SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
CareMatrix Corporation
(Name of Registrant as Specified In Its Charter)
CareMatrix Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0.11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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>
[CAREMATRIX LOGO]
197 First Avenue
Needham, Massachusetts 02194
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 16, 1997
------------
The Annual Meeting of Stockholders of CareMatrix Corporation (the
"Company") will be held on Monday, June 16, 1997 at 3:00 p.m. at the Company's
principal executive offices located at 197 First Avenue, Needham, Massachusetts,
for the following purposes:
1. To elect the members of the Board of Directors who shall hold office until
the 1998 annual meeting of stockholders and thereafter until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to amend and restate the Company's
Restated 1991 Combination Stock Option Plan.
3. To consider and approve the Company's 1996 Equity Incentive Plan.
4. To consider and act upon such other business and matters or proposals as
may properly come before said Annual Meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on April 25, 1997 as
the record date for determining the stockholders having the right to receive
notice of and to vote at said Annual Meeting.
By Order of the Board of Directors
James M. Clary, III, Secretary
Needham, Massachusetts
May 2, 1997
- -------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE. RETURNING THE ENCLOSED PROXY
WILL NOT AFFECT YOUR RIGHT TO ATTEND THE MEETING AND VOTE YOUR SHARES IN
PERSON.
- -------------------------------------------------------------------------------
<PAGE>
[CAREMATRIX LOGO]
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
------------
PROXY STATEMENT
------------
ANNUAL MEETING OF STOCKHOLDERS
June 16, 1997
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of CareMatrix Corporation (the
"Company") of proxies for use at the Annual Meeting of Stockholders of the
Company to be held, pursuant to the accompanying Notice of Annual Meeting, on
Monday, June 16, 1997 at 3:00 p.m., and at any adjournment or adjournments
thereof (the "Annual Meeting"), for the purposes stated in the accompanying
Notice of Meeting. Action will be taken at the Annual Meeting to elect the
members of the Board of Directors for the ensuing year and until their
successors are duly elected and qualified, to consider and act upon a proposal
to amend and restate the Company's Restated 1991 Combination Stock Option Plan
and to consider and approve the Company's 1996 Equity Incentive Plan.
Any stockholder giving a proxy retains the power to revoke such proxy at
any time prior to its being voted by (i) delivering a written revocation to the
Secretary of the Company, (ii) by executing and returning to the Company a proxy
bearing a later date, or (iii) by attending the Annual Meeting and voting his or
her shares in person. Any stockholder who attends the Annual Meeting in person
will not be deemed to have revoked his or her proxy unless such stockholder
affirmatively indicates at the Annual Meeting his or her intention to vote the
shares in person. If the proxy is properly executed and is not revoked, it will
be voted at the Annual Meeting in the manner specified. If no instructions are
specified, the shares represented by the proxy will be voted "for" the election
of the nominees for directors named herein and "for" the approval of Item 2 and
Item 3 in the Notice of Meeting.
The Company mailed this Proxy Statement and the related form of proxy on or
about May 2, 1997 to its stockholders of record at the close of business on
April 25, 1997.
VOTING SECURITIES
The holders of record of shares of the Company's Common Stock at the close
of business on April 25, 1997 may vote at the Annual Meeting. On that date,
there were outstanding and entitled to vote 17,105,689 shares of Common Stock.
Each stockholder has one vote at the Annual Meeting for each share of Common
Stock held of record on said date. A majority of issued and outstanding shares
of Common Stock, present in person or represented by proxy, is necessary to
constitute a quorum for the transaction of business.
Directors will be elected at the Annual Meeting by a plurality of the votes
cast at the meeting by the holders of shares entitled to vote thereon. Approval
of Item 2 and Item 3 requires a majority of the votes so cast. Where proxies are
marked as abstentions (or stockholders appear in person but abstain from voting)
with respect to any matter submitted to the stockholders for a vote, such
abstentions will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter for
purposes of determining the presence of a quorum.
MERGER WITH CAREMATRIX AFFILIATES
On October 4, 1996, twelve wholly-owned subsidiaries of the Company were
merged into twelve privately-owned corporations (the "CareMatrix Affiliates"),
owned primarily by Abraham, Andrew and Michael Gosman and other members of the
Company's current management. The stockholders of the CareMatrix Affiliates
received approximately 92% of the outstanding shares of Common Stock of the
Company, with the Gosmans collectively receiving approximately 77.8%. See
"Security Ownership of Certain Beneficial Owners and Management" for further
detail with respect to the current share ownership of the Gosmans.
<PAGE>
ITEM 1.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
not less than one nor more than 10 directors, the exact number to be fixed by
the Board of Directors. The Board of Directors has currently fixed the number of
directors at eight, however, the By-laws provide that, within the limits
specified above, the number of directors may at any time be increased or
decreased by the vote of the Board.
The nominees for election to the Board of Directors consist of Abraham D.
Gosman, Andrew D. Gosman, Michael M. Gosman, Donald J. Amaral, H. Loy Anderson,
Jr., Rev. Bedros Baharian, Robert Cataldo and Stephen E. Ronai. The nominees
were nominated by the Board of Directors. If elected, the nominees will serve as
directors until the 1998 Annual Meeting of Stockholders and thereafter until
their respective successors are duly elected and qualified.
In the event that any of the nominees becomes unavailable to serve as a
director of the Company, the persons named as proxies have discretionary
authority to vote for a substitute. The Board of Directors has no reason to
believe that any of the nominees will be unwilling or unable to serve if
elected.
Nominees for Election
Each of the following directors has been nominated for election at the
Annual Meeting:
Abraham D. Gosman, age 68, has served as Chairman of the Board of Directors
of the Company since October 4, 1996. In addition, he has served as Chairman of
the Board of Trustees and Chief Executive Officer of Meditrust, the nation's
largest health care real estate investment trust, since its inception in 1985.
He has also served since January 1996 as the Chairman of the Board of Directors
and Chief Executive Officer of PhyMatrix Corp. ("PhyMatrix"), a publicly-traded
physician practice management company. Mr. Gosman was the Chief Executive
Officer and Chairman of the Board of The Mediplex Group, Inc. ("Mediplex"), an
operator and developer of health care facilities, from August 1990 until June
1994, when Mediplex was acquired by Sun Healthcare Group, Inc.
Andrew D. Gosman, age 31, has served as Vice Chairman of the Board of
Directors and Executive Vice President of the Company since October 4, 1996.
From January through October 1996, he also served alternatively as President and
Executive Vice President of a group of privately-owned corporations (the
"CareMatrix Affiliates") which merged with and into the Company on October 4,
1996. Previously, he served as Executive Vice President of Development for
Continuum Care Corporation ("Continuum") from June 1994 to January 1996. He has
also served as a Vice President of AMA Funding Corporation and AMA Venture
Corporation, two closely held investment and development concerns, since March
1992.
Michael M. Gosman, age 34, has served as a member of the Board of Directors
and Executive Vice President--Acquisition and Development of the Company since
October 4, 1996 and as Executive Vice President-Assisted Living of the
CareMatrix Affiliates from January 1996 until October 4, 1996. Previously, he
served as the Executive Vice President of Finance and Administration for
Continuum from June 1994 to January 1996. From January 1990 to June 1993, he
served as the Director of Special Projects for Diamond Health Group, Inc. where
he was responsible for organizing financing packages and structuring
acquisitions. Prior to such time, he was a financial analyst for Meditrust.
Donald J. Amaral, age 44, has served as a director of the Company since
October 4, 1996. Mr. Amaral has served as director, President and Chief
Executive Officer of Coram HealthCare Corp. since October 13, 1995. Previously,
he was President and Chief Operating Officer of OrNda Healthcorp ("OrNda") from
April 1994 to August 1995, and served in various executive positions with Summit
Health Ltd. ("Summit") from October 1989 to April 1994, including President and
Chief Executive Officer between October 1991 and April 1994. Summit was merged
into OrNda in April 1994. Prior to joining Summit, Mr. Amaral was President and
Chief Operating Officer of Mediplex from 1986 until October 1989. Mr. Amaral is
also a member of the Board of Directors of Summit Care Corporation.
H. Loy Anderson, Jr., age 53, has served as a director of the Company since
October 4, 1996. He has served as President, Chief Executive Officer and a
director of Palm Beach National Bank & Trust Company since June 1990.
Rev. Bedros Baharian, age 81, has served as a director of the Company since
October 4, 1996. Rev. Baharian is a consultant and private investor. He has also
served as Chairman of the Board of FACT Retirement Services, a not-for-profit
owner and manager of continuing retirement communities in California since 1994.
He served as Chairman of the Board of Teachers Assistance Life Care Centers,
Inc. from 1990 to 1993 and as a board member
2
<PAGE>
of Casa de las Campanas from 1990 to 1994. He is a founder and past president of
the New England Elderly Housing Association.
Robert Cataldo, age 70, has been President of Sheldon Corporation, a health
care and real estate consulting firm since July 1983.
Stephen E. Ronai, age 60, has served as a director of the Company since
October 4, 1996. Mr. Ronai has been a partner in the Connecticut law firm of
Murtha, Cullina, Richter and Pinney since 1984 where he serves as Chairman of
the firm's Health Care Department. He is a member of the American Academy of
Healthcare Attorneys of the American Hospital Association, and from 1989 to
1995, he served as a member of the Board of Directors of the National Health
Lawyers Association. Mr. Ronai has been a director of PhyMatrix since January
1996.
