<PAGE>
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:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
American Dental Partners, 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)(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 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:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
Notes:
<PAGE>
AMERICAN DENTAL PARTNERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1999
To the Shareholders of
American Dental Partners, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of American
Dental Partners, Inc. (the "Company") will be held at the offices of Summit
Partners located at 600 Atlantic Avenue, Suite 2800, Boston, Massachusetts
02210, on Friday, May 7, 1999 at 2:00 p.m., local time, for the following
purposes:
1. To elect two Class II directors;
2. To vote on a proposal to amend the Company's 1996 Stock Option
Plan as described in this Proxy Statement;
3. To vote on a proposal to amend the Company's 1996 Directors Stock
Option Plan as described in this Proxy Statement; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on March 12, 1999 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting and any adjournment thereof. Only holders of Common Stock of record at
the close of business on that date will be entitled to notice of, and to vote
at, the Annual Meeting and any adjournments or postponements thereof.
In order that your shares may be represented at this meeting and to assure
a quorum, please sign and return the enclosed proxy promptly. A return
addressed envelope, which requires no postage, is enclosed. In the event you
are able to attend and wish to vote in person, at your request, we will cancel
your proxy.
By Order of the Board of Directors
/s/ Gregory A. Serrao
Gregory A. Serrao
Chairman, President and Chief
Executive Officer
Wakefield, Massachusetts
Dated: April 7, 1999
Whether or not you plan to attend the annual meeting in person, you are
requested to complete, date, sign and return the enclosed proxy card in the
enclosed envelope which requires no postage if mailed in the United States. If
you attend the annual meeting, you may vote in person if you wish, even if you
have previously returned your proxy card.
<PAGE>
AMERICAN DENTAL PARTNERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
GENERAL
This Proxy Statement is being furnished to the holders of common stock,
$.01 par value, of American Dental Partners, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company to be used at the Company's Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the office of Summit Partners
located at 600 Atlantic Avenue, Suite 2800, Boston, Massachusetts 02210, on
Friday, May 7, 1999, at 2:00 p.m., local time, for the purposes set forth on the
accompanying Notice of Annual Meeting. This Proxy Statement and the form of
proxy together with the 1998 Annual Report to Shareholders are first being sent
to shareholders on or about April 7, 1999.
All shares represented by properly executed proxies will be voted at the
Annual Meeting in accordance with the choices indicated on the proxy. If no
choices are indicated, the shares will be voted to elect the director nominees
set forth under "Election of Directors" and in favor of the proposals set forth
in the Notice of Annual Meeting as more fully described in this Proxy Statement.
Any proxy may be revoked at any time prior to its exercise by delivery to the
Company of a later dated proxy or by giving notice of revocation to the Company
in writing. A shareholder's presence at the Annual Meeting does not by itself
revoke the proxy.
The close of business on March 12, 1999, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. On the record date, there were
7,466,880 shares of the Company's Common Stock outstanding and entitled to vote
and approximately 62 shareholders of record. Each share of Common Stock is
entitled to one vote. Only holders of Common Stock of record at the close of
business on the record date will be entitled to notice of, and to vote at, the
Annual Meeting.
ELECTION OF DIRECTORS
The number of directors currently is fixed at five. The Board of Directors
is divided into three classes, Class I, Class II, and Class III, with one Class
I director and two directors in each of Class II and Class III. The directors
in each class are elected to three-year terms. The terms of office of one class
of directors expire each year at the annual meeting of shareholders and at such
time as their successors are duly elected and qualified. The term of office of
the Class II directors expires concurrently with the holding of the Annual
Meeting, and the two incumbent directors in such Class have been nominated for
re-election. There is no cumulative voting in the election of directors, and
nominees receiving the highest number of votes will be elected. Abstentions and
broker non-votes will not be counted in favor of or against any nominee.
At the Annual Meeting, Common Stock represented by proxies, unless
otherwise specified, will be voted to elect the nominees named below as Class II
directors for a three-year term expiring in 2002. In the event that any nominee
named below as a Class II director is unable to serve (which is not expected),
the persons named in the proxy may vote for another nominee using their
judgment.
<PAGE>
CLASS II DIRECTORS
(NOMINEES FOR ELECTION)
<TABLE>
<CAPTION>
Expiration of
Name of Principal Occupation A Director of the Term for which
Nominee Age and Business Experience Company Since Proposed
------- --- ----------------------- ----------------- --------------
<S> <C> <C> <C> <C>
James T. Kelly 52 Chairman of the Board of Lincare February 1997 2002
Holdings Inc., a provider of home
respiratory therapy services, since
April 1994.
Martin J. Mannion 39 General Partner of Summit Partners, January 1996 2002
a private equity capital firm,
where he has been employed since
1985.
</TABLE>
Set forth below is information relating to directors whose terms will continue
after the Annual Meeting:
CLASS III DIRECTORS
(TERM EXPIRING IN 2000)
<TABLE>
<CAPTION>
Name of A Director of the
Director Age Principal Occupation Company Since
-------- --- -------------------- -----------------
<S> <C> <C> <C>
Derril W. Reeves 55 Founder, Vice Chairman of the Board February 1997
of Directors and Chief Development
Officer of PhyCor, Inc. where he
has been employed since 1988.
Gregory A. Serrao 36 Founder, President, Chief Executive December 1995
Officer and Director of the Company
since December 1995. Chairman since
October 1997. From 1992 through
December 1995, Mr. Serrao served as
the President of National Specialty
Services, Inc., a subsidiary of
Cardinal Health, Inc.
</TABLE>
1
<PAGE>
CLASS I DIRECTOR
(TERM EXPIRING IN 2001)
<TABLE>
<CAPTION>
Name of A Director of the
Director Age Principal Occupation Company Since
-------- --- -------------------- -----------------
<S> <C> <C> <C>
Gregory T. Swenson, D.D.S. 64 President of PDHC, Ltd. and Park November 1996
Dental since November 1996.
Chairman and Chief Executive
Officer of Park Dental from 1983
until November 1996.
</TABLE>
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board of Directors has established a Compensation Committee and an
Audit Committee. The Board of Directors does not have a standing nominating
committee or a committee performing similar functions.
The members of the Compensation Committee are Martin J. Mannion and Derril
W. Reeves. The Compensation Committee, which is responsible for making
recommendations to the Board of Directors with respect to the compensation of
executive officers of the Company, held four meetings during 1998 and took
action once by written consent.
The members of the Audit Committee are Martin J. Mannion, James T. Kelly
and Derril W. Reeves. The Audit Committee, which is responsible for the
appointment of the independent auditors, supervision of the annual audit of the
Company's consolidated financial statements by the independent auditors and
related matters, held two meetings during 1998.
The Directors Stock Option Plan Committee is responsible for administering
the Amended and Restated 1996 Directors Stock Option Plan. Gregory Serrao is
the only member of the Directors Stock Option Plan Committee. The Committee
took action once by written consent in 1998.
The Board of Directors held four meetings and took action four times by
written consent during 1998. Each director attended at least 75% of the
meetings held by the Board of Directors and the committees on which he served
during 1998.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company or one of its subsidiaries
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or one of its subsidiaries receives a fee
of $1,000 for attending each Board of Directors' meeting and $500 for attending
each committee meeting. In addition, such directors are eligible to receive
options under the Company's 1996 Amended and Restated Directors Stock Option
Plan. These options are issued at such times and in such amounts as may be
determined by the Directors Stock Option Plan Committee. Directors are also
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees thereof.
2
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 31, 1999, by: (i) each person who is known
to the Company to own beneficially more than 5% of the outstanding shares of
Common Stock; (ii) each director; (iii) the Company's Chief Executive Officer
and the four other most highly compensated executive officers named in the
Summary Compensation Table; and (iv) the Company's directors and executive
officers as a group. Under the rules of the Securities and Exchange Commission,
a person is deemed to be a ''beneficial owner'' of a security if he or she has
or shares the power to vote or direct the voting of such security, has or shares
the power to dispose of or direct the disposition of such security, or has the
right to acquire the security within 60 days. Accordingly, more than one person
may be deemed to be the beneficial owner of the same security. All persons
listed have sole voting and investment power with respect to their shares unless
otherwise indicated.
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
-------------------------------
Number PERCENTAGE
--------------- --------------
<S> <C> <C>
Summit Ventures(2).................................................... 2,376,162 31.8%
Martin J. Mannion(2).................................................. 2,376,162 31.8%
Gregory A. Serrao(3)(9)............................................... 662,877 8.5%
Pilgrim Baxter & Associates, Ltd.(4).................................. 497,600 6.7%
Capital Research and Management Company(5)............................ 443,000 5.9%
Delta Associates, Ltd.(6)............................................. 378,001 5.1%
Gregory T. Swenson, D.D.S.(7)(9)...................................... 338,485 4.5%
Ronald M. Levenson(8)(9).............................................. 154,747 2.0%
Forrest M. Flint(9)................................................... 27,993 *
Joseph V. Errante, D.D.S.(9)(10)...................................... 20,280 *
William H. Bottlinger(9).............................................. 10,853 *
Derril W. Reeves(9)................................................... 7,825 *
James T. Kelly(9)..................................................... 4,825 *
All executive officers and directors as a group (11 persons)(11)...... 3,650,581 45.8%
</TABLE>
___________________
* less than 1%
(1) This table includes for each person or group of persons shares of Common
Stock that may be purchased by such person or group pursuant to options
which are currently exercisable or exercisable within 60 days of March 31,
1999. As of such date, a total of 7,466,880 shares of Common Stock were
issued and outstanding and options for 679,476 shares were exercisable.
(2) Represents 2,285,869 and 90,293 shares of Common Stock owned by Summit
Ventures IV, L.P. and Summit Investors II, L.P., respectively. Summit
Partners is affiliated with both limited partnerships. Mr. Mannion, a
Director of the Company, is a general partner of Summit Partners. The
address of Summit Partners and Mr. Mannion is 600 Atlantic Avenue, Suite
2800, Boston, Massachusetts 02110.
(3) Includes 30,000 shares owned by a family trust, of which Mr. Serrao is the
grantor and trustee, 5,000 shares held by Mr. Serrao's minor children and
5,000 shares held by Mr. Serrao's wife. The address for Mr. Serrao is
American Dental Partners, Inc., 301 Edgewater Place, Suite 320, Wakefield,
Massachusetts 01880.
(4) The address for Pilgrim Baxter & Associates, Ltd. is 825 Duportail Road,
Wayne, Pennsylvania 19087.
(5) The address for Capital Research and Management Company is 333 South Hope
Street, Los Angeles, California 90071.
(6) Represents shares received by Delta Associates, Ltd. in connection with
the Company's affiliation with PDHC, Ltd. The address of Delta Associates,
Ltd. is 3560 Delta Dental Drive, Eagan, Minnesota 55122.
(7) Includes 96,000 shares owned by a family trust, of which Dr. Swenson is
the grantor.
(8) Includes 950 shares held by Mr. Levenson's minor children.
(9) Includes options for 330,877 shares for Mr. Serrao, 8,650 shares for Dr.
