<PAGE> 1
SCHEDULE 14A
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 [ ]
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e)(2)
Lifemark Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy 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 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.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
LIFEMARK CORPORATION
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
SEPTEMBER 11, 2000
You are cordially invited to attend the Annual Meeting of Stockholders
of Lifemark Corporation (the "Company" or "Lifemark"), which will be held at the
Lifemark corporate offices located at 7600 North 16th Street, Suite 150,
Phoenix, Arizona on Monday, September 11, 2000, at 8:00 a.m., Mountain Time, for
the following purposes:
1. To elect directors;
2. To consider and vote upon a proposal to approve the Lifemark
Corporation 2000 Non-Employee Director Stock Plan;
3. To consider and vote upon a proposal to approve the Lifemark
Corporation 1999 Executive Stock Option and Ownership Plan;
4. To consider and vote upon a proposal to amend the Lifemark Corporation
Employee Stock Purchase Plan; and
5. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on August 18, 2000
are entitled to vote at the Annual Meeting or any adjournment thereof.
A Proxy Statement and a proxy card solicited by the Board of Directors
are enclosed herewith. The Proxy Statement should be read carefully. It is
important that your shares be represented at the Annual Meeting regardless of
the size of your holdings. Whether or not you intend to be present at the
meeting in person, we urge you to please mark, date and sign the enclosed proxy
card and return it in the envelope provided for that purpose, which does not
require postage if mailed in the United States. If you attend the meeting, you
may, if you wish, withdraw your proxy and vote in person.
Stephen G. Smyth
Secretary
Phoenix, Arizona
August 21, 2000
<PAGE> 3
LIFEMARK CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 11, 2000
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Lifemark Corporation (the "Company" or "Lifemark"),
of proxies for use at the Annual Meeting of Stockholders of the Company to be
held at the Lifemark corporate offices located at 7600 North 16th Street, Suite
150, Phoenix, Arizona on Monday, September 11, 2000, at 8:00 a.m., Mountain
Time, and at any adjournment thereof.
Proxies properly executed and returned in a timely manner will be voted
at the Annual Meeting in accordance with the directions specified therein. If no
direction is indicated, they will be voted for the election of the nominees
named herein as directors, for approval of the Lifemark Corporation 2000
Non-Employee Director Stock Plan, for approval of the Lifemark Corporation 1999
Executive Stock Option and Ownership Plan, for approval of the amendment to the
Lifemark Corporation Employee Stock Purchase Plan, and on other matters properly
presented for a vote at the Annual Meeting, in accordance with the judgment of
the persons acting under the proxies. Any stockholder giving a proxy has the
power to revoke it any time before it is voted, either in person at the meeting,
by written notice to the Secretary of the Company, or by delivery of a
later-dated proxy.
The Company's executive offices are located at 7600 North 16th Street,
Suite 150, Phoenix, Arizona 85020 and its telephone number is 602-331-5100.
Proxy materials are being mailed to stockholders beginning on or about August
21, 2000.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on August 18,
2000, are entitled to vote at the Annual Meeting. The only voting stock of the
Company outstanding is its Common Stock, of which 5,156,444 shares were
outstanding at the close of business on August 18, 2000. Each share of Common
Stock issued and outstanding is entitled to one vote. The six nominees for
director receiving the most votes will be elected as directors; abstentions and
broker non-votes will have no effect on the election of directors. Approval of
each of the 2000 Non-Employee Director Stock Plan, the 1999 Executive Stock
Option and Ownership Plan and the amendment to the Employee Stock Purchase Plan
requires the vote of a majority of the shares represented and entitled to vote
at the Annual Meeting; abstentions will have the effect of a vote against
approval of each plan, while broker non-votes will have no effect on approval.
Votes will be tabulated, using an automated scanner, by the inspectors of
election appointed by the Company.
<PAGE> 4
COMMON STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth, as of June 30, 2000, certain
information regarding the beneficial ownership of Common Stock by each of the
Company's directors, executive officers named in the "Summary Compensation
Table", by all directors and executive officers of the Company as a group, and
by each person known by the Company to be the beneficial owner of 5 percent or
more of the outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME(1) BENEFICIALLY OWNED COMMON STOCK
------- ------------------ ------------
<S> <C> <C>
Rhonda E. Brede...................................... 208,345(2) 4.0%
William G. Brown..................................... 247,932(2)(3) 4.7
Richard C. Jelinek................................... 826,270(2)(3)(4) 15.7
Henry H. Kaldenbaugh................................. 514,954(2) 10.0
Risa Lavizzo-Mourey.................................. 57,965(2) 1.1
John G. Lingenfelter................................. 433,159(2) 8.4
Michael J. Kennedy................................... 174,997(2) 3.3
David G. Decker...................................... 46,627(2) *
Richard M. Jelinek(5)................................ 236,148(2) 4.4
Michael D. Hernandez(6).............................. - -
Hollybank Investments, LP............................ 607,947(7) 11.8
All directors and executive officers
as a group (10 persons)............................ 2,588,475(2)(3)(4) 45.4
</TABLE>
* Represents less than 1% of Common Stock beneficially owned.
(1) The address of all of the persons named or identified above, except Michael
D. Hernandez and Hollybank Investments, LP is c/o Lifemark Corporation,
7600 North 16th Street, Suite 150, Phoenix, Arizona 85020.
(2) Includes 82,500, 46,250, 7,500, 7,500, 28,750, 7,500, 87,000, 16,250,
168,823, and 452,073 shares covered by options held by Ms. Brede, Mr.
Brown, Richard C. Jelinek, Dr. Kaldenbaugh, Dr. Lavizzo-Mourey, Dr.
Lingenfelter, Mr. Kennedy, Mr. Decker, Richard M. Jelinek, and all
directors and executive officers as a group, respectively, which were
exercisable within sixty days of June 30, 2000. These amounts also include
90,000, 60,000, 60,000 and 25,000 shares of stock pledged by Ms. Brede, Mr.
Kennedy, Richard M. Jelinek and Mr. Decker, respectively, to the Company as
security for payment pursuant to loans made by the Company in connection
with the acquisition of such shares pursuant to the exercise of stock
options. These amounts do not include 60,000, 15,000, 15,000, 15,000,
15,000, 40,000, 25,000 and 40,000 shares covered by option and/or
restricted stock awards granted to Ms. Brede, Mr. Brown, Richard C.
Jelinek, Dr. Kaldenbaugh, Dr. Lavizzo-Mourey, Mr. Kennedy, Mr. Decker and
Richard M. Jelinek, respectively, under the 1999 Executive Stock Option
Plan and the 2000 Non-Employee Director Stock Plan that are conditioned
upon stockholder approval of such plans at the Annual Meeting. In the event
both plans are approved at the Annual Meeting, the granted options under
the 1999 Executive Stock Option Plan will be immediately exercisable and
25% of the total number of shares subject to the options granted under the
2000 Non-Employee Director Stock Plan will be exercisable 12 months after
the date of the grant and with respect to an additional 25% at the end of
each 12-month period thereafter during the succeeding three years. The
restricted stock awards granted under the 2000 Non-Employee Director Stock
Plan may not be sold, pledged, assigned, transferred, gifted, or otherwise
alienated or hypothecated until the earlier of (a) five years from the date
of the award or (b) termination of the participant's service as a director
by reason of death, disability or retirement from the Board.
(3) Includes 77,922 shares which may be acquired upon conversion of $300,000 in
principal amount of a Convertible Note of the Company and 10,000 shares
covered by a currently exercisable stock purchase warrant. Each of the
Convertible Note, the Stock Purchase Warrant and an additional 70,000
shares are held by a trust created by Mr. Brown for the benefit of members
of his family, of which Mr. Jelinek is one of the co-trustees.
(4) Includes 25,333 shares owned by Mr. Jelinek's wife.
(5) Richard M. Jelinek is the son of Richard C. Jelinek.
(6) The address of Michael D. Hernandez is 770 Park Avenue,
New York, New York 10021.
2
<PAGE> 5
(7) Represents shares as of January 1, 2000, as reported on Schedule 13G.
Except to the extent of his interest as a limited partner Hollybank
Investments, LP, Dorsey R. Gardner, the general partner of Hollybank
Investments, LP, disclaims beneficial ownership with respect to all of the
shares for all purposes other than for reporting purposes on Schedule 13G.
The address of Hollybank Investments, LP is One Financial Center, Suite
1600, Boston, Massachusetts, 02111.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and 10% stockholders to file reports of
ownership with the Securities and Exchange Commission. Such persons also are
required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of such forms received by it and
inquiries of such persons, the Company believes that all such filing
requirements applicable to its executive officers, directors and 10%
stockholders were complied with, except Richard C. Jelinek who filed one report
as to one transaction for one account late and Dr. Lingenfelter who filed three
reports as to five transactions for one account late.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting. The persons
named below have been designated by the Board of Directors as nominees for
election as directors, for terms expiring at the next Annual Meeting of
Stockholders. All nominees are currently serving as directors.
Unless authority is withheld, signed proxies which are returned in a
timely manner will be voted for the election of the six nominees for director,
provided that if any of such nominees should be unable to serve by virtue of an
unexpected occurrence, the proxies will be voted for such other person or
persons as will be determined by the holders of the proxies in their discretion.
Nominees receiving a plurality of the votes of the shares present or represented
by proxy at the Annual Meeting and entitled to vote will be elected as
directors.
Biographical information concerning the six nominees is presented
below.
Rhonda E. Brede, age 43, has been President, Chief Operating Officer
and a director of the Company since July 1999 and Chief Executive Officer of the
Company since October 1999. Previously, she was Lifemark's Senior Vice President
of Health Plan Administration and Implementation with responsibility for all of
the Company's owned and managed health plan operations. She also has been the
Chief Executive Officer of Ventana Health Systems, Inc. ("Ventana") and Arizona
Health Concepts, Inc. ("AHC") since 1998 and Senior Vice President of the
Company since 1996. During the period 1993 to 1996, she was Executive Director
for Ventana. Ms. Brede has been involved in management and operations of
Ventana, a prepaid, fully capitated Long-Term Care ("LTC") health plan since its
inception in 1989. She has 14 years of experience in managed health care,
including commercial, Medicaid Acute Care and LTC environments.
Richard C. Jelinek, age 63, Chairman of the Board of the Company since
July 1999 and from March 1996 until January 1998, was co-founder of a
predecessor of Medicus Systems Corporation in 1969 and served as Chief Executive
Officer and Director of that corporation (the "Predecessor Corporation") from
its incorporation in December 1984 until February 1996 and of the Company since
March 1996. From 1983 to 1985 he was also Chairman of the Board and Chief
Executive Officer of Mediflex Systems Corporation. Prior to 1969, Mr. Jelinek
was Associate Professor of Industrial Engineering and Hospital Administration
and Director, Systems Engineering Group, Bureau of Hospital Administration at
The University of Michigan. He has a Ph.D. in Industrial Engineering from The
University of Michigan.
William G. Brown, age 57, is a member of Bell, Boyd & Lloyd LLC,
Chicago, Illinois, counsel to the Company, and has been a director of the
Predecessor Corporation since its incorporation in 1984 and of the Company since
March 1996. Mr. Brown also served as Secretary of the Predecessor Corporation
since its incorporation and of the Company from March 1996 until October 1998.
Mr. Brown is also a director of Dovenmuehle Mortgage, Inc. and CFC
International, Inc.
3
<PAGE> 6
Risa Lavizzo-Mourey, M.D., age 46, is the Sylvan Eisman Professor of
Medicine and Health Care Systems at the University of Pennsylvania. Dr.
Lavizzo-Mourey earned her medical degree at Harvard Medical School followed by a
Masters of Business Administration at the University of Pennsylvania's Wharton
School of Business. Dr. Lavizzo-Mourey has served on numerous Federal advisory
committees and, most recently, on President Clinton's Commission for Consumer
Protection and Quality in the Health Care Industry. She is a member of the
Institute of Medicine of the National Academy of Science. Dr. Lavizzo-Mourey
joined the Predecessor Corporation Board in April 1994 and has served as a
director of the Company since March 1996. She is also a director of Beverly
Enterprises and The Hangar Orthopedics Inc.
Henry H. Kaldenbaugh, M.D., age 55, is a founder of two subsidiaries of
the Company, Ventana and AHC, as well as Managed Care Solutions of Arizona, Inc.
("MCSAZ"), which was dissolved June 1997, and has been a director of the Company
since March 1996. He has been an officer and board member of Ventana and AHC
since their inception and of MCSAZ from 1993 to 1997. He has had a family
medicine and pediatric practice in northern Arizona since 1977. Dr. Kaldenbaugh
is board certified in Pediatrics and Quality Assurance and Utilization and
Review. Dr. Kaldenbaugh served as medical director of AHC from 1992 through 1997
and has been an officer or director of AHC, Ventana and MCSAZ (until its
dissolution) since their inception. He served as Administrative Medical Director
for Health Management Associates, Inc. from 1990 through 1991, for Northern
Arizona Family Health Plan from 1988 through 1991, and for the Arbors Nursing
Facility from 1984 through 1987. Dr. Kaldenbaugh is a member of the Board of
Directors of Health Services Advisory Group, the Arizona Medicare Professional
Review Organization (PRO). Dr. Kaldenbaugh received his medical degree from
Baylor University.
