SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
Omega Orthodontics, Inc.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Notice of Annual Meeting of Stockholders of
Omega Orthodontics, Inc.
To Be Held on June 10, 1998
The Annual Meeting of Stockholders of Omega
Orthodontics, Inc. will be held on June 10, 1998 at 9:00
a.m., local time, at the offices of the Company, 63 Chatham
Street, Boston, Massachusetts for the following purposes:
1. To elect six (6) directors to serve for the
ensuing year and until their successors are duly elected.
2. To consider and act upon a proposal to amend the
Omega Orthodontics Incentive Stock Plan to increase from
450,000 to 700,000 the total number of shares of the
Company's Common Stock reserved for issuance thereunder.
3. To consider and act upon any matters incidental to
the foregoing purposes and any other matters which may
properly come before the Meeting or any adjourned session
thereof.
The Board of Directors has fixed April 22, 1998 as the
record date for determining the stockholders entitled to
notice of, and to vote at, the Meeting.
You are cordially invited to attend the Meeting.
By Order of the Board of
Directors
/s/ Edward M. Mulherin
-----------------------------
Edward M. Mulherin, Secretary
Boston, Massachusetts
May 8, 1998
YOUR VOTE IS IMPORTANT
____________________________________________________________
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED
TO VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED
FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION, BY
EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING AND
VOTING AT THE MEETING.
____________________________________________________________
<PAGE>
OMEGA ORTHODONTICS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 10, 1998
This proxy statement is furnished in connection with
the solicitation of proxies by the Board of Directors of
Omega Orthodontics, Inc., a Delaware corporation (the
"Company"), with its principal executive offices 3621 Silver
Spur Lane, Acton, California 93510 for use at the Annual
Meeting of Stockholders to be held on June 10, 1998, and at
any adjournment or adjournments thereof (the "Meeting").
The enclosed proxy relating to the Meeting is solicited on
behalf of the Board of Directors of the Company and the cost
of such solicitation will be borne by the Company. It is
expected that this proxy statement and the accompanying
proxy will be mailed to stockholders on or about May 18,
1998. Certain of the officers and regular employees of the
Company may solicit proxies by correspondence, telephone or
in person, without extra compensation. The Company may also
pay to banks, brokers, nominees and certain other
fiduciaries their reasonable expenses incurred in forwarding
proxy material to the beneficial owners of securities held
by them.
Only stockholders of record at the close of business on
April 22, 1998 will be entitled to receive notice of, and to
vote at, the Meeting. As of that date, there were
outstanding and entitled to vote 4,800,982 shares of Common
Stock, $.01 par value (the "Common Stock"), of the Company.
The holders of Common Stock are entitled to one vote
per share. The directors of the Company will be elected by
a plurality of the votes cast. Approval of the amendment to
the Omega Orthodontics Incentive Stock Plan described in
Proposal No. 2 requires the affirmative vote of at least a
majority of the outstanding shares of Common Stock
represented and entitled to vote at the Meeting.
The enclosed proxy, if executed and returned, will be
voted as directed on the proxy or, in the absence of such
direction, for the election of the nominees as directors and
for Proposal No. 2 below. If any other matters shall
properly come before the Meeting, the enclosed proxy will be
voted by the proxies in accordance with their best judgment.
The proxy may be revoked at any time prior to exercise by
filing with the Secretary of the Company a written
revocation, by executing a proxy with a later date, or by
attending and voting at the Meeting.
The Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1997, including financial
statements audited by Arthur Andersen LLP, is being mailed
to each of the stockholders simultaneously with this proxy
statement.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information as
of March 31, 1998 with respect to the beneficial ownership
of the Company's Common Stock by each nominee for director,
each named executive officer in the Summary Compensation
Table under "Executive Officers and Compensation" below, all
directors and executive officers as a group, and each person
known by the Company to be the beneficial owner of 5% or
more of the Company's Common Stock. This information is
based upon information received from or on behalf of the
named individuals.
Name and Address of Number of Shares
Beneficial Owner (1) Beneficially Owned Percentage
- -------------------- ------------------ ----------
The Orthodontic Management
Effectiveness Group
of America, LLC (2)
3621 Silver Spur Lane 1,050,000 21.9%
Acton, CA 93510
Robert J. Schulhof (3)
3621 Silver Spur Lane
Acton, CA 93510 1,050,000 21.9%
Putnam Investments, Inc. (4)
One Post Office Square
Boston, MA 02109 257,500 6.0%
Mellon Bank Corporation (5)
One Mellon Bank Center
Pittsburgh, PA 15258 240,000 5.7%
C. Joel Glovsky (6)
44 Grey Lane
Lynnfield, MA 01940 231,000 4.8%
The Mayflower Group Ltd. (7)
393 Commonwealth Avenue
Boston, MA 02115 225,000 4.7%
David T. Grove (8)
581 12th Street
Elko, NV 89801 144,721 3.0%
Dean C. Bellavia (9)
44 Capen Boulevard
Buffalo, NY 14214 68,850 1.4%
Edward M. Mulherin (10)
63 Chatham Street
Boston, MA 02109 160,000 3.2%
Floyd V. Elliott (11)
2555 Homeland Drive
Elko, NV 89801 50,000 1.0%
John J. Clarke, Jr. (12)
116 B South River Road
Bedford, NH 03110 10,000 *
All directors and executive
officers as 1,714,571 33.8%
a group (7 persons) (13)
____________________________
* Represents less than 1%.
