<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VISION TWENTY-ONE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
(VISION TWENTY-ONE-LOGO)
(VISION TWENTY-ONE A DIFFERENT POINT OF VIEW-LOGO)
VISION TWENTY-ONE, INC.
7209 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
Date: May 8, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting (the "Meeting")
of stockholders of Vision Twenty-One, Inc. (the "Company"). The Meeting will be
held June 8, 1998 at 10:00 a.m., Eastern Daylight Savings Time, at the Tampa
Westshore Marriott, located at 1001 North Westshore Blvd., Tampa, Florida 33607.
The Notice of the Meeting and the Proxy Statement on the following pages
cover the formal business of the Meeting, which includes the election of
Directors, a proposal to amend the Company's Stock Option Plan and a proposal to
ratify the appointment of the Company's independent certified public
accountants. We will also report on the progress of the Company and comment on
matters of current interest.
It is important that your shares be represented at the Meeting. We ask that
you promptly sign, date and return the enclosed proxy card in the envelope
provided, even if you plan to attend the Meeting. Returning your proxy card to
us will not prevent you from voting in person at the Meeting if you are present
and choose to do so.
If your shares are held in street name by a brokerage firm, your broker
will supply you with a proxy to be returned to the brokerage firm. It is
important that you return the form to the brokerage firm as quickly as possible
so that the brokerage firm may vote your shares. You may not vote your shares in
person at the Meeting unless you obtain a power of attorney or legal proxy from
your broker authorizing you to vote the shares, and you present this power of
attorney or proxy at the Meeting.
Your Board of Directors and management look forward to greeting you
personally at the Meeting.
Sincerely,
/s/ Theodore N. Gillette
THEODORE N. GILLETTE
Chairman of the Board and Chief Executive
Officer
<PAGE> 3
(VISION TWENTY-ONE LOGO)
(VISION TWENTY-ONE A Different Point of View LOGO)
VISION TWENTY-ONE, INC.
7209 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
Notice is hereby given that the annual meeting of stockholders of Vision
Twenty-One, Inc. (the "Company"), a Florida corporation, will be held at the
Tampa Westshore Marriott, located at 1001 North Westshore Blvd., Tampa, Florida
33607, on June 8, 1998, at 10:00 a.m., Eastern Daylight Savings Time (the
"Meeting") for the following purposes:
1. To elect three Directors to serve until the Annual Meeting in 2000
and until their successors are elected and qualified or until their earlier
resignation, removal from office or death;
2. To consider and vote upon a proposal to amend the Company's 1996
Stock Incentive Plan;
3. To consider and vote upon a proposal to give the Board of Directors
the authority to reallocate unused shares reserved for issuance under the
Company's 1996 Affiliated Professionals Stock Plan and the Company's 1996
Stock Incentive Plan in order that such shares may be available for
issuance under either of these plans.
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal year 1998; and
5. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete description of the matters to be acted upon at the Meeting.
The 1997 Annual Report of the Company is also enclosed. Stockholders of record
at the close of business on Monday, April 27, 1998 are entitled to receive
notice of and to vote at the Meeting and any adjournment thereof.
All stockholders are cordially invited to attend the Meeting. Whether or
not you expect to attend, please sign and return the enclosed Proxy promptly in
the envelope provided to assure the presence of a quorum. You may revoke your
Proxy and vote in person at the Meeting if you desire. If your shares are held
in street name by a brokerage firm, your broker will supply you with a proxy to
be returned to the brokerage firm. It is important that you return the form to
the brokerage firm as quickly as possible so that the brokerage firm may vote
your shares. You may not vote your shares in person at the Meeting unless you
obtain a power of attorney or legal proxy from your broker authorizing you to
vote the shares, and you present this power of attorney or proxy at the Meeting.
Please note that attendance at the Meeting will be limited to stockholders
of the Company as of the record date (or their duly authorized representatives).
If your shares are held by a bank or broker, please bring to the Meeting your
bank or broker statement evidencing your beneficial ownership of Company stock.
By order of the Board of Directors
/s/ Richard L. Sanchez
RICHARD L. SANCHEZ
Secretary
Tampa, Florida
May 8, 1998
<PAGE> 4
VISION TWENTY-ONE, INC.
7209 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
---------------------
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors and management
of Vision Twenty-One, Inc. (the "Company") in connection with the solicitation
of proxies to be voted at the Company's 1998 Annual Meeting of Stockholders,
which will be held at 10:00 a.m., Eastern Daylight Savings Time on Wednesday,
June 8, 1998 at the Tampa Westshore Marriott, 1001 North Westshore Blvd., Tampa,
Florida 33607 (the "Meeting"). The Meeting is the Company's first since the
completion of its initial public offering of common stock, par value $.001 (the
"Common Stock"), on August 18, 1997 (the "Initial Public Offering").
Any proxy delivered pursuant to this solicitation may be revoked, at the
option of the person executing the proxy, at any time before it is exercised by
delivering a signed revocation to the Company, by submitting a later-dated
proxy, or by attending the Meeting in person and casting a ballot. If proxies
are signed and returned without voting instructions, the shares represented by
the proxies will be voted as recommended by the Board of Directors.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone by
regular employees of the Company. The Company does not expect to pay any
compensation for the solicitation of proxies, but may reimburse brokers and
other persons holding stock in their names, or in the names of nominees, for
their expense in sending proxy materials to their principals and obtaining their
proxies. The approximate date on which this Proxy Statement and enclosed form of
proxy has been first mailed to stockholders is May 8, 1998.
The close of business on Monday, April 27, 1998 has been designated as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Meeting (the "Stockholders"). As of April 29, 1998,
14,180,657 shares of the Company's Common Stock were issued and outstanding.
Each Stockholder will be entitled to one vote for each share of Common Stock
registered in his or her name on the books of the Company as of the close of
business on Monday, April 27, 1998, on all matters that come before the Meeting.
1. ELECTION OF DIRECTORS
There are currently eight seats on the Board of Directors of the Company,
with no vacancies. The Board is divided into three classes of Directors serving
staggered three-year terms. Directors hold their positions until the annual
meeting of stockholders in the year in which their term expires and until their
respective successors are elected and qualified or until their earlier
resignation, removal from office or death. The term of office of three of the
Company's current eight Directors, Messrs. Richard T. Welch, Jeffrey I. Katz,
M.D. and Herbert U. Pegues, II, M.D., will expire at the Meeting. The Board of
Directors recommends that these Directors be elected at the Meeting to hold
office until the Company's annual meeting in 2001 and until their successors
shall be duly elected and qualified or until their earlier resignation, removal
from office or death.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE "FOR" THE
RE-ELECTION OF MESSRS. WELCH, KATZ AND PEGUES AS DIRECTORS, TO SERVE TERMS AS
DESCRIBED ABOVE. For further information on such nominees see "Management --
Directors and Executive Officers" and " -- Security Ownership." Stockholders may
vote for up to three nominees. The affirmative vote of holders of a majority of
the shares represented, in person or by proxy, and entitled to vote at the
Meeting is required to elect each nominee. Abstentions will be counted toward
the number of shares represented at the Meeting. Broker non-votes will be
disregarded. Stockholders may not vote cumulatively in the election of
Directors. In the event any of the nominees should be unable to serve, which is
not anticipated, the proxy committee, which consists of Theodore N. Gillette and
Richard L. Sanchez, will vote for such other person or persons for the office of
Director as the Board of Directors may recommend.
<PAGE> 5
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth (i) the names and ages of the Directors and
executive officers of the Company and the positions they hold with the Company
and (ii) the names and ages of the nominees for Director listed herein.