Swenson, 109,807 shares for Mr. Levenson, 27,663 shares for Mr. Flint, 250
shares for Dr. Errante, 7,807 shares for Mr. Bottlinger, 4,825 shares for
Mr. Reeves and 4,825 shares for Mr. Kelly, respectively, which are
currently exercisable or exercisable within 60 days of March 31, 1999.
(10) Includes 932 shares owned by a family trust, of which Dr. Errante is the
grantor, and 1,390 shares owned by a family trust, of which Dr. Errante is
the trustee.
(11) Includes options for 499,346 shares for all executive officers and
directors as a group which are currently exercisable or exercisable within
60 days of March 31, 1999.
3
<PAGE>
EXECUTIVE COMPENSATION
Set forth below is summary information regarding the annual and long-term
compensation of the Company's chief executive officer and the four most highly
compensated executive officers of the Company whose annual compensation exceeded
$100,000 during 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM AWARDS
-------------------------------------------------------- --------------------------------
OTHER SECURITIES ALL OTHER
ANNUAL RESTRICTED UNDERLYING COMPENSATION
YEAR SALARY ($) BONUS ($) COMPENSATION/(1)/ STOCK OPTIONS (#) /(2)/
------ ------------ ------------ ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregory A. Serrao.... 1998 $ 170,000 $ 102,000 $ - $ - 12,000 $ 2,259
Chairman, President 1997 $ 153,000 $ 123,600 $ - $ - 189,600 $ 1,946
and Chief Executive 1996 $ 144,000/(3)/ $ 90,000 $ 136,543/(4)/ $ 99,500/(5)/ 270,270 $ 519
Officer
Ronald M. Levenson... 1998 $ 165,000 $ 66,000 $ - $ - 12,000 $ 2,200
Senior Vice 1997 $ 153,000 $ 82,400 $ - $ - 126,000 $ 1,946
President,
Chief Financial 1996 $ 101,000/(3)/ $ 41,600 $ 23,000/(6)/ $ - 81,000 $ -
Officer and
Treasurer
William H. 1998 $ 152,880 $ 65,800 $ - $ - 4,523 $ -
Bottlinger..........
Vice President- 1997 $ 143,000/(3)/ $ 58,800 $ 57,900/(6)/ $ - 15,000 $ -
Regional
Operations and 1996 $ - $ - $ - $ - - $ -
Chief Information
Officer
Forrest M. Flint..... 1998 $ 130,000 $ 26,250 $ - $ - 1,692 $ 2,430
Vice President- 1997 $ 125,000 $ 30,000 $ - $ - 7,200 $ 2,340
Business
Development 1996 $ 14,000/(3)/ $ 15,000 $ - $ - 36,000 $ 288
Joseph V. Errante,
DDS................. 1998 $ 120,000 $ 717 $ - $ - 11,000 $ 4,943
Vice President- 1997 $ - $ - $ - $ - - $ -
Regional
Operations 1996 $ - $ - $ - $ - - $ -
</TABLE>
__________________
(1) Except as specifically noted, no Other Annual Compensation for any Named
Executive Officer exceeded $50,000 or 10% of the total salary and bonus for
such officer.
(2) Represents matching contributions under the Company's 401(k) plan.
(3) Represents less than one full year's compensation.
(4) Consists of a tax offset bonus in the amount of $84,461 paid with respect
to the restricted Common Stock issued to Mr. Serrao in January 1996 and
moving and relocation expenses in the amount of $52,082.
(5) Represents the dollar value (net of consideration paid) of 300,000 shares
of restricted Common Stock issued to Mr. Serrao in January 1996, based upon
the fair market value of such shares on the date of issuance. Such shares
are subject to repurchase rights in favor of the Company upon the
occurrence of certain events, including the termination of Mr. Serrao's
employment. Such repurchase rights lapse ratably during the first four
years of Mr. Serrao's employment and upon the occurrence of certain other
events. As of December 31, 1998, 81,180 shares of restricted Common Stock
with a fair market value on such date of $938,644 were held by Mr. Serrao.
Dividends, if declared and paid upon the Common Stock, will be paid on such
restricted stock.
(6) Consists of moving and relocation expenses.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all grants of stock options to the executive
officers named in the Summary Compensation Table during 1998:
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
--------------------------------------- Annual Rates of Stock
Number of Price Appreciation
Securities % of Total Exercise for Option Term
Underlying Options Options Granted Price Expiration --------------------
Granted (#)(1) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
------------------ --------------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gregory A. Serrao.................. 12,000 12% $13.00 2/27/08 $98,108 $248,624
Ronald M. Levenson................. 12,000 12% $13.00 2/27/08 $98,108 $248,624
William H. Bottlinger.............. 4,523 4% $13.00 2/27/08 $36,978 $ 93,710
Forrest M. Flint................... 1,692 2% $13.00 2/27/08 $13,833 $ 35,056
Joseph V. Errante, D.D.S........... 1,000 1% $14.17 1/01/08 $ 8,911 $ 22,583
10,000 10% $11.50 11/06/08 $72,323 $183,280
</TABLE>
- ----------
(1) All option grants were issued under the Amended and Restated 1996 Stock
Option Plan, as amended. The exercise price of such options is no less than
the fair market value of the Company's Common Stock on the date of grant.
Options become exercisable in equal annual installments over a four-year
period.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth the number of securities underlying
unexercised options and the value of in-the-money stock options held by the
executive officers named in the Summary Compensation Table as of December 31,
1998 (1):
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1998(#) at December 31, 1998 ($)
------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Gregory A. Serrao............................ 325,477 146,393 $3,035,808 $ -
Ronald M. Levenson........................... 90,307 128,693 $ 572,858 $336,975
William H. Bottlinger........................ 5,213 14,310 $ - $ -
Forrest M. Flint............................. 27,240 17,652 $ 82,235 $ 34,135
Joseph V. Errante, D.D.S..................... - 11,000 $ - $ 625
</TABLE>
- -----------
(1) There were no stock options exercised by executive officers named in the
Summary Compensation Table during 1998.
5
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has a five-year employment agreement with Mr. Serrao which
terminates in January 2001. Under his employment agreement, Mr. Serrao receives
an annual base salary, which was $170,000 in 1998 (subject to potential annual
salary increases), and a bonus in an amount up to 60% of his then current base
salary. Mr. Serrao is also subject to non-competition and confidentiality
provisions in the employment agreement. If Mr. Serrao's employment is terminated
prior to the end of the five-year term by the Company without cause or by Mr.
Serrao for "good reason" (as defined in the employment agreement), he is
entitled to receive severance benefits which include severance payments in an
amount equal to his then current annual base salary and health care benefits for
one year after termination.
The Company has a three-year employment agreement with Mr. Levenson which
terminates in April 1999. Under his employment agreement, Mr. Levenson receives
an annual base salary, which was $165,000 in 1998 (subject to potential annual
salary increases), and a bonus in an amount up to 40% of his then current base
salary. Mr. Levenson is also subject to non-competition and confidentiality
provisions in the employment agreement. If Mr. Levenson's employment is
terminated prior to the end of the three-year term by the Company without cause
or by Mr. Levenson for "good reason" (as defined in the employment agreement),
he is entitled to receive severance benefits which include severance payments in
an amount equal to his then current annual base salary and health care benefits
for one year after termination.
The Company has a three-year employment agreement with Mr. Flint which
terminates in November 1999. Under his employment agreement, Mr. Flint receives
an annual base salary, which was $130,000 in 1998 (subject to potential annual
salary increases), and a bonus in an amount up to 25% of his then current base
salary. Mr. Flint is also subject to non-competition and confidentiality
provisions in the employment agreement. If Mr. Flint's employment is terminated
prior to the end of the three-year term by the Company for any reason other than
for cause, he is entitled to receive severance benefits which include severance
payments in an amount equal to his then current base salary for the remainder of
such term.
The Company has a four-year employment agreement with Dr. Errante which
terminates in January 2003. Under his employment agreement, Dr. Errante receives
an annual base salary of $140,000 (subject to potential annual salary increases)
and a bonus in an amount up to 35% of his then current base salary. Dr. Errante
is also subject to non-competition and confidentiality provisions in the
employment agreement. If Dr. Errante's employment is terminated prior to the end
of the four-year term by the Company for any reason other than for cause, he is
entitled to receive severance benefits which include severance payments in an
amount equal to the lesser of the remainder of the term or one year of his then
current base salary.
COMPENSATION COMMITTEE INTERLOCKS
Prior to October 27, 1997, the Company did not have a separate Compensation
Committee or other committee performing equivalent functions. As a result,
compensation decisions prior to that time were made by the Company's Board of
Directors consisting of Messrs. Serrao, Kelly, Mannion, Reeves and Dr. Swenson.
Messrs. Mannion and Reeves serve as the current members of the Company's
Compensation Committee. There are no interlocking relationships between any
executive officers of the Company and any entity whose directors or executive
officers serve on the Company's Board of Directors or Compensation Committee.
6
<PAGE>
CERTAIN TRANSACTIONS
The Company and a group of investors (collectively, the "Purchasers") were
parties to various agreements and transactions which were entered into in
connection with the initial capitalization of the Company. The Purchasers
included, among others, Mr. Serrao and certain limited partnerships which are
affiliated with Summit Partners. Mr. Mannion, a Director of the Company, is a
general partner of Summit Partners. Summit Partners and its affiliated limited
partnerships are hereinafter collectively referred to as "Summit Partners."
The Company and the Purchasers were parties to a Series A and Series B
Preferred Stock Purchase Agreement dated January 8, 1996, as amended (the
"Preferred Stock Purchase Agreement"), pursuant to which the Purchasers
purchased, in the aggregate, 400,000 shares of Series A Convertible Preferred
Stock at a price of $19.75 per share and 70,000 shares of Series B Redeemable
Preferred Stock at a price of $100 per share. In addition, in connection with
entering into the Preferred Stock Purchase Agreement, the Purchasers purchased
an aggregate of 300,000 shares of Common Stock at $0.33 per share. The aggregate
purchase price for all Preferred and Common Stock purchased by the Purchasers
was $15,000,000. The proceeds from the sale of such shares were used by the
Company in connection with affiliations with dental practices and for general
working capital purposes. The following table describes the number of shares of
Series A and Series B Preferred Stock and Common Stock purchased by Mr. Serrao
and Summit Partners:
Number of Shares
--------------------
Series A Convertible Series B Redeemable Common
Preferred Stock Preferred Stock Stock
-------------------- ------------------- -------
Gregory A. Serrao...... 2,933 513 2,200
Summit Partners........ 349,600 61,180 278,563
The Series A Convertible Preferred Stock was converted into 17,600 and
2,097,599 shares of Common Stock for Mr. Serrao and Summit Partners,
respectively, upon completion of the initial public offering ("IPO") in April,
1998. Approximately $7.9 million of the proceeds of the IPO were used to redeem
all of the Series B Preferred Stock, including unpaid dividends. In connection
with such redemption, Mr. Serrao and Summit Partners received $57,572 and
$6,861,887, respectively.
