,000 shares under the
Directors' Plan and 10,000 shares under the Plan. Mr. Kahle is a
Managing Director of The GulfStar Group, Inc., an affiliate of GulfStar
Investments, Ltd., the holder of the GulfStar Warrant.
(6) Includes presently exercisable options to acquire 10,000 shares of
Common Stock issued under the Plan. Excludes options to acquire 100,000
shares of Common Stock issued under the Plan.
(7) Includes presently exercisable options to acquire 8,000 shares of Common
Stock issued under the Plan. Excludes options to acquire 46,000 shares
of Common Stock issued under the Plan.
(8) Excludes options to acquire 25,000 shares of Common Stock under the
Directors' Plan.
(9) Includes (i) 714,000 shares of Common Stock held by the Castle 1995 Gift
Trust f/b/o Jack H. Castle, Jr., (ii) 514,000 shares of Common Stock
held by Castle Interests, Ltd., (iii) 948,243 shares of Common Stock
beneficially owned by the Pecks Investors, and (iv) 56,579 shares of
Common Stock issuable to GulfStar Investments, Ltd. on exercise of the
GulfStar Warrant.
EXECUTIVE OFFICERS
The Board elects executive officers annually at its first meeting
following the annual meeting of stockholders. Information concerning Mr. Jack H.
Castle, Jr. is set forth above under "Election of Directors." Information
concerning G. Daniel Siewert, III and John M. Slack is set forth below.
G. Daniel Siewert, III, 54, joined the Company in August 1997 as
President and Chief Operating Officer. From January 1995 through June 1997, he
served as Chief Operating Officer for Family Dental Center, Inc., a large group
dental practice with locations in Sears Roebuck & Company stores. From November
1993 to December 1994, Mr. Siewert provided business management consulting for a
major retail eye care company. Prior to that, from September 1990 until August
1993, he was Chief Executive Officer of National Vision Associates, Inc.
-7-
<PAGE>
John M. Slack, 50, joined the Company in December, 1995 as Vice
President and Chief Financial Officer. From November 1994 through November 1995,
he served as Vice President and Chief Financial Officer of Team, Inc., a
publicly-held environmental services company. From 1985 through August 1994, Mr.
Slack was Vice President and Chief Financial Officer of Serv-Tech, Inc., a
publicly-held industrial services company. Mr. Slack received a B.S. in
international economics from Georgetown University in 1969.
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain summary information concerning
compensation earned by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers (the "Named Executive
Officers") during the year ended December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
OTHER ANNUAL RESTRICTED NUMBER OF ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL YEAR ($) ($) ($) ($) GRANTED ($)
------------------ ---- -------- ------- ----- ----- --------- ----
POSITION
--------
<S> <C> <C> <C>
Jack H. Castle, Jr.......... 1997 254,167 --- --- --- 100,000 ---
Chief Executive Officer
G. Daniel Siewert III...... 1997 61,698(1) --- --- --- 110,000 ---
President,
Chief Operating Officer
John M. Slack............... 1997 120,001 --- --- --- 30,000 ---
Vice President,
Chief Financial Officer,
Treasurer and Secretary
</TABLE>
(1) Represents less than one full year's compensation; pursuant to agreement
between the officer and the Company, such officer's employment began on
August 4, 1997.
-8-
<PAGE>
STOCK OPTIONS
The following table reflects certain information regarding stock options granted
to the Named Executive Officers during 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term
Number of
Securities
Underlying Percent of Total
Options Options Granted to Exercise Expiration
NAME GRANTED EMPLOYEES IN 1997 PRICE (1) DATE 5% ($) 10% ($)
- ---- ------- ----------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack H. Castle, Jr..... 100,000 23.1% $10.00 11/10/07 628,845 1,593,742
G. Daniel Siewert III.. 110,000 25.4% $10.00 11/10/07 691,784 1,753,117
John M. Slack ........ 30,000 6.9% $10.00 11/10/07 188,668 478,123
</TABLE>
(1) Originally authorized at the initial public offering price of $13.00,
the options were subsequently reissued at $10.00 per share, the fair
market value of the Common Stock on the date of grant.
