SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CYCARE SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CYCARE SYSTEMS, INC.
7001 North Scottsdale Road
Suite 1000
Scottsdale, Arizona 85253-3644
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1996
To the Stockholders:
The 1996 Annual Meeting of Stockholders (the "Meeting") of CyCare Systems,
Inc., a Delaware Corporation (the "Company") will be held at 7001 North
Scottsdale Road, Suite 1000, Scottsdale, Arizona 85253-3644, on Tuesday, May 21,
1996, at 3:00 p.m., local time, for the following purposes:
1. To elect two directors for three-year terms expiring in 1999;
2. To amend the CyCare Systems, Inc. Certificate of Incorporation,
increasing the number of authorized shares of Common Stock by
15,000,000;
3. To amend the CyCare Systems, Inc., 1995 Long-Term Incentive Plan,
increasing the number of shares of stock available for awards by
400,000;
4. To consider and act upon any other business that may properly come
before the Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 22, 1996,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Meeting or any adjournment thereof.
A copy of the Company's Annual Report covering the year ended December 31,
1995 is enclosed, but is not deemed to be part of the official proxy soliciting
materials. Stockholders failing to receive a copy of the Annual Report may
obtain one by writing to the Secretary of the Company at the address stated
above.
Your attention is directed to the accompanying Proxy and Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Mark R. Schonau, Secretary
Scottsdale, Arizona
March 29, 1996
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY DATE, SIGN AND RETURN THE ENCLOSED
PROXY. A POSTAGE PREPAID ENVELOPE IS PROVIDED FOR MAILING. A PERSON GIVING A
PROXY HAS THE POWER TO REVOKE IT. IF YOU ATTEND THE MEETING, YOUR PROXY WILL NOT
BE COUNTED WITH RESPECT TO ANY MATTER UPON WHICH YOU VOTE IN PERSON.
<PAGE>
CYCARE SYSTEMS, INC.
7001 North Scottsdale Road
Suite 1000
Scottsdale, Arizona 85253-3644
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of CyCare Systems, Inc. (the
"Company") for the Annual Meeting of Stockholders of the Company (the "Meeting")
to be held on May 21, 1996 at the time and place and for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to the voting thereof, by giving written notice to
the Company or by voting in person at the Meeting. All valid, unrevoked proxies
will be voted as directed. In the absence of any contrary directions, proxies
will be voted in favor of each proposal set forth in the Notice of Meeting and,
with respect to such other matters as may properly come before the Meeting, in
the discretion of the appointed proxies.
Only holders of record of the Company's Common Stock (the "Common Stock")
as of the close of business on March 22, 1996 will be entitled to vote at the
Meeting. At that date, there were 5,058,170 shares of Common Stock outstanding.
Each share of Common Stock is entitled to one vote on all matters on which
stockholders may vote. There is no cumulative voting in the election of
directors.
The proxy solicitation is being made primarily by mail, although proxies
may be solicited by personal interview, telephone, telegraph or letter. The
Company will pay the cost of this solicitation, including the charges and
expenses of brokerage firms and others who forward solicitation materials to
beneficial owners of the Common Stock. The Company has arranged for First
Chicago Trust Company of New York (First Chicago) and Corporate Investor
Communications, Inc. (CIC) to serve as its proxy solicitation agents. In such
capacity, First Chicago will coordinate and oversee the distribution of the
proxy materials to, and the return of the proxy cards by, registered
stockholders, and CIC will provide similar services for beneficial owners. The
fee for such services is estimated to be $1,750 for First Chicago and $1,500 for
CIC, plus out-of-pocket expenses. This Proxy Statement and the proxy card are
being mailed to stockholders on or about March 29, 1996.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes, with one class elected each year
for a three-year term. Two current Board members, Jim H. Houtz and James L.
Schamadan, M.D., have been unanimously nominated for three-year terms expiring
in 1999. The shares represented by the enclosed proxy will be voted for the
election of Mr. Houtz and Dr. Schamadan as directors, unless a vote is withheld
from such persons. To be elected, Mr. Houtz and Dr. Schamadan must receive a
plurality of the votes of shares present in person or represented by proxy at
the Meeting and entitled to vote for election of directors. An abstention with
respect to the election of any director nominee will not be counted either in
favor or against the election of any such nominee. Members of the New York Stock
Exchange are permitted to vote their clients' proxies in their own discretion as
to the election of directors if the clients have not furnished voting
instructions within ten (10) days of the Meeting. If either of the nominees
ceases to be a candidate for election for any reason, the proxies will be voted
for a substitute nominee designated by the Board. The Board currently has no
reason to believe that either nominee will not remain a candidate for election
as a director or will be unwilling to serve as a director if elected.
<PAGE>
Information Concerning Directors and Nominees
The following table sets forth certain information as to the nominees for
director and for each director with a term expiring after 1996:
Served as
Director
Name Age Position(s) with the Company Since
- ---- --- ---------------------------- ---------
NOMINEES WITH TERMS EXPIRING IN 1999
Jim H. Houtz 60 Director; Chairman of the Board; 1969
(1) President; Chief Executive Officer
James L. Schamadan, M.D. 68 Director 1990
(2)
DIRECTORS WITH TERMS EXPIRING IN 1997
Richard J. Burgmeier 62 Director 1969
(3)
Frank H. Bertsch 70 Director 1978
(4)
DIRECTOR WITH TERM EXPIRING IN 1998
A. Theodore Engkvist (5) 61 Director 1990
- --------
(1) Mr. Houtz founded the Company in 1967 and serves as its Chairman of the
Board, President and Chief Executive Officer. In 1992, Mr. Houtz was also
named Chairman of the Board of CyData, Inc., the Company's wholly-owned
subsidiary.
(2) Dr. Schamadan is the President of the consulting group, Young Everett
Stars, Inc. He is a physician in private practice, specializing in
occupational and environmental medicine. He also serves as Chairman of the
American Foundation for Firefighter Health & Safety. From 1982 until his
retirement in 1992, he was the President and Chief Executive Officer of
the Scottsdale Memorial Hospital System. He has authored numerous
scientific publications in the field of biomedical engineering and
currently is on the Board of Directors of Medical Control, Inc., a
diversified health corporation based in Dallas, Texas.
(3) Mr. Burgmeier serves as the Company's Director of Vendor Relations and
CyCare Plaza. He has served as a consultant to the Company or as an
executive officer of the Company since 1969.
(4) Mr. Bertsch is Chairman of the Executive Committee of Flexsteel
Industries, Inc., a furniture manufacturer. He has been an executive
officer and director of that firm since 1947.
(5) Mr. Engkvist has been President of Enjo Consulting, a business consulting
firm, since 1992. Prior to that time, he served as Chairman of the Board
and Chief Executive Officer of AGS Computers, Inc., a provider of
consulting and software solutions. AGS Computers, Inc. was a subsidiary of
NYNEX. Mr. Engkvist was President of NYNEX Information Solutions Group,
Inc., a provider of communications and information systems and software,
from 1987 until 1991. Mr. Engkvist also serves on the Board of Directors
of Sequoia, Inc., a company specializing in the design, manufacture and
service of totally available computer systems.
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PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has approved and recommends that the
stockholders approve an amendment to the Company's Certificate of Incorporation
to increase the authorized shares of Common Stock from 10,000,000 shares to
25,000,000 shares. The Board of Directors of the Company believes the increase
in the authorized shares is necessary to provide the Company with the
flexibility to act in the future with respect to financing programs,
acquisitions and other corporate purposes without the delay and expense
incidental to obtaining stockholder approval each time an opportunity requiring
the issuance of shares may arise.