The Company and the Purchasers are parties to a Registration Rights Agreement
dated January 8, 1996, as amended (the "Purchasers Registration Rights
Agreement"), pursuant to which the Purchasers have the right, subject to certain
restrictions, to cause the Company to effect a registration of their shares of
Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"). The Purchasers also have certain "piggy back" registration rights in the
event the Company registers any of its securities for either itself or for
security holders exercising their registration rights.
In addition, Mr. Levenson, the Company's Senior Vice President, Chief
Financial Officer and Treasurer, was a party to such agreements and
transactions. Pursuant to the Preferred Stock Purchase Agreement, Mr. Levenson
purchased 5,600 shares of Series A Convertible Preferred Stock at a price of
$19.75 per share and 980 shares of Series B Redeemable Preferred Stock at a
price of $100 per share. In addition, in connection with entering into the
Preferred Stock Purchase Agreement, Mr. Levenson purchased 4,199 shares of
Common Stock at $0.33 per share. The Series A Convertible Stock was converted
into 33,600 shares of Common Stock at the completion of the IPO. As part of the
redemption of the Series B Redeemable Preferred Stock with a portion of the
proceeds of the IPO, Mr. Levenson received $109,714. Mr. Levenson is also a
party to the Purchasers Registration Rights Agreement.
7
<PAGE>
The Company acquired PDHC, Ltd. ("Park") pursuant to an Acquisition and
Exchange Agreement effective November 12, 1996 (the "Acquisition Agreement"),
among the Company, Park and all of the shareholders of Park, including Dr.
Swenson. Under the Acquisition Agreement, the shareholders of Park received an
aggregate of $3.3 million in cash, $1.5 million principal amount of Subordinated
Notes of the Company and 1,260,000 shares of Common Stock in consideration for
the exchange of all of their Park shares. Dr. Swenson received $74,848 in
principal and interest payments under the Subordinated Notes in 1998. The terms
and conditions of the acquisition of Park, including the consideration received
for the exchange of the Park shares, were based upon arms-length negotiations
between representatives of the Company and Park, including Dr. Swenson.
The Company acquired Smileage Dental Care, Inc. pursuant to an Agreement and
Plan of Merger and Reorganization effective December 23,1996 (the "Merger
Agreement"), among the Company, American Dental Partners of Wisconsin, Inc.
("American"), Smileage Dental Care, Inc. ("Smileage") and the shareholders of
Smileage, including Jesley C. Ruff., D.D.S., who became Vice President - Chief
Professional Officer on January 1, 1999. Under the Merger Agreement, the
shareholders of Smileage received an aggregate of $546,250 in cash, $247,500
principal amount of Subordinated Notes of the Company and 304,200 shares of
Common Stock in consideration of the merger of Smileage with American. Dr. Ruff
received $3,955 in principal and interest payments under the Subordinated Notes
in 1998. The terms and conditions of the acquisition of Smileage, including the
consideration received for the exchange of the Smileage shares, were based upon
arms-length negotiations between representatives of the Company and Smileage,
including Dr. Ruff.
The Company acquired Innovative Practice Concepts, Inc. pursuant to a Stock
Purchase Agreement dated December 22, 1997 (the "Purchase Agreement") among the
Company, Associated Dental Care Providers, P.C. ("Associated"), Innovative
Practice Concepts, Inc. ("IPC") and the shareholders of IPC. The transaction was
effective January 1, 1998. Under the Purchase Agreement, the shareholders of IPC
received an aggregate of $2,910,000 in cash less certain amounts applied to pay
off indebtedness of IPC to Joseph V. Errante, D.D.S. and his sister Margaret E.
Errante, D.D.S., $500,000 principal amount of Subordinated Notes of the Company
and 34,800 shares of Common Stock in consideration for the exchange of all of
their IPC shares. All of the stock of IPC was owned by Dr. Joseph Errante, Dr.
Margaret Errante and trusts for the benefit of certain members of their
families. The terms and conditions of the acquisition of IPC, including the
consideration received for the exchange of the IPC shares, were based upon arms-
length negotiations between representatives of the Company and representatives
of IPC, including Dr. Joseph Errante. Dr. Joseph Errante was elected to the
office of Vice President - Regional Operations in November 1998.
The Company entered into registration rights agreements with the former
shareholders of each of Park and Smileage. These registration rights agreements
contain provisions which grant the former shareholders of Park and Smileage
piggy back registration rights in the event the Company registers any of its
securities for either itself or for security holders exercising their
registration rights. In addition, the former Park shareholders may require
registration of their shares of Common Stock (subject to the other general
applicable limitations on the Company's registration obligations) on one
occasion if and to the extent that they have not otherwise had the opportunity
to register their shares during the three-year period following the completion
of the IPO.
In connection with the Park, Smileage and IPC transactions, the Company
entered into service agreements with the professional corporations owned in part
by Drs. Swenson, Ruff and Errante, respectively. These professional corporations
are PDG, P.A. ("PDG"), Wisconsin Dental Group, S.C. ("WDG") and Associated
Dental Care Providers, P.C. ("Associated"). These service agreements are on
substantially the same terms and conditions as all of the Company's other
service agreements. The amounts received by subsidiaries of the Company under
the service agreements with PDG, WDG and
8
<PAGE>
Associated in 1998 were approximately $34,414,000, $10,270,000 and $4,467,000,
respectively. Dr. Swenson owns approximately 6% of the issued and outstanding
capital stock of PDG, Dr. Ruff owns approximately 13% of the issued and
outstanding capital stock of WDG and Dr. Errante owns approximately 23% of the
issued and outstanding capital stock of Associated.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors regularly reviews
executive compensation policies and levels and evaluates the performance of
management in the context of the Company's performance. The Compensation
Committee is composed entirely of independent outside directors.
The Compensation Committee's primary objective with respect to executive
compensation is to establish programs which attract and retain key managers and
align their compensation with the Company's overall business strategies, values
and performance. To this end, the Compensation Committee has established an
executive compensation philosophy which includes the following considerations:
. An emphasis on performance based compensation that differentiates
compensation results based upon corporate, operating unit, and
individual performance;
. Recognition of both quantitative and qualitative performance
objectives in light of an executive officer's responsibilities;
. A mix of short-term cash and long-term stock based compensation which
aligns the interests of the Company's executive officers with the
interests of the Company's shareholders.
In light of these considerations, the primary focus of the Compensation
Committee has been on the competitiveness of each of the key elements of
executive compensation (base salary, bonus and stock option grants) and the
compensation package as a whole. Certain of the executive officers have
employment agreements that specify certain minimum compensation for such
officers. Base salaries for executive officers are determined on the basis of
individual performance, level of responsibility and market competitive
considerations. The Company's executive officers are eligible to receive annual
cash bonuses in amounts varying as a percentage of base salary depending upon
each executive's level of responsibility and function. Performance objectives
are established for each executive officer, including specific quantitative
objectives related to improving the Company's financial performance and other
more qualitative and developmental criteria. For executive officers with
primary operating unit responsibilities, annual cash bonuses are based primarily
on the achievement of specific quantitative objectives related to the financial
performance of the operating unit. For executive officers with primary staff or
corporate responsibilities, the annual cash bonuses are based on achievement of
specific corporate performance objectives as well as individual qualitative
criteria. The Company's executive officers are also eligible to receive grants
of stock options under the Company's Amended and Restated 1996 Stock Option
Plan, as amended. Grants under this Plan are designed to align a significant
portion of the executive compensation package with the long-term interests of
the Company's shareholders by providing an incentive that focuses attention on
managing the Company from the perspective of an owner with an equity stake in
the business.
In determining Mr. Serrao's compensation for 1998, the Compensation
Committee reviewed information regarding the compensation paid to the Chief
Executive Officers of comparable companies, and evaluated achievement of
corporate, individual and organizational objectives for the year. Mr. Serrao's
base salary for 1998 was $170,000. Like other executive officers, Mr. Serrao
also received an
9
<PAGE>
incentive bonus determined on the basis of individual and Company performance,
including specific quantitative objectives and more qualitative criteria. Mr.
Serrao was awarded an incentive bonus of $102,000 for 1998. In addition, Mr.
Serrao was awarded options to purchase 12,000 shares of the Company's Common
Stock at an exercise price of $13.00 per share in order to provide him with a
long-term incentive tied to the Company's performance.
COMPENSATION COMMITTEE
Martin J. Mannion
Derril W. Reeves
11
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in the Company's Common Stock with the cumulative total
return of a hypothetical investment in each of the Russell 2000 Index and an
index of dental practice management companies based on the respective market
price of each such investment at April 16, 1998 (the date of the Company's IPO),
June 30, 1998, September 30, 1998 and December 31, 1998, assuming in each case
an initial investment of $100 on April 15, 1998 and the reinvestment of
dividends.
COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN
AMONG AMERICAN DENTAL PARTNERS, INC., THE RUSSELL 2000 INDEX
AND PEER GROUP (1)
[GRAPH APPEARS HERE]
The foregoing graph is not, nor is it intended to be, indicative of future
performance of the Company's common shares.
_______________________
(1) The peer group of dental practice management companies includes Apple
Orthodontix, Inc., Birner Dental Management Services, Inc., Castle Dental
Centers, Inc., Coast Dental Services, Inc., Dental Care Alliance, Inc.,
Gentle Dental Service Corporation, Monarch Dental Corporation, Orthodontic
Centers of America, Inc., OrthAlliance, Inc., and Pentegra Dental Group,
Inc.
11
<PAGE>
PROPOSAL 1 - AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN TO AUTHORIZE
ADDITIONAL COMMON SHARES AVAILABLE FOR GRANT
The Company's Board of Directors originally adopted the Amended and
Restated 1996 Stock Option Plan, as amended (the "1996 Plan") in January 1996,
and it was approved by the Company's shareholders on February 9, 1996. The
Board of Directors has approved an amendment to the 1996 Plan to increase by
300,000 shares the total number of shares of Common Stock available for awards
under the Plan and directed that such amendment be submitted to the Company's
shareholders for approval. Such amendment will not be effective absent
shareholder approval.
DESCRIPTION OF THE PLAN
Under the 1996 Plan, awards of options to purchase shares of Common Stock
may be made to key employees of the Company and its subsidiaries (including
officers and directors who are also employees). The options provided for under
the 1996 Plan may be either incentive stock options intended to qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or nonqualified stock options which do not qualify for
such treatment.
Options granted under the 1996 Plan are granted at a price per share which
is no less than the fair market value of the Common Stock at the time of grant.
Options granted pursuant to the 1996 Plan expire ten years from the date of
grant. The purchase price of the Common Stock subject to the options must be
paid in full by an optionee at the time of exercise of such options. Options
granted under the 1996 Plan are exercisable at such time or times as the
Compensation Committee determines at the time of grant. Unless otherwise
determined by the Compensation Committee, the unexercised portion of any option
granted under the 1996 Plan will terminate 90 days after the grantee of such
option ceases to be an employee of the Company or one of its subsidiaries (such
90-day period becomes one year if the grantee's employment with the Company or
one of its subsidiaries terminates because of the grantee's death or permanent
disability). The 1996 Plan is not subject to the Employee Retirement Income
Security Act of 1974, nor is it qualified under Section 401(a) of the Code.
