SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<CAPTION>
<S> <C>
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Advanced Health Corporation
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
ADVANCED HEALTH CORPORATION
555 White Plains Road
Tarrytown, New York 10591
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Advanced Health Corporation, a Delaware corporation (the
"Company"), will be held at the Tarrytown Hilton, 455 South Broadway, Tarrytown,
New York 10591, on June 6, 1997, at 10:00 a.m. (local time) for the following
purposes:
1. to elect one director of the Company to serve for a three-year term
and until his successor is duly elected and qualified;
2. to approve an amendment to the Company's 1995 Stock Option Plan
authorizing the issuance of options thereunder to purchase up to an additional
600,000 shares of Common Stock of the Company;
3. to ratify the selection of Arthur Andersen LLP as auditors for the
Company for the fiscal year ending December 31, 1997; and
4. to transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 25, 1997,
are entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors,
/s/JONATHAN EDELSON, M.D.
-------------------------------------------------
Jonathan Edelson, M.D.
Chairman of the Board and Chief Executive Officer
Tarrytown, New York
April 30, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE READ THE
ENCLOSED PROXY STATEMENT AND SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE UNITED
STATES.
<PAGE>
ADVANCED HEALTH CORPORATION
555 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591
===================
PROXY STATEMENT
===================
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 1997
This Proxy Statement is being mailed to you in connection with the
solicitation of proxies by the Board of Directors of Advanced Health
Corporation, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Meeting") of Advanced Health Corporation, a
Delaware corporation (the "Company"), to be held on June 6, 1997, at 10:00 a.m.
(local time), at the Tarrytown Hilton, 455 South Broadway, Tarrytown, New York
10591, and any adjournments thereof.
SOLICITATION OF PROXIES
All shares represented by duly executed proxies in the form enclosed
herewith received by the Company prior to the Meeting will be voted as
instructed therein at the Meeting. There are boxes on the proxy card to vote for
or to withhold authority to vote for the director nominee and there are also
boxes to vote for or against or to abstain on the proposal to amend the
Company's 1995 Stock Option Plan and to ratify the selection of the Company's
auditors. If no instructions are given, the persons named in the accompanying
proxy intend to vote FOR the one nominee named herein as a director of the
Company, FOR the proposal to amend the Company's 1995 Stock Option Plan and FOR
ratification of the selection of the auditors named herein.
Any stockholder may revoke a previously executed proxy at any time
prior to its exercise (i) by delivering a later-dated proxy, (ii) by giving
written notice of revocation to the Secretary of the Company at the address set
forth above at any time before such proxy is voted or (iii) by voting in person
at the Meeting. No proxy will be voted if the stockholder who executed such
proxy attends the Meeting and elects to vote in person. If a stockholder does
not intend to attend the Meeting, any proxy or notice should be returned to the
Company for receipt by the Company not later than the close of business on June
4, 1997.
A copy of the Annual Report of the Company containing audited financial
statements for the fiscal year ended December 31, 1996, is enclosed herewith.
This Proxy Statement and the form of proxy enclosed herewith were first mailed
to stockholders on or about April 30, 1997. The mailing address of the Company's
principal executive offices is 555 White Plains Road, Tarrytown, New York 10591.
The Board of Directors does not know of any matter other than as set
forth herein that is expected to be presented for consideration at the Meeting.
However, if other matters properly come before the Meeting, the persons named in
the accompanying proxy (each of whom is an officer and employee of the Company)
intend to vote thereon in accordance with their judgment.
RECORD DATE, OUTSTANDING VOTING SECURITIES
AND VOTES REQUIRED
The Company's common stock, $.01 par value per share ("Common Stock"),
is the only outstanding class of voting securities of the Company. The record
date for determining the holders of Common Stock entitled to vote on the actions
to be taken at the Meeting is the close of business on April 25, 1997 (the
"Record Date"). As of the Record Date, 7,201,566 shares of Common Stock were
outstanding. Each holder of Common Stock on the Record Date is entitled to cast
one vote per share at the Meeting. The Common Stock does not have cumulative
voting rights.
<PAGE>
Holders of a majority of the shares entitled to vote must be present at
the Meeting, in person or by proxy, so that a quorum may be present for the
transaction of business. The affirmative vote of the holders of a majority of
the shares of Common Stock present at the Meeting, in person or by proxy, is
necessary for the election of directors of the Company and for amendment of the
Company's 1995 Stock Option Plan and ratification of the selection of Arthur
Andersen LLP as auditors for the Company.
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes,
having terms expiring at the annual meeting of the Company's stockholders in
1997, 1998 and 1999, respectively. At the Meeting, one person will be elected to
serve as a director in the class whose term is expiring at the Meeting for a
three-year term expiring at the annual meeting of the Company's stockholders in
the year 2000 and until a successor has been duly elected and qualified as
provided in the Company's Restated Certificate of Incorporation and Restated
By-laws.