On February 22, 1996, the Company had 6,097,957 shares of Common Stock
issued. Also on that date, the Company had reserved shares of Common Stock for
issuance as follows: (i) 529,022 for issuance under the Company's 1995 Long-Term
Incentive Plan with a proposal in this proxy statement to increase the number of
shares available by 400,000; (ii) 46,375 for issuance under the Company's
Director Stock Plan; and (iii) 302,701 for issuance under the Company's Employee
Stock Purchase Plan.
The lack of authorized Common Stock available for issuance would
unnecessarily limit the Company's ability to pursue opportunities for future
financings, acquisitions, mergers and other transactions. The Company would also
be limited in its ability to effectuate future stock splits or stock dividends.
Although the Company has no plans to issue additional shares of Common Stock in
the near future, the Board of Directors believes that the increase in the
authorized shares of Common Stock is necessary to provide the Company with the
flexibility to pursue the types of opportunities described above without added
delay and expense.
The availability of authorized but unissued shares of Common Stock might
have the effect of preventing or discouraging an attempt by another person to
obtain control of the Company, because the additional shares could be issued by
the Board of Directors, which could dilute the stock ownership of such person.
The Company has no plans for such issuances and this proposal is not being
proposed in response to a known effort to acquire control of the Company.
Adoption of the amendment to the Certificate of Incorporation to increase
the Company's authorized Common Stock requires the vote of the majority of the
outstanding shares of the Company's Common Stock. Because they are not
affirmative votes for the proposal, abstentions and broker non-votes will have
the same effect as votes against the proposal. If the proposal is approved, the
Company intends to file an amendment to the Certificate of Incorporation shortly
after the 1996 Annual Meeting.
The Board recommends a vote FOR approval of the Amendment to Certificate of
Incorporation to Increase Authorized Shares of Common Stock.
3
<PAGE>
PROPOSAL 3
AMENDMENT OF THE CYCARE SYSTEMS, INC. 1995 LONG-TERM INCENTIVE PLAN
The Board has approved, and recommends that the stockholders approve, the
amendment of the CyCare Systems, Inc. 1995 Long-Term Incentive Plan (the
"Plan"). The Plan authorizes grants of Incentive Stock Options ("ISOs"),
Non-Qualified Stock Options ("NQSOs"), Stock Appreciation Rights ("SARs"),
Restricted Stock Performance Shares, and Dividend Equivalents to officers and
other key employees of the Company. Approximately 100 of the Company's employees
are eligible to participate in the Plan. The Plan amendment would increase the
total number of shares of Common Stock available for awards from 1,120,000 to
1,520,000.
The Board believes that use of long-term incentives as authorized under
the Plan is beneficial to the Company as a means of promoting the success and
enhancing the value of the Company by linking the personal interests of its key
employees to those of its stockholders and by providing them with an incentive
for outstanding performance. These incentives also provide the Company
flexibility in its ability to attract and retain the services of employees upon
whose judgment, interest and special effort the successful conduct of the
Company's operation is largely dependent. As of February 22, 1996, 1,120,000
shares of Common Stock are authorized for issuance under the Plan. Of these,
590,978 shares have been exercised and are included in the total number of
shares of Common Stock issued. Option grants representing 434,625 shares are
currently outstanding and 94,397 remain available for grants for future
issuance. It is the Company's policy to issue shares held in Treasury as stock
options are exercised. The Board believes that an increase in the number of
authorized shares is necessary for the continued optimal use of the Plan.
The Plan is administered by a committee appointed by the Board consisting
of at least two (2) non-employee directors (the "Committee"). The Committee has
the exclusive authority to administer the Plan, including the power to determine
eligibility, the types and sizes of awards, and the timing of awards. On March
22, 1996, the last reported sale price of the Common Stock on the New York Stock
Exchange was $27.375 per share.
DESCRIPTION OF THE AVAILABLE AWARDS
Incentive Stock Options
An ISO is a stock option that satisfies the requirements specified in
Section 422 of the Internal Revenue Code (the "Code"). Under the Code, ISOs may
only be granted to employees. In order for an option to qualify as an ISO, the
price payable to exercise the option must equal or exceed the fair market value
of the stock at the date of the grant, the option must lapse no later than 10
years from the date of the grant, and the stock subject to ISOs that are first
exercisable by an employee in any calendar year must not have a value of more
than $100,000 as of the date of grant. Certain other requirements must also be
met. The Committee shall determine the consideration to be paid to the Company
upon exercise of any options. The form of payment may include cash, Common
Stock, or other property.
An optionee will not be treated as receiving taxable income upon either
the grant of an ISO or upon the exercise of an ISO. However, the difference
between the exercise price and the fair market value on the date of exercise
will be an item of tax preference at the time of exercise in determining
liability for the alternative minimum tax, assuming that the Common Stock is
either transferable or is not subject to a substantial risk of forfeiture under
Section 83 of the Code. If at the time of exercise, the Common Stock is both
nontransferable and is subject to a substantial risk of forfeiture, the
difference between the exercise price and the fair market value of the Common
Stock (determined at the time the Common Stock becomes either transferable or
not subject to a substantial risk of forfeiture) is a tax preference item in the
year in which the Common Stock becomes either transferable or not subject to a
substantial risk of forfeiture.
If Common Stock acquired by the exercise of an ISO is not sold or
otherwise disposed of within two years from the date of its grant and is held
for at least one year after the date such Common Stock is transferred to the
optionee, any gain or loss resulting from its disposition will be treated as
long-term capital gain or loss. If such Common Stock is disposed of before the
expiration of the above-mentioned holding periods, a "disqualifying disposition"
will occur. If a disqualifying disposition occurs, the optionee will realize
ordinary income in the year of the disposition in an amount equal to the
difference between the fair market value of the Common Stock on the date of
exercise and the exercise price, or the selling price of the Common Stock and
the exercise price, whichever is less. The balance of the optionee's gain on a
disqualifying disposition, if any, will be taxed as capital gain.
The Company will not be entitled to any tax deduction as a result of the
grant or exercise of an ISO, or on a later disposition of the Common Stock
received, except that in the event of a disqualifying disposition, the Company
will be entitled to a deduction equal to the amount of ordinary income realized
by the optionee.
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<PAGE>
Non-Qualified Stock Options
An NQSO is any stock option other than an Incentive Stock Option. Such
options are referred to as "non-qualified" because they do not meet the
requirements of, and are not eligible for, the favorable tax treatment provided
by Section 422 of the Code.
No taxable income will be realized by an optionee upon the grant of an
NQSO, nor is the Company entitled to a tax deduction by reason of such grant.
Upon the exercise of an NQSO, the optionee will realize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock on the
date of exercise over the exercise price and the Company will be entitled to a
corresponding tax deduction.
Upon a subsequent sale or other disposition of Common Stock acquired
through exercise of an NQSO, the optionee will realize short-term or long-term
capital gain or loss to the extent of any intervening appreciation or
depreciation. Such a resale by the optionee will have no tax consequence to the
Company.
Stock Appreciation Rights
An SAR is the right granted to an employee to receive the appreciation in
the value of a share of Common Stock over a certain period of time. Under the
Plan, the Company may pay that amount in cash, in Common Stock, or in a
combination of both.