(1) Except as otherwise indicated, the Company believes that
the persons named in the table above, based upon
information furnished by such persons, have sole voting
and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to
community property laws where applicable. Amounts and
percentages shown are based on calculations that, pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), include shares issuable
pursuant to stock options which may be exercised on or
before June 25, 1998.
(2) The Company has relied on information reported on a
Statement on Schedule 13G dated February 13, 1998 filed
jointly by The Orthodontic Management Effectiveness Group
of America, LLC ("OMEGA, LLC") and Mr. Schulhof with the
Securities and Exchange Commission (the "Commission").
Mr. Schulhof holds 330 membership points in OMEGA, LLC, or
27.7% of the voting power of OMEGA, LLC, and is the sole
manager of OMEGA, LLC with authority to vote and dispose
of shares of the Common Stock of the Company held by
OMEGA, LLC. Each of the following other directors of
Omega holds more than five percent of the membership
points of OMEGA, LLC, and the amount of such holdings is
as set forth in the parenthetical following the holder's
name: C. Joel Glovsky (75 points or 6.3%); David T. Grove
(150 points or 12.6%); Dean C. Bellavia (100 points or
8.4%); and Floyd V. Elliott (20 points or 1.7%).
(3) The Company has relied on information reported on a
Statement on Schedule 13G dated February 13, 1998 filed
jointly by OMEGA, LLC and Mr. Schulhof with the
Commission. Includes the 1,050,000 shares held by OMEGA,
LLC which Mr. Schulhof may be deemed to beneficially own
as the principal membership point holder and the sole
manager of OMEGA, LLC. In connection with that certain
Underwriting Agreement dated as of October 1, 1997 between
the Company and National Securities Corporation, as the
representative of the several underwriters of the
Company's initial public offering of securities (the
"Underwriting Agreement"), Mr. Schulhof has agreed in his
individual capacity and not as an officer or director of
the Company, that for a period of two years after the date
of the Underwriting Agreement, in any stockholder vote
other than the election of the directors of the Company,
or security holder proposals presented for the vote of
stockholders in accordance with Rule 14a-8 under the
Exchange Act, he will vote all shares of Common Stock
beneficially owned by him individually or in his capacity
as the sole manager of OMEGA, LLC with authority to vote
shares of the Common Stock of the Company held by such
entity, but no other affiliates, in accordance with the
vote of a majority of the holders of Common Stock of the
Company which has been registered under the Securities
Act, except if such action, in the opinion of legal
counsel, would not be consistent with his fiduciary duties
as a director or officer or principal stockholder of the
Company.
(4) The Company has relied on information reported on a
Statement on Schedule 13G dated January 27, 1998 filed by
Putnam Investments, Inc. with the Commission.
(5) The Company has relied on information reported on a
Statement on Schedule 13G dated January 29, 1998 filed by
Mellon Bank Corporation with the Commission.
(6) The Company has relied on information reported on a
Statement on Schedule 13G dated February 12, 1998 filed by
Dr. Glovsky with the Commission. Includes 5,000 shares
held of record by Dr. Glovsky's Individual Retirement
Account.
(7) The Company has relied on information reported on a
Statement on Schedule 13G dated February 12, 1998 filed by
The Mayflower Group Ltd. with the Commission.
(8) Includes 10,000 shares issuable upon the exercise of
options held by Dr. Grove.
(9) Includes 50,000 shares issuable upon the exercise of
options held by Dr. Bellavia. Also includes 8,100 shares
held by certain trusts for the benefit of Dr. Bellavia and
750 shares held by certain trusts for the benefit of Dr.
Bellavia's spouse.
(10) Includes 10,000 shares held of record by Leonard, Mulherin
& Greene, P.C. ("LMG"), a public accounting firm that
provides accounting services to the Company and makes Mr.
Mulherin available to be the Company's Chief Financial
Officer pursuant to a consulting agreement, and of which
Mr. Mulherin is a principal stockholder. Also includes
150,000 shares issuable upon the exercise of options held
by LMG.
(11) Includes 50,000 shares issuable upon the exercise of
options held by Mr. Elliott.
(12) Includes 10,000 shares issuable upon the exercise of
options held by Mr. Clarke.
(13) See Notes 3, 6, 8, 9, 10, 11 and 12.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, six directors are to be elected to
serve until the 1999 Annual Meeting of Stockholders and
until their respective successors have been duly elected and
qualified. The persons listed below in the following table
are the nominees for election as directors. All nominees
are currently directors of the Company. It is the intention
of the persons named as proxies to vote for the election of
the nominees. In the unanticipated event that any such
nominee should be unable to serve, the persons named as
proxies will vote the proxy for such substitutes, if any, as
the Board of Directors may designate. The nominees have not
been nominated pursuant to any arrangement or understanding
with any person.