Additional Information Regarding the Board of Directors
The Board of Directors held 13 meetings during 1996. In addition to the
full Board of Directors, the Board of Directors has authorized the following
committees:
Executive Committee. The members of the Executive Committee of the
Company's Board of Directors are Andrew D. Gosman, Messrs. Doyle and Amaral and
Rev. Baharian. The Executive Committee exercises all the powers of the Board of
Directors between meetings of the Board of Directors, except such powers as are
reserved to the Board of Directors by law. The Executive Committee was not
authorized until after the Company's merger with the CareMatrix Affiliates in
October 1996. The Executive Committee did not hold any meetings during 1996.
Audit Committee. The members of the Audit Committee of the Company's Board
of Directors are Messrs. Amaral and Anderson and Rev. Baharian, all of whom are
independent directors. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans for and results of the audit, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and nonaudit fees and reviews the adequacy of the Company's internal accounting
controls. The Audit Committee held one meeting during 1996.
Compensation Committee. The members of the Compensation Committee of the
Company's Board of Directors are Rev. Baharian and Messrs. Anderson and Ronai.
The Compensation Committee establishes a general compensation policy for the
Company and approves increases both in directors' fees and in salaries paid to
officers and senior employees of the Company. The Compensation Committee
administers all of the Company's employee benefit plans. The Compensation
Committee determines, subject to the provisions of the Company's plans, the
directors, officers and employees of the Company eligible to participate in any
of the plans, the extent of such participation and terms and conditions under
which benefits may be vested, received or exercised. There are no interlocks
among the members of the Compensation Committee. The Compensation Committee held
one meeting during 1996.
Family Relationships
Andrew D. Gosman and Michael M. Gosman are sons of Abraham D. Gosman. No
other family relationship exists among the Company's directors or executive
officers.
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.
3
<PAGE>
MANAGEMENT
Executive Officers
Executive Officers are appointed by and serve at the discretion of the
Board of Directors. The following is a biographical summary of the experience of
the executive officers of the Company who have not been nominated to serve as
directors of the Company.
Michael J. Doyle, age 39, has served as Chief Executive Officer and a
member of the Board of Directors of the Company from its inception in 1989 and
also served as its Chairman from January 1994 to October 1996. From 1984 to
1986, Mr. Doyle served as the Director of Development for the Hillhaven
Corporation, an owner and operator of assisted living and independent living
communities and nursing facilities. From 1986 to October 1989, Mr. Doyle served
as Vice President of Voluntary Hospitals of America Development Company, a
developer and operator of senior living communities and related projects. Mr.
Doyle is a member of the American College of Health Care Executives and a
director of the Assisted Living Facilities Association of America and the
Massachusetts Assisted Living Facilities Association. He is also a corporator of
Lawrence Memorial Hospital, and Winchester Hospital.
Robert M. Kaufman, age 48, has served as President of the Company since
October 4, 1996 and as President of the CareMatrix Affiliates since July 9,
1996. Mr. Kaufman spent from 1972 until July 1996 with Coopers & Lybrand L.L.P.,
the last 15 years as a partner, specializing in the for-profit healthcare, real
estate and retail/consumer products industries. Mr. Kaufman has significant
experience advising companies in the long-term care, senior housing and
physician practice sectors in such areas as business and strategic planning,
deal negotiations and structure, public and private financing, real estate
development and management. In addition, he has been a member of Coopers &
Lybrand's mergers and acquisitions group and served on their Board of Partners,
the Firm's nationally elected oversight committee.
James M. Clary, III, age 35, has served as Executive Vice President,
General Counsel and Secretary of the Company since October 4, 1996 and as
Executive Vice President, General Counsel and Secretary of the CareMatrix
Affiliates from December 1995 until October 4, 1996. Since January 23, 1996 Mr.
Clary has also served as the Senior Legal Adviser to PhyMatrix. Previously, he
served as Legal Counsel and Senior Vice President for Continuum. From June 1993
to August 1994, he served as Associate Counsel to Meditrust. Prior to joining
Meditrust, Mr. Clary was a Senior Associate with the Boston law firm of Choate,
Hall & Stewart, from December 1991 to June 1993, and the Boston law firm of
Nutter, McClennen & Fish, LLP from October 1987 to December 1991, where he
specialized in the areas of real estate, health care, and corporate law.
Joel A. Kanter, Ph.D., age 46, has served as Executive Vice President of
the Company since October 4, 1996 and as Executive Vice President of the
CareMatrix Affiliates from December 1995 until October 4, 1996. Previously, he
served as Senior Vice President of Development and Acquisitions for Continuum
from June 1994 to January 1996. From April 1986 to June 1994, Dr. Kanter served
in a variety of development capacities with Mediplex, including terms as its
Senior Vice President of Administration and Senior Vice President of
Development. From 1981 through 1986, Dr. Kanter served as the Director of the
Massachusetts State Senate's Committee on Post Audit and Oversight.
Harold E. Nash, III, age 43, has served as Executive Vice President of
Construction/Planning and Zoning of the Company since October 4, 1996 and as
Executive Vice President of the CareMatrix Affiliates from August 1996 until
October 1996. From 1991 through March 1996, he served as Vice President of
Suffolk Construction Company, Inc., with primary responsibility as Director of
Design Build Services and Pre-Construction Services. Prior to joining Suffolk
Construction Company, Mr. Nash was a Vice President of two diversified
development companies from 1984 to 1991.
Michael J. Zaccaro, age 39, has served as Executive Vice President of
Operations of the Company since October 4, 1996 and as Senior Vice President of
the CareMatrix Affiliates from December 1995 until October 1996. From 1990 to
1995, Mr. Zaccaro served as a Senior Vice President of Continuum and of GWZ
Development Corp.
Marc H. Benson, age 40, has served as Chief Operating Officer of the
Company since October 4, 1996 and as Chief Operating Officer of the CareMatrix
Affiliates from August 25, 1996 until October 1996. From September 1995 to July
1996, he served as a Vice President/Director of Operations for ManorCare, Inc.'s
southeast district where he had primary operating responsibility for ManorCare,
Inc.'s assisted living and Alzheimer's facilities in the southeastern portion of
the United States. Prior to joining ManorCare, Inc., Mr. Benson served as
Director of Operations for Beverly Enterprises where he managed senior housing,
assisted living, skilled nursing and home health care centers in seven states
from 1992 to September 1995. He served as Director of Finance of the Retirement
Living Division Beverly Enterprises from 1990 to 1992.
4
<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table shows compensation information for
the last three years for the Company's current Chief Executive Officer, Mr.
Doyle, and such other executive officers of the Company whose compensation
exceeded $100,000 in 1996 (collectively, the "Named Officers").
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Long Term
Annual Compen Compensation
-------------------------------------- --------------------
Other Annual Securities
Name and Principal Position Year Salary ($)(2) Compensation ($) Underlying Options
- ----------------------------- ------- ---------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Michael J. Doyle ............ 1996 191,450 (3) 100,000
1995 157,500 (3) 10,000
1994 150,000 (3) --
Kenneth M. Miles ............ 1996 117,300 (4) 50,000
1995 90,000 (4) 7,000
1994 * (4) --
</TABLE>
- ------------
* Amount insufficient to be reportable under applicable rules of the
Securities and Exchange Commission.
(1) This table does not include any of the Company's executive officers that
joined the Company as a result of the October 1996 merger between the
Company and the CareMatrix Affiliates, because none of said executive
officers received salary and bonus compensation from the Company during the
1996 fiscal year that was in excess of $100,000.
(2) All salary figures shown represent the amounts which the Named Officers
received by year end under their respective employment agreements. Mr.
Doyle's annual base salary increased from $150,000 to $165,000 on July 1,
1995, and from $165,000 to $250,000 on October 4, 1996. Mr. Miles annual
salary increased from $75,000 to $105,000 on July 1, 1995 and from $105,000
to $125,000 on October 4, 1996.
(3) Under the terms of his employment agreement, Mr. Doyle is entitled to
receive an automobile allowance of $10,000 per annum and payment of
approximately $624 of premiums on a life insurance policy for a beneficiary
designated by Mr. Doyle.
(4) Under the terms of his employment agreement, Mr. Miles was entitled to
receive an automobile allowance of $6,000 per annum.
Employment Agreements
The Company has an employment agreement with Mr. Doyle, its Chief Executive
Officer. This employment agreement, as amended effective as of October 4, 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 $440 in 1996) 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. Mr. Doyle's employment agreement also provides that
if his employment terminates within a 24-month period following the occurrence
of certain changes in control because, among other 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 the average yearly total compensation (consisting of base
salary and any cash bonus) payable with respect to the previous five full
calendar years.
During 1996, the Company also had an employment agreement with Mr. Miles,
the former Senior Vice President of Finance of the Company. As noted below, this
employment agreement was terminated on March 28, 1997. Prior to its termination,
Mr. Miles employment agreement was similar in structure to Mr. Doyle's, and
contained substantially the same provisions, except that Mr. Miles' agreement
(i) provided for a term through December 31, 1998, subject to renewal on a
year-to-year basis, (ii) provided for an annual base salary of $125,000 plus
bonus compensation to be determined by the Board of Directors in its sole
discretion, (iii) made no provision for life insurance, and (iv) provided a lump
sum severance payment of 1.0 times the average yearly total compensation
(consisting of base salary and any cash bonus) payable with respect to the
previous five full calendar years.
