SCHEDULE 14C INFORMATION
Information Statement
Pursuant to Section 14(c) of the Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2)
Definitive Information Statement
The Standish Care Company
(Name of Registrant as specified in its charter)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY INFORMATION STATEMENT - FOR SEC USE ONLY
The Standish Care Company
197 First Avenue
Needham, Massachusetts 02194
617-433-1000
INFORMATION STATEMENT
AND
SUPPLEMENT TO PROXY STATEMENT
INTRODUCTION
This Information Statement and Supplement to Proxy Statement (the
"Information Statement") is being furnished pursuant to Sections 14(a) and 14(c)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the
holders (the "Stockholders") of the common stock, par value $.01 per share (the
"Common Stock") and of the Series A Cumulative Convertible Preferred Stock, $.01
par value per share ("Series A Preferred Stock"), of The Standish Care Company,
a Delaware company (the "Company"), in connection with (i) the approval of an
amendment to the Company's Restated Certificate of Incorporation changing the
name of the Company to "CareMatrix Corporation"; (ii) the approval of an
amendment to the Company's Restated Certificate of Incorporation authorizing a
1-for-5 reverse split of the presently issued and outstanding shares of Common
Stock; (iii) the approval of an amendment to the Company's Restated Certificate
of Incorporation changing the number of shares of Common Stock which the Company
is authorized to issue to 35,000,000; (iv) the approval of an amendment to the
Company's By-Laws to provide for a Board of Directors divided into three classes
(Items (i), (ii) (iii) and (iv) are collectively referred to herein as the
"Amendments"); and (v) the approval of the Company's 1996 Equity Incentive Plan
(the "Equity Plan").
It is anticipated that on September 27, 1996, holders of a majority
of the 53,697,366 shares of Common Stock then outstanding will deliver written
consents to the Company adopting the Amendments and the Equity Plan. Since the
Amendments and the Equity Plan will have been approved by the holders of the
required majority of the Common Stock and the Series A Preferred Stock issued
and outstanding and taken together as a class, no proxies are being solicited
with this Information Statement.
Pursuant to Rule 14c-2 under the Exchange Act, the effective date of
the Amendments and the Equity Plan will not occur until a date at least twenty
(20) days after the date on which this Information Statement has been mailed to
the Stockholders. The Company anticipates that the actions contemplated by this
Information Statement will be effected on or about the close of business on
October __, 1996.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
This Information Statement is being sent to Stockholders of record
as of August 23, 1996. This Information Statement also serves as notice to
Stockholders of an action taken by less than unanimous written consent as
required by Section 228(d) of the Delaware General Corporation Law, as amended.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
The date of this Information Statement is September __, 1996.
This Information Statement is first being
sent to Stockholders on September __, 1996.
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<PAGE>
BACKGROUND
The Standish Care Company ("Standish") was incorporated in Delaware
in 1989. It is contemplated that, subject to a vote of Stockholders to be taken
at a meeting to be held on September 26, 1996, on September 27, 1996, twelve
wholly-owned subsidiaries of Standish will merge (the "Merger") into twelve
corporations owned primarily by Abraham D. Gosman, Andrew D. Gosman and Michael
M. Gosman, referred to herein as "Pre-Merger CareMatrix." The holders of the
common stock of Pre-Merger CareMatrix will receive approximately 92% of the
outstanding shares of Common Stock of Standish. For purposes of this Information
Statement, it is assumed that the Merger has occurred. All references to "the
Company," therefore, are to the entity surviving the Merger.
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning each of
the persons who will be directors or executive officers of the Company after the
Merger.
<TABLE>
<CAPTION>
Name Age Position
- --- ---- ---------
<S> <C> <C>
Abraham D. Gosman 67 Chairman of the Board; Director
Andrew D. Gosman 30 Vice Chairman; Executive Vice President; Director
Michael J. Doyle 38 Chief Executive Officer; Director
Robert M. Kaufman 47 President
Michael M. Gosman 33 Executive Vice President--Acquisition and Development;
Director
James M. Clary, III 35 Executive Vice President, General Counsel and Secretary
Joel A. Kanter 46 Executive Vice President
Harold E. Nash, III 43 Executive Vice President--Construction/Planning and Zoning
Marc H. Benson 40 Chief Operating Officer
Donald J. Amaral 43 Director
H. Loy Anderson, Jr. 52 Director
Rev. Bedros Baharian 79 Director
Stephen E. Ronai 59 Director
</TABLE>
Executive Compensation
Standish. As required by the regulations promulgated under the
Securities Exchange Act of 1934, as amended, the following Summary Compensation
Table sets forth the annual and long term compensation paid by Standish with
regard to 1993, 1994 and 1995 to Mr. Doyle, its Chief Executive Officer, and to
the other individuals who served as executive officers of Standish as of
December 31, 1995 and whose cash compensation exceeded $100,000 for services in
all capacities to Standish. Information regarding the annual and long term
compensation paid by Standish to individuals who formerly served as executive
officers of Standish and whose cash compensation exceeded $100,000 during the
fiscal year ended December 31, 1995 is set forth in the footnotes to the Summary
Compensation Table.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(1)
Securities/
Name and Other Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options/SARs($)(2) Compensation
- ------------------ ---- --------- ------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Doyle, 1995 157,500(3) **(4) - 50,000(7)
Chairman and Chief 1994 150,000 * * ** (5)
Executive Officer 1993 150,000 19,500 19,528 50,000
Michael J. Brenan, 1995 67,998(3)(6) **(4) **(6) 45,000(7)
President and Chief
Operating Officer
Kenneth M. Miles, 1995 90,000(3) * *(8) 35,000(7)
Chief Financial 1994 * * * **
Officer and 1993 * ** ** 9,500
Treasurer
C. Joel Glovsky, 1995 150,000(3) ** - **
Executive Vice 1994 150,000 * 22,000(8) **
President 1993 127,500 19,500 * 15,000
</TABLE>
* Amount insufficient to be reportable under applicable rules of the
Commission.
** No such awards were made to the individual during the relevant fiscal years.
(1) In addition to the information shown on the table above in respect of
the four named executive officers (the "Named Executive Officers"),
during 1994 the Company paid a salary of $95,000 to Christopher W.
Hollister, who resigned from his position as Standish's Executive
Vice President and a director effective May 1995. During 1994, Mr.
Hollister received a housing relocation allowance of $25,000 and an
automobile allowance of $8,000. During 1994, Standish also paid
salary in the amount of $101,327 to G. Faye Godwin, who resigned from
her position as Standish's Chief Operating Officer in May 1995.
During 1994, Standish granted options to Ms. Godwin under its
Stock Option Plan (as defined below under "--Stock Option Plans")
to purchase 50,000 shares of its Common Stock at a price of $6.25
per share. Two-thirds of those options had not vested and expired
in May 1995 upon the termination of her employment. In accordance
with the terms of the Stock Option Plan. Ms. Godwin's remaining
options expired within three months of her departure from Standish.
(2) In February 1995, Standish adjusted the exercise price of shares
issuable upon exercise of stock options previously awarded or granted
to the named executive officers by replacing such options with a like
number of options repriced to $2.00 per share, which was the closing
bid price for the Common Stock as reported by Nasdaq for the day
preceding the date such repricing was authorized.
(3) All compensation figures shown for 1995 reflect the amounts which the
named executive officer received by year end under their respective
employment agreements. Mr. Doyle's annual base salary increased from
$150,000 to $165,000 as of July 1, 1995. Mr. Brenan's employment with
Standish commenced as of July 25, 1995 at an annual base salary of
$150,000. Mr. Miles annual base salary increased from $75,000 to
$105,000 as of July 1, 1995. Dr. Glovsky's annual base salary was
$150,000.
(4) Bonus compensation, if any, is determined by Standish's Board of
Directors in its sole discretion up to 40%, 30% and 25% of the annual
base salaries of Messrs. Doyle, Brenan and Miles, respectively. No
bonuses were paid in 1995.
(5) Under the terms of his employment agreement, Mr. Doyle is entitled to
receive an automobile allowance of $10,000 per annum and payment of
premiums of approximately $624 on a life insurance policy for a
beneficiary designated by Mr. Doyle. During 1993, Mr. Doyle received
an automobile allowance of $10,000 and a housing relocation allowance
of $9,000.
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<PAGE>
(6) Under the terms of his employment agreement, Mr. Brenan was entitled
to receive an automobile allowance of $6,000 per annum. Mr. Brenan
resigned from his position as President and Chief Operating Officer
of Standish and director effective August 15, 1996. For amounts of
consulting fees, a lump sum severance payment and other sums and
benefits payable to Mr. Brenan under the Termination Agreement, see
"-Termination Agreements."
(7) Stock options were granted to each of Messrs. Doyle, Brenan and
Miles, dated as of July 1, 1995 at an exercise price per share as
established in September 1995 at $2.38 per share. In the case of
Messrs. Doyle and Miles, the options vest over two years, with
one-third vesting on the date of grant and an additional one-third on
each anniversary provided that the grantee remains in the employ of
the Company. In the case of Mr. Brenan, vesting of his options was
accelerated under this Termination Agreement. See "Termination
Agreements."
(8) Under the terms of his employment agreement, Mr. Miles is entitled to
receive an automobile allowance of $6,000 per annum, effective as of
March 1, 1996.