The following table sets forth certain information with
respect to the nominees.
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- -----
Robert J. Schulhof 56 President, Chief 1996
Executive Officer,
Treasurer and Director
Dr. Dean C. 54 Director of Affiliate 1996
Bellavia Programs and Director
John J. Clarke, 55 Director 1997
Jr. (1)(2)
Floyd V. Elliott 55 Director of Professional 1996
Relations and Staff
Development and Director
Dr. C. Joel 65 Chairman of the Board 1996
Glovsky (1)(2)
Dr. David T. Grove 57 Director 1996
(2)
_______________________
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation.
Robert J. Schulhof, the Company's founder, has been the
President and Chief Executive Officer of the Company since its
formation in August 1996. In 1995, Mr. Schulhof founded OMEGA,
LLC, a principal stockholder of the Company, and is the sole
manager of OMEGA, LLC. From 1990 to 1994, Mr. Schulhof was the
Chief Executive Officer of Solutions Providers, a California
general partnership and a firm that offered integrated computer
technology and practice management consulting services to the
orthodontic industry, and from 1994 until he founded OMEGA, LLC
in 1995, Mr. Schulhof was an officer, director and principal
stockholder of Integrated Management Systems, Inc., a firm
providing software and consulting services to the orthodontic
industry. He holds a masters degree in Mathematical Statistics
and Probability from the University of California at Los
Angeles.
Dean C. Bellavia is a co-founder of the Company and was
employed as the Director of Affiliate Programs since its
formation in August 1996 until December 31, 1997. As of
January 1, 1998, Dr. Bellavia entered into a consulting
agreement with the Company pursuant to which he continues to
perform the services he was performing as the Director of
Affiliate Programs. Dr. Bellavia is also the founder and
President of The Bio Engineering Company, a consulting firm
serving the orthodontic industry which he will continue to
operate to the extent it does not adversely affect his duties
for the Company. He holds a Ph.D. in Bio-Engineering from
Carnegie Mellon University.
John J. Clarke, Jr., was elected to the Board of Directors
of the Company in March 1997. Since 1971, Mr. Clarke has been
a principal in Baldwin & Clarke Companies, a diversified
financial services organization that provides investment
banking and other financial advisory services. He is a director
of Centerpoint Bank, a wholly-owned subsidiary of Community
Bankshares, Inc., a bank holding company in Concord, New
Hampshire. Mr. Clarke holds a B.A. from Northeastern
University.
Floyd V. ("Sonny") Elliott, joined the Company's Board of
Directors in December 1996 and since October 1, 1997 has been
the Company's Director of Professional Relations and Staff
Development. Mr. Elliott is the founder and President of
Elliott Enterprises, a consulting firm serving the orthodontic
industry which he will continue to operate to the extent it
does not adversely affect his duties for the Company. Prior to
founding Elliott Enterprises, Mr. Elliott was President of
Paradigm Practice Management, a management consulting firm
working primarily with orthodontic practices.
C. Joel Glovsky, a co-founder of the Company, has served as
the Chairman of the Board of Directors of the Company since its
formation in August 1996. Dr. Glovsky has been engaged in the
private practice of orthodontics since 1961. He is a graduate
of the dental school of Tufts University and served as
Assistant Clinical Professor there for 15 years. Dr. Glovsky
is a diplomat of the American Board of Orthodontics. In October
1989, Dr. Glovsky co-founded The Standish Care Company, an
assisted living company, and he served on the Board of
Directors of Standish from 1989 to 1994.
David T. Grove, has served on the Board of Directors of
the Company since its inception in August 1996. Dr. Grove
has been in the private practice of orthodontics in Nevada
since 1971. Dr. Grove holds a dental degree from the
University of Louisville, a Masters degree in Orthodontics
from St. Louis University and a Masters degree in education
from the University of South California. He served as
Clinic Director for two years in the Orthodontics Department
at the University of California at San Francisco. He is the
Chairman of the Company's Clinical Advisory Board.
Meetings of the Board of Directors and Committees
The Board of Directors of the Company held five
meetings during 1997. The Board of Directors also acted on
three occasions by unanimous written consent in lieu of
special meetings. Each director attended at least 75% of
the aggregate number of all meetings of the Board of
Directors and committees of which he was a member during
1997.
Board Committees
The Board of Directors has established an Audit Committee
and a Compensation Committee.
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 auditors 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 Dr. Glovsky and Mr.
Clarke. The Audit Committee did not meet in 1997.
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 stock and other compensatory plans. The Compensation
Committee consists of Dr. Glovsky, Dr. Grove and Mr. Clarke.
The Compensation Committee met twice in 1997.
Director Compensation
Members of the Board who are not full-time employees of the
Company (currently Dr. Grove and Mr. Clarke) receive a fee of
$500 for each Board meeting attended and a fee of $250 for each
committee meeting attended. Such Board members are reimbursed
for their out-of-pocket expenses for each meeting attended.
Executive Officers and Compensation
Executive officers of the Company hold their positions
until the next annual meeting of the Board of Directors and
until their respective successors are elected and qualified.