The 1996 Plan is administered by the Compensation Committee, each member of
which is a "Non-Employee Director" (as defined in Rule 16b-3 promulgated under
Section 16(b) of the Securities Exchange Act of 1934) and an "outside director"
within the meaning of Section 162(m) of the Code.
DESCRIPTION OF THE AMENDMENT
The 1996 Plan was originally adopted in January 1996 to provide options to
officers and key employees of the Company and its subsidiaries. Prior to the
Board of Directors' approval of the additional 300,000 shares on February 26,
1999, the total number of shares of Common Stock subject to the 1996 Plan was
973,246.
As proposed to be amended, the total number of shares of Common Stock
available for issuance would be increased by 300,000 shares, which would mean
that a total of 1,273,246 shares would be available for issuance under the 1996
Plan, of which 871,247 shares were outstanding at March 31, 1999.
As described under the heading, "Compensation Committee Report," the
Company makes annual grants of stock options to its management personnel,
including its executive officers. During the fiscal year ended December 31,
1998, the Company granted awards under the 1996 Plan covering an aggregate of
101,518 shares of Common Stock. As the Company continues to grow and add
employees, it anticipates an increase in the aggregate number of shares of
Common Stock subject to grants under the 1996 Plan each year. Without
authorizing additional Common Stock available for grant under the 1996
12
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Plan, the Company would be unable to continue its annual grant program and could
be disadvantaged in attracting and retaining key management personnel.
The affirmative vote of the holders of a majority of the shares of Common
Stock entitled to vote and present or represented by proxy at the Annual Meeting
will be required for approval of this proposal. Broker non-votes and
abstentions will have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
PROPOSAL 2 - AMENDMENT OF THE COMPANY'S 1996 DIRECTORS STOCK OPTION PLAN TO
AUTHORIZE ADDITIONAL COMMON SHARES AVAILABLE FOR GRANT
The Company's Board of Directors originally adopted the Amended and
Restated 1996 Directors Stock Option Plan, as amended (the "Directors Plan") in
September 1996, and it was approved by the Company's shareholders on October 29,
1997. The Board of Directors has approved the amendment to the Directors Plan
described below and directed that such amendment be submitted to the Company's
shareholders for approval. Such amendment will not be effective absent
shareholder approval.
DESCRIPTION OF THE PLAN
The Directors Plan was originally adopted in September 1996 to grant
options to those directors of the Company who are not employees or officers of
the Company or any subsidiary of the Company. The objective of the Directors
Plan is to advance the interests of the Company and its stockholders by
providing eligible directors with an opportunity to participate in the Company's
future prosperity and growth and an incentive to increase the value of the
Company based on the Company's performance, development and financial success.
Options granted under the Directors Plan are not intended to qualify as
incentive stock options under Section 422 of the Code. The Directors Plan is
administered by the Directors Stock Option Plan Committee, the members of which
shall not include any directors eligible to receive awards under the Directors
Plan. The exercise price per share issuable under the Directors Plan shall be
determined by the Committee but shall not be less than the fair market value per
share on the date the option is granted. Options granted under the Directors
Plan shall be exercisable for a period of ten years after the date on which the
options are granted. Options granted under the Directors Plan are exercisable at
such time or times and on the basis of such criteria, including the performance
of the Company, as the Directors Stock Option Plan Committee determines at the
time of grant. Unless otherwise determined by the Directors Stock Option Plan
Committee at the time a director ceases to be a director eligible to participate
in the Plan, any non-vested portion of the option granted to such director under
the Directors Plan automatically terminates and the vested but unexercised
portion of any option will terminate 90 days after the grantee of such option
ceases to be eligible to participate in the Directors Plan (such 90-day period
becomes one year if the grantee's status as an eligible director terminates
because of the grantee's death or disability).
DESCRIPTION OF THE AMENDMENT
Prior to the Board of Directors' approval of an additional 25,000 shares on
February 26, 1999, the total number of shares of Common Stock subject to the
Directors Plan was 60,000.
As proposed to be amended, the total number of shares available for grant
would be increased by 25,000 shares, which would mean that a total of 85,000
shares would be available for issuance under the Directors Plan, of which 36,800
shares were issued and outstanding as of March 31, 1999. The guidance and
direction provided by the Board of Directors has been and is expected to
continue to be of great value
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<PAGE>
to the Company. Grants of options under the Directors Plan help the Company
retain directors and continue to have the benefit of their guidance and
direction.
The affirmative vote of the holders of a majority of the Common Shares
entitled to vote and present or represented by proxy at the Annual Meeting will
be required for approval of this proposal. Broker non-votes and abstentions
will have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has been selected by the Board of Directors as the
independent public accountants for the Company for its fiscal year ending
December 31, 1999.
It is expected that a representative of KPMG Peat Marwick LLP will be
present at the Annual Meeting and will be given an opportunity to make a
statement if desired and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 (the "Exchange Act") at the 2000
annual meeting of shareholders must be received by the Company on or before
December 9, 1999 for inclusion in the proxy statement and form of proxy relating
to the 2000 annual meeting of shareholders. In order for a shareholder proposal
outside of Rule 14a-8 under the Exchange Act to be considered timely within the
meaning of Rule 14a-4(c) of the Exchange Act, such proposal must be received by
the Company no later than February 22, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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 reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% shareholders are required by the Securities and Exchange
Commission's regulations to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of such forms furnished
to the Company, the Company believes that during 1998 all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
shareholders were complied with by such persons.
OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by officers, directors, and
regular employees, personally or by telephone or telegraph. If there are
follow-up requests for proxies, the Company may employ other persons for such
purpose.
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<PAGE>
ANNEX A
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
-------------------------------------------
1. Purpose of the Plan.
-------------------
This stock option plan (the "Plan") is intended to encourage ownership of
the stock of American Dental Partners, Inc. (the "Company") by employees and
advisors of the Company and its subsidiaries, to induce qualified personnel to
enter and remain in the employ of the Company or its subsidiaries and otherwise
to provide additional incentive for optionees to promote the success of its
business.
2. Stock Subject to the Plan.
-------------------------
(a) The total number of shares of the authorized but unissued or
Treasury shares of the common stock, $.01 par value, of the Company
("Common Stock") for which options may be granted under the Plan shall
not exceed One Hundred Forty-Five Thousand Five Hundred Forty One
(145,541) shares, subject to adjustment as provided in Section 12
hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having vested fully or having been exercised in full,
the unvested and/or unpurchased shares subject thereto shall again be
available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan
may be subject to such restrictions on transfer, repurchase rights or
other restrictions as shall be determined by the Board of Directors or
Committee.
3. Administration of the Plan.
--------------------------
The Plan shall be administered by the Company's board of directors (the
"Board"). The Board shall have the power and authority to: (a) approve
eligible persons as recipients of options; (b) approve the grant of options; (c)
approve the terms and conditions, not inconsistent with the terms hereof, of any
option, including without limitation time and performance restrictions, and
approve the form of Agreement (as defined in Section 6, below); (d) adopt,
alter, and repeal such administrative rules, guidelines, and practices governing
the Plan as it shall, from time to time, deem advisable; (e) interpret the terms
and provisions of the Plan and any option granted and any agreements relating
thereto; and (f) take any other actions the Board considers appropriate in
connection with, and otherwise supervise the administration of, the Plan, all in
a manner consistent with the other provisions of the Plan. All decisions made
by the Board pursuant to the provisions hereof, including without limitation
decisions with respect to eligible persons to be granted options and the number
of options, shall be made in the Board's sole discretion and shall be final and
binding on all persons.
The Board may, in its discretion at any time or from time to time, appoint
a committee (the "Committee") of not less than one director to administer the
Plan, in which event the Committee shall have such of the powers and duties of
the Board under the Plan as the Board shall delegate to the Committee. The
member or members of the Committee shall serve at the pleasure of the Board,
which may remove members from the Committee or appoint new members to the
Committee from time to time, and members of the Committee may resign by written
notice to the Chairman of the Board or the Secretary of the Company.
<PAGE>
Notwithstanding the foregoing to the contrary, beginning at such time as
the Company has completed an initial public offering (an "IPO") for its common
stock pursuant to a registration statement filed under the Securities Act of
1933, as amended (the "1933 Act"), including registration of the Shares under
Section 12 of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
any option granted to a person who, because of his relationship with the
Company, is subject to the reporting requirements of Section 16(a) of the 1934
Act, shall not be effective unless (a) the grant of such option is approved by
either the Board or a committee consisting solely of two or more "Non-Employee
Directors" (as defined in Rule 16b-3(b)(3) promulgated under the 1934 Act), (b)
the grant of such option is approved or ratified by the stockholders of the
Company, in compliance with Section 14 of the 1934 Act, not later than the date
of the annual meeting of the Company's stockholders next following the date of
such grant, or (c) such option, by its terms, provides that shares of Common
Stock received upon exercise of the option may not be disposed of before at
least six months have elapsed from the date the option was granted.
4. Type of Options.
---------------
Options granted pursuant to the Plan shall be authorized by action of the
Board of Directors and may be designated as either incentive stock options
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options which are not intended to meet
the requirements of such Section 422 of the Code, the designation to be in the
sole discretion of the Board of Directors. The Plan shall be administered by
the Board of Directors in such manner as to permit options to qualify as
incentive stock options under the Code.
5. Eligibility.
-----------
Options designated as incentive stock options shall be granted only to key
employees (including officers and directors who are also employees) of the
Company and its subsidiaries. Options designated as non-qualified options may
be granted to officers, key employees and, consultants and advisors of the
Company or of any of its subsidiaries. "Subsidiary" or "subsidiaries" shall be
as defined in Section 424 of the Code and the Treasury Regulations promulgated
thereunder (the "Regulations").
Directors who are not otherwise employees of the Company or a subsidiary
shall not be eligible to be granted an option pursuant to the Plan.
The Board shall, from time to time, at its sole discretion, select from
such eligible persons those to whom options shall be granted and shall determine
the number of shares to be subject to each option. In determining the
eligibility of an individual or person to be granted an option, as well as in
determining the number of shares to be granted to any individual or person, the
Board of Directors in its sole discretion shall take into account the position
and responsibilities of the individual or person being considered, the nature
and value to the Company or its subsidiaries of his or her or its service and
accomplishments, his or her or its present and potential contribution to the
success of the Company or its subsidiaries, and such other factors as the Board
of Directors may deem relevant.
No option designated as an incentive stock option shall be granted to any
employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for the stock under such
option shall be at least 110% of its fair market value at the time such option
is granted and the option, by its terms, shall not be exercisable more than five
years from the date it is granted. In determining the stock ownership under
this paragraph, the provisions of Section 424(d) of the Code shall be
controlling. In determining the fair market value under this paragraph, the
provisions of Section 7 hereof shall apply.
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6. Option Agreement.
