<PAGE>
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CHARTER MEDICAL CORPORATION
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 18, 1994
____________
The Annual Meeting of Stockholders of Charter Medical Corporation will be
held at 191 Peachtree Street, 50th floor, Atlanta, Georgia, on Friday,
February 18, 1994, at 10:00 A.M., Eastern Standard Time, to consider and act
upon the following:
(1) Election of three directors to three-year terms;
(2) Approval of the Company's proposed Directors' Unit Award Plan;
(3) Approval of the Company's proposed 1994 Employee Stock Purchase
Plan;
(4) Approval of the Company's proposed 1994 Stock Option Plan;
(5) Approval of an amendment to the Director's Stock Option Plan; and
(6) Such other matters as may properly come before the meeting.
Only stockholders of record at the close of business on December 30, 1993
are entitled to notice of, and to vote at, the meeting. A complete list of
stockholders entitled to vote at the meeting will be available for inspection
at the offices of the Company during normal business hours from February 8,
1994 through February 17, 1994.
Your attention is directed to the accompanying proxy statement.
Linton C. Newlin
Secretary
Macon, Georgia
January 18, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED PROXY. THE PROXY IS REVOCABLE AND YOU MAY VOTE YOUR
SHARES IN PERSON IF YOU ATTEND THE MEETING AND WISH TO DO SO.
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CHARTER MEDICAL CORPORATION
577 Mulberry Street
Macon, Georgia 31298
____________
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
____________
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Charter Medical Corporation, a Delaware
corporation (the "Company"), from the holders of the Company's Common Stock
(the "Common Stock"), for use at the Annual Meeting of Stockholders to be held
at 10:00 a.m., Eastern Standard Time, on Friday, February 18, 1994, and any
adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held
at 191 Peachtree Street, 50th floor, Atlanta, Georgia. This Proxy Statement
and the accompanying form of proxy were first sent or given to stockholders on
or about January 18, 1994.
VOTING
The Board of Directors has fixed the close of business on December 30,
1993, as the record date for determining the stockholders entitled to notice
of and to vote at the Annual Meeting. On December 30, 1993, 26,720,280 shares
of Common Stock were outstanding. Each share is entitled to one vote on each
matter presented for a vote at the Annual Meeting.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding on the record date constitutes a quorum for
the transaction of business at the Annual Meeting.
The matters submitted to the stockholders at the Annual Meeting require
the affirmative vote of a majority of the votes cast at the meeting with
respect to each matter. With regard to the election of directors,
stockholders may vote in favor of all nominees, withhold their votes as to all
nominees or withhold their votes as to specific nominees. With respect to
approval of the Directors' Unit Award Plan, 1994 Employee Stock Purchase Plan,
1994 Stock Option Plan and the amendment to the Directors' Stock Option Plan,
stockholders may vote in favor of or against the proposal or may abstain from
voting.
Stockholders should specify their choices on the enclosed form of proxy
card. If no specific instructions are given with respect to the matters to be
acted upon, the shares represented by a properly signed proxy card will be
voted FOR the election of the nominees for the office of director and FOR
approval of the Directors' Unit Award Plan, 1994 Employee Stock Purchase Plan,
1994 Stock Option Plan and the amendment to the Directors' Stock Option Plan.
If any other matters properly come before the Annual Meeting, the persons
named as proxies will vote on such matters in their discretion.
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A stockholder who has returned a proxy may revoke it at any time before
it is voted at the Annual Meeting by executing a later-dated proxy, by voting
by ballot at the meeting or by filing with the Inspector of Election an
instrument of revocation.
Under Delaware law and the Company's bylaws, the treatment and effect of
abstentions and broker non-votes are as follows. Abstentions with respect to
a proposal are counted for purposes of establishing a quorum and are also
counted for purposes of determining the minimum number of affirmative votes
required for approval of matters other than the election of directors.
Accordingly, if a stockholder registers an abstention vote by checking the
Abstain box on the proxy card, the abstention vote has the effect of a vote
against the proposal. If a broker or other nominee holding shares of Common
Stock for beneficial owners has voted on one or more matters pursuant to
discretionary authority or instructions from beneficial owners, but does not
vote on other matters because the broker or nominee has not received
instructions from beneficial owners and does not have the right to exercise
discretionary voting power, such shares are counted for purposes of
determining whether a quorum is present, but broker non-votes have no effect
on the vote with respect to such other matters. That is, broker non-votes are
not counted as votes for the proposal or as votes against the proposal and
also are not counted in determining the number of votes needed in order for a
proposal to be approved.
Voting By ESOP Participants
Each participant in the Company's Employee Stock Ownership Plan (the
"ESOP") is being sent, together with this proxy statement, an ESOP proxy card
for voting of the shares of the Company's Common Stock allocated to such
participant's ESOP account (the "Allocated Shares"). The ESOP proxy card may
be used by a participant to direct the Trustee of the ESOP (the "ESOP
Trustee") as to the manner in which the participant's Allocated Shares shall
be voted. In order to direct the ESOP Trustee, a participant must have
completed, signed and dated the ESOP proxy card and returned it to the ESOP
Trustee, in the envelope provided, which card must be received by the ESOP
Trustee prior to the Annual Meeting.
Prior to the Annual Meeting, the ESOP Trustee will aggregate votes of
Allocated Shares for, against or abstaining or withholding authority to vote
for any proposal or nominee. At the Annual Meeting, the ESOP Trustee will
vote the Allocated Shares for which it has received instructions in accordance
with such instructions. The ESOP Trustee will not vote any Allocated Shares
in the absence of timely instructions. As of December 30, 1993, 302,959 shares
of Common Stock were held by the ESOP Trustee and eligible to be voted at the
Annual Meeting at the direction of participants. Under the terms of the ESOP,
instructions received by the ESOP Trustee from participants are required to be
held by the Trustee in confidence and not to be divulged or released to any
person, including officers and employees of the Company. Neither the ESOP
Trustee nor the Administrative Committee of the ESOP (consisting of three
officers of the Company) will make recommendations to participants on whether
to vote or how to vote.
Shares of Common Stock held by the ESOP which have not been allocated to
participants' accounts will be voted by the ESOP Trustee at the direction of
the Administrative Committee of the ESOP. Under the applicable plan document,
the Administrative Committee directs the ESOP Trustee concerning voting of
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unallocated shares after it determines such action to be in the best interests
of participants. The Administrative Committee has advised the Company that it
intends to direct the ESOP Trustee to vote for the election as directors of
the nominees named in this proxy statement and to vote for the adoption of the
Directors' Unit Award Plan, 1994 Employee Stock Purchase Plan, 1994 Stock
Option Plan and the amendment to the Directors' Stock Option Plan. As of
December 30, 1993, 221,946 shares of Common Stock were held by the ESOP
Trustee but not allocated to participants' accounts.
SOLICITATlON OF PROXIES
The cost of soliciting proxies in the accompanying form will be paid by
the Company. In addition to solicitation by mail, banks, brokers and other
custodians, nominees and fiduciaries will be requested to send proxy material
to the beneficial owners and to secure their voting instructions, if
necessary. The Company will reimburse them for their expenses in so doing.
