<PAGE> 1
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
/ / Preliminary Information Statement / / Confidential,
for Use of the Commission Only
/X/ Definitive Information Statement (as permitted by Rule 14c-5(d)(2))
COMPLETE WELLNESS CENTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
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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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<PAGE> 2
COMPLETE WELLNESS CENTERS, INC.
666 11TH STREET, N.W.
WASHINGTON, D.C. 20001
----------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
This information statement (the "Information Statement"), which is
being mailed on December 22, 1998, to holders of record on December 17, 1998 of
shares of Common Stock, par value $.0001665 per share (the "Common Stock"), of
Complete Wellness Centers, Inc., a Delaware corporation (the "Company"), is
being furnished in connection with the election to the Board of Directors of
the Company (the "Board" or the "Board of Directors") of persons (the "Investor
Designees") designated by Imprimis Investors LLC, a Delaware limited liability
company ("Imprimis"), and Wexford Spectrum Investors LLC, a Delaware limited
liability company ("Wexford" and, together with Imprimis, the "Investors").
Such designation is being made pursuant to the Company's Certificate of
Designations, Preferences and Rights (the "Certificate") for its Senior
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock").
Pursuant to Section (iv) of the Certificate, the Company has the
option to redeem the shares of Preferred Stock in whole but not in part during
the period from July 2, 1998 through January 3, 1999. The redemption price
equals the liquidation preference, which is equal to $50 per share, plus any
accumulated and unpaid dividends to the redemption date. Pursuant to Section
(viii)(B) of the Certificate, in the event that the Company fails to so redeem
all of the Preferred Stock on or prior to January 3, 1999, the Company shall,
if and when requested by the holders of a majority of the outstanding shares of
the Preferred Stock to do so, take any action necessary, including calling a
special meeting of the Board, to elect designees of the holders of a majority
of the outstanding shares of the Preferred Stock to the Board such that such
designees shall constitute a majority of the Board. Thereafter, for so long as
any shares of Preferred Stock remain outstanding, the Company shall take such
action as shall be necessary to ensure that such designees or successor
designees are duly elected to serve as directors of the Company.
The Investors currently hold all of the Preferred Stock. In view of
the likelihood that the Company will not be able to redeem all of the Preferred
Stock by January 3, 1999, the Company has agreed to take steps to ensure that
the Investors Designees hold majority membership on the Board no later than
January 4, 1999. To effect the majority membership of the Investor Designees,
the Company will (i) call a special meeting (the "Special Meeting") of the
Board; (ii) take action at the Special Meeting to increase the number of
directors on the Board to fifteen members; and (iii) take action at the Special
Meeting to appoint Kenneth A. Rubin, Frederick B. Simon, Frank Goveia, Joseph
M. Jacobs, Jay L. Maymudes, Arthur H. Amron, Paul M Jacobi, and Douglas J.
Lambert, the Investor Designees, to the Board.
<PAGE> 3
The purpose of this Information Statement is to provide information
concerning the Investor Designees and the Board. The information contained
herein concerning the Investors and the Investor Designees has been furnished
to the Company by the Investors, and the Company assumes no responsibility for
the accuracy or completeness of such information. The address of the Investors
is 411 West Putnam Avenue, Suite 125, Greenwich, Connecticut 06830.
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<PAGE> 4
THE BOARD OF DIRECTORS OF THE COMPANY
THE INVESTOR DESIGNEES
The Company expects its Board of Directors to elect the Investor
Designees to the Board at the Special Meeting, effective January 4, 1999. The
Investors will choose the Investor Designees from the directors and executive
officers of their manager, Wexford Management LLC ("Wexford Management").
The Investors currently intend to select Kenneth A. Rubin, Frederick
B. Simon, Frank Goveia, Joseph M. Jacobs, Jay L. Maymudes, Arthur H. Amron,
Paul M. Jacobi, and Douglas J. Lambert to serve as directors.
None of the Investor Designees currently is a director of, or holds
any position with the Company. Mr. Simon served as a director on the Board for
the period from May 26, 1998 through September 10, 1998, when he resigned from
the Board. The Investors, Wexford Management, and certain individuals who are
affiliates of the Investors and Wexford Management are the beneficial owners of
the Preferred Stock. See "Security Ownership of Certain Persons and
Management."
THE CURRENT COMPANY BOARD OF DIRECTORS
Under the Company's By-Laws, the number of directors on the Board may
be changed by resolution of a majority of the Board or by the stockholders, but
no decrease may shorten the term of any incumbent directors. Any director may
resign at any time. Any vacancy in the Board, including one created by an
increase in the number of directors, may be filled for the unexpired term by a
majority vote of the remaining directors, though less than a quorum. Directors
so elected will hold office for the remainder of the unexpired term. Directors
hold office until the next annual meeting of stockholders and until the
election and qualification of their respective successors. Currently there are
seven directors on the Board.