The following person has consented to be nominated and, if elected, to
serve as a director of the Company. The nominee is presently a member of the
Company's Board of Directors. Information about the nominee for director is set
forth below.
NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS
JONATHAN LIEBER, age 30, has been a Director of the Company since
September 1995. Mr. Lieber has served as an investment analyst focusing on
special situation investments, including the areas of healthcare, banking and
other consumer services, of GeoCapital Corp., since July 1992. Mr. Lieber has
served since June 1992 as Vice President of Applewood Capital, where he
specializes in consumer services including healthcare, banking and finance.
Additionally, Mr. Lieber has served as a Vice President of Infomedia Management
Co., Inc., the management company for the general partner of the 21st Century
investment partnerships since February 1995. Prior to joining GeoCapital, Mr.
Lieber was employed as a research analyst at Gabelli & Co., an investment
management and brokerage firm, from 1990 to 1991.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 1998
JAMES T. CARNEY, age 53, has been a director of the Company since
September 1996. Mr. Carney has served as General Manager of Benefits
Administration for USX Corporation and Vice President of Administration for
United States Steel and Carnegie Pension Fund since 1989. Mr. Carney was named
General Attorney-Employee Benefits of USX Corporation in 1978, Senior General
Attorney-Employee Benefits and Workers' Compensation in 1985 and Senior General
Attorney-Commercial and Employee Relations for the U.S. Diversified Group in
1986.
BARRY KUROKAWA, age 41, has been a director of the Company since March
1996. Since February 1996, Mr. Kurokawa has served as a Managing Director of
ProMed Asset Management, L.L.C. ("ProMed"), a private health care investment
management and services company, and as the President of Blackriver Capital
Management, Ltd., the general partner of ProMed and a consultant to INVESCO
Trust Company, a mutual fund company. From May 1992 to January 1996, he was
employed by INVESCO Trust Company as Senior Vice President and portfolio manager
of four health care funds managed by the firm. From July 1992 to January 1996,
Mr. Kurokawa was also the Vice President of Global Health Services, a closed-end
mutual fund. Before he joined INVESCO, Mr. Kurokawa served as Vice President
Equity Research and health care analyst at Trust Company of the West, an
investment management company, from July 1987 to April 1992.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 1999
JONATHAN EDELSON, M.D., age 37, has been the Chairman of the Board and
Chief Executive Officer of the Company since its inception. Dr. Edelson is a
board-certified internist. Prior to co-founding the Company, Dr.
-2-
<PAGE>
Edelson served as the Chief Executive Officer of Physicians' Online, Inc. from
August 1993 to December 1994 and as a director from August 1993 to the present.
Dr. Edelson was a senior vice president with ValueRx, Inc., the prescription
drug benefits management unit of Value Health, Inc., from October 1990 to June
1993. As a practicing physician prior to joining ValueRx, Inc., Dr. Edelson
founded Medical Decision Resources, Inc., a physician profiling and education
business, in March 1989, and served as its President through September 1990. Dr.
Edelson attended Yale University, University of Chicago School of Medicine and
the Harvard School of Public Health.
STEVEN HOCHBERG, age 35, has been President and a director of the
Company since its inception. He is a co-founder of the Company and co-founder of
Physicians' Online, Inc. Mr. Hochberg served as the President of Physicians'
Online, Inc. from January 1993 to June 1994. Mr. Hochberg served as the
President of Ascent Group, Inc., a financial consulting business that he
founded, from February 1992 to January 1993, and as the Vice President of
Sigoloff & Associates, management consultants, from September 1989 to February
1992. In addition, he worked with Alex. Brown & Sons as a Corporate Finance
Associate in 1985 and with Bain & Company as a Strategy Consultant from 1986 to
1987. Mr. Hochberg, a CPA, holds an MBA from Harvard Business School.
MEETINGS OF THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS;
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors
met four times and acted by unanimous written consent thirteen times. The
Company's Compensation Committee, comprised of Messrs. Carney and Kurokawa,
which met three times in 1996, makes recommendations to the Board of Directors
with respect to general compensation and benefit levels, determines the
compensation and benefits for the Company's executive officers and administers
the Company's 1995 Stock Option Plan and Employee Stock Purchase Plan. The Audit
Committee, comprised of Messrs. Kurokawa and Lieber, which did not meet in 1996,
oversees the activities of the Company's independent auditors and internal
accounting controls. The Board of Directors does not have a standing nominating
committee or any committee performing a similar function. Each director attended
at least 75% of the aggregate of all Board meetings and all meetings of
committees of which he was a member held during 1996 while he was in office.
