<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
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
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:
- --------------------------------------------------------------------------------
<PAGE> 2
[ORTHODONTIC CENTERS OF AMERICA, INC. LOGO]
5000 SAWGRASS VILLAGE CIRCLE
SUITE 25
PONTE VEDRA BEACH, FLORIDA 32082
April 14, 2000
TO THE STOCKHOLDERS OF
ORTHODONTIC CENTERS OF AMERICA, INC.:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Orthodontic Centers of America, Inc. ("OCA"), to be held on Thursday, May 18,
2000, at 1:00 p.m. (Central Time) at the Doubletree Hotel, 3838 North Causeway
Boulevard, Metairie, Louisiana.
Whether or not you plan to attend the Annual Meeting, please complete,
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.
The attached Proxy Statement and the accompanying Annual Report to
Stockholders contain important information about OCA and the matters to be
addressed at the Annual Meeting. We encourage you to read them.
I look forward to seeing you in Metairie, Louisiana at this year's Annual
Meeting.
Sincerely,
/s/ GASPER LAZZARA
Gasper Lazzara, Jr., D.D.S.
Chairman of the Board and
Co-Chief Executive Officer
IMPORTANT:
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE> 3
[ORTHODONTIC CENTERS OF AMERICA, INC. LOGO]
5000 SAWGRASS VILLAGE CIRCLE
SUITE 25
PONTE VEDRA BEACH, FLORIDA 32082
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2000
TO THE STOCKHOLDERS OF
ORTHODONTIC CENTERS OF AMERICA, INC.:
The Annual Meeting of Stockholders of Orthodontic Centers of America, Inc.
("OCA") will be held on May 18, 2000, at 1:00 p.m. (Central Time) at the
Doubletree Hotel, 3838 North Causeway Boulevard, Metairie, Louisiana for the
following purposes:
(1) To elect two nominees as Class III directors;
(2) To ratify the appointment of the accounting firm of Ernst & Young LLP
as independent auditors of OCA and its subsidiaries for the year ending
December 31, 2000; and
(3) 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 March 31, 2000 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, JR.
Bartholomew F. Palmisano, Jr.
Corporate Secretary
Metairie, Louisiana
April 14, 2000
IMPORTANT:
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, TO ASSURE
THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED RETURN ENVELOPE AS SOON AS POSSIBLE. IF YOU ATTEND
THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY
TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 4
[ORTHODONTIC CENTERS OF AMERICA, INC. LOGO]
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 Doubletree Hotel, 3838
North Causeway Boulevard, Metairie, Louisiana, on May 18, 2000, at 1:00 p.m.
(Central Time), for the purposes set forth in the attached notice of annual
meeting, 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 14, 2000.
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 (i) FOR the
election as Class III directors of the nominees listed thereon and described in
this Proxy Statement, (ii) FOR ratification of the appointment of the accounting
firm of Ernst & Young LLP as independent auditors of the Company and its
subsidiaries for the year ending December 31, 2000, and (iii) 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 card 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 March 31, 2000 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 March 31, 2000, the Company had
authorized 100,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), of which 48,364,227 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 Restated Certificate of Incorporation and Bylaws of
the Company, the Board of Directors has divided the current Board of Directors
into three classes, with one class consisting of one director, one class
consisting of two directors 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.,
the Chairman of the Board and Co-Chief Executive Officer of the Company, and
Bartholomew F. Palmisano, Sr., the Co-Chief Executive Officer and President of
the Company, expires at the
<PAGE> 5
Annual Meeting. The Board of Directors has nominated Dr. Lazzara and Mr.
Palmisano for election at the Annual Meeting as Class III directors to serve
until the Company's Annual Meeting of Stockholders in 2003 and until their
respective successors have been elected and qualified. Dr. Lazzara and Mr.
