SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
National Home Health Care Corp.
-------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction
applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
700 White Plains Road
Scarsdale, New York 10583
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held December 7, 1999
---------------
To the Stockholders of National Home Health Care Corp.:
The Annual Meeting of Stockholders of National Home Health Care Corp.
(the "Company") will be held at the offices of Parker Chapin Flattau & Klimpl,
LLP, 1211 Avenue of the Americas, New York, New York, at 10:00 A.M. on Tuesday,
December 7, 1999, for the following purposes:
(1) To elect five directors of the Company to hold office until the next
Annual Meeting of Stockholders and until their successors shall have
been duly elected and qualified;
(2) To approve the Company's 1999 Stock Option Plan; and
(3) To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
A Proxy Statement, form of proxy and the Annual Report to Stockholders
of the Company for the fiscal year ended July 31, 1999 are enclosed herewith.
Only holders of record of Common Stock of the Company at the close of business
on November 10, 1999 will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. A complete list of the stockholders
entitled to vote will be available for inspection by any stockholder during the
meeting. In addition, the list will be open for examination by any stockholder,
for any purpose germane to the meeting, during ordinary business hours for a
period of at least 10 days prior to the meeting at the offices of the Company,
located at 700 White Plains Road, Scarsdale, New York 10583.
By Order of the Board of Directors,
Steven Fialkow
Secretary
Scarsdale, New York
November 11, 1999
- --------------------------------------------------------------------------------
All stockholders are cordially invited to attend the meeting. If you do not
expect to be present, please date and sign the enclosed form of proxy and return
it promptly using the enclosed envelope. No postage is required if mailed in the
United States.
- --------------------------------------------------------------------------------
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
700 White Plains Road
Scarsdale, New York 10583
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation
by the board of directors (the "Board of Directors") of National Home Health
Care Corp. (the "Company") of proxies in the form enclosed. Such proxies will be
voted at the annual meeting of stockholders of the Company to be held at the
offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New
York, New York, at 10:00 A.M. on Tuesday, December 7, 1999 (the "Meeting") and
at any adjournments thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders.
The principal executive offices of the Company are located at 700 White
Plains Road, Scarsdale, New York 10583. This Proxy Statement and accompanying
form of proxy are being mailed on or about November 11, 1999 to all stockholders
of record on November 10, 1999 (the "Record Date").
Any stockholder giving a proxy has the power to revoke the same at any
time before it is voted. The cost of soliciting proxies will be borne by the
Company. The Company has no contract or arrangement with any party in connection
with the solicitation of proxies. Following the mailing of the proxy materials,
solicitation of proxies may be made by officers and employees of the Company by
mail, telephone, telegram or personal interview. Properly executed proxies will
be voted in accordance with instructions given by stockholders at the places
provided for such purpose in the accompanying proxy. Unless contrary
instructions are given by stockholders, the shares represented by such proxies
are intended to be voted in favor of the election of the five nom inees for
director named herein and for approval of the Company's 1999 Stock Option Plan.
VOTING SECURITIES
Stockholders of record as of the close of business on the Record Date
will be entitled to notice of, and to vote at, the Meeting or any adjournments
thereof. On the Record Date, there were 5,056,250 outstanding shares of common
stock, par value $.001 per share, of the Company (the "Common Stock"). Each
holder of Common Stock is entitled to one vote for each share held by such
holder. The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Meeting. Proxies submitted which contain abstentions or broker non-votes will be
deemed present at the Meeting in determining the presence of a quorum.
Shares of Common Stock that are voted to abstain with respect to any
matter will be considered cast with respect to that matter. Shares subject to
broker non-votes with respect to any matter will not be considered cast with
respect to that matter.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise indicated, the shares represented by all proxies
received by the Board of Directors will be voted at the Meeting in accordance
with their terms and, in the absence of contrary instructions, for the election
of Frederick H. Fialkow, Steven Fialkow, Ira Greifer, M.D., Bernard Levine, M.D.
and Robert C. Pordy, M.D. to serve until the next Annual Meeting of Stockholders
and until their successors are elected and qualified. Although it is anticipated
that each nominee will be available to serve as a director, should any nominee
be unavailable to serve, the persons named in the proxies have discretionary
authority to vote the proxies for one or more alternative nominees who will be
designated by the Board of Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the nominees
for director and executive officers of the Company:
YEAR FIRST
ELECTED OR
APPOINTED PRESENT POSITION
NAME AGE DIRECTOR WITH THE COMPANY
---- --- ---------- ----------------
Frederick H. Fialkow 68 1985 Chairman of the Board of Directors
and Chief Executive Officer
Bernard Levine, M.D. 71 1983 Director
Steven Fialkow 40 1991 President, Chief Operating
Officer, Secretary and Director
Ira Greifer, M.D. 68 1983 Director
Robert C. Pordy, M.D. 42 1995 Director
Robert P. Heller 38 -- Vice President of Finance and
Chief Financial Officer
Richard Garofalo 48 -- President of Health Acquisition
Corp.
The Company's directors are elected at each Annual Meeting of
Stockholders of the Company to serve for a term of one year or until their
successors are duly elected and qualified. Officers serve at the discretion of
the Board of Directors. The terms of office of all officers and directors expire
at the time of the annual meeting each year.
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<PAGE>
INFORMATION ABOUT DIRECTORS AND NOMINEES
The following is a brief summary of the background of each director and
nominee:
FREDERICK H. FIALKOW has been Chief Executive Officer of the Company as
well as Chairman of the Board of Directors since February 1988 and was President
of the Company from February 1988 until October 1997. He has been a Director of
the Company since April 1985. Frederick H. Fialkow is the father of Steven
Fialkow.
BERNARD LEVINE, M.D., has been a Director of the Company since July
1983. For more than 20 years he has been a Professor of Internal Medicine at New
York University School of Medicine with a sub-speciality in Allergy and
Immunology. Dr. Levine devotes a portion of his time as a private consultant to
the health care industry.
STEVEN FIALKOW has been a Director of the Company since December 1991
and has served as Secretary of the Company since September 1995 and as President
and Chief Operating Officer of the Company since October 1997. He served as
Executive Vice President of New England Home Care, Inc. from August 1995 through
October 1997. He also served as Executive Vice President of Health Acquisition
Corp. from May 1994 to August 1995, as President of National HMO (New York),
Inc. from April 1989 to April 1994 and as Vice President of National HMO (New
York), Inc. from August 1984 to March 1989. Steven Fialkow is a certified public
accountant. He is the son of Frederick H. Fialkow.