Executive officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Theodore N. Gillette, O.D. ................ 44 Chairman of the Board, Chief Executive
Officer, President and Director(1)
Richard L. Sanchez......................... 44 Chief Development Officer, Secretary and
Director
Richard T. Welch(3)........................ 46 Chief Financial Officer, Treasurer and
Director(2)
Richard L. Lindstrom, M.D. ................ 50 Chief Medical Officer and Director
Michael P. Block........................... 46 Executive Vice President -- Managed Care
and President -- Block Vision
Peter J. Fontaine.......................... 45 Director(1)(2)
Herbert U. Pegues, II, M.D.(3)............. 47 Director(1)(2)
Bruce S. Maller............................ 44 Director
Jeffrey I. Katz, M.D.(3)................... 51 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Directors Currently Nominated for Re-Election.
THEODORE N. GILLETTE, O.D., CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
PRESIDENT AND DIRECTOR. Dr. Gillette has served as Chairman of the Board, Chief
Executive Officer, President, and Director of the Company since its inception.
Dr. Gillette has served as President and Director of the Company's wholly-owned
subsidiaries, Vision 21 Physician Practice Management Company and Vision 21
Managed Eyecare of Tampa Bay, Inc. since 1984 and 1993, respectively. He
obtained his Doctorate of Optometry from Southern California College of
Optometry in 1979 and his Bachelor of Science from Florida State University in
1975.
RICHARD L. SANCHEZ, CHIEF DEVELOPMENT OFFICER, SECRETARY AND DIRECTOR. Mr.
Sanchez has served as Chief Development Officer, Secretary and Director of the
Company since its inception. From 1993 until assuming his positions with the
Company, Mr. Sanchez was Vice President of Marketing and Administration of the
Company's wholly-owned subsidiary, Vision 21 Managed Eyecare of Tampa Bay, Inc.
Prior to November of 1992, Mr. Sanchez worked for Exxon Corporation for over 18
years in various management positions including divisional management
responsibility for over 300 employees and $600 million in revenues. Mr. Sanchez
obtained his Bachelor of Science in Chemistry from Florida State University in
1975.
RICHARD T. WELCH, CHIEF FINANCIAL OFFICER, TREASURER AND DIRECTOR. Mr.
Welch has served as Chief Financial Officer, Treasurer and Director of the
Company since August 1996. From December 1994 to March 1996, Mr. Welch served as
Executive Vice President of Finance and Administration, and as Vice Chairman of
the Board of Directors, of Sports & Recreation, Inc., a public company engaged
in the business of retail sporting goods and equipment sales generating over
$500 million in annual revenue, and from January 1992 to December 1994, he
served as its Chief Financial Officer and a Director from January 1992 to
December 1994. Mr. Welch is a certified public accountant and graduated from
Louisiana State University in 1973 with a Bachelor of Science in Management and
Accounting.
RICHARD L. LINDSTROM, M.D., CHIEF MEDICAL OFFICER AND DIRECTOR. Dr.
Lindstrom has served as Chief Medical Officer of the Company since September
1996 and has served as a Director since January 1997. Since October 1989, Dr.
Lindstrom has maintained a private practice adjacent to the Phillips Eye
Institute in Minneapolis where he serves as the Medical Director for Research
and Teaching. Dr. Lindstrom holds 22 patents in ophthalmology and has given
numerous presentations throughout the world including 13 named
2
<PAGE> 6
lectures. He is active on multiple educational and advisory boards including
chief medical editor of Ocular Surgery News. He has co-authored two books,
published 50 chapters in other books and published over 300 articles in referred
journals. Dr. Lindstrom graduated from the University of Minnesota Medical
School in 1972 followed by a research residency and cornea fellowship at the
University of Minnesota, an Anterior Segment fellowship at Mary Shields Eye
Hospital in Dallas and a third fellowship in Glaucoma/Anterior Segment at
University Hospitals in Salt Lake City.
MICHAEL P. BLOCK, EXECUTIVE VICE PRESIDENT -- MANAGED CARE AND
PRESIDENT -- BLOCK VISION. Mr. Block has served as Executive Vice President of
Managed Care for the Company and as President of the Company's wholly owned
subsidiary BBG-COA, Inc. (together with its subsidiaries "Block Vision"), since
the Company's acquisition of Block Vision in November 1997. Mr. Block was the
founder of Block Vision and served as its Chairman of the Board, President and
Treasurer since its inception in 1984. Mr. Block graduated from Farleigh
Dickinson University in 1973 with a Bachelor of Arts degree and has been a
licensed optician in the State of New Jersey since 1974. Mr. Block is a member
of the New Jersey Society of Dispensing Opticians, holds a Fellowship with the
National Academy of Opticianary and is a member of the Board of Overseers of
Lynn University.
PETER J. FONTAINE, DIRECTOR. Mr. Fontaine has served as a Director of the
Company since July 1996. Mr. Fontaine is currently the Chairman of the Board of
Directors and Chief Executive Officer of Discount Auto Parts, Inc., a public
company engaged in the business of retail automotive parts sales, and he has
been employed by Discount Auto Parts, Inc. in various capacities since 1977. Mr.
Fontaine has served on the Board of Directors of Discount Auto Parts, Inc. since
1996 and as its Chief Executive Officer since 1994. From 1994 to January 1997,
Mr. Fontaine also served as its President.
HERBERT U. PEGUES, II, M.D., DIRECTOR. Dr. Pegues has served as a Director
of the Company since November 1996. He is currently Medical Director for managed
care at the Miami Children's Hospital, Miami, Florida and administers its
physician hospital organization. He has been the Vice President/Medical Director
for Memorial Sisters of Charity Health System in Houston, Texas from 1995 to
1996. From 1988 to 1992, Dr. Pegues was the Associate Executive Director of
Medical Affairs for Humana Healthcare Plans in Tampa, Florida and Assistant
Clinical Professor of the Department of Family Medicine at the University of
South Florida College of Medicine. Dr. Pegues graduated from the University of
Illinois College of Medicine in 1975. He received his B.A. from Grinnell College
in Grinnell, Iowa and is a Diplomate, Certified by the American Board of Family
Practice and National Board of Medical Examiners. Dr. Pegues is also a Fellow of
the American Academy of Family Physicians, and is licensed to practice medicine
in Florida.
BRUCE S. MALLER, DIRECTOR. Mr. Maller has served as a Director of Vision
Twenty-One since November 1996 and is an ophthalmology practice management
consultant to the Company. He is the founder of, and has been the President of,
the BSM Consulting Group of Incline Village, Nevada since 1978. BSM provides
consulting services predominantly in the fields of ophthalmology and cardiology
and to individual physicians and corporate clients such as Allergan, Inc.,
Boston Scientific, Columbia/HCA Healthcare, Inc. and Vision Twenty-One. Mr.
Maller has served as a Vice-President of Summit Medical Systems, Inc., the
parent company of BSM since October 1995. Mr. Maller is a frequent lecturer for
various medical societies, including the American Academy of Ophthalmology and
the American Society of Cataract and Refractive Surgery. Mr. Maller also heads
BSM Healthcare Publications, which produces works related to the field of
medical practice management. Mr. Maller received his Bachelor of Arts degree
from the University of Colorado in 1975.
JEFFREY KATZ, M.D., DIRECTOR. Dr. Katz has served as a Director of the
Company since January 1997. Dr. Katz has operated an ophthalmology practice at
the Eye Institute of Southern Arizona in Tucson since 1984. He also serves as a
clinical associate professor in the Department of Ophthalmology at the
University of Arizona in Tucson and is the past president of the Tucson
Ophthalmologic Society. Dr. Katz graduated from George Washington University
Medical School in 1972. He was chief of ophthalmic surgery at El Dorado Hospital
in Tucson and has served as the Medical Director for the Tucson Laboratory of
the Arizona Lions eye Bank since 1978.
3
<PAGE> 7
Pursuant to the terms of the Company's Articles of Incorporation and
Bylaws, the Board of directors has the power to set the number of directors. The
number of directors is presently set at eight members. The directors are divided
into three classes. Each director in a particular class is elected to serve a
three-year term or until his or her successor is duly elected and qualified. The
classes are staggered so that their terms expire in successive years resulting
in the election of only one class of directors each year. The Class I directors
are Mr. Welch and Drs. Pegues and Katz, the Class II directors are Messrs.
