SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS 240.14a-11(c) or SS 240.14a-12
Diversified Senior Services, Inc.
---------------------------------
(Name of Registrant as Specified in Its
Charter)
Joanne Ragan, Secretary
(Name of Person(s) Filing Proxy Statement)
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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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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[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
Notes:
DIVERSIFIED SENIOR SERVICES, INC.
915 West Fourth Street
Winston-Salem, North Carolina 27101
April 20, 2000
To our Shareholders:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders of
Diversified Senior Services, Inc. at 10:00 A.M., local time, on May 25, 2000, at
our corporate offices, 915 West Fourth Street, Winston-Salem, North Carolina.
The Notice of Meeting and Proxy Statement on the following pages describe the
matters to be presented at the meeting.
It is important that your shares be represented at this meeting to assure the
presence of a quorum. Whether or not your plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy in the enclosed envelope, as soon as possible. Your stock will be voted in
accordance with the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
William G. Benton
Chairman of the Board
DIVERSIFIED SENIOR SERVICES, INC.
915 West Fourth Street
Winston-Salem, North Carolina 27101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Diversified Senior Services, Inc. (the "Company") will be held at our corporate
offices, 915 West Fourth Street, Winston-Salem, North Carolina, on May 25, 2000,
at 10:00 A.M., local time, for the following purposes:
1. To elect one class of Directors for a term expiring in 2003;
2. To ratify the appointment of The Daniel Professional Group, Inc.
as independent accountants for the Company for the fiscal year
ending December 31, 2000;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
A Proxy Statement, form of Proxy and the Annual Report to Shareholders
of the Company for fiscal year ended December 31, 1999, including financial
statements (the "Annual Report), are enclosed herewith. Common Shareholders of
record at the close of business on March 31, 2000 will be entitled to notice of
and to vote at the meeting and any adjournment(s) thereof. The stock transfer
books of the Company will remain open between the record date and the date of
the meeting. At least 10 days prior to the meeting, a complete list of the
Shareholders entitled to vote will be available for inspection by any
Shareholder, for any purpose germane to the meeting, during ordinary business
hours, at the executive offices of the Company. Should you receive more than one
Proxy because your shares are registered in different names and addresses, each
Proxy should be signed and returned to assure that all your shares will be
voted. You may revoke your Proxy at any time prior to the meeting.
In the event there are not sufficient votes for a quorum or to approve
or ratify any of the foregoing proposals at the time of the meeting, the meeting
may be adjourned by a vote of the majority of the votes cast by the Shareholders
entitled to vote thereon.
The Board of Directors of Diversified Senior Services, Inc. hopes that
you will find it convenient to attend the meeting in person. In any event,
please mark, sign, date and return the enclosed proxy to make sure that your
shares are represented at the meeting. If you attend the meeting, you may vote
your stock personally even though you have sent in your proxy.
By Order of the Board of Directors,
JOANNE RAGAN
Secretary
Winston-Salem, North Carolina
April 20, 2000
PLEASE DATE, SIGN AND MAIL THE ACCOMPANYING FORM OF PROXY AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
DIVERSIFIED SENIOR SERVICES, INC.
915 West Fourth Street
Winston-Salem, North Carolina 27101
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held May 25, 2000
Your vote is very important. For this reason the Board of Directors is
requesting that you allow your Common Stock to be represented at the Annual
Meeting by the Proxies named in the enclosed Proxy Card. This Proxy Statement is
being sent to you in connection with this request and has been prepared for the
Board of Directors by the Company's management. The Proxy Statement is being
sent to Shareholders on or about April 20, 2000.
General Information About Voting
WHO CAN VOTE: You are entitled to vote your Common Stock if our records showed
that you held your stock as of March 31, 2000. At the close of business on March
31, 2000, 3,743,622 shares of Common Stock were outstanding and entitled to
vote. Each share of Common Stock has one vote. The enclosed Proxy Card shows the
number of shares that you are entitled to vote. Your individual vote is
confidential and will not be disclosed to third parties.
