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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:
[X] Preliminary Proxy Statement [X] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SMT Health Services Inc
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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Notes:
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PRELIMINARY COPY
FOR SEC USE ONLY
SMT HEALTH SERVICES INC.
10521 PERRY HIGHWAY
WEXFORD, PENNSYLVANIA 15090
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 1997
-------------------------
To the Stockholders of
SMT Health Services Inc.:
The Annual Meeting of Stockholders of SMT Health Services Inc. will be held
at the Pittsburgh Airport Marriott, 100 Aten Road, Coraopolis, Pennsylvania
15108, on Wednesday, May 7, 1997, at 9:00 a.m., to consider and act upon the
following matters:
1. A proposed amendment to the Certificate of Incorporation to provide for
the classification of the Board of Directors into three classes of
directors with staggered terms.
2. A proposed amendment to the Certificate of Incorporation to provide
that any vacancy on the Board of Directors be filled only by the
affirmative vote of a majority of the remaining directors.
3. A proposed amendment to the Certificate of Incorporation to provide
that the number of directors will be between three (3) and nine (9), as
determined by the directors.
4. A proposed amendment to the Certificate of Incorporation to provide
that the stockholder vote required to amend or repeal or adopt any
provision inconsistent with the provisions contained in Proposals 1, 2
and 3 be increased from a majority to two-thirds of the outstanding
shares of Common Stock.
5. A proposed amendment to Article Fourth of the Certificate of
Incorporation to increase the total number of authorized shares of
Common Stock from 10,000,000 to 20,000,000.
6. The election of five (5) members of the Board of Directors as follows:
(a) two directors to serve three-year terms, two directors to serve
two-year terms and one director to serve a one-year term, and, in each
case, until their respective successors shall be duly elected and
qualified; or (b) if Proposal 1 is not approved, five directors to
serve until the next annual meeting and until their respective
successors shall be duly elected and qualified.
7. Ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors for the year ending December 31, 1997.
8. A proposal to approve the 1997 Stock Option Plan.
9. Such other matters as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has established the close of business on Friday,
March 21, 1997, as the record date for determination of stockholders entitled
to notice of and to vote at the Annual Meeting.
IT IS REQUESTED, WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING,
THAT YOU COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
DANIEL DICKMAN, Secretary
March [28], 1996
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SMT HEALTH SERVICES INC.
10521 PERRY HIGHWAY
WEXFORD, PENNSYLVANIA 15090
-------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
MAY 7, 1997
-------------------------
This proxy statement is being furnished to the holders of the Common Stock,
par value $.01 per share (the "Common Stock"), of SMT Health Services Inc., a
Delaware corporation (the "Company"), in connection with the solicitation by
the Board of Directors of the Company of proxies to be voted at the annual
meeting of stockholders (the "Annual Meeting") scheduled to be held on
Wednesday, May 7, 1997, at 9:00 a.m., at the Pittsburgh Airport Marriott, 100
Aten Road, Coraopolis, Pennsylvania 15108, or at any adjournment thereof. This
proxy statement was first mailed to stockholders on or about March [28], 1997.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996, is being furnished with this proxy statement.
Only holders of the Common Stock of record as of the close of business on
Friday, March 21, 1997, are entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof. On that date, shares of Common
Stock, each entitled to one vote per share, were outstanding.
All shares of Common Stock represented by valid proxies received by the
Secretary of the Company prior to the Annual Meeting will be voted as
specified in the proxy. If no specification is made, the shares will be voted
FOR each of the proposed amendments to the Certificate of Incorporation, FOR
the election of each of the Board's nominees to the Board of Directors, FOR
the proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending December 31, 1997 and FOR the approval of
the Company's 1997 Stock Option Plan. Unless otherwise indicated by the
stockholder, the proxy card also confers discretionary authority on the Board-
appointed proxies to vote the shares represented by the proxy on any matter
that is properly presented for action at the Annual Meeting. A stockholder
giving a proxy has the power to revoke it any time prior to its exercise by
delivering to the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date (though no revocation shall be effective
until notice thereof has been given to the Secretary of the Company), or by
attending the meeting and voting his or her shares in person.
Under the Company's Certificate of Incorporation and By-Laws, and applicable
state law, abstentions and broker non-votes, if any, will have no effect on
the election of the Board nominees, who are elected by a plurality vote, nor
on the proposals to ratify the appointment of the independent auditors or to
approve the Company's 1997 Stock Option Plan, each of which requires the
affirmative vote of at least a majority of the votes cast on the matter.
Shares with respect to abstentions and broker non-votes, however, will be
counted for purposes of establishing a quorum. With respect to the proposed
amendments to the Certificate of Incorporation, which require the affirmative
vote of at least a majority of the outstanding shares of Common Stock,
abstentions and broker non-votes will have the same effect as votes against
such proposals.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR each of the
proposed amendments to the Certificate of Incorporation, FOR the election of
each of the nominees named below for election as director, FOR the proposal to
ratify the appointment of KPMG Peat Marwick LLP
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as independent auditors of the Company for the year ending December 31, 1997
and FOR the approval of the Company's 1997 Stock Option Plan.
PROPOSAL 1: AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE
FOR A CLASSIFIED BOARD OF DIRECTORS.
The Board has unanimously approved and recommends that the stockholders
adopt certain amendments (collectively, the "Classified Board Amendments") to
the Company's Certificate of Incorporation, as amended (the "Certificate").
The Classified Board Amendments are set out in Proposals 1, 2, 3 and 4 herein
(the "Classified Proposals"), and unless all of the Classified Proposals are
approved by the stockholders, none of them shall be adopted by the Board.
Consequently, a vote against any one of the Classified Proposals may have the
effect of a vote against all of the Classified Proposals. The advantages,
disadvantages and effects of each of the Classified Proposals may be similar
to the advantages, disadvantages and effects of other Classified Proposals. As
such, certain of the discussion under any one Classified Proposal may apply to
another Classified Proposal. Stockholders are urged to carefully review all
discussions under the Classified Proposals.
Exhibit A sets forth the full text of the Classified Board Amendments in
Article Fifth(1) of the Restated Certificate of Incorporation. The description
of the Classified Board Amendments is qualified in its entirety by reference
to Exhibit A.
Proposal 1, if approved by the stockholders and adopted by the Board, would
amend the Certificate by adding provisions that would classify the Board into
three classes of directors, and one director will be elected for a term
expiring at the 1998 Annual Meeting, two directors will be elected for a term
expiring at the 1999 Annual Meeting and the remaining two directors will be
elected for a term expiring at the 2000 Annual Meeting (and in each case until
their respective successors are duly elected and qualified). Starting with the
1998 Annual Meeting, one class of directors will be elected each year for a
three-year term. If Proposal 1 is not adopted, all directors will be elected
to serve until the 1998 Annual Meeting and until their successors are elected
and qualified. See "Proposal 6: Election of Directors."
If at any time the size of the Board is changed, the increase or decrease in
the number of directors would be apportioned among the three classes to make
all classes as nearly equal as possible. The Board has no present plans,
arrangements, commitments or understandings with respect to increasing or
decreasing the size if the Board or of any class of directors.
Under Delaware law, directors of a classified board may be removed only for
cause. Accordingly, the Board of Directors has adopted, subject to stockholder
approval of the Classified Proposals, an amendment to the By-Laws to provide
that directors of the Company may be removed only for cause. The Board also
has adopted, subject to stockholder approval of the Classified Proposals,
amendments to the By-Laws to make them consistent with the Classified
Proposals.
A classified Board could moderate the pace of any change in control of the
Board by extending the time required to elect a majority of the directors. At
least two annual meetings, instead of one, will be required to effect a change
in control of the Board. The Board believes that the longer time required to
elect the majority of the Board will help to assure the continuity and
stability of the Company's management and policies in the future, since a
majority of the directors at any given time will have prior experience as
directors of the Company. Although the Company has had no difficulty in the
past in maintaining continuity, the Board considers it advisable to provide
the additional assurance of continuity that is afforded by the classification
of directors.
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The classification provision will apply to every election of directors,
whether or not a change in the Board would be beneficial to the Company and
its stockholders and whether or not a majority of the Company's stockholders
believes that such a change would be desirable. Therefore, adoption of the
Classified Board Amendments may have significant effects on the ability of the
stockholders of the Company to change the composition of the incumbent Board.
Advantages And Disadvantages Of Classified Board Amendments. The Classified
Board Amendments have both advantages and disadvantages to stockholders. The
Classified Board Amendments do not, and are not intended to, prevent a
purchase of all or a majority of the equity securities of the Company, whether
pursuant to open-market purchases, negotiated purchases from large
stockholders or an unsolicited bid for all or part of the securities of the
Company. Rather, the Board believes that the Classified Board Amendments will
discourage disruptive tactics and encourage persons who may seek to acquire
control of the Company to initiate such an acquisition through negotiations
with the Board. The Board believes that it will therefore be in a better
position to protect the interests of all the stockholders. Furthermore, the
stockholders of the Company will have a more meaningful opportunity to
evaluate any such action. Although the Classified Board Amendments are
intended to encourage persons seeking to acquire control of the Company to
initiate such an acquisition through arm's-length negotiations with the Board,
the overall effect of the Classified Board Amendments may be to discourage a
third party from making a tender offer for a portion or all of the Company's
Common Stock, or otherwise attempting to obtain a substantial position in the
equity securities of the Company, by preventing such third party from
immediately removing and replacing the incumbent directors.
To the extent any potential acquirors are deterred by the Classified Board
Amendments, the Classified Board Amendments may have the effect of preserving
the incumbent management in office. The proposed amendments may also serve to
benefit incumbent management by making it more difficult to remove management
even when the only reason for the proposed change of control or the
stockholder action may be the unsatisfactory performance of the present
directors. In addition, since the classified Board Amendments are in part
designed to discourage accumulations of large blocks of the Company's voting
shares by purchasers whose objective is to have such voting shares repurchased
by the Company at a premium, their adoption could tend to reduce the temporary
fluctuations in the market price of such voting shares that are caused by such
accumulations. Accordingly, stockholders could be deprived of certain
opportunities to sell their shares at a temporarily higher market price.
Takeovers or changes in the Board of Directors of a Company that are
proposed and effected without prior consultation and negotiation with the
Company are not necessarily detrimental to the Company and its stockholders.
However, the Board feels that the benefits of seeking to protect the ability
of the Company to negotiate effectively through directors who have previously
been elected by the stockholders as a whole and are familiar with the Company,
outweigh any disadvantage of discouraging such unsolicited proposals.