Sanchez and Fontaine, and the Class III directors are Drs. Gillette and
Lindstrom and Mr. Maller. The initial terms of the current Class I, Class II and
Class III directors will expire at the annual meeting of the stockholders of the
Company in 1998, 1999 and 2000, respectively. Officers of the Company are
appointed by the Board of Directors and hold office until the first meeting of
directors following the annual meeting of stockholders and until their
successors are appointed, subject to the terms of any applicable employment
agreement or to earlier removal by the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Following the Initial Public Offering, the Board of Directors established
the Audit and Compensation Committees. The Company's two independent Directors
are Messrs. Peter J. Fontaine and Herbert U. Pegues, II. Messrs. Fontaine and
Pegues serve on the Company's Audit and Compensation Committees. Mr. Pegues has
been nominated for re-election to the Board. The Board of Directors does not
have a Nominating Committee. The entire Board of Directors functions as a
Nominating Committee, and the Board will consider written recommendations from
stockholders for nominations to the Board of Directors in accordance with the
procedures set forth in the By-Laws of the Company. There are no arrangements or
understandings between any Director or nominee and any other person concerning
service or nomination as a Director.
The Board of Directors held three formal meetings during 1997. All actions
prior to the Company's Initial Public Offering were accomplished through the
unanimous written consent of the Directors without a meeting including, but not
limited to, the Company's reverse stock split during the year in June which
resulted in the exchange of 1 share for every 1.5 shares of Common Stock issued
and outstanding at the time of the split. All share amounts referenced in this
proxy statement give effect to such stock split.
The Audit Committee was formed shortly after the Initial Public Offering.
It held one meeting in 1997. The Audit Committee consists of Director Richard T.
Welch and the Company's two independent Directors, Messrs. Fontaine and Pegues.
The Audit Committee recommends the appointment of the independent public
accountants of the Company, discusses and reviews the scope and fees of the
prospective annual audit and reviews the results thereof with the independent
public accountants, reviews and approves non-audit services of the independent
public accountants, reviews compliance with existing major accounting and
financial policies of the Company, reviews the adequacy of the financial
organization of the Company, reviews management's procedures and policies
relative to the adequacy of the Company's internal accounting controls and
compliance with federal and state laws relating to accounting practices, and
reviews and approves (with the concurrence of the majority of the disinterested
Directors of the Company) transactions, if any, with affiliated parties.
The Compensation Committee was formed shortly after the Initial Public
Offering. It held one meeting in 1997. The Compensation Committee consists of
Director Theodore N. Gillette and the Company's two independent Directors,
Fontaine and Pegues. The Compensation Committee's principal function is to make
recommendations to the Board of Directors with respect to the compensation and
benefits to be paid to officers, and perform other duties prescribed by the
Board with respect to employee stock plans and benefit programs.
In 1997, incumbent Directors, Richard T. Welch, Herbert U. Pegues and
Jeffrey I. Katz, who are nominated for re-election, participated in all actions
taken by the Board.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation (the "Articles") provide that a
Director will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director,
4
<PAGE> 8
except: (i) for any breach of duty of loyalty; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of
laws; (iii) for liability under the Florida Business Corporation Act (relating
to certain unlawful dividends, stock repurchases or stock redemptions); or (iv)
for any transaction from which the director derived any improper personal
benefit. The Company's Bylaws provide that the Company will indemnify each
director and such of the Company's officers, employees and agents as the Board
of Directors shall determine from time to time to the fullest extend provided by
the Florida Business Corporation Act.
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with all of its directors and certain of its
officers. Similar Indemnification Agreements may from time to time be entered
into with additional officers of the Company or certain other employees or
agents of the Company. At present, there is no material pending litigation or
proceeding involving a director, officer, employee or agent of the Company where
indemnification is required or permitted, nor is the Company aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification. The Company is also empowered under its Articles to purchase
and maintain insurance or furnish similar protection on behalf of any person who
is required or permitted to indemnify and the Company has acquired such
insurance in connection with such individuals that the Company believes is
warranted.
DIRECTOR'S COMPENSATION
Directors are reimbursed for expenses in connection with attendance at
Board and Committee meetings. Directors who are not officers of the Company or
affiliates of major stockholders are paid $1,000 per meeting plus expenses. In
addition, non-employee directors may be awarded options under the Company's 1996
Stock Incentive Plan. During the year, non-employee directors were each awarded
options under the 1996 Stock Incentive Plan to purchase 4,000 shares of the
Company's Common Stock.
In 1996, the Company entered into a five-year Advisory Agreement with Mr.
Bruce S. Maller, a director of the Company (the "Advisory Agreement"), pursuant
to which Mr. Maller renders certain advisory services to the Company, including
the identification and integration of ophthalmology practices and the provision
of assistance to the Company with its strategic planning, growth and
development. In consideration for such services, the Company issued to Mr.
Maller 125,627 shares of Common Stock. A decreasing percentage of such shares
are subject to forfeiture in the event the Advisory Agreement is terminated "for
cause" prior to January 1, 2000. The shares issued to Mr. Maller pursuant to the
Advisory Agreement are subject to certain piggyback and demand registration
rights. In 1995, the Company also entered into a five-year services agreement
with the BSM Consulting Group ("BSM"), a consulting company of which Mr. Maller
is an employee and the sole owner (the "BSM Services Agreement"), pursuant to
which BSM agreed to provide substantial consulting services to assist the
Company with its operational and management development. The fees payable to BSM
for such services are approximately $40,000 per month. Payments earned by BSM
under the BSM Services Agreement were approximately $600,000 in the year ended
December 31, 1997.
Effective September 9, 1996, the Company entered into a services agreement
with Dr. Richard L. Lindstrom (the "Lindstrom Services Agreement"), a director
of the Company, pursuant to which Dr. Lindstrom provides certain consulting and
advisory services primarily related to assisting the Company in the
identification and integration of Affiliated Providers into the Company's
managed eye care delivery network and assistance in the development of
Affiliated Provider practices. In consideration for his services, Dr. Lindstrom
is paid $60,000 annually, and received 108,133 shares of Common Stock, of which
40% is non-forfeitable and the remaining 60% is subject to forfeiture in various
amounts if the Lindstrom Services Agreement is terminated by the Company for
cause or by Dr. Lindstrom prior to August 31, 2000. The shares issued to Dr.
Lindstrom pursuant to the Lindstrom Services Agreement are subject to certain
piggyback and demand registration rights. Payments earned by Dr. Lindstrom under
the Lindstrom Services Agreement were $60,000 in the year ended December 31,
1997.
The Company acquired all of the stock of a corporation in which Dr.
Lindstrom owned an 8% interest, for a total purchase price of $700,000, which
was paid in full from the net proceeds from the Initial Public Offering. The
Company also entered into regional service agreements with the shareholders of
Midwest Eye
5
<PAGE> 9
Care Alliance, Inc. ("M.E.C.A."), which included Dr. Lindstrom, following its
acquisition by the Company (collectively the "Regional Agreements"). The
Regional Agreements provide for Dr. Lindstrom and the other former M.E.C.A.
Shareholders to render advisory services to the Company in connection with
identifying potential ophthalmology and optometry practices in the Midwestern
region of the United States for acquisition or affiliation and assisting the
Company in negotiating agreements with such practices in exchange for specific
cash compensation that varies among the Regional Agreements. Dr. Lindstrom will
receive a total of $40,000 per year for each of the three years of his Regional
Agreement.