The following table sets forth the names, ages and positions of the
current directors of the Company as of December 17, 1998. To the extent the
Board will consist of persons who are not the Investor Designees, the Board is
expected to consist of Mr. McMillen, Mr. Raymond, Mr. Mrazek, Dr. McMillen,
Mr. Sharer, Dr. Vallejo, and Dr. Kaplan.
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<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
C. Thomas McMillen.............. 46 Chairman of the Board, Chief
Executive Officer and Director
E. Eugene Sharer................ 65 Vice Chairman, Treasurer and
Director
Eric S. Kaplan, D.C............. 46 President, Chief Operating Officer and
Director
Robert J. Mrazek................ 53 Director
James T. McMillen, M.D.......... 53 Director
Sergio Vallejo, DMD............. 34 Director
Joseph Raymond, Jr.............. 36 Director
</TABLE>
The principal occupations for the past five years (and, in some
instances, for prior years) of each of the directors are as follows:
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 and a director of Clinicorp, Inc., a
publicly-traded physician practice management company. 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 and served until December 1997. Mr. McMillen is currently a member of the
Board of Directors of College Television Network, Inc., and North Atlantic
Acquisition Corporation (of which he is also the secretary and treasurer). Mr.
McMillen is the brother of James J. McMillen, a director of the Company.
E. EUGENE SHARER has been President, Chief Operating Officer, and a
director of the Company since April 1996, and Chief Financial Officer and
Treasurer since February 1997. He relinquished the CFO title in February 1998,
the COO title in November 1997 and the President title in July 1998 when
elected Vice Chairman. 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 and 1985,
Mr. Sharer was Vice President of the Systems Group at Computer Sciences
Corporation and prior to 1980 held various executive management positions with
IBM.
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Mr. Sharer currently serves as director of Computer Applications Development
and Integration, Inc., the High Technology Council of Maryland and on the
Industrial and Professional Advisory Committee for the College of Engineering
at Penn State University.
ERIC S. KAPLAN, D.C. has been Senior Vice President and a director
since April 1997. From August 1996 to April 1997, he served as Senior Director
of Operations and Development. He was named Chief Operating Officer in
November 1997 and President in July 1998. 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. From 1977 to the present, Dr. McMillen has been in private
medical practice in St. Joseph, Missouri. 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. 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 in New York. In August
1997, Mr. Mrazek was elected as the Chairman and CEO of the Complete Wellness
Smoking Cessation, Inc. subsidiary of the Company.
SERGIO R. VALLEJO, DMD has been a director of the Company since June
1998. From 1996 to 1998, Dr. Vallejo was Director of Pharmacy Operations in
Florida for Sunscript Pharmacy Corporation, a subsidiary of Sun Healthcare.
Dr. Vallejo joined Sunscript after selling the institutional pharmacy that he
founded eight years earlier, PVM Prescription Center, to Sun Healthcare. Dr.
Vallejo is also a Director of Universal Building Specialists, a Florida
building contractor. He is a member of the American Dental Association, the
Florida Dental Association and the West Coast Dental Association.
JOSEPH J. RAYMOND, JR. was elected to the Board of Directors on
September 2, 1998. Mr. Raymond has been President of JJR, Inc., an independent
financial consulting firm specializing in providing financial, operational and
administrative growth solutions for companies throughout the United States. In
1987, he formed Transworld Services Group ("TSG"), a strategic staffing firm
responsible for placing workers in temporary staffing positions. Mr. Raymond
sold TSG in 1996 to Corestaff, Inc., where he remained as a Vice President of
Operations until December 31, 1997. In January 1998, Mr. Raymond founded RVR
Consulting Group, Inc. He has been active in the society for Human Resource
Management since 1990 and has served on the Business Advisory Board of the
Orange County Public School System since 1994.
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INVESTOR DESIGNEES
KENNETH A. RUBIN, 44, is a Senior Vice President of Wexford
Management. Mr. Rubin joined Wexford Management in August 1996. For the
balance of the past five years Mr. Rubin was a Managing Director of Bear,
Stearns & Co., Inc. Mr. Rubin received a J.D. from Stanford Law School, Order
of the Coif, and a B.A. with honors in Economics and Mathematics from Yale
College, magna cum laude.
FREDERICK B. SIMON, 44, is a Senior Vice President of Wexford
Management. Mr. Simon joined Wexford Management in November 1995. For the
balance of the past five years Mr. Simon was 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 a M.B.A. in
Finance from Hofstra University.
FRANK GOVEIA, 51, is a Senior Vice President and Chief Operating
Officer of Wexford Management. Mr. Goveia joined Wexford Management in
November 1994. For the balance of the past five years Mr. Goveia was a Senior
Vice President of Integrated Resources Inc. Mr. Goveia is a Certified Public
Accountant and received a B.S. in Accounting from Rutgers University.
