SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by 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 Rule 14a-12
OPTICARE HEALTH SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, schedule or registration statement No.:
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3) Filing party:
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4) Date Filed:
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OPTICARE HEALTH SYSTEMS, INC.
87 GRANDVIEW AVENUE
WATERBURY, CONNECTICUT 06708
(203) 596-2236
April 15, 2004
To Our Stockholders:
On behalf of the Board of Directors of OptiCare Health Systems, Inc., I
cordially invite you to attend the 2004 Annual Meeting of Stockholders to be
held on Friday, May 7, 2004, at 12:00 p.m., local time, at Montammy Golf Club,
Route 9W, Alpine, New Jersey.
The accompanying Notice of Meeting and Proxy Statement cover the
details of the matters to be presented.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING, I URGE
THAT YOU PARTICIPATE BY COMPLETING AND RETURNING YOUR PROXY AS SOON AS POSSIBLE.
YOUR VOTE IS IMPORTANT AND WILL BE GREATLY APPRECIATED. YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU DECIDE TO ATTEND THE ANNUAL MEETING.
Cordially,
/s/ Dean J. Yimoyines
Dean J. Yimoyines, M.D.
Chairman of the Board and
Chief Executive Officer
OPTICARE HEALTH SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders (the "Meeting"), of OptiCare Health Systems, Inc. (the "Company"),
which will be held on Friday, May 7, 2004, at 12:00 p.m., local time, at
Montammy Golf Club, Route 9W, Alpine, New Jersey, for the following purposes:
1. To elect eight members to serve on the Board of Directors until
the next annual meeting of stockholders and until their successors
are duly elected and qualified (Proposal 1); and
2. To transact such other business as may properly be brought before
the Meeting.
Stockholders of record at the close of business on March 24, 2004 shall
be entitled to notice of and to vote at the Meeting. A copy of the Annual Report
of the Company for the year ended December 31, 2003 is being mailed to
stockholders along with the attached Proxy Statement.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF
YOU DECIDE TO ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Christopher J. Walls
Christopher J. Walls
Vice President, General Counsel and Secretary
April 15, 2004
OPTICARE HEALTH SYSTEMS, INC.
87 GRANDVIEW AVENUE
WATERBURY, CONNECTICUT 06708
(203) 596-2236
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2004
PROXY SOLICITATION AND GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy (the "Proxy Card")
are being furnished to the holders of (i) the common stock, par value $.001 per
share (the "Common Stock"), of OptiCare Health Systems, Inc., a Delaware
corporation (the "Company"), (ii) the Company's Series B 12.5% voting
convertible participating preferred stock (the "Series B Preferred Stock") and
(iii) the Company's Series C voting convertible preferred stock (the "Series C
Preferred Stock" and, together with the Common Stock and Series B Preferred
Stock, the "Voting Stock") in connection with the solicitation of proxies by the
Board of Directors (the "Board" or "Board of Directors") of the Company for use
at the 2004 Annual Meeting of Stockholders to be held on Friday, May 7, 2004, at
12:00 p.m., local time, at Montammy Golf Club, Route 9W, Alpine, New Jersey, and
at any adjournment or postponement thereof (the "Meeting"). This Proxy Statement
and the Proxy Card are first being sent to stockholders on or about April 15,
2004.
At the Meeting, holders of Voting Stock will be asked:
1. To elect eight members to serve on the Board of Directors
until the next annual meeting of stockholders and until
their successors are duly elected and qualified (Proposal 1);
and
2. To transact such other business as may properly be brought
before the Meeting.
The Board of Directors has fixed the close of business on March 24,
2004 (the "Record Date") as the record date for the determination of
stockholders entitled to notice of and to vote at the Meeting. Each holder of
Common Stock as of the Record Date shall be entitled to one vote for each share
of Common Stock held on all matters to come before the Meeting and may vote in
person or by proxy authorized in writing. Each holder of the Series B Preferred
Stock and Series C Preferred Stock shall be entitled to one vote for each share
of Common Stock into which such holder's shares are convertible.
Stockholders are requested to complete, sign, date and promptly return
the Proxy Card in the enclosed envelope. Voting Stock represented by properly
executed proxies received by the Company and not revoked prior to the Meeting
will be voted at the Meeting in accordance with instructions contained therein.
If the Proxy Card is signed and returned without instructions, the shares will
be voted FOR the election of each nominee for director named herein (Proposal
1). A stockholder who so desires may revoke his proxy at any time before it is
voted at the Meeting by: (i) delivering written notice to the Company
(attention: Corporate Secretary) prior to the Meeting; (ii)
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duly executing and delivering a proxy bearing a later date prior to the
Meeting; or (iii) casting a ballot at the Meeting. Attendance at the Meeting
will not in and of itself constitute a revocation of a proxy. The Chairman of
the Board and Chief Executive Officer will announce the closing of the polls
during the Meeting. Proxies must be received prior to the closing of the polls
in order to be counted.
Where a stockholder is not the record holder, such as where the shares
are held through a broker, nominee, fiduciary or other custodian, the
stockholder must provide voting instructions to the record holder of the shares
in accordance with the record holder's requirements in order to ensure the
shares are properly voted.
Stockholders who represent more than 50% of the voting power of the
Voting Stock outstanding must be present or represented by proxy in order to
constitute a quorum to conduct business at the Meeting. A list of eligible
voters will be available at the Meeting.
The Board of Directors knows of no other matters that are to be brought
before the Meeting other than as set forth in the Notice of Meeting and this
Proxy Statement. If any other matters properly come before the Meeting, the
persons named in the enclosed Proxy Card or their substitutes will vote in
accordance with their best judgment on such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Only stockholders as of the close of business on the Record Date are
entitled to notice of, and to vote at, the Meeting. As of the Record Date, there
were 30,386,061 shares of Common Stock outstanding and entitled to vote, with
each share entitled to one vote, 41,396,255 shares of common stock issuable upon
conversion of the 3,204,960 outstanding shares and related accrued dividends of
Series B Preferred Stock and 20,307,900 shares of common stock issuable upon
conversion of 406,158 outstanding shares of Series C Preferred Stock. Each share
of Series B Preferred Stock entitles the holder to one vote for each of the ten
shares of common stock into which it is convertible and each share of Series C
Preferred Stock entitles the holder to one vote for each of the 50 shares of
common stock into which it is convertible. Accordingly, the total number of
votes which may be cast at the meeting is 92,090,216.
REQUIRED VOTES
The affirmative vote of a plurality of the votes cast in person or by
proxy is necessary for the election of directors (Proposal 1).
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from beneficial owners. If
specific instructions are not received, brokers may be precluded from exercising
their discretion, depending on the type of proposal involved. Brokers have
discretionary authority to vote shares for which they do not receive
instructions from beneficial owners on Proposals 1. Shares as to which brokers
have not received instructions from beneficial owners and either do not have
discretionary authority or have not exercised discretionary authority are
considered "broker non-votes." Broker non-votes will be counted for purposes of
determining whether there is a quorum.
Votes at the Meeting will be tabulated by an inspector of elections
appointed by the Company or the Company's transfer agent. Since the affirmative
vote of a plurality of votes cast is required for the election of directors
(Proposal 1), abstentions, broker non-votes and other unvoted shares will have
no effect on the outcome of such election.
Palisade Concentrated Equity Partnership, L.P. ("Palisade"), which, as
of the Record Date owned 19,375,000 shares of Common Stock, 2,880,600 shares of
Series B Preferred Stock and 403,256 shares of Series C Preferred Stock,
representing in the aggregate approximately 83% of the Voting Stock, has advised
the Company that it intends to vote its shares FOR the approval of Proposal 1.
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PROXY SOLICITATION
The Company will bear the costs of the solicitation of proxies for the
Meeting. Directors, officers and employees of the Company may solicit proxies
from stockholders by mail, telephone, e-mail, personal interview or otherwise.
Such directors, officers and employees will not receive additional compensation
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Brokers, nominees, fiduciaries and other custodians have been
requested to forward soliciting material to the beneficial owners of Common
Stock held of record by them, and such custodians will be reimbursed for their
reasonable expenses.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE VOTING
STOCK BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE PRESENT
AT THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY CARD TO
ENSURE THAT YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT THE MEETING
AND DESIRE TO DO SO, YOU MAY WITHDRAW YOUR PROXY CARD AND VOTE IN PERSON BY
GIVING WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. PLEASE RETURN YOUR
EXECUTED PROXY CARD PROMPTLY.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, there were 30,386,061 shares of the Company's
Common Stock outstanding and entitled to vote. In addition, there were 3,204,960
shares of Series B Preferred Stock outstanding entitled to voting power
equivalent to an aggregate of 41,396,255 shares of Common Stock (i.e., one vote
for each of the ten shares of Common Stock into which a share of Series B
Preferred Stock and related accrued dividends are convertible) and 406,158
shares of Series C Preferred Stock outstanding entitled to voting power
equivalent to an aggregate of 20,307,900 shares of Common Stock (i.e., one vote
for each of the 50 shares of Common Stock into which a share of Series C
Preferred Stock is convertible). Therefore, as of the Record Date, the aggregate
voting power of the outstanding Common Stock, Series B Preferred Stock and
Series C Preferred Stock which were entitled to notice of, and to vote at, the
Meeting is equivalent to 92,090,216 shares of Common Stock.
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of the outstanding Voting Stock
by: (i) each person who is known by the Company to own 5% or more of any class
of the Company's Voting Stock (the holdings of certain unrelated entities listed
below are based on shareholdings disclosed in their public filings), (ii) each
of the Company's current directors and nominees for the Board of Directors,
(iii) each Named Executive Officer set forth in the Summary Compensation Table
on page 11 and (iv) all of the Company's current executive officers and
directors as a group. Unless otherwise indicated, each of the stockholders shown
in the table below has sole voting and investment power with respect to the
shares beneficially owned. Unless otherwise indicated, the address of each
person named in the table below is c/o OptiCare Health Systems, Inc., 87
Grandview Avenue, Waterbury, Connecticut 06708.