VOTING BY PROXY: If your Common Stock is held by a broker, bank or other
nominee, you will receive instructions from them that you must follow to have
your shares voted, If you hold your shares in your own name as a holder of
record, you may instruct the Proxies how to vote your Common Stock by signing,
dating and mailing the Proxy Card in the postage paid envelope included with
this Proxy Statement. Of course you can always come to the meeting and vote your
shares in person. If you give voting instructions on your Proxy Card, the
Proxies will vote your shares in accordance with those instructions. If you sign
and return your Proxy Card without giving specific voting instructions, your
shares will be voted as recommended by the Board of Directors. The Company is
not now aware of any other matters to be presented except for those described in
this Proxy Statement. If any matters not described in this Proxy Statement are
presented at the meeting, the Proxies will use their own judgment to determine
how to vote your shares. If the meeting is adjourned, the Proxies may vote your
shares on the new meeting date, unless you have revoked your proxy instructions.
HOW TO REVOKE PROXY INSTRUCTIONS: To revoke your proxy instructions, you must
either (1) inform the Secretary in writing before your shares have been voted by
the Proxies at the meeting, (2) deliver later proxy instructions or (3) attend
the meeting and vote your shares in person.
HOW VOTES ARE COUNTED: The Annual Meeting will be held if a majority of the
outstanding Common Stock entitled to vote is represented at the meeting. If you
have returned valid proxy instructions or attend the meeting in person, your
shares will be counted for the purpose of determining whether there is a quorum,
even if you wish to abstain from voting on some or all matters presented to the
meeting.
COST OF THIS PROXY SOLICITATION: The Company will pay the cost of the proxy
solicitation, which is expected to be the normal amount spent for a proxy
solicitation. The solicitation will be by mail. Certain officers and regular
employees of the Company may solicit proxies by letter, telephone and personal
interview. No additional compensation will be paid for these activities. The
Company will, upon request, reimburse brokers, banks and other nominees for
their expenses in sending proxy materials to their principals and obtaining
their proxies.
ATTENDING THE ANNUAL MEETING: The Annual Meeting will be held on Thursday, May
25, 2000 at 10:00 o'clock a.m. at our corporate offices, 915 West Fourth Street,
Winston-Salem, North Carolina. If you are a beneficial owner of Common Stock
held by a bank or a broker (i.e., in "street name") and you want to vote your
shares in person at the meeting, you will have to` get a proxy in your name from
the registered holder.
SHAREHOLDERS BENEFICIALLY OWNING MORE THAN 5% OF THE COMMON STOCK: The following
is a schedule of Common Stock and Common Stock equivalents beneficially owned as
of the dates indicated by each person known to the Company to be the beneficial
owner of more than five percent of the Common Stock. Unless otherwise indicated,
each of the named individuals and each member of the group has sole voting power
and sole investment power with respect to the shares shown.
- ---------------------- -------------------------------------- ---------------------------- --------------------
Amount And Percent
Name and Address of Nature of of
Type of Class Beneficial Owner Beneficial Owner Class
- ---------------------- -------------------------------------- ---------------------------- --------------------
Common Stock Taylor House Enterprises, Limited ("THE") 1,824,181 46.4%
(1) (2)..................................
Common Stock William G. Benton (1) (3)................ 1,332,992 33.4
Common Stock Susan L. Christiansen (1) (4)............ 327,666 8.3
Common Stock G. L. Clark, Jr. (1) (5)................. 325,805 8.2
Common Stock Austinvest Anstalt Balzers (6) (7)....... 735,042 16.4 (9)
Common Stock Esquire Trade & Finance Inc. (6) (8)..... 734,871 16.4 (9)
NOTES:
(1) The address of the indicated persons is 915 West Fourth Street,
Winston-Salem, NC 27101 and the ownership is as of March 31, 2000.
(2) The shares owned by THE include 148,655 shares of Common Stock that may be
obtained by THE upon conversion of its Series A Preferred Stock at the
stated conversion price of $6.00 per share and 41,026 shares of Common
Stock that may be obtained by THE upon conversion of its Series B Preferred
Stock at a conversion price equal to the lowest per share market value
during the thirty trading days prior to the conversion date, or $4.00 per
share, whichever is lower. For purposes of this disclosure the conversion
price was based on the lowest per share market value for the thirty trading
days ending March 31, 2000, which equaled $2.4375 per share. As described
in notes 3 through 5 below, the shares owned by THE are beneficially owned
primarily by the executive officers of the Company.
(3) Mr. Benton owns, directly or indirectly, 65.6% of the issued and
outstanding shares of THE. In addition to his beneficial interest in the
shares owned by THE, Mr. Benton owns 56,750 shares directly, shares control
of 22,000 shares owned by an employee partnership and has options for
57,579 shares.
