<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MEDPARTNERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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Notes:
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MedPartners, Inc.
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244
April 22, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JUNE 10, 1999
The 1999 annual meeting of stockholders of MedPartners, Inc. will be held at
The Wynfrey Hotel, 1000 Riverchase Galleria, Birmingham, Alabama, on Thursday,
June 10, 1999, at 3:00 p.m. Central Time, for the following purposes:
1. Election of three directors, each to serve a term of three years; and
2. Any other matters that properly come before the meeting.
Stockholders of record at the close of business on April 12, 1999 are
entitled to vote at the meeting or any postponement or adjournment thereof.
Please review the voting options on the attached proxy card and submit your
vote promptly. If you attend the Annual Meeting, you may revoke your Proxy and
vote in person if you desire to do so, but attendance at the Annual Meeting
does not itself serve to revoke your Proxy.
By Order of the Board of Directors,
/s/ Sara J. Finley
Sara J. Finley
Corporate Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ABOUT THE MEETING........................................................... 1
STOCK OWNERSHIP............................................................. 2
PRINCIPAL STOCKHOLDERS OF THE COMPANY....................................... 3
ELECTION OF DIRECTORS....................................................... 4
DIRECTORS CONTINUING IN OFFICE.............................................. 5
</TABLE>
<TABLE>
<S> <C>
EXECUTIVE OFFICERS.......................................................... 6
EXECUTIVE COMPENSATION SUMMARY.............................................. 8
OPTION GRANTS FOR FISCAL 1998............................................... 9
</TABLE>
<TABLE>
<S> <C>
OPTION VALUES ON DECEMBER 31, 1998.......................................... 10
TEN YEAR OPTION REPRICINGS AND OPTION SURRENDER ............................ 10
THE BOARD OF DIRECTORS AND BOARD COMMITTEES................................. 12
THE COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION............... 13
CERTAIN TRANSACTIONS........................................................ 19
</TABLE>
<TABLE>
<S> <C>
STOCK PRICE PERFORMANCE GRAPH .............................................. 20
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............................ 21
OTHER MATTERS............................................................... 21
ADDITIONAL INFORMATION...................................................... 21
</TABLE>
<PAGE>
MedPartners, Inc.
PROXY STATEMENT
This proxy statement contains information related to the annual meeting of
stockholders of MedPartners, Inc. (the "Company") to be held on Thursday, June
10, 1999, beginning at 3:00 p.m. Central Daylight Time, at The Wynfrey Hotel,
1000 Riverchase Galleria, Birmingham, Alabama, and at any postponements or
adjournments thereof. This Proxy Statement is being mailed to the Company's
stockholders on or about April 22, 1999.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors. In addition, the Company's management will report on the performance
of the Company during fiscal 1998 and respond to questions from stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date,
April 12, 1999, are entitled to receive notice of the annual meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponement or adjournment of the meeting. Each outstanding share entitles
its holder to cast one vote on each matter to be voted upon.
Who can attend the meeting?
All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum. On April 12, 1999, there were 199,046,249 shares of common
stock of the Company outstanding and entitled to vote at the meeting.
What is required to elect a director?
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of a director. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted, although it will be counted for purposes of determining whether
there is a quorum. Abstentions and broker non-votes will have no effect on the
election of directors.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you are a registered
stockholder (that is, if you hold your stock in your own name) and attend the
meeting, you may deliver your completed proxy card in person.
<PAGE>
Can I vote by telephone or electronically?
If you are a registered stockholder you may vote by telephone, or
electronically through the Internet, by following the instructions included
with your proxy card.
If your shares are held in "street name," you will need to contact your
broker or other nominee to determine whether you will be able to vote by
telephone or electronically.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing either a notice of revocation
or a duly executed proxy bearing a later date with the Corporate Secretary of
the Company. The powers of the proxy holders will be suspended if you attend
the meeting in person and so request, although attendance at the meeting will
not by itself revoke a previously granted proxy.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board recommends a vote FOR
election of the nominated slate of directors (see page 4).
STOCK OWNERSHIP
Who are the largest owners of the Company's common stock?
<TABLE>
<CAPTION>
Aggregate Percent of
Number of Shares Shares
Name Beneficially Owned Outstanding(1)
---- ------------------ --------------
<S> <C> <C>
Manning & Napier Advisors, Inc.
1100 Chase Square
Rochester, New York 14604................... 17,058,298 8.6%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109................. 12,796,427 6.4%
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109................. 11,521,084 5.7%
Wachovia Bank and Trust Co.(2)
Trust Services
301 Main Street
Winston-Salem, North Carolina 27150......... 8,696,333 4.4%
</TABLE>
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(1) Based on 199,140,319 shares outstanding on December 31, 1998.
(2) Shares held as Trustee for MedPartners, Inc. Employee Compensation Trust.
2
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) by the Company's directors,
certain executive officers, and the directors and executive officers of the
Company as a group. Except as otherwise indicated, all information is as of
December 31, 1998. Shares of the Company's common stock subject to options held
by the directors and executive officers that are exercisable within 60 days of
April 12, 1999, are deemed outstanding for the purpose of computing their
beneficial ownership individually and as a group. All individuals who acted as
Chief Executive Officer for the Company during 1998, as well as the four other
most highly compensated executive officers as of December 31, 1998, are
included in this table. These individuals may be referred to collectively as
the "Named Executive Officers".
<TABLE>
<CAPTION>
Number of Shares Percent of
of MedPartners Shares
Name Position Held Common Stock(1) Outstanding
---- ------------- ---------------- -----------
<C> <S> <C> <C>
Edwin M. Crawford................. Chairman of the Board,
President and Chief
Executive Officer 3,775,340 1.9%
Richard M. Scrushy................ Director, Former
Chairman of the Board
and Acting Chief
Executive Officer 2,891,500(2) 1.4%
Larry R. House.................... Former Chairman of the
Board and Chief
Executive Officer 5,413,115 2.7%
John J. Arlotta................... President-Pharmaceutical
Services 138,418 *
James H. Dickerson................ Director, Executive Vice
President and Chief
Financial Officer 459,340 *
Edward L. Hardin, Jr.............. Executive Vice President
and General Counsel 516,871 *
Rosalio J. Lopez, M.D............. Director and Chief
Medical Officer 136,719 *
Kristen E. Gibney................. Director 18,500 *
Roger L. Headrick................. Director 86,250(2) *
Michael D. Martin................. Director 196,000(2) *
Ted H. McCourtney................. Director 94,841 *
John S. McDonald, J.D............. Director 358,281 *
Walter T. Mullikin, M.D........... Director 470,424 *
Charles W. Newhall III............ Director 1,540,000 *
C.A. Lance Piccolo................ Director 1,107,701(2) *
Larry D. Striplin, Jr............. Director 182,100 *
All executive officers & directors
as a group (24 persons).......... 17,915,173 8.5%
</TABLE>
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*less than one percent.
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or
shared investment or voting authority. Certain of the Company's directors
and executive officers may disclaim beneficial ownership of certain shares
included in the table and certain of the shares included in the table
represent options to purchase shares, described as follows:
. Mr. Crawford--includes options to purchase 3,750,340 shares;
. Mr. Scrushy--includes options to purchase 575,000 shares, 250,000 shares
held in trust for minor children and 1,098,500 shares held by HEALTHSOUTH
Corporation ("HEALTHSOUTH"). Mr. Scrushy is Chairman of the Board and
Chief Executive Officer of HEALTHSOUTH. Mr. Scrushy disclaims beneficial
ownership of the shares held by HEALTHSOUTH;
. Mr. House--includes options to purchase 4,589,376 pursuant to a
Retirement Agreement dated January 16, 1998, the terms of which are being
contested by the Company, and 257 shares in the Company 401(k) plan. The
amount in the 401(k) is calculated by taking the funds in the account on
December 31, 1998 and dividing by the market price on that day;
. Mr. Arlotta--includes options to purchase 134,741 shares and 660 shares
held by his son who does not reside in the same household for the
majority of the year. Mr. Arlotta disclaims beneficial ownership of the
shares held by his son;
3
<PAGE>
. Mr. Dickerson--includes options to purchase 434,340 shares;
. Mr. Hardin--includes options to purchase 456,340 shares;
. Dr. Lopez--includes options to purchase 37,650 shares and 81,293 shares
held in trust for the benefit of Dr. Lopez and members of his family;
. Ms. Gibney--includes options to purchase 8,500 shares;
. Mr. Headrick--includes options to purchase 49,000 shares and 1,250 shares
held by his wife;
. Mr. Martin--includes options to purchase 159,000 shares;
. Mr. McCourtney--includes options to purchase 40,000 shares;
. Mr. McDonald--includes options to purchase 40,000 shares and 318,281
shares held by certain trusts for his benefit;
. Dr. Mullikin--includes options to purchase 40,000 shares and 430,424
shares held by the Mullikin Family Trust U/D/T, dated February 10, 1976,
for the benefit of Dr. Mullikin and members of his family;
. Mr. Newhall--includes options to purchase 40,000 shares and 1,500,000
shares held by New Enterprise Associates VI, Limited Partnership ("NEA").
