<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MEDICAL ALLIANCE, INC.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than
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:
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 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> 2
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE
SUITE 150
IRVING, TX 75063
April 13, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Meeting") of Medical Alliance, Inc., a Texas corporation ("Medical
Alliance"), to be held at 9:00 a.m., local time, on May 14, 1997, at the Harvey
Hotel DFW, 4545 W. John Carpenter Freeway, Irving, Texas 75063. The attached
Notice of Annual Meeting and Proxy Statement fully describe the formal business
to be transacted at the Meeting, which includes the election of two directors
of Medical Alliance. We have enclosed a copy of Medical Alliance's Annual
Report for the fiscal year ended December 31, 1996.
Directors and officers of Medical Alliance will be present to help
host the Meeting and to respond to any questions that our shareholders may
have. I hope that you will be able to attend.
Medical Alliance's Board of Directors believes that a favorable vote
on each of the matters to be considered at the Meeting is in the best interest
of Medical Alliance and its shareholders and unanimously recommends a vote
"FOR" each such matter. Accordingly, we urge you to review the attached
material carefully and to return the enclosed Proxy promptly. Whether or not
you plan to attend the Meeting, please complete, sign, date and return your
proxy in the enclosed envelope. If you attend the Meeting, you may vote in
person if you wish, even though you have previously returned your proxy. It is
important that your shares be represented and voted at the Meeting.
On behalf of your Board of Directors, thank you for your support.
Sincerely,
/s/ PAUL R. HERCHMAN
Paul R. Herchman
Chairman of the Board,
Chief Executive Officer and President
<PAGE> 3
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE
SUITE 150
IRVING, TX 75063
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Medical Alliance, Inc. (the "Company") will be held at 9:00 a.m.,
local time, on May 14, 1997, at the Harvey Hotel DFW, 4545 W. John Carpenter
Freeway, Irving, Texas 75063, for the following purposes:
(1) The election of two members of the Board of
Directors, which currently consists of seven
directors, and will consist of seven directors on the
date of the Meeting, for the term of office stated in
the Proxy Statement.
(2) The ratification of the selection of Coopers &
Lybrand, L.L.P. as independent public accountants for
the Company for the fiscal year ending December 31,
1997.
(3) Such other business as may properly come before the
Meeting or any adjournments thereof.
The close of business on March 21, 1997, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting or any adjournments thereof. For a period of at least 10 days prior to
the Meeting, a complete list of shareholders entitled to vote at the Meeting
will be open for examination by any shareholder during ordinary business hours
at the offices of Medical Alliance, Inc. at 2445 Gateway Drive, Suite 150,
Irving, Texas 75063.
Information concerning the matters to be acted upon at the Meeting is
set forth in the accompanying Proxy Statement.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY TO
ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. A RETURN ENVELOPE
(WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS PROVIDED. EVEN IF
YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
By Order Of The Board Of Directors,
/s/ MARK NOVY
Mark Novy
Secretary
Irving, Texas
April 13, 1997
<PAGE> 4
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE
SUITE 150
IRVING, TX 75063
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1997
This Proxy Statement is being first mailed on or about April 13, 1997,
to shareholders of Medical Alliance, Inc., a Texas corporation (the "Company"),
by the Board of Directors to solicit proxies (the "Proxies") for use at the
Annual Meeting of Shareholders (the "Meeting") to be held at 9:00 a.m., local
time, on May 14, 1997, at the Harvey Hotel DFW, 4545 W. John Carpenter
Freeway, Irving, Texas 75063, or at such other time and place to which the
Meeting may be adjourned (the "Meeting Date").
The purpose of the Meeting is to consider and act upon (i) the
election of two directors for terms expiring in 2000, (ii) the ratification of
the selection of Coopers & Lybrand, L.L.P. as independent public accountants
for the Company for the fiscal year ending December 31, 1997 and (iii) such
other matters as may properly come before the Meeting or any adjournments
thereof.
All shares represented by valid Proxies, unless the shareholder
otherwise specifies, will be voted (i) FOR the election of the persons named
herein under " Proposal I - Election of Directors" as nominees for election as
directors of the Company for the term described therein, (ii) FOR the
ratification of the selection of Coopers & Lybrand, L.L.P. as independent
public accountants for the Company for the fiscal year ending December 31, 1997
and (iii) at the discretion of the Proxy holders, with regard to any other
matter that may properly come before the Meeting or any adjournments thereof.