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 nominees listed below. Should a nominee
become unavailable for 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 UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR ELECTION OF THE FOLLOWING NOMINEES AS CLASS III DIRECTORS OF THE COMPANY:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Gasper Lazzara, Jr., D.D.S. ......... 57 Chairman of the Board (1994-Present); 1994
Co-Chief Executive Officer of the Company
(1998-Present); Chief Executive Officer of
the Company (1994-1998); President of the
Company (1994-1997)
Bartholomew F. Palmisano, Sr. ....... 53 Co-Chief Executive Officer of the Company 1994
(1998-Present); President of the Company
(1999-Present); Chief Financial Officer and
Senior Vice President of the Company (1994-
1998)
</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>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---- --- -------------------- --------------
<S> <C> <C> <C>
CLASS I-TERM EXPIRES IN 2001
A Gordon Tunstall.................... 56 President, Tunstall Consulting, Inc., 1996
Tampa, Florida
CLASS II-TERM EXPIRES IN 2002
Michael C. Johnsen................... 47 Chief Operating Officer of the Company 1994
(1997-Present); Vice President of
Operations of the Company (1994-1997)
Ashton J. Ryan, Jr. ................. 52 President and Chief Executive Officer, 1996
FirsTrust Corp., New Orleans, Louisiana
(1998-Present); President, First National
Bank of Commerce, New Orleans, Louisiana
(1993-1998)
Edward J. Walters, Jr. .............. 53 Attorney and Partner, Moore, Walters, 1994
Shoenfelt & Thompson, Baton Rouge,
Louisiana
</TABLE>
2
<PAGE> 6
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., Horizon Medical Products, Inc. and KForce.com.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1999, the Board of Directors held four regularly scheduled and no
special meetings. Each director attended at least 75% of the meetings of the
Board of Directors and committees on which such director 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 currently comprised of Dr. Lazzara and
Messrs. Palmisano and Johnsen. The Executive Committee held one meeting during
1999.
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 currently comprised of
Messrs. Ryan, Tunstall and Walters. The Audit Committee held one meeting during
1999.
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
provisions of the Company's plans, the directors, officers and employees of the
Company eligible to participate in any of the plans, the extent of such
participation and terms and conditions under which benefits may be vested,
received or exercised. The Compensation Committee is currently comprised of
Messrs. Tunstall and Walters. The Compensation Committee held one meeting during
1999.
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 ten years after 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 March 31, 2000, options to
purchase an
3
<PAGE> 7
aggregate of 40,800 shares of Common Stock had been granted to the Company's
outside directors under the Director Plan. Of such options, 16,200 have become
exercisable.
PROPOSAL 2: SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected the accounting
firm of Ernst & Young LLP as independent auditors of the Company and its
subsidiaries for the year ending December 31, 2000, 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 and its subsidiaries
for 2000. If the appointment is not approved, the matter will be referred to the
Audit Committee for further review.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to ownership of
shares of Common Stock at March 31, 2000, by each of the Company's directors and
by all directors and executive officers of the Company as a group. Unless
otherwise indicated in a footnote to the following table, each of the
stockholders listed below has sole voting and investment power with respect to
the shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- ---------------- --------------------- ---------------------
<S> <C> <C>
Gasper Lazzara, Jr., D.D.S.(2)............................. 4,522,806 9.4%
Bartholomew F. Palmisano, Sr.(3)........................... 3,476,669 7.2
Michael C. Johnsen(4)...................................... 115,794 *
Ashton J. Ryan, Jr.(5)..................................... 6,800 *
A Gordon Tunstall(6)....................................... 3,600 *
Edward J. Walters, Jr.(7).................................. 13,000 *
Bartholomew F. Palmisano, Jr.(8)........................... 749,993 1.6
All Executive Officers and Directors as a Group (seven
persons)................................................. 8,888,662 18.4
</TABLE>
- ---------------
* Less than 1%.
(1) In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options held by that person which are currently exercisable or which will
become exercisable within 60 days following March 31, 2000, are deemed to be
outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person.
(2) Includes options currently exercisable to purchase 667,962 shares of Common
Stock. Of the shares deemed beneficially owned by Dr. Lazzara, an aggregate
of 685,400 shares are held in separate trusts by a third party trustee for
the benefit of each of Dr. Lazzara's children, and 301,832 shares are held
in a charitable foundation of which Dr. Lazzara is a co-trustee. Dr. Lazzara
disclaims beneficial ownership of such shares.