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NAMES OF EXECUTIVE OFFICERS, DIRECTORS, SERIES B PREFERRED SERIES C PREFERRED
NOMINEES AND 5% STOCKHOLDERS COMMON STOCK (1) STOCK (1)(2) STOCK (3)
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SHARES PERCENT SHARES PERCENT SHARES PERCENT
------ ------- ------ ------- ------ -------
Palisade Concentrated Equity Partnership, 77,144,516 87.5% 2,880,600 89.9% 403,256 99.3%
L.P. (2 - 4)
Dean J. Yimoyines, M.D., Chairman and 6,351,014 17.5% 324,360 10.1% 2,902 0.7%
Chief Executive Officer (2, 3, 5)
Nicholas Berggruen (6) 2,454,026 7.5% - - - -
Eric J. Bertrand, Director (7) 77,198,816 87.6% 2,880,600 89.9% 403,256 99.3%
William A. Blaskiewicz, Vice President and 217,655 * - - - -
Chief Financial Officer (8)
Norman S. Drubner, Esq., Director (9) 524,489 1.7% - - - -
Jason M. Harrold, President, Managed 170,479 * - - - -
Vision Division (10)
Mark S. Hoffman, Director (11) 77,144,516 87.5% 2,880,600 89.9% 403,256 99.3%
Richard L. Huber, Director (12) 200,000 * - - - -
Clark A. Johnson, Director 226,000 * - - - -
Melvin Meskin, Director (13) 190,000 * - - - -
Mark S. Newman, Director (14) 200,000 *
Christopher J. Walls, Esq., Vice President 143,750 * - - - -
and General Counsel (15)
Lance A. Wilkes, President and Chief 535,126 1.7% - - - -
Operating Officer (16)
All executive officers and directors as a 86,065,829 89.9% 3,204,960 100.0% 406,158 100.0%
group--13 persons. (2,3 and 17)
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* Less than 1%
(1) As used in this table, a beneficial owner of a security includes any person
who, directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise, has or shares (a) the power to vote, or direct
the voting of, such security or (b) investment power which includes the
power to dispose, or to direct the disposition of, such security. In
addition, a person is deemed to be the beneficial owner of a security if
that person has the right to acquire beneficial ownership of such security
within 60 days. Shares not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire them within 60 days upon
the exercise of an option are treated as outstanding for purposes of
determining beneficial ownership and the percent beneficially owned by such
individual and for the executive officers and directors as a group. The
percentage of outstanding Common Stock set forth opposite the name of each
stockholder has been determined in accordance with Securities and Exchange
Commission Rule 13d-3(d)(1), without regard to Common Stock acquirable
within 60 days hereafter under options, warrants, and convertible
securities beneficially owned by persons other than such stockholder.
(2) Each share of Series B Preferred Stock entitles the holder to one vote for
each of the ten shares of Common Stock into which it is convertible.
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(3) Each share of Series C Preferred Stock entitles the holder to one vote for
each 50 shares of Common Stock into which it is convertible.
(4) Common Stock beneficially owned by Palisade Concentrated Equity
Partnership, L.P. ("Palisade") consists of 19,375,000 shares of Common
Stock presently issued and outstanding; 400,000 shares of Common Stock
issuable upon exercise of warrants; 37,206,716 shares of Common Stock
issuable upon conversion of Series B Preferred Stock; and 20,162,800 shares
of Common Stock issuable upon conversion of Series C Preferred Stock.
Palisade may cast 76,744,516 votes at the Meeting, which represents 83.3%
of the Voting Stock. The address of Palisade is One Bridge Plaza, Suite
695, Fort Lee, NJ 07024.
(5) Includes 130,000 shares of Common Stock and 1,461,450 shares of Common
Stock issuable upon the exercise of outstanding options owned by Dr.
Yimoyines. Also includes the following securities held by Linda Yimoyines,
wife of Dr. Yimoyines: 374,925 shares of Common Stock; 4,189,539 shares of
Common Stock issuable upon conversion of Series B Preferred Stock; 145,100
shares of Common Stock issuable upon conversion of Series C Preferred
Stock; and 50,000 shares issuable upon exercise of warrants. Dr. Yimoyines
disclaims beneficial ownership of securities held by his wife. At the
Meeting, Dr. Yimoyines may cast an aggregate of 130,000 votes, representing
0.1% of the Voting Stock and Ms. Yimoyines may cast an aggregate of
4,709,564 votes, representing 5.1% of the Voting Stock.
(6) Consists of 2,300,000 shares of Common Stock issuable upon exercise of
warrants held by Medici I Investment Corp. and 154,026 shares of Common
Stock held by Alexander Enterprise Holdings Corp. Mr. Nicholas Berggruen
acts as an investment advisor to both Medici I Investment Corp. and
Alexander Enterprise. Mr. Berggruen disclaims beneficial ownership of such
shares. The address of Alexander Enterprise Holdings Corp. is: c/o Alpha
Investment Management, Inc., 499 Park Ave., 24th Floor, New York, NY 10022.
(7) Common Stock beneficially owned by Mr. Bertrand consists of 54,300 shares
of Common Stock held directly by Mr. Bertrand; 19,375,000 shares of Common
Stock owned by Palisade; 400,000 shares of Common Stock issuable upon
exercise of warrants held by Palisade; 37,206,716 shares of Common Stock
issuable upon conversion of Series B Preferred Stock owned by Palisade; and
20,162,800 shares of Common Stock issuable upon conversion of Series C
Preferred Stock owned by Palisade. Mr. Bertrand is a director of Palisade
Capital Management, LLC, an affiliate of Palisade.
(8) Includes 195,868 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Blaskiewicz.
(9) Includes 230,000 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Drubner.
(10) Consists of 170,479 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Harrold.
(11) Common Stock beneficially owned by Mr. Hoffman consists of 19,375,000
shares of Common Stock owned by Palisade; 400,000 shares of Common Stock
issuable upon exercise of warrants held by Palisade; 37,206,716 shares of
Common Stock issuable upon conversion of Series B Preferred Stock owned by
Palisade; and 20,162,800 shares of Common Stock issuable upon conversion of
Series C Preferred Stock owned by Palisade. Mr. Hoffman is a managing
director of Palisade Capital Management, LLC, an affiliate of Palisade.
(12) Consists of 200,000 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Huber.
(13) Includes 40,000 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Meskin.
(14) Consists of 200,000 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Newman.
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(15) Consists of 32,500 shares of common stock, 12,500 shares of restricted
common stock and 98,750 shares of Common Stock issuable upon the exercise
of outstanding options held by Mr. Walls.
(16) Includes 510,126 shares of Common Stock issuable upon the exercise of
outstanding options held by Mr. Wilkes.
(17) See Notes 4, 5 and 7 through 16. Also includes 108,500 shares of common
stock issuable upon the exercise of options held by an officer not included
in Named Executive Officers.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Amended and Restated By-laws
of the Company provide that the number of directors which shall constitute the
whole Board of Directors of the Company shall be fixed and determined by
resolution of the Board of Directors. Effective at the time and for the purposes
of the Meeting, the number of directors of the Company, as fixed by the Board of
Directors pursuant to the By-laws of the Company, will be eight.
Directors of the Company are elected annually at the annual meeting of
stockholders. Their respective terms of office continue until the next annual
meeting of stockholders and until their successors have been elected and
qualified in accordance with the Company's By-laws.
Pursuant to a restructure agreement among the Company, Palisade and
Dean J. Yimoyines, M.D. (the Chairman of the Board of Directors and Chief
Executive Officer of the Company), dated as of December 17, 2001, as amended on
January 5, 2002 and January 22, 2002, the Company has agreed that, so long as
Palisade owns more than 50% of the voting power of the Company, it shall have
the right to designate a majority of the Company's Board of Directors. Pursuant
to this provision, Messrs. Bertrand, Hoffman, Johnson, Meskin and Newman have
been nominated by the Board of Directors on the recommendation of Palisade.
Unless otherwise specified on the Proxy Cards, each Proxy Card received
will be voted FOR the election as directors of the eight nominees named below to
serve until the next annual meeting of stockholders and until their successors
shall have been duly elected and qualified. Each of the nominees has consented
to be named a nominee in the Proxy Statement and to serve as a director if
elected. Should any nominee become unable or unwilling to accept a nomination or
election, the proxies named in the enclosed Proxy Card will vote for the
election of an alternate nominee designated by the Board of Directors or will
vote for such lesser number of directors as may be prescribed by the Board of
Directors in accordance with the By-laws of the Company. The Board has no reason
to believe that any nominee will be unable or unwilling to serve.
The following Directors have been nominated for reelection to the
Board:
ERIC J. BERTRAND - Mr. Bertrand, age 31, a current Director who was
first elected on January 25, 2002, is a Director of Palisade Capital Management,
LLC, an affiliate of Palisade Concentrated Equity Partnership, L.P., where he
has held a series of positions of increasing responsibility since 1997. From
1996 to 1997, Mr. Bertrand held a position with Townsend Frew & Company, a
healthcare-focused investment banking boutique. From 1994 to 1996, he was with
Aetna, Inc.'s private equity group, focusing on middle market leveraged buy-outs
and larger private equity investments. Mr. Bertrand is a Director of U.S.
Vision, Control F-1 and Versura, Inc. He holds a Bachelor of Science in Business
Administration from Bryant College and a Master of Business Administration in
Finance and Entrepreneurship with a certificate in the Digital Economy from New
York University.
