<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ORTHODONTIC CENTERS OF AMERICA, 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)(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:
-------------------------------------------------------------------------
Notes:
<PAGE>
ORTHODONTIC CENTERS OF AMERICA, INC.
5000 SAWGRASS VILLAGE CIRCLE
SUITE 25
PONTE VEDRA BEACH, FLORIDA 32082
April 21, 1997
TO THE STOCKHOLDERS OF
ORTHODONTIC CENTERS OF AMERICA, INC.:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Orthodontic Centers of America, Inc., to be held on Monday, May 19, 1997,
at 10:00 a.m. (Eastern Time) at the Marriott at Sawgrass Resort in Ponte Vedra
Beach, Florida.
Please read the enclosed Annual Report to Stockholders and Proxy Statement
for the 1997 Annual Meeting of Stockholders. Whether or not you plan to attend
the Annual Meeting, please sign, date and return the enclosed proxy card as
soon as possible so that your vote will be recorded. If you attend the Annual
Meeting, you may withdraw your proxy and vote your shares personally.
Sincerely,
/s/ Gasper Lazzara, Jr., D.D.S.
Gasper Lazzara, Jr., D.D.S.
Chairman of the Board, President and
Chief Executive Officer
IMPORTANT
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY.
<PAGE>
ORTHODONTIC CENTERS OF AMERICA, INC.
5000 SAWGRASS VILLAGE CIRCLE
SUITE 25
PONTE VEDRA BEACH, FLORIDA 32082
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
TO THE STOCKHOLDERS OF
ORTHODONTIC CENTERS OF AMERICA, INC.:
The Annual Meeting of Stockholders of Orthodontic Centers of America, Inc.
(the "Company") will be held on May 19, 1997, at 10:00 a.m. (Eastern Time) at
the Marriott at Sawgrass Resort in Ponte Vedra Beach, Florida for the
following purposes:
(1) To elect two nominees as Class III directors;
(2) To consider and vote upon the approval of an amendment to the
Restated Certificate of Incorporation of the Company to increase the number
of authorized shares of the Company's Common Stock from 80,000,000 to
100,000,000;
(3) To ratify the appointment of the accounting firm of Ernst & Young LLP
as independent auditors of the Company and its subsidiaries for the
Company's 1997 fiscal year; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 1, 1997 as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournment thereof.
By order of the Board of Directors,
/s/ Bartholomew F. Palmisano, Sr.
Bartholomew F. Palmisano, Sr.
Corporate Secretary
Metairie, Louisiana
April 21, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, TO ASSURE
THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED
PROXY CARD AS SOON AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE
YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
EXERCISED.
<PAGE>
ORTHODONTIC CENTERS OF AMERICA, INC.
5000 SAWGRASS VILLAGE CIRCLE
SUITE 25
PONTE VEDRA BEACH, FLORIDA 32082
-----------------
PROXY STATEMENT
-----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors") of Orthodontic
Centers of America, Inc. (the "Company"), to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Marriott at Sawgrass
Resort in Ponte Vedra Beach, Florida, on May 19, 1997, at 10:00 a.m. (Eastern
Time), for the purposes set forth in the accompanying notice, and at any
adjournment thereof. This Proxy Statement and the accompanying form of proxy
are first being mailed or given to stockholders of the Company on or about
April 21, 1997.
If the enclosed proxy is properly executed, returned and not revoked, it
will be voted in accordance with the instructions, if any, given by the
stockholder, and if no instructions are given, it will be voted (a) FOR the
election as Class III directors of the nominees listed thereon and described
in this Proxy Statement, (b) FOR the approval of the amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock, $.01 per value per share (the
"Common Stock"), from 80,000,000 to 100,000,000, (c) FOR ratification of the
appointment of the firm of Ernst & Young LLP as independent auditors of the
Company and its subsidiaries, and (d) in accordance with the recommendations
of the Board of Directors on any other proposal that may properly come before
the Annual Meeting. The persons named as proxies in the enclosed form of proxy
were selected by the Board of Directors.
Stockholders who sign proxies have the right to revoke them at any time
before they are voted by written request to the Company. The giving of the
proxy will not affect the right of any stockholder to attend the Annual
Meeting and vote in person.
The close of business on April 1, 1997 has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. As of the close of business on April 1, 1997, the Company had
authorized 80,000,000 shares of Common Stock, of which 43,630,797 shares were
outstanding and entitled to vote. The Common Stock is the Company's only class
of voting stock with shares outstanding.
