SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party Other than the Registrant [ ]
Check the appropriate item:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
Geriatric & Medical Companies, Inc.
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(Name of Registrant as Specified in its Charter)
Arthur A. Carr, Jr., Secretary
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(Name of Person Filing this Proxy Statement)
Payment of Filing Fee (Check the appropriate item)
[X] $125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6(i) (1), or
14a-6(j) (2).
[ ] $500 per each part to the controversy pursuant to Exchange 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 the transaction applies
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Rule 0-11
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[ ] 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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GERIATRIC & MEDICAL COMPANIES, INC.
5601 Chestnut Street
Philadelphia, Pennsylvania 19139
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF GERIATRIC & MEDICAL COMPANIES, INC.
Notice is hereby given that the 1995 Annual Meeting of
Stockholders of Geriatric & Medical Companies, Inc. will be held at
the principal executive offices of the Company located at 5601
Chestnut Street, Philadelphia, Pennsylvania 19139, on November 2,
1995 at 9:00 AM, local time for the following purposes:
1. To elect two directors in Class II for a three-year term
expiring at the Annual Meeting of Stockholders in 1998;
2. To approve the 1995 Equity Incentive Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on September
22, 1995, are entitled to notice of and to vote at the meeting or
any adjournments thereof.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON BUT, IF
YOU DO NOT EXPECT TO ATTEND IN PERSON, YOU ARE URGED TO SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING SELF-ADDRESSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Dated: October 2, 1995
By Order of the Board of Directors
Arthur A. Carr, Jr., Secretary
<PAGE>
GERIATRIC & MEDICAL COMPANIES, INC.
PROXY STATEMENT
PURPOSE OF THE MEETING
The solicitation of the accompanying Proxy is made by and on
behalf of the Board of Directors of Geriatric & Medical Companies,
Inc., a Delaware corporation (the "Company"), for use at the 1995
Annual Meeting of Stockholders to be held at the Company's
principal executive offices located at 5601 Chestnut Street,
Philadelphia, Pennsylvania 19139, on Thursday, November 2, 1995, at
9:00 A.M., local time, and at any adjournment or postponement
thereof for the purposes set forth in the attached Notice of 1995
Annual Meeting of Stockholders and as further described in this
Proxy Statement. This Proxy Statement and the accompanying form of
Proxy will be first sent or given to stockholders on or about
October 2, 1995.
The Company will bear the cost of the solicitation of Proxies.
Proxies will be solicited by mail, telephone and personal contact
by certain officers and regular employees of the Company. The
Company is, upon the request of record holders, required to pay
the reasonable expenses incurred by record holders who are brokers,
dealers, banks or voting trustees, or their nominees, for mailing
proxy material and the Company's Annual Report to Stockholders to
any beneficial holder of the Common Stock they hold of record.
Any stockholder executing and delivering the accompanying Proxy
has the power to revoke the same, at any time prior to its use, by
filing with the Secretary of the Company an instrument of
revocation or a duly executed Proxy bearing a later date. Unless
revoked, all properly executed proxies will be voted at the meeting
in accordance with the instructions therein. In the absence of
specific instructions, a Proxy will be voted for the election of
all nominees named in the Proxy, for the approval of the 1995
Equity Incentive Plan (the "1995 Plan") and in accordance with the
recommendations of the Board of Directors on any other matters
properly brought before the meeting, as described herein. As of
the date of this Proxy Statement, the Board does not know of any
matters which may come before the Annual Meeting other than those
discussed in this Proxy Statement. If any other matters properly
come before the Annual Meeting, the Proxy holders will vote the
shares represented by those Proxies in accordance with their
discretion on such matters.
Only stockholders of record at the close of business on September
22, 1995 are entitled to notice of and to vote at the meeting or
any adjournments thereof. As of September 22, 1995, the
outstanding voting securities of the Company consisted of
15,406,011 shares of Common Stock, $.10 par value (the "Common
Stock"). Stockholders are entitled to one vote per share of Common
Stock on any matter which may properly come before the meeting.
The presence, in person or by proxy, of the holders of a majority
of the shares of Common Stock issued and outstanding is necessary
to constitute a quorum at the meeting. In order to be elected a
director, a nominee must receive a plurality of votes out of the
total number of shares of Common Stock voted at the meeting for the
election of directors. A majority of the shares voted must be cast
in favor of the 1995 Plan for approval. For the purpose of
determining the number of votes cast, only those cast "for" or
"against" are counted. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is
present at the meeting.
Under the Company's Bylaws, any stockholder who desires to place
the name of a person in nomination for election as a director to be
elected at the 1995 Annual Meeting of Stockholders must submit such
nomination in writing to the Secretary of the Company not later
than the close of business on October 23, 1995 together with the
signed written consent of the nominee to serve if elected.
COMPENSATION AND SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of September 22,
1995, with respect to the beneficial ownership of the Company's
Common Stock by all persons known to the Company to be the
beneficial owner of more than five percent of its outstanding
Common Stock, by each Director of the Company, by each Executive
Officer of the Company, and by all Directors and Executive Officers
of the Company as a group. Unless otherwise indicated, each such
person has sole voting and dispositive power with respect to the
shares listed opposite his/her name.
<TABLE>
<S> <C> <C>
Approximate
Name and Address Number of Shares Percentage
of Beneficial Owner (1) Beneficially Owned of Class
Daniel Veloric. . . . . 3,746,178 24.0%
Thomas J. Gorman. . 1,058,125 (2), (3) 6.8%
Robert P. Krauss. . . 1,000,000 (3) 6.4 %
1735 Market Street
Philadelphia, PA 19103
Esther Ponnocks . . . 146,501 (4) *
Gerald E. Bisbee, Jr. . 17,969 (5) *
Anthony C. Salvo. . . . 127,214 (6) *
Michael Veloric . . . . 96,082 (7) *
Arthur A. Carr, Jr. . . 69,718 (8) *
James J. Wankmiller . . 41,800 (9) *
James J. O'Malley . . . 29,396 (10) *
All Directors and Executive Officers
as a group (9 persons). 5,332,983 (11) 34.2%
</TABLE>
<PAGE>
(1) Except as shown, each person's respective address is 5601 Chestnut
Street, Philadelphia, PA 19139.
(2) Includes 25,125 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the 1990 Stock Option Plan for Directors. Also includes 3,000 Restricted
Shares issued under the 1994 Stock Option and Restricted Stock Plan for
Directors.
(3) Includes 1,000,000 shares held in Trusts of which Mr. Gorman and Mr.
Krauss are co-Trustees.
(4) Includes 82,188 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the Company's 1982 and 1989 Stock Option Plans.
(5) Includes 14,969 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the 1990 Stock Option Plans for Directors. Also includes 3,000 Restricted
Shares issued under the 1994 Stock Option and Restricted Stock Plan for
Directors.
(6) Includes 14,969 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the 1990 Stock Option Plan for Directors. Also includes 3,000 Restricted
Shares issued under the 1994 Stock Option and Restricted Stock Plan for
Directors.
(7) Includes 7,500 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the Company's 1982 and 1989 Stock Option Plans.