(4) Ms. Christiansen owns, directly or indirectly, 16.4% of the issued and
outstanding shares of THE. In addition to her beneficial interest in the
shares owned by THE, Ms. Christiansen owns 1,500 shares directly, shares
control of 22,000 shares owned by an employee partnership and has options
for 5,000 shares.
(5) Mr. Clark owns, directly or indirectly, 14.7% of the issued and outstanding
shares of THE. In addition to his beneficial interest in the shares owned
by THE, Mr. Clark owns 6,500 shares directly, shares control of 22,000
shares owned by an employee partnership and has options for 29,150 shares.
(6) The address of the indicated persons is c/o LH Financial, 160 Central Park
South, Suite 1312, New York, NY 10019.
(7) The shares owned by Austinvest Anstalt Balzers include 222,222 shares of
Common Stock from conversion of 250 shares of Series B preferred stock on
March 3, 2000 and 512,820 shares of Common Stock that may be obtained by
Austinvest Anstalt Balzers upon conversion of its remaining Series B
preferred stock at a conversion price equal to the lowest per share market
value during the thirty trading days prior to the conversion date, or $4.00
per share, whichever is lower. For purposes of this disclosure the
conversion price was based on the lowest per share market value for the
thirty trading days ending March 31, 2000, which equaled $2.4375 per share.
(8) The shares owned by Esquire Trade & Finance Inc. include 220,000 shares of
Common Stock from conversions Series B preferred stock on February 25, 2000
and March 3, 2000 and 514,871 shares of Common Stock that may be obtained
by Esquire Trade & Finance Inc. upon conversion of its remaining Series B
preferred stock at a conversion price equal to the lowest per share market
value during the thirty trading days prior to the conversion date, or $4.00
per share, whichever is lower. For purposes of this disclosure the
conversion price was based on the lowest per share market value for the
thirty trading days ending March 31, 2000, which equaled $2.4375 per share.
(9) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 3,743,622
shares of common stock outstanding as of March 3, 2000. In calculating the
percentage amount, we treat as outstanding the number of shares of common
stock issuable upon conversion of all of that particular holder's Series B
preferred stock. We did not assume, however, the conversion of any other
holder's Series B preferred stock.
PROPOSAL 1: Election of Directors
One of the five-member Board of Directors is to be elected at the Annual
Meeting. Upon election, this director will hold office until the third
succeeding Annual Meeting of Shareholders. The person who has been nominated for
election to a three-year term is William G. Benton.
VOTE REQUIRED: Directors must be elected by a plurality of all votes cast
at the meeting. This means that the nominee receiving the greatest number of
votes will be elected. Votes withheld for any director will not be counted.
VOTING BY THE PROXIES: The Proxies will vote your shares in accordance with
your instructions. If you have not given specific instructions to the contrary,
your shares will be voted to approve the election of the nominee named in the
Proxy Statement. Although the Company knows of no reason why the nominee would
not be able to serve, if the nominee is not available for election, the Proxies
would vote your Common Stock to approve the election of any substitute nominee
proposed by the Board of Directors. The Board may also choose to reduce the
number of directors to be elected as permitted by our Bylaws.
GENERAL INFORMATION ABOUT THE NOMINEES AND OTHER DIRECTORS: The nominee is
currently a Director. He has agreed to be named in this Proxy Statement and to
serve if elected. The nominee attended at least 75% of the meetings of the Board
and committees on which the nominee served in the last year.
The following table provides biographical information about both the
nominee and the other directors of the Company.
- --------------------------- ------ -------------------------------------------
Name Age Principal Occupation or Employer for
Last Five Years
- --------------------------- ------ -------------------------------------------
William G. Benton(2) 54 Chairman of the Board and Chief Executive
Officer since inception. Mr. Benton is a
Director, President and the controlling
shareholder of THE since its incorporation in
1991. THE, through its subsidiary
corporations, engages in the commercial real
estate business. Mr. Benton originally
developed and serves as General Partner on
many of the Section 8 elderly properties that
the Company manages. Mr. Benton served as
Chief Executive Officer and director of
Health Equity Properties Incorporated
("HEP"), a New York Stock Exchange listed
real estate investment trust with over $150
million in long-term health care assets from
1988 through September 1994 when HEP merged
with Omega Healthcare Investors, Inc. He is
also a director of Tanger Factory Outlet
Centers, Inc., a New York Stock
Exchange-listed real estate investment trust.