PROPOSAL 1: ELECTION OF DIRECTORS
INTRODUCTION
In accordance with the Bylaws of the Company, the Board of Directors has
divided the current Board of Directors into three classes, with two classes
consisting of two directors each and one class consisting of three directors.
One class of directors is elected each year for a term of three years. The
term of each of the Company's current Class III directors, Gasper Lazzara,
Jr., D.D.S. and Bartholomew F. Palmisano, Sr., expires at the Annual Meeting.
The Board of Directors has nominated Messrs. Lazzara and Palmisano for
election at the Annual Meeting as Class III directors to serve until the
Company's Annual Meeting of Stockholders in 2000 or until their respective
successors have been elected and qualified. Messrs. Lazzara and Palmisano have
each consented to be a candidate and to serve as a director of the Company, if
elected.
Unless a proxy specifies otherwise, the persons named in the proxy shall
vote the shares covered thereby for the nominee designated by the Board of
Directors listed below. Should the nominee become unavailable for
<PAGE>
election, shares covered by a proxy will be voted for a substitute nominee
selected by the current Board of Directors.
A director of the Company is elected by the affirmative vote of a plurality
of the votes present or represented at the Annual Meeting and entitled to
vote. The Company's Restated Certificate of Incorporation does not provide for
cumulative voting and, accordingly, each stockholder may cast one vote per
share for each nominee.
CLASS III NOMINEES
The Board of Directors recommends that the stockholders vote FOR election of
the following nominees as Class III directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<C> <C> <S> <C>
Gasper Lazzara, Jr., D.D.S....... 54 Chairman of the Board, 1994
President and Chief
Executive Officer of the
Company
Bartholomew F. Palmisano, Sr..... 50 Chief Financial Officer, 1994
Senior Vice President,
Treasurer and Secretary
of the Company
</TABLE>
CONTINUING DIRECTORS
The persons named below will continue to serve as directors of the Company
until the annual meeting of stockholders in the year indicated below and until
their successors are elected and take office. Stockholders are not voting on
the election of the Class I and Class II directors. The following table shows
the names, ages and principal occupations of each continuing director, and the
year in which each was first elected to the Board of Directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
CLASS I--TERM EXPIRES IN 1998
<C> <C> <S> <C>
A. Gordon Tunstall............... 53 President, Tunstall 1996
Consulting, Inc.
Geoffrey L. Faux................. 41 Executive Vice President and 1996
Chief Administrative
Officer of the Company
(1996-Present);
Director, Investment
Banking Group, Prudential
Securities Incorporated
(1992-1996)
<CAPTION>
CLASS II--TERM EXPIRES IN 1999
<C> <C> <S> <C>
Michael C. Johnsen............... 44 Vice President of Operations 1994
of the Company
Edward J. Walters, Jr............ 50 Attorney and Partner, Moore, 1994
Walters Shoenfelt &
Thompson, Baton Rouge,
Louisiana
Ashton J. Ryan, Jr............... 49 President, First National 1996
Bank of Commerce, New
Orleans, Louisiana
</TABLE>
Except as indicated above, the nominees and continuing directors have had
the principal occupations indicated for more than five years. Dr. Lazzara and
Mr. Johnsen are brothers-in-law. Mr. Tunstall also serves on the boards of
directors of Advanced Lighting Technologies, Inc., Discount Auto Parts, Inc.,
L A T Sportswear, Inc. and Romac International, Inc.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors held two regularly scheduled and special
meetings. Each director attended at least 75% of the meetings of the Board of
Directors and committees on which such nominee served.
The Board of Directors has established the standing committees described
below. The Executive Committee acts on behalf of the Board of Directors on all
matters concerning the management and conduct of the business and affairs of
the Company except those matters that cannot by law be delegated by the Board
of Directors. The Executive Committee is comprised of Messrs. Lazzara,
Palmisano and Johnsen. The Executive Committee held one meeting during 1996.
2
<PAGE>
The Audit Committee selects and engages on behalf of the Company, subject to
the approval of the stockholders, and fixes the compensation of, a firm of
certified public accountants whose duty it is to audit the books and accounts
of the Company and its subsidiaries for the fiscal year in which they are
appointed, and who also report to the Audit Committee. The Audit Committee
confers with the auditors and determines the scope of the auditing of the
books and accounts of the Company and its subsidiaries. The Audit Committee is
also responsible for determining that the business practices and conduct of
employees and other representatives of the Company and its subsidiaries comply
with the Company's policies and procedures. The Audit Committee is comprised
of Messrs. Walters, Tunstall and Ryan. The Audit Committee held one meeting
during 1996.
