<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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.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
February 9, 2000
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 March 7, 2000, at the Omni
Dallas Hotel Park West, 1590 LBJ Freeway, Dallas, Texas 75234. 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 three directors
of Medical Alliance. We have enclosed a copy of Medical Alliance's Annual Report
for the fiscal year ended December 31, 1998.
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,
Paul R. Herchman
Chairman of the Board, and
Chief Executive Officer
<PAGE> 3
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE
SUITE 150
IRVING, TX 75063
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 7, 2000
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 March 7, 2000, at the Omni Dallas Hotel Park West, 1590 LBJ
Freeway, Dallas, Texas 75234, for the following purposes:
(1) The election of three 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) Such other business as may properly come before the
Meeting or any adjournments thereof.
The close of business on February 2, 2000, 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,
Mark Novy
Secretary
Irving, Texas
February 9, 2000
<PAGE> 4
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE
SUITE 150
IRVING, TX 75063
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 7, 2000
This Proxy Statement is being first mailed on or about February 9,
2000, 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 March 7, 2000, at the Omni Dallas Hotel Park West, 1590 LBJ
Freeway, Dallas, Texas 75234, 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 three directors for terms expiring in 2002, and (ii) such other matters as
may properly come before the Meeting or any adjournments thereof. The Company
has selected PricewaterhouseCoopers LLP as independent public accountants for
the Company for the fiscal year ended December 31, 1999. A representative from
PricewaterhouseCoopers LLP will be present at the Meeting and will have the
opportunity to make a statement if they desire to do so and to answer any
appropriate questions from shareholders.
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, and (ii) 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: Tim Reagan, by
March 7, 2000. 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 February 2, 2000, (the "Record Date"),
at which time the Company had issued and outstanding 6,090,052 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
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.
Three Directors, Paul Herchman, David Kallenberger, M.D., and Tony
LeVecchio are in the class whose term of office expires in 2002. The Board has
nominated Messrs. Herchman, Kallenberger, and LeVecchio 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 2002 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 three
nominees. The following sets forth information as of the Record Date 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 2002:
Paul Herchman ............................ 43 Chairman of the Board
and Chief Executive
Officer 1999
David Kallenberger, M.D................... 51 Medical Director and 1999
Director
Tony LeVecchio (1)(2)(3).................. 53 Director 1999
Continuing Directors
Jim Silcock (1)(2)(3)..................... 49 Director 2001
Gary Hill................................. 51 President, Chief
Operating Officer and
Director 2000
Tom Montgomery (1)(2)(3).................. 42 Director 2001
Leon Pritzker ............................ 77 Director 2000
</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
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 HERCHMAN is a co-founder of the Company and has served as Chairman
of the Board and Chief Executive Officer since its inception in 1989. Mr.
Herchman served as President from 1989 until December 1997. 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.
GARY HILL, has served as President and Chief Operating Officer of the
Company since December 1997 and has served as a director since February 1998.
From January 1994 to April 1996, Mr. Hill served as President of the North Texas
Division of Columbia/HCA. Prior thereto, Mr. Hill was Senior Vice President of
Region II for Galen Health Care Inc. and Columbia from 1992 to 1994. From 1976
to 1992, Mr. Hill served in various capacities with Humana Inc., most recently
as Vice President for its hospital and insurance operations in central Kentucky
and Cincinnati. Mr. Hill received a Bachelor of Science degree from the
University of North Alabama.
DAVID 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 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.
TONY LEVECCHIO, has been a director of the Company since 1997 and
advisor to the Company since 1990. Mr. LeVecchio is a member of the Audit
Committee, the Compensation Committee, and the Incentive Plan Committee. Mr.
LeVecchio is President of The James Group, a business advisory firm, where he
has been a principal since 1989. Prior to The James Group, Mr. LeVecchio was
Senior Vice President and Chief Financial Officer for VHA Southwest Inc., a
regional health care division of Voluntary Hospitals of America, Inc. Mr.
LeVecchio received a Bachelor of Economics degree and a Master of Business
Administration degree from Rollins College in 1968 and 1969 respectively.
THOMAS 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, the Compensation Committee, and the Incentive Plan
Committee. Mr. Montgomery is a partner of Montgomery, Baggett & Drews, L.L.P.,
and has recently been appointed as Chief Financial Officer of Solution 6
Holdings, Ltd., an Australian Public Company. 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, has been a director of the Company since February 1996 and
a member of the Audit Committee, the Compensation Committee, and the Incentive
Plan Committees, has served as a general partner of Mapleleaf Capital Ltd., 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 degree
from Dartmouth College and a Master of Business Administration degree from the
Amos Tuck School of Business Administration at Dartmouth College.