Certain officers and other employees of the Company, who will receive no
compensation for their services other than their regular compensation, may
solicit proxies by mail, telephone and personal contact. In addition, the firm
of MacKenzie Partners, Inc. has been retained to assist in the solicitation of
proxies for a fee of approximately $3,500 plus expenses.
<TABLE>
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information as of December 3, 1993 (except
as otherwise noted) with respect to persons known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock:
<CAPTION>
Amount and Nature Percent of
Name and Address of Beneficial Ownership Class
<S> <C> <C>
W.R. Huff Asset Management 2,839,218 11.3%
Co., L.P.(1)
30 Schuyler Place
Morristown, N.J. 07960
William A. Fickling, Jr.(2) 2,585,113 9.4%
577 Mulberry Street
Macon, GA 31298
The Putnam Companies, Inc.(3) 1,437,965 5.7%
One Post Office Square
Boston, MA 02109
______________
<FN>
(1) Information concerning beneficial ownership of securities by W.R. Huff
Asset Management Co., L.P. is based on its Schedule 13D, dated July 30,
1992.
(2) Information concerning beneficial ownership of securities by Mr.
Fickling is based on his amended Schedule 13D, dated December 3, 1993,
and on notices of option exercises received by the Company in December
1993.
(3) Information concerning beneficial ownership of securities by the Putnam
Companies, Inc. is based on its Schedule 13G, dated January 19, 1993.
</TABLE>
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W.R. Huff Asset Management Co., L.P. ("Huff") is a registered investment
adviser and, under the terms of Huff's investment advisory contracts with its
clients, Huff has shared voting and shared investment power over the 2,839,218
shares of Common Stock. Huff is a limited partnership; and one of its general
partners, W.R. Huff, of the same address, may be deemed a beneficial owner of
the shares under Securities and Exchange Commission (the "Commission") rules
because of his control of Huff.
William A. Fickling, Jr., is the former Chairman of the Board of
Directors of the Company. Of the 2,585,113 shares of Common Stock
beneficially owned by Mr. Fickling, he has sole voting and investment power
with respect to 672,252 shares, but he disclaims beneficial ownership of
56,934 of such shares which are held in trusts and 25,076 of such shares which
are beneficially owned by his spouse. In December 1993, subsequent to the
filing of amended Schedule 13D on which the above information is based,
Mr. Fickling acquired direct ownership of 1,406,747 of the 2,585,113 shares
beneficially owned by him on December 3, 1993, by exercising options to
purchase such shares. In addition, in connection with such exercise,
Mr. Fickling surrendered 487,589 optioned shares related to the payment of
income taxes. Mr. Fickling has sole investment power with respect to 18,525
shares of Common Stock which he has the right to acquire within sixty days
upon exercise of certain options held by him, but has no voting power with
respect to such shares until the right to acquire such shares is exercised.
Certain Putnam investment managers (together with their parent
corporations, The Putnam Companies, Inc. and Marsh & McLennan Companies,
Inc.), are considered "beneficial owners" in the aggregate of 1,437,965
shares, or 5.7% of shares outstanding, of the Company's voting common stock,
which shares were acquired for investment purposes by such investment managers
for certain of their advisory clients.
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation, the number of
directors is fixed at eight. Two director positions (for terms expiring in
1995) are vacant. The directors are divided into three classes, with one
class being elected each year to serve three-year terms. At the Annual
Meeting, stockholders will elect three directors for three-year terms. Of the
present six directors, three will continue to serve after the Annual Meeting,
one for a term expiring in 1995 and two for terms expiring in 1996.
One of the vacancies on the Board of Directors was created by the
resignation of William A. Fickling, Jr. in December 1993. The other vacancy
is a position created by an amendment to the Company's Certificate of
Incorporation effective on July 21, 1992, which amendment was adopted as part
of the Company's Plan of Reorganization under the Bankruptcy Code (the
"Plan"). The vacancies may be filled by the Board of Directors for terms
expiring in 1995.
If any of the nominees listed below is unable to serve (which is not
anticipated), the Board of Directors will designate a substitute nominee or
nominees, in which case the persons designated as proxies will vote all valid
proxy cards for the election of such substitute nominee or nominees.
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The first table below sets forth the names of the nominees for the
director positions to be elected by the holders of the Common Stock at the
Annual Meeting. The second table sets forth the names of each other present
director who will continue to serve after the Annual Meeting. With respect to
each nominee and continuing director, the table lists his age, month and year
in which he first became a director, any other position with the Company,
principal occupations during the past five years and any directorships in
public or certain other companies.
<TABLE>
NOMINEES FOR THE DIRECTOR POSITIONS
FOR TERMS EXPIRING IN 1997
<CAPTION>
Position with Company,
Name, Age, and Date Principal Occupations
First Became a During Past Five Years
Director Term Expiring and Other Directorships
<S> <C> <C>
E. Mac Crawford 1994 Chairman of the Board of Directors,
44 President and Chief Executive
April 1990 Officer of the Company (since 1993);
President and Chief Operating
Officer of the Company (1992-1993);
Executive Vice President-Hospital
Operations (1990-1992); Assistant
to the President and Chairman
(1990); President (1988-1990),
Mulberry Street Investment Company.
Raymond H. Kiefer 1994 Retired insurance executive
66 (since 1992); President, Allstate
July 1992 Insurance Company (1989-1992);
President, Personal Property and
Casualty Company (1984-1989)
(a subsidiary of Allstate Insurance
Company).
Gerald L. McManis -- Chairman of the Board and President
57 (since 1965) of McManis Associates,
Inc. (strategy development and
management consulting firm for
healthcare and healthcare related
companies).
CONTINUING DIRECTORS
Andre C. Dimitriadis 1995 Chairman and Chief Executive
53 Officer, LTC Properties (a
July 1992 healthcare real estate investment
trust) (since 1992); Director of
Sun Healthcare Group (since 1993);
Director of Home Care Management,
Inc. (since 1993); Executive Vice
President and Chief Financial
Officer, Beverly Enterprises, Inc.
(nursing homes) (1989-1992); Chief
Financial Officer and Director,
American Medical International, Inc.
(hospitals) (1984-1989).
</TABLE>
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<TABLE>
CONTINUING DIRECTORS
Position with Company,
Name, Age, and Date Principal Occupations
First Became a During Past Five Years
Director Term Expiring and Other Directorships
<S> <C> <C>
Edwin M. Banks 1996 Securities Analyst, W.R. Huff
31 Asset Management Co., L.P. (1988-
July 1992 present).
Lawrence W. Drinkard 1996 Executive Vice President and Chief
54 Financial Officer (since 1994) of
January 1991 the Company; Senior Vice President -
Finance (1990-1993); Vice President
(1987-1990); Treasurer (1986-1991).
</TABLE>
Mulberry Street Investment Company manages the personal investments of
William A. Fickling, Jr. and his family. As President (1988-1990) of Mulberry
Street Investment Company, Mr. Crawford had responsibility for managing real
estate and other investments and related financings.
BOARD OF DIRECTORS INFORMATION
During the fiscal year ended September 30, 1993, the Board of Directors
held 12 meetings; and each director attended all Board meetings and all
meetings of committes of which he was a member.