Susan L. Christiansen 47 President, Chief Operating Officer and
Director since inception. Ms. Christiansen is
an officer, director, General Counsel and a
shareholder of THE. Ms. Christiansen served
as Vice President, General Counsel and
Secretary of HEP from 1990 until its merger
in 1994. Ms. Christiansen is a licensed real
estate broker in North Carolina and West
Virginia and serves as the principal broker
of Residential Properties Management, Inc.,
("RPM") the Company's wholly owned property
management subsidiary.
G. L. Clark, Jr. 54 Treasurer, Chief Financial Officer and
Director since inception. Mr. Clark is a
Director, Chief Financial Officer and a
shareholder of THE, and has been Chairman of
the Board of RPM since January 1, 1996. Mr.
Clark served as Vice President and Chief
Financial Officer of HEP from 1988 until its
merger in 1994. Mr. Clark is a Certified
Public Accountant.
Perry C. Craven (1),(3) 59 Director. Ms. Perry C. Craven has been the
sole shareholder and director of Perry C.
Craven Associates, Inc. since 1977, a company
that specializes in elderly housing
development, non-profit development, housing
training, rural housing development and
communications. Ms. Craven has served as a
director of the Company since June 10, 1997.
Walter H. Ettinger, Jr. 47 Director. Dr. Walter H. Ettinger, Jr. as
(1), (3) Executive Vice President has served of
Physician Services at Virtua Health, Marlton
New Jersey since June 1998. From 1987 to June
1998, Dr. Ettinger was an Associate Professor
of Medicine, Head of Section of Internal
Medicine and Gerontology, Department of
Medicine, Bowman Gray School of Medicine,
Winston-Salem, North Carolina and Deputy
Director of the J. Paul Sticht Center on
Aging, Bowman Gray/Baptist Hospital Medical
Center since 1987. Dr. Ettinger has served as
a director of the Company since June 10,
1997.
NOTES:
(1) Member of Audit Committee. The Audit Committee is responsible for matters
relating to executive compensation.
(2) The indicated director is a nominee for re-election at the meeting of
Shareholders.
(3) The indicated directors are Independent Directors.
ABOUT THE BOARD AND ITS COMMITTEES: The Board of Directors of the Company
has a standing Audit Committee. The members of the Audit Committee are indicated
in the preceding table. During 1999 the Audit Committee met one time to
determine the scope of the engagement of the Company's auditors and to recommend
the selection of The Daniel Professional Group, Inc. to serve as the Company's
auditors for year ending December 31, 1999. As discussed in more detail below,
the Audit Committee also reviews compensation matters and administers the
Company's 1997 Stock Incentive Plan. See "Plan" and "Report on Compensation
Matters" below. The Board of Directors held three meetings during the fiscal
year ended December 31, 1999.
DIRECTOR COMPENSATION: For year ended December 31, 1999, the Company's
directors who are not full time employees of the Company received $1,250 per
quarter. In addition, the Company reimburses directors for out-of-pocket and
travel expenses incurred for their attendance at meetings.
The following is a schedule of Common Stock and Common Stock equivalents
beneficially owned as of March 31, 2000 by each nominee for director, the
executive officers named in the Summary Compensation Table and all directors and
executive officers as a group. Unless otherwise indicated, each of the named
individuals and each member of the group has sole voting power and sole
investment power with respect to the shares shown.
- ------------- ---------------------------------------- -------------------- -----------
Amount And Percent
Name and Address of Nature of of
Type of Class Beneficial Owner(1) Beneficial Owner Class
- ------------- ----------------------------------------- ------------------- ------------
Common Stock THE (2).................................. 1,823,781 46.4%
Common Stock William G. Benton (3).................... 1,332,729 33.4
Common Stock Susan L. Christiansen (4)................ 327,600 8.3
Common Stock G. L. Clark, Jr. (5)..................... 325,746 8.2
Common Stock Deborah O. Robinson (6).................. 53,462 1.4
Common Stock Sandra T. Walker 3,000 *
Common Stock Bernie Gawley............................ 5,000 *
Common Stock All directors and executive officers as a
group (8 persons)........................ 1,984,324 49.1%
NOTES:
(1) The address of all persons listed is 915 West Fourth Street, Winston-Salem,
NC 27101.
