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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number 0-29172
PROMEDCO MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-2529809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
801 Cherry Street, Suite 1450
Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 335-5035
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of February 17, 2000 (computed by reference
to the closing price of such stock on the Nasdaq National Market) was
$50,050,825.
As of February 17, 2000, there were 22,479,239 shares of our common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
This amendment is being filed to provide the information called for by
Items 10 through 13 of the Annual Report on Form 10-K of ProMedCo Management
Company for the year ended December 31, 1999.
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<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The Company's Articles of Incorporation and Bylaws provide for the
division of the Board of Directors into three classes, designated Class I, Class
II, and Class III, with staggered terms of three years. The terms of Class I,
Class II, and Class III Directors expire in 2001, 2002, and 2003, respectively.
The Board currently consists of eight members. James F. Herd, M.D. and
Charles J. Buysse, M.D. are Class I Directors, David T. Bailey, M.D., Jack W.
McCaslin and Sanjeev K. Mehra are Class II Directors, and H. Wayne Posey,
Richard E. Ragsdale and E. Thomas Chaney are Class III Directors.
Directors
The following are the current members of the Board of Directors:
<TABLE>
<CAPTION>
Director
Name Age Position Class
<S> <C> <C> <C>
H. Wayne Posey(1)(2)............................... 61 Chairman, President, Chief
Executive Officer and Director III
Richard E. Ragsdale(1)(2)(3)....................... 56 Director III
David T. Bailey, M.D.(4)........................... 54 Director II
Charles J. Buysse, M.D............................. 59 Director I
E. Thomas Chaney(1)(2)(3).......................... 57 Director III
James F. Herd, M.D................................. 64 Director I
Jack W. McCaslin(4)................................ 60 Director II
Sanjeev K. Mehra................................... 41 Director II
</TABLE>
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Option Committee
(4) Member of Audit Committee
H. Wayne Posey, a co-founder of the Company, has been the President,
Chief Executive Officer, and a Director of the Company since its inception and
Chairman of its Board of Directors since December 1998. Mr. Posey was a
healthcare consultant from 1975 until 1994, most recently as the principal in
charge of the healthcare services division of McCaslin & Company, P.C. Mr. Posey
was employed by Hospital Affiliates International, Inc. ("HAI"), a publicly
owned hospital management company, from 1970 until 1975, holding the positions
of Controller, Vice President and Controller, and Senior Vice President of
Operations, and he also served on HAI's Board of Directors and Executive
Committee. He has also served as a director of InterDent, Inc. (formerly Gentle
Dental Services Corporation), a publicly held dental practice management company
since 1996.
Richard E. Ragsdale, a co-founder of the Company, served as the
Chairman of its Board of Directors from its inception until December 1998. He is
currently Chairman of the Board's Executive Committee. He was also a co-founder
and served as the Chairman of the Board of Directors of Community Health
Systems, Inc. ("CHS"), a non-urban hospital management company, from its
inception in 1985 until his retirement in 1998, and has been a director of The
RehabCare Group, Inc., a publicly owned rehabilitation services management
company, since 1993.
David T. Bailey, M.D. has served as a Director of the Company since
January 1996. Dr. Bailey also serves as President of Abilene Diagnostic Clinic,
P.L.L.C., a ProMedCo affiliated physician group. Dr. Bailey is Board Certified
with the American Board of Family Practice and has been a full-time practicing
family physician since 1973. He has served as Chairman of the Department of
Family Practice both at Hendrick Medical Center and Abilene Regional Hospital in
Abilene. He has been appointed to chair a committee to develop the transition of
health care for the military to private medicine. He also served as Chairman of
the Board of Trustees at Abilene Christian Schools from 1983 to 1994. He is
presently serving as Chairman of the medical section at Abilene Regional Medical
Center and is a member of the patient/physician advocacy committee for the Texas
Medical Association.
Charles J. Buysse, M.D. has been in the private practice of medicine in
Naples, Florida, since 1975. He is past President of Naples Medical Center,
P.A., a ProMedCo affiliated physician group, and has been a Director of the
Company since November 1997.
E. Thomas Chaney served as President and Chief Executive Officer of
CHS, which he co-founded in 1985, until his retirement in 1997. A co-founder of
the Company, he has served as a Director since its inception and is a member of
the Board's Executive Committee.
James F. Herd, M.D. has been in private practice in obstetrics and
gynecology in Fort Worth, Texas since 1968. During 1994, he was the President of
the Tarrant County Medical Society. From 1986 to 1990, he served as Chief and
Vice Chief of Staff of Harris Methodist Hospital in Fort Worth. He has been a
Director of the Company since its inception in July 1994.