The Board has established an Audit Committee and Compensation Committee.
There is no nominating committee of the Board; nominees for director are
selected by the Board of Directors.
Audit Committee. Audit Committee members are Edwin M. Banks (Chairman)
and Raymond H. Kiefer. The Audit Committee held five meetings in fiscal
1993. The Audit Committee recommends to the Board of Directors the engagement
of independent auditors of the Company, reviews the scope and results of
audits of the Company, reviews the Company's internal accounting controls and
the activities of the Company's internal audit staff and reviews the
professional services furnished to the Company by its independent auditors.
Compensation Committee. Compensation Committee members are Andre C.
Dimitriadis (Chairman) and Michael D. Hernandez, whose term as a director
expires at the Annual Meeting. The Compensation Committee's duties are
described under the caption, "Board Compensation Committee Report on Executive
Compensation."
During fiscal 1993, non-employee directors received annual compensation
of $18,000 and a fee of $800 for each Board meeting attended. In addition,
non-employee directors were paid $200 for each committee meeting attended
($800 if the committee meeting was not held in conjunction with a Board
meeting) and on February 4, 1993, were each granted an option under the
Directors' Stock Option Plan to purchase 25,000 shares of the Company's common
stock for an exercise price of $14.56 per share. In addition, the Company
paid Michael D. Hernandez, whose term as a director expires at the Annual
Meeting, compensation in the amount of $100,000 for his services as the
non-employee Chairman of the Board of Directors during a portion of fiscal
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1993. Effective October 1, 1993, non-employee directors receive annual
compensation of $24,000 and a fee of $1,000 for each board meeting or
committee meeting attended.
<TABLE>
EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended
September 30, 1993, the compensation paid by the Company to the present Chief
Executive Officer, the two other most highly compensated present executive
officers and the former Chief Executive Officer:
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Other Compensation
Annual Compensation Annual Option/ LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation SARS Payouts Compensation
Position Year ($) ($) ($)(1) (#)(2) ($) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C>
E. Mac Crawford 1993 $520,000 $293,280 $ 711 -- -- $ 30,049
Chairman of the 1992 500,000 903,650 * 572,990 -- *
Board of Directors, 1991 362,292 685,305 * -- -- *
President and Chief
Executive Officer
Lawrence W. Drinkard 1993 350,000 197,400 $ 3,007 -- -- $ 29,806
Executive Vice 1992 335,000 489,458 * 215,000 -- *
President and Chief 1991 235,825 365,078 * -- -- *
Financial Officer
C. Clark Wingfield 1993 225,000 110,790 $ 37,820 -- -- $ 31,000
Vice President - 1992 215,000 217,975 * 30,000 $15,714 *
Administrative
Services
William A.
Fickling, Jr. 1993 415,000 -- $121,011 -- -- $2,474,941
Former Chairman of 1992 800,000 726,000 * 2,220,336 -- *
the Board of 1991 691,696 605,234 * -- -- *
Directors and Chief
Executive Officer
________________
<FN>
* Under the rules of the Securities and Exchange Commission, no disclosure is required for these
items in 1992 and 1991.
(1) Includes, for Mr. Wingfield, primarily country club dues of $15,998, car allowance of $12,000 and
an administrative services allowance of $7,939. The amounts for Messrs. Crawford and Drinkard are
for the reimbursement of taxes due to the taxability of certain group life insurance coverages.
The amount for Mr. Fickling includes primarily the payment by the Company of tax preparation fees
of $100,350.
(2) Represents the number of stock options granted under the Company's 1992 Stock Option Plan.
(3) For Mr. Fickling, includes severance pay of $2,075,000 and an Annual Incentive Plan bonus of
$242,849, as required by his employment agreement, $113,864 of accrued vacation pay paid to him
subsequent to his termination, the book value of his company car of $12,613, ESOP contributions of
$28,047, 401K plan contributions of $2,003 and premiums paid for term life insurance of $565. For
the current executive officers, includes the following: (a) contributions to ESOP, $27,163,
$27,734 and $28,294 for Mr. Crawford, Mr. Drinkard and Mr. Wingfield, respectively; (b)
contributions to the Company's 401-K Plan, $2,003, $1,144 and $1,969 for Mr. Crawford, Mr.
Drinkard and Mr. Wingfield, respectively; and (c) premiums paid for term life insurance $883, $928
and $737 for Mr. Crawford, Mr. Drinkard and Mr. Wingfield, respectively.
</TABLE>
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<TABLE>
Aggregated Option/SAR Exercises in Fiscal 1993
and Option/SAR Values at September 30, 1993
The following table provides information related to options exercised by
the executive officers during fiscal 1993, and the number and value of options
held on September 30, 1993.
<CAPTION>
Value of Unexercised
In-the-Money
Number of Options/SARs
Shares Value Unexercised Option/SARs at September 30, 1993
Acquired on Realized at September 30, 1993 ($)(2)
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
E. Mac Crawford 10,000 $170,775 336,244 229,196 $ 6,430,541 $4,415,461
Lawrence W. Drinkard 20,000 337,800 109,300 86,000 2,099,885 1,656,790
C. Clark Wingfield 12,000 215,430 6,150 12,000 115,590 231,180
William A.
Fickling, Jr.(3) -- -- 2,238,861 -- 51,911,456 --
________________
<FN>
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise, multiplied by the number of shares to which the exercise
relates.
(2) The closing price for the Company's Common Stock as reported by the
American Stock Exchange on September 30, 1993 was $23.625. Value is
calculated on the basis of the difference between the per share option
exercise price (for in the money options, the per share option prices are
$4.36 for Messrs. Crawford, Drinkard and Wingfield and $0.25 for Mr.
Fickling) and $23.625, multiplied by the number of shares of Common Stock
underlying the in the money options.
(3) Chief Executive Officer of the Company until March 4, 1993.
</TABLE>
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Compensation Committee") of the Board of
Directors is responsible for establishing the policies relating to and the
components of executive officer compensation. The Compensation Committee was
organized and the two members were appointed on August 27, 1992, at the first
Board of Directors meeting held after consummation of the Company's Chapter 11
Plan of Reorganization on July 21, 1992. Prior to organization of the
Compensation Committee, the terms of the Company's 1992 Stock Option Plan and
the terms of employment agreements between the Company and three of its
executive officers, including the present and former chief executive officers,
had been determined by negotiations between the Company and an unofficial
committee of the Company's unsecured creditors held prior to the time the
Company filed its "prepackaged" Chapter 11 Bankruptcy proceeding on June 2,
1992. Accordingly, except for the 1993 fiscal year Annual Incentive Plan and
base salary adjustments (both discussed below), executive officer compensation
for the 1993 fiscal year was not established by the Compensation Committee.
Except for executive officer compensation matters that were determined
prior to organization of the Compensation Committee, the Compensation
Committee approves the design of all compensation plans applicable to
executive officers, reviews and approves performance goals, establishes award
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opportunities, determines appropriate base salary increases, approves
incentive award payouts, and oversees the ongoing operation of the various
plans as they relate to executive officers. The Compensation Committee
consists of directors who are not employees of the Company and who are not
eligible to participate in any of the compensation plans that it administers.