Where a shareholder has appropriately specified how a Proxy is to be
voted, it will be voted accordingly. The Proxy may be revoked at any time by
providing written notice of such revocation to ChaseMellon Shareholder
Services, L.L.C., 2323 Bryan Street, Suite 2300, Dallas, Texas 75201,
Attention: Stacy Peck, by May 7, 1997. If notice of revocation is not received
by such date, a shareholder may nevertheless revoke a Proxy if such shareholder
attends the Meeting and desires to vote in person; however, if your shares are
held of record by a broker, bank or other nominee and you wish to vote at the
meeting, you must obtain from the record holder a Proxy issued in your name.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders entitled to vote at
the Meeting is the close of business on March 21, 1997, (the "Record Date"), at
which time the Company had issued and outstanding 5,992,995 shares of common
stock, par value $.002 per share (the "Common Stock"). Common Stock is the
only class of outstanding voting securities of the Company.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
a majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum to transact business. Each share represented at the
Meeting in person or by proxy will be counted toward a quorum. In deciding all
questions and other matters, a holder of Common Stock on the Record Date shall
be entitled to cast one vote for each share of Common Stock registered in his
or her name.
In order to be elected a director, a nominee must receive a plurality
of the votes of the shares of Common Stock present in person or represented by
proxy at the Meeting. Votes that are withheld and broker non-votes will not be
counted in the election of directors, but will be counted toward a quorum.
<PAGE> 5
Approval of the proposal to ratify the selection of Coopers & Lybrand,
L.L.P. as the Company's independent auditors requires the affirmative vote of a
majority of the shares present or represented at the Meeting and entitled to
vote thereon. Abstentions on the proposal may be specified and will have the
same effect as a vote against the proposal.
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") is divided into
three classes and presently consists of seven directors. On the date of the
Annual Meeting of Shareholders, the size of the Board will be seven directors,
with two classes consisting of two directors and one class consisting of three
directors, with the term of one class expiring each year and with the directors
of each class, upon election, holding a three year term. Each director shall
serve until the Annual Meeting of Shareholders in the year in which his term
expires or until his successor is elected and shall have qualified.
Two directors, Leon Pritzker and Morris G. Moreland, are in the class
whose term of office expires in 1997. The Board has nominated Messrs. Pritzker
and Moreland for re-election as directors at the Meeting, each to serve for a
three-year term expiring at the Company's Annual Meeting of Shareholders in
2000 or until his successor is elected and shall have qualified.
Each of the nominees has indicated his willingness to serve as a
member of the Board if elected; however, in case any nominee shall become
unavailable for election to the Board for any reason not presently known or
contemplated, the Proxy holders have discretionary authority to vote the Proxy
for a substitute nominee or nominees. Proxies cannot be voted for more than
two nominees. The following sets forth information as of April 2,1997, as to
the nominees for election at the Meeting and each of the directors whose term
of office will continue after the Meeting, including their ages, present
principal occupations, other business experience during the last five years,
membership on committees of the Board and directorships in other publicly-held
companies.
<TABLE>
<CAPTION>
NAME AGE POSITION YEAR CURRENT TERM
---- --- -------- -----------------
EXPIRES
-------
<S> <C> <C> <C>
Nominees for a three-year
term ending in 2000:
--------------------
Morris G. Moreland (1)(2)(3) . . . . 65 Director 1997
Leon Pritzker . . . . . . . . . . . . 74 Director 1997
Continuing Directors
--------------------
Paul R. Herchman (1) . . . . . . . . 40 Chairman of the Board, 1999
Chief Executive Officer
and President
David A. Kallenberger, M.D. . . . . . 47 Medical Director and 1999
Director
Leo Lopez . . . . . . . . . . . . . . 53 Director 1999
Thomas A. Montgomery(2) . . . . . . . 40 Director 1998
Jim Silcock (1)(2)(3) . . . . . . . . 46 Director 1998
</TABLE>
__________________
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Incentive Plan Committee
2
<PAGE> 6
BOARD OF DIRECTORS
MORRIS G. MORELAND, a director of the Company since 1991 and a member of the
Audit, Compensation, and Incentive Plan Committees, has served as Vice
President and Chief Financial Officer of Satana Corporation ("Satana"), an
investment company. Mr. Moreland is a Certified Public Accountant and received
a Bachelor of Business Administration degree from West Texas A & M University.
LEON PRITZKER, a director of the Company since 1989, has been self-employed
as a management consultant since 1990. From 1985 to 1990, Mr. Pritzker served
as the Executive Vice President of Campbell Taggart, Inc. From 1967 to 1984,
Mr. Pritzker served in various capacities with Anheuser-Busch Companies, Inc.,
most recently as Director, Management Systems Group. Mr. Pritzker is a fellow
of the American Statistical Association. Mr. Pritzker received a Bachelor of
Science degree from College of the City of New York and a Master of Arts degree
from the University of Pennsylvania.
PAUL R. HERCHMAN is a co-founder of the Company and has served as Chairman
of the Board, Chief Executive Officer and President since its inception in
1989. In addition, Mr. Herchman is a member of the Compensation Committee.
From 1986 to 1989, Mr. Herchman was a sales representative for Sun Medical,
Inc., a distributor of medical equipment. Prior thereto, Mr. Herchman served
in sales positions with Chesebrough-Ponds USA Co. in its Hospital Products
Division, from 1984 to 1986, and with Johnson & Johnson in its Ortho
Pharmaceutical Division, from 1982 to 1984. Mr. Herchman received a Bachelor
of Science degree from Texas Tech University.