3
<PAGE> 7
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 seven (7) times
and acted by unanimous written consent six (6) times during 1998. During 1998,
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. In 1999, the Board met seventeen (17) times and acted by unanimous
written consent five (5) times during 1999. During 1999, 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.
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, 1998, 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. Montgomery, LeVecchio and Silcock. The Audit Committee met
one (1) time during 1998. In 1999, the Audit Committee did not meet.
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. LeVecchio, Montgomery, and Silcock. The
Compensation Committee did not meet in 1998 and acted by unanimous written
consent one (1) time during 1998. In 1999, the Compensation Committee met two
(2) times.
Incentive Plan Committee. The Incentive Plan Committee was established
in 1997 and administers the Company's 1994 Amended and Restated Long-Term
Incentive Plan (the "Incentive Plan"). The Incentive Plan Committee is comprised
of Messrs. Montgomery, LeVecchio and Silcock. The Incentive Plan Committee met
four (4) times and acted by unanimous written consent three (3) times during
1998. In 1999, the Incentive Plan Committee met two (2) times.
The Company does not have a nominating committee. The functions
customarily performed by a nominating committee are performed by the Board as a
whole.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of Common Stock as of the Record Date, 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 1998 and 1999 based on salary and bonus earned during 1998 and
1999 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 February 9, 2000. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
Name and address of
- ------------------- Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned (1) Beneficially Owned (1)
- ----------------- ---------------------- ----------------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS
Paul Herchman (2) ............................. 436,646 7.0%
Gary Hill (3) ................................. 140,000 2.2%
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTORS
<S> <C> <C>
David Kallenberger, M.D (4).................... 184,498 3.0%
Tony LeVecchio (5)............................. 45,147 0.7%
Thomas Montgomery (6).......................... 253,792 4.1%
Leon Pritzker (7).............................. 85,120 1.4%
Jim Silcock (8)................................ 1,003,859 16.1%
All executive officers and directors
as a group (7 persons)(9)...................... 2,149,062 34.4%
OTHER 5% SHAREHOLDERS
Mapleleaf Capital, Ltd (10).................... 742,996 11.9%
Patrick Rivelli (11)........................... 1,012,759 16.2%
Satana Corporation (12)........................ 494,645 7.9%
Dimensional Fund Advisors,Inc (13)............. 380,700 6.1%
</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 1,000 shares underlying currently exercisable options to
purchase Common Stock. The business address of Mr. Herchman is 2445
Gateway Drive, Suite 150, Irving, Texas 75063.
(3) Includes 125,000 shares underlying currently exercisable options to
purchase Common Stock. The business address of Mr. Hill is 2445 Gateway
Drive, Suite 150, Irving, Texas 75063.
(4) Includes 17,471 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.
(5) Includes 3,332 shares underlying currently exercisable options to
purchase Common Stock. The business address of Mr. LeVecchio is 4975
Preston Park Blvd., Suite 150, Plano, Texas 75093.
(6) Includes 4,666 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 53,610 shares of Common
Stock held by Montgomery, Jessup and Company L.L.P.'s ("MJC") 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.
(7) Includes 4,666 shares underlying currently exercisable options to
purchase Common Stock. The business address of Mr. Pritzker is 3825
Echo Brook Lane, Dallas, Texas 75229.
5
<PAGE> 9
(8) Includes 742,996 shares beneficially owned by Mapleleaf Capital, Ltd.,
which includes 4,666 shares underlying currently exercisable options to
purchase Common Stock, 135,649 shares beneficially owned by Sunwestern
Cayman 1988 Partners, and 125,214 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. Mr. Silcock's business
address is 12221 Merit Drive, Suite 935, Dallas, Texas 75251.
(9) Includes the shares referenced in footnotes (2) - (8).
(10) Includes 4,666 shares underlying currently exercisable options to
purchase Common Stock. The business address for Mapleleaf Capital,
Ltd., is 12221 Merit Drive, Suite 935, Dallas, Texas 75251.
