<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 Statement / / 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 Section 240.14a-11(c) or
Section 240.14a-12
Coram Healthcare Corporation
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to 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
CORAM HEALTHCARE CORPORATION
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
Donald J. Amaral
Chief Executive Officer and President
May 9, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Coram Healthcare Corporation (the "Company"), which will be held on Monday,
June 24, 1996 at 12:00 p.m. local time, at The Westin Hotel, 1672 Lawrence
Street, Denver, Colorado. In addition to the matters to be acted upon at the
meeting, which are described in detail in the attached Notice of Annual Meeting
of Stockholders and Proxy Statement, there will be a report to the stockholders
on the operations of the Company. I hope that you will be able to attend.
Whether or not you plan to be at the meeting, please be sure to complete,
date, sign and return the proxy card enclosed with this letter and the
accompanying Proxy Statement as promptly as possible so that your shares may be
voted in accordance with your wishes. Your vote, whether given by proxy or in
person at the meeting, will be held in confidence by the Inspector of Election
for the meeting.
Sincerely,
DONALD J. AMARAL
Chief Executive Officer and
President
<PAGE> 3
CORAM HEALTHCARE CORPORATION
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1996
To the Stockholders of Coram Healthcare Corporation:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of
Coram Healthcare Corporation, a Delaware corporation ("Coram" or the "Company"),
will be held on Monday, June 24, 1996, at 12:00 p.m. local time, at The Westin
Hotel, 1672 Lawrence Street, Denver, Colorado (the "Meeting"), for the following
purposes:
(1) To elect seven directors to serve until the 1997 Annual Meeting of
Stockholders and until their successors are duly elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP, as the independent
auditors of the Company for the Company's 1996 fiscal year; and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
These matters are more fully described in the accompanying Proxy Statement.
The Board of Directors of the Company has fixed the close of business on April
26, 1996 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Meeting. Only holders of
the Company's common stock, $.001 par value per share, at the close of business
on the Record Date are entitled to notice of, and to vote at, the Meeting. A
complete list of stockholders entitled to vote at the Meeting will be available
for examination during normal business hours by any stockholder, for purposes
related to the Meeting, for a period of ten days prior to the Meeting, at the
Company's corporate offices located at 1125 Seventeenth Street, Suite 1500,
Denver, Colorado 80202.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting in person, please complete, date and sign the accompanying
proxy card and return it promptly in the enclosed envelope to ensure that your
shares are represented and voted in accordance with your wishes. If you choose,
you may still vote in person at the Meeting even though you previously submitted
your proxy. You may revoke your proxy by following the procedures set forth in
the accompanying Proxy Statement.
By order of the Board of Directors
Richard M. Smith, Secretary
Denver, Colorado
May 9, 1996
<PAGE> 4
CORAM HEALTHCARE CORPORATION
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
---------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1996
---------------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors (the "Board of Directors") of Coram Healthcare Corporation, a Delaware
corporation ("Coram" or the "Company"), to be used at the 1996 Annual Meeting of
Stockholders of the Company to be held on Monday, June 24, 1996, at 12:00 p.m.,
local time, at the Westin Hotel, 1672 Lawrence Street, Denver, Colorado and at
any adjournment or postponement thereof (the "Meeting"). This Proxy Statement
and the accompanying proxy card are first being mailed to the holders of the
Company's common stock, $.001 par value per share (the "Common Stock"), on or
about May 9, 1996. The Company's Annual Report to Stockholders, which includes
financial statements for the fiscal year ended December 31, 1995, is being
concurrently mailed or delivered with this Proxy Statement to stockholders
entitled to vote at the Meeting.
Stockholders of the Company represented at the Meeting will consider and
vote upon (i) the election of seven directors to serve until the 1997 Annual
Meeting of Stockholders of the Company and until their successors are duly
elected and qualified, (ii) the ratification of the appointment of Ernst & Young
LLP, as the Company's independent auditors for the year ending December 31, 1996
and (iii) such other business as may properly come before the Meeting. The
Company is not aware of any other business to be presented for consideration at
the Meeting.
VOTING AND SOLICITATION OF PROXIES
The enclosed proxy provides that each stockholder may specify that his or
her shares be voted "FOR" the election of the named nominees to the Board of
Directors with provision to "WITHHOLD AUTHORITY" as to all nominees or any
individual nominee or nominees; and voted "FOR," "AGAINST" or "ABSTAIN" from
voting with respect to the ratification of the appointment of Ernst & Young LLP
as the Company's independent auditors for the year ending December 31, 1996. In
accordance with Delaware law, broker non-votes will not be counted and will be
treated as not present for purposes of calculating the vote on a proposal for
which no specification is made in the proxy. Abstentions will be counted in
tabulations of the votes cast on proposals presented to stockholders. Execution
of a proxy given in response to this solicitation will not affect a
stockholder's right to attend the meeting and to vote in person. Presence at the
meeting of a stockholder who has signed a proxy does not alone revoke a proxy.
Any proxy may be revoked by any stockholder who attends the Meeting and gives
oral notice of his or her intention to vote in person without compliance with
any other formalities. Any stockholder who executes and returns a proxy may
revoke it by executing a subsequent proxy or by giving written notice of
revocation to the Secretary of the Company at any time before it is voted at the
meeting. The persons named in the proxies will have discretionary authority to
vote all proxies with respect to additional matters that are properly presented
for action at the Meeting.
The Company has fixed the close of business on April 26, 1996 as the record
date for determining the holders of its Common Stock who will be entitled to
notice of and to vote at the meeting. On that date, the Company had issued and
outstanding 40,796,074 shares of its Common Stock which are the only outstanding
shares of capital stock of the Company having general voting rights. Holders of
the Company's Common Stock are entitled to one vote for each share owned of
record. Shares representing a majority of the votes
<PAGE> 5
entitled to be cast by the holders of the outstanding shares of Common Stock
must be represented in person or by proxy at the Meeting in order for a quorum
to be present.
Solicitation of proxies for use at the Meeting may be made in person or by
mail, telephone or telegram, by directors, officers and employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. The Company will request banks and brokers to solicit
their customers who beneficially own shares listed of record in names of
nominees, and will reimburse those banks and brokers for their reasonable
out-of-pocket expenses in connection with such solicitation. The Company will
bear the entire cost of preparing, assembling, printing and mailing this Proxy
Statement and the enclosed proxy card, and of soliciting proxies (including,
without limitation, costs, if any, related to advertising, printing, fees of
attorneys, financial advisors, proxy solicitors, accountants, public relations,
transportation, litigation and other costs relating to the solicitation).
The First National Bank of Boston ("Bank of Boston"), the transfer agent
and registrar for the Common Stock, has been appointed by the Board of Directors
to serve as Inspector of Election at the Meeting. All proxies and ballots
delivered to Bank of Boston shall be kept confidential by Bank of Boston.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors are to be elected and qualified at the Meeting. In the
absence of written instructions to the contrary, proxies representing shares of
Common Stock will be voted FOR the election of each of the persons listed below
as directors of Coram for a term commencing on the date of the Meeting and
continuing until the 1997 Annual Meeting of Stockholders and until their
successors have been duly elected and qualified. In the event that any nominee
for director should become unavailable or declines to serve, it is intended that
votes will be cast, pursuant to the enclosed proxy, FOR an additional nominee
designated by the Nominating Committee. As of the date of this Proxy Statement,
the Board of Directors has no knowledge that any of the persons named will be
unavailable or will decline to serve. None of the nominees has any family
relationship among themselves or with any executive officer of Coram.