IRA GREIFER, M.D. has been a Director of the Company since July 1983.
He has been a Professor and Director of Pediatrics at the Children's Kidney
Center of the Montefiore Medical Center - Albert Einstein College of Medicine
since 1966.
ROBERT C. PORDY, M.D., has been a director of the Company since
December 1995. Since April 1993, Dr. Pordy has served as Director of
International Cardiovascular Clinical Research at Hoffman-La Roche Inc., a
biopharmaceutical company.
INFORMATION ABOUT NON-DIRECTORS EXECUTIVE OFFICERS
RICHARD GAROFALO has served as President of Health Acquisition Corp., a
wholly owned subsidiary of the Company, since January 1988.
ROBERT P. HELLER, a certified public accountant, has served as Vice
President of Finance and Chief Financial Officer of the Company since March
1989. Prior thereto, he was an accountant with Richard A. Eisner & Company, LLP,
a firm of certified public accountants.
MEETINGS OF THE BOARD OF DIRECTORS AND OF COMMITTEES
The Board of Directors held four meetings during the fiscal year ended
July 31, 1999 ("Fiscal 1999"). Each director attended at least 75% of (i) all of
the meetings of the Board of Directors during Fiscal 1999 and (ii) all of the
meetings of all the Committees on which he served.
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<PAGE>
The Company's Audit Committee is currently composed of Drs. Levine,
Pordy and Greifer. The function of the Audit Committee is to make
recommendations concerning the selection each year of independent auditors of
the Company, to review the effectiveness of the Company's internal accounting
methods and procedures and to determine through discussions with the independent
auditors whether any instructions or limitations have been placed upon them in
connection with the scope of their audit or its implementation. The Audit
Committee held one meeting during Fiscal 1999 and acted by unanimous consent one
time; in addition, its members met informally from time to time.
The Compensation Committee is currently composed of Drs. Greifer and
Levine. The function of the Compensation Committee is to review and recommend to
the Board of Directors policies, practices and procedures relating to
compensation of key employees and to administer employee benefit plans. The
Compensation Committee held two meetings during Fiscal 1999; in addition, its
members met informally from time to time.
The Nominating Committee is currently composed of Mr. Frederick H.
Fialkow and Drs. Greifer, Levine and Pordy. Its function is to recommend
nominees for the Board of Directors. The Nominating Committee did not meet
formally during Fiscal 1999; however, its members met informally from time to
time.
The Quality Assurance Committee is currently composed of Drs. Greifer
and Levine. Its function is to review and recommend to the Board of Directors
policies, practices and procedures relating to quality assurance in connection
with health care services. The Quality Assurance Committee did not meet formally
during Fiscal 1999; however, its members met informally from time to time.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company during the fiscal year ended July 31, 1999, there were
no late or delinquent filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are Drs. Ira Greifer and Bernard Levine, non-employee directors. No
member of the Compensation Committee has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of Common
Stock for the five years ended July 31, 1999 with the National Association of
Securities Dealers Automated Quotation System Market Index and a SIC group index
for the same period. The comparison assumes $100 was invested at the close of
business on July 29, 1994 in the Common Stock and in each of the comparison
groups, and assumes reinvestment of dividends. The Company paid no cash
dividends during the periods.
TOTAL STOCKHOLDERS RETURNS - DIVIDENDS REINVESTED
ANNUAL RETURN PERCENTAGE
Years Ending
July July July July July
COMPANY NAME/INDEX 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
NATIONAL HOME HEALTH CARE 31.80 65.54 -9.46 -12.08 -12.14
NASDAQ US INDEX 40.40 8.96 47.57 17.72 42.62
PEER GROUP 24.29 -23.21 22.32 -3.08 40.22
INDEXED RETURNS
Base Years Ending
Period
July July July July July July
COMPANY NAME/INDEX 1994 1995 1996 1997 1998 1999
------ ------ ----- ----- ------ ------
NATIONAL HOME HEALTH CARE 100 131.80 218.18 197.54 173.68 152.60
NASDAQ US INDEX 100 140.40 152.98 225.75 265.75 379.01
PEER GROUP 100 124.29 95.44 116.75 113.15 158.66
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(1) The peer group selected by the Company includes those companies within the
Company's Standard Industrial Code ("SIC") of "home health care services".
The companies which comprise the SIC group are Amedisys Inc., Apria
Healthcare Group, Cancer Treatment Holding, Caretenders Healthcorp,
Community Care Services Inc., Coram Healthcare Corp., DYNACQ International
Inc., Help At Home Inc., Home Health Corp. of America Inc., Hooper Holmes
Inc., Hospital Staffing Services Inc., Housecall Medical Rscs Inc., In Home
Health Inc., Infu-Tech Inc., Interwest Home Medical Inc., Matria Healthcare
Inc., New York Health Care Inc., Numed Home Health Care Inc., Option Care
Inc., Pediatric Services of America Inc., PHC Inc./MA - CL A, Simione
Central Holdings Inc., Staff Builders Inc., Star Multi Care Services,
Transworld Healthcare Inc., and Wellpoint Health Network - CLA.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors is composed
entirely of non-employee directors and is responsible for developing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation policies. In addition, the Compensation Committee,
pursuant to authority delegated by the Board of Directors, determines the
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company.
The objectives of the Company's executive compensation program are to:
* Support the achievement of desired Company performance
* Provide compensation that will attract and retain superior talent
and reward performance
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the health care industry, as
well as with a broader group of companies of comparable size and complexity.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of
base salary, annual cash incentive compensation, long-term incentive
compensation in the form of stock options, specific performance - base bonuses
and various benefits, including medical and pension plans generally available to
employees of the Company. Since the employment agreements entered into between
the Company and its executive officers in 1997, amendments have been made to the
compensation arrangements of Messrs. Frederick Fialkow, Steven Fialkow, Garofalo
and Heller. See "Executive Compensation--Employment and Related Agreements."
BASE SALARY
Base salary levels for the Company's executive officers are
competitively set relative to companies in the health care industry. In
determining salaries, the Committee also takes into account individual
experience and performance and specific issues particular to the Company.
STOCK OPTION PROGRAM
The stock option program is the Company's long-term incentive plan for
providing an incentive to key employees (including directors and officers who
are key employees) and to directors who are not employees of the Company.