See "Certain Transactions" for additional information on certain members of
management.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and holders of more than 10% of the Company's Common Stock
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and any other equity
securities of the Company. The Company did not become subject to such
requirements until the Initial Public Offering. To the Company's knowledge,
based solely upon a review of the forms, reports and certificates furnished the
Company by such persons in conjunction with the Initial Public Offering, all
such reports were filed on a timely basis.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of April 29, 1998, information as to the
beneficial ownership of the Company's Common Stock by (i) each person known to
the Company as having beneficial ownership of more than 5% of the Company's
Common Stock, (ii) each person serving the Company as a Director on such date
and each nominee for Director, (iii) each person serving the Company as an
executive officer on such date who qualifies as a "named executive officer" as
defined in Item 402(a)(3) of Regulation S-K under the Securities Exchange Act of
1934, and (iv) all of the Directors and executive officers of the Company as a
group.
SECURITY OWNERSHIP
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) OWNED(2)
- --------------------------------------- ------------------- --------------------
<S> <C> <C>
Theodore N. Gillette, O.D.(3)............................... 1,860,558 13.1%
Gillette Family Limited Partnership(4)...................... 1,702,494 12.0
Richard L. Sanchez(5)....................................... 593,329 4.2
Peter J. Fontaine(6)........................................ 361,755 2.6
Bruce S. Maller(7).......................................... 271,644 1.9
Jeffrey I. Katz, M.D.(8).................................... 270,808 1.9
Richard L. Lindstrom, M.D.(9)............................... 261,197 1.8
Michael P. Block(10)........................................ 116,908 *
Richard T. Welch(11)........................................ 68,000 *
Herbert U. Pegues, II, M.D.(11)............................. 1,333 *
All directors and executive officers as a group (9
persons).................................................. 3,805,532 26.7%
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 7209 Bryan Dairy Road, Largo, Florida 33777.
(2) Based on 14,180,657 shares of Common Stock outstanding (excluding
contingent shares held in escrow in conjunction with certain acquisitions).
Pursuant to the rules of the Securities and Exchange Commission (the
"Commission"), certain shares of Common Stock which a person has the right
to acquire within 60 days of the date hereof pursuant to the exercise of
stock options are deemed to be outstanding for the purpose of computing the
percentage ownership of such person but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(3) Represents (a) 1,702,494 shares owned by the Gillette Family Limited
Partnership over which Dr. Theodore Gillette has voting control as the sole
shareholder of the corporate general partner
6
<PAGE> 10
(b) 9,077 shares owned by Gillette, Beiler & Associates, P.A. and (c)
148,987 shares owned individually. See "Certain Transactions."
(4) Shares are owned by the Gillette Family Limited Partnership, a Nevada
Limited Partnership, in which Dr. Theodore Gillette exercises voting and
investment control as the sole shareholder of the corporate general
partner.
(5) Represents shares owned by the Sanchez Family Limited Partnership over
which Richard L. Sanchez has voting and investment control as the majority
shareholder of the corporate general partner.
(6) Represents 360,422 shares owned by the Fontaine Industries Limited
Partnership over which Peter Fontaine has voting and investment control and
1,333 shares issuable upon the exercise of stock options granted, pursuant
to the Company's 1996 Stock Incentive Plan, which have vested and are fully
exercisable.
(7) Includes 108,976 owned by BSM Investment, Ltd., over which Bruce Maller has
voting and investment control and 1,333 shares issuable upon the exercise
of stock options granted, pursuant to the Company's 1996 Stock Incentive
Plan, which have vested and are fully exercisable.
(8) Includes 1,333 shares issuable upon the exercise of stock options granted
pursuant to the Company's 1996 Stock Incentive Plan, which have vested and
are fully exercisable and 69,189 shares held in escrow pending receipt by
the Company of an ASC license in the state of Arizona.
(9) Includes 1,333 shares issuable upon the exercise of stock options granted
pursuant to the Company's 1996 Stock Incentive Plan, which have vested and
are fully exercisable.
(10) Includes 58,670 shares owned by Mr. Block's wife and excludes 56,018
contingent shares Mr. and Mrs. Block may receive in connection with the
Company's acquisition of Block Vision if certain post acquisition
performance targets are met.
(11) Represents shares issuable upon the exercise of stock options granted
pursuant to the Company's 1996 Stock Incentive Plan, which have vested and
are fully exercisable.
COMPENSATION OF EXECUTIVE OFFICERS
The following table is a summary of the compensation paid or accrued by the
Company for the last three fiscal years for services rendered in all capacities
to the Company by the Chief Executive Officer and each of the persons who
qualified as a "named executive officer" (as defined in Item 402(a)(3) of
Regulation S-K under the Securities Exchange Act of 1934) during fiscal year
1997 ("Named Executive Officers"). The Company anticipates that it will pay
compensation in excess of $100,000 to each of the Chief Executive Officer, Chief
Financial Officer, Chief Development Officer, and the President of the Block
Vision subsidiary for the year ended December 31, 1998 pursuant to certain
employment agreements. See "-- Employment Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------- ------------
SECURITIES
UNDERLYING/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Theodore N. Gillette, O.D...................... 1996 $189,072 $ 8,200
Chief Executive Officer 1997 $220,000 $11,138
Richard L. Sanchez............................. 1996 $143,984 $ 5,700
Chief Development Officer 1997 $180,000 $ 8,368
Richard T. Welch............................... 1996 $ 57,600(1) --
Chief Financial Officer 1997 $150,000 70,000 --
</TABLE>
- ---------------
(1) Represents the salary earned by Mr. Welch for the portion of year in which
he was employed by the Company.
(2) Amounts for fiscal year 1997 represent automobile allowances of $8,174 and
$5,586 and premiums paid by the Company for life insurance policies of
$2,964 and $2,782, for Dr. Gillette and Mr. Sanchez, respectively. Amounts
for fiscal 1996 represent automobile allowances.
7
<PAGE> 11
Employment Agreements
Theodore N. Gillette, O.D. and Richard L. Sanchez have each entered into
Employment Agreements with the Company (the "Employment Agreements"), pursuant
to which they have agreed to serve as the Company's Chief Executive Officer and
Chief Development Officer, respectively. Each Employment Agreement is for a term
of five years ending on September 30, 2001 and is renewable for subsequent
one-year terms by mutual agreement of the parties. Dr. Gillette and Mr. Sanchez
will receive annual base salaries which are subject to review by the
Compensation Committee of the Board of Directors at annual intervals and may be
adjusted from time to time as the Compensation Committee deems to be
appropriate. Dr. Gillette and Mr. Sanchez will each be eligible for annual
incentive bonuses, up to 50% of their annual base salary, in an amount to be
determined by the Compensation Committee to the extent that the Company achieves
certain performance measures set by the Committee. Dr. Gillette and Mr. Sanchez
each waived bonuses for fiscal year 1997 in order that the Company's resources
could be channeled toward the Company's growth strategy. Dr. Gillette and Mr.
Sanchez are also entitled to receive stock options or other stock awards under
the Company's Stock Incentive Plan to the extent that the Compensation Committee
determines such awards to be appropriate. Each Employment Agreement provides
that in the event that employment is terminated by the Company other than (i)
for cause, (ii) upon death or disability, or (iii) upon voluntary termination by
the employee, such employee will be entitled to receive from the Company monthly
payments equal to one-twelfth of the employee's annual base salary for each
month during the remaining term of such Employment Agreement, but not less than
twenty-four months. In the event of a change in control (as defined in the
Employment Agreements), each Employment Agreement provides that if such
employee's employment is terminated other than for cause within twelve months
following a change of control of the Company, the Company shall pay such
employee thirty-six monthly payments of one-twelfth of the sum of such
employee's base salary plus his previous year's bonus. Each Employment Agreement
also contains a covenant not to compete with the Company for a period of
twenty-four months following termination of employment.