THE CORAM BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF ALL NOMINEES FOR DIRECTOR IDENTIFIED BELOW TO SERVE UNTIL
THE 1997 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
2
<PAGE> 6
INFORMATION CONCERNING NOMINEES TO THE BOARD OF DIRECTORS
Information is set forth below concerning the nominees for election as
directors of Coram. All of the nominees for election as directors at the Meeting
are incumbent directors of Coram. Each nominee has furnished information as to
his beneficial ownership of Common Stock as of April 26, 1996, and, if not
employed by Coram, the nominee's principal occupation. Each nominee has
consented to being named in this Proxy Statement as a nominee for director of
Coram and has agreed to serve as a director of Coram if elected. Except as
provided below, none of the nominees for director entered into any arrangement
or understanding pursuant to which such person was to be selected as a director
or nominee for director.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH CORAM SINCE
-------------------------------- --- -------------------------- --------
<S> <C> <C> <C>
James M. Sweeney................ 53 Chairman 1994
Donald J. Amaral................ 43 Director, Chief Executive 1995
Officer and President
Richard A. Fink................. 41 Director 1994
Andrew J. Nathanson............. 38 Director 1995
Stephen G. Pagliuca............. 40 Director 1994
L. Peter Smith.................. 47 Director 1994
Dr. Gail R. Wilensky............ 52 Director 1994
</TABLE>
Mr. Sweeney has served as the Chairman of the Board of Directors of Coram
since July 1994. Mr. Sweeney also served as Chief Executive Officer of Coram
from July 1994 until October 13, 1995, and as President from August 3, 1995
through October 13, 1995. Prior to joining Coram, Mr. Sweeney was the Chairman
and Chief Executive Officer of McGaw, Inc., and served as a member on the Board
of Directors of McGaw, Inc. from October 1990 until he resigned effective
February 7, 1994. From February 1988 to October 1990, Mr. Sweeney was the
Chairman and Chief Executive Officer of CarePartners, Inc., a provider of
patient monitoring services and home therapies. Mr. Sweeney was the founder of
Caremark, Inc., formerly the largest home infusion therapy company in the United
States, and served as its Chairman and Chief Executive Officer from June 1979 to
February 1988.
Mr. Amaral has served as director, President and Chief Executive Officer of
the Company since October 13, 1995. Previously, he was President and Chief
Operating Officer of OrNda Healthcorp ("OrNda") from April 1994 to August 1995,
and served in various executive positions with Summit Health Ltd. ("Summit")
from October 1989 to April 1994, including President and Chief Executive Officer
between October 1991 and April 1994. Summit was merged into OrNda in April 1994.
Prior to joining Summit, Mr. Amaral was President and Chief Operating Officer of
The Mediplex Group, Inc., a health care subsidiary of Avon Products, Inc., from
1986 until October 1989. Mr. Amaral is also a member of the Board of Directors
of Summit Care Corporation.
Mr. Fink has served as a director of Coram since July 1994. Mr. Fink has
been a partner of the law firm of Brobeck, Phleger & Harrison LLP since October
1987 and is currently Chairman of that firm's Business & Technology Group.
Mr. Nathanson has served as a director of Coram since November 1995. Mr.
Nathanson was appointed to the Board of Directors pursuant to the terms of the
Securities Purchase Agreement dated as of April 6, 1995, as amended (the
"Purchase Agreement"), by and among Coram, Coram, Inc., a wholly-owned
subsidiary of Coram, and Coram Funding, Inc., an affiliate of Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ") pursuant to which an affiliate of DLJ
provided a $150 million bridge loan to Coram. See "Certain Relationships and
Related Transactions." Mr. Nathanson has been a Managing Director of DLJ since
January 1991 and served as Senior Vice President of DLJ between January 1990 and
January 1991. Mr. Nathanson has also served as a director of Specialty Foods
Corporation, a diversified food producer and distributor, since August 1993.
3
<PAGE> 7
Mr. Pagliuca has served as a director of Coram since July 1994. Mr.
Pagliuca founded Information Partners, a venture capital and management buyout
company based in Boston, Massachusetts, in 1989 and has been Managing Director
since that time, focusing on health care and information industry private-equity
investment opportunities. Prior to 1989, Mr. Pagliuca was a partner at Bain &
Company, a management consulting firm based in Boston, Massachusetts, where he
concentrated on the health care and information industries.
L. Peter Smith has served as a director of Coram since July 1994. Between
November 1993 and July 1994, Mr. Smith was a director of Medisys, Inc.
("Medisys"). Mr. Smith served as the Managing Partner of AllCare Health
Services, Inc., which was acquired by Medisys in December of 1992. Mr. Smith is
also President and serves on the Board of Directors of Ralin Medical, Inc.
("Ralin"), a company specializing in cardiac disease management. Prior to
joining Ralin in 1990, Mr. Smith served in various capacities with Baxter
Healthcare. From 1984 through 1989 he was president of the home infusion therapy
division of Baxter Healthcare. Mr. Smith also serves on the Board of Directors
of Sabratek, Inc. and AMSYS, Inc.
Dr. Wilensky has served as a director of Coram since November 1994. Since
January 1993, Dr. Wilensky has served as the John M. Olin Senior Fellow at
Project HOPE and since May 1995 has served as chair of the Physician Payment
Review Commission. From March 1992 to January 1993, Dr. Wilensky served in the
Bush Administration as Deputy Assistant to the President for Policy Development,
responsible for advising the President on health and welfare issues. From
January 1990 to March 1992, Dr. Wilensky served in the Department of Health and
Human Services, where she directed the Medicare and Medicaid programs. From
April 1983 to January 1990, Dr. Wilensky was Vice President, Division of Health
Affairs at Project HOPE. Dr. Wilensky is an elected member of the Institute of
Medicine of the National Academy of Sciences. She has also served as a member of
the Physician Payment Review Commission and the Health Advisory Committee of the
General Accounting Office. Dr. Wilensky also serves as a Director of United
HealthCare Corporation, Syncor International Corporation, Advanced Tissue
Sciences, Inc., Capstone Pharmacy Services, Inc. and Saint Jude Medical, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
The Coram Board of Directors met 11 times during the fiscal year ended
December 31, 1995. Each director attended at least 75% of the aggregate of (i)
the total number of meetings of the Coram Board of Directors held subsequent to
the date of their election or appointment to the Board and (ii) the total number
of meetings held by all committees of the Board of Directors on which such
director served.
The Board of Directors has established an Audit Committee, a Compensation
Committee, a Nominating Committee and a Compliance and Quality Assurance
Committee. Coram does not have an executive or similar committee. The Board
generally acts in its entirety upon matters which might otherwise be the
responsibility of such a committee.
Coram Audit Committee. The Audit Committee consists of Messrs. Nathanson,
L. Peter Smith and Pagliuca, each a non-employee director of Coram. The Audit
Committee's principal functions are: (i) to recommend to the Board of Directors
the independent public accountants to be engaged by Coram and to arrange or
approve the details of their engagement, including the remuneration to be paid;
(ii) to review with the independent public accountants Coram's general policies
and procedures with respect to audits and accounting and financial controls, the
general accounting and reporting principles and practices applied in preparing
the financial statements and conducting financial audits of Coram, and to
recommend to management changes or improvements therein; and (iii) to perform
such other functions as the Board of Directors may from time to time elect. The
Audit Committee met once during the fiscal year ended December 31, 1995.
Coram Compensation Committee. The Compensation Committee consists of
Messrs. Fink and Pagliuca, each a non-employee director of Coram. The
Compensation Committee's principal functions are: (i) to
4
<PAGE> 8
recommend to the Coram Board of Directors the salaries and other terms of
employment for the senior executive officers of Coram and make recommendations
to the Coram Board of Directors with respect to proposals for new benefits,
incentive plans or programs and (ii) to administer the Company's 1994 Stock
Option/Stock Issuance Plan (the "Coram Option Plan") and grant stock options and
stock issuances thereunder to all eligible individuals, including members of the
executive and managerial group. The Compensation Committee took action by
written consent 11 times during the fiscal year ended December 31, 1995.
Coram Nominating Committee. The Board of Directors established a Nominating
Committee on April 13, 1996. The Nominating Committee consists of Messrs.
Amaral, Nathanson and Sweeney. The Nominating Committee's principal function is
to nominate persons for election to the Board of Directors at Coram's annual
stockholder meetings. The Nominating Committee will consider nominations made by
a stockholder provided that such stockholder complies with certain procedures
set forth in the Bylaws of the Company. Such stockholder nominations must be
made in writing to the Secretary of the Company in a timely fashion. To be
timely, notice must be delivered to or mailed and received at the principal
executive offices of the Company no less than 30 days nor more than 60 days
prior to the meeting to which such nomination relates; provided, however, that
if less than 40 days' notice or prior public disclosure of the meeting is given
or made to stockholders, to be timely, notice by the stockholder must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's written notice must set forth: (a) as to
each person whom the stockholder proposes to nominate, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
the Company which are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class and number of shares of the Company which are
beneficially owned by the stockholder. The Company may require any proposed
nominee to furnish such other information as may reasonably be required by the
Company to determine the eligibility of such proposed nominee to serve as a
director of the Company.