6
NORMAN S. DRUBNER, ESQ. - Mr. Drubner, age 64, a current Director who
was first elected on November 1, 2001, is senior partner in the law firm of
Drubner, Hartley & O'Connor, which he founded in 1971, and is the owner of
Drubner Industrials, a commercial real estate brokerage firm. Mr. Drubner has
been practicing law in Connecticut since 1963, specializing in real estate,
zoning, and commercial transactions. He is a member of the Connecticut Bar and
the Waterbury, Connecticut Bar Association. Mr. Drubner has been admitted to
practice before the U.S. District Court, District of Connecticut. He is a former
trustee of Teikyo Post University and was a Director of American Bank of
Connecticut from 1985 - 2001. Mr. Drubner holds a Bachelor of Arts degree from
Boston University and received his Juris Doctor degree from Columbia University
in 1963.
MARK S. HOFFMAN - Mr. Hoffman, age 43, a current Director who was first
elected on January 25, 2002, is a Managing Director of Palisade Capital
Management, LLC, an affiliate of Palisade Concentrated Equity Partnership, L.P.,
which he joined upon its formation in 1995. He is a Director of Refac and
Neurologix, publicly-traded companies, as well as several privately held
companies, including C3i, Marco Group and Marketing Technology Solutions.
Mr. Hoffman is a graduate of the Wharton School at the University of
Pennsylvania.
RICHARD L. HUBER - Mr. Huber, age 67, a current Director who was first
elected on July 16, 2002, is Chief Executive Officer of Norte Sur, a private
equity firm targeting Latin America. Mr. Huber is former Chairman, President and
Chief Executive Officer of Aetna, Inc., the Hartford, CT-based insurance
company, which he joined in 1995. At Aetna, Mr. Huber was responsible for a
number of strategic acquisitions, such as NYLCare, PruCare and USHealthcare,
making Aetna the largest healthcare insurer in the world. Prior to Aetna, Mr.
Huber had a 35-year career in banking, including four years as Vice Chairman and
Director of Continental Bank and senior management positions at Chase Manhattan
and Citibank. Mr. Huber serves as Director of Danielson Holding Company, a
publicly-traded company, and was a member of the Congressional International
Financial Institutions Advisory Commission. He is a former Coast Guard officer
and holds a Bachelor of Arts degree from Harvard College.
CLARK A. JOHNSON - Mr. Johnson, age 72, a current Director who was
first elected on May 21, 2002, is Chairman of PSS World Medical, Inc., a
national distributor of medical equipment and supplies to physicians, hospitals,
and nursing homes. Mr. Johnson served as Chairman and Chief Executive Officer of
Pier 1 Imports from March 1985 to June 1998. He is a Director of the following
public companies: MetroMedia International Group, Neurologix, Inc., and Refac.
Mr. Johnson owns a 5% preferred, non-voting equity interest in Palisade Capital
Management, LLC, an affiliate of Palisade Concentrated Equity Partnership, L.P.
MELVIN MESKIN - Mr. Meskin, age 59, a current Director who was first
elected on January 25, 2002, is Chairman of Refac, a publicly held company on
the American Stock Exchange. Mr. Meskin retired as Vice
President-Finance-National Operations of Verizon, the combined Bell Atlantic/GTE
telecommunications company. Mr. Meskin joined New York Telephone in 1970 and
held a variety of line and staff assignments with the company over a 31-year
career. In 1994, he was named Vice President-Finance and Treasurer for NYNEX
Telecommunications. When Bell Atlantic and NYNEX merged, he was appointed Vice
President-Finance and Comptroller of Bell Atlantic. Mr. Meskin is a member of
the Board of Trustees of the Post Graduate Center for Mental Health.
MARK S. NEWMAN - Mr. Newman, age 54, a current Director who was first
elected on May 21, 2002, is Chairman of the Board, President and Chief Executive
Officer of DRS Technologies, Inc., a publicly-traded company and a leading
supplier of defense electronics systems to government and commercial customers
worldwide. Mr. Newman joined DRS Technologies in 1973, served many years as its
Chief Financial Officer, was named a Director in 1988, became President and
Chief Executive Officer in 1994, and was elected Chairman of the Board in 1995.
Mr. Newman serves as Chairman of the American Electronics Association, and as a
Director of the New Jersey Technology Council, SSG Precision Optronics and the
Congoleum Corporation where he chairs the Audit Committee. He is a member of the
Board of Governors of the Aerospace Industries Association of America, and also
serves as a member of the Navy League of the United States, the National Defense
Industrial Association, the Association of the U.S. Army, and the American
Institute of Certified Public Accountants, among other professional
affiliations. Mr. Newman holds a Bachelor of Arts degree in Economics from the
State University of New York at Binghamton and a Master of Business
Administration from Pace University. He is also a C.P.A.
7
DEAN J. YIMOYINES, M.D. - Dr. Yimoyines, age 56, a current Director,
has served as Chairman of the Board and Chief Executive Officer of OptiCare
Health Systems, Inc. since August 13, 1999. Dr. Yimoyines also served as
President of OptiCare Health Systems, Inc. from August 13, 1999 to June 10,
2002. Dr. Yimoyines is a founder of OptiCare Eye Health Centers, Inc. and has
served as the Chairman, President and Chief Executive Officer of OptiCare Eye
Health Centers, Inc. since 1985. Dr. Yimoyines has been instrumental in the
development and implementation of the business of OptiCare Eye Health Centers,
Inc. for nearly 20 years. He graduated with distinction from the George
Washington School of Medicine. He completed his ophthalmology residency at the
Massachusetts Eye and Ear Infirmary, Harvard Medical School. Dr. Yimoyines
completed fellowship training in vitreoretinal surgery at the Retina Associates
in Boston. He is a graduate of the OPM (Owner / President Management) program at
Harvard Business School and is a Fellow of the American Academy of
Ophthalmology.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR
EACH OF THE ABOVE NAMED DIRECTOR NOMINEES.
INFORMATION CONCERNING MEETINGS OF THE BOARD OF DIRECTORS,
BOARD COMMITTEES AND DIRECTOR COMPENSATION
MEETINGS AND COMMITTEES
During 2003, the Board of Directors held five meetings and acted by
written consent on nine occasions. The Board of Directors has a standing Audit
Committee, a Compensation Committee and an Executive Committee. The Board
previously had a Stock Plan Committee, but this Committee was disbanded in 2001.
The Audit, Compensation and Executive Committees do not meet on a regular basis,
but only as circumstances require. During 2003, all of the directors then in
office attended at least 75% of the total number of meetings of the Board of
Directors and the Committees of the Board of Directors on which they served.
Each member of the Board of Directors is encouraged to attend each annual
meeting of our stockholders. Seven of our directors attended our annual meeting
of stockholders held in 2003.
Audit Committee
The functions of the Audit Committee are to recommend to the Board of
Directors the appointment of independent auditors for the Company, to analyze
the reports and recommendations of such auditors and to review the Company's
systems of internal controls. The Audit Committee also monitors the adequacy and
effectiveness of the Company's financial controls and reporting procedures. The
Audit Committee met four times during 2003 and acted by written consent on one
occasion. The Audit Committee is comprised of Messrs. Drubner, Huber and Newman
(Chairman). All members of the Audit Committee are "independent directors" as
required by the Securities and Exchange Commission and the applicable listing
standards of the American Stock Exchange. Mr. Newman qualifies as an "audit
committee financial expert" as required by the Securities and Exchange
Commission. The current charter of the Audit Committee, as adopted by the Board
of Directors on March 9, 2004, is set forth in Appendix A to this Proxy
Statement.
Compensation Committee
The Compensation Committee determines or recommends the compensation of
officers of the Company and approves and authorizes the execution of employment
agreements with officers and employees other than the chief executive officer.
The Compensation Committee met three times during the year ended December 31,
2003. The Compensation Committee currently consists of Messrs. Drubner, Huber
and Johnson (Chairman). At the beginning of 2003, the Compensation Committee
consisted of: Mr. Johnson; Mr. Bertrand, and Mr. Cornstein. Mr. Cornstein,
Chairman, resigned from the Board on May 19, 2003 and his seat as Chairman of
the Compensation Committee was then taken by Mr. Johnson; Mr. Drubner was
appointed to the Compensation Committee on May 19, 2003, replacing Mr.
Cornstein; and Mr. Bertrand relinquished his seat on the Compensation Committee
to Mr. Richard Huber on April 1, 2004.
8
Compensation Committee Interlocks and Insider Participation
Messrs. Bertrand, Drubner, and Johnson served on the Compensation
Committee during 2003. During 2003, no executive officer of the Company (i)
served as a member of the Compensation Committee (or other committee of the
Board of Directors performing similar functions or, in the absence of any such
committee, the Board of Directors) of another entity, one of whose executive
officers served on the Company's Compensation Committee, (ii) served as director
of another entity, one of whose executive officers served on the Company's
Compensation Committee, or (iii) served as member of the Compensation Committee
(or other committee of the Board of Directors performing similar functions or,
in the absence of any such committee, the Board of Directors) of another entity,
one of whose executive officers served as a director of the Company.
Executive Committee
The Executive Committee may exercise the powers and authority of the
Board of Directors in the management of the business and affairs of the Company
for operational matters with a monetary impact or exposure of less than $500,000
individually or in the aggregate. The Executive Committee was established on
March 19, 2002 and is currently comprised of Mr. Bertrand and Dr. Yimoyines. The
Executive Committee did not meet in 2003.
Nominating Committee
Our Board of Directors does not have a Nominating Committee or a
committee serving a similar function. Our Board of Directors as a whole
considers nominations for directors. We have no Nominating Committee because as
a "Controlled Company" within the rules of The American Stock Exchange we are
not required to have one, and accordingly we do not have a Nominating Committee
charter. Our Board of Directors will consider candidates recommended by
stockholders and from other sources such as directors or officers, third-party
search firms or other appropriate sources. In considering potential candidates,
our Board of Directors considers a candidate's personal integrity and sound
judgment, business and professional skills and experience, independence,
possible conflicts of interest, the extent to which the candidate would fill a
present need on the board and concern for the long-term interest of our
stockholders. If you would like our Board of Directors to consider a candidate
for nomination for election at our Annual Meeting of Stockholders to be held in
2005, the candidate's name and other required information must be received by
the Company no later than December 17, 2004, to be considered for inclusion in
the Proxy Statement and form of proxy for the 2005 Annual Meeting. You must send
together with the candidate's name and his or her consent to be nominated, the
information required regarding the election of a nominee for director pursuant
to Regulation 14A under the Securities Exchange Act of 1934. This information
should be sent to the Company's Corporate Secretary at OptiCare Health Systems,
Inc., 87 Grandview Avenue, Waterbury, Connecticut 06708.