(8) Includes 25,000 shares which may be purchased pursuant to options
that are immediately exercisable or will become exercisable within 60 days
under the Company's 1982 and 1989 Stock Option Plans. Does not include
1000 shares owned by Mr. Carr's wife, beneficial ownership of which he
disclaims.
(9) Includes 23,781 shares which may be purchased pursuant to options that
are immediately exercisable or will become exercisable within 60 days under
the Company's 1982 and 1989 Stock Option Plans.
(10) Includes 13,125 shares which may be purchased pursuant to options
that are immediately exercisable or will become exercisable within 60 days
under the Company's 1982 and 1989 Stock Option Plans.
(11) Includes 206,657 shares which may be purchased pursuant to options
that are immediately exercisable or will become exercisable within 60 days
under the Company's Stock Option Plans. Also includes 1,000,000 shares
held in Trusts as noted in (3) above and includes Restricted Shares issued
under the 1994 Stock Option and Restricted Stock Plan for Directors.
* Less than 1%.
<PAGE>
Section 16
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons
who own more than ten percent (10%) of a registered class of the Company's
equity securities, to file reports of the ownership and change of ownership
of such securities with the Securities and Exchange Commission ("SEC") and
the National Association of Securities Dealers, Inc. Officers, directors
and beneficial owners of more than ten percent (10%) of the Company's
Common Stock are required by SEC regulation to furnish the Company with
copies of all such forms which they file.
Based solely on the Company's review 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 the fiscal
year ended May 31, 1995, its officers, directors and greater than ten
percent beneficial owners complied with all applicable filing requirements
under Section 16(a) of the Exchange Act, except that Thomas J. Gorman, a
Director of the Company, made a late Form 5 filing reporting one
transaction which should have been previously reported on Form 4.
COMPENSATION COMMITTEE REPORT
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee of the Board of Directors (the
"Compensation Committee"). The Compensation Committee consists of three
independent, non-employee Directors of the Company. Except for the 1990
Stock Option Plan Committee, no compensation committee interlocks nor
insider participation exists on the Compensation Committee.
Policies and Mission
The Compensation Committee has determined that compensation of executive
officers should include a mixture of short and long range compensation
plans which attract, motivate and retain competent executive personnel,
increase executive ownership interests in the Company and encourage
increases in the Company's productivity and profitability. As such, the
Company's policy is that executive compensation should be directly and
materially related to the short-term and long-term operating performance
and objectives of the Company. To achieve these ends, executive
compensation, including base salary, bonuses, stock awards and stock option
grants, is to a significant extent dependent upon the Company's financial
performance and the return on its Common Stock. However, to ensure that
the Company is strategically and competitively positioned for the future,
the Compensation Committee also attributes significant weight to other
factors in determining executive compensation, such as maintaining
competitiveness, implementing capital improvements, expanding markets and
achieving other long-range business and operating objectives.
Compensation Plan
In order to determine appropriate levels of executive compensation, the
Compensation Committee periodically reviews the executive compensation
programs and policies of the Company's competitors, in addition to a
broader group of companies in its marketplace, to ensure that the Company's
plans and practices are competitive and appropriate based on the Company's
performance and compensation philosophy. The Company also participates in
compensation surveys and solicits compensation pay data from various
compensation consultants. An executive officer's total compensation
package is comprised of five components: (1) base salary, (2) annual
incentives, (3) stock options and stock awards, (4) deferred compensation,
and (5) executive benefits package.
Base Salary
It is the Company's policy to target executive's base salaries in the
range of the 60th to 80th percentile of similar employees in similar
positions. In setting base salary levels for individual executives, the
Compensation Committee considers such factors as the executive's scope of
responsibility, current performance, future potential and overall
competitive positioning relative to comparable positions at other
companies. No increase in salary was provided for Daniel Veloric, Chief
Executive Officer during the fiscal year ended May 31, 1995. See
"Executive Officer Employment Agreements" below. The salaries for Esther
Ponnocks, Arthur A. Carr, Jr., James J. O'Malley and James J. Wankmiller
were adjusted in fiscal 1995 based upon merit and inflation.
Annual Incentives
The Company did not pay a discretionary bonus in the fiscal year ended
May 31, 1995. The Compensation Committee is considering the implementation
of a Management Incentive Bonus Program based primarily on performance.
The payment of awards is expected to be based on the achievement of
predetermined goals to be established by the Compensation Committee using
the Company's overall business plan, budget objectives, external
marketplace conditions (e.g. economic outlook) and return measures.
Performance relative to industry peers may also be considered in assessing
year-end results and determining award payout levels. The amount of the
award may also be adjusted to reflect each executive's individual
performance and potential.
Pursuant to the Employment Agreement between Daniel Veloric and the
Company, Mr. Veloric is entitled to an annual incentive bonus equal to 5%
of the amount by which the Company's eligible net income (net income less
any unusual or infrequent non-operating income items plus annual bonus) for
such year exceeds Base Net Income (eligible net income for the preceding
fiscal year, but not less than $2,000,000). Mr. Veloric earned an
incentive bonus under this plan for the fiscal year ended May 31, 1995
totaling $107,000.
Stock Options and Stock Awards
Stock options under the provisions of the Company's Stock Option Plan are
granted from time to time to reinforce the importance of improving
stockholder value over the long-term, and to encourage and facilitate
executive stock ownership. Stock options are granted at not less than 100%
of the fair market value of the stock on the date of grant to ensure that
executives can only be rewarded for appreciation in the price of the Common
Stock where the Company's stockholders are similarly benefited. The
Compensation Committee has established levels of participation for each
approved incentive stock option program based upon each executive's or
other employee's position in the Company. The number of stock options
granted to each executive is limited to this maximum level by position and
is contingent on the individual executive's performance, tenure and future
potential.
On August 17, 1995, the Company's Board of Directors determined that an
aggregate of 161,750 shares of the Company's Common Stock would be awarded
to certain officers and key executives effective September 15, 1995 in
recognition of their performance. Of such shares, 25,000 were awarded to
each of Ms. Ponnocks and Mr. Carr and 15,000 were awarded to each of Mr.
O'Malley, Mr. M. Veloric and Mr. Wankmiller.
On August 17, 1995, the Company's Board of Directors adopted, subject to
approval of the Shareholders, the 1995 Equity Incentive Plan (See Proposal
No. 2 below). Pursuant to that Plan, the Board also adopted a Management
Long Term Incentive Program pursuant to which a maximum of 525,000 shares
of the Company's Common Stock, subject to standard anti-dilution
provisions, could be granted to the Company's officers and key executives
for the original three years of the program. Awards under the program may
be earned by achieving certain economic (including minimum net income
growth requirements) and company-wide and individual management goals
(including marketing, planning and management development).
Incentive Deferred Compensation Plan
As a part of its Executive Compensation Plan, the Company provides
retirement/deferred compensation to its key employees under one of several
different methods. Pursuant to the Employment Agreement between Daniel
Veloric and the Company, Mr. Veloric is entitled to the benefits of a long-
term incentive plan. Pursuant to this plan, he is entitled to receive
6,500 phantom shares (each phantom share equivalent to one share of the
Company's common stock) for each 1/8th point increment by which the
Company's average stock price each fiscal year exceeds the base stock price
(the average stock price for the preceding fiscal year, but not less than
$2.00 per share.) Mr. Veloric received 6,500 phantom shares pursuant to
this plan for the fiscal year ended May 31, 1995. The value of all phantom
shares earned by Mr. Veloric pursuant to this plan will be determined on
the earlier of the termination of his Employment Agreement or May 31, 1998
and paid over a period of 10 years with interest at the lowest rate then
permitted by the Internal Revenue Service on deferred payments.