John G. Lingenfelter, M.D., age 72, is the Vice Chairman of the Company
and a founder of AHC, Ventana and MCSAZ. He has been a director of the Company
since March 1996, and has been an officer and board member of Ventana and AHC
since their inception and of MCSAZ from 1993 to 1997. Dr. Lingenfelter has
engaged in the general practice of medicine in Kingman, Arizona since 1961. He
served as Mohave County, Arizona Health Director from 1966 through 1982 and
Medical Director of the Kingman Health Care Center from 1985 to 1995. He has
served as Mohave County Hospital District Board Trustee since 1988. He was a
member of the Mohave County board of education and past President of the Mohave
County Union High School District from 1979 to 1986. He has been a director
since 1980 of The Stockmen's Bank, Kingman, Arizona. Dr. Lingenfelter received
his medical degree from the University of Iowa.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended May 31, 2000, the Board of Directors held
eight meetings. No director attended fewer than three-fourths of the aggregate
number of meetings of the Board and of the committees described below on which
he or she served during the past fiscal year. The Board has designated an Audit
Committee, whose functions include the responsibilities and duties described in
the Company's Audit Committee Charter included as Appendix A and is responsible
for recommending annually to the Board of Directors a firm of independent public
accountants; reviewing the overall scope of audits and the annual financial
statements of the Company and reporting to the full Board on the Committee's
conclusions; and making inquiries of the independent accountants and the
Company's financial officers and reporting to the full Board concerning
accounting methods, policies and financial and operating controls. The Board has
also designated a Compensation Committee, whose functions include making
recommendations to the Board regarding the salaries and bonuses to be paid, and
a Stock Option Committee, whose functions include granting options under, and
administering, the Company's stock option plans. Mr. Brown, Richard C. Jelinek
and Dr. Lavizzo-Mourey are currently the members of the Audit Committee; Richard
C. Jelinek, Mr. Brown and Dr. Lavizzo-Mourey are currently the members of the
Compensation Committee; and Richard C. Jelinek and Dr. Lavizzo-Mourey are
currently the members of the Stock Option Committee. During the fiscal year
ended May 31, 2000, the Audit Committee met two times, the Compensation
Committee met three times and the Stock Option Committee met two times.
4
<PAGE> 7
COMPENSATION
Set forth below is information concerning the executive officers of the
Company as of May 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION (1) YEAR ($) ($) ($) (2) (#)(3) ($)(4)
------------------- ------- -------- ------- ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Rhonda E. Brede 2000 200,000 89,600 14,252 250,000 -
Chairman and 1999 178,242 45,000 11,339 25,000 -
Chief Executive Officer 1998 125,889 30,000 5,644 55,000 -
Michael D. Hernandez (5) 2000 25,000 16,110 - - 207,072
Former Chairman and 1999 200,000 50,000 - - -
Chief Executive Officer 1998 78,030 25,000 - 400,000 -
Michael J. Kennedy 2000 160,000 53,760 7,864 100,000 -
Chief Financial Officer 1999 143,125 47,125 4,832 - -
and Treasurer 1998 136,000 32,500 2,813 - -
Richard M. Jelinek 2000 150,000 50,400 6,954 100,000 -
Executive Vice President 1999 140,686 35,000 4,019 - -
1998 118,044 22,000 2,214 - -
David G. Decker 2000 140,000 47,040 5,676 90,000 -
Chief Information Officer 1999 133,750 31,500 3,807 - -
1998 111,333 21,000 871 5,000 -
</TABLE>
(1) Includes each person who served as the Chief Executive Officer during
the most recent fiscal year and the other most highly compensated
executive officers as measured by salary and bonus meeting the
disclosure threshold requirements pursuant to Item 402 of S.E.C.
Regulation S-K.
(2) The amount shown for Ms. Brede for fiscal years 2000, 1999 and 1998
includes $6,000, $7,750 and $4,250, respectively, for an automobile
allowance. The amount shown for Mr. Kennedy for fiscal years 2000, 1999
and 1998 includes officer's disability insurance of $598 each year. The
Company has a contributory retirement savings plan, which covers
eligible employees who qualify as to age and length of service.
Participants may contribute 1% to 15% of their salaries, subject to
maximum contribution limitations imposed by the Internal Revenue
Service. The amount shown for Ms. Brede for fiscal years 2000, 1999 and
1998 includes Company contributions to her account in the amount of
$4,844, $3,589 and $1,394, respectively. The amount shown for Mr.
Kennedy for fiscal years 2000, 1999 and 1998 includes Company
contributions to his account in the amount of $4,994, $4,234 and
$2,215, respectively. The amount shown for Mr. Jelinek for fiscal years
2000, 1999 and 1998 includes Company contributions to his account in
the amount of $4,682, $4,019 and $2,214, respectively. The amount shown
for Mr. Decker for fiscal years 2000, 1999 and 1998 includes Company
contributions to his account in the amount of $4,729, $3,807 and $871,
respectively. The amount shown for fiscal year 2000 for each of Ms.
Brede, Mr. Kennedy, Mr. Jelinek and Mr. Decker includes an additional
bonus each received, in addition to her or his regular bonus, equal to
the amount of interest due on loans from the Company in the amount of
$3,408, $2,272, $2,272 and $947, respectively.
(3) The grants of 60,000 options to Ms. Brede, 40,000 options to each of
Mr. Kennedy and Mr. Jelinek and 25,000 options to Mr. Decker are
contingent, and become immediately exercisable, upon approval at the
Annual Meeting of the 1999 Executive Stock Option and Ownership Plan.
(4) Mr. Hernandez was relieved of his duties as Chairman and Chief
Executive Officer of the Company on July 15, 1999. Such amount paid in
fiscal year 2000 represents severance paid to Mr. Hernandez.
5
<PAGE> 8
(5) Pursuant to his employment contract, 200,000 options were cancelled on
July 15, 1999 and 200,000 of his options expired on December 12, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
options granted under the Company's Executive Stock Option Plan during fiscal
year 2000 to each named executive officer.
OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
# OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ------------------------
NAME GRANTED (1) IN FISCAL YEAR SHARE ($) DATE 5%($) 10% ($)
------------------ ------------- -------------- ----------- ---------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rhonda E. Brede 100,000 17.24 3.250 August 10, 2009 204,391 517,966
Rhonda E. Brede 150,000 25.86 2.938 October 14, 2009 277,154 702,362
Michael J. Kennedy 100,000 17.24 2.938 October 14, 2009 184,769 468,242
Richard M. Jelinek 100,000 17.24 2.938 October 14, 2009 184,769 468,242
David G. Decker 40,000 6.90 3.500 July 21, 2009 88,045 223,124
David G. Decker 50,000 8.62 2.938 October 14, 2009 92,385 234,121
</TABLE>
(1) All options were granted at fair market value on the grant date. Of the
amount shown, 90,000, 60,000, 60,000 and 25,000 of the options granted
on October 14, 1999 to Ms. Brede and Messrs. Kennedy, Jelinek and
Decker, respectively, were exercisable as of that date, and 60,000,
40,000, 40,000 and 25,000 of the options granted to Ms. Brede and
Messrs. Kennedy, Jelinek and Decker, respectively, are contingent, and
become immediately exercisable, upon approval at the Annual Meeting of
the 1999 Executive Stock Option and Ownership Plan.
(2) These amounts represent hypothetical gains that could be achieved for
options if they are exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the options are granted to the
end of the option term. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Company's common stock
and the optionee's continued employment through the vesting period.
There can be no assurance that the amounts reflected in this table will
be achieved.
OPTION / SAR EXERCISES AND YEAR-END VALUATION
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARs AT FY-END SARs AT FY-END
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
ON EXERCISE (1) REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
------------------ -------------- ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Rhonda E. Brede 90,000 - 45,000 215,000 90,825 514,625
Michael D. Hernandez - - - - - -
Michael J. Kennedy 60,000 - 87,000 40,000 222,720 114,800
Richard M. Jelinek 60,000 - 168,823 40,000 451,936 114,800
David G. Decker 25,000 - 6,250 68,750 16,938 174,688
</TABLE>
(1) Number of securities underlying options/SAR exercised.
(2) Market value of underlying securities on date of exercise, minus the
exercise or base price.
6
<PAGE> 9
DIRECTOR COMPENSATION
During the fiscal year ended May 31, 2000, all directors of the Company
were paid an annual retainer of $10,000. Commencing June 1, 2000, all directors
of the Company will be paid $1,000 per Board meeting attended. In addition,
under the Company's 1995 Directors' Stock Option Plan, an option to purchase
20,000 shares of Common Stock is granted to each director of the Company who is
not an officer, employee or greater than five percent stockholder of the Company
at the time of such director's initial election to the Board. Under the
Company's 1996 Non-Employee Director Stock Option Plan, each non-employee
director of the Company receives, on the date of each annual meeting of
stockholders, an option to purchase 5,000 shares of Common Stock. Options under
each of the 1995 Directors' Stock Option Plan and the 1996 Non-Employee Director
Stock Option Plan are for a term of ten years, become exercisable with respect
to 25% of the shares covered thereby on each of the first four anniversaries of
the date of grant and have an exercise price equal to the fair market value on
the date of grant.
The Company's Board of Directors has adopted, subject to stockholder
approval, the Lifemark Corporation 2000 Non-Employee Director Stock Plan,
pursuant to which each non-employee director of the Company will receive, on
June 1 of each year (including June 1, 2000), 5,000 shares of restricted stock
and an option to purchase 10,000 shares of Common Stock. The grant of restricted
stock and options to the Company's non-employee directors on June 1, 2000 is
contingent upon stockholder approval of the 2000 Non-Employee Director Stock
Plan. If approved by stockholders at the Annual Meeting, the 2000 Non-Employee
Director Stock Plan will supersede the 1995 Directors' Stock Option Plan and the
1996 Non-Employee Director Stock Option Plan. See "Proposal to Approve the 2000
Non-Employee Director Stock Plan" for a description of the Lifemark Corporation
2000 Non-Employee Director Stock Plan.
EMPLOYMENT AGREEMENTS
The Company was a party to an employment agreement with Michael D.
Hernandez providing for his employment as Chairman and Chief Executive Officer
of the Company. Mr. Hernandez was relieved of his duties as Chairman and Chief
Executive Officer of the Company and each of its subsidiaries on July 15, 1999.
The agreement, which was entered into on January 1998 and had an initial term of
four years, provided that during Mr. Hernandez's employment, he was to receive
an annual salary of not less than $200,000, was eligible to participate in the
Company's bonus plan with a targeted bonus of 25% of his base salary in
accordance with the Company's customary practices and formulae, and was to
devote not less than 75% of his full time to the business and affairs of the
Company. Upon execution of this employment agreement, Mr. Hernandez received a
signing bonus of $25,000. Mr. Hernandez also received options to purchase
400,000 shares of the Company's Common Stock, subject to vesting in four equal
increments of 25% on January 12, 1999, 2000, 2001 and 2002. Pursuant to his
agreement, 200,000 options were cancelled on July 15, 1999 and the other 200,000
options expired on December 12, 1999.
The Company has entered into an employment agreement with Rhonda E.
Brede providing for her employment as President and Chief Executive Officer of
the Company. The agreement, which was entered into in October 1999 and amended
in August 2000, provides that during Ms. Brede's employment, she is to receive
an annual salary of not less than $200,000, and is eligible to participate in
the Company's bonus plan with a targeted bonus of 40% of her base salary in
accordance with the Company's customary practices and formulae. Upon execution
of her employment agreement, Ms. Brede received options to purchase 150,000
shares of the Company's Common Stock, 90,000 of which vested and were exercised
immediately and for which Ms. Brede delivered to the Company a promissory note
on the terms described below. The remaining 60,000 shares will vest upon
stockholder approval of the 1999 Executive Stock Option and Ownership Plan. The
Company has agreed that if Ms. Brede's employment is terminated by the Company
other than for just cause or, in the event of a change in control of the
Company, the Company, without her consent, reduces her base salary or targeted
bonus opportunity, materially changes her duties or responsibilities, or changes
the location of her principle place of work, and as a result of such change or
changes she voluntarily terminates her employment, then, in either event, all of
Ms. Brede's outstanding options will vest and become exercisable on the date of
termination of her employment, and she shall be entitled to receive severance
pay equal to 18-months' base salary, as well as a pro rated portion of all
bonuses.
The agreement provides that the options received by Ms. Brede upon
execution of her employment agreement may be exercised upon delivery by her of a
nine-year promissory note (secured by the Common Stock
7
<PAGE> 10
acquired upon exercise). The agreement also provided that Ms. Brede would
receive, in addition to her regular bonus, an additional bonus on January 1 of
each year equal to the amount of interest due on any such loans from the
Company. Such loans become due 180 days after termination of employment by the
Company, 60 days after termination of employment by Ms. Brede, or immediately if
Ms. Brede is terminated for just cause or breaches her non-disclosure agreement
with the Company.