YEAR END 1997 OPTION VALUES
The following table reflects certain information concerning the number of
unexercised options held by the Named Executive Officers and the value of such
officers' unexercised options as of December 31, 1997. No options were exercised
by the Named Executive Officers during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options "In-the-Money" Options
AT DECEMBER 31, 1997 (#) AT DECEMBER 31, 1997 (1)
------------------------ ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C>
Jack H. Castle, Jr..................... --- 100,000 --- $ ---
G. Daniel Siewert III.................. 10,000 100,000 --- ---
John M. Slack......................... 8,000 42,000 --- ---
</TABLE>
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The exercise
price of the options granted to the Named Executive Officers is $10.00
per share. The value of unexercised options for each of the Named
Executive Officers represents the difference between the exercise price
of such options and the closing price of the Company's Common Stock on
December 31, 1997 ($7.75 per share). Therefore, none of the options
granted to the Named Executive Officers were "in-the-money" at December
31, 1997.
-9-
<PAGE>
STOCK PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Common Stock with the cumulative total return of the
Nasdaq Composite Index and a peer group stock index (the "Peer Group Index")
defined as follows: Coast Dental Services, Inc., Dental Care Alliance, Inc.,
Gentle Dental Service Corp., and Monarch Dental Corporation. The cumulative
total return computations set forth in the Performance Graph assume the
investment of $100 in the Company's Common Stock, the Nasdaq Composite Index and
the Peer Group Index on September 12, 1997, the date that the Company began
trading on the National Association of Securitites Dealers Automated Quotation
system.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DOLLARS
- --------------------------------------------------------------------
CASTLE DENTAL CENTERS 9/97 100
12/97 59.62
- --------------------------------------------------------------------
NASDAQ COMPOSITE 9/97 100
12/97 99.35
- --------------------------------------------------------------------
PEER GROUP 9/97 100
12/97 95.13
- --------------------------------------------------------------------
ASSUMES INITIAL INVESTMENT OF $100
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
NOTE: TOTAL RETURNS BASED ON MARKET CAPITALIZATION
-10-
<PAGE>
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, a committee of the Board of Directors composed of the
non-employee directors listed below this report. The Compensation Committee is
responsible for recommending to the full Board of Directors compensation of the
President of the Company, determining the compensation of the other executive
officers of the Company, and administering the Company's employee benefit plans.
None of the members of the Compensation Committee have any interlocking or other
relationships with the Company that would call into question their independence
as Compensation Committee members.
COMPENSATION POLICIES AND PROGRAMS
The Compensation Committee believes that the goals of the executive
compensation program should be to align executive compensation with the
Company's long-term business objectives and performance and to enable the
Company to attract, retain and reward executive officers who contribute to the
long-term success of the Company. The Compensation Committee believes that the
best way to achieve these goals is by aligning the financial interests of the
Company's executive officers closely to the interests of the Company's
stockholders through a combination of annual cash incentives and stock options,
while providing the executive officers with base salary compensation at levels
that are competitive with, but which do not exceed, prevailing standards. The
compensation of the Company's executive officers is reviewed and approved
annually by the Compensation Committee. The Company's executive compensation
program is based on three elements, each of which is determined in part by
corporate performance:
o Base salary compensation
o Annual incentive compensation
o Stock-based incentive compensation
Corporate performance is evaluated by reviewing the extent to which strategic
and business plan goals are met, including the relationship between the
Company's net income and sales.
BASE SALARY
In the fourth quarter of 1998, the Company entered into an employment
agreement with G. Daniel Siewert, III providing for an annual base salary of
$175,000. See "Employment Agreements." Mr. Siewert is the only executive officer
to have an employment agreement with the Company. In 1997, the Company paid Jack
H. Castle, Jr. a base salary of $254,167 and John M. Slack a base salary of
$120,001. Each of Messrs. Siewert, Castle, and Slack is eligible to receive a
performance based discretionary bonus, but no such bonuses were awarded in 1997.
INCENTIVE COMPENSATION
The Compensation Committee believes its stock options are critical in
motivating the long-term creation of stockholder value because options focus
executive attention on stock price as the primary measure of performance. In
January 1996, the Company adopted and its stockholders approved a Castle Dental
Centers, Inc. Omnibus Stock and Incentive Plan (the "Plan") for the benefit of
its employees, including executive officers. The Plan is administered by the
Compensation Committee. The purpose of the Plan is to encourage ownership of
Common Stock by eligible employees, including executive officers, to provide
increased incentive for such employees to render services and to exert maximum
effort for the business success of the Company and to strengthen identification
of such employees with the stockholders for the purpose of maximizing
stockholder value. The Plan also utilizes vesting periods to encourage its
executive officers and eligible employees to continue in the employ of the
Company. Stock option grants made to the Chief Executive Officer and other
executive officers in 1997 were made in part because of the Company's
-11-
<PAGE>
success in significantly increasing operating profits and cash flow and
consummating the initial public offering. Stock option grants to the Company's
Chief Executive Officer and other executive officers are not made automatically
each year and are not considered to be a part of normal annual compensation.