The Classified Board Amendments are not in response to any specific efforts
of which the Company is aware to accumulate shares of Common Stock or obtain
control of the Company. The Board is recommending the adoption of the
classified Board Amendments in order to further continuity and stability in
the leadership and policies of the Company and to discourage certain types of
tactics that could involve actual or threatened changes of control that are
not in the best interests of the stockholders. Due to the time associated with
obtaining stockholder approval, the Company believes it is inadvisable to
defer consideration of the Classified Board Amendments until a takeover threat
is pending. Once a specific threat exists, the time required to adopt the
Classified Board Amendments may render their adoption impractical prior to the
completion of the takeover. Further, the absence of
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a specific threat permits stockholders to consider the merits of the
Classified Board Amendments outside the pressured atmosphere of a takeover
threat. For these reasons, the Company believes it is prudent to consider the
Classified Board Amendments at this time. Other than as disclosed herein, the
Board does not currently contemplate recommending the adoption of any further
amendments to the Certificate or By-Laws or any other action designed to
affect the ability of third parties to take over or change control of the
Company.
Existing Anti-Takeover Provisions Of The Certificate, By-Laws And
Delaware. The Company's Certificate and By-Laws currently do not contain any
provisions intended by the Company to have, or to the knowledge of the Board
having, any anti-takeover effect. In addition, the Certificate does not
currently provide for cumulative voting by the stockholders.
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Anti-Takeover Law") regulating corporate takeovers. The Anti-
Takeover Law prevents certain Delaware corporations from engaging, under
certain circumstances, in a "business combination" (which includes a merger or
sale of more than 10% of the corporation's assets) with any "interested
stockholder" (a stockholder who acquired 15% or more of the corporation's
outstanding voting stock without the prior approval of the corporation's Board
of Directors) for three years following the date that such stockholder became
an "interested stockholder." A Delaware corporation may "opt out" of the Anti-
Takeover Law with an express provision in its Certificate of Incorporation or
By-Laws resulting from a stockholder's amendment approved by at least a
majority of the outstanding voting shares. The Company has not "opted out" of
the provisions of the Anti-Takeover Law, nor does the Company currently
contemplate recommending the stockholders approve an amendment to the
Certificate to provide for the "opting out" of the Anti-Takeover Law.
In November 1995, the Company adopted a Rights Plan and distributed Rights
to stockholders pursuant thereto. The Rights Plan and the issuance of the
Rights could be deemed to have an anti-takeover effect.
Vote Required. Under the Delaware General Corporation Law, the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock is
required to adopt this Proposal 1. Unless all of the Classified Proposals are
approved by the stockholders, none of them shall be adopted by the Board.
Consequently, a vote against any one of the Classified Proposals may have the
effect of a vote against all of the Classified Proposals. With respect to the
proposal to amend the Company's Certificate of Incorporation to provide for
the classification of directors, all such shares will be voted FOR or AGAINST,
or not voted, as specified on each proxy. If no choice is indicated, a proxy
will be voted FOR the Classified Proposals, including this proposal to amend
the Company's Certificate of Incorporation to provide for classification of
directors. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ADOPTION OF THIS PROPOSAL.
PROPOSAL 2: AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE
THAT ANY VACANCY ON THE BOARD OF DIRECTORS SHALL BE FILLED ONLY BY THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE REMAINING DIRECTORS.
Currently, a vacancy on the Board, including a vacancy created by an
increase in the number of directors, may be filled by a majority vote of the
remaining directors, and that the newly elected director shall serve until the
next annual meeting of stockholders. Proposal 2, if approved by the
stockholders and adopted by the Board, shall amend the Certificate to provide
that a vacancy on the Board, including a vacancy created by an increase in the
number of directors, occurring prior to the expiration of the term in office
of the class in which such vacancy occurs, shall be filled only by the
affirmative vote of a majority of the remaining directors. In addition,
Proposal 2 would provide that any director elected to the Board to replace
another director will hold office for the unexpired term of the director he
replaced; and that a director elected by the Board to fill a vacancy created
by an increase in the number of directors will hold office until the next
election for the class to which he was elected.
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For a discussion of the advantages and disadvantages of Proposal 2,
including possible "anti-takeover" effects and other potential adverse
consequences to the stockholders, see "PROPOSAL 1: AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS."
Under the Delaware General Corporation Law, the affirmative vote of the
holders of a majority of the shares of Common Stock entitled to vote at the
Annual Meeting is required to adopt this Proposal 2. Unless all of the
Classified Proposals are approved by the stockholders, none of them shall be
adopted by the Board. Consequently, a vote against any one of the Classified
Proposals may have the effect of a vote against all of the Classified
Proposals. With respect to the proposal to amend the Company's Certificate of
Incorporation to provide that any vacancy on the Board of Directors shall be
filled by the affirmative vote of two-thirds of the remaining Directors, all
such shares will be voted FOR or AGAINST, or not voted, as specified on each
proxy. If no choice is indicated, a proxy will be voted FOR the Classified
Proposals, including this proposal to amend the Company's Certificate of
Incorporation to provide that vacancies be filled by the remaining directors.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ADOPTION
OF THIS PROPOSAL.
PROPOSAL 3: AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE
THAT THE NUMBER OF DIRECTORS BE BETWEEN THREE AND NINE AS DETERMINED BY THE
DIRECTORS.
Article Fifth(1) of the Certificate now provides that the number of
directors shall be fixed by or in the manner provided by the By-Laws. The By-
Laws now provide that the number of directors shall be determined by the vote
of a majority of the directors then in office, but shall not be less than
three nor more than nine. The number of directors is currently set at five and
each is elected annually for a one-year term. If approved by the stockholders
and adopted by the Board, Proposal 3 would amend the Certificate to so
provide.
The Board has no present plans, arrangements, commitments or understandings
with respect to increasing or decreasing the size of the Board or of any class
of directors.
For a discussion of the advantages and disadvantages of Proposal 3,
including possible "anti-takeover" effects and other potential adverse
consequences to the stockholders, see "PROPOSAL 1: AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS."
Under the Delaware General Corporation Law, the affirmative vote of the
holders of a majority of the shares of Common Stock entitled to vote at the
Annual Meeting is required to adopt this Proposal 3. Unless all of the
Classified Proposals are approved by the stockholders, none of them shall be
adopted by the Board. Consequently, a vote against any one of the Classified
Proposals may have the effect of a vote against all of the Classified
Proposals. With respect to the proposal to amend the Company's Certificate of
Incorporation to provide that the number of Directors be between three and
nine, all such shares will be voted FOR or AGAINST, or not voted, as specified
on each proxy. If no choice is indicated, a proxy will be voted FOR the
Classified Proposals, including this proposal to amend the Company's
Certificate of Incorporation to provide that the number of directors be
between three and nine. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE ADOPTION OF THIS PROPOSAL.
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PROPOSAL 4: AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE
THAT THE STOCKHOLDER VOTE TO AMEND OR REPEAL, OR ADOPT ANY PROVISION
INCONSISTENT WITH, THE CLASSIFIED BOARD AMENDMENTS SHALL BE INCREASED FROM A
MAJORITY TO TWO-THIRDS OF THE COMPANY'S COMMON STOCK.
Under the Delaware General Corporation Law, amendments to the Certificate of
Incorporation require the approval of the holders of a majority of the
outstanding shares entitled to vote thereon and, in certain cases, of a
majority of the outstanding shares of each class entitled to vote thereon as a
class. The Delaware General Corporation Law also permits provisions in a
corporation's Certificate of Incorporation that require a greater vote than
the vote otherwise required by law for any corporation action. Proposal 4, if
approved by the stockholders and adopted by the Board, would amend the
Certificate to provide that the affirmative vote of the holders of at least
two-thirds of the outstanding shares entitled to vote thereon would be
required for the amendment or repeal of, or the adoption of any provision
inconsistent with, the Classified Board Amendments.
The requirement of an increased stockholder vote for amendment of the
provisions contained in the Classified Board Amendments is designed to prevent
a stockholder with a majority of the Company's stock from avoiding the
requirements of the Classified Board Amendments by simply amending the
Certificate to delete all of the provisions or adopting new provisions
inconsistent with the Classified Board Amendments.
For further discussion of the advantages and disadvantages of Proposal 4,
including possible "anti-takeover" effects and other potential adverse
consequences to the stockholders, see "PROPOSAL 1: AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS."
Under the Delaware General Corporation Law, the affirmative vote of the
holders of a majority of the shares of Common Stock entitled to vote at the
Annual Meeting is required to adopt this Proposal 4. Unless all of the
Classified Proposals are approved by the stockholders, none of them shall be
adopted by the Board. Consequently, a vote against any one of the Classified
Proposals may have the effect of a vote against all of the Classified
Proposals. With respect to the proposal to amend the Company's Certificate of
Incorporation to provide that the stockholder vote to repeal or amend the
Classified Board Amendments shall be increased from a majority to two-thirds
of the Company's Common Stock, all such shares will be voted FOR or AGAINST,
or not voted, as specified on each proxy. If no choice is indicated, a proxy
will be voted FOR the Classified Proposals, including this proposal to amend
the Company's Certificate of Incorporation to provide for a two-thirds
affirmative vote to amend, repeal or adopt any provision inconsistent with the
Classified Board Amendments. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE ADOPTION OF THIS PROPOSAL.
PROPOSAL 5: AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
On , 1997, the Board of Directors adopted a resolution proposing that
Article Fourth of the Certificate of Incorporation of the Company be amended
to increase the authorized number of shares of the stock of the Company from
11,000,000 shares to 21,000,000 shares consisting of 20,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. The Board directed that
the proposed amendment be submitted to a vote of the stockholders at the
Annual Meeting.
Proposed Article Fourth would increase the total number of authorized shares
of the Company to 21,000,000 of the par value of $0.01 per share. This
amendment would increase the number of authorized shares of Common Stock by
10,000,000, from 10,000,000 to 20,000,000. The amendment
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will not change the 1,000,000 authorized shares of Preferred Stock. At
present, the Company has authority to issue 10,000,000 shares of Common Stock.
At , 1997, shares of common stock were issued and outstanding.