In accordance with the Employment Agreement entered into by the Company
and Esther Ponnocks on June 1, 1992, the Company has obtained an Annuity
Program that provides a defined benefit of payments for Miss Ponnocks, for
her lifetime, commencing at age 70. Contributions to this plan which
include a one time charge for the purchase of a single premium life
insurance policy are included as "Other Annual Compensation" in the Summary
Compensation Table in this document.
Messrs. Carr, O'Malley, M. Veloric and Wankmiller are covered under the
Company's Incentive Deferred Compensation Plan. Under the terms of this
plan, the Compensation Committee approves a discretionary award (generally
in the form of a percentage of salary) to each participant on an annual
basis based upon the financial performance of the Company and a performance
evaluation of each participant. Awards are subject to vesting over a
period of time and the benefits are unfunded, unsecured general obligations
of the Company. During fiscal 1995, the Company awarded $16,999 to Mr.
Carr, $12,390 to Mr. O'Malley, $12,040 to Mr. M. Veloric and $12,040 to Mr.
Wankmiller.
Compensation Committee of the Board of Directors
Gerald E. Bisbee, Jr., Anthony C. Salvo, Thomas J. Gorman
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table includes individual compensation information
on the Chief Executive Officer and the four most highly paid executive officers
of the Company whose salary and bonus exceeded $100,000, for services rendered
in all capacities during the fiscal years ended May 31, 1995, 1994 and 1993.
<TABLE>
<S> <C> <C> <C> <C>
ANNUAL COMPENSATION
Name and Principal Other Annual
Position Year Salary Bonus Compensation(1)
Daniel Veloric 1995 $450,008 $107,000 $11,179
Chairman, President 1994 $450,008 - $12,359
and Chief Executive 1993 $450,008 - $75,808
Officer
Esther Ponnocks 1995 $180,965 - $138,817
Senior Executive 1994 $166,425 $ 20,000 $ 46,902
Vice President 1993 $154,950 - $120,079
Arthur A. Carr, Jr. 1995 $170,738 - $ 14,062
Executive Vice 1994 $156,600 $ 17,500 $ 14,519
President & Secretary 1993 $147,750 - $ 32,964
James J. O'Malley 1995 $131,169 - $ 12,962
Vice President and 1994 $115,050 $ 15,000 $ 12,996
Chief Financial Officer 1993 $105,219 - $ 15,283
James J. Wankmiller, Esquire 1995 $121,554 - $ 8,252
Vice President-Legal and 1994 $110,951 $ 15,000 $ 8,925
Assistant Secretary 1993 $102,850 - $ 15,037
LONG TERM COMPENSATION AWARDS
Restricted (*) Options All Other
Stock Awards (in Shares) Compensation
Daniel Veloric - - $16,005(3)
Chairman, President ($115,126)(5) - $14,495(3)
and Chief Executive Officer $ 16,500 - -
Esther Ponnocks - 20,000 -
Senior Executive ( $50,437)(5) - $ 9,375(4)
Vice President $ 8,250 5,000 -
Arthur A. Carr, Jr. - 15,000 $16,999(2)
Executive Vice ( $32,437)(5) - $ 8,100(2)
President & Secretary $ 8,250 7,500 $ 7,250(2)
James J. O'Malley - 10,000 $12,390
Vice President and ( $ 8,725)(5) - $ 6,000
Chief Financial Officer $ 5,500 10,000 $ 4,550
James J. Wankmiller, Esquire - 10,000 $12,040(2)
Vice President-Legal and ( $12,787)(5) 3,906 $ 5,750(2)
Assistant Secretary $ 4,125 10,406 $ 4,950(2)
</TABLE>
(1) Includes all other compensation reported on IRS Form W-2.
(2) Includes Company contribution relating to the Incentive Deferred
Compensation Plan.
(3) Represents the value of 6,500 phantom shares issued under his Long Term
Incentive Plan for the respective years.
(4) Represents the value of 25,000 unregistered shares issued on December 16,
1993 in recognition of 25 years of service.
(5) Amount represents the forfeiture as of May 31, 1994 of restricted
shares previously granted.
(*) Other Annual Comp shows W-2 wages for release of restrictions.
This is estimated $ amount of award.
NOTE: During fiscal 1995, no executive officer received personal benefits
from the Company valued at more than 10% of total Annual Compensation
or $50,000, whichever is less.
<PAGE>
Executive Officer Employment Agreements
Effective June 1, 1993, the Company entered into an Employment
Agreement with Daniel Veloric, Chairman and President of the
Company, which provides for an annual base compensation, which
increased from $450,000 per year to $500,000 per year effective
June 1, 1995, and an original term of five years (which, until
terminated, extends one additional year each year). The
Agreement also provides for a death benefit of $1,000,000 as well
as benefits under the previously described short term incentive
plan and long term incentive plan for Daniel Veloric.
Effective June 1, 1992, the Company entered into an Employment
Agreement with Esther Ponnocks, Senior Executive Vice President,
which provides for an annual base compensation, which increased
from $172,500 per year to $188,000 per year effective November 1,
1994, and an original term of three years, with annual extensions
through not later than May 31, 2002. If a person acquires more
than 20% of the outstanding voting stock of the Company without
the prior approval of the Company's Board of Directors, or if the
Company materially breaches the employment agreement or under
certain other circumstances; the Company will owe Ms. Ponnocks
the remainder of the compensation due under the agreement through
as long as May 31, 2002.
Compensation Pursuant to Plans
The Company's Profit Sharing Plan was merged into a 401(k)
Profit Sharing Plan effective June 1, 1989. Under the 401(k)
Plan, eligible employees may contribute up to 15% of their total
compensation on a tax-deferred basis subject to maximum annual
limitations. Pursuant to the terms of the plan, the Company may
make matching contributions at a percentage or amount determined
at the sole discretion of the Company. During the fiscal year
ended May 31, 1995, no contribution was made by the Company to
the plan.
The Company's 1989 Stock Option and Restricted Stock Plan ("the
1989 Plan") provides that incentive and non-qualified stock
options may be granted to key employees of the Company and its
subsidiaries. The 1989 plan is administered by the Compensation
Committee which has the discretion to determine those key
employees who will receive options and the amount of options to
be granted to said employees; to determine when options will be
granted and the exercise price of each option, which price
cannot, however, be less than the fair market value of the Common
Stock on the date of grant; and to determine when each option can
be exercised and the term (up to ten years) of each option
granted. All options will expire within ten years from the date
of grant and no options may be granted after November 9, 1999.
