<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
APOGEE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
APOGEE
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 15, 1998
------------------------
King of Prussia, Pennsylvania
June 29, 1998
To the Holders of Common Stock of APOGEE, INC.:
The Annual Meeting of the Stockholders of APOGEE, INC. (the "Company") will
be held at the Fourth Floor Board Room, 1060 First Avenue, King of Prussia,
Pennsylvania 19406 on Wednesday, July 15, 1998 at 9:00 A.M., local time, to
consider and act upon the following matters:
1. To elect seven directors for the ensuing year.
2. To approve a proposal to amend the Company's Certificate of
Incorporation changing the corporate name of the Company from Apogee,
Inc. to Integra, Inc.
3. To ratify the Board of Directors' selection of Price Waterhouse LLP as
the Company's independent accountants for 1998.
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on June 24, 1998 are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
STANLEY F. SZCZYGIEL
Secretary
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED FORM OF PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE SO THAT YOUR VOTE CAN BE
RECORDED. THE ENVELOPE DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE> 3
PROXY STATEMENT
This Proxy Statement, which will be mailed commencing on or about June 29,
1998 to the persons entitled to receive the accompanying Notice of Annual
Meeting of Stockholders, is furnished in connection with the solicitation of
Proxies by and on behalf of the Board of Directors of Apogee, Inc. (the
"Company") for use at the 1998 Annual Meeting of Stockholders (the "Meeting") to
be held on July 15, 1998, and at any adjournment or adjournments thereof. If
properly signed and returned to the Company and not revoked, the accompanying
Proxy will be voted in accordance with the instructions it contains. The persons
named in the Proxy will vote the shares represented thereby for the Board of
Directors' slate of directors and as recommended by the Board of Directors
unless contrary instructions are given. The Company's principal executive
offices are located at 1060 First Avenue, King of Prussia, Pennsylvania 19406.
Any Proxy may be revoked at any time before it is exercised by written
notice to the Secretary of the Company. The casting of a ballot at the Meeting
by a stockholder who may theretofore have given a Proxy will not have the effect
of revoking that Proxy unless the stockholder so notifies the Secretary of the
Company in writing at any time prior to the voting of the shares represented by
the Proxy.
Only stockholders of record at the close of business on June 24, 1998 (the
"Record Date") are entitled to vote at the Meeting or any adjournment or
adjournments thereof. As of the Record Date, the Company had outstanding
10,114,329 shares of common stock, $.01 par value (the "Common Stock"), each
holder of which is entitled to one vote per share with respect to each matter to
be voted on at the Meeting. The Company has no class or series of stock
outstanding other than the Common Stock.
Directors are elected by plurality vote. Adoption of proposal II, an
amendment to the Company's Certificate of Incorporation to change the corporate
name of the Company from Apogee, Inc. to Integra, Inc. (the "Name Change
Proposal") requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of Common Stock. Adoption of proposal III will
require the affirmative vote of a majority of the Common Stock voting on that
proposal. Abstentions and broker non-votes (as hereinafter defined) will be
counted as present for the purpose of determining the presence of a quorum. For
the purpose of determining the vote required for approval of matters to be voted
on at the Meeting, shares held by stockholders who abstain from voting will be
treated as being "present" and "entitled to vote" on the matter and, thus, an
abstention has the same legal effect as a vote against the matter. However, in
the case of a broker non-vote where a stockholder withholds authority from his
Proxy to vote the Proxy as to a particular matter, such shares will not be
treated as "present" and "entitled to vote" on the matter and, thus, a broker
non-vote or the withholding of a Proxy's authority will have no effect on the
outcome of the vote on matters I and III. As to proposal II, broker non-votes
have the same effect as a vote against proposal II. A "broker non-vote" refers
to shares of Common Stock represented at the Meeting in person or by proxy by a
broker or a nominee where such broker or nominee (i) has not received voting
instructions on a particular matter from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on such matter.
<PAGE> 4
I. ELECTION OF DIRECTORS
Seven directors will be elected at the Meeting. It is the intention of each
of the persons named in the accompanying form of Proxy to vote the shares
represented thereby in favor of the seven nominees listed in the following
table, unless otherwise instructed in such Proxy. Each such nominee is presently
serving as a director. In case any of the nominees is unable or declines to
serve, such persons reserve the right to vote the shares represented by such
Proxy for another person duly nominated by the Board of Directors in his stead
or, if no other person is so nominated, to vote such shares only for the
remaining nominees. The Board of Directors has no reason to believe that any
nominee listed below will be unable or will decline to serve. The directors
elected by the stockholders will serve until the 1999 Annual Meeting of
Stockholders and until their respective successors are duly elected and shall
have qualified.
CERTAIN INFORMATION CONCERNING NOMINEES
Certain information concerning the nominees for election as directors is
set forth below. Such information was furnished by them to the Company.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED PERCENT
BENEFICIALLY AS OF OF
NAME OF NOMINEE AND CERTAIN BIOGRAPHICAL INFORMATION JUNE 24, 1998(1) CLASS
---------------------------------------------------- ------------------ -------
<S> <C> <C>
JOHN H. FOSTER, age 56, has been Chairman of the Board and
Chief Executive Officer of the Company since March 1991.