The Board of Directors is not negotiating nor does it have any present plans
for the issuance of additional shares, but in the judgment of the Board, the
additional shares should be authorized so that they will be available for
issuance from time to time by action of the Board if need therefor should
arise; for example, if it should become desirable to implement financing
through the sale of additional shares of stock, make an acquisition by the
issuance of stock, or effect a stock split by way of a stock dividend or
distribution. The Board believes that increasing the authorized shares of
capital stock would enable it, if it so chooses, to take actions promptly on
behalf of the Company that may involve the issuance of additional shares of
stock without the delay necessarily incident to the convening of a
stockholders' meeting. After adoption of the proposed amendment, the Board of
Directors, without further action by the stockholders, would have authority to
issue additional authorized and unissued shares of capital stock at such
times, for a consideration of such character and value (not less than par),
and upon such terms, as it may deem advisable and in accordance with the
Delaware General Corporation Law. In certain circumstances, a vote of the
stockholders on the issuance of additional shares will be required under the
rules of Nasdaq. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ADOPTION OF THIS PROPOSAL.
PROPOSAL 6: ELECTION OF DIRECTORS.
At the Annual Meeting of Stockholders, five directors are to be elected. If
the Classified Board Amendments (see Proposals 1, 2, 3 and 4 described above)
are approved by the stockholders, the Board will be divided into three classes
and the directors will be elected to hold office for terms of one, two or
three years, in accordance with the classifications indicated below and until
their successors are elected and qualified.
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CLASS I DIRECTOR WITH TERM EXPIRING IN 1998:
ALAN NOVICH
CLASS II DIRECTORS WITH TERMS EXPIRING IN 1999:
DANIEL DICKMAN AND DAVID J. MALONE
CLASS III DIRECTORS WITH TERMS EXPIRING IN 2000:
JEFF D. BERGMAN AND GERALD J. COHN
In the event the Classified Proposals are not approved by the stockholders,
each of the nominees, if elected, will serve until the next annual meeting of
stockholders and until his successor is elected and qualified.
The holders of Common Stock have one vote for each share owned as of the
record date in the election of directors. The nominees receiving the greatest
number of affirmative votes will be elected as directors.
The persons named as proxies on the enclosed proxy card were selected by the
Board of Directors and have advised the Board of Directors that, unless
authority is withheld, they intend to vote the shares represented by them at
the Annual Meeting for the election of Alan Novich, Daniel Dickman, David J.
Malone, Jeff D. Bergman and Gerald L. Cohn, nominees of the Board of
Directors, all of whom currently serve as directors of the Company.
The Board of Directors knows of no reason why any nominee for director would
be unable to serve as director. If at the time of the Annual Meeting any of
the named nominees is unable or unwilling to serve as a director of the
Company, the persons named as proxies intend to vote for such substitute as
may be nominated by the Board of Directors.
The following sets forth certain information concerning the Company's
directors, each of whom also is a nominee for election as a director of the
Company.
Jeff D. Bergman, 42, has been Chief Executive Officer, President, and a
Director of the Company since its formation in 1991 and held the same
positions with the Company's predecessors Shared Medical Technologies, Inc.
since 1987 and Shared MRI-4, Inc. since its inception in 1990. From 1979 to
1982, he was employed by BOC-AIRCO as a Marketing Representative for the
Corporate Steel Division. In 1983, Mr. Bergman joined Mobile Diagnostech, Inc.
("MDI"), a provider of mobile CAT scanners and MRI equipment, as a developer
and manager of fixed-site oncology centers. In 1987, Mr. Bergman left MDI and
formed the Company. Mr. Bergman is also an official in the National Football
League.
Daniel Dickman, 50, has been Executive Vice President and Chief Operating
Officer of the Company since 1991 and held the same positions with the
Company's predecessors, Shared Medical Technologies, Inc. since 1987 and
Shared MRI-4, Inc. since its inception in 1990. From 1985 to 1987, Mr. Dickman
was employed by Mobile Diagnostech, Inc. ("MDI") and was responsible for its
management and day-to-day operations of its MRI equipment and CAT scanners. In
1987, Mr. Dickman joined the Company to manage the Company's equipment routes
and fixed-site modalities. He has over 12 years of experience in healthcare
management consulting and systems design, and was formerly employed by Blue
Cross of Western Pennsylvania as Manager of Hospital Consulting.
Gerald L. Cohn, 68, is a private investor. Since 1986, Mr. Cohn has served
as a Director of and consultant to DVI, Inc., a publicly held medical
equipment leasing company, a subsidiary of which, DVI
8
<PAGE>
Financial Services Inc. ("DVI"), was a principal stockholder of, and is a
lessor of medical equipment to, the Company. See "Certain Relationships and
Related Transactions." Mr. Cohn is a director of Diametrics Medical, Inc. and
Niagara Steel Corp.
Alan Novich, 51, is a private attorney. From June 1992 to October 1993, Mr.
Novich had been a consultant to Stratton Oakmont Inc., the underwriter of the
Company's initial public offering. From January 1991 to May 1992, Mr. Novich
was a Vice President and the Counsel for Corporate Finance of Stratton Oakmont
Inc. From June 1988 through December 1990, Mr. Novich was engaged in the
private practice of law and dentistry. From 1985 to June 1988, Mr. Novich
attended law school and was engaged in the private practice of dentistry. Mr.
Novich is Chairman of the Board of Directors of Futurebiotics, Inc.
David J. Malone, CLU, ChFC, 42, has served as President and Director of
Gateway Financial Group, a financial planning organization, since 1982. Mr.
Malone is a licensed broker-dealer who has served as President of DJM
Financial Advisory Services, Inc. since 1985. Mr. Malone has also served as
general partner of various real estate transactions, including hotel,
commercial office and retail properties.
BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
The Company's Board of Directors held three (3) meetings during the year
ended December 31, 1996. Each director attended at least 75% of the aggregate
of the number of meetings of the Board of Directors and any committee of which
he is a member.
Directors who are not also employees of the Company receive $18,000
annually, $1,000 per meeting and reimbursement of expenses related to their
services as Directors of the Company. Also, each director receives options to
buy 2,100 shares (2,247 after adjustment to reflect the 7% Common Stock
dividend paid to shareholders on January 15, 1997) of Common Stock on December
31 of each year. See "Stock Option Plans." Directors who also are employees of
the Company receive no annual compensation for service on the Board of
Directors or any committee thereof.
On August 9, 1995, the Company adopted the 1995 Director Warrant Plan (the
"Warrant Plan") pursuant to which eligible directors automatically receive
unregistered warrants to purchase 100,000 shares of Common Stock. The Warrant
Plan allows for a total issuance of warrants to purchase up to 700,000 shares
of Common Stock.
On August 9, 1995, warrants to purchase up to 500,000 shares of Common Stock
at an initial exercise price of $3.875, the closing price of the Company's
stock on the date of issue, were issued to the five eligible directors.
Separately, unregistered warrants to purchase 114,500 shares of Common Stock
at an initial exercise price of $4.01 were also issued to an individual who
was an outside director and consultant to the Company, who was ineligible to
participate in the Warrant Plan.
During May 1996, the outside director who was also a consultant of the
Company exercised the 114,500 Warrants and sold 114,500 shares of Common
Stock. The Company received cash proceeds of approximately $459,000 related to
the exercise of such Warrants.
During January 1997, the Company's three outside directors each exercised
25,000 Director Warrants and sold 26,750 shares of Common Stock (after
adjustment for the January 1997 7% Common Stock dividend). The Company
received cash proceeds of approximately $291,000 as a result of the exercise
of the 75,000 Director Warrants.
9
<PAGE>
Pursuant to the 1995 Director Warrant Plan, the Director Warrants have been
recapitalized to reflect the January 1997 7% Common Stock dividend.
Accordingly, the outstanding Director Warrants' exercise price of $3.875 now
entitles the holder to purchase 1.07 shares of Common Stock of the Company. As
of January 31, 1997, 425,000 Director Warrants to purchase 454,750 shares of
Common Stock of the Company were outstanding.
AUDIT COMMITTEE
The Board has an Audit Committee currently consisting of Messrs. Malone and
Novich. The Audit Committee's duties include monitoring performance of the
Company's business plan, reviewing the Company's internal accounting methods
and procedures and reviewing certain business strategies. The Audit Committee
met once in 1996.
COMPENSATION COMMITTEE
The Board has a Compensation Committee currently consisting of Messrs.
Bergman, Dickman and Cohn. The Compensation Committee is responsible for
determining the compensation of the Company's employees, other than Messrs.
Bergman and Dickman. The Compensation Committee met twice in 1996.
EXECUTIVE PLAN COMMITTEE
The Board has an Executive Plan Committee, consisting of Messrs. Novich and
Malone, which administers the Company's 1991 Employee Stock Option Plan, as it
applies to persons who are subject to the reporting requirements of Section 16
("Reporting Persons") of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Executive Plan Committee met twice in 1996.
PLAN COMMITTEE
The Board has a Plan Committee, consisting of Messrs. Novich, Malone and
Bergman, which administers the 1991 Employee Stock Option Plan as it applies
to persons who are not subject to the reporting requirements of Section 16 of
the Exchange Act. The Plan Committee met twice in 1996.
NOMINATING COMMITTEE; NOMINATION PROCEDURES
The Company does not have a standing nominating committee. The Board of
Directors, however, is responsible for the evaluation and recommendation of
qualified nominees, as well as other matters pertaining to Board composition
and size. The Board will give appropriate consideration to qualified persons
recommended by stockholders for nomination as director in accordance with the
Company's By-Laws as described below.
The Company's By-Laws describe in full the procedures to be followed by a
stockholder in recommending nominees for director. In general, such
recommendations can only be made by a stockholder entitled to notice of and to
vote at a meeting at which directors are to be elected, must be in writing and
must be received by the Chairman of the Board of the Company no later than (i)
with respect to the election of directors at an annual meeting, sixty (60)
days prior to the anniversary date of the prior year's annual meeting, or (ii)
with respect to the election of directors at a special meeting, the close of
business on the fifteenth (15th) day following the date on which notice of
such meeting is given to stockholders or publicly disseminated. Furthermore,
the recommendation must include the following information to the extent known
to the notifying stockholder: (a) the name and address of each proposed
nominee and of the notifying stockholder; (b) the principal occupation of each
proposed nominee; (c) a representation that the notifying stockholder intends
to appear in person or by proxy at
10
<PAGE>
the meeting to nominate the person or persons specified in the notice; (d) the
total number of shares of the Company that will be voted for each proposed
nominee; (e) the total number of shares of the Company owned by the notifying
stockholder; (f) a description of all arrangements or understandings between
the notifying stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the notifying stockholder; (g) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed with the Securities and
Exchange Commission; and (h) the consent of each nominee to serve as a
director of the Company if so elected.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth all cash compensation paid by the Company and
its subsidiaries, as well as other compensation paid or accrued, to each of
its executive officers whose annual salary and bonus exceeded $100,000 (the
"Named Executive Officers"), for services rendered in all capacities during
the year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) COMPENSATION(3)
--------------------------- ---- ------- -------- ------------ ---------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Jeff D. Bergman--President,
Chief Executive Officer and
Chairman of the Board...... 1996 209,000 134,000 14,500 9,534
1995 180,000 73,700 224,000 4,500
1994 161,000 19,000 50,000 4,500
Daniel Dickman--Executive
Vice
President, Chief Operating
Officer
and Director............... 1996 209,000 134,000 14,500 12,633
1995 180,000 73,700 224,000 6,500
1994 161,000 19,000 50,000 6,500
David Spindler--Senior Vice
President--Operations and
Marketing.................. 1996 110,000 41,000 5,000 1,000
1995 95,500 21,000 59,250 500
1994 86,000 6,000 25,000 500
David A. Zynn--Chief
Financial
Officer and Treasurer...... 1996 108,000 45,000 5,000 1,000
1995 83,200 27,400 49,000 500
1994 76,000 7,000 25,000 500
</TABLE>
- --------
(1) Amounts shown are for payments made pursuant to the Company's Profit
Sharing Plan. Employment agreements with Messrs. Bergman, Dickman,
Spindler and Zynn require the Company to maintain a profit sharing plan.