5
<PAGE>
Termination Agreements
As noted above, Mr. Miles resigned as an officer and employee of the
Company effective March 28, 1997. Under Mr. Miles Resignation Agreement, the
Company (i) made a lump sum severance payment to Mr. Miles in the amount of
$131,000 (equivalent to his annual salary and annual car allowance), less
applicable tax withholdings and insurance contributions and (ii) will provide
family health insurance through March 31, 1998. The Resignation Agreement also
provides for the acceleration of the vesting of Mr. Miles' unexercised stock
options to purchase 65,900 shares of Common Stock and extends the period during
which Mr. Miles may exercise his options to October 31, 1998.
Stock Option Plans
Restated 1991 Combination Stock Option Plan.
The Company's Restated 1991 Combination Stock Option Plan, as amended and
restated to date (the "1991 Plan"), was adopted initially in October 1991 and
has been amended several times subsequently, most recently in order to increase
the number of shares of Common Stock reserved for issuance and to adjust terms
of the 1991 Plan to reflect the five-for-one reverse split of the Company's
Common Stock on October 14, 1996. The number of shares currently reserved for
issuance under the 1991 Plan is 400,000. The purpose of the 1991 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. See "Item 2: Proposal to Amend the Restated 1991 Combination Stock
Option Plan" for more detailed information concerning the 1991 Plan and the
proposed amendments thereto. The 1991 Plan, as it is proposed to be amended, is
attached to this Proxy Statement as Exhibit A.
1995 Non-Qualified Stock Option Plan.
Directors who are not also employees of the Company are eligible to
participate in the Company's 1995 Non-Qualified Stock Option Plan (the "1995
Plan"). Under the 1995 Plan, each non-employee director, upon becoming a
director, is automatically granted options to purchase 1,200 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 November
1996, pursuant to the 1995 Plan, the Company granted options to purchase 1,200
shares of Common Stock to each of Robert S. DeVore and Marshall S. Sterman, who
served on the Board of Directors of the Company.
1996 Equity Incentive Plan.
In October 1996, the Board of Directors adopted the 1996 Equity Incentive
Plan (the "1996 Plan") which provides for the award ("Award") of up to 1,600,000
shares of Common Stock in the form of incentive stock options, non-qualified
stock options, 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 1996 Plan. See "Item 3: Proposal
to Approve the 1996 Equity Incentive Plan" for more detailed information
concerning the 1996 Plan. The 1996 Plan is attached to this Proxy Statement as
Exhibit B.
Stock Option Grants
The following is a summary of all stock options granted to Named Officers
during 1996. Where applicable, individual grants are listed separately for each
Named Officer.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Potential Realizable
Number of Shares % of Total Value at Assumed
Underlying Options Exercise or Annual Rates of
Options Granted to Base Price Stock Price Appreciation
Name Granted (#)(1) Employees in 1996 ($/sh)(1) Expiration Date 5% 10%
- ------------------ ------------------- -------------------- -------------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Doyle 90,000 13.6% $14.70 10/4/06 $436,206 $519,978
10,000 1.5% $14.70 6/3/06 $ 97,334 $108,969
Kenneth M. Miles 45,000 6.8% $14.70 10/4/06(1) $218,103 $259,989
5,000 0.8% $14.70 6/3/06(1) $ 48,667 $ 54,485
</TABLE>
- ------------
(1) Pursuant to Mr. Miles resignation agreement, as described above, all options
held by him must be exercised on or before October 31, 1998.
6
<PAGE>
Aggregated Stock Option Exercises and Stock Option Values
There were no options exercised by any of the Named Officers during fiscal
1996. The following table indicates the aggregate value of all unexercised
options held by each Named Officer as of December 31, 1996.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Shares In-The-Money Options as of
Underlying Unexercised December 31, 1996 (1)
--------------------------------- -------------------------------
Number of Number of
Exercisable Unexercisable Exercisable Unexercisable
Name Shares Shares Value Value
- ------------------ -------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael J. Doyle 120,000 -- $51,000 --
Kenneth M. Miles 65,900 -- $21,700 --
</TABLE>
- ------------
(1) Value of unexercised, in-the-money options based upon the closing price of
the Company's Common Stock on the American Stock Exchange on December 31,
1996 of $13.50.
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, of 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
individuals 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.
Section 16 Compliance
During the 1996 reporting period, Marc H. Benson filed one late Form 3
reporting one transaction; Joel A. Kanter filed one late Form 3 reporting one
transaction; Michael J. Zaccaro filed one late Form 3 reporting one transaction,
and two late Form 4's reporting two transactions and one transaction,
respectively; and Michael J. Doyle filed one late Form 4 reporting seven
transactions.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is comprised of three
non-employee directors. The Committee is responsible for the establishment and
administration of the Company's executive compensation program. In addition, the
Committee is responsible for the granting of awards under and the administration
of the Company's 1991 Plan, the 1995 Plan and the 1996 Plan.
The Compensation Committee's basic policy in setting compensation for the
Company's executive officers is to ensure that compensation is (a) designed to
align the interests of executive management with the long term interests of the
shareholders and (b) competitive with the compensation paid by other assisted
living companies in order to attract and retain executives and to base
compensation on each individual's contribution to the Company's success. The
Committee's objective is to have each executive's compensation package
contingent on the Company's operational and, ultimately, financial success, as
well as on individual performance milestones. Compensation recommendations for
the Company's other executive officers are made by the Chairman and/or the
President and reviewed by the Compensation Committee.
The Committee continues to believe that long term equity-based incentive
compensation (in the form of stock options) which is performance driven and
intended to align management's interest with the interests of the Company's
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shareholders constitutes a fundamental element of each executive officer's total
compensation package. The Committee's policy generally is that executive
officers having higher levels of responsibility should have a compensation
package that places greater emphasis and dependence upon the Company's success
and stock appreciation than on base salary.
The two key components of the executive officers' compensation are
discussed below.
Base Salary. The base salary of the Company's executive officers, including
Mr. Doyle, the Chief Executive Officer, is established based on the performance
of the individual as well as on a review of the compensation paid to persons
holding comparable positions in other healthcare related companies.
Stock Options. In fiscal 1996, the Board of Directors approved grants of
incentive stock options to the executive officers which were designed to provide
an incentive to these individuals to work as a team to achieve long term
objectives of the Company. Generally, these options vest in three equal annual
installments beginning on October 4, 1996 and first become exercisable on
December 31, 1996.
Respectfully submitted,
H. Loy Anderson, Jr.
Rev. Bedros Baharian
Stephen E. Ronai
PERFORMANCE CHART (1)
The following graph compares the relative performance of the Company's
Common Stock (as measured by the price per share) against the cumulative
market-weight return of the Standard & Poor's Composite 500 Stock Index for the
five-year period commencing February 28, 1992 and ending December 31, 1996.
[GRAPHIC]
CMD = [pyramid] S&P 500 Index = o
PLOT POINTS
2/92 100 100
12/92 95.957 105.575
12/93 116.216 113.024
12/94 50.011 111.294
12/95 89.189 149.244
12/96 56.757 179.486
- ------------
(1) Assumes that the value of an investment in shares of the Company's Common
Stock and the S&P 500 Index was $100 on February 28, 1992.
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ITEM 2.
PROPOSAL TO AMEND AND RESTATE THE 1991 COMBINATION STOCK OPTION PLAN
In the opinion of the Board of Directors, the future success of the Company
depends, in large part, on its ability to attract, retain and motivate key
employees with experience and ability. Under the Company's 1991 Combination
Stock Option Plan (the "1991 Plan"), the Company is currently authorized to
grant incentive and non-statutory stock options to employees, officers and
employee directors of, and consultants and advisers to, the Company to purchase
up to 400,000 shares of Common Stock. Currently, approximately 800 employees of
the Company are eligible to participate in the 1991 Plan. As of April 25, 1997,
options to purchase 219,640 shares of Common Stock were outstanding under the
1991 Plan and 180,360 shares were available for future grant. The closing price
of the Company's Common Stock on April 25, 1997 was $18.875.
In Item 2 of the Notice of Meeting, the Board of Directors proposes to
amend and restate the 1991 Plan in order to (i) limit the number of shares of
Common Stock available for issuance to any participant in any one year to
120,000 shares, (ii) change certain language relating to the composition of the
Compensation Committee, and (iii) to update references to sections of the
Internal Revenue Code of 1986, as amended (the "Code"), which have been revised
since the 1991 Plan was originally drafted.
Under the proposed amendments, the 1991 Plan would limit the number of
shares of Common Stock available for issuance to any participant in any one year
to 120,000 shares. Section 162(m) of the Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation is not subject to
the deduction limit if certain requirements are met. In order for compensation
under the 1991 Plan to comply with such requirements, the 1991 Plan must state
the maximum number of shares with respect to which options or rights may be
granted during a specified period to any participant. Under the transition rules
applicable to Section 162(m), the Company was not required to amend the 1991
Plan to comply with the above-stated requirement until the 1997 Annual Meeting
of the shareholders.
Section III(a) of the 1991 Plan would also be amended to require that the
Compensation Committee administering the 1991 Plan be comprised solely of two or
more "outside directors" who are also "non-employee directors." The 1991 Plan
would also be amended to provide that the definitions of "outside directors" and
"non-employee directors" have the meaning provided in Rule 16b-3 under the
Securities and Exchange Act of 1934, as amended and Treasury Regulations Sec.
1.162-27(e)(3), respectively.
The following is a summary of the material provisions of the 1991 Plan and
is qualified in its entirety by reference to the complete text of the 1991 Plan
which is attached to this Proxy Statement as Exhibit A.