Mr. Foster has been Chairman of the Board of NovaCare,
Inc., a leading national provider of comprehensive medical
rehabilitation services ("NovaCare"), since December 1984.
Between December 1984 and May 1997 he was also Chief
Executive Officer of NovaCare. Mr. Foster is a director of
Corning Incorporated, an international corporation with
business interests in specialty materials, communications,
laboratory services and consumer products. Mr. Foster is a
director of CulturalAccessWorldwide, Inc., an outsourced
and marketing services company. Mr. Foster is the founder
and Chairman of the Board of Foster Management Company, a
venture capital firm, and general partner of various
venture capital investment funds.......................... 4,137,974(2) 39.4%
LAWRENCE M. DAVIES, age 39, has been a director of the
Company since January 1992 and its President since June
1993. Mr. Davies was Vice President of the Central
Division of the Contract Services Group of NovaCare from
June 1992 to May 1993 and Division Vice President of the
Midwest Region of the Contract Services Group of NovaCare
from September 1988 to May 1992. From January 1987 to
August 1988 Mr. Davies was Director of Corporate
Development for NovaCare. Mr. Davies was manager of
Mergers and Acquisitions for Foster Medical Corporation
from August 1984 to December 1986......................... 120,568(3) 1.2
HARVEY V. FINEBERG, M.D., age 52, has been a director of the
Company since November 1993. Dr. Fineberg has been Provost
of Harvard University since July 1997 and Dean of the
Harvard School of Public Health since July 1984. He has
been Professor of Health Policy and Management at the
Harvard School of Public Health since 1982 and has held
other faculty positions at Harvard University since 1973.
Dr. Fineberg earned a medical degree at Harvard Medical
School and a doctorate in Public Policy at the Kennedy
School of Government at Harvard University. Dr. Fineberg
is a director of PrincipalCare Incorporated, a provider of
women's health services................................... 7,000 *
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED PERCENT
BENEFICIALLY AS OF OF
NAME OF NOMINEE AND CERTAIN BIOGRAPHICAL INFORMATION JUNE 24, 1998(1) CLASS
---------------------------------------------------- ------------------ -------
<S> <C> <C>
TIMOTHY E. FOSTER, age 47, has been a director of the
Company since February 1993. Mr. Foster has been Chief
Executive Officer of NovaCare since May 1997. Between
October 1994 and May 1997 he was President and Chief
Operating Officer of NovaCare. He has been a director of
NovaCare since December 1984. Prior to becoming President
of NovaCare, he served in a variety of finance and
administrative roles at NovaCare beginning in 1984. Mr.
Foster has been a Managing Partner of Foster Management
Company since June 1997................................... 4,119,421(4) 39.2
IRWIN LEHRHOFF, PH.D., age 69, has been a director of the
Company since March 1991, at which time his company, Irwin
Lehrhoff &Associates, Inc., was acquired by the Company.
For more than the prior five years, Dr. Lehrhoff has
engaged in the private practice of clinical psychology in
Southern California. Dr. Lehrhoff holds a Ph.D. in
Communication Disorders and a Ph.D. in Clinical
Psychology. He is a member of the American Psychological
Association and the International Society of Mental
Health. Dr. Lehrhoff presently serves as a director of the
Thalians Community Mental Health Center. He was previously
a director and President of the National Association of
Rehabilitation Agencies. Dr. Lehrhoff was Director and
President of the California Speech Pathologists and
Audiologists in Private Practice from 1973 to 1977........ 196,500(5) 1.9
R. BRUCE MOSBACHER, age 45, has been a director of the
Company since July 1992. Mr. Mosbacher has been a general
partner of Saw Island Partners, a securities, real estate
and oil and gas investment firm, since 1985. From 1983 to
1985, Mr. Mosbacher was of counsel to Gaston Snow & Ely
Bartlett of Palo Alto, California; prior to that, he was
associated with Wilson, Sonsini, Goodrich & Rosati of Palo
Alto, California. Mr. Mosbacher serves on the Boards of
Advisors of investment funds managed by Foster Management
Company and is a director of a number of privately held
companies. He previously was a director of ISI
Corporation, ISI Trust Fund, ISI Growth Fund, Inc. and ISI
Income Fund, Inc. and is a member of the State Bar of
California................................................ 5,000(6) *
SHAWKAT RASLAN, age 46, has been a director of the Company
since February 1994. Mr. Raslan serves as President and
Chief Executive Officer of International Resources
Holdings, Inc., an asset management and investment
advisory service. He has held these positions since 1982.
Mr. Raslan serves as a director of U.S.Home Care
Corporation............................................... 10,000 *
</TABLE>
- ---------------
* Less than one percent.
(1) Except as indicated in the following footnotes, each of the persons listed
above has sole voting and investment power with respect to all shares of
Common Stock shown in the table as beneficially owned by him.