Special Committee
In February 2003, the Company's Board of Directors formed a Special
Committee in connection with a proposed exchange transaction (the "Proposed
Transaction") whereby Palisade Concentrated Equity Partnership, L.P., the
Company's majority stockholder, and Linda Yimoyines, wife of the Company's Chief
Executive Officer, would exchange debt owed to them by the Company for stock of
the Company. The Board of Directors determined it to be in the best interests of
the Company to appoint a Special Committee of independent directors of the Board
of Directors for the purpose of considering, evaluating and negotiating the
Proposed Transaction. The Special Committee, which consisted of Messrs. Drubner,
Huber and Newman, met multiple times from February 2003 through May 2003 to
consider the Proposed Transaction, which was ultimately recommended by the
Special Committee and approved by the entire Board of Directors in May 2003.
Communicating with the Independent Directors
The Board of Directors does not have a formal policy with regard to
stockholder communications to the Board of Directors. The Board of Directors
will give appropriate attention to written communication that are
9
submitted by stockholders and will respond if and as appropriate. The Board of
Directors has delegated to the Corporate General Counsel and Secretary
responsibility for monitoring communications from stockholders and for providing
copies or summaries to the other directors as he considers appropriate.
Stockholders who wish to send communications on any topic to the Board of
Directors should address such communications to the Board of Directors of the
Company, in care of the Company's Corporate Secretary.
COMPENSATION OF DIRECTORS
Effective January 1, 2003, independent, non-employee directors of the
Company serving on the Board of Directors as of the first day of the calendar
year, receive an annual non-qualified stock option to purchase 30,000 shares of
the Company's Common Stock pursuant to the Company's Amended and Restated 2002
Stock Incentive Plan (the "2002 Stock Plan"). Independent, non-employee
directors serving as members of committees of the Board of Directors as of the
first day of the calendar year receive an annual non-qualified stock option to
purchase 10,000 shares of the Company's Common Stock, pursuant to the Company's
2002 Stock Plan, for each committee on which they serve. Options for both Board
and committee membership are exercisable starting on the last calendar day of
the calendar year provided the director is still serving on the Board of
Directors at that time at an exercise price equal to the fair market value of
the Common Stock on the date of grant. Directors who are also employees of the
Company do not receive any additional compensation for their service as
directors.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee assists the Board in overseeing and monitoring the
integrity of the Company's financial reporting process, its compliance with
legal and regulatory requirements and the quality of its internal and external
audit processes. The role and responsibilities of the Audit Committee are set
forth in a written Charter, which was adopted by the Board on March 9, 2004 and
set forth in Appendix A to this Proxy Statement. The Audit Committee reviews and
reassesses the Charter annually and recommends any changes to the Board for
approval. The Audit Committee is responsible for overseeing the Company's
overall financial reporting process. In fulfilling its responsibilities for the
financial statements for 2003, the Audit Committee took the following actions:
1. The Audit Committee has reviewed and discussed with management
the Company's audited financial statements for the year ended
December 31, 2003.
2. The Audit Committee has discussed with Deloitte & Touche LLP, the
Company's independent accountants, the matters required to be
discussed by Statement of Auditing Standards No. 61,
Communications with Audit Committees.
3. The Audit Committee has received the written disclosures and the
letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1, Independence Discussions with
Audit Committees, and has discussed with Deloitte & Touche LLP
their independence.
4. Based on the reviews and discussions referred to in paragraphs
(1) through (3) above, the Audit Committee recommended to the
Board of Directors of the Company that the audited financial
statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2003, for filing with the
Securities and Exchange Commission.
Respectfully submitted,
Norman S. Drubner, Esq.
Richard L. Huber
Mark S. Newman
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth information
concerning the annual and long-term compensation earned by the Company's chief
executive officer and each of the four other most highly compensated executive
officers of the Company whose annual salary and bonus during 2003 exceeded
$100,000 (collectively, the "Named Executive Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- ------------------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND BONUS COMPENSATION STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($)(3) ($) (4) AWARDS ($) OPTIONS (#) ($) (6)
------------------ ---- ---------- ------- ------- ---------- ----------- -------
Dean J. Yimoyines, M.D. 2003 345,000 93,500 50,506 - 100,000 26,663
Chairman of the Board of 2002 349,423 101,960 47,891 - 1,150,000 24,408
Directors and Chief 2001 410,000 50,000 41,108 - - 22,552
Executive Officer
William A. Blaskiewicz 2003 150,000 50,000 - - 20,000 4,133
Vice President and 2002 145,000 34,640 - - 250,000 3,812
Chief Financial Officer 2001 133,462 30,000 - - - 3,143
Jason M. Harrold 2003 180,000 14,200 - - 22,500 3,376
President of the Managed 2002 175,000 44,000 - - 150,000 2,985
Vision Division 2001 157,692 65,000 - - - 2,342
Christopher J. Walls (1) 2003 160,000 50,000 - - 20,000 3,673
Vice President and 2002 126,923 34,640 - 4,000 (5) 125,000 202
General Counsel
Lance A. Wilkes (2) 2003 216,000 53,250 - - 40,500 1,954
President and 2002 113,077 81,800 - - 1,000,000 108
Chief Operating Officer
(1) Mr. Walls was hired as Vice President and General Counsel in February 2002.
His annual base salary for 2002 was $150,000.
(2) Mr. Wilkes was hired as President and Chief Operating Officer in June 2002.
His annual base salary for 2002 was $210,000.
(3) Bonuses are awarded in the form cash and/or shares of the Company's Common
Stock. Awards of the Company's Common Stock are valued at the market price
as of the date of grant. The 2003 bonus includes a transaction bonus,
related to the acquisition of Wise Optical, and a performance bonus. The
transaction bonus was awarded in the form of shares of the Company's Common
Stock to: Dr. Yimoyines - 30,000 shares valued at $19,500; Mr. Blaskiewicz
- 20,000 shares valued at $13,000; Mr. Walls - 20,000 shares valued at
$13,000; and Mr. Wilkes - 25,000 shares valued at $16,250. The 2003
performance bonus was awarded in the form of cash and the Company's Common
Stock as follows: Dr. Yimoyines - $40,000 in cash and 50,000 common shares
valued at $34,000; Mr. Blaskiewicz - $20,000 in cash and 25,000 common
shares valued at $17,000; Mr. Harrold - $4,000
11
in cash and 15,000 common shares valued at $10,200; Mr. Walls - $20,000 in
cash and 25,000 common shares valued at $17,000; and Mr. Wilkes - $20,000
in cash and $25,000 common shares value at $17,000. Bonuses for 2002 were
in the form of cash, except for Dr. Yimoyines' which consisted of cash of
$36,960 and 100,000 common shares valued at $65,000.
(4) The amounts shown include insurance premiums paid the Company for
disability insurance on behalf of Dr. Yimoyines of $23,960 in 2003; $20,980
in 2002; and $16,231 in 2001.
(5) Represents an aggregate of 25,000 shares of restricted common stock valued
at the market price of the Company's Common Stock as of the date of grant.
Vested 25% on March 19, 2003 and 2004. Vesting 25% on March 19, 2005 and
2006.
(6) The amounts shown include, for the year ended December 31, 2003: (i)
matching contributions by the Company under a 401(k) retirement savings
plan maintained by the Company for each of Dr. Yimoyines ($4,000); Mr.
Blaskiewicz ($3,708); Mr. Harrold ($3,046); Mr. Walls ($3,219); and Mr.
Wilkes ($1,530); and (ii) insurance premiums paid by the Company for life
insurance on behalf of Dr. Yimoyines ($22,663); Mr. Blaskiewicz ($425); Mr.
Harrold ($330); Mr. Walls ($454); and Mr. Wilkes ($424).
OPTIONS GRANTED IN 2003
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF SHARES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION VALUE
NAME (#) FISCAL YEAR ($/SH) DATE ($) (2)
-------------------------------------------------------------------------------------------------------------
Dean J. Yimoyines, M.D. 100,000 (1) 16.2 % 0.65 2/28/13 $35,000
William A. Blaskiewicz 20,000 (1) 3.2 % 0.65 2/28/13 $7,000
Jason M. Harrold 22,500 (1) 3.6 % 0.65 2/28/13 $7,785
Christopher J. Walls 20,000 (1) 3.2 % 0.65 2/28/13 $7,000
Lance A. Wilkes 40,500 (1) 6.6 % 0.65 2/28/13 $14,175
(1) Vested 25% on February 28, 2004; Vesting 25% on: February 28, 2005,
February 28, 2006 and February 28, 2007.
(2) The estimated values reported are based on the Black-Scholes pricing model
with the following assumptions: risk free interest rate of 3.0%, stock
price volatility of 60%, no dividends and a holding period of five years.
The estimated values are not intended as a forecast of the future
appreciation in the price of the Common Stock. If the Common Stock does not
increase in value above the exercise price of the stock options, then the
grants described in the table will have no value. There is no assurance
that the value realized by an executive will be at or near the values
estimated.