JOSEPH M. JACOBS, 45, is President of Wexford Management. Mr. Jacobs
joined Wexford Management in May 1994. For the balance of the past five years
Mr. Jacobs was a Senior Managing Director of Bear Stearns & Co. covering real
estate and related bankruptcies and reorganizations. Mr. Jacobs is also
President and a director of Resurgence Properties Inc. and a director of
Elcotel, Inc. Mr. Jacobs received a B.S. in economics from the Wharton School
of the University of Pennsylvania and a M.B.A. from Harvard Business School.
JAY L. MAYMUDES, 38, is a Principal and Chief Financial Officer of
Wexford Management. Mr. Maymudes joined Wexford in July 1994. From December
1988 to June 1994, Mr. Maymudes was Senior Vice President and Chief Financial
Officer of Dusco, Inc., a real estate investment advisor. Prior thereto, Mr.
Maymudes was a Senior Manager at Touche Ross & Co. (currently known as Deloitte
& Touche LLP). Mr. Maymudes is a Certified Public Accountant and received a
B.A. in Accounting from Queens College.
ARTHUR H. AMRON, 42, is a Senior Vice President and General Counsel of
Wexford Management. Mr. Amron joined the Wexford Management in November 1994.
For the balance of the past five years Mr. Amron was an attorney with the New
York law firm of Schulte, Roth & Zabel. Mr. Amron received a J.D. from Harvard
Law School, cum laude, and a B.A. in Political Theory from Colgate University
with high honors.
PAUL M. JACOBI, 32, is a Vice President of Wexford Management. Mr.
Jacobi joined Wexford Management in June 1996. From January 1995 to May 1996,
Mr. Jacobi was an Analyst with Moody's Investor Service in the financial
institutions group and, for the
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balance of the past five years he was a Senior Financial Analyst with Kidder
Peabody & Co. Mr. Jacobi is a Certified Public Accountant and received a B.S.
in Accounting from Villanova University.
DOUGLAS J. LAMBERT, 41, is a Vice President of Wexford Management.
Mr. Lambert joined Wexford Management in November 1994. For the balance of the
past five years Mr. Lambert was Treasurer and Chief Financial Officer of
Integrated Resources, Inc., Equipment Leasing Group. Mr. Lambert is a
Certified Public Accountant and received a B.B.A. in Accounting from Hofstra
University.
BOARD MEETINGS
During the fiscal year ended December 31, 1997, the Company held
twelve (12) meetings of the Board of Directors. In such year, all of the
incumbent directors attended at least 90% of the aggregate of all meetings of
the Board of Directors and committees on which they served held during the
year.
COMMITTEES
The Board of Directors has established an Executive Committee, an
Audit Committee, a Compensation Committee, and an Acquisition and Affiliation
Committee.
Executive Committee. The Executive Committee exercises all the powers
of the Board of Directors between meetings of the Board of Directors, except
such powers as are reserved to the Board of Directors by law. The Executive
Committee consists of C. Thomas McMillen, Joseph Raymond, Jr., Eric Kaplan and
Sergio Vallejo.
Audit Committee. The Audit Committee has the responsibility for
reviewing and supervising the financial controls of the Company. The Audit
Committee makes recommendations to the Board of Directors of the Company with
respect to the Company's financial statements and the appointment of
independent auditors, reviews significant audit and accounting policies and
practices, meets with the Company's independent public accountants concerning,
among other things, the scope of audits and reports, and reviews the
performance of overall accounting and financial controls of the Company. The
Audit Committee consists of James McMillen, M.D., Eugene Sharer and Robert
Mrazek.
Compensation Committee. The Compensation Committee has the
responsibility for reviewing the performance of the officers of the Company and
recommending to the Board of Directors of the Company salary and bonus amounts
for all officers of the Company, subject to the terms of existing employment
agreements. The Compensation Committee also has the responsibility for
oversight and administration of the Company's long-term incentive plans. The
Compensation Committee consists of Sergio Vallejo, Robert Mrazek and James
McMillen.
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<PAGE> 9
Acquisition and Affiliation Committee. The Acquisition and
Affiliation Committee has the responsibility for reviewing and approving
affiliations or strategic alliances with chiropractors and their existing
chiropractic practices, corporations, governmental entities, or other entities
as well as acquisitions of other businesses. Proposed acquisitions involving
the issuance of equity securities of the Company will be referred to the Board
of Directors. The members of the Acquisition and Affiliation Committee are C.
Thomas McMillen, Eric Kaplan and Joseph Raymond, Jr.