(2) The shares owned by THE include 148,655 shares of Common Stock that may be
obtained by THE upon conversion of its Series A Preferred Stock at the
stated conversion price of $6.00 per share and 41,026 shares of Common
Stock that may be obtained by THE upon conversion of its Series B Preferred
Stock at a conversion price equal to the lowest per share market value
during the thirty trading days prior to the conversion date, or $4.00 per
share, whichever is lower. For purposes of this disclosure the conversion
price was based on the lowest per share market value for the thirty trading
days ending March 31, 2000, which equaled $2.4375 per share. As described
in notes 3 through 5 below, the shares owned by THE are beneficially owned
primarily by the executive officers of the Company.
(3) Mr. Benton owns, directly or indirectly, 65.6% of the issued and
outstanding shares of THE. In addition to his beneficial interest in the
shares owned by THE, Mr. Benton owns 56,750 shares directly, shares control
of 22,000 shares owned by an employee partnership and has options for
57,579 shares.
(4) Ms. Christiansen owns, directly or indirectly, 16.4% of the issued and
outstanding shares of THE. In addition to her beneficial interest in the
shares owned by THE, Ms. Christiansen owns 1,500 shares directly, shares
control of 22,000 shares owned by an employee partnership and has options
for 5,000 shares.
(5) Mr. Clark owns, directly or indirectly, 14.7% of the issued and outstanding
shares of THE. In addition to his beneficial interest in the shares owned
by THE, Mr. Clark owns 6,500 shares directly, shares control of 22,000
shares owned by an employee partnership and has options for 29,150 shares.
(6) Ms. Robinson owns, directly or indirectly, 1.54% of the issued and
outstanding shares of THE. In addition to her beneficial interest in the
shares owned by THE, Ms. Robinson owns 370 shares directly, shares
beneficial ownership of 22,000 shares owned by an employee partnership and
has options for 3,000 shares. -----------------------------
- ---------------
* less than 1%
As of March 31, 2000, THE owned 100% of the issued and outstanding Series A
preferred stock of the Company. The Series A preferred stock is nonvoting, is
subordinate to the Common Stock for payment of dividends, has a stated
liquidation value of $5 per share which is subordinate to a preferred
distribution to holders of Common Stock equal to $10 per share, may be converted
to Common Stock at $6 per share after September 30, 1999 and is not redeemable
at the option of the holder.
Executive Compensation
REPORT OF AUDIT COMMITTEE ON COMPENSATION:
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE ON COMPENSATION IS PROVIDED FOR
INFORMATION PURPOSES ONLY AND SHALL NOT BE DEEMED TO BE SOLICITATION MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
1. The Committee and General Philosophy. The Company's compensation
policies are determined by the Audit Committee of the Board of
Directors which makes its compensation recommendations to the full
Board of Directors for approval. The Committee is comprised of two
directors of the Company, neither of whom is employed by the Company.
In addition to making recommendations with respect to compensation,
the Committee also administers the Company's 1997 Stock Incentive
Plan. The plan is described later in the Proxy Statement.
The Company's approach to compensation places primary emphasis on team
performance and secondary emphasis on individual performance. As such,
compensation is awarded to all employees as a whole with specific
allocations based on deemed contribution to the team effort.
The Company's compensation program currently is comprised of two
elements: base salary and incentive pay. Base salaries of executive
officers are generally in the 50th percentile or below the base
salaries in comparable companies. Incentive pay is based on the
Company's incentive plan and is comprised of a combination of points,
cash and fair market value stock options, with the amount tied to
specific performance measures.
2. Incentive Pay Plan. Mr. Benton as Chief Executive Officer will
recommend individual, team and Company based performance measures to
be reviewed monthly. Because of the startup nature of the Company's
business, it is anticipated that amounts awarded in 2000 will be based
more heavily on stock participation than cash awards.
3. Compensation to Chief Executive Officer. Mr. Benton voluntarily
lowered his base salary from $189,264 to $104,000 during 1997 so that
a larger percentage of his compensation would be based on performance.
Mr. Benton's performance measures for 2000 are based on the Company
meeting its development goals and the performance of the Company's
Common Stock in the market.
Perry C. Craven Walter H. Ettinger, Jr.