Mr. Newhall is a general partner of NEA Partners VI, Limited Partnership,
which is the general partner of NEA. Mr. Newhall disclaims beneficial
ownership of the shares held by NEA;
. Mr. Piccolo--includes options to purchase 895,660 shares; and
. Mr. Striplin--includes options to purchase 48,000 shares.
(2) Excludes options to purchase 4,000,000, 54,208, 520,000 and 628,466 shares
that were held by Scrushy, Headrick, Martin and Piccolo respectively as of
December 31, 1998 but were subsequently returned to the Company for
cancellation in 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors and executive officers complied
during fiscal year 1998 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, with the exception of the failure of C. Clark
Wingfield, Jr. and John J. Arlotta, who failed to file a Form 3 within ten days
of their election as executive officers. These forms have been filed with the
Securities and Exchange Commission. These late filings resulted from
administrative oversights at the Company.
ELECTION OF DIRECTORS
The Board of Directors is currently divided into three classes, each having
a three-year term. The terms expire in successive years.
Class II Directors.
The current three-year term of office of directors in Class II expires at
the 1999 annual meeting. The Board of Directors proposes that the nominees
described below be elected to Class II for a term of three years and until
their successors are duly elected and qualified.
Edwin M. Crawford, 50, was named Chairman of the Board in December 1998. He
has served as President and Chief Executive Officer and a director of
MedPartners since March 1998. From 1990 until March 1998, Mr. Crawford was with
Magellan Health Services, Inc., a publicly-held specialty managed healthcare
company, where he served as Chairman of the Board, President and Chief
Executive Officer from 1993 until March 1998, and as President and Chief
Operating Officer from 1992 until 1993. Mr. Crawford is also a director of
Integrated Health Services, Inc.
4
<PAGE>
James H. Dickerson, Jr., 52, has been a member of the Board of Directors
since February 1999. He joined MedPartners as Executive Vice President and
Chief Financial Officer in May 1998. Prior to joining the Company, he was
Senior Vice President and Chief Financial Officer of Aetna U.S. Healthcare from
March 1994 until January 1998.
Kristen E. Gibney, 50, has been a member of the Board of Directors since
February 1999. From January 1994 until January 1997, she was the Corporate Vice
President responsible for the Prescription Benefit Management business of
Caremark International Inc. ("Caremark"), a subsidiary of the Company .
DIRECTORS CONTINUING IN OFFICE
Class III Directors.
The terms of the following directors will expire at the 2000 annual meeting
of the stockholders.
C.A. Lance Piccolo, 58, has been Vice Chairman of the Company's Board of
Directors since September 1996. He has been the President and CEO of HealthPic
Consultants, Inc. since September 1996. From August 1992 until September 1996,
he was Chairman of the Board of Directors and Chief Executive Officer of
Caremark. From 1987 until November 1992, Mr. Piccolo was an Executive Vice
President of Baxter International, Inc. ("Baxter") and from 1988 until November
1992, he served as a director of Baxter. Mr. Piccolo also serves as a director
of Crompton and Knowles Corporation and Physician Dynamics, Inc.
Rosalio J. Lopez, M.D., 46, has been a member of the Company's Board of
Directors since November 1995. He has served as Chief Medical Officer of the
Company since July 1997. Dr. Lopez has served as a director of Mullikin Medical
Enterprises, L.P. ("MME") since 1989. He joined MME's principal professional
corporation in 1984. He is also a director and shareholder of Mullikin
Independent Physician Association, the Mullikin Practice Group, Inc. and
Pacific Physician Services Medical Group, Inc. He is the Chairman of the Board
of the Mullikin Practice Group.
Ted H. McCourtney, 60, has been a member of the Company's Board of Directors
since August 1993. He has been a general partner of Venrock Associates, a
venture capital firm, since 1970. Mr. McCourtney is a member of the Board of
Directors of NTL, Inc., Core Comm, Ltd. and Visual Networks, Inc., each of
which is publicly-traded.
Richard M. Scrushy, 46, has been a member of the Company's Board of
Directors since January 1993. On January 16, 1998, Mr. Scrushy was elected
Chairman of the Board and Acting Chief Executive Officer. He relinquished the
Acting Chief Executive Officer position on March 16, 1998 upon the election of
Mr. Crawford as President and Chief Executive Officer and relinquished the
Chairman of the Board position in December 1998. Since 1984, Mr. Scrushy has
been Chairman of the Board and Chief Executive Officer of HEALTHSOUTH, a
publicly-traded healthcare company.
Class I Directors.
The terms of the following directors will expire at the 2001 annual meeting
of the stockholders.
Roger L. Headrick, 62, has been a member of the Company's Board of Directors
since September 1996. He is Managing General Partner of HMCH Ventures, a
private venture capital investment partnership. He was
5
<PAGE>
the President and Chief Executive Officer of the Minnesota Vikings Football
Club from January 1991 until August 1998. Additionally, since June 1989, Mr.
Headrick has been President and Chief Executive Officer of ProtaTek
International, Inc., a bioprocess and biotechnology company that develops and
manufactures animal vaccines. Prior to 1989, he was Executive Vice President
and Chief Financial Officer of The Pillsbury Company, a food manufacturing and
processing company. Mr. Headrick also serves as a director of Crompton &
Knowles Corporation, a publicly-traded company.
Michael D. Martin, 38, became a member of the Company's Board of Directors
on January 16, 1998. Mr. Martin joined HEALTHSOUTH in October 1989 as Vice
President and Treasurer, was named Senior Vice President-Finance and Treasurer
in February 1994 and Executive Vice President-Finance and Treasurer in May
1996. In October 1997, he was named Chief Financial Officer of HEALTHSOUTH, and
in March 1998, he was named a director of HEALTHSOUTH. From 1983 through
September 1989, Mr. Martin specialized in healthcare lending with AmSouth Bank
N.A., Birmingham, Alabama, where he was a Vice President immediately prior to
joining HEALTHSOUTH.
Charles W. Newhall III, 54, has been a member of the Company's Board of
Directors since September 1993. He has been a general partner of New Enterprise
Associates, a venture capital firm, since 1978. Mr. Newhall is a member of the
Board of Directors of HEALTHSOUTH, Integrated Health Services, Inc. and OPTA
Food Ingredients, Inc., all publicly-traded companies. He is founder and
Chairman of the Mid-Atlantic Venture Association, which was organized in 1988.
John S. McDonald, J.D., 66, has been a member of the Company's Board of
Directors since November 1995. Mr. McDonald was the Chief Executive Officer of
the general partner of MME from March 1994 to November 1995, and he was an
executive of Pioneer Hospital and related entities since 1967. Mr. McDonald was
also a director, the Corporate Secretary and a shareholder of MME's general
partner until November 1995. Mr. McDonald is a past president of the Unified
Medical Group Association.
EXECUTIVE OFFICERS
John J. Arlotta, 49, has been President-Pharmaceutical Services of the
Company's Caremark Pharmaceutical Group, which includes the prescription
services and therapeutic services divisions, since May 1998. From September
1997 until May 1998, he was Chief Operating Officer of Caremark Pharmaceutical
Group. Mr. Arlotta joined the Company in 1996 as president of the therapeutic
services division. From April 1986 until November 1996, Mr. Arlotta owned a
durable medical equipment and consumable supplies business. From January 1972
until April 1986, Mr. Arlotta was employed in a number of sales, marketing and
general management positions by Baxter, a publicly-traded healthcare company.
Charles C. Clark, 49, has been Executive Vice President-Corporate Strategies
since May 1998. From January 1997, when he joined the Company, until May 1998,
he was Senior Vice President and Chief Tax Officer. Prior to joining the
Company, Mr. Clark was with KPMG Peat Marwick for 21 years, having served as
Tax Partner in charge of the Birmingham, Alabama office and leader of tax
services for the Health Care & Life Sciences practice in the Southeast. Mr.
Clark is a Certified Public Accountant holding memberships in the American
Institute of Certified Public Accountants and the Alabama and Mississippi
Societies of Certified Public Accountants.
John M. Deane, 44, has been Executive Vice President and Chief Information
Officer of the Company since May 1998. From January 1997 until May 1998, he
served as Executive Vice President-Information Services. From December 1995
through January 1997, Mr. Deane was Vice President-Information Services and
Chief Information Officer of Caremark Pharmaceutical Group, based in
Northbrook, Illinois. From December 1992 to December 1995, Mr. Deane was
Director, Information Services-Planning and Consulting for the Whirlpool
Corporation. Prior to joining Whirlpool, he was a Senior Manager on large IS
projects for Price Waterhouse's Management Consulting Services practice in the
Midwest, where he led large IS engagements for various Fortune 100 companies.