The Company and Richard T. Welch are parties to an Employment Agreement
(the "Employment Agreement"), pursuant to which Mr. Welch has agreed to serve as
Chief Financial Officer of the Company. The term of the Employment Agreement is
for two years ending on August 31, 1998, and is renewable for subsequent
one-year terms by mutual agreement of the parties. Under the Employment
Agreement, Mr. Welch will receive an annual base salary which is subject to
review by the Compensation Committee of the Board of Directors at annual
intervals and may be adjusted from time to time as the Compensation Committee
deems to be appropriate. Under the Employment Agreement, Mr. Welch has agreed to
devote his best efforts and substantially all of his business time and services
to the business and affairs of the Company. Mr. Welch will be eligible for
annual incentive bonuses, up to 50% of his annual base salary, in an amount to
be determined by the Compensation Committee of the Board of Directors to the
extent that the Company achieves certain performance measures set by the
Committee. Under the Employment Agreement, Mr. Welch received non-statutory
stock options to purchase 80,000 shares of Common Stock pursuant to the
Company's Stock Incentive Plan. The options are exercisable at a price of $3.11
per share and 64,000 shares became vested at the time of the Company's Initial
Public Offering on August 18, 1997. The remaining 16,000 shares vest pro rata on
an equal basis over a four-year period. Mr. Welch is also entitled to receive
such additional stock options or other stock awards under the Company's Stock
Incentive Plan to the extent the Compensation Committee determines such awards
to be appropriate. The Employment Agreement provides substantially similar terms
with respect to termination and changes in control as the employment agreements
with Dr. Gillette and Mr. Sanchez. The Employment Agreement also contains a
covenant not to compete with the Company for a period of twelve months following
termination of employment.
At the time of the Block Acquisition, Michael Block entered into an
employment agreement with the Company (the "Employment Agreement"), pursuant to
which he has agreed to serve as President of Block Vision, Inc., the Company's
wholly-owned subsidiary. The Employment Agreement is for a term of two years
ending on October 30, 1999, and is renewable for subsequent one-year terms by
mutual agreement of the parties. Mr. Block will receive an annual base salary of
$250,000, which is subject to review by the Compensation Committee of the Board
of Directors at annual intervals and may be adjusted from time to time as the
Compensation Committee deems appropriate. Under the Employment Agreement, Mr.
Block has
8
<PAGE> 12
agreed to devote his best efforts and substantially all of his business time and
services to the business and affairs of Block Vision. Mr. Block will be eligible
for an annual incentive bonus of up to 25% of his annual base salary, if Block
Vision's earnings before interest, taxes, depreciation and amortization reaches
certain levels, which target levels will increase in 1999. Under the Employment
Agreement, Mr. Block received non-statutory stock options to purchase 40,000
shares of Common Stock, pursuant to the Company's Stock Incentive Plan. The
options are exercisable at a price of $13.20 per share and vest pro rata on an
equal basis over a four-year period subject to acceleration upon the occurrence
of certain events. In the event 25% of Block Vision's capitated lives are
expanded to include medical and surgical services, 50% of the unvested options
would vest at such time and in the event that 50% of Block Vision's capitated
lives are expanded to include medical and surgical services, all remaining
options will vest at such time. Mr. Block is also entitled to receive such
additional stock options or other stock awards under the Company's Stock
Incentive Plan to the extent determined by the Compensation Committee as
successful integration and growth of Block Vision occurs. The Employment
Agreement provides substantially similar terms with respect to termination and
changes in control as the employment agreements with Dr. Gillette and Mr.
Sanchez. The Employment Agreement also contains a covenant not to compete with
the Company for a period of three years following termination of employment.
Stock Options
The Company has options outstanding under its 1996 Stock Incentive Plan
(the "Stock Incentive Plan"). Options granted are for the right to acquire the
Company's Common Stock. The following tables provide information concerning (i)
options granted to the Named Executive Officers under the Stock Incentive Plan
during 1997 and (ii) aggregate share option exercises in 1997 and year-end
option values for unexercised stock options held by each of the Named Executive
Officers. The Company did not grant any stock appreciation rights during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OPTIONS OF STOCK PRICE
OF SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR FOR OPTION TERM(2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION --------------------------
NAME GRANTED YEAR(1) ($/SHARE) DATE 5% 10%
- ---- ------------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Theodore N. Gillette......... 0 -- -- -- $ -- $ --
Richard L. Sanchez........... 0 -- -- -- -- --
Richard T. Welch (3)......... 20,000 5.5% 10.00 07/01/2007 125,779 318,748
50,000 13.8% 11.38 10/27/2007 357,841 906,839
</TABLE>
- ---------------
(1) Based upon 362,496 shares of Common Stock underlying stock options, granted
during 1997.
(2) The U.S. dollar amounts under these columns are the result of calculations
at 5% and 10% which reflect rates of potential appreciation set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Company's Common Stock
price. The gains reflect a future value based upon growth at these
prescribed rates. It is important to note that options have value to
recipients only if the Company's stock price advances beyond the grant date
price shown in the table during the effective option periods.
(3) Mr. Welch was granted options to purchase 20,000 and 50,000 shares of Common
Stock in July and October of 1997, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(1) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard T. Welch............ -- -- 68,000 82,000 $417,520 $73,680
</TABLE>
- ---------------
(1) There were no options exercised during fiscal year 1997 by any Named
Executive Officer.
9
<PAGE> 13
(2) Based upon the Company's closing stock price of $9.25 at December 31, 1997.
The Stock Incentive Plan authorizes the Company to grant eligible officers,
employees, consultants and directors of the Company awards consisting of options
to purchase shares of Common Stock, stock appreciation rights, shares of
restricted stock or performance shares. The Compensation Committee has the
discretion to select the particular officers, employees and consultants who will
receive awards. At April 29, 1998, approximately 1,250 officers and employees of
the Company were eligible to participate. The particular terms of the stock
options and other awards granted to eligible employees will be established by
the Compensation Committee within the limitations set forth in the provisions of
the Stock Incentive Plan. Eligible employees and other participants generally
are not required to provide the Company with consideration for the awards (other
than their services), but stock options will require the optionees to pay an
option exercise price based on the fair market value of the shares of common
stock at the time the grant of the options was approved by the Compensation
Committee. Stock options granted to employees under the Stock Incentive Plan may
be either Stock Options intended to qualify as Incentive Stock Options under
Section 422 of the Internal Revenue Code or nonstatutory Stock Options which do
not so qualify. Stock Options will expire no later than the tenth anniversary of
the date of grant and become exercisable under such vesting schedules as may be
established by the Compensation Committee. Vesting of the awards granted under
the Stock Incentive Plan may be accelerated in the event of a change in
corporate control, as defined in and upon the terms of the Stock Incentive Plan.
The Compensation Committee has discretionary authority to accelerate the vesting
of stock options and other awards in any other circumstances it determines to be
appropriate, and the stock option agreements under the Stock Incentive Plan may
provide for accelerated vesting upon death, disability, and, in some cases,
termination of employment without cause.
The Stock Incentive Plan can be amended by the Board from time to time in
any manner the Board deems to be advisable, except that the Board must obtain
shareholder approval for amendments that require shareholder approval under the
federal tax or securities laws or the NASDAQ National Market System stock
exchange, including amendments to increase the aggregate number of shares
available for issuance under the Stock Incentive Plan.
If the amendment to the Stock Incentive Plan described in Proposal 2 is
approved, the stock available for issuance pursuant to awards under the Stock
Incentive Plan will consist of 1,600,000 shares of Company's shares of common
stock. The last reported sales price of a share of Common Stock on the Nasdaq
Stock Market's National Market on April 29, 1998 was $9.625.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee until shortly after the
Company's Initial Public Offering, prior thereto executive compensation was
determined by the Company's Chief Executive Officer, Theodore N. Gillette. The
current members of the Company's Compensation Committee are Theodore N.
Gillette, Herbert V. Pegues, II, M.D., and Peter Fontaine. Messrs. Pegues and
Fontaine were appointed to the Committee following the Company's Initial Public
Offering. Neither Mr. Pegues nor Mr. Fontaine has at any time been an officer of
the Company. The Company borrowed $3.0 million from Mr. Fontaine pursuant to a
Promissory Note dated June 1996 (the "Fontaine Note") bearing interest at 8% per
annum. The Fontaine Note was repaid in full from the proceeds of the Initial
Public Offering. In addition, the Company borrowed $200,000 and $500,000 from
Mr. Fontaine in November and December 1996, respectively, for working capital
pursuant to unsecured promissory notes bearing interest at 8.5% per annum. The
unsecured promissory notes were repaid in full from the net proceeds from the
Initial Public Offering.