The Compensation Committee establishes a general compensation policy for the
Company and has the responsibility for the approval of increases in directors'
fees and in salaries paid to officers and senior employees earning in excess
of an annual base salary of $75,000. The Compensation Committee also possesses
all of the powers of administration under all of the Company's employee
benefit plans, including any stock option plans, bonus plans, retirement
plans, stock purchase plans and medical, dental and insurance plans. In
connection therewith, the Compensation Committee determines, subject to the
provision of the Company's plans, the directors, officers and employees of the
Company eligible to participate in any of the plans, the extent of such
participation and terms and conditions under which benefits may be vested,
received or exercised. The Compensation Committee is comprised of Mr. Walters
and Mr. Tunstall. The Compensation Committee held one meeting during 1996.
The Board of Directors has no standing nominating committee.
COMPENSATION OF DIRECTORS
Directors of the Company are paid compensation of $1,250 for each meeting of
the Board of Directors attended. Members of the Executive Committee of the
Board of Directors receive a fee of $750 per month and members of the Audit
and Compensation Committees of the Board of Directors receive $625 per
committee meeting attended. All directors receive reimbursement for necessary
travel expenses incurred in attending Board of Directors or committee
meetings.
The Company's 1994 Non-Qualified Stock Option Plan for Non-Employee
Directors (the "Director Plan") provides that directors who are not employees
of the Company will automatically receive options to purchase 2,400 shares of
Common Stock on the first trading date of each year at an exercise price equal
to the market price of the Common Stock on the date of grant. The options
(one-third of which may be exercised two years from the date of grant, one-
third three years from the date of grant and one-third four years from the
date of grant) terminate 10 years from the date of grant. In addition, the
options terminate if not exercised within 90 days after the director ceases to
be a member of the Board of Directors unless the director dies, becomes
disabled, retires or is terminated other than for cause.
At April 1, 1997, options to purchase an aggregate of 16,800 shares of
Common Stock had been granted to the Company's outside directors under the
Director Plan. Of such options, 2,400 have become exercisable.
3
<PAGE>
PROPOSAL 2: INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed to amend the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 80,000,000 shares to 100,000,000 shares. At April 1, 1997,
the Company had 43,630,797 shares of Common Stock outstanding and an
additional 6,726,610 shares of Common Stock reserved for future issuance under
the Company's various stock plans and programs.
The purpose of the amendment is to provide additional shares of Common Stock
issuable from time to time by the Company for corporate purposes without
obtaining stockholder approvals unless such approval is required by applicable
law. The Company may utilize additional authorized shares of Common Stock in
connection with future stock dividends, stock splits, acquisition
transactions, option exercises, restricted and bonus stock awards and programs
and to issue additional shares of Common Stock in public offerings to fund the
continued growth of the Company.
An increase in the number of authorized shares of Common Stock could enable
the Board of Directors to take certain actions making it more difficult for a
third party to acquire control of the Company, even though stockholders of the
Company may deem such an acquisition to be desirable. To the extent that the
issuance of additional shares impedes any such attempts to acquire control of
the Company, the amendment may serve to perpetuate existing management. The
issuance of additional shares by the Company may also have a dilutive effect
on earnings per share and would have a dilutive effect on the percentage
ownership interest of the current holders of the Common Stock.
The Board of Directors does not intend to issue any Common Stock to be
authorized pursuant to the amendment except upon terms that the Board of
Directors deems to be in the best interest of the Company and its
stockholders. The Board of Directors believes that it is necessary to increase
the number of authorized shares of Common Stock for continued growth and to
provide a continuing incentive for its employees and affiliated orthodontists.
Approval of the proposed amendment to the Company's Restated Certificate of
Incorporation requires the affirmative vote of the holders of a majority of
the votes entitled to vote and present or represented at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT
TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK FROM 80,000,000 TO 100,000,000.
PROPOSAL 3: SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected the firm of Ernst
& Young LLP as independent auditors of the Company for 1997, subject to the
approval of the stockholders. This firm has served as the independent auditors
of the Company since the Company's formation in July 1994. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they desire and will be available to
respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares present or
represented at the Annual Meeting and entitled to vote is needed to ratify the
appointment of Ernst & Young LLP as auditors of the Company for 1997. If the
appointment is not approved, the matter will be referred to the Audit
Committee for further review.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information with respect to ownership of
shares of Common Stock at April 1, 1997 by each of the Company's directors and
by all directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the stockholders listed below has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED (1)
---------------- ------------ ------------
<S> <C> <C>
Gasper Lazzara, Jr., D.D.S.(2)....................... 6,376,760 14.61%
Bartholomew F. Palmisano, Sr.(3)..................... 4,125,463 9.45%
Geoffrey L. Faux..................................... 1,000 --
Michael C. Johnsen................................... 6,400 --
Edward J. Walters, Jr.(4)............................ 5,400 --
A. Gordon Tunstall................................... 5,000 --
Ashton J. Ryan, Jr................................... 1,200 --
All Executive Officers and Directors as a Group
(seven persons)..................................... 10,521,223 24.11%
</TABLE>
- --------
(1) Pursuant to rules promulgated by the Securities and Exchange Commission
("SEC"), an aggregate of 2,400 shares of Common Stock which beneficial
owners set forth in this table have a right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
beneficially owned by that owner but are not deemed outstanding for the
purpose of computing percentage ownership of any other beneficial owner
shown in the table.