Stock option grants provide an incentive that focuses the executives'
attention on managing the Company from the perspective of an owner with an
equity stake in the business. Accordingly, these stock options are tied to the
future performance of the Company's Common Stock and provide value to the
recipient only when the price of the Company's Common Stock increases above the
option grant price. Pursuant to the Plan, in November 1997 the Compensation
Committee approved the following option grants: 100,000 shares to Jack H.
Castle, Jr., 110,000 shares to G. Daniel Siewert, III, and 30,000 shares to John
M. Slack. These options were authorized shortly before the Company's initial
public offering with an exercise price equal to the initial public offering
price of the Company's Common Stock. On November 6, 1997, the Compensation
Committee recommended, on the Board of Directors' approval, that the options
awarded to Messrs. Castle, Siewert and Slack, be reissued at an exercise price
of $10.00 per share, the closing price of the Company's Common Stock on November
10, 1997, the date the option grants were issued. The recommendation of the
Compensation Committee to reprice the options granted under the Plan was
motivated by the Committee's belief that holders of such options, including the
Company's executive officers, would be more highly motivated to exert maximum
effort for the business success of the Company and to strengthen identification
of such employees with the stockholders for the purpose of managing stockholder
value if the exercise price of the options was more closely related to the
market price of the underlying Common Stock.
This report is furnished by the Compensation Committee of the Board of
Directors.
Elizabeth A. Tilney: Chairperson
Robert J. Cresci
EMPLOYMENT AGREEMENTS
G. Daniel Siewert, III entered into an employment agreement (the
"Agreement") with the Company providing for a salary at the rate of not less
than $14,583.33 per month and a performance bonus to be determined at the sole
discretion of the Compensation Committee of the Company's Board of Directors.
Under the Agreement, the term of employment commenced on August 4, 1997 and
shall continue in force and effect until, or unless, written notice is given by
either Mr. Siewert of the Company to the other party with at least ninety days
notice of an intent to end the employment relationship for any reason. The
Agreement provides that, in the event of a termination of employment by the
Company without cause, Mr. Siewert will be entitled to receive from the Company
any obligations with respect to earned but then unpaid base salary and benefits
to the extent then vested through the date of termination; in addition, the
Company will pay Siewert a severance amount consisting of twelve months base
salary, car allowance, and medical insurance. If terminated for cause, the
Company will honor any obligations with respect to earned but then unpaid base
salary and benefits to the extent then vested through the date of termination.
In the event of a change in control of the Company (as defined in the
Agreement), Mr. Siewert will be (i) permitted to vest fifty percent in all
remaining unvested stock options or (ii) permitted to vest in all remaining
unvested stock options if he does not retain his employment with the Company in
a substantially similar position for twelve months after the change of control
occurs. The Agreement contains a covenant not to compete with the Company for a
period of one year immediately following termination of employment for any
reason.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kahle, a director of the Company, is a Managing Director of The
GulfStar Group, Inc., which has provided investment banking and advisory
services to the Company. In 1995, the Company paid $540,000 in investment
banking fees to The GulfStar Group, Inc., and issued the GulfStar Warrant for
56,579 shares of Common Stock to GulfStar Investments, Ltd. The Company has paid
The GulfStar Group, Inc. for investment banking and financial advisory
-12-
<PAGE>
services provided to the Company an amount equal to one percent of the total
consideration for each of the Company's acquisitions which has been consummated.
The GulfStar Group, Inc. received approximately $195,000 in investment banking
and financial advisory fees from the Company in 1996. The GulfStar Group, Inc.
will receive an advisory fee in connection with the acquisition of Dental
Consulting Services, L.L.C., which is expected to be approximately $180,000. The
directors of the Company other than Mr. Kahle approve the payments made to The
GulfStar Group, Inc. by the Company.
