<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Sierra Tucson Companies, Inc.
- - --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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
[LOGO]
SIERRA TUCSON COMPANIES, INC.
=============================
April 26, 1995
Dear Stockholder:
The Board of Directors joins me in inviting you to attend the 1995 annual
meeting of stockholders. The meeting will be held in the Finger Rock Room at The
Westin La Paloma Hotel in Tucson, Arizona on Friday, May 26, 1995.
In addition to the matters described in the attached proxy statement, I will
report on the business and progress of Sierra Tucson during 1994 and Sierra
Tucson's future. I also encourage you to participate at this meeting. Regardless
of how many shares you hold or whether you attend the meeting in person, your
opinion is important to us.
At the conclusion of the annual meeting, you are invited to attend a
presentation in the Verbena Room at the Westin La Paloma. This presentation is
intended to both showcase Sierra Tucson's strategic initiatives, including the
Company's new wellness center and Onsite initiatives, and extend to you the
opportunity to meet our senior executive team.
I hope you will be able to attend the meeting and I look forward to seeing you
there.
Sincerely,
/s/ John H. Schmitz
_________________________
John H. Schmitz
President and Chief Executive Officer
<PAGE> 3
[LOGO]
SIERRA TUCSON COMPANIES, INC.
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1995
---------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Sierra
Tucson Companies, Inc., (the "Company"), a Delaware corporation, will be held at
The Westin La Paloma, 3800 E. Sunrise Drive, Tucson, Arizona, on Friday, May 26,
1995, at 9:00 a.m., for the following purposes:
1. Election of Directors. To elect two directors to hold office for a term
of three years and until their successors have been elected and
qualified.
2. Appointment of Independent Auditors. To act upon the recommendation of
the Board of Directors on the appointment of Ernst & Young LLP as the
Company's independent auditors for 1995.
3. Amendment to Stock Option Plan. To act upon the recommendation of the
Board of Directors to amend the 1992 Stock Option Plan to, among other
things, increase the number of shares available for issuance under the
Plan.
4. Other Matters. To act upon such other matters as may properly come
before the meeting or any postponements or adjournments thereof.
Stockholders of record at the close of business on April 20, 1995 shall be
entitled to notice of and to vote at the meeting or any postponements or
adjournments thereof. Only stockholders of record and guests of the Company
shall be entitled to attend the Annual Meeting.
By Order of the Board of Directors
George H. Daranyi, Esq.
Secretary
April 26, 1995
Tucson, Arizona
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 4
[LOGO]
SIERRA TUCSON COMPANIES, INC.
16500 N. Lago Del Oro Parkway
Tucson, Arizona 85737
April 26, 1995
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Sierra Tucson Companies, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at The Westin La Paloma, 3800 E.
Sunrise Drive, Tucson, Arizona on Friday, May 26, 1995, at 9:00 a.m., or at any
and all postponements or adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting.
This Proxy Statement, the Notice of Meeting, and the accompanying Proxy
Card are first being mailed to stockholders on or about April 26, 1995. The
Annual Report to Stockholders (including financial statements for the year ended
December 31, 1994) which is not part of this proxy solicitation material, has
previously been mailed to all stockholders of record.
GENERAL INFORMATION
Only stockholders of record at the close of business April 20, 1995, (the
"Record Date"), will be entitled to notice of and to vote the shares of common
stock of the Company, par value $.01 per share ("Common Stock"), held by them on
such date at the Annual Meeting or any and all postponements or adjournments
thereof. On the Record Date, 8,546,884 shares of Common Stock were outstanding
and entitled to vote at the Annual Meeting.
Each share of Common Stock entitles the holder thereof to cast one vote on
each matter to be voted upon at the Annual Meeting.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the accompanying proxy card will vote for the
election as directors of the nominees listed herein; for the appointment of
Ernst & Young LLP as the Company's independent auditors for 1995; for the
proposed amendments to the 1992 Stock Option Plan; and, as recommended by the
Board of Directors with regard to all other matters or if no such recommendation
is given, in their own discretion.
<PAGE> 5
Tabulation of proxies and the votes cast at the meeting will be conducted
and certified to by an independent inspector of election.
Each proxy granted may be revoked by the stockholder giving such proxy at
any time before it is exercised by filing with the Secretary of the Company a
revoking instrument or a duly executed proxy bearing a later date. The powers of
the proxy holders will be suspended if the person executing the proxy attends
the Annual Meeting in person and so requests in writing. Attendance at the
Annual Meeting will not, in itself, constitute revocation of the proxy.
The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of Common Stock outstanding on the Record Date, will constitute a
quorum.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five persons
who serve staggered three year terms in such a way that approximately one-third
of the total number of directors is elected each year. The terms of office of
two directors expire at the Annual Meeting. The Board of Directors has nominated
William T. O'Donnell, Jr. and John H. Schmitz, current directors, as directors
of the Company for a term of three years and until their successors are duly
elected and qualified.
It is the intention of the persons named as proxies to vote the proxies for
the election of Mr. O'Donnell and Mr. Schmitz as directors unless the
stockholders direct otherwise in their proxies. The Board has no reason to
believe that either Mr. O'Donnell or Mr. Schmitz will not serve if elected, but
if one or both of them should become unavailable to serve as a director, and if
the Board shall designate a substitute nominee(s), the persons named as proxies
intend to vote for the substitute nominee(s) designated by the Board of
Directors.
Mr. O'Donnell and Mr. Schmitz will be elected as directors if a quorum is
present and they each receive the affirmative vote of a plurality of the
outstanding shares of the Common Stock of the Company present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. "Plurality" means that the two individuals who receive the largest
number of votes cast are elected as directors. Only proxies and ballots
indicating votes "FOR the nominees", "WITHHOLD AUTHORITY to vote for the
nominees" or specifying that votes be withheld for one or both of the nominees
are counted to determine the total number of votes cast and broker non-votes are
not counted.
The following information is submitted concerning the nominees for director
and the directors continuing in office:
NOMINEES:
WILLIAM T. O'DONNELL, JR.
Director Since: 1984
Age: 46
Mr. O'Donnell is the Chairman of the Board of the Company. From February
1984 until February 1993, Mr. O'Donnell held the title of President. He has
been the Chairman of the Board since 1984 and was, until year end 1994,
also the Company's Chief Executive Officer. Mr. O'Donnell is now the
Managing Director of ODE, LLC, of Chicago, Illinois an investment and
development company.