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<PAGE>
1992 STOCK OPTION PLAN
The 1992 Stock Option Plan authorizes the Compensation Committee to award
key executives stock options. Options granted under the plan may be granted
containing terms determined by the Committee, including exercise period and
price; provided, however, that the plan requires that exercise price may not be
less than the fair market value of the Common Stock on the date of the grant and
the exercise period may not exceed ten years, subject to further limitations.
BENEFITS
The Company provides to executive officers medical and pension benefits
that generally are available to Company employees. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of salary for
Fiscal 1999.
BONUS
Following consultations with its financial advisor and in light of the
Compensation Committee's satisfaction with the performance of management, the
Company provides to certain executive officers bonuses based on performance
and/or a change of control of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
During Fiscal 1999, the Compensation Committee discussed amending the
employment agreements of the Company's executive officers, including Frederick
H. Fialkow, who has been the Company's Chief Executive Officer since 1988. Each
employment agreement became effective on November 1, 1997 and had a term of four
years, except Mr. Fialkow's, which had a term of five years. After
acknowledgment of the achievements and performance of each of the executive
officers, including Mr. Fialkow, the Committee authorized the Company to enter
into an amendment to each employment agreement with each such executive officer,
including an amended and restated employment agreement with respect to Mr.
Fialkow, containing the material terms set forth under the caption "Executive
Compensation--Employment and Related Agreements." With respect to Mr. Fialkow,
the amended and restated employment agreement, among other things, extended the
term thereof until November 30, 2003, to be coterminous with the employment
agreements of the other executive officers, and increased to $305,000 the base
amount upon which his annual salary is calculated (before giving effect to cost
of living adjustments). In making these compensation decisions, the Compensation
Committee specifically considered the Company's recent revenue and earnings
performance in the context of the very difficult time for the Company's
industry, as well as the increased risk of loss of qualified management
personnel as occurred during the prior year with respect to an executive officer
of the Company.
In addition, during Fiscal 1999, the Compensation Committee granted to
the Company's four executive officers, pursuant to the Company's 1992 Stock
Option Plan, options to purchase an aggregate of 151,902 shares of Common Stock.
Each executive officer received a number of options proportionate to his share
of an aggregate of 159,920 then-outstanding options, which were scheduled to
expire during 1999. These expiring options were purchased from the executive
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<PAGE>
officers by the Company at a price per option equal to the fair market value of
the Common Stock minus the exercise price thereof. The replacement options were
granted at an exercise price equal to the fair market value of the common stock
on the date of grant and for a term of ten years (except with respect to Mr.
Fialkow, for whom the exercise price is 110% of fair market value and the term
is five years). The Compensation Committee authorized the repurchase by the
Company of the options and granted the replacement options in order to continue
the economic benefit to each optionee and preserve for each optionee the same
incentive benefits provided by the expiring options. The Compensation Committee
agreed that the stock options represented a valuable method of retaining and
incentivizing valued employees, particularly in light of the adverse
circumstances of the Company's industry, and noted that the options granted were
limited by the remaining options available under the Company's 1992 Stock Option
Plan.
Ira Greifer, M.D.
Bernard Levine, M.D.
Members of the Compensation Committee
STANDARD REMUNERATION OF DIRECTORS
The Company's non-employee directors are paid a fee of $3,500 for each
meeting of the Board of Directors attended.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock at October 27, 1999 by (i) each person or group known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock; (ii) each nominee for director of the Company; (iii)
each of the executive officers named in the Summary Compensation Table herein
under "Executive Compensation;" and (iv) all directors and executive officers of
the Company as a group:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------- ----------------------- --------
FREDERICK H. FIALKOW 1,692,907(2) 32.9%
700 WHITE PLAINS ROAD
SCARSDALE, NY 10583
BERNARD LEVINE, M.D. 730,305 (3) 14.4%
210 RIVERSIDE DRIVE
NEW YORK, NY 10025
STEVEN FIALKOW 95,854 (4) 1.9%
700 WHITE PLAINS ROAD
SCARSDALE, NY 10583
IRA GREIFER, M.D. 49,131 (3) *
150 EXECUTIVE DRIVE
MANHASSET, NY 11040
ROBERT C. PORDY, M.D. 1,092 *
140 EAST 72ND STREET
NEW YORK, NY 10021
RICHARD GAROFALO 57,843 (5) 1.1%
99 RUSTIC AVENUE
MEDFORD, NY 11763
ROBERT P. HELLER 37,594 (6) *
617 FIR COURT
NORWOOD, NJ 07648
TRAFALGER MANAGEMENT 425,802 (7) 8.4%
N.V.1-7 WILLENSTAD
CURACAO, NETHERLANDS ANTILLES
ALL EXECUTIVE OFFICERS AND DIRECTORS, 2,664,728 (8) 50.4%
AS A GROUP (7 PERSONS)
- ------------------------------
* LESS THAT 1%
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<PAGE>
(1) INCLUDES, WHERE INDICATED, SHARES ALLOCATED TO CERTAIN INDIVIDUALS UNDER
THE COMPANY'S SAVINGS AND STOCK INVESTMENT PLAN (THE "SAVINGS PLAN") AS OF
JUNE 30, 1999. UNDER THE TERMS OF THE SAVINGS PLAN, IF A PARTICIPANT FAILS
TO GIVE TIMELY INSTRUCTIONS AS TO THE VOTING OF SHARES OF COMMON STOCK HELD
IN A PARTICIPANT'S ACCOUNT, THE TRUSTEE OF THE PLAN WILL VOTE SUCH SHARES
IN THE SAME PROPORTION AS IT VOTES ALL OF THE SHARES FOR WHICH SUCH TRUSTEE
RECEIVES INSTRUCTIONS.
(2) DOES NOT INCLUDE 546 SHARES OF COMMON STOCK OWNED BY MR. FIALKOW'S WIFE, AS
TO WHICH SHARES MR. FIALKOW DISCLAIMS BENEFICIAL OWNERSHIP. INCLUDES 77,779
SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO CURRENTLY
EXERCISABLE OPTIONS GRANTED UNDER THE COMPANY'S 1992 STOCK OPTION PLAN (THE
"1992 PLAN") AND 62,598 SHARES OF COMMON STOCK ALLOCATED TO MR. FIALKOW'S
ACCOUNT UNDER THE SAVINGS PLAN.
(3) INCLUDES 5,459 SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO
CURRENTLY EXERCISABLE OPTIONS GRANTED UNDER THE 1992 PLAN.