The Company and the Compensation Committee retained an independent
compensation consultant to advise the Compensation Committee with respect to
the plans that will be considered by stockholders at the 1994 Annual Meeting.
Policies. Executive officer compensation for fiscal 1993 consisted of
base salaries for executive officers and the Annual Incentive Plan. The
minimum 1993 base salaries of the Company's present and former chief executive
officers and chief financial officer were established by employment agreements
executed prior to organization of the Compensation Committee, as described
above. After its appointment in August 1992, the Compensation Committee
approved an approximately 4% increase for fiscal 1993 in the base salaries of
the three executive officers whose minimum base salaries were set by the terms
of their employment agreements and a 4.7% increase for fiscal 1993 in Mr.
Wingfield's base salary. These base salary adjustments were approved
primarily because of the Company's fiscal 1992 operating results, which
exceeded fiscal 1991 operating income. In addition to fixed base salaries for
executive officers, the Compensation Committee's policy regarding annual
compensation includes providing each executive officer a performance-based
opportunity to earn a bonus equal to a significant percentage of base salary.
The bonus is based on the operating income criterion described below under
"Annual Incentive Plan."
With regard to long-term incentive compensation for fiscal 1994 and
subsequent years, the proposed 1994 Stock Option Plan does not contain any
performance-based criteria in order for options granted to executive officers
to vest. In the judgment of the Compensation Committee, these are not
necessary because (1) the holding of the options granted creates incentive for
executive officers to manage the Company's business so that the Common Stock
will increase in value over time and (2) the options result in realizable
benefits to executive officers only if the value of the Common Stock increases
over the term (10 years) of each option.
Annual Incentive Plan. Under the Annual Incentive Plan, annual bonuses
for executive officers are payable as a percentage of base salary based on an
operating income (net revenue less operating and bad debt expenses) target
that is established by the Compensation Committee after review of the
Company's budget for the fiscal year. The Compensation Committee believes
that operating income was an appropriate measure of the Company's 1993
performance, as opposed to net income, because the Company's net income is
determined after certain charges (such as amortization of excess
reorganization value and ESOP expense) that are not based on the Company's
performance. If the operating income target is met, executive officers earn a
bonus of between 40% and 50% of base salary. If the Company achieves greater
than 90% of the operating income target, but less than target, a threshold
bonus of between .6% and .8% of base salary is earned, and the bonus increases
to between 39.8% and 49.8% of base salary as operating income increases to the
operating income target. If the target is exceeded, bonuses are increased to
a maximum of 85% of base salary when operating income equals or exceeds 120%
of the target.
<PAGE>
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Chief Executive Officer Compensation. In fiscal 1993, the compensation
of E. Mac Crawford, the Company's Chief Executive Officer, consisted of a base
salary of $520,000 and an annual bonus under the Annual Incentive Plan of
$293,280. Mr. Crawford's minimum base salary for fiscal 1993 of $500,000 was
established by the terms of his employment agreement and was increased by 4%
for fiscal 1993 for the reason described above.
Under the Annual Incentive Plan targets established by the Compensation
Committee, fiscal 1993 operating income was 103.7% of the targeted operating
income level, and Mr. Crawford received, pursuant to the provisions of the
plan, a bonus equal to 56.4% of his base salary. Accordingly, the
performance-based portion of Mr. Crawford's fiscal 1993 compensation was based
on the Company's operating income performance compared to a target established
by the Compensation Committee.
Compensation Committee Members:
Andre C. Dimitriadis
Michael D. Hernandez
PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total return on
$100 invested on July 22, 1992, in the Company's Common Stock, the S&P 500
Composite Index (the "S&P 500") and the S&P Hospital Management Index (the
"S&P HMI"). "Cumulative total return" includes stock price appreciation plus
dividends paid, with cash dividends reinvested on the date paid; but the term
excludes trading commissions and taxes. Because the Company's Common Stock
began publicly trading on July 22, 1992, the chart set forth below begins on
July 22, 1992, and uses as the beginning price for the Company its initial
opening price of $7.75.
<TABLE>
CUMULATIVE TOTAL RETURNS
ON $100 INVESTED ON JULY 22, 1992
<CAPTION>
July 22 September 30 September 30
1992 1992 1993
<S> <C> <C> <C>
Company $100 $ 79 $305
S&P 500 $100 $102 $115
S&P HMI $100 $ 87 $111
</TABLE>
OTHER PLANS
Employment Agreements
Upon consummation of the Plan on July 21, 1992, the Company entered into
employment agreements with Messrs. Crawford and Drinkard, for terms beginning
on July 21, 1992, and ending on September 30, 1995. The agreements provide
for base salaries (Mr. Crawford - $500,000 and Mr. Drinkard - $335,000) and
for bonuses and life and disability insurance benefits that are competitive
with similar benefits for comparable positions within the investor-owned
hospital industry. The agreements also provide for severance payments
<PAGE>
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upon termination without cause (including certain constructive termination
events), termination due to death or disability and termination due to a
change in control of the Company. Upon any such termination, the employee
will be paid the greater of his base salary through September 30, 1995 or his
base salary for a period of two years and amounts accrued for the employee
through the date of termination under the Annual Incentive Plan and other
bonus plans, if any. The terms of the two employment agreements were
negotiated by the Company and a committee of unsecured creditors prior to
consummation of the Plan.
<TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of December 3, 1993, information
concerning ownership of shares of Common Stock by directors and officers.
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name Ownership Total Outstanding
<S> <C> <C>
E. Mac Crawford 336,876 (1) 1.33%
Lawrence W. Drinkard 111,046 (1) .44%
C. Clark Wingfield 6,453 (1) (3)
Andre C. Dimitriadis 7,000 (2) (3)
Raymond H. Kiefer 5,000 (2) (3)
Edwin M. Banks 5,500 (2) (3)
Michael D. Hernandez 5,000 (2) (3)
All directors and executive
officers as a group (7 persons) 476,875 (4) 1.87%
__________________
<FN>
(1) Includes 336,594, 109,599 and 6,201 shares that Mr. Crawford, Mr.
Drinkard and Mr. Wingfield, respectively, have the present right to
acquire upon exercise of options and warrants.
(2) Includes 5,000 shares for each that Mr. Dimitriadis, Mr. Kiefer, Mr.
Banks and Mr. Hernandez have the present right to acquire upon the
exercise of options.
(3) Less than .1% of total outstanding.
(4) Includes 472,394 shares that the directors and executive officers have
the present right to acquire upon exercise of options and warrants.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 21, 1992, the Company entered into an employment agreement with
William A. Fickling, Jr., the former Chairman of the Board of Directors of the
Company. The agreement provided for severance payments upon termination
without cause. Mr. Fickling's employment was terminated without cause on
March 4, 1993, and the Company recorded severance expense of approximately
$2.1 million and paid Mr. Fickling approximately $243,000 in incentive bonus
under the terms of Mr. Fickling's employment agreement. The $2.1 million
severance is being paid to Mr. Fickling in semi-monthly installments through
September 1995.
<PAGE>
<PAGE>
Upon consummation of the Plan, the Company implemented the 1992 Stock
Option Plan. Mr. Fickling was granted options under the 1992 Stock Option
Plan to purchase approximately 2.2 million shares at exercise prices of either
$4.36 per share or $9.60 per share. Under the terms of the plan, if Mr.