2
<PAGE> 6
Previously, Mr. O'Donnell was employed by Bally Manufacturing Corporation
from 1971 to 1983 in various marketing and corporate positions. He served
as President of two major divisions and was a corporate Vice President of
Bally. Mr. O'Donnell is a member of the Committee to Advance the Center for
Alcohol and Addiction Studies at Brown University. He also serves on the
National Board of Directors of Boy's Hope. Mr. O'Donnell received his
Bachelor of Arts degree from Brown University in 1971 and a Master of
Management degree from the Kellogg Graduate School of Management at
Northwestern University in 1978.
JOHN H. SCHMITZ
Director Since: 1988
Age: 48
Mr. Schmitz is the Chief Executive Officer, President and Treasurer of the
Company. From January 1987 until February 1993, he was the Executive Vice
President and Chief Financial Officer of the Company. He has been a
director since December 1988 and has held the title of President since
February 1993. He was also the Company's Chief Operating Officer from
February 1993 until year end 1994. During 1985 and 1986, Mr. Schmitz was
the owner and President of Regent/West, Inc., a medically-oriented real
estate development firm. From 1975 until 1985, he served in various
managerial and financial positions with SamCor Inc., one of the largest
health care providers in the United States. Mr. Schmitz is a Certified
Public Accountant and was previously employed by the accounting firm of
Ernst & Whinney, now Ernst & Young LLP. Mr. Schmitz received a Bachelor of
Business Administration degree in 1971 from the University of Cincinnati
and a Master in Health Service Administration degree in 1981 from Arizona
State University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
MR. O'DONNELL AND MR. SCHMITZ AS DIRECTORS.
DIRECTORS CONTINUING IN OFFICE:
(TERM EXPIRING AT 1996 ANNUAL MEETING OF STOCKHOLDERS)
RONALD E. ROBISON
Director Since: 1989
Age: 56
Since 1987 Mr. Robison has been the Managing Director -- Mutual Funds of
Trust Company of the West. From 1978 to 1987, he was the Director of Merger
and Acquisition Services for the Western Region of Ernst & Whinney, now
Ernst & Young LLP. Prior to 1978, Mr. Robison was the President of Pacific
Health Resources and has significant management and consulting experience
in the health care industry including strategic planning, acquisitions,
valuations, and corporate structuring. Mr. Robison received his Bachelor of
Science degree in 1963 from Brigham Young University and his Master of
Business Administration degree in 1966 from UCLA.
3
<PAGE> 7
(TERMS EXPIRING AT 1997 ANNUAL MEETING OF STOCKHOLDERS)
JOSEPH R. CRUSE, M.D.
Director Since: 1991
Age: 65
Dr. Cruse was the Clinical Director of ONSITE Training and Consulting, Inc.
from 1988 until 1992. He also maintained a private consulting practice in
alcoholism and other drug dependencies. He is a certified addictionologist.
From 1985 to 1988, Dr. Cruse was the Medical Director of the R.J. CARON
Foundation. He was also the founding Medical Director of The Betty Ford
Center. Dr. Cruse is the author and co-author of numerous books regarding
addictions and dependencies. He received his Doctor of Medicine degree in
1957 from the University of Colorado and his Bachelor of Science and Master
of Science degrees from the University of Denver in 1952 and 1953,
respectively.
NEIL E. JENKINS, ESQ.
Director Since: 1994
Age: 45
Mr. Jenkins is Executive Vice President and Secretary and a member of the
Board of Directors of Bally Gaming International, Inc. Mr. Jenkins also
served as Vice President, Secretary and General Counsel of Bally
Manufacturing Corporation from 1985 through 1992. Mr. Jenkins graduated
from Brown University and the Loyola University School of Law in 1971 and
1980, respectively. He is a member of the Chicago, Illinois and American
Bar Associations and is a member of the Board of Trustees of the
International Association of Gaming Attorneys. Mr. Jenkins was appointed to
the Board of the Company in December, 1994 to conclude the unfinished
directorship term of Mr. A. Steven Crown, who resigned.
COMPENSATION OF DIRECTORS
In 1994, directors who were not employees of the Company each received a
fee of $10,000 per year and $1,000 per meeting (Board or Committee) day
attended, plus reimbursement of reasonable expenses. In addition, a Non-Employee
Director Stock Option Plan (the "Plan") provides for the automatic granting of
options to acquire shares of the Company's Common Stock to members of the Board
of Directors who are not officers or employees of the Company ("Outside
Directors"). 300,000 shares of Common Stock were originally set aside for this
purpose.
In 1994, each Outside Director received, pursuant to this Plan, options to
purchase 7,500 shares of Common Stock for his service on the Board of Directors
plus an additional grant of options to purchase Common Stock totaling 1,000
multiplied by the number of "Applicable Committees" of which such Outside
Director is the Chairman. The Applicable Committees for purposes of the Plan are
the Company's Executive, Audit, Compensation, and Stock Option Committees.
Each Outside Director shall receive options to purchase a like sum of
shares of Common Stock on the first business day of each fiscal year of the
Company. In addition, upon an Outside Director's initial election to the Board
of Directors, such Outside Director shall receive the grant of an option to
purchase 10,000 shares of Common Stock. All options granted pursuant to the Plan
are fully vested at the time of grant.
Directors who are also full-time employees of the Company receive no
additional compensation for their services as Directors.
4
<PAGE> 8
DIRECTORS' ATTENDANCE
In 1994, the Board of Directors of the Company met eight (8) times. There
were four (4) regular (quarterly) meetings and four (4) special meetings. No
current member of the Board failed to attend any meetings of the Board or of any
Committee on which such member served.
COMMITTEES OF THE BOARD
The standing committees of the Board of Directors consist of the following:
Executive Committee. The Executive Committee is currently comprised of
Messrs. O'Donnell (Chairman), Schmitz, and Jenkins. The Executive Committee did
not meet in 1994. The Executive Committee possesses all of the powers of the
Board except the power to: (1) issue stock; (2) approve mergers with
non-affiliated corporations; (3) declare dividends; and (4) exercise certain
other powers specifically reserved by Delaware law to the Board.