6
<PAGE>
Edward L. Hardin, Jr., 58, has been Executive Vice President and General
Counsel of the Company since June 1998. From September 1965 until June 1998,
Mr. Hardin was engaged in the private practice of law in Birmingham, Alabama,
where he was senior principal in the law firm of Hardin & Hawkins. Mr. Hardin
is a member of the American Bar Association and the Alabama Bar Association. He
has been selected as a member of the American Board of Trial Advocates and is a
member of the Alabama Trial Lawyers Association, having served as its President
in 1975-1976. Mr. Hardin is also a founding member of the Board of Directors of
the American Sports Medicine Institute. After graduation from Birmingham
Southern College in 1962, Mr. Hardin received a Juris Doctor degree from the
University of Alabama School of Law, where he served on the Editorial Board of
the Law Review.
Edward J. Novinski, 39, has been Executive Vice President of Managed Care
for the Company since September 1996. Prior to joining the Company, Mr.
Novinski was most recently Vice President of Network Management for United
HealthCare Corporation in its corporate office and held various other positions
with United HealthCare from August 1986 to August 1996. Mr. Novinski was
responsible for United HealthCare's network strategies for physician and
hospital relationships which supported United HealthCare's diverse managed care
product line. From 1977 to 1986, Mr. Novinski was with Lutheran General Health
System in managerial and administrative positions including Director of
Physician Practice Management for a large multi-specialty group.
C. Clark Wingfield, Jr., 48, has been Executive Vice President and Chief
Administrative Officer of the Company since September 1998. From October 1996
to September 1998, he served as Senior Vice President of Human Resources for
the Company. Prior to joining MedPartners, he was Senior Vice President of
Human Resources at Magellan Health Services, Inc. for ten years.
Peter J. Clemens IV, 34, has been Senior Vice President of Finance and
Treasurer of the Company since May 1998. From 1995 until May 1998, he was Vice
President of Finance and Treasurer of the Company. From 1991 to 1995, Mr.
Clemens worked in Corporate Banking with Wachovia Bank of Georgia, N.A. Mr.
Clemens was with AmSouth Bank, N.A. from 1987 to 1989. He received a Masters
Degree in Business Administration from Vanderbilt University in 1991.
Sara J. Finley, 38, has been Senior Vice President, Assistant General
Counsel and Corporate Secretary since August 1998. She joined MedPartners in
November 1995 and previously served as Assistant General Counsel and as Vice
President-Legal Services. She was Director of Legal Affairs at Flexel, Inc. in
Atlanta (November 1993 to November 1995), a partner and associate at the Kutak
Rock law firm in Atlanta (April 1987 to November 1993) and an associate with
Maynard Cooper and Gale, P.C. in Birmingham, Alabama (October 1985 to April
1987). She is admitted to the Alabama State Bar and the State Bar of Georgia.
Ms. Finley attended the University of Alabama (B.A., 1982) and Vanderbilt
University School of Law (J.D., 1985).
Howard A. McLure, 42, has been Senior Vice President and Chief Accounting
Officer of the Company since June 1998. From 1995 to 1998, Mr. McLure was
Senior Vice President and Controller at Magellan Health Services, Inc.
Mark S. Weeks, 36, has been Vice President of Finance and Controller of the
Company since June 1994. From 1985 to 1994, Mr. Weeks was with Ernst & Young
LLP, most recently as Senior Manager. Mr. Weeks is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
7
<PAGE>
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth information concerning total compensation
earned or paid for services rendered to the Company during each of the last
three fiscal years to the Chief Executive Officer, one former Acting Chief
Executive Officer, one former Chief Executive Officer and the other Named
Executive Officers.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------- ------------
Number of
Stock All Other
Fiscal Other Options Compensation
Name Year Salary Bonus Compensation Granted (6) (7)
- ------------------------ ------ -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Edwin M. Crawford (1)... 1998 $788,466 $3,000,000 (5) 6,501,000 $ 232,781
Chairman of the Board, 1997 -- -- -- -- --
President And Chief 1996 -- -- -- -- --
Executive Officer
Richard M. Scrushy (2).. 1998 110,101 -- -- 5,500,000 --
Former Chairman of the
Board 1997 16,000 -- -- 25,000 --
And Acting Chief
Executive 1996 11,500 -- -- 10,000 --
Officer
Larry R. House (3)...... 1998 38,988 -- (5) -- 7,031,905
Former Chairman of the
Board 1997 935,712 582,525 (5) 2,161,376 37,149
And Chief Executive
Officer 1996 717,852 1,980,604 (5) 2,700,000 25,000
John J. Arlotta......... 1998 370,674 431,696 (5) 261,001 80,665
President 1997 248,303 32,685 (5) 150,000 2,659
Pharmaceutical Services 1996 23,653 -- (5) 50,000 109
James H. Dickerson, Jr.
(4).................... 1998 250,005 500,000 68,995 401,000 33,356
Executive Vice
President, Chief 1997 -- -- -- -- --
Financial Officer and
Director 1996 -- -- -- -- --
Edward L. Hardin, Jr.... 1998 243,750 400,000 (5) 401,000 142,529
Executive Vice
President 1997 -- -- -- 10,000 --
And General Counsel 1996 -- -- -- 10,000 --
Rosalio J. Lopez, M.D... 1998 438,486 212,500 (5) 62,500 84,022
Chief Medical Officer 1997 384,881 -- (5) 120,000 1,734
And Director 1996 325,093 46,033 (5) 85,000 2,153
</TABLE>
- --------
(1) Mr. Crawford's bonus amount includes a sign-on bonus of $1,000,000 and a
year-end performance bonus of $2,000,000.
(2) Mr. Scrushy's salary includes $21,000 received as payment for outside Board
of Directors' fees. He received $89,101 as salary during his tenure as
Acting Chief Executive Officer. All salary reported for Mr. Scrushy in 1996
and 1997 was for payment of non-employee director fees.
(3) Mr. House resigned as Chairman of the Board and Chief Executive Officer on
January 16, 1998. See "The Compensation Committee's Report on Executive
Compensation" and "Certain Transactions".
(4) Mr. Dickerson received a sign-on bonus of $200,000 and a year-end
performance bonus of $300,000. Other annual compensation shown for him
includes $57,197 for relocation expenses.
(5) Dollar value of perquisites and other personal benefits was less than the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the listed officer.
(6) Mr. Crawford received a grant of options for 3,250,000 shares of common
stock on March 18, 1998, and such options were deemed canceled and re-
granted on August 6, 1998 pursuant to an amendment to his employment
agreement. Mr. Scrushy returned 4,000,000 options to the Company for
cancellation in 1999. Pursuant to the Voluntary Option Surrender Program,
Mr. Arlotta and Dr. Lopez surrendered all of their 1996 and 1997 options
except for 20,000 and 20,500 shares respectively. The 1998 amount for Mr.
Arlotta and Dr. Lopez includes options for 60,001 and 61,500 shares,
respectively, received pursuant to the Voluntary Option Surrender Program.
See "Ten Year Option Repricings and Voluntary Option Surrender Program."
8
<PAGE>
(7) The following amounts were paid for split dollar life insurance premiums:
Mr. Crawford--$216,533; Mr. House--$282,423; Mr. Arlotta--$39,860; Mr.
Dickerson--$32,180; Mr. Hardin--$141,029; and Dr. Lopez--$41,555. Mr.
House's amount includes payments totaling $6,656,196 pursuant to his
Retirement Agreement. See "The Compensation Committee's Report on Executive
Compensation" and "Certain Transactions". The following amounts were
imputed income received for insurance premiums: Mr. Crawford--$1,524; Mr.
House--$10,066; Mr. Arlotta--$3,305, $2,659 and $109 for 1998, 1997 and
1996, respectively; Mr. Dickerson--$1,176; Mr. Hardin--$1,500; and Dr.
Lopez--$4,967, $1,734 and $1,403 for 1998, 1997 and 1996, respectively. The
following payments were made under the Executive Flexible Benefit Plan: Mr.
House--$75,000; Mr. Arlotta--$37,500; and Dr. Lopez--$37,500. Long-term
disability coverage was paid for Mr. Crawford--$14,724 and Mr. House --
$8,220. Dr. Lopez's 1996 amount includes $750 contributed to the Company
401(k) Plan.
OPTION GRANTS FOR FISCAL 1998
The following table sets forth information with respect to option grants to
the Named Executive Officers during fiscal 1998 and the potential realizable
value of such stock option grants.