Jack W. McCaslin has been the managing principal of McCaslin & Company,
P.C., a public accounting and consulting company in Fort Worth, Texas and its
predecessor, McCaslin, Wright & Greenwood, P.C. since 1983. He has served as a
Director of the Company since its inception.
Sanjeev K. Mehra is a Managing Director of Goldman, Sachs & Co. in the
Principal Investment Area. He joined Goldman Sachs in 1986. He is a member of
Goldman Sachs' Principal Investment Area Investment Committee. Mr. Mehra serves
on the Boards of Directors of, Madison River Telephone Company, L.L.C., and
several privately held companies on behalf of Goldman Sachs. He holds a B.A.
from Harvard University and an M.B.A. from the Harvard Graduate School of
Business Administration.
<PAGE>
Item 11. Executive Compensation
The following table sets forth the compensation earned in the years
ended December 31, 1997, 1998 and 1999 by the Chief Executive Officer and the
four most highly compensated executive officers whose individual remuneration
exceeded $100,000 for 1999 (the "Named Executive Officers").
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Name and Principal Annual Underlying All other
Position Year Salary Bonus Compensation Options Compensation(1)
- - - -------------- ---- ----------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Posey........................ 1999 $ 450,000 $ 18,570(2) $ - 375,000 $ 16,773
Chairman, President and CEO 1998 332,150 199,290(3) - 300,000 34,102
1997 327,383 - - 50,000 26,152
Dale K. Edwards....................... 1999 215,500 67,135(2) - 120,000 -
Senior Vice President--Development 1998 205,000 132,000(3) - 50,000 -
1997 176,667 16,431 - 80,000 -
Charles W. McQueary................... 1999 215,534 - - - -
Senior Vice President--Operations 1998 205,000 61,500(3) - - -
1997 104,583 25,000(4) - 200,000 -
Robert M. Sontheimer (5).............. 1999 247,000 180,000(2) - 50,000 477
Senior Vice President--Managed Care 1998 240,000 72,000(3) - - 374
1997 19,068 - - - -
Gregory A. Wagoner, M.D. (5).......... 1999 196,308 - - 90,000 -
1998 175,000 36,000(3) - - -
1997 12,308 - - - -
</TABLE>
(1) For 1999, reflects payment of professional fees for estate planning in the
amount of $12,352 and automobile allowance of $4,420 for Mr. Posey and
payment of an automobile allowance in the amount of $477 for Mr.
Sontheimer. For 1998, reflects payment of professional fees for estate
planning in the amount of $23,768 and automobile allowance of $10,334 for
Mr. Posey and payment of an automobile allowance in the amount of $374 for
Mr. Sontheimer. For 1997, reflects payment of professional fees for estate
planning in the amount of $26,152 for Mr. Posey.
(2) Reflects bonus earned in 1999 and paid in 2000.
(3) Reflects bonus earned in 1998 and paid in 1999.
(4) Reflects bonus earned in 1997 and paid in 1998.
(5) The Company employed Mr. Sontheimer and Dr. Wagoner in December 1997 in
connection with the acquisition of Health Plans, Inc., now PMC Medical
Management.
Option Grants in Fiscal Year 1999
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rates of
Shares Granted to Stock Price
Underlying Employees Exercise Appreciation for
Options in Fiscal Year Price Expiration Option Term(2)
Name Granted(1) 1998 Per Share Date 5% 10%
- - - ---- ---------- ---- --------- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Posey................. 375,000 37.2% $ 5.31 01/22/09 $ 1,252,286 $ 3,173,540
Dale K. Edwards................ 120,000 11.9% 5.31 01/22/09 400,732 1,015,533
Charles W. McQueary............ - 0.0% - - - -
Robert M. Sontheimer........... 50,000 5.0% 5.31 01/22/09 166,972 423,139
Gregory Wagoner................ 20,000 2.0% 5.31 01/22/09 66,789 169,255
</TABLE>
(1) Represents options to purchase Common Stock granted pursuant to the 1994
and 1996 Stock Option Plans. Options generally are exercisable in 20%
increments, commencing one year after the date of grant.
(2) Based upon the market price of the Common Stock on the date the option was
granted and on annual appreciation of such value, through the expiration
date of such options, at the stated rates. These amounts represent assumed
rates of appreciation only and may not necessarily be achieved. Actual
gains, if any, depend on the future performance of the Common Stock, as
well as the continued employment of the Named Executive Officers for the
full term of the options.