(9) During 1994, Dr. Glovsky received an automobile allowance of $9,492
and Standish paid premiums in the amount of $12,508 on an
insurance policy on Dr. Glovsky's life for a beneficiary to be
designated by him. Dr. Glovsky retired from his position as an
Executive Vice President of Standish and director effective
December 31, 1995. For amounts of severance pay and other sums and
benefits to be paid or granted to Dr. Glovsky in connection with his
early retirement from the Company, see "-Termination Agreements."
Compensation of Directors
Officers who are members of the Board of Directors do not receive
compensation for serving on the Board. Each other member of the Board receives
annual compensation of $15,000 for serving on the Board, plus a fee of $1,000
for each Board of Directors' meeting attended and $500 for telephonic meetings.
In addition, such directors receive an additional fee of $500 for each committee
meeting attended, except that only one fee will be paid in the event that more
than one such meeting is held on a single day. All directors receive
reimbursement of reasonable expenses incurred in attending Board and committee
meetings and otherwise carrying out their duties.
Employment Agreements
The Company has employment agreements with Mr. Doyle, Chief Executive
Officer, Mr. Miles, Senior Vice President of Finance, and Mr. Benson, Chief
Operating Officer. The employment agreement with Mr. Doyle, as amended effective
September 27, 1996, provides for an initial employment term ending December 31,
1999, continuing thereafter on year-to-year renewal terms, subject to either the
Company's or the employee's electing not to renew, an annual base salary
of$250,000 through December 31, 1999, bonus compensation to be determined by the
Board of Directors of the Company in its sole discretion, restrictions against
competition with the Company, an automobile allowance of $10,000 per annum and
payment of premiums (amounting to approximately $6,300 in 1995) on a life
insurance policy in the amount of $500,000 for a beneficiary to be designated by
Mr. Doyle. Such policy is in addition to the key man life insurance policy to be
maintained by and for the benefit of the Company.
The employment agreement between the Company and Mr. Miles is similar
in structure to Mr. Doyle's, and contains substantially the same provisions,
except that Mr. Miles' agreement provides for a term through December 31, 1998,
subject to renewal on a year-to-year basis, an annual base salary of $125,000
plus bonus compensation to be determined by the Board of Directors in its sole
discretion, but makes no provision for life insurance.
Both of the employment agreements described above also provide that
if the employee's employment terminates within a 24-month period following the
occurrence of certain changes in control because, among other
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events, either (a) his employment is not renewed by the Company, (b) his
employment is involuntarily terminated other than for cause as of a date prior
to the end of the initial term or any renewal term or (c) a change in his duties
occurs, he is entitled to receive a lump sum severance payment within 30 days
after ceasing to be employed equal to 2.99 times (in the case of Mr. Doyle) and
1.0 times (in the case of Mr. Miles) the yearly average total compensation
(consisting of base salary and any cash bonus) payable with respect to the
previous five full calendar years.
The employment agreement between the Company and Mr. Benson provides
for an initial employment term ending August 26, 1999 and continuing thereafter
on a year-to-year basis, subject to the Company's or Mr. Benson's election not
to renew. The agreement provides for an annual base salary of $175,000, bonus
compensation granted in the sole discretion of the Company, a monthly car
allowance of $550 and a grant of options to purchase 131,000 shares of Common
Stock at an exercise price of $4.00 per share vesting in equal increments over
three years beginning in August 1997. Mr. Benson's agreement may be terminated
by the Company without cause upon written notice or by Mr. Benson in the event
of a failure of the Company to substantially perform its duties under the
agreement. Upon such termination, Mr. Benson would be entitled to receive his
salary payments for the twelve months following such termination.
Termination Agreements
During 1995, Standish also had an employment agreement with Dr.
Glovsky, which provided for a term of employment through December 31, 1997, a
base annual salary of $150,000 and various other benefits. On December 29, 1995,
Standish and Dr. Glovsky, a co-founder, director and officer of Standish,
entered into an Early Retirement and Non-Competition Agreement (the "Early
Retirement Agreement"). Under the terms of the Early Retirement Agreement, Dr.
Glovsky resigned as a director and an officer of Standish effective December
31, 1995. Standish and Dr. Glovsky agreed to terminate his employment
agreement which was scheduled to expire on December 31, 1997 and Standish
agreed to enter into a five year consulting arrangement. Under the Early
Retirement Agreement, Dr. Glovsky will provide services to the Company on an as
needed basis over the next five years. The Company will pay Dr. Glovsky $60,000
per annum for these services and will also provide Dr. Glovsky with health
insurance, life insurance and other certain benefits through 1997. As part of
the Early Retirement Agreement, Standish also agreed to forgive loans
totalling approximately $139,000 (including interest) that Standish had
extended to Dr. Glovsky as well as pay approximately $49,900 for income taxes on
behalf of Dr. Glovsky for the forgiveness of these loans. Standish also
entered into a non-compete agreement with Dr. Glovsky providing for payments
totalling $40,000 under a promissory note and fully vested Dr. Glovsky's stock
options.
Until Dr. Glovsky's shares of Standish Common Stock beneficially
owned by him are acquired as part of a merger or take-over proposal at a per
share value of at least $5.00 or are otherwise disposed by Dr. Glovsky,
whichever shall occur first, but not after December 31, 1996, Dr. Glovsky's
monthly consulting fee under the Early Retirement Agreement will be increased by
$4,000 per month and his non-compete note is subject to adjustment and Dr.
Glovsky has the right to require the Company to purchase up to 65,000 of his
shares at a purchase price of $6.00 per share.
During 1995 and 1996, Standish had an employment agreement with
Michael J. Brenan, which provided for a term of employment through December 31,
1997, a base salary of $150,000 and various other benefits. Effective August 15,
1996, Mr. Brenan resigned as a Director, officer and employee. In August 1996,
Standish and Michael J. Brenan, the then President and Chief Operating
Officer of Standish, entered into an agreement (the "Termination Agreement")
under which Mr. Brenan resigned as a Director and officer of Standish and his
employment was terminated. Under the Termination Agreement, Standish made a
lump sum severance payment to Mr. Brenan in the amount of $150,000 (less any
consulting fees previously paid), will provide
5
<PAGE>
family health insurance through December 31, 1996 and a moving allowance not to
exceed $5,000. The Termination Agreement also provides for acceleration of the
vesting of Mr. Brenan's unexercised stock options to purchase 45,000 shares of
Common Stock at a purchase price of $2.38 per share. In addition, the
Termination Agreement prohibits Mr. Brenan, for a period of one year beginning
September 27, 1996 from engaging in any competing activity within a twenty-mile
radius of any offices or Company operated communities, facilities or development
sites.
Limitation of Liability and Indemnification Agreements
As permitted by the Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation provides for the elimination, subject to
certain conditions, for the personal liability of directors of the Company for
monetary damages for breach of their fiduciary duties.
The Company's By-Laws provide for the indemnification of directors
and officers. In addition, the Company has entered into indemnification
agreements with each of its directors. The Company may also enter into similar
agreements with certain of the Company's officers who are not also directors.
Generally, the Company's By-Laws and the indemnification agreements attempt to
provide the maximum protection permitted by Delaware law with respect to
indemnification of directors and officers.
The indemnification agreements, like the Company's By-Laws, provide
that the Company will pay certain amounts incurred by a director or officer in
connection with any civil or criminal action or proceeding, and specifically
including actions by or in the name of the Company (derivative suits), where the
individual's involvement is by reason of the fact that he is or was a director
or officer. Such amounts include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts, and
other expenses customarily incurred in connection with legal proceedings. Under
the indemnification agreements and the Company's By-Laws, a director or officer
will not receive indemnification if he is found not to have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company.
Stock Option Plans
The Company's 1991 Combination Stock Option Plan (as amended and
restated to date, the "Stock Option Plan") was adopted initially in October
1991, has been amended several times subsequently, and is proposed to be amended
at the Special Meeting of Stockholders to be held September 26, 1996, in order
to increase the number of shares of Common Stock reserved for issuance under it
to 2,000,000. The number of shares currently reserved for issuance under the
Stock Option Plan is 785,000. The purpose of the Stock Option Plan is to provide
long-term incentives and rewards to the Company's key employees, officers,
directors and others in a position to contribute to the success of the Company.
Under the Stock Option Plan, the Company may grant both incentive
stock options intended to qualify under Section 422 of the Internal Revenue Code
of 1986, as amended ("incentive stock options"), and options which are not
qualified as incentive stock options ("non-qualified stock options"). Incentive
stock options may be granted only to persons who are employees of the Company at
the time of the grant, which may include officers and directors (other than
members of the Compensation Committee) who are also employees. Non-qualified
stock options may be granted to officers, directors (other than members of the
Compensation Committee) or employees of, or consultants or advisors to, the
Company at the time of the grant, and other persons, provided that directors who
serve on the Compensation Committee are not eligible to receive options under
the Stock Option Plan.
No stock appreciation rights have been granted by the Company. None
of the Named Executive Officers exercised stock options during 1995, and no
stock options were repriced during 1995, except on February 18, 1995,
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<PAGE>
as permitted by the terms of the Stock Option Plan, the Board of Directors
determined to make appropriate adjustments in the exercise price of stock
options previously awarded under the Stock Option Plan to take into account the
effect of issuance of a substantial number of shares of the Company Common Stock
pursuant to the exchange offer (the "Exchange Offer") made by the Company in
1994, pursuant to which, on the basis of a 2.6:1 ratio, an aggregate of
1,701,180 shares of the Company Common Stock were issued in exchange for 654,300
shares of the Company's Series A Preferred Stock. Pursuant to the adjustments
adopted by the Board of Directors, the Company exchanged options to purchase an
aggregate of 205,700 shares of the Company Common Stock for outstanding options
to purchase a like number of shares and the exercise price was set at $2.00 per
share (the closing sale price as reported by Nasdaq SmallCap System for the day
immediately preceding the Board's determination to make such adjustment).