The potential realizable value is calculated based on the term of the option
at its time of grant (10 years). It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate compounded
annually for the entire term of the option and that the option is exercised and
sold on the last day of its term for the appreciated stock price.
<TABLE>
<CAPTION>
Potential
Realizable Gain
---------------------
% of Total
Number of Options Granted Exercise
Options to Employees in Price Expiration
Name Granted(1) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------ ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edwin M. Crawford....... 3,250,000 22% $10.00 Cancelled 0 0
3,250,000 22% $ 3.25 3/17/08 52,302,652 89,539,748
1,000 * $ 3.00 9/20/08 1,886 4,781
Richard M. Scrushy...... 4,000,000 27% $ 9.00 Cancelled 0 0
1,500,000 10% $ 3.25 10/18/08 775,228 4,122,044
Larry R. House.......... -- -- -- -- -- --
John J. Arlotta......... 261,001 1.7% $ 3.00 9/20/08 492,426 1,247,905
James H. Dickerson,
Jr..................... 400,000 2.7% $ 3.25 8/6/08 817,563 2,071,865
1,000 * $ 3.00 9/20/08 1,886 4,781
Edward L. Hardin,
Jr..................... 400,000 2.7% $ 3.25 8/6/08 817,563 2,071,865
1,000 * $ 3.00 9/20/08 1,886 4,781
Rosalio J. Lopez, M.D... 62,500 * $ 3.00 9/20/08 117,917 298,826
</TABLE>
- --------
* Less than one percent.
(1) . Mr. Crawford's 3,250,000 options granted at $10.00 per share on March 18,
1998 were cancelled and re-granted at $3.25 per share on August 6, 1998
pursuant to an amendment to his employment agreement. The 3,250,000
options vest as follows: 1,250,000 vested on March 18, 1998, and the
remaining 2,000,000 shares vested upon the completion of the sale of the
Company's contract services division on March 12, 1999. The 1,000 option
grant vested 34% on September 21, 1998 and will vest 33% on each
anniversary in 1999 and 2000.
. Mr. Scrushy's 4,000,000 options granted at $9.00 per share were returned to
the Company for cancellation. The 1,500,000 options vested 34% on the grant
date and 33% on each anniversary in 1999 and 2000. The vesting may be
accelerated to 100% upon the sale of the Company's Team Health business, its
operations at Kelsey-Seybold Clinic in Houston, Texas and its operations at
DuPage Medical Group and Suburban Heights in the Chicago, Illinois area.
. Mr. Arlotta's 261,001 options vested 34% on September 21, 1998 and will vest
33% on each anniversary in 1999 and 2000.
. Mr. Dickerson's 400,000 options vested 34% on September 21, 1998, and the
remaining shares vested upon the completion of the sale of the Company's
contract services division March 12, 1999. The 1,000 option grant vested 34%
on September 21, 1998 and will vest 33% on each anniversary in 1999 and
2000.
. Mr. Hardin's 400,000 options vested 34% on September 21, 1998 and the
remaining shares vested upon the completion of the sale of the Company's
contract services division on March 12, 1999. The 1,000 option grant vested
34% on September 21, 1998, and will vest 33% on each anniversary in 1999 and
2000.
9
<PAGE>
. Dr. Lopez's 62,500 options vested 34% on September 21, 1998 and will vest
33% on each anniversary in 1999 and 2000.
With the exception of Mr. Scrushy, Mr. Crawford, Mr. Hardin and Mr.
Dickerson's special vesting arrangements with respect to certain of their
options, all other options granted to Named Executive Officers in 1998
contain the following accelerated vesting feature: if during the first year
anniversary of the option grant date, the stock price of the Company's
common stock closes at or above $12.00 for any twenty out of thirty
consecutive trading days, the 33% of the options due to vest on the first
anniversary of the option grant date shall vest immediately at the end of
such 20th day; and, if during the second year after the option grant date,
the stock closes at or above $18.00 for any twenty out of thirty consecutive
trading days, the 33% options due to vest on the second anniversary of the
option grant date shall vest immediately at the end of such 20th day.
OPTION VALUES ON DECEMBER 31, 1998
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options 12/31/98 12/31/98(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edwin M. Crawford.......... 1,250,340 2,000,660 $2,500,765 $4,001,485
Richard M. Scrushy (2)..... 4,553,000 1,007,000 $1,146,250 $1,980,000
Larry R. House............. 4,589,376 -- -- --
John J. Arlotta............ 96,741 184,260 $ 199,667 $ 387,585
James H. Dickerson, Jr..... 136,340 264,660 $ 272,765 $ 529,485
Edward L. Hardin, Jr....... 154,340 276,660 $ 272,765 $ 529,485
Rosalio J. Lopez, M.D...... 37,550 45,450 $ 47,812 $ 92,812
</TABLE>
- --------
(1) In accordance with Securities and Exchange Commission rules, values are
calculated by subtracting the exercise price from the fair market value of
the underlying common stock. For purposes of this table, fair market value
is deemed to be $5.25, the closing price reported on the New York Stock
Exchange on December 31, 1998.
(2) 4,000,000 shares were returned by Mr. Scrushy to the Company for
cancellation in 1999.
None of the Named Executive Officers exercised any stock options in 1998.
TEN YEAR OPTION REPRICINGS AND VOLUNTARY OPTION SURRENDER PROGRAM
The Compensation Committee and the Board of Directors believes that the
future growth and success of the Company is dependent upon the ability to
attract and retain its executive officers and other key employees.
Option Repricings. The Company, in 1996, repriced all options granted during
the period February 22, 1995 through July 23, 1996. All outstanding options
having a share value in excess of $16.625 were repriced to $16.625 per share.
Voluntary Option Surrender Program. In fiscal 1998, the Compensation
Committee provided Company employees with the Voluntary Option Surrender
Program pursuant to which employees holding stock options ("Old Options") could
voluntarily surrender and relinquish 90% of their existing Old Options and
receive new options ("New Options") at a rate of one New Option for (i) each
three Old Options surrendered with an exercise price of $15.00 or above and
(ii) each two Old Options with an exercise price under $15.00. Employees who
participated in the Voluntary Option Surrender Program were required to
surrender 90% of their outstanding Old Options in order to receive New Options.
Old Options surrendered were exchanged for New Options based on such ratios at
$3.00 a share and subject to certain limitations, vested (i) 34% on the date of
grant, (ii) 33% on the first anniversary of the grant and (iii) 33% on the
second anniversary of the grant. See "The Compensation Committee's Report on
Executive Compensation".
10
<PAGE>
Shown below is information with respect to the amendment to Mr. Crawford's
employment agreement, which was deemed to be a cancellation and re-grant of the
options thereunder, the Voluntary Option Surrender Program and the repricing of
stock options previously granted to any executive officer of the Company since
it became publicly-traded.
<TABLE>
<CAPTION>
Length of Original
Date of Option Term
Repricing, Market Price at Exercise Price at Remaining at Date
Surrender Original Time of Repricing, Options Time of Repricing, New of Repricing,
or Number Surrender or at New Surrender or Exercise Surrender or
Name Amendment of Options Amendment Price(1) Amendment Price Amendment
- ------------------------ ---------- ---------- ------------------ -------- ------------------ -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Arlotta......... 9/21/98 25,000 $ 3.00 60,001 $18.00 $3.00 8 years, 219 days
9/21/98 125,000 $18.50 8 years, 240 days
9/21/98 50,000 $20.875 8 years, 58 days
Charles C. Clark........ 9/21/98 65,000 $3.00 46,500 $18.50 $3.00 8 years, 240 days
9/21/98 90,000 $18.625 8 years, 132 days
Peter J. Clemens IV..... 9/21/98 40,000 $3.00 44,250 $16.625 $3.00 7 years, 306 days
9/21/98 77,500 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 20,000 $3.00 $18.625 $3.00 8 years, 132 days
7/24/96 15,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 10,000 $16.625 $25.75 $16.625 9 years, 260 days
Edwin M. Crawford....... 8/7/98 3,250,000 $3.75 $10.00 $3.25 9 years, 178 days
John M. Deane........... 9/21/98 13,068 $3.00 57,824 $15.397 $3.00 7 years, 82 days
9/21/98 100,000 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 60,000 $3.00 $18.625 $3.00 8 years, 132 days
9/21/98 10,000 $3.00 $19.875 $3.00 8 years, 46 days
Sara J. Finley.......... 9/21/98 20,000 $3.00 19,500 $16.625 $3.00 7 years, 306 days
9/21/98 20,000 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 15,000 $3.00 $18.625 $3.00 8 years, 132 days
9/21/98 10,000 $3.00 $19.875 $3.00 7 years, 349 days
7/24/96 10,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 10,000 $16.625 $25.75 $16.625 9 years, 260 days
Rosalio J. Lopez........ 9/21/98 50,000 $3.00 61,500 $16.625 $3.00 7 years, 306 days
9/21/98 100,000 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 20,000 $3.00 $18.625 $3.00 8 years, 132 days
9/21/98 35,000 $3.00 $19.875 $3.00 7 years, 349 days
7/24/96 30,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 20,000 $16.625 $25.75 $16.625 9 years, 260 days
Edward J. Novinski...... 9/21/98 100,000 $3.00 64,500 $16.625 $3.00 7 years, 306 days
9/21/98 100,000 $3.00 $18.625 $3.00 8 years, 132 days
9/21/98 15,000 $3.00 $18.50 $3.00 8 years, 240 days
Richard M. Scrushy...... 7/24/96 10,000 $16.625 $28.25 $16.625 9 years, 129 days
Mark S. Weeks........... 9/21/98 25,000 $3.00 47,850 $16.625 $3.00 7 years, 306 days
9/21/98 72,500 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 40,000 $3.00 $18.625 $3.00 8 years, 132 days
9/21/98 15,000 $3.00 $19.875 $3.00 7 years, 349 days
7/24/96 15,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 10,000 $16.625 $25.75 $16.625 9 years, 260 days
C. Clark Wingfield,
Jr..................... 9/21/98 50,000 $3.00 40,500 $18.50 $3.00 8 years, 240 days
9/21/98 20,000 $3.00 $18.625 $3.00 8 years. 132 days
9/21/98 40,000 $3.00 $19.875 $3.00 8 years, 46 days
9/21/98 25,000 $3.00 $20.375 $3.00 8 years, 104 days
William R. Dexheimer (2).. 7/24/96 40,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 100,000 $16.625 $25.75 $16.625 9 years, 260 days
Larry R. House (2)...... 7/24/96 500,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 600,000 $16.625 $25.75 $16.625 9 years, 260 days
J. Brooke Johnston, Jr. (2).. 7/24/96 20,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 75,000 $16.625 $25.75 $16.625 9 years, 260 days
Harold O. Knight, Jr.