Directors do not currently receive any cash compensation from the
Company for their service as members of the Board of Directors, although they
are reimbursed for certain out-of-pocket expenses in connection with attendance
at Board and committee meetings. Non-employee directors of the Company are
eligible to receive options under the Company's 1995 Stock Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of Common Stock as of April, 1, 1997, with respect to (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each of the Company's directors, (iii) certain executive
officers of the Company and (iv) all directors and officers as a group. Unless
otherwise indicated, the address for each stockholder is c/o the Company, 555
White Plains Road, Tarrytown, New York 10591.
-3-
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON
NAME AND ADDRESS STOCK(1) PERCENT(1)
- ------------------------------------------------------------------------ ----------------- ---------------
<S> <C> <C> <C>
INVESCO Trust Company (2)
7800 E. Union Avenue
Denver, CO 80237..................................................... 1,300,086 18.1%
21st Century Partnerships (3)
767 Fifth Avenue
New York, NY 10153................................................... 595,535 8.3%
Christian Mayaud, M.D.(4)
1235 Oenoke Ridge
New Canaan, CT 06840................................................. 436,430 6.1%
Jonathan Edelson, M.D.(5).............................................. 480,032 6.6%
Steven Hochberg(6)..................................................... 490,917 6.8%
Alan Masarek(7)........................................................ 33,407 *
Robert Alger(8)........................................................ 25,818 *
James T. Carney........................................................ --- ---
Barry Kurokawa(9)...................................................... 2,502 *
Jonathan Lieber(10).................................................... 2,502 *
All directors and executive officers as a group (7 persons)(11)........ 1,035,178 14.1%
</TABLE>
- ----------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities and
includes options exercisable within 60 days of April 1, 1997. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Percentage of beneficial ownership is based
on 7,170,516 shares of Common Stock outstanding as of April 1, 1997.
(2) Includes 687,087 shares of Common Stock owned of record by INVESCO
Strategic Portfolios, Inc. - Health Sciences Portfolio ("ISP -- HSP") and
612,999 shares of Common Stock owned of record by The Global Health
Sciences Fund ("GHS"). ISP--HSP and GHS are mutual fund companies advised
by INVESCO Funds Group, Inc., which is a subsidiary of INVESCO PLC.
INVESCO Trust Company is a subsidiary of INVESCO Funds Group, Inc.
(3) Includes shares owned by 21st Century Communications Partners, L.P., 21st
Century Communications T-E Partners, L.P. and 21st Century Foreign
Partners, L.P.
(4) Includes presently exercisable options to purchase 7,447 shares of Common
Stock.
(5) Includes presently exercisable options to purchase 51,636 shares of
Common Stock.
(6) Includes presently exercisable options to purchase 51,636 shares of
Common Stock.
(7) Includes presently exercisable options to purchase 33,407 shares of
Common Stock.
(8) Includes presently exercisable options to purchase 25,818 shares of
Common Stock.
(9) Includes presently exercisable options to purchase 2,502 shares of Common
Stock.
(10) Includes presently exercisable options to purchase 2,502 shares of Common
Stock.
(11) See notes (5), (6), (7), (8), (9) and (10).
-4-
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the executive officers of the Company.
See "Election of Directors" for a description of the business experience of
Dr. Edelson and Mr. Hochberg.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jonathan Edelson, M.D............. 37 Chairman, Chief Executive Officer and Director
Steven Hochberg................... 35 President and Director
Alan Masarek...................... 36 Chief Operating Officer and Chief Financial Officer
Robert Alger...................... 42 Vice President and Chief Information Officer
</TABLE>
ALAN B. MASAREK has been Chief Operating Officer and Chief Financial
Officer of the Company since November 1995. Prior to joining the Company, from
April 1995 to November 1995, Mr. Masarek was acting as an independent
consultant. Mr. Masarek was President and Chief Executive Officer of the Scovill
Group, an international manufacturer of fasteners and other component items with
annual revenues of approximately $125 million, from February 1994 to April 1995.
Prior to Scovill, Mr. Masarek was President of two divisions of the Bibb
Company, a diversified textile manufacturer, from December 1991 to February
1994. Prior to that, Mr. Masarek worked for three years as a buyout specialist
with the NTC Group and for five years in the audit division of Arthur Andersen &
Co. Mr. Masarek, a CPA, holds an MBA from Harvard Business School.
ROBERT ALGER has been Vice President and Chief Information Officer of
the Company since February 1995. Prior to joining the Company, Mr. Alger was
Chief Information Officer and Vice President of Information Systems at Blue
Shield of California, from December 1991 to February 1995, and a partner at
Scribner, Jackson & Associates, a technology consulting group, from January 1986
to December 1991. Mr. Alger received his B.S.
from California State University -- Northridge.