In addition, the Company is party to agreements entered into in October
1999 and amended in August 2000 with Mr. Kennedy, Mr. Decker and Richard M.
Jelinek. Pursuant to such agreements, Mr. Kennedy, Mr. Decker and Richard M.
Jelinek received options to purchase 100,000, 50,000 and 100,000 shares,
respectively, 60,000, 25,000 and 60,000 of which, respectively, were vested and
exercised immediately and for which each of Mr. Kennedy, Mr. Decker and Richard
M. Jelinek delivered to the Company a promissory note on the terms described
below. The remaining options vest upon stockholder approval of the 1999
Executive Stock Option and Ownership Plan. The agreements with these executives
provide for the exercise of these options upon delivery by them of promissory
notes on the same terms as those described above for Ms. Brede (including the
provision for an additional bonus equal to the amount of interest due on the
note on each January 1).
The agreements with Mr. Kennedy, Mr. Decker and Mr. Jelinek also
provide that, in the event of a change in control of the Company, for a period
of two years following the change in control, if the executive's employment is
terminated without just cause by the Company, or the Company, without the
executive's consent, materially changes his or her duties or responsibilities or
the location of his or her principal place of work and as a result of such
change the executive voluntarily terminates his or her employment, then in
either such event all of the executive's outstanding options will immediately
vest, and he or she will become entitled to severance payments equal to his or
her base salary for a period of 12 months (six months for Mr. Decker), payable
monthly, plus a pro rated portion of all bonuses.
For purposes of the agreements with Ms. Brede, Mr. Kennedy, Mr. Decker
and Mr. Jelinek, "Change in Control" is defined to mean the occurrence of any of
the following events:
(i) The acquisition, by new stockholders (as defined in the agreements)
acting in concert, of a beneficial ownership interest in the Company, resulting
in the total beneficial ownership of such persons or group of persons equaling
or exceeding 50% of the outstanding common stock and warrants of the Company; or
(ii) A merger, consolidation or other reorganization having
substantially the same effect, or the sale of all or substantially all the
consolidated assets of the Company in each case, with respect to which the
persons or group of persons who were the respective beneficial owners of the
outstanding common stock immediately prior to such event do not, following such
event, beneficially own, directly or indirectly, more than 50% of the then
outstanding voting stock of the corporation resulting from such event or the
corporation purchasing or receiving assets pursuant to such event.
In addition, for purposes of the agreements with Ms. Brede, Mr.
Kennedy, Mr. Decker and Mr. Jelinek, termination by Lifemark "for just cause"
shall mean a termination on account of gross negligence, dishonesty, or any
willful material violation of any reasonable rule or regulation of Lifemark of
which the executive has been advised in writing.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation and Stock
Option Committee Report" and "Performance Graph" will not be deemed to be filed
or to be proxy soliciting material or incorporated by reference in any prior or
future filings by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
8
<PAGE> 11
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Company's compensation policies applicable to its executive
officers are administered by the Compensation Committee and, with respect to
stock options, the Stock Option Committee of the Board of Directors.
Compensation Philosophy
The Company's compensation programs are designed to link executives'
compensation to the performance of the Company and provide competitive
compensation for Company executives relative to the marketplace in order to
attract and retain high caliber senior executives essential to the long-term
prosperity of the Company. The compensation mix reflects a balance of annual
base salary, bonus and equity-based incentives. Emphasis, however, is placed on
the more strategic equity-based plans intended to build shareholder value and
provide incentives to motivate executive behavior over the long term.
Compensation Program
Executive officer compensation consists of two key elements: (1) an
annual cash component comprised of base salary and bonus and (2) a long-term
equity component with respect to which existing holdings of Common Stock are
recognized and in appropriate cases stock options are granted. The policies with
respect to each of these elements are described below.
(1) Annual Compensation
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing it with other executive officer
positions in the Company and the marketplace. For this purpose, the "market"
consists of a broad range of companies with which the Company feels it competes
for executive talent. This group is different than the peer group used for
comparison purposes in the stock price performance graph that appears elsewhere
in this Proxy Statement because the Company believes the market for executive
talent extends to a broader range of companies than those included in the stock
price performance graph.
Annual salary adjustments are determined by a review of market
research, Company performance (measured by earnings per share growth), the
individual's contribution to that performance, and for executive officers
responsible for particular business units, the financial and operating results
of their business units. No specific weights are assigned to these factors.
Annual bonuses for executive officers in fiscal 2000 were awarded in
accordance with the Company Performance Incentive program, a bonus incentive
program based on the Company meeting or exceeding its targeted earnings
objective, and are defined as a percentage of each executive's salary. The
Company Performance Incentive program is designed to link compensation to the
performance of the Company. Under this program, the Company must produce a
minimum target return to shareholders before Company performance awards are
generated. At the minimum target level, 40% of the Company Performance award is
given. Additional Company Performance awards are payable should the Company
achieve specified percentages, up to 150%, of the target performance level. For
fiscal 2000, 112% of the target performance level was achieved, and therefore
112% of Company Performance Incentive bonuses were awarded.
(2) Long-Term Compensation
To align shareholders' and executive officers' interests, the Company's
long-term compensation plan uses stock option grants whose value is related to
the value of Common Stock. Grants of stock options are made under the Company's
1995 and 1996 Stock Option Plans and Executive Stock Option Plan and the 1999
Executive Stock Option and Ownership Plan. Options granted under the 1999 Plan
are contingent upon stockholder approval of that Plan. In granting options, the
Board takes into account existing holdings and options already held by each
executive. The size of each option grant is determined by the individual's
position within the Company, the individual's level of responsibility and the
number of options currently held by the individual.
9
<PAGE> 12
Stock options are granted with an exercise price equal to the fair
market value of the Common Stock on the date of grant. Stock options generally
vest in four annual increments and are exercisable up to ten years from the date
granted. Stock options provide incentive for the creation of shareholder value
over the long term since the full benefit of the compensation package cannot be
realized unless an appreciation occurs in the price of Common Stock over a
specified number of years.
CEO Compensation
Mr. Hernandez was compensated pursuant to his employment agreement
(described above under "Employment Agreements") through the date his employment
terminated. In determining the level of compensation, Mr. Hernandez's experience
in the health care industry was considered.
In determining Ms. Brede's compensation, the Committee took into
account her prior compensation history with the Company, her extensive
experience with the Company and in the managed health care industry,
compensation paid by the Company to its previous chief executive officers, and a
comparison with chief executive officer compensation at those companies with
which the Company feels it competes for executive talent.
Policy with Regard to the $1 Million Deduction Limit
In 1993, Section 162(m) was added to the Internal Revenue Code. This
Section generally limits to $1 million the tax deduction for compensation paid
to executive officers of a publicly-held corporation who are named in the proxy
statement, subject to an exception for "performance-based" compensation plans as
defined under that Section. Each of the Company's 1995 and 1996 Stock Option
Plans, as amended, and 1999 Executive Stock Option Plan are intended to qualify
as a "performance-based plan". The Compensation and Stock Option Committee has
determined that the other compensation currently paid to the Company's executive
officers is not expected to exceed the limitation as set forth in Section
162(m).
The foregoing report has been approved by all members of the
Compensation and Stock Option Committees.
Richard C. Jelinek
William G. Brown
Risa Lavizzo-Mourey
10
<PAGE> 13
PERFORMANCE GRAPH
The Company as it presently exists is the result of a spin-off and
subsequent merger transactions which occurred on March 1, 1996. Prior to March
1, 1996 the Company was named Medicus Systems Corporation (the "Predecessor
Corporation"). On March 1, 1996, all of the assets of the Predecessor
Corporation, other than those related to its managed care business, were
transferred to a wholly owned subsidiary of the Predecessor Corporation, and all
of the shares of that company, then named Medicus Systems Corporation
("Medicus"), were distributed (the "Distribution") on a share-for-share basis to
stockholders of the Predecessor Corporation. Immediately after the Distribution,
the Company, which then consisted only of the managed care business of the
Predecessor Corporation, effected a one-for-three reverse stock split. Also on
March 1, 1996, immediately after the reverse stock split, the Company acquired
three Arizona corporations engaged in the managed care business through merger
transactions (the "Mergers") pursuant to which each of the Arizona corporations
became a wholly owned subsidiary of the Company, and the Company's name was
changed to Managed Care Solutions, Inc. On July 12, 1999, the Company changed
its name to Lifemark Corporation.
The following graph compares the cumulative total shareholder return on
Common Stock since March 1, 1996 (the effective date of the Mergers and the date
on which the Common Stock began trading under the symbol MCSX) to that of the
Nasdaq market index and Nasdaq Health Services index. The Company stock symbol
was changed to LMRK effective with the adoption of the Company's new name,
Lifemark Corporation.
[Performance Graph]
<TABLE>
<CAPTION>
May 31,
-------------------------------------------------------
March 1, 1996 1996 1997 1998 1999 2000
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Lifemark Corporation 100 91 45 109 58 85
NASDAQ U.S. 100 114 128 162 229 315
NASDAQ Health Services 100 113 94 96 83 66
</TABLE>
11
<PAGE> 14
The following graph compares the cumulative total shareholder return on
Predecessor Corporation (then known as Medicus Systems Corporation) Common Stock
from June 1, 1995 to February 29, 1996 (the last trading day prior to the
effective date of the Mergers) to that of the Nasdaq market index and an index
comprised of the Common Stock of 13 peer companies that compete in the
healthcare information systems industry. In calculating cumulative total
shareholder return, reinvestment of dividends is assumed, and the returns of
each member of the peer group are weighted for market capitalization.
[Performance Graph]
<TABLE>
<CAPTION>
June 1, 1995 February 29, 1996
------------ -----------------
<S> <C> <C>
Medicus 100 92
NASDAQ U.S. 100 128
Peer Group 100 128
</TABLE>
The peer group of companies was selected based upon their being in the
business of healthcare information systems and related services. The companies
in the peer group, which for performance graph purposes, does not include the
Predecessor Corporation, are as follows: Access Health Marketing, First Data
Corporation, GMIS, Inc., Health Management Systems, Health Risk Management,
Keane, Inc., Medaphis Corporation, Medic Computer Systems, Mediware Information
Systems, Policy Management Systems, Shared Medical Systems, Scapulas Medical,
Inc. and US Services, Inc.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jelinek, Mr. Brown and Dr. Lavizzo-Mourey are currently members of
the Compensation Committee and Mr. Jelinek and Dr. Lavizzo-Mourey are currently
members of the Stock Option Committee. None of the Company's directors have
interlocking or other relationships with other boards or the Company that
require disclosure under Item 402(j) of S.E.C. Regulation S-K, except as
described below.
For the fiscal year ended May 31, 2000, the Company incurred legal fees
for general legal services of $54,000 to the law firm of Bell, Boyd & Lloyd LLC
of which William G. Brown, a director of the Company, is a member. During the
fiscal year ended May 31, 2000, Dr. Kaldenbaugh was paid consulting fees of
$115,000 by the Company.
Certain Relationships and Related Transactions
The Company. In October 1999, Dr. Kaldenbaugh repaid the Company
$10,526, representing the remaining balance on a promissory note in the original
principal amount of $94,000, which accrued interest at the rate of 3%. The
highest balance outstanding during fiscal year 2000 was $10,526. The note was
originally payable to Ventana, and was transferred to the Company during the
fiscal year ended May 31, 1997. The purpose of this loan was to provide Dr.
Kaldenbaugh funds to settle litigation in 1992 concerning a covenant not to
compete to which he was subject.
12
<PAGE> 15
During fiscal year 2000, the Company received $4,621,452 from Rio
Grande HMO, Inc. ("RGHMO"), a subsidiary of Health Care Services Corp. ("HCSC"),
pursuant to administrative services agreements between the Company and RGHMO. In
addition, pursuant to a Risk Sharing Agreement with RGHMO, the Company
recognized revenue of $48,794,000 in fiscal year 2000.
In October 1996, the Company signed an agreement whereby HCSC invested
$3,000,000 in the Company in the form of a convertible secured loan. The loan
had an original term of three years with a renewal option for two additional
one-year periods, if certain conditions were met. The loan bore interest at a
rate of 8% per annum. Principal and interest were payable at the end of the
initial three-year term and, thereafter, at the end of each annual extension.
The loan was convertible into Common Stock at a conversion price of $3.85 per
share. HCSC also received a warrant to purchase 100,000 shares of Common Stock
at an exercise price of $4.45 per share. HCSC had the right of first refusal to
participate as an equity partner in subsequent Lifemark funding requirements.
Effective November 1999, the note was paid off by the Company and the existing
warrants were cancelled.