Fickling's employment with the Company were terminated without cause and
certain financial targets were satisfied, the option prices would be reduced
to $.25 per share and all options would become immediately vested. On March
4, 1993, all of Mr. Fickling's options vested and the option prices were
reduced to $.25 per share.
The Company owns 50% of the Charter Medical Building in Macon, Georgia,
and leases approximately 88,000 square feet of office space in such building
for use as its corporate headquarters. The lease, which expires on
September 30, 1994, provides for an average annual rental of approximately
$1,189,000 (approximately $13.50 average per square foot per year).
Mr. Fickling and his father's estate each owns 12.5% of the building. During
fiscal 1993 each had an interest of approximately $149,000 in rental payments
made by the Company.
On September 15, 1993, the Company sold its 19.8% ownership interest
(plus its right to acquire an additional 9.6% interest for approximately $2
million) in Beech Street of California, Inc. ("Beech Street") to the children
of Mr. Fickling for approximately $5.5 million, plus the right to receive
additional consideration, if certain events (i.e. a public offering of Beech
Street stock or if Beech Street sells 50% or more of its assets) occur within
two years. The Company obtained a fairness opinion by an independent
appraisal firm stating that the financial consideration was fair. The Company
acquired its ownership interest in a series of related transactions beginning
in May, 1989, for a total purchase price of $2,956,000. Beech Street was,
prior to May, 1989, a wholly owned subsidiary of Beech Street, Inc., in which
Mr. Fickling beneficially owns a majority of the outstanding stock. During
the period of its ownership, the Company received $1,242,000 in dividend
distributions from Beech Street.
Beech Street provides, among other things, utilization review services
and operates preferred provider organizations ("PPOs") in various states.
Under agreements effective January 1, 1991, Beech Street provides utilization
review services and PPO services for the Company's self-insured medical
plans. The Company paid approximately $124,000 to Beech Street during fiscal
1993 for utilization review services. Beech Street's PPO services permit the
Company's employees and their covered dependents to utilize a Beech Street
PPO. In fiscal 1993, the Company paid Beech Street a fixed fee per enrolled
participant for PPO services (which aggregated approximately $87,000).
The Company also has agreements with Beech Street where certain of the
Company's hospitals provide services to employers (and their related employee
and covered dependent groups) who have entered into agreements with Beech
Street to utilize a Beech Street PPO for hospital and other healthcare
services. Such agreements provide for covered services to be rendered under
terms (including discounts from the hospital's normal charges) which
management of the Company believes are customary for hospital PPO agreements.
The Beech Street PPO reviews claims and serves as an intermediary between the
Company's hospitals and the contracting employers. The Company derived
approximately $21.4 million, $14.8 million and $11.5 million in revenues from
these agreements during fiscal 1993, 1992 and 1991, respectively. The
aggregate discount from customary charges was 12% in fiscal 1993 and was 17%
in fiscal 1992 and 1991.
<PAGE>
<PAGE>
In fiscal 1993, prior to the sale of Beech Street, Beech Street paid
approximatedly $160,000 in management fees and expense reimbursements to
Mulberry Street Investment Company ("Mulberry Street"). Mulberry Street
provided senior level management and financial services for Beech Street. Mr.
Fickling beneficially owns all of the capital stock of Mulberry Street.
During fiscal 1991 the Company's Board of Directors, with Mr. Fickling
abstaining, authorized the payment by the Company of the reasonable legal
expenses and disbursements of the law firms serving as counsel to
Mr. Fickling, his family and related trusts and entities in all matters
reasonably related to the restructuring of the Company, which services
included not only matters relating to ownership of the Company's formerly
outstanding Class B Common Stock and Series B, C and D Preferred Stock, but
also services relating to other matters that were reasonable and appropriate
to resolve or consider in connection with the restructuring. During fiscal
1993 the Company paid aggregate fees and expenses of approximately $142,000 to
such firms with respect to such services.
During fiscal 1993 the Company had two agreements in which Fickling &
Walker Company, a licensed real estate brokerage firm of which the estate of
Mr. Fickling's father owns 50%, represented the Company in the listing of
improved parcels of real estate for sale. Fickling & Walker Company received
a $48,750 commission from one such sale and, should the remaining parcel be
sold at its estimated sales price, would receive $46,500 in additional
commission.
Gerald L. McManis, a nominee for director, is the Chairman of the Board,
President and owner of 92% of the stock of McManis Associates, Inc. ("MAI"), a
healthcare development and management consulting firm. During fiscal 1993,
MAI provided consulting services for the Company related to the development of
strategic plans and a review of the Company's business processes. The Company
incurred $1,003,041 in fees for such services during fiscal 1993, and
reimbursed MAI $127,762 for expenses.
PROPOSED DIRECTORS' UNIT AWARD PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Directors' Unit Award Plan (the "Unit Plan"), which provides for the award of
a maximum of 15,000 Units (the "Units") that, upon vesting under the terms of
the Unit Plan, would result in the issuance of an aggregate of 15,000 shares
of Common Stock in settlement of Units. The purpose of the Plan is to provide
an incentive and a means of encouraging stock ownership by non-employee
Directors of the Company.
The Unit Plan provides for the award on February 18, 1994, or the date a
participant first becomes a Director, to each Director who is not an employee
of the Company of 2,500 Units. Upon vesting of the Units awarded to a
Director, the Company will settle the Units by issuing to the Director a
number of shares of the Company's Common Stock equal to the number of vested
Units. The number of shares of the Company's Common Stock issuable upon
vesting of Units is subject to adjustment to reflect certain changes in
capitalization of the Company, or a merger or reorganization. The closing
price per share of the Common Stock on the American Stock Exchange on
January 13, 1994, was $24 7/8.
Units awarded under the Unit Plan vest when the participant ceases to be
a non-employee Director of the Company. Within thirty days after vesting, the
Company will settle the vested Units by issuing a number of shares of Common
<PAGE>
<PAGE>
Stock to the Participant equal to the number of Units vested, subject to
adjustment as described above. The number of Units that vest upon a
participant's ceasing to be a non-employee Director of the Company is 2,500
except as follows. If a Director ceases to be a non-employee Director of the
Company due to voluntary resignation, voluntary decision not to stand for
reelection, removal as a Director by the stockholders for cause or the
participant's becoming an employee of the Company or a subsidiary, the number
of vested Units shall be 500 times the number of anniversary dates (but not
more than five) that have occurred prior to the time the Director ceases to be
a non-employee Director of the Company for such reasons. If a Director ceases
to be a non-employee Director of the Company for any other reason, including
death and disability, the number of Units vested is 2,500.
Units are not transferable, but, in the event of death of a Participant,
shares of Common Stock issuable upon settlement of Units will be issued to the
Participant's estate, heirs or legal representatives. Upon settlement of
Units and issuance of shares of Common Stock, the participant is required to
pay to the Company the amount, if any, which the Company is required to
withhold under applicable federal or state income tax laws.