----------------
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board of Directors, provided that options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. The date of grant of an option shall be as
determined by the Board of Directors. More than one option may be granted to an
individual.
7. Option Price.
------------
The exercise price per share of Common Stock issuable upon exercise of an
option shall be determined by the Board at the time of grant and set forth in
the applicable Agreement; provided that such exercise price shall not be less
than the fair market value per share on the date the option is granted. For
purposes of the Plan, the fair market value of the Common Stock shall mean, as
of any given date, the (i) last reported sale price on the New York Stock
Exchange on the most recent previous trading day, (ii) last reported sale price
on the NASDAQ National Market System on the most recent previous trading day,
(iii) mean between the high and low bid and ask prices, as reported by the
National Association of Securities Dealers, Inc. on the most recent previous
trading day, or (iv) last reported sale price on any other stock exchange on
which the Common Stock is listed on the most recent previous trading day,
whichever is applicable; provided that if none of the foregoing is applicable,
then the fair market value of the Common Stock shall be the value determined by
the Board, in its sole discretion.
8. Manner of Payment; Manner of Exercise.
-------------------------------------
(a) Options granted under the Plan may provide for the payment of the
exercise price, as determined by the Board of Directors, by delivery of
(i) cash or a check payable to the order of the Company in an amount
equal to the exercise price of such options, (ii) shares of Common
Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised,
(iii) cancellation of shares otherwise issuable upon exercise of an
option, or (iv) any combination of (i), (ii) and (iii), provided,
however, that payment of the exercise price by delivery of shares of
Common Stock of the Company owned by such optionee may be made only if
such payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board of Directors.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time
or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Company, stating the
number of shares with respect to which the option is being exercised,
accompanied by payment in full for such shares as provided in
subparagraph (a) above. Upon such exercise, delivery of a certificate
for paid-up non-assessable shares shall be made at the principal office
of the Company to the person or persons exercising the option at such
time, during ordinary business hours, after seven (7) but not more than
thirty (30) days from the date of receipt of the notice by the Company,
as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons
exercising the option. Upon exercise of the option and payment as
provided above, the optionee shall become a shareholder of the Company
as to the Shares acquired upon such exercise.
Page 3
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9. Exercise of Options.
-------------------
Each option granted under the Plan shall, subject to Section 10(b) and
Section 13 hereof, be exercisable at such time or times and during such period
as determined by the Board of Directors which shall be set forth in the
Agreement; provided, however, that no option granted under the Plan shall have a
term in excess of ten (10) years from the date of grant.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less
than one hundred (100) full shares of Common Stock or such lesser number of
shares as are then issuable upon exercise of an option.
Notwithstanding the foregoing, the Board of Directors may in its discretion
(i) specifically provide for another time or times of exercise or (ii)
accelerate the exercisability of any option subject to such terms and conditions
as the Board of Directors deems necessary and appropriate.
10. Term of Options; Exercisability.
-------------------------------
(a) Term.
----
(1) Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier
termination as herein provided.
(2) Except as otherwise provided in this Section 10, an option
granted to any employee optionee who ceases to be an employee of the
Company or one of its subsidiaries shall terminate, in the case of both
non-qualified and incentive stock options, ninety (90) days after the
date such optionee ceases to be an employee of the Company or one of
its subsidiaries, or on the date on which the option expires by its
terms, whichever occurs first.
(3) If an optionee's employment terminates because the optionee
has become permanently disabled (within the meaning of (S)22(e)(3) of
the Code), or because of the death of the optionee, then such option
shall terminate one year after the date such optionee ceases to be an
employee of the Company or one of its subsidiaries or on the date on
which the option expires by its terms, whichever occurs first.
(4) Notwithstanding subparagraph (2) above, the Board shall have
the authority to extend the expiration date of any outstanding option
in circumstances in which it deems such action to be appropriate,
provided that no such extension shall extend the term of an option
beyond the date on which the option would have expired if no
termination of the optionee's employment had occurred.
(b) Exercisability.
--------------
An option granted to an employee optionee who ceases to be an
employee of the Company or one of its subsidiaries shall be exercisable
only to the extent that the right to purchase shares under such option
has accrued and is in effect on the date such optionee ceases to be an
employee of the Company or one of its subsidiaries.
11. Options Not Transferable.
------------------------
Page 4
<PAGE>
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution or (solely with respect to non-qualified
stock options) pursuant to a qualified domestic relations order, as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder, and any such option shall be exercisable during the lifetime of such
optionee only by him. Any option granted under the Plan shall be null and void
and without effect upon the bankruptcy of the optionee to whom the option is
granted, or upon any attempted assignment or transfer, except as herein
provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, except as provided above with respect to non-qualified
stock options, trustee process or similar process, whether legal or equitable,
upon such option. Notwithstanding the foregoing to the contrary, the Board may,
in its sole discretion and in the manner established by the Board, provide for
the irrevocable transfer, without payment of consideration, of any non-qualified
stock option by an optionee to such optionee's spouse, children, grandchildren,
nieces, or nephews or to the trustee of any trust for the principal benefit of
one or more such persons or to a partnership whose only partners are one or more
such persons. In the case of such a permitted transfer, the option shall be
exercisable only by the transferee or such transferee's legal representative.
12. Recapitalizations, Reorganizations and the Like.
-----------------------------------------------
(a) In the event that the outstanding shares of the Common Stock of
the Company are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of
shares, or dividends payable in capital stock, appropriate adjustment
shall be made in the number and kind of shares as to which options may
be granted under the Plan and as to which outstanding options or
portions thereof then unexercised shall be exercisable, to the end
that the proportionate interest of the optionee shall be maintained as
before the occurrence of such event; such adjustment in outstanding
options shall be made without change in the total price applicable to
the unexercised portion of such options and with a corresponding
adjustment in the option price per share.
(b) Upon dissolution or liquidation of the Company, all options
granted under this Plan shall terminate, but each optionee (if at such
time in the employ of or otherwise associated with the Company or any
of its subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise his or her option to the
extent then exercisable.
(c) No fraction of a share shall be purchasable or deliverable upon
the exercise of any option, but in the event any adjustment hereunder
of the number of shares covered by the option shall cause such number
to include a fraction of a share, such fraction shall be adjusted to
the nearest smaller whole number of shares.
13. Change in Control.
-----------------
(a) Accelerated Vesting and Company Purchase Option. Notwithstanding
-----------------------------------------------
any provision of this Plan or any Agreement to the contrary (unless
such Agreement contains a provision referring specifically to this
Section 13 and stating that this Section 13 shall
Page 5
<PAGE>
not be applicable to the Option evidenced by such Agreement), if a
Change in Control or a Potential Change in Control (each as defined
below) occurs, then:
(i) At the Company's option, any and all options theretofore
granted and not fully vested shall thereupon become vested and
exercisable in full and shall remain so exercisable in accordance with
their terms; provided that no option which has previously been
exercised or otherwise terminated shall become exercisable; and
(ii) The Company may, at its option, terminate any or all
unexercised options and portions thereof not more than 30 days after
such Change in Control or Potential Change in Control; provided that
the Company shall, upon such termination and with respect to each
option so terminated, pay to the optionee (or such optionee's
transferee, if applicable) theretofore holding such option cash in an
amount equal to the difference between the fair market value (as
defined in Section 7, above) of the shares of Common Stock subject to
the option at the time the Company exercises its option under this
Section 13(a)(ii) and the exercise price of the option, less
applicable withholding taxes; and provided further that if such fair
market value is less than such exercise price, then the Board may, in
its sole discretion, terminate such option without any payment.
(b) Definition of Change in Control. For purposes of the Plan, a
-------------------------------
"Change in Control" means the happening of any of the following:
(i) When any "person" as defined in (S)3(a)(9) of the 1934 Act
and as used in (S)(S)13(d) and 14(d) thereof, including a "group" as
defined in (S)13(d) of the 1934 Act, but excluding the Company, any
subsidiary of the Company, any employee benefit plan sponsored or
maintained by the Company or any subsidiary of the Company (including
any trustee of such plan acting as trustee), any person who is a
stockholder of the Company on the effective date of the Plan (an
"Existing Stockholder"), and any affiliate of an Existing Stockholder,
directly or indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act) of securities of the Company
representing 20% or more of the combined voting power of the Company's
then outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any
reason other than death to constitute at least a majority of the
Board; provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if
such director was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors either actually (because they were directors at
the beginning of such 24-month period) or by prior operation of this
Section 13(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than
the Company or a subsidiary of the Company through purchase of assets,
by merger, or otherwise.
Provided that neither an initial nor any secondary public offering of
common stock of the Company pursuant to a registration statement under
the 1933 Act nor any issuance of securities of the Company or any
subsidiary of the Company in connection with an acquisition of a
dental practice or other business entity by the Company or any
subsidiary
Page 6
<PAGE>
of the Company shall constitute a Change in Control; and provided
further that a change in control shall not be deemed to be a Change in
Control for purposes of this Plan if the Board had approved such
change prior to either (A) the commencement of any of the events
described in Sections 13(b)(i), (ii), (iii), or 13(c)(i) of this Plan,
or (B) the commencement by any person other than the Company of a
tender offer for shares of Common Stock.
(c) Definition of Potential Change in Control. For purposes of the
-----------------------------------------
Plan, a "Potential Change in Control" means the happening of any one
of the following:
(i) The approval by the stockholders of the Company of an
agreement by the Company, the consummation of which would result in a
Change in Control of the Company as defined in Section 13(b), above;
or
(ii) The acquisition of beneficial ownership of the Company,
directly or indirectly, by any entity, person, or group (other than
the Company, a subsidiary of the Company, any Company employee benefit
plan (including any trustee of such plan acting as such trustee), an
Existing Stockholder, or an affiliate of an Existing Stockholder)
representing 5% or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of a resolution
to the effect that a Potential Change in Control of the Company has
occurred for purposes of the Plan.
14. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board of
Directors at the time.
15. Withholding.
-----------
The Company's obligation to deliver shares upon the exercise of any option
granted under the Plan shall be subject to the option holder's satisfaction of
all applicable Federal, state and local income, excise, employment and any other
tax withholding requirements. On or after the date of the first registration of
an equity security of the Company under Section 12 of the 1934 Act, if an
optionee is an officer of the Company within the meaning of Section 16 of the
1934 Act, he may elect to pay such withholding tax obligations in accordance
with rules prescribed by the Board by having the Company withhold shares of
Common Stock having a value equal to the amount required to be withheld. The
value of the shares to be withheld shall equal the fair market value of the
shares on the day the option is exercised as determined by the Board.
16. Restrictions on Issue of Shares.
-------------------------------
(a) Notwithstanding the provisions of Section 8, the Company may
delay the issuance of shares covered by the exercise of an option and
the delivery of a certificate for such shares until one of the
following conditions shall be satisfied:
Page 7
<PAGE>
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively
registered or qualified under applicable Federal and state securities
acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable
Federal and state securities acts now in force or as hereafter
amended.