If an optionee is terminated other than for wrongful conduct, the
optionee may exercise his/her options within three months (one
year for an optionee who ceases to be employed because of
permanent and total disability) provided that his/her right to
exercise said options has vested at the date of termination and
provided that the exercise of the option is within ten years from
the date it was granted (five years for an incentive stock option
granted to a 10% stockholder). If an optionee dies while in the
employ of the Company or within three months (one year in the
case of disability) after the termination of employment, and
provided that his/her options have vested at the time of his/her
death and the exercise of the options are within ten years from
the date of grant (five years for an incentive stock option
granted to a 10% stockholder), then the optionee's personal
representative may exercise said options within one year after
the optionee's death.
In 1992, the Company implemented an Incentive Deferred
Compensation Plan for selected key employees. Under this Plan,
the Company makes discretionary awards to such executives, which
amount, if any, can vary annually and by participant, and is
generally expressed as a percentage of salary. The amounts are
credited to a book-entry account established in such
participant's name. Such account is also credited with the
equivalent of interest and such interest rate is determined
annually by the Company. Participants become vested in the
amounts credited to the deferred compensation account on a
graduated basis. However, full vesting cannot occur prior to
attainment of age 65 while actively employed by the Company.
Upon retirement at age 65 or later, the vested deferred
compensation account is paid out as a 15 year annuity.
Participants who terminate employment prior to age 65 will
receive a 10 year annuity at retirement based on the vested
account balance. In the event of the death of a participant
while actively employed, the plan provides to the participant's
survivor a continuation of 50% of the final salary for one year,
followed by 25% of final salary until the participant would have
attained age 65, subject to a minimum of 10 years of total
payments. All benefits under the incentive Deferred Compensation
Plan are unfunded, unsecured general obligations of the Company.
The Company has purchased corporate owned life insurance on the
participants estimated to be sufficient to recover the
distributions to be made under this Plan.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year - End Option Values
The following table provides information, with respect to the
named executive officers, concerning the exercise of options
during the last fiscal year and unexercised options held as of
the end of the fiscal year, May 31, 1995. There are no
outstanding stock appreciation rights.
<TABLE>
<S> <C> <C> <C> <C>
Number of Value of Unexercised
Unexercised Options In-the-Money
Shares at Fiscal Options at
Acquired Year End Fiscal Year-End
Name on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexcerisable
Daniel
Veloric. . . -- -- -- -- -- --
Esther
Ponnocks . . -- -- 82,188 16,250 $58,126 --
Arthur
A. Carr,Jr.. -- -- 25,000 13,125 -- --
James J.
O'Malley . .1,953 $3,496 13,125 10,000 -- --
James J.
Wankmiller .5,469 $7,547 23,781 9,125 $7,500 --
</TABLE>
Compensation of Directors
Employees of the Company are not paid any fees for their
services as Directors of the Company. Effective January 1, 1995,
Directors who are not employees of the Company are paid a fee of
$18,000 per calendar year for their services, which includes
services on any committee of which they are a member and attendance
at any meeting of the Board. In addition, as part of their
compensation package, Directors who are not employees of the
Company receive an annual grant of 3,000 Restricted Shares and
4,000 non-qualified stock options for each year they serve as a
Director.
The 1990 Stock Option Plan for Directors, which was approved by
the Board of Directors on January 25, 1990, provides for the grant
of options to purchase an aggregate of 120,313 shares of Common
Stock of the Company to Directors of the Company who are not
employees of the Company at the time the options are granted. Such
Options vest over a period of four years. The plan is administered
by the 1990 Stock Option Plan Committee (which presently consists
of Daniel Veloric and Arthur A. Carr, Jr.) which has discretion
when options will be granted and the exercise price of each option,
which price cannot, however, be less than the fair market value of
the Common Stock on the date of grant; and to determine when each
option can be exercised. All options granted to date will expire
within five years from the date of grant and the plan provides that
no options may be granted after December 31, 1994. If an
optionee's term as a Director of the Company terminates, the
options held by such optionee will terminate immediately unless the
termination is voluntary and with the consent of the Board, in
which case options subject to exercise on the date of termination
may be exercised within thirty (30) days following termination, or
if caused by the death of the optionee, in which case options
exercisable at death may be exercised by the optionee's personal
representative upon the earlier of six (6) months after the date of
death or the date the options expire in accordance with the terms
of the option agreement. In fiscal 1995, 4,000 options were
granted at fair market value to each of Gerald E. Bisbee, Jr.,
Thomas J. Gorman, and Anthony C. Salvo. No Directors exercised
options under this plan in 1995.
The 1994 Stock Option and Restricted Stock Plan for Directors
("1994 Plan") was approved by the stockholders at the Annual
Meeting of Stockholders held November 7, 1994. The 1994 Plan is
administered by the 1994 Plan Committee (the "Plan Committee"),
which presently consists of Daniel Veloric and Arthur A. Carr., Jr.
The Committee designates those non-employee Directors ("Outside
Directors") to whom grants will be made, the form and amount of
grants, and the terms and conditions of grants. Awards under the
1994 Plan may be made to Directors of the Company, who are not
employees of the Company or its subsidiaries. Currently there are
three Outside Directors eligible to participate in the 1994 Plan,
Gerald E. Bisbee, Jr., Thomas J. Gorman and Anthony C. Salvo.
The Plan Committee has the authority to grant the following type
of awards to non-employee Directors under the 1994 Plan: (1) Stock
Options; (2) Restricted Stock; and (3) Other Stock-Based Awards.
Outside Directors also may elect to forego all or a portion of
their annual cash retainer and receive in lieu thereof restricted
shares or stock options equal to the value of the foregone
retainer.
Non-qualified stock options may be granted for such number of
shares as the Plan Committee determines and may be granted alone,
in conjunction with, or in tandem with, other awards under the 1994
Plan. A stock option may generally be exercised at such times and
subject to such terms and conditions as the Committee shall
determine and over a term to be determined by the Committee. The
option price for any option granted to an Outside Director of the
Company or its subsidiaries will not be less than 100% of the fair
market value of Company Common Stock as of the date of grant.
Payment of the option price may be in cash or in stock of the
Company which has a fair market value equal to the option price and
has been held for more than six months. Options may be exercised
in cashless transactions.
Outside Directors are eligible to receive grants of shares of
restricted stock. Typically, restricted shares will be granted at
no purchase price, although the Plan Committee may elect to require
the grantee to pay some de minimis purchase price which may be less
than the fair market value of such shares on the date of issuance.
Restricted shares are merely shares of the Company's Common Stock
which the grantee is not entitled to sell or otherwise transfer
until ownership of the shares vest. The minimum vesting period is
one year. The vesting schedule of restricted shares is determined
by the Plan Committee at the time of grant.
During the restriction period, certificates are held by the
Company. Generally, if a Director terminates service because of
death, disability, or retirement from the board at age 70 or later,
all shares are delivered to him, or his designated beneficiary,
free of restrictions, or under such terms as determined by the Plan
Committee from time to time. Commencing on the date of grant, each
Director has the right to vote all of the shares. Dividends paid
on the shares are reinvested in additional shares of Common Stock
and subject to the same restriction schedule as the initial grant.
In fiscal 1995, 3,000 shares of Restricted Stock were granted to
each of Gerald E. Bisbee, Jr., Thomas J. Gorman and Anthony C.
Salvo.