(4) INCLUDES 64,747 SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO
CURRENTLY EXERCISABLE OPTIONS GRANTED UNDER THE 1992 PLAN AND 31,107 SHARES
OF COMMON STOCK ALLOCATED TO MR. FIALKOW'S ACCOUNT UNDER THE SAVINGS PLAN.
(5) INCLUDES 41,227 SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO
CURRENTLY EXERCISABLE OPTIONS GRANTED UNDER THE 1992 PLAN AND 14,978 SHARES
OF COMMON STOCK ALLOCATED TO MR. GAROFALO'S ACCOUNT UNDER THE SAVINGS PLAN.
(6) INCLUDES 25,556 SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO
CURRENTLY EXERCISABLE OPTIONS GRANTED UNDER THE 1992 PLAN AND 10,638 SHARES
OF COMMON STOCK ALLOCATED TO MR. HELLER'S ACCOUNT UNDER THE SAVINGS PLAN.
(7) THE AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF THESE SHARES OF COMMON
STOCK BY TRAFALGER MANAGEMENT, N.V. ("TRAFALGER") IS BASED SOLELY ON THE
RECORDS OF THE COMPANY'S TRANSFER AGENT, AMERICAN STOCK TRANSFER & TRUST
COMPANY. TRAFALGER HAS THE POWER TO VOTE, DIRECT THE VOTE, DISPOSE OF, OR
DIRECT THE DISPOSITION OF, THESE SHARES. THE COMPANY'S BOARD OF DIRECTORS
HAS NO INDEPENDENT KNOWLEDGE OF THE ACCURACY OR COMPLETENESS OF THE
INFORMATION SET FORTH BY SUCH TRANSFER AGENT, BUT HAS NO REASON TO BELIEVE
THAT SUCH INFORMATION IS NOT COMPLETE OR ACCURATE.
(8) INCLUDES 220,227 SHARES OF COMMON STOCK WHICH MAY BE ACQUIRED PURSUANT TO
CURRENTLY EXERCISABLE OPTIONS GRANTED UNDER THE 1992 PLAN AND 119,321
SHARES OF COMMON STOCK ALLOCATED UNDER THE SAVINGS PLAN.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long
term compensation during the Company's last three fiscal years of the Company's
Chief Executive Officer and other most highly compensated executive officers of
the Company, whose salary and bonus for Fiscal 1999 exceeded $100,000, for
services rendered in all capacities to the Company and its subsidiaries:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Frederick H. Fialkow 1999 $298,333 $44,765(1) 77,779(4) $78,804(5)
Chairman of the Board and Chief 1998 285,000 61,499(2) ----- 3,758
Executive Officer 1997 285,000 71,497(3) ----- 3,267
Steven Fialkow 1999 172,674 ----- 34,747(6) 47,811(7)
President, Chief Operating 1998 150,742 ----- 30,000 3,890
Officer and Secretary 1997 122,957 ----- ----- 5,344
Robert P. Heller 1999 138,338 ----- 15,556(8) 23,650(9)
Vice President of Finance and 1998 119,962 ----- 10,000 3,134
Chief Financial Officer 1997 112,349 ----- ----- 2,568
Richard Garofalo 1999 157,500 53,144 21,227(10) 32,293(11)
President of 1998 157,500 67,502 20,000 5,006
Health Acquisition Corp. 1997 157,500 42,491 ----- 3,451
</TABLE>
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(1) Includes $44,765, which represents the payment of the cost of living
increase in salary compensation for the last three fiscal years pursuant to
Mr. Fialkow's employment agreement with the Company.
(2) Includes $39,446, which represents the payment of the cost of living
increase in salary compensation for the last three fiscal years pursuant to
Mr. Fialkow's employment agreement with the Company.
(3) Includes $32,038, which represents the payment of the cost of living
increase in salary compensation for the last three fiscal years pursuant to
Mr. Fialkow's employment agreement with the Company.
(4) This option was granted to Mr. Fialkow on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Fialkow, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 81,885 shares of Common
Stock.
(5) Includes $7,793 representing the Company's matching contribution as
deferred compensation under the Company's Savings Plan pursuant to Section
401(k) of the Internal Revenue Code of 1986, as amended (the
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<PAGE>
"Code"), and $71,011 representing the difference ($0.87 per share) between
the price paid by the Company to Mr. Fialkow for the repurchase of an
option to purchase 81,885 shares of Common Stock ($3.50 per share) and the
exercise price of such option ($2.63 per share).
(6) This option was granted to Mr. Fialkow on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Fialkow, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 36,581 shares of Common
Stock.
(7) Includes $7,334 representing the Company's matching contribution as
deferred compensation under the Company's Savings Plan pursuant to Section
401(k) of the Code, and $40,477 representing the difference ($1.11 per
share) between the price paid by the Company to Mr. Fialkow for the
repurchase of an option to purchase 36,581 shares of Common Stock ($3.50
per share) and the exercise price of such option ($2.39 per share).
(8) This option was granted to Mr. Heller on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Heller, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 16,377 shares of Common
Stock.
(9) Includes $5,529 representing the Company's matching contribution as
deferred compensation under the Company's Savings Plan pursuant to Section
401(k) of the Code, and $18,121 representing the difference ($1.11 per
share) between the price paid by the Company to Mr. Heller for the
repurchase of an option to purchase 16,377 shares of Common Stock ($3.50
per share) and the exercise price of such option ($2.39 per share).
(10) This option was granted to Mr. Garofalo on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Garofalo, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 22,347 shares of Common
Stock.
(11) Includes $7,566 representing the Company's matching contribution as
deferred compensation under the Company's Savings Plan pursuant to Section
401(k) of the Code, and $24,727 representing the difference ($1.11 per
share) between the price paid by the Company to Mr. Garofalo for the
repurchase of an option to purchase 22,347 shares of Common Stock ($3.50
per share) and the exercise price of such option ($2.39 per share).
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------
The following table contains information at July 31, 1999 relating to the
number of options granted during the 1999 fiscal year to those individuals
listed in the Summary Compensation Table. All options are currently exercisable.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE-AT-ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED APPRECIATION FOR
OPTIONS TO EMPLOYEES EXERCISE OR EXPIRATION OPTION-TERMS
NAME GRANTED IN FISCAL 1999 BASE-PRICE DATE 5% 10%
- ---- ---------- -------------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Frederick H. Fialkow 77,779(1) 43% $3.99 April 26, 2004 $85,746 $189,306
Steven Fialkow 34,747(2) 19.2% $3.625 April 26, 2009 $79,353 $200,273
Robert P. Heller 15,556(3) 8.6% $3.625 April 26, 2009 $35,526 $89,660
Richard Garofalo 21,227(4) 11.7% $3.625 April 26, 2009 $48,477 $122,347
</TABLE>
-12-
<PAGE>
- -------------------
(1) This option was granted to Mr. Fialkow on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Fialkow, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 81,885 shares of Common
Stock.
