<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Complete Wellness 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
<PAGE> 2
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE> 3
COMPLETE WELLNESS CENTERS, INC.
666 11th Street, N.W., Suite 200
Washington, D.C. 20001
(202) 630-9700
- --------------------------------------------------------------------------------
May 4, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Complete Wellness Centers, Inc. (the "Company") to be
held at the Company's corporate headquarters, 666 11th Street, N.W., Suite 200,
Washington, D.C. 20001, on Tuesday, May 26, 1998, at 10:00 a.m., local time.
At the Annual Meeting, you will be asked to consider and vote upon the
proposals to (i) elect a Board of six directors, (ii) vote upon a proposal to
create a stock option plan containing 50,000 shares of the Company's $.0001665
par value common stock (the "Common Stock") for non-employee directors
("Outside Directors") on the Company's Board of Directors, (iii) vote upon a
proposal to amend the Company's 1994 Stock Option Plan, 1996 Stock Option Plan
and 1996 Restricted Stock Option Plan for Health Care Professionals to add a
"change in control" provision and a "cashless exercise" provision, and (iv) to
ratify the selection of Ernst & Young LLP as independent accountants for the
fiscal year ending December 31, 1998.
The accompanying Proxy Statement, which you are urged to read
carefully, provides important information with respect to the foregoing
proposals. Whether or not you plan to attend the Annual Meeting, please
complete, date and sign the enclosed proxy card and promptly return it in the
enclosed postage-prepaid envelope. If you attend the Annual Meeting, you may
vote in person even though you have previously returned the proxy.
On behalf of the Board of Directors,
C. Thomas McMillen
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
[COMPLETE WELLNESS CENTER LETTERHEAD]
April 14, 1998
Dear Shareholder,
1997 was a dynamic year for Complete Wellness Centers, Inc,. While we have
been issuing numerous news releases on an on-going basis, we feel this is an
opportunity to contact you on a more personal level.
To summarize the Company's highlights during the past year:
- - Completed an initial public offering of $6.1 million in February 1997 and
recently closed a $5 million private equity offering;
- - Experienced rapid growth, particularly by the increase in the number of
clinics we manage from seven one year earlier to 85 at year end. Plus, we
have 50 clinics in various stages of development. Our revenues rose 573%
from 1996. Our current annualized revenues of approximately $25 million is
ten times our annualized revenues at the start of 1997;
- - Established a managed care subsidiary, Optimum Health Services, Inc., which
has executed two contracts in Florida and is soon to become the first
alternative medicine HMO in the state;
- - Acquired SmokEnders(R), the nation's leading smoking cessation program,
with over 1 million graduates. SmokEnders(R) is positioned to capitalize on
the proposed tobacco settlement which has a projected $1 billion per year
in smoking cessation funding;
- - Acquired 56 of the most profitable Nutri/System(R) weight loss centers
which generated over $19 million in revenues and $2.6 million in operating
profit before general and administrative costs in 1997.
This year has also brought some challenges. As you may know, an
interdepartmental team of federal investigative officers initiated an inquiry
into the Company's clinical billing practices in November 1997. We are working
to resolve this matter with the government and continuing to cooperate fully
with the investigative authorities.
We have taken great strides this year in building the premier wellness company
in America. I am confident that we will continue to make progress towards that
objective. We share your confidence in the Company's future prospects and
thank you for your continued support and interest.
This release contains forward-looking statements regarding the plans or
objectives of the Company for future operations, including the development of
the multi-disciplinary medical centers. The forward-looking statements
included herein are based on current expectations that involve some
uncertainties. Actual results may differ materially from those projected in
such forward-looking statements.
Sincerely,
/s/ C. THOMAS MCMILLEN
C. Thomas McMillen
Chairman and CEO
Complete Wellness Centers, Inc.
<PAGE> 5
COMPLETE WELLNESS CENTERS, INC.
666 11th Street, N.W., Suite 200
Washington, D.C. 20001
(202) 639-9700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
---------------
To the Stockholders of
COMPLETE WELLNESS CENTERS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Complete Wellness Centers, Inc. (the "Company") will be
held at the Company's corporate headquarters, 666 11th Street, N.W., Suite 200,
Washington, D.C. 20001, on Tuesday, May 26, 1998, at 10:00 a.m., local time,
to consider and act upon the following proposals:
1. To elect a Board of six (6) directors.
2. To consider and vote upon a proposal to create a
stock option plan containing 50,000 shares of the Company's Common Stock for
Outside Directors on the Company's Board of Directors.
3. To consider and vote upon a proposal to amend the
Company's 1994 Stock Option Plan, 1996 Stock Option Plan and 1996 Restricted
Stock Option Plan for Health Care Professionals to add a "change in control"
provision and a "cashless exercise" provision.
4. To ratify the selection of Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 1998.
5. To transact such other business as may properly come
before the meeting or any adjournments thereof.
<PAGE> 6
Only holders of record of the Company's Common Stock at the
close of business on April 7, 1998, the Record Date for the Annual Meeting, are
entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
/s/ F. Ryan Knoll
F. Ryan Knoll
Secretary
Washington, D.C.
May 4, 1998
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 7
COMPLETE WELLNESS CENTERS, INC.
666 11th Street, N.W., Suite 200
Washington, D.C. 20001
(202) 639-9700
-----------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
-----------------
INTRODUCTION
General
This Proxy Statement is being furnished to holders of the Common
Stock, par value $.0001665 per share ("Common Stock"), of Complete Wellness
Centers, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on Tuesday, May 26, 1998 at the
Company's corporate headquarters, 666 11th Street, N.W., Suite 200, Washington,
D.C. 20001, at 10:00 a.m., local time, and at any and all adjournments or
postponements thereof (the "Annual Meeting"). The cost of this solicitation
will be borne by the Company. This Proxy Statement and enclosed proxy card are
being mailed to the Company's stockholders on or about May 4, 1998.