The Plan Committee may also grant other types of awards that are
valued, in whole or in part, by reference to or otherwise based on
the Common Stock. These awards may be granted alone, in addition
to, or in tandem with stock options, restricted stock, and cash
awards outside of the 1994 Plan. Such awards will be made upon
terms and conditions as the Plan Committee in its discretion
provides.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
Geriatric & Medical Companies, Inc., (NASDAQ: GEMC) NASDAQ Market Index,
SIC Code Index and Peer Group Index
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
GEMC 100 113.64 156.25 106.53 149.15 113.64
NASDAQ Mkt Index 100 162.35 155.37 231.04 300.04 310.69
SIC Code Market 100 99.83 106.28 127.19 139.48 152.66
Peer Group Index 100 212.78 156.38 253.38 317.46 262.23
</TABLE>
The above graph compares the performance of Geriatric & Medical
Companies, Inc. with that of the NASDAQ Market Index, a peer group
comprised of companies having the same standard industrial
classification (SIC) code (SIC code 8051 - Skilled Care Nursing
Facilities), and a peer group of health care providers.
The health care providers in the Peer Group Index are Beverly
Enterprises, Inc. and Horizon Healthcare Company. Due to
acquisitions of companies previously in this comparison peer group,
only two peers remain. The Company believes that this comparison
therefore no longer provides information as useful as in the past,
and the Company has determined to use, hereafter, the SIC Code
Index comprised of companies in SIC code 8051, instead of the Peer
Group Index. The Peer Group Index is included in the above graph
this year for purposes of comparison.
The companies in the SIC Code Index are: Advocat, Inc., Arbor
Health Care Co., Beverly Enterprises, Inc., Concord Health Group,
Genesis Health Ventures, Geriatric & Medical Companies, Grancare,
Inc., Health Care & Retirement, Hillhaven Corp., Horizon CMS
Healthcare Corp., Iatros Health Network, Integrated Health Service,
Living Centers of America, Manor Care, Inc., Mariner Health Group,
Inc., Meadowbrook Rehab Group A, Multicare Companies, Inc.,
National Healthcare, L.P., Newcare Health Corp., Regency Health
Services, Summit Care Corp., Theratx, Inc. and Transworld Home
Healthcare.
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During the fiscal year ended May 31, 1995, four meetings of the
Board of Directors were held. During such fiscal year, each
Director attended over 75% of the meetings of the Board of
Directors and the committees of the Board on which he/she served
that were held during the period he/she served.
Committees of the Board of Directors include: the Executive
Committee (which acts for the Board of Directors in situations
requiring prompt action when a full meeting of the Board of
Directors is not feasible, or implements specific action for the
Board of Directors where directed to do so); the Incentive Stock
Option and Compensation Committee (the "Compensation Committee")
(which has the authority to review the performance and compensation
of the officers of the Company, to review the benefit plans of the
Company and make recommendations on such matters to the Board of
Directors and to grant options and other awards pursuant to the
1989 Stock Option and Restricted Stock Plan); the Audit Committee
(which has the authority to approve the selection and engagement of
the Company's independent accountants, and the scope of the audit
to be performed thereby, and to review the Company's accounting
principles, financial and operating policies, review the reports
and actions of the internal audit department, and review the
reports submitted by the Company's independent accountants); the
Special Committee (which was appointed to review and consider
potential transactions involving properties owned by the Company
and Tomahawk Capital Investments, Inc. (or its affiliates) which is
owned/controlled by Daniel Veloric, Chairman of the Board for the
Company; and the Quality Review Committee (which monitors and
reports to the Board of Directors on compliance with the Company's
Quality Assurance Programs). The Company does not maintain a
Nominating Committee.
Daniel Veloric and Gerald E. Bisbee, Jr. are members of the
Executive Committee. Gerald E. Bisbee, Jr., Thomas J. Gorman and
Anthony C. Salvo are members of the Compensation Committee. The
Audit Committee consists of Thomas J. Gorman, Gerald E. Bisbee,
Jr., and Anthony C. Salvo. Gerald E. Bisbee, Jr., Thomas J. Gorman
and Anthony C. Salvo are members of the Special Committee. Gerald
E. Bisbee, Jr., Michael Veloric and others who are not Directors
are members of the Quality Review Committee. During the fiscal
year ended May 31, 1995, the Executive Committee did not meet, the
Compensation Committee met on two occasions, the Audit Committee
met on one occasion and the Quality Review Committee met on two
occasions.
The Bylaws of the Company, as amended, provide that the Company
shall have a Board of Directors consisting of six members, who
shall be divided into three Classes, with two members in each
Class. At the present time, the members of the Board are Anthony
C. Salvo and Thomas J. Gorman in Class I, Gerald E. Bisbee, Jr. and
Michael Veloric in Class II, and Daniel Veloric and Esther Ponnocks
in Class III. All members of the Board of Directors were elected
at the times, and for the terms, indicated in the following
paragraph or in the table below. At the meeting, stockholders will
elect two Class II directors for a three-year term expiring at the
Annual Meeting of Stockholders in 1998.
The Proxies solicited by the Board of Directors will be voted by
the person named therein as so indicated, or if no indication, for
Gerald E. Bisbee, Jr. and Michael Veloric as the nominees for
election to Class II for a three-year term expiring at the Annual
Meeting of Stockholders in 1998 or until his respective successor
is elected and qualified. If the nominees withdraw or otherwise
become unable to serve, which is not expected, the Proxies will be
voted for a substitute nominee who will be designated by the Board
of Directors.
<PAGE>
The following table sets forth information concerning the
Company's Directors and the nominees for Director:
<TALBE>
[S]
[C]
Name (Age) and Principal First Became
Occupation for the Past Five Years A Director
Class I - Directors elected in 1994 to serve until the
Annual Meeting in 1997:
Anthony C. Salvo (52) 1988
Principal of RAI Capital, LLC (1995 to date);
Vice President of Dillon, Read & Co., Inc., an
investment banking firm (1989 to 1994); President
of ACS Holdings, Inc., a diversified investment
company (1989 to date).
Thomas J. Gorman (56) 1990
Independent Investor (1994 to date); Chief Financial
Officer and Treasurer of Carlino Financial Corporation,
a diversified holding company with interests in various
insurance, leasing and other entities (1984 to 1994).
Class II - Nominees for election to serve until the Annual
Meeting in 1998:
Gerald E. Bisbee, Jr., Ph.D. (51) 1988
Chairman and Chief Executive Officer of Apache Medical
Systems, Inc., a provider of informational systems to
the healthcare industry (March 1990 to date);
Chairman and Chief Executive Officer of Hanger
Orthopedic Group, Inc. (formerly Sequel Corporation),
an orthopedic products company (1988 and 1989);
Director of Cerner Corp. and Yamaichi Capital
Management, Inc.
Michael Veloric (38) 1992
Vice President and Assistant Secretary of the Company.
Vice President of the Company since June 1987 and
Assistant Secretary since October 1984. Mr. Veloric
(son of Daniel Veloric), holds an MBA degree in Health
Administration and has been a member of the
Company's management for over ten years.