Coram Compliance and Quality Assurance Committee. The Compliance and
Quality Assurance Committee, established by the Board of Directors in February
1995, consists of Dr. Gail R. Wilensky and Richard A. Fink. The Compliance and
Quality Assurance Committee is responsible for overseeing and ensuring Coram's
compliance with applicable laws, regulations, and Coram's corporate code of
conduct, as well as providing oversight of Coram's corporate compliance program
as it relates to the conduct of its business to ensure that the highest
standards of business, professional, legal and personal ethics are being met by
Coram in the delivery of its services and products. The Compliance and Quality
Assurance Committee met once during the fiscal year ended December 31, 1995.
COMPLIANCE WITH SECTION 16
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Coram's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of Coram's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the New York Stock
Exchange. Based solely upon its review of copies of the Section 16 reports Coram
has received and written representations from certain reporting persons, Coram
believes that during its fiscal year ended December 31, 1995, all of its
directors, executive officers and greater than 10% beneficial owners were in
compliance with their filing requirements, with the exception that (i) the Form
5 for each of Coram's directors and executive officers was filed with the
Commission one day after its due date, (ii) the Form 3 filed by Mr. Amaral in
connection with his appointment as director, Chief Executive Officer and
President of Coram failed to disclose Mr. Amaral's ownership of 3,000 shares of
Coram Common Stock, and (iii) the Form 3 required to be filed by Mr. Nathanson
in connection with his appointment as a director of Coram was not filed with the
Commission within the required time frame.
5
<PAGE> 9
EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
executive officers of Coram. The executive officers serve at the pleasure of the
Board of Directors of Coram. Biographical information with respect to Donald J.
Amaral is set forth under the caption "Election of Directors" above.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH CORAM
- ------------------------------ --- ----------------------------------------------
<S> <C> <C>
Donald J. Amaral.............. 43 Director, Chief Executive Officer and
President
Richard M. Smith.............. 36 Chief Financial Officer and Secretary
John T. Gallatin.............. 45 Executive Vice President
Kelly J. McCrann.............. 40 Executive Vice President
Paul J. Quiner................ 36 Senior Vice President and General Counsel
Daniel L. Frank............... 39 Senior Vice President of Business Development
</TABLE>
Richard M. Smith has been the Chief Financial Officer of Coram since August
1995 and has been serving as Secretary since July 1995. Mr. Smith also served as
Vice President, Tax and Treasury, from October 1994 to August 1995. Between
November 1993 and October 1994, Mr. Smith served as Vice President, Finance and
Treasurer, and Assistant Secretary, for CoreSource, Inc., a health care company
specializing in third party claims administration, workers compensation and
integrated health delivery systems. Mr. Smith served as Assistant Treasurer from
July 1990 to November 1993 and Director of Taxes from July 1985 to July 1990 of
Lane Industries, Inc., a holding company engaged in the manufacture of office
products, hotel ownership and management, radio stations, farming and ranching.
Prior to July 1985, Mr. Smith served in various capacities with KPMG Peat
Marwick as tax accountant and tax manager.
Mr. Gallatin has been an Executive Vice President of Coram since August
1995. Between March 1995 and August 1995, Mr. Gallatin served as the President
of Coram Physician Services, Inc., a subsidiary of Coram, and between July 1994
and March 1995, Mr. Gallatin served as a Vice President of Coram. Between
October 1991 and July 1994, Mr. Gallatin served as Executive Vice President of
T2 Medical, Inc. ("T2"). Prior to October 1991, Mr. Gallatin served as the
Southeast Area Vice President of Caremark International, Inc. Before joining
Caremark International, Inc. in 1986, he served as the Vice President of Baxter
Healthcare's Alternate Site Group in the Southeast Area from 1985 to 1986,
served as the Director of National Accounts for Continue Care, Inc., the home
infusion division of American Hospital Supply, Inc. from 1984 to 1985, and held
various other sales and management positions with American Hospital Supply, Inc.
between 1977 and 1984.
Mr. McCrann has been an Executive Vice President of Coram since August
1995. Previously, Mr. McCrann served as President, Lithotripsy Division, of
Coram from July 1994 to August 1995. Between February 1994 and July 1994, Mr.
McCrann served as a consultant to T2. From 1990 through 1993, Mr. McCrann served
as Vice President of Strategy with Secomerica, Inc., a company involved in
alternate site infusion therapy, pediatric specialty care, ambulance services
and residential security, and its wholly-owned subsidiary, HMSS, Inc., a
regional provider of home infusion services. Prior to 1990, Mr. McCrann served
as Vice President of Strategy for American Medical International, Inc. and as a
consultant with McKinsey & Company, Inc.
Mr. Quiner has been Senior Vice President and General Counsel of Coram
since March 1996. Mr. Quiner also served as Assistant General Counsel from July
1994 to February 1996. Between September 1992 and July 1994, Mr. Quiner served
as Assistant General Counsel for T2. Previously, Mr. Quiner was a partner at the
law firm of Alston & Bird.
Mr. Frank has been Senior Vice President of Business Development since
March 1996. Previously, Mr. Frank served as an outside consultant to Coram from
October 1995 to March 1996. Between
6
<PAGE> 10
October 1993 and October 1995, Mr. Frank served as the Chief Executive Officer
for Western Medical Center, Orange County. Prior to October 1993, Mr. Frank
served as President of Summit Ambulatory Network ("Summit"), and Vice President
of Business Development for Summit, which was merged into OrNda in April 1994.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth as of April 17, 1996 the number of shares of
outstanding Common Stock beneficially owned by (i) each person known to Coram to
be the owner of more than 5% of the outstanding Common Stock, (ii) each of
Coram's nominees for director, (iii) each of the Chief Executive Officer and the
other executive officers as of December 31, 1995 and a former executive officer
during 1995 (the "Named Executive Officers"), (iv) the current executive
officers of the Company, and (v) all directors and executive officers of Coram
as a group. All information is taken from or based upon ownership filings made
by such persons with the Commission or upon information provided by such persons
to Coram.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON STOCK
BENEFICIAL OWNER(1) OF COMMON STOCK(2)(3) OUTSTANDING(2)
- ------------------------------------------------------ --------------------- --------------------
<S> <C> <C>
James M. Sweeney(4)................................... 2,500 *
Donald J. Amaral(5)................................... 3,000 *
Richard A. Fink(6).................................... 2,500 *
Andrew J. Nathanson................................... -0- *
Stephen G. Pagliuca(7)................................ 2,500 *
L. Peter Smith(8)..................................... 62,581 *
Dr. Gail R. Wilensky(9)............................... 2,500 *
Richard M. Smith(10).................................. 113,194 *
John T. Gallatin(11).................................. 239,916 *
Kelly J. McCrann(12).................................. 148,884 *
Patrick J. Fortune(13)................................ -0- *
Paul J. Quiner(14).................................... 20,106
Daniel L. Frank(15)................................... -0-
All executive officers, directors and nominees for
director, as a group (11 persons)................... 597,681 1.5%
American Express Company
American Express Financial Corporation IDS Life
Capital Resource Fund(16)........................... 3,975,000 9.7%
Putnam Investments, Inc.
Marsh & McLennan Companies, Inc.
Putnam Investment Management, Inc.
The Putnam Advisory Company, Inc.(17)............... 2,511,400 6.2%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person named above is 1125
Seventeenth Street, Suite 1500, Denver, Colorado 80202. Beneficial
ownership information has been provided for the holdings of Mr. Quiner and
Mr. Frank, in addition to the disclosure required for the Directors and
Named Executive Officers.