(2) In connection with the settlement of litigation initiated by two
orthodontists against the Company, such orthodontists entered into a
voting trust agreement which provides that, until the later of the time at
which the two orthodontists own no shares of Common Stock or October 18,
2004, Dr. Lazzara or a designee of Dr. Lazzara may vote the shares of the
orthodontists. Such orthodontists hold 889,593 shares of Common Stock
which are included in the table. Dr. Lazzara disclaims beneficial
ownership of such shares. Of the shares in the table, an aggregate of
685,016 shares are held in separate trusts by a third party trustee for
the benefit of each of Dr. Lazzara's children, and 15,000 shares are held
in a charitable foundation of which Dr. Lazzara is a co-trustee. Dr.
Lazzara disclaims beneficial ownership of such shares.
(3) Of the shares in the table, an aggregate of 707,016 shares are held in
separate trusts by a third party trustee for the benefit of each of Mr.
Palmisano's children. Mr. Palmisano disclaims beneficial ownership of such
shares.
(4) Includes options currently exercisable to purchase 2,400 shares of Common
Stock.
5
<PAGE>
The following table sets forth information with respect to ownership of
shares of Common Stock at April 1, 1997 by each person not listed in the table
above that is known to the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock. Unless otherwise indicated, each of
the stockholders listed below has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED
------------------------------------ ------------ ------------
<S> <C> <C>
The Capital Group Companies, Inc. and Capital 2,335,000 5.5%
Research and Management Company....................
333 South Hope Street
Los Angeles, CA 90071
Pilgram Baxter & Associates, Ltd.................... 4,318,700(2) 9.9%
1255 Drummers Lane, Suite 300
Wayne, PA 19087
T. Rowe Price Associates, Inc....................... 2,324,100 5.4%
100 East Pratt Street
Baltimore, MD 21202
</TABLE>
- --------
(1) As disclosed in Schedule 13G filed with the SEC.
(2) Voting power is shared as to all of such stock.
REPORTS OF BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than 10%
of the Common Stock to file with the SEC initial reports of ownership and
reports of changes in ownership of the Common Stock. These officers, directors
and stockholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) reports they file. There are specific dates by
which these reports are to be filed and the Company is required to report in
this Proxy Statement any failure to file reports as required during 1996.
Based solely upon its review of the copies of reports furnished to the
Company and written representations from certain of the Company's directors
and executive officers that no other reports were required, the Company
believes that all Section 16(a) reporting and filing requirements relating to
ownership of the Common Stock were complied with during 1996, except that the
Company notes that Mr. Faux inadvertently failed to report in a timely manner
an initial report on Form 3.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the compensation of Dr. Lazzara, the Company's
Chief Executive Officer, and Messrs. Palmisano and Johnsen, each of whom are
executive officers of the Company and whose total annual compensation during
1996 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION
------------------------------- SECURITIES
ANNUAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ---- -------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Gasper Lazzara, Jr., D.D.S... 1996 $107,164 -- $10,750 250,050
Chief Executive Officer 1995 150,000 -- 10,250 --
1994 162,300(1) -- 2,250 --
Bartholomew F. Palmisano, Sr. 1996 $150,000 -- $13,375 250,050
Chief Financial Officer 1995 150,000 -- 10,250 --
1994 99,060(2) -- 2,250 --
Michael C. Johnsen........... 1996 $125,000 $5,853 $ 3,750 11,364
Vice President of Operations 1995 100,000 -- 10,250 400
1994 * * * *
</TABLE>
- --------
* Total annual compensation did not exceed $100,000 during the period
indicated.
(1) The salary amount does not include distributions of $696,000 in 1994 to
Dr. Lazzara as a result of his ownership interest in certain of the
Company's predecessor entities, which predecessor entities distributed
profits to their respective stockholders, partners and members.