Directors who are not also employees of the Company are eligible to
participate in the Company's 1995 Non-Qualified Stock Option Plan. Under the
1995 Non-Qualified Stock Option Plan, each non-employee director, upon becoming
a director, is automatically granted options to purchase 6,000 shares of
Common Stock, subject to vesting over three years, and options to purchase
additional shares hereafter are based upon the formula provisions of said Plan.
In June 1995, pursuant to the 1995 Non-Qualified Stock Option Plan, the Company
granted options to purchase 6,000 shares of Common Stock to each of Messrs.
DeVore and Sterman and Dr. Rayport. The Company intends to grant options to
purchase 6,000 shares of Common Stock to each of Messrs. DeVore and Sterman and
to John Carucci assuming that they are elected directors at the Special Meeting
of Stockholders to be held September 26, 1996. Messrs. DeVore and Sterman are
currently directors of Standish who will resign upon completion of the Merger.
Dr. Rayport surrendered his options when he resigned as a director in July 1995.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1995
Individual Grants
----------------------------------------------------------------------------
Number of Securities % of Total
Underlying Options Exercise or
Options Granted to Base Price
Granted Employees in 1995 ($/sh) Expiration Date
------- ----------------- ------ ---------------
<S> <C> <C> <C> <C>
Michael J. Doyle 50,000 23.9% $2.38 7/1/05
Michael J. Brenan 45,000 21.5% $2.38 7/1/05
Kenneth M. Miles 35,000 16.7% $2.38 7/1/05
</TABLE>
None of the Named Executive Officers exercised stock options during
1995, and no stock options were repriced during 1995 except, as noted above,
action by the Board of Directors to reprice outstanding stock options was taken
in February 1995. In June 1996, Standish granted to Messrs. Doyle and Miles
stock options to purchase 50,000 and 25,000 shares, respectively (increased upon
consummation of the Merger to 500,000 and 250,000 shares respectively), of
Common Stock at an exercise price of $2.94 per share, the closing price of the
Common Stock on the Nasdaq SmallCap System on the date of initial grant
authorization. By action taken by the Board of Directors on July 29 and August
15, 1996, these options were modified to provide for immediate vesting in lieu
of the original vesting in installments over two years.
The Company does not maintain a long-term incentive plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
Common Stock. The following table and the notes thereto set forth
information regarding the anticipated beneficial ownership of Common Stock of
the Company, as of September 27, 1996, by each Director and each Named Executive
Officer, by persons who beneficially own 5% or more of the outstanding shares of
Common Stock, and by all Directors and executive officers of the Company as a
group. The beneficial ownership information described and set forth below is
based on information furnished by the specified persons and is determined in
accordance with Rule 13d-3 under the Exchange Act. It does not constitute an
admission of beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
Common Stock
Name and Address of Beneficial Owner Beneficially Owned(1) Percentage(2)
- ----------------------------------- --------------------- -------------
<S> <C> <C>
Abraham D. Gosman................................... 42,446,539(3) 78.6%
777 South Flagler Drive
West Palm Beach, FL 33401
Andrew D. Gosman.................................... 17,111,833(4) 32.0%
197 First Avenue
Needham, MA 02194
Michael M. Gosman................................... 17,111,833(4) 32.0%
197 First Avenue
Needham, MA 02194
Michael J. Doyle.................................... 755,699(5) 1.4%
Kenneth M. Miles.................................... 304,500(6) *
Donald J. Amaral.................................... 0 0.0%
H. Loy Anderson, Jr................................. 0 0.0%
Rev. Bedros Baharian................................ 0 0.0%
Stephen E. Ronai.................................... 0 0.0%
All directors and executive officers as a group..... 46,702,238 85.5%
(13 persons including certain of the above-named
individuals)
</TABLE>
- --------------------
* Represents less than 1%.
(1) Includes shares which may be acquired within 60 days of September 27,
1996 pursuant to exercise or conversion of outstanding options, warrants
and convertible securities of the Company. The table does not show the
45,000 shares subject to options held by Michael J. Brenan or the 63,523
shares owned by Dr. C. Joel Glovsky, who are no longer officers or
directors of the Company. Their share ownership represents less than 1%
of the outstanding shares of Common Stock.
(2) The percentages shown are based on an anticipated 53,697,366 shares of
Common Stock as of September 27, 1996 outstanding plus, as to each
individual and group listed, the number of shares of Common Stock deemed
to be owned by such holder pursuant to Rule 13d-3 under the Exchange Act,
assuming exercise or conversion of outstanding options, warrants and
convertible securities of the Company held by such holder which are
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<PAGE>
exercisable within 60 days of September 27, 1996, after application of
anti-dilution adjustments in respect of such holders.
(3) Consists of (a) 3,509,167 shares of Common Stock owned directly, (b)
38,600,833 shares of Common Stock held by Abraham D. Gosman as trustee
for the benefit of each of his sons, Andrew D. Gosman and Michael M.
Gosman, who are directors of the Company (as trustee, Abraham D. Gosman
has investment power with respect to all such shares and voting power
with respect to 21,489,000 of such shares), and (c) 336,538 shares of
Common Stock currently issuable upon conversion of the Series B Preferred
Stock at an initial conversion price of $4.16 per share, subject to
customary anti-dilution adjustments.
(4) 38,600,833 shares (71.8% of the outstanding shares) of Common Stock are
held in trust for Andrew and Michael Gosman by their father Abraham D.
Gosman who has sole investment power with respect to all of the shares
and sole voting power with respect to 21,489,000 of the shares. Andrew
and Michael Gosman have shared voting power with respect to 17,111,833
shares.
(5) Includes 45,339 shares held by Mr. Doyle's spouse and 13,560 shares held
by trusts for the benefit of each of Mr. Doyle's two minor children. Mr.
Doyle disclaims beneficial ownership of the shares held by his spouse and
by the two trusts. Also includes (a) 50,000 shares which may be acquired
within 60 days pursuant to options dated as of February 28, 1995, (b)
50,000 shares which may be acquired within 60 days pursuant to options
dated as of July 1, 1995 and (c) 500,000 shares which may acquired within
60 days pursuant to options dated as of June 28, 1996.
(6) Includes (a) 54,500 shares of Common Stock which may be acquired within
60 days pursuant to options dated as of February 27, 1993, November 12,
1993 and July 1, 1995 and (b) 250,000 shares which may be acquired within
60 days pursuant to options dated as of June 28, 1996.
Series A Preferred Stock. As of August 23, 1996, Robert A.
Schneider and Deltec Asset Mgmt. Corp. ("Deltec") beneficially owned 14,000 and
10,000 shares, respectively, representing 48.3% and 34.5% of the outstanding
shares, of the Company's Series A Preferred Stock. Mr. Schneider's address is 2
Broadway, New York, NY 10004. Deltec's address is 535 Madison Avenue., New York,
NY 10022.
Recent Developments. The Company has filed with the Securities and
Exchange Commission a Registration Statement on Form S-1 covering an
underwritten public offering of up to 35,937,500 shares of Common Stock
(including 4,687,500 shares to cover over-allotments). Certain of the principal
stockholders of the Company may sell shares of Common Stock upon exercise by the
underwriters of their over-allotment option.
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<PAGE>
CHANGE OF CORPORATE NAME
Proposed Amendment
On September 27, 1996, the Board of Directors will direct that there be
submitted to the Stockholders a proposed amendment to the Restated Certificate
of Incorporation to provide for a change of the name of the Company from "The
Standish Care Company" to "CareMatrix Corporation". It is anticipated that on
September 27, 1996, holders of a majority of the shares of Common Stock
outstanding will deliver written consents to the Company adopting the name
change.
REVERSE SPLIT OF ISSUED AND OUTSTANDING SHARES OF COMMON STOCK;
REDUCTION IN AUTHORIZED CAPITAL
General
On September 27, 1996, the Board of Directors of the Company will direct
that there be submitted to the Stockholders a proposed 1-for-5 reverse split of
the then issued and outstanding shares of Common Stock (the "Reverse
Split"). It is anticipated that on September 27, 1996, holders of a majority of
the shares of Common Stock outstanding will deliver written consents to the
Company adopting the Reverse Split. The effect of the Reverse Split upon holders
of Common Stock will be that the total number of shares of the Company's Common
Stock held by each Stockholder immediately prior to the Reverse Split (the "Old
Shares") will be automatically converted into the number of whole shares of
Common Stock (the "New Shares") equal to the number of Old Shares owned divided
by 5, adjusted, as described below, for any fractional shares. Each
Stockholder's percentage ownership interest in the Company and proportional
voting power will remain unchanged, except for minor differences resulting from
adjustments for fractional shares. The rights and privileges of the holders of
shares of Common Stock will be substantially unaffected by the Reverse Split. No
certificates or scrip representing fractional shares of the Company's Common
Stock will be issued to Stockholders because of the Reverse Split. In lieu of
such fractional interest, a Stockholder will receive cash equal to the average
closing price of the Common Stock for the three trading days following the
Reverse Split Effective Date (as defined below) multiplied by the fractional
interest.