-5-
<PAGE>
EXECUTIVE COMPENSATION
AND RELATED INFORMATION
The following table sets forth a summary of the compensation of the
Company's Chief Executive Officer and each other executive officer of the
Company who earned in excess of $100,000 in annual salary and bonus during the
Company's fiscal year ended December 31, 1996 (collectively, the "Named
Executive Officers"), for services rendered in all capacities to the Company
during the Company's fiscal years ended December 31, 1996 and 1995,
respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
------------------- ----------------------
Securities Underlying
Options/SARs
Name and Principal Position Year Salary ($) (#)
- ------------------------------------------- -------- ------------------- ----------------------
<S> <C> <C> <C>
Jonathan Edelson, M.D......................... 1996 $220,224 ---
Chief Executive Officer 1995 187,115 101,286
Steven Hochberg............................... 1996 220,184 ---
President 1995 187,115 101,286
Alan Masarek.................................. 1996 200,198 ---
Chief Operating Officer 1995 25,942 86,307
and Chief Financial Officer
Robert Alger.................................. 1996 154,854 ---
Vice President and Chief Information Officer 1995 123,937 41,706
</TABLE>
During the fiscal year ended December 31, 1996, the Company made no option
grants to the Named Executive Officers and no Named Executive Officer exercised
any options. The following table sets forth certain information regarding
options held at December 31, 1996, by each of the Named Executive Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Fiscal Year-End Options at Fiscal Year-End(1)
---------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
--------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Jonathan Edelson, M.D............. 33,762 67,524 $321,052 $642,115
Steven Hochberg................... 33,762 67,524 321,052 642,115
Alan Masarek...................... 33,407 52,630 299,992 472,620
Robert Alger...................... 13,902 27,804 136,756 273,512
</TABLE>
(1) Value of unexercised in-the-money options is based on a value of $12.50
per share of the Company's Common Stock, the fair market value of the
Company's Common Stock on December 31, 1996. Amounts reflected are based
on the assumed value minus the exercise price multiplied by the number of
shares subject to the option.
-6-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program requires that a substantial portion
of any executive's compensation (including that of the Chief Executive Officer)
be tied to the profitability and performance of the Company. In addition, the
Company believes that tying an employee's compensation to stock performance
enables the Company to align employees' interests more closely with those of its
stockholders.
To implement these policies, the Company's executive compensation
program consists of two main elements: (i) annual compensation, consisting of
base salary and incentive bonuses; and (ii) long-term incentives that provide a
financial opportunity through stock options. Each component of compensation has
an integral role in the total executive compensation program.
The base salary component of annual compensation is based on
competitive salaries earned by executives with similar experience in companies
similar in size to the Company. Increases in base salary are the direct result
of individual achievements within a fiscal year.
The incentive bonus component of annual compensation is a function of
an individual's contributions relative to performance objectives and overall
Company profitability. The incentive bonus portion of executive compensation
reflects the Compensation Committee's view that, for senior executives, a
meaningful portion of compensation should be "at risk," providing a direct link
between pay, achievements and Company results for any year.
Long-term incentive compensation, rather than reflecting a single
year's results, is intended to focus management's attention on the Company's
future. The Compensation Committee believes strongly that executive pay should
relate directly to Company performance. Long-term incentives are intended to
provide financial opportunities for executives based on the Company's
performance over a number of years.
Long-term incentive compensation is achieved through grants of stock
options, which may be either incentive stock options ("ISOs") or stock options
that are non-qualified for Federal income tax purposes ("NSOs") under the
Company's 1995 Stock Option Plan (the "Option Plan"). Options provide executives
with the opportunity to buy and maintain an equity interest in the Company and
to share in the appreciation of the value of the Company's stock. Under the
Option Plan, the exercise price of ISOs may not be less than 100% of the fair
market value of the Common Stock at the time of grant and the exercise price of
NSOs is determined by the Compensation Committee at the time such options are
granted. Options granted under the Option Plan typically vest in equal annual
installments over a three-year period. These features result in (i) enhancing
the Company's ability to retain, for an extended period of time, those
individuals who are key to the creation of stockholder value and (ii) ensuring
that executives gain only when stockholders gain through appreciation in the
market price of the Company's Common Stock.
The base salary for 1996 for Jonathan Edelson, the Company's Chief
Executive Officer, was set by the Compensation Committee based on Dr. Edelson's
performance in 1995 and an analysis of the compensation for executives at a
comparable level in the Company's industry. Dr. Edelson's employment agreement
provided for the payment of a base salary of $220,000 for 1996. Based on Dr.