(11) Includes 742,996 shares beneficially owned by Mapleleaf Capital, Ltd.,
which includes 4,666 shares underlying currently exercisable options to
purchase Common Stock, 135,649 shares beneficially owned by Sunwestern
Cayman 1988 Partners, and 125,214 shares beneficially owned by
Sunwestern Investment Fund III, all of which are affiliates of Mr.
Rivelli. Mr. Rivelli 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. Rivelli disclaims beneficial ownership
of the shares owned by Mapleleaf Capital, Ltd., Sunwestern Cayman 1988
Partners and Sunwestern Investment Fund III. The business address for
Mr. Rivelli is 12221 Merit Drive, Suite 935, Dallas Texas 75251.
(12) Includes 2,000 shares underlying currently exercisable options to
purchase Common Stock. The business address of Satana Corporation is
National Plaza 2, Suite 102, Amarillo, Texas 79101.
(13) Dimensional Fund Advisors, Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment
manager to certain other investment vehicles, including commingled
group trusts. (These investment companies and investment vehicles are
the "Portfolios"). In its role as investment advisor and investment
manager , Dimensional possesses both voting and investment power over
380,700 shares of the Company's Common Stock as of December 30, 1999.
The Portfolios own all securities reported in this statement, and
Dimensional disclaims beneficial ownership of such securities. The
business address of Dimensional Fund Advisors, Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
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 the Company's other most highly compensated executive
officer, based on salary and bonus earned during 1997, 1998 and 1999.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
NAME AND ALL OTHER
PRINCIPAL POSITION SECURITIES COMPENSATION
- ------------------ FISCAL OTHER ANNUAL UNDERLYING ------------
YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#) ($)(1)
---- -------- ---------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Paul Herchman............................... 1999 $200,000 $0 $0 100,000 5,240
Chairman of the Board and Chief 1998 200,000 0 0 00 5,700
Executive Officer 1997 155,510 0 0 1,000 5,700
Gary Hill (3)............................... 1999 200,000 0 0 0 5,420(2)
President and 1998 200,000 0 0 151,540 5,420
Chief Operating Officer 1997 16,667 0 0 98,460 350
</TABLE>
(1) Represents a $350 per month automobile allowance paid to Mr. Herchman,
and $1,040 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.
(2) Represents a $350 per month automobile allowance paid to Mr. Hill, and
$1,220 of annual premiums on a life insurance policy, of which Mr.
Hill's spouse is the beneficiary, paid by the Company on Mr. Hill's
behalf.
(3) Mr. Hill's employment term with the Company began in December 1997.
OPTION GRANTS IN 1998 AND 1999
The following table provides information related to options granted to the Named
Executive Officers during 1998 and 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL REALIZED
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE PER TERM (1)
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------------------
GRANTED (#) 1998 OR 1999(%) ($/SH)(2) DATE 5% ($) 10% ($)
----------- --------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Herchman (3)...... 100,000 22% $1.91 12/15/09 $120,119 $304,405
Gary Hill (4).......... 151,540 54% 4.06 12/02/03 209,245 474,705
</TABLE>
(1) The dollar amounts in these columns represent potential value that
might be realized upon exercise of the options immediately prior to the
expiration of their term, assuming that the market price of the Common
Stock appreciates in value from the date of grant at the 5% and 10%
annual rates prescribed by regulation, and therefore are not intended
to forecast possible future appreciation, if any, of the price of the
Common Stock.
(2) The exercise price of each option was equal to the fair market value of
the Common Stock on the date of the grant.
7
<PAGE> 11
(3) Options granted to Mr. Herchman were related to 1999.
(4) Options granted to Mr. Hill were related to 1998.
<TABLE>
<CAPTION>
AGGREGATE OPTION VALUES AT DECEMBER 31, 1999
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT
OPTIONS/SARS AT FY-END (#) FY-END ($) (1)
--------------------------- --------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul Herchman.......................... 0 101,000 $0 $15,000
Gary Hill.............................. 125,000 125,000 0 0
</TABLE>
(1) These values assume a valuation of $2.06 per share at December 31, 1999.
Value is calculated based on the difference between the option price and $2.06
multiplied by the number of shares of Common Stock underlying the options.