Purposes of the Proposed Reverse Split
The Reverse Split is desirable for several reasons. The Reverse Split
should enhance the acceptability of the Common Stock by the financial community
and investing public. The reduction in the number of issued and outstanding
shares of Common Stock caused by the Reverse Split is expected to increase the
per share market price of the Common Stock. The proposed Reverse Split will
likely result in a broader market for the Common Stock than that which currently
exists. A variety of brokerage house policies and practices tend to discourage
individual brokers within those firms from dealing with lower priced stocks.
Some of those policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function to make the handling
of lower priced stocks economically unattractive to brokers. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of lower priced stock because the brokerage commission on a sale of
lower priced stock generally represents a higher percentage of the sales price
than the commission on a relatively higher priced issue. The proposed Reverse
Split should result in a price level for the Common Stock that will reduce, to
some extent, the effect of the above-referenced policies and practices of
brokerage firms and diminish the adverse impact of trading commissions on the
market for the Common Stock. The expected increased per share price level may
also encourage interest and trading in the Common Stock and possibly promote
greater liquidity for the Company's Stockholders, although such liquidity could
be adversely affected by the reduced number of shares of
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Common Stock outstanding after the Reverse Split Effective Date (as defined
below). Finally, the Reverse Split is expected to help the Company meet the
minimum listing requirements established by Nasdaq for all Nasdaq National
Market companies.
However, there can be no assurance that any or all of these effects will
occur, including, without limitation, that the market price per New Share of
Common Stock after the Reverse Split will be five times the market price per Old
Share of Common Stock before the Reverse Split, or that such price will either
exceed or remain in excess of the current market price. Further, there is no
assurance that the market for the Common Stock will be improved.
The Reverse Split may result in some Stockholders owning "odd-lots" of
less than 100 shares of Common Stock. Brokerage commissions and other costs of
transactions in odd-lots are generally somewhat higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.
Stockholders have no right under Delaware law or under the Company's
Restated Certificate of Incorporation or By-Laws to dissent from the Reverse
Split or to dissent from the payment of cash in lieu of issuing fractional
shares.
Effective Date of the Reverse Split
The Reverse Split will be effected by means of filing an Amendment to the
Restated Certificate with the Delaware Secretary of State. The Amendment to the
Restated Certificate will be filed with the Delaware Secretary of State as
promptly as practicable and the Reverse Split will become effective as of 5:00
p.m., Eastern daylight time, on the date of such filing (the "Reverse Split
Effective Date"). Without any further action on the part of the Company or the
Stockholders, after the Reverse Split, the certificates representing Old Shares
will be deemed to represent one-fifth the number of New Shares, as adjusted.
Change in Authorized Capital
The Company has authorized capital stock of 75,000,000 shares of Common
Stock. In connection with the Reverse Split, the authorized capital stock will
be changed to 35,000,000 shares. The following table illustrates the principal
effects of the proposed Reverse Split and decrease in outstanding Common Stock
assuming no additional shares of Common Stock are issued prior to the Reverse
Split Effective Date as a result of the exercise of any options or warrants:
Shares of Prior to Proposed After Proposed
Common Stock Reverse Split Reverse Split
------------ ----------------- --------------
Authorized 75,000,000 35,000,000
Outstanding 53,697,366 10,739,473
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Changes Affecting Capital Stock
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a result, the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Split will not effect the registration of the Common
Stock under the Exchange Act. After the Reverse Split Effective Date, trades of
the New Shares will continue to be reported on the Nasdaq SmallCap Market under
the Company's symbol.
Exchange of Stock Certificates
As soon as practicable after the Reverse Split Effective Date, the
Company will send a letter of transmittal to each holder of record of Old Shares
of Common Stock outstanding on the Reverse Split Effective Date. The letter of
transmittal will contain instructions for the surrender of certificate(s)
representing such Old Shares to American Securities Transfer Incorporated, the
Company's exchange agent (the "Exchange Agent"). Upon proper completion and
execution of the letter of transmittal and return thereof to the Exchange Agent,
together with the certificate(s) representing Old Shares, a Stockholder will be
entitled to receive a certificate representing the number of New Shares of
Common Stock into which his Old Shares have been reclassified and changed as a
result of the Reverse Split and cash for any fractional share interest.
Stockholders should not submit any certificates until requested to do
so. No new certificate will be issued to a Stockholder until he has surrendered
his outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the Exchange Agent.
Options, Warrants and Rights to Purchase
The Company has previously issued, and has outstanding, various
options, warrants and rights to purchase, including convertible preferred stock,
shares of Common Stock. In general, both the exercise price and the number of
shares subject to each such option, warrant and right will be affected by the
Reverse Split. The number of shares subject to such option, warrant or right
will be reduced by 80% and the exercise price of such option, warrant or right
will increase by approximately five times.
Federal Income Tax Consequences of the Reverse Split
The Company has not sought and will not seek an opinion of counsel or
a ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Split. The Company, however, believes that because
the Reverse Split is not part of a plan to periodically increase a Stockholder's
proportionate interest in the assets or earnings and profits of the Company, the
Reverse Split will have the following federal income tax effects.
1. A Stockholder will not recognize gain or loss on the exchange.
In the aggregate, the Stockholder's basis in the New Shares will
equal his basis in the Old Shares.
2. A Stockholder's holding period for the New Shares will be the
same as the holding period of the Old Shares exchanged therefor.
3. The Reverse Split will constitute a reorganization within
the meaning of Section 368(a)(1)(E) of the Code and the
Company will not recognize any gain or loss as a result of
the Reverse Split.
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Miscellaneous
The Board of Directors may abandon the proposed Reverse Split at any
time before the filing of the Amendment to the Restated Certificate of
Incorporation and prior to the Reverse Split Effective Date if for any reason
the Board of Directors deems it advisable to abandon the proposal. The Board of
Directors may consider abandoning the proposed Reverse Split if it determines,
in its sole discretion, that the Reverse Split would adversely affect the
ability of the Company to raise capital or the liquidity of the Common Stock,
among other things. In addition, the Board of Directors may make any and all
changes to the Amendment to the Restated Certificate that it deems necessary to
file the Amendment to the Restated Certificate with the Delaware Secretary of
State and give effect to the Reverse Split.
AMENDMENT TO BY-LAWS TO PROVIDE
FOR CLASSIFIED BOARD OF DIRECTORS
On September 27, 1996, the Board of Directors will direct that there
be submitted to the Stockholders a proposed amendment to the By-laws of the
Company to provide for a Board of Directors divided into three classes. It is
anticipated that on September 27, 1996, holders of a majority of the shares of
Common Stock outstanding will deliver written consents to the Company adopting
the classified Board. Proposed Section 2.2 of Article II, which follows, would
provide for the Board to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board
will be elected each year. Directors elected to Class I positions will serve
until the 1998 annual meeting of Stockholders. Directors elected to Class II and
III positions will serve until the 1999 and 2000 annual meetings, respectively.
When the Board adds additional directors, such directors will be added in a
manner such that ultimately each class of directors will have an equal number of
members.
Commencing with the re-election of directors to Class I positions in
1998, each class of directors elected at an annual meeting will be elected to a
three year term. Vacancies occurring in any class (or arising from an increase
in the size of the Board) may be filled solely by the affirmative vote of a
majority of the entire Board to serve for the remainder of the term of the
class. This proposal gives the Board a greater likelihood of continuity and
experience since at any one time at least one-third of the Board will be in its
second year of service and at least one-third will be in its third year of
service. Members elected within the most recent year will comprise approximately
one-third of the membership of the Board. Although the Board is not aware of any
problems experienced by the Company in the past with respect to continuity and
stability of leadership and policy, the Board believes that a classified Board
will decrease the likelihood of problems of continuity and stability arising in
the future.
Proposed Section 2.2 of Article II of the Company's By-Laws would be
applicable to every future election of directors. As such, the holders of a
majority of the shares would require more time to replace a majority of the
directors. Under Delaware law, directors may be removed at any time without
cause by the holders of a majority of the shares then entitled to vote at an
election of directors, unless the Board is classified as proposed herein.
Adoption of this proposed Section 2.2 will deny Stockholders the right to remove
a director without cause. Directors will continue to be removable by the
Stockholders with cause by the affirmative vote of a majority of the outstanding
shares of Common Stock.
A classified Board with staggered three-year terms will also make the
Company less susceptible to hostile takeovers since, if the Board was comprised
of eight members as at present, a majority Stockholder will, under the proposed
amendment, normally need at least two annual meetings to obtain control of a
majority of the Board, as opposed to one meeting. The proposed amendment will
likely lead a well financed bidder into direct negotiation with the Board and
therefore discourage potential hostile takeovers of the Company. Although
management will
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control more than a majority of the shares of Common Stock, that control may be
diluted by future issuances of Common Stock. Therefore, the proposed amendment
may discourage future potential hostile takeovers.
This proposal is not the result of any specific effort to accumulate
the Company's securities or to obtain control of the Company by means of a
merger, tender offer, solicitation in opposition to management or otherwise.
Further, although this provision may be beneficial to management in a hostile
tender offer, it may have an adverse impact on Stockholders who may want to
participate in such a tender offer.
The text of proposed Section 2.2 of Article II of the Company's
By-Laws is as follows:
Section 2.2 Number of Directors; Qualifications; Classified Board.
The Board of Directors shall consist of such number of directors, not
less than one (1) nor more than ten (10), as shall be fixed from time
to time by the Board of Directors. No director need be a stockholder.