DAVID A. KALLENBERGER, M.D. is a co-founder of the Company and has served as
a director and as the Medical Director since its inception in 1989. Dr.
Kallenberger is a practicing physician specializing in obstetrics and
gynecology and has been practicing at Integris Baptist Medical Center in
Oklahoma City, Oklahoma since 1981. Dr. Kallenberger serves as a Clinical
Professor in the Department of Obstetrics/Gynecology at the University of the
Oklahoma Health Science Center and as the Program Director of the Henry G.
Bennett Fertility Institute at Integris Baptist Medical Center. Dr.
Kallenberger received his Medical Doctorate degree from The University of
Oklahoma.
LEO LOPEZ, a director of the Company since 1994, has served as the President
and Chief Executive Officer of Eligibility Services, Inc., a company that
provides business management and information management services to the health
care industry, since 1989. Prior thereto, Mr. Lopez served as Vice President
of Donaldson, Lufkin & Jenrette Securities Corporation from 1988 to 1990 in the
Public Finance Group in Dallas, Texas and from 1986 to 1988 in the Healthcare
Finance Group in New York, New York. Mr. Lopez received a Bachelor of Science
Degree in Business Administration from Washington University and a Masters of
Health Administration degree from the Washington University School of Medicine.
THOMAS A. MONTGOMERY is a co-founder of the Company and has served as a
director of the Company since 1989. In addition, Mr. Montgomery is a member of
the Audit Committee. Mr. Montgomery is a partner of Montgomery, Jessup & Co.,
L.L.P., an accounting firm. From December 1982 to December 1990, Mr.
Montgomery served in various capacities with Arthur Andersen & Co., and as the
Senior Tax Manager of the Enterprise Group since 1985. Mr. Montgomery received
a Bachelor of Business Administration degree from Texas Tech University and a
Master of Science degree from Texas Tech University.
JIM SILCOCK, a director of the Company since February 1996 and a member of
the Audit, Compensation and Incentive Plan Committees, has served as a general
partner of Mapleleaf Capital Ltd., and as a general partner of Sunwestern
Associates III, a general partner of Sunwestern Investment Fund III, a venture
capital fund, since 1988 and as a general partner of T.V.P. Associates Limited,
the general partner of Texas Venture Partners, a venture capital fund, since
1984. Mr. Silcock received a Bachelor of Arts from Dartmouth College and a
Master of Business Administration from the Amos Tuck School of Business
Administration at Dartmouth College.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board.
The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring approval of
the Board. It also holds special meetings when an important matter requires
action by the Board between scheduled meetings. The Board met five times and
acted by unanimous written consent fourteen times during 1996. During 1996,
each member of the Board participated in at least 75% of all Board and
applicable committee meetings held during the period for which he was a
director.
3
<PAGE> 7
The Board has three standing committees: the Audit Committee, the
Compensation Committee and the Incentive Plan Committee. The functions of
these committees, their current members, and the number of meetings held during
the fiscal year ending December 31, 1996, are described below.
Audit Committee. The Audit Committee makes recommendations to the Board
regarding the appointment of independent auditors, reviews the plan and scope
of any audit to the Company's financial statements and reviews the Company's
significant accounting policies and related matters. The Audit Committee is
comprised of Messrs. Moreland, Silcock and Montgomery. The Audit Committee did
not meet in 1996.
Compensation Committee. The Compensation Committee makes recommendations to
the Board regarding the compensation of executive officers. Prior to the
formation of the Incentive Plan Committee in 1997, the Compensation Committee
was responsible for the administration of the Company's 1994 Amended and
Restated Long Term Incentive Plan (the "Incentive Plan"). The Compensation
Committee is comprised of Messrs. Moreland, Herchman and Silcock. The
Compensation Committee did not meet in 1996 and acted by unanimous written
consent one time during 1996.
Incentive Plan Committee. The Incentive Plan Committee was established in
1997 and administers the Incentive Plan. The Incentive Plan Committee is
comprised of Messrs. Silcock and Moreland.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board as a whole.
PROPOSAL II - INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Coopers & Lybrand, L.L.P. as independent certified
public accountants to examine the Company's accounts for the fiscal year ending
December 31, 1997 and proposes that the Company's shareholders ratify this
selection. It is expected that representatives of Coopers & Lybrand, L.L.P.