Eligibility
All key employees of the Company are eligible to receive incentive stock
options, non-statutory stock options and awards of restricted stock under the
1991 Plan. Outside consultants and advisors to the Company are eligible to
receive non-statutory options and awards of restricted stock. As of April 25,
1997, approximately 800 employees of the Company were eligible to participate in
the 1991 Plan.
Administration
The 1991 Plan is administered by the Compensation Committee of the Board of
Directors, consisting of Rev. Baharian and Messrs. Anderson and Ronai.
Stock Options
The Compensation Committee designates the optionee, date of grant and term
of each option, except that no incentive stock option can have a term exceeding
ten years (five years in the case of a 10% shareholder). The exercise price of
options is determined by the Compensation Committee, but may not be less than
100% (110% in the case of a 10% shareholder) of the fair market value on the
date of grant for incentive stock options. In the case of non-statutory options,
the exercise price may not be less than 50% of the fair market value on the date
of grant. Under Section 422 of the Code, to the extent that the aggregate fair
market value of stock with respect to which incentive stock options are
exercisable for the first time by any individual during any calendar year
exceeds $100,000, such options will be treated as non-statutory options. Payment
of the option exercise price may be made in cash, shares of Common Stock, a
combination of cash or stock or by any other method approved by the Compensation
Committee consistent with Section 422 of the Code and Rule 16b-3 under the
Securities Exchange Act of 1934 ("Rule 16b-3"). The Compensation Committee will
determine the length of time during which an optionee may exercise his or her
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option following the termination of employment (which may not exceed three
months in the case of incentive stock options) and upon death or disability
(which may not exceed one year in the case of incentive stock options).
The Compensation Committee, in its sole discretion, may include additional
provisions in any option granted under the 1991 Plan, including without
limitation restrictions on transfer, repurchase rights, commitments to pay cash
bonuses, to make, arrange for or guaranty loans or to transfer other property to
optionees upon exercise of options, or such other provisions as shall be
determined by the Compensation Committee so long as not inconsistent with the
1991 Plan. The Compensation Committee generally, in its sole discretion, may
also accelerate or extend the date or dates on which all or any particular
option or options granted under the 1991 Plan may be exercised.
Future Awards
Future issuances under the 1991 Plan are subject to the discretion of the
Compensation Committee. Therefore, it is impossible to indicate the specific
awards that will be granted to or benefits that will be received by any
individual participant or any group of participants under the 1991 Plan.
Amendment and Termination of the Plan
The Board of Directors at any time may amend or modify the terms of the
1991 Plan in any respect except that the Board of Directors may not materially
increase the benefits accruing to participants, increase the number of shares of
Common Stock reserved for purposes of this 1991 Plan, extend the term of this
1991 Plan or materially modify the requirements to be a participant in this 1991
Plan without further approval by the affirmative vote of at least a majority of
the holders of the outstanding shares of Common Stock.
Withholding Taxes
Pursuant to applicable Federal, state, local or foreign laws, the Company
may be required to collect income or other taxes upon the grant of a stock
option to, or exercise of a stock option by, a holder. The Company may require,
as a condition to the exercise of a stock option, or demand, at such other time
as it may consider appropriate, that the employee pay the Company the amount of
any taxes which the Company may determine is required to be withheld or
collected, and the employee shall comply with the requirement or demand of the
Company.
Federal Income Tax Consequences
The following is a summary of the federal income tax treatment of incentive
stock and non-statutory options.
Non-Statutory Stock Options. No taxable income is recognized by the
optionee upon the grant of a non-statutory stock option. The optionee must
recognize as ordinary income in the year in which the option is exercised the
amount by which the fair market value of the purchased shares on the date of
exercise exceeds the option price. Subject to Section 162(m) of the Code, the
Company will be entitled to a business expense deduction equal to the amount of
ordinary income recognized by the optionee. Any additional gain or any loss
recognized by the optionee upon the subsequent disposition of the purchased
shares will be a capital gain or loss, and will be a long-term gain or loss if
the shares are held for more than one year.
Incentive Stock Options. As in the case of non-statutory options, no
taxable income is recognized by the optionee upon the grant of an incentive
stock option. However, unlike non-statutory options, no taxable income is
recognized by the optionee upon the exercise of an incentive stock option, and
no corresponding expense deduction is available to the Company. Generally, if an
optionee holds shares acquired upon the exercise of an incentive stock option
until the later of (i) two years from the grant of the option and (ii) one year
from the date of transfer of the purchased shares to him or her (the "Statutory
Holding Period"), any gain recognized by the optionee on a subsequent sale of
the shares will be treated as long-term capital gain. The federal income tax
effect on the holder of incentive stock options is to defer, until the purchased
shares are sold, taxation of any increase in the shares' value from the time of
grant to the time of exercise.
If the optionee sells shares acquired upon the exercise of an incentive
stock option prior to the expiration of the Statutory Holding Period, he or she
will recognize taxable income at ordinary income tax rates in an amount equal to
the lesser of (i) the value of the shares on the date of exercise less the
option price; or (ii) the amount realized on the date of sale less the option
price. Subject to Section 162(m), the Company will be entitled to a
corresponding business expense deduction.
For purposes of the "alternative minimum tax" applicable to individuals,
the exercise of an incentive stock option is treated in the same manner as the
exercise of a non-statutory stock option. Thus, in the year of option exercise
an optionee must generally include in his or her alternative minimum taxable
income the difference between the exercise price and the fair market value of
the purchased shares on the date of exercise. The alternative minimum
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tax is imposed upon an individual's alternative minimum taxable income at rates
of 26% to 28%, but only to the extent that such tax exceeds the taxpayer's
regular income tax liability for the taxable year.
Compensation Deduction. Section 162(m) provides a $1 million limit for
deductions of the Company with respect to compensation of the Company's Chief
Executive Officer and four other most highly compensated executive officers.
Stock options (whether qualified or non-qualified) will be excluded from this
limitation provided that the exercise price of the option is equal to the fair
market value of the Company's shares subject to the option on the date of grant,
and certain other requirements, relating to the composition of the Compensation
Committee and shareholder approval of the 1991 Plan, are met. Therefore, it is
possible that at a future point in time the Company's deduction for executive
compensation could be subject to the $1 million limitation.
Board Recommendation
The Board of Directors believes that approval of the proposed amendments to
the 1991 Plan are in the best interests of the Company and its shareholders and
recommends a vote "FOR" the proposals contained in Item 2 of the Notice of
Meeting.
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ITEM 3.
PROPOSAL TO APPROVE THE 1996 EQUITY INCENTIVE PLAN
The 1996 Equity Incentive Plan (the "1996 Plan") was adopted by the Board
of Directors in October 1996 and provides for the award of up to 1,600,000
shares of Common Stock in the form of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs"), restricted stock, performance shares and
stock appreciation rights. To date, the Company has only awarded stock options.
In 1996, the Company granted options to purchase 507,740 shares of its Common
Stock to 92 employees leaving a total of 1,092,260 shares available for future
grant. The closing price of the Company's Common Stock on April 25, 1997 was
$18.875.
In Item 3 of the Notice of Meeting, the Board of Directors proposed
shareholder approval of the 1996 Plan so that it may meet the requirements of
Section 162(m) of the Code and for the ISOs to meet the requirements of Code
Section 422. The following is a summary of the material provisions of the 1996
Plan and is qualified in its entirety by reference to the complete text of the
1996 Plan which is attached to this Proxy Statement as Exhibit B.
Eligibility
All employees, directors and consultants of the Company and any of its
subsidiaries are eligible to participate in the 1996 Plan. The Company currently
has approximately 800 employees, consultants and directors who are eligible to
participate in the 1996 Plan.
Administration
The 1996 Plan will be administered by the Compensation Committee which
determines (i) who shall receive awards from those who are eligible to
participate in the 1996 Plan, (ii) the type of award to be made, (iii) the
number of shares of Common Stock which may be acquired pursuant to the award and
(iv) 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 1996 Plan.
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 Compensation
Committee need not treat participants uniformly. Except as otherwise provided by
the 1996 Plan or a particular award, any determination with respect to an award
may be made by the Compensation Committee at the time of award or at any time
thereafter. The Compensation 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 Compensation Committee may permit a participant to defer
all or any portion of a payment under the 1996 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 Compensation 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
NSO, if the participant consents to such action, or if the Compensation
Committee determines that the action would not materially and adversely affect
the participant. Awards may not be made under the 1996 Plan after September 1,
2006, but outstanding awards may extend beyond such date.
Stock Available for Awards
The 1996 Plan provides for the award for up to 1,600,000 shares of Common
Stock. The number of shares of Common Stock issuable pursuant to the 1996 Plan
may not be changed except by approval of the stockholders. However, in the event
that the Compensation 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 1996 Plan, the
Compensation Committee may adjust equitably the number and kind of shares of
stock or securities in respect of which awards may be made under the 1996 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 Compensation 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
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awards which expire or are terminated prior to exercise or Common Stock which
has been forfeited under the 1996 Plan will be available for future awards under
the 1996 Plan. Both treasury shares and authorized but unissued shares may be
used to satisfy awards under the 1996 Plan.
The 1996 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.
The maximum number of shares of Common Stock that could be awarded to any
employee in any one year is 120,000 shares.
Stock Options
The Compensation Committee may award two types of options: ISOs, which
qualify for special tax treatment under Section 422 of the Code and NSOs that do
not qualify for special federal income tax treatment under the Code. The
Compensation 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 NSO will
be determined by the Compensation Committee and may be less than, equal to or
greater than the fair market value of the Common Stock on the date of award.