Matters to be Considered at the Annual Meeting
At the Annual Meeting, the stockholders will be asked to consider and
vote upon the following proposals:
1. To elect a Board of six (6) directors.
2. To consider and vote upon a proposal to create a
stock option plan containing 50,000 shares of the Company's Common Stock for
Outside Directors on the Company's Board of Directors.
3. To consider and vote upon a proposal to amend the
Company's 1994 Stock Option Plan, 1996 Stock Option Plan and 1996 Restricted
Stock Option Plan for Health Care Professionals to add a "change in control"
provision and a "cashless exercise" provision.
4. To ratify the selection of Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 1998.
all as more fully described in this Proxy Statement.
<PAGE> 8
Voting at the Annual Meeting
Only holders of record of Common Stock at the close of business on
April 7, 1998 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting, each such holder of record being entitled to one vote per share
on each matter to be considered at the Annual Meeting. On the Record Date,
there were 2,149,286 shares of Common Stock issued and outstanding.
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting (1,074,644 shares of the 2,149,286 shares outstanding) is
necessary to constitute a quorum at the Annual Meeting. All abstentions and
broker non-votes, if any, will be included as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
Annual Meeting. A plurality vote of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting is required to elect the
Board of six (6) directors. The affirmative vote by the holders of a majority
of the shares of Common Stock present in person or by proxy at the Annual
Meeting is required to adopt (i) the proposal to create a stock option plan
containing 50,000 shares of the Company's Common Stock for Outside Directors on
the Company's Board of Directors, (ii) to adopt the proposal to amend the
Company's 1994 Stock Option Plan, 1996 Stock Option Plan and 1996 Restricted
Stock Option Plan for Health Care Professionals to add a "change in control"
provision and a "cashless exercise" provision and (iii) to ratify the selection
of Ernst & Young LLP as independent accountants for the fiscal year ending
December 31, 1998.
If the enclosed proxy card is properly executed and returned to the
Company prior to the vote at the Annual Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon. Shares
represented by proxies which are marked "WITHHOLD AUTHORITY" to vote for (i)
all six (6) nominees or (ii) any individual nominee(s) for election as
directors and are not otherwise marked "FOR" the other nominees, will not be
counted in determining whether a plurality vote has been received for the
election of directors. Similarly, shares represented by proxies which are
marked "ABSTAIN" on any other proposal will not be counted in determining
whether the requisite vote has been received for such proposal. IN THE ABSENCE
OF INSTRUCTIONS, THE SHARES WILL BE VOTED FOR ALL THE PROPOSALS SET FORTH IN
THE NOTICE OF ANNUAL MEETING. At any time prior to its exercise, a proxy may
be revoked by the holder of Common Stock granting the proxy by delivering
written notice of revocation, or a duly executed proxy bearing a later date, to
the Secretary of the Company at the address of the Company set forth on the
first page of this Proxy Statement or by attending the Annual Meeting and
voting in person.
ELECTION OF DIRECTORS
At the Annual Meeting, the entire Board of six (6) directors is to be
elected to hold office until the next Annual Meeting of Stockholders and until
their successors are duly elected and qualified. Unless otherwise specifically
directed by stockholders executing proxies, it is intended that all proxies in
the accompanying form received in time for the Annual Meeting will be voted at
the Annual Meeting FOR the election of the six (6) nominees named below, all of
whom currently are directors of the Company. In the event any nominee should
become
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<PAGE> 9
unavailable for election for any presently unforeseen reason, it is intended
that the proxies will be voted for such substitute nominee as may be designated
by the present Board of Directors.
Each nominee's name, age, office with the Company, the year first
elected a director and certain biographical information are set forth below:
<TABLE>
<CAPTION>
YEAR FIRST ELECTED
NAME AGE A DIRECTOR POSITION
---- --- ---------- --------
<S> <C> <C> <C>
C. Thomas McMillen(2) 45 1994 Chairman of the Board, Chief Executive
Officer and Director
E. Eugene Sharer(2) 64 1996 President, Treasurer and Director
Robert J. Mrazek 52 1994 Chairman of the Board and Chief
Executive Officer, Complete Wellness
Smoking Cessation, Inc., Director
James J. McMillen,
M.D.(1)(3) 52 1994 Director
Eric S. Kaplan, D.C.(2) 45 1997 Senior Vice President, Chief Operating
Officer and Director
Frederick B. Simon (1)(3) 42 1998 Director
</TABLE>
- -------------
(1) Member of Audit Committee.
(2) Member of the Acquisition and Affiliation Committee.
(3) Member of the Compensation Committee.
C. Thomas McMillen, the Company's founder, has been the Chairman of
the Board of Directors and Chief Executive Officer since its formation in
November 1994. He was also the President of the Company until April 1996. In
1993, Mr. McMillen formed McMillen and Company, Inc., a health care consulting
firm, and subsequently from November 1993 through March 1994, assumed the role
of Chief Administrative Officer of Clinicorp, Inc., a publicly-traded physician
practice management company. Mr. McMillen was also a director of Clinicorp,
Inc., from January 1993 through December 1994. From 1987 to 1993, Mr. McMillen
served three consecutive terms in the U.S. House of Representatives from the
4th Congressional District of Maryland. He was named by President Clinton to
Co-Chair the President's Council on Physical Fitness and Sports in 1993. He
served in this capacity through 1997. Mr. McMillen is currently a member of the
Board of Directors of CHG Inc., a subsidiary of Chemring Group, PLC, and North
Atlantic Acquisition Corporation I (of which he is also the secretary and
treasurer).