See "Certain Relationships and Related Transactions--Employment
Arrangements."
(2) Not adjusted for the January 1997 7% stock dividend.
(3) Amounts shown for fiscal 1996 include disability insurance premiums
totaling $7,814 and $10,443 and split-dollar life insurance premiums
totaling $720 and $1,190 for Messrs. Bergman and Dickman, respectively.
Amounts shown for fiscal 1996 also include, for each of the Named
Executive Officers, the Company's 401(k) contribution of $1,000.
11
<PAGE>
STOCK OPTION PLANS
The Board of Directors and stockholders of the Company have adopted the
Company's 1991 Employee Stock Option Plan, as amended (the "1991 Employee
Plan"), and have authorized the issuance of options covering up to 842,625
shares of Common Stock under such plan (subject to appropriate adjustments in
the event of stock splits, stock dividends and similar dilutive events).
Options may be granted under the Employee Plan to officers and key employees
(including those who may also be directors) of, and consultants and advisors
to, the Company and its subsidiaries.
The Board of Directors of the Company in October 1996 adopted the Company's
1996 Employee Stock Option Plan ("1996 Employee Plan") and have authorized the
issuance of options covering 267,500 shares of Common Stock under such plan
(subject to appropriate adjustments in the event of stock splits, stock
dividends or similar dilutive events). Options may be granted under the 1996
Employee Plan to officers and key employees (including those who may also be
directors) of, and consultants or advisors to, the Company and its
subsidiaries. Grants to the Named Executive Officers and directors are limited
to an aggregate of 26,750 shares of Common Stock.
The Board of Directors and stockholders have also adopted the Company's 1991
Directors Stock Option Plan for Nonemployee Directors (the "Directors Plan")
and have authorized the issuance of options covering up to 112,350 shares of
Common Stock under such plan (subject to appropriate adjustments in the event
of stock splits, stock dividends and similar dilutive events). Under the
Directors Plan, each eligible director automatically receives options to
purchase 2,247 shares of Common Stock (also subject to appropriate adjustments
in the event of stock splits, stock dividends and similar dilutive events) on
December 31st of each year at an exercise price equal to the fair market value
of the Common Stock on that date.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the stock options and
warrants granted to each of the Company's Named Executive Officers for
services rendered in 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED (#) YEAR ($/SHARE) DATE
- ---- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Jeff D. Bergman..................... 7,000 18% $4.50 4/11/06
7,500 3% $6.875 10/1/06
Daniel Dickman...................... 7,000 18% $4.50 4/11/06
7,500 3% $6.875 10/1/06
David Spindler...................... 5,000 2% $6.875 10/1/06
David A. Zynn....................... 5,000 2% $6.875 10/1/06
</TABLE>
- --------
(1) Not adjusted for the January 1997 7% stock dividend. All such options were
exercisable in full on the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each of the
Company's Named Executive Officers concerning the exercise of options during
1996 and unexercised options held as of December 31, 1996:
12
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS OPTIONS
ACQUIRED ON VALUE AT FISCAL AT FISCAL
NAME EXERCISE(1) REALIZED YEAR END(1) YEAR END
- ---- ----------- ---------- --------------- ----------------
(#) ($) (# EXERCISABLE/ ($ EXERCISABLE/
#UNEXERCISABLE) $ UNEXERCISABLE)
<S> <C> <C> <C> <C>
Jeff D. Bergman......... 136,500 $ 996,000 186,000/-- 391,000/--
Daniel Dickman.......... 136,500 $1,021,000 186,000/-- 391,000/--
David Spindler.......... 26,250 $ 154,000 80,000/-- 417,000/--
David A. Zynn........... 73,500 $ 480,000 22,500/-- 90,000/--
</TABLE>
- --------
(1) Not adjusted for the January 1997 7% stock dividend.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mark A. DeSimone, who was a director of the Company until March 27, 1996 and
who the Company believes beneficially owned in excess of five percent of the
outstanding Common Stock, was a consultant to the Company. In 1991, the
Company entered into a five-year consulting agreement with him pursuant to
which he received a consulting fee of $75,000 per annum. Mr. DeSimone provided
services relating to special projects and other business affairs of the
Company. The Company believes that the terms of this consulting agreement were
as favorable, in all material respects, as might have been obtained from an
unaffiliated third party. On March 27, 1996, the Company prepaid the remaining
$50,000 due under the agreement and terminated the consulting relationship.
Mr. DeSimone also was a partner in the law firm that provided services to the
Company in 1993. That law firm did not provide legal services to the Company
during 1994, 1995 or 1996 nor is it expected to perform legal services in the
future. The Company believes Mr. DeSimone no longer owns any outstanding
Common Stock, options or warrants.
Gerald L. Cohn, a director of the Company, is a director of, consultant to
and stockholder of DVI. The Company has entered into numerous leasing
transactions with DVI in the past, and DVI may serve as one of many financing
sources for the Company in the future.
During 1992 and 1993, the Company entered into numerous leasing transactions
with DVI pertaining to both continuing and discontinued operations involving
total financing of approximately $15.6 million. During 1994, the Company did
not enter into any new leases with DVI and refinanced with third parties $3.2
million of leases held by DVI. During the first quarter of 1995, the Company
refinanced its then-remaining leases with DVI, totaling approximately $6.5
million, with third-party lease companies. Interest rates under financing
agreements with DVI ranged from 11% to 14%. During 1996, the Company financed
the acquisition of a new MRI unit with DVI. In connection with such
transaction, the Company and DVI entered into a 60-month capital lease
financing approximately $1.5 million at an interest rate of 9.5%. Total
payments to DVI during 1994, 1995 and 1996 with respect to capital lease
obligations were approximately $3.9 million, $440,000 and $100,000,
respectively, including $1.4 million, $87,000 and $36,000, respectively, of
interest expense associated with such capital leases.
EMPLOYMENT ARRANGEMENTS
The Company entered into a three-year employment agreement commencing on
July 1, 1996 with each of Jeff D. Bergman and Daniel Dickman and a two-year
employment agreement commencing on October 1, 1996 with each of David Spindler
and David A. Zynn pursuant to which Mr. Bergman
13
<PAGE>
agreed to serve as the Chairman of the Board, President and Chief Executive
Officer of the Company, Mr. Dickman as the Executive Vice President and Chief
Operating Officer, Mr. Spindler as Senior Vice President of Operations and
Marketing and Mr. Zynn as Treasurer, Assistant Secretary and Chief Financial
Officer, at an annual base salary of not less than $240,000, $240,000,
$140,000 and $125,000 respectively.
Each of the employment agreements automatically extends for an additional
three months on each quarterly anniversary. The employment agreements provide
that if the employee is terminated other than for "cause" or if such employee
terminates for "good reason," the employee shall be entitled to a continuation
of full salary and bonus compensation for a period equal to the remainder of
the term. If the employee is terminated for "cause" or if the employee
terminates "without good reason," the employee shall only be entitled to
accrued salary and other accrued benefits prior to the date of termination.
Mr. Bergman's and Mr. Dickman's agreements each provide that if such
employee is terminated after a change in control of the Company, such employee
can elect to receive a lump sum payment of three times salary, bonus and
certain other amounts and continuation of certain benefits in lieu of
continued compensation for the remainder of the term. Mr. Spindler's and Mr.
Zynn's agreements each provide that if such employee is terminated after a
change in control of the Company, such employee shall receive a lump sum
payment of two times salary and continuation of certain benefits. Each of the
agreements contains a noncompete provision which generally restricts the
employee from competing with the Company in the same geographic proximity for
a two-year period.
Each of the agreements provide for annual profit sharing with other
executive level employees of a bonus pool consisting of 15% of the Company's
consolidated income before taxes, determined in accordance with generally
accepted accounting principles for financial reporting purposes. Mr. Bergman,
Mr. Dickman, Mr. Spindler and Mr. Zynn received approximately $134,000,
$134,000, $41,000 and $45,000, respectively, pursuant to the bonus pool for
services rendered in 1996.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unless otherwise indicated, the following table sets forth certain
information available to the Company as of March 15, 1997 regarding (a) the
ownership of the Company's Common Stock by (i) each of the Company's directors
and nominees; (ii) each of the Company's Named Executive Officers; and (iii)
all directors and executive officers of the Company as a group; and (b) the
ownership of the Company's Common Stock by all those known by the Company to
be beneficial owners of more than five percent of its outstanding Common
Stock. Unless otherwise indicated, the business address of each person named
below who beneficially owns in excess of five percent of the Common Stock is
10521 Perry Highway, Wexford, Pennsylvania 15090.
<TABLE>
<CAPTION>
PERCENT
AMOUNT(1) OF CLASS
--------- --------
<S> <C> <C>
Jeff D. Bergman......................................... 421,300(2) %
Daniel Dickman.......................................... 458,275(2) %
Gerald L. Cohn.......................................... 110,500(3) %
Alan Novich............................................. 102,100(3) %
David J. Malone......................................... 102,100(3) %
David Spindler.......................................... 80,000(4) %
David A. Zynn........................................... 22,500(4) %
All directors and executive officers as a group (seven
persons)............................................... 1,402,485(5) %
Emerald Advisors, Inc................................... 278,300 %
1857 William Penn Way
Lancaster, PA 17601
Dorchester Partners, L.P................................ 301,400 %
Dorchester Advisors, Inc.