(2) Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days are deemed outstanding for
computing the percentage of the person holding such options or warrants but
are not deemed outstanding for computing the percentage of any other
person. Except as indicated by footnote, Coram understands that the persons
named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
7
<PAGE> 11
No percent of class is shown for holdings of less than 1%. Percentage
computations are based on 40,796,074 shares of Common Stock outstanding as
of April 26, 1996.
(3) On December 28, 1995, Mr. Sweeney and the other members of the Board of
Directors returned stock options held by them for an aggregate of 3.9
million shares. Mr. Sweeney returned 3.5 million stock options and Mr.
Carter returned 100,000 stock options. Mr. Fink, Mr. Pagliuca, L. Peter
Smith and Dr. Wilensky each returned 75,000 stock options. (Mr. Carter is
not a nominee in the current proxy statement.)
(4) Consists of 2,500 shares subject to an option granted to Mr. Sweeney on
December 11, 1995 pursuant to the Automatic Option Grant Program of the
Coram Option Plan. The option is immediately exercisable, but any shares
purchased thereunder will be subject to repurchase by Coram at the original
exercise price paid per share upon Mr. Sweeney's cessation of services
prior to the vesting of such shares. The optionee will vest in the option
shares in a series of equal monthly installments over twelve (12) months of
Board service measured from the automatic option grant date.
(5) Mr. Amaral, who is also a director of the Company, assumed the duties of
Chief Executive Officer and President from Mr. Sweeney on October 13, 1995.
Does not include 2,200,000 shares subject to an option granted to Mr.
Amaral on October 13, 1995. The option shares will vest and become
exercisable in three successive equal installments, upon his completion of
each year of service over the three-year period measured from the grant
date. An option for the purchase of 1,400,000 shares was granted under the
Coram Option Plan, and an option for the purchase of the remaining 800,000
shares was granted outside of the Coram Option Plan.
(6) Consists of 2,500 shares subject to an option granted to Mr. Fink on
December 11, 1995 pursuant to the Automatic Option Grant Program of the
Coram Option Plan. The option is immediately exercisable, but any shares
purchased thereunder will be subject to repurchase by Coram at the original
exercise price paid per share upon Mr. Fink's cessation of services prior
to the vesting of such shares. The optionee will vest in the option shares
in a series of equal monthly installments over twelve (12) months of Board
service measured from the automatic option grant date.
(7) Consists of 2,500 shares subject to an option granted to Mr. Pagliuca on
December 11, 1995 pursuant to the Automatic Option Grant Program of the
Coram Option Plan. The option is immediately exercisable, but any shares
purchased thereunder will be subject to repurchase by Coram at the original
exercise price paid per share upon Mr. Pagliuca's cessation of services
prior to the vesting of such shares. The optionee will vest in the option
shares in a series of equal monthly installments over twelve (12) months of
Board service measured from the automatic option grant date.
(8) Includes 2,500 shares subject to an option granted to L. Peter Smith on
December 11, 1995 pursuant to the Automatic Option Grant Program of the
Coram Option Plan. The option is immediately exercisable, but any shares
purchased thereunder will be subject to repurchase by Coram at the original
exercise price paid per share upon Mr. Smith's cessation of services prior
to the vesting of such shares. The optionee will vest in the option shares
in a series of equal monthly installments over twelve (12) months of Board
service measured from the automatic option grant date.
(9) Consists of 2,500 shares subject to an option granted to Dr. Wilensky on
December 11, 1995 pursuant to the Automatic Option Grant Program of the
Coram Option Plan. The option is immediately exercisable, but any shares
purchased thereunder will be subject to repurchase by Coram at the original
exercise price paid per share upon Dr. Wilensky's cessation of services
prior to the vesting of such shares. The optionee will vest in the option
shares in a series of equal monthly installments over twelve (12) months of
Board service measured from the automatic option grant date.
(10) Richard M. Smith assumed the duties of Chief Financial Officer on August
30, 1995. Includes 100,000 shares subject to an option granted to Mr. Smith
on September 7, 1995, which option is immediately exercisable for
fully-vested shares. Also includes 13,194 shares vested and exercisable
before June 16, 1996, pursuant to an option to purchase 25,000 shares
granted to Mr. Smith on November 1, 1994, but does not include the balance
of 11,806 option shares, which will become exercisable and vested in
successive equal monthly installments upon his completion of each
additional month of service with
8
<PAGE> 12
Coram after June 30, 1996. Does not include 200,000 shares subject to an
option granted to Mr. Smith on December 28, 1995. Twenty-five percent of
such option shares will vest and become exercisable on December 28, 1996
and the remaining 75% of such option shares will vest and become
exercisable in successive equal monthly installments upon his completion of
each additional month of service with Coram over the thirty-six (36) months
after December 28, 1996.
(11) Mr. Gallatin became an executive officer of the Company on August 3, 1995.
Includes 100,000 shares subject to an option granted to Mr. Gallatin on
September 7, 1995, which option is immediately exercisable for fully-vested
shares. Also includes (i) options to purchase 84,891 shares of Coram Common
Stock that were previously granted to him by T(2) and were assumed by
Coram, (ii) 2,247 shares credited to Mr. Gallatin's account under the Coram
Healthcare Corp. 401(k) Plan and (iii) 52,778 shares vested and exercisable
before June 16, 1996 pursuant to an option to purchase 100,000 shares
granted to Mr. Gallatin on November 1, 1994, but does not include the
balance of 47,222 option shares, which will become exercisable and vest in
a series of successive equal monthly installments upon his completion of
each additional month of service with Coram after June 30, 1995. Does not
include 200,000 shares subject to an option granted to Mr. Gallatin on
December 28, 1995. Twenty-five percent of such option shares will vest and
become exercisable on December 28, 1996 and the remaining 75% of such
option shares will vest and become exercisable in successive equal monthly
installments upon his completion of each additional month of service with
Coram over the thirty-six (36) months after December 28, 1996.
(12) Mr. McCrann became an executive officer of the Company on August 3, 1995.
Includes 100,000 shares subject to an option granted to Mr. McCrann on
September 7, 1995, which option is immediately exercisable for fully-vested
shares, as well as 967 shares credited to Mr. McCrann's account under the
Coram Healthcare Corp. 401(k) Plan. Also includes 100,000 shares subject to
an option granted to Mr. McCrann on July 28, 1994, which option is
immediately exercisable but any option shares purchased thereunder will be
subject to repurchase by Coram at the original exercise price paid per
share upon Mr. McCrann's cessation of service prior to the vesting of such
shares. Mr. McCrann vested as to 25,000 of the option shares on July 7,
1995 and will vest as to the balance of the option shares in a series of
successive equal monthly installments upon his completion of each
additional month of service with Coram over the next thirty-six (36) months
thereafter. As of June 16, 1996, included 22,917 shares vested and
exercisable pursuant to the remaining 75,000 option shares granted on July
28, 1994, but does not include the balance of 52,083 option shares. Does
not include 50,000 shares subject to an option granted to Mr. McCrann on
December 28, 1995. Twenty-five percent of such option shares will vest and
become exercisable on December 28, 1996 and the remaining 75% of such
option shares will vest and become exercisable in successive equal monthly
installments upon his completion of each additional month of service with
Coram over the thirty-six (36) months after December 28, 1996.
(13) Mr. Fortune resigned on August 3, 1995.
(14) Mr. Quiner became an executive officer of the Company on March 1, 1996.
Includes options to purchase 12,600 shares of Coram Common Stock that were
previously granted to him by T(2) and were assumed by Coram, as well as
1,256 shares credited to Mr. Quiner's account under the Coram Healthcare
Corp. 401(k) Plan. Also includes 6,250 shares vested and exercisable before
June 16, 1996, pursuant to an option to purchase 25,000 shares granted to
Mr. Quiner on September 7, 1995, but does not include the balance of 18,750
option shares which will become exercisable and vested in successive equal
monthly installments upon his completion of each additional month of
service with Coram after June 30, 1996. Does not include 25,000 shares
subject to options granted to Mr. Quiner on December 28, 1995 and 25,000
shares subject to options granted to Mr. Quiner on March 19, 1996.