(2) Includes 3,689,200 shares of Common Stock owned by Abbingdon Venture
Partners Limited Partnership ("Abbingdon") and Abbingdon Venture Partners
Limited Partnership-II ("Abbingdon-II"), limited partnerships, of each of
which Mr. John H. Foster is a general partner through intermediate general
partnerships. Also includes 400,000 shares of Common Stock presently
issuable upon the exercise of warrants owned by Abbingdon and Abbingdon-II.
Also includes 16,800 shares of Common Stock owned by the Trust u/w Virginia
C. Foster, of which Mr. John H. Foster is a trustee.
(3) Includes 8,000 shares of Common Stock presently issuable upon the exercise
of stock options.
3
<PAGE> 6
(4) Includes 3,689,200 shares of Common Stock owned by Abbingdon and
Abbingdon-II, of each of which Mr. Timothy E. Foster is a general partner
through intermediate general partnerships. Also includes 400,000 shares of
Common Stock presently issuable upon the exercise of warrants owned by
Abbingdon and Abbingdon-II.
(5) Includes 176,000 shares of Common Stock owned by Irwin Lehrhoff Trust No. 1,
of which Dr. Lehrhoff is a trustee and a beneficiary. Does not include 500
shares of Common Stock held by Dr. Lehrhoff's spouse, of which shares of
Common Stock Dr. Lehrhoff disclaims beneficial ownership.
(6) Represents shares of Common Stock owned by the Mosbacher/Ditz Living Trust,
of which Mr. Mosbacher is the trustee and a beneficiary.
During 1997, the Board of Directors of the Company met five times. The
Board of Directors also acted by unanimous written consent on one occasion
during 1997. Each of the persons named in the table above, other than Harvey V.
Fineberg and John H. Foster, attended at least 75% of the meetings of the Board
of Directors and meetings of any committees of the Board on which such person
served which were held during the time that such person served.
The Board of Directors has a Compensation Committee, an Acquisition
Committee and an Audit Committee. The Board of Directors does not have a
Nominating Committee.
The members of the Compensation Committee are Shawkat Raslan, who serves as
Chairman, and John H. Foster. The Compensation Committee makes recommendations
to the full Board of Directors as to the compensation of senior management and
administers the Apogee, Inc. 1994 Stock Option Plan and determines the persons
who are eligible to receive options and the number of shares of Common Stock
subject to each option. The Compensation Committee met once during 1997.
The members of the Acquisition Committee are Lawrence M. Davies and R.
Bruce Mosbacher who serves as Chairman. The Acquisition Committee develops
acquisition strategies and programs and identifies and evaluates potential
acquisition opportunities. The Acquisition Committee did not meet during 1997.
The members of the Audit Committee are Timothy E. Foster, who serves as
Chairman, Harvey V. Fineberg, and R. Bruce Mosbacher. The Audit Committee acts
as a liaison between the Board of Directors and the independent auditors and is
authorized to recommend to the Board the appointment of the independent
auditors. The Audit Committee reviews with the independent auditors the planning
and scope of the audits of the financial statements, the results of those audits
and the adequacy of internal accounting controls and monitors other corporate
and financial policies. The Audit Committee met two times in 1997.
No family relationships exist between any of the directors and officers of
the Company.
The Board of Directors will consider nominees for directors recommended by
stockholders or others. There are no specified formal procedures for submitting
such recommendations. Recommendations may be addressed to the Chief Executive
Officer, Apogee, Inc., 1060 First Avenue, King of Prussia, Pennsylvania 19406.
Article Sixth of the Certificate of Incorporation of the Company provides
that the Company shall indemnify and hold harmless any director, officer,
employee or agent of the Company from and against any and all expenses and
liabilities that may be imposed upon or incurred by him or her in connection
with, or as a result of, any proceeding in which he or she may become involved,
as a party or otherwise, by reason of the fact that he or she is or was such a
director, officer, employee or agent of the Company, whether or not he or she
continues to be such at the time such expenses and liabilities shall have been
imposed or incurred, to the extent permitted by the laws of the State of
Delaware, as they may be amended from time to time.
Article Eleventh of the Certificate of Incorporation of the Company
contains a provision, authorized by Delaware law, which eliminates the personal
liability of a director of the Company to the Company or to any of its
stockholders for monetary damages for a breach of his fiduciary duty as a
director, except in a case in which the director breached his or her duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law, or obtained an improper
personal benefit.
4
<PAGE> 7
DIRECTOR COMPENSATION
Directors of the Company do not receive fees for service as directors but
are reimbursed for out-of-pocket expenses. Irwin Lehrhoff, Ph.D. receives
certain fees for consulting services he performs for the Company. See "Certain
Transactions."