Aggregated Option Exercises in 1999
and Warrant/Option Values as of December 31, 1999
<TABLE>
<CAPTION>
Number of Number of Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Warrants/Options at Warrants/Options at
on Value December 31, 1999 December 31, 1999 (1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - - ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Posey................ - $ - 696,971 645,000 $ 1,107,389 $ -
Dale K. Edwards............... 40,000 178,320 106,000 224,000 - -
Charles W. McQueary........... - - 80,000 20,000 - -
Robert M. Sontheimer.......... - - - 50,000 - -
Gregory Wagoner............... - - 10,000 35,000 - -
</TABLE>
- - - ---------------
(1) Based upon the closing sale price of the Company's Common Stock of $2.94
share as reported on the NASDAQ National Market on December 31, 1999 less
the exercise price of the options.
<PAGE>
Employment and Termination Agreements
The Company has entered into employment agreements with Messrs. Posey,
Edwards, Sontheimer, McQueary, and Wagoner to serve in their respective current
positions. The agreement with Mr. Posey, which expires February 15, 2004,
currently provides for an annual base salary of $500,000, plus an annual bonus
based upon the achievement of certain operating goals. In the event Mr. Posey's
employment is terminated without cause or there is a "change in control" of the
Company (as defined in his employment agreement), Mr. Posey is entitled to
receive severance benefits equal to the present value of 36 months of his
salary, bonus, and certain other benefits.
The employment agreement with Mr. Edwards automatically renews in
November of each year and currently provides for an annual base salary of
$230,000. In addition, the agreement with Mr. Edwards provides for an annual
bonus based upon the achievement of certain operating goals. Mr. McQueary's
agreement automatically renews in April of each year and currently provides for
an annual base salary of $225,000 and an annual bonus based upon the achievement
of certain operating goals. Mr. Sontheimer's agreement, which expires in
December 2000 (subject to certain renewal provisions), currently provides for an
annual base salary of $260,000 and an annual bonus based upon the achievement of
certain operating goals. Dr. Wagoner's agreement, which expires in December 2000
(subject to certain renewal provisions), currently provides for an annual base
salary of $200,850 and an annual bonus based upon the achievement of certain
operating goals. Each of Messrs. Edwards, Sontheimer, McQueary and Wagoner's
contracts include a provision that in the event of a termination without cause
or a change in control of the Company, the individual is entitled to receive
his/her base salary and average bonus through the later of the expiration of the
agreement or periods ranging from six to twelve months, depending on the
individual agreement.
Director Compensation
Members of the Board of Directors receive no cash compensation in their
capacities as Directors. Each Director not employed by the Company is granted
options annually to purchase 2,000 shares of Common Stock at an exercise price
equal to the fair market value of such stock on the date of grant, exercisable
in annual increments of 20%. Each such Director who is newly appointed or newly
elected to the Board of Directors will in addition be granted options to
purchase 5,000 shares of Common Stock upon the same terms. All Directors are
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees thereof and for other expenses incurred in
their capacity as Directors.
The Company has entered into five-year consulting agreements with
Messrs. Ragsdale and Chaney, providing for annual compensation of $60,000 and
$36,000, respectively, under which Messrs. Ragsdale and Chaney provide strategic
and financial advisory services to the Company. Compensation under such
agreements is paid to Messrs. Ragsdale and Chaney in their capacities as
consultants to the Company and not as Directors. The Company believes that the
terms of the arrangements, which were determined through negotiation among the
Company's founders, are as favorable as might have been obtained from
non-affiliated persons.
Compensation Committee Interlocks
The Company's Compensation Committee is comprised of Messrs. Posey, the
Company's Chief Executive Officer, Ragsdale and Chaney. See "--Employment and
Termination Agreements," "--Director Compensation" and "Item 13 - Certain
Relationships and Related Transactions."
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 1999 by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
of the Company's outstanding Common Stock, (ii) each Director of the Company,
(iii) each Named Executive, and (iv) all Directors and executive officers of the
Company as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed, based on information furnished by
such owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Unless otherwise indicated,
the address of each stockholder is: c/o ProMedCo Management Company, 801 Cherry
Street, Suite 1450, Fort Worth, Texas 76102.