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 non-employee directors may receive a director's fee of $500 per
meeting for attendance at Board of Directors or committee meetings held after
December 1997. Additionally, each Director is granted 7,500 Common Stock
options for each year served, which options vest 50% in each of two years. 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 the election and
qualification of their respective successors. 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.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages, and positions of the
executive officers and key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
C. Thomas McMillen.............. 46 Chairman of the Board, Chief Executive
Officer, and Director
E. Eugene Sharer................ 65 Vice Chairman, Treasurer and Director
Eric S. Kaplan, D.C............. 46 President, Chief Operating Officer, and
Director
Michael T. Brigante............. 44 Senior Vice President and Chief Financial
Officer, Acting Secretary
</TABLE>
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<PAGE> 10
Executive officers of the Company are elected annually by the Board,
and each such officer holds office until the next annual meeting of the Board
and until their successors are chosen and qualify, subject to earlier
resignation or removal by the Board of Directors. The principal occupations
for the past five years (and in some instances, for prior years) of each of the
executive officers of the Company (except for Messrs. McMillen, Sharer and
Kaplan, for whom such information is set forth in the section hereof entitled
"The Board of Directors of the Company") are as follows:
MICHAEL T. BRIGANTE has been Chief Financial Officer since February,
1998. From March, 1996 to January, 1998, he served as Controller. Mr.
Brigante is an executive manager with over twenty years of diversified
financial experience with public and private companies. From 1978 through
1986, he worked with the Thomas & Betts Corporation, culminating his tenure as
controller. From 1987 to 1988, Mr. Brigante served as senior manager of
international financial systems with SeaLand Corporation. In 1988 Mr. Brigante
joined the MAC Group and served as chief financial officer and controller until
starting his own consulting firm in 1994.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
The Company has included in its Amended and Restated Certificate of
Incorporation and By-Laws provisions to (i) eliminate the personal liability of
its directors and officers for monetary damages resulting from breaches of
their fiduciary duty (provided that such provisions do not eliminate liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, violations
under Section 174 of the Delaware General Corporation Law, or for any
transaction from which the director and/or officer derived an improper personal
benefit), and (ii) indemnify its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law, including circumstances in
which indemnification is otherwise discretionary. The Company believes that
these provisions are necessary to attract and retain qualified persons as
directors and officers.
The Company has entered into separate indemnification agreements with
its directors and officers containing provisions which may in some respects are
broader than the specific indemnification provisions contained in the Company's
Amended and Restated Certificate of Incorporation.
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SECURITY OWNERSHIP OF
CERTAIN PERSONS AND MANAGEMENT
As of December 17, 1998, the number of shares of Common Stock
outstanding was 2,457,968. Each share of Common Stock is entitled to one vote
at meetings of stockholders. The following table sets forth certain
information regarding the beneficial ownership of the Company's voting
securities as of December 17, 1998 by (i) all persons known by the Company to
be the beneficial owner of more than 5% of any class of the Company's voting
securities, (ii) each director of the Company individually, and (iii) all
officers and directors of the Company as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the securities
listed below have sole investment and voting power with respect to such
securities, subject to community property laws where applicable.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF ACQUIRABLE PERCENT
NAME AND ADDRESS OF SHARES WITHIN 60 BENEFICIALLY
BENEFICIAL OWNER BENEFICIALLY DAYS (1) OWNED
---------------- OWNED -------- -----
-----
<S> <C> <C> <C>
C. Thomas McMillen 360,000 50,000(2) 18.1
666 11th St., NW, Suite 200
Washington, DC 20001
Robert A Mrazek 24,500 7,500(4) 1.3
301 Constitution Ave., NE
Washington, DC 20003 (3)
E. Eugene Sharer 126,667 10,000(6) 5.6
666 11th St., NW, Suite 200
Washington, DC 20001 (5)
James J. McMillen, MD 6,000 11,250 *
4004 Miller Road
St. Joseph, MO 64505 (3)(7)
Janice Peterson 93,500 0 3.8
984 N. 1800 Road
Lawrence, KS 66049
Eric S. Kaplan, DC 23,506 66,660(8) 3.7
4727 Marlwood Lane
Palm Beach Gardens, FL 33418
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C> <C>
R. Michael Floyd 72,886 0 3.0
5817 Ogden Court
Bethesda, MD 20816
Robert S. Libauer 79,200 0 3.2
3704 N. Charles Street
Apt. 1004
Baltimore, MD 21218
Michael T. Brigante 32,867 20,333(9) 2.2
17 Daniel Drive
Belle Mead, NJ 08502
Wexford Spectrum Investors LLC 0 615,241(10) (10)
411 West Putnam Avenue
Greenwich, CT 06830
Imprimis Investors LLC 0 2,449,716(10) (10)
411 West Putnam Avenue
Greenwich, CT 06830
Sergio Vallejo, DMD 28,000(11) 3,750(12) 1.3
4335 Highland Park Road
Lakeland, FL 33813
Joseph Raymond, Jr. 123,670 3,750(14) 5.2
4074 Scarlet Iris Place
Winter Park, FL 32792 (13)
All directors and executive officers 853,210 165,243 41.4
as a group (8 persons)
</TABLE>
*Less than 1%.