A recipient who receives an SAR award is not subject to tax at the time of
the grant and the Company is not entitled to a tax deduction by reason of such
grant. At the time such award is exercised, the recipient must include in income
the appreciation inherent in the SARs (i.e., the difference between the fair
market value of the Common Stock on the date of grant and the fair market value
of the Common Stock on the date the SAR is exercised). The Company is entitled
to a corresponding tax deduction in the amount equal to the income includible by
the recipient in the year in which the recipient recognizes taxable income with
respect to the SAR.
Performance Shares
Under the Plan, the Committee may grant performance share units to a key
employee. Typically, each performance share unit will be deemed to be the
equivalent of one share of Common Stock.
A recipient of a Performance Share award will not realize taxable income
at the time of grant, and the Company will not be entitled to a deduction by
reason of such grant. Instead, a recipient of Performance Shares will recognize
ordinary income equal to the fair market value of the shares at the time the
performance goals related to the Performance Shares are attained and paid to the
recipient. The Company is entitled to a tax deduction equal to the amount of
income recognized by the recipient in the year in which the performance goals
are achieved.
Restricted Stock Awards
Under the Restricted Stock feature of the Plan, a key employee may be
granted a specified number of shares of Common Stock ("Restricted Stock").
However, vested rights to such stock are subject to certain restrictions or are
conditioned on the attainment of certain performance goals. If the employee
violates any of the restrictions during the period specified by the Committee or
the performance standards fail to be satisfied, the stock is forfeited.
A recipient of a Restricted Stock award will recognize ordinary income
equal to the fair market value of the Restricted Stock at the time the
restrictions lapse. The Company is entitled to a tax deduction equal to the
amount of income recognized by the recipient in the year in which the
restrictions lapse.
Instead of postponing the income tax consequences of a Restricted Stock
award, the recipient may elect to include the fair market value of the Common
Stock in income in the year the award is granted. This election is made under
Section 83(b) of the Code. This Section 83(b) election is made by filing a
written notice with the Internal Revenue Service office with which the recipient
files his or her federal income tax return.
The tax treatment of the subsequent disposition of Restricted Stock will
depend upon whether the recipient has made a Section 83(b) election to include
the value of the Common Stock in income when awarded. If the recipient makes a
Section 83(b) election, any disposition thereafter will result in a capital gain
or loss equal to the difference between the selling price of the Common Stock
and the fair market value of the Common Stock on the date of grant. Such capital
gain or loss will be a long-term or short-term capital gain or loss depending
upon the period the Restricted Stock is held. If no Section 83(b) election is
made, any disposition thereafter will result in a capital gain or loss equal to
the difference between the selling price of the Common Stock and the fair
5
<PAGE>
market value of the Common Stock on the date the restrictions lapsed. Again,
such capital gain or loss will be a long-term or short-term capital gain or loss
depending upon the period the Restricted Stock is held.
Dividend Equivalents
The Plan also allows for the granting of Dividend Equivalent rights in
conjunction with the grant of options or SARs. These rights entitle the employee
to receive an additional amount of stock upon exercising the underlying option
or SAR.
A recipient of a Dividend Equivalent award will not realize taxable income
at the time of grant, and the Company will not be entitled to a deduction by
reason of such grant. Instead, when the option upon which the Dividend
Equivalent award is paid is exercised, the recipient must include in ordinary
income the fair market value of the Common Stock issued in payment of the
Dividend Equivalent award at the time the award is paid.
The Company will be entitled to a tax deduction in an amount, and at the
time, that the participant recognizes ordinary income due to the payment of the
Dividend Equivalent award. The amount included as ordinary income in the
optionee's income becomes the optionee's tax basis for determining gains or
losses on the subsequent sale of the Common Stock.
Approval of this proposal requires the affirmative vote of the holders of
the majority of the outstanding shares of Common Stock present for this proposal
at the Meeting. Abstentions are considered present for this proposal, so they
will have the same effect as votes against the proposal. Broker non-votes are
not considered present for this proposal.
Participating in the 1995 Long-Term Incentive Plan
The following table sets forth grants of NQSOs made under the Plan during
1995 to (i) each of the executive officers named on page 11; (ii) all current
executive officers as a group; and (iii) all employees, including all current
officers who are not executive officers, as a group. Grants under the Plan are
made at the discretion of the Committee. Accordingly, future grants under the
Plan are not yet determinable.
PLAN BENEFITS
1995 Long-Term Incentive Plan
Number of Shares Weighted Average
Subject to Options Exercise Price
Name and Position Granted (#) Per Share ($/sh)
- ----------------- ------------------ ----------------
Jim H. Houtz 40,000 21.5625
Chairman of the Board,
President and Chief
Executive Officer
David H. Koeller 40,000 22.8438
President of Group Practice
Mark R. Schonau 20,000 21.5625
Chief Financial Officer,
Secretary and Treasurer
Bill W. Childs 30,000 22.2500
Senior Vice President
Randy L. Skemp 20,000 21.5625
Senior Vice President
Current Executive Officers 170,000 21.9853
Non-Executive Officer Employee Group 315,500 22.8879
The Board unanimously recommends a vote FOR approval of the Amendment of the
CyCare Systems, Inc. 1995 Long-Term Incentive Plan.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 22, 1996, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director of the Company, by each named executive officer of the Company and
by all directors and executive officers of the Company as a group:
Shares
Beneficially Percent
Name and Address of Beneficial Owner Owned Owned
- ------------------------------------ ------------ -------
Jim H. Houtz (1) (2) (3) 390,721 7.7
Richard J. Burgmeier (1) (4) 63,000 1.2
Mark R. Schonau (1) (3) 25,639 *
David H. Koeller (1) (3) 21,339 *
Frank H. Bertsch (1) 11,598 *
Randy L. Skemp (1) (3) 10,176 *
Bill W. Childs (1) (3) 7,870 *
James L. Schamadan, M.D. (1) (3) 7,125 *
A. Theodore Engkvist (1) (3) 4,125 *
AIM Management Group Inc. (5) 491,900 9.7
Putnam Investments Inc. (6) 378,645 7.5
All directors and executive officers
as a group (10 persons) (7) 553,360 11.0
- ----------
* Less than one percent
(1) The address of the above named executive officers and directors is c/o the
Company at 7001 North Scottsdale Road, Suite 1000, Scottsdale, Arizona
85253-3644.
(2) Includes 37,500 shares held by Mr. Houtz's wife for herself, over which Mr.
Houtz shares voting and investment power.
(3) Includes shares which may be acquired by the exercise of stock options
within 60 days of the record date as follows: 20,000 for Mr. Houtz; 16,250
for Mr. Schonau; 4,375 for Mr. Koeller; 8,750 for Mr. Skemp; 6,250 for Mr.
Childs; 3,625 for Dr. Schamadan; and 625 for Mr. Engkvist.
(4) Includes 25,000 shares held by Mr. Burgmeier's wife. Mr. Burgmeier
disclaims beneficial ownership of these shares.
(5) The address of AIM Management Group Inc. is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046. According to the Schedule 13G dated February 12,
1996, AIM Management Group Inc., on behalf of itself and its wholly owned
subsidiaries, AIM Advisors, Inc. and AIM Capital Management, Inc.,
beneficially owned 491,900 shares of Common Stock at December 31, 1995.
According to the Schedule 13G, AIM Management Group Inc. had shared voting
and dispositive power over all 491,900 shares. The Company makes no
representation as to the accuracy or completeness of the information
provided in this footnote, which is based solely on AIM Management Group
Inc.'s Schedule 13G filings.