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 5,000 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 each of
the first, second and third anniversaries thereof, and will expire ten years
from the date of grant. As of the Record Date, the current Independent Directors
and their affiliated entities have been granted options to purchase a total of
94,915 shares of Common Stock at exercise prices ranging from $2.16 to $13.50
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, 1998, (the "Herchman Agreement"). The Herchman
Agreement may be terminated by the Company upon (12) twelve months prior notice
and may be terminated by Mr. Herchman upon (3) three months prior notice. The
Herchman Agreement provides that Mr. Herchman receive a base salary of $200,000
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 Gary Hill,
dated as of December 2, 1997, (the "Hill Agreement"). The Hill Agreement
provides that Mr. Hill will receive a base salary of $200,000 per year and is
eligible to receive bonuses based upon the Company's financial performance. The
Hill Agreement is terminable by the Company with (12) twelve months prior notice
and may be terminated by Mr. Hill upon (3) three months prior notice. The Hill
Agreement requires Mr. Hill to maintain the confidentiality of the Company's
proprietary information during his employment and thereafter and prohibits Mr.
Hill from competing with the Company during his employment and for a period of
one year thereafter.
8
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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 primarily 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 1998 and 1999 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 1998 AND 1999
The Company's Chief Executive Officer is compensated under the terms of
his employment agreement which, since January 1, 1998, provided for an annual
base salary of $200,000 and quarterly and annual bonuses based on certain
performance levels of the Company. Prior to January 1, 1998, Mr. Herchman's
employment agreement provided for an annual base salary of $155,510 and bonuses
based upon certain performance levels of the Company. For 1998 and 1999, the
Company's Chief Executive Officer received no bonuses.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation of the Company's executive officers is generally
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 1998 and 1999, 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.
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<PAGE> 13
This report is submitted by the members of the Compensation Committee:
COMPENSATION COMMITTEE
Tom Montgomery
Tony Levecchio
Jim Silcock
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998 and 1999, 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 Tom Montgomery, Tony LeVecchio, and Jim Silcock during 1998 and
1999. 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,
through December 31, 1999, 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 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C>
Medical Alliance, Inc. $100 104.55 36.36 18.18 18.73
S&P Small Cap 600 100 104.74 130.42 127.7 142.4
Nasdaq Stock Market 100 104.37 126.95 177.26 328.97
</TABLE>
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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 1999, 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 as
follows. Annual statement of beneficial ownership reports on behalf of Mapleleaf
Capital Ltd. and Patrick Rivelli, shareholders of the Company were inadvertently
not filed for fiscal year 1998. Option grants received during fiscal year 1998
by such shareholders were reported on an annual statement of beneficial
ownership report for fiscal year 1999. An annual statement of beneficial
ownership report on behalf of Paul Herchman, Chairman of the Board and Chief
Executive Officer of the Company, was filed for fiscal year 1999 which contained
a report of the sale of securities by Mr. Herchman which should have been
reported on a Form 4 in December 1999.
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 1999 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, March 15, 2000 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, 1998, accompanies this Proxy
Statement. The Annual Report is not to be deemed part of this Proxy Statement.
By Order Of The Board Of Directors,
Mark Novy
Secretary
Irving, Texas
February 9, 2000
11
<PAGE> 15
MEDICAL ALLIANCE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 7, 2000
PROXY
The undersigned hereby appoints Paul R. Herchman and Mark A. Novy, 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.
("Medical Alliance") to held on Tuesday, March 7, 2000, at the Omni Dallas Hotel
Parkwest, 1590 LBJ Freeway, Dallas TX 75234, 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 three nominees for director, (ii) 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)
-------------------------------------------
-------------------------------------------
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(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 REVERSE SIDE)
o FOLD AND DETACH HERE o
<PAGE> 16
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE PLEASE MARK
FOR EACH DIRECTOR NOMINEE. YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
1. Election as Directors of the three nominees listed below (except as
indicated to the contrary below)
<TABLE>
<CAPTION>
<S> <C> <C>
FOR all WITHHOLD AUTHORITY INSTRUCTION: To withhold authority to vote for any individual nominee, check the
nominees to vote on one or more withhold box and write the nominee's name on the space provided opposite his name.
listed to nominees listed to the Paul Herchman
the right right, but vote FOR ---------------------------
the remaining nominees David Kallenberger, M.D.
---------------------------
[ ] [ ] Tony LeVecchio
---------------------------
2. With discretionary authority as to such other matters as may properly come before the Annual Meeting.
CHANGE
OF [ ]
ADDRESS
SIGNATURE SIGNATURE DATE
------------------------------------ -------------------------------------- -------------------------
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.
</TABLE>
o FOLD AND DETACH HERE o