(1) Reflects number of shares of Common Stock acquirable upon exercise of
options and, in the case of Wexford Spectrum Investors, LLC and
Imprimus Investors, LLC, conversion of Preferred Stock.
(2) Includes 16,667 shares subject to stock options which became
exercisable on July 30, 1998; 16,666 shares subject to stock options
which became exercisable in April 1998 and 16,667 shares subject to
stock options which became exercisable in April 1997.
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<PAGE> 13
(3) Mr. Mrazek and Dr. McMillen have each given Mr. McMillen an
irrevocable proxy to vote their respective shares until December 31,
2000.
(4) Includes 3,750 shares subject to stock options that become exercisable
on July 25, 1998; and 3,750 shares subject to stock options that
became exercisable on July 25, 1997.
(5) On July 6, 1998, Mr. Sharer was granted 10,000 shares of Common Stock
in connection with his appointment to the position of Vice Chairman of
the Company.
(6) Includes 10,000 shares subject to stock options that became
exercisable in April 1998.
(7) Includes 3,750 shares subject to stock options that became exercisable
on July 25, 1998; 3,750 shares subject to stock options that became on
July 25, 1997 and 3,750 shares subject to stock options which became
exercisable on May 26, 1998.
(8) Includes 16,667 shares subject to stock options which became
exercisable in April 1997; 15,003 shares subject to stock options
which became exercisable in April 1998; 7,867 shares subject to stock
options which become exercisable on July 25, 1998; 8,799 shares
subject to stock options which become exercisable on July 25, 1998;
and 16,660 shares subject to stock options which became exercisable on
August 26, 1998.
(9) Includes 4,000 shares which became exercisable on April 7, 1998; 3,000
shares which became exercisable on September 2, 1998 and 13,333 shares
which became exercisable on September 30, 1998.
(10) The Company issued 20,880 shares of Preferred Stock to Wexford and
83,521 shares of Preferred Stock to Imprimis on July 2, 1998. The
Preferred Stock is convertible into shares of the Company's Common
Stock commencing January 3, 1999, at an exercise price equal to the
lesser of $1.75 per share or 75% of the average closing sale prices of
the Company's publicly traded Common Stock for the twenty consecutive
trading days prior to the date of conversion of the Preferred Stock
into Common Stock. The Company issued the Preferred Stock in
connection with the exchange of $5,000,000 principal amount of Senior
Redeemable Preferred Stock and 2,875,000 Common Stock Purchase
Warrants originally sold through a private offering to Wexford and
Imprimis which closed on January 13, 1998. 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. After December
31, 2000, the dividend on the Preferred Stock is 12% per annum. The
Company has the right to redeem all of the Preferred Stock on or prior
to January 3, 1998 upon paying $5 million plus accrued dividends from
the date of original investment at the rate of 12% per annum. On
September 30, 1998, the Company paid a dividend in kind on the
Preferred Stock of a total of 2,610 additional shares of Preferred
Stock, of which 2,088 shares were payable as
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<PAGE> 14
a dividend to Imprimis and 522 shares were payable as a dividend to
Wexford. Wexford and Imprimis together hold 100% of the Preferred
Stock issued and outstanding. Imprimis beneficially owns 2,445,966
shares of Common Stock issuable pursuant to its Preferred Stock. The
percentage of shares so held is 44.3%, on the basis of 2,457,968
shares of Common Stock issued and outstanding on December 17, 1998, an
assumed 3,057,457 shares of Common Stock issuable pursuant to the
Preferred Stock at an assumed conversion price of $1.75 per share of
Common Stock issuable to Imprimis and Wexford. Wexford beneficially
owns 611,491 shares of Common Stock issuable pursuant to its Preferred
Stock. The percentage of shares so held is 11.1%, on the basis of
2,457,968 shares of Common Stock issued and outstanding on December
17, 1998, an assumed 3,057,457 shares of Common Stock issuable
pursuant to the Preferred Stock at an assumed conversion price of
$1.75 per share of Common Stock issuable to Imprimis and Wexford.
Wexford Management may, by reason of its status as manager of Imprimis
and Wexford, be deemed to own beneficially the Common Stock of which
Imprimis and Wexford possess beneficial ownership. Charles E.
Davidson and Joseph M. Jacobs are controlling persons of Wexford
Management and may, by reason of such status, be deemed to own
beneficially the Common Stock of which Imprimis and Wexford possesses
beneficial ownership.
(11) Includes 21,000 shares held in Dr. Vallejo's name and 1,000 shares in
Dr. Vallejo's son's name over which Dr. Vallejo maintains control.
Dr. Vallejo is a principal in RVR Consulting Group, Inc. which has a
consulting agreement with the Company.
(12) Includes 3,750 shares subject to stock options that became exercisable
on May 26, 1998.
(13) Mr. Raymond was elected to the Board on September 2, 1998 and RVR
Consulting Group, Inc. in which Mr. Raymond is a principal, has a
consulting agreement with the Company.