Compensation Committee. The Compensation Committee, which is currently
comprised of Messrs. Jenkins (Chairman), O'Donnell, and Dr. Cruse, met two (2)
times during 1994. The Committee is empowered by the Board of Directors to
advise management on compensation strategies and formulate and approve
compensation programs or plans. In March 1995, the authority of the Compensation
Committee was expanded. The Compensation Committee now has authority to approve
compensation guidelines and set compensation for the Executive Officers of the
Company. The "Executive Officers" consist of the Chief Executive Officer
("CEO"), and the other executive officers of the Company. In February 1994, the
Compensation Committee assumed the overall responsibility and authority
previously held by the Stock Option Committee for the remainder of 1994. In
February 1995, the Stock Option Committee was re-established in order to
administer the Company's 1990 and 1992 Stock Option Plans (see below).
Audit Committee. The Audit Committee, which is currently comprised of
Messrs. Robison (Chairman), Jenkins, and Dr. Cruse, met two (2) times in 1994.
The functions of the Audit Committee are to review the financial affairs and
procedures of the Company with management and the independent auditors of the
Company.
Nominating Committee. The Nominating Committee, which is currently
comprised of Messrs. O'Donnell (Chairman) and Jenkins was formed by the Board in
October 1994. It met one (1) time in 1994. The functions of the Nominating
Committee are to screen, select and recommend appropriate candidates for
election to the Company's Board. The Nominating Committee will consider nominees
recommended by stockholders of the Company if the names and qualifications of
such nominees are submitted in writing by December 28, 1995 to the Secretary of
the Company, 16500 N. Lago Del Oro Parkway, Tucson, Arizona 85737, who will then
forward the recommendation to the Chairperson of the Nominating Committee.
Stock Option Committee. The Stock Option Committee, which is currently
comprised of Dr. Cruse (Chairman) and Messrs. Robison and Jenkins, was formed by
the Board in February 1995. From February 1994 until February 1995 all of the
duties and activities of the Stock Option Committee were undertaken by the
Compensation Committee. Therefore, the Stock Option Committee did not meet in
1994. The Stock Option Committee governs the administration of the 1990 and 1992
Stock Option Plans of the Company.
5
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides information for the three years ended December
31, 1994 concerning the compensation of the Company's Chairman of the Board,
William T. O'Donnell, Jr., and the Company's next most highly compensated
executive officers ("Named Executive Officers") whose annual compensation
exceeded $100,000.00:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- - ------------------------------ ------ ---------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William T. O'Donnell, Jr. 1994 160,417.00 0 0 2,411.47
Chairman of the Board, former 1993 307,500.00 0 0 0 3,254.95
Chief Executive Officer(3) 1992 368,333.00 0 0 0 3,188.49
John H. Schmitz, 1994 220,000.00 0 0 100,000 3,683.20
President and Chief (3) 1993 220,000.00 0 0 100,000 4,486.26
Executive Officer 1992 238,333.00 0 0 0 4,422.99
Bruce W. Martin, 1994 134,583.00 1,000.00 0 25,000 9,241.77
Vice President of 1993 0 0 0 0
Marketing(4) 1992 0 0 0 0
Kenneth J. Whitaker, 1994 103,958.00 5,000.00 0 28,000 1,553.75
Executive Director, 1993 92,500.00 0 0 0 1,796.24
Sierra Tucson, Inc.(5) 1992 92,500.00 9,250.00 0 17,500 1,984.86
</TABLE>
- - ---------------
(1) The dollar value of perquisites and other personal benefits were less than
the lesser of either $50,000 or ten (10%) percent of the total annual salary
and bonus for each named executive officer and therefore has been excluded.
(2) The Company paid annual premiums of $1,006.00 and $2,240.50 on term life
insurance policies on behalf of Mr. O'Donnell and Mr. Schmitz, respectively.
The Company also paid premiums in the amounts of $115.00 and $110.00 for Mr.
Martin and Mr. Whitaker, respectively. This column also includes the
Company's contribution to the 401(k) plan for each Named Executive Officer.
The Company also reimbursed Mr. Martin $9,126.77 for moving expenses
incurred in 1994.
(3) Mr. Schmitz was elected to the position of Chief Executive Officer effective
January 1, 1995. Mr. O'Donnell was the Chief Executive Officer until
December 31, 1994; and, Mr. Schmitz was the Chief Operating Officer and
President.
(4) Mr. Martin commenced employment with the Company February 1994.
(5) Mr. Whitaker has been the Executive Director of Sierra Tucson, Inc., a
wholly-owned subsidiary of the Company, since June 4, 1994.
6
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1994 to
the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL POTENTIAL REALIZABLE
GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS FOR OPTION TERM(4)
OPTIONS GRANTED TO EXERCISE ---------------------
GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR(3) ($/SHARE) DATE ($) ($)
- - -------------------------- ---------- -------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William T. O'Donnell, Jr. 0 -- -- --
John H. Schmitz(1) 100,000 24.8% $4.00 2/3/2004 $251,600 $637,600
Bruce W. Martin(2) 25,000 6.2% $4.00 2/24/2004 $ 62,900 $159,400
Kenneth J. Whitaker(2) 25,000 6.2% $4.00 2/3/2004 $ 62,900 $159,400
3,000 .74% $2.88 12/4/2004 $ 5,435 $ 13,772
</TABLE>
- - ---------------
(1) Mr. Schmitz's options vest as follows: If Mr. Schmitz is employed by the
Company at the time, one-fourth of the options are exercisable after one
year from grant of option, one-fourth are exercisable after two years from
grant of option, one-fourth are exercisable after three years from grant of
option, and the balance becomes exercisable four years after grant of
option. Mr. Schmitz's employment agreement with the Company provides for the
acceleration of the vesting of his options in certain circumstances (see
"Employment Agreements").
(2) Mr. Martin's and Mr. Whitaker's options vest as follows: If employed by the
Company at the time, one-third of the options are exercisable after one year
from grant of option, one-third are exercisable after two years from grant
of option, and the balance becomes exercisable three years after grant of
option. In 1994, the Compensation Committee adopted a policy that would
result in the acceleration of the options of all employees in the event of a
change of control of the Company.
(3) The Company granted options representing 402,959 shares to employees in
fiscal 1994. Of this number, 98,459 were issued pursuant to the Company's
Option Exchange Plan whereby certain eligible employees and consultants
exchanged old options for newly priced options. The Named Executive Officers
were not eligible to participate in the Option Exchange Plan.