In a separate transaction, a trust created by William G. Brown, a
director of the Company, for the benefit of members of his family, and of which
Richard C. Jelinek, Chairman and Director, is one of the co-trustees (the "Brown
GST Trust"), invested $300,000 in the Company through a convertible unsecured
loan and received a warrant to purchase 10,000 shares of Common Stock. The
interest rate, term, conversion price, and warrant exercise price were the same
for the Brown GST Trust as for HCSC, except that interest on the loan is payable
monthly. During the fiscal year ended May 31, 2000, the Company paid an
aggregate of $24,000 in interest to the Brown GST Trust. On April 20, 2000 the
term of the existing warrant was extended by three years, the maturity date on
the loan from the Brown GST Trust was extended by three years and the Company's
right to prepay the loan was terminated.
MCSAZ. In October 1995, MCSAZ borrowed $155,000 from a trust
established by Dr. Lingenfelter and $52,000 from a trust established by Dr.
Kaldenbaugh. The loans, due December 31, 2000, provided for interest income to
accrue at 8% per annum. MCSAZ then loaned from these funds $118,000 to Dr.
Kaldenbaugh pursuant to a promissory note, due December 31, 2000, that also
provided for interest to accrue at 8% per annum. The loan to Dr. Kaldenbaugh was
secured by a pledge of the Company Common Stock received by Dr. Kaldenbaugh in
the Mergers in exchange for his stock in MCSAZ. The stock pledge also secured
the above-described loans from the trust to MCSAZ. The purpose of the loan to
Dr. Kaldenbaugh was to provide him with funds to pay taxes incurred as a result
of his owning shares in AHC, then a Subchapter S corporation. In June 1998, the
Company made a $97,000 payment to Dr. Lingenfelter's trust. In December 1999,
additional payments were made in the amounts of $51,115 and $80,108 to trusts
established by Drs. Kaldenbaugh and Lingenfelter, respectively. At May 31, 2000,
no loans were outstanding to the two trusts. The loan to Dr. Kaldenbaugh was
also repaid during the fiscal year 2000.
Ventana. In October 1995, Dr. Kaldenbaugh borrowed $95,055 from Ventana
pursuant to a promissory note due December 31, 2000 providing for interest to
accrue at 8% per annum. The note was secured by a pledge of Common Stock
received by Dr. Kaldenbaugh in the Mergers in exchange for his stock in Ventana.
The purpose of the loan was to provide Dr. Kaldenbaugh funds to pay taxes as
described in the preceding paragraph. During fiscal year 2000, the loan was
repaid in full.
During fiscal year 2000, Dr. Lingenfelter received $8,749 for
capitation and fee-for-service payments and $67,679 for risk sharing contracts
between Dr. Lingenfelter and Ventana in Mohave County, Arizona. As of May 31,
2000, all capitation and fee-for-service and all risk payments have been paid in
full to Dr. Lingenfelter. During fiscal year 2000, the Company also paid
$1,071,627 to the Gardens Care Center, a nursing home, of which Dr. Lingenfelter
is a shareholder.
During fiscal year 2000, the Company paid $25,320 in life insurance
premiums on behalf of Dr. Lingenfelter, and wrote off $33,464 and $149,494 of
amounts due from Dr. Kaldenbaugh and Dr. Lingenfelter, respectively, in
connection with the life insurance policies previously paid for by the Company.
Arizona Health Concepts. Dr. Lingenfelter received $133,048 for
capitation and fee-for-service payments, and $72,394 for risk payments, during
fiscal year 2000. As of May 31, 2000, Dr. Lingenfelter was owed $153,683,
13
<PAGE> 16
pursuant to risk sharing contracts. During fiscal year 2000, AHC paid $64,080 to
the Gardens Care Center, of which Dr. Lingenfelter is a shareholder.
CERTAIN TRANSACTIONS
For descriptions of certain transactions involving Mr. Brown and Drs.
Kaldenbaugh and Lingenfelter and HCSC, see the information under the caption
"Compensation and Stock Option Committee Interlocks and Insider Participation."
In connection with the exercise of options received on October 14,
1999, Ms. Brede, Mr. Kennedy, Mr. Decker and Richard M. Jelinek delivered
promissory notes to the Company on the terms described under "Compensation -
Employment Agreements." As of May 31, 2000, $270,070, $180,713, $75,297 and
$180,713 was outstanding under the notes delivered by Ms. Brede, Mr. Kennedy,
Mr. Decker and Mr. Jelinek, respectively.
PROPOSAL TO APPROVE 2000 NON-EMPLOYEE DIRECTOR STOCK PLAN
In order to further the growth, development and financial success of
the Company through strengthening the Company's ability to attract and retain
the services of knowledgeable non-employee directors by facilitating further
acquisitions of stock, the Board of Directors has adopted and recommends that
stockholders approve the Lifemark Corporation 2000 Non-Employee Director Stock
Plan (the "Director Plan"). A copy of the Director Plan is attached as Appendix
B to this proxy statement. The Director Plan was adopted by the Board of
Directors on April 20, 2000. On June 1, 2000, non-employee directors received
awards of restricted stock, and options to purchase shares under the Director
Plan at an exercise price of $6.50 per share, in the amounts listed in the New
Plan Benefits table set forth below. The closing sales price of the Common Stock
on June 1, 2000 was $6.50. Approval of the Director Plan by stockholders at the
Annual Meeting will constitute, in effect, approval of such awards and the
Director Plan will supersede the 1995 Directors' Stock Option Plan and the 1996
Non-Employee Director Stock Option Plan.
The following summary of the Director Plan is qualified in its entirety
by reference to the text of the Director Plan.
The Director Plan is administered by the Board of Directors of the
Company whose interpretation and administration of the plan are final. The only
persons eligible to participate in the Director Plan are non-employee directors
of the Company. Nothing in the Director Plan shall be deemed to create an
obligation of the Board to renominate a director for election to the Board. The
total number of shares available for award under the Director Plan may not
exceed 250,000, subject to adjustment in the event of a merger, reorganization,
recapitalization, liquidation, stock dividend, split up, share combination, or
other change in capitalization of the Company, in which case the Board of
Directors shall provide for equitable adjustment in the number of shares then
subject to the Director Plan.
Restricted Stock
Under the Director Plan, an award of 5,000 shares of restricted stock
will be granted to each non-employee director on June 1 of each year. Restricted
stock awards were automatically granted under the Director Plan on June 1, 2000,
subject to stockholder approval.
At the time that restricted stock is issued the participating
non-employee director becomes a stockholder of the Company with respect to the
restricted stock and shall be entitled to vote the shares and to receive all
dividends. If a dividend is paid in stock, the stock shall be held by the
Company subject to the same restrictions as the restricted stock that is the
basis of the dividend. All stock certificates are to be held in custody by the
Company for the account of the participant together with stock powers executed
by the participant in favor of the Company. The restricted shares issued under
the Director Plan may not be sold, pledged, assigned, transferred, gifted, or
otherwise alienated or hypothecated until the restrictions lapse. The
restrictions lapse upon the earlier of (a) five years from the date of the award
or (b) termination of the participant's service as a director by reason of
death, disability or retirement from the Board. The Company may impose such
other restrictions as it deems necessary or advisable, including imprinting a
legend on the stock certificates and restrictions to achieve compliance with the
securities
14
<PAGE> 17
laws and stock exchange requirements. Upon lapse of the restrictions, the
certificates representing the shares are to be delivered to the participating
non-employee director or to his or her legal representative. In the event that
the participating non-employee director's service as a director is terminated
for fraud, intentional misrepresentation, embezzlement, misappropriation or
conversion of assets or opportunities of the Company, all restricted stock is
forfeited.
Options
Under the Director Plan, an option covering 10,000 shares of Common
Stock will be automatically granted to each non-employee director of the Company
on June 1 of each year. Options were automatically granted under the Director
Plan on June 1, 2000, subject to stockholder approval. The option price shall be
the fair market value of a share of Common Stock on the date of the grant. Each
option is for a term of ten years, subject to earlier termination if the
optionee's service as a director terminates. Each option becomes exercisable
with respect to 25% of the shares subject to the option twelve months after the
date of its grant and with respect to an additional 25% at the end of each
twelve-month period thereafter during the succeeding three years.
The Board of Directors may permit the purchase price for shares
purchased upon exercise of an option to be paid, all or in part, by the delivery
to the Company of other shares of Common Stock of the Company in such
circumstances and manner as the Committee may specify, valued at the fair market
value of the Common Stock at the close of business on the date preceding the
date of exercise.
If the tenure of any optionee as a director with the Company or any of
its subsidiaries is terminated for any reason other than death, disability or
resignation, such optionee's option shall terminate immediately. In the event of
termination of directorship because of death or disability, the option may be
exercised in full, unless otherwise provided at the time of grant, without
regard to any installments established as described above, by the optionee or,
if he is not living, by his heirs, legatees, or legal representative, during its
specified term prior to three months after the date of death or disability. In
the event of termination of directorship because of resignation, the option may
be exercised by the optionee (or, if he dies within three months after such
termination, by his heirs, legatees, or legal representative), at any time
during its specified term prior to three months after the date of such
termination, but only to the extent the option was exercisable at the date of
such termination.
No option is transferable by the optionee otherwise than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, and each option shall be exercisable during an optionee's lifetime only
by him; provided that, if certain procedures are complied with, an optionee, at
any time prior to his or her death, may transfer or assign all or any portion of
an option to: (i) his or her spouse or lineal descendants or the spouse or
spouses of his or her lineal descendants; (ii) the trustee of a trust
established for the benefit of his or her spouse or lineal descendants or the
spouse or spouses of his or her lineal descendants; or (iii) a partnership whose
only partners are the spouse and/or lineal descendants and/or the spouse or
spouses of the lineal descendants of the optionee.
Change in Control
Notwithstanding the other provisions of the Director Plan, the
restrictions on the restricted stock lapse, and the restricted stock is vested
in the participating non-employee director, and all outstanding options become
immediately exercisable, upon a Change in Control of the Company. A Change in
Control includes (i) the acquisition by any person or group acting in concert of
beneficial ownership of 50% or more of the Company's outstanding shares of
Common Stock, with certain exceptions or (ii) approval by stockholders of the
Company of a merger, consolidation or similar transaction, or the sale of all or
substantially all of the Company's consolidated assets, as to which those
stockholders immediately prior to such transaction are not the owners of more
than 50% of the resulting corporation's outstanding voting securities after such
event.
Federal Tax Consequences
Restricted Stock. Under existing federal income tax law, no income will
be recognized to the participant at the time of the restricted stock award. Upon
lapse of restrictions, the participant will be required to treat as ordinary
income the fair market value of the stock and the Company will be entitled to a
deduction in such amount.
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<PAGE> 18
Options. No gain or loss will be recognized to an optionee upon the
grant of an option under the Director Plan, but upon exercise of the option
ordinary income measured by the excess of the fair market value of the shares
acquired over the option price will be recognized to the optionee. The Company
will be entitled to a deduction equal to the amount of ordinary income
recognized to the optionee. An optionee's basis in shares acquired upon the
exercise of an option will be equal to the option price plus the amount of
ordinary income recognized to the optionee. An optionee's holding period begins
on the date on which the option is exercised.
The Board of Directors may terminate, amend or modify the Director Plan
at any time provided that the provisions concerning the price or timing of
awards may not be amended other than to comply with changes in applicable law.
The Director Plan terminates upon the award of all of the shares subject to it
but in no event later than April 20, 2010. Upon approval of the Director Plan by
stockholders, the Director Plan shall be deemed to have become effective on
April 20, 2000.
Options and restricted shares which have been granted under the
Director Plan to date, to the individuals and groups identified below, subject
in each case to stockholder approval, are displayed in the following table:
NEW PLAN BENEFITS
-----------------
<TABLE>
<CAPTION>
NAME RESTRICTED SHARES OPTIONS
---- ----------------- -------
<S> <C> <C>
Richard C. Jelinek...................................... 5,000 10,000
William G. Brown........................................ 5,000 10,000
Risa Lavizzo-Mourey..................................... 5,000 10,000
Henry Kaldenbaugh....................................... 5,000 10,000
John Lingenfelter....................................... 5,000 10,000
All Current Executive Officers as a group (4 persons)... - -
All Current Directors who are not Executive Officers
as a group (5 persons)................................ 25,000 50,000
Other employees......................................... - -
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE COMPANY'S 2000 NON-EMPLOYEE DIRECTOR STOCK PLAN. If no
other direction is given, signed proxies which are returned in a timely manner
will be voted for approval of the Director Plan. Approval of the Director Plan
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Annual Meeting and entitled to vote.
Abstentions will have the effect of a vote against the plan and non-voted shares
will have no effect on the approval of the plan (assuming the presence of a
quorum).
PROPOSAL TO APPROVE 1999 EXECUTIVE STOCK OPTION AND OWNERSHIP PLAN
In order to continue to encourage ownership of the Company's Common
Stock by executives and key personnel of the Company and to provide incentives
for them to make maximum efforts for the success of the Company, the Board of
Directors of the Company has adopted and recommends that stockholders vote to
approve the Lifemark Corporation 1999 Executive Stock Option and Ownership Plan
(the "Executive Plan"). Options granted under the Executive Plan are intended
not to qualify as "Incentive Stock Options" as defined in the Internal Revenue
Code of 1986 (the "Code").