The information contained in the following sections entitled "Report of the
Compensation Committee" and "Performance Graph" are not deemed to be "soliciting
material" or to be "filed" with the Commission or subject to Regulation A under
the Securities Act of 1933, or to the liabilities of Section 18 of the
Securities Exchange Act of 1934.
10
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE
In accordance with rules adopted in 1992 by the Securities and Exchange
Commission, as amended in 1993, the Compensation Committee of the Board of
Directors of the Company, consisting of Directors Theodore N. Gillette, Peter
Fontaine and Herbert U. Pegues, II, M.D., as the members thereof (the
"Committee") offer this report regarding compensation policies for executive
officers and the Chief Executive Officer of the Company. The overall goal of the
Committee is to develop executive compensation policies and practices which are
consistent with and linked to the Company's business objectives which include
the goal of maximizing shareholder value over time. In structuring the
compensation of executive officers the Committee seeks to adhere to the
following principles:
FIXED COMPENSATION: A significant portion of compensation is fixed
and is based upon employment agreements with such individuals taking into
consideration other similarly situated companies;
EQUITY BASED: The interests and focus of management should be aligned
with those of stockholders through the use of equity-based incentive awards
to link a portion of compensation to the Company's stock performance;
MANAGEMENT RETENTION: The Company's executive compensation should be
structured so as to attract and retain individuals who are capable of
leading the Company toward the achievement of its objectives; and
AT RISK: A portion of pay should be linked to achievement of
performance goals by the Company.
These principles apply to compensation policies for all executive officers
of the Company. The Committee does not follow the principles in any particular
order, rather experience and judgment are applied in determining the appropriate
mix of compensation for each individual executive. Annual compensation for
executive officers is determined by the Committee, subject to the terms of any
applicable employment agreement negotiated between an officer and the Company.
During fiscal year 1997, the Company's Chief Executive Officer, Dr.
Theodore N. Gillette's annual compensation was based upon his employment
agreement and is principally fixed. The Chief Executive Officer's compensation
in subsequent years will be based upon the Committee's subjective evaluation of
the Chief Executive Officer's responsibilities, individual performance, growth
of the Company, earnings of the Company and increases in the cost of living. The
Committee is not expected to give particular weight to a specific factor or use
a formula in determining any bonus that may be paid to the Chief Executive
Officer or any adjustment to his annual salary or other long-term compensation
awards. The Committee did not provide any incentive based compensation to the
Chief Executive Officer in 1997 due primarily to the level of his beneficial
ownership of Company stock.
During fiscal year 1997, the compensation for the Company's other executive
officers was set by the Committee pursuant to existing employment agreements.
Much of such compensation is based upon fixed salary. The Committee and Board
have and may continue in the future to grant officers of the Company stock
options when such grants are deemed appropriate. The Compensation Committee
expects that stock options so granted will be at exercise prices based upon the
fair market value of the Company's Common Stock on the date of grant. Cash
bonuses may be earned by certain executive officers based upon financial
performance standards established by the Committee or as set forth in their
employment agreement.
The Committee believes its executive compensation principles and policies
described above serve the interests of the Company and its shareholders.
Respectfully submitted,
The Compensation Committee
Theodore N. Gillette
Peter Fontaine
Herbert U. Pegues, II, M.D.
11
<PAGE> 15
PERFORMANCE GRAPH
Rules promulgated by the SEC require that the Company include in this Proxy
Statement a line graph which compares the yearly percentage change over the past
five years in cumulative total stockholder return on the Common Stock with (i)
the performance of a broad equity market index, and (ii) the performance of a
published industry index or peer group index. As the Company did not consummate
its Initial Public Offering of Common Stock until August 18, 1997, there was no
active public market for the Company's Common Stock prior to that time. On
August 18, 1997, the opening price per share of the Company's Common Stock was
$10.00 and on such date the price closed at $9.50 per share. Accordingly, the
following graph compares the percentage change in the return on the Common Stock
for the period from August 18, 1997 to December 31, 1997 with the cumulative
total return on the Center for Research in Security Prices ("CRSP") Index for
the Nasdaq Stock Market (U.S. Companies) and the CRSP Index for Health Services
for the same period. The graph assumes the investment of $100 on August 18, 1997
and the reinvestment of any dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD AUGUST 18, 1997 TO DECEMBER 1997
AMONG VISION TWENTY-ONE, INC., CRSP NASDAQ U.S. INDEX AND
CRSP HEALTH SERVICES INDEX
[GRAPH]
<TABLE>
<CAPTION>
CRSP
NASDAQ
STOCK
VISION MARKET (U.S. CRSP HEALTH
MEASUREMENT PERIOD TWENTY-ONE, COMPANIES) SERVICES
(FISCAL YEAR COVERED) INC. INDEX INDEX
<S> <C> <C> <C>
08/19/97 $100.000 $100.000 $100.000
08/29/97 $127.778 $ 99.263 $100.892
09/30/97 $150.000 $105.135 $109.411
10/31/97 $127.778 $ 99.693 $102.264
11/28/97 $106.250 $100.192 $ 97.783
12/31/97 $102.778 $ 98.621 $ 98.335
</TABLE>
Note: The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
CERTAIN TRANSACTIONS
The information set forth herein briefly describes transactions since the
beginning of the Company's last fiscal year between the Company and its
directors, officers and 5% stockholders. These transactions have been approved
by the Company's Board of Directors. Transactions after the Company's Initial
Public Offering, if
12
<PAGE> 16
any, with affiliated parties were approved by a majority of the Company's
independent directors and were on terms no less favorable to the Company than
those that could be obtained from unaffiliated parties.
As part of a reorganization of the Company in November 1996, the Company
completed an acquisition of all the outstanding stock of Vision 21 Managed
Eyecare of Tampa Bay, Inc. in exchange for a certain number of shares of Common
Stock of the Company. In addition, in November 1996, the Company completed an
acquisition of all of the outstanding stock of Dr. Gillette & Associates, Inc.
(renamed Vision 21 Physician Practice Management Company). The shareholders of
these entities acquired by the Company were Theodore Gillette, Richard Sanchez
and Peter Fontaine. Dr. Gillette and Mr. Sanchez are executive officers and
directors of the Company and Mr. Fontaine is a director of the Company. In
connection with these transactions, Messrs. Gillette, Sanchez and Fontaine
received an aggregate of 1,724,574, 600,302 and 360,442 shares of Common Stock,
respectively.
Effective December 1, 1996, the Company acquired all the business assets of
Gillette, Beiler & Associates, #6965 P.A. ("G&A"), a Florida professional
association owned in part by Theodore Gillette, an executive officer and
director of the Company, with nine optometry offices located in Tampa, Port
Richey, Clearwater, St. Petersburg, Palm Harbor and Seminole, Florida. As
consideration for the acquisition, G&A received 373,971 shares of Common Stock,
of which Dr. Gillette is the beneficial owner of 196,064 shares, and a
promissory note in the amount of $416,103, which bears interest at 8% per annum.
The promissory note was repaid in full from the net proceeds of the Initial
Public Offering.
The Company has an agreement to provide practice management services to
G&A, pursuant to which G&A made payments of $392,206, $423,890 and $538,982 in
1994, 1995 and 1996, respectively. In December 1996, the Company and G&A entered
into a new Management Agreement pursuant to which the Company provides practice
management services for a management fee equal to a gross percentage of the
revenue of G&A's eye care practice. Payments earned by the Company under the new
Management Agreement in the year ended December 31, 1997 were approximately $1.2
million.