(2) The salary amount does not include distributions of $363,000 in 1994 to
Mr. Palmisano as a result of his ownership interest in certain of the
Company's predecessor entities, which predecessor entities distributed
profits to their respective stockholders, partners and members.
7
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth certain information concerning stock options
exercised by, and granted to, the Named Executive Officers in 1996. The
Company granted no stock appreciation rights in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF TOTAL EXERCISE PRICE APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED OR BASE TERM
UNDERLYING TO EMPLOYEES IN PRICE PER EXPIRATION -------------------------------
NAME OPTIONS GRANTED FISCAL YEAR SHARE DATE 5% 10%
---- --------------- ---------------- --------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gasper Lazzara, Jr.,
D.D.S.................. 189,912 30.0% $12.375 July 16, 2006 $ 1,477,993(1) $ 3,745,546(1)
60,138 9.5% $12.625 Dec. 1, 2006 $ 1,477,480(2) $ 1,210,035(2)
Bartholomew F.
Palmisano, Sr.......... 189,912 30.0% $12.375 July 16, 2006 $ 1,477,993(1) $ 3,745,546(1)
60,138 9.5% $12.625 Dec. 1, 2006 $ 1,477,480(2) $ 1,210,035(2)
Michael C. Johnsen...... 11,364 1.8% $ 11.00 Jan. 1, 2007 $ 1,478,614(3) $ 0,199,224(3)
</TABLE>
- --------
(1) Based on closing price per share of the Common Stock of $12.375 on July
16, 1996, as reported on the Nasdaq Stock Market National Market, less the
exercise price of the options.
(2) Based on closing price per share of the Common Stock of $12.625 on
December 1, 1996, as reported on the Nasdaq Stock Market National Market,
less the exercise price of the options.
(3) Based on closing price per share of the Common Stock of $11.00 on January
1, 1997, as reported on the Nasdaq Stock Market National Market, less the
exercise price of the options.
STOCK OPTIONS EXERCISED AND YEAR-END VALUES
The following table provides certain information, with respect to the Named
Executive Officers, concerning the exercise of options during 1996 and with
respect to unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS AT
SHARES END FISCAL YEAR-END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gasper Lazzara, Jr.,
D.D.S.................. -- -- -- 250,050 -- $ 891,397
Bartholomew F.
Palmisano, Sr.......... -- -- -- 250,050 -- $ 891,397
Michael C. Johnsen...... 86,268 $1,013,582 -- 183,898 -- $1,481,160
</TABLE>
- --------
(1) Based upon the closing price per share of the Common Stock of $16.00 on
December 30, 1996, as reported on the Nasdaq Stock Market National Market,
less the exercise price of the options.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into employment agreements with each of Dr. Lazzara and
Mr. Palmisano effective as of November 21, 1994. Each such employment
agreement provides for a term of three years, which is automatically extended
each year for an additional year. Each of Dr. Lazzara and Mr. Palmisano has
agreed not to compete with the Company during the term of their respective
employment agreement and for a period of two years thereafter.
Under their respective employment agreements, Dr. Lazzara and Mr. Palmisano
are each to receive an annual base salary of $150,000, subject to cost of
living adjustments and annual increases in the discretion of the
8
<PAGE>
Compensation Committee of the Board of Directors, and each are entitled to
participate in the Company's stock option plans and other benefit programs
generally available to executive officers of the Company. In addition, each of
Dr. Lazzara and Mr. Palmisano are entitled to receive an annual bonus in the
discretion of the Compensation Committee.
If the Company terminates the employment of Dr. Lazzara or Mr. Palmisano
without "cause", as defined in their respective employment agreements, Dr.
Lazzara or Mr. Palmisano, as applicable, is to receive any accrued salary,
earned bonus and vested deferred compensation, and any stock options granted
to him by the Company would immediately vest. In addition, he is to receive
continued payment of his annual base salary for a period of three years
(reduced by the amount of any compensation he receives during that time
through other employment) and an amount equal to two times the average annual
bonus paid to him during the two years prior to such termination. Dr. Lazzara
and Mr. Palmisano may elect to receive a lump sum amount equal to the present
value of such severance payments, but not less than two times their respective
annual base salary.