will be present at the Meeting, will be available to respond to appropriate
questions of shareholders and will have an opportunity to make a statement if
they desire.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of Common Stock as of April 12, 1997, by (i) all persons known to
the Company to be the beneficial owner of 5% or more of the Common Stock, (ii)
each director of the Company, (iii) the chief executive officer and each of the
Company's other most highly compensated executive officers whose total annual
compensation for 1996 based on salary and bonus earned during 1996 exceeded
$100,000 (the "Named Executive Officers") and (iv) all the Company directors
and executive officers as a group. This table does not include shares of
Common Stock that may be purchased pursuant to options not exercisable within
60 days of April 12, 1997. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name of Beneficial Owner Beneficially Owned (1) Beneficially Owned (1)
------------------------ ---------------------- ----------------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS
Paul R. Herchman (2) 503,827 8.4%
Kevin D. O'Brien (3) 104,119 1.7%
Michael G. Wallace (4) 35,862 *
DIRECTORS
David A. Kallenberger, M.D (5). . . . 194,003 3.2
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C> <C>
Leo Lopez (6) . . . . . . . . . . . . 3,561 *
Thomas A. Montgomery (7) . . . . . . 213,125 3.5
Morris G. Moreland (8) . . . . . . . 585,957 9.7
Leon Pritzker (9) . . . . . . . . . . 82,454 1.3
Jim Silcock (10) . . . . . . . . . . 951,193 15.8
All executive officers and directors
as a group (9
persons)(11) . . . . . . . . . . . . 2,675,149 44.6
OTHER 5% SHAREHOLDERS
Mapleleaf Capital, Ltd (12). . . . . 740,330 12.4
Satana Corporation (13) . . . . . . . 494,645 8.3
</TABLE>
__________________________
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Shares of Common Stock subject to options or warrants that
are currently exercisable or exercisable within 60 days are deemed to be
outstanding and to be beneficially owned by the person or entity holding
such options.
(2) Includes 20,732 shares underlying currently exercisable options to
purchase Common Stock and 15,610 share underlying currently exercisable
warrants to purchase Common Stock. The business address of Mr. Herchman
is 2445 Gateway Drive, Suite 150, Irving, Texas 75063.
(3) Includes 87,416 shares underlying currently exercisable options to
purchase Common Stock.
(4) Includes 17,172 shares underlying currently exercisable options to
purchase Common Stock.
(5) Includes 26,976 shares underlying currently exercisable options to
purchase Common Stock. The business address of Dr. Kallenberger is 3433
N.W. 56th Street, Suite 310, Oklahoma City, Oklahoma 73112.
(6) Includes 3,561 shares underlying currently exercisable options to
purchase Common Stock.
(7) Includes 25,415 shares underlying currently exercisable options to
purchase Common Stock, 7,805 shares of Common Stock held by Mr.
Montgomery's spouse's profit sharing plan and 15,610 shares of Common
Stock held by MJC's profit sharing plan, of which Mr. Montgomery is a
partner. As a partner of MJC, Mr. Montgomery may be deemed to be the
indirect owner of the shares beneficially owned by MJC by virtue of his
authority to make investment decisions regarding the voting and
disposition of such shares. The business address of Mr. Montgomery is
5220 Spring Valley, Suite 600, Dallas, Texas 75240.
(8) Includes the shares of Common Stock beneficially owned by Satana, of
which Mr. Moreland is an executive officer. As an executive officer of
Satana, Mr. Moreland may be deemed to be the indirect beneficial owner
of the shares beneficially owned by Satana by virtue of his authority to
make investment decisions regarding the voting and disposition of the
such shares. Mr. Moreland disclaims beneficial ownership of the shares
beneficially owned by Satana. The business address of Mr. Moreland in
National Plaza 2, Suite 102, Amarillo, Texas 79101.
(9) Consists of 3,561 shares underlying currently exercisable options to
purchase Common Stock.
(10) Includes the shares beneficially owned by Mapleleaf Capital, Ltd.,
109,649 shares beneficially owned by
5
<PAGE> 9
Sunwestern Cayman 1988 partners, and 101,214 shares beneficially owned
by Sunwestern Investment Fund III, all of which are affiliates of Mr.
Silcock. Mr. Silcock may be deemed to be the indirect beneficial owner
of shares beneficially owned by such entities by virtue of his
authority to make investment decisions regarding the voting and
disposition of such shares. Mr. Silcock disclaims beneficial ownership
of the shares owned by Mapleleaf Capital, Ltd., Sunwestern Cayman 1988
Partners and Sunwestern Investment Fund III. The business address of
Mr. Silcock is 12221 Merit Drive, Suite 935, Dallas, Texas 75251.
(11) Includes the shares referenced in footnotes (2) - (10), and 1,048
additional shares.
(12) Includes 3,561 shares underlying currently exercisable options to
purchase Common Stock. The business address of Mapleleaf Capital, Ltd.
is 12221 Merit Drive, Suite 935, Dallas, Texas 75251.
(13) Includes 3,561 shares underlying currently exercisable options to
purchase Common Stock. The business address of Satana Corporation is
National Plaza 2, Suite 102, Amarillo, Texas 79101.