In addition to Mr. Schulhof (President, Chief Executive
Officer and Treasurer) and Mr. Elliott (Director of
Professional Relations and Staff Development), Mr. Edward M.
Mulherin and Mr. Peter I. Wexler are executive officers of
the Company.
Edward M. Mulherin, has provided consulting services as
the part-time Chief Financial Officer of the Company since
October 1996. Such services have been provided through LMG,
a firm in which Mr. Mulherin is a principal stockholder and
with which he has been associated since 1991. Mr. Mulherin
is a certified public accountant and holds a B.S. in
Accounting from Boston College and a J.D. from Suffolk
University Law School. Mr. Mulherin is 38.
Peter I. Wexler has served as the General Counsel of
the Company since March 1998. From 1995 to 1998, Mr. Wexler
Corporate Counsel and Commercial Manager for Stone and
Webster Engineering Corporation, a global engineering and
construction company, where he specialized in domestic and
international transactions. Prior to Stone and Webster, Mr.
Wexler was associated with the law firm Jackson Parton in
London, England. Mr. Wexler is 30.
The following Summary Compensation Table sets forth
compensation awarded to, earned by or paid to Robert J.
Schulhof, the Company's Chief Executive Officer. No other
executive officer or director earned a salary and bonus of
more than $100,000 during either (a) the period from August
30, 1996 (inception) to December 31, 1996 or (b) the year
ended December 31, 1997. The Company entered into an
employment agreement with Mr. Schulhof effective January 1,
1997. See "Employment Agreements." The Company did not
grant any restricted stock awards, options or stock
appreciation rights or make any long-term incentive plan
payouts to any named executive officer during such periods,
nor did any of the named executive officers own options or
stock appreciation rights during such periods. The Company
has no defined benefit or actuarial plans covering its
employees.
Summary Compensation Table
Annual Compensation
-------------------
Long Term
Compensation
Awards;
Name and Fiscal Securities All Other
Principal Year Salary Bonus Underlying Compensation
Position Ended ($) ($) Options ($)
- -------- ----- ------ ----- --------- ------------
Robert J. 12/31/97 $ 120,000 (1) $ 0 --- $ 3,500 (2)
Schulhof,
President, 12/31/96 (3) 49,200 $ 0 --- ---
Chief
Executive 12/31/95 (3) NA NA NA NA
Officer and
Treasurer
______________________
(1) Reflects amounts paid pursuant to an employment
agreement between the Company and Mr.
Schulhof which became effective January 1, 1997. See
"Employment Agreements."
(2) Reflects amounts paid to Mr. Schulhof as an automobile
allowance.
(3) The Company was not formed until August 30, 1996.
Employment Agreements
The Company has entered into employment agreements
(individually, an "Employment Agreement" and collectively,
the "Employment Agreements") with each of Mr. Schulhof, Dr.
Bellavia (whose agreement has been terminated and replaced
with a consulting agreement -- see "Certain Relationships
and Related Transactions") and Mr. Elliott (collectively,
the "Executives"). Mr. Schulhof's Employment Agreement
became effective January 1, 1997 and provides that he is
employed as the President and Chief Executive Officer of the
Company. The initial term of Mr. Schulhof's Employment
Agreement is three years, and such term will be extended
automatically on January 1, 2000 and on each January 1
thereafter for an additional year, unless Mr. Schulhof
receives notice of termination prior to such extension. Mr.
Schulhof is paid an annual base salary of $120,000, which
amount is subject to annual review, and bonuses, the amounts
of which are determined by the Compensation Committee. Mr.
Schulhof also has the use of a company car or, at his
election, will be paid an automobile allowance of $700 per
month. During 1997, Mr. Schulhof received an automobile
allowance of $3,500.
Dr. Bellavia's Employment Agreement became effective upon
the closing of the Company's initial public offering of
securities (the "IPO") and provided that he was employed as the
Director of Affiliate Programs of the Company. The initial
term of Dr. Bellavia's Employment Agreement was three years.
Dr. Bellavia was paid a monthly advance of $10,000, which
advance was subject to review and reduction in the event that
certain affiliation targets were not met by the Company. The
Board of Directors of the Company determined that such targets
had been met during 1997, and no reduction of Dr. Bellavia's
advances was imposed. As of January 1, 1998, Dr. Bellavia and
the Company terminated his Employment Agreement and replaced it
with a consulting agreement on substantially the same terms.
See "Certain Relationships and Related Transactions."
Mr. Elliott's Employment Agreement became effective upon the
closing of the IPO and provides that he is employed as the
Director of Professional Relations and Staff Development of the
Company. The initial term of Mr. Elliott's Employment
Agreement is three years, and such term will be extended
automatically on the third anniversary date of the
effectiveness and on each anniversary date thereafter for an
additional year, unless either party receives notice of
termination prior to such extension. Mr. Elliott was paid a
monthly advance of $10,000, which advance was subject to review
and reduction in the event that certain affiliation targets
were not met by the Company. The Board of Directors of the
Company determined that such targets had been met during 1997,
and no reduction of Mr. Elliott's advances was imposed.