(4) The assumed rates of appreciation in this table were set by the SEC and are
not intended to predict appreciation of the Company's common stock prices.
If the stock price does not increase, the options will be valueless.
7
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information on the value of the named
executive officers' unexercised options at December 31, 1994. There were no
option exercises by such officers in fiscal 1994.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END AT FISCAL YEAR END(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William T. O'Donnell, Jr. 0 0 -- --
John H. Schmitz 25,000 200,000 -- --
Bruce W. Martin 0 25,000 -- --
Kenneth J. Whitaker 29,666 60,500 -- --
</TABLE>
- - ---------------
(1) Fiscal year ended December 31, 1994. The closing price of the Company's
Common stock on that day on the NASDAQ National Market System was $2.875. At
that price no unexercised options, whether exercisable or unexercisable,
were in-the-money.
EMPLOYMENT AGREEMENTS
In April 1995, the Company entered into an Employment Agreement with Mr.
Schmitz with a three-year term commencing April 1, 1995. Mr. Schmitz's
annualized base salary for the period from January 1, to June 30, 1995 is
$220,000. Commencing on July 1, 1995, his annualized base salary shall be
$275,000. Thereafter, Mr. Schmitz's base salary is subject to increase (but not
decrease) at the discretion of the Compensation Committee. The Employment
Agreement sets forth the basic terms of employment including base salary and
benefits, incentive compensation, and severance benefits which are payable if
Mr. Schmitz's employment is terminated. For 1995, Mr. Schmitz is eligible to
earn up to 34% of his base salary as incentive compensation depending upon the
accomplishment of certain objective performance criteria based on the Company's
gross revenues and earnings per share as well as certain subjective performance
criteria. In the event the Company terminates Mr. Schmitz (other than for cause)
or if Mr. Schmitz terminates his employment for good reason (as defined in the
agreement, including his removal as Chief Executive Officer or as a Director or
a reduction in his responsibilities or duties), the Employment Agreement
provides for the payment of an amount equal to the greater of the product of Mr.
Schmitz's base salary multiplied by the number of years remaining under the term
of the Agreement or the equivalent of his annualized salary at the time of
termination for eighteen months. In addition, all unvested options automatically
vest. Mr. Schmitz's Employment Agreement also provides that, upon a change of
control of the Company and Mr. Schmitz's termination, Mr. Schmitz is to be paid
a lump sum amount equal to three times his base salary plus previous unpaid
years incentive compensation. In addition, all unvested stock options
automatically vest.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934 that might incorporate future
filings, including this Proxy Statement, in whole or in part, the
following report and the Performance Graph on Page 12 shall not be
incorporated by reference into any such filings.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS OF SIERRA TUCSON COMPANIES, INC.
Decisions relating to compensation of the Company's executive officers are
made by the Compensation Committee of the Board of Directors. The Compensation
Committee's executive compensation policies are designed to clearly articulate
and define the Board's philosophy with respect to executive compensation
(including the named executive officers). The Board's objectives are to provide
direct linkage between the total compensation program and the accomplishment of
the Company's business strategies and Company performance. Furthermore, the
compensation program has been designed to enable the company to attract, retain,
and reward executive officers who contribute to the long-term success of the
Company.
Since February 1993, the composition of the Compensation Committee has
consisted entirely of Outside Directors. In addition, the role of the
Compensation Committee was redefined and expanded in February 1993 and again in
March 1995. The Compensation Committee is empowered to provide oversight, set
compensation and help formulate and approve compensation programs.
DUTIES AND RESPONSIBILITIES
In 1995, the specific responsibilities of the Compensation Committee
consist of:
- The development and approval of compensation policies and guidelines for
the Company's executive officers. Executive officers include the Chief Executive
Officer and the other executive officers of the Company as that term is defined
in the rules of the Securities and Exchange Commission.
- The formulation and approval of comprehensive compensation programs for
the executive officers based upon a review of industry competitive practices and
the Compensation Committee's compensation philosophies and policies.
- The review of the performance of the executive officers against specified
annual corporate and individual objectives and the making of any annual base
salary adjustments or annual or long-term incentive awards. Overall, the intent
is to have more significant emphasis on variable compensation components and
less on fixed cost components. The Committee believes this philosophy and
program structure are in the best interests of the stockholders.
In February 1994, the Compensation Committee assumed all of the
responsibilities and authority of the Stock Option Committee, until February
1995, when a Stock Option Committee was again created by the Board, consisting
entirely of Outside Directors.
COMPENSATION PHILOSOPHIES
The Compensation Committee developed additional policies, guidelines, and
programs relating to executive compensation which included an alignment of the
specific incentive components of compensation with measurable indicators of
Company financial and strategically oriented performance indicators including
earnings per share and gross revenues. Other factors considered in making
compensation decisions included individual performance and position
accountabilities. In establishing total executive compensation, the Compensation
Committee seeks to be competitive with other companies in the Company's industry
peer group. An independent compensation consulting firm was retained directly by
the Compensation Committee to assist it in analyzing peer-group compensation and
in developing comprehen-
9
<PAGE> 13
sive, performance-based policies and guidelines for use in structuring
compensation plans for the Company's executive officers. That data includes
comparable compensation information from publicly traded and privately held
companies in the health care industry. Base salaries are generally set at the
average of the peer group. The number of options granted to the executive
officers of the Company is generally determined on a basis comparable to other
publicly held companies in the health care industry; although the Company does
not adhere to any firmly established formula or schedule for the issuance of
options.
COMPONENTS OF COMPENSATION
The Company's executive compensation program generally consists of three
components: base salary, an annual incentive (bonus) payment, and long-term
incentives (which consist primarily of stock options).
BASE SALARIES/ANNUAL CASH COMPENSATION
Executive officer base salaries are reviewed and set annually by the
Compensation Committee based on recommendations developed by the Committee's
independent compensation consultant. Salary levels are based on such factors as
the individual officer's level of responsibility, comparisons to similar
companies in the industry, and the performance of the Company and individual
executives. With the exception of Mr. Whitaker, who was promoted to his current
position in 1994, base salaries for the senior executives of the Company were
not changed in 1994.
Mr. O'Donnell was the Company's Chief Executive Officer until December 31,
1994, when his resignation became effective. Effective February 1994, Mr.