(3) Includes options currently exercisable to purchase 667,962 shares of Common
Stock. Of the shares deemed beneficially owned by Mr. Palmisano, 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,
Sr. disclaims beneficial ownership of such shares.
(4) Includes options currently exercisable to purchase 56,004 shares of Common
Stock.
(5) Includes options currently exercisable to purchase 1,800 shares of Common
Stock.
(6) Includes options currently exercisable to purchase 3,600 shares of Common
Stock.
(7) Includes options currently exercisable to purchase 9,000 shares of Common
Stock. Of the shares deemed beneficially owned by Mr. Walters, 4,000 shares
are held in trusts, of which Mr. Walters is the trustee. Mr. Walters
disclaims beneficial ownership of such shares.
(8) Includes options currently exercisable to purchase 27,766 shares of Common
Stock. Of the shares deemed beneficially owned by Mr. Palmisano, an
aggregate of 707,016 shares are held in trusts, of which Mr. Palmisano, is
the co-trustee, for the benefit of Mr. Palmisano's siblings. These shares
are also included in the number of shares beneficially owned by Bartholomew
F. Palmisano, Sr. Mr. Palmisano, Jr. disclaims beneficial ownership of such
shares.
5
<PAGE> 9
The following table sets forth information with respect to ownership of
shares of Common Stock at March 31, 2000, 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 in a footnote
to the following table, each of the stockholders listed below has sole voting
and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- ------------------- --------------------- ---------------------
<S> <C> <C>
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116...................................... 4,010,176(2) 8.3%
T. Rowe Price Associates, Inc. and T. Rowe
Price New Horizons Fund, Inc.
100 East Pratt Street
Baltimore, MD 21202................................... 3,941,100(3) 6.2
</TABLE>
- ---------------
(1) As disclosed in Schedule 13G filed with the Securities and Exchange
Commission ("SEC").
(2) Includes 3,693,076 shares with respect to which sole voting power is held.
(3) Includes 498,700 shares with respect to which T. Rowe Price Associates, Inc.
has sole voting power, and 3,000,000 shares as to which T. Rowe New Horizons
Fund, Inc. has sole voting power.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who 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 for 1999.
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 for 1999, except that Dr. Gasper Lazzara,
Jr. filed a Form 4 in January 2000 shortly after the deadline for filing such
form.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects the compensation of Dr. Lazzara and
Bartholomew F. Palmisano, Sr., the Company's Co-Chief Executive Officers,
Michael C. Johnsen and Bartholomew F. Palmisano, Jr., who are both executive
officers of the Company, and Geoffrey L. Faux, who served as President of the
Company during part of 1999, each of whose total annual compensation during 1999
exceeded $100,000 (collectively, 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....... 1999 $180,000 -- $15,000 204,507
Co-Chief Executive Officer 1998 180,000 -- -- 120,000
1997 120,000 -- 11,500 120,000
Bartholomew F. Palmisano, Sr. ... 1999 $150,000
Co-Chief Executive Officer 1998 150,000 -- $15,000 204,507
1997 150,000 -- -- 120,000
-- 11,500 120,000
Michael C. Johnsen............... 1999 $200,000 -- $15,000 --
Chief Operating Officer 1998 200,000 -- -- --
1997 159,616 -- 11,500 30,000
Bartholomew F. Palmisano, Jr. ... 1999 $105,000 -- -- 15,000
Chief Financial Officer 1998 105,000 -- -- 49,558
1997 90,000 -- -- 4,063
Geoffrey L. Faux................. 1999 $200,000(1) $ 80,000(1) $12,500(1) --
(former President) 1998 200,000 80,000(1) -- 40,000
1997 200,000 120,000 11,500 199,014
</TABLE>
- ---------------
(1) Includes certain amounts paid to Mr. Faux in connection with termination of
his employment with the Company in October 1999.
