SCHEDULE 14A
(RULE 14-A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] 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 14-a-6(e)(2))
DENTAL CARE ALLIANCE, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the 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 (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:
[ ] 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>
DENTAL CARE ALLIANCE, INC.
1343 MAIN STREET
7TH FLOOR
SARASOTA, FLORIDA 34236
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1998
To the Stockholders of
Dental Care Alliance, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Dental Care Alliance, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on Wednesday, May 27, 1998,
at the Hyatt-Sarasota, 1000 Boulevard of the Arts, Sarasota, Florida, for the
following purposes:
(1) To elect two Class I Directors to hold office until the Company's 2001
Annual Meeting of Stockholders or until their successors are duly
elected and qualified;
(2) To consider and vote upon a proposal to approve and ratify the
Company's 1997 Executive Incentive Compensation Plan, as set forth in
Appendix A hereto; and
(3) To transact such other business as may properly come before the Annual
Meeting and any and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 17, 1998
as the record date for determining those stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present at the Annual Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed pre-addressed envelope. No postage is required if mailed in the United
States.
By Order of the Board of Directors
DR. STEVEN R. MATZKIN
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Sarasota, Florida
April 29, 1998
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
DENTAL CARE ALLIANCE, INC.
1343 MAIN STREET
7TH FLOOR
SARASOTA, FLORIDA 34236
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Dental Care Alliance, Inc., a Delaware corporation
(the "Company"), of proxies from the holders of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), for use at the Company's 1998 Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m., local
time, on Wednesday May 27, 1998, at the Hyatt-Sarasota, 1000 Boulevard of the
Arts, Sarasota, Florida, or at any adjournments or postponements thereof,
pursuant to the foregoing Notice of Annual Meeting of Stockholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is April 29, 1998. Stockholders
should review the information provided herein in conjunction with the Company's
1997 Annual Report which accompanies this Proxy Statement. The Company's
principal executive offices are located at 1343 Main Street, 7th floor,
Sarasota, Florida 34236 and its telephone number is (941) 955-3150.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's principal executive offices a written revocation or
duly executed proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the Company at
or prior to the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and vote
upon the following matters:
(1) The election of two Class I Directors to hold office until the
Company's 2001 Annual Meeting of Stockholders or until their successors
are duly elected and qualified;
(2) A proposal to approve and ratify the Company's 1997 Executive Incentive
Compensation Plan (the "Incentive Plan"); and
(3) To transact such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
<PAGE>
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the two nominees for director named below
and (b) FOR the proposal to approve and ratify the Incentive Plan. In the event
a stockholder specifies a different choice by means of the enclosed proxy, such
stockholder's shares will be voted in accordance with the specification so
made. The Board does not know of any other matters that may be brought before
the Annual Meeting nor does it foresee or have reason to believe that proxy
holders will have to vote for substitute or alternate nominees. In the event
that any other matter should come before the Annual Meeting or any nominee is
not available for election, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies not marked to the contrary with
respect to such matters in accordance with their best judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 17, 1998 as
the record date (the "Record Date") for determining stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting. As of the Record
Date, there were 6,977,700 shares of Common Stock issued and outstanding, all
of which are entitled to be voted at the Annual Meeting. Stockholders do not
have the right to cumulate their votes, and are entitled to one vote for each
share of Common Stock held.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The affirmative vote of a majority of the shares of
Common Stock present in person or by proxy at the Annual Meeting and entitled
to vote is required to approve the Incentive Plan. Any other matter that may be
submitted to a vote of the stockholders will be approved by the affirmative
vote of a majority of the shares of Common Stock present in person or by proxy
at the Annual Meeting and entitled to vote, unless such matter is one for which
a greater vote is required by law or by the Company's certificate of
incorporation or bylaws. If less than a majority of outstanding shares entitled
to vote are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time, or place if the new date, time,
or place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Pursuant to
Delaware law, abstentions and broker non-votes are counted as present for
purposes of determining the presence of a quorum. Abstentions are not counted
as votes cast "for" or "against" the election of any director. However,
abstentions are treated as present and entitled to vote and thus have the
effect of a vote against proposal 2. A broker non-vote on a matter is
considered not entitled to vote on that matter and thus is not counted in
determining whether a matter requiring approval of a majority of the shares
present and entitled to vote has been approved or whether a plurality of the
shares present and entitled to vote has been voted in favor of a proposal.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 1343 Main Street, 7th floor, Sarasota,
Florida 34236, for a period of ten (10) days prior to the Annual Meeting and at
the Annual Meeting itself for examination by any stockholder.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, the number of
shares of Common Stock of the Company which were owned beneficially by (i) each
person known by the Company to own beneficially more than 5% of its Common
Stock, (ii) the Chief Executive Officer and the other most highly paid
executive officers who were serving as such at the end of 1997 and whose
compensation exceeded $100,000 (collectively, the "Named Executive Officers"
See "Executive Compensation"), (iii) each director and nominee for director and
(iv) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) SHARES OWNED
- ------------------------------------------------- ------------------------- --------------
<S> <C> <C>
Dr. Steven R. Matzkin(3) ........................ 1,516,328 21.7%
SRM '93 Children's Trust ........................ 1,529,148 21.9
Curtis Lee Smith, Jr.(4) ........................ 451,973 6.5
Robert F. Raucci(5) ............................. 20,452 *
Mitchell B. Olan(6) ............................. 155,915 2.2
David P. Nichols(7) ............................. 49,576 *
Crescent International Holdings Limited ......... 593,119 8.5
All directors and executive officers as a
group (6 persons)(8) .......................... 2,194,244 31.3
<FN>
- ----------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified above is c/o Dental Care Alliance, Inc., 1343 Main Street, 7th
floor, Sarasota, Florida 34236.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and that are exercisable within 60 days
have been exercised. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Includes 3,000 shares of Common Stock issuable upon exercise of options to
purchase shares of Common Stock under the Incentive Plan, which options
will be exercisable within 60 days. Does not include options to purchase
5,000 shares of Common Stock, which options are not presently exercisable
under the Incentive Plan.
(4) Does not include options to purchase 5,000 shares of Common Stock, which
options are not presently exercisable under the Incentive Plan.
(5) Does not include options to purchase 5,000 shares of Common Stock, which
options are not presently exercisable under the Incentive Plan.
(6) Includes 3,000 shares of Common Stock issuable upon exercise of options to
purchase shares of Common Stock under the Incentive Plan, which options
will be exercisable within 60 days. Does not include options to purchase
5,000 shares of Common Stock, which options are not presently exercisable
under the Incentive Plan.
(7) Includes 49,576 shares of Common Stock issuable upon exercise of options to
purchase shares of Common Stock, which options are currently exercisable.
Does not include options to purchase 8,000 shares of Common Stock, which
options are not presently exercisable under the Incentive Plan.
(8) Includes 55,576 shares of Common Stock issuable upon exercise of options to
purchase shares of Common Stock under the Incentive Plan, which options
are currently exercisable or will be exercisable within 60 days. Does not
include options to purchase 28,000 shares of Common Stock, which options
are not presently exercisable under the Incentive Plan.
</FN>
</TABLE>
ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the Company's
Board of Directors is divided into three classes, as nearly equal in number as
possible, designated Class I, Class II and Class III. At each annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting are elected for a three-year term. The current term of the Class
I Directors terminates on the date of the Company's Annual Meeting; the current
term of the Class II Directors terminates on the date of the Company's 1999
annual meeting of stockholders; and the current term of the Class III Directors
terminates on the date of the Company's 2000 annual meeting of stockholders.
Messrs. Mitchell B. Olan and Curtis Lee Smith currently serve as Class I
directors and will
3
<PAGE>
stand for re-election at the Annual Meeting. Mr. Robert Raucci currently serves
as a Class II director and Dr. Steven R. Matzkin currently serves as a Class
III director. If elected at the Annual Meeting, Messrs. Mitchell B. Olan and
Curtis Lee Smith will serve until the Company's 2001 annual meeting of
stockholders or until their successors are duly elected and qualified.
Messrs. Mitchell B. Olan and Curtis Lee Smith have consented to serve on
the Company's Board of Directors and the Board of Directors has no reason to
believe that the nominees will not serve if elected. However, if either or both
of them should become unavailable to serve as a director, and if the Board
shall have designated a substitute nominee or nominees, the persons named as
proxies will vote for such substitute nominee or nominees.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's executive officers and directors, their ages and positions
with the Company are as follows:
<TABLE>
<S> <C> <C>
Dr. Steven R. Matzkin ............. 39 Chairman of the Board, Chief Executive Officer
and President
Mr. Mitchell B. Olan .............. 39 Vice President, Chief Operating Officer
and Director
Mr. David P. Nichols .............. 40 Chief Financial Officer
Dr. Oscar L. Hausdorff ............ 62 Director of Development
Mr. Curtis Lee Smith, Jr. ......... 70 Director
Mr. Robert F. Raucci .............. 42 Director
</TABLE>
NOMINEES FOR CLASS I DIRECTOR
MITCHELL B. OLAN has served as the Company's Vice President, Chief
Operating Officer, and as a director since 1994. From 1991 to 1994, Mr. Olan
served in various capacities, including area Vice President and Regional Vice
President at Optioncare Incorporated, a publicly traded national franchiser of
home infusion therapy businesses. From 1980 to 1990, Mr. Olan served in various
capacities including sales, sales management, general management and
administration with the ORMCO Division of Sybron Corporation. ORMCO is the
leading manufacturer and marketer of dental orthodontic appliances, equipment
and supplies. Mr. Olan earned a BS degree in Business Administration in 1980
from Indiana University School of Business.
CURTIS LEE SMITH JR. has been a director of the Company since 1996.
Beginning in 1986, Mr. Smith served as Chairman of the Board and Chief
Executive Officer of Handex Corporation ("Handex"), an environmental consulting
and remediation company which became a public company in 1989. Handex acquired
New Horizons Computer Learning Centers, a software training company, in 1994.