Edelson's performance in 1996 and the desire to provide appropriate incentives
for future performance, the Committee initially decided to grant Dr. Edelson a
base salary increase, a cash bonus and incentive stock options. At Dr. Edelson's
request, in order to promote investment in the future growth of the Company, the
Compensation Committee determined to grant Dr. Edelson additional incentive
stock options in lieu of a cash bonus. Guided by its analysis of industry
compensation, the Compensation Committee granted Dr. Edelson a base salary
increase of $35,000 and 100,000 incentive stock options effective in January
1997.
James T. Carney
Barry Kurokawa
-7-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common
Stock for the period from October 3, 1996 through December 31, 1996 to that of
the NASDAQ Index and an index based on the common stock of a peer group of the
following eight companies: American Oncology Resources, Inc. (AORI); FPM Medical
Management, Inc. (FPAM); Medcath, Inc. (MCTH); Medpartners, Inc. (MDM); Phycor,
Inc. (PHYC); Phymatrix Corp. (PHMX); Physicians Reliance Network, Inc. (PHYN);
and Physicians Resource Group, Inc. (PRG). The graph assumes that the value of
the investment in Common Stock and each index was $100 at October 3, 1996, and
that all dividends were re-invested. Stock price performances shown in the graph
are not necessarily indicative of future price performances.
Comparison of Cumulative Total Return Among
Advanced Health Corporation, peer group
companies within the Company's industry
and NASDAQ National Market Index
[PERFORMANCE CHART]
ADVH ADVH Comparable Companies** NASDAQ
- -------- --------------------------- ----------
100.000 100 100
103.175 98.17824 100.8168
95.238 83.88083 98.69267
107.143 84.01062 102.7679
90.476 86.68788 104.6883
97.225 82.05421 104.1059
84.127 81.38334 104.4124
-8-
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Jonathan Edelson, M.D., its Chairman and Chief Executive
Officer, Steven Hochberg, its President, Alan Masarek, its Chief Operating
Officer and Chief Financial Officer, and Robert Alger, its Vice President and
Chief Information Officer (each, an "Executive"). The Employment Agreements
provide that the annual base salary of each of the Executives is: Dr. Edelson,
$220,000; Mr. Hochberg, $220,000; Mr. Masarek, $200,000; and Mr. Alger,
$154,000. The Executives are also entitled to receive discretionary bonuses.
The Employment Agreements generally provide for a three-year term that
is automatically renewable for successive one-year terms unless either party
gives prior written notice of its intent not to renew. The Employment Agreements
set forth the compensation arrangements and the employee fringe benefits
provided by the Company to each Executive. In addition, the Employment
Agreements set forth the compensation payable to an Executive in the event of a
termination of the Executive's employment by the Company. Generally, upon the
termination of an Executive's employment by the Company for cause, the Executive
is entitled to receive earned but unpaid salary and reimbursement for business
expenses incurred during the performance of the Employee's duties. If an
Executive's employment with the Company is terminated without cause, due to the
death or incapacity of the Employee or within a specified period after a change
of control (as defined in the Employment Agreements), the Executive is entitled
to receive the amounts payable in the event of a termination for cause plus a
cash severance payment not to exceed the cash compensation received by the
Executive in the prior 12-month period and the vesting of certain shares of
Common Stock and options to purchase Common Stock of the Company then held by
such Executive. Each Employment Agreement contains a non-compete provision that
restricts an Executive from competing against the Company for a period of
one-year following such Executive's termination of employment with the Company.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
In June 1996, the Company issued three 9% Series B Promissory Notes in
the aggregate principal amount of $1 million to certain 21st Century
partnerships. In August 1996, the Company issued three additional 9% Series B
Promissory Notes in the aggregate principal amount of $1 million to certain 21st
Century partnerships. 21st Century partnerships is a principal stockholder of
the Company. Such notes were repaid in full from the proceeds of the Company's
initial public offering (the "IPO") in October 1996.
-9-
<PAGE>
In 1996 and 1997, in accordance with the Company's Senior Executive
Loan Policy, which is administered by the Compensation Committee of the Board of
Directors, the Company made loans of $220,000, $275,000 and $60,000 to each of
Dr. Edelson, Mr. Hochberg and Mr. Alger, respectively. These loans are due three
years from the date of grant with interest payable monthly at a rate of 6% per
annum.
In January 1997, the Company and Physicians' Online, Inc. ("Physicians'
Online") announced an agreement to jointly market, distribute and operate the
first prescription writing service for physicians over the Internet. Physicians'
Online is a Delaware corporation of which approximately 16% of the currently
outstanding stock is owned by Dr. Edelson, Mr. Hochberg and Christian Mayaud,
M.D., a principal stockholder of the Company. Physicians' Online was founded in
January 1992 by Mr. Hochberg and Dr. Mayaud.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All transactions, including loans, between the
Company and its officers, directors and principal stockholders and their
affiliates are approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors of the Board of
Directors.