(14) Includes 3,750 shares subject to stock options which became
exercisable on September 2, 1998.
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<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
compensation of the Company's executive officers for services in all capacities
to the Company during the Company's last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
FISCAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY
- --------------------------------------------------------------------------
<S> <C> <C>
C. Thomas McMillen*.......... 1997 $135,500
Chief Executive Officer
E. Eugene Sharer............. 1997 $132,500
Vice Chairman
Eric S. Kaplan............... 1997 $120,000
President and Chief
Operating Officer
Michael T. Brigante.......... 1997 $ 90,000
Senior Vice President
Finance and Chief Financial
Officer; Acting Secretary
</TABLE>
* Mr. McMillen did not receive any cash compensation for fiscal years
1995 or 1996, nor were any options granted to him. For fiscal year
1996, compensation in the amount of $45,000 was accrued. In addition,
the Company advanced to him without interest approximately $23,000 in
1996, which he repaid in February 1997. No other executive officer
received compensation in excess of $100,000 during the Company's last
fiscal year.
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<PAGE> 16
EMPLOYMENT AGREEMENTS
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 $150,000. Mr. McMillen
may participate in all executive benefit plans and has the use of a Company
car. Mr. McMillen has been granted options to purchase 135,000 shares of the
Company's Common Stock at exercise prices ranging from $3.33 to $4.81 per
share. None of these options have been exercised and 50,000 shares have vested
as of the date of this Information Statement. The agreement also provides,
among other things, that if his employment is terminated without cause the
Company will pay an amount equal to one year's base salary, payable over a one
year period. In September 1998 his agreement was extended until August 31,
2001.
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
an initial public offering of the Company's Common Stock, and for participation
in the executive benefit plans, as well as an automobile allowance of $1,000
per month. Mr. Sharer has been granted options to purchase 141,667 shares of
the Company's Common Stock at exercise prices ranging from $0.03 to $3.38 per
share. In addition, Mr. Sharer has been awarded a 10,000 share grant of the
Company's Common Stock. The agreement also provides, among other things, that
if his employment is terminated without cause the Company will pay to him an
amount equal to one year's base salary, payable over a one year period.
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 has been granted options to purchase 70,000
shares of the Company's Common Stock at exercise prices ranging from $0.03 to
$3.37 per share. On February 23, 1998, Mr. Brigante was elected to the
position of Vice President of Finance and Chief Financial Officer. His annual
compensation increased to $100,000 at that time. On September 16, 1998, Mr.
Brigante was named Senior Vice President and Chief Financial Officer and his
employment agreement was extended to August 31, 2000. In addition, he was
granted an auto and phone allowance of $850 per month.
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 and
consulting agreement each provides for a base salary of $75,000 per annum. Dr.
Kaplan has been granted options to purchase 206,667 shares of the Company's
Common Stock at exercise prices ranging from $0.60 to $4.38 per share. 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 one year's base salary, payable over
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<PAGE> 17
a twelve month period. On April 6, 1997, Dr. Kaplan became a Senior Vice
President and a director of the Company. In November 1997 he became the Chief
Operating Officer of the Company; in July 1998 was elected President; and in
September 1998 his employment agreement was extended until August 31, 2000.
Each of the employment agreements with Messrs. McMillen, Sharer,
Brigante, and with Dr. Kaplan requires the full-time services of such employees
and all have confidentiality and non-compete clauses. 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. An independent
compensation expert is to be engaged subsequent to any financing in excess of
$10,000,000 to evaluate and report to the Board of Directors the cash
compensation averages for Chief Executive Officers and Presidents in the
physician practice management industry for companies with similar revenues,
profitability, growth rates and stage of development as the Company's. The
Compensation Committee of the Board of Directors will evaluate the report and
take whatever action it deems appropriate.
BENEFIT PLANS
STOCK OPTION PLANS
1994 Stock Option Plan. The Company's 1994 Stock Option Plan (the
"1994 Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company in December 1994. The 1994 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 Plan to 400,000 from 60,000. The
purpose of the 1994 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 17, 1998, options to purchase 148,992 shares of Common Stock at a
weighted average per share exercise price of $1.86 were outstanding. A total
of 45,147 shares of Common Stock were available for grant under the 1994 Plan
at that date. The 1994 Plan will terminate in April 2004, unless sooner
terminated by the Board of Directors.
The 1994 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 may
delegate administration of the 1994 Plan to the Compensation Committee.