Executive Compensation Tables
I. Summary Compensation Table
Long-Term All Other
Annual Compensation Compensation Compensation
Awards
--------------------------------------------------- ---------------- ----------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary(1) Bonus Compensation Options Compensation
William G. Benton 1999 104,000 - - - -
Chief Executive Officer..... 1998 104,000 26,000
1997 146,632 48,316
Susan L. Christiansen......... 1999 104,000 - - - -
Chief Operating Officer 1998 104,000 3,500
1997 104,000 4,500
G. L. Clark, Jr. 1999 104,000 - - - -
Chief Financial Officer..... 1998 104,000 26,000
1997 99,250 24,625
Sandra T. Walker.............. 1999 90,000 - - - -
Executive Vice President 1998 90,000 2,500
1997 89,615 6,000
Bernard T. Gawley............. 1999 100,000 - - - -
President, DSS Funding 1998 87,500 -
1997 - -
- ----------------------
(1) Each of the employees in the table accrued a portion of their 1997 salary
listed above. Mr. Benton accrued $146,632. Ms. Christiansen accrued
$14,000. Mr. Clark accrued $99,250. Ms. Walker accrued $10,000. Under an
agreement with the Company, those employees agreeing to accrue a portion of
base compensation for the first six months of the year are entitled to
repayment of the accrued compensation, plus a bonus equal to 50% of the
accrued compensation. All such accruals ceased December 31, 1997.
No stock options were granted during the year ended December 31, 1999. The
following table provides information for stock options granted in earlier years.
-------------------------------------------------------------------------------------------------------------
III. Aggregate Option/SAR Exercises in 1999 and
Option/SAR Values as of Year -End 1999
-------------------------------------------------------------------------------------------------------------
---------------------------- ------------------ -------------------- --------------------- ------------------
Name Shares Acquired Value Realized Number of Value(1) Of
on Exercise Unexercised Unexercised
($) Securities In-The-Money
(#) Underlying Options/SARs
Options/SARs at FY-End ($)
at FY-End (#) Exercisable/
Exercisable/ Unexercisable
Unexercisable
---------------------------- ------------------ -------------------- --------------------- ------------------
William G. Benton - - 57,579/0 $0/0
Susan L. Christiansen - - 5,000/0 $0/0
G. L. Clark, Jr. - - 29,150/0 $0/0
Sandra T. Walker - - 3,000/0 $0/0
Bernard T. Gawley - - 5,000/0 $0/0
(1) Value is based on closing price per share of the Common Stock on December 31, 1999.
EMPLOYMENT AGREEMENTS: Mr. Benton, Ms. Christiansen, Mr. Clark and Mr.
Gawley have employment agreements with the Company. The employment agreements
provide for base salaries with increases as authorized by the Board of
Directors. The Agreements are for terms of five years, with each day worked
being deemed to extend the term by an additional day.
The agreements provide for the payment to each executive officer of a
lump-sum severance payment if the Company terminates such executive's employment
during the term of the agreements other than for cause, or if the employment is
terminated for certain reasons, including a change of control of the Company.
The lump-sum severance payment is equal to three times the amount of such
executive's average base salary for the previous 5 years. These three employment
agreements contain terms prohibiting solicitation of Company employees for 18
months after termination, non-disclosure of confidential information and return
of all Company documents.
STOCK INCENTIVE PLAN: The Company's 1997 Stock Incentive Plan (the "Stock
Incentive Plan") was adopted by the Company's Board of Directors and approved by
the sole shareholder in January 1997. A total of 500,000 shares of Common Stock
have been reserved for issuance under the Stock Incentive Plan. Stock options,
stock appreciation rights, restricted stock and deferred stock may be granted
under the Stock Incentive Plan to key employees and directors or consultants of
the Company or a subsidiary. The Company granted 47,000 stock options to certain
employees at an exercise price ranging from $4.75 to $5.225, the market value of
the shares at the date of grant. The stock options are 100% vested and have a
five-year term. Warrants for 45,000 shares were issued with a four-year term, a
one-year vesting schedule and exercise prices ranging from $6.00 to $9.00 per
share. Warrants for 50,000 shares have a four-year term, one year vesting
schedule and an exercise price of $6.75 per share. All the warrants were issued
to third parties for services rendered. At December 31, 1999, a total of 142,000
stock options and warrants are outstanding, 1,400 common shares have been issued
and 356,600 shares are available for granting.
The Stock Incentive Plan is administered by a Committee (the "Stock
Incentive Committee") consisting of at least two disinterested directors. The
Stock Incentive Plan requires that the members of the Stock Incentive Committee
be "disinterested persons" within the meaning of Rule 16b-3, as from time to
time amended, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Stock Incentive Committee has the authority, within
limitations set forth in the Stock Incentive Plan, to establish rules and
regulations concerning the Stock Incentive Plan, to determine the persons to
whom options may be granted, the number of shares of Common Stock to be covered
by each option, and the terms and provisions of the option to be granted. In
addition, the Stock Incentive Committee has the authority, subject to the terms
of the Stock Incentive Plan, to determine the appropriate adjustments in the
terms of each outstanding option in the event of a change in the Company's
capital structure.