APPROVAL OF AMENDMENT TO 1995 STOCK OPTION PLAN
The Company has adopted the Amended and Restated 1995 Stock Option
Plan, which provides for the grant to directors, officers and employees of, and
consultants to, the Company and its subsidiaries of stock options, including
"incentive stock options" ("ISOs") intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and stock options that are non-qualified for Federal income tax
purposes ("NSOs"). 1,500,000 shares of Common Stock were originally reserved for
issuance under the Option Plan, subject to adjustment for stock splits, stock
dividends, recapitalizations, reclassifications and similar events. As of April
1, 1997, options to purchase an aggregate of 1,356,804 shares of Common Stock
had been granted under the Option Plan. On March 26, 1997, the Board of
Directors of the Company, subject to stockholder approval at the Meeting,
approved an amendment to the Option Plan increasing the number of shares of
Common Stock reserved for issuance under the Option Plan by 600,000 shares to
2,100,000 shares of Common Stock.
The purpose of the Option Plan is to further the growth and success of
the Company by enabling directors, officers and employees of the Company and
independent consultants retained by the Company who have been selected by the
Compensation Committee to acquire Common Stock, thereby increasing their
personal interest in such growth and success and to provide a means of rewarding
outstanding service by them on the Company's behalf. As of April 1, 1997, there
were approximately 150 persons eligible to receive options under the Option
Plan.
The Option Plan is administered by the Compensation Committee comprised
of Messrs. Carney and Kurokawa. The Compensation Committee has full power and
authority to determine, with respect to the option grants, (i) the persons to
whom options are granted, (ii) the number of shares to be covered by each such
grant, (iii) the per share exercise price thereof, (iv) the status of the
granted option as either an ISO or an NSO, (v) the time or times at which each
granted option is to become purchasable and (vi) the maximum term for which the
option may remain outstanding, which term shall in no event exceed 10 years
after the date of the grant. Options granted under the Option Plan typically
vest in equal annual installments over a three-year period.
The exercise price of ISOs granted under the Option Plan may not be
less than 100% of the fair market value of the Common Stock on the date of the
grant. With respect to any employee who owns stock possessing more than 10% of
the voting power of the outstanding capital stock of the Company, the exercise
price may not be less than 110% of the fair market value of such shares on the
date of grant, and the terms of such option may
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not exceed five years. The exercise price of an NSO shall be an amount
determined by the Compensation Committee in its sole discretion.
Upon exercise of an option, payment in full of the purchase price
either in cash, check, in equivalently valued shares of Common Stock of the
Company or by any other means permitted by the Compensation Committee, is
required before the option shares are delivered. By allowing payment of the
exercise price by delivering shares of the Company's Common Stock, the Option
Plan permits the "pyramiding" of shares. Pyramiding occurs when the option
holder in a series of successive transactions uses the shares received upon the
prior exercise of an option to purchase additional shares under other
outstanding options. An option holder can thereby substantially increase his or
her equity ownership in the Company without a significant capital contribution.
The Board of Directors of the Company may from time to time adopt such
amendments to the Option Plan as it may deem appropriate, provided that
stockholder approval of such amendments must be obtained if required to comply
with regulations promulgated by the Securities and Exchange Commission under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or with Section 422 of the Code or the regulations promulgated by the
Treasury Department thereunder. The Option Plan shall terminate on the tenth
anniversary of the date on which the Option Plan was adopted by the Board of
Directors.
Under the Option Plan, any optionee whose employment with the Company
is terminated for any reason, other than death or disability or a termination
for cause, may exercise his or her option, to the extent exercisable on the
effective date of such termination, at any time within 45 days after the date of
termination, provided such option has not expired on the date of such exercise.
In the event of the death or disability of the optionee, the option may be
exercised, to the extent exercisable on the date of death or disability, at any
time within 12 months by the person to whom the option shall have passed by will
or the laws of descent and distribution or the optionee, as the case may be. In
the event of termination of an optionee's employment for cause, the option
terminates immediately.
An NSO granted under the Option Plan is taxed in accordance with
Section 83 of the Code and the regulations issued thereunder. The following
general rules are applicable to holders of such "non-statutory" options and to
the Company for Federal income tax purposes under existing law.
1) The optionee will not recognize any income on the grant of the
option pursuant to the Option Plan.
2) The optionee will recognize ordinary compensation income at the
time of exercise of the option in an amount equal to the excess of
the fair market value of the shares acquired on the date of
exercise, over the exercise price thereof.