(2).................... 7/24/96 150,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 150,000 $16.625 $25.75 $16.625 9 years, 260 days
H. Lynn Massingale (2).. 9/21/98 23,000 $3.00 60,000 $16.625 $3.00 7 years, 306 days
9/21/98 75,000 $3.00 $18.50 $3.00 8 years, 240 days
9/21/98 102,000 $3.00 $18.625 $3.00 8 years, 132 days
7/24/96 23,000 $16.625 $25.75 $16.625 9 years, 260 days
J. Rodney Seay (2)...... 7/24/96 40,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 100,000 $16.625 $25.75 $16.625 9 years, 240 days
Tracy P. Thrasher (2)... 7/24/96 100,000 $16.625 $27.25 $16.625 9 years, 120 days
7/24/96 150,000 $16.625 $25.75 $16.625 9 years, 260 days
Mark L. Wagar (2)....... 7/24/96 250,000 $16.625 $27.25 $16.625 9 years, 128 days
7/24/96 150,000 $16.625 $25.75 $16.625 9 years, 240 days
</TABLE>
- -------
(1) Options listed are the total amount of new options received for all shares
surrendered on September 21, 1998.
(2) These executive officers were no longer employed by the Company as of April
12, 1999.
11
<PAGE>
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
How are Directors compensated?
Directors who are employees of the Company are not compensated for their
additional services as directors. Each non-employee director receives $3,000
for each board meeting attended in person, and $1,000 for each board meeting
attended by telephone. Board members who serve on the Audit and Compensation
Committees receive $1,000 for each committee meeting attended in person. Non-
employee directors also receive an annual stock option grant for 25,000 shares
of MedPartners common stock. Because this grant was not made in 1998, the 1999
grant to each director serving in 1998 and 1999 was for 50,000 shares.
On October 19, 1998, after observing the scope of duties and the amount of
professional time which the Strategic Planning Committee members were expected
to devote to the Company, the Compensation Committee granted stock options to
each of the four non-employee directors serving on the Strategic Planning
Committee. The Compensation Committee determined that in light of the critical
role of the Strategic Planning Committee in determining the Company's strategic
direction and in creating value for the Company's stockholders, the appropriate
form of compensation for the Strategic Planning Committee members should be
stock options, which tie the incentive and rewards of the Strategic Planning
Committee to appreciation in the price of the Company's common stock for the
benefit of all stockholders. The options, which have an exercise price of
$3.25, vested 34% on the date of grant and will vest 33% on each anniversary in
1999 and 2000, and were granted in the following amounts:
<TABLE>
<S> <C>
. Mr. Scrushy................................................... 1,500,000
. Mr. Piccolo................................................... 500,000
. Mr. Martin.................................................... 400,000
. Mr. Headrick.................................................. 50,000
</TABLE>
The vesting of these options will be accelerated to 100% upon the sale of the
Company's Team Health business, its operations at Kelsey-Seybold Clinic in
Houston, Texas and its operations at Du Page Medical Group and Suburban Heights
in the Chicago, Illinois area.
How often did the Board meet during 1998?
The Board of Directors met in person or by telephone 16 times during 1998.
Each director attended more than 75% of the total number of meetings of the
Board and Board Committees on which they served.
What Committees has the Board established and what are their responsibilities?
The Board of Directors has established the Audit, Strategic Planning,
Compensation, and Nominating Committees. The Executive Committee was terminated
in August 1998.
Audit Committee. Mr. McCourtney is the Chairman of the Audit Committee, and
Mr. Martin and Mr. Piccolo serve as members. The Audit Committee met four times
in 1998. Its duties include:
. Making recommendations to the Board of Directors with respect to the
Company's financial statements and the appointment of independent
auditors;
. Reviewing significant audit and accounting policies and practices;
. Meeting with the Company's independent accountants on matters such as the
scope of audits and reports; and
. Reviewing the performance of overall accounting and financial controls of
the Company.
Strategic Planning Committee. The Strategic Planning Committee was formed in
August 1998. Mr. Crawford is the Chairman of the Strategic Planning Committee,
and Mr. Headrick, Mr. Martin, Mr. Piccolo, and Mr. Scrushy serve as members.
The Strategic Planning Committee met two times in 1998. Its duties include:
. Consulting with outside advisors as appropriate to facilitate informed
judgments concerning the strategic direction of the Company;
12
<PAGE>
. Evaluating analyses and recommendations from outside advisors concerning
the strategic direction of the Company;
. Making recommendations to the Board of Directors concerning the Company's
future business plans and objectives, including possible divestiture and
acquisition plans;
. Advising the Board of Directors with respect to efforts to maximize
shareholder value; and
. Monitoring the progress of the Company's divestiture of its PPM operations
previously recommended by the Strategic Planning Committee.
Compensation Committee. Mr. Newhall is the Chairman of the Compensation
Committee, and Mr. Striplin, Mr. McDonald, and Mr. Headrick serve as members.
The Compensation Committee met eight times in 1998. Its duties include:
. Recommending compensation and benefit programs for the Company to the
Board of Directors;
. Administering the Company's stock option plans;
. Reviewing the performance of the officers of the Company;
. Setting executive compensation levels; and
. Reporting to the stockholders about executive compensation.
Nominating Committee. The Nominating Committee was formed in March 1999. Mr.
Crawford is the Chairman, and Mr. Scrushy and Mr. Piccolo serve as members. The
duty of the Nominating Committee is to select a slate of nominees for the Board
of Directors, to be voted on at the 1999 annual meeting. The Company does not
have a standing nominating committee. The nominating committee may consider
shareholder nominees for the Board of Directors if submitted in accordance with
the Company's Bylaws.
THE COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
Who determines executive compensation?
The Compensation Committee determines each executive officer's compensation.
The Compensation Committee makes recommendations to the Board of Directors
about appropriate levels of compensation for specific individuals and
compensation and benefit programs for the Company as a whole. These
recommendations are based on several factors, including:
. Enabling the Company to compete effectively for the services of qualified
officers and key employees;
. Giving such officers and employees appropriate incentives to pursue the
maximization of long-term stockholder value; and
. Recognizing the success of such officers and employees in achieving both
qualitative and quantitative goals for the benefit of the Company and its
stockholders.
What is the Company's compensation philosophy?
The Company's executive compensation program is structured and administered
to support the Company's business mission. Historically, that mission focused
on the efficient and effective delivery of physician practice management
services, prescription benefit management and therapeutic pharmaceutical
services and other related healthcare services, generating favorable returns
for its stockholders in the process. In light of the
13
<PAGE>
decisions made in 1998 to discontinue operations in certain divisions of the
Company, the Compensation Committee has engaged a compensation consulting
company to review the current compensation philosophy. The basic principles of
the philosophy, however, will remain the same. The program is designed to
provide three types of compensation:
. Base salaries that represent competitive compensation for the Company's
executive officers;
. Cash incentive compensation, or bonuses; and
. Equity-based incentive compensation, or stock options.