Handex sold its environmental division in 1996 and now operates as New Horizons
Worldwide, of which Mr. Smith serves as Chairman of the Board and Chief
Executive Officer.
CONTINUING CLASS II DIRECTOR
ROBERT F RAUCCI has been a director of the Company since 1996. Mr. Raucci
has been a managing member of Newlight Management, LLC, a technology oriented
venture capital fund, since July 1997. Mr. Raucci also has served as president
of RAM Investment Corporation, a venture capital investment and advisory
company, since 1994. Between 1985 and 1994, Mr. Raucci served as a private
equity investment manager for Alliance Capital Management Corporation, a global
investment management company.
4
<PAGE>
CONTINUING CLASS III DIRECTOR
DR. STEVEN R. MATZKIN founded the Company's predecessors in 1992 and 1993
and serves full-time as the Company's Chairman of the Board, Chief Executive
Officer and President. Dr. Matzkin has over 13 years of experience in the
administration and management of dental practices. He practiced dentistry in
Michigan for six years, during which time he owned five dental practices and
managed over 25 dental practices through an affiliate management company. Dr.
Matzkin has also been featured as a guest speaker at regional Practice
Management conferences, including the national meeting for the National
Association of Dental Plans. Dr. Matzkin earned his BA degree in 1980 from the
Indiana School of Biology and his DDS degree in 1984 from Northwestern
University.
OTHER EXECUTIVE OFFICERS
DAVID P. NICHOLS has served as the Company's Chief Financial Officer since
February 1997. From October 1994 until February 1997, Mr. Nichols served as
Chief Financial Officer at Biodynamics International, a publicly traded company
in the biotechnology business. From May 1993 until October 1994, Mr. Nichols
served as Vice President-Finance of Biodynamics. He was also Managing Director,
United States Operations, of Biodynamics from March 1996 until February 1997.
From June 1992 until May 1993, Mr. Nichols served as Chief Financial Officer of
KiMed Corporation, a medical device company. Prior to joining the Company, Mr.
Nichols had over sixteen years experience in the health care field. He served
as Chief Financial Officer of the long term care division of Trizec
Corporation, Ltd., and was in public accounting with the audit divisions of
Price Waterhouse LLP and Deloitte & Touche LLP. Mr. Nichols earned his BS
Degree from the University of Florida in 1979 and a masters degree in
Accounting from the University of Florida in 1980. He is a Certified Public
Accountant and a Certified Management Accountant.
DR. OSCAR L. HAUSDORFF has served as the Company's Director of Development
since 1996. From 1988 to 1995, he served as President, Chief Operating Officer
and as a director of Princeton Dental Management Corporation, a publicly traded
dental practice management company. From 1977 to 1988, Dr. Hausdorff held
positions in sales, sales management, training, development and recruiting for
various firms in the stock brokerage business. From 1960 to 1977, Dr. Hausdorff
practiced General Dentistry and Orthodontics in New York. In addition, he was
an instructor in Post-Graduate orthodontics at New York University from 1960 to
1965. Dr. Hausdorff earned a DDS degree from New York University in 1958, and a
post graduate degree in Orthodontics from New York University in 1964.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board of Directors of the
Company held a total of four (4) meetings and took a number of actions by
unanimous written consent. During 1996, no director attended fewer than 75% of
the aggregate of (i) the number of meetings of the Board of Directors held
during the period he served on the Board, and (ii) the number of meetings of
committees of the Board of Directors held during the period he served on such
committees.
Messrs. Smith and Raucci are the current members of the Company's Audit
Committee, which committee held one (1) meeting during the year ended December
31, 1997. The duties and responsibilities of the Audit Committee include (i)
recommending to the Board of Directors the engagement of the Company's
independent certified public accountants, (ii) reviewing with such accountants
the plan and results of audits, (iii) determining the independence of such
accountants and (iv) having general responsibility for all audit related
matters.
Messrs. Smith and Raucci are also the current members of the Company's
Compensation Committee, which committee held one (1) meeting during the year
ended December 31, 1997. The
5
<PAGE>
Compensation Committee reviews and makes the recommendations with respect to
the compensation of the Company's executive officers and administers the
Company's compensation and benefit plans, including the grant of options or
other benefits under the Incentive Plan.
The Board does not have a standing nominating committee.
ADDITIONAL INFORMATION CONCERNING DIRECTORS
Each non-employee director of the Company is entitled to receive a
directors' fee of $350 per Board meeting and/or committee meeting. All
directors are reimbursed for expenses associated with travel to meetings of the
Company's Board of Directors or committees thereof. Directors who are also
employees of the Company do not receive additional compensation for their
services as directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of the Company's outstanding Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Such persons are required by
SEC regulation to furnish the Company with copies of all such reports they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
complied with.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the past fiscal year to the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------- ---------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)($) OPTIONS(#)(2) COMPENSATION($)
- ---------------------------- ------ ----------- ---------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Steven R. Matzkin 1997 200,000 -- -- 8,000 --
Chairman of the Board, 1996 200,000 -- -- -- --
Chief Executive Officer
and President(3)
Mitchell B. Olan 1997 135,000 -- -- 8,000 --
Vice President, Chief 1996 126,000 -- -- -- --
Operating Officer and
Director(3)
<FN>
- ----------------
(1) The aggregate amount of perquisites and other personal benefits provided to
such Named Executive Officer is less than 10% of the total annual salary
and bonus of such officer.
(2) All options are exercisable at $12.00 per share.
(3) See "Management-Employment Agreements" for information regarding current
and future compensation arrangements.
</FN>
</TABLE>
OPTION GRANTS
The following table sets forth certain information with respect to options
to purchase shares of Common Stock of the Company granted to the Named
Executive Officers during 1997 and represents
6
<PAGE>
all options granted by the Company to such executive officers during such
period. In accordance with rules promulgated by the Securities and Exchange
Commission, the table also describes the hypothetical gains that would exist
for the respective options based on assumed rates of annual compound stock
appreciation of 5% and 10% from the date of grant to the end of the option
term. These hypothetical gains are based on assumed rates of appreciation and,
therefore, the actual gains, if any, on stock option exercises are dependent on
the future performance of the Common Stock, overall stock market conditions,
and the executive officer's continued employment with the Company. As a result,
the amounts reflected in this table may not necessarily be achieved.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARs PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR(%) ($/SH) DATE 5%($) 10%($)
- ------------------------------- -------------- ---------------- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Dr. Steven R. Matzkin ......... 8,000(3) 11.1 12.00 11/2007 136,827 217,874
Mitchell B. Olan .............. 8,000(3) 11.1 12.00 11/2007 136,827 217,874
<FN>
- ----------------
(1) The Company has not granted any SARs. Does not include information relating
to options granted under the Company's 1997 Non-Qualified Stock Option
Plan, which options are not granted to employees of the Company.
(2) Potential realizable value assumes that any shares acquired by the exercise
of options are held until the end of the 10-year term.
(3) Options were granted pursuant to the Incentive Plan in November 1997. All
such options are for a term of ten years and vest 3,000 in May 1998 and
the remaining 5,000 in one-third increments over the next three years. See
"Proposal to Approve and Ratify the Company's 1997 Executive Incentive
Compensation Plan" below for additional information on the terms of these
options.
</FN>
</TABLE>
OPTION EXERCISES. The following table sets forth stock option exercises
during 1997 by the Named Executive Officers, including the value realized upon
exercise. In addition, this table describes the number of unexercised options
and the value of unexercised in-the-money options at the end of the 1997 fiscal
year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1997 OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SARs AT
DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(2)
------------------------ ------------------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- ------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Dr. Steven R. Matzkin ......... 0 0 0 / 8,000 $0 / $0
Mitchell B. Olan .............. 163,080 272,768 0 / 8,000 $0 / $0
<FN>
- ----------------
(1) The Company has not granted any SARs. Does not include information relating
to options granted under the Company's 1997 Non-Qualified Stock Option
Plan, which options are not granted to employees of the Company. See
"Proposal to Approve and Ratify the Company's 1997 Executive Incentive
Compensation Plan" below for additional information on the terms of
options granted under the Incentive Plan.
(2) At the Record Date, the closing market price of a share of Common Stock was
$13.25 and the value of unexercised in-the-money options was $10,000 for
the options held by Messrs. Matzkin and Olan.
(3) Such shares were issued pursuant to warrants to purchase 81,540 shares of
Common Stock granted to Mr. Olan in January 1994 and warrants to purchase
81,540 shares of Common Stock granted to Mr. Olan in October 1996.
</FN>
</TABLE>
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements with Dr. Steven R.
Matzkin, Chairman of the Board, Chief Executive Officer and President of the
Company, Mitchell B. Olan, Vice President and Chief Operating Officer of the
Company, and David P. Nichols, Chief Financial Officer of the Company. The
Employment Agreements of Messrs. Matzkin and Olan were entered into as of
October 25, 1996, and are for terms of five years and four years, respectively.
The Employment Agreement of Mr. Nichols was entered into as of January 1997 and
is for a term of four years. These agreements provide for annual base salaries
to Messrs. Matzkin, Olan and Nichols of $200,000, $120,000 and $120,000,
respectively, subject to increase at the Company's discretion. Pursuant to the
agreements, Dr. Matzkin and Messrs. Olan and Nichols are entitled to receive
60%, 25% and 15%, respectively, of an annual bonus pool which is equal to 50%
of the Company's net income in excess of the Company's budgeted net income for
each year. Bonuses paid to Dr. Matzkin, Mr. Olan and Mr. Nichols in any year
may not exceed $200,000, $100,000, and $50,000, respectively. Dr. Matzkin's,
Mr. Olan's and Mr. Nichols' employment agreements entitle them to participate
in any Company stock option plan at a level commensurate with their positions.