(6) The address of Putnam Investments Inc. is One Post Office Square, Boston,
Massachusetts 02109. Certain Putnam investment managers (together with
their parent corporations, Putnam Investments, Inc. and Marsh & McLennan
Companies, Inc.) are considered "beneficial owners" of an aggregate of
378,645 shares of Common Stock at December 31, 1995. The information
regarding Putnam Investment Inc.'s stockholdings was obtained from its
Schedule 13G filings. Accordingly, the Company makes no representation as
to the accuracy or completeness of the information.
(7) Includes 65,625 shares which executive officers and directors have the
right to acquire beneficial ownership of within the next 60 days of the
record date under the Company's 1995 Long-Term Incentive Plan.
7
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MEETINGS OF THE BOARD AND COMMITTEES
There were four regularly scheduled meetings and five special meetings of
the Board during 1995. With the exception of Raymond R. Maturi whose term
expired on May 16, 1995, each director attended 75% or more of the meetings of
the Board and of the meetings of the Board committees on which he served.
The Board has established an Audit Committee comprised of Mr. Bertsch and
Dr. Schamadan. The Audit Committee is responsible for the review of internal
accounting controls, financial reporting and related audit matters and selection
of the Company's independent public accounting firm. The Audit Committee met
once in 1995 to discuss 1994 audit matters. The Compensation Committee, also
consisting of Mr. Bertsch and Dr. Schamadan, met four times during 1995. The
Compensation Committee is responsible for the annual review of officer
compensation and other incentive programs. The Company does not maintain a
standing nominating committee or other committees performing similar functions.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Company's compensation program for executive officers is primarily
comprised of base salary, annual bonus and long-term incentives in the form of
stock option grants. Executives also participate in various other benefit plans,
including medical and retirement plans, generally available to all employees of
the Company.
The Company's philosophy is to pay base salaries to executives that enable
the Company to attract, motivate and retain highly qualified executives
comparable with similarly situated companies. The annual bonus program is
designed to reward for performance based on financial results. Stock option
grants are intended to result in minimal or no rewards if stock price does not
appreciate, but may provide substantial rewards to executives as stockholders
benefit from stock price appreciation.
The Compensation Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies that
would be included in a peer group established to compare stockholder returns.
Thus, the compensation peer group is not the same as the peer group index in the
performance graph included in this proxy statement.
Base Salary and Annual Incentives
Base salaries for executive positions are established at the average pay
level of comparable positions in similarly-sized high technology companies and
in relation to executive salaries paid within the industry in which the Company
competes. The Compensation Committee has access to competitive surveys and
outside compensation consultants to help determine the relevant competitive pay
levels. The Company targets base pay at the level required to attract and retain
highly qualified executives. In determining salaries, the Compensation Committee
also takes into account individual experience and performance, internal equity
relative to other positions within the Company and specific needs particular to
the Company.
Annual incentive awards are based on the achievement of predetermined
performance objectives. The objectives are based on pre-tax income and revenue
growth and the successful achievement of functional and personal goals. The
Company feels that bonuses paid in 1995 were reflective of these achievements
and goals.
Stock Option Grants
The Company strongly believes in tying executive rewards directly to the
long-term success of the Company and increases in stockholder value through
grants of stock options. Stock grants will also enable executives to develop and
maintain a significant stock ownership position in the Company.
Other Benefits
Executive officers are eligible to participate in benefit programs
designed for all full-time employees of the Company. These programs include
medical insurance, a qualified retirement program allowed under Section 401(k)
of the Code, a stock purchase program provided for under Section 423 of the
Code, which allows employees to purchase stock at a discount from fair market
value, and life insurance coverage equal to 2-1/2 times base salary up to a
maximum of $300,000. In addition to these all-employee programs, selected
executives participate in a supplemental split-dollar life insurance program.
Payments under this program made on behalf of the executives during 1995 are
listed in the All Other Compensation column in the Summary Compensation Table.
8
<PAGE>
Section 162(m)
The Compensation Committee intends to review all compensation programs in
1996 for compliance with Section 162(m) of the Code and make any necessary
adjustments to comply with this section of the Code.
Chief Executive Officer Compensation
Mr. Houtz was a founder of the Company and has served as its President or
CEO since the Company's inception in 1967. In January 1993, the Compensation
Committee increased Mr. Houtz's base salary by 4% over previous levels based on
his increased responsibilities for, and the success of, CyData, the Company's
wholly-owned subsidiary. However, as of August 1993, Mr. Houtz received a 10%
reduction in base salary as a cost cutting measure. To date, Mr. Houtz's
previous base salary has not been reinstated.
In 1994, the Compensation Committee commissioned a study by the Wyatt
Company, a nationally-known compensation consulting group, to review the
compensation of the CEO. The study found that the CEO's total compensation level
was in the competitive range of other CEOs within the Company's peer group.
Mr. Houtz also has a retirement plan that enables the Company to continue
to benefit from Mr. Houtz's expertise and experience upon his retirement as the
Company's CEO. Mr. Houtz will continue to perform services for the Company as
directed by the President or Board of Directors on a part-time consulting basis
following retirement. As compensation for these services, Mr. Houtz will receive
60% of his average annual compensation during his last two years of service and
continuation of the existing benefits package while acting in the consulting
capacity. In making this provision, the Company did not anticipate the imminent
retirement of Mr. Houtz, but did so to ensure the desired level of management
continuity for the Company. The consulting arrangement will continue for five
years following his retirement.
Frank H. Bertsch
James L. Schamadan, M.D.
Members of the Compensation Committee
9
<PAGE>
PERFORMANCE GRAPH FOR CYCARE SYSTEMS, INC.
Indexed Comparison of 5-Year Cumulative Total Return
CyCare Systems, Inc., Russell 2000 Index and Custom Peer Group Indices
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Russell 2000 100.00 146.05 172.94 205.64 201.56 258.89
Custom Index 100.00 146.17 193.96 247.73 349.99 643.94
CyCare 100.00 102.17 117.39 145.65 258.69 445.65
Note: Assumes $100 invested on 12/31/90 in CyCare Systems, Inc., Russell 2000
Index and a Custom market capitalization weighted index including Medaphis,
Shared Medical Systems, HBO & Co., C.I.S. Technologies and National Data Corp.
Total return assumes reinvestment of dividends on a daily basis for the Russell
2000 and quarterly for the Custom Index.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
------------------------------ --------------------------
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compensa-
Name and Salary Bonus sation Awards SARS Pay- sation
Principal Position Year ($) (3) ($) (4) ($) (5) ($) (#) ($) ($) (6)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jim H. Houtz 1995 290,149 102,900 --- 0 20,000 0 132,741
Chairman of the Board, --- 20,000 0
President and Chief 1994 290,155 104,450 --- 0 30,000 0 132,741
Executive Officer 1993 308,967 0 --- 0 0 0 165,543
David H. Koeller 1995 169,615 33,750 --- 0 10,000 0 16,930
President of Group Practice 30,000 0
1994 139,997 62,500 --- 0 7,500 0 16,931
1993 126,500 0 --- 0 0 0 16,894
Mark R. Schonau 1995 151,846 44,100 --- 0 10,000 0 16,929
Chief Financial Officer, 10,000
Secretary and Treasurer 1994 129,550 41,435 --- 0 5,000 0 16,688
25,000
1993 114,138 18,000 --- 0 0 0 16,244
Bill W. Childs 1995 115,500 45,000 25,000 0 25,000 0 1,386
Senior Vice President (1) 5,000
1994 --- --- --- --- --- ---
1993 --- --- --- --- --- ---
Randy L. Skemp 1995 106,430 31,501 31,544 0 10,000 0 6,571
Senior Vice President (2) 10,000
1994 92,198 68,516 --- 0 20,000 0 6,422
1993 --- --- --- --- --- ---
</TABLE>
- -----------------------
(1) On April 1, 1995, Bill W. Childs joined the Company as Senior Vice
President.