E. Eugene Sharer has been President and a director of the Company
since April 1996, and the Treasurer of the Company since February 1997. He was
Chief Operating Officer from April 1996 until November 1997, and Chief
Financial Officer from February 1997 until February 1998. From 1990 to 1995 he
was President and Chief Operating Officer of R.O.W. Sciences, Inc., a health
research company. In August 1995, Mr. Sharer formed Sharer Associates, a
management consulting company. From 1989 to 1990 he was Executive Vice
President, Chief Operating Officer and Director of Iverson Technology
Corporation and from 1985 through 1988, he was President and Director of
Calculon Corporation and a Vice President of Atlantic Research Corporation, the
parent company of Calculon. Between 1980
3
<PAGE> 10
and 1985, Mr. Sharer was Vice President of the Systems Division and
subsequently the Systems Group at Computer Sciences Corporation. Prior to
that, he held several managerial positions with IBM.
Eric S. Kaplan, D.C., has been a Director since April 1997. He has
been Chief Operating Officer since November 1997. Prior to that date, he was
Senior Vice President since April 1997. He served as Senior Director of
Operations and Development from August 1996 to April 1997. From June 1993 to
August 1996, Dr. Kaplan was president of two subsidiaries of Clinicorp, Inc.,
Medical Diagnostic Imaging of America and Clinicare Wellness Centers. From 1978
to June 1993, he was the founder and owner of six chiropractic, weight loss,
and medical clinics in south Florida.
James J. McMillen, M.D., has been a director of the Company since
November 1994. Dr. McMillen has been in private medical practice in St.
Joseph, Missouri since 1977. He is board certified in internal medicine. Dr.
McMillen is the brother of C. Thomas McMillen.
Robert J. Mrazek has been a director of the Company since January
1995. He currently serves as C.E.O. of Complete Wellness Smoking Cessation,
Inc., a subsidiary of the Company of which Mr. Mrazek owns 11.77%. Since 1993,
Mr. Mrazek has been a legislative affairs consultant. From 1983 to January
1993, he served five consecutive terms in the U.S. House of Representatives from
the 3rd Congressional District of New York.
Frederick B. Simon has been a director of the Company since March
1998. He currently serves as a Senior Vice President at Wexford Spectrum
Investors LLC, a position he has held since November 1995. Prior to joining
Wexford, Mr. Simon was the Executive Vice President and a partner of Greycoat
Real Estate Corporation, the U.S. arm of Greycoat PLC, a London Stock Exchange
real estate investment and development company. Mr. Simon received a B.A. in
political science from Union College and an M.B.A. in Finance from Hofstra
University.
-------------------------------
MEETINGS AND COMMITTEES
The Board of Directors met 11 times and acted 1 time by written
consent during fiscal 1997. With the exception of Mr. Mrazek, who was unable
to attend the May 13, 1997 meeting, no director attended fewer than 100% of the
total meetings of the Board of Directors.
The Board of Directors currently has three committees that were in
existence during fiscal 1997. The Audit Committee reviews the internal
accounting policies of the Company and consults with, and reviews the services
provided by the Company's independent accountants. The Audit Committee met
twice during fiscal 1997 to review the report of the Company's independent
auditors for fiscal year 1996. The Audit Committee is comprised of James J.
McMillen, M.D. and Frederick B. Simon.
The Compensation Committee reviews the performance of the officers of
the Company and makes recommendations to the Board on executive compensation,
bonuses and
4
<PAGE> 11
employment plan benefits. The Compensation Committee is comprised of James J.
McMillen, M.D. and Frederick B. Simon.
The Acquisition and Affiliation Committee reviews and approves the
affiliations or strategic alliances with chiropractors and their existing
chiropractic practices, corporations, governmental entities, or other entities
as well as acquisitions of other businesses. The members of the Acquisition
and Affiliation Committee are C. Thomas McMillen, E. Eugene Sharer, and Eric S.
Kaplan, D.C.
COMPENSATION OF DIRECTORS
The Company does not currently compensate, and does not anticipate
compensating its directors for their services as directors, except that each of
the Company's Outside Directors will receive a director's fee of $500 per
meeting for attendance at Board of Directors or committee meetings, and 7,500
options to purchase the Company's Common Stock, exercisable over a period of
five years at a price to be determined by the plan administrators on the date
of grant, which shall not be less than the fair market value of the Company's
publicly traded Common Stock on the date of issuance. The options to be issued
to the Outside Directors shall be issued upon election to the Board of
Directors by the stockholders and were vested 50% as of July 25, 1997, and 50%
after one year of service, effective after July 25, 1997, for all years after
December 31, 1996. In addition, each of the Company's directors receives
reimbursement of all ordinary and necessary expenses incurred in attending any
meeting or any committee meeting of the Board of Directors. Currently, all
directors hold office until the next annual meeting of stockholders and until
their successors have been duly elected and qualified. The Company's executive
officers are appointed annually and serve at the direction of the Board of
Directors, subject to the terms of existing employment agreements.
Directors who are employees of the Company and certain other Executive
Officers have entered into employment arrangements with the Company. See
"Executive Compensation - Employment and Termination Arrangements."
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock on the Record Date by (i) each person known by the Company to own
beneficially five percent or more of such shares, (ii) each director and
nominee for election as a director, (iii) each person named in the Summary
Compensation Table under "Executive Compensation" of this Proxy Statement, and
(iv) all directors and executive officers as a group, together with their
respective percentage ownership of the outstanding shares:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
CURRENTLY ACQUIRABLE PERCENT OF
NAME AND ADDRESS OWNED WITHIN 60 DAYS (1) OUTSTANDING
---------------- ------------------- ------------------ -----------
<S> <C> <C> <C>
</TABLE>
5
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
C. Thomas McMillen
666 11th Street, N.W., Suite 200
Washington, D.C. 20001 394,500 (2) 33,333 (3) 19.6
Robert J. Mrazek
301 Constitution Ave., N.E.
Washington, D.C. 20003(4) 16,500 3,750 *
E. Eugene Sharer
666 11th Street, N.W., Suite 200
Washington, D.C. 20001 50,001 43,333 (5) 4.3
James J. McMillen, M.D.
4004 Miller Road
St. Joseph, MO 64505(6) 6,000 3,750 *
Reach Laboratories, Inc.