EXECUTIVE COMPENSATION
The following table sets forth information for the years ended December 31,
1997, 1996 and 1995 concerning the compensation of the Company's Chief Executive
Officer and each of the other most highly compensated executive officers of the
Company whose total annual salary and bonus exceeded $100,000 during the year
ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------------------------------
ANNUAL OTHER
COMPENSATION ANNUAL
--------------------------- COMPENSATION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John H. Foster................... 1997 -- -- -- -- --
Chairman of the Board and 1996 -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- --
Lawrence M. Davies............... 1997 150,000 20,000 6,000(1) -- 2,885(2)
President and Chief 1996 150,000 20,000 6,000(1) -- --
Operating Officer.............. 1995 160,327 6,750 -- -- --
Massoud G. Hampton, Ph.D......... 1997 137,471 10,600 -- 5,000 12,354(3)(4)
Vice President of Clinical 1996 129,433 7,260 -- 3,000 11,700(5)
Services....................... 1995 121,443 7,260 -- -- 11,700(6)
Stanley F. Szczygiel............. 1997 113,820 8,800 -- 5,000 9,915(7)(8)
Vice President of Finance 1996 110,000 8,000 -- 3,000 7,800(9)
1995 101,923 3,000 -- -- 7,800(10)
</TABLE>
- ---------------
(1) Represents car allowance.
(2) Represents payment for unused paid time off.
(3) Includes $2,654 payment for unused paid time off.
(4) Includes $11,700 representing the difference between the fair market value
($4.00) of the 3,000 (out of 15,000) shares of Common Stock which have
vested during fiscal year 1997 and the purchase price ($0.10) paid by Mr.
Hampton for such shares.
(5) Represents the difference between the fair market value ($4.00) of the
3,000 (out of 15,000) shares which have vested during fiscal year 1996 and
the purchase price ($0.10) paid by Mr. Hampton for such shares.
(6) Represents the difference between the fair market value ($4.00) of the
3,000 (out of 15,000) shares which have vested during fiscal year 1995 and
the purchase price ($0.10) paid by Mr. Hampton for such shares.
(7) Includes $2,115 payment for unused paid time off.
(8) Includes $7,800 representing the difference between the fair market value
($4.00) of the $2,000 (out of 10,000) shares which have vested during
fiscal year 1997 and the purchase price ($0.10) paid by Mr. Szczygiel for
such shares.
(9) Represents the difference between the fair market value ($4.00) of the
2,000 (out of 15,000) shares which have vested during fiscal year 1996 and
the purchase price ($0.10) paid by Mr. Szczygiel for such shares.
(10) Represents the difference between the fair market value ($4.00) of the
2,000 (out of 15,000) shares which have vested during fiscal year 1995 and
the purchase price ($0.10) paid by Mr. Szczygiel for such shares.
5
<PAGE> 8
The Company granted 10,000 stock options to the executive officers named in
the Summary Compensation Table during the year ended December 31, 1997.
The following table sets forth the grants of stock options to the executive
officers named in the Summary Compensation Table during the year ended December
31, 1997. The amounts shown for each of the named executive officers as
potential realizable values are based on arbitrarily assumed annualized rates of
stock price appreciation of five percent and ten percent over the exercise price
of the options during the full terms of the options, which would result in stock
prices of approximately $5.30 and $8.42, respectively. The amounts shown as
potential realizable values for all stockholders represent the corresponding
increases in the market value of 10,029,325 outstanding shares of the Common
Stock held by all stockholders as of December 31, 1997, which would total
approximately $53,155,423 and $84,446,917, respectively. No gain to the
optionees is possible without an increase in stock price which will benefit all
stockholders proportionately. These potential realizable values are based solely
on arbitrarily assumed rates of appreciation required by applicable Securities
and Exchange Commission regulations. Actual gains, if any, on option exercises
and holdings of Common Stock are dependent on the future performance of the
Common Stock and overall market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ------- -------------- -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders'
Stock
Appreciation........ N/A N/A N/A N/A $53,155,423 $84,466,917
John H. Foster........ 0 0 N/A N/A N/A N/A
Lawrence M. Davies.... 0 0 N/A N/A N/A N/A
Stanley F.
Szczygiel........... 5,000 5% $3.25 5/09/07 $ 10,250 $ 25,850
Massoud G. Hampton,
Ph.D................ 5,000 5% $3.25 5/09/07 $ 10,250 $ 25,850
</TABLE>
The following table sets forth the number and value of options held by the
executive officers of the Company named in the Summary Compensation Table.
During the fiscal year ended December 31, 1997, none of the executive officers
named in the Summary Compensation Table exercised any options to purchase Common
Stock.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED OPTIONS MONEY OPTIONS AT
AT DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
----------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------------------------- ----------------------------
<S> <C> <C>
John H. Foster............................. N/A N/A
Lawrence M. Davies......................... 8,000/2,000 N/A
Stanley F. Szczygiel....................... 6,200/6,800 N/A
Massoud G. Hampton, Ph.D................... 6,200/6,800 N/A
</TABLE>
- ---------------
(1) None of the options held by the executive officers named in the Summary
Compensation Table were in-the-money at December 31, 1997. In-the-money
options are those for which the fair market value of the underlying Common
Stock exceed the exercise price of the option. The value of in-the-money
options is determined in accordance with regulations of the Securities and
Exchange Commission by subtracting the aggregate exercise price of the
option from the aggregate year-end value of the underlying Common Stock.