12
AGGREGATE OPTION EXERCISES IN 2003 AND YEAR END OPTION VALUES
The following table contains certain information regarding options to
purchase Common Stock held as of December 31, 2003, by each of the Named
Executive Officers. None of the Named Executive Officers exercised stock options
during 2003.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/03 (#) AT 12/31/03 ($) (1)
----------------------------- ------------------------------
NON- NON-
NAME EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
---------------------------------------------------------------- ------------------------------
Dean J. Yimoyines, M.D. 1,273,950 587,500 $323,500 $276,500
William A. Blaskiewicz 128,368 157,500 $68,000 $84,200
Jason M. Harrold 127,354 103,750 $41,625 $51,100
Christopher J. Walls 62,500 82,500 $37,500 $39,700
Lance A. Wilkes 250,000 790,500 $75,000 $229,455
(1) The value of the in-the-money options was calculated as the difference
between the closing price of our Common Stock as reported on the American
Stock Exchange on December 31, 2003 and the exercise price of the options.
REPORT ON EXECUTIVE COMPENSATION
BY THE COMPENSATION COMMITTEE
COMPENSATION POLICY
The policy of the Compensation Committee is to determine or recommend
compensation of the Company's officers reflecting the contribution of such
officers to growth in revenue and earnings, the implementation of strategic
plans consistent with long term growth objectives and the enhancement of
stockholder value. Contributions to the specific corporate and business unit
objectives are evaluated in setting compensation policy, including growth in
revenue and earnings in the Company's three divisions, the development of new
business opportunities and other strategic initiatives. The Company's
compensation program consists of base salary, bonus and long-term incentive
compensation comprised of the award of stock options and restricted stock under
the Company's Amended and Restated 2002 Stock Incentive Plan and its 2003
Incentive Compensation Plan. Compensation decisions, other than base
compensation for executive officers with multi-year contracts, are generally
made on a calendar year basis.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During the year ended December 31, 2003, Dr. Yimoyines, the Chief
Executive Officer of the Company, received no compensation other than pursuant
to his employment agreement with the Company, which was approved by the
Compensation Committee and the Board of Directors of the Company during 1999.
However, in connection with the Company's Capital Restructuring Transactions in
January 2002, Dr. Yimoyines agreed in principle to an adjustment to his annual
base salary and guaranteed bonus, which, when later implemented, reduced that
salary from $410,000 to $335,000, effective March 4, 2002. Effective January 1,
2003, his annual base salary was increased to $345,000.
During 2003, under Dr. Yimoyines' leadership, the Company substantially
improved the profitability of its Consumer Vision Division, diversified the
revenue base of its Managed Vision Division, and added a $50 million eye care
products distribution business to its Distribution & Technology Division.
Operational and marketing improvements in Consumer Vision led to substantially
improved operating results; a promising direct-to-employer suite of products was
added by Managed Vision to reduce its reliance on a relatively small number of
large, wholesale contracts; in February 2003, Wise Optical, one of the leading
contact lens distributors in the U.S., was acquired by, and integrated into, the
Company under very challenging circumstances. In addition, during 2003, Dr.
13
Yimoyines was instrumental in the Company's achievement of settlements with many
of its former Health Services Organization affiliates, in keeping with the
Company's plans to exit from that sector and concentrate on more forward-looking
ventures. Dr. Yimoyines also led the Company through a bank debt restructuring
which resulted in more credit becoming available on better terms than the
Company previously experienced.
The Committee believes that Dr. Yimoyines has managed the Company
favorably in a changing and competitive business climate. He has contributed
substantially to growth in revenue, implementation of strategic plans consistent
with long term growth objectives and the enhancement of stockholder value. In
determining the amount of Dr. Yimoyines' bonus, the Committee assessed the end
of the year results against the qualitative and quantitative objective that had
been established at the start of the year and awarded Dr. Yimoyines his bonus
based on this assessment. Mr. Yimoyines' bonus was paid solely on the
achievement of qualitative objectives.
During 2003, the Board of Directors awarded stock options and stock to
Dr. Yimoyines and certain of the other executive officers and key employees of
the Company. The options and stock, which were awarded under terms of the
Amended and Restated 2002 Stock Incentive Plan and in connection with the
Company's acquisition of Wise Optical, were intended to: (1) align executive
interest with stockholder interest by creating a direct link between
compensation and stockholder return; (2) assure that executives maintain a
significant long-term interest in the Company's success; and (3) help retain key
employees in a competitive market.
Respectfully submitted,
Eric J. Bertrand
Norman S. Drubner, Esq.
Clark A. Johnson
14
PERFORMANCE GRAPH
The following graph compares the performance of an investment of
$100.00 in the Company's Common Stock with the performance of an investment of
$100.00 in the CRSP NASDAQ Health Index (a published industry index), and the
American Stock Exchange Composite Index, for the period from August 16, 1999
(the first day on which the Company's Common Stock was publicly traded on the
American Stock Exchange and the first trading day after the closing of the
mergers with PrimeVision Health, Inc. and OptiCare Eye Health Centers, Inc.)
through December 31, 2003. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
TOTAL RETURN PERFORMANCE
[GRAPH OMITTED]
PERIOD ENDING
---------- ----------------------------------- ----------- -----------
8/16/99 12/31/99 12/29/00 12/31/01 12/31/02 12/31/03
---------- ----------- ----------- ----------- ----------- -----------
OptiCare Health Systems, Inc. 100.00 50.91 7.27 6.30 15.33 30.66
CSRP Index for NASDAQ Health Services 100.00 89.20 122.50 132.40 114.10 174.48
AMEX Composite 100.00 118.09 109.53 101.95 83.33 112.79
15
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Key provisions of the employment agreements with the Named Executive
Officers are summarized below.
Dean J. Yimoyines, Chairman and Chief Executive Officer. The Company
entered into an employment agreement with Dr. Yimoyines on August 10, 1999. The
initial term of Dr. Yimoyines' employment agreement, which was three years,
expired August 13, 2002. Pursuant to its terms, the agreement was automatically
renewed for one year on August 13, 2002 and again on August 13, 2003. The
agreement is automatically renewable for additional one year terms unless either
party gives six months' notice. Dr. Yimoyines may terminate his employment
agreement without cause upon six months' notice. Under the terms of the
agreement, Dr. Yimoyines' annual base salary and guaranteed bonus was $410,000.
However, in connection with the Company's capital restructuring transactions,
Dr. Yimoyines agreed in principle to an adjustment to his annual base salary and
guaranteed bonus, which, when later implemented, reduced that salary and bonus
to $335,000. Effective January 1, 2003, his annual base salary and guaranteed
bonus was increased to $345,000. Dr. Yimoyines may receive performance-based
bonuses, as determined by the Board of Directors, of up to 100% of base salary
plus guaranteed bonus, subject to the achievement of goals established for each
calendar year by the Board of Directors or the Compensation Committee. Dr.
Yimoyines is entitled to a disability benefit consisting of full base salary and
guaranteed bonus for the first six months of a disability, and thereafter 65% of
base salary, guaranteed bonus and performance-based bonus earned as of the date
of disability and to a life insurance policy on his life in the amount of
$1,500,000 payable to a beneficiary designated by Dr. Yimoyines. If his
employment is terminated on account of disability or without cause by the
Company, Dr. Yimoyines shall receive a lump sum payment of the greater of
$500,000 or an amount equal to his total compensation for the year prior to
termination, plus continuation of all benefits for a period of three years after
termination. If: (a) during the three year period following a change in control,
Dr. Yimoyines' duties are materially diminished, his principal place of
employment is moved more than 50 miles, or his employment is terminated on
account of disability or by the Company without cause or by non-renewal of the
agreement, or (b) Dr. Yimoyines voluntarily terminates his employment during the
one year period following a change in control, then Dr. Yimoyines shall receive
severance pay equal to the greater of $500,000 or an amount equal to his total
compensation for the year ended prior to the change in control. If Dr.
Yimoyines' employment is not terminated at the Company's election, then: (1)
during the term of the agreement and for a period of 18 months after the date of
termination of employment, Dr. Yimoyines shall not engage in the practice of any
branch of ophthalmology or ophthalmic surgery in any capacity in Connecticut or
any portion of any other state where the Company actively conducts business; and
(2) for the 12-month period following termination, Dr. Yimoyines may not render
services to any organization which is engaged in: (i) researching, developing,
marketing or selling any eye wear or eye care product, process or service or
(ii) management of an ophthalmic medical practice which competes with any of the
Company's products, processes or services. It is the Company's expectation that
Dr. Yimoyines' employment agreement will be amended and extended, although,
other than Dr. Yimoyines' acceptance of a reduction in annual base salary and
guaranteed bonus, the agreement has not been so amended.
William A. Blaskiewicz, Vice President, Chief Financial Officer. Mr.
Blaskiewicz' employment agreement began on September 1, 2001, and continues
until terminated by either party. Effective January 1, 2003, his base annual
salary, excluding the cost of certain perquisites, is $150,000. As provided in
the Company's 2003 Incentive Compensation Plan, Mr. Blaskiewicz may receive
discretionary bonuses as authorized by the Board of Directors and as determined
by the Chief Executive Officer. Mr. Blaskiewicz may terminate the agreement for
any reason upon 90 days' notice. It shall be deemed a termination of the
agreement if, during the term of the agreement, the Company: (a) requires Mr.
Blaskiewicz to relocate permanently outside of Connecticut, (b) requires Mr.
Blaskiewicz to render services other than those customarily performed by chief
financial officers or (c) materially increases or decreases his duties or
responsibilities. In the event of a deemed termination, or if the Company
terminates Mr. Blaskiewicz' employment agreement without cause, then he shall
receive: (a) a severance payment equal to his base salary for 12 months from the
date of termination, and (b) payment for any benefits which are required to be
continued under COBRA during the 12 months from the date of termination.
Additionally, during the term of the agreement and for a period of 18 months
after termination, subject to certain exceptions, Mr. Blaskiewicz may not render
services directly or indirectly to any organization that competes with a
product, process or service of the Company.
16
Jason M. Harrold, President, Managed Vision Division. The Company
entered into an employment agreement with Mr. Harrold on July 1, 2000. The
initial term of this agreement was two years, but it is automatically renewable
for subsequent one year terms unless either party gives the other six months'
notice prior to the renewal date. Pursuant to its terms, on June 30, 2002, Mr.