Options may be exercisable for not more than ten years after the date the option
is awarded in the case of ISOs and ten years and one day after the date the
option is awarded in the case of NSO. The Compensation 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 NSO 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 NSO 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 timely complies with certain reporting requirements. 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 Compensation Committee shall so determine at
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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 1996
Plan, the Compensation Committee may award SARs in tandem with a Non-Qualified
Stock Option (at or after the award of the option), or alone and unrelated to an
option and determine the terms and conditions applicable thereto, including the
form of payment. SARs granted in tandem with an option terminate to the extent
that the related option is exercised, and the related option terminates to the
extent that the tandem SARs are exercised. 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 1996 Plan, the Compensation 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 Compensation Committee, on the date
the Compensation Committee determines that the Performance Share has been
earned. The Compensation 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 Share, 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 timely complies with certain reporting requirements.
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
less than par value, subject to such conditions and restrictions as the
Compensation 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 1996 Plan, the
Compensation 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 Compensation
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.
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 rec-
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ognized 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).
Section 162(m) of the Code
Section 162(m) provides a $1 million limit for deductions of the Company
with respect to compensation of the Company's Chief Executive Officer and four
other most highly compensated executive officers. Stock options (whether
qualified or non-qualified) will be excluded from this limitation provided that
the exercise price of the option is equal to the fair market value of the
Company's shares subject to the option on the date of grant, and certain other
requirements, relating to the composition of the Compensation Committee and
shareholder approval of the 1996 Plan, are met. Further, the compensation
element of grants of restricted stock is not excluded from this limitation.
Therefore, it is possible that at a future point in time the Company's deduction
for executive compensation could be subject to the $1 million limitation.
Future awards under the 1996 Plan are subject to the discretion of the
Compensation Committee. Therefore, it is impossible to indicate the specific
awards that will be granted to or benefits that will be received by any
individual participant or any group of participants under the 1996 Plan.
Board Recommendation
The Board of Directors believes that approval of the 1996 Plan is in the
best interests of the Company and its shareholders and recommends a vote "FOR"
the proposals contained in Item 3 of the Notice of Meeting.
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CERTAIN TRANSACTIONS
During the year ended December 31, 1996, Continuum Care of Massachusetts,
Inc. ("CCM"), whose principal stockholder is Abraham D. Gosman, provided
management, general and administrative services to the CareMatrix Affiliates and
the Company, generating fees for CCM in the amount of $5,105,845, including rent
expense of $318,885.
To the extent such services were rendered to the CareMatrix Affiliates, the
fees were based on the discretion of the parties and may not be indicative of
what they would have been if the CareMatrix Affiliates had performed these
services internally or had contracted for such services with unaffiliated
entities. Payments to Continuum Care of Massachusetts, Inc., for salaries and
wages were substantially reduced subsequent to July 1996. The Company intends to
provide development, management and other services in connection with the
establishment of assisted living facilities, skilled nursing facilities and
other health care facilities to or for the benefit of Chancellor, which will be
the owner of the new facilities. Abraham D. Gosman is the principal owner of,
and certain members of the Company's senior management and stockholders also
have an ownership interest in, Chancellor.
As used herein, a "Chancellor Entity" is Chancellor Senior Housing Group,
Inc. or a company in which Abraham D. Gosman has an ownership interest in excess
of 90%.
On September 1, 1996, the Company and a Chancellor Entity entered into a
Development and Turnkey Services Agreement (the "Global Services Agreement") in
connection with the development and management of assisted living, supportive
independent living and skilled nursing/rehabilitation facilities by the Company
for such Chancellor Entities. Pursuant to the Global Services Agreement, upon
the closing of the purchase of the real estate by the Chancellor Entity and the
receipt of final, non-appealable zoning approvals for the facility to be
developed, the parties expect to enter into a development agreement, the form of
which is attached to the Global Services Agreement (the "Global Development
Agreement"), prior to the commencement of construction of the facility. The
Global Development Agreement provides for a development fee that the Company
expects will range between 4% and 7% of total project costs, depending on the
individual transaction and determined on the date of signing. Upon completion of
the construction of a facility, and pursuant to the Global Development
Agreement, the parties will enter into a management agreement, the form of which
is attached to the Global Development Agreement (the "Global Management
Agreement"), pursuant to which the Company expects to earn a management fee
equal to approximately 5% of gross revenues. The Company expects that each
Global Management Agreement will have a 10 year term with three five-year
renewal options in favor of the Company. Each Global Management Agreement is
expected to contain an option granting the Company the right to lease each
facility at a fair market value rental to be a negotiated percentage of total
project costs determined on the date of execution (the "Lease Option"). The
Lease Option will have an initial 10-year term and will grant the Company three
to four five-year fair market value renewal options. The Lease Option will
contain an option to purchase the facility at a price equal to the then fair
market value. The Company also expects that, to the extent solely development or
solely management opportunities present themselves with such Chancellor
Entities, it will utilize the Global Development Agreement or the Global
Management Agreement on a stand alone basis.
On July 3, 1996, the Company was assigned the right to co-develop and
manage an assisted/independent living facility in Darien, Connecticut from a
Chancellor Entity. The Company currently expects to enter into a Global
Development Agreement and a Global Management Agreement with Stony Brook Court,
LLC, in which a Chancellor Entity has a 50% interest.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Deerfield Beach, Florida and was assigned rights under a
purchase and sale agreement concerning a parcel of land in such location by a
Chancellor Entity. The Company simultaneously assigned its rights under the
purchase and sale agreement to another Chancellor Entity. The Company expects to
enter into a Global Development Agreement and a Global Management Agreement
relating to the proposed Deerfield facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Macon, Georgia and assigned its rights under a letter
agreement dated June 3, 1996 granting a right to purchase a parcel of land in
such location to such Chancellor Entity. The Company expects to enter into a
Global Development Agreement and a Global Management Agreement concerning the
proposed Macon facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Livingston, New Jersey and assigned its rights
16
<PAGE>
under a purchase and sale agreement, dated July 9, 1993, relating to a parcel of
land in Livingston to such Chancellor Entity. The Company expects to enter into
a Global Development Agreement and a Global Management Agreement relating to the
proposed Livingston facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop an assisted/independent living
facility in Park Ridge, New Jersey and was assigned by such Chancellor Entity
its rights, duties and obligations under a management agreement with a third
party having an initial term of ten years and an option in favor of the Company
to renew for an additional ten year term. The Company is entitled to receive as
a management fee under such agreement a monthly fee equal to the facility's
positive cash flow each month, if any. The Company expects to enter into a
Global Development Agreement concerning this facility.
On July 3, 1996, pursuant to an assignment agreement, the Company was
granted by a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Jensen Beach, Florida and assigned to
such Chancellor Entity its right under a purchase agreement, dated February 27,
1996, relating to a parcel of land in Jensen Beach. The Company expects to enter
into a Global Development Agreement and a Global Management Agreement relating
to the proposed Jensen Beach facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Bonita Springs, Florida and assigned to such Chancellor
Entity its rights under an option agreement dated May 3, 1996 to purchase a
parcel of land in Bonita Springs. The Company expects to enter into a Global
Development Agreement and a Global Management Agreement relating to the proposed
Bonita Springs facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Ridgefield, Connecticut and was assigned rights under a
purchase and option agreement concerning a parcel of land in said location by a
Chancellor Entity. The Company in turn assigned its rights under the purchase
option agreement to another Chancellor Entity. The Company expects to enter into
a Global Development Agreement and a Global Management Agreement relating to the
proposed Ridgefield facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Durham, North Carolina and assigned its rights under a
purchase agreement, dated May 29, 1996, relating to a parcel of land in Durham
to such Chancellor Entity. The Company expects to enter into a Global
Development Agreement and a Global Management Agreement relating to the proposed
Durham facility.
On July 3, 1996, pursuant to an assignment agreement, the Company was
granted by a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Atlanta, Georgia and assigned its rights
under four options to purchase certain parcels of land in that same location to
such Chancellor Entity. The Company expects to enter into a Global Development
Agreement and a Global Management Agreement relating to the proposed Atlanta
facility.
On December 20, 1996, the Company entered into a Management Agreement with
an entity owned by Andrew D. Gosman and Michael M. Gosman with respect to a
senior hotel/assisted living facility in Palm Beach, Florida currently being
developed by another party.
The Company expects to enter into agreements similar to the Global
Development Agreement and the Global Management Agreement with B&G Limited
Liability Company, in which a Chancellor Entity has a 50% interest, relating to
a facility to be located in Rye Brook, New York.
The Company expects to enter into separate Global Development Agreements
and Global Management Agreements with separate Chancellor Entities with respect
to assisted/independent living facilities in Saco, Maine, Ellicott, Maryland,
Upper Nyack, New York and Reston, Virginia.
The Company expects to enter into a Global Management Agreement with
respect to an assisted/independent living facility in Princeton, New Jersey. The
Company has entered into a development agreement, dated March 8, 1996, with
Netwest Development Corporation ("Netwest") and Emerald Springs Associates
General Partnership, in which a Chancellor Entity has an 85% interest, to
co-develop an assisted living/supportive independent living facility in Yuma,
Arizona. The development agreement provides that the Company will be paid a
fixed price for the development, construction and furnishing of the project. The
Company expects to earn development fee income to the extent the Company's total
development costs are less than the contract price.
17
<PAGE>
The Company has entered into a development agreement, dated August 28,
1996, with Netwest and Amethyst Arbor Associates General Partnership, in which a
Chancellor Entity has an 85% interest, to co-develop an assisted
living/supportive independent living facility in Peoria, Arizona. The
development agreement provides that the Company will be paid a fixed price for
the development, construction and furnishing of the project; the Company expects
to earn development fee income to the extent the Company's total development
costs are less than the contract price.