1000 NBC Center
Lincoln, NE 68508 (7) 110,000 0 5.1
Eric S. Kaplan, D.C.
4727 Marlwood Lane
Palm Beach Gardens, FL 33418 0 63,339 (8) 2.9
Michael T. Brigante
17 Daniel Drive
Belle Meade, NJ 08502 26,667 4,000 *
Wexford Spectrum Investors LLC
411 West Putnam Avenue
Greenwich, CT 06830 0 570,000 (9) 21.0
Imprimis Investors LLC
411 West Putnam Avenue
Greenwich, CT 06830 0 2,280,000 (9) 51.5
Frederick B. Simon
c/o 411 West Putman Avenue
Greenwich, CT 06830 (10) 0 0 *
All directors and executive officers
as a group (7 persons) 493,668 151,505 28.0
</TABLE>
- ---------------
* Less than 1%.
(1) Reflects number of shares of Common Stock acquirable upon exercise of
options.
(2) Includes 34,500 shares as to which Mr. McMillen has sole voting power
until December 31, 2000, pursuant to irrevocable proxies from four
other holders of Common Stock.
(3) Includes 16,667 shares subject to stock options which vest in July
1998 and 16,666 options which became exercisable in April 1998.
(4)(6) Mr. Mrazek and Dr. McMillen have each given Mr. McMillen an
irrevocable proxy to vote their respective shares until December 31,
2000.
(5) Includes 43,333 shares subject to stock options that became
exercisable in April 1998.
6
<PAGE> 13
(7) The beneficial owners of Reach Laboratories, Inc. are Richard R.
Endacott and Janice G. Peterson.
(8) Includes 16,667 shares subject to stock options which became
exercisable in August 1996; 15,002 shares subject to stock options
which became exercisable in April 1997; 16,667 shares subject to stock
options which became exercisable in August 1997 and 15,003 shares
subject to stock options which became exercisable in April 1998.
(9) Exercisable for shares of the Company's Common Stock commencing
January 23, 1998 at an exercise price of $1.75 per share. The
warrants have a term expiring January 12, 2005, and up to 1,500,000 of
such warrants (300,000 of the warrants owned by Wexford Spectrum
Investors LLC and 1,200,000 of the warrants owned by Imprimis
Investors LLC) may be redeemed by the Company if the Company achieves
certain income targets through March 31, 2001. The warrants were
issued by the Company in connection with the sale of $5,000,000
principal amount of Senior Redeemable Preferred Stock through a
private offering to Wexford Spectrum Investors LLC and Imprimis
Investors LLC which closed on January 23, 1998. Imprimis Investors
LLC is an investor in the equity pool funding the aforementioned
transaction administered by Wexford Spectrum Investors LLC. The
Preferred Stock bears a dividend of 8% per annum through December 31,
2000, provided that the dividend is currently paid on a quarterly
basis, and if not paid the dividend accrues at 10% per annum through
December 31, 2000. After December 31, 2000, the dividend on the
Preferred Stock is 12% per annum. All shares of the Preferred Stock
are mandatorily redeemable on the earlier of (a) December 31, 2000,
and (b) the date of the completion by the Company or any of its
subsidiaries of a financing, the gross proceeds of which aggregate in
excess of $5,000,000. The Company issued 20,000 shares of Preferred
Stock to Wexford Spectrum Investors LLC and 80,000 shares of Preferred
Stock to Imprimis Investors LLC.
(10) Mr. Simon is a Managing Director of Wexford Spectrum Investors LLC.
On the Record Date, the outstanding Common Stock was held by
approximately 481 stockholders of record.
REPORTS UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity security (collectively,
"Section 16 reporting persons"), to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Section 16 reporting persons are required by regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to Section 16 reporting persons
were satisfied, except: a late Form 3 will be filed in May 1998 reporting the
initial beneficial equity security ownership at the time of the initial public
offering of the Company in February 1997 as shown in the Company's Prospectus
dated February 19, 1997 for the following persons: C. Thomas McMillen, Chairman
of the Board and Chief Executive Officer, E. Eugene Sharer, President,
Treasurer and Director, Danielle F. Milano, M.D., former Vice President for
Medical Affairs, Robert J. Mrazek, Director, James J. McMillen, M.D., Director,
Robert Libauer, Director, and Eric S. Kaplan, D.C., Senior Vice President and
Director. A late Form 3 that should have been filed in July 1997 will be filed
in May 1998 reporting the initial beneficial equity security ownership of F.
Ryan Knoll on July 25, 1997, the date he became Secretary of the Company. A
late Form 5, that should have been filed in February 1998, will be filed in May
1998 reporting the granting of employee stock options under the Company's
various employee stock option plans that should have been reported on a Form 4
in 1997 for the following persons: C. Thomas McMillen, E. Eugene Sharer, Robert
J. Mrazek, James J. McMillen, M.D. and Eric S. Kaplan, D.C. and reporting
transactions by E. Eugene Sharer and Danielle F. Milano, M.D. that should have
been reported on a Form 4 in 1997.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid and
accrued by the Company to its Chief Executive Officer and each of its other
four most highly compensated executive officers for the years ended December
31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------
COMPENSATION
------------
AWARDS
------
<S> <C>
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION($)
------------------ ---- ---------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
C. Thomas McMillen 1997 135,000 0 100,000 (1) 0
Chairman and Chief 1996 0 0 0 0
Executive Officer 1995 0 0 0 0
E. Eugene Sharer 1997 132,500 0 15,000 (2) 12,000 (3)
President and Treasurer 1996 0 0 116,667 (2) 9,000 (3)
1995 0 0 0 0
Eric S. Kaplan, D.C. 1997 60,000 0 100,000 (4) 75,000 (5)
Senior Vice President 1996 16,000 0 46,666 (4) 26,000 (5)
and Chief Operating Officer 1995 0 0 0 0
Danielle F. Milano, M.D. 1997 120,000 0 9,333 (7) 5,000 (8)
Vice President for 1996 48,000 0 46,667 (7) 0
Medical Affairs (6) 1995 0 0 0 0
Michael T. Brigante, 1997 90,000 0 6,000 (9) 14,000 (10)
C.P.A. 1996 29,500 0 40,000 (9) 15,750 (10)
Vice President for 1995 0 0 0 0
Finance and Chief
Financial Officer
</TABLE>
- ---------------
(1) Exercisable cumulatively at the rate of approximately 25% of the
underlying shares per year, commencing April 1998.