7
<PAGE> 11
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 1999. The Company
granted no stock appreciation rights in 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE DATE 5% 10%
- ---- ---------- -------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gasper Lazzara, Jr., D.D.S. ...... 84,507 19.93% $ 13.935 10/26/09 $740,584(4) $1,876,796(4)
120,000 28.30 12.375 12/01/09 933,902(4) 2,366,704(5)
Bartholomew F. Palmisano, Sr. .... 84,507 19.93 13.935 10/26/09 740,584(4) 1,876,796(4)
120,000 28.30 12.375 12/01/09 933,902(4) 1,876,796(5)
Michael C. Johnsen................ -- -- N/A N/A N/A N/A
Bartholomew F. Palmisano, Jr. .... 15,000 3.54 13.4375 7/15/09 126,762(5) 321,238(6)
Geoffrey L. Faux.................. -- -- N/A N/A N/A N/A
</TABLE>
- ---------------
(1) 50% of such options vest 13 months following the date of grant, and the
remaining 50% vest on the third anniversary of the date of grant.
(2) Based on the grant of options to purchase a total of 824,660 shares of
Common Stock.
(3) Represents hypothetical gains that could be achieved with respect to the
grants of options if the options were to be exercised at the end of the
option term, based upon assumed rates of appreciation in the market price of
Common Stock of 5% and 10%, compounded annually from the date of grant to
the expiration date. Actual gains, if any, could vary and will depend upon
the actual date or dates, if any, on which the options are exercised and the
actual rates of appreciation, if any, in the price of Common Stock.
(4) Based on closing price per share of the Common Stock of $13.935 on October
26, 1999, as reported on the New York Stock Exchange, less the exercise
price of the options.
(5) Based on closing price per share of the Common Stock of $12.375 on December
1, 1999, as reported on the New York Stock Exchange, less the exercise price
of the options.
(6) Based on closing price per share of the Common Stock of $13.4375 on July 15,
1999, as reported on the New York Stock Exchange, 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 1999 and with
respect to unexercised options at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-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. .... -- -- 667,962 204,507 $ -- $ --
Bartholomew F. Palmisano,
Sr. .......................... -- -- 667,962 204,507 -- --
Michael C. Johnsen.............. -- -- 56,004 242,960 443,183 653,866
Bartholomew F. Palmisano,
Jr. .......................... -- -- 27,766 80,633 189,811 125,156
Geoffrey L. Faux................ -- -- 115,000 -- -- --
</TABLE>
- ---------------
(1) Based upon the closing price per share of the Common Stock of $11.9375 on
December 31, 1999, as reported on the New York Stock Exchange, less the
exercise price of the options.
8
<PAGE> 12
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into employment agreements with each of Dr. Lazzara and
Bartholomew F. Palmisano, Sr. 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 his 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 at least $150,000, subject to cost of living
adjustments and annual increases in the discretion of the Compensation Committee
of the Board of Directors, and each is 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 is
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 "Code").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
1999 were Edward J. Walters, Jr. and A Gordon Tunstall. There are no interlocks
among the members of the Compensation Committee. Moore, Walters, Shoenfelt &
Thompson, a law firm of which Mr. Walters is a partner, provided certain legal
services to the Company during 1999, and may provide additional legal services
to the Company in the future.
9
<PAGE> 13
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 SEC and provides certain
information regarding compensation of the Company's executive officers. 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.
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. Gasper Lazzara, Jr. and Bartholomew F. Palmisano, Sr. are
subject to the terms of their respective employment agreements with the Company.
ANNUAL BONUS
The employment agreements with Dr. Lazzara and Bartholomew F. Palmisano,
Sr. provide for annual cash bonuses in the discretion of the Compensation
Committee. The Company has not granted cash bonuses to Dr. Lazzara, Mr.
Palmisano and the other Named Executive Officers with respect to 1999, except
that Geoffrey L. Faux, a former President of the Company, was granted a cash
bonus of $80,000 pursuant to 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 1994 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. During 1999, the Compensation Committee
granted stock options to purchase 204,507 shares of
10
<PAGE> 14
Common Stock to each of Dr. Lazzara and Bartholomew F. Palmisano, Sr. under the
Company's 1994 Incentive Stock Plan.
SECTION 162(m)
Section 162(m) of the Code generally disallows a tax deduction by a
publicly-held 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 if certain requirements are met. The Compensation Committee
intends to consider the deductibility of compensation under Section 162(m) when
structuring the future compensation of the Company's executive officers.