If Dr. Lazzara or Mr. Palmisano terminates his employment upon a "change of
control" of the Company, as defined in their respective employment agreements,
Dr. Lazzara or Mr. Palmisano, as applicable, is to receive any accrued salary,
earned bonus and vested deferred compensation, and any stock options granted
to him by the Company would immediately vest. In addition, he is to receive
continued payment of his annual base salary for the remainder of the term of
his employment agreement (reduced by the amount of any compensation he
receives during that time through other employment) and an amount equal to two
times the average annual bonus paid to him during the two years prior to such
termination. Dr. Lazzara and Mr. Palmisano may elect to receive a lump sum
amount equal to the present value of such severance payments, but not less
than three times their respective annual base salary. Severance payments to
Dr. Lazzara and Mr. Palmisano upon a change of control may not, however,
exceed the maximum amount which the Company may deduct for federal income tax
purposes pursuant to Section 280G of the Internal Revenue Code.
The Company entered into an employment agreement with Mr. Faux effective as
of September 1, 1996. Mr. Faux's employment agreement provides for a term of
three years, which is to be automatically extended for an additional two year
period unless either party provides the other party with prior written notice
to the contrary. Mr. Faux has agreed not to compete with the Company during
the term of his employment agreement and for a period of two years thereafter.
Under Mr. Faux's employment agreement, he is to receive an annual base
salary of $200,000, subject to annual increases in the discretion of the
Compensation Committee of the Board of Directors, and he is entitled to
participate in the Company's stock option plans and other benefit programs
generally available to executive officers of the Company. Upon the effective
date of his employment agreement, Mr. Faux was paid a $15,000 cash bonus and,
on October 25, 1996, granted options to purchase 100,000 shares of Common
Stock under the Company's 1994 Stock Incentive Plan (the "Incentive Stock
Plan"). On each of September 1, 1997, 1998 and, if the term of the employment
agreement is extended, 1999 and 2000, Mr. Faux is to be granted options to
purchase 50,000, 15,000, 20,000, 25,000 and 30,000 shares of Common Stock,
respectively, under the Incentive Stock Plan.
In addition, for each fiscal year during the term of his employment
agreement, Mr. Faux is to receive an annual cash performance bonus equal to
either: (i) 40% of Mr. Faux's annual base salary if during such year the
Company meets or exceeds certain performance criteria established by the
Compensation Committee, (ii) 60% of his annual base salary if during such year
the Company exceeds such performance criteria by at least 15%, or (iii) 80% of
his annual base salary if during such year the Company exceeds such
performance criteria by at least 22.5%. Further, at the end of each two-fiscal
year cycle during the term of Mr. Faux's employment agreement (beginning with
fiscal years 1997 and 1998), he is to be granted options under the Incentive
Stock Plan to purchase either (i) 20,000 shares of Common Stock under the
Incentive Stock Plan if the Company exceeds certain performance criteria
established by the Compensation Committee for such two-fiscal year cycle by at
least 15%, (ii) 35,000 shares of Common Stock if the Company exceeds such
criteria by at least 20%, or (iii) 50,000 shares of Common Stock if the
Company exceeds such criteria by at least 25%.
9
<PAGE>
If the Company terminates Mr. Faux's employment without "cause", or if Mr.
Faux terminates his employment for "good reason", each as defined in his
employment agreement, Mr. Faux is to receive any accrued salary, earned bonus,
vested deferred compensation, and any stock options granted to Mr. Faux by the
Company would immediately vest. In addition, Mr. Faux is to receive continued
payment of his annual base salary for a period of three years (reduced by the
amount of any compensation he receives during that time through other
employment) and an amount equal to two times the average annual bonus paid to
Mr. Faux during the two years prior to such termination. Mr. Faux may elect to
receive a lump sum amount equal to the present value of such severance
payments, up to an amount equal to three times his annual base salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Messrs. Walters and Tunstall. There are no interlocks among the members of the
Compensation Committee.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee of the Board
of Directors pursuant to rules established by the Commission, and provides
certain information regarding compensation of the Company's executive
officers. Each of the members of the Compensation Committee is a non-employee
director of the Company.
The Compensation Committee is responsible for establishing and administering
a general compensation policy and program for the Company. The Compensation
Committee also possesses all of the powers of administration under the
Company's employee benefit plans, including all stock option plans and other
employee benefit plans. Subject to the provisions of those plans, the
Compensation Committee must determine the individuals eligible to participate
in each one of the plans, the extent of such participation and the terms and
conditions under which benefits may be vested, received or exercised.
COMPENSATION POLICIES
The Company's executive compensation policies are designed to complement the
Company's business objectives by motivating and retaining quality members of
senior management, by aligning management's interests with those of the
Company's stockholders and by linking total compensation to the performance of
the Company. The Company's executive compensation policies generally consist
of equity-based long term incentives, short term incentives and competitive
base salaries. The Compensation Committee will continue to monitor the
performance of the Company and its executive officers in reassessing executive
compensation.