The Board of Directors has the right at any time to terminate or amend
the Unit Plan, provided such action does not affect adversely any previously
awarded Units without the written consent of any Director affected. Certain
amendments may require stockholder approval in order to comply with Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act").
Under the Internal Revenue Code and current regulations, a participant in
the Unit Plan will not recognize any income for federal income tax purposes at
the time Units are awarded. Such participant will recognize ordinary income
for federal income tax purposes at the time he receives shares of Common Stock
upon settlement of Units in an amount equal to the fair market value of the
shares at the time of delivery. The amount of income recognized by such
participant upon acquisition of the shares will be the basis of such shares
for computation of gain or loss realized upon the ultimate disposition of such
shares. If such participant sells the shares, any profit realized in excess
of his basis will result in short or long-term capital gain or loss.
The Company is entitled to a federal income tax deduction with respect to
Units in an amount equal to the ordinary income realized by the participant
upon settlement of the Units.
Approval of the Unit Plan requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock cast at the Annual
Meeting.
The Board of Directors unanimously recommends a vote FOR approval of the
Directors' Unit Award Plan.
PROPOSED 1994 STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
1994 Stock Option Plan (the "Option Plan"), covering 1.3 million shares of
Common Stock. The principal purpose of the Option Plan is to promote the
interests of the Company and its stockholders by attracting, retaining and
stimulating the performance of management by providing participants incentive
opportunities tied to the Company's long-term performance. The Option Plan
<PAGE>
<PAGE>
will enable eligible executive officers, officers and key employees of the
Company and its subsidiaries to acquire proprietary interests in the Company
through the ownership of Common Stock.
Under the terms of the Option Plan, options can be granted to
participants to purchase, out of the authorized but unissued Common Stock or
out of shares of Common Stock held in the Company's treasury, or partly out of
each, a total of 1.3 million shares of Common Stock. Both the number of
shares of Common Stock covered by the Option Plan and the per share exercise
price of options granted are subject to adjustment upon certain changes in
capitalization of the Company, such as stock splits or stock dividends.
Options granted under the Option Plan are nonqualified stock options.
The Option Plan is administered by the Compensation Committee or such
committee as may from time to time be designated by the Board of Directors to
administer the Option Plan (the "Committee"). The Committee is required to be
comprised of not fewer than two members of the Board of Directors, each of
whom is a "disinterested person" as that term is defined in Rule 16b-3 under
the Exchange Act. The Committee administers the Option Plan, selects the
eligible participants to whom options will be awarded, determines the number
of shares for which options are to be awarded to each eligible participant,
and determines the terms and conditions of each option, subject to the
provisions of the Option Plan. The duties of the Committee in granting
options to officers and key employees (but not to executive officers or any
other person subject to Section 16 of the Exchange Act) may be delegated to
the Company's Chief Executive Officer, subject to any review, approval or
notification required by the Committee or as may otherwise be required by
law. The Committee may from time to time prescribe, amend and rescind such
rules, regulations, provisions and procedures, consistent with the terms of
the Option Plan, as, in its opinion, may be advisable in the administration of
the Option Plan and approves the provisions of the stock option agreements
required by the Option Plan.
Executive officers (3 persons) and officers (10 persons) of the Company
and key employees (approximately 125 persons) of the Company and its
subsidiaries are eligible to participate in the Option Plan.
<PAGE>
<PAGE>
<TABLE>
The following table indicates the options that the Committee presently
intends to grant under the Option Plan on or shortly after the date of the
Annual Meeting, subject to approval of the Option Plan by the stockholders at
the Annual Meeting:
<CAPTION>
Name and Position Number of Options
<S> <C>
E. Mac Crawford, Chairman of the Board
and President 90,000
Lawrence W. Drinkard, Executive Vice
President and Chief Financial Officer
and Director 35,500
C. Clark Wingfield, Vice President-
Administrative Services 17,500
Executive Officers as a Group (3 persons) 143,000
Non-Executive Director Group --
Non-Executive Officer Employee
Group (135 persons) 752,000
</TABLE>
The above options, and options subsequently granted, will have a per
share exercise price equal to the mean between the high and low sales prices
per share of the Common Stock on the American Stock Exchange on the date of
grant of the options. The closing price of the Common Stock on January 14,
1994 was $ per share. More than one grant of an option may be made to the
same person, but no person may be granted options to purchase more than
150,000 shares.
Options granted under the Option Plan will be exercisable to the extent
vested. An option vests at the rate of 33-1/3% of the shares covered by the
option on each of the first three anniversary dates of the grant of the option
if the optionee is an employee of the Company or a subsidiary of the Company
on such dates. Options granted pursuant to the Option Plan which are vested
may be exercised in whole or in part by the optionee from time to time, but in
no event later than ten years after the date of grant.
The exercise price is payable upon the exercise of the option in cash or
in shares of Common Stock, or a combination of the foregoing, but payment of
all or a portion of the exercise price by delivery of shares of Common Stock
is permitted only at the discretion of the Company. In the event of any
payment with shares of Common Stock, such shares will be valued on the basis
of their fair market value determined as of the day prior to the date of
delivery to the Company.
The Option Plan provides that: (i) upon termination of employment for
any reason except death or total disability, unvested options granted will
terminate on the date of termination of employment and vested options on the
date of termination may be exercised during the 90 days following termination
<PAGE>
<PAGE>
(but not after expiration of the term of the option); (ii) upon total
disability of a participant, vested options on the date the participant became
totally disabled may be exercised by the participant within 12 months from the
date of total disability of the participant (but not after expiration of the
term of the option); and (iii) upon the death of a participant, the vested
options on the date of the participant's death may be exercised by the legal
representative, heir or legatee within 12 months of the date of death of the
participant (but not after expiration of the term of the option).
Options under the Option Plan must be granted on or before December 31,
1996. No option granted under the Option Plan shall be assignable or
transferrable by the participant except by will, by the laws of descent and
distribution or pursuant to certain domestic relations orders.
Subject to certain limitations set forth in the Option Plan, the Board
may at any time or from time to time terminate, modify or amend the Option
Plan. No amendment shall be made without stockholder approval if such
approval is required for continued compliance with Rule 16b-3 of the Exchange
Act, by other applicable law or regulation or by the rules of any stock
exchange on which the Common Stock is listed for trading. Under Rule 16b-3
stockholder approval would be required for any amendment that would (i)
materially increase the maximum number of shares for which options may be
awarded under the Option Plan, or (ii) materially modify the eligibility
requirements for participation in the Option Plan, or (iii) materially
increase the benefits accruing to participants under the Option Plan. The
termination or any modification or amendment of the Option Plan or options
thereunder shall not, without the consent of the participant, affect such
person's rights under an option previously granted.
Under the Internal Revenue Code and current regulations, a participant is
not subject to any federal income tax upon the grant of an option under the
Option Plan and the grant of an option will not result in an income tax
deduction for the Company.
Upon the exercise of an option, the participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
purchased over the option price. At that time the Company will be entitled to
a deduction as compensation expense in an amount equal to the amount taxable
to the participant as income, provided the Company satisfies applicable
federal income tax withholding requirements. The sale or other taxable
disposition of shares of Common Stock acquired upon exercise of an option
generally will result in a short or long-term capital gain or loss equal to
the difference between the amount realized on the disposition and the fair
market value of the share of Common Stock when the option was exercised.