Mr. Olan's employment agreement entitled him to warrants to purchase 163,080
shares of common stock for an aggregate exercise price of $272,768. These
warrants were exercised in February 1997. Upon the Company's constructive
discharge of Dr. Matzkin or termination of the employment of Dr. Matzkin
without cause, as specified in his employment agreement, Dr. Matzkin shall be
entitled to receive his base salary for the period commencing on the effective
date of the termination and ending on the later to occur of (x) the second
anniversary of the date of termination or (y) the end of the five-year term of
the employment agreement. Upon the Company's termination of Mr. Olan without
cause, as specified in his employment agreement, Mr. Olan shall be entitled to
receive his base salary for the period commencing on the date of termination
and ending on the date nine months thereafter. Upon the Company's termination
of Mr. Nichols without cause as specified in his employment agreement, Mr.
Nichols shall be entitled to receive his base salary for the period commencing
on the date of termination and ending on the date six months thereafter. Upon
termination with cause or voluntary termination of either Dr. Matzkin, Mr. Olan
or Mr. Nichols, such executive shall be entitled to receive his base salary
through the effective date of such termination.
Dr. Matzkin's employment agreement also provides that upon termination of
his employment for any reason, if the Company's securities are then publicly
traded, Dr. Matzkin has the right to request that the Company register, as
expeditiously as possible, any or all of the Common Stock then owned by Dr.
Matzkin, including all shares of Common Stock issuable pursuant to any
derivative securities of the Company then held by Dr. Matzkin.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Steven R. Matzkin, the Chairman of the Board, Chief Executive Officer
and President of the Company participated in deliberations of the Company's
Board of Directors concerning executive compensation during 1997.
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COMPENSATION COMMITTEE REPORT
The Company established a Compensation Committee in late 1997 in
connection with its planned initial public offering. Prior to the establishment
of the Compensation Committee, all compensation decisions were made by the
Board of Directors. The Compensation Committee will be primarily responsible
for determining the compensation of the Company's executive officers, subject
to existing employment agreements, although the Company's Chief Executive
Officer and President makes recommendations to the Compensation Committee as to
the compensation of the Company's executive officers.
The Compensation Committee's general philosophy with respect to the
compensation of the Company's executive officers is to offer competitive
compensation programs designed to attract and retain qualified executives, to
motivate performance to achieve specific goals and to align the interests of
senior management with the long-term interests of the Company's stockholders.
In determining compensation, the Compensation Committee considers job
level, individual performance and Company performance. More specifically,
factors considered include the Chief Executive Officer and President's
recommendations, specific accomplishments of the executive officers, the
Company's historical and projected performance, sales, earnings, financial
condition and economic conditions. Determination of compensation is subjective.
The Company attempts to provide incentives to retain qualified executive
officers, but also believes that the compensation paid to its executives is
within the range of compensation paid to similarly situated executives at other
companies in similar industries or at companies having a similar market
capitalization. Given the level of the Company's executive officer
compensation, the Committee does not believe that it is necessary to incur the
expense of formal studies or market analyses.
Prior to its initial public offering, the Company had entered into
employment agreements with Dr. Steven R. Matzkin, Chairman of the Board, Chief
Executive Officer and President of the Company, Mitchell B. Olan, Vice
President and Chief Operating Officer of the Company, and David P. Nichols,
Chief Financial Officer of the Company. The employment agreements of Messrs.
Matzkin and Olan were entered into as of October 1996 and are for terms of five
years and four years, respectively. Mr. Nichols' agreement was entered into as
of January 1997 and is for a term of four years.
For those officers with employment agreements, salary is provided for in
the agreements, subject to increase in the Company's discretion. For 1997,
salaries were not increased based upon the recommendation of the Company's
Chief Executive Officer and President, as well as the Company's underwriters,
and taking into consideration the Company's revenue base at that time. The fact
that salaries were not increased was not a reflection on the performance of the
executive officers. The matters considered were subjective and not subject to
specific criteria. Based on its experience with companies generally and in the
Company's industry, and without utilizing any formal market studies, the
Committee believes that the salaries paid by the Company to its executive
officers are within the range paid to other executive officers in the Company's
industry.
In 1997, the executive officers' employment agreements were amended.
Pursuant to these amendments, Company performance is the key to determining
bonus payments. Dr. Matzkin, Mr. Olan and Mr. Nichols are entitled to receive
60%, 25% and 15%, respectively, of an annual bonus pool which is equal to 50%
of the Company's net income in excess of the Company's budgeted net income for
each year. Bonuses paid to Dr. Matzkin, Mr. Olan and Mr. Nichols in any year
may not exceed $200,000, $100,000, and $50,000, respectively. Any bonuses to
which the executive officers are entitled for 1997 are to be determined under
the employment agreements.
The Company also attempts to provide incentives to its executive officers
to become employed by and remain with the Company and to improve performance
through the grant of stock options. Options allow executive officers to share,
to some extent, in shareholders' return on equity. Typically, Company options
vest in staggered amounts over a long-term, such as a given percentage every
six months to a
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year during the initial term of the option. The determination of how many
options were granted to executive officers in 1997 depended, to varying
degrees, on what was necessary to retain the executive officer's services, the
number of outstanding options or shares held by the executive officer, his job
level and performance and Company performance.
A significant number of options were granted to procure the services of
one executive officer. Given that the executive officers already had a
significant interest in the Company, a moderate number of options were granted
to the executive officers under the Incentive Plan. Existing ownership will
probably be less of a criterion for the grant of options in the future.
As a result of the foregoing factors and primarily the Chief Executive
Officer's own recommendation, the President and Chief Executive Officer's
salary was not increased in 1997. In addition, he has as of yet received no
bonus. Options were granted consistent with those granted to other executive
officers. The final determination was subjective.
In December 1993, the Internal Revenue Service issued proposed regulations
concerning compliance with Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) generally disallows a public company's
deduction for compensation to any one of certain employees (primarily executive
officers) in excess of $1.0 million per year unless the compensation is
pursuant to a plan or performance goals approved by the public company's
shareholders. None of the Named Executive Officers presently receives, and the
Compensation Committee does not anticipate that such persons will receive,
annual cash compensation in excess of the $1.0 million cap provided in Section
162(m). The Compensation Committee intends to take any necessary steps to
ensure compliance with Section 162(m) of the Code.
ROBERT F. RAUCCI
CURTIS LEE SMITH, JR.
DR. STEVEN R. MATZKIN
MITCHELL B. OLAN
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CERTAIN TRANSACTIONS
In 1993, Dr. Matzkin sold four dental practices in Michigan to Dr. David
Ross Johnson, a Dental Director, for a $237,000 note under which payments
commenced in May 1997. In connection with that sale Profit Dental Management,
Inc. ("Profit"), a corporation controlled by Dr. Matzkin, agreed to provide
consulting services to these practices for $18,000 per month until May 1997 and
$15,000 per month thereafter through May 2005. In July 1997, the Company
purchased the right to manage these practices for $846,000 and entered into a
global management agreement pursuant to which it will provide management
services to these practices until 2005. The Company subcontracted the
day-to-day management services to an affiliate of Dr. Johnson, but retains most
other management functions for which it retains 20% of net profits of these
practices, after certain adjustments, and Dr. Johnson's affiliate is paid 80%
of such net profits. The Company also receives $800 per month from each
practice as a licensing fee.
In July 1997, the Company entered into a Management Agreement with a PA in
Michigan which was controlled by Dr. Steven Matzkin, the Company's President,
Chief Executive Officer and Chairman of the Board. As of September 30, 1997,
Dr. Matzkin assigned the ownership of the capital stock and all rights relating
thereto to Dr. David Ross Johnson in consideration for Dr. Johnson's assumption
of all obligations to pay for such capital stock and all obligations relating
to such capital stock.
Certain of the Dental Centers managed by the Company ("Managed Dental
Centers") lease their office facilities from entities controlled by Dr.
Matzkin. Such leases terminate at various times between 2000 and 2004. Managed
Dental Centers and the Company paid rent pursuant to the leases in the
aggregate amount of $193,900 in 1997. Dr. Matzkin also owns certain dental
laboratories that perform laboratory services for the Managed Dental Centers,
primarily relating to the making of prostheses. In 1997 the amount paid by the
Managed Dental Centers to such laboratories was $133,448 of which $60,000 was
advanced by the Company in 1996 and remains outstanding at December 31, 1997.
Dr. Matzkin owns 33.3% of the capital stock of Equipment Management Services,
an equipment leasing company ("EMS"). Certain Managed Dental Centers have
entered into capitalized equipment leases with EMS. Amounts paid by such
Managed Dental Centers to EMS pursuant to such leases aggregated approximately
$123,000 in 1997. The Company believes that such arrangements are no less
favorable to such Managed Dental Centers than could have been obtained in
arms-length transactions with unrelated third parties. In addition, Dr. Matzkin
has personally guaranteed an aggregate of approximately $3.3 million of
indebtedness of certain of the Managed Dental Centers. The Company is currently
negotiating with the lenders to whom Dr. Matzkin has given such guarantees to
release Dr. Matzkin from his obligations thereunder and to cause the Company to
guaranty such obligations.
Pursuant to a Stockholders' Agreement (the "Stockholders' Agreement")
among the Company and Dr. Matzkin, Mr. Smith, Mr. Raucci, the SRM 1993
Children's Trust and Crescent International Holdings, Inc. (collectively, the
"Stockholders") initially entered into in connection with the sale of the
Company's Series A Preferred Stock in October 1996, each stockholder received
(i) "piggyback" registration rights, (ii) a right of first refusal with respect
to a greater than 50% share transfer by a stockholder prior to a Qualified
Initial Public Offering (as defined in the Stockholders' Agreement), (iii)
co-sale rights to participate on a pro rata basis in certain resales of Common
Stock by other Stockholders (other than in connection with a Qualified Initial
Public Offering) and (iv) participation rights with respect to certain
issuances of securities by the Company made prior to a Qualified Initial Public
Offering. In addition, stockholders who are also directors of the Company,
other than Dr. Matzkin, also were granted demand registration rights under the
Stockholders' Agreement. Mitchell B. Olan has been granted certain "piggyback"
registration rights with respect to an aggregate of 163,080 shares of Common
Stock pursuant to an agreement with the Company. Pursuant to Dr. Matzkin's
employment agreement, upon termination of his employment for any reason, if the
Company's securities are then publicly traded, Dr. Matzkin has the right to
request that the Company register any or all of the Common Stock then owned by
Dr. Matzkin.