3) When the optionee sells the shares, he or she will recognize
capital gain or loss (assuming the shares are held as a capital
asset) in an amount equal to the difference between the fair
market value of the shares on the date of exercise and his or her
selling price.
4) In general, the Company will be entitled to a tax deduction in the
year in which the ordinary compensation income based on exercise
is recognized by the optionee and in the same amount of such
ordinary compensation income recognized by the optionee, subject
to applicable tax withholding requirements.
5) Upon the exercise of an NSO, the Company is entitled to require as
a condition of delivery of the shares of Common Stock that the
optionee remit an amount sufficient to satisfy all Federal, state
and local withholding tax and employment tax requirements relating
thereto.
The following Federal income tax consequences are applicable to ISOs
granted and exercised pursuant to the Option Plan.
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1) If the optionee does not own stock possessing more than 10% of the
total voting power of all classes of stock of the Company (or if
the optionee owns stock possessing more than 10% of the total
voting power of all classes of stock of the Company, the option
price is at least 110% of the fair market value of the shares on
the date of grant and the option by its terms is not exercisable
more than five years from the date of grant), no regular taxable
income results to the optionee upon the grant of an ISO or upon
the issuance of shares to him or her upon exercise of the option.
2) No tax deduction is allowed to the Company upon either the grant
or exercise of an ISO pursuant to the Option Plan.
3) If shares acquired upon exercise of an ISO are not disposed of (i)
within the two years following the date the option was granted or
(ii) within one year following the date the shares are transferred
to the optionee pursuant to the option exercise (the "Holding
Periods"), the difference between the amount realized on any
disposition of the shares thereafter and the exercise price will
be treated as long-term capital gain or loss to the optionee.
4) If shares acquired upon exercise of an ISO are disposed of before
the expiration of either of the Holding Periods (a "disqualifying
disposition"), then the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the option
over the exercise price or (ii) the actual gain on disposition
will be treated as compensation to the optionee and will be taxed
as ordinary income in the taxable year in which the disposition
occurs.
5) In any taxable year that an optionee recognizes compensation
income on a disqualifying disposition of an ISO, the Company will
generally be entitled to a corresponding deduction, subject to
applicable tax withholding requirements.
6) Any excess of the amount realized by the optionee on disposition
over the sum of (i) the exercise price and (ii) the amount of
ordinary income recognized under the above rules may be either
long-term or short-term capital gain, depending upon the time
elapsed between receipt and disposition of such shares.
7) An option will not be treated as an ISO to the extent the
aggregate fair market value for which ISOs are exercisable by an
optionee for the first time in a calendar year exceeds $100,000.
Under present accounting principles, neither the grant nor the exercise
of options granted with an exercise price equal to the fair market value of the
Common Stock will result in any charge to the Company's earnings. However, the
number of outstanding options, even if not granted at a discount, may be a
factor in determining the Company's reported earnings per share.
As of April 1, 1997, options to purchase an aggregate of 1,356,804
shares of Common Stock had been granted under the Option Plan to an aggregate of
150 persons at a weighted average exercise price of $6.83 per share, including
201,286 to Dr. Edelson, 176,286 to Mr. Hochberg, 15,000 to Mr. Carney, 22,507 to
Mr. Kurokawa, 22,507 to Mr. Lieber, 196,037 to Mr. Masarek and 66,706 to Mr.
Alger.
The Board of Directors adopted, subject to stockholder approval, the
amendment to the Option Plan increasing the number of shares of Common Stock
reserved for issuance under the Option Plan by 600,000, from 1,500,000 to
2,100,000, in order to permit the Company to continue to grant options, as
determined by the Compensation Committee, to directors, officers and employees
of, and consultants to, the Company to incent such persons to further the growth
and success of the Company and to reward outstanding service. The market value
of the 2,100,000 shares reserved for issuance under the Option Plan is
$37,275,000 , based on the closing price of the Common Stock on April 1, 1997
($17 3/4). If the proposed amendment to the Option Plan is not approved by the
stockholders, the Company's ability to utilize stock options as a form of
incentive compensation would be substantially limited. Because the Compensation
Committee has discretion under the Option Plan to grant options
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thereunder and to determine the terms of such grants, it is not possible to
determine the dollar value or the number of shares that will be received by any
of the Company's directors, officers, employees or consultants under the Option
Plan as so amended. The vote of a majority of the shares of Common Stock
represented in person or by proxy at the Meeting is required to approve the
proposed amendment to the Option Plan. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE 1995 STOCK OPTION
PLAN.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of Arthur
Andersen LLP, independent certified public accountants, to serve as auditors for
the Company for the fiscal year ending December 31, 1997. Arthur Andersen LLP
has served as the Company's auditors since its inception. It is expected that a
representative of Arthur Andersen LLP will be present at the Meeting and will be
available to make a statement (if he or she desires to do so) and to respond to
appropriate questions at the Meeting. If the stockholders do not ratify the
selection of Arthur Andersen LLP, the Board of Directors may consider selection
of other independent certified public accountants to serve as independent
auditors, but no assurances can be made that the Board of Directors will do so
or that any other independent certified public accountants would be willing to
serve. The vote of a majority of the shares of Common Stock represented in
person or by proxy at the Meeting is required to ratify the selection of
auditors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THIS SELECTION.