During 1996, the Company retained the services of an independent consultant
to assist the Company in developing a comprehensive executive compensation
policy and to provide recommendations to the Compensation Committee on
compensation of the Company's executive officers. The consultant conducted a
review of the Company's executive compensation, and presented a report to the
Compensation Committee assessing the effectiveness of the Company's executive
compensation policies and providing a comparison of base salaries and long
term incentives paid to executive officers of 11 other publicly traded, health
care management companies. The consultant generally recommended that the
Company adjust the base salaries of its executive officers to reflect
competitive market practices, tie annual incentive amounts to certain
performance criteria, and establish long term incentives that align financial
interests of the executives with increases in value to the Company's
stockholders.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction by a public company for compensation in excess of $1,000,000 paid to
the company's chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation is not subject
to the deduction limit
10
<PAGE>
if certain requirements are met. The Compensation Committee intends to
structure the future compensation of the Company's executive officers so as to
preserve the deductibility of such compensation under Section 162(m).
BASE SALARY
The Compensation Committee reviews the base salaries of the Company's
executive officers on an annual basis. Base salaries are determined based upon
a subjective assessment of the nature and responsibilities of the position
involved, the performance of the particular officer and of the Company, the
officer's experience and tenure with the Company and base salaries paid to
persons in similar positions with companies comparable to the Company. The
base salaries paid to Dr. Lazzara, Mr. Palmisano and Mr. Faux are subject to
the terms of their respective employment agreements with the Company. During
1996, the base salaries of Dr. Lazzara, Mr. Palmisano and Mr. Johnsen were
increased in accordance with the recommendations of the report provided by the
consultant on executive compensation.
ANNUAL BONUS
The employment agreements with Dr. Lazzara and Mr. Palmisano provide for
annual bonuses in the discretion of the Compensation Committee. Dr. Lazzara
and Mr. Palmisano have not been granted bonuses with respect to 1996. The
Company's employment agreement with Mr. Faux provides for annual cash
performance bonuses beginning in fiscal year 1997, in the event that the
Company achieves certain performance criteria established by the Compensation
Committee. Mr. Faux received a cash signing bonus during 1996 in the amount of
$15,000, upon the effectiveness of his employment agreement with the Company.
LONG-TERM INCENTIVES
The Company's long-term compensation strategy is focused on the grant of
stock options under the Company's Incentive Stock Plan, which the Compensation
Committee believes rewards executive officers for their efforts in improving
long-term performance of the Common Stock and creating value for the Company's
stockholders, and aligns the financial interests of management with those of
the Company's stockholders. Based upon these beliefs, the recommendations of
the independent compensation consultant and a subjective assessment of the
Company's performance since its formation and the contributions of Dr. Lazzara
and Mr. Palmisano to that performance, the Compensation Committee granted
stock options during 1996 to each of Dr. Lazzara and Mr. Palmisano, with an
exercise price equal to the market price of the Common Stock on the date of
grant of the options. Dr. Lazzara and Mr. Palmisano had not previously been
issued any options by the Company. Mr. Faux was granted stock options in 1996
pursuant to the terms of his employment agreement with the Company. Under the
terms of his employment agreement, beginning in 1998, Mr. Faux is to be
granted stock options in the event that the Company achieves certain long-term
performance criteria established by the Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR FISCAL YEAR 1996
Based upon the recommendations of the independent compensation consultant
and a subjective assessment of the performance of the Company and of Dr.
Lazzara, in 1996 the Compensation Committee increased the base salary of Dr.
Lazzara, the Chairman of the Board and Chief Executive Officer of the Company.
The Compensation Committee also granted stock options in 1996 to Dr. Lazzara
under the Company's Incentive Stock Plan, based upon the recommendations of
the independent compensation consultant, in recognition of the Company's
performance during the prior year and of Dr. Lazzara's contribution to that
performance.
COMPENSATION COMMITTEE
Edward J. Walters, Jr., Chairman
A. Gordon Tunstall
11
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
Rules promulgated by the SEC require that the Company include in this Proxy
Statement a line graph which compares the yearly percentage change in
cumulative total stockholder return on the Common Stock with (a) the
performance of a broad equity market indicator, and (b) the performance of a
published industry index or peer group index. The following graph compares the
percentage change in the return on the Common Stock since December 20, 1994
with the cumulative total return on the CRSP Index for Nasdaq Stock Market
(U.S. Companies) and CRSP Index for Nasdaq Health Services Stocks. The graph
assumes the investment of $100 on December 20, 1994 and the reinvestment of
all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD ENDING DECEMBER 31, 1996
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
- ----------------------------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Orthodontic Centers of
America, Inc. .............. 106.4 410.6 544.7
Nasdaq Stock Market
(US Companies).............. 79.0 92.0 105.6 103.2 146.0 179.5
Nasdaq Health Services Stocks
SIC 8000-8099
US & Foreign................ 79.2 82.1 94.7 101.6 129.0 129.2
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, there were no transactions or series of similar transactions
involving an amount exceeding $60,000 in which the Company was a party and in
which any of the directors or executive officers of the Company, any holders
of more than 5% of the Common Stock or any immediate family members of the
foregoing, had a direct or indirect material interest.