These compensation components are described in detail below:
Base Salary. Each executive officer's annual base salary, including the base
salary of the Chief Executive Officer, is based primarily upon the competitive
market for the executive officer's services. It is the Compensation Committee's
goal that the Company pay market level compensation for market level
performance. The Compensation Committee therefore considers the levels of
compensation paid by other companies in determining appropriate levels of
compensation for the Company's executives. Base salary decisions, however, are
not targeted to specific levels of compensation paid by other companies.
The Compensation Committee also evaluates certain qualitative factors
relating to the executive officer's performance during the preceding year,
including:
. Experience;
. Responsibilities assumed;
. Demonstrated leadership ability;
. Overall effectiveness;
. The level of an executive's compensation in relation to other executives
in the Company with the same, more or less responsibilities; and
. The performance of the executive's division or group in relation to
established operating budgets.
Compensation arrangements for executive officers are often set forth in
employment contracts with specified terms. See "How are the employment
agreements between the Company and the Named Executive Officers structured?"
below.
Bonuses. In addition to base salary, the Compensation Committee recommends
cash bonuses for executives of the Company, based upon the performance of the
Company and the success of each executive in meeting qualitative and
quantitative performance goals on an annual basis. Individual cash incentive
bonuses are not determined according to a set formula, but are determined on a
basis that takes into account each executive's success in achieving standards
of performance established by the Board of Directors and such executive's
superiors. These standards may or may not be quantitative. Bonus determinations
are made on a case-by-case basis, and there is no fixed relationship between
any particular performance factor and the amount of a given executive's bonus.
In addition to the annual bonus review, the Compensation Committee also
believes that exceptional performance by an executive related to specific
projects or goals set by the Board of Directors and senior management should be
rewarded with special cash bonuses that are awarded from time to time, as
circumstances indicate.
Stock Options. The Company has, since inception, used stock option award
grants as a tool to encourage its executives to work to meet the Company's
operational goals and maximize long-term stockholder value. Because the value
of stock options granted to an executive is directly related to the Company's
success in enhancing its market value over time, the Compensation Committee
feels that such grants align the interests of management and stockholders.
Under the Company's various stock option plans, specific grants are determined
by taking into account:
. An executive's current responsibilities;
. His or her historical performance;
14
<PAGE>
. The desirability of his or her long-term services; and
. His or her perceived contributions to the Company's results of operations
and growth.
Stock option award grants are also used to provide an incentive to newly
promoted officers at the time that they are asked to assume greater
responsibilities. In determining whether to make a grant, the Compensation
Committee considers prior grants of stock options and shares of the Company's
common stock currently held, as well as the recipient's success in meeting
operational goals and the recipient's level of responsibility. However, no
fixed formula is used to determine particular grants. The Compensation
Committee believes that the opportunity to acquire a significant equity
interest in the Company is a strong motivation for the Company's executives to
pursue the long-term interests of the Company and its stockholders, and
promotes longevity and retention of key executives.
How are the employment agreements between the Company and the Named Executive
Officers structured?
Mr. Arlotta. Mr. Arlotta's employment agreement, which became effective on
September 20, 1997, provides that he will serve as Chief Operating Officer of
Caremark Pharmaceutical Group until December 31, 1999. He has since been
promoted to President-Pharmaceutical Services. The term will automatically be
extended for an additional year on that date and on each subsequent
anniversary, unless either Mr. Arlotta or the Company gives at least sixty days
written notice of its intent to terminate the agreement. The agreement provides
for an annual base salary, $370,674 in 1998, to be reviewed annually by the
President of the Company. In addition, Mr. Arlotta is eligible to receive an
annual performance bonus, with a current target of up to 75% of his base
salary.
Mr. Dickerson. Mr. Dickerson's employment agreement, which became effective
on May 7, 1998, provides that he will serve as Executive Vice President and
Chief Financial Officer of the Company for a three-year term. The agreement
provides for an annual base salary of $400,000, subject to periodic review by
the Board of Directors or a Committee of the Board. As an inducement to enter
into the agreement, Mr. Dickerson received a signing bonus of $100,000 and a
grant of 400,000 stock options. Mr. Dickerson is eligible to receive a bonus of
up to 100% of his annual base salary, based on his performance, at the
discretion of the Chief Executive Officer.
Mr. Hardin. Mr. Hardin's employment agreement, which became effective on
June 16, 1998, provides that he will serve as Executive Vice President and
General Counsel of the Company until June 30, 2001. The agreement provides for
an annual base salary of $450,000, subject to periodic review by the Board of
Directors or a Committee of the Board. As an inducement to enter into the
agreement, Mr. Hardin received a grant of 400,000 stock options. Mr. Hardin is
eligible to receive a bonus of up to 100% of his base salary, based on his
performance, at the discretion of the Chief Executive Officer.
Dr. Lopez. Dr. Lopez entered into an employment agreement with the Company
effective March 15, 1998. The agreement provides that he will serve as Chief
Medical Officer of the Company until December 31, 2000, and will hold similar
offices with the Company's subsidiaries and affiliates during that time. The
term will be automatically extended for an additional year on December 31, 2000
and on each subsequent anniversary, unless either Dr. Lopez or the Company
gives at least ninety days written notice of intent to terminate the agreement.
The agreement provides for an annual base salary, $414,486 in 1998, to be
reviewed annually by the Chief Executive Officer of the Company. In addition,
Dr. Lopez is eligible to receive an annual performance bonus of up to 50% of
his annual base salary.
Each of these officers is also eligible for other benefits customary for
employees and officers. Each agreement further provides that any payment by
MedPartners to the officer which is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code shall be "grossed up" so that the
officer retains an
15
<PAGE>
amount of the "gross up" payment equal to the excise tax imposed on the
original payment. The agreements also contain provisions regarding pay and
benefits upon certain termination events which are normally found in executive
employment agreements. The chart below describes the various provisions for
each officer depending on the reason for termination. The terms "Cause,"
"Change in Control," "Disability," and "Good Reason" are all used as defined in
the respective employment agreements.
<TABLE>
<CAPTION>
Termination due
Termination for to death, Termination not
Cause or with Disability, or for Cause or with Termination due to a
Named Executive Officer Good Reason retirement out Good Reason Change in Control
- ------------------------ ---------------- ---------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Mr. Arlotta............. All rights under All rights under Continued payment Immediate vesting
the agreement the agreement of salary and of all stock options.
terminated. terminated. bonuses for two years;
continued benefits
for the remainder
of the term;
immediate vesting of
all stock options.
Mr. Dickerson........... All rights under Salary and Salary and bonuses Salary and bonuses
the agreement bonuses for for the remainder for the remainder
terminated. the remainder of the term in a of the term
of the term in a lump sum; in a lump sum;
lump sum. continued benefits continued benefits
for the remainder for the remainder
of the term. of the term.
Mr. Hardin.............. All rights Salary and Salary and bonuses Salary and bonuses
under the bonuses for the for the remainder of for the remainder
agreement remainder of the term in a lump of the term in a
terminated. the term in sum; continued lump sum; continued
a lump sum. benefits for the benefits for the
remainder of remainder of the term.
the term.
Dr. Lopez............... Continued Six months Continued payment Lump sum payment
payment salary in a of salary and equal to three times
of salary for lump sum; bonuses for three base salary and three
six months. immediate years; continued times bonus for the
vesting benefits for three year of termination;
of all stock years; immediate immediate vesting
options. vesting in all of all stock options.
stock options.
</TABLE>
The employment agreement between the Company and Mr. Crawford is described
below in "How is the Chief Executive Officer compensated?"
What Compensation Committee interlocks and insider participation does the
Company have?
In connection with the acquisition of MME, the Company entered into a
Termination Agreement and a Consulting Agreement with Mr. McDonald pursuant to
which Mr. McDonald is entitled to receive certain payments. These agreements
are discussed below in "Certain Transactions--MME Acquisition Agreements."
16
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How is the Company addressing Internal Revenue Code limits on deductibility of
compensation?
Section 162(m) of the Code generally disallows a tax deduction to publicly-
held corporations for compensation in excess of $1,000,000 in any taxable year
that is paid to a corporation's chief executive officer or to the four most
highly compensated executive officers. Compensation in excess of $1,000,000
continues to be deductible if that compensation is "performance based" within
the meaning of Section 162(m) of the Code. Various criteria must be satisfied
to meet the "performance based" standard including, among others, requirements
to determine whether members of the Compensation Committee are "outside"
directors and limitations regarding the maximum number of shares subject to
options that can be awarded under any option plan to an executive during a
specified time.