(b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the
Company shall be under no obligation to qualify shares or to cause a
registration statement or a post-effective amendment to any
registration statement to be prepared for the purpose of covering the
issue of shares in respect of which any option may be exercised,
except as otherwise agreed to by the Company in writing.
17. Purchase for Investment; Rights of Holder on Subsequent Registration.
--------------------------------------------------------------------
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.
18. Loans.
-----
The Company may make loans to optionees to permit them to exercise options.
If loans are made, the requirements of all applicable Federal and state laws and
regulations regarding such loans must be met.
19. Modification of Outstanding Options.
-----------------------------------
Page 8
<PAGE>
The Board of Directors may authorize the amendment of any outstanding
option with the consent of the optionee when and subject to such conditions as
are deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.
20. Approval of Stockholders.
------------------------
The Plan shall be subject to approval by the vote of stockholders holding
at least a majority of the voting stock of the Company present, or represented,
and entitled to vote at a duly held stockholders' meeting, or by written consent
of the stockholders as provided for under applicable state law, within twelve
(12) months after the adoption of the Plan by the Board of Directors and shall
take effect as of the date of adoption by the Board of Directors upon such
approval. The Board of Directors may grant options under the Plan prior to such
approval, but any such option shall become effective as of the date of grant
only upon such approval and, accordingly, no such option may be exercisable
prior to such approval.
21. Termination and Amendment.
-------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the Board of
Directors of the Company. The Board of Directors may at any time terminate the
Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 21, the Board of
Directors may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 20, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any other change
in the Plan which requires stockholder approval under applicable law or
regulations, including any approval requirement which is a prerequisite for
exemptive relief under Section 16 of the Securities Exchange Act of 1934. The
Board of Directors may terminate, amend or modify any outstanding option without
the consent of the option holder, provided, however, that, except as provided in
Section 12, without the consent of the optionee, the Board of Directors shall
not change the number of shares subject to an option, nor the exercise price
thereof, nor extend the term of such option.
22. Compliance with Rule 16b-3.
--------------------------
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the Act shall comply in all respects with the terms and conditions of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Act"), or any successor
provisions. Any agreement granting options shall contain such provisions as are
necessary or appropriate to assure such compliance. To the extent that any
provision hereof is found not to be in compliance with such Rule, such provision
shall be deemed to be modified so as to be in compliance with such Rule, or if
such modification is not possible, shall be deemed to be null and void, as it
relates to a recipient subject to Section 16(a) of the Act.
23. Reservation of Stock.
--------------------
The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
24. Limitation of Rights in the Option Shares.
-----------------------------------------
Page 9
<PAGE>
An optionee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the optionee.
25. Notices.
-------
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on
the records of the Company.
26. Effective Date.
--------------
The Plan is effective October 27, 1997.
27. Term of Plan.
------------
No option shall be granted pursuant to the Plan on or after January 11,
2006 (the tenth anniversary of the effective date of the 1996 Stock Option
Plan), but options granted prior to such date may extend beyond that date.
28. Savings Clause.
--------------
In case any one or more of the provisions of this Plan shall be held
invalid, illegal, or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and the invalid, illegal, or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted, or
revised retroactively to permit this Plan to be construed so as to foster the
intent of this Plan. This Plan is intended to comply in all respects with
applicable law and regulation, including (S)422 of the Code and, with respect to
persons subject to (S)16 of the 1934 Act ("Reporting Persons"), Rule 16b-3 under
the 1934 Act. In case any one or more of the provisions of this Plan shall be
held to violate or be unenforceable in any respect under (S)422 or Rule 16b-3,
then, to the extent permissible by law, any provision which could be deemed to
violate or be unenforceable under (S)422 or Rule 16b-3 shall first be construed,
interpreted, or revised retroactively to permit the Plan to be in compliance
with (S)422 and Rule 16b-3. Notwithstanding anything in this Plan to the
contrary, the Board in its sole discretion, may bifurcate the Plan so as to
restrict, limit, or condition the use of any provision of this Plan to optionees
who are Reporting Persons or covered employees as defined under (S)162(m) of the
Code without so restricting, limiting, or conditioning this Plan with respect to
other optionees.
Page 10
<PAGE>
AMENDMENT NO. 1
TO
AMERICAN DENTAL PARTNER, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
-------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Stock Option
Plan (the "Plan") is hereby amended pursuant to the following provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Shares Subject To Plan
----------------------
The total number of shares of Common Stock for which options may be granted
under the Plan, as provided under Section 2(a) of the Plan (as previously
adjusted pursuant to Section 12 of the Plan) is increased by 100,000 shares to a
total of 973,246 shares of Common Stock.
3. Effective Date; Construction
----------------------------
The effective date of this amendment is February 27, 1998, and this
amendment shall be deemed to be a part of the Plan as of such date. In the
event of any inconsistencies between the provisions of the Plan and this
amendment, the provisions of this amendment shall control. Except as modified
by this amendment, the Plan shall continue in full force and effect without
change.
This amendment shall be submitted to the stockholders of the Company for
approval as soon as reasonably practicable, but in any event not later than 12
months after the date of this amendment. Notwithstanding the preceding
paragraph or any other provisions of this amendment to the contrary, if this
amendment is not approved by the stockholders of the Company within such 12-
month period, this amendment and all options granted with respect to the
additional shares of Common Stock subject to the Plan as a result of this
amendment shall automatically become null and void and have no further force or
effect.
<PAGE>
AMENDMENT NO. 2
TO
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
-------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Stock Option
Plan, as previously amended (the "Plan"), is hereby amended pursuant to the
following provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Manner of Exercise
------------------
Section 8(b) of the Plan is hereby deleted from the Plan in its entirety
and replaced with the following:
(b) To the extent that the right to purchase shares under an option
has accrued and is in effect, options may be exercised in full at one time
or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Company, stating the number
of shares with respect to which the option is being exercised, accompanied
by payment in full for such shares as provided in subparagraph (a) above.
Upon such exercise, delivery of a certificate for paid-up non-assessable
shares shall be made at the principal office of the Company to the person
or persons exercising the option at such time, during ordinary business
hours, not more than thirty (30) days from the date of receipt of the
notice by the Company, as shall be designated in such notice, or at such
time, place and manner as may be agreed upon by the Company and the person
or persons exercising the option. Upon exercise of the option and payment
as provided above, the optionee shall become a shareholder of the Company
as to the shares acquired upon such exercise.
3. Change in Control
-----------------
Section 13 of the Plan is hereby deleted from the Plan in its entirety and
replaced with the following:
13. Change in Control.
-----------------
(a) Accelerated Vesting and Company Purchase Option. Notwithstanding
-----------------------------------------------
any provision of the Plan or any Agreement to the contrary (unless such
Agreement contains a provision referring specifically to this Section 13
and stating that this Section 13 shall not be applicable to the option
evidenced by such Agreement), if a Change in Control (as defined below)
occurs, then:
(i) Any and all options theretofore granted under the Plan and
not fully vested shall thereupon become vested and exercisable in full
and shall
<PAGE>
remain so exercisable in accordance with their terms; provided that no
option which has previously been exercised or otherwise terminated
shall become exercisable; and
(ii) The Company may, at its option, terminate any or all
unexercised options and portions thereof not more than 30 days after
such Change in Control; provided that the Company shall, upon such
termination and with respect to each option so terminated, pay to the
optionee (or such optionee's transferee, if applicable) theretofore
holding such option cash in an amount equal to the difference between
the fair market value (as defined in Section 7, above) of the shares
of Common Stock subject to the option at the time the Company
exercises its option under this Section 13(a)(ii) and the exercise
price of the option, less applicable withholding taxes; and provided
further that if such fair market value is less than such exercise
price, then the Board may, in its sole discretion, terminate such
option without any payment.
(b) Definition of Change in Control. For purposes of the Plan, a
-------------------------------
"Change in Control" shall mean the happening of any of the following:
(i) The direct or indirect acquisition by any "person" as
defined in (S)3(a)(9) of the 1934 Act and as used in (S)(S)13(d) and
14(d) thereof, including a "group" within the meaning of (S)13(d) of
the 1934 Act (hereinafter, simply a "Person"), of "beneficial
ownership" (within the meaning of Rule 13d-3 under the 1934 Act) of
securities of the Company representing more than 50% of the combined
voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors of the Company
(the "Company Voting Securities"); provided that: (A) for purposes of
this subsection (i), the term "Person" shall not include the Company,
any subsidiary of the Company, any employee benefit plan sponsored or
maintained by the Company or any subsidiary of the Company (including
any trustee of such plan acting as trustee), any person who was a
stockholder of the Company on the effective date of the Plan (an
"Existing Stockholder"), and any affiliate of an Existing Stockholder;
and (B) the provisions of this subsection (i) shall not apply to (1)
any acquisition of securities from the Company or any of its
subsidiaries, or (2) any acquisition of securities pursuant to a
Business Combination (as defined below) which satisfies clauses (A),
(B), and (C) of subsection (iii) of this Section 13(b);
(ii) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period constitute the Board (the "Incumbent Directors") cease for any
reason other than death to constitute at least at least a majority of
the Board; provided, however, that a director who was not a director
at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if
such director was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors either actually (because they were directors at
the beginning of such 24-month period) or by prior operation of this
Section 13 (b)(ii); or
-2-
<PAGE>
(iii) Approval by the stockholders of the Company of a
reorganization, merger, consolidation, or recapitalization of the
Company, or a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of the assets of another
corporation (any such transaction, a "Business Combination"), or the
consummation of a Business Combination for which stockholder approval
is not obtained, unless, in any such case, following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the beneficial owners of the Company Voting
Securities outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, immediately following such
Business Combination, more than 50% of the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such
Business Combination in substantially the same proportions as their
ownership of the Company Voting Securities immediately prior to such
Business Combination, and (B) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were Incumbent Directors at the time of the execution of
the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
4. Effective Date; Construction
----------------------------
The effective date of this amendment is November 6, 1998, and this
amendment shall be deemed to be a part of the Plan as of such date and shall be
applicable to all options granted under the Plan prior to that date, as well as
options hereafter granted under the Plan. In the event of any inconsistencies
between the provisions of the Plan and this amendment, the provisions of this
amendment shall control. Except as modified by this amendment, the Plan shall
continue in full force and effect without change.
-3-
<PAGE>
AMENDMENT NO. 3
TO
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
-------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Stock Option
Plan, as previously amended by Amendment No. 1 dated February 27, 1998
("Amendment No. 1") and Amendment No. 2 dated November 6, 1998 (collectively,
the "Plan"), is hereby amended pursuant to the following provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Shares Subject To Plan
----------------------
The total number of shares of Common Stock for which options may be granted
under the Plan, as provided under Section 2(a) of the Plan, as previously
adjusted pursuant to Section 12 of the Plan and increased by Amendment No. 1, is
increased by 300,000 shares to a total of 1,273,246 shares of Common Stock.
3. Effective Date; Construction
----------------------------
The effective date of this amendment is February 26, 1999, and this
amendment shall be deemed to be a part of the Plan as of such date. In the
event of any inconsistencies between the provisions of the Plan and this
amendment, the provisions of this amendment shall control. Except as modified
by this amendment, the Plan shall continue in full force and effect without
change.