Harrold's employment agreement was automatically renewed for one year to June
30, 2003, and on June 30, 2003 was renewed for one year to June 30, 2004.
Effective January 1, 2003, Mr. Harrold's annual base salary is $180,000. As
provided in the Company's 2003 Incentive Compensation Plan, Mr. Harrold may
receive discretionary bonuses of up to 100% of base salary, as authorized by the
Board of Directors and as determined by the Chief Executive Officer and Chief
Operating Officer. Mr. Harrold may terminate the agreement without cause upon
six months' notice and the Company may terminate without cause at any time upon
notice. If Mr. Harrold is terminated without cause, he is entitled to: (a) a
lump sum payment of 12 months' base salary, and (b) benefits for a 12-month
period. If Mr. Harrold becomes disabled, he is entitled to full base salary for
the first three months, and, thereafter, as allowed by a long-term disability
policy provided by the Company, 60% of base salary plus performance-based bonus
earned as of the date of disability. During the term of the agreement and for a
period of 18 months after termination, subject to certain exceptions, Mr.
Harrold may not render services directly or indirectly to any organization which
is engaged in: (i) the managed eye care business, (ii) the optical buying group
business, or (iii) the business of owning or managing the practice of
ophthalmologists, optometrists, opticians, ambulatory or refractive surgery
facilities or providing services to such organizations. If, during the one year
period following a change in control of the Company, Mr. Harrold's duties are
materially diminished, his principal place of employment is moved more than 50
miles, or his employment is terminated by the Company without cause or by
non-renewal of the agreement, he shall receive a lump sum payment equal to his
annual base salary.
Christopher J. Walls, Vice President and General Counsel. The Company
entered into an employment agreement with Mr. Walls on February 18, 2002. The
agreement continues until terminated by either party. Effective January 1, 2003,
Mr. Walls' annual base salary, excluding the cost of certain perquisites, is
$160,000. As provided in the Company's 2003 Incentive Compensation Plan, Mr.
Walls may receive discretionary bonuses as authorized by the Board of Directors
and as determined by the Chief Executive Officer. Following Board of Director
approval, Mr. Walls received, pursuant to the 2002 Stock Incentive Plan, options
to purchase up to 125,000 shares of the Company's Common Stock at an exercise
price of $0.16 per share, which options vest at the rate of 25% per year over
four years commencing March 19, 2003. Mr. Walls also received 25,000 shares of
restricted Common Stock, which shares vest at the rate of 25% per year over four
years commencing March 19, 2003. Mr. Walls may terminate the agreement for any
reason without notice. If the Company terminates Mr. Walls' employment agreement
without cause, then he shall receive: (a) a severance payment equal to his base
salary for 3 months from the date of termination, and (b) payment for any
benefits which are required to be continued under COBRA during such period as is
then mandated by law commencing with the date of termination. If the Company
terminates Mr. Walls' employment agreement without cause or in the event of a
change in control of the Company, Mr. Walls' stock option grant and restricted
stock grant shall become immediately vested.
Lance A. Wilkes, President and Chief Operating Officer. The Company
entered into an employment agreement with Mr. Wilkes on May 21, 2002. The
agreement continues until terminated by either party. Mr. Wilkes' employment
began on June 10, 2002. Effective January 1, 2003, Mr. Wilkes' annual base
salary, excluding the cost of certain perquisites, is $216,000. As provided in
the Company's 2003 Incentive Compensation Plan, Mr. Wilkes may receive
discretionary bonuses as authorized by the Board of Directors and as determined
by the Chief Executive Officer. Following Board of Director approval, Mr. Wilkes
received, pursuant to the Amended and Restated 2002 Stock Incentive Plan,
options to purchase up to 600,000 shares of the Company's Common Stock at an
exercise price of $0.26 per share; options to purchase up to 200,000 shares of
the Company's Common Stock at an exercise price equal to $1.00 per share; and
options to purchase up to 200,000 shares of the Company's Common Stock at an
exercise price equal to $2.00 per share, all of which options vest at the rate
of 25% per year over four years commencing June 27, 2003. If the Company
terminates Mr. Wilkes' employment agreement without cause, then he shall
receive: (a) a severance payment equal to his base salary for three months from
the date of termination, and (b) payment for any benefits which are required to
be continued under COBRA during such period as is then mandated by law
commencing with the date of termination. In the event of a change in control of
the Company, Mr. Wilkes' stock option grant shall become immediately vested.
During the term of the agreement and for a period of 18 months after
termination, subject to certain exceptions, Mr. Wilkes may not render services
directly or indirectly to any organization which is engaged in: (i) the managed
eye care business, (ii) the optical buying group business, or (iii) the business
of managing, owning or affiliating
17
with the practices of ophthalmologists, optometrists, opticians, ambulatory or
refractive surgery facilities or providing services to such facilities; and
shall not, without the prior written consent of the Company, render services to
any individual or organization which is engaged in researching, marketing or
selling any process or service which competes or would compete with a product,
process or service of the Company, its subsidiaries and affiliates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPTICARE, P.C. PROFESSIONAL SERVICES AND SUPPORT AGREEMENT
OptiCare Eye Health Centers, Inc. is party to a Professional Services
and Support Agreement, dated December 1, 1995 with OptiCare, P.C., a Connecticut
professional corporation. Dr. Yimoyines, the Chairman of the Board and Chief
Executive Officer of the Company, and a beneficial holder of 17.5% of the
Company's outstanding Voting Stock, is the sole stockholder of OptiCare, P.C.
Pursuant to that agreement, OptiCare, P.C. employs medical personnel and
performs all ophthalmology and optometry services at the Company's facilities in
Connecticut. The Company selects and provides the facilities at which the
services are performed and it is the exclusive provider of all administrative
and support services for the facilities for which OptiCare, P.C. provides
medical personnel and performs all ophthalmology and optometry services pursuant
to this agreement. The Company bills and receives payment for the services
rendered by the medical personnel of OptiCare, P.C., which totaled approximately
$17.0 million in 2003, and OptiCare P.C. pays its physicians compensation for
such medical services rendered, which totaled approximately $7.6 million in
2003. These amounts were included in the consolidated revenue and expense,
respectively, of the Company for the year ended December 31, 2003. The Company
owns all the rights to the "OptiCare" name and, under the terms of the
agreement, if the agreement with OptiCare, P.C. is terminated, OptiCare, P.C.
must change its name and discontinue using the OptiCare name. The agreement
expired on December 1, 2002, but automatically renews for successive two year
terms unless either party terminates the agreement at least 180 days before the
next renewal date.
CERTAIN LEASES
The Company, through its subsidiaries, was, during 2003, party to
certain leases with entities in which present or former officers of the Company
have ownership interests. All such leases which were in effect during all or
part of 2003 are listed below.
1. OptiCare Eye Health Centers, Inc. is the tenant under a Lease
Agreement dated September 1, 1995 with O.C. Realty Associates
Limited Partnership, as landlord. The leased premises are located
in New Milford, Connecticut and are used for the practice of
ophthalmology and optometry and incidental activities such as the
sale of eyeglasses and corrective lenses. The term of the lease
is 15 years. Dean J. Yimoyines, M.D., Chairman of the Board and
Chief Executive Officer of the Company and John Yimoyines,
brother of Dr. Yimoyines each owns a 4.11% interest in O.C.
Realty Associates Limited Partnership. In 2003, OptiCare Eye
Health Centers, Inc. paid $50,400 under the lease.
2. OptiCare Eye Health Centers, Inc. is the tenant under a Lease
Agreement dated September 1, 1995 with French's Mill Associates,
as landlord. The leased premises are located in Waterbury, CT and
are used for the practice of ophthalmology and optometry, an
ambulatory surgery center, and incidental activities such as the
sale of eyeglasses and corrective lenses. The term of the lease
is fifteen years. In addition, OptiCare Eye Health Centers, Inc.
pays all taxes, assessments, utilities and insurance related to
the property being leased. Linda Yimoyines, wife of Dr.
Yimoyines, and John Yimoyines each owns a 14.28% interest in
French's Mill Associates. In 2003, OptiCare Eye Health Centers,
Inc. paid $779,102 under the lease.
3. OptiCare Eye Health Centers, Inc. is the tenant under a Lease
dated September 30, 1997 with French's Mill Associates II, LLP,
as landlord. The leased premises are located in Waterbury, CT and
are the location of the Company's main headquarters. The term of
the lease is fifteen years. Linda Yimoyines and John Yimoyines
each own a 12.5% interest in French's Mill Associates II, LLP. In
2003, OptiCare Eye Health Centers, Inc. paid $166,026 under the
lease.
18
4. OptiCare Eye Health Centers, Inc. is also the tenant under a
second Lease Agreement dated September 1, 1995 with French's Mill
Associates II, L.L.P. as landlord. The leased premises are
located in Waterbury, CT and are also part of the Company's main
headquarters. The term of the lease is fifteen years. In
addition, OptiCare Eye Health Centers, Inc. pays all taxes,
assessments, utilities and insurance related to the property
being leased. Linda Yimoyines and John Yimoyines each own a 12.5%
interest in French's Mill Associates II, LLP. In 2003, OptiCare
Eye Health Centers, Inc. paid $63,151 under the lease.
5. O.N.B. Associates owns approximately a 25% interest in Cross
Street Medical Building Partnership, the landlord under a lease
dated March 1, 2001. The leased premises are located in Norwalk,
CT and are used for the practice of ophthalmology and optometry
and incidental activities such as the sale of eyeglasses and
corrective lenses. The term of the lease is five years Linda
Yimoyines and John Yimoyines each own an 11% interest in O.N.B.
Associates. In 2003, OptiCare Eye Health Centers, Inc. paid
$127,710 under the lease.