CO-CHIEF EXECUTIVE OFFICER COMPENSATION FOR FISCAL YEAR 1999
The compensation paid to Dr. Lazzara and Bartholomew F. Palmisano, Sr.
during 1999 was subject to the terms of their respective employment agreements
with the Company. Discretionary and incentive compensation for Dr. Lazzara and
Mr. Palmisano during 1999 focused on the grant of stock options, rather than
cash compensation. During 1999, Dr. Lazzara and Mr. Palmisano did not receive a
cash bonus or a salary increase. Based upon a subjective assessment of the
performance of the Company, including increases in the amount of the Company's
revenue, net income, affiliated orthodontists and orthodontic centers, and of
Dr. Lazzara's and Mr. Palmisano's contributions to that performance, the
Compensation Committee granted stock options to purchase 204,507 shares of
Common Stock to each of Dr. Lazzara and Mr. Palmisano under the Company's 1994
Incentive Stock Plan in 1999.
COMPENSATION COMMITTEE
Edward J. Walters, Jr., Chairman
A Gordon Tunstall
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<PAGE> 15
COMPARATIVE PERFORMANCE GRAPH
The SEC requires the Company to include in this Proxy Statement a line
graph which compares the yearly percentage change in cumulative total
stockholder return on the Common Stock with (i) the performance of a broad
equity market indicator, and (ii) the performance of a published industry index
or peer group index. Set forth below is a line graph comparing the yearly
percentage change in the cumulative total stockholder return on the Common Stock
against the cumulative total return of (i) the S&P 500 Index, as the broad
equity market index, and (ii) a self-determined peer group consisting of 18
publicly traded healthcare practice management companies for use in this Proxy
Statement. The peer group includes American Oncology Resources, Inc., Apple
Orthodontix, Inc., Castle Dental Centers, Inc., Coast Dental Services, Inc.,
Coastal Physician Group, Inc., Complete Management, Inc., Innovative Clinical
Solutions, Ltd., Integra, Inc., Monarch Dental Corp., Omega Orthodontics, Inc.,
OrthAlliance, Inc., Pediatrix Medical Group, PhyCor, Inc., Physician Reliance
Network, Inc., Physicians Specialty Corp., ProMedCo Management Company, Sheridan
Healthcare, Inc. and Specialty Care Network, Inc. Caremark RX, Inc. (formerly
MedPartners, Inc.) has been omitted from the peer group because it is no longer
in the practice management industry.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C>
Orthodontic Centers of America,
M Inc. 100.0 386.0 512.0 532.0 622.0 382.0
] S&P 500 Stocks 100.0 137.6 169.5 226.1 291.8 353.3
O Self-Determined Peer Group 100.0 159.8 108.2 119.7 67.3 20.6
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/30/1994.
12
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's 1997 Key Employee Stock Purchase Plan (the
"Plan"), the Company financed 50% of the purchase price for each employee who
purchased shares of the Common Stock pursuant to the Plan. Among those employees
participating in the Plan were Michael C. Johnsen and Bartholomew F. Palmisano,
Jr. Each loan is evidenced by a promissory note, is a full recourse obligation
of the employee secured by all of the shares of Common Stock acquired by the
employee in connection with the loan, and bears interest at 6.01% per annum. In
addition, Dr. Gasper Lazzara, Jr. and Bartholomew F. Palmisano, Sr. personally
financed the remaining 50% of the purchase price for each employee (including
Mr. Johnsen and Bartholomew F. Palmisano, Jr.) who purchased shares of the
Common Stock pursuant to the Plan, on terms comparable to the loans from the
Company. Mr. Johnsen purchased 56,338 shares of Common Stock, for a total
purchase price of $999,990.50. Bartholomew F. Palmisano, Jr. purchased 15,211
shares of Common Stock for a total purchase price of $269,996. The outstanding
principal and accrued interest under each loan is payable, in one lump-sum
payment, on the earlier of (i) November 3, 2002 or (ii) termination of the
employee's employment with the Company. If the employee sells or transfers any
of the shares of Common Stock purchased under the Plan prior to that date, a
proportionate amount of the loans and accrued interest will become due and
payable. If the employee holds the shares of Common Stock purchased under the
Plan for three to five years, he or she will be entitled to 100% of any gains
from a sale of the shares, and the Company will reduce the balance amount of its
loan to the employee by 50% of the losses from such a sale or transfer. If the
employee holds the shares of Common Stock for less than three years, he or she
will be responsible for 100% of any losses, but entitled to only 50% of any
gains, from such a sale or transfer. At December 31, 1999, the total original
principal amount of the loans to Mr. Johnsen and Bartholomew F. Palmisano, Jr.