The Company borrowed $3.0 million from Mr. Fontaine pursuant to a
Promissory Note dated June 1996 (the "Fontaine Note") bearing interest at 8% per
annum. The Fontaine Note was repaid in full from the proceeds of the Initial
Public Offering. In addition, the Company borrowed $200,000 and $500,000 from
Mr. Fontaine in November and December 1996, respectively, for working capital
pursuant to unsecured promissory notes bearing interest at 8.5% per annum. The
unsecured promissory notes were repaid in full from the net proceeds from the
Initial Public Offering.
Effective December 1, 1996, the Company acquired all the business assets of
Lindstrom, Samuelson and Hardten Ophthalmology Associates, P.A. ("Lindstrom
P.A."), in which Dr. Lindstrom owns a majority interest, at a purchase price of
247,108 shares of Common Stock of the Company, of which Lindstrom received
151,732 shares, and a promissory note in the amount of $460,416 bearing interest
at 8% per annum. The shares are subject to certain registration rights. In
connection with the acquisition, Lindstrom P.A. and the Company entered into a
Management Agreement which provides for a management fee of 30% of the amounts
remaining after certain expenses are paid as set forth in the Management
Agreement. The Company earned fees of approximately $526,000 under the
Management Agreement in the year ended December 31, 1997. The promissory note
was repaid in full from the net proceeds of the Initial Public Offering.
Effective December 1, 1996, the Company acquired all the business assets of
Eye Institute of Southern Arizona, P.C. ("Eye Institute"), an Arizona
professional corporation located in Tucson, Arizona and engaged in the provision
of ophthalmology services. Jeffrey I. Katz, M.D., a director of the Company,
owns a 50% interest in Eye Institute. The acquisition was accomplished by a
merger of Eye Institute into the Company's wholly-owned subsidiary, Vision 21 of
Southern Arizona, Inc. As consideration for the acquisition, Dr. Katz received
198,306 shares of Common Stock. The shares are subject to certain registration
rights. As a result of the merger of Eye Institute with and into Vision 21 of
Southern Arizona, Inc., Vision 21 of Southern Arizona, Inc. assumed Eye
Institute's role as business manager under a Management Agreement between Eye
Institute and Vital Sight, P.C., a newly-formed Arizona professional corporation
to which Eye Institute had transferred its medical assets prior to the merger.
The Management Agreement provides for a management fee of 35% of the amounts
remaining after certain expenses are paid as set forth in the Management
Agreement. The
13
<PAGE> 17
Company earned fees of $564,000 under the Management Agreement in the year ended
December 31, 1997. The Company, the former shareholders of Eye Institute and
certain other related entities closed in escrow an agreement dated as of July
31, 1997 to transfer certain ASC assets from Vital Sight, P.C. and such
shareholders' limited liability company to Vision 21 of Southern Arizona, Inc.
When the State of Arizona approves Vital Sight, P.C.'s application for a license
to conduct an ASC business, all income associated with such ASC business shall
be subject to the business management fee and until such time, the Company
receives a fee approximately equal to the business management fee. The Company
received fees of approximately $111,000 for the year ended December 31, 1997.
The Company's obligation to purchase the ASC business shall terminate if the ASC
license is not obtained within eighteen months of the closing date of the merger
of Eye Institute into Vision Twenty-One of Southern Arizona, Inc. As
consideration for this ASC transaction, Dr. Katz will be entitled, subject to
post-closing adjustments, to receive 69,169 shares of Common Stock.
Effective October 31, 1997, the Company acquired all of the stock of
BBG-COA, Inc., a corporation in which Michael P. Block, President of Block
Vision, Inc., and his wife owned a 25.6% interest, for a total purchase price of
approximately $35.0 million consisting of cash and Common Stock of which Mr.
Block received his pro rata share. The shares are subject to certain
registration rights. Additionally, Mr. and Mrs. Block may receive up to an
additional 56,018 shares of Common Stock contingent upon Block Vision
successfully attaining certain 1998 targets agreed to as part of the Block
Acquisition.
2. PROPOSAL TO ADOPT AMENDMENT TO STOCK INCENTIVE PLAN
The Stock Incentive Plan, as originally approved, authorizes 933,333 shares
of the Company's Common Stock to be issued to eligible employees, consultants
and directors of the Company and its subsidiaries as restricted stock awards or
upon the exercise of stock options. During 1996 and 1997, the number of
employees eligible to participate in the Stock Incentive Plan, and the number of
options granted, increased dramatically as the Company completed numerous
significant acquisitions. As of April 28, 1998, stock options to purchase all of
the available shares under the Stock Incentive Plan had been granted to an
aggregate of approximately 142 eligible employees, consultants and directors.
Accordingly, no shares remain available for awards to any additional officers,
key employees or consultants first employed or retained by the Company during
1998 or subsequent years. In addition, there are no current plans by the Company
to make any immediate awards to any of the Company's named executive officers.
The Board of Directors believes it is necessary to amend the Stock
Incentive Plan to increase the number of shares that may be issued under the
Stock Incentive Plan, in order to continue to provide adequate stock option and
other equity-based awards to the new key employees the Company anticipates
hiring as it continues to complete new acquisitions and expand its operations
over the next several years. The proposed amendment would immediately increase
the number of shares available under the Stock Incentive Plan by 500,000 shares,
to a total of 1,433,333 shares. If approved, this amendment authorizes
sufficient shares to provide for the awards the Company currently anticipates
will be made in the near future.
The stock options provided to eligible employees, consultants and directors
under the Stock Incentive Plan will permit these individuals to purchase shares
of the Company's Common Stock at an option purchase price equal to the fair
market value of a share of the Company's Common Stock as of the date the option
was granted. On April 28, 1998, the last reported sales price for Common Stock
on the NASDAQ was $9.625 per share. Since the granting of future options will be
at the discretion of the Compensation Committee, it is not possible to determine
at the present time when and how awards will be made with the additional shares
that will become available if the proposed amendment to the Stock Incentive Plan
is approved.
A complete copy of the amendment to the Stock Incentive Plan is attached to
this Proxy Statement as Appendix A. The discussion of the Amendment is qualified
in its entirety by reference to Appendix A.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU VOTE "FOR"
APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S STOCK INCENTIVE PLAN.
14
<PAGE> 18
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the meeting will be required for approval of
the proposed amendment.
3. PROPOSAL TO GIVE THE BOARD OF DIRECTORS THE AUTHORITY TO REALLOCATE UNUSED
SHARES RESERVED FOR ISSUANCE UNDER ITS 1996 AFFILIATED PROFESSIONALS STOCK
PLAN AND THE 1996 STOCK INCENTIVE PLAN
The Company currently has reserved for issuance under its 1996 Affiliated
Professionals Stock Plan (the "Professionals Stock Plan") and its Stock
Incentive Plan (collectively the "Plans") an aggregate of 1,600,000 shares of
Common Stock. Of these 1,600,000 shares, 666,667 were reserved for issuance
under the Professionals Stock Plan, however, only approximately 134,000 shares
have been utilized by the Company pursuant to stock options granted to
affiliated professionals. In light of the Company's underutilization of shares
reserved for issuance under the Professionals Stock Plan, the Company's Board of
Directors determined that the ability to use shares reserved under either Plan
would provide the Board of Directors with greater flexibility in its
administration and use of the Plans. The Board of Directors therefore believes
that it would be in the best interest of the Company if the unused shares
reserved for issuance under either of the Company's two Plans could be
reallocated between the Plans for issuance pursuant to stock options granted
under either Plan.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU VOTE "FOR"
APPROVAL OF THE PROPOSAL TO GIVE THE BOARD OF DIRECTORS THE AUTHORITY TO
REALLOCATE UNUSED SHARES RESERVED FOR ISSUANCE UNDER ITS PROFESSIONALS STOCK
PLAN AND STOCK INCENTIVE PLAN BETWEEN SUCH PLANS.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the Meeting will be required for the approval
of the proposal.