6
<PAGE> 9
EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements, which are terminable at
will, with each of Lawrence M. Davies, Mark D. Gibson, Stanley F. Szczygiel and
Massoud G. Hampton, Ph.D. These agreements set forth, among other things, the
base salary, bonus, equity participation, and other employee benefit
arrangements for each of Messrs. Davies, Gibson, Szczygiel and Hampton.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors of the
Company during 1997 were Shawkat Raslan and John H. Foster. During 1997, John H.
Foster, Chairman of the Board and Chief Executive Officer of the Company and
Shawkat Raslan, a director and Company, were directors and members of the
Compensation Committee of CulturalAccessWorldwide, Inc. See "Certain
Transactions".
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return of the Company's Common Stock to the AMEX Market Value Index and to The
NASDAQ Stock Market (U.S.) Index and to the NASDAQ Health Services Index for the
period from June 7, 1994, the date of the Company's initial public offering, to
December 31, 1997. Effective July 14, 1997, the Company's Common Stock was
listed on the American Stock Exchange and, accordingly, the Company has selected
the AMEX Market Value Index as an appropriate index for this graph. The graph
assumes that $100 was invested in each of the Company's Common Stock, the AMEX
Market Value Index, The NASDAQ Stock Market (U.S.) Index and the NASDAQ Health
Services Index on June 7, 1994 and that all dividends were reinvested.
7
<PAGE> 10
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN* SINCE JUNE 7, 1994
AMONG APOGEE, INC., THE AMEX MARKET VALUE INDEX, THE NASDAQ STOCK
MARKET (US) INDEX AND THE NASDAQ HEALTH SERVICES INDEX
<TABLE>
<CAPTION>
NASDAQ
AMEX STOCK NASDAQ
MEASUREMENT PERIOD 'APOGEE, MARKET MARKET HEALTH
(FISCAL YEAR COVERED) INC.' INDEX (US) INDEX SERVICES
<S> <C> <C> <C> <C>
6/7/94 100 100 100 100
DEC-94 103 98 102 105
DEC-95 54 124 145 133
DEC-96 22 132 178 133
DEC-97 15 160 219 135
</TABLE>
- ---------------
* $100 INVESTED ON JUNE 7, 1994 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
8
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
The report of the Compensation Committee documents the Committee's policies
regarding executive officer compensation. The Company's philosophy and
objectives in setting compensation are:
- to offer levels of compensation which are competitive with those offered
by other companies in similar businesses;
- to compensate executives based on each executive's level of
responsibility and contribution to the Company's business goals;
- to link compensation with the Company's financial performance; and
- to align the interests of the Company's executives with the interests of
the Company's stockholders.
There are three major components to executive compensation at the Company:
base salary, bonus and stock options.
BASE SALARY
Base salary is determined by level of responsibility, individual
performance and Company performance, as well as by the need to provide a
competitive package that allows the Company to recruit and retain key
executives. After reviewing individual and Company performance and salaries at
other companies of similar size, the Chief Executive Officer makes
recommendations to the Compensation Committee concerning officers' salaries. The
Compensation Committee reviews and, with any changes it deems appropriate,
approves these recommendations.
EXECUTIVE OFFICER BONUSES
Bonuses are paid to the Company's executive officers based upon both their
individual performance and the Company's financial performance. Amounts which
may be earned by an executive officer as bonus, expressed as a percentage of
base salary, are generally agreed upon with the executive officer at the
commencement of his employment, subject to annual review by the President of the
Company in consultation with the Compensation Committee. Bonuses, which are paid
annually, range from 10% to 30% of an employee's annual base salary. Depending
on the provisions of the executive officer's employment agreement, between 30%
and 75% of the employee's bonus will be based upon the financial performance of
the Company. The remaining portion of an executive officer's bonus is based upon
the achievement of personal performance goals which are set by the President of
the Company in consultation with the Compensation Committee in the following
areas: patient care efficiency, employee retention, management objectives and
personal objectives. The President's personal performance goals are set by the
Chief Executive Officer of the Company in consultation with the rest of the
Compensation Committee.