Mr. Cresci, a director of the Company, is a Managing Director of Pecks
Management Partners Ltd., the investment advisor to the Pecks Investors, which
acquired 948,243 shares of Common Stock on conversion of 1,244,737 shares of
Series A Convertible Preferred Stock and 485,382 shares of Series C Convertible
Preferred Stock. Pursuant to the provisions of the Securities Purchase Agreement
dated December 18, 1995, for so long as certain ownership thresholds with
respect to the Common Stock are maintained, Mr. Cresci has the contractual right
to nominate one member of the Company's Board of Directors.
In December 1995, the Company acquired all of the stock of Jack H.
Castle, D.D.S., Inc., a professional corporation of which Dr. Castle, a director
of the Company, was the sole owner. In connection with that transaction, the
Company paid Dr. Castle $6.0 million in cash and entered into a Deferred
Compensation Agreement with Dr. Castle pursuant to which the Company has agreed
to pay Dr. Castle $2.6 million in 20 quarterly installments beginning March
1996. In June 1997, Dr. Castle and the Company amended the Deferred Compensation
Agreement (i) postponing the payment of any scheduled payments under the
Deferred Compensation Agreement until the earlier of (a) the issuance of any
debt consented to by the bank the proceeds of which are applied to pay amounts
owed under the Bank Credit Facility and the Interim Financing, or the closing of
any equity offering the proceeds of which are applied to pay amounts owed under
the Bank Credit Facility and the Interim Financing, and (b) January 31, 1998, at
which time the scheduled deferred compensation payments shall become payable
beginning on the next scheduled payment date, and (ii) deferring payment of the
scheduled payments under the Deferred Compensation Agreement which were not made
on or after September 30, 1996 until the earlier of (a) the closing of an
initial public offering of the Company's Common Stock in which the gross
proceeds are not less than $25.0 million, provided, however, that such payments
shall only be made in the event the Company first pays any amounts owing under
the Bank Credit Facility and the Interim Financing; or (b) December 31, 2000.
Proceeds of the initial public offering were used to pay amounts so deferred
under the Deferred Compensation Agreement and the Company has made all scheduled
payments under the Deferred Compensation Agreement. The Company has obtained the
required consents under the Bank Credit Facility to make the above-described
payments of the Deferred Compensation Agreement. In connection with the purchase
of the stock of Jack H. Castle, D.D.S., Inc., the Company also entered into a
management services agreement with Jack H. Castle, D.D.S., P.C., a professional
corporation of which Dr. Castle is the sole owner. Pursuant to the management
services agreement, Dr. Castle receives an annual payment of $100,000 for
services performed in connection therewith.
The Company is party to a lease agreement with Goforth, Inc., a company
owned by Jack H. Castle, Jr., the Company's Chairman and Chief Executive
Officer. The lease agreement relates to the Castle Dental Center located at 2101
West Loop South in Houston, Texas, a 6,781 square foot free-standing building.
The Company has agreed to pay Goforth, Inc. a minimum guaranteed rental of
$12,000 per month through January 2001 and $13,200 per month from January 2001
through January 2006. The Company has also agreed to pay additional rent of
approximately $1,600 per month for insurance, taxes and common area maintenance.
The Company believes that this lease agreement is on terms no less favorable to
the Company than could have been obtained with an independent third party.
Pursuant to a Registration Rights Agreement dated as of December 18,
1995, as amended, the Pecks Investors, GulfStar Investments, Ltd. and the
members of the Castle Family have been granted certain registration rights by
the Company with respect to the shares of Common Stock owned by them or acquired
on conversion of Series A Convertible Preferred Stock and Series C Convertible
Preferred Stock and exercise of the GulfStar Warrant.
-13-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
In 1997, the members of the Compensation Committee were Elizabeth A.
Tilney and Robert J. Cresci. Mr. Cresci is a party to certain transactions with
the Company. See "Certain Relationships and Related Transactions."
AMENDMENT TO THE COMPANY'S
OMNIBUS STOCK AND INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK OF THE COMPANY SUBJECT THERETO BY 300,000 (Proposal 2)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
COMPANY'S OMNIBUS STOCK AND INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK OF THE COMPANY SUBJECT THERETO BY 300,000. THE SHARES OF COMMON
STOCK AND PREFERRED STOCK REPRESENTED BY RETURNED PROXY CARDS WILL BE VOTED FOR
THE ELECTION OF THIS INCREASE UNLESS OTHERWISE SPECIFIED.