Twenty-five percent of the option shares in each of such grants will vest
and become exercisable on December 28, 1996 and March 19, 1997,
respectively. The remaining 75% of the option shares in each of such grants
will vest and become exercisable in successive equal monthly installments
upon his completion of each additional month of service with Coram over the
thirty-six (36) months after December 28, 1996 and March 19, 1997,
respectively.
9
<PAGE> 13
(15) Does not include 200,000 shares subject to an option granted to Mr. Frank
on March 4, 1996. Twenty-five percent of such option shares will vest and
become exercisable on March 4, 1997 and the remaining 75% of such option
shares will vest and become exercisable in successive equal monthly
installments upon his completion of each additional month of services with
Coram over the thirty six (36) months after March 4, 1997.
(16) American Express Company ("Amex"), American Express Financial Corporation
("AmexFC") and IDS Life Capital Resource Fund ("IDS") report shared
dispositive power with respect to the 3,975,000 shares of Common Stock
reported above. IDS reports sole voting power with respect to such shares.
The information with respect to Amex, AmexFC and IDS is as of December 31,
1995. The address of Amex is American Express Tower, World Financial
Center, New York, NY 10285. The address of AmexFC and IDS is IDS Tower 10,
Minneapolis, MN 55440.
(17) Marsh & McLennan Companies, Inc. ("MMC"), Putnam Investment Management,
Inc. ("PIM"), The Putnam Advisory Company, Inc. ("PAC") and Putnam
Investments, Inc. ("PI") have jointly filed a Schedule 13G with respect to
Coram. MMC reports no beneficial ownership of Common Stock. PI reports
beneficial ownership of all 2,511,400 shares, including shared power to
vote all such shares and shared power to dispose of 171,900 such shares.
PIM reports beneficial ownership of 2,217,800 of such shares based on its
shared power to vote such shares and no power to vote any shares. PAC
reports beneficial ownership of 293,600 of such shares based on its shared
power to dispose of such 293,600 shares and its shared power to vote
171,900 of such shares. The information with respect to MMC, PI, PAC and
PIM is as of July 7, 1995. The address of MMC is 1166 Avenue of the
Americas, New York, NY 10036. The address of PI, PIM and PAC is One Post
Office Square, Boston, Massachusetts 02109.
There is no arrangement known to the Company, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent
date result in a change in control of the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Fees for Board Service. Directors who are employees of Coram receive no
additional compensation for service on the Board of Directors. Non-employee
directors of Coram receive no compensation for each Board meeting attended
during fiscal 1995; however, all out-of-pocket expenses of directors related to
meetings attended are reimbursed by Coram.
Outside Directors' Automatic Option Grant Program. Non-employee members of
the Board of Directors participate in the Automatic Option Grant Program in
effect under the Coram Option Plan. On the date of each Annual Meeting of
Stockholders, each individual who will continue to serve as a non-employee Board
member will receive a non-statutory stock option to purchase 2,500 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the automatic option grant date. Each individual who served as a
non-employee Board member on December 11, 1995 received an automatic option
grant under the program for 2,500 shares of Coram Common Stock at an exercise
price of $4.875 per share, the fair market value on such date, with the
exception of Mr. Nathanson. Each option will be immediately exercisable for all
of the option shares. However, any shares purchased under the option will be
subject to repurchase by Coram at the original exercise price paid per share
upon the optionee's cessation of Board service prior to vesting in such shares.
The optionee will vest in the option shares in a series of equal monthly
installments over twelve (12) months of Board service measured from the
automatic option grant date.
The shares subject to each automatic option grant under the Coram Option
Plan will vest in full upon (i) the optionee's cessation of Board service due to
death or disability, (ii) an acquisition of Coram by merger or asset sale or
(iii) a change in control of Coram.
Each automatic option granted to the non-employee Board members includes a
limited stock appreciation right which will allow the optionee, upon the
successful completion of a hostile tender offer for more than 50% of Coram's
outstanding securities, to surrender that option to Coram, in return for a cash
distribution in an amount per surrendered option share equal to the highest
price per share of Coram Common Stock paid in the tender offer less the exercise
price payable per share.
10
<PAGE> 14
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation earned
by the Named Executive Officers for services rendered in all capacities to the
Company and its subsidiaries for the year ended December 31, 1995. Information
with respect to fiscal years prior to the year ended December 31, 1994 is not
provided because Coram was not a reporting company pursuant to Section 13(a) or
15(d) of the Exchange Act at any time prior to July 8, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS
------------------------------------- -------------
NAME AND OTHER ANNUAL STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION (#) COMPENSATION
- ------------------------------ ---- -------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald J. Amaral
Director, Chief Executive 1995 $120,834(2) -- -- 2,200,000 --
Officer and President
James M. Sweeney 1995 80,513 -- -- 502,500(3)
Chairman and Former 1994 -- -- -- 3,000,000(3) $3,596,920(4)
Chief Executive Officer
Richard M. Smith 1995 145,178(5) $156,250 -- 300,000 --
Chief Financial Officer
John T. Gallatin 1995 208,333(7) 200,000 -- 300,000 --
Executive Vice President
Kelly J. McCrann(8) 1995 225,088 48,750 $139,780(6) 150,000 --
Executive Vice President
Patrick J. Fortune(9) 1995 228,397 100,000 141,795(9) 50,000(9) --
Former President and 1994 161,760 87,000 171,130(6) 350,000(9)
Former Chief Operating
Officer
</TABLE>
- ---------------
(1) Reflects salary, bonus and other annual compensation paid by the registrant
since its formation on July 8, 1994 to the Named Executive Officers as of
December 31, 1995.
(2) Mr. Amaral assumed the duties of President and Chief Executive Officer from
Mr. Sweeney on October 13, 1995 at an annual salary of $600,000. See
"Employment Contracts, Termination of Employment and Change of Control
Arrangements."
(3) Options for 500,000 shares granted to Mr. Sweeney in 1995 and all of the
3,000,000 options for shares granted to Mr. Sweeney in 1994 were returned to
Coram by Mr. Sweeney during the fiscal year ended December 31, 1995.
(4) Consists of a cash fee paid to Mr. Sweeney for financial advisory services
rendered in connection with the formation of Coram pursuant to an agreement
with T2. See "Certain Relationships and Transactions."
(5) Mr. Smith assumed the duties of Chief Financial Officer of Coram on August
30, 1995 at an annual salary of $175,000.
(6) Consists of reimbursed expenses in connection with the respective
individual's relocation to Denver, Colorado.
(7) Mr. Gallatin became an executive officer of the Company on August 3, 1995 at
an annual salary of $225,000.
(8) Mr. McCrann became an executive vice president of Coram in August 1995.
(9) Mr. Fortune resigned on August 8, 1995, and all such options were canceled
by Coram during the fiscal year ended December 31, 1995. Mr. Fortune was
paid $141,795 in the fiscal year ended December 31, 1995 in connection with
a severance agreement. See "Employment Contracts, Termination of Employment
and Change of Control Arrangements."
11
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
each of the Named Executive Officers during the year ended December 31, 1995. In
addition, in accordance with the rules of the Commission, there are shown
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 0%, 5% and 10% from the date the options were granted over the
full option term. No stock appreciation rights were granted to the Named
Executive Officers during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM(2)
OPTIONS EMPLOYEES IN PER --------------------------------------
NAME GRANTED(3) FISCAL YEAR SHARE(4) EXPIRATION DATE(3) 0% 5% 10%
- ------------------------ ---------- ------------ -------- ------------------ ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Amaral(1)..... 2,200,000 29.82% $ 3.45 October 13, 2005 -- $3,608,651 $10,241,979
James M. Sweeney........ 500,000 (5) 6.78 3.50 September 7, 2005 -- 1,100,565 2,789,049
2,500 3.38 4.88 December 11, 1996 -- 7,665 19,424
Richard M. Smith........ 100,000 1.36 2.98 September 7, 2005 $52,000 272,113 609,810
200,000 2.71 4.25 December 28, 2005 -- 534,560 1,354,681
John T. Gallatin........ 100,000 1.36 2.98 September 7, 2005 52,000 272,113 609,810
200,000 2.71 4.25 December 28, 2005 -- 534,560 1,354,681
Kelly J. McCrann........ 100,000 1.36 2.98 September 7, 2005 52,000 272,113 609,810
50,000 0.68 4.25 December 28, 2005 -- 133,640 338,670
Patrick J. Fortune...... 50,000 (6) 0.68 21.50 February 1, 2005 -- 676,062 1,713,273
</TABLE>
- ---------------
(1) The option shares subject to Mr. Amaral's grant will vest and become
exercisable in three successive equal annual installments upon his
completion of each year of service with the Company over the three-year
period measured from the October 13, 1995 grant date.