(2) Exercisable cumulatively at the rate of approximately 25% of the
underlying shares per year, commencing April 1996.
(3) Represents the amount attributable to the lease of an automobile for
corporate use.
(4) Exercisable cumulatively at the rate of 25% of the underlying shares
per year, commencing August 1996.
(5) Represents amounts attributable to the lease of an automobile for
corporate use ($2,000 in 1996 and $6,000 in 1997), compensation for
consulting services rendered to the Company ($24,000 in 1996 and
$60,000 in 1997) and housing in connection with services rendered to
the Company ($9,000 in 1997).
(6) Dr. Milano resigned effective January 15, 1998.
(7) Forfeited effective January 15, 1998.
(8) Represents the amount attributable to the lease of an automobile for
corporate use.
(9) Exercisable cumulatively at the rate of approximately 25% of the
underlying shares per year, commencing March 1996.
(10) Represents amounts attributable to the lease of an automobile for
corporate use ($5,000 in 1997), compensation for consulting services
rendered to the Company ($10,500) in 1996) and housing in connection
with services rendered to the Company ($5,250 in 1996 and $9,000 in
1997).
The following table sets forth certain information concerning options
granted during 1997 to the individuals named in the Summary Compensation Table:
OPTION GRANTS IN 1997
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
8
<PAGE> 15
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
NAME NUMBER OF % OF TOTAL EXERCISE EXPIRATION DATE
---- SECURITIES OPTIONS PRICE ---------------
UNDERLYING GRANTED TO ($/SHARE)
OPTIONS ALL ---------
GRANTED (#) EMPLOYEES
----------- ---------
<S> <C> <C> <C> <C>
C. Thomas McMillen 50,000 16.14% 3.71 5/23/05
50,000 16.14% 4.81 9/13/05
E. Eugene Sharer 15,000 4.84% 3.38 5/23/05
Eric Kaplan, D.C. 50,000 16.14% 3.38 5/23/05
50,000 16.14% 4.38 9/10/05
Michael T. Brigante 6,000 1.94% 3.38 5/23/05
</TABLE>
Note: 9,333 options were issued to Danielle F. Milano, M.D. during
1997, but such options were forfeited in January 1998 when Dr. Milano resigned
as an officer of the Company.
The following table presents the value of unexercised options held at
December 31, 1997 by the individuals named in the Summary Compensation Table:
OPTIONS VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR-END (#) AT YEAR-END ($)*
EXERCISABLE (E)/ EXERCISABLE (E)/
NAME UNEXERCISABLE (U) UNEXERCISABLE (U)
---- ----------------- -----------------
<S> <C> <C>
C. Thomas McMillen 33,333 (E) $ 0 (E)
66,667 (U) 0 (U)
E. Eugene Sharer 43,333 (E) 69,833 (E)
38,333 (U) 69,833 (U)
Eric Kaplan, D.C. 63,339 (E) 45,759 (E)
83,327 (U) 25,407 (U)
Michael T. Brigante 4,000 (E) 0 (E)
15,333 (U) 27,933 (U)
</TABLE>
- ---------------
* Values are calculated by subtracting the exercise price from the fair
market value of the Common Stock at year-end
---------------
EMPLOYMENT AND TERMINATION AGREEMENTS
The Company has entered into certain employment and termination
agreements with the following executive officers:
9
<PAGE> 16
In July 1996, the Company entered into an employment agreement with
Mr. McMillen providing for his employment, as Chairman of the Board and Chief
Executive Officer, for a term expiring in March 1999. The employment agreement
provides for an annual base salary for Mr. McMillen of $90,000 that increased
to $150,000 upon the closing of the Company's initial public offering in
February 1997 (the "IPO"). All salary payments were accrued until the closing
of the IPO and paid with a portion of the net proceeds of the IPO. Mr. McMillen
may participate in all executive benefit plans and has the use of a Company
car. The agreement also provides, among other things, that if his employment is
terminated without cause (as defined in the agreement), the Company will pay
Mr. McMillen an amount equal to one year's base salary, payable over a one
year period. In 1996, the Company advanced approximately $23,000 to Mr.
McMillen without interest. Mr. McMillen repaid the amount in February 1997.
In March 1996 the Company entered into an employment agreement with
Mr. Sharer providing for his employment as President and Chief Operating
Officer for a term expiring in March 1999. The employment agreement provides
for an annual base salary for Mr. Sharer of $150,000 effective upon closing of
the IPO, and for participation in all executive benefit plans, as well as an
automobile allowance of $1,000 per month. Mr. Sharer was granted options to
purchase 116,667 shares of the Company's Common Stock at an exercise price of
$0.03 per share. On the date of such grant, 16,667 of those options were
exercisable, of which 10,000 were exercised in 1996. The remaining options were
to vest in equal installments on April 1, 1997, April 1, 1998, and March 31,
1999. Mr. Sharer exercised his vested options of 40,001 in December 1997. The
agreement also provides, among other things, that, if his employment is
terminated without cause (as defined in the agreement) the Company will pay to
him an amount equal to one year's base salary, payable over a one year period.