For information regarding employment agreements with certain executive
officers and directors, see "Management-Employment Agreements."
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The Company has adopted a policy whereby all transactions between the
Company and one or more of its affiliates must be approved in advance by a
majority of the Company disinterested directors.
PROPOSAL TO APPROVE AND RATIFY THE COMPANY'S
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
BACKGROUND AND PURPOSE. In September 1997, the Board of Directors and
stockholders adopted, effective upon the consummation of the Company's initial
public offering (the "Effective Date"), the 1997 Executive Incentive
Compensation Plan (the "Incentive Plan") and recommended that it be submitted
to the Company's stockholders for their approval after the offering and at the
Annual Meeting. The terms of the Incentive Plan provide for grants of stock
options, stock appreciation rights ("SARs"), restricted stock, deferred stock,
other stock-related awards and performance or annual incentive awards that may
be settled in cash, stock or other property (collectively, "Awards"). The
purpose of the Incentive Plan is to advance the interests of the Company by
providing additional incentives for attracting, motivating, retaining and
rewarding key officers, directors, employees and independent contractors
(collectively, the "Participants") by enabling the Participants to acquire or
increase an ownership interest in the Company in order to strengthen the
mutuality of interests between Participants and the Company's stockholders, and
providing Participants with annual and long term performance incentives to
expend their maximum efforts in the creation of stockholder value. The
Company's Compensation Committee, or in the absence thereof the Board of
Directors (the "Committee"), will administer and interpret the Incentive Plan
and is authorized to grant Awards thereunder to all eligible Participants.
The following is a summary of certain principal features of the Incentive
Plan. This summary is qualified in its entirety by reference to the complete
text of the Incentive Plan, which is attached to this Proxy Statement as
Appendix A. Stockholders are urged to read the actual text of the Incentive
Plan in its entirety.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
Incentive Plan, the total number of shares of Common Stock that may be subject
to the granting of Awards under the Incentive Plan at any time during the term
shall be equal to 250,000 shares, plus the number of shares with respect to
which Awards previously granted under the Incentive Plan that terminate without
being exercised, and the number of shares that are surrendered in payment of
any Awards or any tax withholding requirements.
The Incentive Plan limits the number of shares which may be issued
pursuant to incentive stock options to 250,000 shares.
In addition, the Incentive Plan imposes individual limitations on the
amount of certain Awards in part to comply with Code Section 162(m). Under
these limitations, during any fiscal year the number of options, SARs,
restricted shares of Common Stock, deferred shares of Common Stock, shares as a
bonus or in lieu of other Company obligations, and other stock-based Awards
granted to any one Participant may not exceed 150,000 for each type of such
Award, subject to adjustment in certain circumstances. The maximum amount that
may be paid out as an annual incentive Award or other cash Award in any fiscal
year to any one Participant is $2,000,000, and the maximum amount that may be
earned as a performance Award or other cash Award in respect of a performance
period by any one Participant is $5,000,000.
The Committee is authorized to adjust the limitations described in the two
preceding paragraphs and is authorized to adjust outstanding Awards (including
adjustments to exercise prices of options and other affected terms of Awards in
the event that a dividend or other distribution (whether in cash, shares of
Common Stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange or other similar corporate transaction or event affects the Common
Stock so that an adjustment is appropriate in order to prevent
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dilution or enlargement of the rights of participants. The Committee is also
authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
ADMINISTRATION. The Incentive Plan is to be administered by a committee
designated by the Board of Directors consisting of at least two directors, each
of whom must shall be a "non-employee director" as defined under Rule 16b-3
under the Exchange Act and an "outside director" for purposes of Section 162(m)
of the Code. The Compensation Committee of the Board of Directors has been
appointed as the committee for the Incentive Plan, or in the absence thereof,
the Board of Directors. Subject to the terms of the Incentive Plan, the
Committee is authorized to select eligible persons to receive Awards, determine
the type and number of Awards to be granted and the number of shares of Common
Stock to which Awards will relate, specify times at which Awards will be
exercisable or settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions of Awards,
prescribe forms of Award agreements, interpret and specify rules and
regulations relating to the Incentive Plan, and make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Incentive Plan.
ELIGIBILITY. The persons eligible to receive Awards under the Incentive
Plan are the officers, directors, employees and independent contractors of the
Company and any subsidiary. An employee on leave of absence may be considered
as still in the employ of the Company or a subsidiary for purposes of
eligibility for participation in the Incentive Plan. As of March 31, 1998,
approximately 350 persons were eligible to participate in the Incentive Plan.
STOCK OPTIONS AND SARs. The Committee is authorized to grant stock
options, including both incentive stock options ("ISOs"), which can result in
potentially favorable tax treatment to the Participant, and non-qualified stock
options, and SARs entitling the Participant to receive the amount by which the
fair market value of a share of Common Stock on the date of exercise (or
defined "change in control price" following a change in control) exceeds the
grant price of the SAR. The exercise price per share subject to an option and
the grant price of an SAR are determined by the Committee, but must not be less
than the fair market value of a share of Common Stock on the date of grant. For
purposes of the Incentive Plan, the term "fair market value" means the fair
market value of Common Stock, Awards or other property as determined by the
Committee or under procedures established by the Committee. Unless otherwise
determined by the Committee, the fair market value of Common Stock as of any
given date shall be the closing sales price per share of Common Stock as
reported on the principal stock exchange or market on which Common Stock is
traded on the date as of which such value is being determined or, if there is
no sale on that date, then on the last previous day on which a sale was
reported. The maximum term of each option or SAR, the times at which each
option or SAR will be exercisable, and provisions requiring forfeiture of
unexercised options or SARs at or following termination of employment generally
are fixed by the Committee, except that no option or SAR may have a term
exceeding ten years. Options may be exercised by payment of the exercise price
in cash, shares, outstanding Awards or other property having a fair market
value equal to the exercise price, as the Committee may determine from time to
time. Methods of exercise and settlement and other terms of the SARs are
determined by the Committee. SARs granted under the Incentive Plan may include
"limited SARs" exercisable for a stated period of time following a change in
control of the Company, as discussed below.
RESTRICTED AND DEFERRED STOCK. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares of
Common Stock which may not be sold or disposed of, and which may be forfeited
in the event of certain terminations of employment, prior to the end of a
restricted period specified by the Committee. A Participant granted restricted
stock generally has all of the rights of a stockholder of the Company, unless
otherwise determined by the Committee. An Award of deferred stock confers upon
a Participant the right to receive shares of Common Stock at the end of a
specified deferral period, subject to possible forfeiture of the Award in the
event of certain terminations of employment prior to the end of a specified
restricted period. Prior to settlement, an Award of deferred stock carries no
voting or dividend rights or other rights associated with stock ownership,
although dividend equivalents may be granted, as discussed below.
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DIVIDEND EQUIVALENTS. The Committee is authorized to grant dividend
equivalents conferring on Participants the right to receive, currently or on a
deferred basis, cash, shares of Common Stock, other Awards or other property
equal in value to dividends paid on a specific number of shares of Common
Stock, or other periodic payments. Dividend equivalents may be granted alone or
in connection with another Award, may be paid currently or on a deferred basis
and, if deferred, may be deemed to have been reinvested in additional shares of
Common Stock, Awards or otherwise as specified by the Committee.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee is
authorized to grant shares of Common Stock as a bonus free of restrictions, or
to grant shares of Common Stock or other Awards in lieu of Company obligations
to pay cash under the Incentive Plan or other plans or compensatory
arrangements, subject to such terms as the Committee may specify.
OTHER STOCK-BASED AWARDS. The Committee is authorized to grant Awards
that are denominated or payable in, valued by reference to, or otherwise based
on or related to shares of Common Stock. Such Awards might include convertible
or exchangeable debt securities, other rights convertible or exchangeable into
shares of Common Stock, purchase rights for shares of Common Stock, Awards with
value and payment contingent upon performance of the Company or any other
factors designated by the Committee, and Awards valued by reference to the book
value of shares of Common Stock or the value of securities of or the
performance of specified subsidiaries or business units. The Committee
determines the terms and conditions of such Awards.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
Participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions (including
subjective individual goals) as may be specified by the Committee. In addition,
the Incentive Plan authorizes specific annual incentive Awards, which represent
a conditional right to receive cash, shares of Common Stock or other Awards
upon achievement of certain preestablished performance goals and subjective
individual goals during a specified fiscal year. Performance Awards and annual
incentive Awards granted to persons whom the Committee expects will, for the
year in which a deduction arises, be "covered employees" (as defined below)
will, if and to the extent intended by the Committee, be subject to provisions
that should qualify such Awards as "performance-based compensation" not subject
to the limitation on tax deductibility by the Company under Code Section
162(m). For purposes of Section 162(m), the term "covered employee" means the
Company's chief executive officer and each other person whose compensation is
required to be disclosed in the Company's filings with the SEC by reason of
that person being among the four highest compensated officers of the Company as
of the end of a taxable year. If and to the extent required under Section
162(m) of the Code, any power or authority relating to a performance Award or
annual incentive Award intended to qualify under Section 162(m) of the Code is
to be exercised by the Committee and not the Board.
Subject to the requirements of the Incentive Plan, the Committee will
determine performance Award and annual incentive Award terms, including the
required levels of performance with respect to specified business criteria, the
corresponding amounts payable upon achievement of such levels of performance,
termination and forfeiture provisions and the form of settlement. In granting
annual incentive or performance Awards, the Committee may establish unfunded
award "pools," the amounts of which will be based upon the achievement of a
performance goal or goals based on one or more of certain business criteria
described in the Incentive Plan (including, for example, total stockholder
return, net income, pretax earnings, EBITDA, earnings per share, growth in
earnings per share, and return on investment). During the first 90 days of a
fiscal year or performance period, the Committee will determine who will
potentially receive annual incentive or performance Awards for that fiscal year
or performance period, either out of the pool or otherwise.