Michael J. Halpern
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA 90067
JMG Convertible Investments, Inc........................ 198,345 %
JMG Capital Management, Inc.
Jonathan M. Glaser
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA 90067
James Rich.............................................. 256,125 %
307 Fourth Avenue, Suite 507
Pittsburgh, PA 15222
</TABLE>
- --------
(1) Unless otherwise indicated, each of the stockholders named in the table
has sole voting and investment power with respect to the shares
beneficially owned, subject to the information contained in the footnotes
to the table.
(2) Includes 186,000 shares and 186,000 shares of Common Stock which Jeff D.
Bergman and Daniel Dickman, respectively, are deemed to beneficially own
as a result of their ownership of warrants and Company stock options to
acquire such shares.
(3) Includes for Mr. Cohn 110,500 shares, and for each of Messrs. Malone and
Novich 102,100 shares, pursuant to warrants and Company stock options to
purchase such shares.
(4) Includes for Messrs. Spindler and Zynn 80,000 and 22,500 shares,
respectively, pursuant to Company stock options to acquire such shares.
(5) Includes 789,200 shares of Common Stock which the members of the group
have the right to acquire pursuant to warrants and Company stock options.
15
<PAGE>
PROPOSAL 7: RATIFICATION OF APPOINTMENT OF AUDITORS.
Unless otherwise directed by the stockholders, proxies will be voted for the
approval of KPMG Peat Marwick LLP as the Company's independent auditors for
the fiscal year ended December 31, 1997. The affirmative vote of the holders
of at least a majority of the votes cast at the Annual Meeting is required to
approve such firm as auditors. A representative of KPMG Peat Marwick LLP is
expected to be present at the Annual Meeting. It is not expected that such
representative will make a statement although such representative will be
available to respond to appropriate questions. THE BOARD UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ADOPTION OF THIS PROPOSAL.
PROPOSAL 8: APPROVAL OF THE 1997 STOCK OPTION PLAN.
On , 1997, the Board of Directors adopted, subject to approval of the
stockholders of the Company, the Company's 1997 Stock Option Plan (the "1997
Stock Option Plan"). The 1997 Stock Option Plan authorizes the issuance of
options ("Stock Options") covering up to 950,000 shares of Common Stock
(subject to appropriate adjustments in the event of stock splits, stock
dividends and similar dilutive events). The Board of Directors of the Company
believes that the 1997 Stock Option Plan constitutes a key element of the
Company's incentive program and is utilized to attract, retain and motivate
key employees of the Company and to align key employee and director interests
with those of the stockholders. Accordingly, the Board of Directors believes
that adoption of the 1997 Stock Option Plan is in the best interests of the
Company and its stockholders. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE ADOPTION OF THIS PROPOSAL.
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the 1997 Stock Option Plan.
SUMMARY PLAN DESCRIPTION
The following description is not a complete statement of the 1997 Stock
Option Plan and is qualified in its entirety by reference to the complete text
of the 1997 Stock Option Plan, a copy of which is attached hereto as Exhibit
B.
Administration. The 1997 Stock Option Plan is to be administered by the
Board of Directors or by one or more committees who are appointed by and serve
at the pleasure of the Board of Directors (the "Plan Administrator"). The Plan
Administrator from time to time at its discretion makes determinations with
respect to the persons who shall be granted Options, as well as the amount and
timing of such Options, under the 1997 Stock Option Plan.
Eligibility. Any employee may be granted options to purchase shares of the
Company's Common Stock in the form of incentive stock options ("Incentive
Stock Options") qualified as such under the Internal Revenue Code of 1986, as
amended (the "Code"), and any director, employee or consultant of the Company
may be granted other options ("Non-Statutory Options") under the 1997 Stock
Option Plan.
Terms of Options. The Plan Administrator, in its discretion, may grant
Incentive Stock Options or Nonstatutory Stock Options, as designated in the
optionee's stock option agreement.
Options granted under the 1997 Stock Option Plan are not transferable other
than by the laws of descent and distribution or pursuant to a qualified
domestic relations order. Incentive Stock Options may not have a term
exceeding ten years from the date of grant. Additionally, Incentive Stock
Options
16
<PAGE>
may not be granted to an employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company (a "Ten-
Percent Stockholder") with a term exceeding five years.
The Plan Administrator determines the exercise price for each option granted
under the 1997 Stock Option Plan; provided, however, that the exercise price:
(1) in the case of an Incentive Stock Option granted to an employee, other
than a Ten-Percent Stockholder, shall not be less than the fair market value
of the shares to which the option relates on the date of grant; (2) in the
case of an Incentive Stock Option granted to an employee who is a Ten-Percent
Stockholder, shall not be less than 110% of the fair market value of the
shares to which the option relates on the date of grant; and (3) in the case
of a Nonstatutory Stock Option, shall not be less than 85% of the fair market
value of the shares to which the option relates.
An Option may be exercised upon written notice to the Company specifying the
number of Shares to be purchased. The exercise price of the Option must be
paid at the time of exercise. Such payment may be made in cash, through the
delivery to the Company of shares of Common Stock outstanding at least six
months with a fair market value equal to the exercise price, or through a
combination of cash and shares. In addition, payment may be made through the
delivery to the Company of a notice of exercise of an option along with an
irrevocable direction to a broker-dealer registered under the Exchange Act to
sell a sufficient portion of the shares and to deliver sufficient proceeds
directly to the Company to pay the exercise price.
In the event that an optionee shall cease to be employed by the Company,
such optionee shall have the right to exercise the option at any time until
the earlier of the expiration of the option or six months after such
termination of employment. In the event that such optionee's termination was
due to disability (as defined in the 1997 Stock Option Plan), such optionee
shall have the right to exercise the option at any time until the earlier of
the expiration of the option or one year after termination of employment. In
the event that an optionee is terminated for cause, however, the option shall
immediately terminate as of the date of termination of employment.
Notwithstanding the foregoing, the Plan Administrator, in its sole discretion,
may extend the period during which any option may be exercised for up to three
years from the date of any termination of employment regardless of the
original period during which such option could have been exercised. In the
event that an optionee shall die prior to termination of employment, the
option may be exercised at any time by the optionee's legal representative or
persons entitled under the optionee's will or the laws of descent and
distribution, until the earlier of the expiration of the option or one year
from such optionee's death. In the event of a change in control, all options
shall vest in full.
The aggregate fair market value of stock for which Incentive Stock Options
are exercisable for the first time by an optionee during any calendar year
under the terms of the 1997 Stock Option Plan may not exceed the sum of
$100,000.
Adjustments, Amendment or Discontinuance. The 1997 Stock Option Plan
provides for the adjustment of the number and price of Options and shares
available for Options, as the result of a subdivision or consolidation of
shares, stock split, or the payment of a stock dividend. The Board of
Directors or the Plan Administrator may at any time terminate, and from time
to time may amend or modify the 1997 Stock Option Plan; provided, however,
that no amendment or modification may become effective without approval of the
amendment or modification by the stockholders if stockholder approval is
required or desirable. In addition, the Board of Directors or the Plan
Administrator may modify, extend or renew outstanding Options granted under
the plan, or accept the exchange of outstanding Options for the granting of
new Options and substitution therefor; however, no modification of an option
shall, without the consent of the grantee, impair any rights or obligations
under any Option previously granted under the 1997 Stock Option Plan.
17
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following summary is based upon an interpretation of present federal tax
laws and regulations and may be inapplicable if such laws and regulations are
changed. The 1997 Stock Option Plan is not subject to the protective
provisions of the Employee Retirement Income Security Act of 1974 and is not
qualified under Section 401(a) of the Code.
An optionee will not be required to recognize any income for federal income
tax purposes at the time of grant of an Incentive Stock Option, nor is the
Company entitled to any deduction. The exercise of an Incentive Stock Option
also is not a taxable event, although the difference between the option price
and the fair market value on the date of exercise is an item of tax preference
for purposes of the alternative minimum tax. If stock acquired upon exercise
of an Incentive Stock Option is held for two years from the date the option
was granted and one year from the date the stock was transferred to the
optionee (the "ISO Holding Period"), then the optionee will have a long-term
capital gain or loss on the sale of such stock measured by the difference
between the amount realized and the option price. If the ISO Holding Period is
not met, then, upon disposition of such shares (a "disqualifying
disposition"), the optionee will realize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the shares
at the time of exercise over the option price, limited, however, to the gain
on sale. Any additional gain would be taxable as long-term or short-term
capital gain. If the Incentive Stock Option is exercised by delivery of
previously owned shares of Common Stock in partial or full payment of the
option price, no gain or loss will ordinarily be recognized by the optionee on
the transfer of such previously owned shares. However, if the previously owned
shares transferred were acquired through the exercise of an Incentive Stock
Option, the optionee may realize ordinary income with respect to the shares
used to exercise an Incentive Stock Option if such transferred shares have not
been held for the ISO Holding Period. If the optionee recognizes ordinary
income upon a disqualifying disposition, the Company generally will be
entitled to a tax deduction in the same amount.
If the exercise price of a Nonstatutory Stock Option is paid in shares of
Common Stock, the tax results to the optionee are (i) a tax-free exchange of
previously owned shares for an equivalent number of new shares and (ii) the
realization of ordinary income in an amount equal to the fair market value on
the date of exercise of any additional shares received in excess of the number
exchanged. If the exercise price of a Nonstatutory Stock Option is paid in
part in shares of Common Stock and in part in cash, the tax results to the
optionee are (i) a tax-free exchange of previously owned shares for an
equivalent number of new shares, (ii) the realization of ordinary income in an
amount equal to the fair market value on the date of exercise of any
additional shares received in excess of the number exchanged and (iii) the
realization of ordinary income in an amount equal to the fair market value on
the date of exercise of any remaining shares received in excess of the cash
paid.
The foregoing rules regarding time of taxation of optionees upon the
disposition of stock acquired upon the exercise of an Incentive Stock Option
and upon the exercise of a Nonstatutory Stock Option may differ somewhat with
respect to options that are exercised within six months of the date of grant
by optionees who are subject to the short-swing profit restrictions of Section
16(b) of the Exchange Act.
FORM 10-K ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION
A copy of the Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1996, as filed with the Securities and Exchange Commission,
will be available to stockholders on or about March 31, 1997. A stockholder
may obtain a copy of the Form 10-K without charge and a copy of any exhibits
thereto upon payment of a reasonable charge limited to the Company's costs of
providing such exhibits by writing to David A. Zynn, Chief Financial Officer
and Treasurer, SMT Health Services Inc., 10521 Perry Highway, Wexford,
Pennsylvania 15090.