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation paid
during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's two other most highly compensated
executive officers, based on salary and bonus earned during 1994, 1995 and
1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- -----------------------
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#) COMPENSATION
------------------ ---- -------- ---------- ------------ ----------- ------------
($)(1)
-------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Herchman . . . . . . . . . . . . 1996 145,200 36,000 - 11,708 5,700
Chairman of the Board, Chief 1995 132,000 77,000 - 48,391 5,700
Executive Officer and President 1994 120,000 25,000 - 16,391 5,700
Kevin D. O'Brien . . . . . . . . . . . . 1996 115,500 30,000 - 11,708 -
Senior Vice President & Chief 1995 105,000 51,000 - 46,830 -
Operating Officer 1994 103,050 8,500 - 781 -
Michael G. Wallace 1996 84,000 30,000 - 11,708 -
Senior Vice President & 1995 60,000 21,000 - 35,123 -
Chief Financial Officer 1994 50,500 4,000 - 781 -
</TABLE>
(1) Represents a $350 per month automobile allowance paid to Mr. Herchman,
and $1,500 of annual premiums on a life insurance policy, of which Mr.
Herchman's spouse is the beneficiary, paid by the Company on Mr.
Herchman's behalf.
OPTION GRANTS IN 1996
The following table provides information related to options granted to the
Named Executive Officers during 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------
POTENTIAL REALIZED
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM (1)
OPTION EMPLOYEES PRICE PER EXPIRATION -----------------------
GRANTED (#) IN 1996 (%) SHARE DATE 5% ($) 10% ($)
----------- ----------- ($/SH)(2) ------ ------ -------
---------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Herchman . . . 11,708 5 2.56 9/16/99 123,737 144,505
Kevin D. O'Brien . . . 11,708 5 2.56 9/16/99 123,737 144,505
Michael G. Wallace . . 11,708 5 2.56 9/16/99 123,737 144,505
</TABLE>
(1) The dollar amounts in these columns represent potential value that might
be realized upon exercise of the options immediately prior to the
expiration of their term, assuming that the market price of the Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates prescribed by regulation, and therefore are not intended to forecast
possible future appreciation, if any, of the price of the Common Stock.
(2) The exercise price of each option was equal to the fair market value of
the Common Stock on the date of the grant.
7
<PAGE> 11
AGGREGATE OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END (#) AT FY-END ($) (1)
------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul R. Herchman . . . . . . . . . 18,732 58,538 191,418 523,186
Kevin D. O'Brien . . . . . . . . . 87,416 58,538 893,284 523,186
Michael G. Wallace . . . . . . . . 17,172 46,831 175,477 418,554
</TABLE>
(1) These values assume a valuation of $11.50 per share at December 31, 1996.
Volume is calculated based on the difference between the option price and
$11.50 multiplied by the number of shares of Common Stock underlying the
option.
COMPENSATION OF DIRECTORS
It is the policy of the Company that directors who are not employees of
the Company ("Independent Directors") receive $500 for each Board meeting
attended. All directors of the Company are reimbursed for travel, lodging and
other out-of-pocket expenses in connection with their attendance at Board and
committee meetings. Under the terms of the Incentive Plan, so long as the
Company is a reporting company subject to the terms of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), Independent Directors will
receive an option to purchase 2,500 shares of Common Stock upon his or her
initial election to the Board and an option to purchase 1,500 shares of Common
Stock at each annual meeting of the shareholders thereafter while he or she
continues to serve as a director of the Company. Such options will be
non-qualified stock options, will have an exercise price equal to the fair
market value of the Common Stock at the date of grant, will become exercisable
one-third on the date of grant and on each of the second and third
anniversaries thereof, and will expire ten years from the date of grant. As of
April 4, 1997, the current Independent Directors and their affiliated entities
have been granted options to purchase a total of 23,366 shares of Common Stock
at exercise prices ranging from $1.28 to $2.56 per share pursuant to the
Incentive Plan.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into an Employment Agreement with Paul Herchman,
dated as of January 1, 1994, as amended (the "Herchman Agreement"). The
Herchman Agreement may be terminated by the Company upon 12 months prior notice
and may be terminated by Mr. Herchman upon three months prior notice. The
Herchman Agreement provides that Mr. Herchman receive a base salary of $145,200
per year and is eligible to receive bonuses based upon the Company's financial
performance. The Herchman Agreement requires Mr. Herchman to maintain the
confidentiality of the Company's proprietary information during his employment
and thereafter and prohibits Mr. Herchman from competing with the Company
during his employment and for a period of one year thereafter.
The Company has entered into an Employment Agreement with Kevin O'Brien,
dated as of January 1, 1995, as amended (the "O'Brien Agreement"). The O'Brien
Agreement provides that Mr. O'Brien will receive a base salary of $115,500 per
year and is eligible to receive bonuses based upon the Company's financial
performance. The 0'Brien Agreement is terminable by the Company with six
months prior notice and may be terminated by Mr. O'Brien upon three months
prior notice. The O'Brien Agreement requires Mr. O'Brien to maintain the
confidentiality of the Company's proprietary information during his employment
and for a period of four years thereafter and prohibits Mr. O'Brien from
competing with the Company during his employment and for a period of one year
thereafter.
The Company has entered into an Employment Agreement with Michael G.