The Company is currently negotiating a development agreement with Netwest
and Amber Lights Associates General Partnership, in which a Chancellor Entity
will have an 85% interest, to co-develop an assisted living/supportive
independent living facility in Tucson, Arizona. The development agreement will
provide that the Company will be paid a fixed price for the development,
construction and furnishing of the Project; the Company expects to earn
development fee income to the extent its total costs are less than the fixed
price. In connection with the development of this facility, the Company was
assigned pursuant to an assignment agreement, dated July 3, 1996, rights under a
letter of intent, dated December 11, 1995, to participate in the joint venture
that will own the proposed Tucson facility and to develop such facility for the
joint venture. The Company in turn assigned its rights to participate in the
joint venture to another Chancellor Entity.
The Company has entered into a turnkey construction agreement, dated August
14, 1996, with Atlantic Development Group, LLC and Cambridge House Associates
General Partnership ("Cambridge House Partnership"), in which a Chancellor
Entity has a 70% interest, to co-develop an assisted living facility in
Ossining, New York. Pursuant to this agreement, the Company is entitled to a
development fee of $200,000 and a construction supervision fee of $5,000 per
month during the course of construction of the project. The Company has also
entered into a management agreement, dated as of August 14, 1996, with Cambridge
House Partnership to manage this facility with a ten year initial term and two
five-year renewal options in favor of the Company. Pursuant to this agreement,
the Company shall receive a management fee equal to 5% of gross revenues of the
facility (less contractual adjustments for uncollectible accounts).
The Company has entered into a management agreement, dated as of June 30,
1996, with a Chancellor Entity, to manage a facility in Dedham, Massachusetts.
Pursuant to this agreement, which extends for a 10-year period, with three
five-year renewal periods at the Company's option, the Company shall receive a
management fee equal to 5% of gross revenues of the facility (less contractual
adjustments for uncollectible accounts).
The Company has entered into a management agreement, dated June 30, 1996,
with a Chancellor Entity to manage skilled nursing and assisted living
facilities in Needham, Massachusetts. Pursuant to this agreement, which has a 20
year term with three five-year renewal periods at the Company's option, the
Company shall receive a management fee equal to 5% of gross revenues of the
facilities (less contractual adjustments for uncollectible accounts). The
Company acquired the management contract for the facilities from a Chancellor
Entity for $2.8 million in cash.
The Company has entered into an assignment agreement, dated as of June 25,
1996, with a Chancellor Entity to develop a skilled nursing facility in
Millbury, Massachusetts, in accordance with the turnkey construction contract,
dated October 19, 1994, as amended, between Sun Healthcare Group, Inc. and CCC
of Florida, Inc. Pursuant to the Millbury construction contract, the Company
shall receive a development fee equal to the difference, if any, between the
contract price and the actual construction costs.
On October 3, 1996, the Company executed a turnkey construction contract
with Cragganmore Associates Limited Partnership ("Cragganmore"), in which a
Chancellor Entity has an 80% interest, to develop an assisted living facility in
Southington, Connecticut and pursuant to which the Company will receive a
development fee equal to the difference between the contract price and the
actual costs of development and construction. The Company was assigned the right
to enter into such contract pursuant to the assignment agreement, dated July 3,
1996, with a Chancellor Entity, assigning to the Company the right to develop
this facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an assisted/independent
living facility in Houston, Texas. On September 1, 1996, the Company entered
into a development agreement with such Chancellor Entity which provides that the
Company will earn a development fee of $875,000. The Company also expects to
enter into a management agreement substantially similar to the Global management
Agreement.
On July 3, 1996, pursuant to an assignment agreement, the Company assigned
its rights, duties and obligations to a Chancellor Entity with respect to its
rights under a letter of intent to participate in the joint venture that would
own senior housing facilities to be developed in Glen Cove, Roslyn, and Great
Neck, New York and Wallingford, Connecticut. The Company retained the rights
under such letter of intent to develop and manage such facilities. On October 3,
1996, the Company entered into a management agreement concerning the proposed
Glen Cove facil
18
<PAGE>
ity with a term of 15 years with two five-year renewal options in favor of the
Company and a management fee equal to 5% of gross revenues. The Company expects
to enter into a turnkey development agreement with such Chancellor Entity to
co-develop the senior housing facility in Great Neck. Pursuant to this agreement
the Company expects to receive a development fee the amount of which will be
negotiated prior to construction.
The Company has entered into (i) an assignment agreement, dated as of June
6, 1996, with a Chancellor Entity to develop a skilled nursing facility in West
Bridgewater, Massachusetts, in accordance with the turnkey construction
contract, dated April 20, 1995, as amended, between West Bridgewater Medical
Investors Limited Partnership and Continuum Care of West Bridgewater, Inc.; (ii)
an assignment agreement, dated as of June 6, 1996, with a Chancellor Entity to
develop a skilled nursing facility in Auburn, Massachusetts, in accordance with
the turnkey construction contract, dated March 3, 1994, as amended, between
Auburn Medical Investors, Limited Partnership and Continuum Care Corporation;
(iii) an assignment agreement, dated as of June 6, 1996, with a Chancellor
Entity to develop a skilled nursing facility in Plymouth, Massachusetts, in
accordance with the turnkey construction contract, dated March 3, 1994, as
amended, between Plymouth Medical Investors Limited Partnership and Continuum
Care Corporation; and (iv) an assignment agreement, dated as of June 6, 1996,
with a Chancellor Entity to develop a skilled nursing facility in Raynham,
Massachusetts, in accordance with the turnkey construction contract, dated March
3, 1994, as amended, between Raynham Medical Investors Limited Partnership and
Continuum Care Corporation. The development of the facilities under each of the
agreements listed in clauses (i) through (iv) has been completed, and the
Company is entitled to receive future payments based upon occupancy levels and
cash flow coverage, the necessary minimum thresholds of which have not yet been
reached. In the aggregate, the Company expects to receive approximately
$1,000,000. Prior payments under these contracts were made to a Chancellor
Entity prior to the assignment of such agreements.
In July 1996, the Company purchased certain assets in connection with the
facility in Needham, Massachusetts from a Chancellor Entity at a purchase price
of $500,000.
Meditrust, a publicly traded real estate investment trust with assets in
excess of $1.7 billion and of which Abraham D. Gosman is the Chairman of the
Board and Chief Executive officer, has provided financing to a skilled
nursing/assisted living facility located in Needham, Massachusetts and owned
principally by Mr. Gosman, in the aggregate amount of $20,109,241 at December
31, 1996.
As of October 30, 1996, the Company had borrowed $9,661,381 (inclusive of
interest) from Mr. Gosman with interest accruing at the prime rate. The Company
repaid this indebtedness in connection with the receipt of net proceeds from its
1996 equity offering. As of April 30, 1997, Mr. Gosman owed the Company
approximately $357,000. Interest accrues on such outstanding indebtedness at the
prime rate of interest. The indebtedness from the Company has a maturity date of
June 30, 1997. Interest on the borrowings is payable upon demand. In June and
July 1996, the Company borrowed an aggregate of $1.0 million for working capital
purposes from the CareMatrix Affiliates. In addition to executing a promissory
note to evidence the obligation, the Company entered into a mortgage and option
agreement with the CareMatrix Affiliates under which all advances on the working
capital loan would be secured by a subordinate lien deed of trust on the Bailey
Village community, subordinate to certain prior mortgages. On July 30, 1996,
Abraham D. Gosman purchased from the Company 100 shares of the newly created
Series B Preferred Stock for a purchase price of $14,000 per share, or $1.4
million in the aggregate, $1.0 million of which was used to satisfy the working
capital loan from the CareMatrix Affiliates. The Company used a portion of the
net proceeds of its 1996 equity offering to redeem the Series B Preferred Stock
for $1.4 million. Concurrently with the sale of the Series B Preferred Stock to
Mr. Gosman, Standish issued to Mr. Gosman five-year warrants to purchase an
additional 80,000 shares of Common Stock at an exercise price equal to $20.80
per share (subject to customary anti-dilution adjustments).
On April 17, 1997, the Company entered into an agreement with PhyMatrix
Corp. ("PhyMatrix") relating to the reimbusement of any fees or expenses
incurred in connection with the utilization of the services or property of the
respective companies. Abraham D. Gosman is the Chairman and Chief Executive
Officer of PhyMatrix and is also the beneficial owner of approximately 37% of
the outstanding shares of PhyMatrix Common Stock, a portion of which he holds as
trustee for the benefit of his sons, Michael and Andrew Gosman.
It is the general policy of the Company not to enter into any transaction,
or amend in a manner adverse to the Company any existing transaction, in which
an affiliate of the Company has a material interest, unless a majority of the
disinterested directors approve the terms thereof.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, certain information
regarding the beneficial ownership of shares of Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of outstanding
Common Stock, by each director and each director nominee, and each of the Named
Officers of the Company and by all directors and executive officers as a group.