(2) Potential realizable value is determined by taking the exercise price per
share and applying the stated annual appreciation rate compounded annually
for the term of the option, subtracting the exercise price per share at the
end of the period and multiplying the remaining number by the number of
options granted. Actual gains, if any, on stock option exercises and Coram
Common Stock holdings are dependent on the future performance of the Coram
Common Stock and overall stock market conditions. Does not reflect changes
in the market price of Coram Common Stock subsequent to December 31, 1995.
(3) The options granted to the Named Executive Officers other than Mr. Amaral
that expire on September 7, 2005 were immediately exercisable for all the
option shares as of September 7, 1995, the grant date. Twenty-five percent
of the options granted to the Named Executive Officers other than Mr. Amaral
that expire on December 28, 2005 vest and become exercisable on December 28,
1996.
(4) The Compensation Committee, as the Coram Option Plan Administrator, has the
authority to reprice outstanding options under such plan, other than the
automatic option grants held by the non-employee Directors. On September 7,
1995, the Compensation Committee repriced all such outstanding options held
by Coram employees other than Directors and Mr. Fortune, on such date with
exercise prices in excess of $5.50 per share to a reduced exercise price of
$5.50 per share. See "Compensation Committee Report on Executive
Compensation -- Option Repricings."
(5) All of such options were returned to Coram by Mr. Sweeney during the fiscal
year ended December 31, 1995.
(6) All of such options were canceled by Coram during the fiscal year ended
December 31, 1995.
12
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the aggregate number
of options exercised during the year ended December 31, 1995 by each of the
Named Executive Officers and outstanding options held by each such officer at
December 31, 1995. None of the Named Executive Officers exercised any stock
appreciation rights during the 1995 fiscal year. No stock appreciation rights
were held by the Named Executive Officers at the end of the 1995 fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1995 DECEMBER 31, 1995(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald J. Amaral(1)....... -- -- -0- 2,200,000 -0- $ 2,035,000
James M. Sweeney.......... -- -- 2,500 -0- -0- -0-
Richard M. Smith.......... -- -- 109,028 215,972 $ 55,185 109,315
John T. Gallatin.......... -- -- 221,002 263,889 74,925 89,525
Kelly J. McCrann.......... -- -- 135,417 114,583 112,624 27,126
Patrick J. Fortune(3)..... -- -- 87,500 -0- -0- -0-
</TABLE>
- ---------------
(1) The option shares subject to Mr. Amaral's grant will vest and become
exercisable in three successive equal annual installments upon his
completion of each year of service with the Company over the three-year
period measured from the October 13, 1995 grant date.
(2) Value is determined by subtracting the exercise price from the fair market
value (the closing price for the Common Stock as reported by the New York
Stock Exchange) as of December 29, 1995 ($4.38) and multiplying the
resulting number by the number of underlying shares of Common Stock. For
the purpose of such calculation, the exercise price per share is the
applicable exercise price as of December 31, 1995 and does not reflect
market price changes subsequent to December 31, 1995.
(3) All of such options were canceled by Coram on February 3, 1996.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Except for Donald J. Amaral, Coram does not presently have any employment
contracts in effect with any of the Named Executive Officers.
Coram presently has an employment agreement with its President and Chief
Executive Officer, Donald J. Amaral, for a three-year term commencing October
13, 1995, unless otherwise terminated. In light of the downturn in the Company's
business and its uncertain prospects, Mr. Amaral was extended the agreement by
the Company to attract and retain his services as he is considered critical to
Coram's future success in the Company's turn-around period. Under the agreement,
Mr. Amaral will receive a base salary of $600,000 per annum, and the right to
receive a performance bonus. If Mr. Amaral's employment is terminated by the
Company other than for cause or by Mr. Amaral in the event that the Company
fails to comply with any material provision of the agreement, Mr. Amaral will be
entitled to receive his base salary through the longer of (i) the remaining term
of the agreement or (ii) twelve months, plus a bonus payable after the end of
each of the Company's fiscal years thereafter through 1998 in an amount equal to
the average bonus earned by Mr. Amaral during the employment period. Under the
agreement, Mr. Amaral was also granted options to purchase 2,200,000 shares of
Common Stock at $3.45 per share. The options will vest and become exercisable in
three equal annual installments upon Mr. Amaral's completion of each year of
service over the three-year period measured from the October 13, 1995 grant
date. The options will immediately vest and become exercisable in full upon (i)
a change in control of the Company; (ii) any termination by the Company of the
employment agreement other than for cause; (iii) any termination by Mr. Amaral
as a result of a material breach of the employment agreement by the Company; or
(iv) termination of the employment agreement as a
13
<PAGE> 17
result of Mr. Amaral's death or permanent disability. Mr. Amaral is also
eligible to receive all other benefits generally made available by the Company
to its senior executives.
The Company has an executive compensation plan in effect with Richard M.
Smith, Mr. Gallatin and Mr. McCrann in regards to severance and retention
bonuses. If any of the such executives resigns before December 31, 1996 because
(i) such executive's position is eliminated and a position is offered that is
not commensurate and represents a substantial reduction in authority; (ii) such
executive's salary is reduced by more than 10% (other than due to a general
salary reduction for substantially all employees); (iii) such executive's
primary residence is relocated outside of a fifty (50) miles radius of Denver;
or (iv) such executive is terminated without cause, then such executive will be
paid his base salary as a severance payment for a period of twelve (12) months.
In addition, retention bonuses will be awarded equal to six months of base
salary if the executive remains actively employed with Coram until December 31,
1996.
Shares subject to options granted under the Coram Option Plan to the
Company's other executive officers will immediately vest in full upon (i) an
acquisition of the Company by merger or asset sale in which such options are not
to be assumed by the acquiring entity or, (ii) if such options are so assumed,
the subsequent termination of the optionee's employment (whether involuntarily
or through a forced resignation) within eighteen (18) months following such
acquisition. In addition, the Compensation Committee, as the Coram Option Plan
Administrator, has the authority to provide for the accelerated vesting of the
shares of the Company's Common Stock subject to outstanding options held by the
Company's executive officers, or any unvested shares actually held by those
individuals under the Coram Option Plan, in connection with a hostile take-over
of the Company effected through a successful tender offer for more than 50% of
the Company's outstanding securities or through a change in the majority of the
Board as a result of one or more contested elections for Board membership or in
the event such individual's employment were to be terminated (whether
involuntarily or through a forced resignation) following such hostile take-over.
Since the resignation of Patrick J. Fortune as the Company's President and
Chief Operating Officer, the Company has been paying Mr. Fortune his salary in
accordance with the terms of his original offer of employment to Mr. Fortune in
August 1994. Mr. Fortune's salary continuation will continue until April 1996.
The Company entered into a consulting agreement with Mr. Fortune on August 3,
1995 under which Mr. Fortune will render consulting services to the Company on
an as needed basis for a one year term. Under the agreement, Mr. Fortune agreed
to devote (i) reasonable consulting services as requested by the Company's Chief
Executive Officer or his designee; (ii) no more than twenty hours per week to
performing consulting services commencing November 3, 1995; and (iii) no more
than ten hours per week commencing February 3, 1996. As compensation for Mr.
Fortune's consulting services, the Company agreed to pay Mr. Fortune a
consulting fee of $1,350 for each day on which Mr. Fortune devotes a material
amount of time to rendering such consulting services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard A. Fink and Stephen G. Pagliuca were the only two members of the
Compensation Committee of Coram during the last completed fiscal year. Messrs.
Fink and Pagliuca are both non-employee directors of Coram who have not
previously been in Coram's employ. Mr. Fink is a partner in a law firm that
rendered various legal services to Coram in 1995. In April 1995, Coram paid Mr.