Wallace, dated as of January 1, 1995, as amended (the "Wallace Agreement").
The Wallace Agreement provides that Mr. Wallace will receive a base salary of
$84,000 per year and is eligible to receive bonuses based upon the Company's
financial performance. The Wallace Agreement is terminable by the Company with
six months prior notice and may be terminated by Mr.
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Wallace upon three months prior notice. The Wallace Agreement requires Mr.
Wallace to maintain the confidentiality of the Company's proprietary
information during his employment and for a period of four years thereafter and
prohibits Mr. Wallace from competing with the Company during his employment
and for a period of one year thereafter.
The Company has entered into an Employment Agreement with Rory Deal,
dated as of January 27, 1997, (the "Deal Agreement"). The Deal Agreement
provides that Mr. Deal will receive a base salary of $100,000 per year and is
eligible to receive bonuses based upon the Company's financial performance.
The Deal Agreement is terminable by the Company with 90 days prior notice and
may be terminated by Mr. Deal upon 30 days prior notice. The Deal Agreement
requires Mr. Deal to maintain the confidentiality of the Company's proprietary
information during his employment and for a period of four years thereafter and
prohibits Mr. Deal from competing with the Company during his employment and
for a period of one year thereafter.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company is engaged in a unique business niche. In order to succeed,
the Company believes that it must be able to attract and retain qualified
executives. The Compensation Committee has been primary responsible for
determining executive compensation. All of the Company's executive officers
are parties to employment agreements (the "Executives Employment Agreements"),
which provide for their base compensation level, as well as annual incentives
based on company performance. The Compensation Committee intends that future
determination of executive compensation will continue to take into account
input from the Company's senior management and, among other things, one or more
of the following goals:
o Aligning Company, employee and shareholder interests;
o Rewarding executives for successful strategic management;
o Recognizing outstanding performance;
o Providing incentives and rewards that will attract and retain
highly qualified and productive people;
o Motivating employees to high levels of performance; and
o Ensuring external competitiveness and internal equity.
To achieve these goals, the Company's executive compensation policies
will continue to integrate annual base compensation with bonuses based upon a
variety of factors that may include the Company's operating performance and
individual initiatives and performance. In measuring the Company's operating
performance, the Compensation Committee may consider, among other things, the
Company's attainment of gross margin, operating profit and growth targets,
limits on corporate general and administrative expenses, net income and
earnings per share targets, and debt to capital ratio levels. The Compensation
Committee has not applied a formula assigning specific weights to any such
factors. Compensation through stock options is designed to attract and retain
qualified executives and to ensure that such executives have a continuing stake
in the long-term success of the Company. When granting stock options, the
Compensation Committee may consider, among other things, a number of criteria
and factors including the recipient's level of cash compensation, years of
service with the Company, position with the Company and the number of
unexercised options held by the recipient. In order to continue to provide
management the long-term incentives afforded by stock options, during 1996 the
Compensation Committee approved the grant of options to a number of the
Company's officers, directors and employees.
Chief Executive Officer's Compensation for 1996. The Company's Chief
Executive Officer is compensated under the terms of his employment agreement
which, since January 1, 1996, provided for an annual base salary of $145,200
and quarterly and annual bonuses are based on certain performance levels of the
Company. Prior to January 1, 1996, Mr. Herchman's employment agreement
provided for an annual base salary of $132,000 and bonuses based upon certain
performance levels of the Company. For 1996, the Company's Chief Executive
Officer received bonuses of $36,000.
Compensation of Executive Officers. Compensation of the Company's
executive officers is generally
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comprised of base salary, quarterly and annual cash bonuses, and long-term
incentive compensation in the form of stock options. In determining salaries
for the executive officers in 1996, the Board took into account individual
experience and performance of its executive officers. In determining stock
option grants for the executive officers, the Compensation Committee evaluated
a number of criteria, including the recipient's level of cash compensation,
years of service with the Company, position with the Company and the number of
unexercised options held by the recipient.
This report is submitted by the members of the Compensation Committee:
COMPENSATION COMMITTEE
Jim Silcock
Morris G. Moreland
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee made recommendations to the
Board regarding compensation of the Company's executive officers and the Board
approved all of such recommendations. The Compensation Committee was comprised
of Paul R. Herchman, Jim Silcock and Morris G. Moreland during 1996. Other
than Mr. Herchman, no officer, former officer or employee served on the
Compensation Committee. No executive officer of the Company served as a member
of the Compensation Committee or similar committee or board of directors of any
other entity which an executive officer thereof served on the Compensation
Committee or Board.
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative total shareholder return on the Common Stock from October 11, 1996,
the date of the Company's initial public offering, through December 31, 1996,
with the cumulative total return on the Nasdaq Stock Market and the S& P Small
Cap 600.The Company does not believe it is feasible to provide a comparison
against a group of peer companies, as there is an insufficient number of
similar publicly traded companies. The comparison assumes $100 was invested
immediately prior to such period in Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends. Dates on the following chart
represent the last day of the indicated fiscal year. The Company paid no
dividends during such period.