DISCLOSURE PURSUANT TO SECTION 16 OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who are beneficial owners of ten percent or more of the
Company's Common Stock, to file reports of ownership and changes in ownership of
the Company's securities with the Commission. Officers, directors and greater
than ten percent beneficial owners are required by applicable regulations to
furnish the Company with copies of all forms they file pursuant to Section
16(a).
Based solely upon a review of the copies of the forms furnished to the
Company, and written representations from certain reporting persons that no
Forms 5 were required, the Company believes that during the fiscal year ended
December 31, 1996, all filing requirements applicable to its officers, directors
and ten percent beneficial owners were complied with except for a late filing by
Barry Kurokawa of a Form 4, Statement of Changes in Beneficial Ownership of
Securities, with respect to the purchase by Mr. Kurokawa of 2,500 shares of
Common Stock in October 1996, which purchase was reported in a year-end report
on Form 5, Annual Statement of Beneficial Ownership of Securities.
STOCKHOLDER PROPOSALS
It is presently contemplated that the 1998 Annual Meeting of
Stockholders will be held on or about June 5, 1998. Proposals by stockholders
intended for inclusion in the proxy statement to be furnished to all
stockholders entitled to vote at the next annual meeting of the Company must be
received at the Company's principal executive offices not later than December
31, 1997. In order to curtail controversy as to the date on which a proposal was
received by the Company, it is suggested that proponents submit their proposals
by certified mail, return receipt requested. Any such proposal must also meet
the other requirements of the rules of the Commission relating to stockholder
proposals.
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EXPENSES AND SOLICITATION
The Company will bear the cost of soliciting proxies, including
expenses in connection with the preparation and mailing of this Proxy Statement
and all papers which now accompany or may hereafter supplement it. Solicitation
of proxies will be primarily by mail. However, proxies may also be solicited by
directors, officers and regular employees of the Company (who will not be
specifically compensated for such services) by telephone or otherwise. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward proxies and proxy material to the beneficial owners of Common Stock, and
the Company will reimburse them for their expenses.
The Company will provide without charge to each person being solicited
by this Proxy Statement, upon written request, a copy of the Company's Form 10-K
for the fiscal year ended December 31, 1996, filed with the Commission. All such
requests should be directed to Advanced Health Corporation, 560 White Plains
Road, Tarrytown, New York 10591, Attention: Secretary.
By Order of the Board of Directors,
/s/ JONATHAN EDELSON, M.D.
--------------------------------------------------
Jonathan Edelson, M.D.
Chairman of the Board and Chief Executive Officer
Tarrytown, New York
April 30, 1997
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1 Election of Directors FOR the nominee WITHHOLD AUTHORITY to vote
listed below [ ] for the nominee listed below []
Nominee: Jonathan Lieber
2. Approval of Amendment to 3. Ratification of Independent
1995 Stock Option Plan. Auditor.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In accordance with their judgement, the proxies
are authorized to vote upon such other matters as
may properly come before the Annual Meeting, or
any adjournment thereof.
Change of address and/or
comments mark here [ ]
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporation name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.
DATED____________________, 1997
_______________________________
_______________________________
SIGNATURE
VOTES Must be indicated
(X) in Black or Blue ink.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELPOE.
ADVANCED HEALTH CORPORATION
Proxy-This Proxy is Solicited by the Board of Directors
The undersigned hereby appoints Jonathon Edelson, M.D. and Steven
Hochberg as proxies, each with full powers of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Sotck of Advanced Health Corporation held of record by the undersigned on
April 25, 1997 at the Annual Meeting of Stockholders to be held on June 6, 1997
or any adjournment thereof.
This proxy when properly executed and returned in a timely manner will
be voted at the Annual Meeting and any adjournment thereof in the manner
directed herein. If no direction is made, the proxy will be voted FOR the
nominee and FOR Proposals 2 and 3 and in accordance with the judgment of the
persons named as proxies herein on any other matters that may properly come
before the Annual Meeting.
(Continued and to be signed and dated on reverse side.)
ADVANCED HEALTH CORPORATION
P.O. BOX 11400
NEW YORK, N. Y. 10203-0400