Except as indicated in the footnotes, all of such shares of Common Stock set
forth in the following table are owned directly, and the indicated person has
sole voting and investment power with respect to all Common Stock shown as
beneficially owned by such person:
<TABLE>
<CAPTION>
Amount of Beneficial Ownership
-------------------------------------------------
Name Shares Beneficially Owned Percentage Owned
- ------------------------------------------------ ---------------------------- ------------------
<S> <C> <C>
Abraham D. Gosman (1) ........................ 7,647,754 44.7%
Andrew D. Gosman (2) ........................... 3,178,140 18.5%
Michael M. Gosman (2) ........................ 3,178,840 18.5%
Michael J. Doyle (3) ........................... 151,139 *
Donald J. Amaral .............................. -- --
H. Loy Anderson, Jr. ........................ 110 *
Rev. Bedros Baharian ........................... 20,000 *
Robert Cataldo** .............................. -- --
Stephen E. Ronai .............................. 1,000 *
Kenneth M. Miles (4) ........................... 65,900 *
All directors and executive officers as a group
(14 persons) ................................. 8,602,957 50.3%
</TABLE>
- ------------
* Less than one percent.
** Nominee
(1) Consists of 35,000 shares of Common Stock owned directly, and 7,612,154
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 4,558,910
shares).
(2) 7,612,754 shares of Common Stock are held in trust for the benefit of Andrew
D. Gosman and Michael M. Gosman by their father, Abraham D. Gosman, who has
sole investment power with respect to all such shares and sole voting power
with respect to 4,558,910 shares). Andrew and Michael have shared voting
power with respect to the remaining 3,053,244 shares remaining in the trust.
(3) Includes 9,067 shares held by Mr. Doyle's spouse and 2,712 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 120,000 shares which may be acquired upon the
exercise of options.
(4) Includes 65,900 shares which may be acquired upon the exercise of options.
20
<PAGE>
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Company at its principal
executive offices by December 31, 1997 for inclusion in the proxy statement and
form of proxy relating to that meeting and must comply with the applicable
requirements of the federal securities laws.
ANNUAL REPORT AND INDEPENDENT ACCOUNTANTS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1996, including financial statements and the report of Coopers &
Lybrand LLP ("Coopers & Lybrand") thereon, is being mailed herewith to each of
the Company's shareholders of record at the close of business on April 25, 1997.
The Board of Directors has selected Coopers & Lybrand as the Company's
independent accountants for the current fiscal year. Representatives of Coopers
& Lybrand are expected to be present at the Annual Meeting where they will have
the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as shown above. However, if any
such other business should come before the Annual Meeting, it is the intention
of the persons named in the enclosed proxy to vote the proxies in respect of any
such business in accordance with their best judgment.
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit proxies otherwise than by use of
the mail, in that certain officers and regular employees of the Company, without
additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies. Such assistance may take the form of personal,
telephonic or written solicitation or any combination thereof. The Company will
also request persons, firms and corporations holding shares in their names, or
in the names of their nominees, which shares are beneficially owned by others,
to send this proxy material to and obtain proxies from such beneficial owners
and will reimburse such holders for their reasonable expenses in doing so.
By Order of the Board of Directors
James M. Clary, III
Secretary
May 2, 1997
21
EXHIBIT A
CAREMATRIX CORPORATION
AMENDED AND RESTATED 1991 COMBINATION STOCK OPTION PLAN
Section I. Purpose of the Plan.
The purposes of the CareMatrix Corporation (f/k/a The Standish Care
Company) 1991 Combination Stock Option Plan (the "1991 Plan") are (i) to provide
long-term incentives and rewards to those key employees (the "Employee
Participants") of CareMatrix Corporation (the "Corporation") and its
subsidiaries (if any), and any other persons (the "Non-employee Participants")
who are in a position to contribute to the long-term success and growth of the
Corporation and its subsidiaries, (ii) to assist the Corporation in retaining
and attracting executives and key employees with requisite experience and
ability, and (iii) to associate more closely the interests of such executives
and key employees with those of the Corporation's stockholders.
Section II. Definitions.
Code. The "Code" is the Internal Revenue Code of 1986, as it may be amended
from time to time.
Common Stock. "Common Stock" is the $0.05 par value common stock of the
Corporation.
Committee. "Committee" is defined in Section III, paragraph (a).
Corporation. "Corporation" is defined in Section I of this 1991 Plan.
Corporation ISOs. "Corporation ISOs" are all stock options (including 1991
Plan ISOs) which (i) are Incentive Stock Options and (ii) are granted on or
after the Effective Date of this 1991 Plan under any plans (including this 1991
Plan) of the Corporation, a Parent Corporation and/or a Subsidiary Corporation.
Employee Participants. "Employee Participants" is defined in Section I.
Fair Market Value. The "Fair Market Value" of any property is the value of
the property as reasonably determined by the Committee.
Incentive Stock Option. An "Incentive Stock Option" is a stock option which
is treated as an incentive stock option under Section 422 of the Code.
1991 Plan. "1991 Plan" is defined in Section I.
1991 Plan ISOs. "1991 Plan ISOs" are Stock Options which are Incentive
Stock Options.
Non-employee Directors. "Non-employee directors" has the meaning provided
in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
Non-employee Participants. "Non-employee Participants" is defined in
Section I.
Non-qualified Option. A "Non-qualified Option" is a Stock Option which does
not qualify as an Incentive Stock Option or for which the Committee provides, in
the terms of such option and at the time such option is granted, that the option
shall not be treated as an Incentive Stock Option.
Outside Directors. "Outside directors" has the meaning provided in Treasury
Regulations Sec. 1.162-27(e)(3).
Parent Corporation. "Parent Corporation" has the meaning provided in
Section 424(e) of the Code.
Participants. "Participants" are all persons who are either Employee
Participants or Non-employee Participants.
Permanent and Total Disability. "Permanent and Total Disability" has the
meaning provided in Section 22(e)(3) of the Code.
Stock Options. Stock Options are rights granted pursuant to this 1991 Plan
to purchase shares of Common Stock at a fixed price.
Subsidiary Corporation. "Subsidiary Corporation" has the meaning provided
in Section 424(f) of the Code.
Ten Percent Stockholder. "Ten Percent Stockholder" means, with respect to a
1991 Plan ISO, any individual who directly or indirectly owns stock possessing
more than 10% of the total combined voting power of all classes
<PAGE>
of stock of the Corporation or any Parent Corporation or any Subsidiary
Corporation at the time such 1991 Plan ISO is granted.
Section III. Administration.
(a) The Committee. The Plan shall be administered by the Board of Directors
of the Corporation, or if the Board so determines, by a Compensation Committee,
such administering body to be referred to as the "Committee" consisting solely
of two or more Outside Directors who are also Non-employee Directors. The
Committee shall serve at the pleasure of the Board of Directors, which may from
time to time, and in its sole discretion, discharge any member, appoint
additional new members in substitution for those previously appointed and/or
fill vacancies however caused. A majority of the Committee shall constitute a
quorum and the acts of a majority of the members present at any meeting at which
a quorum is present shall be deemed the action of the Committee.
(b) Authority and Discretion of the Committee. Subject to the express
provisions of this 1991 Plan and provided that all actions taken shall be
consistent with the purposes of this 1991 Plan, and subject to ratification by
the Board Of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine those
persons who shall constitute Employee Participants and Non-employee
Participants; (ii) select the Participants to whom Stock Options shall be
granted under this 1991 Plan; (iii) determine the size and the form of the Stock
Options, if any, to be granted to any Participant; (iv) determine the time or
times such Stock Options shall be granted including the grant of Stock Options
in connection with other awards made, or compensation paid, to the Participant;
(v) establish the terms and conditions upon which such Stock Options may be
exercised and/or transferred, including the exercise of Stock Options in
connection with other awards made, or compensation paid, to the Participant;
(vi) make or alter any restrictions and conditions upon such Stock Options and
the Stock received on exercise thereof, including, but not limited to, providing
for limitations on the Participant's right to keep any Stock received on
termination of employment; and (vii) adopt such rules and regulations,
establish, define and/or interpret these and any other terms and conditions, and
make all determinations (which may be on a case-by-case basis) deemed necessary
or desirable for the administration of this 1991 Plan. Michael J. Doyle, so long
as he is employed by the Corporation, shall have the authority to recommend
Participants in the 1991 Plan to the Committee. Notwithstanding any provision of
this 1991 Plan to the contrary, only Employee Participants shall be eligible to
receive 1991 Plan ISOs.
(c) Applicable Law. This 1991 Plan, and all Stock Options shall be governed
by the law of the State of Delaware.
Section IV. Terms of Stock Options.
(a) Agreements. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. Said
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1991 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive Stock Option, such
agreement shall include the following, or a similar statement: "This stock
option is not intended to be an Incentive Stock Option, as that term is
described in Section 422 of the Internal Revenue Code of 1986, as amended."
(b) Term. Stock Options shall be for such periods as may be determined by
the Committee, provided that in the case of 1991 Plan ISOs, the term of any such
1991 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1991 Plan ISO that in the event of the
Permanent and Total Disability or death of the Participant, the 1991 Plan ISO
may be exercised by the Participant or his estate (if applicable) for a period
of up to one year after the date of such Permanent and Total Disability or
Death. In no event may a 1991 Plan ISO be exercisable (including provisions, if
any, for exercise in installments) subsequent to ten years after the date of
grant, or, in the case of 1991 Plan ISOs granted to Ten percent Stockholders,
more than five years after the date of grant.