[CHART]
<TABLE>
<CAPTION>
--------------------------------
10/11/96 12/31/96
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<S> <C> <C>
Medical Alliance $100 $104.50
- ------------------------------------------------------------
S&P Small Cap 600 $100 $104.30
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Nasdaq Stock Market $100 $103.40
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</TABLE>
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CERTAIN BUSINESS RELATIONSHIPS
On November 17, 1995, the Company entered into a Preferred Stock
Purchase Agreement with various investors, pursuant to which the Company issued
an aggregate of 362,500 shares of Series B Convertible Preferred Stock ("Series
B Preferred") to such investors at a purchase price of $4.00 per share ($1.45
million in the aggregate). In such offering, Morris G. Moreland and Satana, of
which Mr. Moreland is a director, acquired an aggregate of 163,662 shares of
Series B Preferred, and Mapleleaf Capital, Ltd., Sunwestern Investment Fund III
and Sunwestern Cayman 1988 Partners, affiliated entities of Jim Silcock,
acquired an aggregate of 171,067 shares of Series B Preferred. Upon completion
of the Company's initial public offering of Common Stock (the "Offering"), all
shares of Series B Preferred were converted to Common Stock at an exchange rate
of 1.561 for one.
On November 26, 1991, MJ Capital Corporation ("MJ Corporation") loaned
the Company $35,000 (the "MJ Corporation Loan") bearing interest at a rate of
16% per annum. In February 1992, an additional $10,000 was advanced to the
Company and on December 31, 1992 the balance, including $8,392 of accrued
interest, was consolidated into the MJ Corporation Loan. On May 12, 1993,
Montgomery, Jessup and Company L.L.P. ("MJC") loaned the Company $13,000
bearing an interest rate of 16% per annum with an additional loan of $2,500 in
May 1993 (the "MJC Loan"). On September 30, 1993, MJ Corporation and MJ
Partners became partners of MJ Capital Partners, L.P. ("MJ Partners"). In
connection therewith, MJ Corporation contributed the MJ Corporation Loan to MJ
Partners and MJC contributed the MJC Loan, together with $8,961 of fees due to
MJC for accounting services rendered, to MJ Partners, all of which amounts were
consolidated into the MJ Partners Note described below. Mr. Montgomery, a
Director of the Company, is the President of MJ Corporation and the general
partner of MJC and MJ Partners.
On September 5, 1991, MJ Partners loaned the Company $95,000 evidenced
by a promissory note (the "MJ Partners Note") bearing interest at a rate of 16%
per annum. In addition to the consolidation of the MJ Corporation Loan and MJC
Loan, during 1991, 1992, 1993 and 1994, MJ Partners loaned the Company
additional amounts under the MJ Partners Note of $78,000, $50,000, $190,000 and
$57,500, respectively, and rolled an aggregate of $46,148 of accrued interest
back into the MJ Partners Note during such period. The MJ Partners Note was
paid on June 29, 1995 with proceeds from the NationsBank Loans.
On July 27, 1995, the Company granted Paul R. Herchman a warrant to
purchase up to 15,610 shares of Common Stock at an exercise price of $2.56 per
share, which warrant vested upon the date of grant and expires in September
1999. This warrant was granted to Mr. Herchman in consideration for his
personal guaranty of the obligations of the Company under its revolving credit
facility and term loans with NationsBank of Texas, N.A. a portion of the net
proceeds from the Offering were used to repay such indebtedness in full.
The Company issued the following warrants to certain partners of MJ
Partners in connection with additional advances under the MJ Partners Note, all
of which warrants expire on March 31, 1997: (i) on August 15, 1993, the Company
granted to Columbia General Corporation warrants to purchase up to 23,416
shares of Common Stock exercisable as follows: 11,708 shares immediately, with
the remaining 11,708 shares on or after August 16, 1994, in each case at an
exercise price of $1.28 per share: (ii) on October 17, 1993, the Company
granted to Robert Matthews warrants to purchase up to 2,810 shares of Common
Stock exercisable as follows: 1,405 shares immediately, with the remaining
1,405 shares on or after October 18, 1994, in each case at an exercise price of
$1.28 per share; (iii) on May 31, 1994, the Company granted Thomas A.
Montgomery warrants to purchase up to 4,214 shares of Common Stock exercisable
as follows: 2,107 shares immediately, and the remaining 2,107 shares on or
after May 31, 1995, in each case at an exercise price of $1.28 per share; (iv)
on August 1, 1994, the Company granted to Mr. Montgomery warrants to purchase
up to 1,404 shares of Common Stock exercisable as follows: 702 shares
immediately, and the remaining 702 shares on or after August 1, 1995, in each
case at an exercise price of $1.28 per share, which remaining portion was
canceled in connection with the repayment of the MJ Partners Note; (v) on
August 15, 1994, the Company granted to Mr. Montgomery warrants to purchase up
to 2,810 shares of Common Stock exercisable as follows: 1,405 shares
immediately, and the remaining 1,405 shares on or after August 15, 1995, in
each case at an exercise price of $1.28 per share, which remaining portion was
canceled in connection with the repayment of the MJ Partners Note; and (vi) On
August 31, 1994, the Company granted to Shelly Burks warrants to purchase up to
2,342 shares of Common Stock exercisable as follows: 1,171 shares immediately,
and the remaining 1,171 shares on or after August 31, 1995, in each case at an
exercise price of $1.28 per share, which remaining portion was canceled in
connection with the repayment of the MJ Partners Note.