Effective as of the 1997 Annual Meeting , the Board of Directors
shall be divided into three classes, designated Class I, Class II and
Class III, as nearly equal in number as possible and the term of
office of directors of one class shall expire at each annual meeting
of Stockholders, and in all cases as to each director, until his
successor shall be elected and shall qualify, or until his earlier
resignation, removal from office, death or incapacity. Additional
directorships resulting from an increase in number of directors shall
be apportioned among the classes as equally as possible. Vacancies,
including vacancies created from an increase in the size of the Board
of Directors, shall be filled by the affirmative vote of a majority
of the entire Board. The initial term of office of directors of Class
I shall expire at the annual meeting of Stockholders in 1998; that of
Class II shall expire at the annual meeting in 1999; and that of
Class III shall expire at the annual meeting in 2000. At each annual
meeting of Stockholders, the number of directors equal to the number
of directors of the class whose term expires at the time of such
meeting (or, if less, the number of directors properly nominated and
qualified for election) shall be elected to hold office until the
third succeeding annual meeting of Stockholders after their election.
1996 EQUITY INCENTIVE PLAN
On September 27, 1996, the Board of Directors will direct that there
be submitted to the Stockholders a proposal to approve the 1996 Equity Incentive
Plan (the "Equity Plan") as set forth in Appendix A to this Information
Statement. This discussion is qualified in its entirety by reference to Appendix
A. It is anticipated that on September 27, 1996, holders of a majority of the
shares of Common Stock outstanding will deliver written consents to the Company
adopting the Equity Plan. As presented in Appendix A and discussed herein, the
Equity Plan does not contemplate the Reverse Split. If the Reverse Split is
approved, as expected, the number of shares of Common Stock underlying the
Equity Plan, and the maximum number of shares any one individual can receive in
a year, shall be reduced by a factor of five.
The Equity Plan provides for the award ("Award") of up to six million
shares of Common Stock in the form of incentive stock options ("ISOs"),
non-qualified stock options ("Non-Qualified Stock Options"), bonus stock,
restricted stock, performance shares and stock appreciation rights. All
employees, directors and consultants of the Company and any of its subsidiaries
are eligible to participate in the Equity Plan.
The Equity Plan will be administered by the Compensation Committee
(the "Committee"), as the designee of the Board of Directors, which determines
who shall receive Awards from those employees and directors who are eligible to
participate in the Equity Plan, the type of Award to be made, the number of
shares of Common Stock which may be acquired pursuant to the Award and the
specific terms and conditions of each Award, including the purchase price, term,
vesting schedule, restrictions on transfer and any other conditions and
limitations applicable to the Awards or their exercise. The Board of Directors,
at its discretion, may assume administration of the Equity Plan.
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Each Award may be made alone, in addition to or in relation to any
other Award. The terms of each Award need not be identical, and the Committee
need not treat participants uniformly. Except as otherwise provided by the
Equity Plan or a particular Award, any determination with respect to an Award
may be made by the Committee at the time of award or at any time thereafter. The
Committee determines whether Awards are settled in whole or in part in cash,
Common Stock, other securities of the Company, Awards or other property. The
Committee may permit a participant to defer all or any portion of a payment
under the Equity Plan, including the crediting of interest on deferred amounts
denominated in Common Stock. Such a deferral may have no effect for purposes of
determining the timing of taxation of payments. In the event of certain
corporate events, including a merger, consolidation, dissolution, liquidation or
the sale of substantially all of the Company's assets, all Awards become fully
exercisable and realizable.
The Committee may amend, modify or terminate any outstanding Award,
including substituting therefor another Award of the same or a different type,
changing the date of exercise or realization, and converting an ISO to a
Non-Qualified Stock Option, if the participant consents to such action, or if
the Committee determines that the action would not materially and adversely
affect the participant. Awards may not be made under the Equity Plan after
September 1, 2006, but outstanding Awards may extend beyond such date.
The number of shares of Common Stock issuable pursuant to the Equity
Plan may not be changed except by approval of the stockholders. However, in the
event that the Committee determines that any stock dividend, extraordinary cash
dividend, creation of a class of equity securities, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination, exchange
of shares, warrants or rights offering to purchase Common Stock at a price
substantially below fair market value, or other similar transaction affects the
Common Stock such that an adjustment is required to preserve the benefits
intended to be made available under the Equity Plan, the Committee may adjust
equitably the number and kind of shares of stock or securities in respect of
which Awards may be made under the Equity Plan, the number and kind of shares
subject to outstanding Awards, and the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award. In
addition, upon the adoption of a plan or agreement concerning a change in
control, sale of substantially all the assets, or liquidation or dissolution of
the Company, all Awards which are not then fully exercisable or realizable
become so. Common Stock subject to Awards which expire or are terminated prior
to exercise or Common Stock which has been forfeited under the Equity Plan will
be available for future Awards under the Equity Plan. Both treasury shares and
authorized but unissued shares may be used to satisfy Awards under the Equity
Plan.
The Equity Plan may be amended from time to time by the Board of
Directors or terminated in its entirety; however, no amendment may be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
Options
The Committee may award two types of options: ISOs, which qualify for
special tax treatment under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and Non-Qualified Stock Options that do not qualify for
special federal income tax treatment under the Code. The Committee may also
determine the number of shares to be covered by each option, the option price
therefor, the term of the option, and the other conditions and limitations
applicable to the exercise of the option. As required by the Code, the option
price per share of Common Stock purchasable under an ISO may not be less than
the fair market value of the Common Stock on the date of award. The option price
per share of Common Stock purchasable under a Non-Qualified Stock Option will be
determined by the Committee and may be less than, equal to or greater than the
fair market value of the Common Stock on the date of award. In no event,
however, shall the option price per share of Common
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Stock purchasable under an option be less than the par value of the Common
Stock. Options may be exercisable for not more than ten years after the date the
option is awarded. The Committee may at any time accelerate the exercisability
of all or any portion of any option.
For federal income tax purposes, no taxable income results to the
optionee upon the grant of an ISO or upon the issuance of shares to him or her
upon the exercise of the option. Correspondingly, no deduction is allowed to the
Company for federal income tax purposes upon either the grant or the exercise of
an ISO.
If shares acquired upon the exercise of an ISO are not disposed of
either within the two-year period following the date the option is granted or
within the one-year period following the date the shares are transferred to the
optionee pursuant to exercise of the option, the difference between the amount
realized on any disposition thereafter and the option price will be treated as
long-term capital gain or loss to the optionee. If a disposition occurs before
the expiration of the requisite holding periods, then the lower of (i) any
excess of the fair market value of the shares at the time of the exercise of the
option over the option price or (ii) the actual gain realized on disposition,
will be deemed to be compensation to the optionee and will be taxed at ordinary
income rates. In such event, the Company will be entitled to a corresponding
deduction for federal income tax purposes. Any such increase in the income of
the optionee or deduction from the income of the Company attributable to such
disposition is treated as an increase in income or deduction from income in the
taxable year in which the disposition occurs. Any excess of the amount realized
by the optionee on disposition over the fair market value of the shares at the
time of exercise will be treated as capital gain.
"Alternative minimum taxable income" in excess of the taxpayer's
exemption amount is subject to the alternative minimum tax, which is imposed at
graduated rates of up to 28% on individuals and is payable to the extent it
exceeds regular income tax. The excess of the fair market value on the date of
exercise over the option price of shares acquired upon exercise of an ISO
generally constitutes an item of alternative minimum taxable income for the
purpose of the alternative minimum tax, and the payment of any alternative
minimum tax resulting therefrom will not increase the optionee's basis for the
shares acquired for regular income tax purposes. In addition, if the aggregate
fair market value (determined at the time the option is granted) of the Common
Stock covered by ISOs which are exercisable for the first time by an individual
during a calendar year exceeds $100,000, the amount of the excess will not be
treated as shares acquired through the exercise of an ISO.
Under the Code, a person who is granted a Non-Qualified Stock Option
will not have taxable income at the date of grant; however, an optionee who
thereafter exercises such an option will be deemed to have received compensation
income in an amount equal to the difference between the option price and the
fair market value of the shares on the date of exercise. The optionee's tax
basis for such shares will be increased by the amount which is deemed
compensation income. For the year in which a Non-Qualified Stock Option is
exercised, the Company will be entitled to a deduction in the same amount as the
optionee is required to include in his or her income, provided the Company
withholds and deducts to the extent required by then applicable law. When the
optionee disposes of such shares he or she will recognize capital gain or loss.
Stock Appreciation Rights
A stock appreciation right ("SAR") entitles the participant to receive
an amount in cash or shares of Common Stock or a combination thereof having a
value equal to (or, if the Committee shall so determine at the time of grant,
less than) the excess of the fair market value of a share of Common Stock on the
date of exercise over the fair market value of a share of Common Stock on the
date of grant (or over the option price, if the SAR was granted in tandem with
an option) multiplied by the number of shares with respect to which the SAR is
exercised. Subject to the provisions of the Equity Plan, the Committee may award
SARs in tandem with an option (at or after
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the award of the option), or alone and unrelated to an option and determine the
terms, conditions and limitations applicable thereto, including the form of
payment. Generally, SARs granted in tandem with an option will be exercisable at
such time or times, and only to the extent that, a related option is
exercisable, and shall not be transferable except to the extent that a related
option is transferable.