Pagliuca a fee of approximately $2 million for certain investment banking and
financial advisory services rendered in connection with Coram's acquisition of
the alternate site and certain related businesses of Caremark International,
Inc. (the "Caremark Business") in 1995. The fee was contingent upon the closing
of the acquisition of the Caremark Business and represented approximately
two-thirds of one percent of the $310 million financing secured by Coram in
connection with such transaction. No executive officer of Coram serves as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of Coram's Board of
Directors or Compensation Committee.
14
<PAGE> 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As members of the Compensation Committee of Coram's Board of Directors, it
is our duty to set the base salary of certain executive officers each fiscal
year and to approve the individual bonus programs to be in effect for those
individuals. In addition, we have the authority to award stock options under the
Coram Option Plan to Coram's executive officers and other key employees. The
following is a summary of the policies which governed our decisions concerning
the compensation paid to Coram's executive officers for the fiscal year ended
December 31, 1995, including the compensation reflected in the tables which
appear elsewhere in this Proxy Statement.
General Compensation Policy
Introduction. Coram was established in July 1994 through the merger of four
separate publicly-held corporations (the "Four-Way Merger"). Our major
objectives for the 1995 fiscal year were to continue a compensation structure
which would retain the services of those executive officers of the four merged
companies who we identified as essential to Company's long-term financial
success and to attract additional executive officers to the Company.
Accordingly, we developed a compensation policy with three principle objectives:
(i) to maintain key executive compensation consistent with the healthcare
industry, (ii) in light of the downturn in the Company's business and its
uncertain prospects, to offer base salary levels and annual incentive
compensation sufficient to attract new executives and induce certain existing
management to remain with the Company to lead the Company's turn-around efforts
and (iii) to provide a significant equity component in the form of stock option
grants which would serve to strengthen the mutuality of interests between
management and Coram's shareholders.
Factors. The primary factors which we considered in establishing the
components of each executive officer's compensation package for the 1995 fiscal
year are summarized below. We may, however, apply entirely different factors,
particularly different measures of performance, in setting executive
compensation for future fiscal years.
- BASE SALARY. As indicated, the base salary of each executive officer for
the 1995 fiscal year was based on salary levels we believed were necessary to
retain and attract certain executive officers. On the basis of our knowledge of
the alternate site health care industry and turn-around situations, we believe
that these base salary levels are competitive with the companies with which
Coram competes for executive talent. However, we did not, through one or more
external salary surveys for the industry, independently confirm the specific
percentiles at which the base salary levels in effect for Coram's executive
officers stood in relation to other companies in the industry. We felt that the
most appropriate vehicle to retain and attract executive officers and to
contribute to Coram's financial success was to have a substantial portion of
their total compensation package be in the form of the long-term equity
component described below.
Because it was not our intent for the 1995 fiscal year to target the base
salary levels in effect for the executive officers at a designated percentile of
the salary levels in effect for other companies in the alternate site health
care industry, there is no meaningful correlation between Coram's salary levels
and the rates of base salary in effect for those companies which are taken into
account in the Industry Index utilized for purposes of the stock price
performance graph which follows this report.
- ANNUAL INCENTIVE COMPENSATION. Incentive compensation is awarded based
upon the Company's financial performance and improvement, as well as the
Compensation Committee's discretion regarding current position, specific
accomplishments and personal performances of executive officers. All executive
officers have the opportunity to earn cash awards. The Compensation Committee
believes that significant accomplishments have been made in the current year to
stabilize the Company and form a foundation for the future. As a result,
discretionary awards were approved by the Compensation Committee for certain
executive officer's performance in the current fiscal year.
- LONG-TERM INCENTIVE COMPENSATION. The option grants which we make under
the Coram Option Plan to the executive officers are intended to advance our
overall objective in subjecting a substantial portion of each officer's
compensation package to Company performance measured in terms of stock price
appreciation.
15
<PAGE> 19
Accordingly, the option grants were designed to align the interests of Coram's
executive officers with those of the shareholders and provide each officer with
a significant incentive to manage Coram from the perspective of an owner with an
equity stake in the business. Each grant allows the executive officer to acquire
shares of Coram Common Stock at a fixed price per share (the market price on the
grant date) over a specified period of time (up to ten years). The option shares
vest in periodic installments over a specified period (generally four years),
contingent upon the executive officer's continued employment with Coram.
Accordingly, the options will provide a return to the executive officer only if
he or she remains with Coram, and then only if the price of Coram's Common Stock
appreciates.
The size of the option grant to each executive officer was set at a level
which we felt was appropriate to create a meaningful opportunity for stock
ownership based upon the executive officer's current position with Coram,
internal comparability with option grants made to other Company executives, the
executive officer's current level of performance and his or her potential for
future responsibility and promotion over the option term. As of September 7,
1995, certain key executive officers were granted options which were immediately
exercisable for fully-vested shares in conjunction with the Compensation
Committee's principle compensation objective of inducing certain key management
to remain with the Company.
We have established certain general guidelines by which we seek to target a
fixed number of unvested option shares for each executive officer based upon his
or her current position with Coram and his or her potential for growth within
Coram, i.e., future responsibilities and possible promotions over the option
term. However, we do not strictly adhere to these guidelines in making stock
option grants, and the relative weight which we give to the various factors
varies from individual to individual, as the circumstances warrant.
Option Repricings
The following table sets forth information concerning ten year options
which were repriced by the Compensation Committee on September 7, 1995 for the
executive officers of Coram as of December 31, 1995.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
SECURITIES OF STOCK PER PRICE PER NEW OPTION TERM
UNDERLYING SHARE AT SHARE AT EXERCISE REMAINING
NAME AND OPTIONS TIME OF TIME OF PRICE PER AT DATE OF
PRINCIPAL POSITIONS DATE REPRICED REPRICING(1) REPRICING SHARE REPRICING
- --------------------------------- ----------------- --------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Smith................. September 7, 1995 25,000 $ 3.50 $ 16.13 $5.50 8.9 years
Chief Financial Officer and
Secretary
John T. Gallatin................. September 7, 1995 100,000 3.50 16.13 5.50 8.9 years
Executive Vice President
Kelly J. McCrann................. September 7, 1995 100,000 3.50 11.00 5.50 8.9 years
Executive Vice President
</TABLE>
- ---------------
(1) Represents the market price of Coram Common Stock at September 7, 1995.
On September 7, 1995, we decided in our capacity as the Coram Option Plan
Administrator to reprice each option outstanding under the Coram Option Plan on
such date to a reduced exercise price of $5.50 per share, which represented a
$2.00 per share premium over the market price of the Common Stock on such date.
However, we did not reprice the options held by any of the Company's directors.
The remaining terms and conditions of each such repriced option remain
unchanged. We implemented the repricing program because we believe that equity
incentives are a significant factor in the Company's ability to attract and
retain key employees and consultants who are critical to the Company's near and
long-term success. During the period from April 1995 to September 1995, the
market value of the Common Stock fell significantly as a result of a variety of
factors. As a result, almost all of the options outstanding under the Coram
Option Plan had exercise prices significantly in excess of the current market
price of the Company's Common Stock. We believed that the Company's ability to
retain existing employees would be impaired unless value was restored to their
options by reducing the exercise price to a level closer to the current market
value.
16
<PAGE> 20
CEO Compensation
See "Employment Contracts, Termination of Employment and Change of Control
Arrangements" for a description of compensation relating to Mr. Amaral.
Compliance with Internal Revenue Code Section 162(m)
As a result of Section 162(m) of the Internal Revenue Code, Coram is
allowed a federal income tax deduction for compensation paid to certain
executive officers, to the extent that compensation does not exceed $1 million
per officer in any one year. This limitation applies to all compensation paid to
the covered executive officers which is not considered to be performance based.
However, any payments which qualify as performance-based compensation are not
taken into account for purposes of this limitation. On the basis of this
distinction, the Coram Option Plan has been specifically designed to assure that
any compensation deemed paid in connection with the exercise of stock options
granted under that plan with an exercise price equal to the fair market value of
the option shares on the grant date will qualify for performance-based
treatment.