(2) This option was granted to Mr. Fialkow on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Fialkow, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 36,581 shares of Common
Stock.
(3) This option was granted to Mr. Heller on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Heller, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 16,377 shares of Common
Stock.
(4) This option was granted to Mr. Garofalo on April 27, 1999, simultaneously
with the repurchase by the Company from Mr. Garofalo, pursuant to an
exception to Section 16(b) provided by Rule 16b-3(e) of the 1934 Exchange
Act, as amended, of an option to purchase up to 22,347 shares of Common
Stock.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
The following table contains information at July 31, 1999 relating to the
number of options exercised during the 1999 fiscal year and the number and value
of unexercised options held by those individuals listed in the Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED-IN-THE
ACQUIRED UNEXERCISED-OPTIONS MONEY OPTIONS AT
ON AT FISCAL YEAR-END FISCAL YEAR-END
EXERCISE VALUE EXERCISABLE / EXERCISABLE /
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ---- -------- ------------ -------------------- -----------------
<S> <C> <C> <C> <C>
Frederick H. Fialkow ---- ---- 77,779 / 0 0 / 0
Steven Fialkow ---- ---- 64,747 / 0 $7,602 / 0
Robert P. Heller ---- ---- 25,556 / 0 $3,403 / 0
Richard Garofalo ---- ---- 41,227 / 0 $4,644 / 0
</TABLE>
- ------------------
(1) Determined based on the fair market value of underlying securities (the
closing bid price ($3.8438) per share of Common Stock on the Nasdaq
National Market) at fiscal year end (July 30, 1999), minus the exercise
price.
-13-
<PAGE>
EMPLOYMENT AND RELATED AGREEMENTS
FREDERICK H. FIALKOW. Effective December 1, 1998, the Company entered
into a five-year amended and restated employment agreement with Mr. Fialkow
pursuant to which he is employed as the Company's Chairman of the Board and
Chief Executive Officer. The agreement, among other things, is automatically
renewable for an additional five-year period, unless terminated at the option of
either party. The agreement extended the term of employment until November 30,
2003, and increased to $305,000 the base amount upon which Mr. Fialkow's annual
salary is calculated (before giving effect to cost of living adjustments). In
addition, Mr. Fialkow is entitled to receive an annual bonus in an amount equal
to 5% of the Company's consolidated net income (before income taxes) in such
year in which the consolidated net income is in excess of $3,000,000, provided
that the bonus may not exceed $150,000 in any year.
STEVEN FIALKOW. Effective November 1, 1997, the Company entered into a
four-year employment agreement with Mr. Fialkow pursuant to which he is employed
as the Company's President, Chief Operating Officer and Secretary. The term of
the agreement may be extended in writing by both parties, unless earlier
terminated. The agreement provided for an annual base salary of $157,500, but
was amended on December 1, 1998 to provide for an annual base salary of
$180,000, and was amended again on October 7, 1999 to provide for an annual base
salary of $230,000. The amendment to the agreement also extended the term of the
agreement to five years. In addition, Mr. Fialkow is entitled to receive an
annual bonus in an amount equal to 3% of the amount by which the Company's
income from operations in such year exceeds $3,300,000. The agreement also
provides for a grant to Mr. Fialkow of an option to purchase 30,000 shares of
the Company's Common Stock, pursuant to the 1992 Plan.
ROBERT P. HELLER. Effective November 1, 1997, the Company entered into
a four-year employment agreement with Mr. Heller pursuant to which he is
employed as the Company's Executive Vice President of Finance, Chief Financial
Officer and Treasurer. The term of the agreement may be extended in writing by
both parties, unless earlier terminated. The agreement provided for an annual
base salary of $122,500, but was amended on December 1, 1998 to provide for an
annual base salary of $140,000. The amendment to the agreement also extended the
term of the agreement to five years. The Company's Board of Directors also may
grant bonuses to Mr. Heller. The agreement also provides for a grant to Mr.
Heller of an option to purchase 10,000 shares of the Company's Common Stock,
pursuant to the 1992 Plan.
RICHARD GAROFALO. Effective November 1, 1997, the Company entered into
a four-year employment agreement with Mr. Garofalo pursuant to which he is
employed as the President of Health Acquisition Corporation, a wholly owned
subsidiary of the Company. The term of the agreement may be extended in writing
by both parties, unless earlier terminated, and provides for an annual base
salary of $157,500. An amendment to the agreement dated December 1, 1998
extended the term of the agreement to five years. The Company's Board of
Directors also may grant bonuses to Mr. Garofalo. The agreement also provides
for a grant to Mr. Garofalo of an option to purchase 20,000 shares of the
Company's Common Stock, pursuant to the 1992 Plan.
The employment agreements of Messrs. Frederick H. Fialkow, Steven
Fialkow, Heller and Garofalo contain confidentiality and nondisclosure
provisions relating to the Company's business and all confidential information
developed or made known to each individual during his respective
-14-
<PAGE>
term of employment. The agreements also contain certain non-competition
provisions that preclude Messrs. Frederick H. Fialkow, Steven Fialkow, Heller
and Garofalo from competing with the Company for a period of one year from the
date of termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A lease for office premises maintained by Health Acquisition Corp., a
wholly owned subsidiary of the Company, located in Queens, New York is with a
company owned (in whole or in part) and controlled by the Company's Chairman of
the Board of Directors and Chief Executive Officer, which company also is owned
in part by a director of the Company who is also the President and Chief
Operating Officer of the Company. Rent expense under such lease is approximately
$129,000 per year. The Company believes that such lease contains terms in the
aggregate no less advantageous to the Company than otherwise could have been
obtained from an unrelated third party.
-15-
<PAGE>
PROPOSAL 2
APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN
On October 7, 1999, the Company's Board of Directors approved the
Company's 1999 Stock Option Plan (the "1999 Stock Option Plan") and directed
that the 1999 Stock Option Plan be submitted to the Company's stockholders for
approval at the Meeting. The Board of Directors adopted the 1999 Stock Option
Plan, which covers 500,000 shares of Common Stock, upon evaluating the Company's
existing compensation programs and the Company's long-range goals and expansion
plans.