In January 1996, the Company entered into an employment agreement with
Dr. Milano, providing for her employment as Vice President-Medical Affairs, for
a term expiring on December 31, 1998. The employment agreement provides for an
annual base salary of $120,000 beginning August 1, 1996, of which $6,000 per
month was accrued until the closing of the IPO and paid with a portion of the
net proceeds of the IPO, a bonus of $1,000 for each medical corporation (a
"Medcorp") formed as a professional corporation of which Dr. Milano is a
shareholder, to be paid by such Medcorp, and for participation in all executive
benefit plans plus an automobile allowance of $500 per month. Dr. Milano was
granted options to purchase 46,667 shares of the Company's Common Stock at an
exercise price of $0.03 per share. The options have vested as to 31,667 shares.
Dr. Milano exercised her vested options of 31,667 in December, 1997. Any
additional compensation Dr. Milano receives for services as a shareholder of a
Medcorp formed as a professional corporation is offset against her base salary.
The agreement also provides, among other things, that, if her employment is
terminated without cause (as defined in the agreement), the Company will pay to
her an amount equal to six months' salary, payable over a six month period.
She voluntarily left the Company in January 1998.
In March, 1996, the Company entered into an employment agreement with
Mr. Brigante for his services as corporate controller for a term expiring on
September 30, 1999. The Employment Agreement provided for an annual base
salary for Mr. Brigante of $90,000 beginning January 1, 1997 and for
participation in all executive benefit plans plus an automobile allowance of
$500 per month. Mr. Brigante was granted options to purchase
10
<PAGE> 17
40,000 shares of the Company's common stock at an exercise price of $.03 per
share. The options have vested as to 26,667 shares and will vest as to 13,333
shares on September 30, 1998. Mr. Brigante exercised his vested options of
26,667 shares in December 1997. On February 23, 1998, Mr. Brigante was elected
to the position of Vice President for Finance and Chief Financial Officer. His
annual compensation increased to $100,000 at that time.
In August 1996, the Company entered into an employment agreement with
Dr. Kaplan providing for his employment as Senior Director for Operations and
Development for a term expiring in August 1999. The employment agreement
provides for a base salary of $4,000 per month, which was accrued until the
closing of the IPO. After such closing, Dr. Kaplan became entitled to an
automobile allowance of $500 per month. Dr. Kaplan was granted options to
purchase 46,667 shares of the Company's Common Stock at an exercise price of
$0.60 per share. The options have vested with respect to 30,000 shares and will
vest as to 16,667 shares on August 26, 1998. The agreement also provides, among
other things, that if his employment is terminated by mutual agreement or upon
his death or disability, the Company will pay an amount equal to $60,000,
payable over a six month period. On April 6, 1997, Dr. Kaplan became a Senior
Vice President and a director of the Company. In November 1997, he was named
Chief Operating Officer.
Each of the employment agreements with Messrs. McMillen, Sharer,
Brigante and with Dr. Kaplan requires the full-time services of such employees.
Mr. McMillen's employment agreement requires that he devote a minimum of 40
hours per week to his responsibilities as Chairman and Chief Executive Officer.
The agreements also contain covenants restricting the employee from engaging in
any activities competitive with the business of the Company during the term of
such agreement and for a period of one year thereafter, and prohibiting the
employee from disclosing confidential information regarding the Company.
REQUIRED VOTE
A plurality vote of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting is required to elect the Board of
six (6) directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ITS SIX
(6) NOMINEES FOR DIRECTORS.
ESTABLISHMENT OF AN OUTSIDE DIRECTORS STOCK OPTION PLAN
On March 30, 1998, the Board of Directors approved the establishment
of a stock option plan for Outside Directors on the Company's Board of
Directors or on the Boards of Directors of any of the Company's subsidiaries
(the "Directors Option Plan"). The plan provides for the grant of incentive
and nonqualified stock options, provided that the maximum number of shares of
Common Stock of the Company that may be issued upon the exercise of options
granted pursuant to the Directors Option Plan is 50,000. Under the Directors
Option Plan, each Outside Director will receive an option for 7,500 shares for
every year of service on the Company's Board of Directors. The Company
currently has two Outside Directors eligible to participate in the Directors
Option Plan.
11
<PAGE> 18
In the event of any stock dividend, stock split, recapitalization,
combination, reclassification, or like change in the capital structure of the
Company, appropriate adjustments will be made to the shares, subject to the
Directors Option Plan, and to outstanding options. To the extent that any
outstanding option under the Directors Option Plan expires or terminates prior
to exercise in full or if shares issued upon the exercise of an option are
repurchased by the Company, the shares of Common Stock for which such option is
not exercised or the repurchased shares will be returned to the Directors
Option Plan and will become available for future grants.
The Directors Option Plan will be administered by the Board of
Directors or a duly appointed committee of the Board of Directors; the exercise
price of options granted pursuant to the Directors Option Plan will be
determined by the plan administrators of the Board of Directors.
The executive officers of the Company believe that the Directors
Option Plan is important to permit the Company to obtain and retain the service
of qualified persons who are neither employees nor officers of the Company to
serve as members of the Board of Directors.
REQUIRED VOTE
Approval of the establishment of an outside directors stock option
plan requires the separate affirmative vote by the holders of a majority of the
shares of Common Stock present in person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
ESTABLISH A STOCK OPTION PLAN FOR OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF
DIRECTORS.
ADOPTION OF AMENDMENT TO THE 1994 STOCK OPTION PLAN, THE 1996 STOCK OPTION
PLAN AND THE 1996 RESTRICTED STOCK OPTION PLAN FOR HEALTH
CARE PROFESSIONALS TO ADD A "CHANGE IN CONTROL" PROVISION
AND A "CASHLESS EXERCISE" PROVISION
The Company's 1994 Stock Option Plan (the "1994 Stock Option Plan")
was adopted by the Company's Board of Directors and was approved by the
stockholders of the Company in December 1994, the Company's 1996 Stock Option
Plan (the "1996 Stock Option Plan") was adopted by the Company's Board of
Directors and was approved by the stockholders of the Company in October 1996,
and the Company's 1996 Restricted Stock Option Plan for Health Care
Professionals (the "Restricted Stock Option Plan") was adopted by the Company's
Board of Directors and was approved by the stockholders of the Company in
October 1996.