The Executive Plan was adopted by the Board of Directors on October 14,
1999. On that date, executive officers of the Company received options to
purchase shares under the Executive Plan, at an exercise price of $2.9375 per
share, in the amounts listed in the New Plan Benefits table set forth below. The
closing sales price of the Common Stock on that date was $2.9375. Approval of
the Executive Plan by stockholders at the Annual Meeting will also constitute,
in effect, approval of such grants.
The following description is qualified in its entirety by reference to
the terms of the Executive Plan, a copy of which is attached to this proxy
statement as Appendix C.
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<PAGE> 19
The Executive Plan is administered by a committee of the Board of
Directors composed of no fewer than two outside, non-employee directors
designated by the Board of Directors. The Stock Options Committee (the
"Committee") currently administers the Executive Plan. The Committee has
authority to determine the persons to be granted options under the Executive
Plan, the number of shares subject to each option, the time or times at which
options will be granted, the option price of the shares subject to each option
(which price shall not be less than the fair market value of the shares at the
date of grant), and the time or times when each option becomes exercisable and
the duration of the exercise period.
Options may be granted to key employees and directors (other than
members of the Committee) of the Company. Options may be granted with respect to
a total of not more than 200,000 shares of Common Stock under the Executive
Plan, subject to antidilution and other adjustment provisions. The maximum
aggregate number of shares subject to options which may be granted to any
individual in any fiscal year is 60,000. No options may be granted under the
Executive Plan after October 14, 2009. If an option expires or is terminated or
canceled unexercised as to any shares, such released shares may again be
optioned (including a grant in substitution for a canceled option).
Options
Each option is for such term of not more than ten years as shall be
determined by the Committee at the date of the grant. Each option becomes
exercisable in such installments, at such time or times, and may be subject to
such conditions, including conditions based upon the performance of the Company,
as the Committee may in its discretion determine at the date of grant. The
Committee may accelerate the exercisability of any option or, at any time before
the expiration or termination of an option previously granted, extend the terms
of such option for such additional period as the Committee, in its discretion,
shall determine, except that the aggregate option period with respect to any
option, including the original term of the option and any extensions thereof,
shall never exceed ten years. The options granted under the Executive Plan on
October 14, 1999 will become exercisable upon stockholder approval of the
Executive Plan.
The Committee may permit the purchase price for shares purchased upon
exercise of an option to be paid, all or in part, by the delivery to the Company
of other shares of Common Stock of the Company in such circumstances and manner
as the Committee may specify, valued at the fair market value of the Common
Stock at the close of business on the date preceding the date of exercise. In
addition, in connection with the exercise of options, the Company may make loans
to the optionees on such terms as the Committee, in its discretion, may
determine; provided that the loans may not exceed the fair market value of the
shares covered by the option, may not exceed nine years, and must be secured by
Common Stock with a fair market value at least equal to the principal amount of
the loan.
If the employment or tenure as a director of any optionee with the
Company or any of its subsidiaries is terminated for any reason other than
death, permanent disability, retirement or cause, such optionee's option, to the
extent the option is exercisable at the date of termination, shall expire ninety
days after the termination of employment or directorship (or upon the scheduled
termination of the option, if earlier). In the event of termination of
employment or directorship because of death or permanent disability, the option
may be exercised in full, unless otherwise provided at the time of grant,
without regard to any installments established at the time of grant, by the
optionee or, if he is not living, by his heirs, legatees, or legal
representative, during its specified term prior to one year after the date of
death or permanent disability. In the event of termination of employment or
directorship because of retirement, the option may be exercised by the optionee
(or, if he dies within three months after such termination, by his heirs,
legatees, or legal representative), at any time during its specified term prior
to three months after the date of such termination, but only to the extent the
option was exercisable at the date of such termination. If an optionee is
discharged for cause, his option shall expire forthwith and all rights to
purchase shares under it shall terminate immediately. For this purpose,
"discharge for cause" means a discharge on account of gross negligence,
dishonesty, disloyalty or any willful violation of any reasonable rule or
regulation of the Company of the which the optionee has been advised in writing.
No option is transferable by the optionee otherwise than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, and each option shall be exercisable during an optionee's lifetime only
by him or his legal representative.
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<PAGE> 20
The Board of Directors may amend or discontinue the Executive Plan at
any time. However, no such amendment or discontinuation shall (a) change or
impair any option previously granted without the consent of the optionee, (b)
increase the maximum number of shares which may be purchased by all optionees or
any one optionee, (c) change the minimum purchase price, (d) change the
limitations on the option period or increase the time limitations on the grant
of options, or (e) permit the granting of options to members of the Committee.
Options granted to date under the Executive Plan, subject to
stockholder approval, are displayed in the following table.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
-----------------
1999 EXECUTIVE STOCK OPTION
NAME AND OWNERSHIP PLAN (#)
---- ----------------------
<S> <C>
Rhonda E. Brede............................ 60,000
Michael J. Kennedy......................... 40,000
David G. Decker............................ 25,000
Richard M. Jelinek......................... 40,000
Executive Officers as a Group (4 persons).. 165,000
Non-executive Directors (5 persons)........ -
All Employees as a Group................... 165,000
</TABLE>
On August 14, 2000, the last reported sales price of the Company's
Common Stock on the Nasdaq National Market (as reported by the Wall Street
Journal (Western Edition)) was $7.50 per share.
Federal Tax Consequences
The Company understands that no gain or loss will be recognized to an
optionee upon the grant of an option under the Executive Plan, but that upon
exercise of the option ordinary income measured by the excess of the fair market
value of the shares acquired over the option price will be recognized by the
optionee. The Company will be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. An optionee's basis in shares
acquired upon the exercise of an option will be equal to the option price plus
the amount of ordinary income recognized by the optionee. An optionee's holding
period begins on the date on which the option is exercised.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE COMPANY'S 1999 EXECUTIVE STOCK OPTION AND OWNERSHIP PLAN. If
no other direction is given, signed proxies which are returned in a timely
manner will be voted for approval of the Executive Plan. Approval of the
Executive Plan requires the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy at the Annual Meeting and
entitled to vote. Abstentions will have the effect of a vote against the plan
and non-voted shares will have no effect on the approval of the plan (assuming
the presence of a quorum).
PROPOSAL TO AMEND THE EMPLOYEE STOCK PURCHASE PLAN
The Company adopted the Lifemark Corporation Employee Stock Purchase
Plan, effective June 1, 1996, and has previously adopted three amendments to
such plan (the Lifemark Corporation Employee Stock Purchase Plan and its
amendments are collectively called the "Stock Purchase Plan"). The Stock
Purchase Plan provides that an aggregate of 300,000 shares of the Company's
common stock may be offered for sale pursuant to the Stock Purchase Plan and
permits eligible employees of the Company and its subsidiaries to purchase
shares of the Company's common stock upon exercise of options granted in one or
more semi-annual offerings, each having a duration of 6 months, which may be
made by the Company pursuant to the Stock Purchase Plan during a five-year
period that commenced June 1, 1996.
The current amendment to the Stock Purchase Plan (the "Amendment") was
approved by the Company's Board of Directors on August 11, 2000, and is being
submitted for the approval of stockholders. The Amendment provides for 150,000
additional shares of the Company's common stock that may be offered for sale
pursuant to the
18
<PAGE> 21
Stock Purchase Plan. Stockholder approval is a condition to the issuance of any
additional shares pursuant to the Stock Purchase Plan. A proportionate or
equitable adjustment of the number of shares subject to the Stock Purchase Plan
and to any outstanding options thereunder, and of the purchase price per share,
will be made in the event that the Company's outstanding common stock is changed
by any stock dividend, stock split or combination of shares, or in the event of
any merger or consolidation of the Company with one or more other corporations
or any other relevant change in the capitalization of the Company. The Amendment
also extends the period from five years to eight years during which shares may
be offered for sale pursuant to the Stock Purchase Plan.
The Board of Directors may amend the Stock Purchase Plan or terminate
the Stock Purchase Plan and all rights of employees under any offering pursuant
to the Stock Purchase Plan, at any time. However, without the approval of the
holders of a majority of the Company's outstanding shares, no such amendment may
increase or decrease the number of shares subject to the Stock Purchase Plan or
decrease the purchase price per share.
The Stock Purchase Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Code and the regulations thereunder. The
Stock Purchase Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974, and is not qualified under Section 401(a) of the
Code.
The following description is qualified in its entirety by reference to
the terms of the Stock Purchase Plan and the Amendment, a copy of the Amendment
is attached to this proxy statement as Appendix D.
The principal purpose of the Stock Purchase Plan is to benefit the
Company and its subsidiaries by offering eligible employees a favorable
opportunity to become holders of stock in the Company over a period of years,
thereby giving them a proprietary interest in the growth and prosperity of the
Company and encouraging the continuance of their services with the Company or
its subsidiaries. All employees of the Company and its subsidiaries on the
effective date of an offering are eligible to participate in the Stock Purchase
Plan except for employees who would (immediately after the grant of an option
under the Stock Purchase Plan) own, or be entitled to purchase upon exercise of
outstanding options, shares of the Company's common stock possessing five
percent or more of the total combined voting power or value of all classes of
stock of the Company or any parent or subsidiary corporation.
Each employee participating in an offering will be granted an option to
purchase as many whole shares of the Company's common stock as may be purchased
with the following amounts: (i) up to 10% of his or her recognized compensation
during the offering period or during such portion thereof as the employee may
elect to participate, to be paid by payroll deductions during such period, (ii)
the amount of any dividends received on any shares purchased by the employee
under the Stock Purchase Plan while such shares are registered in the name of a
custodian appointed pursuant to the Stock Purchase Plan, and (iii) the balance,
if any, carried forward from the employee's payroll deduction account for the
preceding offering period. The purchase price of shares subject to options under
the Stock Purchase Plan will be the lesser of 85% of the fair market value, on
the effective date of the offering, of the stock subject to the option, or 85%
of its fair market value at the time the option is exercised.
An eligible employee on the effective date of an offering under the
Stock Purchase Plan may elect to participate in such offering at any time by
completing a payroll deduction authorization form authorizing a regular payroll
deduction from the employee's direct compensation and specifying the date (which
may not be retroactive) on which such deduction is to commence. The Stock
Purchase Plan provides that an employee may authorize a payroll deduction in
terms of whole number percentages, from a minimum of 1% to a maximum of 10%, of
his or her direct compensation during the offering period. If on the last day of
an offering period, and upon termination of the Stock Purchase Plan, the balance
in a participating employee's payroll deduction account (including any dividends
added to the account) is sufficient to purchase one or more whole shares, the
employee will be deemed to have exercised an option to purchase such share or
shares as of that date. Participants in the Stock Purchase Plan will have none
of the rights or privileges of a stockholder of the Company until such time as a
stock certificate with respect to such shares shall have been issued to the
employee.
A participating employee may withdraw the entire balance in his or her
payroll deduction account at any time, and thereby withdraw from participation
in the offering. Partial withdrawals of funds will not be permitted. After such
a withdrawal of funds, an employee will thereafter be permitted to begin to
participate again only upon the commencement of a new offering period; provided,
however, that an employee who is an officer or director of
19
<PAGE> 22
the Company may not resume participation in that offering or participate in a
subsequent offering prior to the expiration of six months from the date of such
withdrawal.
In the event of a participating employee's retirement, death or
termination of employment (other than an authorized leave of absence), no
payroll deduction will be made from any direct compensation due at the time of
such termination, and the balance, if any, in the employee's payroll deduction
account will be paid in cash to the employee or, in the event of the employee's
death, to the employee's estate, as soon as practicable.
The Stock Purchase Plan and all rights of employees under any offering
may be terminated at any time, in the discretion of the Company's Board of
Directors, and will terminate on the date that participating employees become
entitled to purchase in the aggregate at least as many shares as then remain
available for purchase pursuant to the Stock Purchase Plan (in which case such
available shares will be allocated by the Committee administering the Stock
Purchase Plan pro rata among participating employees according to their direct
compensation on that date). No offering shall be made which extends beyond May
31, 2004. Upon any termination of the Stock Purchase Plan, any balance remaining
in the payroll deduction accounts of participating employees representing
fractional shares shall be carried forward into the employee's payroll deduction
account under a successor Stock Purchase Plan, if any, or refunded as soon as
practicable thereafter.
No right of a participating employee under the Stock Purchase Plan is
transferable other than by will or the laws of descent and distribution, and
each option will be exercisable during an employee's lifetime only by the
employee.
The Stock Purchase Plan provides that it will be administered by a
Committee appointed by the Company's Board of Directors and consisting of not
fewer than two directors, none of whom is eligible to participate in the Stock
Purchase Plan. Members of the Committee may be removed by the Board of Directors
at any time. The Committee's interpretations and decisions concerning
administration of the Stock Purchase Plan will be final and conclusive.
Options granted during the fiscal year ended May 31, 2000 under the
Stock Purchase Plan are displayed in the following table.