The Board concluded that the addition of a stock option plan was
necessary for the Company to continue to attract, motivate and retain qualified
employees and directors.
THE 1999 STOCK OPTION PLAN
The following is a discussion of certain terms of the 1999 Stock Option
Plan:
Types of Grants and Eligibility
-------------------------------
The 1999 Stock Option Plan is designed to provide an incentive to key
employees (including officers and directors who are key employees), non-employee
directors and consultants of the Company and its present and future subsidiaries
and to offer an additional inducement in obtaining the services of such
individuals. The 1999 Stock Option Plan provides for the grant of "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code, and
nonqualified stock options ("NQSOs").
Shares Subject to the 1999 Stock Option Plan
--------------------------------------------
The aggregate number of shares of Common Stock for which options may be
granted under the 1999 Stock Option Plan may not exceed 500,000; provided,
however, that the maximum number of shares of Common Stock with respect to which
options may be granted to any individual in any fiscal year may not exceed
100,000. Such shares of Common Stock may consist either in whole or in part of
authorized but unissued shares of Common Stock or shares of Common Stock held in
the treasury of the Company. Shares of Common Stock subject to an option which
for any reason expires, is canceled or is terminated unexercised or which ceases
for any reason to be exercisable may again become available for the granting of
options under the 1999 Stock Option Plan.
Administration of the 1999 Stock Option Plan
--------------------------------------------
The 1999 Stock Option Plan is administered by the Board of Directors
which, to the extent it so determines, may delegate its powers with respect to
the administration of the 1999 Stock Option Plan to a committee of the Board of
Directors (the "Committee") consisting of not less than two directors (or such
greater number as required by law), each of whom will be a "non-employee
director" within the meaning of rules and regulations promulgated by the
Securities and Exchange Commission. References in the 1999 Stock Option Plan to
determinations or actions by the Committee will be deemed to include
determinations and actions by the Board of Directors.
-16-
<PAGE>
Subject to the express provisions of the 1999 Stock Option Plan, the
Committee has the authority, in its sole discretion, with respect to options
granted pursuant to the 1999 Stock Option Plan to a key employee of the Company
or a subsidiary thereof, to determine, among other things: the key employees and
consultants who are to receive options; the times when they may receive options;
whether an option granted to an employee is to be an ISO or a NQSO; the number
of shares of Common Stock to be subject to each option; the term of each option;
the date each option is to become exercisable; whether an option is to be
exercisable in whole, in part or in installments, and, if in installments, the
number of shares of Common Stock to be subject to each installment; whether the
installments are to be cumulative; the date each installment is to become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any installment; whether shares of Common Stock may be issued on
exercise of an option as partly paid, and, if so, the dates when future
installments of the exercise price are to become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and to waive any such
restriction; and whether to subject the exercise of all or any portion of an
option to the fulfillment of contingencies as specified in an applicable stock
option contract. With respect to all options, the Committee has such discretion
to construe the applicable stock option contracts and the 1999 Stock Option
Plan, with the consent of the optionee, to cancel or modify an option, provided
such option as modified would be permitted to be granted on such date under the
terms of the 1999 Stock Option Plan; to prescribe, amend and rescind rules and
regulations relating to the 1999 Stock Option Plan; and to make all other
determinations necessary or advisable for administering the 1999 Stock Option
Plan.
Eligibility; Grants
-------------------
The Committee may, consistent with the purposes of the 1999 Stock
Option Plan, grant options from time to time, to key employees (including
officers and directors who are key employees) of the Company or any of its
subsidiaries. Options granted will cover such number of shares of Common Stock
as the Committee may determine; provided, however, that the maximum number of
shares subject to options that may be granted to any employee in any fiscal year
of the Company under the 1999 Stock Option Plan (the "162(m) Maximum") may not
exceed 100,000; and further provided, however, that the aggregate market value
(determined at the time the option is granted) of the shares of Common Stock for
which any eligible person may be granted ISOs under the 1999 Stock Option Plan
or any other plan of the Company, or of the parent or any subsidiary of the
Company, which are exercisable for the first time by such optionee during any
calendar year will not exceed $100,000. The $100,000 ISO limitation will be
applied by taking ISOs into account in the order in which they were granted. Any
option (or any portion thereof) granted in excess of such amount will be treated
as a NQSO.
On the date the 1999 Stock Option Plan is adopted by the Board of
Directors, every outside director will be granted an Outside Director Option (as
defined herein) to purchase 5,000 shares of Common Stock. In addition, at the
end of the first fiscal year of the Company in which its Net Income (as defined
below) exceeds each of $4,000,000, $5,000,000, $6,000,000, $7,000,000, etc.,
each person who is an outside director of the Company on the last day of such
fiscal year will be granted an Outside Director Option to purchase 2,500 shares
of Common Stock. For purposes of this paragraph, "Net Income" means the net
after-tax income of the Company and its consolidated subsidiaries, as determined
from the Company's audited financial statements. The Outside Director
-17-
<PAGE>
Options described in this paragraph with respect to a given fiscal year will be
granted as soon as the Company's audited financial statements for such fiscal
year become available. In the event the remaining shares available for grant
under the 1999 Stock Option Plan are not sufficient to grant the Outside
Director Options to each such outside director in any year, the number of shares
subject to the Outside Director Options for such year will be reduced
proportionately. Neither the Board of Directors nor the Committee will have any
discretion with respect to the selection of directors to receive Outside
Director Options or the amount, the price or the timing with respect thereto.
Exercise Price
--------------
The exercise price of the shares of Common Stock under each option is
to be determined by the Committee; provided, however, that the exercise price is
not to be less than 100% of the fair market value of the Common Stock subject to
such option on the date of grant; and further provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) shares possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its subsidiaries or of a parent,
the exercise price of such ISO may not be less than 110% of the fair market
value of the Common Stock subject to such ISO on the date of grant. The exercise
price of the shares of Common Stock under each NQSO granted pursuant to the 1999
Stock Option Plan to a director of the Company who, at the time of the grant, is
not an employee of the company or any of its subsidiaries (each such option, an
"Outside Director Option") will be equal to the fair market value of the Common
Stock subject to the option on the date of grant.
Term
----
The term of each option granted pursuant to the 1999 Stock Option Plan
is established by the Committee, in its sole discretion, at or before the time
such option is granted; provided, however, that the term of each ISO granted
pursuant to the 1999 Stock Option Plan is to be for a period not exceeding ten
years from the date of grant thereof, and further provided, that if, at the time
an ISO is granted, the optionee owns (or is deemed to own under Section 424(d)
of the Code) shares possessing more than ten percent of the total combined
voting power of all classes of stock of the Company, of any of its subsidiaries
or of a parent, the term of the ISO is to be for a period not exceeding five
years from the date of grant. Each Outside Director Option is to be exercisable
for a term of five years commencing on the date of grant.