Class III - Directors elected in 1993 to serve until the Annual
Meeting in 1996:
Daniel Veloric (67) 1968
Chairman of the Board, President and Chief Executive
Officer of the Company for more than five years and an
officer of the Company for more than twenty-five
years. Founder of the Company.
Esther Ponnocks (63) 1985
Senior Executive Vice President of the Company (October
1991 to date); Executive Vice President - LTC (Long-Term
Care) Operations of the Company (April 1990 to October
1991); and a member of the Company's management for more
than twenty-five years.
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
Gerald F. Bisbee, Jr. and Michael Veloric are nominees for
election to membership on the Board as Class II Directors to
serve for a three year term until the Annual Meeting in 1998 or
until their respective successors are duly elected and shall have
qualified.
The Proxy holders intend to vote FOR the election of Messrs.
Bisbee and M. Veloric unless a contrary instruction is stated in
the Proxy. If for any reason either or both of such nominees
should become unavailable for election, the Proxy holder may vote
the Proxy for the election of a substitute designated by the
Board, unless a contrary instruction is given on the Proxy. The
Board has no reason to believe that either of the nominees will
be unable or unwilling to serve the entire term for which
election is sought.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES.
<PAGE>
APPROVAL OF THE COMPANY'S
1995 EQUITY INCENTIVE PLAN
(Proposal No. 2)
PURPOSE
The purpose of the 1995 Equity Incentive Plan (the "1995 Plan")
is to enhance the ability of the Company to (i) attract and
retain employees and other persons or entities that are in a
position to make significant contributions to the success of the
Company and its subsidiaries (such persons are hereinafter
collectively referred to as "Participants"); (ii) reward such
persons for such contributions; and (iii) encourage such persons
to take into account the long-term interest of the Company
through ownership of shares ("Shares") of the Company's Common
Stock ("Stock"). Non-employee Directors are not entitled to
receive awards under the 1995 Plan.
Under the 1995 Plan, the Company will be able to grant awards
("Awards") in the form of Stock, Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock, all as more fully
described below.
ADMINISTRATION
The 1995 Plan will be administered by the Compensation
Committee (the "Committee") of the Board of Directors of the
Company (the "Board") which will be constituted to permit the
Plan to comply with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee will determine the recipients of Awards, the times at
which Awards will be made and the size and type or types of
Awards to be made to each recipient and will set forth in such
Awards the terms, conditions and limitations applicable to them.
Awards may be made singly, in combination or in tandem. The
Committee will have full and exclusive power to interpret the
Plan, to adopt rules, regulations and guidelines relating to the
Plan, to grant waivers of Plan restrictions permissible under
applicable law and to make all of the determinations necessary
for its administration. The Committee may at any time and from
time to time accelerate the time at which all or part of an Award
may be exercised and, in the case of a change in control of the
Company not approved by the Board, Awards will vest automatically
and become immediately exercisable.
EFFECTIVE DATE AND TERM OF PLAN
The 1995 Plan will become effective as of the date on which it
is approved by the stockholders of the Company. Grants of Awards
under the 1995 Plan may be made prior to that date, subject to
such approval of the 1995 Plan. (See Discussion of
Compensation.)
The 1995 Plan will terminate ten years after the effective date
of the 1995 Plan, subject to earlier termination of the 1995 Plan
by the Board. No Award may be granted under the Plan after the
termination date of the 1995 Plan, but Awards previously granted
may extend beyond that date.
SHARES SUBJECT TO THE PLAN
The maximum aggregate number of Shares of Stock that may be
delivered for all purposes under the 1995 Plan shall be
1,000,000, subject to standard anti-dilution provisions.
If any Award requiring exercise by the Participant for delivery
of Stock is canceled or terminates without having been exercised
in full, the number of Shares of Stock as to which such Award was
not exercised will be available for future grants of Stock except
that Stock subject to an Option canceled upon the exercise of SAR
shall not again be available for Awards under the 1995 Plan
unless, and to the extent that, the SAR is settled in cash.
Shares of Stock tendered by a Participant or withheld by the
Company to pay the exercise price of an Option or to satisfy the
tax withholding obligations of the exercise or vesting of an
Award will be available again for Awards under the 1995 Plan, but
only to Participants who are not subject to Section 16 of the
Exchange Act. Shares of Restricted Stock forfeited to the
Company in accordance with the 1995 Plan and the terms of the
particular Award will be available again for Awards under the
1995 Plan unless the Participant has received the benefits of
ownership (within the applicable interpretation under Rule 16b-3
under the Exchange Act), in which case such Shares may only be
available for Awards to Participants who are not subject to
Section 16 of the Exchange Act.
OPTIONS
a. Nature of Options. An Option is an Award entitling the
Participant to purchase a specified number of Shares at a
specified exercise price. Both "incentive stock options" ("ISO")
as defined in Section 422 of the Internal Revenue Code and non-
incentive stock options ("NQSO") may be granted under the 1995
Plan. ISOs may be awarded only to Employees.
b. Exercise Price. The exercise price of each Option will be
determined by the Committee and may be at less than the fair
market value of a Share at the date of grant, except that in the
case of an ISO shall not be less than 100% (110% in the case of
an ISO granted to a ten-percent shareholder) of the fair market
value of a Share at the date the ISO is granted.
c. Duration of Options. In no case will an ISO be exercisable
more than ten years (five years, in the case of an ISO granted to
a ten-percent shareholder) from the date the ISO was granted.
d. Exercise of Options and Conditions. Options granted under
any single Award will become exercisable at such time or times,
and on and subject to such conditions, as the Committee may
specify. The Committee may at any time and from time to time
accelerate the date on which all or any part of the Option may be
exercised.
e. Payment for and Delivery of Stock. Full payment for Shares
purchased will be made at the time of the exercise of the Option,
in whole or in part. Payment of the purchase price will be made
in cash or in such other form as the Committee may approve,
including, without limitation, delivery of Shares of Stock.
STOCK APPRECIATION RIGHTS
a. Nature of Stock Appreciation Rights. A Stock Appreciation
Right (a "SAR") is an Award entitling the recipient to receive
payment, in cash and/or Stock, determined in whole or in part by
reference to appreciation in the value of a Share. In general, a
SAR entitles the recipient to receive, with respect to each Share
as to which the SAR is exercised, the excess of the fair market
value of a Share on the date of exercise over the fair market
value of a Share on the date the SAR was granted. However, the
Committee may provide at the date of grant that the amount the
recipient is entitled to receive will be adjusted upward or
downward under rules established by the Committee to take into
account the performance of the Shares in comparison with the
performance of other stocks or an index or indices of other
stocks.
b. Grant of SARs. SARs may be granted in tandem with, or
independently of, Options granted under the Plan. An SAR granted
in tandem with an Option which is not an ISO may be granted
either at or after the time the Option is granted. A SAR granted
in tandem with an ISO may be granted only at the time the Option
is granted.
c. Exercise of SARs. A SAR not granted in tandem with an Option
will become exercisable at such time or times, and on such
conditions, as the Committee may specify. A SAR granted in
tandem with an Option will be exercisable only at such times, and
to the extent, that the related Option is exercisable. A SAR
granted in tandem with an ISO may be exercised only when the
market price of the Shares subject to the Option exceeds the
exercise price of such Option. The Committee may at any time and
from time to time accelerate the time at which all or part of a
SAR may be exercised.