After the end of each fiscal year or performance period, the Committee
will determine (i) the amount of any pools and the maximum amount of potential
annual incentive or performance Awards payable to each Participant in the pools
and (ii) the amount-of any other potential annual incentive or
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performance Awards payable to Participants in the Incentive Plan. The Committee
may, in its discretion, determine that the amount payable as a final annual
incentive or performance Award will be reduced from the amount of any potential
Award.
OTHER TERMS OF AWARDS. Awards may be settled in the form of cash, shares
of Common Stock, other Awards or other property, in the discretion of the
Committee. The Committee may require or permit Participants to defer the
settlement of all or part of an Award in accordance with such terms and
conditions as the Committee may establish, including payment or crediting of
interest or dividend equivalents on deferred amounts, and the crediting of
earnings, gains and losses based on deemed investment of deferred amounts in
specified investment vehicles. The Committee is authorized to place cash,
shares of Common Stock or other property in trusts or make other arrangements
to provide for payment of the Company's obligations under the Incentive Plan.
The Committee may condition any payment relating to an Award on the withholding
of taxes and may provide that a portion of any shares of Common Stock or other
property to be distributed will be withheld (or previously acquired shares of
Common Stock or other property be surrendered by the Participant) to satisfy
withholding and other tax obligations. Awards granted under the Incentive Plan
generally may not be pledged or otherwise encumbered and are not transferable
except by will or by the laws of descent and distribution, or to a designated
beneficiary upon the Participant's death, except that the Committee may, in its
discretion, permit transfers for estate planning or other purposes subject to
any applicable restrictions under Rule 16b-3.
Awards under the Incentive Plan are generally granted without a
requirement that the Participant pay consideration in the form of cash or
property for the grant (as distinguished from the exercise), except to the
extent required by law. The Committee may, however, grant Awards in exchange
for other Awards under the Incentive Plan, awards under other Company plans, or
other rights to payment from the Company, and may grant Awards in addition to
and in tandem with such other Awards, rights or other awards.
ACCELERATION OF VESTING; CHANGE IN CONTROL. The Committee may, in its
discretion, accelerate the exercisability, the lapsing of restrictions or the
expiration of deferral or vesting periods of any Award, and such accelerated
exercisability, lapse, expiration and vesting shall occur automatically in the
case of a "change in control" of the Company, as defined in the Incentive Plan
(including the cash settlement of SARs and "limited SARs" which may be
exercisable in the event of a change in control). In addition, the Committee
may provide in an Award agreement that the performance goals relating to any
performance-based Award will be deemed to have been met upon the occurrence of
any "change in control." Upon the occurrence of a change in control, if so
provided in the Award Agreement, stock options and limited SARs (and other SARs
which so provide) may be cashed out based on a defined "change in control
price," which will be the higher of (i) the cash and fair market value of
property that is the highest price per share paid (including extraordinary
dividends) in any reorganization, merger, consolidation, liquidation,
dissolution or sale of substantially all assets of the Company, or (ii) the
highest fair market value per share (generally based on market prices) at any
time during the 60 days before and 60 days after a change in control. For
purposes of the Incentive Plan, the term "change in control" generally means
(a) approval by stockholders of any reorganization, merger or consolidation or
other transaction or series of transactions if persons who were stockholders
immediately prior to such reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50% of the combined
voting power of the reorganized, merged or consolidated company's then
outstanding voting securities, or a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the Company (unless
the reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned), or (b) a change in
the composition of the Board such that the persons constituting the current
Board, and subsequent directors approved by the current Board (or approved by
such subsequent directors), cease to constitute at least a majority of the
Board.
AMENDMENT AND TERMINATION. The Board of Directors may amend, alter,
suspend, discontinue or terminate the Incentive Plan or the Committee's
authority to grant Awards without further stockholder
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approval, except stockholder approval must be obtained for any amendment or
alteration that is material or if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on
which shares of Common Stock are then listed or quoted. Thus, stockholder
approval may not necessarily be required for every amendment to the Incentive
Plan which might increase the cost of the Incentive Plan or alter the
eligibility of persons to receive Awards. Stockholder approval will not be
deemed to be required under laws or regulations, such as those relating to
ISOs, that condition favorable treatment of Participants on such approval,
although the Board may, in its discretion, seek stockholder approval in any
circumstance in which it deems such approval advisable. Unless earlier
terminated by the Board, the Incentive Plan will terminate at such time as no
shares of Common Stock remain available for issuance under the Incentive Plan
and the Company has no further rights or obligations with respect to
outstanding Awards under the Incentive Plan.
SECURITIES ACT REGISTRATION. The Company intends to register the shares
of Common Stock available for Awards under the Incentive Plan pursuant to a
Registration Statement on Form S-8 filed with the SEC.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS. The following is a
brief description of the federal income tax consequences generally arising with
respect to Awards of options under the Incentive Plan.
The grant of an option will create no tax consequences for the Participant
or the Company. A Participant will not have taxable income upon exercising an
ISO (except that the alternative minimum tax may apply). Upon exercising an
option other than an ISO, the Participant must generally recognize ordinary
income equal to the difference between the exercise price and the fair market
value of the freely transferable and non-forfeitable shares of Common Stock
acquired on the date of exercise.
Upon a disposition of shares of Common Stock acquired upon exercise of an
ISO before the end of the applicable ISO holding periods, the Participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares of Common Stock at the date of exercise of the ISO minus
the exercise price, or (ii) the amount realized upon the disposition of the ISO
shares of Common Stock minus the exercise price. Otherwise, a Participant's
disposition of shares of Common Stock acquired upon the exercise of an option
(including an ISO for which the ISO holding periods are met) generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the Participant's tax basis in such
shares of Common Stock (the tax basis generally being the exercise price plus
any amount previously recognized as ordinary income in connection with the
exercise of the option).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the Participant in connection with an
option. The Company generally is not entitled to a tax deduction relating to
amounts that represent a capital gain to a Participant. Accordingly, the
Company will not be entitled to any tax deduction with respect to an ISO if the
Participant holds the shares of Common Stock for the ISO holding periods prior
to disposition of the shares.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, the Company intends that options and certain other Awards
granted to employees whom the Committee expects to be covered employees at the
time a deduction arises in connection with such Awards, qualify as such
"performance-based compensation," so that such Awards will not be subject to
the Section 162(m) deductibility cap of $1 million. Future changes in Section
162(m) or the regulations thereunder may adversely affect the ability of the
Company to ensure that options or other Awards under the Incentive Plan will
qualify as "performance-based compensation" that is fully deductible by the
Company under Section 162(m).
The foregoing discussion, which is general in nature and is not intended
to be a complete description of the federal income tax consequences of the
Incentive Plan, is intended for the
16
<PAGE>
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to Participants in the Incentive Plan. This discussion does
not address the effects of other federal taxes or taxes imposed under state,
local or foreign tax laws. Participants in the Incentive Plan should consult a
tax adviser as to the tax consequences of participation.
PRIOR GRANTS OF OPTIONS
As of the Record Date, options to purchase an aggregate of 102,500 shares
of Common Stock had been granted under the Incentive Plan to forty-two (42)
employees and the two (2) non-employee directors of the Company. Each of the
options granted under the Incentive Plan have a term of ten (10) years and
either become exercisable at the rate of one-third per year commencing on the
first anniversary of the date of grant or 37.5% after six (6) months and
one-third of the remainder per year commencing on the first anniversary of the
first exercise date.
The following table indicates, as of December 31, 1997, certain
information regarding options which have been granted under the Incentive Plan
to the persons and groups indicated:
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT EXERCISE PRICE VALUE OF OPTIONS AT
NAME AND POSITION TO OPTIONS PER SHARE DECEMBER 31, 1997(1)(2)
- ------------------------------------------ ---------------- ---------------- ------------------------
<S> <C> <C> <C>
Dr. Steven R. Matzkin .................... 8,000 $ 12.00 $0
Mitchell B. Olan ......................... 8,000 12.00 0
All current executive officers as a
group (4 persons) ...................... 27,000 12.00 0
All current directors who are not
executive officers (2 persons) ......... 10,000 12.00 0
All employees, other than executive
officers (38 persons)(3) ............... 34,500 12.00 0
<FN>
- ----------------
(1) Represents options granted in 1997 under the Incentive Plan. For purposes
of this table, the value of each option was deemed to be the amount, if
any, by which the closing market price of a share of Common Stock on
December 31, 1997 ($10.50) exceeds the option's exercise price. The value
is determined without regard to whether the option is currently
exercisable or not. All options are nonqualified options, all with an
exercise price of $12.00 per share (the market price on the date of
grant), either become exercisable at the rate of one-third per year
commencing on the first anniversary of the date of grant or 37.5% after
six (6) months and one-third of the remainder per year commencing on the
first anniversary of the first exercise date, and have a term of 10 years.
(2) At the Record Date, the value of options held by (i) each of Dr. Steven R.
Matzkin and Mr. Olan was $10,000, (ii) all current executive officers as a
group was $33,750, (iii) all current directors who are not executive
officers was $12,500 and (iv) all employees, other than executive
officers, was $105,125.
(3) At the Record Date, all employees, other than executive officers held
options to purchase 65,500 shares of Common Stock at exercise prices
ranging from $10.25-$12.00 per share.
</FN>
</TABLE>
The Company believes that Awards granted under the Incentive Plan will be
granted primarily to those persons who possess a capacity to contribute
significantly to the successful performance of the Company. Because persons to
whom Awards may be made are to be determined from time to time by the Committee
in its discretion, it is impossible at this time to indicate the precise
number, names or positions of persons who will hereafter receive Awards or the
nature and terms of such Awards.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE PROPOSAL TO APPROVE AND RATIFY THE 1997 EXECUTIVE INCENTIVE
COMPENSATION PLAN.