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OTHER MATTERS
The Company knows of no other matters to be presented for action at the
meeting. If any other matters should properly come before the meeting,
however, it is intended that votes will be cast pursuant to the proxy in
respect thereto in accordance with the best judgment of the persons acting as
proxies.
The Company will pay the expense in connection with the printing, assembling
and mailing to the holders of capital stock of the Company the notice of
meeting, this proxy statement and the accompanying form of proxy. In addition
to the use of the mails, proxies may be solicited by directors, officers or
regular employees of the Company personally or by telephone or telegraph. The
Company may request the persons holding stock in their names, or in the names
of their nominees, to send proxy material to and obtain proxies from their
principals, and will reimburse such persons for their expense in so doing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who beneficially own
more than ten percent of a class of the Company's registered equity securities
to file with the Securities and Exchange Commission and deliver to the Company
initial reports of ownership and reports of changes in ownership of such
registered equity securities.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company's directors, executive officers and more
than ten percent stockholders filed all reports due under Section 16(a) for
the period from January 1, 1996, through December 31, 1996, except that Jeff
Bergman, Daniel Dickman, David Spindler and David A. Zynn each filed one late
report on Form 5 reporting two, two, one and one transactions, respectively,
regarding grant of stock options pursuant to the 1991 and 1996 employee stock
plans that was not reported on a timely basis.
STOCKHOLDER PROPOSALS
Stockholders who intend to submit a proposal at the Annual Meeting of the
stockholders of the Company, expected to be held in April 1998, must submit
such proposal to the attention of the Treasurer of the Company at the address
of its executive offices no later than December 1, 1997.
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SMT HEALTH SERVICES INC.
SMT Health Services Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is SMT Health Services Inc. and the name
under which the corporation was originally incorporated was Shared Medical
Technologies, Inc. The date of filing of its original Certificate of
Incorporation with the Secretary of State of Delaware is November 20, 1991,
and the original Certificate of Incorporation was amended by documents filed
with the Secretary of State of Delaware on December 9, 1991 and January 23,
1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended and supplemented is hereby restated and further amended to read in its
entirety as follows:
FIRST: The name of the corporation is SMT Health Services Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100 in the City of Dover, in the County of Kent, in
the State of Delaware. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall be authorized to issue is 21,000,000 shares, of which
20,000,000 shall be designated Common Stock, having a par value of $.01 per
share (hereinafter called "Common Stock") and 1,000,000 shall be designated
Preferred Stock, having a par value of $.01 per share (hereinafter called
"Preferred Stock").
Shares of the Preferred Stock shall be designated as the Board of Directors
may determine and may be issued in series by the Board of Directors as
hereinafter provided in paragraph (c) below. The relative rights and
preferences of the shares of capital stock of the Corporation shall be as
follows:
(a) Each holder of Common Stock shall, at every meeting of stockholders
of the Corporation, be entitled to one vote in person or by proxy for each
share of Common Stock held by such holder and each holder of Preferred
Stock with voting rights shall, at every meeting of stockholders of the
Corporation, be entitled to one vote in person or by proxy for each share
of Preferred Stock with voting rights held by such holder to the extent of
such rights as specified pursuant to paragraph (c)(vii) below.
(b) Subject to the rights, if any, of the holders of the Preferred Stock,
or any series thereof, the holders of the Common Stock are entitled to the
entire voting power, all dividends declared and paid by the Corporation and
all assets of the Corporation in the event of any liquidation, dissolution,
or winding up of the Corporation.
(c) The Preferred Stock may be divided into and issued from time to time
in one or more series. All shares of the Preferred Stock shall be of equal
rank and shall be identical, except with respect to the particulars that
may be fixed by the Board of Directors as hereinafter provided
<PAGE>
pursuant to authority that is hereby expressly vested in the Board of
Directors; provided, however, that each share of a given series of the
Preferred Stock shall be identical in all respects with the other shares of
such series. Before any shares of the Preferred Stock of any particular
series shall be issued, the Board of Directors shall fix and determine, in
the manner provided by law, the following particulars with respect to the
shares of such series:
(i) the distinctive designation of such series and the number of
shares of Preferred Stock that shall constitute such series, which
number may be increased (except where otherwise provided by the Board
of Directors in creating such series) or decreased (but not below the
number of shares of such series then issued) from time to time by the
Board of Directors by resolution;
(ii) the dividend or rate of dividend payable with respect to shares
of Preferred Stock of such series, the time of payment of any dividend,
whether dividends shall be cumulative and, if so, the conditions under
which and the date from which dividends shall be accumulated; the
redemption provisions applicable to the shares of Preferred Stock of
such series, if any, and if applicable, the time or times when, the
price or prices at which, and the other terms and conditions under
which the shares of Preferred Stock of such series shall be redeemable;
(iii) the redemption provisions applicable to the shares of Preferred
Stock of such series, if any, and if applicable, the time or times
when, the price or prices at which, and the other terms and conditions
under which the shares of Preferred Stock of such series shall be
redeemable;
(iv) the amount payable on shares of Preferred Stock of such series
in the event of any voluntary or involuntary dissolution, liquidation
or winding-up of the affairs of the Corporation, which shall not be
deemed to include the merger or consolidation of the Corporation or a
sale, lease or conveyance of all or part of the assets of the
Corporation;
(v) the purchase, retirement or sinking fund provisions, if any, for
the redemption or purchase of shares of Preferred Stock of such series;
(vi) the rights, if any, of the holders of shares of Preferred Stock
of such series to convert such shares into or exchange such shares for
shares of the Common Stock or shares of any other series of the
Preferred Stock and the terms and conditions of such conversion or
exchange;
(vii) subject to paragraph (a) above, the extent of voting rights of
the shares of Preferred Stock of such series or the absence thereof;
and
(viii) such other terms, limitations, rights and preferences, if any,
of such series as the Board of Directors may lawfully fix under the
laws of the State of Delaware as in effect at the time of creation of
such series.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(1)(a) Number, Election and Terms of Directors. Subject to the rights of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be fixed from
time to time solely by a majority of the directors then in office; provided
that such number shall not be less than three nor more than nine. The
directors, other than those who may be elected
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by the holders of any class or series of stock having preference over the
Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes,
each as nearly equal in number as possible, one class (Class I) to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1998, another class (Class II) to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1999, and another class
(Class III) to hold office initially for a term expiring at the annual meeting
of stockholders to be held in 2000, with the members of each class to hold
office until their successors are elected and qualified or until their earlier
resignation or removal. At each subsequent annual meeting of the stockholders
of the Corporation, the successors to the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders to be held in the third year following the
year of their election. Election of directors need not be by ballot unless the
By-Laws so provide.
(b) Newly Created Directorships and Vacancies. Subject to the rights of any
class or series of stock having a preference over Common Stock as to dividends
or upon liquidation to elect directors under specified circumstances, newly
created directorships resulting from any increase in the number of directors
and any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of at least a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified or until their earlier
resignation or removal. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
(c) Amendment, Repeal, etc. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least two-thirds of the voting power of all shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with, or repeal, this Article FIFTH(1) or any provision
hereof.
(2) The Board of Directors shall have power without the assent or vote of
the stockholders:
(a) to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon all
or any part of the property of the Corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends; and
(b) to determine from time to time whether, and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation (other than the stock ledger) or any
of them, shall be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person
or by proxy) shall be as valid and as binding upon the Corporation and upon
all the stockholders as though it had been approved or ratified by every
stockholder of the Corporation, whether or not the contract or act would
otherwise be open to legal attack because of directors' interest, or for any
other reason.
A-3
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(4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any By-Laws from time to time made by
the stockholders; provided, however, that no By-Laws so made shall invalidate
any prior act of the directors which would have been valid if such By-Laws had
not been made.
SIXTH: Any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (whether or not by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, incorporator, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
incorporator, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall be entitled to be indemnified by the
Corporation to the full extent then permitted by law or to the extent that a
court of competent jurisdiction shall deem proper or permissible under the
circumstances, whichever is greater against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred by him in
connection with such action, suit or proceeding. Such right of indemnification
shall inure whether or not the claim asserted is based on matters which
antedate the adoption of this Article SIXTH. Such right of indemnification
shall continue as to a person who has ceased to be a director, officer,
incorporator, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such person.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or a class of stockholders of the Corporation, as
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
EIGHTH: The personal liability of directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph 7 of Subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware as the
same may be amended and supplemented.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
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EXHIBIT B
SMT HEALTH SERVICES INC.
1997 STOCK OPTION PLAN
1. Establishment and Purpose. There is hereby established the 1997 Stock
Option Plan of SMT HEALTH SERVICES INC. in order to provide equity-based and
performance-based incentive awards and compensation to directors, Employees
and consultants of the Corporation, thereby attracting, retaining and
motivating such persons, encouraging proprietary interest in the Corporation
thereby strengthening mutuality of interests between such persons and the
Company's stockholders, and rewarding such persons for previous service.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean (i) with respect to any person covered by an
agreement with the Corporation in effect at the time of the event which
defines the term "Cause" or "For Cause" or words of similar import for
purposes of termination of employment, the meaning set forth in such
agreement at such time, and (ii) with respect to all other persons, (A) the
willful or reckless commission by a person of an act or acts which
constitute a felony or which, whether or not criminal, cause substantial
harm (economic or otherwise) to the Corporation; (B) the willful commission
of an act or acts of fraud or deceit upon the Corporation; (C) the
continuing willful failure of a person to perform the duties assigned to
such person by the Corporation (other than due to incapacity due to illness
or Disability) after written notice of such failure and a reasonable
opportunity to cure such failure; or (D) with respect to a director,
removal from the Board for cause.