No income will be recognized by a participant in connection with the
grant of an SAR. When the SAR is exercised or when a participant receives
payment in cancellation of an option, the participant will generally be required
to include as taxable ordinary income in the year of such exercise or payment an
amount equal to the amount of cash received and the fair market value of any
stock received. The Company will generally be entitled to a deduction for
federal income tax purposes at the same time equal to the amount includable as
ordinary income by such participant, provided the Company withholds and deducts
to the extent required by then applicable law.
Performance Shares
A performance share ("Performance Share") entitles a participant to
acquire shares of Common Stock upon the attainment of specified performance
goals. Subject to the provisions of the Equity Plan, the Committee may award
Performance Shares and determine the performance goals applicable to each such
Award, the number of such shares for each Performance Cycle, the duration of
each Performance Cycle, and all other limitations and conditions applicable to
the awarded Performance Shares. There may be more than one Performance Cycle in
existence at any one time, and the duration of Performance Cycles may differ
from each other. The payment value of each Performance Share shall be equal to
the fair market value of one share of Common Stock on the date the Performance
Share is earned or, in the discretion of the Committee, on the date the
Committee determines that the Performance Share has been earned. The Committee
will determine, at or after the time of award, whether payment values will be
settled in whole or in part in cash or other property, including Common Stock or
Awards.
No income will be recognized by a recipient in connection with the
grant of Performance Shares. When a recipient receives a Performance Stock Unit,
the recipient will generally be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any Common Stock or other property received. The Company
will generally be entitled to a deduction for federal income tax purposes at the
same time equal to the amount includable as ordinary income by such recipient,
provided the Company withholds and deducts to the extent required by then
applicable law.
Restricted Stock
An Award of restricted stock ("Restricted Stock") entitles the
participant to acquire shares of Common Stock for a purchase price per share
equal to or greater than par value, subject to such conditions and restrictions
as the Committee shall determine, including a right of the Company, during a
specified period or periods, to repurchase such shares at their original
purchase price (or to require forfeiture of such shares) upon the participant's
termination of employment. Subject to the provisions of the Equity Plan, the
Committee may award shares of Restricted Stock and determine the purchase price
therefor, the duration of the restricted period during which, and the conditions
under which, the shares may be forfeited to or repurchased by the Company, and
the other terms and conditions of such Awards. The Committee may modify or waive
the restrictions with respect to any Restricted Stock. Shares of Restricted
Stock may be issued for no cash consideration or such minimum consideration as
may be required by applicable law. A participant shall have all the rights of a
stockholder with respect to the Restricted Stock, including voting and dividend
rights, subject to restrictions on transferability and Company repurchase rights
or forfeiture conditions and subject to any other conditions contained in the
Award.
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A recipient of Restricted Stock generally will be subject to tax at
ordinary income rates on the fair market value of the Common Stock at the time
the Common Stock is no longer subject to forfeiture, less any amount paid for
such stock. A recipient who makes an election under Section 83(b) of the Code
within 30 days of the date of issuance of the Restricted Stock, however, will
recognize ordinary income on the date of issuance equal to the fair market value
of the shares of Restricted Stock at that time (measured as if the shares were
unrestricted and could be sold immediately), less any amount paid for such
stock. If the election is made, no taxable income will be recognized when the
shares subject to such election are no longer subject to forfeiture. If the
shares subject to such election are forfeited, the recipient will not be
entitled to any deduction, refund or loss for tax purposes with respect to the
forfeited shares, except that the amount, if any, actually paid for the shares
will be a capital loss. The holding period to determine whether the recipient
has long-term or short-term capital gain or loss begins when the forfeiture
period expires (or upon earlier issuance of the shares, if the recipient elected
immediate recognition of income under Section 83(b) of the Code).
Stock Units
Subject to the provisions of the Plan, the Committee may award stock
units ("Stock Units) subject to such terms, restrictions, conditions,
performance criteria, vesting requirements and payment rules as the Committee
shall determine. Shares of Common Stock issued in connection with a Stock Unit
shall be issued for no cash consideration or such minimum consideration as may
be required by law.
Other Awards
The Board of Directors shall have the authority to specify the terms
and provisions of other forms of equity-based or equity-related which the Board
determines to be consistent with the purpose of the Plan and the interests of
the Company, which Awards may provide for cash payments based in whole or in
part on the value or future value of Shares, for the acquisition or future
acquisition of Shares, or any combination thereof. Other Awards may also include
cash payments (including the cash payment of dividend equivalents) under the
Equity Plan which may be based on one or more criteria determined by the Board
of Directors that are unrelated to the value of the Shares and that may be
granted in tandem with, or independent of, other Awards under the Plan.
Section 162(m) of the Code
Approval of the 1995 Incentive Plan will also constitute approval of
options and SARs for purposes of Section 162(m) of the Code to the extent the
exercise price of the options is not less than the fair market value of the
Common Stock on the date of grant ("Non-Discount Options").
Section 162(m) of the Code denies a deduction for federal income tax
purposes of compensation paid to any "covered employee" to the extent such
compensation exceeds $1 million in any year. Covered employees for purposes of
Section 162(m) are the chief executive officer and the four next most highly
compensated officers. The deduction limit does not apply, however, to "qualified
performance-based compensation." Compensation attributable to an option or SAR
is deemed to constitute qualified performance-based compensation if, among other
things, (i) the award is made by a committee comprised solely of outside
directors, (ii) the plan states the maximum number of shares with respect to
which options and SARs may be granted during a specified period to any employee,
(iii) the amount of compensation the employee could receive pursuant to any SAR
or option is not greater than the difference between the fair market value of
the Common Stock on the date of grant and at a future measurement date,
respectively, and (iv) the plan is approved by stockholders after adequate
disclosure, including a general
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description of the class of eligible employees and a description of the formula
used to calculate the compensation to be paid if the performance goal is
attained or the maximum amount of compensation that could be paid to any
employee during a specified period. Awards, other than Non-Discount Options and
SARs, do not qualify as "qualified performance based compensation" under Section
162(m).
As noted above, the formula to calculate the maximum amount of
compensation that could be attributed to Non-Discount Options or SARs granted to
any employee in any one year is equal to 600,000 (which is the maximum number of
shares of Common Stock or equivalent units that may be awarded to any
participant during a calendar year) multiplied by the difference between the
fair market value of the Common Stock at the date of grant and the fair market
value of the Common Stock on the date of exercise.
The Company believes that Non-Discount Options and SARs granted under
the Equity Plan will constitute qualified performance-based compensation
following approval of the Equity Plan.
New Plan Benefits
Following its adoption, options to purchase approximately 2,300,000
shares of Common Stock will be issued under the Equity Plan to approximately 50
officers and other employees of Pre-Merger CareMatrix who became officers or
employees of the Company in exchange for options granted to them in 1996 by
Pre-Merger CareMatrix. Such options have an average exercise price of
approximately $2.95 per share. None of such options is exercisable prior to
December 31, 1996. Although eligible to receive Awards under the Equity Plan in
the future, no current executive officers or directors of the Company will
receive Awards immediately upon the Equity Plan's adoption. All future grants of
Awards pursuant to the Plan are at the discretion of the Committee or the Board
of Directors. Because Awards are granted from time to time by the Committee or
the Board of Directors to Equity Plan participants who the Committee or the
Board determines in its discretion should receive Awards, it is not possible for
the Company to determine at this time those Equity Plan participants who will
actually receive grants of Awards (other than those former Pre-Merger CareMatrix
officers and employees), or who would have received grants of Awards if the
Equity Plan had been in effect during 1995.
By Order of the Board of Directors
Kenneth M. Miles, Assistant Secretary
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APPENDIX A
CAREMATRIX CORPORATION
1996 EQUITY INCENTIVE PLAN
Section 1. Purpose and Duration
1.1 Purposes. The purposes of the Plan are to attract, retain and
motivate employees and consultants of the Company, its Parent (if any), and any
present or future Subsidiaries to enable them to participate in the growth of
the Company by providing for or increasing the proprietary interests of such
persons in the Company.
1.2 Effective Date. The Plan is effective as of its adoption by the
Board, subject to approval by the stockholders of the Company. Prior to such
stockholder approval, the Board may grant Awards conditioned on stockholder
approval. If such stockholder approval is not obtained at or before the first
annual meeting of stockholders to occur after the adoption of the Plan by the
Board but in any event within twelve months after adoption by the Board, the
Plan and any Awards made thereunder shall be null and void.
1.3 Expiration Date. The Plan shall expire one day less than ten
years from the date of the adoption of the Plan by the Board. In no event shall
any Awards be made under the Plan after the expiration of the Plan, but Awards
previously granted may extend beyond expiration of the Plan.
Section 2. Definitions
As used in the Plan, the following capitalized words shall have the
meanings indicated below:
"1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
"Award" means, individually or collectively, a grant under the Plan
of Options, SARs, Performance Shares, Restricted Stock or Stock Units.
"Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
"Committee" means any committee of the Board appointed by the Board
to administer the Plan in accordance with Section 3.1.
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"Company" means CareMatrix Corporation, a Delaware corporation, or
any successor thereto.
"Director" means any individual who is a member of the Board.
"Fair Market Value" means, with respect to a Share, the fair market
thereof as of the relevant date of determination, as determined in accordance
with a valuation methodology approved by the Board in good faith but in no event
less than, in the case of newly issued stock, the par value per Share.
"Grant Date" means the effective date of an Award as specified by the
Board and set forth in the applicable Award Agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
"Nonqualified Stock Option" or "NQO" means an option to purchase
Shares awarded to a Participant under Section 6 of the Plan that is not intended
to be an ISO.