In January 1996, the Board of Directors adopted, and the stockholders of
the Company approved, the Castle Dental Centers, Inc. Omnibus Stock and
Incentive Plan (the "Plan"). The purpose of the Plan is to advance the interests
of the Company, by providing for the acquisition of an equity interest in the
Company by its key employees, directors, consultants and former consultants, by
providing additional incentives and motivation toward superior performance by
key employees and consultants of the Company, and by enabling the Company to
attract and retain the services of key employees and consultants on whose
judgment, interest and special effort the successful conduct of the Company's
operations is largely dependent. The aggregate amount of Common Stock with
respect to which grants under the Plan may be made may not exceed 750,000
shares.
The Plan, which is administered by the Compensation Committee, provides
for the grant of incentive stock options ("ISOs") as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock
options and shares of restricted stock (collectively, the "Awards"). The
Compensation Committee has, subject to the terms of the Plan, the sole authority
to grant Awards under the Plan, to construe and interpret the Plan and to make
all other determinations and take any and all actions necessary or advisable for
the administration of the Plan.
All of the employees, directors, consultants and former consultants of
the Company or its affiliates are eligible to receive Awards under the Plan. In
addition, key employees of entities managed by the Company may receive Awards.
Only key employees of the Company are eligible to receive ISOs. Options will be
exercisable during the period specified in each option agreement and will
generally be exercisable in installments, pursuant to a vesting schedule to be
designated by the Compensation Committee. No option will remain exercisable
later than ten years after the date of grant (or five years from the date of
grant in the case of ISOs granted to holders of more than 10% of the Common
Stock). Restricted stock granted under the Plan will have such terms, conditions
and restrictions as the Compensation Committee shall determine.
The exercise price for ISOs granted under the Plan may be no less than
the fair market value of the Common Stock on the date of grant (or 110% in the
case of ISOs granted to employees owning more than 10% of the Common Stock). The
exercise price for nonqualified options granted under the Plan will be
determined at the discretion of the Compensation Committee.
During 1997, the Company granted Awards to purchase approximately
433,250 shares of Common Stock under the Plan at prices per share ranging from
$10.00 to the initial public offering price. Generally, the outstanding options
are, and options to be granted will be, exercisable one year from the date of
grant as to 20% of the underlying shares, and as to an additional 20% on each of
the next four anniversaries of the date of option grant.
-14-
<PAGE>
On March 4, 1998, the Board of Directors adopted an amendment to the
Plan to increase the total number of shares of Common Stock that may be awarded
under the Plan by 300,000 from 750,000 to 1,050,000. The amendment will become
effective only upon the approval of the stockholders of the Company. The total
number of shares that can currently be issued pursuant to options awarded under
the Plan is 750,000, and options with respect to only 245,000 of such shares
remained available under the Plan as of December 31, 1997. The Board of
Directors believes that the Plan is accomplishing its purposes and adopted this
proposed amendment to the Plan in order that option awards may continue to be
made as the Compensation Committee may determine.
An important consideration to the Board of Directors in proposing the
amendment to the Plan was the pendency of the Company's efforts to acquire
various dental practices. The expansion of the Company's business through future
acquisitions will be accompanied by an increase in the number of employees
eligible for options under the Plan. The Board of Directors believes it will be
important for the Company to have the flexibility to provide incentive-based
compensation packages to key members of the management of these acquired
businesses. The proposed amendment to the Plan will increase the Company's
flexibility in structuring its compensation packages for key members of
management, while allowing the Company to continue its historical practices in
this area.
In the past Jack H. Castle, Jr., G. Daniel Siewert, III, G. Kent Kahle,
and John M. Slack, all of whom are directors and/or executive officers of the
Company, have been awarded options to purchase an aggregate of 270,000 shares of
Common Stock under the Plan. Such persons may benefit from approval of the
amendment to increase the number of shares of Common Stock subject to the Plan
if the Compensation Committee determines to award additional options under the
Plan to such persons.
APPOINTMENT OF AUDITORS (Proposal 3)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS TO AUDIT THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDING DECEMBER 31, 1998. THE SHARES OF COMMON STOCK AND PREFERRED
STOCK REPRESENTED BY RETURNED PROXY CARDS WILL BE VOTED FOR THE ELECTION OF
THESE ACCOUNTANTS UNLESS OTHERWISE SPECIFIED.