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<PAGE> 15
Mr. Montgomery, a Director of the Company, is the President of MJ
Corporation and the general partner of MJC and MJ Partners.
SECTION 16 REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission (the
"SEC"). Such persons are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
with respect to fiscal year 1996, or written representations from certain
reporting persons, the Company believes that all filing requirements applicable
to its officers, directors and persons who own more than 10% of a registered
class of the Company's equity securities have been complied with, except that
Patrick A. Rivelli, of whom Mapleleaf Capital Ltd. is an affiliate, failed to
timely file a Form 4 to reflect the open-market purchase by Mr. Rivelli of 900
shares of Common Stock.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for
shareholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Exchange Act. For such proposals to be
considered in the Proxy Statement and Proxy relating to the 1998 Annual Meeting
of Shareholders, such proposals must be received by the Company, Attention:
Secretary, at the address set forth on the first page of this Proxy Statement,
no later than January 13, 1998, in order to be included in the Company's proxy
materials and form of proxy relating to that meeting. Shareholder proposals
must also be otherwise eligible for inclusion.
OTHER BUSINESS
The Company does not intend to bring any business before the Meeting
other than those described herein and at this date the Company has not been
informed of any matters that may be presented at the Meeting by others;
however, if any other matters properly come before the Meeting or any
adjournment thereof, it is intended that the persons named in the accompanying
Proxy will vote pursuant to such Proxy in accordance with their best judgment
on such matters.
MISCELLANEOUS
All costs of solicitation of Proxies will be borne by the Company. In
addition to solicitation by mail, the officers and employees of the Company may
solicit Proxies by telephone or personally, without additional compensation.
The Company may also make arrangements with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares of Common Stock held of record by
such persons, and the Company may reimburse them for their out-of-pocket
expenses incurred in connection therewith. The Company's regularly retained
investor relations firm, Corporate Communications, Inc., may also be called
upon to solicit proxies by telephone or mail.
The Annual Report to Shareholders of the Company, including financial
statements for the fiscal year ended December 31, 1996, accompanies this Proxy
Statement. The Annual Report is not to be deemed part of this Proxy Statement.
By Order Of The Board Of Directors,
/s/ MARK NOVY
Mark Novy
Secretary
Irving, Texas
April 13, 1997
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<PAGE> 16
PROXY
MEDICAL ALLIANCE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14, 1997
The undersigned hereby appoints Paul R. Herchman and Michael G. Wallace,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to vote all shares of Common Stock that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Medical Alliance, Inc. (the "Company") to be held on Wednesday, May 14, 1997,
at the Harvey Hotel DFW, 4545 W. John Carpenter Freeway, Irving, Texas 75063,
at 9:00 a.m., or at any adjournment thereof, hereby revoking any proxy
heretofore given.
The proxy, when properly executed, will be voted in the manner directed herein,
and in the absence of specific directions to the contrary, this proxy will be
voted (i) FOR the election of the two nominees for director, (ii) FOR the
ratification of the selection of the independent public accountants for the
Company and (iii) in the discretion of the proxyholders on any other matters
that may properly come before the meeting and any adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of and Proxy
Statement for, the aforesaid Annual Meeting.
(change of address)
--------------------------------------
--------------------------------------
--------------------------------------
(if you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH DIRECTOR PLEASE MARK [X]
NOMINEES AND FOR THE RATIFICATION OF THE SELECTION OF THE INDEPENDENT PUBLIC YOUR VOTE AS
ACCOUNTANTS FOR THE COMPANY. INDICATED IN
THIS EXAMPLE
1. Election of Directors of the two nominees listed below (except as indicated to the contrary below):
FOR all WITHHOLD AUTHORITY INSTRUCTION: To withhold authority to vote for any individual nominee,
nominees to vote on one or more nominees check the withhold box and write the nominee's name on the space provided
listed to the listed to the right, but vote FOR opposite his name.
right. the remaining nominees.
LEON PRITZKER
[ ] [ ] -------------------------------------
MORRIS G. MORELAND
------------------------------------
2. Ratification of the selection of Coopers & Lybrand LLP. 3. With discretionary authority as to such other matters as may
as independent public accountants for the Company for properly come before the Annual Meeting.
the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
CHANGE [ ]
OF
ADDRESS
SIGNATURE SIGNATURE DATE
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NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
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FOLD AND DETACH HERE
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