(2) Mr. Skemp did not serve as an executive officer during 1993.
(3) Amounts shown include cash compensation earned by executive officers, as
well as amounts deferred pursuant to the Company's 401(k) Savings Plan.
(4) Reflects amounts earned under the Company's bonus plan which is open to
all officers and a relocation bonus of $8,516 paid to Mr. Skemp in 1994.
(5) Mr. Childs was awarded a $25,000 bonus upon acceptance of his position
with the Company. Mr. Skemp was reimbursed moving expenses of $23,066 and
was paid gross-up payments of $8,478 for tax liabilities incurred as a
result of his relocation.
(6) "All Other Compensation" consists of the following:
11
<PAGE>
1995 1994 1993
---- ---- ----
(a) Economic benefit of split-dollar life insurance policies:
Jim H. Houtz 6,618 5,565 5,318
David H. Koeller 739 686 629
Mark R. Schonau 643 613 579
Bill W. Childs --- --- ---
Randy L. Skemp 321 305 ---
(b) Amount of premiums paid for the split dollar life insurance policies less
the economic benefit of the policy identified in 6(a):
Jim H. Houtz 46,046 47,099 60,696
David H. Koeller 14,805 14,859 14,916
Mark R. Schonau 14,900 14,930 14,965
Bill W. Childs --- --- ---
Randy L. Skemp 4,864 4,881 ---
(c) Amount of premiums paid for the split dollar life insurance policy
covering Mr. Houtz and his spouse and the economic benefit of said policy:
Premiums Paid 76,790 77,067 96,740
Economic Benefit 1,901 1,624 1,440
(d) Amounts contributed by the Company under the 401(k) Plan:
Jim H. Houtz 1,386 1,386 1,349
David H. Koeller 1,386 1,386 1,349
Mark R. Schonau 1,386 1,145 700
Bill W. Childs 1,386 --- ---
Randy L. Skemp 1,386 1,236 ---
DIRECTOR COMPENSATION
In 1995, each non-employee director received $1,500 for each regular or
special Board meeting which he attended and $500 for each telephonic Board
meeting in which he participated. Each director is also reimbursed for
reasonable travel expenses incurred to attend meetings of the Board and
committees of which he is a member. Additionally, Dr. Schamadan received $3,000
for consulting services performed on behalf of the Company.
As approved at the Company's 1995 Annual Meeting of Stockholders, each
non-employee director was granted 1,000 shares of Common Stock, subject to
certain restrictions due to lapse July 1, 1996. The value of the aggregate
restricted stock at the end of the last fiscal year was $76,875.
12
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Options/SARS
Options/SARS Granted to Exercise or
Granted Employees in Base Price Expiration Grant Date
Name (#) (1) Fiscal Year ($/Sh) (2) Date Value ($) (3)
- ---- ----------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Jim H. Houtz 20,000 6% 19.000 02/20/2000 202,800
20,000 6% 24.125 11/26/2000 241,800
David H. Koeller 10,000 3% 19.000 02/20/2000 101,400
30,000 10% 24.125 11/26/2000 362,700
Mark R. Schonau 10,000 3% 19.000 02/20/2000 101,400
10,000 3% 21.125 11/26/2000 120,900
Bill W. Childs 25,000 8% 21.875 03/31/2000 292,000
5,000 2% 21.125 11/26/2000 60,450
Randy L. Skemp 10,000 3% 19.000 02/20/2000 101,400
10,000 3% 24.125 11/26/2000 120,900
</TABLE>
(1) Options granted in 1995 are exercisable 12 months after the grant date,
with 25% of the shares covered thereby becoming exercisable at that time
and with an additional 25% of the option shares becoming exercisable on
each successive anniversary date with full vesting occurring on the fourth
anniversary date. All options were granted for a term of five years and
are subject to early termination upon certain events related to
termination of employment.
(2) The Exercise or Base Price equaled the fair market value at grant date.
(3) The Black-Scholes option pricing model was used to determine the present
value of options at date of grant. The assumptions used in the model were
expected volatility of 51%, 52% and 50% and risk-free rate of return of
7.49%, 7.04% and 5.50% for options granted 2/21/95; 4/1/95 and 11/27/95,
respectively; dividend yield of 0% for all grants; and time to exercise
five years for all grants.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY -- END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number or Securites
Underlying Unexercised Value of Unexercised
Share Options/SARs In-the-Money Options/
Acquired Value at FY -End SARs at FY-End
On Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexcercisable Exercisable/Unexcercisable
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jim H. Houtz --- --- 15,000/62,500 153,944/1,601,563
David H. Koeller 79,375 1,068,938 -0-/45,625 -0-/1,169,141
Mark R. Schonau 35,000 690,440 12,500/42,500 110,469/1,089,063
Bill W. Childs --- --- -0-/30,000 -0-/768,750
Randy L. Skemp 4,500 60,626 5,000/37,500 60,625/960,938
</TABLE>
13
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
In December 1993, the Company and Jim H. Houtz entered into a Retirement
Benefit Program. The program provides that, upon Mr. Houtz's retirement from the
Company or his attainment of age 65, whichever occurs last, the Company shall
pay him on a monthly basis, until he attains 70 years of age, an amount equal to
one-twelfth of 60% of his average annual compensation during his last two years
of service subject to certain reductions. If Mr. Houtz dies prior to attaining
70 years of age, but after he attains 65 years of age, his heirs will be
entitled to such payments. Further, if Mr. Houtz attains age 70, the Company
agrees to give Mr. Houtz its interest in the life insurance policies on the
lives of Mr. and Mrs. Houtz referenced in the first paragraph under "Certain
Relationships and Related Transactions." Should Mr. Houtz die prior to attaining
age 70, the Company shall be entitled to an amount equal to the total premiums
paid by the Company for such policies out of the proceeds.
In November 1995, the Company and Mark R. Schonau entered into an
employment agreement that superseded and replaced in its entirety a previous
agreement dated August 1994. The term of the agreement is two years, unless
sooner terminated. Commencing on May 1, 1996, and on each subsequent day
thereafter, Mr. Schonau's term of employment shall automatically be extended for
the 18 month period commencing on each such day. Pursuant to this agreement, if
Mr. Schonau's employment is terminated by the Company without cause or by Mr.
Schonau for good reason, the Company shall pay to Mr. Schonau commencing on the
thirtieth day following the termination date, 12 monthly payments equal to
one-twelfth of the sum of his base salary in effect immediately prior to the
time such termination occurs, plus the average of annual incentive bonuses paid
to Mr. Schonau for the two fiscal years immediately preceding the fiscal year in
which the termination occurs. In addition, the Company will pay Mr. Schonau six
monthly payments equal to one-twelfth of his base salary in effect immediately
prior to the time such termination occurs. Should Mr. Schonau attain alternative
employment during the last six months of the 18 month payment period, the
Company's obligations will be reduced by the amount of Mr. Schonau's
compensation from his new employer during this six month period. Mr. Schonau
shall have the right to exercise all stock options and warrants unexercised, but
vested at termination date. Additionally, Mr. Schonau shall have the right to
vest and exercise any unvested, unexercised stock options and warrants that vest
within six months following such termination date. In consideration for this
extension of the vesting period, Mr. Schonau shall serve as a consultant to the
Company at the Board's request during the six month period and perform services
for up to 30 hours per month. The Company shall also provide Mr. Schonau and his
eligible beneficiaries all employee benefits he was entitled to receive prior to
termination. These benefits shall continue until the first to occur of his
attainment of alternative employment or 18 months following his termination
date.