Beginning in 1998 and thereafter, Mr. Elliott's Employment
Agreement provides for a base salary of $10,000 per month,
which amount is subject to annual review, and bonuses, the
amounts of which are determined by the Compensation Committee.
The Employment Agreements may be terminated by the Company
or the respective Executives without cause with 90 days' prior
written notice. If the Executive suffers a "termination other
than for cause" (as defined in the Employment Agreements),
including such termination within 24 months after a "change in
control" (as defined in the Employment Agreements), the
Executive is entitled to receive his accrued salary, earned
bonus compensation, vested deferred compensation (other than
plan benefits which will be payable in accordance with the
applicable plan) and other benefits through the date of
termination and severance payments of salary (at the rate
payable at the time of such termination) for the longer of 12
months or the remaining term of the Employment Agreement. Each
of the Executives may elect to receive from the Company a lump
sum severance payment equal to the present value of the flow of
cash flow from the severance payments of salary. In addition,
each Executive is entitled to an accelerated vesting of any
awards granted to the Executive under the Incentive Stock Plan.
Notwithstanding the foregoing, the Company is not required to
pay any amount which is not deductible for federal income tax
purposes.
If the Executive is terminated for "cause" (as defined in
the Employment Agreements), he is entitled to receive his
accrued salary, earned bonus compensation, vested deferred
compensation (other than plan benefits which will be payable in
accordance with the applicable plan) and other benefits through
the date of termination, but shall receive no other severance
benefits. Each of the Executives may also be terminated if he
dies or becomes disabled for a period of 12 consecutive months.
In the event of termination due to death or disability, the
Executive (or his estate) shall receive the same payments, but
no additional severance, except that, if the Executive becomes
disabled, the Company will maintain his insurance benefits for
the remaining term of his Employment Agreement.
Incentive Stock Plan
Effective as of January 31, 1997, the Company adopted the
Omega Orthodontics Incentive Stock Plan (the "Incentive Stock
Plan"). The Company reserved 300,000 of the authorized shares
of Common Stock for issuance under the Incentive Stock Plan.
On April 28,1997, the Incentive Stock Plan was amended to
increase the number of shares of Common Stock authorized for
issuance under the Incentive Stock Plan to 450,000. Unless
terminated earlier, the Incentive Stock Plan will terminate on
January 30, 2007. The Incentive Stock Plan is administered by
a committee consisting solely of two or more non-employee
Directors (the "Committee").
On April 28, 1997, the Committee granted options with
respect to 350,000 shares of Common Stock to Dr. Bellavia,
Mr. Elliott and LMG in the amounts of 50,000, 150,000 and
150,000 shares, respectively, at an exercise price of $6.00
per share. On December 24, 1997, the Committee granted
options with respect to 20,000 shares of Common Stock to Mr.
Clarke and Dr. Grove in the amounts of 10,000 shares each at
an exercise price of $3.00 per share. On March 25, 1998,
the Committee granted options with respect to 25,000 shares
of Common Stock to Mr. Wexler and an aggregate of 30,000
shares of Common Stock to two employees at an exercise price
of $3.0625 per share. At March 31, 1998, 25,000 shares of
Common Stock were reserved for issuance pursuant to future
grants under the Incentive Stock Plan.
The options granted to Mr. Elliott, LMG, Mr. Wexler and
the two employees vest in three equal installments on each
of the first three anniversaries of the date of grant, the
options granted to Dr. Bellavia vest fully on the first
anniversary of the date of grant and the options granted to
Mr. Clarke and Dr. Grove vest six months following the date
of grant. On March 25, 1998, the Committee voted to
accelerate the vesting of the options granted to LMG
retroactively to December 31, 1997.
Certain Relationships and Related Transactions
On August 31, 1996, the Company acquired OMEGA, LLC's
orthodontic practice management business and certain related
assets, management contracts and practice affiliation
agreements in exchange for 1,050,000 shares of the Company's
Common Stock. The related assets, contracts and agreements
included certain computer and other office equipment; non-
binding letters of intent with orthodontic practices to
affiliate with OMEGA, LLC, four of which were superseded by
affiliation agreements that closed simultaneously with the
IPO; consulting services agreements which provided limited
revenues to the Company pending the closing of the IPO;
consulting agreements with Dr. Bellavia and Mr. Elliott,
both of which were superseded by Employment Agreements; and
the consulting agreement (which is described below) with Dr.
Glovsky and Mayflower. Mr. Schulhof and Drs. Glovsky and
Bellavia, all of the then directors of the Company, held 330
(27.7%), 75 (6.3%), 150 (12.6%) and 100 (8.4%) of the
membership points of OMEGA, LLC, respectively, at the time
of the transaction, and Mr. Schulhof was the sole manager of
OMEGA, LLC.