"Option" means an ISO or an NQO.
"Parent" means a "parent corporation" as that term is defined in
Section 424 of the Code.
"Participant" means an individual eligible to receive Awards under
the Plan who has been selected by the Board to receive an Award under the Plan.
"Performance Cycle" means the period of time selected by the Board
during which performance is measured for the purpose of determining the extent
to which an Award of Performance Shares has been earned. More than one
Performance Cycle may be in progress at any one time and the duration of
Performance Cycles may differ from each other.
"Performance Share" means a Share awarded to a Participant under
Section 8 of the Plan that entitles the Participant to acquire Shares upon the
attainment of specified performance goals.
"Plan" means the Equity Incentive Plan set forth in this document and
as hereafter amended from time to time in accordance with Section 13.
"Restricted Period" means the period of time selected by the Board
during which Shares of Restricted Stock are subject to forfeiture and/or
restrictions on transferability.
"Restricted Stock" means Shares awarded to a Participant under
Section 9 of the Plan pursuant to an Award that entitles the Participant to
acquire Shares for a purchase price (which may be zero), subject to such
conditions, including a Company right during a specified period or periods to
repurchase such Shares at their original purchase price (or to require
forfeiture of such Shares if the purchase price was zero) upon the Participant's
termination of employment.
"SAR" or "Stock Appreciation Right" means an Award that is designated
as an SAR pursuant to Section 7 of the Plan, granted alone or in connection with
a related Award, entitling a Participant to receive an amount in cash or Shares
or a combination thereof having a value equal to (or if the Board shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
Share on the date of exercise
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over the Fair Market Value of a Share on the Grant Date (or over the Option
exercise price, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of Shares with respect to which the Stock
Appreciation Right is exercised.
"Shares" means shares of the Company's common stock, par value
$0.01 per share.
"Stock Unit" means an Award of a Share or a unit valued in whole or
in part by reference to, or otherwise based on, the value of a Share, granted to
a Participant under Section 10 of the Plan.
"Subsidiary" means a "subsidiary corporation" as that term is
defined in Section 424 of the Code.
Section 3. Administration of the Plan
3.1 The Board. The Plan shall be administered by the Board. The Board
may, in its discretion, delegate some or all of its powers with respect to the
Plan to the Committee, in which event all references in the Plan (as
appropriate) shall be deemed to refer to the Committee. The Committee, if one is
appointed, shall consist of two or more Non-Employee Directors (as defined in
the 1934 Act).
3.2 Authority of the Board. The Board shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the Plan as it shall consider advisable from time to
time, to interpret the provisions of the Plan and any Award, and to decide all
disputes arising in connection with the Plan. The Board's decisions and
interpretations shall be final and binding.
Section 4. Eligibility
4.1 Participants. The persons eligible to receive Awards under the
Plan shall be all executive officers of the Company, its Parent (if any), and
any Subsidiaries and other employees, consultants and advisers who, in the
opinion of the Board, are in a position to make a significant contribution to
the success of the Company, its Parent (if any), and any Subsidiaries.
Directors, including directors who are not employees, of the Company, its Parent
(if any), and any Subsidiaries, shall be eligible to receive Awards under the
Plan.
Section 5. Stock Available for Awards
5.1 Number of Shares. Awards may be made under the Plan for up to Six
Million (6,000,000) Shares. Shares issued under the Plan may consist in whole or
in part of authorized but unissued Shares or treasury Shares.
5.2 Lapsed, Forfeited or Expired Awards. If any Award in respect of
Shares expires or is terminated before exercise or is forfeited for any reason,
the Shares subject to such Award, to the extent of such expiration, termination,
or forfeiture, shall again be available for award under the Plan.
5.3 Maximum Number of Shares to a Single Participant in any Calendar
Year. In no event shall any Participant receive in any calendar year Awards
under the Plan and any other grants for more than Six Hundred Thousand (600,000)
Shares.
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Section 6 Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the
Plan, the Board may award Options and determine the number of shares to be
covered by each Option, the exercise price therefor, the term of the Option, and
any other conditions and limitations applicable to the exercise of the Option.
The Board may grant ISOs, NQOs or a combination thereof.
6.2 Exercise Price. Subject to the provisions of this Section 6, the
exercise price for each Option shall be determined by the Board in its sole
discretion.
6.3 Restrictions on Option Transferability and Exercisability. No
Option shall be transferable by the Participant other than by will or the laws
of descent and distribution, and all Options shall be exercisable, during the
Participant's lifetime, only by the Participant; provided, however, that the
Board may provide that an NQO is transferable by the Participant and exercisable
by persons other than the Participant upon such terms and conditions as the
Board shall determine.
6.4 Certain Additional Provisions for Incentive Stock Options
6.4.1 Exercise Price. In the case of an ISO, the exercise price shall
be not less than one hundred percent (100%) of the Fair Market Value per Share
on the Grant Date; provided, however, that if on the Grant Date the Participant
(together with persons whose stock ownership is attributed to the Participant
pursuant to Section 424(d) of the Code) owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, its Parent (if any) or any Subsidiaries, the exercise price shall be
not less than one hundred and ten percent (110%) of the Fair Market Value of a
Share on the Grant Date.
6.4.2 Exercisability. Subject to Section 12.3, the aggregate Fair
Market Value (determined on the Grant Date(s)) of the Shares with respect to
which ISOs are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company, its Parent (if any) and any
Subsidiaries) shall not exceed $100,000.
6.4.3 Eligibility. ISOs may be granted only to persons who are
employees of the Company, its Parent (if any) or any Subsidiaries on the Grant
Date.
6.4.4 Expiration. No ISO may be exercised after the expiration of one
day less than ten (10) years from the Grant Date; provided, however, that if the
Option is granted to a Participant who, together with persons whose stock
ownership is attributed to the Participant pursuant to Section 424(d) of the
Code, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, its Parent (if any) or any
Subsidiaries, the ISO may not be exercised after the expiration of one day less
than five (5) years from the Grant Date.
6.4.5 Compliance with Section 422 of the Code. The terms and
conditions of ISOs shall be subject to and comply with Section 422 of the Code
or any successor provision.
6.4.6 Notice to Company of Disqualifying Disposition. Each
Participant who receives an ISO agrees to notify the Company in writing
immediately after the Participant makes a Disqualifying Disposition of any
Shares received pursuant to the exercise of an ISO. The term "Disqualifying
Disposition" means any disposition (including any sale) of Shares before the
later of (a) two years after the Participant was granted
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the ISO under which he acquired such Shares, or (b) one year after the
Participant acquired such Shares by exercising the ISO.
6.4.7 Substitute Options. Notwithstanding the provisions of Section
6.4.1, in the event that the Company, its Parent (if any) or any Subsidiary
consummates a transaction described in Section 424(a) of the Code (relating to
the acquisition of property or stock from an unrelated corporation), individuals
who become employees or consultants of the Company, its Parent (if any) or any
Subsidiary on account of such transaction may be granted ISOs in substitution
for options granted by their former employer. The Board, in its sole discretion
and consistent with Section 424(a) of the Code, shall determine the exercise
price of such substitute Options.
6.5 NQO Presumption. Options granted pursuant to the Plan shall be
presumed to be NQOs unless expressly designated ISOs.
Section 7 Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and provisions of the Plan,
the Board may award SARs in tandem with another Award (at or after the Grant
Date of the other Award), or alone and unrelated to another Award, and may
determine the terms and conditions applicable thereto, including the form of
payment.
7.2 Termination of SARs. SARs granted in tandem with an ISO shall
terminate to the extent that the related ISO is exercised, and the related ISO
shall terminate to the extent that the tandem SARs are exercised.
Section 8 Performance Shares
8.1 Grant of Performance Shares. The Board may award Performance
Shares to Participants and determine the performance goals applicable to each
such Award, the number of Shares for each Performance Cycle, the duration of
each Performance Cycle and all other limitations and conditions applicable to
the awarded Performance Shares. The payment value of each Performance Share
shall be equal to the Fair Market Value of one Share on the date the Performance
Share is earned or, in the discretion of the Board, on the date the Board
determines that the Performance Share has been earned.
8.2 Adjustment of Performance Goals. Except as provided in an Award,
during any Performance Cycle, the Board may adjust the performance goals for
such Performance Cycle as it deems equitable in recognition of unusual or
non-recurring events affecting the Company, changes in applicable tax laws or
accounting principles, or such other factors as the Board shall determine.
8.3 Written Certification. As soon as practical after the end of a
Performance Cycle, the Board shall certify in writing the extent to which the
performance goals applicable to each Participant for the Performance Cycle were
achieved or exceeded and the number of Performance Shares which have been earned
on the basis of performance in relation to the established performance goals.
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Section 9 Restricted Stock
9.1 Grant of Restricted Stock. The Board may award Shares of
Restricted Stock and determine the purchase price, if any, therefor, the
duration of the Restricted Period and the conditions under which the Shares may
be forfeited to or repurchased by the Company and the other terms and conditions
of such Awards. The Board may modify or waive the restrictions with respect to
any Restricted Stock. Shares of Restricted Stock may be issued for no cash
consideration or such minimum consideration as may be required by applicable
law.
9.2 Transferability. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Board, during the Restricted Period.
9.3 Evidence of Award. Shares of Restricted Stock shall be evidenced
in such manner as the Board may determine. Any certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
and stock power to the Participant.