Subject to the limitations set forth in the 1994 Plan, the Board of Directors
(or the Compensation Committee) has the authority to select the persons to whom
grants are to be 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
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<PAGE> 18
the 1994 Plan is ten years. Options granted under the 1994 Plan are
nontransferable 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 Plan,
options previously granted under the 1994 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. In October 1996, the Board of Directors of
the Company, with stockholder approval, adopted its 1996 Stock Option Plan (the
"1996 Plan") covering up to 200,000 shares of the Common Stock, pursuant to
which officers, directors, employees, advisors and consultants to the Company
are eligible to receive incentive and/or nonqualified stock options. The 1996
Plan was increased as approved by the Company's stockholders to 400,000 shares
in June, 1997. The 1996 Plan, which expires in September 2006, is administered
by the Compensation Committee of the Board of Directors. The 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 Plan are
exercisable for a period of up to 10 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 the grant, except that the term of an incentive stock option
granted under the 1996 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 17, 1998, options to purchase an aggregate of
357,167 shares of Common Stock at a weighted average per share exercise price
of $3.74 were outstanding. A total of 40,333 shares of Common Stock were
available for grant under the 1996 Plan at that date.
1996 Restricted Stock Option Plan for Health Care Professionals. In
October 1996, the Board of Directors adopted, and the stockholders of the
Company approved, the 1996 Restricted Stock Option Plan for Health Care
Professionals (the "1996 Professionals Plan"), which expires in October 2006.
The 1996 Professionals Plan permits the Company to grant nonqualified stock
options to licensed health care professionals affiliated with the Company and
in most cases health care professionals employed by a Medcorp. 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 Committee the authority to grant options under such a plan, to
construct and interpret such plan, and to make all other determinations and
take all actions necessary or advisable for the administration of such plan.
The exercise price for options granted under the 1996 Professionals 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 1996 Professionals Plan will expire no later
than the tenth anniversary of the date of grant. There have been 29,500
options granted under the 1996 Professionals Plan as of December 17, 1998, at a
weighted average per share exercise price of $2.70.
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<PAGE> 19
1998 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 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 stock and nonqualified 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. 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. Under the
Directors Option Plan, each Outside Director will receive an option for 7,500
shares for every year of service on the Board of Directors. The Company
currently has four outside directors eligible to participate in the Director
Option Plan. As of December 17, 1998, 45,000 options have been granted of
which 30,000 were exercisable at a weighted average per share price of $3.44.
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 will be returned to the Directors Option
Plan and will become available for future grants.
EXECUTIVE BONUS PLAN
Effective January 1, 1996, the Board of Directors established an
Executive Bonus Plan for Key Executives (the "Bonus Plan") to reward executive
officers and other key employees based upon the performance of the Company and
such individuals. Under the Bonus Plan, the Compensation Committee of the
Board of Directors has discretion to award bonuses in an aggregate amount equal
to 10% of the Company's pre-tax income for a particular fiscal year (the "Bonus
Fund"). The maximum amount of the Bonus Fund for any year is $5 million.
Under the terms of existing employment agreements, which expire on various
dates from March 1999 through August 2000, the Bonus Fund has been allocated as
follows: 40% to Mr. McMillen, 30% to Mr. Sharer, and 30% to Dr. Kaplan. Awards
under the Bonus Fund are not exclusive of other bonuses that may be awarded by
the Board of Directors or the Compensation Committee from time to time.
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<PAGE> 20
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
CONSULTING AGREEMENTS
In August 1996, the Company entered into a consulting agreement with
J.E.M., Inc. ("JEM"), the sole stockholders of which are Dr. Kaplan, the
Company's President and Chief Operating Officer, and his wife. Under the terms
of the consulting agreement, JEM agreed to provide advice and assistance to the
Company in connection with identifying and affiliating with chiropractors and
their existing chiropractic practices and identifying, acquiring, and/or
managing businesses engaged in providing services ancillary to those provided
by Integrated Medical Centers. The Company agreed to pay JEM $6,000 per month
for its services. The consulting agreement expires in August 1999 and may be
terminated sooner by mutual agreement of the parties, by the Company for
"cause," defined as a violation by JEM of any material provision of the
consulting agreement not remedied within 30 days after notification or JEM's
conviction of a felony, upon termination of the employment agreement between
Dr. Kaplan and the Company, or upon JEM's failure to meet certain performance
goals. In September, 1998, the consulting agreement with JEM was extended until
September 1, 2000, with annual compensation payable to JEM increased $75,000
per year, and severance of one year's compensation payable to JEM upon
termination.
On August 31, 1998, the Company entered into a consulting agreement
with RVR Consulting Group, Inc. ("RVR"). RVR is a Florida corporation owned in
part by Company Board members Joseph Raymond, Jr. and Sergio Vallejo, D.M.D.
The consulting agreement is for a term of one year, with RVR paid a monthly
retainer of $7,000 plus expenses for certain business consulting services.
Additionally, under the consulting agreement, RVR was granted 150,000 Common
Stock warrants, which vest in three equal amounts of 50,000 Common Stock
warrants upon execution of the consulting agreement, six months after execution
of the agreement, and twelve months after execution of the agreement. The
consulting services to be rendered to the Company by RVR include review,
assessment and modification of the Company's organizational and operational
structure; formulation, supervision, and execution of Company business
objectives; monitoring and advising on the Company's financial condition,
including cash flow, collections, revenues, and expenses; and review and
assessment of the Company's business plan, administrative processes, and
profitability.