(c) Purchase Price. The purchase price of shares purchased pursuant to any
Stock Option shall be determined by the Committee, and shall be paid by the
employee in full upon exercise, (a) in cash, (b) by delivery of shares of Common
Stock (valued at their Fair Market Value on the date of such exercise), (c) any
other property (valued at its Fair Market Value on the date of such exercise),
or (d) any combination of cash, stock and other property, each of the foregoing
only as the Committee, in its sole discretion, may permit. In no event will the
purchase price of Common Stock subject to a 1991 Plan ISO be less than the Fair
Market Value of the Common Stock on the date of the issuance of the 1991 Plan
ISO, provided that in the case of 1991 Plan ISOs granted to Ten Percent
Stockholders, the purchase price shall not be less than 110% of the Fair Market
Value of the Common Stock on the date of issuance of the 1991 Plan ISO. In
addition in no event will the purchase price of Common Stock subject to a
A-2
<PAGE>
Non-qualified Option be less than one-half of the Fair Market Value of the
Common Stock. Furthermore, in no event shall the purchase price of any Option be
less than the par value of the Common Stock.
(d) Further Restrictions as to Incentive Stock Options. To the extent that
the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to this section) are exercisable for
the first time by any Employee Participant during any calendar year exceeds
$100,000, such Corporation ISOs shall be treated as options which are not
Incentive Stock Options.
(e) Restrictions. At the discretion of the Committee, the Common Stock
issued pursuant to the Stock Options granted hereunder may be subject to
restrictions on vesting or transferability.
(f) Withholding of Taxes. Pursuant to applicable Federal, state, local or
foreign laws, the Corporation may be required to collect income or other taxes
upon the grant of a Stock Option to, or exercise of a Stock Option by, a holder.
The Corporation may require, as a condition to the exercise of a Stock Option,
or demand, at such other time as it may consider appropriate, that the Employee
pay the Corporation the amount of any taxes which the Corporation may determine
is required to be withheld or collected, and the Employee shall comply with the
requirement or demand of the Corporation.
(g) Securities Law Compliance. Upon exercise (or partial exercise) of a
Stock Option, the Employee shall make such representations and furnish such
information as may, in the opinion of counsel for the Corporation, be
appropriate to permit the Corporation to issue or transfer Stock in compliance
with the provisions of applicable federal or state securities laws. The
Corporation, in its discretion, may postpone the issuance and delivery of Stock
upon any exercise of this Option until completion of such registration or other
qualification of such shares under any federal or state laws, or stock exchange
listing, as the Corporation may consider appropriate. The Corporation may
require that prior to the issuance or transfer of Stock upon exercise of a Stock
Option, the Employee enter into a written agreement to comply with any
restrictions on subsequent disposition that the Corporation deems necessary or
advisable under any applicable federal and state securities laws. Certificates
of Stock issued hereunder may be legended to reflect such restrictions.
(h) Right to Stock Option. No employee of the Corporation or any other
person shall have any claim or right to be a participant in this 1991 Plan or to
be granted a Stock Option hereunder. Neither this 1991 Plan nor any action taken
hereunder shall be construed as giving any person any right to be retained in
the employ of the Corporation. Nothing contained hereunder shall be construed as
giving any person any equity or interest of any kind in any assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between the Corporation and any such person. As to any claim for any unpaid
amounts under this 1991 Plan, any person having a claim for payments shall be an
unsecured creditor.
(i) Indemnity. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Corporation or any subsidiary, shall
be liable for any act, omission, interpretation, construction or determination
made in good faith in connection with their responsibilities with respect to
this 1991 Plan, and the Corporation hereby agrees to indemnify the members of
the Board of Directors, the members of the Committee, and the employees of the
Corporation and its subsidiaries in respect of any claim, loss, damage, or
expense (including counsel fees) arising from any such act, omission,
interpretation, construction or determination to the full extent permitted by
law.
(j) Participation by Foreigners. Without amending this 1991 Plan, except to
the extent required by the Code in the case of Incentive Stock Options, the
Committee may modify grants made to participants who are foreign nationals or
employed outside the United States so as to recognize differences in local law,
tax policy, or custom.
Section V. Amendment and Termination; Adjustments Upon Changes in Stock.
The Board of Directors of the Corporation may at any time, and from time to
time, amend, suspend or terminate this 1991 Plan in whole or in part; provided,
however, that the Board of Directors may not materially increase the benefits
accruing to Participants, increase the number of shares of Common Stock reserved
for purposes of this 1991 Plan, extend the term of this 1991 Plan or materially
modify the requirements to be a Participant in this 1991 Plan without further
approval by the affirmative vote of at least a majority of the holders of the
outstanding shares of Common Stock. Except as provided herein, no amendment,
suspension or termination of this 1991 Plan may affect the rights of a
Participant to whom a Stock Option has been granted without such Participant's
consent. The Committee is specifically authorized to convert the unexercised
portion of any 1991 Plan ISO granted to an Employee Participant to a
Non-qualified Option at any time prior to the exercise, in full, of such 1991
Plan ISO. If there shall be any change in the Common Stock or to any Stock
Option granted under this 1991 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate
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structure of the Corporation, appropriate adjustments may be made by the Board
of Directors of the Corporation (or if the Corporation is not the surviving
corporation in any such transaction, the Board of Directors of the surviving
corporation) in the aggregate number and kind of shares subject to this 1991
Plan, and the number and kind of shares and the price per share subject to
outstanding options, provided that such adjustment does not affect the
qualification of any 1991 Plan ISO as an Incentive Stock Option. In connection
with the foregoing, the Board of Directors may issue new Stock Options in
exchange for outstanding Stock Options.
Section VI. Shares of Stock Subject to the Plan.
The number of shares of Common Stock that may be the subject of awards
under this 1991 Plan shall not exceed 400,000 shares. In no event shall any
participants receive in any calendar year stock options for more than 120,000
shares of Common Stock. Shares to be delivered under this 1991 Plan may be
either authorized but unissued shares of Common Stock or treasury shares. Any
shares subject to an option hereunder which for any reason expires unexercised,
shares reacquired by the Corporation because restrictions do not lapse, shares
returned because payment is made hereunder in stock of equivalent value rather
than in cash, and/or shares reacquired from a recipient for any other reason
shall, at such time, no longer count towards the aggregate number of shares
which have been the subject of Stock Options issued hereunder, and such number
of shares shall be subject to further awards under this 1991 Plan, provided the
total number of shares then eligible for award under this 1991 Plan may not
exceed the total specified in the first sentence of this Section VI.
Section VII. Effective Date and Term of this Plan.
Provided the stockholders of the Corporation approve this 1991 Plan, the
effective date of this 1991 Plan is October 1, 1991 (the "Effective Date") and
awards under this 1991 Plan may be made for a period of ten years commencing on
the Effective Date. The period during which a Stock Option may be exercised may
extend beyond that time as provided herein.
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EXHIBIT B
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 on September 1, 2006. 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.
"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 (or in the absence of
such determination, the closing price of the Shares as reported by The Nasdaq
Stock Market's National Market or any successor thereto, on the applicable date
of determination (or if such date shall not be a trading day, on the last
trading day previous thereto)) 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.
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"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 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 $0.05 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 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 One
Million Six Hundred Thousand (1,600,000) Shares. Shares issued under the Plan
may consist in whole or in part of authorized but unissued Shares or treasury
Shares.
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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 One Hundred Twenty Thousand (120,000)
Shares.
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 shall 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 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.
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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.
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
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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
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 assume outstanding Awards
and/or grant to Participants replacement Awards, which Awards in the case of
ISOs 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 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
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of a note or Shares, including Restricted Stock, valued at their Fair Market
Value on the date of delivery, or such other lawful consideration or provision
for the payment thereof 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 entity, 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 entity 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 amount of cash in
lieu of any 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
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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 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.
B-7
<PAGE>
PROXY PROXY
CAREMATRIX CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 1997
The undersigned, having received the Notice of Annual Meeting of
Stockholders and the Board of Directors' Proxy Statement (the "Proxy
Statement"), hereby appoint(s) Abraham D. Gosman, Robert M. Kaufman and James M.
Clary, III, and each of them, Proxies of the undersigned (with full power of
substitution) to attend the Annual Meeting of Stockholders of CareMatrix
Corporation to be held June 16, 1997, and all adjournments thereof (the
"Meeting"), and there to vote all shares of Common Stock of CareMatrix
Corporation that the undersigned would be entitled to vote, if personally
present, in regard to all matters which may come before the meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority (i) to consider and act upon such business, matters or
proposals other than the business set forth below as may properly come before
the Meeting and (ii) with respect to the election of directors in the event
that any of the nominees is unable or unwilling to serve. The Proxy when
properly executed will be voted in the manner specified herein. If no
specification is made, the Proxies intend to vote FOR all nominees for director.
Please mark vote as in this example. [X]
1. For the election of all nominees listed below (except as otherwise
indicated).
[ ] FOR all nominees [ ] WITHHOLD from all nominees
Nominees: Abraham D. Gosman, Andrew D. Gosman, Michael M. Gosman, Donald J.
Amaral, H. Loy Anderson, Jr., Rev. Bedros Baharian, Robert Cataldo
and Stephen E. Ronai
-------------------------------------------------------------------
FOR all nominees, except those listed on the line above
(CONTINUED ON REVERSE SIDE.)
<PAGE>
2. For the amendment of the Company's Restated 1991 Combination Stock Option
Plan.
[ ] FOR the amendment [ ] AGAINST the amendment [ ] ABSTAIN
3. For the approval of the Company's 1996 Equity Incentive Plan.
[ ] FOR the amendment [ ] AGAINST the amendment [ ] ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Mark here for address change and note below. [ ]
----------------------------------------------- -----------------
Signature Date
----------------------------------------------- -----------------
Signature Date
In signing, please write name(s) exactly as appearing in the imprint on this
card. For shares held jointly, each joint owner should sign. If signing as
executor, or in any other representative capacity, or as an officer of a
corporation, please indicate your full title as such.