9.4 Shareholder Rights. A Participant shall have all the rights of a
shareholder with respect to Restricted Stock awarded, including voting and
dividend rights, unless otherwise provided in the Award Agreement.
Section 10. Stock Units
10.1 Grant of Stock Units. Subject to the terms and provisions of the
Plan, the Board may award Stock Units subject to such terms, restrictions,
conditions, performance criteria, vesting requirements and payment rules as the
Board shall determine.
10.2 Consideration. Shares awarded in connection with a Stock Unit
shall be issued for no cash consideration or such minimum consideration as may
be required by applicable law.
Section 11 Other Awards
11.1 Grant of Other Awards. The Board shall have the authority to
specify the terms and provisions of other forms of equity-based or
equity-related Awards not described above which the Board determines to be
consistent with the purpose of the Plan and the interests of the Company, which
Awards may provide for cash payments based in whole or in part on the value or
future value of Shares, for the acquisition or future acquisition of Shares, or
any combination thereof. Other Awards may also include cash payments (including
the cash payment of dividend equivalents) under the Plan which may be based on
one or more criteria determined by the Board that are unrelated to the value of
the Shares and that may be granted in tandem with, or independent of, other
Awards under the Plan.
Section 12 General Provisions Applicable to Awards
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12.1 Legal and Regulatory Matters. The delivery of Shares shall be
subject to compliance with (i) applicable federal and state laws and
regulations, (ii) the listing requirements of a stock exchange, if the
outstanding Shares are at the time listed on any such exchange, and (iii) the
Company's counsel's approval of all other legal matters in connection with the
issuance and delivery of such Shares. If the sale of Shares has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to receipt of the Shares, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Shares bear an appropriate legend restricting transfer.
12.2 Written Award Agreement. The terms and provisions of an Award
shall be set forth in a written Award Agreement approved by the Board and
delivered or made available to the Participant as soon as practicable following
the Grant Date. Where the Award is an Option Award, the Award Agreement shall
specify whether the Option is intended to be an ISO or a NQO.
12.3 Determination of Restrictions on the Award. The vesting,
exercisability, payment and other restrictions applicable to an Award (which may
include, without limitation, restrictions on transferability or provision for
mandatory resale to the Company) shall be determined by the Board and set forth
in the applicable Award Agreement. Notwithstanding the foregoing, the Board may
accelerate (i) the vesting or payment of any Award (including an ISO), (ii) the
lapse of restrictions on any Award (including an Award of Restricted Stock) or
(iii) the date on which any Option or SAR first becomes exercisable.
12.4 Mergers, etc. Notwithstanding any other provision of the Plan,
in the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, then if the Board so
determines, all outstanding Awards shall terminate, provided that at least 20
days prior to the effective date of any such merger, consolidation or sale of
assets, the Board shall either (i) make all outstanding Awards exercisable
immediately prior to the consummation of such merger, consolidation or sale of
assets or (ii) if there is a surviving or acquiring corporation, arrange,
subject to consummation of the merger, consolidation or sale of assets, to have
that corporation or an affiliate of that corporation grant to Participants
replacement Awards, which Awards in the case of incentive options shall satisfy,
in the discretion of the Board, the requirements of section 424(a) of the Code.
12.5 Termination of Employment. For purposes of the Plan, the
following events shall not be deemed a termination of employment of a
Participant: (i) a transfer to the employment of the Company from its Parent (if
any) or from a Subsidiary, or from the Company to its Parent (if any) or to a
Subsidiary, or from one Subsidiary to another; or (ii) an approved leave of
absence for military service or sickness, or for any other purpose approved by
the Company, if the Participant's right to employment is guaranteed either by a
statute or by contract or under the policy pursuant to which the leave of
absence was granted or if the Board otherwise so provides in writing. For
purposes of the Plan, employees of a Subsidiary or Parent (if any) shall be
deemed to have terminated their employment on the date on which such Subsidiary
or Parent ceases to be a Subsidiary or Parent of the Company, as the case may
be.
12.5.1 Date of Termination of Employment. The date of a Participant's
termination of employment for any reason shall be determined in the sole
discretion of the Board.
12.5.2 Effect of Termination of Employment. The Board shall have full
authority to determine and specify in the applicable Award Agreement the effect,
if any, that a Participant's termination of
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employment for any reason will have on the vesting, exercisability, payment or
lapse of restrictions applicable to an outstanding Award.
12.6 Grant of Awards. Each Award may be made alone, in addition to or
in relation to any other Award. The terms of each Award need not be identical,
and the Board need not treat Participants uniformly.
12.7 Settlement of Awards. No Shares shall be delivered pursuant to
any exercise of an Award until payment in full of the price therefor, if any, is
received by the Company. Such payment may be made in whole or in part in cash or
by certified or bank check or, to the extent permitted by the Board at or after
the Grant Date, by delivery of a note or Shares, including Restricted Stock,
valued at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Board shall determine.
12.8 Withholding Requirements and Arrangements. The Participant shall
pay to the Company or make provision satisfactory to the Board for payment of
any taxes required by law to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in Shares,
including Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Participant.
12.9 No Effect on Employment. The Plan shall not give rise to any
right on the part of any Participant to continue in the employ of the Company,
its Parent (if any) or any Subsidiary. The loss of existing or potential profit
in Awards granted under the Plan shall not constitute an element of damages in
the event of termination of the relationship of a Participant even if the
termination is in violation of an obligation of the Company to the Participant
by contract or otherwise.
12.10 No Rights as Shareholder. Subject to the provisions of the Plan
and the applicable Award Agreement, no Participant shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until he
or she becomes the holder thereof.
12.11 Adjustments. Upon the happening of any of the following
described events, a Participant's rights with respect to Awards granted
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the Award Agreement.
12.11.1 Recapitalizations. In the event Shares shall be subdivided or
combined into a greater or smaller number of Shares or if, upon a merger,
consolidation, reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, Shares shall be exchanged for other
securities of the Company or of another corporation, each Participant shall be
entitled, subject to the conditions herein stated, to purchase such number of
Shares or amount of other securities of the Company or such other corporation as
were exchangeable for the number of Shares which such Participant would have
been entitled to purchase except for such action, and appropriate adjustments
shall be made in the purchase price per Share to reflect such subdivision,
combination, or exchange.
12.11.2 Stock Dividends. In the event the Company shall issue any of
its shares as a stock dividend upon or with respect to the Shares at the time
subject to option hereunder, each Participant upon exercising an Award shall be
entitled to receive (for the purchase price paid upon such exercise) the Shares
as to which he is exercising his Award and, in addition thereto (at no
additional cost), such number of shares of the class or classes in which such
stock dividend or dividends were declared or paid, and such
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amount of cash in lieu of fractional shares, as he would have received if he had
been the holder of the Shares as to which he is exercising his Award at all
times between the Grant Date of such Award and the date of its exercise.
12.11.3 Restricted Stock. If any person owning Restricted Stock
receives new or additional or different shares or securities ("New Securities")
in connection with a corporate transaction described in Section 12.11.1 or a
stock dividend described in Section 12.11.2 as a result of owning such
Restricted Stock, such New Securities shall be subject to all of the conditions
and restrictions applicable to the Restricted Stock with respect to which such
New Securities were issued.
12.11.4 Board Determination. Notwithstanding the foregoing, any
adjustments made pursuant to this Section 12.11 with respect to ISOs shall be
made only after the Board, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs as that term is defined in Section 424 of the Code, or would cause any
adverse tax consequences for the holders of such ISOs. No adjustments shall be
made for dividends paid in cash or in property other than securities of the
Company.
12.11.5 Fractional Shares. No fractional shares shall be issued under
the Plan. Any fractional shares which, but for this Section, would have been
issued shall be deemed to have been issued and immediately sold to the Company
for their fair market value, and the Participant shall receive from the Company
cash in lieu of such fractional shares.
12.11.6 Other Distributions. The Board may adjust the number of
Shares subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, consolidations or mergers
(except those described in Section 12.4), acquisitions or dispositions of stock
or property or any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of the Plan,
provided that no such adjustment shall be made in the case of an ISO, without
the consent of the Participant, if it would constitute a modification, extension
or renewal of the option within the meaning of Section 424(h) of the Code.
12.11.7 Further Adjustment. Upon the happening of any of the events
described in Sections 12.11.1 or 12.11.2, the class and aggregate number of
Shares set forth in Sections 5.1 and 5.3 hereof that are subject to Awards which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such Sections. The
Board shall determine the specific adjustments to be made under this Section
12.11.7.
Section 13. Amendment and Termination
13.1 Amendment, Suspension, Termination of the Plan. The Board may
modify, amend, suspend or terminate the Plan in whole or in part at any time;
provided, however, that no modification, amendment, suspension or termination of
the Plan shall be made without shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement; provided,
further, that such modification, amendment, suspension or termination shall not,
without a Participant's consent, affect adversely the rights of such Participant
with respect to any Award previously made.
13.2 Amendment, Suspension, Termination of an Award. The Board may
modify, amend, or terminate any outstanding Award, including, without
limitation, substituting therefor another Award of the
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same or a different type, changing the date of exercise or realization and
converting an ISO to an NQO; provided, however, that the Participant's consent
to such action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant.
Section 14. Legal Construction
14.1 Captions. The captions provided herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan or serve as a basis for interpretation or construction of
the Plan.
14.2 Severability. In the event any provision of the Plan shall be
held invalid or illegal for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the internal laws of the State of
Delaware.
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