O'Donnell's base salary was reduced from $275,000 per year to $150,000 per year
at his request, pending an improvement in the Company's financial performance.
ANNUAL INCENTIVE COMPENSATION
The Company has, in the past, provided annual incentive (bonus)
compensation to its senior executives. Such payments were based upon an
assessment of individual performance as it relates to job responsibilities. The
Compensation Committee is developing, with its compensation consultant, an
annual incentive compensation plan for senior executives that will be based upon
the accomplishment of specific qualitative criteria and the achievement of
established performance goals.
LONG-TERM INCENTIVES
The Company's long-term incentive compensation takes the form of stock
option grants. The Compensation Committee's position is that stock ownership by
senior management is beneficial in aligning management's and stockholders'
interests in the enhancement of share value. Mr. Schmitz was granted an option
to purchase 100,000 shares in February 1994. In making this grant, the
Compensation Committee also considered Mr. Schmitz's responsibilities and his
equity position in the Company. The other Named Executive Officers received an
award of 25,000 stock options each in 1994. Mr. Whitaker also received an
additional 3000 options to reward him for concluding five (5) years of
continuing service with the Company. Generally, the options vest over a three or
four year period commencing one year after the date of grant. An optionee must
remain employed with the Company in order to vest or exercise options. See the
tables on pages 7 and 8 for details.
10
<PAGE> 14
CHIEF EXECUTIVE OFFICER
As discussed under the heading "Certain Transactions", the Company entered
into a Separation Agreement with Mr. O'Donnell in connection with his
resignation as CEO. In approving the terms of the Separation Agreement, the
Compensation Committee considered a number of factors including: (i) the length
and value of Mr. O'Donnell's service to the Company, (ii) the Company's past
practices with respect to resigning executive officers, and (iii) Mr.
O'Donnell's non-competition agreement.
On January 1, 1995, Mr. Schmitz became the Company's Chief Executive
Officer. As was described previously in the section on Employment Agreements, in
April 1995, the Company entered into a three-year Employment Agreement with Mr.
Schmitz. Under the terms of that Agreement, Mr. Schmitz may be eligible to earn
incentive compensation based upon the attainment of certain key objectives and
performance guidelines established by the Compensation Committee. The
performance criteria represent the most significant factors and are based upon
gross revenues and earnings per share of the Company for 1995. The amount of the
incentive compensation is based upon the level of attainment of these two
criteria. In addition, if certain threshold performance criteria are achieved,
the amount of compensation can be increased by up to twenty-five (25%) percent
of the incentive compensation that is based on objective criteria by the
Compensation Committee depending upon its assessment of Mr. Schmitz's
performance and the accomplishment of certain specific operational and
organizational objectives.
As stated above, the Compensation Committee believes that stock option
grants represent an effective means of providing long-term incentive to the
Company's senior management and aligns their interests with those of the
stockholders. In keeping with this philosophy, in April 1995, the Compensation
Committee recommended to the Stock Option Committee and the Stock Option
Committee approved a grant to Mr. Schmitz of an option to purchase 100,000
shares of common stock that would vest annually in increments of 25,000 shares,
each commencing one year from the date of grant. The exercise price of 50,000 of
the shares included in such option would be the market price of the common stock
on the date of grant. So as to provide even further incentive to increase
long-term stockholder value, the exercise price of the remaining option shares
would be $6.00 per share, approximately twice the market price.
Section 162(m) of the Internal Revenue Code of 1986 as amended (the
"Code"), adopted as part of the Revenue Reconciliation Act of 1993, generally
limits to $1,000,000 the deduction that can be claimed by any publicly-held
corporation for compensation paid to any "covered employee" in any taxable year
beginning after December 31, 1993. Performance-based compensation is outside the
scope of the $1,000,000 limitation and, hence, generally can be deducted by a
publicly-held corporation without regard to amount; provided that, among other
requirements, stockholder approval is obtained. It is the Compensation
Committee's understanding that any gain from the exercise of options granted
under the current 1990 and 1992 Stock Option Plans and any amendments thereto
will be fully deductible.
In general, it is the intent of the Compensation Committee to assure the
deductibility to the Company of executive compensation whenever possible and
consistent with operational policies.
Compensation Committee
Neil E. Jenkins, Chairman
William T. O'Donnell, Jr.
Joseph R. Cruse, M.D.
11
<PAGE> 15
COMPARISON CUMULATIVE PERFORMANCE GRAPH
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock with the total return index of the NASDAQ Stock Market and the total
return index of NASDAQ Health Service Companies.
PERFORMANCE GRAPH FOR SIERRA TUCSON COMPANIES, INC.
INDEXED COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
CRSP TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET AND
CRSP TOTAL RETURN INDEX FOR NASDAQ HEALTH SERVICES COMPANIES
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ HEALTH SERVICES SIERRA TUCSON
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 84.92 115.90 108.33
1991 136.26 258.16 133.33
1992 158.57 267.44 38.54
1993 182.03 308.57 33.33
1994 177.99 331.77 23.96
</TABLE>
Note: Assumes $100 invested on 12/31/89 in Sierra Tucson, the CRSP total return
index for the Nasdaq Stock Market and the CRSP total return index for Nasdaq
Health Services. Assumes reinvestment of dividends on a daily basis.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to be the beneficial owner of more than five
(5%) percent of the Company's outstanding Common Stock, (ii) each
12
<PAGE> 16
director (and nominee for director) of the Company, and (iii) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OWNERSHIP PERCENT OF CLASS
---- ---------- ----------------
<S> <C> <C>
William T. O'Donnell, Jr.(1) 2,340,279 27.38%
Morgan Stanley Asset Management, Inc.(2) 1,261,500 14.76
BIL (Far East Holdings)Ltd.(3) 842,900 9.86
Peter Cundill & Associates (Bermuda) Ltd.(4) 606,900 7.1
Dimensional Fund Advisors Inc.(5) 454,000 5.3
John H. Schmitz(6) 371,684 4.3
Neil E. Jenkins(7) 99,775 1.17
Ronald E. Robison(8) 48,500 *
Dr. Joseph Cruse(9) 40,500 *
Kenneth W. Whitaker(10) 39,659 *
Bruce W. Martin(11) 8,333 *
All Executive Officers and Directors
as a Group (8 persons)(12) 2,965,528 34.7
</TABLE>
- - ---------------
* Represents less than one (1%) percent of the Company's outstanding voting
stock.