STOCK OPTIONS
During 1997, the Company granted 30,000 stock options under the Apogee,
Inc. 1994 Stock Option Plan (the "Stock Option Plan") to executive officers of
the Company. In addition, in May 1997, the Company granted options for 81,000
shares of Common Stock to eight other employees of the Company. The primary
purpose of the Stock Option Plan is to align the interests of the Company's key
employees, including its executive officers, more closely with the interests of
the Company's stockholders by offering these key employees an opportunity to
benefit from increases in the market price of the Common Stock. The Stock Option
Plan will provide long-term incentives that will enable the Company to attract
and retain key employees by encouraging their ownership of Common Stock. The
Stock Option Plan is administered by the Compensation Committee of the Board of
Directors, which will determine the persons who are to receive options and the
number of shares to be subject to each option. In selecting individuals for
options and determining the terms thereof, the Compensation Committee may take
into consideration any factors it deems relevant, including present and
potential contributions to the success of the Company.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
SHAWKAT RASLAN, CHAIRMAN
JOHN H. FOSTER
9
<PAGE> 12
CERTAIN TRANSACTIONS
Each of the directors (except John H. Foster and Irwin Lehrhoff, Ph.D.) and
the following executive officers of the Company acquired the following shares of
Common Stock from the Company in the following months for $.10 per share, which
shares of Common Stock vest over a three- to five-year period contingent upon
continued service: in March 1992, 5,000 shares of Common Stock to Lawrence M.
Davies, President and Chief Operating Officer and a director of the Company; in
August 1992, 5,000 shares of Common Stock to R. Bruce Mosbacher, a director of
the Company; in June 1993, 5,000 shares of Common Stock to Timothy E. Foster, a
director of the Company and 100,000 shares of Common Stock to Mr. Davies; in
December 1993, 5,000 shares of Common Stock to Harvey V. Fineberg, M.D., a
director of the Company; in January 1994, 10,000 shares of Common Stock to
Stanley F. Szczygiel, Vice President of Finance and Secretary of the Company and
5,000 shares of Common Stock to Shawkat Raslan, a director of the Company; and
in February 1994, 15,000 shares of Common Stock to Massoud G. Hampton, Ph.D.,
Vice President of Clinical Services of the Company. The shares issued during
January and February 1994 were deemed to have a fair value of $4.00 per share
resulting in the recognition of compensation expense by the Company over the
periods during which such shares vest.
The Company has entered into stock purchase agreements with each of its
directors and executive officers (except John H. Foster and Irwin Lehrhoff,
Ph.D.) and executive officers (except Mark D. Gibson) (the "Stock Purchase
Agreements") pursuant to which such individuals purchased their respective
shares of Common Stock. The Stock Purchase Agreements provide for restrictions
on the sale of such shares and further provide that the Company has the option
to repurchase such shares at $.10 per share upon the occurrence of certain
conditions contained therein.
The Company entered into a stockholders agreement with Dr. Lehrhoff (the
"Stockholders Agreement") in connection with the Company's acquisition from Dr.
Lehrhoff of Irwin Lehrhoff & Associates, Inc. in March 1991. The Stockholders
Agreement grants certain registration rights to Dr. Lehrhoff in the event that
the Company registers shares of Common Stock pursuant to a registration
statement (other than a registration statement on Form S-8 or Form S-4 or other
comparable registration form) in connection with a public offering of Common
Stock.
The Company entered into a consulting agreement with Dr. Lehrhoff in April
1996 providing for a fee of $1,500 per month for consulting services plus
contingent fees based upon the consummation of acquisitions. Under the
consulting agreement, with respect to acquisitions initiated by him, Dr.
Lehrhoff receives a fee of $8,000 for each acquisition of a business with less
than $1,000,000 in annual net revenues, a fee of $12,000 for each acquisition of
a business with $1,000,000 or more in annual net revenues but less than
$2,000,000 in annual net revenues and a fee equal to one percent of the annual
net revenues of each acquired business having annual net revenues of $2,000,000
or more. Total fees paid under the consulting agreement in 1997 were
approximately $32,000.
Until February 1998, the Company subleased its principal corporate offices
from NovaCare, Inc., of which John H. Foster is Chairman of the Board and a
director and Timothy E. Foster is President and Chief Executive Officer and a
director. The Company paid base rent at a rate equal to NovaCare, Inc.'s cost,
including reimbursement for leasehold improvements made by NovaCare, Inc. During
1997, the Company paid NovaCare, Inc. a total of $129,000 pursuant to this
sublease.
During 1997, NovaCare, Inc. paid the Company $526,000 for EAP and managed
mental health services provided by the Company pursuant to a contract between
the Company and NovaCare, Inc.
During 1996, NovaCare, Inc. paid the Company $460,000 for EAP and managed
mental health services provided by the Company pursuant to a contract between
the Company and NovaCare, Inc.
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
The stockholders (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge of the
Board of Directors of the Company, owned beneficially more than five percent of
the Company's one class of outstanding voting securities as of June 24, 1998,
each
10
<PAGE> 13
director and each executive officer named in the Summary Compensation Table of
the Company and all directors and officers of the Company as a group, and their
respective shareholdings as of such date (according to information furnished by
them to the Company), are set forth in the following table. Except as indicated
in the footnotes to the table, all of such shares are owned with sole voting and
investment power.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED
NAME AND ADDRESS BENEFICIALLY PERCENT OF CLASS
- ---------------- ---------------- ----------------
<S> <C> <C>
Abbingdon Venture Partners.................................. 3,067,650(1) 29.5%
Limited Partnership
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Abbingdon Venture Partners.................................. 1,021,550(2) 10.0
Limited Partnership-II
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
John H. Foster.............................................. 4,137,974(3) 39.4
Foster Management Company
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Lawrence M. Davies.......................................... 120,568(4) 1.2
Apogee, Inc.