Options granted under the Stock Incentive Plan may be either incentive
stock options ("ISO's") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), or non-qualified stock options
("NQSOs"), as the Stock Incentive Committee may determine. The exercise price of
an option will be fixed by the Stock Incentive Committee on the date of grant,
except that (i) the exercise price of an ISO granted to any individual who owns
(directly or by attribution) shares of Common Stock possessing more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company (a "10% Owner") must be at least equal to 110% of the fair market value
of the Common Stock on the date of grant and (ii) the exercise price of an ISO
granted to any individual other than a 10% Owner must be at least equal to the
fair market value of the Common Stock on the date of the grant. Any options
granted must expire within ten years from the date of grant (five years in the
case of an ISO granted to a 10% Owner). Shares subject to options granted under
the Stock Incentive Plan which expire, terminate or are canceled without having
been exercised in full become available again for option grants. No options
shall be granted under the Stock Incentive Plan more than ten years after the
adoption of the Stock Incentive Plan.
Options are exercisable by the holder subject to terms fixed by the Stock
Incentive Committee. However, an option will be exercisable immediately upon the
happening of any of the following (but in no event during the six-month period
following the date of grant or subsequent to the expiration of the term of an
option): (i) the holder's retirement on or after attainment of age 65; (ii) the
holder's disability or death; or (iii) the occurrence of such special
circumstances or events as the Stock Incentive Committee determines merits
special consideration. Under the Stock Incentive Plan, a holder generally may
pay the exercise price in cash, by check, by delivery to the Company of shares
of Common Stock already owned by the holder or, in certain circumstances, in
shares issuable in connection with the options, or by such other method as the
Stock Incentive Committee may permit from time to time.
Options granted under the Stock Incentive Plan will be non-transferable and
non-assignable; provided, however, that the estate of a deceased holder may
exercise any options held by the decedent. If an option holder terminates
employment or consultancy with the Company or service as a director of the
Company while holding an unexercised option, the option will terminate
immediately, but the option holder will have until the end of the 90th business
day following his or her termination of employment or service to exercise the
option. However, all options held by an option holder will terminate immediately
if the termination is for cause or voluntarily on the part of the employee.
The Stock Incentive Plan may be terminated and may be modified or amended
by the Stock Incentive Committee or the Board of Directors at any time;
provided, however, that (i) no modification or amendment either increasing the
aggregate number of shares which may be issued under options or to any
individual, increasing materially the benefits accruing to participants under
the Stock Incentive Plan, or materially modifying the requirements as to
eligibility to receive options will be effective without shareholder approval of
such amendment and (ii) no such termination, modification or amendment of the
Stock Incentive Plan will alter or affect the terms of any then outstanding
options without the consent of the holders thereof.
Additional Information about Directors and Executive Officers
SECTION 16(A) REPORTING COMPLIANCE: The Company's directors and executive
officers file reports with the Securities and Exchange Commission and The Nasdaq
Stock Market indicating the number of shares of any class of Company equity
securities they owned when they became a director or executive officer and,
after that, any change in their ownership of Company equity securities. Copies
of any of these reports must also be provided to us. These reports are required
by Section 16(a) of the Securities Exchange Act of 1934. The Company has
reviewed the copies of the reports that we have received and written
representations from the individuals required to file the reports. Based on this
review, we believe that each of our independent directors has complied with
applicable reporting requirements for transactions in Company securities during
1999. The executive officers (Mr. Benton, Ms. Christiansen, Mr. Clark and Ms.
Robinson) and THE inadvertently omitted to file Forms 4 reporting the purchase
by THE of 10 shares of Series B preferred stock in October and the return to DSS
by THE of 362,500 shares of common stock in November. Both transactions were
reported on Forms 5, timely filed by the executive officers and THE .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: In July 1995, Grandfather
Mountain Limited Partnership, which owns a shopping center in Boone, North
Carolina, filed a Chapter 11 Reorganization under the Federal Bankruptcy Laws
because both the anchor tenant, Roses Department Store, and the lender, Mutual
Savings and Loan Association, Morganton, North Carolina filed for
Reorganization. The plan of reorganization was approved on October 6, 1997 and
the partnership is operating in accordance with the plan. Benton Investment
Company, a wholly owned subsidiary of THE, is one of the two General Partners of
Grandfather Mountain Limited Partnership. Mr. Benton and Mr. Clark serve as
Chief Executive Officer and President, respectively, of Benton Investment
Company.