(1) Does not include 78,275 shares held in a trust the trustee of which is Mr.
Jenkins, for the benefit of Mr. O'Donnell's children, and as to which Mr.
O'Donnell disclaims any beneficial interest. Mr. O'Donnell's address is c/o
ODE, LLC, 144 Green Bay Road, Winnetka, Illinois 60093.
(2) As of February 10, 1995, the address of Morgan Stanley Asset Management,
Inc., is 1251 Avenue of Americas, New York, NY 10020. This information is
based upon a Schedule 13D filing with the Securities and Exchange
Commission dated February 10, 1995.
(3) As of December 31, 1993, the address of BIL (Far East Holdings) Ltd. is
2801 Three Exchange Square, Central Hong Kong. This information is based
upon a Schedule 13G filing with the Securities and Exchange Commission
dated January 22, 1993.
(4) As of February 22, 1995, the address of Peter Cundill & Associates
(Bermuda) Ltd. is 15 Alton Hill, South Hampton SN 01 Bermuda. This
information is based upon a Schedule 13D filing with the Securities and
Exchange Commission dated February 22, 1995.
(5) As of January 31, 1995, the address of Dimensional Fund Advisors Inc., is
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. This information is
based upon a Schedule 13G filing with the Securities and Exchange
Commission dated January 31, 1995.
(6) Includes options, which are exercisable within the next sixty (60) days, to
purchase 75,000 shares granted to Mr. Schmitz pursuant to the Company's
1992 Stock Option Plan.
(7) Includes options to purchase 17,500 shares granted to Mr. Jenkins pursuant
to the Company's 1993 Non-Employee Directors Stock Option Plan. Also,
includes 78,275 shares held in a trust, of which Mr. Jenkins is trustee,
for the benefit of Mr. O'Donnell's children.
13
<PAGE> 17
(8) Includes options, which are exercisable within the next sixty (60) days, to
purchase 10,000 shares granted to Mr. Robison pursuant to the Company's
1990 Stock Option Plan, 10,000 shares granted pursuant to the 1992 Stock
Option Plan and 19,000 shares granted pursuant to the Company's 1993
Non-Employee Directors Stock Option Plan.
(9) Includes options, which are exercisable within the next sixty (60) days, to
purchase 10,000 shares granted to Dr. Cruse pursuant to the Company's 1990
Stock Option Plan, 4,000 shares granted pursuant to the 1992 Stock Option
Plan and 17,000 shares granted pursuant to the Company's 1993 Non-Employee
Directors Stock Option Plan.
(10) Includes options, which are exercisable within the next sixty (60) days, to
purchase 38,999 shares granted to Mr. Whitaker pursuant to the Company's
1990 and 1992 Stock Option Plans.
(11) Includes options, which are exercisable within the next sixty (60) days, to
purchase 8,333 shares granted to Mr. Martin pursuant to the Company's 1990
and 1992 Stock Option Plan.
(12) Includes options, which are exercisable within the next (60) days, to
purchase 541,514 shares granted to members of this group pursuant to the
Company's 1990, 1992 and Non-Employee Directors Stock Option Plans.
CERTAIN TRANSACTIONS
Mr. O'Donnell resigned as the Company's Chief Executive Officer effective
as of December 31, 1994. In connection with such resignation and in recognition
of his significant and lengthy service and other valuable contributions to the
Company, the Company entered into a Separation Agreement pursuant to which Mr.
O'Donnell received a termination payment in the amount of $275,000 and on
January 20, 1995 was granted an option to purchase 75,000 shares of the
Company's Common Stock at an exercise price of $2.94 per share. Such options
vest in equal amounts over a four-year period commencing on the first
anniversary of the effective date of the Separation Agreement. As part of the
Separation Agreement Mr. O'Donnell is prohibited from competing with the Company
for a three year period. Mr. O'Donnell continues in his capacity as Chairman of
the Board of Directors of the Company.
In December 1994 the Company engaged in a business transaction with ODE,
LLC, a Limited Liability Company (the "Related LLC") owned by the Chairman of
the Company's Board of Directors, then executive officer and five (5%) percent
stockholder, Mr. O'Donnell. The Company sold to and leased back from the Related
LLC its closed Adolescent Center. Under these agreements, the Company sold its
Adolescent Center to the Related LLC for the appraised and book value of $1
million and simultaneously leased the Adolescent Center back from the Related
LLC for seven years at an annual cost of $140,000 payable in quarterly
installments. The lease agreement grants the Company the option to both
repurchase the Adolescent Center for fair market value after one year and to
renew the lease for an additional ten-year period.
The terms of this transaction are disclosed in the Company's audited
financial statements which are incorporated in its 1994 Annual Report to
Stockholders mailed to all stockholders of record.
In January 1995, the Company acquired Onsite Training and Consulting, Inc.,
("Onsite") from unrelated parties. Onsite offers short-term therapeutic
experiences and workshops that have been combined with the Company's existing
therapeutic workshop program. As part of the acquisition of Onsite, the Company
assumed the remaining term of a Consulting Agreement between Onsite and Sharon
Weg-
14
<PAGE> 18
scheider Cruse, the wife of Joseph R. Cruse, M.D., a director of the Company.
The remaining amount of the Consulting Agreement, which expires in July 1995,
was approximately $30,000. In addition, in January 1995, the Company entered
into an Independent Contractor Agreement with Sharon W. Cruse, Inc.
("Contractor"), a corporation wholly-owned by Ms. Cruse which provides for the
payment of consulting fees to the Contractor in 1995 in the amount of
$100,000.00. The term of the Independent Contractor Agreement is one year
subject to an automatic two year renewal except that either party may terminate
the Independent Contractor Agreement on 60 days written notice to the other.
Consulting fees for subsequent years have not been determined. The Company also
agreed to maintain in effect a royalty agreement between Onsite and the
Contractor for a period of not less than five years pursuant to which the
Contractor is entitled to receive royalty payments, which vary in amount
depending on the volume of sales, but which have historically ranged from
approximately $18,000 to $30,000 per year for the prior three years. The
Contractor is also entitled to incentive compensation based upon increases in
the market price of the Company's common stock on the first, second, and third
anniversaries of the date of execution of the Independent Contractor Agreement.