This amendment shall be submitted to the stockholders of the Company for
approval as soon as reasonably practicable, but in any event not later than 12
months after the date of this amendment. Notwithstanding the preceding
paragraph or any other provisions of this amendment to the contrary, if this
amendment is not approved by the stockholders of the Company within such 12-
month period, this amendment and all options granted with respect to the
additional shares of Common Stock subject to the Plan as a result of this
amendment shall automatically become null and void and have no further force or
effect.
<PAGE>
ANNEX B
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 DIRECTORS STOCK OPTION PLAN
-----------------------------------------------------
(S)1. Purposes of Plan.
----------------
The purpose of this Amended and Restated 1996 Directors Stock Option Plan
(the "Plan") of American Dental Partners, Inc., a Delaware corporation (the
"Company"), is to advance the interests of the Company and its stockholders by
providing Eligible Directors (as defined in (S)3, below) with an opportunity to
participate in the Company's future prosperity and growth and an incentive to
increase the value of the Company based on the Company's performance,
development, and financial success. These objectives will be promoted by
granting to Eligible Directors options (the "Options"), which are not intended
to qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), to purchase shares of the Company's
common stock, $.01 par value (the "Shares").
(S)2. Administration of Plan.
----------------------
The Plan shall be administered by a committee (the "Committee") of not
less than two directors, none of whom shall be an Eligible Director. The member
or members of the Committee shall serve at the pleasure of the Company's board
of directors (the "Board"), which may remove members from the Committee or
appoint new members to the Committee from time to time, and members of the
Committee may resign by written notice to the Chairman of the Board or the
Secretary of the Company. The Committee shall have the power and authority to:
(a) approve the grant of Options to Eligible Directors (such Eligible Directors,
"Participants"); (b) approve the terms and conditions, not inconsistent with the
terms hereof, of any Option, including without limitation time and performance
restrictions, and approve the form of Stock Option Agreement (as defined in
(S)5, below); (c) adopt, alter, and repeal such administrative rules,
guidelines, and practices governing the Plan as it shall, from time to time,
deem advisable; (d) interpret the terms and provisions of the Plan and any
Option granted and any agreements relating thereto; and (e) take any other
actions the Committee considers appropriate in connection with, and otherwise
supervise the administration of, the Plan, all in a manner consistent with the
other provisions of the Plan. All decisions made by the Committee pursuant to
the provisions hereof shall be made in the Committee's sole discretion and shall
be final and binding on all persons.
(S)3. Participants in Plan.
--------------------
The persons eligible to receive Options under the Plan shall be those
directors of the Company who are not employees or officers of the Company or any
subsidiary of the Company (any such person, an "Eligible Director").
(S)4. Shares Subject to Plan.
----------------------
The maximum aggregate number of Shares which may be issued under the Plan
shall be 10,000 Shares. The Shares which may be issued under the Plan may be
authorized but unissued Shares or issued Shares reacquired by the Company and
held as Treasury Shares.
If any Shares that have previously been the subject of an Option cease to
be the subject of an Option (other than by reason of exercise), or if any Shares
previously distributed under the Plan are returned to the Company in connection
with the exercise of an Option (including without limitation in payment of the
exercise price or tax withholding), such Shares shall again be available for
distribution in connection with future grants under the Plan.
<PAGE>
(S)5. Grant of Options.
----------------
Each Option granted under the Plan shall be authorized by the Committee
and shall be evidenced by a written agreement (the "Stock Option Agreement") in
form approved by the Committee from time to time, which shall be dated as of the
date on which the Option is granted, signed by an officer of the Company
authorized by the Committee, and signed by the Participant, and which shall
describe the Option and state that the Option is subject to all the terms and
provisions of the Plan and such other terms and provisions, not inconsistent
with the Plan, as the Committee may approve. The date on which the Committee
approves the granting of an Option shall be deemed to be the date on which the
Option is granted for all purposes, unless the Committee otherwise specifies in
its approval. However, the granting of an Option under the Plan shall be
effective only if a written Stock Option Agreement is duly executed and
delivered by or on behalf of the Company and the Participant.
In addition to the foregoing, all Stock Option Agreements shall include
without limitation the following provisions:
(a) Vesting.
-------
Each Option shall be exercisable only with respect to the Shares
which have become vested pursuant to the terms of that Option. Each
Option shall become vested with respect to Shares subject to that
Option on such date or dates and on the basis of such other
criteria, including without limitation performance of the Company,
as the Committee may determine, in its discretion, and shall be
specified in the applicable Stock Option Agreement. The Committee
shall have the authority, in its discretion, to accelerate the time
at which an Option shall be exercisable whenever it may determine
that such action is appropriate by reason of changes in applicable
tax or other laws or other changes in circumstances occurring after
the grant of such Option.
(b) Exercise Price.
--------------
The exercise price per Share issuable upon exercise of an Option
shall be determined by the Committee at the time of grant and set
forth in the applicable Stock Option Agreement; provided that such
exercise price shall not be less than the fair market value per
Share on date the Option is granted. For purposes of the Plan, the
fair market value of the Shares shall mean, as of any given date,
the (i) last reported sale price on the New York Stock Exchange on
the most recent previous trading day, (ii) last reported sale price
on the NASDAQ National Market System on the most recent previous
trading day, (iii) mean between the high and low bid and ask prices,
as reported by the National Association of Securities Dealers, Inc.
on the most recent previous trading day, or (iv) last reported sale
price on any other stock exchange on which the Shares are listed on
the most recent previous trading day, whichever is applicable;
provided that if none of the foregoing is applicable, then the fair
market value of the Shares shall be the value determined by the
Committee, in its sole discretion.
(c) Term.
----
No Option shall be exercisable after the expiration of 10 years from
the date on which that Option is granted.
(d) Method of Exercise.
------------------
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<PAGE>
An Option may be exercised, in whole or in part, by giving written
notice to the Company stating the number of Shares (which must be a
whole number) to be purchased. Upon receipt of payment of the full
purchase price for such Shares, plus applicable withholding taxes, by
certified or bank cashier's check or other form of payment acceptable
to the Company, or, if approved by the Committee, by (i) delivery of
unrestricted Shares having a fair market value on the date of such
delivery equal to the total exercise price, (ii) surrender of Shares
subject to the Option which have a fair market value equal to the
total exercise price at the time of exercise, or (iii) a combination
of the preceding methods, and subject to compliance with all other
terms and conditions of the Plan and the Stock Option Agreement
relating to such Option, the Company shall issue, as soon as
reasonably practicable after receipt of such payment, such Shares to
the person entitled to receive such Shares, or such person's
designated representative. Such Shares may be issued in the form of a
certificate, by book entry, or otherwise, in the Company's sole
discretion.
(e) Restrictions on Shares Subject to Options.
-----------------------------------------
Shares issued upon the exercise of any Option may be made subject to
such transferability or other restrictions or conditions as the
Committee may determine, in its discretion, and as shall be set forth
in the applicable Stock Option Agreement.
(f) Transferability.
---------------
Options shall not be transferable. Any attempted transfer shall be
null and void. All Options shall be exercisable during a
Participant's lifetime only by the Participant or the Participant's
legal representative. Notwithstanding the foregoing to the contrary:
(i) Options may be transferred by a Participant by will or the laws of
descent and distribution or pursuant to a domestic relations order (as
defined in the Code); and (ii) the Committee may, in its sole
discretion and in the manner established by the Committee, provide for
the irrevocable transfer, without payment of consideration, of any
Option by a Participant to such Participant's spouse, children,
grandchildren, nieces, or nephews or to the trustee of any trust for
the principal benefit of one or more such persons or to a partnership
whose only partners are one or more such persons. In the case of such
a permitted transfer, the Option shall be exercisable only by the
transferee or such transferee's legal representative.
(g) Termination of Status as an Eligible Director by Reason of Death or
-------------------------------------------------------------------
Disability.
----------
If a Participant's status as an Eligible Director terminates by reason
of the Participant's death or disability (as defined by the Committee
from time to time, in its sole discretion), then (i) unless otherwise
determined by the Committee within 90 days of such termination, to the
extent an Option held by such Participant is not vested as of the date
of such termination, such Option shall automatically terminate on such
date; and (ii) to the extent an Option held by such Participant is
vested (whether pursuant to its terms, a determination of the
Committee under the preceding clause (i), or otherwise) as of the date
of such termination, such Option may thereafter be exercised by the
Participant, the legal representative of the Participant's estate, the
legatee of the Participant under the will of the Participant, the
distributee of the Participant's estate, or the Participant's other
successor in interest, whichever is applicable (A) if such termination
results from the Participant's death, for a period of one year from
the date of death or, if sooner, until the
Page 3
<PAGE>
expiration of the stated term of the Option, (B) if such termination
results from the Participant's disability, for one year from the date
of termination of the Participant's status as an Eligible Director or,
if sooner, until the expiration of the stated term of the Option, or
(C) for such other period as the Committee may specify at or after
grant or the Participant's death or disability.
(h) Other Termination of Status as an Eligible Director.
---------------------------------------------------
If a Participant's status as an Eligible Director terminates for any
reason other than death or disability, then (i) to the extent any
Option held by such Participant is not vested as of the date of
termination, such Option shall automatically terminate on such date;
and (ii) unless otherwise determined by the Committee at or after
grant or termination, to the extent any Option held by such
Participant is vested as of the date of such termination, such Option
may thereafter be exercised for a period of 90 days from the date of
termination or, if sooner, until the expiration of the stated term of
the Option; provided that, if the Participant's status as an Eligible
Director is terminated for Cause, any and all unexercised Options held
by such Participant shall immediately lapse and be of no further force
or effect. For purposes of the Plan, whether termination of a
Participant's status as an Eligible Director is for "Cause" shall be
determined by the Committee, in its sole discretion.
(i) Effect of Termination of Participant's Status as an Eligible Director
---------------------------------------------------------------------
on Transferee.
- -------------
Except as otherwise permitted by the Committee, in its sole
discretion, no Option held by a transferee of a Participant pursuant
to (S)5(f), above, shall remain exercisable for any period of time
longer than would otherwise be permitted under (S)(S)5(g) and 5(h)
without specification of other periods by the Committee as provided
therein.
(S)6. Restriction on Exercise After Termination.
------------------------------------------
Notwithstanding any provision of this Plan to the contrary, no
unexercised right created under this Plan (an "Unexercised Right") shall be
exercisable if, prior to such exercise, the Participant violates any non-
competition, confidentiality, conflict of interest, or similar provision set
forth in the Stock Option Agreement pursuant to which such Unexercised Right was
awarded or otherwise conducts himself in a manner adversely affecting the
Company or any subsidiary of the Company, as determined by the Committee, in its
sole discretion.
(S)7. Withholding Tax.