<TABLE>
<CAPTION>
AMENDED PLAN BENEFITS
---------------------
STOCK PURCHASE
NAME PLAN (#)
---- --------
<S> <C>
Rhonda E. Brede............................. -
Michael J. Kennedy.......................... 5,478
David G. Decker............................. 784
Richard M. Jelinek.......................... 1,276
Executive Officers as a Group (4 persons)... 7,538
Non-executive Directors (5 persons)......... -
All Employees as a Group.................... 74,983
</TABLE>
Federal Income Tax Consequences
The Stock Purchase Plan is intended to provide employees with the
opportunity to receive the special tax treatment afforded by Section 423 of the
Code. The following summary of tax consequences is not intended to be a complete
statement of all possible federal income tax consequences of participation in
the Stock Purchase Plan and does not cover state or local tax consequences.
The Company understands that under existing law income will not be
recognized to an employee who participates in the Stock Purchase Plan when he
receives or exercises an option, executes a payroll deduction authorization, has
amounts deducted from his pay or has shares purchased on his behalf by the
custodian.
If shares purchased under the Stock Purchase Plan are not disposed of
by the employee within two years after the date of the granting of the option to
him nor within one year after the purchase of such shares, then when
20
<PAGE> 23
the employee does dispose of his shares after such period he will be required to
include in his ordinary income as compensation an amount equal to the lesser of
(a) the excess of the fair market value of the shares on the date of disposition
over the amount paid by the employee or (b) the excess of the fair market value
of the shares on the date the option was granted over the option price. For
purposes of the preceding sentence, the option price equals 85% of the fair
market value of the shares on the effective date of the offering. If the
employee's purchase price exceeds the fair market value on the date of
disposition, no amount is included as ordinary income and the excess is treated
as a long-term capital loss. If the fair market value of the shares on the date
of disposition exceeds the fair market value on the date the option was granted,
the excess will be treated as a long-term capital gain. The term "disposition"
generally includes every sale, exchange, gift or transfer of legal title except
transfers made as the result of an employee's death.
If an employee dies while holding shares acquired under the Stock
Purchase Plan, there will be included in his taxable income for the year of his
death the amount of ordinary income described in the preceding paragraph,
regardless of whether the holding periods described above have been met.
If an employee disposes of shares acquired under the Stock Purchase
Plan prior to the end of the holding period described above, he will be required
to include in ordinary income as compensation the excess of the fair market
value of the shares on the date they were purchased over the employee's purchase
price. The difference between the fair market value of the shares on the date of
disposition and the fair market value on the date of purchase will be treated as
capital gain or loss, as the case may be.
In the case of a disposition before the end of the holding period, the
Company will receive a tax deduction equal to the amount of ordinary income
recognized to the employee.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been selected by the Board of Directors
of the Company, upon the recommendation of its Audit Committee, to continue to
act as auditors in fiscal year 2001. A representative of PricewaterhouseCoopers
LLP will be present at the Annual Meeting. He will have the opportunity to make
a statement, if he desires to do so, and will be available to respond to
appropriate questions.
ANNUAL REPORT
The Annual Report of the Company on Form 10-K for the fiscal year ended
May 31, 2000 is enclosed with this Proxy Statement. Stockholders are referred to
this report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not a part of the
proxy soliciting material.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the 2001
Annual Meeting of Stockholders must be received by the Company no later than
April 23, 2001 in order to be considered by the Board of Directors for inclusion
in the Company's Proxy materials for that meeting. The Company will be entitled
to exercise discretionary proxy authority with respect to any other proposals
presented by stockholders at that meeting unless the Company is notified of such
proposals no later than July 6, 2001.
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<PAGE> 24
OTHER MATTERS
Brokerage firms, banks, fiduciaries, voting trustees or other nominees
will be requested to forward the soliciting material to each beneficial owner of
stock held of record by them, and the Company will, upon request, reimburse them
for the reasonable expense of doing so. The entire cost of the solicitation will
be borne by the Company.
The Board of Directors does not intend to present, and does not have
any reason to believe that others will present, any item of business at the
Annual Meeting other than those specifically set forth in the notice of the
meeting. However, if other matters are properly presented for a vote, the
proxies will be voted with respect to such matters in accordance with the
judgment of the persons acting under the proxies.
By Order of the Board of Directors
Stephen G. Smyth
Secretary
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<PAGE> 25
APPENDIX A
LIFEMARK CORPORATION
AUDIT COMMITTEE CHARTER
(ADOPTED APRIL 20, 2000)
I. Purpose
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing:
the financial reports and other financial information provided by the
Corporation to any governmental body or the public; the Corporation's
systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established;
and the Corporation's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit Committee
should encourage continuous improvement of, and should foster adherence
to, the Corporation's policies, procedures and practices at all levels.
The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
- Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a
member of the Committee. If it is determined that the Board does not
have three members that meet the definition of independence that
follows, the Board may choose to elect no more than one Board member to
the Audit Committee that does not meet the definition. "Independence"
for the Committee will follow the NASD definition, which considers
whether the Audit Committee Member has:
- Been employed by the Corporation or its affiliates in the
current or past three years;
- Accepted any compensation from the Corporation or its
affiliates in excess of $60,000 during the previous fiscal
year (except for board service, retirement plan benefits, or
non-discretionary compensation);
- Been an immediate family member of someone who is, or has been
in the past three years, employed by the Corporation or its
affiliates as an executive officer;
- Been a partner, controlling shareholder or an executive
officer of any for-profit business to which the Corporation
made, or from which it received, payments (other than those
which arise solely from investments in the Corporation's
securities) that exceed five percent of the Corporation's
consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years; or
- Been employed as an executive in another entity where any of
the Corporation's executives serve on that entity's
compensation committee.
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one member of the
Committee shall have accounting or related financial management
A-1
<PAGE> 26
expertise. Committee members may enhance their familiarity with finance
and accounting by participating in education programs conducted for the
Corporation by an outside consultant.
The members of the Committee shall be elected by the Board at the
annual organization meeting of the Board or until their successors
shall be duly elected and qualified. Unless a Chair is elected by the
full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with
management, the director of the internal auditing department and the
independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or its Chair should
meet with the independent accountants and management quarterly to
review the Corporation's financial statements consistent with IV.4
below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and, as conditions dictate, update this Charter at
least annually.
2. Review the Corporation's annual financial statements and any
reports or other financial information submitted to any
governmental body, or the public, including any certification,
report, opinion, or review rendered by the independent
accountants. The Audit Committee may elect to have the
Committee Chair perform the review in lieu of participation by
the full committee for routine reporting requirements.
3. Review the regular internal reports to management prepared by
the internal auditing department and management's response.
4. Review with financial management and the independent
accountants financial results and matters required to be
discussed by SAS61 prior to respective filings or prior to the
release of earnings. The Chair of the Committee may represent
the entire Committee for purposes of this review.
Independent Accountants
5. Recommend to the Board of Directors the selection of the
independent accountants, considering independence and
effectiveness, and approve the fees and other compensation to
be paid to the independent accountants. On an annual basis,
the Committee should review and discuss with the accountants
all significant relationships the accountants have with the
Corporation to determine the accountants' independence and
obtain a formal written statement to that effect.
6. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
7. Periodically consult with the independent accountants out of
the presence of management about internal controls and the
fullness and accuracy of the Corporation's financial
statements.
Financial Reporting Processes
8. In consultation with the independent accountants and the
internal auditors, review the integrity of the Corporation's
financial reporting processes, both internal and external.
A-2
<PAGE> 27
9. Consider the independent accountants' judgments about the
quality and appropriateness of the Corporation's accounting
principles as applied in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices
as suggested by the independent accountants, management, or
the internal auditing department.
Process Improvement
11. Establish regular and separate systems of reporting to the
Audit Committee by each of management, the independent
accountants and the internal auditors regarding any
significant judgments made in management's preparation of the
financial statements and the view of each as to the
appropriateness of such judgments.
12. Following completion of the annual audit, review separately
with each of management, the independent accountants and the
internal auditing department any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
13. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
14. Review with the independent accountants, the internal auditing
department and management the extent to which changes or
improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review
should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the
Committee).
Ethical and Legal Compliance
15. Establish, review and update periodically a Code of Ethical
Conduct and ensure that management has established a system to
enforce this Code.
16. Review management's monitoring of the Corporation's compliance
with the Corporation's Ethical Code, and ensure that
management has the proper review system in place to ensure
that the Corporation's financial statements, reports and other
financial information disseminated to governmental
organizations and the public satisfy legal requirements.
17. Review activities, organizational structure, and
qualifications of the internal audit department.
18. Review, with the Corporation's counsel, legal compliance
matters including the Corporation's securities trading
policies.
19. Review, with the Corporation's counsel, any legal matter that
could have a significant impact on the Corporation's financial
statements.
20. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or
the Board deems necessary or appropriate.
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APPENDIX B
LIFEMARK CORPORATION
2000 NON-EMPLOYEE DIRECTOR STOCK PLAN
ARTICLE I - PURPOSE OF THE PLAN
The purpose of the Lifemark Corporation Non-Employee Director Stock
Plan is to further the growth, development, and financial success of the Company
by strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable Non-Employee Directors by enabling them to
participate in the Company's growth and by linking the personal interests of
Non-Employee Directors to those of the Company's shareholders.
ARTICLE II - CERTAIN DEFINITIONS
Unless the context clearly indicates otherwise, the following terms
shall have the following meanings:
2.1 "Award" means a grant of Restricted Stock or Options under the
Plan.
2.2 "Board" means the Board of Directors of Lifemark Corporation.
2.3 "Cause" means an event described in Section 6.5(a) or (b).
2.4 "Change of Control" shall have the meaning set forth in Section
8.2.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.6 "Company" means Lifemark Corporation.
2.7 "Disability" means total disability within the meaning of Section
22(e)(3) of the Code.
2.8 "Employee" means any full time worker, paid hourly or by salary, in
the employment of the Company or any of its subsidiaries.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.10 "Fair Market Value" shall be the closing sales price of the Stock
reported on the Nasdaq National Market (or on the principal national stock
exchange on which it is listed or quotation service on which it is listed) (as
reported in the Wall Street Journal, Western Edition) on the date an Option is
granted or the date the Fair Market Value is otherwise to be determined (or, if
the date of the grant or determination is not a trading date, on the trading
date immediately preceding the date of grant or determination). In the event
that the Stock is not listed or quoted on the Nasdaq National Market or any
other national stock exchange, the Fair Market Value of the Shares for all
purposes of this Plan shall be reasonably determined by the Board of Directors.
2.11 "Non-Employee Director" means any individual who is a member of
the Board of the Company, but who is not otherwise an Employee of the Company.
2.12 "Option" means an option to purchase shares of common stock of the
Company granted to a Non-Employee Director under Article VII of the Plan.
2.13 "Participant" means a Non-Employee Director who has received an
Award under the Plan.
2.14 "Plan" means the Lifemark Corporation 2000 Non-Employee Director
Stock Plan.
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<PAGE> 29
2.15 "Restricted Stock" or "Restricted Shares" means shares of common
stock of the Company granted to a Non-Employee Director under Article VI of the
Plan.
2.16 "Retirement" means cessation of membership on the Board of the
Company for any reason other than death, Disability or for Cause.
2.17 "Stock" or "Shares" means common stock of the Company.
ARTICLE III - ADMINISTRATION
3.1 ADMINISTRATION OF PLAN. The Plan shall be administered by the
Board, subject to the restrictions set forth in the Plan.
3.2 AUTHORITY OF THE BOARD. The Board shall have the full power,
discretion, and authority to interpret and administer the Plan in a manner which
is consistent with the Plan's provisions. Any action taken by the Board with
respect to the administration of the Plan which would result in any Non-Employee
Director ceasing to be a "Non-Employee Director" within the meaning of Rule
16b-3 under the Exchange Act shall be null and void.
3.3 EFFECT OF BOARD DETERMINATIONS. All determinations and decisions
made by the Board pursuant to the provisions of the Plan and all related orders
or resolutions of the Board shall be final, conclusive, and binding on all
persons, including the Company, its shareholders, Employees, Participants and
their estates and beneficiaries.
ARTICLE IV - ELIGIBILITY
4.1 Persons eligible to participate in the Plan shall be limited to the
Non-Employee Directors of the Company.
ARTICLE V - SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment as provided herein, the
total number of Shares available for Awards, including grants of Options, under
the Plan may not exceed 250,000. If any Shares awarded under the Plan shall be
forfeited, or any Shares are subject to Options granted under the Plan which
expire unexercised, such Shares shall again become available for future Awards,
including grants of Options, under the Plan.
5.2 ADJUSTMENTS IN AUTHORIZED SHARES. The number of Shares subject to
this Plan and to Awards and Options granted and to be granted under this Plan
shall be adjusted as follows: (a) in the event that the Stock is changed by any
stock dividend, stock split or combination of shares, the numbers of Shares
subject to this Plan and to Awards and Options granted and to be granted
hereunder shall be proportionately adjusted; (b) in the event of any merger,
consolidation or reorganization of the Company with any other corporation or
corporations, there shall be substituted on an equitable basis as determined by
the Board of Directors, for each share of Stock then subject to this Plan,
whether or not at the time subject to outstanding Awards or Options, the number
and kind of shares of stock or other securities to which the other holders of
Stock will be entitled pursuant to the transaction; and (c) in the event of any
other relevant change in the capitalization of the Company, the Board of
Directors shall provide for an equitable adjustment in the number of Shares then
subject to this Plan, whether or not then subject to outstanding Awards or
Options. In the event of any such adjustment the purchase price per share of
outstanding Options shall be proportionately adjusted.