At the Annual Meeting a vote will be taken on the proposal to ratify the
appointment by the Board of Directors of Coopers & Lybrand, L.L.P., independent
certified public accountants, as auditors of the Company's consolidated
financial statements for the year ending December 31, 1998. Coopers & Lybrand,
L.L.P. audited the consolidated financial statements of the Company for the year
ended December 31, 1997.
Representatives of Coopers & Lybrand, L.L.P. are expected to be present
at the Annual Meeting, with the opportunity to make a statement should they
choose to do so, and to be available to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons holding more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission ("SEC") and any stock exchange or automated quotation
system on which the Common Stock may then be listed or quoted (i) initial
reports of ownership, (ii) reports of changes in ownership and (iii) annual
reports of ownership of Common Stock and other equity securities of the Company.
Such directors, officers and ten-percent stockholders are also required to
furnish the Company with copies of all such filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1997, the Company believes that all of the Company's executive officers and
-15-
<PAGE>
directors complied with Section 16(a) reporting requirements during 1997 except
as follows: (i) Elizabeth A. Tilney and G. Daniel Siewert, III, each, on one
occasion, failed to file a Form 4 on a timely basis for one transaction
concerning the purchase of Company Common Stock; (ii) all executive officers and
directors failed to file Form 3s on a timely basis; and (iii) Messrs. Moore,
Waters, and Castle each failed to file a Form 5 on a timely basis.
ANNUAL REPORTS
The Company's Annual Report to stockholders, together with its Annual
Report on Form 10-K for the year ended December 31, 1997, accompanies this Proxy
Statement. The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1997 with the Securities and Exchange Commission on March 31, 1998.
A copy of the Form 10-K, including any financial statements and schedules and a
list describing any exhibits not contained therein, may be obtained without
charge by any stockholder. Written requests for copies of the report should be
directed to John M. Slack, Secretary, Castle Dental Centers, Inc., 1360 Post Oak
Boulevard, Suite 1300, Houston, Texas 77056.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Secretary of the Company
no later than January 28, 1999, and must otherwise comply with the requirements
of Rule 14a-8 under the Securities Exchange Act of 1934.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be
presented at the Annual Meeting other than those described in this proxy
statement. Should any other matter properly come before the Annual Meeting,
however, the persons named in the form of proxy accompanying this proxy
statement will vote all shares represented by proxies in accordance with their
best judgment on such matters.
-16-
<PAGE>
(FRONT)
Castle Dental Centers, Inc.
ANNUAL MEETING OF STOCKHOLDERS
Solicited by the Board of Directors of Castle Dental Centers, Inc.
The undersigned hereby appoints Jack H. Castle, Jr. and John M. Slack,
and each of them individually, as proxies with full power of substitution, to
vote all shares of Common Stock and Preferred Stock of Castle Dental Centers,
Inc. that the undersigned is entitled to vote at the Annual Meeting of
Stockholders thereof to be held on May 28, 1998, or at any adjournment or
postponement thereof, as follows:
Any executed proxy which does not designate a vote shall be deemed to
grant authority for any item not designated.
PROPOSAL 1: ELECTION OF DIRECTORS
/_/ FOR all nominees listed below /_/WITHHOLD AUTHORITY for all
nominees listed below
Jack H. Castle, Jr., Jack H. Castle, D.D.S., Robert J. Cresci, G. Kent
Kahle, Elizabeth A. Tilney, and Emmett E. Moore to hold office until the 1999
Annual Meeting and until their successors are elected and qualified.
INSTRUCTION: to withhold authority to vote for any individual nominee,
write that nominee's name in the space provided here.
-17-
<PAGE>
(BACK)
PROPOSAL 2: ADOPTION TO AMEND THE COMPANY'S OMNIBUS STOCK AND INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY SUBJECT
THERETO BY 300,000.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
PROPOSAL 3: APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS AUDITORS FOR
THE COMPANY.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
Please check the following box if you plan to attend the Annual Meeting
of Stockholders in person. /_/
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED "FOR" PROPOSAL 1 (ALL NOMINEES), "FOR" PROPOSAL 2, "FOR"
PROPOSAL 3 AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE PROXY
WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.
Dated: , 1998
------------------------------------
Signature
Please sign exactly as name appears
on this card. Joint owners should
each sign. Executors,
administrators, trustees, etc.,
should give their full titles.
Please complete, sign and promptly mail this proxy in the enclosed envelope.
-18-