In 1992, the Company and Mr. Schonau entered into an Executive Severance
Agreement (the "Severance Agreement"). Pursuant to this agreement, should Mr.
Schonau terminate his employment with the Company for good reason following a
change in control or should the Company terminate Mr. Schonau's employment
without cause following a change in control, the Company shall pay to Mr.
Schonau a lump sum payment, the present value of which shall equal 299% of Mr.
Schonau's base salary. All terms and conditions of the agreement are made in
accordance with Section 280G of the Code and the regulations promulgated
thereunder from time to time. In such case, the Company shall continue to
provide Mr. Schonau and his eligible beneficiaries the employee benefits he was
entitled to receive prior to termination. These benefits shall continue until
the first to occur of his attainment of alternate employment or 24 months. In
addition, if, following a change in control, Mr. Schonau terminates his
employment or his employment is terminated by the Company without cause, then
Mr. Schonau shall be given the right, for a period of twelve months, to cause
the Company to purchase all of the Company's Common Stock held by him at a price
equal to the higher of (i) the average closing price for the Common Stock
trading on the New York Stock Exchange for the 10 days preceding the termination
date, and (ii) the closing price on the New York Stock Exchange on the last
trading day preceding a change in control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into agreements with (i) Mr. and Mrs. Houtz and Mr.
and Mrs. Burgmeier for the purchase of joint life insurance policies, and (ii)
with Messrs. Houtz, Burgmeier and Maturi for life insurance policies in
aggregate policy amounts of (i) $6,000,000 and $1,000,000 and (ii) $2,091,700,
$110,000 and $900,000, respectively. Under each policy, the Company is entitled
to receive the return of premiums paid out of the proceeds of the policies, with
the balance of the proceeds going to the estates of the insured, with the
following exception: in the event Mr. Houtz attains age 70, Mr. Houtz will be
the direct beneficiary of the total premiums
14
<PAGE>
paid by the Company for the policies for Mr. and Mrs. Houtz. Aggregate annual
premiums paid approximate $131,400, $19,500 and $41,700 for Mr. and Mrs. Houtz,
Mr. and Mrs. Burgmeier and Mr. Maturi, respectively.
In 1993, the Company and Mr. Houtz entered into a consulting agreement. The
agreement memorialized a 1984 agreement between the Company and Mr. Houtz. The
agreement provides that, if Mr. Houtz retires after his 57th birthday, the
Company shall pay him monthly for 60 months (commencing on the first day of the
month following his termination) an amount equal to one-twelfth of 60% of the
salary and bonus that he received for the calendar year immediately preceding
his date of retirement. Additionally, the Company shall continue to provide Mr.
Houtz with the fringe benefits he received for the calendar year immediately
preceding his date of retirement for such 60-month period. Under the agreement,
the Company shall obtain consulting and advisory services from Mr. Houtz for the
period he receives consulting payments under this agreement. If Mr. Houtz dies
subsequent to his retirement, the Company shall continue to make all of the
above-referenced payments to Mr. Houtz's designated beneficiary or his estate
for the balance of the term of the agreement.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, directors and
persons who beneficially own more than ten percent of a registered class of the
Company's equity securities (collectively, "Reporting Persons"), to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. Reporting Persons are required by
the Exchange Act regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain Reporting Persons that no Forms 5 were
required for those persons, the Company believes that, during 1995 its Reporting
Persons were in compliance with all applicable filing requirements except that
Mr. Skemp filed an amended Form 3 to include shares not previously disclosed.
INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal year ended December 31, 1995 was Ernst & Young LLP. It is
currently anticipated that Ernst & Young LLP will be retained as the principal
accounting firm to be utilized by the Company throughout the fiscal year ending
December 31, 1996. A representative of Ernst & Young LLP is expected to attend
the Meeting for the purpose of responding to appropriate questions. At the
Meeting, this representative will be afforded an opportunity to make a statement
if he or she so desires.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1997
Annual Meeting of Stockholders must be received by the Company by November 29,
1996 for inclusion in the Company's proxy materials relating to such meeting.
OTHER MATTERS
Management does not intend to present to the Meeting any matters other than
those hereinbefore mentioned and does not presently know of any matters that
will be presented by other parties.
BY ORDER OF THE BOARD OF DIRECTORS
Mark R. Schonau, Secretary
Scottsdale, Arizona
March 29, 1996
15
<PAGE>
Appendix A
CYCARE SYSTEMS, INC.
1995 LONG-TERM INCENTIVE PLAN
ARTICLE 1. PURPOSE AND EFFECTIVE DATE
1.1 General. The purpose of the CyCare Systems, Inc. 1995 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
CyCare Systems, Inc. (the "Company") by linking the personal interests of its
key employees to those of Company stockholders and by providing its key
employees with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of employees upon whose judgment, interest, and
special effort the successful conduct of the Company's operation is largely
dependent. Accordingly, the Plan permits the grant of incentive awards from time
to time to selected officers and key employees. It is also intended that the
Plan replace the CyCare Systems, Inc. Stock Option Plan (the "Prior Plan");
provided, however, that options granted under the Prior Plan shall continue to
be subject to the terms and conditions set forth in the agreement evidencing the
option grant.
1.2 Effective Date. The Plan is effective as of March 1, 1995 (the
"Effective Date). Within one year after the Effective Date, the Plan shall be
submitted to the shareholders of the Company for their approval. The Plan will
be deemed to be approved by the stockholders if it receives the affirmative vote
of the holders of a majority of the shares of stock of the Company present, or
represented, and entitled to vote at a meeting duly held (or by the written
consent of the holders of a majority of the shares of stock of the Company
entitled to vote) in accordance with the applicable provisions of Delaware law
and the Company's Bylaws and Restated Certificate of Incorporation. Any Awards
granted under the Plan prior to stockholder approval are effective when made
(unless the Committee specifies otherwise at the time of grant), but no Award
may be exercised or settled and no restrictions relating to any Award may lapse
before stockholder approval. If the stockholders fail to approve the Plan, any
Award previously made shall be automatically canceled without any further act.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 1.2 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award,
or Other Stock-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the
Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means and includes each of the following:
(1) A change of control of the Company through a transaction or
series of transactions, such that any person (as that term
is used in Section 13 and 14(d)(2) of the 1934 Act),
excluding affiliates of the Company as of the Effective
Date, is or becomes the beneficial owner (as that term is
used in Section 13(d) of the 1934 Act) directly or
indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then
outstanding securities;
(2) Upon the first purchase under a tender offer or exchange
offer for 20% or more of the outstanding shares of Stock (or
securities convertible into Stock), other than an offer by
the Company or any Subsidiary or any employee benefit plan
sponsored by the Company or any Subsidiary;
16
<PAGE>
(3) Any merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which Shares would be converted into cash,
securities or other property, other than a merger of the
Company in which the holders of the Shares immediately
before the merger have the same proportionate ownership of
Common Stock of the surviving corporation immediately after
the merger;
(4) Substantially all of the assets of the Company are sold or
otherwise transferred to parties that are not within a
"controlled group of corporations" (as defined in Section
1563 of the Code) in which the Company is a member; or
(5) If, at any time after March 1, 1995, there shall cease to be
a majority of the Board comprised as follows: individuals
who as of March 1, 1995, constitute the Board and any new
director(s) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of the majority of the directors still in office who
either were directors as of March 1, 1995, or whose election
or nomination for election was previously so approved.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the committee of the Board described in Article
3.