6. PrimeVision Health, Inc., as a result of a merger with Cohen
Systems, Inc. (now known as CC Systems), is a tenant under a
Lease Agreement with Stephen Cohen, an officer of the Company,
and Bente Jensen, Mr. Cohen's wife. The leased premises are
located in Largo, FL and are used as the office for CC Systems'
operations. The lease term is five years beginning October 1,
1999. In 2003, PrimeVision Health, Inc. paid $27,216 under the
lease.
A subsidiary of the Company remains a guarantor with respect to two
leases where the lessee is an entity owned by Drs. Harrold and Barker, two
former officers of the Company. The leased premises are used for the practice of
optometry and for the sale of eyeglasses and corrective lenses and expire in
2005. Aggregate annual rent under the leases is $194,392. Each of the guarantees
and its underlying lease involved the professional optometry practice locations
and retail optical business the Company owned or operated in the State of North
Carolina which were sold to Optometric Eye Care Center, P.A. in August 2002.
Although, in connection with that sale, Optometric Eye Care Center, P.A. assumed
from the Company any obligations the Company or its subsidiaries or affiliates
may have had as lessee under those leases, Optometric Eye Care Center, P.A. and
the Company were unable to obtain landlord consent to the assignment of the
Company's guarantees with respect to the leases.
CONSULTING AGREEMENTS
In June 2002, the Company entered into a consulting agreement with
Melvin Meskin, a director of the Company. The consulting agreement expired on
February 28, 2003 and a new agreement was entered into effective March 1, 2003.
The March 1, 2003 agreement is still in effect as it provides for continuation
under the same terms unless either party provides 30 days prior written notice
of a desire to terminate. Such notice of termination has not been tendered or
received by either party. In 2003 the Company had paid an aggregate of $68,000
to Mr. Meskin in consideration of consulting services under these agreements.
CONVERSION OF LOANS TO SERIES C PREFERRED STOCK
In January 2002, Linda Yimoyines, wife of Dr. Yimoyines, participated
in the January 2002 capital restructuring of the Company by lending the Company
$100,000 on a subordinated basis. On May 12, 2003, Ms. Yimoyines exchanged the
entire amount of principal and interest due to her under that loan, totaling
approximately $116,000 for 2,902 shares of Series C Preferred Stock.
Messrs. Bertrand and Hoffman, directors of the Company, are also
officers of Palisade Capital Management, LLC, an affiliate of Palisade
Concentrated Equity Partnership, LP ("Palisade"). Palisade, a holder of
approximately 64% of the Common Stock of the Company and which now holds
approximately 83% of the voting power of the Voting Stock of the Company, also
participated in the January 2002 capital restructuring by lending the Company
$13,900,0000 on a subordinated basis. On May 12, 2003, Palisade exchanged the
entire amount of principal and interest due to them under that loan, totaling an
aggregate of approximately $16,135,000, for a total of 403,256 shares of Series
C Preferred Stock.
19
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present any other matter for action at the Meeting other than as set
forth in the Notice of Annual Meeting and this Proxy Statement. If any other
matters properly come before the Meeting, it is intended that the shares
represented by the proxies will be voted, in the absence of contrary
instructions, in the discretion of the persons named in the proxy.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP has served as the Company's independent
accountants since August 1999. Deloitte & Touch audited the Company's financial
statements for the fiscal year ended December 31, 2003, and one or more
representatives of Deloitte & Touche will be present at the Annual Meeting to
respond to questions and make a statement should they desire to do so.
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional audit services
rendered by Deloitte & Touche LLP for the audit of the Company's consolidated
financial statements for the years ended December 31, 2002, and December 31,
2003, and fees billed for other services rendered by Deloitte & Touche LLP
during those periods:
2003 2002
--------- ---------
Audit fees $ 392,150 $ 343,000
Audit-related fees 120,425 73,988
Tax fees 9,075 3,800
--------- ---------
Total $ 521,650 $ 420,788
========= =========
Audit Fees. Consists of fees the Company paid Deloitte & Touche LLP for
professional services for the audit of the Company's consolidated financial
statements included in the Company's Annual Report on Form 10-K and review of
financial statements included in the Company's Quarterly Reports on Form 10-Q,
or for services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements.
Audit-related fees. Represents fees billed by Deloitte & Touche LLP for
assurance and related services that are reasonably related to the performance of
the audit or review of the Company's financial statements and primarily
represent services provided in connection with the Company's acquisition of Wise
Optical in 2003 and capital restructuring and discontinued operations in 2002.
Tax fees. Consists of fees for tax compliance, tax advice, and tax
planning.
All other fees. For the fiscal years ended December 31, 2003 and 2002,
there were no services provided by Deloitte & Touche LLP in this category.
The Audit Committee has considered whether the provision of non-audit
services by Deloitte & Touche LLP is compatible with maintaining their
independence and has concluded that it is.
The Audit Committee approves in advance all audit and permissible
non-audit services (including the fees and terms thereof) to be provided to the
Company and its subsidiaries by its independent accountants, subject to the de
minimus exceptions for non-audit services under the Securities Exchange Act of
1934.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who own more than 10% of the Company's capital stock to file
20
with the Securities and Exchange Commission, the American Stock Exchange and the
Company reports regarding their ownership of the Company's capital stock. Based
solely upon reports and representations submitted by the directors, executive
officers and holders of more than 10% of the Company's capital stock, the
Company believes that all persons filed the required reports during the year
ended December 31, 2003.
ANNUAL REPORT
A copy of the Company's 2003 Annual Report to Stockholders is being
mailed to stockholders along with this Proxy Statement. Any stockholder who has
not received a copy of the 2003 Annual Report to Stockholders and wishes to do
so should contact the Company's Corporate Secretary by mail at OptiCare Health
Systems, Inc., 87 Grandview Avenue, Waterbury, Connecticut 06708 or by telephone
at (203) 596-2236.
FORM 10-K
The Company will provide, without charge, to each stockholder as of the
Record Date, on the written request of the stockholder, a copy of the Company's
Annual Report on Form 10-K for the year ended December 31, 2003, including the
financial statements and schedules, as filed with the Securities and Exchange
Commission. Stockholders should direct the written request to the Company's
Corporate Secretary at OptiCare Health Systems, Inc., 87 Grandview Avenue,
Waterbury, Connecticut 06708 or by telephone at (203) 596-2236.
PROPOSALS BY STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the Annual
Meeting of Stockholders to be held in 2005 must be received by the Company no
later than December 17, 2004, to be considered for inclusion in the Proxy
Statement and form of proxy for the 2005 Annual Meeting. Proposals must comply
with Rule 14a-8 promulgated by the Securities and Exchange Commission pursuant
to the Exchange Act. If the Company does not receive notice of any matter to be
considered for presentation at the 2005 Annual Meeting, although not included in
the proxy statement, by March 1, 2005, management proxies may confer
discretionary authority to vote on the matters presented at the 2005 Annual
Meeting by a stockholder in accordance with Rule 14a-4 under the Securities
Exchange Act of 1934, as amended. All stockholder proposals should be sent to
the Company's Corporate Secretary at OptiCare Heath Systems, Inc. 87 Grandview
Avenue, Waterbury, Connecticut 06708.
FOR THE BOARD OF DIRECTORS
Christopher J. Walls
Vice President, General Counsel and Secretary
21
APPENDIX A
AUDIT COMMITTEE CHARTER
FOR
OPTICARE HEALTH SYSTEMS, INC.
PURPOSE OF COMMITTEE
THE PURPOSE OF THE AUDIT COMMITTEE (THE "Committee") OF THE BOARD OF DIRECTORS
(THE "Board") OF OPTICARE HEALTH SYSTEMS, INC. (THE "Company") IS TO ASSIST THE
BOARD IN FULFILLING THE BOARD'S RESPONSIBILITIES TO THE COMPANY'S STOCKHOLDERS
WITH OVERSIGHT OF (I) THE RELIABILITY AND INTEGRITY OF THE COMPANY'S ACCOUNTING
POLICIES, FINANCIAL REPORTING, DISCLOSURE PRACTICES AND FINANCIAL STATEMENTS,
(II) THE COMPANY'S COMPLIANCE WITH LEGAL, REGULATORY AND CORPORATE REQUIREMENTS,
(III) THE COMPANY'S INDEPENDENT AUDITOR'S QUALIFICATIONS AND INDEPENDENCE, AND
(IV) THE PERFORMANCE OF THE COMPANY'S INTERNAL CONTROLS OVER FINANCIAL
REPORTING, INTERNAL AUDIT FUNCTIONS AND INDEPENDENT AUDITORS.
The function of the Committee is oversight. It is not the Committee's
responsibility to certify the Company's financial statements or to guarantee the
report of the independent auditor. The Company's management is responsible for
the (i) preparation, presentation and integrity of the Company's financial
statements, (ii) maintenance of appropriate accounting and financial reporting
principles and policies, and (iii) maintenance of internal controls over
financial reporting designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditor is responsible for
planning and carrying out a proper audit and reviews. In fulfilling their
responsibilities hereunder, it is recognized that members of the Committee are
not full-time employees of the Company. As such, it is not the duty or
responsibility of the Committee or its members to conduct auditing or accounting
reviews or procedures, except to the extent described below under "Performance
Evaluations". Each member of the Committee shall be entitled to rely on (i) the
integrity of those persons and organizations within and outside the Company from
which it receives information, (ii) the accuracy of the financial and other
information provided to the Committee by such persons and organizations absent
actual knowledge to the contrary (which shall be promptly reported to the
Company's Board) and (iii) representations made by management or the independent
auditor as to any non-audit services provided by the independent auditor to the
Company. In addition, the evaluation of the Company's financial statements by
the Committee is not of the same scope as, and does not involve the extent of
detail as, audits performed by the independent auditor, nor does the Committee's
evaluation substitute for the responsibilities of the Company's management for
preparing, or the independent auditor for auditing, the financial statements.