GENERAL INFORMATION
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 annual meeting of
stockholders must be received by the Company at its executive offices at 5000
Sawgrass Village Circle, Suite 25, Ponte Vedra Beach, Florida 32082 not later
than December 1, 1997, in order to be included in the proxy statement and
proxy for the 1998 annual meeting.
COUNTING OF VOTES
All matters specified in this Proxy Statement that are to be voted on at the
Annual Meeting will be by written ballot. Inspectors of election will be
appointed to, among other things, determine the number of shares outstanding,
the shares represented at the annual meeting, the existence of a quorum and
the authenticity, validity and effect of proxies, to receive votes of ballots,
to hear and determine all challenges and questions in any way arising in
connection with the right to vote, to count and tabulate all votes and to
determine the result. Each item presented herein to be voted on at the Annual
Meeting must be approved by the affirmative vote of the holders of the number
of shares described under each such item. The inspectors of election will
treat shares represented by proxies that reflect abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions, however, do not constitute a vote "for" or "against" any
matter and thus will be disregarded in the calculation of a plurality or of
"votes cast."
Inspectors of election will treat shares referred to as "broker non-votes"
as shares that are present and entitled to vote for purposes of determining
the presence of a quorum. However, for purposes of determining the outcome of
any matter as to which the broker has physically indicated on the proxy that
it does not have discretionary authority to vote, those shares will be treated
as not present and not entitled to vote with respect to that matter (even
though those shares are considered entitled to vote for quorum purposes and
may be entitled to vote on other matters).
MISCELLANEOUS
The Company will bear the cost of printing, mailing and other expenses in
connection with this solicitation of proxies and will also reimburse brokers
and other persons holding shares in their names or in the names of nominees
for their expenses in forwarding this proxy material to the beneficial owners
of such shares. Certain of the directors, officers and employees of the
Company may, without any additional compensation, solicit proxies in person or
by telephone.
A copy of the Company's 1996 Annual Report to Stockholders has been mailed
to all stockholders entitled to notice of and to vote at the Annual Meeting.
April 21, 1997
13
<PAGE>
PROXY CARD
ORTHODONTIC CENTERS OF AMERICA, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Gasper Lazzara, Jr., D.D.S. and Bartholomew F.
Palmisano, Sr., and either of them, as proxies, with full power of substitution
and resubstitution, to vote all of the shares of Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Orthodontic Centers of America, Inc., to be held at the Marriott at Sawgrass
Resort in Ponte Vedra Beach, Florida on Monday, May 19, 1997, at 10:00 a.m.
(Eastern Time), and at any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment
thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL VOTE (A) FOR
THE ELECTION AS CLASS III DIRECTORS OF THE NOMINEES NAMED ON THIS CARD, (B) FOR
THE APPROVAL OF AN AMENDMENT TO OCA'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF OCA'S COMMON STOCK FROM 80,000,000
TO 100,000,000, (C) FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS, AND (D) IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING.
1.Election of Class III Directors.
Nominees:Gasper Lazzara, Jr., D.D.S.
Bartholomew F. Palmisano, Sr.
INSTRUCTION: To withhold authority to vote for an
individual nominee, write his name in the space
provided below:
-----------------------------------------------------
FOR all WITHHOLD
nominees AUTHORITY
listed to vote
(except for all
as nominees
marked listed
to the [_]
contrary
below)
[_]
(Continued on reverse side)
2. Proposal to approve an amendment to
OCA's Restated Certificate of
Incorporation to increase the number of
authorized shares of OCA's Common Stock
from 80,000,000 to 100,000,000.
[_] FOR[_] AGAINST[_] ABSTAIN
3. Proposal to ratify the appointment of
Ernst & Young LLP as the Company's
independent auditors.
[_] FOR[_] AGAINST[_] ABSTAIN
Dated: ________________________, 1997
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
IMPORTANT: Please sign exactly as
your name or names appear on this
proxy and mail promptly in the
enclosed envelope. If you sign as
agent or in any other capacity,
please state the capacity in which
you sign.