1994 STOCK OPTION PLAN. The 1994 Stock Option Plan was amended by the
Board of Directors, with stockholder approval, in 1995 so as to increase the
number of shares available under the 1994 Stock Option Plan to 400,000 from
60,000. The purpose of the 1994 Stock Option Plan is to attract and retain
qualified personnel, to provide additional incentives to employees, officers,
directors, consultants and advisors of the Company, and to promote the
Company's business. As of December 31, 1997, options to purchase 219,979
shares of Common Stock at an average per share exercise price of $0.55 were
outstanding. The 1994
12
<PAGE> 19
Stock Option Plan will terminate in April 2004, unless sooner terminated by the
Board of Directors.
The 1994 Stock Option Plan provides for the grant of both incentive
stock options, intended to qualify as such under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options.
The Board of Directors may delegate administration of the 1994 Stock Option
Plan to the Compensation Committee. Subject to the limitations set forth in
the 1994 Stock Option Plan, the Board of Directors (or the Compensation
Committee) has the authority to select the persons to whom grants are made, to
designate the number of shares to be covered by each option, to determine
whether an option is to be an incentive stock option or a nonqualified stock
option, to establish vesting schedules, and, subject to certain restrictions,
to specify the type of consideration to be paid to the Company upon exercise
and to specify other terms of the options. The maximum term of options granted
under the 1994 Stock Option Plan is ten years. Options granted under the 1994
Stock Option Plan are non-transferable and generally expire 90 days after the
termination of an optionee's service to the Company.
Although no specific vesting schedule is required under the 1994 Stock
Option Plan, options previously granted under the 1994 Stock Option Plan have
generally provided for vesting in three equal annual installments. The
exercise price of incentive stock options must equal at least the fair market
value of the Common Stock on the date of grant, except that the exercise price
of incentive stock options granted to any person who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all
classes of stock must be at least 110% of the fair market value of such stock
on the date of grant.
1996 STOCK OPTION PLAN. The 1996 Stock Option Plan was amended by the
Board of Directors, with stockholder approval, in 1997, so as to increase the
number of shares available under the 1996 Stock Option Plan from 200,000 to
400,000. Pursuant to the 1996 Stock Option Plan, officers, directors,
employees, advisors and consultants to the Company are eligible to receive
incentive and/or nonqualified stock options. The 1996 Stock Option Plan, which
expires in September 2006, is administered by the Compensation Committee of the
Board of Directors. The selection of the participants, allotment of shares,
determination of price, and other conditions relating to the grant of options
will be determined by the Compensation Committee in its sole discretion.
Incentive stock options granted under the 1996 Stock Option Plan are
exercisable for a period of up to 5 years from the date of grant at an exercise
price which is not less than the fair market value of the Common Stock on the
date of grant, except that the term of an incentive stock option granted under
the 1996 Stock Option Plan to a stockholder owning more than 10% of the
outstanding Common Stock may not exceed five years and its exercise price may
not be less than 110% of the fair market value of the Common Stock on the date
of the grant. As of December 31, 1997, options to purchase 327,833 shares of
Common Stock at an average per share exercise price of $4.02 were outstanding.
1996 RESTRICTED STOCK OPTION PLAN FOR HEALTH CARE PROFESSIONALS. The
1996 Restricted Stock Option Plan permits the Company to grant nonqualified
stock options to licensed healthcare professionals affiliated with the Company,
and will expire in October 2006. The aggregate amount of Common Stock with
respect to which options may be granted may not exceed 100,000 shares. The
Board of Directors has delegated to the Compensation
13
<PAGE> 20
Committee the authority to grant options under such a plan, to construct and
interpret such a plan, and to make all other determinations and take all
actions necessary or advisable for the administration of such plan. The
exercise price of options granted under the 1996 Restricted Stock Option Plan
may be no less than 85% of the fair market value of the Common Stock on the
date of grant. Options granted under the Restricted Stock Option Plan will
expire no later than the tenth anniversary of the date of plan. As of December
31, 1997, no options to purchase shares of Common Stock have been granted under
the 1996 Restricted Stock Option Plan.
CHANGE IN CONTROL AMENDMENT
The Board of Directors has approved the following amendment to 1994
Stock Option Plan, the 1996 Stock Option Plan and the 1996 Restricted Stock
Option Plan:
ACCELERATION OF EXERCISABILITY UPON A CHANGE IN CONTROL
Upon the occurrence of a "change in control" of the Company (as
defined below), each option outstanding shall become immediately fully
exercisable. For purposes of such options, a "change in control" of the
Company shall mean (i) the acquisition at any time by a "person" or "group" (as
such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act of
beneficial ownership (as defined by rule 13d-3 under the Exchange Act)),
directly or indirectly, of securities representing 50% or more of the combined
voting power in the election of directors of the then outstanding securities of
the Company or any successor of the Company; (ii) the termination of service of
directors, for any reason other than death, disability or retirement from the
Board of Directors, during any period of two consecutive years or less, of
individuals who at the beginning of such period constituted a majority of the
Board of Directors, unless the election of or nomination for election of each
new director during such period was approved by a vote of a least two-thirds of
the directors still in office who were directors at the beginning of the
period; (iii) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange as a result of which the Common
Stock shall be changed, converted, or exchanged (other than a merger,
consolidation, or share exchange with a wholly-owned subsidiary) or liquidation
of the Company; or any sale or disposition of 80% or more of the assets or
earning power of the Company; or (iv) approval by the stockholders of the
Company of any merger, consolidation, or statutory share exchange to which the
Company is a party as a result of which the stockholders immediately prior to
the effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power in the
election of directors of the surviving corporation; provided, however, that no
change in control shall be deemed to have occurred if, prior to such time as a
change in control would otherwise be deemed to have occurred, the Company's
Board of Directors deems otherwise.