17
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative shareholder return on
the Company's Common Stock from November 4, 1997 (the date the Common Stock was
first offered to the public at an initial public price of $12.00 per share)
through December 31, 1997 with the cumulative returns of the NASDAQ Stock
Market-US Index and a group of peer companies (the "Peer Group"). Returns
assume reinvested dividends. The graph assumes $100 was invested on November 4,
1997 in the Company's Common Stock, the NASDAQ Stock Market Index and the Peer
Group. The Company did not pay any dividends on its Common Stock during this
period.
The Peer Group includes Coast Dental Services, Inc., Castle Dental
Centers, Inc., Gentle Dental Service Corporation, Monarch Dental Corp., Apple
Orthodontix, Inc. and Orthodontic Centers of America. The Peer Group consists
of companies that are engaged in the dental and orthodontic practice management
business. Companies included in the Peer Group were weighted by market
capitalization from the beginning of each period for which a return is
indicated.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ AND SELECTED PEERS
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
LEGEND
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 11/04/97 11/28/97 12/31/97
- ------ ----------------------------- -------- -------- --------
<S> <C>
_________ /diamond/ Dental Care Alliance, Inc. 100.00 82.9 77.4
_ _____ _ /star/ Nasdaq Stock Market (US Companies) 100.00 98.3 96.6
_ _ _ _ _ /triangle/ Self-Determined Peer Group 100.00 91.0 84.1
<FN>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on November 4, 1997.
</FN>
</TABLE>
The comparisons in this table are required by the SEC and are not intended
to forecast or be indicative of possible future performance of the Common
Stock.
18
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Price Waterhouse LLP served as the Company's independent
public accountants for the year ended December 31, 1997. The Board of Directors
has selected Price Waterhouse LLP as the Company's independent public
accountants for the year ending December 31, 1998. One or more representatives
of Price Waterhouse LLP are expected to be present at the Annual Meeting and
will be afforded the opportunity to make a statement if they so desire and to
respond to appropriate stockholder questions.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by a
proxy to do otherwise.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999
Annual Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, as amended, must be received by the Company at its executive
offices by December 31, 1998 for inclusion in the Company's proxy statement and
form of proxy relating to such meeting.
By Order of the Board of Directors
DR. STEVEN R. MATZKIN
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Sarasota, Florida
April 29, 1998
19
<PAGE>
APPENDIX A
DENTAL CARE ALLIANCE, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
A-1
<PAGE>
DENTAL CARE ALLIANCE, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<TABLE>
<S> <C> <C>
1. Purpose. ......................................................................... A-3
2. Definitions. ..................................................................... A-3
3. Administration ................................................................... A-5
(a) Authority of the Committee ................................................... A-5
(b) Manner of Exercise of Committee Authority .................................... A-6
(c) Limitation of Liability ...................................................... A-6
4. Stock Subject to Plan. ........................................................... A-6
(a) Limitation on Overall Number of Shares Subject to Awards ..................... A-6
(b) Application of Limitations ................................................... A-6
5. Eligibility; Per-Person Award Limitations. ....................................... A-6
6. Specific Terms of Awards ......................................................... A-7
(a) General ...................................................................... A-7
(b) Options ...................................................................... A-7
(c) Stock Appreciation Rights .................................................... A-8
(d) Restricted Stock ............................................................. A-8
(e) Deferred Stock ............................................................... A-9
(f) Bonus Stock and Awards in Lieu of Obligations ................................ A-10
(g) Dividend Equivalents ......................................................... A-10
(h) Other Stock-Based Awards ..................................................... A-10
7. Certain Provisions Applicable to Awards. ......................................... A-10
(a) Stand-Alone, Additional, Tandem, and Substitute Awards ....................... A-10
(b) Term of Awards ............................................................... A-11
(c) Form and Timing of Payment Under Awards; Deferrals ........................... A-11
(d) Exemptions from Section 16(b) Liability ...................................... A-11
8. Performance and Annual Incentive Awards .......................................... A-11
(a) Performance Conditions ....................................................... A-11
(b) Performance Awards Granted to Designated Covered Employees ................... A-11
(c) Annual Incentive Awards Granted to Designated Covered Employees .............. A-12
(d) Written Determinations ....................................................... A-13
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m) ..... A-14
9. Change in Control. ............................................................... A-14
(a) Effect of "Change in Control" ................................................ A-14
(b) Definition of "Change in Control" ............................................ A-14
(c) Definition of "Change in Control Price" ...................................... A-15
10. General Provisions ............................................................... A-15
(a) Compliance With Legal and Other Requirements ................................. A-15
(b) Limits on Transferability; Beneficiaries ..................................... A-15
(c) Adjustments .................................................................. A-16
(d) Taxes ........................................................................ A-16
(e) Changes to the Plan and Awards ............................................... A-16
(f) Limitation on Rights Conferred Under Plan .................................... A-17
(g) Unfunded Status of Awards; Creation of Trusts ................................ A-17
(h) Non-exclusivity of the Plan .................................................. A-17
(i) Payments in the Event of Forfeitures; Fractional Shares ...................... A-17
(j) Governing Law ................................................................ A-17
(k) Plan Effective Date and Stockholder Approval; Termination of Plan ............ A-17
</TABLE>
A-2
<PAGE>
DENTAL CARE ALLIANCE, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this 1997 Executive Incentive Compensation Plan
(the "Plan") is to assist Dental Care Alliance, Inc. (the "Company") and its
Subsidiaries in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, Directors and independent contractors
enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons
and the Company's stockholders, and providing such persons with annual and long
term performance incentives to expend their maximum efforts in the creation of
shareholder value. The Plan is also intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code
(as hereafter defined) to the extent deemed appropriate by the Committee (or
any successor committee) of the Board of Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of
a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial Ownership"
shall have the meanings ascribed to such terms in Rule 13d-3 under the
Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined with related
terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in accordance
with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to administer
the Plan; provided, however, that the Committee shall consist solely of at
least two directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then required
in order for exemptions under Rule 16b-3 to apply to transactions under the
Plan, and (ii) an "outside director"
A-3
<PAGE>
within the meaning of Section 162(m) of the Code, unless administration of
the Plan by "outside directors" is not then required in order to qualify
for tax deductibility under Section 162(m) of the Code.
(j) "Corporate Transaction" means a Corporate Transaction as defined in
Section 9(b)(i) of the Plan.
(k) "Covered Employee" means an Eligible Person who is a Covered Employee
as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g) hereof, to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan, which shall be
the business day immediately preceding the Company's initial public
offering.
(q) "Eligible Person" means each Executive Officer of the Company (as
defined under the Exchange Act) and other officers, Directors and employees
of the Company or of any Subsidiary, and independent contractors with the
Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may
be considered as still in the employ of the Company or a Subsidiary for
purposes of eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.
(s) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as
of any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or
market on which Stock is traded on the date as of which such value is being
determined or, if there is no sale on that date, then on the last previous
day on which a sale was reported.
(u) "Incentive Stock Option" or "ISO" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422
of the Code or any successor provision thereto.
(v) "Incumbent Board" means the Incumbent Board as defined in Section
9(b)(ii) of the Plan.
(w) "Limited SAR" means a right granted to a Participant under Section 6(c)
hereof.
(x) "Option" means a right granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
A-4
<PAGE>
(y) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(z) "Parent Corporation" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of
the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock
in one of the other corporations in the chain.
(aa) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer
an Eligible Person.
(bb) "Performance Award" means a right, granted to a Eligible Person
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(cc) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a
risk of forfeiture.
(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a- 1(c)(3), as from time to time in effect and applicable to the Plan
and Participants, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act.
(ff) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(gg) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
(hh) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or
interests of such corporation or other entity entitled to vote generally
in the election of directors or in which the Company has the right to
receive 50% or more of the distribution of profits or 50% or more of the
assets on liquidation or dissolution.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee; provided, however, that except as otherwise expressly provided
in this Plan or in order to comply with Code Section 162(m) or Rule 16b-3
under the Exchange Act, the Board may exercise any power or authority
granted to the Committee under this Plan. The Committee or the Board shall
have full and final authority, in each case subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms and
conditions of, and all other matters relating to, Awards, prescribe Award
agreements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the
Plan and Award agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee or the Board may deem necessary or
advisable for the administration of the Plan. In exercising any discretion
granted to the Committee or the Board under the Plan or pursuant to any
Award, the Committee or the Board shall not be required to follow past
practices, act in a manner consistent with past practices, or treat any
Eligible Person in a manner consistent with the treatment of other Eligible
Persons.
A-5
<PAGE>
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee, and not the
Board, shall exercise sole and exclusive discretion on any matter relating
to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions
by such Participant shall be exempt under Rule 16b-3 under the Exchange
Act. Any action of the Committee or the Board shall be final, conclusive
and binding on all persons, including the Company, its subsidiaries,
Participants, Beneficiaries, transferees under Section 10(b) hereof or
other persons claiming rights from or through a Participant, and
stockholders. The express grant of any specific power to the Committee or
the Board, and the taking of any action by the Committee or the Board,
shall not be construed as limiting any power or authority of the Committee
or the Board. The Committee or the Board may delegate to officers or
managers of the Company or any subsidiary, or committees thereof, the
authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other
functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in
the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d).
The Committee or the Board may appoint agents to assist it in administering
the Plan.
(c) LIMITATION OF LIABILITY. The Committee and the Board, and each member
thereof, shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction
or on behalf of the Committee or the Board, shall not be personally liable
for any action or determination taken or made in good faith with respect to
the Plan, and shall, to the extent permitted by law, be fully indemnified
and protected by the Company with respect to any such action or
determination.
4. STOCK SUBJECT TO PLAN.
(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS. Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares
of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 250,000, plus (ii) the number of
shares with respect to Awards previously granted under the Plan that
terminate without being exercised, expire, are forfeited or canceled, and
the number of shares of Stock that are surrendered in payment of any Awards
or any tax withholding with regard thereto. Any shares of Stock delivered
under the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares. Subject to adjustment as provided in Section
10(c) hereof, in no event shall the aggregate number of shares of Stock
which may be issued pursuant to ISOs exceed 250,000 shares.