If previously acquired shares are used to exercise an option, the
participant will not recognize any gain by reason of such use, and the tax
basis of the shares received upon such exercise is as follows: (i) for the
newly received shares equal to the number of shares surrendered by the
participant, the basis is equal to the basis of the surrendered shares, and
the holding period does not start anew, and (ii) the basis of the balance of
the newly acquired shares is the fair market value on the date of exercise.
The latter amount is subject to federal income taxes at ordinary rates in the
year of exercise, and the Company will be entitled to a deduction as
compensation expense in an amount equal to the amount taxable to the
participant as income.
<PAGE>
<PAGE>
Approval of the 1994 Stock Option Plan requires the approval of a
majority of the votes cast at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR approval of the
1994 Stock Option Plan by the stockholders.
PROPOSED 1994 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
1994 Employee Stock Purchase Plan (the "Employee Stock Plan"), covering
600,000 shares of Common Stock. The purpose of the Employee Stock Plan is to
provide eligible employees of the Company and its subsidiaries with an
opportunity to be compensated through the benefits of stock ownership and to
acquire an interest in the Company through the purchase of Common Stock. It is
the intention of the Company that the Employee Stock Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
(the "Code").
The Employee Stock Plan will be administered by a committee (the
"Employee Stock Plan Committee") consisting of not less than three members
appointed by the Chief Executive Officer of the Company. Each member of the
Employee Stock Plan Committee will be either a Director, an officer or an
employee of the Company. The Employee Stock Plan Committee will be vested with
authority to make, administer and interpret such rules and regulations as it
deems necessary to administer the Employee Stock Plan, and any determination,
decision or action of the Employee Stock Plan Committee in connection with the
construction, interpretation, administration or application of the Employee
Stock Plan will be final and binding on all participants and all persons
claiming under or through any participant.
Any person (other than an officer of the Company) who is customarily
employed for more than 20 hours per week by the Company or any of the
Company's subsidiaries designated by the Employee Stock Plan Committee, and
who was employed on or before ninety days preceding the first day of an
offering period, will be eligible to participate in the Employee Stock Plan
for such offering period. No officer of the Company can participate in the
Employee Stock Plan, except for participation in an offering period that
begins prior to such person's election as an officer. As of November 30, 1993,
there were approximately 6,400 employees of the Company and its subsidiaries
who were eligible to participate in the Employee Stock Plan.
The Employee Stock Plan consists of three offerings of a maximum of
300,000 shares each, except that the maximum number of shares offered in the
third offering period may not exceed the then remaining number of shares
available under the Employee Stock Plan. The beginning date and ending date
of each offering period will be established by the Employee Stock Plan
Committee; provided that each offering period will have a term of not less
than six months and not more than 12 months and that the first offering period
will not begin before April 1, 1994, and the last offering period will end on
or before March 31, 1997. On the first date of each offering period, a
participant will be granted an option to purchase a maximum number of shares
of Common Stock equal to the greatest whole number that is less than (i) the
amount elected by the participant to be withheld from such participant's
salary (but not to exceed 10%) as estimated on the first day of the offering
period, divided by (ii) the figure which represents 85% of the mean of the
high and low sales prices of the Common Stock on the American Stock Exchange
<PAGE>
<PAGE>
on the first day of an offering period. The closing price of the Common Stock
on January 13, 1994 was $24 7/8 per share. Payment for shares to be purchased
under the Employee Stock Plan will be made by payroll deductions.
No participant will be granted an option (i) if, immediately after the
grant, the participant would own stock and options possessing 5% or more of
the total combined voting power or value of all classes of stock of the
Company or any subsidiary of the Company, or (ii) which permits his or her
rights to purchase stock under all employee stock purchase plans to accrue at
a rate which exceeds $25,000 of the fair market value of the stock for each
calendar year in which such option is outstanding at any time.
A participant may withdraw from the Employee Stock Plan and all of the
participant's payroll deductions credited to his or her account will be paid
to him or her promptly after receipt of the notice of withdrawal, and no
further payroll deductions will be made during that offering period. A
participant's withdrawal will not have any effect upon his or her eligibility
to participate in any similar plan which may be thereafter adopted by the
Company or in any subsequent offering period. Upon termination of a
participant's employment for any reason, the payroll deductions credited to
the participant's Employee Stock Plan account will be returned to the
participant.
Unless a participant gives written notice of withdrawal from the Employee
Stock Plan to the Company, the option to purchase shares during an offering
period will be exercised automatically for the participant on the day on which
the offering period terminates. The price at which the participant's option
will be exercised is 85% of the mean of the high and low sales prices of the
Common Stock on the American Stock Exchange on the first day of the offering
period. If the total number of shares for which options are to be exercised
exceeds the number of shares then available under the Employee Stock Plan, the
Company shall make a pro rata allocation of the shares available.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Employee Stock Plan may be assigned, transferred, pledged or otherwise
disposed of by a participant. The Company may treat any such act as an
election to withdraw funds.
The Board of Directors of the Company may at any time terminate or amend
the Employee Stock Plan. No such termination can affect options previously
granted, and no amendment can make any change in options theretofore granted
which would adversely affect the rights of any participant. No amendment can
be made prior approval of the stockholders of the Company if such amendment
would: (i) require the sale of more shares than are authorized under the
Employee Stock Plan; or (ii) permit payroll deductions at a rate in excess of
10% of a participant's base pay.
The amounts withheld from a participant's pay under the Employee Stock
Plan will be taxable income to the participant and must be included in the
participant's gross income for federal income tax purposes in the year which
such amounts otherwise would have been received.
A participant will not be required to recognize any income for federal
income tax purposes either at the time the participant is granted an option
(which will be on the first day of the offering period) or by virtue of the
<PAGE>
<PAGE>
exercise of the option (which will take place on the last day of such offering
period). The federal income tax consequences of a sale or disposition of
shares acquired under the Employee Stock Plan depend in part on the length of
time the shares are held by a participant before such sale or disposition. If
a participant sells or otherwise disposes of shares acquired under the
Employee Stock Plan (other than any transfer resulting from death) within two
years after the date on which the option to purchase such shares is granted to
him ("Two-Year Period"), the participant must recognize ordinary income in the
year of such disposition in an amount equal to the excess of (i) the fair
market value of the shares on the date such shares are transferred to the
participant over (ii) the option price. The amount of ordinary income
recognized by the participant will be added to the participant's basis in such
shares. Any gain realized on a sale in excess of the participant's basis
(after increasing such basis in such shares by the amount of the ordinary
income recognized) will be taxed as capital gain, and any loss realized (after
increasing such basis in such shares by the ordinary income recognized) will
be a capital loss.
If a participant sells shares acquired under the Employee Stock Plan
after holding such shares for the Two-Year Period or the participant dies, the
participant or the participant's estate must include as ordinary income in the
year of sale (or the taxable year ending upon death) an amount equal to the
lesser of (i) the excess of the fair market value of the shares on the date
the option was granted over the option price computed on such date, or (ii)
the excess of the fair market value of the shares at the time of sale of the
shares or on the date of death over the option price. Except in the case of a
transfer as a result of death, the amount of ordinary income recognized by the
participant will be added to the participant's basis in such shares. Any gain
realized upon the sale in excess of such basis will be taxed as a long-term
capital gain. Any loss realized will be treated as long-term capital loss.