(c) "Change of Control" shall mean (i) receipt of stockholder approval of
the sale or other disposition by the Corporation of all or substantially
all of its assets to a single purchaser or to a group of purchasers, other
than to a person with respect to which, following such sale or disposition,
more than eighty percent (80%) of, respectively, the then outstanding
Common Stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors (herein,
"Voting Securities") is then owned beneficially, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Common Stock and the
combined voting power of the then outstanding Voting Securities immediately
prior to such sale or disposition in substantially the same proportion as
their ownership of the outstanding Common Stock and Voting Securities
immediately prior to such sale or disposition;
(ii) The acquisition in one or more transactions by any person or
group, directly or indirectly, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of
twenty-five percent (25%) or more of the outstanding shares of Common
Stock or the combined voting power of the then outstanding Voting
Securities of the Company; provided, however, that any acquisition by
(x) the Corporation, or any employee benefit plan (or related trust)
sponsored or maintained by the Corporation (y) any person who was a
director or executive officer of the Company as of January 1, 1997, or
(z) any person that is eligible, pursuant to rule 13d-1(b) under the
Securities Exchange Act (as such rule is in effect as of January 1,
1997), to file a statement on Schedule 13G with respect to its
beneficial ownership of Common Stock or other Voting Securities whether
or not such person shall have filed a statement on Schedule 13G, unless
such person shall have filed a statement on Schedule 13D with respect
to beneficial ownership of 15 percent (15%) or more of the Company
Voting Securities, shall not constitute a Change of Control;
<PAGE>
(iii) The Company's termination of its business or liquidation of its
assets;
(iv) The receipt of stockholder approval of reorganization, merger or
consolidation of the Company into or with another person or entity, by
which reorganization, merger or consolidation the persons who held one
hundred percent (100%) of the Voting Securities of the Company prior to
such reorganization, merger or consolidation receive less than fifty-
two percent (52%) of the outstanding Voting Securities of the new or
continuing corporation(s); or
(v) If, on any given date, less than a majority of the members of the
Board of Directors are persons who were either (A) nominated or
recommended for election by at least a two-thirds vote of those persons
who were members of the Board of Directors or Nominating committee of
the Board of Directors two years prior to such date, or (B) elected by
the Board of Directors, including at least a two-thirds vote in favor
of such election by the persons who were members of the Board of
Directors two years prior to such date.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean any Committee appointed by the Board in
accordance with Section 4 hereof.
(f) "Common Stock" shall mean the Common Stock, par value $01 per share,
of the Company.
(g) "Company" shall mean SMT Health Services Inc., a Delaware
corporation.
(h) "Corporation" shall mean and include the Company and any parent or
subsidiary corporation thereof, within the meaning of Section 424 of the
Code.
(i) "Disability" shall mean (i) with respect to any person covered by an
agreement with the Corporation in effect at the time of the event which
defines the term "Disability" or "Disabled" or words of similar import, the
meaning set forth in such agreement at such time, and (ii) with respect to
all other persons, the condition of a person who is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months, all within the meaning of Section 22(e)(3) of
the Code.
(j) "Employee" shall mean any individual (including an officer or a
director) who is an employee of the Corporation (within the meaning of
Section 3401(c) of the Code and the regulations thereunder).
(k) "Exercise Price" shall mean the price per Share of Common Stock,
determined by the Board or Committee, at which an Option may be exercised.
(l) "Fair Market Value" of a Share of Common Stock as of a specified date
shall mean (i) if the Common Stock is quoted on a closing sale price basis,
the closing price of a Share on the principal securities exchange or market
on which such Shares are traded on the day immediately preceding the date
as of which Fair Market Value is being determined, or on the next preceding
date on which such Shares are traded if no Shares were traded on such
immediately preceding day, or (ii) if the Shares are not traded on a
securities exchange or market on a closing sale price basis, Fair Market
Value shall be deemed to be the average of the high bid and low asked
closing prices of the Shares on the day immediately preceding the date as
of which Fair Market Value is being determined, or on the next preceding
date on which such high bid and low asked closing prices were recorded if
such prices were not recorded on such immediately preceding date. If the
Shares are not publicly traded, Fair Market Value shall be determined by
the Board or
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Committee. In no case shall Fair Market Value be less than the par value of
a Share of a Common Stock, and in no event shall Fair Market Value be
determined with regard to restrictions other than restrictions which, by
their terms, will never lapse.
(m) "Incentive Stock Option" shall mean an Option described in Code
Section 422(b).
(n) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3) promulgated by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act, or any successor definition or rule.
(o) "Non-Statutory Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(p) "Option" or "Stock Option" shall mean a stock option granted pursuant
to Section 7 of the Plan.
(q) "Participant" means a director, Employee or consultant of the
Corporation to whom an Option has been granted under the Plan.
(r) "Plan" shall mean this SMT Health Services Inc. 1997 Stock Option
Plan.
(s) "Plan Administrator" shall mean the Board or Committee administering
the Plan in accordance with Section 4 hereof.
(t) "Purchase Price" shall mean the Exercise Price times the number of
whole Shares with respect to which an Option is exercised.
(u) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(v) "Share" shall mean one share of Common Stock.
(w) "Ten Percent Stockholder" shall mean any Employee who, at the time of
the grant of an Option, owns (or is deemed to own, under Section 424(d) of
the Code) more than ten percent of the total combined voting power of all
classes of outstanding stock of the Corporation.
3. Effective Date. This Plan was approved by the Board and is effective
beginning on March ----, 1997; provided, however, that, notwithstanding
anything to the contrary contained in the Plan, Incentive Stock Options may
not be granted to any person and (to the extent required by the rules of the
Nasdaq Stock Market) no Non-Statutory Stock Options may be granted to any
director or officer of the Company unless and until the Plan has been approved
by the stockholders of the Company.
4. Administration. The Plan shall be administered by the Board or by one or
more Committees appointed by the Board; provided, however, that with respect
to any Option granted to a person who is subject to Section 16 of the
Securities Exchange Act, in the event that the Committee is not constituted so
as to comply with the rules for exemption of transactions from short-swing
liability under Section 16 of the Securities Exchange Act, then Options
granted to such person and the administrator of the Plan with respect thereto
shall be the exclusive authority of the Board. The Board may from time to time
remove members from, or add members to, a Committee. Vacancies on a Committee,
however caused, shall be filled by the Board. The Plan Administrator shall
from time to time at its discretion make determinations with respect to the
persons who shall be granted and the terms of Options (including the
designation of Options as Incentive Stock Options or Non-Statutory Stock
Options). The interpretation and construction by the Plan Administrator of any
provisions of the Plan or of any Option granted hereunder shall be binding and
conclusive on all Participants and on their legal representatives and
beneficiaries.
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The Plan Administrator shall have the full power and authority to take all
actions and to make all determinations required or provided for under the
Plan, any Option or any agreement with respect to any Option entered into
hereunder and all such other actions and determinations not inconsistent with
the specific terms and provisions of the Plan deemed by such Plan
Administrator to be necessary or appropriate to the administration of the
Plan, any Option or any agreement with respect to an Option entered into
hereunder. Any acts reduced to or approved in writing by a majority of the
members of the Plan Administrator or approved by majority vote of the members
of the Plan Administrator shall be the valid acts of the construction by the
Committee of any provision of the Plan, of any Option, or of any agreement
with respect to any Option entered into hereunder shall be final and
conclusive. No member of the Plan Administrator shall be liable for any action
or determination made in good faith with respect to the Plan, any Option, or
of any agreement with respect to any Option entered into hereunder.
5. Eligibility. Any Employee may be granted Incentive Stock Options under
the Plan and any director, Employee or consultant of the Corporation may be
granted Non-Statutory Stock Options under the Plan.
6. Stock Subject to the Plan. The stock subject to or related to Options
granted under the Plan shall be the Common Stock and may be the authorized but
unissued Shares, or Shares held in the treasury. The aggregate number of
Shares which may be issued pursuant to Options under this Plan shall not
exceed 950,000. The number of Shares subject to or related to Options
outstanding under the Plan at any time may not exceed the number of Shares
remaining available for issuance under the Plan. In the event that any Option
under the Plan expires for any reason, is forfeited or is terminated, the
Shares allocable to the unexercised portion of such Option may again be
subjected to an Option under the Plan. In addition, any Shares delivered to or
withheld by the Company in connection with the Plan, including Shares
delivered or withheld to pay the exercise price of an Option or any tax
withholding obligation, shall be eligible for reissuance under the Plan.
The limitations established by this Section 6 shall be subject to adjustment
upon the occurrence of the events specified and in the manner provided in
Section 9 hereof.
7. Terms and Conditions of Options. Options granted pursuant to the Plan
shall be evidenced by written agreements in such form as the Plan
Administrator shall from time to time determine, which agreements shall comply
with and be subject to the following terms and conditions:
(a) Date of Grant. Each Option shall specify its effective date, which
shall be the date specified by the Board or Committee in its action
relating to the grant of the Option.
(b) Number of Shares. Each Option shall state the number of Shares to
which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 9 hereof.
(c) Exercise Price. Each Option shall state the Exercise Price, which
price shall be determined by the Plan Administrator, provided, however,
that the Exercise Price (i) in the case of an Incentive Stock Option
granted to an Employee who is not a Ten Percent Stockholder, shall not be
less than the Fair Market Value of the Shares to which the Option relates
on the date of grant, (ii) in the case of an Incentive Stock Option granted
to an Employee who is a Ten Percent Stockholder, shall not be less than
110% of the Fair Market Value of the Shares to which the Option relates on
the date of grant, and (iii) in the case of a Non-Statutory Stock Option,
shall not be less than 85% of the Fair Market Value of the Shares to which
the Option relates on the date of grant. The Exercise Price of an Option
shall be subject to adjustment in accordance with Section 9 hereof.
B-4
<PAGE>
(d) Exercise of Options and Medium and Time of Payment. To exercise an
Option, the Participant shall give written notice to the Company specifying
the number of Shares to be purchased and shall pay the Exercise Price for
such Shares at the time of exercise. Such payment may be made in cash,
through the delivery to the Company of Shares with a Fair Market Value
equal to the Exercise Price, or through a combination of cash and Shares,
and any Shares so delivered shall be valued at their Fair Market Value on
the date on which the option is exercised; provided, however, that Shares
delivered in payment of the Exercise Price must have been outstanding for
at least six (6) months. In addition, payment may be made through the
delivery to the Company of a notice of exercise of an Option along with an
irrevocable direction to a broker-dealer registered under the Securities
Exchange Act to sell a sufficient portion of the Shares and to deliver a
sufficient proceeds directly to the Company to pay the Exercise Price. No
Shares shall be issued until full payment therefor has been made.
(e) Terms and Exercise of Options; Non-Transferability of Options. Each
Option granted under this Plan shall be subject to the following terms and
conditions:
(i) No Option shall be transferable by the Participant otherwise than
by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code; and
(ii) An Incentive Stock Option may be exercised in whole, at any
time, or in part from time to time, within such period or periods not
to exceed ten (10) years from its date of grant, as may be determined
by the Committee and set forth in the stock option agreement, provided
that no Incentive Stock Option granted to an Employee who is a Ten
Percent Stockholder shall be exercisable after the expiration of five
(5) years from its date of grant.