(g) "Disability" shall mean any illness or other physical or mental
condition of a Participant which renders the Participant
incapable of performing his full-time duties for the Company for
six consecutive months and within 30 days after notice by the
Committee to the Participant, the Participant does not return to
the full-time performance of his duties.
(h) "Dividend Equivalent" means a right granted to a Participant
under Article 10.
(i) "Fair Market Value" means with respect to Stock or any other
property, the fair market value of such Stock or other property
determined by such methods or procedures as may be established
from time to time by the Committee. Unless otherwise determined
by the Committee, the Fair Market Value of Stock as of any date
shall be the closing price for the Stock as reported in The Wall
Street Journal for that date or, if no closing price is so
reported for that date, the closing price on the next preceding
date for which a closing price was reported.
(j) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor
provision thereto.
(k) "Non-Qualified Stock Option" means an Option that is not intended
to be an Incentive Stock Option.
(l) "Option" means a right granted to a Participant under Article 6
of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive
Stock Option or a Non-Qualified Stock Option.
(m) "Other Stock-Based Award" means a right, granted to a Participant
under Article 11, that relates to or is valued by reference to
Stock or other Awards relating to Stock.
(n) "Participant" means a person who, as an officer or key employee
of the Company or any Subsidiary, has been granted an Award under
the Plan.
(o) "Performance Share" means a right granted to a Participant under
Article 8, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(p) "Plan" means the CyCare Systems, Inc. 1995 Long-Term Incentive
Plan, as amended from time to time.
(q) "Restricted Stock Award" means Stock granted to a Participant
under Article 9 that is
17
<PAGE>
subject to certain restrictions and to risk of forfeiture.
(r) "Stock" means the Common Stock of the Company and such other
securities of the Company that may be substituted for Stock
pursuant to Article 12.
(s) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 7 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as
of the date of exercise of the SAR over the grant price of the
SAR, all as determined pursuant to Article 7.
(t) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
ARTICLE 3. ADMINISTRATION
3.1 Committee. The Plan shall be administered by a Committee that is
appointed by, and shall serve at the discretion of, the Board. The Committee
shall consist of at least two individuals who are members of the Board who are
"disinterested persons," as such term is defined in Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 (the "1934 Act") or any
successor provision, except as may be otherwise permitted under Section 16 of
the 1934 Act and the regulations and rules promulgated thereunder.
3.2 Action By The Committee. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.
3.3 Authority of Committee. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number
of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under
the Plan including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or
waivers thereof, based in each case on such considerations as the
Committee in its sole discretion determines;
(e) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in
connection with an Award;
(h) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan.
3.4 Decisions Binding. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
18
<PAGE>
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment provided in Section 13.1,
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 1,120,000.
4.2 Lapsed Awards. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan, in each case to the full extent available pursuant to the rules and
interpretations of the Securities and Exchange Commission under Section 16 of
the 1934 Act, as amended.
4.3 Stock Distributed. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
4.4 Limitation On Number of Shares Subject To Awards. Notwithstanding
any provision in the Plan to the contrary, the maximum number of shares of Stock
with respect to one or more Awards that may be granted to any one Participant
over the term of the Plan shall be 600,000.
ARTICLE 5. ELIGIBILITY
5.1 General. Awards may be granted only to individuals who are
officers or other key employees (including employees who also are directors or
officers) of the Company or a Subsidiary, as determined by the Committee.
ARTICLE 6. STOCK OPTIONS
6.1 General. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock under
an Option shall be determined by the Committee, provided that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of grant.
(b) Time And Conditions Of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part, provided that no Option may be exercisable prior to
six months following the date of the grant of such Option. The
Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised.
(c) Payment. The Committee shall determine the methods by which
the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other
property (including "cashless exercise" arrangements), and the methods
by which shares of Stock shall be delivered or deemed to be delivered
to Participants. Without limiting the power and discretion conferred
on the Committee pursuant to the preceding sentence, the Committee
may, in the exercise of its discretion, but need not, allow a
Participant to pay the Option price by directing the Company to
withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of shares having a Fair Market
Value on the exercise date equal to the Option price, all as
determined pursuant to rules and procedures established by the
Committee.
(d) Evidence of Grant. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions as may be specified by
the Committee.
6.2 Incentive Stock Options. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) Exercise Price. The exercise price per share of Stock shall
be set by the Committee,
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<PAGE>
provided that the exercise price for any Incentive Stock Option may
not be less than the Fair Market Value as of the date of the grant.
(b) Exercise. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) Lapse of Option. An Incentive Stock Option shall lapse under
the following circumstances:
(1) The Incentive Stock Option shall lapse ten years after
it is granted, unless an earlier time is set in the Award
Agreement.
The Incentive Stock Option shall lapse twelve months after
the Participant's termination of employment, if the termination
of employment was attributable to Disability.
(2) If the Participant separates from employment other than
as provided in paragraph (2), the Incentive Stock Option shall
lapse three months after the Participant's termination of
employment.
(3) If the Participant dies before the Option lapses
pursuant to paragraph (1), (2) or (3), above, the Incentive Stock
Option shall lapse, unless it is previously exercised, on the
earlier of (i) the date on which the Option would have lapsed had
the Participant lived and had his employment status (i.e.,
whether the Participant was employed by the Company on the date
of his death or had previously terminated employment) remained
unchanged; or (ii) 15 months after the date of the Participant's
death. Upon the Participant's death, any exercisable Incentive
Stock Options may be exercised by the Participant's legal
representative or representatives, by the person or persons
entitled to do so under the Participant's last will and
testament, or, if the Participant shall fail to make testamentary
disposition of such Incentive Stock Option or shall die
intestate, by the person or persons entitled to receive said
Incentive Stock Option under the applicable laws of descent and
distribution.
(d) Individual Dollar Limitation. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock
with respect to which Incentive Stock Options are first exercisable by
a Participant in any calendar year may not exceed $100,000.00.
(e) Ten-Percent Owners. An Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of Stock of the Company only if such Option is granted at
a price that is not less than 110% of Fair Market Value on the date of
grant and the Option is exercisable for no more than five years from
the date of grant.
(f) Expiration of Incentive Stock Options. No Award of an
Incentive Stock Option may be made pursuant to this Plan after 2005.
(g) Right To Exercise. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) Right of Payment. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive
the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date
of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the
Fair Market Value of one share of Stock on the date of grant in
the case of any SAR related to any Incentive Stock Option.
20
<PAGE>
(b) Other Terms. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement,
and any other terms and conditions of any Stock Appreciation Right
shall be determined by the Committee at the time of the grant of the
Award and shall be reflected in the Award Agreement.
ARTICLE 8. PERFORMANCE SHARES
8.1 Grant of Performance Shares. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
8.2 Right To Payment. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant, provided that the time period during which
the performance goals must be met shall, in all cases, exceed six months.
8.3 Other Terms. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 9. RESTRICTED STOCK AWARDS
9.1 Grant of Restricted Stock. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by an Award Agreement.
9.2 Issuance And Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.
9.3 Forfeiture. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the Company,
provided, however, that the Committee may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.