CASHLESS EXERCISE AMENDMENT
The Board of Directors has approved the following amendment to 1994
Stock Option Plan, the 1996 Stock Option Plan and the 1996 Restricted Stock
Option Plan:
Each optionee shall also be entitled to exercise an option in a
"cashless exercise" by delivering the number of options to be exercised (with
no payment of the exercise price) to the
14
<PAGE> 21
Company and receiving in return options shares equal to the number of shares by
(i) multiplying the then current "fair market value" of the Company's
outstanding public shares of Common Stock by the number of options to be
exercised, (ii) then deducting the aggregate exercise price associated with the
options being exercised, and (iii) dividing the remaining number by the current
"fair market value." For purposes of the option, the "fair market value" of a
share of Common Stock as of a certain date shall be the closing sale price of
the Common Stock on the NASDAQ Stock Market or, if the Common Stock is not then
traded on the NASDAQ Stock Market, such exchange as the Common Stock is then
traded, on the trading date immediately preceding the date "fair market value"
is being determined.
REQUIRED VOTE
Approval of the adoption of amendments to the 1994 Stock Option Plan,
the 1996 Stock Option Plan and the 1996 Restricted Stock Option Plan for Health
Care Professionals to add a "Change in Control" provision and a "Cashless
Exercise" provision requires the separate affirmative vote by the holders of a
majority of the shares of Common Stock present in person or represented by
proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND
THE 1994 STOCK OPTION PLAN, THE 1996 STOCK OPTION PLAN AND THE 1996 RESTRICTED
STOCK OPTION PLAN FOR HEALTH PROFESSIONALS TO INCLUDE A "CHANGE IN CONTROL"
PROVISION AND A "CASHLESS EXERCISE" PROVISION.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors voted as of September 25, 1997 to appoint Ernst
& Young LLP as independent accountants for the Company for fiscal 1998.
Ernst & Young LLP has served as independent accountants for the
Company since June 1996. This appointment is being submitted to the holders of
Common Stock for ratification. Although the submission of this matter to
stockholders is not required by law, if the appointment is not ratified by the
holders of Common Stock, the Board of Directors will reconsider its selection
of independent accountants.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. This representative will have the opportunity to make a
statement if such representative desires to do so and will be available to
respond to appropriate questions presented at the Annual Meeting.
REQUIRED VOTE
Ratification of Ernst & Young LLP, requires the separate affirmative
vote by the holders of a majority of the shares of Common Stock present in
person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR FISCAL 1998.
15
<PAGE> 22
OTHER BUSINESS
Management does not know of any matter to be brought before the Annual
Meeting other than as described above. In the event any other matter properly
comes before the Annual Meeting, the persons named in the accompanying form of
proxy have discretionary authority to vote on such matters.
STOCKHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
Any stockholder proposal to be considered for inclusion in the
Company's proxy soliciting material for the 1999 Annual Meeting of Stockholders
must be received by the Company at its principal office by December 31, 1998.
ANNUAL REPORT ON FORM 10-KSB
The Company is a "small business issuer" within the meaning of Item
10(a) of Regulation S-B. Accordingly, the Company is complying with the
executive compensation disclosure requirements applicable to small business
issuers (adopted by the Securities and Exchange Commission on October 15, 1992)
in this year's proxy statement.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 and the Chairman of the Board's Letter to the
Stockholders dated April 14, 1998, which together comprise the Company's 1997
Annual Report to Stockholders, is being delivered herewith.
Dated: May 4, 1998 By Order of the Board of Directors
Washington, D.C.
/s/ F. Ryan Knoll
F. Ryan Knoll, Secretary
16
<PAGE> 23
[FRONT OF PROXY CARD]
PROXY COMPLETE WELLNESS CENTERS, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. THOMAS MCMILLEN and E. EUGENE
SHARER and each of them, proxies, each with the power of substitution, to vote
the shares of the undersigned at the Annual Meeting of Stockholders of Complete
Wellness Centers, Inc. on May 26, 1998, and any adjournments and postponements
thereof, upon all matters as may properly come before the Annual Meeting.
Without otherwise limiting the foregoing general authorization, the proxies are
instructed to vote as indicated herein.
PLEASE COMPLETE, DATE AND SIGN ON THE REVERSE SIDE AND MAIL IN THE ENCLOSED
ENVELOPE.
[BACK OF PROXY CARD]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MATTERS (1), (2), (3), (4) and (5)
LISTED BELOW TO COME BEFORE THE ANNUAL MEETING:
<TABLE>
<S> <C> <C>
(1) To elect a Board of six (6) directors.
FOR the nominees listed below (except as marked WITHHOLD AUTHORITY to vote for all six (6)
to the contrary below) six (6) nominees listed nominees listed below
below
[ ] [ ]
</TABLE>
C. Thomas McMillen, E. Eugene Sharer, Robert J. Mrazek, James J. McMillen,
M.D., Eric S. Kaplan, Frederick B. Simon.
To WITHHOLD AUTHORITY to vote for any individual nominee(s), print such
nominee's name below:
(2) To create a stock option plan containing 50,000 shares of the
Company's Common Stock for outside directors of the Company's Board of
Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To adopt an amendment to Company's 1994 Stock Option Plan, 1996 Stock
Option Plan and 1996 Restricted Stock Option Plan for Health Care Professionals
to add a "change in control" provision and a "cashless exercise" provision.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 24
(4) To ratify the selection of Ernst & Young LLP as independent
accountants for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) Upon any and all other business that may come before the Annual
Meeting.
Check here if you plan to attend the Annual Meeting of Stockholders. [ ]
THIS PROXY, WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
WILL BE VOTED FOR THE MATTERS DESCRIBED IN PARAGRAPHS (1), (2), (3), (4) AND
(5) UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE, IN WHICH CASE IT WILL BE VOTED
AS SPECIFIED.
SIGNATURE(S): DATE 1998
--------------------------------------- ------------------
Note: Executors, Administrators, Trustees, etc.
should give full title.