From time to time, the Company advances or borrows funds from THE or other
related entities. Note 2 to the financial statements for the year ended December
31, 1999 schedules those advances and repayments to and advances and repayments
from such related parties. These transactions have resulted in balances of
$233,616 due to the Company from affiliated partnerships, and $4,828,434 due to
the Company from THE and subsidiaries of THE. On September 30, 1997, the Company
issued 178,386 shares of preferred stock to Taylor House in exchange for the
note payable to the parent in the amount of $891,930. There was no interest
income received from related parties during the years ended December 31, 1999
and 1998. Accounts payable to related parties bear no interest and have no
scheduled repayment terms.
Beginning in May 1997, the Company entered into a month-to-month lease with
THE for office space for THE's corporate headquarters with required monthly rent
payments of $2,700. During 1999, the monthly rent increased to $3,800. RPM
entered into a month-to-month lease in May, 1999 for office space in Raleigh, NC
for its corporate staff located there at a monthly rental of $418. The space is
located in an apartment property managed by RPM and owned by a partnership,
whose general partner is Diversified's chief executive officer and a beneficial
shareholder of Taylor House. In addition, RPM leases computer equipment from
THE, which requires monthly payments of $501.
The Company participates in a defined contribution savings incentive plan
covering substantially all of its and its subsidiaries' full time employees. The
policy of the Company and its subsidiaries is to provide a 50% matching
contribution to each employee participant for contributions up to the first 5%
of compensation. The Company's contributions for years ended December 31, 1999
and 1998 were $35,237 and $33,595, respectively.
Management fee income for the years ended December 31, 1999 and 1998
includes $345,937 and $306,233, respectively, earned from partnerships, a
general partner of which is a beneficial shareholder of THE. At December 31,
1999 and 1998, $28,318 and $26,431, respectively, of such fees are included in
trade accounts receivable, and $293,012 and $25,525 are included in accounts
receivable-affiliates at December 31, 1999 and 1998, respectively. In addition,
the Company was reimbursed for payments made through its central payroll system
for payroll and related expenses, by partnerships which are related through
common ownership, of $962,830 and $591,450, respectively, for the years ended
December 31, 1999 and 1998.
In January, 1998, the Company formed a wholly-owned subsidiary, DSS
Funding, Inc. ("DSSF"), a North Carolina corporation, for the purpose of
securing permanent financing for the assisted living facilities which the
Company develops, as well as third party owners. The Company loaned DSSF
$250,000 secured by a non-interest bearing note and will provide working capital
for the subsidiary.
PROPOSAL 2. Appointment Of Independent Accountants
The Board of Directors, upon recommendation of the Audit Committee, has
selected The Daniel Professional Group, Inc., 4400 Silas Creek Parkway, Suite
200, Winston-Salem, NC 27104, as the Company's independent accountants to
examine the financial statements of the Company and its subsidiaries for the
year ending December 31, 2000, and to perform other appropriate accounting
services. A resolution will be presented to the meeting to ratify the
appointment. The affirmative vote of a majority of the number of votes entitled
to be cast by the Common Stock represented at the meeting is needed to ratify
the appointment. If the Shareholders do not ratify the appointment of The Daniel
Professional Group, Inc., the selection of independent accountants will be
reconsidered by the Board of Directors.
The Daniel Professional Group, Inc. has served as the Company's independent
auditor since its inception in 1996 and has served as independent auditor for
THE since 1991. A representative of The Daniel Professional Group, Inc. will be
present at the meeting and will have the opportunity to make a statement if so
desired and available to answer questions.
The Board of Directors recommends that Shareholders vote "FOR" the
ratification of the appointment of The Daniel Professional Group, Inc.
Shareholder Proposals and Nominations for the 2000 Annual Meeting
Shareholder proposals to be included in the Proxy Statement for our next
annual meeting of Shareholders must be received by the Company's Secretary not
later than November 15, 2000. In addition, a proposal must meet all other
requirements of the Securities and Exchange Commission, North Carolina corporate
law and the Company's By-laws. A copy of the Company's By-laws may be obtained
from the Secretary.
By Order of the Board of Directors
WILLIAM G. BENTON, Chairman
April 20, 2000