9.4 Certificates For Restricted Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
ARTICLE 10. DIVIDEND EQUIVALENTS
10.1 Grant Of Dividend Equivalents. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Option Award or SAR
Award, as determined by the Committee. The Committee may provide that Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Stock, or otherwise reinvested.
21
<PAGE>
ARTICLE 11. OTHER STOCK-BASED AWARDS
11.1 Grant Of Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Subsidiaries. The Committee shall determine the terms
and conditions of such Awards.
ARTICLE 12. PROVISIONS APPLICABLE TO AWARDS
12.1 Stand-Alone, Tandem, And Substitute Awards. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
12.2 Exchange Provisions. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 12.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
12.3 Term Of Award. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
12.4 Form Of Payment For Awards. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, other Awards, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
12.5 Limits Of Transfer. No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided below, no Award shall be
assignable or transferable by a Participant other than by will or the laws of
descent and distribution or, except in the case of an Incentive Stock Option,
pursuant to a court order that would otherwise satisfy the requirements to be a
domestic relations order as defined in Section 414(p)(1)(B) of the Code, if the
order satisfies Section 414(p)(1)(A) of the Code notwithstanding that such an
order relates to the transfer of a stock option rather than an interest in an
employee benefit pension plan. In the Award Agreement for any Award other than
an Award that includes an Incentive Stock Option, the Committee may allow a
Participant to assign or otherwise transfer all or a portion of the rights
represented by the Award to specified individuals or classes of individuals, or
to a trust benefiting such individuals or classes of individuals, subject to
such restrictions, limitations, or conditions as the Committee deems to be
appropriate.
12.6 Beneficiaries. Notwithstanding Section 12.5, a Participant may,
in the manner determined by the Committee, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect to
any Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Award shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
22
<PAGE>
12.7 Stock Certificates. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
12.8 Acceleration Upon A Change Of Control. If a Change of Control
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards in
the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse. To the extent that this
provision causes Incentive Stock Options to exceed the dollar limitation set
forth in Section 6.2(d), the excess Options shall be deemed to be Non-Qualified
Stock Options. Notwithstanding any provision in this Plan to the contrary, if a
Change of Control of the Company has occurred and the Participant's employment
is terminated for any reason except those "excepted causes" detailed below, the
Participant shall be entitled for a seven-month period following such
termination, to exercise all Options and other Awards that were exercisable as
of the date of such termination (taking into account the acceleration provision
of this Section 12.8). For this purpose, excepted cause shall mean termination
of employment due to (i) the death of the Participant, (ii) the disability of
the Participant, or (iii) cause (which shall deem to occur if the Participant
willfully engages in conduct that is demonstrably and materially injurious to
the Company, monetarily, or otherwise; and in making such determination, no act,
or failure to act, on the Participant's part shall be deemed "willful" unless
done, or omitted to be done, by the Participant in bad faith and without
reasonable belief that the act or omission was in the best interest of the
Company.
ARTICLE 13. CHANGES IN CAPITAL STRUCTURE
13.1 General. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Award (and the number of shares
subject thereto) shall be increased proportionately without any change in the
aggregate purchase price therefor. In the event the Stock shall be changed into
or exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Award (and for each share of Stock
then subject thereto) the number and class of shares of Stock into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award.
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION
14.1 Amendment, Modification and Termination. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan. However, without approval of the stockholders of the Company or
other conditions (as may be required by the Code, by the insider trading rules
of Section 16 of the 1934 Act, by any national securities exchange or system on
which the Stock is listed or reported, or by a regulatory body having
jurisdiction), no such termination, amendment, or modification may:
(a) Materially increase the total number of shares of Stock that
may be issued under the Plan, except as provided in Section 13.1;
(b) Materially modify the eligibility requirements for
participation in the Plan; or
(c) Materially increase the benefits accruing to Participants
under the Plan.
14.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 15. GENERAL PROVISIONS
15.1 No Rights To Awards. No Participant or employee shall have any
claim to be granted any Award under the Plan, and neither the Company nor the
Committee is obligated to treat Participants and employees uniformly.
15.2 No Stockholders Rights. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3 Withholding. The Company or any Subsidiary shall have the
authority and the right to
23
<PAGE>
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan. With respect to withholding
required upon any taxable event under the Plan, Participants may elect, subject
to the Committee's approval, to satisfy the withholding requirement, in whole or
in part, by having the Company or any Subsidiary withhold shares of Stock having
a Fair Market Value on the date of withholding equal to the amount to be
withheld for tax purposes in accordance with such procedures as the Committee
establishes. The Committee may, at the time any Award is granted, require that
any and all applicable tax withholding requirements be satisfied by the
withholding of shares of Stock as set forth above.
15.4 No Right To Employment. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
15.5 Unfunded Status Of Awards. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Subsidiary.
15.6 Indemnification. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Bylaws or Restated Certificate of Incorporation, as
a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
15.7 Relationship To Other Benefits. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
15.8 Expenses. The expenses of administering the Plan shall be borne
by the Company and its Subsidiaries.
15.9 Titles And Headings. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
15.10 Fractional Shares. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
15.11 Securities And Compliance. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
void to the extent permitted by law and voidable as deemed advisable by the
Committee.
15.12 Government And Other Regulations. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
15.13 Governing Law. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Arizona.
24
<PAGE>
[CyCare Letter Head]
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders of
CyCare Systems, Inc., which will be held at the Company's offices at 7001 North
Scottsdale Road, Suite 1000, Scottsdale, Arizona, at 3:00 P.M., local time, on
Tuesday, May 21, 1996.
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement
describe the items to be considered and acted upon by the stockholders.
Whether or not you plan to attend this meeting, please sign, date and return
your proxy form above as soon as possible so that your shares can be voted at
the meeting in accordance with your instructions. If you attend the meeting, you
may revoke your proxy, if you wish, and vote personally. It is very important
that your stock be represented.
Sincerely,
/s/ Jim H. Houtz
- -----------------------
Jim H. Houtz
Chairman of the Board
President and
Chief Executive Officer
<PAGE>
This Proxy is Solicited on Behalf of the Board of Directors of CyCare Systems,
Inc.
The undersigned hereby appoints Mark R. Schonau and Thomas P. Hull, jointly and
severally, as Proxies, with full power of substitution, and hereby authorizes
them to represent and to vote, as designated hereon, all the shares of Common
Stock of CyCare Systems, Inc. held of record by the undersigned on March 22,
1996, at the Annual Meeting of Stockholders to be held at 3:00p.m., local time,
on May 21, 1996 or any adjournment thereof.
<PAGE>
[X] Please mark votes as in this example
This proxy, when properly executed, will be voted in accordance with the
directions indicated hereon. If no specific directions are given, this proxy
will be voted for approval of all listed proposals and, with repsect to such
other business as may properly come before the Meeting, in accordance with the
discretion of the Proxies.
1. Election of Directors
FOR [ ] WITHHELD [ ] Jim H. Houtz
James L. Schamadan, M.D.
For, except vote withheld from the following nominee(s):
-------------------------------------------------------
2. Proposal to amend the Restated Certificate of Incorporation of CyCare
Systems, Inc. as set forth in the accompanying Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to amend the CyCare Systems, Inc. 1995 Long-Term Incentive Plan as
set forth in the accompanying Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please sign exactly as name appears. When shares are held by joint tenants, both
should sign. When signing as executor, administrator, attorney, 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 PROMPTLY MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE
- ---------------------------------------------
- ---------------------------------------------
SIGNATURE(S) DATE