The Company does not engage in any transactions with its officers,
directors, or five (5%) percent stockholders or their affiliates unless the
transaction is approved by a majority of the disinterested and independent
directors of the Company after full disclosure or is on terms no less favorable
to the Company than would be available from an unaffiliated third party.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has recommended the appointment of Ernst & Young LLP
as the Company's independent auditors for the fiscal year ending December 31,
1995. Ernst & Young LLP has served as the Company's independent auditors since
1988.
Services provided to the Company and its subsidiaries by Ernst & Young LLP
with respect to 1994 included the audit of the Company's consolidated financial
statements and the 401(k) Plan, services related to filings with the Securities
and Exchange Commission, and consultations on various tax, executive
compensation, and information systems matters.
In the event stockholders do not ratify the appointment of Ernst & Young
LLP as the Company's independent auditors for the current fiscal year, such
appointment will be reconsidered by the Audit Committee and the Board of
Directors.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions and to make such statements as they may
desire.
Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal year 1995 will require the affirmative vote of
at least a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting.
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of Ernst & Young LLP is considered to be present and
entitled to vote on such approval at the meeting, and is in effect a negative
vote, but a shareholder (including a broker) who does not give authority to a
proxy to vote, or withholds authority to vote, on the approval of Ernst & Young
LLP shall not be considered present and entitled to vote on such proposal.
15
<PAGE> 19
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN
The Board of Directors has approved an amendment (the "Plan Amendment") to
the Company's 1992 Stock Option Plan (the "1992 Plan") pursuant to which the
number of shares subject to option grants under the 1992 Plan was increased by
750,000 (the "Additional Shares") from 750,000 to 1,500,000. Pursuant to the
provisions of the 1992 Plan, any amendment of the 1992 Plan that increases the
maximum number of shares of the Company's common stock subject to the 1992 Plan
must be submitted to a vote of the stockholders of the Company within twelve
(12) months after the action by the Board of Directors. The Plan Amendment also
contains provisions designed to insure the 1992 Plan's compliance with the
exception under Code Section 162(m) relating to performance-based compensation
and Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934
Act"). Shareholder approval for the provision relating to Rule 16b-3 is not
required. The Plan Amendment was adopted in order to allow the Company to issue
additional options pursuant to the 1992 Plan, thereby furthering the best
interests of the Company and its stockholders by allowing the Company to
continue providing incentive and reward for those employees and directors of the
Company who contribute to its success and earning power. The Plan Amendment will
become effective if it is approved by the holders of at least a majority of the
outstanding shares of common stock. The enclosed form of Proxy provides a means
for stockholders to vote for the approval of the Amendment or to abstain from
voting with regard to the Plan Amendment. Each properly executed Proxy received
in time for the meeting will be voted as specified therein. If a shareholder
executes and returns a Proxy but does not specify otherwise, the shares
represented by such shareholder's Proxy will be counted for approval of the Plan
Amendment. Because the vote required for approval of the Plan Amendment requires
the affirmative vote of a majority of the outstanding shares of common stock,
abstentions and unvoted positions in brokerage accounts with respect to the Plan
Amendment will have the same effect as a vote against such proposal. The
proposed Plan Amendment is attached hereto as Exhibit "A" and included herein by
reference, and the summary of the Plan Amendment is qualified in its entirety by
the full text of the Plan Amendment.
Issuance of options under the 1992 Plan has certain tax consequences for
both the company and individuals who are granted options. Persons receiving
options will not realize taxable income upon the granting of a stock option
pursuant to the 1992 Plan, nor would the Company be entitled to a deduction at
that time. There will be no realization of taxable income by an optionee upon
the exercise of an incentive stock option (if exercised no later than three
months after termination of employment in the case of retirement, and one year
in the case of disability, and to the extent that the aggregate fair market
value of common stock with respect to such incentive stock options, when first
exercised, does not exceed $100,000 during any calendar year). If an optionee
sells or otherwise disposes of common stock received upon exercise of an
incentive stock option after one year from the exercise date and two years from
the date of grant of the incentive stock option, any gain or loss on the sale
will be treated as long-term, and the Company will not be entitled to any
deduction on account of the issuance of common stock or the grant of the
incentive stock option. Upon exercise of a nonqualified stock option, an
optionee will realize compensation income in the amount of the excess of the
fair market value of the common stock on the day of exercise over the stock
option exercise price, and the Company will receive a corresponding deduction.
16
<PAGE> 20
The tax basis of any nonqualified stock option shares of common stock will be
the fair market value of such shares on the date the stock option is exercised.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE 1992 PLAN.
OTHER MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten-percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange commission
and NASDAQ. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
The Company has adopted procedures to assist its officers and directors in
complying with Section 16(a) of the Exchange Act, which includes assisting the
officer or director in preparing forms for filing. Based solely on its review of
the copies of such forms received by the Company, or written representations
from certain reporting persons that no Form 5's were required for those persons,
the Company believes that all filing requirements applicable to its officers,
directors, and greater than ten-percent beneficial owners were complied with for
the 1994 fiscal year, except that, through an oversight, a Form 3, the Initial
Statement of Beneficial Ownership of Securities, for Mr. Neil Jenkins, a
director of the Company, was filed twenty-one days later than required.
OTHER BUSINESS
As of the date of this Proxy Statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than that
which has been referred to above. As to other business, if any, that may come
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the recommendation of the Board
of Directors or if no such recommendation is given in the judgment of the person
or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
1996 Annual Meeting of Stockholders must be received by the Secretary of the
Company, for inclusion in the Company's Proxy and, Notice of Annual Meeting
relating to the 1996 Annual Meeting, by December 28, 1995.
17
<PAGE> 21
AVAILABILITY OF 10-K REPORT
The Company has filed its Form 10-K with the Securities and Exchange
Commission for the year ended December 31, 1994. A copy of the report is
available free of charge to any stockholder. Please contact:
James F. Rianoshek
Investor Relations
SIERRA TUCSON COMPANIES, INC.