The Compensation Committee of the Board of Directors has decided, in certain
cases, to award compensation that does not meet the requirements for
deductibility under Section 162(m). The Compensation Committee believes it is
sometimes necessary to award compensation based on performance and competitive
factors rather than tax or legislative policy. A portion of the compensation
awarded to certain Named Executive Officers in 1998 does not meet the
deductibility requirements of Section 162(m). The Board and the Compensation
Committee reserve the authority to award non-deductible compensation in
circumstances they deem appropriate.
What stock option modifications have occurred?
The Compensation Committee and the Board of Directors believe that the
future growth and success of the Company is dependent upon the ability to
attract and retain its executive officers and other key employees. The
Voluntary Option Surrender Program was proposed and approved by the
Compensation Committee because the stock options outstanding under the
Company's various option plans in 1998 were of little or no value, which was
causing a negative effect upon employee motivation. Another primary factor
considered by the Compensation Committee in adopting the Voluntary Option
Surrender Program was the risk of employee attrition. During fiscal 1998, all
active employees of the Company as of September 21, 1998, were entitled to
participate in the Voluntary Option Surrender Program. Under the program,
optionees were permitted to surrender 90% of their current options with an
exercise price of $15.00 or above on a 3 for 1 basis and options with an
exercise price of less than $15.00 were surrendered 2 for 1. The exercise price
for options issued to all employees under the Voluntary Option Surrender
Program was $3.00 per share, the market value of the Company's common stock on
September 21, 1998. A total of 5,168,298 options were surrendered, and
1,846,457 options were issued under the Voluntary Option Surrender Program.
In August, the Compensation Committee cancelled the 3,250,000 options which
were granted to Mr. Crawford in March 1998. The Compensation Committee granted
Mr. Crawford new options to purchase 3,250,000 shares of common stock at $3.25
per share, the market price of the Company's common stock on August 7, 1998.
The Compensation Committee determined the cancellation and subsequent grant to
Mr. Crawford was necessary to provide Mr. Crawford with the performance
incentives which the March 1998 grant was intended to provide him.
How is the Chief Executive Officer compensated?
Mr. Crawford's employment agreement provides that he will be employed as the
Company's President and Chief Executive Officer for a five-year term beginning
March 18, 1998. The term will be automatically extended for an additional year
on each anniversary unless MedPartners gives Mr. Crawford written notice of
non-extension at least 30 days prior to March 18. The agreement provides for an
annual base salary of not less than $1,000,000, subject to increase at the
discretion of the Compensation Committee.
As an inducement to join MedPartners, Mr. Crawford received a sign-on bonus
of $1,000,000, subject to partial repayment if he voluntarily terminates his
employment before March 18, 2000, for any reason other than Good Reason, as
defined in the agreement. Mr. Crawford also received a stock option grant of
3,250,000 shares priced at $10 per share. In order to provide additional
incentive to Mr. Crawford and to assist in retention of his management talents
and expertise, this grant was cancelled and regranted at a price of $3.25 per
share in
17
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August 1998 pursuant to an amendment to his employment agreement. See "What
Stock Option Modifications have Occurred?" above. 1,250,000 of Mr. Crawford's
options vested on March 18, 1998, and the remaining shares vested upon the
completion of the sale of the Company's contract services division on March 12,
1999.
As discussed above in "What is the Company's Compensation Philosophy?", the
Compensation Committee has determined that equity-based incentive compensation
will motivate the Company's executive officers to achieve strategic business
objectives over the long-term, thereby aligning the interests of the Company's
executives with those of the stockholders. In light of that philosophy, Mr.
Crawford was entitled to receive 500,000 stock options when the MedPartners
1998 target performance goals were met. In addition, Mr. Crawford is eligible
to receive an annual cash incentive bonus of up to two times his base salary,
subject to increase at the discretion of the Board of Directors. The payment of
this bonus is dependent upon the Company's achievement of certain target
performance goals for each year. Mr. Crawford is eligible for other benefits
customarily found in executive employment agreements. His employment agreement
also contains provisions regarding pay and benefits upon certain termination
events. If the agreement is terminated for Cause or without Good Reason, as
defined in the agreement, all rights under the agreement terminate upon such
termination. If Mr. Crawford is terminated for reason other than Cause or if he
terminates for Good Reason, he is entitled to a lump-sum payment equal to base
salary and bonuses for the longer of the remainder of the term of his agreement
or three years, and immediate vesting of all stock options. In the case of
disability, all of Mr. Crawford's stock options will immediately vest. In the
case of death, Mr. Crawford's estate is entitled to a lump-sum payment equal to
his base salary and bonuses for the longer of the remainder of the term of his
agreement or three years, and immediate vesting of all stock options.
Mr. Scrushy became Acting Chief Executive Officer on January 19, 1998. He
was paid a base annual salary of $500,000, and received a grant of 4,000,000
stock options. Mr. Scrushy has since returned those options to the Company for
cancellation. Mr. Scrushy resigned as Acting Chief Executive Officer on March
18, 1998, when Mr. Crawford became President and Chief Executive Officer.
The Company had a five-year employment agreement with Mr. House which was
terminated upon his resignation on January 16, 1998. The agreement provided for
a base salary of $935,700, and an annual bonus of up to $776,700, based on the
achievement of certain performance standards established by the Compensation
Committee. Mr. House was also eligible for other customary benefits provided in
executive employment agreements. At the time of his resignation, Mr. House
entered into a retirement agreement which provided for a consulting arrangement
upon his termination with the Company. This retirement agreement, the terms of
which are being disputed by the Company, is described in "Certain
Transactions," below.
COMPENSATION COMMITTEE
Charles W. Newhall III
Larry D. Striplin, Jr.
John S. McDonald, J.D.
Roger L. Headrick
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<PAGE>
CERTAIN TRANSACTIONS
MME Acquisition Agreements
Termination Agreements. In connection with the MME Acquisition in November
1995, the Company and each of Dr. Mullikin, and Mr. McDonald, entered into a
Termination Agreement that terminated their previous employment agreements with
MME, in exchange for certain payments and other benefits. These payments and
benefits included a lump sum payment of $1,064,000 in the case of Dr. Mullikin,
and $796,000 in the case of Mr. McDonald, continuation of certain fringe
benefits and perquisites for 36 months, certain other payments from the
Company, a trust set up by the Company to fund the remainder of MME's pension
obligations to Dr. Mullikin (or to Dr. Mullikin's spouse, should she survive
him) and Mr. McDonald, payment of all health and medical care (including
prescriptions) for Dr. Mullikin and his spouse and Mr. McDonald for the
remainder of their lives through a Company-sponsored health insurance plan, a
death payment benefit to be paid to Dr. Mullikin's designated beneficiary or
estate of $2,700,000, and certain other benefits. The amounts of the benefits
and payments received by Dr. Mullikin and Mr. McDonald under these agreements
in 1998 was $3,342,257 and $3,290,357, respectively.
Consulting Agreements. In November 1995, the Company entered into five-year
Consulting Agreements with Dr. Mullikin and Mr. McDonald. Dr. Mullikin will
receive consulting fees of $2,480,000, to be paid over the term of the
agreement, with an initial payment of $744,000 on November 29, 1995 and equal
payments of $434,000 on each anniversary of such date. Mr. McDonald will
receive consulting fees of $2,230,000 to be paid over the term of the agreement
with an initial payment of $669,000 on November 29, 1995 and equal payments of
$390,250 on each anniversary thereof. Dr. Mullikin and Mr. McDonald will also
be provided access to an office and support staff and certain other benefits.
Dr. Mullikin and Mr. McDonald received $434,000 and $390,250, respectively,
pursuant to these agreements in 1998.
Caremark Acquisition Agreements
Termination Agreements. In connection with the Caremark acquisition in
September 1996, the employment of Mr. Piccolo, now a director of the Company,
was terminated, entitling him to severance payments of $2,805,426 and
$1,052,138, respectively, and certain other benefits provided in his severance
agreement.
Consulting Agreements. In September 1996, the Company and Mr. Piccolo
entered into a consulting agreement (the "Piccolo Agreement"). The term of the
Piccolo Agreement is ten years, unless terminated sooner. Over the course of
such ten-year period, Mr. Piccolo will be paid consulting fees totaling
approximately $5.4 million. The "gross up" provisions of that severance
agreement will apply to payments made pursuant to the Piccolo Agreement in the
event such consulting payments are determined to be "excess parachute"
payments. Mr. Piccolo or his spouse will be eligible to participate in all
health and medical employee benefit plans and programs available, from time to
time, to employees of the Company and Caremark until he reaches the age of 65.
After age 65, Mr. Piccolo and his spouse will be provided with a prescription
drug program comparable to that provided Caremark employees through Caremark's
prescription drug benefit program. Mr. Piccolo will be provided with an
adequate office and secretarial support, as well as reimbursement of reasonable
expenses, and will be subject to certain non-compete and confidentiality
restrictions. Mr. Piccolo was paid $587,506 pursuant to the Piccolo Agreement
in 1998.