The Company will not receive any income tax deduction as a result of
issuing shares pursuant to the Employee Stock Plan, except upon sale or
disposition of shares by a participant within the Two-Year Period. In such an
event, the Company will be entitled to a deduction equal to the amount
included as ordinary income to the participant with respect to the sale or
disposition of such shares.
Approval of the Employee Stock Plan requires the approval of a majority
of the votes cast at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR approval of the
Employee Stock Plan by the stockholders.
PROPOSED AMENDMENT TO DIRECTORS' STOCK OPTION PLAN
Description of Amendment
The amendment to the Directors' Stock option Plan (the "Directors'
Plan"), subject to approval by stockholders at the Annual Meeting, increases
the total number of shares of Common Stock on which options may be granted to
non-employee Directors from 125,000 to 175,000 shares. The amendment was
adopted by the Board of Directors in December 1993 and, in effect, makes
available a total of 75,000 shares for grants of options to purchase 25,000
shares of Common Stock to Mr. Gerald L. McManis, a nominee for the office of
director, and to each non-employee Director appointed by the Board of
Directors to fill the two existing vacancies on the Board of Directors.
<PAGE>
<PAGE>
Description of Plan
The Directors' Plan was adopted by the Board of Directors in December
1992 and approved by the stockholders at the 1993 annual meeting. The
Directors' Plan, prior to effectiveness of the amendment, provided for the
grant of options to non-employee members of the Company's Board of Directors
to purchase up to a total of 125,000 shares of the Company's Common Stock,
subject to adjustments to reflect certain changes in capitalization.
The Directors' Plan is intended as an incentive and as a means of
encouraging stock ownership by directors. It provides for the grant on
February 4, l993, or the date an optionee first becomes a director, to each
non-employee director an option to purchase 25,000 shares of the Company's
Common Stock (subject to adjustment for stock splits and similar events). The
exercise price is the average of the mean between the high and low sales
prices per share of the Common Stock on the American Stock Exchange for the
ten trading days ending on the date of grant. The closing price per share of
the Common Stock on the American Stock Exchange on January 13, 1994, was
$24 7/8. Persons elected or appointed to the Board as non-employee directors
subsequent to February 4, 1993 will be granted, effective on the date of their
election or appointment, an option to purchase 25,000 shares of Common Stock
for so long as there are shares available under the Directors' Plan.
Options granted can be exercised from the date of vesting until
February 1, 2003. No options can be granted after February 4, 1998. Options
vest 20% when granted and an additional 20% on each successive February 1 for
a period of four years, if the optionee continues to serve as a non-employee
director on the applicable February 1. Unvested options vest in full if and
when a director ceases serving as a director for reasons other than a
voluntary resignation, a voluntary decision not to stand for reelection, or
removal for cause by the stockholders. Options are not transferable but can be
exercised, in the event of death, by an optionee's estate, heirs or legal
representatives for a period of ninety days after death.
The exercise price for an option is payable in full upon the exercise.
Payment may be made in cash or by delivery of shares of Common Stock, by
authorizing the Company to withhold shares upon exercise in an amount (based
on the fair market value) equal to the exercise price or by a combination of
the foregoing. The optionee must also pay an amount equal to the amount, if
any, which the Company is required to withhold under applicable federal or
state income tax laws.
The Board of Directors has the right at any time to terminate or amend
the Directors' Plan, provided such action does not affect adversely any
unexercised option granted under the Directors' Plan without the written
consent of any optionee affected. Certain amendments may require stockholder
approval to comply with Rule 16b-3 under the Exchange Act.
Shares of the Company's Common Stock to be issued upon exercise of the
options will be either authorized but unissued shares or treasury shares.
On February 4, l993, each non-employee director (Messrs. Banks,
Dimitriadis, Hernandez and Kiefer) was granted an option under the Directors
Plan to purchase 25,000 shares of Common Stock for a per share exercise price
of $14.56. If Mr. McManis is elected a director at the Annual Meeting, he will
<PAGE>
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be granted an option to purchase 25,000 shares of Common Stock for a per share
exercise price equal to the average of the mean between the high and low sales
prices per share of the Common Stock for the ten trading days ending on the
date of the Annual Meeting.
Under the Internal Revenue Code and current regulations, a participant in
the Directors' Plan is not subject to any federal income tax upon the grant of
an option; and the grant of an option will not result in an income tax
deduction for the Company. Upon exercise of an option, the participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares purchased over the option price. At that time, the
Company will be entitled to a deduction as compensation expense in an amount
equal to the amount taxable to the participant as income, provided the Company
satisfies applicable federal income tax withholding requirements. The amount
of income recognized by such participant upon purchase of the shares will be
added to the basis of such shares for computation of gain or loss realized
upon the ultimate disposition of such shares. Any gain realized in excess of
his basis will be taxed as a capital gain; any loss realized will be a capital
loss. The capital gain or loss will be long-term if the participant holds the
shares for one year after the date of exercise before selling them.
If previously acquired shares are used to exercise an option, the
participant will not recognize any gain by reason of such use, and the tax
basis of the shares received upon such exercise is as follows: (i) for the
newly received shares equal to the number of shares surrendered by the
participant, the basis is equal to the basis of the surrendered shares, and
the holding period does not start anew, and (ii) the basis of the balance of
the newly acquired shares is the fair market value on the date of exercise.
The latter amount is subject to federal income taxes at ordinary rates in the
year of exercise, and the Company will be entitled to a deduction as
compensation expense in an amount equal to the amount taxable to the
participant as income.
Approval of the amendment to Directors' Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
cast at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR approval of the
amendment to the Directors' Plan.
ADDITIONAL INFORMATION
Attendance. Attendance at the Annual Meeting is limited to stockholders
of record or their proxies, beneficial owners of Common Stock having evidence
of such ownership, and guests of the Company.
Stockholder Proposals. In order to be included in the proxy statement
and form of proxy for the 1995 Annual Meeting, a stockholder proposal must be
in writing and received by the Company by the close of business on
September 20, 1994. All stockholder proposals should be submitted by certified
mail, return receipt requested, to the Secretary of the Company, 577 Mulberry
Street, Macon, Georgia 31298.
Other Business. Management does not know of any matter to be brought
before the Annual Meeting other than those referred to above. If any other
matter properly comes before the meeting, all properly executed proxies
delivered pursuant to this solicitation will be voted on any such matters in
the discretion of the persons named on the enclosed proxy.
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Independent Accountants. Arthur Andersen & Co. served as the Company's
independent accountants for the fiscal year ended September 30, 1993.
Representatives of such firm will be present at the Annual Meeting, will have
an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
AVAILABLE INFORMATION. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED SEPTEMBER 30, 1993 MAY BE OBTAINED FROM THE COMPANY
UPON REQUEST TO THE COMPANY (ATTN: MS. NANCY GORE, DIRECTOR - INVESTOR
RELATIONS) AT 577 MULBERRY STREET, MACON, GEORGIA 31298