1060 First Avenue
King of Prussia, Pennsylvania 19406
Timothy E. Foster........................................... 4,119,421(5) 39.2
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Harvey V. Fineberg, M.D. ................................... 7,000 *
Harvard School of Public Health
677 Huntington Avenue
Boston, Massachusetts 02115
Irwin Lehrhoff, Ph.D. ...................................... 196,500(6) 1.9
Irwin Lehrhoff & Associates
13946 Ventura Boulevard
Sherman Oaks, California 91423
R. Bruce Mosbacher.......................................... 5,000(7) *
Mosbacher & Associates
2200 Sand Hill Road
Suite 150
Menlo Park, California 94025
Shawkat Raslan.............................................. 10,000 *
International Resources Holdings, Inc.
16th Floor
770 Lexington Avenue
New York, New York 10021
Stanley F. Szczygiel........................................ 18,738(8) *
Apogee, Inc.
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Massoud G. Hampton, Ph.D. .................................. 22,800(9) *
Apogee, Inc.
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Mark D. Gibson.............................................. 3,500(10) *
Apogee, Inc.
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED
NAME AND ADDRESS BENEFICIALLY PERCENT OF CLASS
- ---------------- ---------------- ----------------
<S> <C> <C>
Wellington Management Company, LLP.......................... 664,000 6.6
75 State Street
Boston, Massachusetts 02109
Wellington Trust Company, LLP............................... 664,000 6.6
75 State Street
Boston, Massachusetts 02109
Directors and officers as a group (10 persons).............. 4,552,301(3)(5) 43.2
(6)(7)
(11)
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Includes 300,000 shares of Common Stock presently issuable upon the
exercise of warrants.
(2) Includes 100,000 shares of Common Stock presently issuable upon the
exercise of warrants.
(3) Includes 3,689,200 shares of Common Stock owned by Abbingdon and
Abbingdon-II, limited partnerships, of each of which Mr. John H. Foster is
a general partner through intermediate general partnerships. Also includes
400,000 shares of Common Stock presently issuable upon the exercise of
warrants owned by Abbingdon and Abbingdon-II. Also includes 16,800 shares
of Common Stock owned by the Trust u/w Virginia C. Foster, of which Mr.
John H. Foster is a trustee.
(4) Includes 8,000 shares of Common Stock presently issuable upon the exercise
of options.
(5) Includes 3,689,200 shares of Common Stock owned by Abbingdon and
Abbingdon-II, of each of which Mr. Timothy E. Foster is a general partner
through intermediate general partnerships. Also includes 400,000 shares of
Common Stock presently issuable upon the exercise of warrants owned by
Abbingdon and Abbingdon-II.
(6) Includes 176,000 shares of Common Stock owned by Irwin Lehrhoff Trust No.
1, of which Dr. Lehrhoff is a trustee and a beneficiary. Does not include
500 shares of Common Stock owned by Dr. Lehrhoff's spouse, of which shares
of Common Stock Dr. Lehrhoff disclaims beneficial ownership.
(7) Represents shares of Common Stock owned by the Mosbacher/Ditz Living Trust,
of which Mr. Mosbacher is the trustee and a beneficiary.
(8) Includes 7,800 shares of Common Stock presently issuable upon the exercise
of options.
(9) Includes 7,800 shares of Common Stock presently issuable upon the exercise
of options.
(10) Represents 3,500 shares of Common Stock presently issuable upon the
exercise of options.
(11) Includes 27,100 shares of Common Stock presently issuable upon the exercise
of options.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of Common Stock. Officers, directors and greater than
ten percent stockholders are required by the Commission regulations to furnish
the Company with copies of all Section 16(a) reports filed.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended December 31, 1997 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with, except that each of John H.
Foster, Abbingdon Venture Partners Limited Partnership ("Abbingdon"), and
Abbingdon Venture Partners Limited Partnership-II ("Abbingdon-II") failed to
make a timely filing of a statement on Form 4 regarding certain transactions.
Mr. Foster, Abbingdon and Abbingdon-II have subsequently each filed a Form 5
reporting their transactions.
12
<PAGE> 15
II. APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION CHANGING THE CORPORATE NAME
OF THE COMPANY FROM APOGEE, INC. TO INTEGRA, INC.
PROPOSED ACTION
On June 10, 1998, the Board of Directors recommended and adopted a
resolution to amend Article FIRST of the Company's Certificate of Incorporation
to change the corporate name of the Company from Apogee, Inc. to Integra, Inc.,
and directed that the resolution be submitted to the Company's stockholders at
the Annual Meeting for their consideration and approval. The Board of Directors
has determined that changing the corporate name to Integra, Inc. is in the best
interests of the Company and the stockholders because the change will enable the
Company to (i) reflect its primary focus on managed behavioral healthcare and
(ii) to market itself and its subsidiaries under the Integra name which the
Board believes is a respected name that has market recognition in the Company's
geographic marketplace for quality managed behavioral healthcare services. In
order to change the corporate name of the Company, Article FIRST of the
Certificate of Incorporation of the Company must be amended. Therefore, upon
stockholder approval of the Name Change Proposal, a Certificate of Amendment
will be filed with the Secretary of the State of Delaware at which time the
amendment to the Certificate of Incorporation shall be effective.