Retirement Agreement with Mr. House
In connection with his resignation as Chief Executive Officer of the Company
on January 16, 1998, Mr. House agreed to the termination of his employment
agreement and entered into a retirement agreement with the Company which
provided certain severance benefits, including a lump-sum payment of
$5,993,400, in 1998. The retirement agreement called for immediate vesting of
all outstanding stock options held by Mr. House and provides that all such
stock options shall remain in full force and effect for their remaining
19
<PAGE>
terms. The retirement agreement also provided for a two-year consulting
arrangement, pursuant to which Mr. House was to receive fees based on the base
salary and incentive bonus amounts set forth in his prior employment agreement.
The Company rescinded the retirement agreement in October 1998 and ceased
providing pay and benefits to Mr. House at that time. At the time the
retirement agreement was rescinded, Mr. House had been paid consulting fees of
$662,796. Certain terms of the retirement agreement are currently being
contested by the Company. See "How is the Chief Executive Officer compensated?"
STOCK PRICE PERFORMANCE GRAPH
The graph below reflects the cumulative stockholder return on the Company's
common stock compared to the return of the Standard & Poor's 500 Stock Index
and the Company's peer group indices for the periods indicated. The graph
reflects the investment of $100 on February 28, 1995 in the Company's common
stock, the S&P 500 and the Company's peer group indices. The Company's former
peer group consisted of the following companies: AHI Health Systems (1),
American Oncology Resources, Apogee, Inc., Coastal Physician Group, Inc.,
EmCare Holdings, Inc. (1), InPhyNet Medical Management, Inc. (1), MedPartners,
Inc., Occusystems, Inc. (1), Pediatrix Medical Group, Inc., PHP Healthcare
Corp., PhyCor, Inc., Physician Reliance Network, Phymatrix Corp., Physician
Resource Group and Sheridan Healthcare, Inc. The Company's current peer group
consists of the following companies: MIM Corporation (2), Advance Paradigm,
Inc. (3), Express Scripts, Inc. and MedPartners, Inc. The Company selected a
different peer group for 1999 to reflect its decision in 1998 to focus its
business on its pharmacy benefit management and related operations and
discontinue its other operations. The Company's past performance is not
necessarily indicative of its performance relative to its new peer group.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
COMPANY 2/28/95 6/30/95 12/29/95 6/28/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98 2/26/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MDM 100.0 110.0 188.6 119.3 118.6 123.6 127.9 45.7 30.0 33.9
PBM 100.0 101.2 116.7 111.8 125.4 147.8 189.1 227.8 270.2 267.7
PPM 100.0 105.1 175.0 162.2 123.2 132.9 123.5 69.3 55.4 48.0
S&P 500 100.0 111.8 126.4 137.6 152.0 181.6 199.1 232.6 252.2 254.1
</TABLE>
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(1) These companies were acquired or merged with other companies during 1997.
The graph includes these companies only for those dates that each such
company was in existence and trading.
(2) MIM Corporation began trading on August 15, 1996. It is included in the
graph at $12.50 per share, its initial public offering price, for dates
prior to its initial public offering.
(3) Advance Paradigm, Inc. began trading on October 9, 1996. It is included in
the graph at $9.00 per share, its initial public offering price, for dates
prior to its initial public offering.
The stock price performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or
under the Securities Exchange Act of 1934, as amended (together, the "Acts"),
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
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RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP, Birmingham, Alabama, has been engaged by the Board of
Directors of the Company as independent public accountants for the Company and
its subsidiaries for the fiscal year 1998 and is currently engaged to serve in
such capacity for 1999. Management expects that a representative of Ernst &
Young LLP will be present at the annual meeting to make a statement if he or
she desires to do so and to be available to answer appropriate questions posed
by stockholders.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by the stockholders, proxies in the enclosed forms returned
to the Company will be voted in accordance with the recommendation of the Board
of Directors or, in the absence of such a recommendation, in accordance with
the judgment of the proxy holder.
ADDITIONAL INFORMATION
How can I make a proposal for the 2000 annual meeting?
Stockholders interested in presenting a proposal for inclusion in the
Company's proxy statement and proxy card relating to the Company's annual
meeting of the stockholders in 2000 may do so by following the procedures
prescribed in Rule 14a-8 under the Securities Exchange Act of 1934 and the
Company's bylaws. To be eligible for inclusion, stockholder proposals must be
received by the Company's Corporate Secretary no later than December 22, 1999.
Any stockholder proposal to be considered at next year's annual meeting but not
included in the proxy statement must be submitted in writing by March 8, 2000
or the persons appointed as proxies may exercise their discretionary voting
authority if the proposal is considered at the meeting.
What is the Company spending on proxy solicitation costs?
The accompanying proxy is solicited by the Board of Directors for use at the
annual meeting of stockholders. The cost of soliciting proxies in the enclosed
form will be borne by the Company. The Company has retained ChaseMellon
Shareholder Services, L.L.C., 450 West 33rd Street, 14th Floor, New York, New
York 10001, to aid in solicitation. For these services the Company will pay
ChaseMellon Shareholder Services, L.L.C. a fee of $10,500 and reimburse it for
certain out-of-pocket expenses. Additional solicitation may be made by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means by the officers or regular employees of the Company, who will
receive no additional compensation. The Company expects to reimburse brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses in forwarding solicitation material to the beneficial owners of stock.
By Order of the Board of Directors:
Sara J. Finley
Corporate Secretary
April 22, 1999
21
<PAGE>
MedPartners, Inc.
Proxy solicited by the Board of Directors for the Annual Meeting of
Stockholders on June 10, 1999.
The undersigned hereby appoints Edwin M. Crawford and Sara J. Finley, and
each of them, proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of stock of MedPartners,
Inc. (the "Company"), which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held on Thursday,
June 10, 1999, 3:00 p.m., Central time, at the Wynfrey Hotel, 1000 Riverchase
Galleria, Birmingham, Alabama, and at any adjournment thereof, upon the matters
described in the accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement, receipt of which is hereby acknowledged, and upon any other business
that may properly come before the meeting or any adjournment thereof. Said
proxies are directed to vote on the matters described in the Notice of Annual
Meeting and Proxy Statement, as follows, and otherwise in their discretion upon
such other business as may properly come before the meeting or any adjournment
thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR
LISTED ON THE REVERSE SIDE AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS
ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
Please date, sign exactly as your name appears on the form and mail the proxy
promptly. When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title as such. If shares are held jointly, both
owners must sign.
(CONTINUED AND TO BE DATED AND SIGNED ON THE OTHER SIDE)
CHANGE OF ADDRESS
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<PAGE>
MedPartners, Inc.
Annual Meeting of Shareholders
June 10, 1999
3:00 P.M.
The Wynfrey Hotel
1000 Riverchase Galleria
Birmingham, Alabama
Vote by Telephone or Internet
Quick Easy Immediate
MedPartners, Inc. encourages you to take advantage of two new cost-effective and
convenient ways to vote your shares.
You may now vote your proxy 24 hours a day, 7 days a week, using either a touch-
tone telephone or through the Internet. Your telephone or Internet vote must be
received by 12:00 midnight Eastern Daylight Time on June 9, 1999.
Your telephone or Internet vote authorizes the proxies named on the proxy card
below to vote your shares in the same manner as if you marked, signed and
returned your proxy card.
Vote by Phone On a touch-tone telephone dial 1-800-652-8683 from the
U.S. and Canada or dial 201-324-0377 from other
countries.
You will be asked to enter the Voter Control Number
located in the box just below the perforation on the
proxy card. Then follow the instructions.
OR
Vote by Internet Point your browser to the web address:
http://www.vote-by-net.com
Click on the "Proxy Voting" icon. You will be asked to
enter the Voter Control Number located in the box just
below the perforation on the proxy card. Then follow the
instructions.
OR
Vote by Mail Mark, sign and date your proxy card and return it in the
postage-paid envelope. If you are voting by telephone or
the Internet, please do not mail your proxy.
<TABLE>
<CAPTION>
Fold and Detach Here
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The Board recommends a vote FOR election of the following Directors. Voter Control Number: 123456
<S> <C> <C> <C>
Election of Directors
01 Edwin M. Crawford For Withheld To withhold authority to vote, mark
02 James H. Dickerson, Jr. "For" and write the nominee's number
03 Kristen Gibney on the line below.
[_] [_]
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Special Action
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Change of Address & complete Discontinue Annual Report Mailing Will Attend Annual Meeting
section on reverse side. for this Account
[_] [_] [_]
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Please sign exactly and as fully as your name
appears on your stock certificate. If shares
are held jointly, each stockholder must sign.
------------------------------------------------
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Signature(s) Date
</TABLE>