(b) APPLICATION OF LIMITATIONS. The limitation contained in Section 4(a)
shall apply not only to Awards that are settleable by the delivery of
shares of Stock but also to Awards relating to shares of Stock but
settleable only in cash (such as cash-only SARs). The Committee or the
Board may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of tandem or
substitute awards) and make adjustments if the number of shares of Stock
actually delivered differs from the number of shares previously counted in
connection with an Award.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 150,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned
as an Annual Incentive Award or other cash Award
A-6
<PAGE>
in any fiscal year by any one Participant shall be $2,000,000, and the maximum
amount that may be earned as a Performance Award or other cash Award in respect
of a performance period by any one Participant shall be $5,000,000.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee or the Board may impose on
any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the
event of termination of employment by the Participant and terms permitting
a Participant to make elections relating to his or her Award. The Committee
or the Board shall retain full power and discretion to accelerate, waive or
modify, at any time, any term or condition of an Award that is not
mandatory under the Plan. Except in cases in which the Committee or the
Board is authorized to require other forms of consideration under the Plan,
or to the extent other forms of consideration must be paid to satisfy the
requirements of Florida law, no consideration other than services may be
required for the grant (but not the exercise) of any Award.
(b) OPTIONS. The Committee and the Board each is authorized to grant
Options to Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee or the Board,
provided that such exercise price shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock on
the date of grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such Option. If
an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any
Parent Corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of
the Fair Market Value of the Stock on the date such Incentive Stock
Option is granted.
(ii) TIME AND METHOD OF EXERCISE. The Committee or the Board shall
determine the time or times at which or the circumstances under which an
Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the
time or times at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions, the methods
by which such exercise price may be paid or deemed to be paid (including
in the discretion of the Committee or the Board a cashless exercise
procedure), the form of such payment, including, without limitation,
cash, Stock, other Awards or awards granted under other plans of the
Company or any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered or
deemed to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code. Anything
in the Plan to the contrary notwithstanding, no term of the Plan relating
to ISOs (including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority granted under
the Plan be exercised, so as to disqualify either the Plan or any ISO
under Section 422 of the Code, unless the Participant has first requested
the change that will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code, Options granted
as Incentive Stock Options shall be subject to the following special
terms and conditions:
(A) the Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is
A-7
<PAGE>
deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and the
Incentive Stock Option is granted to such Participant, the term of
the Incentive Stock Option shall be (to the extent required by the
Code at the time of the grant) for no more than five years from the
date of grant; and
(B) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of stock with
respect to which Incentive Stock Options granted under the Plan and
all other option plans of the Company or its Parent Corporation
during any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed $100,000.
(c) STOCK APPRECIATION RIGHTS. The Committee and the Board each is
authorized to grant SARs to Participants on the following terms and
conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of stock on the date of exercise (or,
in the case of a "Limited SAR" that may be exercised only in the event of
a Change in Control, the Fair Market Value determined by reference to the
Change in Control Price, as defined under Section 9(c) hereof), over (B)
the grant price of the SAR as determined by the Committee or the Board.
The grant price of an SAR shall not be less than the Fair Market Value of
a share of Stock on the date of grant except as provided under Section
7(a) hereof.
(ii) OTHER TERMS. The Committee or the Board shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be in tandem or in combination with any other Award, and
any other terms and conditions of any SAR. Limited SARs that may only be
exercised in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on such terms,
not inconsistent with this Section 6(c), as the Committee or the Board
may determine. SARs and Limited SARs may be either freestanding or in
tandem with other Awards.
(d) RESTRICTED STOCK. The Committee and the Board each is authorized to
grant Restricted Stock to Participants on the following terms and
conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee or the Board may impose, which
restrictions may lapse separately or in combination at such times, under
such circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee or the Board may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan
and any Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to receive
dividends thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee or the Board). During the restricted
period applicable to the Restricted Stock, subject to Section 10(b)
below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee or
the Board at the time of the Award, upon termination of a Participant's
employment during the applicable
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restriction period, the Participant's Restricted Stock that is at that
time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee or the Board may provide, by rule or
regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted
Stock shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee or the Board may in
other cases waive in whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee or the Board shall
determine. If certificates representing Restricted Stock are registered
in the name of the Participant, the Committee or the Board may require
that such certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the Certificates, and that the
Participant deliver a stock power to the Company, endorsed in blank,
relating to the Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the grant of an Award of
Restricted Stock, the Committee or the Board may require that any cash
dividends paid on a share of Restricted Stock be automatically reinvested
in additional shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the
Committee or the Board, Stock distributed in connection with a Stock
split or Stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) DEFERRED STOCK. The Committee and the Board each is authorized to
grant Deferred Stock to Participants, which are rights to receive Stock,
cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award of Deferred Stock
shall occur upon expiration of the deferral period specified for such
Deferred Stock by the Committee or the Board (or, if permitted by the
Committee or the Board, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which may include a
risk of forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral period or
at earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in combination,
in installments or otherwise, as the Committee or the Board may
determine. Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of shares of Stock
covered by the Deferred Stock, or a combination thereof, as determined by
the Committee or the Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of Deferred Stock
carries no voting or dividend or other rights associated with share
ownership.
(ii) FORFEITURE. Except as otherwise determined by the Committee or
the Board, upon termination of a Participant's employment during the
applicable deferral period thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee or the Board may provide, by rule
or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Deferred Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee or the
Board may in other cases waive in whole or in part the forfeiture of
Deferred Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the
Committee or the Board at date of grant, Dividend Equivalents on the
specified number of shares of Stock covered by
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an Award of Deferred Stock shall be either (A) paid with respect to such
Deferred Stock at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of
such dividends, or (B) deferred with respect to such Deferred Stock and
the amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment vehicles, as
the Committee or the Board shall determine or permit the Participant to
elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee and the
Board each is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Participants subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock
or other Awards are exempt from liability under Section 16(b) of the
Exchange Act. Stock or Awards granted hereunder shall be subject to such
other terms as shall be determined by the Committee or the Board.
(g) DIVIDEND EQUIVALENTS. The Committee and the Board each is authorized
to grant Dividend Equivalents to a Participant entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock, or
other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or
the Board may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee
or the Board may specify.
(h) OTHER STOCK-BASED AWARDS. The Committee and the Board each is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, as deemed by the Committee or the Board to be consistent
with the purposes of the Plan, including, without limitation, convertible
or exchangeable debt securities, other rights convertible or exchangeable
into Stock, purchase rights for Stock, Awards with value and payment
contingent upon performance of the Company or any other factors designated
by the Committee or the Board, and Awards valued by reference to the book
value of Stock or the value of securities of or the performance of
specified subsidiaries or business units. The Committee or the Board shall
determine the terms and conditions of such Awards. Stock delivered pursuant
to an Award in the nature of a purchase right granted under this Section
6(h) shall be purchased for such consideration, paid for at such times, by
such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under
another plan of the Company, any subsidiary, or any business entity to be
acquired by the Company or a subsidiary, or any other right of a
Participant to receive payment from the Company or any subsidiary. Such
additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award
or award, the Committee or the Board shall require the surrender of such
other Award or award in consideration for the grant of the new Award. In
addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any
subsidiary, in which the value of Stock subject to the Award is equivalent
in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or
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purchase price of the Award in the nature of a right that may be exercised
is equal to the Fair Market Value of the underlying Stock minus the value
of the cash compensation surrendered (for example, Options granted with an
exercise price "discounted" by the amount of the cash compensation
surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such period as
may be determined by the Committee or the Board; provided that in no event
shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of
the Code).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made
by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee
or the Board shall determine, including, without limitation, cash, Stock,
other Awards or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of any
Award may be accelerated, and cash paid in lieu of Stock in connection with
such settlement, in the discretion of the Committee or the Board or upon
occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee
or the Board (subject to Section 10(e) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the
Committee or the Board. Payments may include, without limitation,
provisions for the payment or crediting of a reasonable interest rate on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that
neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability
under Section 16(b) thereof (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any
provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any
such transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 or
Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b). In addition, the purchase price of any Award conferring a
right to purchase Stock shall be not less than any specified percentage of
the Fair Market Value of Stock at the date of grant of the Award then
required in order to comply with Rule 16b-3.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee
or the Board. The Committee or the Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing
any performance conditions, and may exercise its discretion to reduce the
amounts payable under any Award subject to performance conditions, except
as limited under Sections 8(b) and 8(c) hereof in the case of a Performance
Award or Annual Incentive Award intended to qualify under Code Section
162(m). If and to the extent required under Code Section 162(m), any power
or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If and to
the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to
be a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
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such Performance Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section
8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
8(b). Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder including
the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.
(ii) BUSINESS CRITERIA. One or more of the following business criteria
for the Company, on a consolidated basis, and/or specified subsidiaries
or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used
exclusively by the Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such total
stockholder return as compared to total return (on a comparable basis) of
a publicly available index such as, but not limited to, the Standard &
Poor's 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after
interest expense and before bonuses, service fees, and extraordinary or
special items; (7) operating margin; (8) earnings per share; (9) return
on equity; (10) return on capital; (11) return on investment; (12)
operating earnings; (13) working capital or inventory; and (14) ratio of
debt to stockholders' equity. One or more of the foregoing business
criteria shall also be exclusively used in establishing performance goals
for Annual Incentive Awards granted to a Covered Employee under Section
8(c) hereof that are intended to qualify as "performance-based
compensation under Code Section 162(m).
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE GOALS.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten years, as
specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring
Company performance in connection with Performance Awards. The amount of
such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof during the given performance period,
as specified by the Committee in accordance with Section 8(b)(iii)
hereof. The Committee may specify the amount of the Performance Award
pool as a percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need
not bear a strictly mathematical relationship to such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or forfeited
in the event of termination of employment by the Participant prior to the
end of a performance period or settlement of Performance Awards.