In connection with the acquisition by the Company of
OMEGA, LLC's orthodontic practice management business, the
Company assumed OMEGA, LLC's rights and obligations under an
agreement with Dr. Glovsky and Mayflower, a private banking
firm, whereby Dr. Glovsky and Mayflower (the "Consultants")
agreed to provide certain consulting services to the Company
regarding the Company's business plan, initial capital
structure and private financing and orthodontic practice
affiliation transactions and the identification and
retention of the Company's Board of Directors, senior
management team and professional advisors. Under the terms
of the agreement, as amended and restated, 225,000 shares of
the Company's Common Stock were issued to each of the
Consultants to be held in escrow pending fulfillment of
their consulting obligations. Following completion of the
consulting services, all of such shares were released from
the escrow on April 28, 1997 at an imputed value of
approximately $4.50 per share and delivered to the
Consultants. In addition, the Company agreed to make cash
payments to the Consultants aggregating $842,000 over three
years beginning in January 1998. The Company is obligated
to make quarterly payments to each of Dr. Glovsky and
Mayflower on January 1, April 1, June 1 and September 1,
1998, 1999 and 2000 of $67,500, $27,000 and $10,800,
respectively. The Company expects to make payments under
this agreement aggregating $270,000 to each of Dr. Glovsky
and Mayflower during 1998. Mayflower is a stockholder of
the Company and holds 75 membership points of OMEGA, LLC,
the Company's principal stockholder. See "Security Ownership
of Certain Beneficial Owners and Management."
The Company has entered into another consulting
agreement with Dr. Glovsky which became effective upon the
closing of the IPO. The initial term of the agreement is
three years, and Dr. Glovsky provides consulting services to
the Company in connection with identifying orthodontic
practices with potential to affiliate with the Company and
negotiating and closing affiliation agreements with such
practices. Dr. Glovsky was paid a monthly advance of
$5,000, which advance was subject to review and reduction in
the event that certain affiliation targets were not met by
the Company. The Board of Directors of the Company
determined that such targets had been met during 1997, and
no reduction of Dr. Glovsky's advances was imposed.
Beginning in 1998 and thereafter, Dr. Glovsky's consulting
agreement provides for a maximum monthly fee of $5,000. In
1997, the Company paid Dr. Glovsky fees of $69,000 and
expects to pay him fees of approximately $60,000 under this
agreement in 1998.
The Company entered into a consulting agreement with
LMG which became effective on May 1, 1997 and provides that
LMG shall make Mr. Mulherin, a principal stockholder of LMG,
available to serve as the Company's Chief Financial Officer.
The initial term of the agreement is three years. For the
services of Mr. Mulherin as Chief Financial Officer, LMG was
paid a monthly retainer fee of $5,000 prior to the closing
of the IPO and a monthly retainer fee of $10,000 thereafter
and for the term of the agreement. In addition, in
connection with work done by LMG in preparation for and
completion of the IPO, the Company paid LMG fees of $
148,565 and issued LMG 10,000 shares of unregistered Common
Stock. The Company granted LMG a non-qualified stock option
under the Incentive Stock Plan to acquire 150,000 shares of
the Company's Common Stock at an exercise price of $6.00 per
share. The Company has also agreed to indemnify LMG against
certain liabilities that may arise in connection with the
services to be rendered by LMG under the agreement.
During September 1996, Drs. Glovsky and Bellavia, both
directors of the Company and more than 5% owners of OMEGA,
LLC, the Company's principal stockholder, purchased $25,000
and $50,000, respectively, of certain 15% bridge financing
notes issued prior to the IPO (the "Bridge Notes") and
received 5,000 and 10,000 shares, respectively, of the
Company's Common Stock in connection therewith. In April,
1997, Dr. Glovsky and Dr. Grove, also a director of the
Company, purchased an additional $5,000 and $25,000 of
Bridge Notes, respectively, and received an additional 1,000
and 5,000 shares of the Common Stock, respectively, in
connection therewith. In October 1997, the Company repaid
all of its Bridge Notes (including interest accrued thereon)
from the net proceeds of the IPO, including the Bridge Notes
held by Drs. Glovsky, Bellavia and Grove.
In June, 1997, Dr. Glovsky and Dr. Grove purchased
$25,000 each of certain 16% interim financing notes issued
prior to the IPO (the "Interim Notes"), and Dr. Glovsky
subsequently purchased an additional $60,000 of Interim
Notes. In October 1997, the Company repaid all of its
Interim Notes (including interest accrued thereon) from the
net proceeds of the IPO, including the Interim Notes held by
Dr. Glovsky and Dr. Grove.
The Company entered into an affiliation agreement with
Dr. Grove which the Company closed concurrently with the
closing of the IPO. Pursuant to its agreement with Dr.
Grove, a director of the Company, the Company acquired
certain assets of Dr. Grove's orthodontic practice in
exchange for a cash payment of $333,567 and 129,721 shares
of the Company's Common Stock.
In December 1997, the Company loaned Mr. Schulhof
$100,000 in exchange for his promissory note (the "Schulhof
Note"). The Schulhof Note is a demand note which bears
interest at the rate of prime (as published in The Wall
Street Journal) plus two percent. Principal and interest
are due upon demand, but if not sooner demanded, then in
December 2000.
Effective as of January 1, 1998, the Company and Dr.