(f) Termination of Service; Disability; Death. In the event that an
Participant shall cease to be employed by the Corporation, cease to serve
as a director, or cease to be a consultant, as the case may be, such
Participant shall have the right, subject to the restrictions of Section
7(e) hereof, to exercise the Option at any time until the earlier of the
expiration of the Option or six (6) months after such termination of
service to the extent that, on the day preceding the date of termination of
service, the Participant's right to exercise such Option had accrued
pursuant to the terms of the option agreement pursuant to which such Option
was granted, and had not previously been exercised; provided, however, in
the event such Participant's termination was due to Disability, such
Participant shall have the right to exercise the Option at any time until
the earlier of the expiration of the Option or one (1) year after
termination of service; provided, further, however, in the event that a
Participant is terminated for Cause, the Option shall immediately terminate
as of the date of termination of service. Notwithstanding the foregoing,
the Committee, in its sole discretion, may extend the period during which
any Option may be exercised for up to three (3) years from the date of any
termination of service regardless of the original period during which such
Option could have been exercised.
For this purpose, the employment relationship will be treated as continuing
intact while the Participant is on military leave, sick leave or other bona
fide leave of absence (to be determined in the sole discretion of the
Committee and, in the case of a Participant who has received an Incentive
Stock Option, only to the extent permitted under Section 422 of the Code and
the regulations promulgated thereunder).
In the event that a Participant shall die prior to termination of service,
the Option may be exercised at any time, by the Participant's legal
representative or persons entitled under the Participant's will or the laws of
descent and distribution, until the earlier of the expiration of the Option or
one (1) year from such Participant's death.
B-5
<PAGE>
(g) Rights as a Stockholder. A Participant or an transferee of a deceased
Participant shall have no rights as a stockholder with respect to any
Shares covered by his or her Option until the date of the issuance of a
stock certificate for such Shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 9.
(h) Modifications, Extension and Renewal of Options. Subject to the terms
and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend or renew outstanding Options granted under
the Plan, or accept the exchange of outstanding Options (to the extent not
theretofore exercised) for the granting of new Options in substitution
therefor. Notwithstanding the foregoing, however, no modification of an
Option shall, without the consent of the Participant, impair any rights or
obligations under any Option theretofore granted under the Plan. Moreover,
in the case of any modification, extension or renewal of an Incentive Stock
Option intended to continue as an Incentive Stock Option, all of the
requirements set forth herein shall apply in the same manner as though a
new Incentive Stock Option had been granted to the Participant on the date
of such modification, extension or renewal, if such modification, extension
or renewal is treated, under Section 424(h) of the Code, as the granting of
a new option.
(i) Identification of Option. Each Option granted under the Plan shall
clearly identify its status as an Incentive Stock Option or Non-Statutory
Stock Option.
(j) Change in Control. In the event of a Change in Control, all Options
shall be immediately exercisable in full.
(k) Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions not inconsistent with the terms of the
Plan, including, without limitation, restrictions upon the exercise of the
Option, as the Plan Administrator shall deem advisable.
(l) Limitation on Annual Options. The aggregate Fair Market Value
(determined at the time the Option is granted) of Common Stock for which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year under the terms of the Plan (and all other plans
maintained by the Corporation) shall not exceed the sum of $100,000.
(m) Stock Retention Options. The Plan Administrator, in its discretion,
may authorize "stock retention options" which provide, upon the exercise of
an Option previously granted under this Plan (a "Prior Option"), using
previously owned Shares, for the automatic issuance of a new Option under
this Plan with an Exercise Price equal to the current Fair Market Value and
for up to the number of Shares equal to the number of previously-owned
Shares delivered in payment of the Exercise Price of the Prior Option. Such
stock retention option shall have the same option period as the Prior
Option.
8. Term of Plan; Limitation on Options. Incentive Stock Options may be
granted pursuant to the Plan until ten years from the date that the Plan is
adopted by the Board or ten years from the date that the Plan is approved by
the stockholders of the Company, whichever occurs earlier. The aggregate
number of shares subject to Options granted to any one person under the Plan
shall not exceed fifty percent (50%) of the Shares that may be issued under
Section 6 of this Plan.
9. Recapitalization. The number of Shares covered by this Plan, the number
of Shares covered by each outstanding Option, the Exercise Price of each
outstanding Option and the price of each outstanding other Option shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares, stock split or
the payment of a stock dividend.
B-6
<PAGE>
If the Company shall be the surviving corporation in any merger or
consolidation, each outstanding Option shall pertain and apply to the
securities to which a holder of the number of Shares subject to the Option
would have been entitled. A dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving corporation
shall cause each outstanding Option to terminate, unless the agreement of
merger or consolidation shall otherwise provide; provided that each
Participant shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the Company is
not the surviving corporation, to exercise the Option in whole or in part,
whether or not the Participant's right to exercise such Option had otherwise
accrued pursuant to the terms of the agreement pursuant to which such Option
was granted, subject to any limitations or exercisability imposed by the Board
or Committee and contained in any agreement with respect to the Option.
In the event of a change in the Common Stock as presently constituted, which
is limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be Shares of Common
Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Plan Administrator,
whose determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided in this Section 9, the Participant
shall have no rights by reason of any subdivision or consolidation of shares
of stock of any class, stock split, or the payment of any stock dividend or
any other increase or decrease in the number of shares or stock of any class
or by reason of any dissolution, liquidation, merger, or consolidation or
spin-off of assets or stock of another corporation which does not involve a
Change of Control, and any issue by the Company of shares of stock of any
class or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to the Option or to which the Option
relates.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
10. Securities Law Requirements. No Shares shall be issued upon the exercise
of any Option unless and until the Company has determined that: (i) it and the
Participant have taken all actions required to register the Shares under the
Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or federal law has been satisfied.
11. Amendment of the Plan. The Board or Committee may at any time terminate,
and from time to time may amend or modify the Plan; provided, however, that no
amendment or modification may become effective without approval of the
amendment or modification by the stockholders if stockholder approval is
required to enable the Plan to satisfy any applicable statutory or regulatory
requirements, or if the Company, on the advice of counsel, determines that
stockholder approval is otherwise necessary or desirable.
12. Application of Funds. The proceeds received by the Company from the sale
of the Common Stock pursuant to the Plan will be used for general corporate
purposes.
B-7
<PAGE>
13. No Obligation to Exercise Option. The granting of an Option shall impose
no obligation upon the Participant to exercise such Option.
14. Withholding.
(a) General. Whenever Shares are to be issued under the Plan, the
Corporation shall have the right to require the Participant to remit to the
Corporation any amount sufficient to satisfy federal, state and local tax
withholding requirements prior to the delivery of any certificate for such
Shares.
(b) Incentive Stock Options. If a Participant makes a disposition of
Shares acquired upon the exercise of an Incentive Stock Option within
either two years after grant or one year after the receipt of Common Stock
by the Participant, the Participant shall promptly notify the Corporation
and the Corporation shall have the right to require the Participant to pay
to the Corporation an amount sufficient to satisfy federal, state and local
tax liability. A Participant may elect to pay such liability, in whole or
in part, by delivering to the Corporation Shares of Common Stock of the
Corporation owned by the Participant and having a Fair Market Value on the
date on which the amount of tax liability is determined equal to the amount
of such liability. Any fractional amount shall be paid to the Corporation
by the Participant in cash or shall be withheld from the Participant's next
regular paycheck.
(c) Non-Statutory Stock Options. A Participant who is obligated to pay to
the Corporation an amount required to be withheld under applicable tax laws
in connection with the exercise of Non-Statutory Stock Options under the
Plan may, if the Board or Committee so determines, elect to satisfy this
withholding obligation, in whole or in part, by requesting that the
Corporation withhold shares of Common Stock otherwise issuable to the
Participant upon exercise of the Option or Option or by delivering to the
Corporation Shares of Common Stock of the Corporation owned by the
Participant and having a Fair Market Value on the date on which the amount
of tax to be withheld is determined equal to the amount of the tax required
to be withheld. Any fractional amount shall be paid to the Corporation by
the Participant in cash or shall be withheld from the Participant's next
regular paycheck.
15. Governing Law. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to the principles of conflicts of laws.
B-8
<PAGE>
SMT HEALTH SERVICES INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- May 7, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Please mark, sign, date and return in the enclosed envelope.)
The undersigned hereby appoints Jeff D. Bergman, Daniel Dickman and David
A. Zynn, or any one of them, with power of substitution to each, as proxies to
represent and to vote as designated on the reverse, all the shares of Common
Stock held of record at the close of business on March 21, 1997 by the
undersigned at the annual meeting of stockholders of SMT Health Services Inc. to
be held at the Pittsburgh Airport Marriott, 100 Aten Road, Coraopolis,
Pennsylvania 15108, on Wednesday, May 7, 1997, at 9:00 a.m., and at any
adjournment thereof.
<PAGE>
(1) Proposal to amend the Certificate of Incorporation of the Company to
provide for the classification of the Board of Directors into three
classes of directors with staggered terms of office
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) Proposal to amend the Certificate of Incorporation of the Company to
provide that any vacancy on the Board of Directors may be filled only by
the affirmative vote of a majority of the remaining directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposal to amend the Certificate of Incorporation of the Company to
provide that the number of directors will be between three and nine, as
determined by the directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Proposal to amend the Certificate of Incorporation of the Company to
provide that the stockholder vote required to amend or repeal any of the
provisions contained in the Amendments to the Certificate of Incorporation
of the Company in Proposals 1, 2 and 3 be increased from a majority to
two-thirds of the Company's Common Stock
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) Proposal to amend the Certificate of Incorporation of the Company to
increase the authorized shares of Common Stock to 20,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) ELECTION OF DIRECTORS
FOR [ ] WITHHOLD AUTHORITY [ ]
all nominees listed below to vote for all
(except as marked below) nominees listed below
Jeff D. Bergman
Daniel Dickman
Gerald L. Cohn
Alan Novich
David J. Malone
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, DRAW A
LINE THROUGH OR STRIKE OUT THAT NOMINEE'S NAME AS SET FORTH ABOVE.
(7) Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for the fiscal year ending
December 31, 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(8) Proposal to approve the Company's 1997 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposal 1, FOR Proposal 2, FOR Proposal 3, FOR Proposal 4, FOR
Proposal 5, FOR the nominees listed in Proposal 6, FOR Proposal 7 and FOR
Proposal 8. The proxies SHALL HAVE DISCRETIONARY POWER to vote upon such other
matters as may properly come before the meeting or any adjournment thereof. A
majority of such proxies who shall be present and act at the meeting (or if only
one shall be present and act then that one) may exercise all powers hereunder.
Signature Dated , 1997.
----------------------------------- ------------------
Note: Stockholder sign here exactly as name appears hereon.