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has engaged the firm of Ernst & Young LLP, independent
certified public accountants, to report upon the financial statements included
in the Annual Report submitted herewith. A representative from said firm will be
in attendance at the Meeting, will have the opportunity to make a statement if
desired, and will be available to respond to any questions from those in
attendance. The Company has appointed Ernst & Young LLP to report upon its 1998
financial statements, subject to ratification of such appointment by the
Stockholders at the Meeting. Stockholder ratification of the Company's
independent certified public accountants is not required by the Company's
By-Laws or otherwise. The Board of Directors has elected to seek such
ratification as a matter of good corporate practice. If the Stockholders do not
ratify this appointment, other certified public accountants will be considered
by the Board of Directors upon recommendation of the Audit Committee.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU VOTE "FOR"
THE RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy, and entitled to vote at the Meeting will be
required to ratify the appointment of Ernst & Young LLP.
5. OTHER BUSINESS
Management of the Company does not know of any other business that may be
presented at the Meeting. If any matter not described herein should be presented
for Stockholder action at the Meeting, the persons named in the enclosed Proxy
will vote the shares represented thereby in accordance with their best judgment.
15
<PAGE> 19
STOCKHOLDER PROPOSALS FOR
PRESENTATION AT THE 1999 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
presentation at the 1999 Annual Meeting be submitted to Richard L. Sanchez,
Secretary, in writing no later than January 8, 1999, for consideration for
inclusion in the Company's proxy materials for such meeting.
The Company's By-Laws require certain advance notice to the Company of any
nominations by stockholders of persons to stand for election as directors at
stockholders' meetings. Notice of director nominations must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
directors are to be elected. To be timely, notice must be received at the
principal executive offices of the Company not less than 60 nor more than 90
days prior to the meeting of stockholders; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder in order
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs.
A stockholder's notice with respect to a director nomination must set forth
(i) certain information about the nominee, (ii) the consent of the nominee to
serve as a director if elected, (iii) the name and record address of the
nominating stockholder, (iv) the class or series and number of shares of the
Company which are beneficially owned by such stockholder, (v) a description of
all arrangements or understandings between such stockholder and each proposed
nominee and any other person pursuant to which the nominations are to be made,
(vi) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named, and (vii) certain other
information.
The complete By-Law provisions governing these requirements are available
to any stockholder without charge upon request from the Secretary of the
Company.
By Order of the Board of Directors
/s/ Richard L. Sanchez
RICHARD L. SANCHEZ
Secretary
Dated: May 8, 1998
16
<PAGE> 20
APPENDIX A
FIRST AMENDMENT TO THE
VISION TWENTY-ONE, INC.
1996 STOCK INCENTIVE PLAN
Vision Twenty-One, Inc., a Delaware corporation (the "Company") hereby
amends the Vision Twenty One, Inc. 1996 Stock Incentive Plan (the "Plan") in the
manner set forth in the terms of this Amendment (the "Amendment"). Capitalized
terms used in this Amendment and not otherwise defined shall have the
definitions set forth in the Plan.
1. Purpose of the Amendment. The purpose of this Amendment is to increase
the number of shares of the Company's common stock reserved for issuance under
the Plan from 933,333 to 1,433,000 shares, and to authorize the Board of
Directors to reallocate shares of the common stock reserved for issuance under
the Company's Affiliated Professionals Stock Plan but not used for grants under
that Plan to increase the number of shares reserved under this Plan.
2. Authority for the Amendment. Section 12.1 of the Plan provides that, to
the extent permitted by law, the Board of Directors of the Company may at any
time and from time to time amend the Plan in such respects as it shall deem
advisable, subject to the requirement that the Board of Directors obtain
stockholder approval of any amendment for which such stockholder approval is
required by law, including any amendment to increase the aggregate number of
shares of Common Stock which may be issued under the Plan.
3. Amendment to Section 9.1. Section 9.1(a) of the Plan shall be amended
by adding the following provision to the end thereof:
Notwithstanding the foregoing, the Board of Directors is authorized to
increase the number of shares reserved for issuance under this Plan by
reallocating to this Plan a number of shares not greater than the number of
shares reserved for issuance under the Company's Affiliated Professionals
Stock Plan which have not previously been used for awards granted under the
Affiliated Professional Stock Plan, and reducing the number of shares
reserved for issuance under the Affiliated Professionals Stock Plan
accordingly.
The effectiveness of this Amendment to Section 9.1 set forth in this Paragraph 3
shall be conditioned upon approval by the Company's stockholders of Proposal 3
at the 1998 Annual Meeting of Stockholders.
4. Amendment to Section 9.1. Section 9.1(a) of the Plan shall be further
amended by restating the first sentence thereof to read as follows:
(a) Shares of Common Stock which may be issued pursuant to Options,
SARs, Restricted Stock awards or Performance Share awards granted under the
Plan may be either authorized and unissued shares of Common Stock or shares
of Common Stock held by the Corporation as treasury stock. The number of
shares of Common Stock which may be issued under this Plan shall not exceed
1,433,000 shares of Common Stock, subject to such adjustments as may be
made pursuant to Section 9.2.
The effectiveness of this Amendment to Section 9.1 set forth in this Paragraph 4
shall be conditioned upon approval by the Company's stockholders of Proposal 2
at the 1998 Annual Meeting of Stockholders.
5. Ratification of the Plan. In all other respects, the Plan, as amended
to date, is hereby ratified, approved and confirmed.
A-1
<PAGE> 21
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of the
Company, has hereby executed this Amendment to the Plan on behalf of the Company
this 1st day of April, 1998, as directed and approved by the Board of Directors
of Vision Twenty-One, Inc.
VISION TWENTY-ONE, INC.
By:/s/ Richard T. Welch
----------------------------
A-2
<PAGE> 22
APPENDIX B
VISION TWENTY-ONE, INC.
7209 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 8, 1998
The undersigned, having received notice of the Annual Meeting of Vision
Twenty-One, Inc. (the "Company") to be held at 10:00 a.m. (Eastern Time), on
June 8, 1998 (the "Meeting"), hereby designates and appoints Theodore N.
Gillette, O.D. and Richard L. Sanchez, and either of them with authority to act
without the other, or , as proxies for the undersigned, with
full power of substitution and resubstitution, to vote all of the shares of
Common Stock which the undersigned is entitled to vote at the Meeting and at any
adjournment thereof, such proxies being directed to vote as specified on the
reverse side.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Meeting or any adjournment thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY AND
WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES
WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4 AND IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF, PROVIDED THAT THIS
PROXY WILL NOT BE VOTED TO ELECT MORE THAN THREE DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING MATTERS. PLEASE
MAKE AN "X" IN ONE SPACE. TO BE EFFECTIVE, THIS PROXY MUST BE DEPOSITED AT THE
COMPANY'S REGISTRARS NOT LATER THAN 48 HOURS BEFORE THE TIME APPOINTED FOR THE
MEETING. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued on the reverse side)
1. Proposal to elect the following three (3) nominees as Directors: Richard T.
Welch, Herbert U. Pegues, II, M.D. and Jeffrey I. Katz, M.D.
<TABLE>
<S> <C> <C> <C>
[ ] FOR [ ] WITHHELD
</TABLE>
FOR, EXCEPT VOTE WITHHELD FOR THE FOLLOWING NOMINEE(S):
- --------------------------------------------------------------------------------
2. Proposal to approve the amendment to the Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to give the Board of Directors the authority to reallocate unused
shares reserved under the Professionals Stock Plan and Stock Incentive Plan
between such plans.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify Ernst & Young LLP as the Company's independent auditors
until the conclusion of the 1999 Annual Meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Dated: , 1998
------------------
------------------------------
Signature
------------------------------
Signature if held jointly
IMPORTANT: Please sign exactly as your name appears on this proxy and mail
promptly in the enclosed envelope. If you sign as agent or in any other
capacity, please state the capacity in which you sign.
B-1