16500 N. Lago Del Oro Parkway
Tucson, Arizona 85737
ADDITIONAL INFORMATION
The cost of preparing, assembling, mailing and all other expenses of
soliciting proxies in the enclosed form will be borne by the Company. In
addition, directors, officers and regular employees of the Company may, but
without compensation other than their regular compensation, solicit proxies by
further mailing, personal conversations, or by telephone or facsimile. The
Company has employed Corporate Investor Communications, Inc., a proxy
solicitation firm, to solicit proxies from brokers and banks at a cost of
approximately $3,500 plus reasonable disbursements. The Company will, upon
request, reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of stock.
By order to the Board of Directors
George H. Daranyi, Esq.
Secretary
April 26, 1995
18
<PAGE> 22
FIRST AMENDMENT
TO THE
1992 STOCK OPTION PLAN
OF
SIERRA TUCSON COMPANIES, INC.
1. Background.
Sierra Tucson Companies, Inc. (the "Company") has previously established a
1992 Stock Option Plan (the "Plan") for the purpose of advancing the interests
of the Company by providing officers, directors and key employees of the Company
and its subsidiaries, as well as non-employee independent contractors of the
Company, with additional incentive for them to promote the success of the
Company's business. Section 6(b) of the plan provides that the aggregate number
of shares of the Company's common stock that may be issued upon the exercise of
all options which may be granted under the Plan will not exceed 750,000.
The Company believes that it is in its best interests (a) to increase the
maximum number of shares issuable upon the exercise of all options that may be
granted under the Plan by 750,000 shares to a total of 1,500,000 shares; (b) to
insure that the Plan complies with the provisions of Rule 16b-3 or its
successors as promulgated by the Securities and Exchange Commission pursuant to
Section 16 of the Securities Exchange Act of 1934.
Pursuant to Section 13 of the Plan, the Board of Directors of the Company
has approved the amendments to the Plan set forth herein.
2. Amendment to Section 5 of the Plan.
Section 5 of the Plan is amended to add a new paragraph D to read as
follows:
"D. Limitation on Number of Options
No employee shall be granted, in any twelve (12) month period, options to
purchase in excess of 200,000 shares of the common stock of the Company."
3. Amendment of Section 6 of the Plan.
Section 6(b) of the Plan is hereby amended to increase the aggregate number
of shares of the Company's common stock that may be issued upon the exercise of
all options which may be granted under the Plan by 750,000 shares (the
"Additional Shares") to an aggregate amount of 1,500,000.
4. Rule 16b-3 Compliance.
A new Section 24 is added to the Plan to read as follows:
"24. COMPLIANCE WITH RULE 16B-3
With respect to the issuance of options hereunder to persons subject to
Section 16 of the 1934 Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under the 1934
Act. To the extent any provision of this Plan or action by the Board or Stock
Option Committee in administering this Plan fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Board or the Stock Option Committee."
19
<PAGE> 23
5. Continued Effect of Plan.
Except as otherwise amended hereby, the Plan shall remain in full force and
effect.
6. Effective Date of Amendment.
This Amendment became effective upon its adoption by the Board on February
4, 1995 (the "Effective Date"); provided, however, that the stockholders of the
Company shall approve the amendment to Section 6 of the Plan as provided in
Paragraph 2 above, in accordance with applicable state law, within twelve (12)
months after the initial adoption of this Amendment by the Board.
Notwithstanding the above, no options to acquire any of the Additional Shares
shall be granted to persons subject to Section 16 of the 1934 Act prior to
approval of this Amendment by the shareholders of the Company. In the event that
the amendment to Section 6 of the Plan is not approved within said twelve (12)
month period, all options to purchase the Additional Shares shall nonetheless
remain valid, but shall constitute Non-Qualified Options.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by
its duly authorized officers effective as of the Effective Date.
SIERRA TUCSON COMPANIES, INC.
a Delaware corporation
By: /s/John H. Schmitz
-------------------------------------
Its: President and Chief
Executive Officer
ATTEST:
By: /s/George H. Daranyi
- - ---------------------------------
Secretary
20
<PAGE> 24
- - --------------------------------------------------------------------------------
PROXY
SIERRA TUCSON COMPANIES, INC.
16500 N. LAGO DEL ORO PARKWAY
TUCSON, ARIZONA 85737
The undersigned hereby appoints William T. O'Donnell, Jr. and John H.
Schmitz, and each of them, with power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Sierra Tucson
Companies, Inc. Common Stock which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held at The Westin La
Paloma, 3800 E. Sunrise Drive, Tucson, Arizona on Friday, May 26, 1995
at 9:00 a.m., and at any adjournment of adjournments thereof, hereby
revoking all proxies heretofore given with respect to such stock, upon
the following proposals more fully described in the notice of and proxy
statement for the meeting (receipt whereof is hereby acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3) AND (4)
1. ELECTION OF DIRECTORS
FOR the nominees listed below WITHHOLD AUTHORITY to
--- vote for the nominees listed below
---
NOMINEES: William T. O'Donnell, Jr. John H. Schmitz
(INSTRUCTION: To grant authority to vote for the nominees named above
check the "FOR" line; to withhold authority for both nominees check
"WITHHOLD AUTHORITY" line. To withhold authority for one of the
nominees, strike through such nominee's name.)
<TABLE>
<S> <C> <C> <C> <C>
2. PROPOSAL TO APPROVE THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER
31, 1995 FOR ----- AGAINST ----- ABSTAIN -----
3. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S 1992 STOCK OPTION
PLAN FOR ----- AGAINST ----- ABSTAIN -----
4. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other
matters
as may properly come before the meeting. FOR ----- AGAINST ----- ABSTAIN -----
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER, IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2),
AND (3).
(Please Sign and Date the Other Side)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Dated: , 1995
----------------------- ----------------------------------------------------
P Signature
----------------------------------------------------
Signature if held jointly
R
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
O such. If a corporation, please sign in full
corporate name by president or other authorized
officer. If a partnership, please sign in partner-
ship name by authorized person.
X
__
|
Y
[PLEASE RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE. I WILL WILL NOT ATTEND THE MEETING.]
--- ---
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 25
APPENDIX A
Description of Company Graphic logo
Location: Top of Stockholder letter (outside front cover), top of Notice
page and top of Proxy statement page 1.
Item: Company Logo
Description: A registered logo that represents a square which is made up
of shapes that resemble leaves. The top and bottom rows of
the logo consist of only 4 of these leaves, while rows 2-5
consist of 6 leaves. The registered trademark appears in the
lower right hand corner of the logo.