Bellavia terminated his Employment Agreement and entered
into a consulting agreement. The initial term of the
agreement is three years. Dr. Bellavia will provide
services relating to the design, schedule of installation
and follow up on the effectiveness of all managerial systems
used by the Company's affiliated orthodontic practices and
the management of the consultants used by the Company to
optimize and maintain the affiliate practices' programs.
Dr. Bellavia is paid a monthly retainer fee of $10,000, and
the Company expects to pay Dr. Bellavia consulting fees in
1998 of approximately $120,000.
The Company entered into a consulting agreement with
Mr. Wexler which became effective on March 9, 1998 and
provides that Mr. Wexler will serve as the Company's Chief
Legal Officer. The initial term of the agreement is three
years. Mr. Wexler is paid a monthly retainer fee of $7,350,
and the Company has agreed to reimburse Mr. Wexler for
certain bar association and professional liability expenses
he incurs in connection with his services as Chief Legal
Officer of the Company. The Company granted Mr. Wexler a
non-qualified stock option under the Incentive Stock Plan to
acquire 25,000 shares of the Company's Common Stock at an
exercise price of $3.0625 per share. The Company has also
agreed to indemnify Mr. Wexler against certain liabilities
that may arise in connection with the services to be
rendered under the agreement and to pay him in a lump sum
the amount that he would be entitled to receive under the
agreement in the event that his employment terminates
within six months following a change in control of the
Company.
The Company has adopted a policy to the effect that
transactions between it and its officers, directors,
principal stockholders and the affiliates of the foregoing
persons be on terms no less favorable to the Company than
could reasonably be obtained in arms-length transactions
with independent third parties, and that any such
transactions also be approved by a majority of the Company's
outside independent directors disinterested in the
transaction.
<PAGE>
Proposal No. 2
AMENDMENT TO THE INCENTIVE STOCK PLAN
Subject to approval of the Stockholders, the Board of
Directors has approved an amendment to the Omega
Orthodontics Incentive Stock Plan (as previously amended and
now in effect, the "Incentive Stock Plan") increasing from
450,000 to 700,000 the total number of shares of the
Company's Common Stock reserved for issuance pursuant to
awards granted under the Incentive Stock Plan.
A total of 450,000 shares of Common Stock presently are
reserved for issuance upon the exercise of awards made under
the Incentive Stock Plan. As of March 31, 1998, options to
acquire a total of 425,000 shares of the Common Stock had
been granted under the Incentive Stock Plan to employees,
consultants and directors of the Company, exercisable over
varying periods of time. The exercise price on all
outstanding options is the fair market value of the Common
Stock at the time of grant of each option.
The Company utilizes grants of stock options as long-
term incentives for outside directors and for executive
officers and other employees and consultants in addition to
cash compensation . The Board of Directors is of the
opinion that the Incentive Stock Plan has helped the Company
compete for, motivate and retain high caliber executives and
other key employees, particularly in a time when the growth
of the Company absorbs much of its available cash, and that
it is in the best interests of the Company to amend the
Incentive Stock Plan by increasing from 450,000 to 700,000
the total number of shares of Common Stock reserved for
issuance pursuant to awards made under the Plan. The
amendment will permit the continuation of option grants as
the Company and its personnel needs expand, thereby
providing long-term incentives to attract, motivate and
retain the executive officers and other key employees and
consultants vital to the Company's future success. The full
text of the proposed amendment is set forth as Appendix I to
this Proxy Statement.
As options expire unexercised, the underlying shares
again become available for the grant of new options. Options
on a total of 425,000 shares of Common Stock, granted at
option prices ranging from $3.00 to $6.00 per share, will
expire at various dates up to March 25, 2008.
The closing price of the Common Stock of the Company on
March 31, 1998 on the Nasdaq SmallCap Market was $3.125.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
AMENDMENT TO THE INCENTIVE STOCK PLAN INCREASING FROM
450,000 TO 700,000 THE TOTAL NUMBER OF SHARES OF COMMON
STOCK RESERVED FOR ISSUANCE IN CONNECTION WITH AWARDS MADE
UNDER THE PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE
ENCLOSED PROXY.
OTHER MATTERS
Voting Procedures
The votes of stockholders present in person or
represented by proxy at the Meeting will be tabulated by an
inspector of elections appointed by the Company. The six
nominees for directors of the Company who receive the
greatest number of votes cast by stockholders present in
person or represented by proxy at the Meeting and entitled
to vote will be elected directors of the Company. The
affirmative vote by the holders of at least a majority of
the shares of Common Stock represented and entitled to vote
at the Meeting will be necessary to approve the amendment to
the Incentive Stock Plan. Abstentions and broker non-votes
will be counted as present in determining whether the quorum
requirement is satisfied, and will have the same effect as a
vote against Proposal No. 2.
Independent Auditors
Arthur Andersen LLP audited the Company's consolidated
financial statements for the year ended December 31, 1997.
A representative of Arthur Andersen LLP will be at the
Meeting and will be available to respond to appropriate
questions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Company's directors, executive officers and persons who
beneficially own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the
Commission and the Nasdaq Stock Market. Directors,
executive officers and greater than 10% stockholders are
required to furnish the Company with copies of all Forms 3,
4 and 5 they file.