The proposal resolution is as follows:
RESOLVED, that, Article FIRST of the Company's Certificate of
Incorporation be amended to read in its entirety as follows: "FIRST: The
name of the corporation is Integra, Inc. (the "Corporation")."
RECOMMENDATION AND VOTE
Approval of the Name Change Proposal requires the affirmative vote of a
majority of the holders of the issued and outstanding shares of Common Stock of
the Company.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE NAME CHANGE
PROPOSAL.
III. RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP to
serve as independent accountants for the Company for 1998. Such firm has
examined the financial statements of the Company since its inception. The Board
of Directors considers Price Waterhouse LLP to be eminently qualified. Note that
effective July 1, 1998, Price Waterhouse LLP will be merging with Coopers &
Lybrand LLP and the combined firm will be named Price Waterhouse Coopers LLP.
Although it is not required to do so, the Board of Directors is submitting
its selection of the Company's accountants for ratification at the Meeting in
order to ascertain the views of stockholders regarding such selection. If the
selection is not ratified, the Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP TO EXAMINE THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY AND ITS SUBSIDIARIES FOR 1998. It is the intention of
the persons named in the accompanying form of Proxy to vote the shares
represented thereby in favor of such ratification unless otherwise instructed in
such Proxy.
A representative of Price Waterhouse LLP will be present at the Meeting
with the opportunity to make a statement if such representative desires to do
so, and will be available to respond to appropriate questions.
13
<PAGE> 16
IV. OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
which may be brought before the Meeting. However, if any such other matters are
properly presented for action, it is the intention of the persons named in the
enclosed Proxy to vote the shares represented thereby in accordance with their
judgment on such matters.
V. MISCELLANEOUS
All costs relating to the solicitation of Proxies will be borne by the
Company. Proxies may be solicited by officers, directors and regular employees
of the Company and its subsidiaries personally, by mail or by telephone or
telegraph, and the Company may pay brokers and other persons holding shares of
stock in their names or those of their nominees for their reasonable expenses in
sending soliciting material to their principals.
It is important that Proxies be returned promptly. Stockholders who do not
expect to attend the Meeting in person are urged to mark, sign and date the
accompanying Proxy and mail it in the enclosed return envelope, which requires
no postage if mailed in the United States, so that their votes can be recorded.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders of the Company must be received by the Company by March 2, 1999
in order to be considered for inclusion in the Company's Proxy Statement
relating to such meeting.
June 29, 1998
14
<PAGE> 17
APOGEE, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- JULY 15, 1998
COMMON STOCK
The undersigned, a stockholder of APOGEE, INC., does hereby appoint JOHN H.
FOSTER and LAWRENCE M. DAVIES, or either of them, with full power of
substitution, his proxies, to appear and vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on Wednesday, July 15, 1998 at 9:00 A.M., local time, or
at any adjournments thereof, upon such matters as may properly come before the
Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their substitutes to vote
as specified below on each of the following matters and in accordance with their
judgment on any other matters which may properly come before the Meeting.
(Continued and to be Signed on Reverse Side.)
SEE REVERSE SIDE
<PAGE> 18
[X] PLEASE MARK YOUR VOTES AS THIS EXAMPLE.
<TABLE>
<S> <C> <C>
1. Election of Directors.
[ ] FOR all the nominees listed [ ] WITHHOLD AUTHORITY to vote for all the nominees listed
(except as marked to the contrary below)
</TABLE>
NOMINEES: John H. Foster, Lawrence M. Davies, Timothy E. Foster, Harvey V.
Fineberg, M.D., Irwin Lehrhoff, Ph.D., R. Bruce Mosbacher and Shawkat
Raslan
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
2. Approval of an amendment to the Company's Certificate of Incorporation
changing the corporate name of the Company from Apogee, Inc. to Integra, Inc.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
3. Ratification of appointment of Price Waterhouse LLP as independent
accountants for 1998.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH ITEM.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO EITHER OF ITEMS 1 OR 2, THEY WILL BE VOTED IN FAVOR OF THE
ITEM(S) FOR WHICH NO DIRECTION IS INDICATED.
IMPORTANT: Before returning this
Proxy, please sign your name or
names on the line(s) below
exactly as shown hereon.
Executors, administrators,
trustees, guardians or corporate
officers should indicate their
full titles when signing. Where
shares are registered in the
name of joint tenants or
trustees, each joint tenant or
trustee should sign.
--------------------------------(L.S.)
Dated
- --------------- , 1998
--------------------------------(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