A-1
COMMITTEE DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Committee are to:
1. Retain and terminate the Company's independent auditors (subject,
if applicable, to shareholder ratification). The Committee shall
have the sole authority to approve in advance all audit
engagement fees and terms, as well as all non-audit engagements
with the independent auditor except that the Committee need not
pre-approve non-audit services that are determined to be de
minimis under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT").
2. On a periodic basis, receive from, and review and discuss with,
the independent auditor a formal written statement delineating
all relationships between the independent auditor and the Company
consistent with Independence Standards Board Standard 1. After
reviewing the foregoing reports and the independent auditor's
work throughout the year, the Committee shall evaluate the
auditor's qualifications, performance and independence, with
discussion with the Board, if necessary. This evaluation shall
include the review and evaluation of the lead partner of the
independent auditor and the appropriateness of rotating the audit
firm itself (included in such review, ensuring that the lead or
coordinating audit partner having primary responsibility for the
audit, or the audit partner responsible for reviewing the audit
does not perform audit services for the Company for more than
five (5) consecutive fiscal years). In making its evaluation, the
Committee shall take into account the opinions of management and
the Company's internal auditors (or other personnel responsible
for the internal audit function). The Committee shall present its
conclusions with respect to the independent auditor to the full
Board and make recommendations, if necessary, that the Board take
appropriate action to satisfy itself of the auditor's
independence and other necessary actions.
3. Meet and discuss prior to their filing the annual audited
financial statements and Forms 10-K and quarterly financial
statements and Forms 10-Q with management and the independent
auditor.
4. As appropriate, obtain advice and assistance from and retain
outside legal, accounting or other advisors, without needing to
seek approval for the retention of such advisors from the Board,
which will be fully paid by the Company. The Committee shall
determine appropriate compensation for any advisor retained by
the Committee.
5. Review with the independent auditor any audit problems or
difficulties and management's response. The Committee must
regularly review with the independent auditor any difficulties
the auditor encountered in the course of the audit work,
including any restrictions on the scope of the independent
auditor's activities or on access to requested information, and
any significant disagreements with management. The review should
also include discussion of the responsibilities, budget and
staffing of the Company's internal audit function. In
consultation with the independent auditor and the internal
auditors, review the integrity of the Company's financial
reporting processes, both internal and external. The Committee
shall report regularly to and review with the full Board any
issues that arise with respect to the quality or integrity of the
Company's financial statements, compliance with legal or
regulatory requirements, the performance and independence of the
independent auditor, or the performance of the internal audit
function.
6. Set clear hiring policies for the hiring by the Company of
employees or former employees of the independent auditors.
7. Establish procedures for (i) the receipt, retention and treatment
of complaints received by the Company, regarding accounting,
internal accounting controls, or auditing matters and (ii) the
confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
A-2
8. Report regularly to the Board. The Committee should review with
the full Board any issues that arise with respect to the quality
or integrity of the Company's financial statements, the Company's
compliance with legal or regulatory requirements, the performance
and independence of the Company's independent auditors, or the
performance of the internal audit function.
9. Review, with the Company's counsel, any legal matter that could
have a significant impact on the Company's financial statements.
10. Maintain minutes or other records of meetings and activities of
the Committee.
11. Review and approve, prior to the Company's entry into any such
transactions, all transactions between the Company and its
executive officers, members of its Board, beneficial holders of
more than 5% of the Company's securities, immediate family
members of any of the foregoing persons, and any other parties
whom the Board determines may be considered to be related
parties.
12. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
COMMITTEE MEMBERSHIP
The Committee shall consist of at least three members of the Board, each of whom
shall meet the independence and experience requirements of Section 10A(m)(3) of
the Exchange Act, the rules and regulations promulgated thereunder, the rules of
the American Stock Exchange ("AMEX") and any other securities exchange on which
the Company's securities are listed, as such laws, rules and regulations may be
amended from time to time; provided, that any non-independent director serving
on the Committee pursuant to the "exceptional and limited circumstances"
exception available under AMEX rules may not serve on the Committee for more
than two (2) years; and provided, further, that such non-independent director
may not be permitted to serve as chairperson of the Committee. At least one
member of the Committee shall be financially sophisticated as defined by having
experience in finance or accounting, professional certification in accounting,
or any other comparable experience or background, such as being or having been a
chief executive officer or chief financial officer or other senior officer with
financial oversight responsibilities. The Company shall disclose, in its annual
report, whether or not, and if not, the reasons therefor, the Committee includes
at least one Committee Financial Expert, as defined by the Exchange Act.
The members of the Committee shall be appointed by the Board, and shall serve at
the pleasure of the Board for such term or terms as the Board may determine.
The Compensation to be paid by the Company to any Committee member must consist
solely of director's fees; provided, however, that pension or other deferred
compensation that is not contingent on future service to the Company will not be
deemed to violate this requirement. Committee members may, however, receive
greater fees than those received for Board service by other Board members, in
light of the heightened responsibilities to the Company.
COMMITTEE STRUCTURE AND OPERATIONS
The Committee shall meet at least on a quarterly basis. A majority of the
Committee shall constitute a quorum. The Board will designate a member of the
Committee as its chairperson. The Committee may act by a majority of the members
present at a meeting of the Committee. In the event of a tie vote on any issue,
the chairperson's vote shall decide the issue. The Committee shall meet in
person or telephonically at least four times a year at a time and place
determined by the Committee chairperson, with further meetings to occur when
deemed necessary or desirable by the Committee or its chairperson. The Committee
may delegate some or all of its duties to a subcommittee comprising one or more
members of the Committee (but in the instance where such delegation relates to
the pre-approval of non-audit services, the decisions of any such subcommittee
to which such authority is delegated shall be presented to the full Committee at
each of its scheduled meetings). The Committee may ask members of management or
others
A-3
whose advice and counsel are relevant to the issues then being considered by the
Committee to attend any meetings and to provide such pertinent information as
the Committee may request and as part of its job to foster open communication,
the Committee should meet separately, at least annually, with management, the
director of the internal auditing department and the independent auditor to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or at least its chairperson
should meet separately with the independent auditor, and management quarterly to
review the Company's financial statements in accordance with the Committee's
duties and responsibilities set forth above.
PERFORMANCE EVALUATION
The Committee shall review the adequacy of this charter and evaluate its
performance hereunder at least annually and present such report to the full
Board. Such report shall include any recommended changes to this charter.
While the fundamental responsibility for the Company's financial statements and
disclosures rests with management and the independent auditor, the Committee
shall review and approve, if appropriate: (i) major issues regarding accounting
principles, and financial statement presentations, including any significant
changes in the Company's selection or application of accounting principles, and
major issues as to the adequacy of the Company's internal controls and any
special audit steps adopted in light of material control deficiencies; (ii)
analyses prepared by management and/or the independent auditor setting forth
significant financial reporting issues and judgments made in connection with the
preparation of the financial statements, including analyses of the effects of
using alternative methods under generally accepted accounting principles
("GAAP") on the financial statements and the treatment preferred by the
independent auditor; (iii) the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures, on the financial statements of the
Company; (iv) earnings press releases (paying particular attention to any use of
"pro forma," or "adjusted" non-GAAP, information), as well as financial
information and earnings guidance provided to analysts and rating agencies; and
(v) other material written communications between the independent auditor and
management of the Company, such as management letters or schedules of
adjustments.
RESOURCES AND AUTHORITY OF THE COMMITTEE
In discharging its oversight responsibilities, the Committee shall have
unrestricted access to the Company's management, books and records and the
authority to retain outside counsel, accountants or other consultants in the
Committee's sole discretion. The Committee may direct any officer of the
Company, the independent auditor and/or the Company's internal audit staff to
inquire into and report to the Committee on any matter.
Nothing contained in this charter is intended to, or should be construed as,
creating any responsibility or liability of the members of the Committee except
to the extent otherwise provided under applicable Delaware law which shall
continue to set the legal standard for the conduct of the members of the
Committee.
A-4
OPTICARE HEALTH SYSTEMS, INC.
87 GRANDVIEW AVENUE
WATERBURY, CONNECTICUT 06708
ANNUAL MEETING OF STOCKHOLDERS, MAY 7, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice and Proxy
Statement dated April 15, 2004 in connection with the 2004 Annual Meeting of
Stockholders and hereby appoints Dean J. Yimoyines and Christopher J. Walls, as
proxies each with full power to act alone and of substitution, and hereby
authorizes them to appear and vote as designated below, all shares of Common
Stock of OptiCare Health Systems, Inc. held of record by the undersigned on
March 24, 2004 at the Annual Meeting of Stockholders to be held on May 7, 2004
at 12:00 p.m. and any adjournments or postponements thereof and upon any and all
matters which may properly be brought before the meeting or any adjournments or
postponements thereof, thereby and hereby revokes all earlier proxies of the
undersigned.
The undersigned hereby directs this Proxy to be voted:
1. Election of directors:
For the election as directors of all nominees listed below [ ]
(except as marked to the contrary below)
or
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
Eric J. Bertrand
Norman S. Drubner, Esq.
Mark S. Hoffman
Richard L. Huber
Clark A. Johnson
Melvin Meskin
Mark S. Newman
Dean J. Yimoyines, M.D.
(Instructions: To withhold authority to vote for any of the above listed
nominees, please strike a line through that individual's name.)
2. In their discretion, the named proxies may vote on such other business
as may properly come before the Annual Meeting, or any adjournments or
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH
THE STOCKHOLDER'S SPECIFICATIONS ABOVE. THE PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE UNDERSIGNED.
Date: , 2004
------------ ---------------------------
Signature of Stockholder
---------------------------
Signature if held jointly
NOTE: PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR OTHER REPRESENTATIVE
CAPACITY, PLEASE GIVE FULL TITLE. IF SIGNING ON BEHALF OF A CORPORATION,
PARTNERSHIP OR OTHER LEGAL ENTITY, PLEASE SIGN IN CORPORATE, PARTNERSHIP OR
ENTITY NAME AND GIVE FULL TITLE.