Based solely on the Company's review of the copies of
such Forms it has received and written representations from
certain reporting persons that they were not required to
file Forms 5, the Company believes that each person who was
a director, executive officer or greater than 10% beneficial
owner of any class of its equity securities at any time
between the IPO on October 1, 1997 and December 31, 1997
complied with all Section 16(a) filing requirements
applicable to them, except: (a) Drs. Bellavia, Glovsky and
Grove, Messrs. Clarke, Elliott, Mulherin and Schulhof,
OMEGA, LLC and Mayflower all filed late Forms 3; (b) Dr.
Bellavia filed a Form 5 in February 1998 reporting a
purchase transaction that should have been reported on a
Form 4 filed in November 1997; and (c) the Company has not
received either a Form 5 or a representation that no Form 5
is required from Mayflower relating to the year ended
December 31, 1997.
Other Proposed Action
The Board of Directors knows of no matters which may
come before the Meeting other than the election of directors
and the proposed amendments to the Incentive Stock Plan set
forth in Proposal No. 2 above. If any other matters should
properly be presented to the Meeting, however, the persons
named as proxies shall have discretionary authority to vote
the shares represented by the accompanying proxy in
accordance with their own judgment.
Stockholder Proposals
Proposals which stockholders intend to present at the
Company's 1999 Annual Meeting of Stockholders and wish to
have included in the Company's proxy materials must be
received by the Company no later than December 24, 1998.
Annual Report on Form 10-KSB
Copies of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997 as filed with the
Securities and Exchange Commission are available to
stockholders without charge upon request addressed to Edward
M. Mulherin, Chief Financial Officer, Omega Orthodontics,
Inc., 63 Chatham Street, Boston, Massachusetts 02109.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
THEREFORE, STOCKHOLDERS ARE URGED TO FILL IN, SIGN AND
RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED
ENVELOPE.
<PAGE>
Appendix I
OMEGA ORTHODONTICS, INC.
AMENDMENT NO. 2
TO
OMEGA ORTHODONTICS, INC. INCENTIVE STOCK PLAN
Omega Orthodontics, Inc., a Delaware corporation (the
"Corporation"), hereby adopts the following Amendment No. 2,
effective as of the later of approval by the stockholders
of the Corporation or October 1, 1998 (or such earlier date
as may be consented to by National Securities Corporation
pursuant to that certain Underwriting Agreement dated
October 1, 1997 between the Corporation and National
Securities Corporation), to the Omega Orthodontics, Inc.
Incentive Stock Plan (the "Plan"):
Part I. Section 3 of the Plan is hereby amended by
deleting the first sentence thereof and substituting the
following new first sentence:
"Subject to the provisions of Paragraph 2 of Part
VIII of the Plan, the Stock which may be issued or
transferred pursuant to Stock Options and Stock Awards
granted under the Plan and the Stock which is subject to
outstanding but unexercised Stock Options under the Plan
shall not exceed 700,000 shares in the aggregate."
OMEGA ORTHODONTICS, INC.
By: /s/ Robert J. Schulhof
---------------------------
Robert J. Schulhof
President and Chief
Executive Officer
<PAGE>
OMEGA ORTHODONTICS, INC.
3621 Silver Spur Lane, Acton, California 93510
The undersigned hereby appoints C. Joel Glovsky and Edward
M. Mulherin, and each of them acting singly, with full power
of substitution, attorneys and proxies to represent the
undersigned at the Annual Meeting of Stockholders of Omega
Orthodontics, Inc. to be held on June 10, 1998 and at
any adjournments thereof with all power which the undersigned
would possess if personally present, and to vote all shares
of stock which the undersigned may be entitled to vote at
said meeting upon the matters set forth in the Notice of
Annual Meeting in accordance with the following instructions
and with discretionary authority on such other matters as
may come before the Annual Meeting or any adjournment
thereof. All previous proxies are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
IT WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED AND, IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES AS DIRECTORS AND FOR PROPOSAL NO. 2.
(1) Election of Directors:
Nominees: Robert J. Schulhof, Dean C. Bellavia, John J.
Clarke, Jr., Floyd V. Elliott,
C. Joel Glovsky and David T. Grove
/_/ FOR all nominees /_/ WITHHELD from all nominees
/_/ FOR, except vote withheld from the following nominee(s):
(Instructions: to withhold authority to vote for any
individual nominee, write the nominee's name in the space
provided above.)
(2) Proposed amendment to the Omega Orthodontics Incentive
Stock Plan, to increase from 450,000 to 700,000 the
total number of shares of the Company's Common Stock
reserved for issuance thereunder.
/_/ FOR /_/ AGAINST /_/ ABSTAIN
/_/ Check here for address change and note change below
/_/ Check here if you plan to attend the meeting.
New Address:_____________________________________________________________
(Please complete, date, sign and mail in the enclosed envelope)
(Signature should be the same
as the name printed on your stock
certificate. Executors,
administrators, trustees,
guardians, attorneys and
officers of the corporation should
add their titles when signing.)
Signature:_________________________
Date:______________________, 1998
Signature:_________________________
Date:______________________, 1998