ARTICLE VI - RESTRICTED STOCK
6.1 AWARDS OF RESTRICTED STOCK. Each Non-Employee Director shall
receive an Award of 5,000 Shares of Restricted Stock on June 1 of each year. If
on any June 1 the Shares available from the Shares covered by this Plan are not
sufficient for each Participant to receive an Award of 5,000 Restricted Shares
and an Option for 10,000 Shares pursuant to Section 7.1, the Award of Restricted
Shares automatically granted on such date to each
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Participant shall be the number of shares equal to one-third of each director's
pro rata share of the Shares available under the Plan.
6.2 TRANSFERABILITY AND CUSTODY. The Restricted Shares awarded to a
Non-Employee Director may not be sold, pledged, assigned, transferred, gifted or
otherwise alienated or hypothecated until such time as the restrictions with
respect to such Shares have lapsed as provided herein. At the time Restricted
Shares are awarded to a Participant, stock certificates representing the
Restricted Stock shall be issued in the name of the Participant. Thereupon the
Participant shall become a stockholder of the Company with respect to such
Restricted Stock and shall be entitled to vote the Shares and be entitled to
receive all dividends. If all or part of a dividend is paid in Stock, the Stock
shall be held by the Company subject to the same restrictions as the Restricted
Stock that is the basis for the dividend. All stock certificates representing
Restricted Shares shall be held in custody by the Company for the account of the
Participant, together with stock powers executed by the Participant in favor of
the Company.
6.3 OTHER RESTRICTIONS. The Company may impose such other restrictions
on Shares granted pursuant to the Plan as it may deem necessary or advisable
including, without limitation, imprinting a legend on the certificates and
restrictions to achieve compliance with securities laws and stock exchange
requirements.
6.4 LAPSE OF RESTRICTIONS. The restrictions provided in Sections 6.2
and 6.3 shall remain in effect until, and shall lapse only upon, the earlier of
(a) five years from the date of the Award or (b) the termination of a
Participant's service as a Director by reason of death, Disability, or
Retirement from the Board. Upon lapse of the restrictions, the certificates
representing the Shares shall thereafter be delivered to the Participant, or in
the case of Participant's death or Disability, to the Participant's personal
representative or to the person to whom such Shares are transferred by will or
by the applicable laws of descent and distribution.
6.5 TERMINATION FOR CAUSE. In the event the Participant's service as a
Director is terminated on account of (a) fraud or intentional misrepresentation,
or (b) embezzlement, misappropriation, or conversion of assets or opportunities
of the Company, all Restricted Shares awarded to such Participant prior to the
date of termination shall be immediately forfeited.
6.6 WITHHOLDING OF TAXES. The Company shall have the right to collect
cash from Participants in an amount necessary to satisfy any Federal, state or
local withholding tax requirements.
ARTICLE VII - OPTIONS
7.1 GRANTING OF OPTIONS. (a) An Option under which a total of 10,000
Shares may be purchased from the Company shall be automatically granted, without
further action required, to each Non-Employee Director on June 1 of each year.
If on any June 1 the Shares available from the Shares covered by this Plan are
not sufficient for each Participant to receive an Option to purchase 10,000
Shares and an Award of 5,000 Shares pursuant to Section 6.1, the Option
automatically granted on such date to each Participant shall be an Option to
purchase the number of shares equal to two-thirds of each director's pro rata
share of the Shares available under the Plan. No Option shall be granted under
this Plan subsequent to April 20, 2010.
(b) Notwithstanding the provisions of Section 5.1, in the
event an Option expires unexercised as to any Shares, such Shares may again be
optioned. Shares subject to Options may be made available from unissued or
treasury Shares.
7.2 OPTION PRICE. Subject to adjustment under Section 5.2, the Option
price shall be the Fair Market Value of the Shares subject to the Option on the
date of the grant of such Option.
7.3 DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. Subject to the
provisions of Section 7.5, each Option shall be for a term of ten years. Each
Option shall become exercisable with respect to 25% of the total number of
Shares subject to the Option 12 months after the date of grant and with respect
to an additional 25% at the end of each 12-month period thereafter during the
succeeding three years.
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7.4 EXERCISE OF OPTION. (a) An Option may be exercised by giving
written notice to the Company, attention of the Secretary, specifying the
numbers of Shares to be purchased, accompanied by the full purchase price for
such number of Shares, either in cash, by check, by a promissory note in a form
specified by the Company and payable to the Company 15 business days after the
date of exercise of the Option, or in Shares, or by a combination thereof. The
per share value of Stock delivered in payment of the exercise price shall be the
Fair Market Value of a share of Stock on the date of exercise.
(b) At the time of any exercise of any Option, the Company
may, if it shall determine it necessary or desirable for any reason, require the
optionee (or his or her heirs, legatees or legal representatives, as the case
may be) as a condition to the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the Stock for investment
and not for distribution. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered
to the optionee upon his or her exercise of part or all of such Option and a
stop transfer order may be placed with the transfer agent. Each Option shall
also be subject to the requirement that, if at any time the Company determines,
in its discretion, that the listing, registration or qualification of the Stock
subject to the Option upon any securities exchange or under any State or Federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase of Stock thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
7.5 TERMINATION--EXERCISE THEREAFTER. (a) In the event an optionee
ceases to be a director of the Company for any reason other than death,
Disability or resignation, such optionee's Option shall expire and all rights to
purchase Stock pursuant thereto shall terminate immediately.
(b) In the event of death or Disability, the Option may be
exercised in full, without regard to any increments established under Section
7.3 hereof, by the optionee or, if he is not living, by his or her heirs,
legatees or legal representatives, as the case may be, during its specified term
within three months after the date of death or Disability. In the event of
resignation, the Option may be exercised by the optionee (or, if he or she dies
within three months after such termination, by his or her heirs, legatees or
legal representatives, as the case may be), at any time during its specified
term within three months after the date of such resignation, but only to the
extent the Option was exercisable at the date of such resignation.
7.6 NON-TRANSFERABILITY OF OPTIONS. Except as provided below, no
Options shall be transferable by the optionee otherwise than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code, and each Option shall be exercisable during an
optionee's lifetime only by the optionee. Notwithstanding the above, an
optionee, at any time prior to his or her death, may transfer or assign all or
any portion of an Option to: (i) his or her spouse or lineal descendants or the
spouse or spouses of his or her lineal descendants; (ii) the trustee of a trust
established for the benefit of his or her spouse or lineal descendants or the
spouse or spouses of his or her lineal descendants; or (iii) a partnership whose
only partners are the spouse and/or lineal descendants and/or the spouse or
spouses of the lineal descendants of the optionee; provided that the form of
agreement evidencing such Option shall specifically set forth the transfer
limitations, the optionee receives no consideration from the transferee or
assignee, and the transferee or assignee is subject to all the conditions
applicable to the Option prior to the grant. Any such transfer or assignment
shall be evidenced by an appropriate written document executed by the optionee
and a copy of such document shall be delivered to the Board on or prior to the
effective date of the transfer or assignment.
ARTICLE VIII - CHANGE IN CONTROL
8.1 EFFECT OF CHANGE OF CONTROL. Notwithstanding the provisions of
Article VI and Article VII herein, upon the occurrence of an event of Change of
Control:
(a) the Restrictions imposed on the Restricted Stock shall
lapse, and the Restricted Stock shall vest in the Participant,
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(b) within ten business days after the occurrence of a Change
of Control, the certificates representing the Restricted Stock so vested,
without any restriction or legend thereon, shall be delivered to the
Participant, and
(c) all outstanding Options shall become immediately
exercisable.
8.2 The term "Change of Control" shall mean the occurrence of any of
the following events:
(a) The acquisition, by new stockholders (being any person or
group of persons acting in concert, other than the directors of the Company as
of April 20, 2000, Dorsey Gardner, their respective families, estates, trusts
and other affiliates), of a beneficial ownership interest in the Company,
resulting in the total beneficial ownership of such persons or group of persons
equaling or exceeding 50% of the outstanding common stock or warrants of the
Company; provided, however, that no such person or group of persons shall be
deemed to beneficially own (i) any common stock or warrants acquired directly
from the Company or (ii) any common stock or warrants held by the Company or any
of its subsidiaries or any employee benefit plan (or any related trust) of the
Company or its subsidiaries. The Change in Control shall be deemed to occur on
the date the beneficial ownership of the acquiring person or group of persons
first equals or exceeds 50% of the outstanding common stock of the Company.
(b) Approval by stockholders of the Company of a merger,
consolidation or other reorganization having substantially the same effect, or
the sale of all or substantially all the consolidated assets of the Company, in
each case with respect to which the persons or group of persons who were the
respective beneficial owners of the common stock of the Company immediately
prior to such event do not, following such event, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding voting
securities of the corporation resulting from such event or the corporation
purchasing or receiving assets pursuant to such event. The Change in Control
shall be deemed to occur on the date on which the transaction is approved by the
Company's stockholders.
ARTICLE IX - AMENDMENT, MODIFICATION AND TERMINATION
9.1 AMENDMENT, MODIFICATION AND TERMINATION. Subject to the terms set
forth in this Section 9.1, and subject to any requirement of stockholder
approval imposed by applicable law, rule, regulation or any stock exchange or
trading system on which the Shares are then listed, the Board may terminate,
amend, or modify the Plan at any time and from time to time; provided, however,
that the provisions set forth in the Plan regarding the amount, the price or the
timing of Awards to Non-Employee Directors may not be amended, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder. The Plan shall terminate when all of the Shares subject
to it have been awarded according to the provisions of the Plan. However, in no
event shall an Award be made or an Option be granted under the Plan on or after
April 20, 2010.
9.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no termination,
amendment or modification of the Plan shall materially affect, in an adverse
manner, any Award previously granted under the Plan, without the consent of the
Non-Employee Director holding the Award.
ARTICLE X - NO RIGHT OF NOMINATION OR CONTINUING SERVICE
10.1 Nothing in the Plan shall be deemed to create any obligation on
the part of the Board to nominate any Participant for reelection by the
Company's stockholders. Nothing contained in this Plan or in any Option granted
pursuant hereto shall in itself confer upon any optionee any right to continue
serving as a director of the Company or interfere in any way with any right of
the Board of Directors or stockholders of the Company to remove such director
pursuant to the certificate of incorporation or by-laws of the Company or
applicable law.
ARTICLE XI - REQUIREMENTS OF LAW
11.1 The granting of Awards under the Plan and the issuance of stock
certificates shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
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ARTICLE XII - EFFECTIVE DATE
12.1 If this Plan is approved at a stockholders' meeting it shall be
deemed to have become effective on April 20, 2000, the date of adoption by the
Board. Options may be granted under this Plan prior, but subject, to the
approval of this Plan by stockholders of the Company and, in each such case, the
date of grant shall be determined without reference to the date of approval of
this Plan by the stockholders of the Company. Notwithstanding any other
provision of this Plan to the contrary, no Option granted hereunder shall be
exercisable prior to the date on which this Plan is approved by stockholders as
herein contemplated. In the event that an Option becomes exercisable prior to
the date on which stockholder approval is obtained as the result of an event
described in Section 7.5(b), the period of exercise thereof shall automatically
be extended to allow for such exercise to be made within three months following
the date on which stockholder approval is obtained.
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APPENDIX C
LIFEMARK CORPORATION
1999 EXECUTIVE STOCK OPTION AND OWNERSHIP PLAN
The purpose of this 1999 Executive Stock Option and Ownership Plan (the
"Plan") is to benefit Lifemark Corporation (the "Company") and its subsidiaries
through the maintenance and development of management by offering certain
present and future executive and key personnel a favorable opportunity to become
holders of stock in the Company over a period of years, thereby giving them a
permanent stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company or its subsidiaries. Options
granted under this Plan are intended not to qualify as "Incentive Stock Options"
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Plan shall be construed so as to carry out that intention.
1. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors composed of no fewer than two
"non-employee" "outside" directors designated by the Board of Directors. For
purposes of this Plan, "non-employee" directors shall include directors who meet
the tests for "non-employee directors" under the rules and regulations adopted
by the Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934 and (b) "outside" directors shall include directors who
meet the tests for "outside director" under the Regulations adopted by the
Internal Revenue Service relating to Section 162 of the Code, including all of
the transition rules thereunder. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all of the members,
shall be the acts of the Committee. This Plan and options granted under this
Plan are intended to qualify for exemption from Section 16(b) of the Securities
Exchange Act of 1934 and to qualify as performance-based compensation under
Section 162 of the Code and shall be interpreted in such a way as to result in
such qualification.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the persons to
be granted options under the Plan, (b) to determine the number of shares subject
to each option, (c) to determine the time or times at which options will be
granted, (d) to determine the option price of the shares subject to each option,
which price shall not be less than the minimum specified in Section 4 of the
Plan, (e) to determine the time or times when each option becomes exercisable
and the duration of the exercise period, (f) to prescribe the form or forms of
the agreements evidencing any options granted under the Plan (which forms shall
be consistent with the Plan), (g) to adopt, amend and rescind such rules and
regulations as, in the Committee's opinion, may be advisable in the
administration of the Plan, and (h) to construe and interpret the Plan, the
rules and regulations and the agreements evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken in good faith by
the Committee in connection with the administration, interpretation, and
implementation of the Plan and of its rules and regulations shall, to the extent
permitted by law, be conclusive and binding upon all optionees under the Plan
and upon any person claiming under or through such an optionee, and no director
of the Company shall be liable for any such decision made or action taken by the
Committee.
2. ELIGIBILITY. Options shall be granted only to key employees and
directors (other than members of the Committee) of the Company and its
subsidiaries.
3. GRANTING OF OPTIONS.
(a) The Committee may grant options under which a total of not
more than 200,000 shares of the common stock of the Company may be
purchased from the Company, subject to adjustment as provided in
paragraph 9. The maximum aggregate number of shares subject to options
which may be granted to any individual in any one fiscal year is
[60,000].
(b) No options shall be granted under the Plan after October
14, 2009. If an option expires or is terminated or canceled unexercised
as to any shares, such released shares may again be optioned (including
a grant in substitution for a canceled option). Shares subject to
options may be made available from unissued or reacquired shares of
common stock.
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(c) Nothing contained in the Plan or in any option granted
pursuant thereto shall confer upon any optionee any right to be
continued in the employment of the Company or any subsidiary of the
Company, or interfere in any way with the right of the Company or its
subsidiaries to terminate his employment at any time.
4. OPTION PRICE. The option price shall be determined by the Committee
and, subject to the provisions of paragraph 9, shall be not less than the fair
market value, at the time the option is granted, of the stock subject to the
option.
5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.
(a) Subject to the provisions of paragraph 7, each option
shall be for such term of not more than ten years as shall be
determined by the Committee at the date of the grant. Each option shall
become exercisable in such installments, at such time or times, and may
be subject to such conditions, including conditions based upon the
performance of the Company, as the Committee may in its discretion
determine at the date of grant.
(b) The Committee may in its discretion (i) accelerate the
exercisability of any option or (ii) at any time before the expiration
or termination of an option previously granted, extend the terms of
such option (including options held by officers) for such additional
period as the Committee, in its discretion, shall, determine, except
that the aggregate option period with respect to any option, including
the original term of the option and any extensions thereof, shall never
exceed ten years.
6. EXERCISE OF OPTION.
(a) An option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to
be purchased, accompanied by the full purchase price for the shares to
be purchased in cash or by check, except that the Committee may permit
the purchase price for the shares to be paid, all or in part, by the
delivery to the Company of other shares of common stock of the Company
in such circumstances and manner as it may specify. For this purpose,
the per share value of the Company's common stock shall be the fair
market value at the close of business on the date preceding the date of
exercise. In addition, in connection with the exercise of options
granted under the Plan, the Company may make loans to the optionees as
the Committee, in its discretion, may determine. Such loans shall be
subject to the following terms and conditions and such other terms and
conditions as the Committee shall determine not inconsistent with the
Plan. Such loans shall bear interest at such rates as the Committee
shall determine from time to time, which rates may be below then
current market rates or may be made without interest. Loans may be in
an amount sufficient to enable the optionee to pay any withholding tax
due in connection with an exercise of an option, in addition to the
exercise price; but in no event may any such loan exceed the fair
market value, at the date of exercise, of the shares covered by the
option, or portion thereof, exercised by the optionee. No loan shall
have an initial term exceeding nine years from the date of grant of the
related option, but any such loan may be renewable at the discretion of
the Committee. When a loan shall have been made, Shares having a fair
market value at least equal to the principal amount of the loan shall
be pledged by the optionee to the Company as security for payment of
the unpaid balance of the loan.
(b) At the time of exercise of any option, the Committee may,
if it shall determine it necessary or desirable for any reason, require
the optionee (or his heirs, legatees, or legal representative, as the
case may be) as a condition upon the exercise, to deliver to the
Company a written representation of present intention to purchase the
shares for his own account for investment and an agreement not to
distribute or sell such shares in violation of the registration
provisions of applicable securities laws. If such representation and
agreement are required to be delivered, an appropriate legend may be
placed upon each certificate delivered to the optionee upon his
exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent.
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(c) Each option shall also be subject to the requirement that,
if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the shares subject to the
option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
issue or purchase of shares thereunder, the option may not be exercised
in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
(d) If the Committee shall determine it necessary or desirable
for any reason, an option shall provide that it is contemplated that
the shares acquired through the exercise of the option will not be
registered under applicable federal and state securities laws and that
such shares cannot be resold unless they are registered under such laws
or unless an exemption from registration is available, and the
certificate for any such shares issued upon the exercise of the option
shall bear a legend making appropriate reference to such provisions.
7. TERMINATION OF EMPLOYMENT-EXERCISE THEREAFTER.
(a) If the employment or tenure as a director of any optionee
with the Company or any of its subsidiaries is terminated for any
reason other than death, permanent disability, retirement or cause,
such optionee's option, to the extent the option is exercisable at the
date of termination, shall expire ninety days after the termination of
employment or directorship (or upon the scheduled termination of the
option, if earlier), and all rights to purchase shares pursuant thereto
shall terminate at such time. Temporary absence from employment because
of illness, vacation, approved leave of absence, or transfer of
employment among the Company and its parent or subsidiary corporations,
shall not be considered to terminate employment or to interrupt
continuous employment.
(b) In the event of termination of employment or directorship
because of death or permanent disability (within the meaning of Section
22(e)(3) of the Code), the option may be exercised in full, unless
otherwise provided at the time of grant, without regard to any
installments established under paragraph 5 hereof, by the optionee or,
if he is not living, by his heirs, legatees, or legal representative or
alternate payee under a qualified domestic relations order, as the case
may be, during its specified term prior to one year after the date of
death or permanent disability. In the event of termination of
employment or directorship because of retirement, the option may be
exercised by the optionee (or, if he dies within three months after
such termination, by his heirs, legatees, legal representative or
alternate payee under a qualified domestic relations order, as the case
may be), at any time during its specified term prior to three months
after the date of such termination, but only to the extent the option
was exercisable at the date of such termination.
(c) If an optionee is discharged for just cause, his option
shall expire forthwith and all rights to purchase shares under it shall
terminate immediately. For this purpose, "discharge for just cause"
shall mean termination on account of gross negligence, dishonesty or
any willful material violation of any reasonable rule or regulation of
the Company of which the optionee has been advised in writing.
(d) Notwithstanding the foregoing provisions of this paragraph
7, the Committee may in the grant of any option make other and
different provisions with respect to its exercise after the optionee's
termination of employment or directorship.
8. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by
the optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order, and each option shall be
exercisable during any optionee's lifetime only by the optionee or optionee's
legal representative.
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9. ADJUSTMENT.
(a) In the event that the Company's outstanding common stock
is changed by any stock dividend, stock split or combination of shares,
the number of shares subject to this Plan and to options under this
Plan shall be proportionately adjusted.
(b) In case of any capital reorganization, or of any
reclassification of the common stock or in case of the consolidation of
the Company with or the merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
reclassification of outstanding shares of common stock) or of the sale
of the properties and assets of the Company as, or substantially as, an
entirety to any other corporation, the Company, or the corporation
resulting from such consolidation or surviving such merger or to which
such sale shall be made, as the case may be, shall determine that upon
exercise of options granted under the Plan after such capital
reorganization, reclassification, consolidation, merger or sale there
shall be issuable upon exercise of an option a kind and amount of
shares of stock or other securities or property (which may, as an
example, be a fixed amount of cash equal to the consideration paid to
stockholders of the Company for shares transferred or sold by them)
which the holders of the common stock (immediately prior to the time of
such capital reorganization, reclassification, consolidation, merger or
sale) are entitled to receive in such transaction as in the judgment of
the Committee is required to compensate equitably for the effect of
such event upon the exercise rights of the optionees. The above
provisions of this paragraph shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers and sales.
(c) In the event of any such adjustment the purchase price per
share shall be proportionately adjusted.
10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue
the Plan at any time. However, no such amendment or discontinuance shall (a)
change or impair any option previously granted without the consent of the
optionee, (b) increase the maximum number of shares which may be purchased by
all optionees or any one optionee, (c) change the minimum purchase price, (d)
change the limitations on the option period or increase the time limitations on
the grant of options, or (e) permit the granting of options to members of the
Committee.
11. EFFECTIVE DATE. The Plan has been adopted and authorized by the
Board of Directors for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock of the Company at a duly held stockholders' meeting, it
shall be deemed to have become effective on October 14, 1999, the date of
adoption by the Board of Directors. Options may be granted under the Plan before
its approval by the stockholders, but subject to such approval, and in each such
case the date of grant shall be determined without reference to the date of the
approval of the Plan by stockholders.
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APPENDIX D
FOURTH AMENDMENT TO THE
LIFEMARK CORPORATION
(FORMERLY MANAGED CARE SOLUTIONS, INC.)
EMPLOYEE STOCK PURCHASE PLAN
Lifemark Corporation (the "Corporation"), under its former name of
Managed Care Solutions, Inc., adopted the Managed Care Solutions, Inc. Employee
Stock Purchase Plan (the "Plan"), effective June 1, 1996, and has previously
adopted three amendments to the Plan. The Plan, as previously amended, is hereby
further amended, pursuant to the authority of Section 17 of the Plan, as
follows:
1. The final two sentences of the first paragraph of the preamble to
the Plan are amended to read as follows:
"Pursuant to this Plan, 450,000 shares of authorized but unissued
common stock of the Corporation may be offered for sale to eligible
employees through periodic offerings to be made during the eight year
period commencing June 1, 1996. The Plan will be implemented by
offerings of the Corporation's common stock (the "offerings"), as
described in more detail in Section 3 below."
2. The first sentence of the last paragraph of Section 18 is amended by
striking out "May 31, 2001", and substituting "May 31, 2004" in lieu thereof.
3. This amendment shall be effective on the date on which it is
approved by the shareholders of the Corporation. Except as otherwise amended
herein, the Plan shall remain in full force and effect, except that the
Committee is authorized to make any additional changes to the Plan of an
administrative or ministerial nature which may be appropriate to implement the
amendments set forth herein.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
executed this 11th day of August, 2000.
LIFEMARK CORPORATION
By: /s/ Michael J. Kennedy
---------------------------------
Its: Chief Financial Officer
<PAGE> 39
PROXY PROXY
LIFEMARK CORPORATION
ANNUAL MEETING, SEPTEMBER 11, 2000
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Rhonda E. Brede and Richard C. Jelinek or either of them, each with full
power of substitution, is hereby authorized to vote all shares of Common Stock
of Lifemark Corporation which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of Lifemark Corporation
to be held on September 11, 2000, and at any adjournment thereof, as indicated
herein.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED HEREIN, BUT
IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR ALL NOMINEES LISTED IN
THE ACCOMPANYING PROXY STATEMENT, FOR APPROVAL OF THE 2000 NON-EMPLOYEE DIRECTOR
STOCK PLAN, FOR APPROVAL OF THE 1999 EXECUTIVE STOCK OPTION AND OWNERSHIP PLAN
AND FOR APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 40
LIFEMARK CORPORATION
PLEASE MARK VOTE IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
The Board of Directors Recommends a Vote "FOR" each Listed Proposal.
<TABLE>
<CAPTION>
FOR ALL
FOR ALL WITHHOLD EXCEPT
<S> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS--
NOMINEES: RHONDA E. BREDE, RICHARD C. JELINEK, JOHN G. [ ] [ ] [ ]
LINGENFELTER, M.D., WILLIAM G. BROWN, HENRY H. KALDENBAUGH,
M.D., RISA LAVIZZO-MOUREY, M.D.
------------------------------------------------------------
<CAPTION>
(EXCEPT NOMINEE(S) WRITTEN ABOVE) FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
2. APPROVAL OF 2000 NON-EMPLOYEE DIRECTOR STOCK PLAN-- [ ] [ ] [ ]
3. APPROVAL OF 1999 EXECUTIVE STOCK OPTION AND OWNERSHIP PLAN-- [ ] [ ] [ ]
4. APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN-- [ ] [ ] [ ]
</TABLE>
DATED:
-----------------------------------, 2000
SIGNATURE(S)
-----------------------------------
-----------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME
(OR NAMES) APPEARS HEREIN.
EXECUTORS, ADMINISTRATORS, TRUSTEES
AND OTHERS SIGNING IN A
REPRESENTATIVE CAPACITY SHOULD
INDICATE THE CAPACITY IN WHICH THEY
SIGN. WHERE THERE IS MORE THAN ONE
OWNER, EACH SHOULD SIGN.