RESTRICTED STOCK
A Restricted Stock Award entitles the recipient to acquire
Shares, subject to certain restrictions or conditions, for no
cash consideration, if permitted by applicable law, or for such
other consideration as determined by the Committee. The Award
may be subject to such restrictions, conditions and forfeiture
provisions as the Committee may determine, including, but not
limited to, restrictions on transfer; continuous service with the
Company or any of its Subsidiaries; achievement of business
objectives; and individual, unit and Company performance.
Subject to such restrictions, conditions and forfeiture
provisions as may be established by the Committee, any
Participant receiving an Award will have all the rights of a
stockholder of the Company with respect to Shares of Restricted
Stock, including the right to vote the Shares and the right to
receive any dividends thereon.
DEFERRED STOCK
A Deferred Stock Award entitles the recipient to receive Shares
to be delivered in the future. Delivery of the Shares will take
place at such time or times, and on such conditions, as the
Committee may specify. The Committee may at any time accelerate
the time at which delivery of all or any part of the Shares will
take place. At the time any Deferred Stock Award is granted, the
Committee may provide that the Participant will receive an
instrument evidencing the Participant's right to future delivery
of Deferred Stock.
STOCK
The Committee may grant an Award of Shares of Stock entitling
the recipient to receive Shares at a price determined at the
discretion of the Committee, including at less than the fair
market value of the Shares.
AMENDMENTS AND TERMINATION
The Committee will have the authority to make such amendments
to any terms and conditions applicable to outstanding Awards as
are consistent with this Plan provided that, except for certain
anti-dilution adjustments, no such action will modify such Award
in a manner adverse to the Participant without the Participant's
consent except as such modification is provided for or
contemplated in the terms of the Award.
The Board may amend, suspend or terminate the Plan except that
no such action may be taken, without shareholder approval, which
would effectuate any change for which shareholder approval is
required pursuant to Section 16 of the Exchange Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1995 PLAN.
The following description of certain federal income tax
consequences of the 1995 Plan is based upon current statutes,
regulations and interpretations and does not include state or
local income tax consequences applicable to a person who receives
stock-based compensation under the 1995 Plan.
Neither the option holder nor the Company incurs any Federal
income tax consequences as a result of the grant of an ISO under
the 1995 Plan.
Upon the exercise of a NQSO, the difference between the
exercise price and the fair market value of the shares on the
Income Recognition Date (defined below) is taxable as ordinary
income to the option holder as of such Income Recognition Date.
The Income Recognition Date for shares received upon exercise of
a NQSO under the 1995 Plan is the date of exercise (except in the
case of persons subject to Section 16(b) of the Securities
Exchange Act of 1934, in which case the Income Recognition Date
is generally the later of the date of exercise or the date six
(6) months after the date of grant, unless the option holder
elects to recognize income as of the exercise date).
At the time of a subsequent sale of any Shares obtained upon
the exercise of a NQSO under the 1995 Plan, any gain or loss
generally will be a capital gain or loss to the option holder.
Such capital gain or loss will be long-term gain or loss if the
sale occurs more than one (1) year after the Income Recognition
Date and short-term capital gain or loss if the sale occurs one
(1) year or less after the Income Recognition Date.
The Company is entitled to a deduction for Federal income tax
purposes at the same time and in the same amount that the holder
of a NQSO recognizes ordinary income, to the extent that such
income is considered reasonable compensation under the Code, and
provided that the Company satisfies the applicable reporting
requirements. The Company is not, however, entitled to a
deduction with respect to any payment that constitutes an "excess
parachute payment" pursuant to Section 280G of the Code or does
not qualify as reasonable compensation pursuant to Section 162 of
the Code. Such payments subject to Section 2806 of the Code
subject a Participant to a 20% excise tax.
An option holder will not recognize any income, and the Company
will not be entitled to a deduction, upon the exercise of an ISO
during the option holder's employment with the Company or within
three (3) months after termination of employment (or longer in
the event of termination by reason of death or disability); how-
ever, in certain circumstances, upon the exercise of an ISO, the
option holder may be subject to the alternative minimum tax.
Assuming that the option holder does not dispose of the shares
received within the "incentive stock option holding period",
which is both two (2) years after the ISO was granted and one (I)
year after the transfer of shares upon exercise of an ISO, any
gain recognized by the option holder on the sale or exchange of
the shares will be treated as long-term capital gain and any loss
sustained will be a long-term capital loss. If the shares
acquired upon exercise of an ISO are disposed of before the end
of the incentive stock option holding period, the disposition may
cause the option holder to recognize ordinary income.
A Participant who has been awarded Restricted Stock does not
recognize taxable income at the time of the Award (except in
cases where an Award of Shares is made without the imposition of
transfer or forfeiture restrictions, in which case the recipient
will recognize ordinary income and the Company will be entitled
to a corresponding deduction as described below). At the time any
transfer or forfeiture restrictions applicable to the Restricted
Stock Award lapse, the recipient recognizes ordinary income and
the Company is entitled to a corresponding deduction equal to the
excess of the fair market value of such stock at such time over
the amount paid therefor (if any), provided that the Company
satisfies the applicable reporting requirements. Any dividends
paid to the recipient on the Restricted Stock at or prior to such
time is ordinary compensation income to the recipient and
deductible as such by the Company.
A Participant who is granted a Deferred Stock Award does not
recognize ordinary income at the time of the Award. At the time
that all of the conditions to the receipt of the Shares subject
to the Award are satisfied, the recipient recognizes ordinary
income and the Company is entitled to a corresponding deduction
equal to the excess of the fair market value of such stock at
such time over the amount paid therefor (if any), provided the
Company satisfies the applicable reporting requirements.
An outright Award of Stock will result in taxable ordinary
income to the recipient in an amount equal to the excess of the
fair market value of the Stock on the date of issuance over the
price the recipient pays for such Shares, and the Company will be
entitled to a deduction at the same time and in the same amount.
There are no federal income tax consequences either to the
employee or the Company upon the grant of SARs. The amount of any
cash (or the fair market value of any Shares received by the
holder upon the exercise of SARs under the 1995 Plan) will be
subject to ordinary income tax in the year of receipt and the
Company is entitled to a deduction for such amount, provided that
the Company satisfies the applicable reporting requirements.
In view of the recent changes to existing tax laws, the Company
presently is considering what action, if any, it will take with
respect to qualifying compensation paid to its executive officers
for deductibility under Section 162(m) of the Code. Effective
January 1, 1994, Section 162(m) of the Code limits deductions for
compensation paid to or accrued for any officer named in the
Compensation Table presented in the Company's Proxy Statement to
$1,000,000 per annum. Certain types of compensation which qualify
as performance-based compensation are not subject to the
specified limit on deductibility if the criteria for the awards
are approved by an independent committee of the Board and by
shareholders.