<TABLE>
<CAPTION>
Shares Beneficially
Number and Address Owned(1)
of Beneficial Owner Number Percent
<S> <C> <C>
H. Wayne Posey................................................................. 1,760,721 7.4%
Richard E. Ragsdale(2)......................................................... 2,258,640 9.4%
David T. Bailey, M.D........................................................... 54,045 *
Charles J. Buysse, M.D......................................................... 5,797 *
E. Thomas Chaney............................................................... 1,115,180 4.7%
James F. Herd, M.D............................................................. 155,420 *
Jack W. McCaslin............................................................... 378,352 1.6%
Robert D. Smith................................................................ 114,250 *
Robert M. Sontheimer........................................................... 346,642 1.5%
Sanjeev K. Merhra(3)........................................................... - -
Charles W. McQueary............................................................ 87,500 *
Dale K. Edwards................................................................ 73,660 *
Deborah A. Johnson............................................................. 17,500 *
Gregory A. Wagoner............................................................. 14,843 *
Wellington Management Company, LLP(4).......................................... 1,965,000 8.5%
T. Rowe Price Associates(5).................................................... 1,586,500 6.9%
The Goldman Sachs Group, Inc.(6)............................................... 1,250,000 5.4%
All Directors and executive officers as a group (14 persons)................... 6,382,556 25.0%
</TABLE>
* Less than 1%
(1) Includes shares issuable upon the exercise of options that are exercisable
within 60 days of the date of this Proxy Statement. The shares underlying
such options are deemed to be outstanding for the purpose of computing the
percentage of outstanding stock owned by such persons individually and by
each group of which they are a member, but are not deemed to be outstanding
for the purpose of computing the percentage of any other person.
(2) This amount includes 15,000 shares owned by Mr. Ragsdale's spouse and
50,000 shares owned by the Ragsdale Unified Credit Trust, as to which Mr.
Ragsdale disclaims beneficial ownership.
(3) Mr. Mehra, who is a Managing Director of Goldman, Sachs & Co., disclaims
beneficial ownership of the shares owned by The Goldman Sachs Group, Inc.
and its affiliates, except to the extent of his pecuniary interest therein,
if any.
(4) Based upon an amendment to a Schedule 13G filed with the Commission on
February 11, 2000. The stockholder has sole investment and voting power
with respect to none of such shares, shared voting power with respect to
945,000 of such shares, and shared investment power with respect to all of
such shares. The address of Wellington Management Company, LLP is 75 State
Street, Boston, Massachusetts 02109.
(5) Based upon a Schedule 13G filed with the Commission on February 3, 2000.
The stockholder has sole investment and voting power with respect to all of
such shares. The address of Dimensional Fund Advisors, Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
(6) Represents shares owned by certain investment partnerships and a limited
liability company, of which Goldman Sachs or affiliates of Goldman Sachs or
The Goldman Sachs Group, Inc. ("GS Group") are the general partner,
managing partner, manager or investment manager. Consists of 928,994 shares
held of record by GS Capital Partners III, L.P., 255,391 shares held of
record y GS Capital Partners III Offshore L.P., 42,888 shares held of
record by Goldman, Sachs & Co. Verwaltungs GmbH, and 22,727 shares held of
record by Stone Street Fund 2000, L.L.C. GS Group and Goldman Sachs
disclaim beneficial ownership of the shares owned by the investment
partnerships and the limited liability company to the extent attributable
to partnership or membership interests therein held by persons other than
GS Group, Goldman Sachs and their affiliates. Each of the investment
partnerships and the limited liability company shares voting and investment
power with certain of its respective affiliates. The address of GS Group is
85 Broad Street, New York, New York 10004.
Item 13. Certain Relationships and Related Transactions
In May 1997, the Company lent $600,000 to H. Wayne Posey, its
President, Chief Executive Officer and a Director of the Company. The loan,
which accrued interest at 6.5% per annum, was repaid in March 1998.
In August 1998, the Company lent $2.0 million to H. Wayne Posey, its
President, Chief Executive Officer and a Director of the Company. Beginning in
August 2003, the loan will be repaid in annual installments of $200,000 plus
accrued interest of 7.0%, with the remaining balance due in August 2008. This
loan is secured by a pledge of warrants, with an exercise price of $1.25, for up
to 620,665 shares of the Company's common stock.
In June 1999, Jack W. McCaslin, a Director of the Company, exercised an
outstanding Warrant for 228,504 shares of the Company's Common Stock which the
Company sold out of treasury.
In April 1999, David T. Bailey, M.D., a Director of the Company, sold
19,402 shares of the Company's Common Stock to the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PROMEDCO MANAGEMENT COMPANY
By: /s/ H. WAYNE POSEY
H. Wayne Posey
Chairman, President and Chief Executive Officer