ARRANGEMENTS WITH INVESTORS
On January 13, 1998, Imprimis acquired from the Company Common Stock
purchase warrants (the "Warrants") to purchase 2,280,000 shares of Common
Stock, at an initial price of $1.75 per share, and 80,000 shares of senior
redeemable preferred stock, par value $.01 per share (the "Redeemable Preferred
Stock"), of the Company, pursuant to an Investment Agreement, dated as of
December 19, 1997, among the Investors and the Company (the "Investment
Agreement"), as supplemented by the First Supplement thereto, dated as of
January 12, 1998, among the Investors and the Company. On the
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<PAGE> 21
same date, Wexford acquired from the Company Warrants to purchase 570,000
shares of Common Stock and 20,000 shares of the Redeemable Preferred Stock.
To acquire the Warrants and the Redeemable Preferred Stock, Imprimis
and Wexford made initial payments to the Company of $800,000 and $200,000,
respectively, on January 13, 1998, and made additional payments to the Company
of $3,200,000 and $800,000, respectively, on January 27, 1998, net of fees and
expense reimbursement payable by the Company to Imprimis and Wexford.
Approximately $500,000 of the initial payment of Imprimis was funded by the
repayment by the Company of a loan made by Imprimis on December 19, 1997. The
funds used by Imprimis and Wexford to make such loan, such initial payments and
such additional payments, as the case may be, came from the working capital of
Imprimis and Wexford.
On July 2, 1998, pursuant to a Second Supplement, dated as of July 2,
1998, to the Investment Agreement, Wexford and Imprimis acquired 20,880 shares
and 83,521 shares respectively of Preferred Stock, and Wexford and Imprimis
acquired, respectively, 20,000 shares of Common Stock and 80,000 shares of
Common Stock. The Investors acquired such shares of Common Stock and their
Preferred Stock in exchange for the Redeemable Preferred Stock (including
certain dividends that had been paid in kind) and Warrants that had previously
been issued. The Investors obtained certain registration rights with respect
to their shares of Common Stock and to the shares of Common Stock issuable
pursuant to their Preferred Stock pursuant to a registration rights agreement.
On September 10, 1998, Mr. Simon resigned as a director of the
Company, a result of which options to purchase 3,750 shares of Common Stock
that had been granted to Mr. Simon lapsed without vesting. On December 10,
1998, following his resignation, the three-month exercise window of his vested
option of 3,750 shares that had been granted lapsed.
On September 30, 1998, the Investors received as a dividend on their
shares of Preferred Stock a total of 2,610 additional shares of Preferred
Stock, of which 2,088 shares were payable as a dividend to Imprimis and 522
shares were payable as a dividend to Wexford.
On October 19, 1998, the Company issued to the Investors $475,000 in
aggregate principal amount of Senior Secured Floating Rate Bridge Notes due
February 1, 1999 (collectively, the "Notes"), of which $350,000 represented
term loans being made on the date the Notes were issued and $125,000
represented revolving loans that could be made by the Investors pursuant to
their revolving loan commitments. Imprimis received a Note for a principal
amount of $380,000, of which $280,000 represented a term loan from Imprimis and
$100,000 represented a revolving loan that could be made by Imprimis. Wexford
received a Note for $95,000, of which $70,000 represented a term loan made by
Wexford and $25,000 represented a revolving loan that could be made by Wexford.
Principal and accrued but unpaid interest on the Notes is payable in full on or
before February 1, 1999. Interest on the Notes accrues from the date of
issuance and compounds quarterly in arrears on the first day of each quarter
commencing on January 1, 1999, at a rate per annum equal to the sum of the rate
from time to time announced by Chase Bank
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<PAGE> 22
as its reference rate (the "Base Rate") plus 3%. Overdue payments of principal
and, to the extent permitted by applicable law, overdue payments of interest
and premium, if any, will accrue at a rate per annum equal to the Base Rate
plus 4%. As of the date of this Information Statement, an aggregate of
$398,781.47 is due and payable on the Notes.
In a series of private transactions from October 22, 1998 through
October 31, 1998, Wexford and Imprimis sold in the aggregate 100,000 shares of
Common Stock at $2.50 per share, of which Imprimis sold 80,000 shares and
Wexford sold 20,000 shares, pursuant to stock purchase agreements with various
buyers.
LEGAL PROCEEDINGS
There are no material legal proceedings to which any director, officer
or affiliate of the Company, any owner of record or beneficially of more than
five percent of any class of voting securities of the Company, or any associate
of any such director, officer, affiliate of the Company, or security holder is
a party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
Submitted,
/s/ MICHAEL T. BRIGANTE
Michael T. Brigante
Chief Financial Officer
Complete Wellness Centers, Inc.
21