Approval of the 1995 Plan requires the
affirmative vote of a majority of the votes at the Annual
Meeting. Unless otherwise instructed, the Proxy holders will
vote FOR the approval of the 1995 Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1995 PLAN.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 31, 1993, the Company sold its Mount Laurel Convalescent
Center and Laurelview Manor facilities in Mount Laurel, New
Jersey to Tomahawk Capital Investments, Inc. ("Tomahawk"), a
company which is controlled by the Chairman of the Board of the
Company, for a purchase price of $8.5 million, the fair market
value as established by an independent appraisal. The Company
received $2.5 million in cash and a $6.0 million note bearing
interest at nine percent (9%) per annum. The note is payable
based on a 25-year amortization with a balloon payment due June
of 2005. Tomahawk prepaid $1,000,000 of this note in January,
1994, and by Agreement dated November 30, 1994, in connection
with the release of the mortgage, the Company received an
additional prepayment of $500,000 of this note and issued $1
million of subordinated debentures to Tomahawk, bearing interest
at the rate of 12% per annum, payable quarterly, with the
principal due on December 1, 1996. Tomahawk is required to
maintain certain minimum net worth requirements in connection
with this transaction.
In connection with the sale to Tomahawk, the Company entered
into various contracts to provide certain services which are
priced at or above projected cost, and include staffing services,
dietary, environmental, financial, and other services. The total
services rendered during fiscal 1995 were $7,194,000. At May 31,
1995, the Company had a receivable of $3,235,000 due from
Tomahawk for these services.
During fiscal 1995, the Company received additional revenues of
approximately $1,000,000 related to its provision of ancillary
services to Tomahawk. These services, including provision of
ambulance transportation, diagnostics, rehabilitation, pharmacy
and medical supplies are provided at market rates.
Tomahawk has issued on behalf of the Company, a $500,000 letter
of credit in connection with the construction of a 120 bed
facility in Cape May, New Jersey and a $74,380 letter of credit
in connection with the construction of a 120 bed facility in
Norristown, Pennsylvania. The Company is paying Tomahawk $15,000
and $1,800 per quarter, respectively for these letters of credit.
These letters of credit are stand-by letters of credit required
by government agencies. During the fiscal year ended May 31,
1995, the Company paid Tomahawk an aggregate of $28,580 as
compensation for causing these letters of credit to be issued for
the benefit of the Company.
During the fiscal year ended May 31, 1995, various operating
subsidiaries and divisions of the Company had business
transactions with Community Care and Development Corporation
("CCDC") and/or its related organization, Dedicated Staffing
Services, Inc. ("DSSI"), both of which are Pennsylvania non-
profit corporations. The Board of Directors and officers of CCDC
and DSSI included Daniel Veloric, Esther Ponnocks and Michael
Veloric, who are also directors and officers of the Company. CCDC
and DSSI paid Michael Veloric $1,000 for consulting services in
fiscal 1995. No payments were made to Daniel Veloric or Esther
Ponnocks in fiscal 1995.
During fiscal 1995, the Company purchased from DSSI
approximately $867,000 of staffing services, including the
provision of registered nurses, licensed practical nurses,
nursing assistants and other personnel on a temporary employment
basis. DSSI has agreed to charge the Company at cost for the
services, which the Company believes to be at or below the fair
market value for the services rendered. In September, 1994, DSSI
determined to cease operations. As of June 1, 1995, the Company
completed the purchase of certain assets from DSSI, which it
determined to be useful in its business. Pursuant to this
purchase, after giving effect to payments due DSSI or the Company
from the other with respect to services rendered, the Company
presently owes DSSI $122,000, with interest at the rate of 9% per
annum, payable monthly over 12 months commencing October 1, 1995.
The Company also assumed certain vehicle leases at current fair
market value.
The Company also leased-back certain properties previously sold
at fair market value to CCDC. The Company paid rent to CCDC at
the rate of $5,167 per month, approximately $62,004 for the
fiscal year ended May 31, 1995. CCDC paid rent to the Company at
the rate of $2,198 per month for office space at 5601 Chestnut
Street totaling $21,975 in fiscal 1995. This lease terminated on
March 31, 1995. The Company believes its transactions with CCDC
and DSSI have been on terms at least as favorable to the Company
as those which would have been available in the general
marketplace.
<PAGE>
INDEPENDENT ACCOUNTANTS
The firm of BDO Seidman, LLP acted as independent accountants for
the Company, for its fiscal year ended May 31, 1995. It is
anticipated that a representative or representatives of BDO
Seidman, LLP will be present at the Annual Meeting to make a
statement if they desire to do so and to respond to appropriate
questions. Although the Company's independent accountants for its
fiscal year ending 1995 may continue to be BDO Seidman, LLP, the
Company wishes to maintain its discretion during the year as to
selection of its independent accountants. Accordingly, no
selection has been made and the Board of Directors has reserved the
right to consider the appointment of another firm.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1996
Annual Meeting of Stockholders must be received by the Company at
its principal executive offices by not later than June 1, 1996 to
be considered for inclusion in management's proxy statement and
form of proxy for that meeting.
OTHER MATTERS
Management does not know of any other matters (other than
procedural matters) to be presented at the meeting. If any other
matters do properly come before the meeting, the persons named in
the accompanying Proxy will vote on such matters in accordance with
their best judgment.
A form of proxy is enclosed for your use. Please complete, date,
sign and return the proxy at your earliest convenience in the
enclosed envelope, which requires no postage if mailed in the
United States. A prompt return of your proxy will be appreciated.
By Order of the
Board of Directors,
Arthur A. Carr, Jr.
Secretary
Philadelphia, Pennsylvania
October 2, 1995
<PAGE>
[ PROXY CARD ]
GERIATRIC & MEDICAL COMPANIES, INC.
5601 Chestnut Street
Philadelphia, PA 19139
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel Veloric and Arthur A.
Carr, Jr. and each of them (or if only one is present, then the
one present), proxies of the undersigned, to attend the 1995
Annual Meeting of Stockholders of Geriatric & Medical Companies,
Inc. to be held at 5601 Chestnut Street, Philadelphia,
Pennsylvania 19139 at 9:00 A.M., local time, on Thursday,
November 2, 1995, or any adjournment thereof, and with all the
powers the undersigned would possess if present to vote:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES NAMED
HEREIN (OR SUCH SUBSTITUTE NOMINEE(S) AS MAY BE DESIGNATED BY THE
BOARD OF DIRECTORS) AND FOR THE APPROVAL OF THE 1995 EQUITY
INCENTIVE PLAN.
(Continued on reverse side)
_______________ [X] Please mark your vote as this
Common
1. Election of two class II Directors 2. Approval of the
FOR both nominees WITHHOLDING AUTHORITY 1995 Equity Incentive Plan
(except as indicated) for both nominees
[ ] [ ] FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3.In their discretion, upon such
other matters as may properly come before
Gerald E. Bisbee, Jr., Ph.D the meeting or any adjournment thereof.
Michael Veloric
Withhold authority to vote for the following nominee(s)
The undersigned hereby acknowledges receipt of the
Notice of 1995 Annual Meeting of Stockholders, the
Proxy Statement with respect to fiscal year ended May 31,
1995.
Note: Signature(s) should be exactly as name or names appear
on this Proxy.
When signing in a fiduciary capacity, please give title as
such.
Co-fiduciaries and joint owners should each sign.
DATE:___________________________________________________,1995
________________________________________________________
(Signature)
_________________________________________________________
(Signature)