We do not expect that the compensation to be paid to Coram's executive
officers for the 1996 fiscal year will exceed the $1 million limit per officer.
Accordingly, until final Treasury regulations are issued with respect to the new
$1 million limitation, we will defer any decision on whether or not to
restructure one or more components of the compensation paid to the executive
officers so as to qualify those components as performance-based compensation
that will not be subject to the $1 million limitation.
The foregoing report has been submitted by the undersigned in our capacity
as members of the Compensation Committee of Coram's Board of Directors.
Richard A. Fink
Stephen G. Pagliuca
17
<PAGE> 21
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total stockholder
returns assuming reinvestment of dividends for (i) Coram, (ii) the companies
included in the Standard & Poor 500 Stock Index, (iii) the companies included in
the Dow Jones Industry Index for Health Care Providers and (iv) Apria Healthcare
Group, Inc., Caremark International Inc., Quantum Health Resource Inc. and
Rotech Medical Corp., which comprise the Company's Peer Group, for the period
commencing July 11, 1994, the date the Common Stock was first publicly traded,
through December 31, 1995. The stockholder returns are based upon an assumed
$100 investment made on July 11, 1994 in each of four charted alternatives. The
chart does not reflect changes in Coram's stock price subsequent to December 31,
1995.
COMPARISON OF 17 MONTH CUMULATIVE TOTAL RETURN*
AMONG CORAM HEALTHCARE CORPORATION, THE S&P 500 INDEX,
THE DOW JONES HEALTH CARE PROVIDERS INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
CORAM
MEASUREMENT PERIOD HEALTHCARE DJ HEALTH
(FISCAL YEAR COVERED) CORPORATION PEER GROUP S&P 500 CARE PROVIDERS
--------------------- ----------- ---------- ------- --------------
<S> <C> <C> <C> <C>
7/11/94 100 100 100 100
12/94 115 95 105 105
12/95 30 84 144 135
</TABLE>
- ---------------
* $100 invested on July 11, 1994 in stock or on June 30, 1994 in
index -- including reinvestment of dividends. Fiscal year ending December 31.
18
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Fink, a director of Coram since July 1994, is a partner in a law firm
that rendered various legal services to Coram in 1995 and is continuing to
render such services in 1996. The legal fees paid by Coram to such firm
approximated $2.4 million in the fiscal year ended December 31, 1995.
In April 1995, Coram paid Mr. Pagliuca a fee of approximately $2 million
for certain investment banking and financial advisory services rendered in
connection with Coram's acquisition of the Caremark Business. The fee was
contingent upon the closing of the acquisition of the Caremark Business and
represented approximately two-thirds of one percent of the $310 million
financing secured by Coram in connection with such transaction.
Mr. Nathanson, a director of Coram since December 1995, is a Managing
Director of DLJ, an investment banking firm that rendered various financial
services to Coram in 1995. An affiliate of DLJ provided a $150 million bridge
loan to Coram in April 1995 in connection with the acquisition of the Caremark
Business pursuant to the terms of the Purchase Agreement. The Purchase Agreement
provides that DLJ has the right to appoint a director to Coram's Board of
Directors if an event of default has occurred and so long as it is continuing;
provided; however, that the right terminates at such time that DLJ is no longer
the holder of at least fifty percent of the aggregate principal amount of the
outstanding bridge notes. DLJ was granted the right to appoint a director in
September 1995 in exchange for certain waivers under the Purchase Agreement.
Fees for financial advisory and investment banking services to DLJ approximated
$6.5 million in 1995.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP, served as independent auditors of
the Company for the years ended December 31, 1995 and 1994. Subject to
stockholder ratification at the Annual Meeting, the Board of Directors has
selected Ernst & Young LLP as the Company's independent auditors for the fiscal
year ending December 31, 1996. The affirmative vote of a majority of the shares
of the Company's voting stock represented and voted at the Annual Meeting is
required for ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors.
Representatives of Ernst & Young LLP are expected to attend the Meeting.
They will have an opportunity to make statements and will be available to
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matter is properly presented for consideration at
the Annual Meeting, it is intended that the proxies will be voted by the persons
named therein in accordance with their discretion on such matters.
19
<PAGE> 23
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual stockholder meetings, consistent with rules
adopted by the Commission. Proposals for the 1997 Annual Meeting of Stockholders
must be received by the Company not less than 30 days nor more than 60 days
prior to the scheduled date of the meeting (or, if less than 40 days' notice or
prior public disclosure of the date of the meeting is given, the 10th day
following the earlier of (i) the day such notice was mailed or (ii) the day such
public disclosure was made) to be considered for inclusion in the proxy
statement and form of proxy relating to the 1997 Annual Meeting of Stockholders.
Any such proposals should be addressed to: Corporate Secretary, Coram Healthcare
Corporation, 1125 Seventeenth Street, Suite 1500, Denver, Colorado 80202.
Under Rule 14a-8 adopted by the Commission under the Exchange Act,
proposals of stockholders must conform to certain requirements as to form and
may be omitted from the proxy statement and proxy under certain circumstances.
In order to avoid unnecessary expenditures of time and money by stockholders,
stockholders are urged to review this rule and, if questions arise, to consult
legal counsel prior to submitting a proposal.
ANNUAL REPORT TO STOCKHOLDERS
The 1995 Annual Report of the Company, as filed with the Commission, is
being mailed to the stockholders with this Proxy Statement. The Annual Report is
not to be considered part of the proxy soliciting material.
CORAM HEALTHCARE CORPORATION
Denver, Colorado
April 29, 1996
20
<PAGE> 24
PROXY
CORAM HEALTHCARE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James M. Sweeney and Donald J. Amaral, or
any of them, the proxies and attorneys-in-fact for the undersigned, with full
power of substitution and revocation, to represent and vote on behalf of the
undersigned, at the 1996 annual meeting of stockholders of Coram Healthcare
Corporation (the "Company") to be held at The Westin Hotel, 1672 Lawrence
Street, Denver, Colorado on June 24, 1996 at 12:00 p.m. local time, and any
adjournments or postponements thereof, all shares of the common stock, $.001
par value per share, of the Company standing in the name of the undersigned or
which the undersigned may be entitled to vote as follows on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
-----------
TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 25
CORAM HEALTHCARE
[Date]
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders of Coram Healthcare Corporation, which will be held on Monday,
June 24, 1996 at 12:00 p.m. local time, at The Westin Hotel, 1672 Lawrence
Street, Denver, Colorado. In addition to the matters to be acted upon at the
meeting, which are described in detail in the attached Notice of Annual Meeting
of Stockholders and Proxy Statement, there will be a report to the stockholders
on the operations of the Company. I hope the you will be able to attend.
Whether or not you plan to be at the meeting, please be sure to complete,
date, sign and return the proxy card as promptly as possible so that your
shares may be voted in accordance with your wishes. Your vote, whether given by
proxy or in person at the meeting, will be held in confidence by the Inspector
of Election for the meeting.
Sincerely,
Donald J. Amaral
Chief Executive Officer and President
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned. If no direction is made, this proxy will be voted FOR Items
1 and 2.
1. Election of Directors
NOMINEES: James M. Sweeney, Donald J. Amaral, Richard A. Fink, Stephen G.
Pagliuca, L. Peter Smith, Dr. Gail R. Wilensky and Andrew J. Nathanson.
[ ] FOR [ ] WITHHELD
[ ] MARK HERE FOR
-------------------------------------- ADDRESS CHANGE [ ]
For all monimees except as noted above AND NOTE BELOW
2. Election of Ernst & Young LLP as independent auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote for the election of
such substitute nominee(s) as such proxies may select in the event that one
or more of the nominees named in Item 1 above becomes unable to serve, and
upon such other business as may properly come before the meeting or any
adjournment or postponement thereof.
The submission of this proxy if properly executed revokes all prior proxies
given by the undersigned.
Receipt of the Notice of Annual Meeting of Stockholders and accompanying Proxy
Statement is hereby acknowledged.
Please sign exactly as name appears on this card. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature: Date:
-------------------------------------------- ------------------
Signature: Date:
-------------------------------------------- ------------------