Exercise
--------
An option (or any part or installment thereof), to the extent then
exercisable, is to be exercised by giving written notice to the Company at its
principal office. Payment in full of the aggregate exercise price may be made
(a) in cash or by certified check, or (b) in the case of an option granted
pursuant to the 1999 Stock Option Plan to a key employee of the Company or a
subsidiary thereof and if the applicable stock option contract at the time of
grant so permits, with the authorization of the Committee, with previously
acquired shares of Common Stock having an aggregate fair market value, on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, or (c) with any combination of cash, certified check or shares of
Common Stock.
-18-
<PAGE>
A person entitled to receive Common Stock upon the exercise of an
option will not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price will continue to have the rights of a stockholder with
respect to such previously acquired shares.
Termination of Relationship
---------------------------
Any employee holder of an option whose employment with the Company (and
its parent and subsidiaries) has terminated for any reason other than his death
or disability may exercise such option, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if his employment is terminated either (a)
for cause, or (b) without the consent of the Company, said option terminates
immediately. Options granted to employees under the 1999 Stock Option Plan are
not affected by any change in the status of the holder so long as he or she
continues to be a full-time employee of the Company, its parent or any of its
subsidiaries (regardless of having been transferred from one corporation to
another).
An Outside Director Option may be exercised at any time during its five
year term; provided, however, that if the holder of an Outside Director Option
ceases to be a director of the Company (other than as a result of death or
disability), unless the holder becomes a director or an employee of the Company
or any of its subsidiaries, the holder may exercise such option, to the extent
exercisable on the date of such cessation, at any time within three months after
the date of such cessation, but not thereafter, and in no event after the
expiration of the term of the option.
Death or Disability
-------------------
If an optionee dies (a) while he is employed by the Company, its parent
or any of its subsidiaries, (b) within three months after the termination of his
employment (unless such termination was for cause or without the consent of the
Company), or (c) within one year following the termination of his employment by
reason of disability, an employee's option may be exercised, to the extent
exercisable on the date of his death, by his executor, administrator or other
person at the time entitled by law to his rights under such option, at any time
within one year after death, but not thereafter and in no event after the date
the option would otherwise have expired.
Any optionee whose employment has terminated by reason of disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
The term of an Outside Director Option will not be affected by the
death or disability of the optionee. In such case, the option may be exercised
at any time during its term by his executor, administrator or other person at
the time entitled by law to the optionee's rights under such option.
-19-
<PAGE>
Adjustments Upon Changes in Common Stock
----------------------------------------
Notwithstanding any other provisions of the 1999 Stock Option Plan, in
the event of any change in the outstanding Common Stock by reason of a share
dividend, recapitalization, merger or consolidation in which the Company is the
surviving corporation, split-up, combination or exchange of shares or the like,
the aggregate number and kind of shares subject to the 1999 Stock Option Plan,
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof will be appropriately adjusted by the Board of
Directors, whose determination will be conclusive.
In the event of (a) the liquidation or dissolution of the Company, (b)
a merger or consolidation in which the Company is not the surviving corporation,
or (c) any other capital reorganization (other than a recapitalization) in which
more than 50% of the shares of Common Stock of the Company entitled to vote are
exchanged, any outstanding options will terminate, unless other provision is
made therefor in the transaction.
Amendments and Termination of the 1999 Stock Option Plan
--------------------------------------------------------
No option may be granted under the 1999 Stock Option Plan after October
6, 2009. The Board of Directors, without further approval of the Company's
stockholders, may at any time suspend or terminate the 1999 Stock Option Plan,
in whole or in part, or amend it from time to time in such respects as it may
deem advisable, including, without limitation, in order that ISOs granted
thereunder meet the requirements for "incentive stock options" under the Code
and to comply with the provisions of certain rules and regulations promulgated
by the Securities and Exchange Commission, among other things; provided,
however, that no amendment may be effective without the requisite prior or
subsequent stockholder approval which would (a) except as required for
anti-dilution adjustments, increase the maximum number of shares of Common Stock
for which options may be granted under the 1999 Stock Option Plan, (b)
materially increase the benefits to participants under the 1999 Stock Option
Plan, or (c) change the eligibility requirements for individuals entitled to
receive options under the 1999 Stock Option Plan.
Non-Transferability of Options
------------------------------
No option granted under the 1999 Stock Option Plan may be transferable
otherwise than by will or the laws of descent and distribution, and options may
be exercised, during the lifetime of the holder thereof, only by such holder or
such holder's legal representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and may not be subject to
execution, attachment or similar process.
Withholding Taxes
-----------------
The Company may withhold cash and/or, with the authorization of the
Committee, shares of Common Stock to be issued having an aggregate fair market
value equal to the amount which it determines is necessary to satisfy its
obligation to withhold federal, state and local income taxes or other taxes
incurred by reason of the grant or exercise of an option, its disposition, or
the disposition of the underlying shares of Common Stock. Alternatively, the
Company may require
-20-
<PAGE>
the holder to pay to the Company such amount, in cash, promptly upon demand. The
Company may not be required to issue any shares of Common Stock pursuant to any
such option until all required payments have been made.
Federal Income Tax Consequences
-------------------------------
The following is a general summary of certain material federal income
tax consequences of the grant and exercise of the options under the 1999 Stock
Option Plan and the sale of any underlying security. This description is based
on current law which is subject to change, possibly with retroactive effect.
This discussion does not purport to address all tax considerations relating to
the grant and exercise of the options or resulting from the application of
special rules to a particular optionee (including an optionee subject to the
reporting and short-swing profit provisions under Section 16 of the Securities
Exchange Act of 1934, as amended, and an optionee exercising an option with
previously owned shares), and state, local, foreign and other tax consequences
inherent in the ownership and exercise of stock options and the ownership and
disposition of any underlying security. An optionee should consult with the
optionee's own tax advisors with respect to the tax consequences inherent in the
ownership and exercise of stock options and the ownership and disposition of any
underlying security.
ISOs EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant or
exercise of an ISO. The optionee's tax basis in the shares acquired upon the
exercise of an ISO with cash will be equal to the exercise price paid by the
optionee for such shares.