remained outstanding.
The Company leases approximately 5,900 square feet of office space in three
different office suites located in Ponte Vedra Beach, Florida from a limited
partnership of which the general partner is a corporation controlled by Dr.
Gasper Lazzara, Jr., the Chairman of the Board and Co-Chief Executive Officer of
the Company, pursuant to a lease agreement providing for rental payments of
approximately $9,480 per month. During 1999, the Company paid approximately
$47,401 in rent under this lease. The term of this lease agreement expires on
May 31, 2000.
Moore, Walters, Shoenfelt & Thompson, a law firm of which Edward J.
Walters, Jr., a director of the Company, is a partner, provided certain legal
services to the Company during 1999, and may provide additional legal services
to the Company in the future.
GENERAL INFORMATION
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2001 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 15, 2000 in order to be included in the Company's proxy statement
and proxy for the Company's 2001 annual meeting of stockholders.
DISCRETIONARY AUTHORITY
As to any proposal(s) that a stockholder intends to present for
consideration by stockholders at the Company's 2001 annual meeting of
stockholders other than by including the proposal(s) in the Company's proxy
statement, the individuals named as proxies on the proxy card for the 2001
annual meeting may exercise their discretionary authority in voting such proxies
unless the Company receives notice of the matter(s) to be proposed not later
than February 28, 2001. Even if proper notice is received on or prior to
February 28, 2001, the individuals named as proxies on the proxy card for that
meeting may nevertheless exercise their discretionary authority in voting such
proxies with respect to such matter(s) by advising stockholders of the
proposal(s) and how the proxies intend to exercise their discretion to vote on
these matter(s), unless the
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<PAGE> 17
stockholder making the proposal(s) solicits proxies with respect to the
proposal(s) to the extent required by Rule 14a-4(c)(2) under the Securities
Exchange Act of 1934, as amended.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting other than that described in the accompanying Notice of Annual
Meeting. If other matters do properly come before the Annual Meeting, it is
intended that the persons named on the enclosed proxy card will vote on such
matters in accordance with the recommendation of the Board of Directors.
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 1999 Annual Report to Stockholders has been mailed
to all stockholders entitled to notice of and to vote at the Annual Meeting.
April 14, 2000
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<PAGE> 18
PROXY CARD
ORTHODONTIC CENTERS OF AMERICA, INC.
PROXY FOR 2000 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. ("OCA") to be held at the Doubletree
Hotel, 3838 North Causeway Boulevard, Metairie, Louisiana on Thursday, May 18,
2000, at 1:00 p.m. (Central 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 (i) FOR the election as Class III directors of the nominees named on this
card, (ii) FOR the ratification of the appointment of Ernst & Young LLP as
independent auditors of OCA and its subsidiaries for the year ending December
31, 2000 and (iii) in accordance with the recommendations of the Board of
Directors on any other matters that may properly come before the Annual Meeting.
(Continued on reverse side)
<PAGE> 19
1. Election of Class III Directors.
Nominees: Gasper Lazzara, Jr., D.D.S.
Bartholomew F. Palmisano, Sr.
FOR all nominees WITHHOLD
listed (except as AUTHORITY to vote
marked to the contrary for all nominees listed
below)
[ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee, write his
name or their names in the following space:
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young LLP as independent
auditors of OCA and its subsidiaries for the year ending December 31,
2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: , 2000
-------------------------------------------------------------------
Signature:
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- --------------------------------------------------------------------------------
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.