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(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If and
to the extent that the Committee determines that an Annual Incentive Award to
be granted to an Eligible Person who is designated by the Committee as likely
to be a Covered Employee should qualify as "performance-based compensation"
for purposes of Code Section 162(m), the grant, exercise and/ or settlement
of such Annual Incentive Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section
8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish an Annual
Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Annual Incentive Awards.
The amount of such Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end of the
90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based
compensation" under Code Section 162(m), the Committee shall determine
the Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for that fiscal
year, either out of an Annual Incentive Award pool established by such
date under Section 8(c)(i) hereof or as individual Annual Incentive
Awards. In the case of individual Annual Incentive Awards intended to
qualify under Code Section 162(m), the amount potentially payable shall
be based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 8(b)(ii) hereof in
the given performance year, as specified by the Committee; in other
cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual Incentive
Award of any Participant shall be subject to the limitation set forth in
Section 5 hereof.
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each fiscal
year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual
Incentive Award payable to each Participant in the Annual Incentive Award
pool, or (B) the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its discretion,
determine that the amount payable to any Participant as an Annual
Incentive Award shall be reduced from the amount of his or her potential
Annual Incentive Award, including a determination to make no Award
whatsoever. The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a fiscal
year or settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards under Section 8(b), and
the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards
under Section 8(c), shall be made in writing in the case of any Award
intended to qualify under Code Section 162(m). The Committee may not
delegate any responsibility relating to such Performance Awards or Annual
Incentive Awards if and to the extent required to comply with Code Section
162(m).
(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE SECTION
162(M). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 8(b) and 8(c) hereof granted to persons who
are designated by the Committee as likely to be Covered Employees within
the meaning of Code Section 162(m) and regulations thereunder shall, if so
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designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will
be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of Performance
Awards or an Annual Incentive Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan or any
agreement relating to such Performance Awards or Annual Incentive Awards
does not comply or is inconsistent with the requirements of Code Section
162(m) or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." If and to the extent provided in the
Award, in the event of a "Change in Control," as defined in Section 9(b),
the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of
the time of the Change in Control, subject only to applicable
restrictions set forth in Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by their terms) shall
become exercisable for amounts, in cash, determined by reference to the
Change in Control Price;
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of the
Change in Control, except to the extent of any waiver by the Participant
and subject to applicable restrictions set forth in Section 10(a) hereof;
and
(iv) With respect to any such outstanding Award subject to achievement
of performance goals and conditions under the Plan, such performance
goals and other conditions will be deemed to be met if and to the extent
so provided by the Committee in the Award agreement relating to such
Award.
(b) DEFINITION OF "CHANGE IN CONTROL." A "Change in Control" shall be
deemed to have occurred upon:
(i) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other form of corporate transaction or series of
transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization,
merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a
liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned); or
(ii) Individuals who, as of the date hereof, constitute the Board (as
of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual
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or threatened election contest relating to the election of the Directors
of the Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board.
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any Corporate Transaction
triggering the Change in Control under Section 9(b)(i) hereof or any
liquidation of shares following a sale of substantially all of the assets
of the Company, or (ii) the highest Fair Market Value per share at any time
during the 60-day period preceding and the 60- day period following the
Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may, to the
extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits
under any Award until completion of such registration or qualification of
such Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock
exchange or automated quotation system upon which the Stock or other
Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee or the Board, may consider
appropriate, and may require any Participant to make such representations,
furnish such information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of
Stock or payment of benefits under any Award or the imposition of any other
conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a
Participant than existed on the 90th day preceding the Change in Control.
(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other right or
interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party (other than the Company or a Subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or
his or her guardian or legal representative, except that Awards and other
rights (other than ISOs and SARs in tandem therewith) may be transferred to
one or more Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent such transfers and
exercises are permitted by the Committee or the Board pursuant to the
express terms of an Award agreement (subject to any terms and conditions
which the Committee or the Board may impose thereon, and further subject to
any prohibitions or restrictions on such transfers pursuant to Rule 16b-3).
A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such
Participant, except as otherwise determined by the Committee or the Board,
and to any additional terms and conditions deemed necessary or appropriate
by the Committee or the Board.
(c) ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger,
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consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate transaction or event
affects the Stock such that a substitution or adjustment is determined by
the Committee or the Board to be appropriate in order to prevent dilution
or enlargement of the rights of Participants under the Plan, then the
Committee or the Board shall, in such manner as it may deem equitable,
substitute or adjust any or all of (i) the number and kind of shares of
Stock which may be delivered in connection with Awards granted thereafter,
(ii) the number and kind of shares of Stock by which annual perperson Award
limitations are measured under Section 5 hereof, (iii) the number and kind
of shares of Stock subject to or deliverable in respect of outstanding
Awards and (iv) the exercise price, grant price or purchase price relating
to any Award and/or make provision for payment of cash or other property in
respect of any outstanding Award. In addition, the Committee (and the Board
if and only to the extent such authority is not required to be exercised by
the Committee to comply with Code Section 162(m)) is authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or non-recurring events
(including, without limitation, events described in the preceding sentence,
as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any Subsidiary or any business unit, or the
financial statements of the Company or any Subsidiary, or in response to
changes in applicable laws, regulations, accounting principles, tax rates
and regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any Subsidiary or
business unit thereof, performance of comparable organizations, economic
and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall
be authorized or made if and to the extent that such authority or the
making of such adjustment would cause Options, SARs, Performance Awards
granted under Section 8(b) hereof or Annual Incentive Awards granted under
Section 8(c) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation" under
Code Section 162(m) and the regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder.
(d) TAXES. The Company and any Subsidiary is authorized to withhold from
any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee or the Board may deem advisable to
enable the Company and Participants to satisfy obligations for the payment
of withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations, either on a mandatory or elective basis in
the discretion of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committee's authority to grant
Awards under the Plan, without the consent of stockholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Company's stockholders not later than the annual meeting
next following such Board action if such stockholder approval is required
by any federal or state law or regulation (including, without limitation,
Rule 16b-3 or Code Section 162(m)) or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted,
and the Board may otherwise, in its discretion, determine to submit other
such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may
waive any conditions or rights under, or amend, alter, suspend, discontinue
or terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without
the consent of an affected Participant, no such Committee or the Board
action may materially and adversely affect the rights of such Participant
under such Award. Notwithstanding
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<PAGE>
anything in the Plan to the contrary, if any right under this Plan would
cause a transaction to be ineligible for pooling of interest accounting
that would, but for the right hereunder, be eligible for such accounting
treatment, the Committee or the Board may modify or adjust the right so
that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash
otherwise payable hereunder for the right which caused the transaction to
be ineligible for pooling of interest accounting.
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant
or in the employ of the Company or a Subsidiary; (ii) interfering in any
way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or
to be treated uniformly with other Participants and employees, or (iv)
conferring on a Participant any of the rights of a stockholder of the
Company unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Participant or obligation to
deliver Stock pursuant to an Award, nothing contained in the Plan or any
Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other
Awards or other property, or make other arrangements to meet the Company's
obligations under the Plan. Such trusts or other arrangements shall be
consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant. The
trustee of such trusts may be authorized to dispose of trust assets and
reinvest the proceeds in alternative investments, subject to such terms and
conditions as the Committee or the Board may specify and in accordance with
applicable law.
(h) NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or
a committee thereof to adopt such other incentive arrangements as it may
deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or
other consideration, the Participant shall be repaid the amount of such
cash or other consideration. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee or the Board
shall determine whether cash, other Awards or other property shall be
issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Florida without
giving effect to principles of conflicts of laws, and applicable federal
law.
(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION OF PLAN.
The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors,
by a vote sufficient to meet the requirements of Code Sections 162(m) and
422, Rule 16b-3 under the Exchange Act, applicable NASDAQ requirements, and
other laws, regulations, and obligations of the Company applicable to the
Plan. Awards may be granted subject to stockholder approval, but may not be
exercised or otherwise settled in the event stockholder approval is not
obtained. The Plan shall terminate at such time as no shares of Common
Stock remain available for issuance under the Plan and the Company has no
further rights or obligations with respect to outstanding Awards under the
Plan.
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APPENDIX A
REVOCABLE PROXY
DENTAL CARE ALLIANCE, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
<TABLE>
<S> <C>
The undersigned, a holder of Common Stock of Dental Care (1) ELECTION OF MITCHELL B. OLAN AND CURTIS LEE SMITH AS
Alliance, Inc., a Delaware corporation (the "Company"), hereby CLASS I DIRECTORS.
appoints Dr. Steven Matzkin and David P. Nichols, and each of
them, as proxies for the undersigned, each with full power of FOR WITHHOLD FOR ALL EXCEPT
substitution, for and in the name of the undersigned to act for [ ] [ ] [ ]
the undersigned and to vote, as designated hereon, all of the
shares of stock of the Company that the undersigned is entitled
to vote at the 1998 Annual Meeting of Stockholders of the INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
Company, to be held on Wednesday, May 27, 1998, at 10:00 a.m., INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT
local time, at the Hyatt-Sarasota, Boulevard of the Arts, NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
Sarasota, Florida, and at any adjournments or postponements
thereof.
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(2) PROPOSAL to approve and ratify the Company's 1997
Executive Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) Upon such other matters as may properly come before
the Annual Meeting and any adjournments or
postponements thereof. In their discretion, the
proxies are authorized to vote upon such other
business as may properly come before the Annual
Meeting, and any adjournments or postponements
thereof.
-----------------------
Date THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
PLEASE BE SURE TO SIGN AND DATE THIS ELECTION OF DIRECTORS AND THE OTHER PROPOSALS SET FORTH.
PROXY IN THE BOX BELOW.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE PROPOSALS.
- -------------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
/dagger/ /dagger/
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
DENTAL CARE ALLIANCE, INC.
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IMPORTANT: Please sign exactly as your name appears and mail it promptly even
though you now plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
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</TABLE>