If the shares received upon exercise of an ISO are disposed of more
than one year after the date of transfer of such shares to the optionee and more
than two years from the date of grant of the option, the optionee will recognize
long-term capital gain or loss on such disposition equal to the difference
between the selling price and the optionee's basis in the shares, and the
Company will not be entitled to a deduction. Long-term capital gain is generally
subject to more favorable tax treatment than short-term capital gain or ordinary
income.
If the shares received upon the exercise of an ISO are disposed of
prior to the end of the two- years-from-grant/one-year-after-transfer holding
period (a "disqualifying disposition"), the excess (if any) of the fair market
value of the shares on the date of transfer of such shares to the optionee over
the exercise price (but not in excess of the gain realized on the sale of the
shares) will be taxed as ordinary income in the year of such disposition, and
the Company generally will be entitled to a deduction in the year of disposition
equal to such amount. Any additional gain or any loss recognized by the optionee
on such disposition will be short-term or long-term capital gain or loss, as the
case may be, depending upon the period for which the shares were held.
NQSOs EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant of
an NQSO. Upon the exercise of an NQSO, the excess of the fair market value of
the shares received at the time of exercise over the exercise price therefor
will be taxed as ordinary income, and the Company will generally be entitled to
a corresponding deduction. The optionee's tax basis in the shares acquired
-21-
<PAGE>
upon the exercise of such NQSO will be equal to the exercise price paid by the
optionee for such shares plus the amount of ordinary income so recognized.
Any gain or loss recognized by the optionee on a subsequent disposition
of shares purchased pursuant to an NQSO will be short-term or long-term capital
gain or loss, depending upon the period during which such shares were held, in
an amount equal to the difference between the selling price and the optionee's
tax basis in the shares.
ALTERNATIVE MINIMUM TAX
In addition to the federal income tax consequences described above, an
optionee who exercises an ISO may be subject to the alternative minimum tax,
which is payable only to the extent it exceeds the optionee's regular tax
liability. For this purpose, upon the exercise of an ISO, the excess of the fair
market value of the shares over the exercise price is an adjustment which
increases the optionee's alternative minimum taxable income. In addition, the
optionee's basis in such shares is increased by such amount for purposes of
computing the gain or loss on disposition of the shares for alternative minimum
tax purposes. If the optionee is required to pay an alternative minimum tax, the
amount of such tax which is attributable to deferral preferences (including the
ISO adjustment) is allowable as a tax credit against the optionee's regular tax
liability (net of other non-refundable credits) in subsequent years. To the
extent the credit is not used, it is carried forward. An optionee of an ISO
should consult with the optionee's tax advisors concerning the applicability and
effect on the optionee of the alternative minimum tax.
NEW PLAN BENEFITS
Subject to stockholder approval of the 1999 Stock Option Plan, set
forth below is the number of shares of Common Stock underlying options currently
determined to be granted under the 1999 Stock Option Plan to each of the persons
indicated:
Dollar Value(1) Number of Options
Non-Executive Directors as a Group $ 0
------------ ------------
- ---------------
(1) Based on the fair market value per share of $3.8438 on the last day of
fiscal 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
-22-
<PAGE>
VOTING REQUIREMENTS
Assuming a quorum is present, a plurality of the votes cast at the
Meeting will be required for the election of directors. The affirmative vote of
the majority of shares of Common Stock present in person or represented by proxy
at the Meeting and entitled to vote on such matter will be required for approval
of the 1999 Stock Option Plan. Shares of Common Stock that are voted to abstain
with respect to any matter will be considered cast with respect to that matter.
Shares subject to broker non-votes with respect to any matter will not be
considered cast with respect to that matter.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY RECOMMENDED A VOTE IN FAVOR OF
EACH NOMINEE NAMED IN THE PROXY AND FOR PROPOSAL 2.
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Stockholders wishing to present proposals at the 2000 Annual Meeting of
Stockholders and wishing to have their proposals presented in the proxy
statement distributed by the Board of Directors in connection with the 2000
Annual Meeting of Stockholders must submit their proposals to the Company in
writing on or before July 14, 2000.
If the Company does not receive notice by September 27, 1999 from a
stockholder who intends to present at the next annual meeting a proposal that is
not discussed in the Company's proxy statement, the persons named in the proxy
accompanying the Company's proxy statement for that annual meeting will have the
discretionary authority to vote on such proposal at such meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other matter to come
before the meeting. However, if any matters requiring a vote of the stockholders
arise, it is the intention of the persons named in the enclosed form of proxy to
vote such proxy in accordance with their best judgment.
PROXIES
All stockholders are urged to fill in their choices with respect to the
matters to be voted on, sign and promptly return the enclosed form of proxy.
By Order of the Board of Directors
Steven Fialkow
Secretary
Scarsdale, New York
November 11, 1999
-23-
<PAGE>
PROXY PROXY CARD PROXY
- ----- -----
NATIONAL HOME HEALTH CARE CORP.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder of Common Stock of National Home Health Care Corp.
(the "Company") hereby revokes all previous proxies, acknowledges receipt of the
Notice of the Stockholders' Meeting to be held on December 7, 1999, and hereby
appoints Frederick H. Fialkow and Steven Fialkow, and each of them, as proxies
of the undersigned, with full power of substitution, to vote and otherwise
represent all of the shares of the undersigned at said meeting and at any
adjournment or adjournments thereof with the same effect as if the undersigned
were present and voting the shares. The shares represented by this proxy shall
be voted in the following manner:
(1) Election of directors
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote
(except as indicated) for all nominees listed below
To withhold authority for any individual nominee, strike through that
nominee's name in the list below:
Frederick H. Fialkow
Steven Fialkow
Ira Greifer, M.D.
Bernard Levine, M.D.
Robert C. Pordy, M.D.
(2) Approval of the Company's 1999 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
[CONTINUED AND TO BE SIGNED ON REVERSE SIDE]
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE NOMINEES, FOR THE APPROVAL OF
THE COMPANY'S 1999 STOCK OPTION PLAN AND FOR SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING AS THE PROXY HOLDERS DEEM ADVISABLE.
Dated: _______________________, 1999
-------------------------------------
Signature
-------------------------------------
Print Name
-------------------------------------
(Title, if appropriate)
This proxy should be signed by the Stockholder(s) exactly as his or her name
appears hereon. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign. If
a corporation, this proxy should be signed in full corporate name by the
president or other authorized officer and should bear the corporate seal. If a
partnership, please sign in partnership name by authorized person.
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK,
SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE
