<PAGE> 1
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
HealthCare COMPARE Corp.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(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:
- - --------------------------------------------------------------------------------
/ / 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> 2
Healthcare Logo
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 21, 1996
Notice is hereby given that the Annual Meeting of Stockholders of
HealthCare COMPARE Corp., a Delaware corporation (the "Company"), will be held
at the offices of the Company, 3200 Highland Avenue, Downers Grove, Illinois
60515 on Tuesday, May 21, 1996 at 10:00 a.m., local time, for the following
purposes:
(1) To elect nine directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
(2) To approve certain amendments to the Directors' Option Plan.
(3) To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on April 1, 1996 are
entitled to notice of and to vote at the meeting and any postponements or
adjournments thereof. A complete list of the stockholders entitled to vote at
the meeting will be available for examination by any stockholder at the
Company's executive offices, for any purpose germane to such meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting.
By Order of the Board of Directors,
RONALD H. GALOWICH
Secretary
Downers Grove, Illinois
April 19, 1996
------------------
THE BOARD OF DIRECTORS EXTENDS A CORDIAL INVITATION TO ALL STOCKHOLDERS TO
ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN AS PROMPTLY AS POSSIBLE THE ENCLOSED PROXY IN
THE ACCOMPANYING REPLY ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE
THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE TO DO SO.
<PAGE> 3
HEALTHCARE COMPARE CORP.
3200 HIGHLAND AVENUE
DOWNERS GROVE, ILLINOIS 60515
------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1996
------------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of HealthCare
COMPARE Corp., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders of the Company to be held on the date, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders and at any postponements or adjournments thereof. The
Company's principal executive offices are located at 3200 Highland Avenue,
Downers Grove, Illinois 60515, and its telephone number is (708) 241-7900.
Stockholders of record at the close of business on April 1, 1996 are entitled to
notice of and to vote at the meeting. This Proxy Statement and the accompanying
proxy are first being mailed to stockholders on or about April 19, 1996.
THE MEETING
VOTING AT THE MEETING
On April 1, 1996, there were issued and outstanding 34,952,162 shares of
common stock, $.01 par value (the "Common Stock"), held by approximately 1,400
holders of record. Each share of Common Stock issued and outstanding on the
record date entitles the holder thereof to one vote on all matters submitted to
a vote of stockholders at the meeting.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock will constitute a quorum. The affirmative
vote of the holders of a plurality of the shares represented at the meeting, in
person or by proxy, will be necessary for the election of directors. The
affirmative vote of the holders of a majority of the shares represented at the
meeting, in person or by proxy, will be necessary for the approval of the
proposed amendments to the Directors' Option Plan (the "Directors' Plan").
PROXIES AND PROXY SOLICITATION
All shares of Common Stock represented by properly executed proxies will be
voted at the meeting in accordance with the directions marked on the proxies,
unless such proxies previously have been revoked. If no directions are indicated
on such proxies, they will be voted FOR the election of each nominee named below
under "Election of Directors" and FOR the approval of the amendments to the
Directors' Plan. If any other matters are properly presented at the meeting for
action, which is not presently anticipated, the proxy holders will vote the
proxies (which confer discretionary authority upon such holders to vote on such
matters) in accordance with their best judgment. Each proxy executed and
returned by a stockholder may be revoked at any time before it is voted by
timely submission of written notice of revocation or by submission of a duly
executed proxy bearing a later date (in either case directed to the Secretary of
the Company) or, if a stockholder is present at the meeting, he may elect to
revoke his proxy and vote his shares personally.
Abstentions will be treated as shares that are present for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted for a vote of the stockholders. If a broker
indicates on a proxy that he or she does not have discretionary authority to
vote on a
1
<PAGE> 4
particular matter as to certain shares, those shares will be counted for quorum
purposes but will not be considered as present and entitled to vote with respect
to that matter.
In addition to solicitation by mail, the Company has engaged the firm of D.
F. King & Co. Inc. to assist in the solicitation of proxies at an estimated cost
of not more than $7,500. Certain directors, officers and other employees of the
Company, not specially employed for this purpose, may solicit proxies, without
additional remuneration therefor, by personal interview, mail, telephone or
other means of communication. The Company will request brokers and other
fiduciaries to forward proxy soliciting material to the beneficial owners of
shares of Common Stock which are held of record by such brokers and fiduciaries
and will reimburse such persons for their reasonable out-of-pocket expenses.
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 1, 1996, certain information
concerning each person who is known by the Company to beneficially own more than
5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED OF CLASS
- - --------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
CIBC Trust Company (Bahamas) Limited, as Trustee under
Settlement T-551(1).......................................... 2,000,000 5.7%
Post Office Box N-3933
Shirley Street
Nassau, Bahamas
</TABLE>
- - ---------------
(1) The beneficiaries of the trusts are the grandchildren of A.N. Pritzker,
deceased. The trustee has sole voting and investment power with respect to
such shares.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of April 1, 1996, certain information
concerning the beneficial ownership of Common Stock by (i) each director and
nominee, (ii) each executive officer named in the Summary Compensation Table
appearing elsewhere herein, and (iii) all directors and executive officers as a
group. Unless otherwise indicated, each person has sole investment and voting
power (or shares such powers with his or her spouse) with respect to the shares
set forth in the following table.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES PERCENT OF CLASS
NAME BENEFICIALLY OWNED (IF MORE THAN 1%)
- - ----------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Thomas J. Pritzker......................................... 661,200(1) 1.9%
Robert J. Becker, M.D., F.A.C.P............................ 85,900(2) *
Michael J. Boskin, Ph.D.................................... 17,000(3) *
Daniel S. Brunner.......................................... 131,383(4) *
Robert S. Colman........................................... 131,312(5) *
Ronald H. Galowich......................................... 95,500(6) *
Burton W. Kanter........................................... 21,000(7) *
David E. Simon............................................. 15,000(8) *
James C. Smith............................................. 530,993(9) 1.5%
Mary Anne Carpenter........................................ 23,424(10) *
Alton L. Dickerson......................................... 36,561(11) *
Patrick G. Dills........................................... 22,208 *
Lottie A. Kurcz............................................ 26,696(12) *
Joseph E. Whitters......................................... 36,242(13) *
Edward L. Wristen.......................................... 64,479(14) *
All Directors and Executive Officers as a Group (15
persons)................................................. 1,898,898(15) 5.4%
</TABLE>
- - ---------------
* Less than 1%.
2
<PAGE> 5
(1) Includes 66,000 shares subject to immediately exercisable options held by
Mr. Pritzker.
(2) Includes 50,000 shares beneficially owned by Dr. Becker's wife.
(3) Includes 17,000 shares subject to immediately exercisable options held by
Dr. Boskin.
(4) Includes 4,500 shares subject to immediately exercisable options held by
Mr. Brunner and 75,000 shares held by a trust of which Mr. Brunner is a
co-trustee.
(5) Includes 15,000 shares subject to immediately exercisable options held by
Mr. Colman, 116,126 shares held by a trust of which Mr. Colman is the
trustee and 186 shares beneficially owned by Mr. Colman's wife.
(6) Includes 16,000 shares subject to immediately exercisable options held by
Mr. Galowich.
(7) Includes 21,000 shares subject to immediately exercisable options held by
Mr. Kanter. Does not include 355,000 shares owned by Walnut Capital Corp.,
of which Mr. Kanter is the Chairman of the Board, or 77,000 shares owned by
Walnut Financial Services, Inc. of which Mr. Kanter is the Chairman of the
Board. Mr. Kanter disclaims beneficial ownership of all shares owned by
Walnut Capital Corp. and by Walnut Financial Services, Inc.
(8) Includes 15,000 shares subject to immediately exercisable options held by
Mr. Simon.
(9) Includes 28,696 shares held by a foundation of which Mr. Smith is an
officer and director.
(10) Includes 4,125 shares subject to immediately exercisable options held by
Ms. Carpenter.
(11) Includes 35,293 shares subject to options held by Mr. Dickerson that are
exercisable on or within 60 days after April 1, 1996.
(12) Includes 26,250 shares subject to immediately exercisable options held by
Ms. Kurcz.
(13) Includes 20,624 shares subject to immediately exercisable options held by
Mr. Whitters.
(14) Includes 53,000 shares subject to options held by Mr. Wristen that are
exercisable on or within 60 days after April 1, 1996.
(15) Includes an aggregate of 293,792 shares subject to options that are
exercisable on or within 60 days after April 1, 1996.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who beneficially own more than 10% of the outstanding Common Stock to
file reports of initial ownership and changes in ownership of Common Stock with
the Securities and Exchange Commission (the "Commission"). Based solely on a
review of such reports furnished to the Company, the Company believes that
during 1995 all persons known by it to be subject to these regulations filed the
required reports on a timely basis.
ELECTION OF DIRECTORS
At the meeting, nine directors are to be elected to the Board of Directors.
Each director elected at the meeting will hold office until the next Annual
Meeting of Stockholders of the Company or until his respective successor is duly
elected and qualified.
The Board of Directors has nominated and it is the intention of the persons
named in the enclosed proxy to vote for the election of the nominees named
below, each of whom has consented to serve as a director if elected. All of the
nominees have previously been elected at meetings of the Company's stockholders.
J. Patrick Foley, a director of the Company since 1986, has resigned from
the Board of Directors in order to pursue other career opportunities. The Board
of Directors wishes to express its gratitude for Mr. Foley's long and faithful
years of service to the Company.
3
<PAGE> 6
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
The following information is furnished with respect to each nominee:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION YEAR FIRST
AND OTHER DIRECTORSHIPS(1) AGE ELECTED
- - ------------------------------------------------------------------------ --- ----------
<S> <C> <C>
Thomas J. Pritzker...................................................... 45 1990(2)
Chairman of the Board of the Company since May 1990; President of Hyatt
Corporation, a diversified company primarily engaged in real estate and
hotel management activities, since March 1979; director of Tenet
Healthcare Corporation a hospital management and healthcare services
company.
Robert J. Becker, M.D., F.A.C.P......................................... 73 1982
Chairman Emeritus and private investor since May 1990; founder of the
Company and Chairman of the Board from its inception to May 1990;
prior thereto, engaged in the practice of internal medicine (allergy and
clinical immunology) for 26 years; director of GMIS, a medical cost
containment company.
Michael J. Boskin, Ph.D................................................. 50 1994
Professor of Economics, Stanford University since 1971; Research
Associate, National Bureau of Economic Research since 1975; President
and Chief Executive Officer of Boskin & Company, an economic consulting
firm, since 1980; Adjunct Scholar, American Enterprise Institute since
1993; Chairman of the Council of Economic Advisors from 1989 to 1993;
director of Oracle Systems, Inc., a developer of computer software, and
Exxon Corporation, an integrated oil and gas company.
Daniel S. Brunner....................................................... 52 1988
Executive Vice President--Government Affairs of the Company since
January 1994; Chief Operating Officer--Policy and Government Affairs
of the Company from 1992 to January 1994.
Robert S. Colman........................................................ 54 1992
Founder in 1989 of R.S. Colman Company, a private merchant banking firm;
founder and partner since 1991 of Colman Furlong & Co., a private
merchant banking firm; from 1978 to 1989, co-founding partner of
Robertson, Colman & Stephens, an investment banking firm; director of
Cleveland-Cliffs, Inc., a producer and processor of iron ore; New Image
Industries, Inc., a manufacturer and marketer of dental intraoral
cameras and related imaging systems; and Van Wagoner Funds, Inc., a no-
load, open-end management investment company.
Ronald H. Galowich...................................................... 60 1982
Secretary and General Counsel of the Company since 1983; Executive Vice
President of the Company from 1983 to May 1994; Chairman of the Board
of Madison Group Holdings, Inc., a multipurpose business and investment
company since 1990; Chairman, Madison Realty Group, Inc., a real estate
investment and development firm since 1985; Chairman and Chief Executive
Officer of Madison Information Technologies, Inc., a data integration,
software solutions and technology company serving the healthcare
industry since 1994.
Burton W. Kanter........................................................ 65 1984
Of counsel to the law firm of Neal, Gerber & Eisenberg since 1986;
Chairman of the Board of Walnut Financial Services, Inc., a venture
capital and consulting firm, since February 1995; Chairman of the Board
of Walnut Capital Corp., a venture capital firm, since 1983; director of
Logic Devices Incorporated, a manufacturer of microchips; Scientific
Measurement Systems, Inc., a manufacturer and retailer of industrial
tomographic machines; Power Cell, Inc., a developer of long life
auxiliary batteries; and Channel America LPTV Holdings, Inc., a network
of television stations.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION YEAR FIRST
AND OTHER DIRECTORSHIPS(1) AGE ELECTED
- - ------------------------------------------------------------------------ --- ----------
<S> <C> <C>
David E. Simon.......................................................... 34 1990
President, Chief Executive Officer and director of Simon Property Group,
Inc., a real estate investment trust which is a shopping center owner,
developer and manager, since 1993; Executive Vice President and Chief
Financial Officer of Melvin Simon & Associates, Inc., a privately-held
firm engaged in the development of shopping centers, since 1990; Vice
President of Wasserstein Perella & Co., Inc., an investment banking
firm, from 1988 to 1990.
James C. Smith.......................................................... 55 1984
President and Chief Executive Officer of the Company since January 1984.
</TABLE>
- - ---------------
(1) Only directorships of issuers with a class of securities registered pursuant
to Section 12 of the Exchange Act, or subject to the requirements of Section
15(d) of the Exchange Act and directorships of issuers registered as
investment companies under the Investment Company Act of 1940, as amended,
are required to be listed in the above table.
(2) Mr. Pritzker previously served as a director of the Company from 1985 to
1986.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors has designated an Audit Committee, a Compensation
Committee and a Committee on Director Affairs. The current members of the Audit
Committee are Burton W. Kanter (Chairman), Michael J. Boskin, Ronald H. Galowich
and Robert J. Becker, M.D. The current members of the Compensation Committee are
Robert S. Colman (Chairman), Ronald H. Galowich and David E. Simon. The current
members of the Committee on Director Affairs are Michael J. Boskin (Chairman),
Robert S. Colman and Thomas J. Pritzker.
The functions of the Audit Committee include reviewing the independence of
the Company's independent auditors, recommending to the Board of Directors the
engagement and discharge of independent auditors, reviewing with the independent
auditors the plan, scope and results of auditing engagements, reviewing the
accounting principles being applied and the effectiveness of internal controls,
assuring, in its oversight role, that management fulfills its responsibilities
in the preparation of the Company's financial statements, directing and
supervising special investigations at the Board of Directors' request and
reviewing and approving or disapproving specific transactions when requested to
do so by the Board of Directors.
The functions of the Compensation Committee include administering and
interpreting the Company's various stock option and stock purchase plans, and
making certain recommendations to the Board of Directors with respect to
executive compensation and the hiring of members of senior management whose
salaries exceed a level specified from time to time by the Board of Directors.
The functions of the Committee on Director Affairs include identifying
potential candidates to serve as directors of the Company, submitting
recommendations with respect to such candidates to the Board of Directors and
providing an annual assessment to the Board of its performance. The Committee on
Director Affairs will consider nominees recommended by stockholders. Any
suggestions may be submitted in writing to the attention of "Committee on
Director Affairs of the Board of Directors" at the Company's principal offices.
During 1995, the Board of Directors held five meetings, the Audit Committee
held two meetings, the Compensation Committee held one meeting and took action
once by written consent, the Nominating Committee, the predecessor to the
Committee on Director Affairs, did not meet. Each director attended at least 75%
of the aggregate number of meetings held by the Board of Directors and the
committees on which he served with the exception of Mr. Simon.
5
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Robert S. Colman
(Chairman), Ronald H. Galowich and David E. Simon. Other than Mr. Galowich, who
serves as Secretary and General Counsel of the Company, none of the members of
the committee, during 1995 or prior thereto, was an officer or employee of the
Company or any of its subsidiaries. Mr. Galowich does not participate in any
deliberations regarding his compensation.
J. Patrick Foley, who served as a member of the Compensation Committee
until he resigned from the Board of Directors in March, 1996, is Chairman of the
Board and Chief Executive Officer of DHL Airways, Inc. ("DHL"). The Company
provides utilization management services and PPO services to a benefit plan
maintained by DHL. Such services are performed pursuant to standardized service
contracts, the terms of which are no less favorable to the Company than those
obtainable from unaffiliated parties. During 1995, the aggregate fees paid to
the Company by DHL were approximately $305,000.
The Company has entered into a retainer agreement with Ronald H. Galowich
which expires on December 31, 1996, pursuant to which he continues to be
employed as the General Counsel of the Company. As consideration for such
services, Mr. Galowich receives $3,750 per month and is entitled to participate
in all employee welfare benefit programs maintained by the Company for its
employees and executives. In addition, the Company has agreed to provide to Mr.
Galowich and his wife (if he subsequently remarries and requests coverage for
his wife), for the life of each of them, at the Company's expense (subject to
certain limitations), various health benefits.
CERTAIN OTHER TRANSACTIONS
Trusts for the benefit of certain members of the Pritzker family
beneficially own approximately 5.7% of the Common Stock. See "Common Stock
Ownership of Certain Beneficial Owners." In addition, other trusts for the
benefit of certain members of the Pritzker family control Hyatt Corporation
("Hyatt") and other trusts for the benefit of certain members of the Pritzker
family own, directly or indirectly, Marmon Holdings, Inc. ("Marmon"). As used
herein, "Pritzker family" refers to the lineal descendants of Nicholas J.
Pritzker, deceased. Thomas J. Pritzker, Chairman of the Board of the Company, is
the President of Hyatt. The Company provides utilization management services and
preferred provider organization ("PPO") services to a benefit plan maintained by
Hyatt. In addition, the Company provides utilization review and PPO services to
certain subsidiaries of Marmon. Such services are performed pursuant to
standardized service contracts, the terms of which are no less favorable to the
Company than those obtainable from unaffiliated parties. During 1995, the
aggregate fees paid to the Company by Hyatt and by subsidiaries of Marmon were
approximately $201,000 and $178,000, respectively.
During 1995, a subsidiary of the Company purchased for $7,976,051, a
limited partnership interest in Trimont Partners 1995, Limited Partnership (the
"1995 Partnership"), the general partner of which is Triton Container
International Limited ("Triton") and one of the other limited partners of which
is Rosemont Leasing, Inc. ("Rosemont"). The 1995 Partnership used the capital
contributions of its partners to acquire a 50% partnership interest in the 1995
tranche of Trimont Leasing Partners ("Trimont"). Trimont, in turn, used the
capital contributions of its partners and the proceeds of loans to acquire
intermodal cargo containers which are being managed by Triton and leased to
third parties. Trusts for the benefit of certain members of the Pritzker family
and their relatives beneficially own approximately 78% of Triton, and trusts for
the benefit of members of the Pritzker family indirectly own all of the capital
stock of Rosemont. Thomas J. Pritzker did not participate in any of the Board's
discussions regarding this transaction, and the Board directed the Audit
Committee to review the advisability of, and approve or disapprove, the proposed
investment in the 1995 Partnership. The Audit Committee reviewed the proposed
investment with its outside legal and accounting advisors and, after extensive
deliberations, concluded that the investment was appropriate and beneficial to
the Company and was being made on an arm's length basis.
Pursuant to provisions of its Certificate of Incorporation and By-laws, the
Company agreed to indemnify James C. Smith and Joseph E. Whitters against
certain expenses incurred by them in defending a civil lawsuit in which the
Company and Messrs. Smith and Whitters were named defendants. The lawsuit was
dismissed in
6
<PAGE> 9
January 1996. The Company's insurance carriers advanced an aggregate of
approximately $12,000 on behalf of such persons to pay legal fees incurred
during fiscal 1995.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information with respect to all
compensation paid by the Company for services rendered in all capacities to the
Company's Chief Executive Officer and to each of the six other most highly paid
executive officers during each of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)(2)
- - -------------------------------- ---- ------------ -------- --------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James C. Smith.................. 1995 $667,660 $350,000 $ 9,600 -- $9,306
President and Chief 1994 650,000 300,000 10,920 -- 9,306
Executive Officer 1993 549,300 -- 9,600 550,000 8,597
Edward L. Wristen............... 1995 240,000 50,000 -- -- 7,678
Executive Vice President, 1994 201,250 27,500 -- 80,000 6,635
Risk Products 1993 152,917 -- -- 8,000 5,515
Lottie A. Kurcz................. 1995 223,333 30,000 -- -- 7,644
Senior Vice President, 1994 185,177 26,250 -- 75,000 6,613
Risk Products 1993 131,417 -- -- 5,000 4,708
Mary Anne Carpenter............. 1995 215,417 40,000 -- -- 8,240
Executive Vice President, 1994 199,180 16,667 -- 60,000 7,812
Service Products 1993 187,333 -- -- 5,000 6,776
Patrick G. Dills................ 1995 215,417 23,600 -- -- 7,627
Executive Vice President, 1994 200,000 -- -- 50,000 6,657
Managed Care Sales 1993 199,184 -- -- -- 5,324
Joseph E. Whitters.............. 1995 212,083 50,000 -- -- 7,503
Vice President, Finance and 1994 188,333 31,667 -- 80,000 7,475
Chief Financial Officer 1993 168,333 -- -- 8,000 5,573
Alton L. Dickerson.............. 1995 189,583 40,000 -- -- 7,771
Senior Vice President, 1994 154,347 28,333 -- 50,000 6,806
Provider Networks and 1993 120,879 -- -- 2,500 6,504
OUCH Systems Administration
</TABLE>
- - ---------------
(1) Pursuant to the rules promulgated by the Commission, does not include
discounts on shares of Common Stock purchased by each of the named executive
officers from the Company pursuant to the Company's Employee Stock Purchase
Plan, which discounts are available generally to all eligible employees.
(2) The amounts shown in this column for 1995 consist of payments made by the
Company on behalf of each of Messrs. or Mses. Smith, Wristen, Kurcz,
Carpenter, Dills, Whitters and Dickerson of $6,930, $6,930, $6,930, $6,930,
$6,930, $6,930, and $6,930, respectively, under the Company's Retirement
Savings Plan, together with insurance premiums paid by the Company in the
amounts of $2,376, $748, $714, $1,310, $697, $573, and $841 for the benefit
of Messrs. or Mses. Smith, Wristen, Kurcz, Carpenter, Dills, Whitters and
Dickerson, respectively.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted in fiscal 1995 to any of the named executive
officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning option exercises in
fiscal 1995 by each of the named executive officers and the value of such
officers' unexercised options at December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL YEAR IN-THE-MONEY OPTIONS/SARS AT
SHARES END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Smith.......... 118,750 $ 1,837,500 6,250 450,000 $ 98,438 $ 9,775,000
Edward L. Wristen....... 6,000 131,750 61,000 80,000 1,085,825 1,438,925
Lottie A. Kurcz......... 4,000 112,750 26,250 61,250 555,359 1,218,328
Mary Anne Carpenter..... 67,320 1,165,951 5,500 49,250 74,250 981,928
Patrick G. Dills........ 40,000 1,355,487 10,000 40,000 197,000 788,000
Joseph E. Whitters...... 46,500 979,781 30,500 66,000 617,075 1,318,925
Alton L. Dickerson...... 6,957 94,333 35,793 55,250 530,710 944,328
</TABLE>
- - ---------------
(1) The closing sale price of the Common Stock on December 29, 1995, the last
business day of fiscal 1995, as reported by the Nasdaq National Market was
$43.50.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mary Anne
Carpenter which expires on May 23, 1996, subject to automatic renewal for
successive one-year terms unless terminated by either party. Pursuant to this
agreement, Ms. Carpenter receives an annual base salary of not less than
$175,000, subject to annual increases of not less than the increase in the
Consumer Price Index during the preceding 12-month period. Ms. Carpenter's
annual base salary is currently fixed at $235,000. In addition, Ms. Carpenter is
entitled to participate in all employee benefit programs and other policies and
programs of the Company.
The Company has entered into an employment agreement with Patrick G. Dills
which expires on December 9, 1996, subject to automatic renewal for successive
one-year terms unless terminated by either party. Pursuant to this agreement,
Mr. Dills receives an annual base salary of not less than $185,000, subject to
annual increases of not less than the increase in the Consumer Price Index
during the preceding 12-month period. Mr. Dills' annual base salary is currently
fixed at $235,000. In addition, Mr. Dills is entitled to participate in all
employee benefit programs and other policies and programs of the Company.
The Company has entered into an employment agreement with Lottie A. Kurcz
which is subject to termination by either party upon 30 days notice. Ms. Kurcz's
annual base salary is currently fixed at $239,200. In addition, Ms. Kurcz is
entitled to participate in all employee benefit programs and other policies and
programs of the Company.
The Company has entered into an employment agreement with James C. Smith
which expires on December 31, 1996 unless previously terminated in accordance
with its terms. Under this agreement, Mr. Smith serves as the President and
Chief Executive Officer of the Company and receives an annual base salary of not
less than $650,000 and such additional compensation as may be approved from time
to time by the Board of Directors based on a review of Mr. Smith's performance
at the end of each fiscal year during the term of his agreement. Pursuant to the
agreement, Mr. Smith is entitled to participate in all employee benefit programs
and other policies and programs of the Company. The Company has also agreed to
provide to Mr. Smith and his wife, for the life of each of them, at the
Company's expense (subject to certain limitations)
8
<PAGE> 11
various health benefits. The agreement also requires the Company (under certain
circumstances) to pay Mr. Smith the balance of the base salary amounts due under
the agreement, including all accrued benefits, upon the termination of his
employment. In connection with his employment agreement, in 1993 Mr. Smith was
granted options to purchase 550,000 shares of Common Stock.
The Company has entered into an employment agreement with Joseph E.
Whitters which expires on May 23, 1996, subject to automatic renewal for
successive one-year terms unless terminated by either party. Pursuant to this
agreement, Mr. Whitters receives an annual base salary of not less than
$125,000, subject to increases approved by the Company. Mr. Whitters' annual
base salary is currently fixed at $235,000. In addition, Mr. Whitters is
entitled to participate in all employee benefit programs and other policies and
programs of the Company.
The Company has entered into an employment agreement with Edward L. Wristen
which expires on April 3, 1997, subject to automatic renewal for successive
one-year terms unless terminated by either party. Pursuant to this agreement,
Mr. Wristen receives an annual base salary of not less than $97,200, subject to
annual increases of not less than the increase in the Consumer Price Index
during the preceding 12-month period. Mr. Wristen's annual base salary is
currently fixed at $260,000. In addition, Mr. Wristen is entitled to participate
in all employee benefit programs and other policies and programs of the Company.
DIRECTORS' COMPENSATION
Only those directors of the Company who are not employees or officers of
the Company receive any compensation for serving on the Board of Directors or on
a committee thereof. Each of such directors received a director's fee of $20,000
during 1995. In 1996, each of such directors will receive a fee of $25,000 for
serving on the Board of Directors. In addition, each outside director is paid
$1,000 for each Board of Directors meeting attended, and was paid $250 in 1995
and will be paid $750 in 1996 for each committee meeting attended which is on a
date other than a date on which there is a Board of Directors meeting.
The Company maintains the Directors' Plan pursuant to which the Chairman of
the Board and other members of the Board of Directors who are not employees of
the Company are eligible to receive options to purchase shares of Common Stock.
Solely for purposes of the Directors' Plan, Ronald H. Galowich is deemed to be a
director who is not also an employee or officer of the Company. Currently, under
the Directors' Plan, on the date of the Board of Directors meeting immediately
following each Annual Meeting of Stockholders of the Company, each eligible
participant receives an option to purchase 3,000 shares of Common Stock. The
Chairman of the Board of Directors receives an option to purchase an additional
10,000 shares of Common Stock, and the Chairman of each of the Audit Committee,
Compensation Committee and Committee on Director Affairs receives an option to
purchase an additional 1,000 shares of Common Stock. The exercise price of each
such option is equal to the "fair market value" of the Common Stock on the date
of grant. In 1995, pursuant to the Directors' Plan, Mr. Pritzker was granted an
option to purchase 13,000 shares of Common Stock, each of Messrs. Kanter and
Colman and Dr. Boskin was granted an option to purchase 4,000 shares of Common
Stock and each of Messrs. Galowich and Simon and Dr. Becker was granted an
option to purchase 3,000 shares of Common Stock. Each of such options was
granted on May 24, 1995 and has an exercise price of $32.50, the closing price
of the Common Stock on the Nasdaq National Market on such date. As described
later under the heading "Amendments to the Directors' Plan," on March 26, 1996,
the Board of Directors approved certain amendments to the Directors' Plan,
subject to stockholder approval. The amendments seek to (i) increase by 1,000
the number of shares subject to options granted annually to each director who is
not also an employee or officer of the Company, and (ii) provide for option
grants to persons who are appointed to the Board of Directors. See "Amendments
to the Directors' Plan."
Pursuant to an employment agreement which expired on May 2, 1993, the
Company agreed to provide to Dr. Becker, the Chairman Emeritus of the Board of
Directors, and his wife, for the life of each of them, at the Company's expense
(subject to certain limitations), various health benefits.
Pursuant to a consulting agreement which expired on May 23, 1995, the
Company granted to Dr. Boskin, a director of the Company, a five-year option to
purchase 6,000 shares of Common Stock at an exercise price of $19.375 per share,
the closing price of the Common Stock on the Nasdaq National Market on May 24,
9
<PAGE> 12
1994, the grant date. On March 26, 1996, the Company entered into a new
three-year consulting agreement with Dr. Boskin pursuant to which the Company
agreed to pay Dr. Boskin a consulting fee of $5,000 per year for each year
during which he serves as a director of the Company and to grant him an option
under the Company's 1995 Stock Option Plan (the "1995 Plan") to purchase 3,000
shares of Common Stock each year during which he serves as a director of the
Company. Pursuant to this agreement, on March 26, 1996, the Company granted to
Dr. Boskin an option to purchase 3,000 shares of Common Stock at an exercise
price of $48.50 per share, the closing price of the Common Stock on the Nasdaq
National Market on such date.
See "Election of Directors--Compensation Committee Interlocks and Insider
Participation" and "--Certain Other Transactions" for information regarding
certain transactions with other directors of the Company.
10
<PAGE> 13
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE EXCHANGE ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING
THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE REPORT PRESENTED BELOW AND THE
PERFORMANCE GRAPH FOLLOWING SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is responsible for reviewing
and approving the two primary elements of the Company's executive compensation
program--base salary and stock options. The Committee carries out its
responsibilities with significant input from the Chief Executive Officer and
other members of senior management. Based on such input and on an assessment of
various subjective criteria including the overall contributions made by an
individual (both on a current and a long-term basis) and the Company's
performance, the Committee makes recommendations to the Board of Directors with
respect to executive cash compensation, annual bonus awards, the establishment
and maintenance of other compensation programs, and the granting of stock
options, including options under the Company's 1995 Stock Option Plan (the
"Option Plan") which is a part thereof (the "Executive Program"). During 1995,
the Board of Directors did not modify or otherwise alter any of the Committee's
recommendations. The Company's philosophy, which the Committee and the Board of
Directors seek to implement, is to design compensation packages which will
enable the Company to attract and retain qualified employees and encourage such
persons to maximize their efforts on behalf of the Company.
Prior to the adoption in 1995 of the Option Plan, the Company maintained a
similar stock option plan and historically granted options to employees who had
been with the Company at least one year as of the summer of each year. It is
anticipated that the Option Plan will be administered in substantially the same
manner. The purpose of the Option Plan is, and of the prior plan was, to aid the
Company in securing and retaining employees and consultants and to motivate such
employees and consultants to exert their best efforts on behalf of the Company.
Option grants are intended to encourage performance that will result in
appreciation of the market value of the Common Stock. The Committee believes
that the Company's stock option plans have historically been very helpful in
attracting and retaining skilled employees at all levels. Stock options are
generally awarded once during the year to optionees selected by the Committee
based on recommendations from the Chief Executive Officer and other members of
senior management of the Company. In making option awards, the Committee
considers various factors, including senior management's subjective assessment
of the contributions made to the Company by the proposed optionee during the
preceding year, the potential future contributions to be made by such person,
such person's current salary level and the terms of previous option grants. In
addition, the Committee considers other performance measures which may not
directly bear on short term stock performance, including, where appropriate,
sales growth, market share and improvements in relations with customers,
providers and employees.
The Company has maintained the Executive Program since its adoption in
1994. The purpose of the Executive Program is to attract and retain highly
qualified members of senior management and to align the interest of such persons
with the interests of the Company's stockholders. Pursuant to the Executive
Program, which is administered under and as part of the Option Plan, key members
of senior management are eligible, at three year intervals, to receive
incrementally vesting stock options. The Chief Executive Officer nominates
participants and recommends grant awards. In addition to the factors outlined
above, these recommendations are based on predetermined guidelines which take
into account a potential grantee's salary and current management position. The
recommendations are then considered and voted upon by the Committee. Stock
options are to be granted under the Executive Program by the Committee at three
year intervals (grants to newly hired key employees may be made earlier) and the
options vest and become exercisable over the five years following the date of
grant. By making large, infrequent grants of options and extending the vesting
of such options over a five-year period, the Company is able to provide senior
management a significant financial stake in the future success of the Company
while also creating a strong disincentive for such persons to leave the
Company's employ before the options fully vest. To date, options covering an
aggregate of 570,000 shares of Common Stock have been granted to 14 members of
senior management, including some of the executive
11
<PAGE> 14
officers named in the Summary Compensation Table contained elsewhere herein. No
further grants will be made under the Executive Program, other than to newly
hired key employees, prior to 1997. Options under the Executive Program were
granted at an exercise price equal to 85% of the closing sale price of the
Common Stock on the date of grant. Options previously granted under the
Executive Program vest at a rate of 20% per year on each of the first five
annual anniversaries of the date of grant and expire ten years from the grant
date.
The Chief Executive Officer is authorized to extend an offer of employment
to, and establish the salary of, an executive officer whose annual salary is
less than $350,000. In the case of an executive officer whose annual salary will
equal or exceed $350,000, the hiring of such individual and the amount of
compensation to be paid is subject to the approval of the Board of Directors. In
considering the advisability of extending an offer of employment to a
prospective executive officer and establishing such person's compensation, the
Board of Directors considers and affords great importance to the recommendations
of the Chief Executive Officer, which are generally based on his subjective
analysis of such individual's prior professional experience, leadership
qualities, expected contributions to the Company and responsibilities to be
undertaken on behalf of the Company. After an executive officer has joined the
Company, depending on the relevant circumstances, increases in his or her salary
are either as provided for in his or her employment agreement, approved by the
Chief Executive Officer, or approved by the Board of Directors.
Under an employment agreement with James C. Smith, the Company's Chief
Executive Officer, which expires on December 31, 1996, the Committee is
obligated to review Mr. Smith's performance at the end of each fiscal year and
recommend to the Board of Directors the amount of bonus compensation, if any, to
which he is entitled. Based on its review of Mr. Smith's performance in 1995,
the Committee recommended the payment to Mr. Smith of bonus compensation in the
amount of $350,000, which recommendation was approved by the Board of Directors
in December 1995. In reviewing Mr. Smith's performance during 1995, the
Committee considered numerous factors including his contributions with respect
to (i) the record revenues, earnings and profit margins attained by the Company
in 1995, (ii) the successful solidification of the Company's relationships with
its distribution partners and the addition of several significant new clients,
(iii) the prospective growth of the Company through the development of risk
products and the then contemplated acquisition of a small health insurance
company (which was completed in February 1996) through which such products will
be marketed. Additional factors considered by the Committee include Mr. Smith's
continuing importance to the Company's future growth and his leadership in
guiding the exploration of new markets (and expanding current markets) in order
to ensure that the Company retains its competitive position.
Provisions of the Internal Revenue Code of 1986, as amended eliminate the
deductibility of compensation over $1,000,000 paid to certain executive officers
unless such compensation is "performance-based". In order to maximize
permissible deductions, it is anticipated that future determinations of
compensation will continue to be conditioned upon the Company's achievement of
certain performance goals identified by the Committee or the Board of Directors.
THE COMPENSATION COMMITTEE
Robert S. Colman, Chairman
Ronald H. Galowich
David E. Simon
12
<PAGE> 15
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock for the five fiscal years ended December 31, 1995 with
the cumulative total return on the Nasdaq Health Services Index and the Nasdaq
Total Return Index (US) over the same period (assuming the investment of $100 in
each of the Common Stock, the Nasdaq Health Services Index and the Nasdaq Total
Return Index (US) on December 31, 1990).
NOTE: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
NASDAQ Health NASDAQ Total
Measurement Period Company Services Return Index
(Fiscal Year Covered) Common Stock Index (U.S.)
<S> <C> <C> <C>
12/31/90 100.00 100.00 100.00
12/31/91 458.00 223.00 161.00
12/31/92 348.00 231.00 187.00
12/31/93 286.00 266.00 215.00
12/31/94 396.00 286.00 210.00
12/31/95 504.00 365.00 296.00
</TABLE>
AMENDMENTS TO THE DIRECTORS' PLAN
GENERAL. On May 23, 1991, the Board of Directors adopted the Directors'
Plan which provides for the granting of options to purchase up to an aggregate
of 330,000 shares of Common Stock to the Chairman of the Board and members of
the Board of Directors who are not also employees or officers of the Company. As
of April 1, 1996, options covering an aggregate of 174,000 shares of Common
Stock had been granted under the Directors' Plan, all of which are immediately
exercisable, and 156,000 shares remained available for future option grants. On
March 26, 1996, the Board approved certain amendments to the Directors' Plan
which would (i) increase by 1,000 the number of shares subject to options
granted annually to each director who is not also an employee or officer of the
Company and (ii) provide for option grants to non-employee directors upon their
election to the Board of Directors.
The Company believes that the Directors' Plan is an effective way to align
the interests of its directors and stockholders. The proposed amendments will
enable the Company to continue to attract highly qualified persons to serve as
directors by permitting the Committee to make discretionary grants of options to
new members of the Board of Directors. In the event the proposed amendments to
the Directors' Plan are not approved by the requisite stockholder vote, the
Company may consider adopting an alternative plan for
13
<PAGE> 16
members of the Board of Directors who are not also employees or officers of the
Company which would be designed to achieve similar goals and provide comparable
benefits to participants.
The following summary is qualified in its entirety by reference to the full
text of the Directors' Plan, as amended.
PURPOSE. The purpose of the Directors' Plan is to aid the Company in
securing individuals to serve on its Board of Directors and to provide financial
incentives to such directors to exert their best efforts on behalf of the
Company.
ADMINISTRATION. The Directors' Plan is administered by the Compensation
Committee, which has the power to administer, construe and interpret the
Directors' Plan and to implement fully the provisions thereof. The Board of
Directors appoints the members of the Compensation Committee, fills vacancies on
the Compensation Committee and has the power to replace members of the
Compensation Committee with other eligible persons at any time. The current
members of the Compensation Committee are Robert S. Colman (Chairman), Ronald H.
Galowich and David E. Simon.
ELIGIBILITY. The Chairman of the Board and members of the Board of
Directors who are not also employees or officers of the Company are eligible to
receive options under the Directors' Plan. Solely for the purposes of the
Directors' Plan, Ronald H. Galowich is deemed to be a director who is not also
an employee or officer of the Company. Seven directors are currently eligible to
participate in the Directors' Plan, including the members of the Compensation
Committee. If the proposed amendments are approved by the requisite stockholder
vote, the Compensation Committee will be able to make discretionary grants to
new members of the Board of Directors.
SHARES SUBJECT TO PLAN. The Directors' Plan currently provides for the
issuance of up to an aggregate of 330,000 shares of Common Stock (subject to
adjustment pursuant to the anti-dilution provisions of the Directors' Plan). In
the event that there is any change in the outstanding Common Stock by reason of
a recapitalization, merger, reorganization, consolidation, split-up, stock
dividend or stock right distribution, the number and kind of shares deliverable
upon exercise of options granted pursuant to the Directors' Plan and the
exercise price thereof will be adjusted in an equitable manner by the Board of
Directors.
If an option expires or terminates for any reason during the term of the
Directors' Plan without having been exercised in full, the shares subject to the
unexercised portion of such option will be available for issuance upon the
exercise of future options granted under the Directors' Plan.
GRANT OF OPTIONS. The Directors' Plan currently provides that each year on
the date of the Board of Directors meeting immediately following the Annual
Meeting of Stockholders (the "Grant Date"), each participant in the Directors'
Plan will be granted an option to purchase 3,000 shares of Common Stock. In
addition, each year on the Grant Date (i) the Chairman of the Board will be
granted an option to purchase an additional 10,000 shares of Common Stock and
(ii) the Chairman of each of the Audit Committee and the Compensation Committee
will be granted an option to purchase an additional 1,000 shares of Common
Stock. If the proposed amendments are approved by the requisite stockholder
vote, the number of shares subject to options granted annually to plan
participants will be increased to 4,000. In addition, if the proposed amendments
are approved, the Compensation Committee will be authorized to grant options to
persons upon their election to the Company's Board of Directors. Options granted
under the Directors' Plan are intended to be "nonstatutory options" and are not
intended to be "incentive stock options" under Section 422 of the Code.
As of April 1, 1996, options to acquire an aggregate of 156,000 shares of
Common Stock were outstanding under the Directors' Plan. Each of such options
has an exercise price ranging from $14.75 to $32.50, the fair market value per
share on the date each such option was granted. The persons named in the table
under "Compensation of Executive Officers" are not eligible to participate in
the Directors' Plan.
EXERCISE PRICE. Each option granted pursuant to the Directors' Plan will
have a per share exercise price equal to 100% of the "fair market value" (as
defined in the Directors' Plan) of a share of Common Stock on the Grant Date. As
of April 1, 1996, the fair market value per share of Common Stock was $50.00 per
share.
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<PAGE> 17
TERMS OF OPTIONS. Options granted pursuant to the Directors' Plan may have
a term of up to ten years. The period during which an option is exercisable may
be reduced as provided in the Directors' Plan in the event of termination of
service as a director of the Company or upon the retirement or death of the
optionholder. See "Death, Disability, Retirement or Termination of Service"
below.
EXERCISE OF OPTIONS. Options granted pursuant to the Directors' Plan are
exercisable in such installments and during such periods as may be fixed by the
Committee at the time of grant.
Upon the exercise of an option, the optionee is required to make payment in
full to the Company of the exercise price therefor (and any required tax
withholding payment) (i) in cash or cash equivalent payment and/or (ii) with
previously acquired shares of Common Stock or a combination of cash or cash
equivalent and shares of Common Stock having an aggregate fair market value
equal to the exercise price (and any required tax withholding payment).
NON-ASSIGNABILITY OF OPTIONS. Options granted under the Directors' Plan are
not transferable other than by will or the then applicable laws of descent and
distribution. During the lifetime of an optionholder, options may be exercised
only by the optionholder.
DEATH, DISABILITY, RETIREMENT OR TERMINATION OF SERVICE. If an optionholder
dies while serving as a director of the Company or within two years after
termination of service as a director of the Company by virtue of retirement or
of becoming disabled (or such shorter period as is specified in such
optionholder's option agreement), an option held by such person may thereafter
be exercised only to the extent they were exercisable at the time of death,
giving effect to any acceleration of exercisability triggered by such death,
within the earlier of (i) two years after the date of death or (ii) the date of
expiration of the option. Such option may be exercised during the permitted
period only by the person or persons to whom the optionholder's rights under the
option passes by the optionholder's will or by the then applicable laws of
descent and distribution.
If an optionholder's service as a director of the Company is terminated due
to disability and such optionholder has served continuously from the date of
grant, he may, within up to two years after the date of such termination but
before expiration of the original exercise period, purchase some or all of the
shares with respect to which he was entitled to exercise the option immediately
prior to such termination, giving effect to any acceleration of exercisability
triggered by such disability.
In the case of an optionholder who has served continuously from the date of
grant and whose service as a director of the Company is terminated due to
retirement, resignation, removal, failure to be nominated by the Board of
Directors for re-election or failure to be re-elected by the stockholders of the
Company, such optionholder may, within up to two years after the date of any
such termination but before the expiration of the original exercise period,
acquire the shares subject to such option immediately prior to such termination,
giving effect to any acceleration of exercisability triggered by such
termination. In the case of a termination "due to cause," all outstanding
options of the optionee shall be cancelled as of the date such optionee is given
notice of termination.
RIGHTS AS A STOCKHOLDER. No person shall have any rights of a stockholder
of the Company as to shares of Common Stock subject to an option until such
option is exercised and certificates representing such shares are received by
the optionholder.
AMENDMENT AND DISCONTINUANCE. The Board of Directors may at any time and
from time to time, alter, suspend or discontinue the Directors' Plan without the
approval of the Company's stockholders, but may not, without the approval of the
holders of a majority of the Company's outstanding capital stock, make any
alteration or amendment to the Directors' Plan which operates to (a) abolish the
Committee, change the qualification of its members, or withdraw administration
of the Directors' Plan from its supervision, (b) make any material change in the
class of eligible employees as defined in the Directors' Plan, (c) increase the
total number of shares reserved for purposes of the Directors' Plan, except for
such adjustments as are permitted under the Directors' Plan, (d) increase the
total number of shares for which an option or options may be granted to any
participant, (e) extend the term of the Directors' Plan or the maximum option
exercise periods provided for therein, (f) decrease the minimum option price
specified in the Directors' Plan, except as
15
<PAGE> 18
provided for therein, (g) change the limitation on fair market value specified
in the Directors' Plan, or (h) materially increase the benefits accruing to
persons participating in the Directors' Plan.
TERMINATION. The period during which options can be granted under the
Directors' Plan expires on May 22, 2001 unless earlier terminated by the Board
of Directors. No amendment, discontinuance or termination of the Directors' Plan
will have any effect on options then outstanding.
MISCELLANEOUS. The Directors' Plan is not qualified under Section 401 of
the Code. In addition, the Directors' Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
PARTICIPATION IN THE DIRECTORS' PLAN. During 1995, the seven non-employee
directors (excluding Mr. Foley) received options covering an aggregate of 34,000
shares of Common Stock pursuant to the Directors' Plan. Under the proposed
amendments to the Directors' Plan, such persons would have received options
covering an aggregate of 41,000 shares of Common Stock during 1995.
FEDERAL INCOME TAX CONSEQUENCES. Following is a brief summary of the
principal federal income tax consequences of the grant and exercise of an option
granted under the Directors' Plan and the subsequent disposition of shares
acquired upon such exercise. This summary is not intended to be exhaustive and
does not describe all federal, state, or local tax laws.
No income is realized by an optionholder upon the grant of an option. Upon
the exercise of an option, the amount by which the fair market value on the date
of exercise of the shares of Common Stock received upon the exercise of such
option ("Option Stock") exceeds the option price will be taxed as ordinary
income to an optionholder, and the Company will be entitled to a deduction in an
equal amount.
Upon subsequent sales of Option Stock, an optionholder may realize
short-term or long-term capital gain or loss, assuming such shares constitute
capital assets in an optionholder's hands and depending upon the bolding period
of the shares, measured by the difference between the selling price and the tax
basis of the shares sold. The tax basis for this purpose will be the sum of the
exercise price and the amount of ordinary income realized by the optionholder as
a result of such exercise.
If an option is exercised and payment is made by means of previously
acquired shares, or previously acquired shares and cash, there is no gain or
loss recognized by the optionholder with respect to the previously acquired
shares. The optionholder's basis in the newly acquired shares is the same as the
optionholder's basis in the previously acquired shares, increased by the amount
of any additional cash paid by the optionholder and the ordinary income realized
by the optionholder on the exercise of the option for federal income tax
purposes.
BOARD RECOMMENDATION. The Board of Directors recommends that stockholders
vote FOR approval of the proposed amendments to the Directors' Plan.
AUDITORS
The Company has engaged Deloitte & Touche LLP to audit the Company's
financial statements for fiscal 1996. Deloitte & Touche LLP audited the
Company's financial statements for fiscal 1995 and the decision to retain
Deloitte & Touche LLP was approved by the Audit Committee of the Board of
Directors and the Board of Directors of the Company.
A representative of Deloitte & Touche LLP is expected to attend the Annual
Meeting of Stockholders where he will have the opportunity to make a statement,
if he so desires, and will be available to respond to appropriate questions.
1997 ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders is presently scheduled to be held
on May 19, 1997. Any proposals of stockholders intended to be personally
presented at such meeting must be received by the Secretary of the Company for
inclusion in the Company's Proxy Statement and form of proxy no later than
December 21, 1996.
16
<PAGE> 19
<TABLE>
<S><C>
- - ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE COMPARE CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
JAMES C. SMITH, RONALD H. GALOWICH and JOSEPH E. WHITTERS and each of them, are hereby constituted and appointed the
lawful attorneys and proxies of the undersigned, with full power of substitution, to vote and act as proxy with respect
to all shares of common stock, $.01 par value, of HEALTHCARE COMPARE CORP. (the "Company") standing in the name of the
undersigned on the books of the Company at the close of business on April 1, 1996, at the Annual Meeting of Stockholders
to be held at the offices of the Company, 3200 Highland Avenue, Downers Grove, Illinois 60515, at 10:00 a.m., local
time, on Tuesday, May 21, 1996, and at any postponements or adjournments thereof, as follows.
(1) ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name
in the list below)
Thomas J. Pritzker, Robert J. Becker, M.D., Michael J. Boskin, Ph.D., Daniel S. Brunner, Robert S. Colman,
Ronald H. Galowich, Burton W. Kanter, David E. Simon, James C. Smith
(2) APPROVAL OF CERTAIN AMENDMENTS TO THE DIRECTORS' 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 and any postponements or adjournments thereof.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
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(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE APPROVAL OF CERTAIN AMENDMENTS TO THE DIRECTORS' OPTION PLAN.
Signed: ____________________________________
____________________________________
Dated: ______________________________, 1996
(Please sign proxy as name appears thereon. Joint
owners should each sign personally. Trustees and
others signing in a representative capacity
should indicate the capacity in which they sign.)
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