----------------
The Company, at its option, shall have the right to require the
Participant or any other person receiving Shares under the Plan to pay the
Company the amount of any taxes which the Company is required to withhold with
respect to such Shares or, in lieu of such payment, to retain or sell without
notice a number of such Shares sufficient to cover the amount required to be so
withheld. The Company, at its option, shall have the right to deduct from all
dividends paid with respect to Shares the amount of any taxes which the Company
is required to withhold with respect to such dividend payments. The obligations
of the Company under the Plan shall be conditional on such payment or other
arrangements acceptable to the Company.
(S)8. Securities Law Restrictions.
---------------------------
Page 4
<PAGE>
No right under the Plan shall be exercisable and no Share shall be
delivered under the Plan except in compliance with all applicable federal and
state securities laws and regulations. The Company shall not be required to
deliver any Shares or other securities under the Plan prior to such registration
or other qualification of such Shares or other securities under any state or
federal law, rule, or regulation as the Committee shall determine to be
necessary or advisable, in its sole discretion.
The Committee may require each person acquiring Shares under the Plan
(a) to represent and warrant to and agree with the Company in writing that such
person is acquiring the Shares without a view to the distribution thereof, and
(b) to make such additional representations, warranties, and agreements with
respect to the investment intent of such person or persons as the Committee may
reasonably request. Any certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be subject
to such stop-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Shares are then
listed, and any applicable federal or state securities law, and the Committee
may cause a legend or legends to be put on any certificates evidencing such
Shares to make appropriate reference to such restrictions.
(S)9. Change in Capital Structure.
---------------------------
In the event the Company changes its outstanding Shares by reason of
stock splits, stock dividends, or any other increase or reduction of the number
of outstanding Shares without receiving consideration in the form of money,
services, or property deemed appropriate by the Board, in its sole discretion,
the aggregate number of Shares subject to the Plan shall be proportionately
adjusted and the number of Shares and the exercise price for each Share subject
to the unexercised portion of any then-outstanding Option shall be
proportionately adjusted with the objective that the Participant's proportionate
interest in the Company shall remain the same as before the change without any
change in the total exercise price applicable to the unexercised portion of any
then-outstanding Options, all as determined by the Committee in its sole
discretion.
In the event of any other recapitalization or any merger, consolidation,
or other reorganization of the Company, the Committee shall make such
adjustment, if any, as it may deem appropriate to accurately reflect the number
and kind of shares deliverable, and the exercise prices payable, upon subsequent
exercise of any then-outstanding Options, as determined by the Committee in its
sole discretion.
The Committee's determination of the adjustments appropriate to be made
under this (S)9 shall be conclusive upon all Participants under the Plan.
(S)10. Change in Control.
-----------------
(a) Accelerated Vesting and Company Purchase Option.
-----------------------------------------------
Notwithstanding any provision of this Plan or any Stock Option
Agreement to the contrary (unless such Stock Option Agreement
contains a provision referring specifically to this (S)10 and stating
that this (S)10 shall not be applicable to the Option evidenced by
Page 5
<PAGE>
such Stock Option Agreement), if a Change in Control or a Potential
Change in Control (each as defined below) occurs, then:
(i) Any and all Options theretofore granted and not fully vested
shall thereupon become vested and exercisable in full and shall
remain so exercisable in accordance with their terms; provided that
no Option which has previously been exercised or otherwise terminated
shall become exercisable; and
(ii) The Company may, at its option, terminate any or all unexercised
Options and portions thereof not more than 30 days after such Change
in Control or Potential Change in Control; provided that the Company
shall, upon such termination and with respect to each Option so
terminated, pay to the Participant (or such Participant's transferee,
if applicable) theretofore holding such Option cash in an amount
equal to the difference between the fair market value (as defined in
(S)5(a), above) of the Shares subject to the Option at the time the
Company exercises its option under this (S)10(a)(ii) and the exercise
price of the Option, less applicable withholding taxes; and provided
further that if such fair market value is less than such exercise
price, then the Committee may, in its discretion, terminate such
Option without any payment.
(b) Definition of Change in Control.
-------------------------------
For purposes of the Plan, a "Change in Control" means the happening
of any of the following:
(i) When any "person" as defined in (S)3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and as used in
(S)(S)13(d) and 14(d) thereof, including a "group" as defined in
(S)13(d) of the 1934 Act, but excluding the Company, any subsidiary
of the Company, any employee benefit plan sponsored or maintained by
the Company or any subsidiary of the Company (including any trustee
of such plan acting as trustee), any person who is a stockholder of
the Company on the effective date of this Plan (an "Existing
Stockholder"), and any affiliate of an Existing Stockholder, directly
or indirectly, becomes the "beneficial owner" (as defined in Rule 13
d-3 under the 1934 Act) of securities of the Company representing 20%
or more of the combined voting power of the Company's then
outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for
any reason other than death to constitute at least a majority of the
Board; provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if
such director was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors either actually (because they were directors
at the beginning of such 24-month period) or by prior operation of
this (S)10(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder approval
for the acquisition of the Company by an entity other than the
Company or a subsidiary of the Company through purchase of assets, by
merger, or otherwise.
Page 6
<PAGE>
Provided that neither an initial or any secondary public offering of
common stock of the Company pursuant to a registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), nor
any issuance of securities of the Company or any subsidiary of the
Company in connection with an acquisition of a dental practice or
other business entity by the Company or any subsidiary of the Company
shall constitute a Change in Control; and provided further that a
change in control shall not be deemed to be a Change in Control for
purposes of this Plan if the Board had approved such change prior to
either (A) the commencement of any of the events described in
(S)(S)10(b)(i), (ii), (iii), or 10(c)(i) of this Plan, or (B) the
commencement by any person other than the Company of a tender offer
for Shares.
(c) Definition of Potential Change in Control.
-----------------------------------------
For purposes of the Plan, a "Potential Change in Control" means the
happening of any one of the following:
(i) The approval by the stockholders of the Company of an agreement
by the Company, the consummation of which would result in a Change in
Control of the Company as defined in (S)10(b), above; or
(ii) The acquisition of beneficial ownership of the Company, directly
or indirectly, by any entity, person, or group (other than the
Company, a subsidiary of the Company, any Company employee benefit
plan (including any trustee of such plan acting as such trustee), an
Existing Stockholder, or an affiliate of an Existing Stockholder)
representing 5% or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of a resolution
to the effect that a Potential Change in Control of the Company has
occurred for purposes of the Plan.
(S)11. Six-Month Holding Period.
------------------------
Shares purchased upon exercise of an Option may not be sold before at
least six months have elapsed from the date the Option was granted.
(S)12. No Enlargement of Rights.
------------------------
The adoption of this Plan and the grant of one or more Options to an
Eligible Director shall not confer any right to the Eligible Director to
continue in the status of Eligible Director and shall not restrict or interfere
in any way with the right of the Company to terminate such Eligible Director's
status as such at any time, with or without cause.
(S)13. Rights as Stockholder.
---------------------
No Participant or his executor or administrator or other transferee
shall have any rights of a stockholder in the Company with respect to the Shares
covered by an Option unless and until a certificate representing such Shares has
been duly issued and delivered to him under the Plan.
(S)14. Acceleration of Rights.
----------------------
The Committee shall have the authority, in its discretion, to accelerate
the time at which an Option shall be exercisable whenever it may determine that
such action is appropriate by reason of
Page 7
<PAGE>
changes in applicable tax or other laws or other changes in circumstances
occurring after the award of such Option.
(S)15. Definition of Subsidiary.
------------------------
The terms "subsidiary" and "subsidiary corporation" when used in the
Plan or any Stock Option Agreement made pursuant to the Plan mean a subsidiary
corporation as defined in (S)424(f) of the Code.
(S)16. Interpretation, Amendment or Termination of Plan.
------------------------------------------------
The interpretation by the Committee of any provision of the Plan or of
any Stock Option Agreement executed pursuant to the grant of an Option under the
Plan shall be final and conclusive upon all Participants or transferees under
the Plan. The Board, without further action on the part of the stockholders of
the Company, may from time to time alter, amend, or suspend the Plan or may at
any time terminate the Plan; provided that no such action shall adversely affect
any Participant's rights with respect to outstanding Options then held by such
Participant without such Participant's consent.
(S)17. Protection of Board and Committee.
---------------------------------
No member of the Board or the Committee shall have any liability for any
determination or other action made or taken in good faith with respect to the
Plan or any Option granted under the Plan.
(S)18. Government Regulations.
----------------------
Notwithstanding any provision of the Plan or any Stock Option Agreement
executed pursuant to the Plan, the Company's obligations under the Plan and such
Agreement shall be subject to all applicable laws, rules, and regulations and to
such approvals as may be required by any governmental or regulatory agencies,
including without limitation any stock exchange on which the Shares may then be
listed.
(S)19. Governing Law.
-------------
The Plan shall be construed and governed by the laws of the State of
Delaware.
(S)20. Genders and Numbers.
-------------------
When permitted by the context, each pronoun used in the Plan shall
include the same pronoun in other genders and numbers.
(S)21. Captions.
--------
The captions of the various sections of the Plan are not part of the
context of the Plan, but are only labels to assist in locating those sections,
and shall be ignored in construing the Plan.
(S)22. Effective Date; Effect on Original Plan.
---------------------------------------
The Plan is effective February 17, 1997 (the "Effective Date"). The Plan
is an amendment and restatement of the Company's 1996 Directors Stock Option
Plan dated September 27, 1996 (the "Original Plan"), and supersedes the Original
Plan in its entirety.
(S)23. Term of Plan.
------------
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<PAGE>
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date, but Options granted prior to such tenth
anniversary may extend beyond that date.
(S)24. Private Company Provisions.
--------------------------
Notwithstanding any of the foregoing provisions of the Plan to the
contrary, unless and until such time as the Company has completed an initial
public offering for its common stock pursuant to a registration statement filed
under the 1933 Act, the following provisions shall apply:
(a) Restrictive Legend.
------------------
If one or more Options or other rights under the Plan are exercised
pursuant to exemptions from the federal and state securities laws:
(a) any Shares issued upon exercise of those Options or rights may not
be sold or otherwise transferred, and the Company shall not be
required to transfer any such Shares, unless they have been registered
under the federal and state securities laws or a valid exemption from
such registration is available; and (b) the Company may cause each
certificate evidencing the ownership of any Shares issued upon
exercise of those Options or rights to be imprinted with a legend in
the following form:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities
law and may not be sold or otherwise transferred without such
registration unless a valid exemption from such registration is
available and the corporation has received an opinion of, or
satisfactory to, its counsel that such transfer would not violate any
Federal or state securities laws.
(b) Purchase Option.
---------------
If the Participant ceases to be an Eligible Director due to such
Participant's resignation, replacement, discharge, or any other reason
other than such Participant's death, disability, or retirement, then
the Company shall have the exclusive right and option to purchase from
the Participant, the executor or administrator of the Participant's
estate, or the Participant's other successor in interest, as the case
may be (for purposes of this subsection, the "Selling Stockholder"),
any or all of the Shares which may have been purchased by the
Participant under the Plan (including without limitation any Shares
purchased upon exercise of an Option after termination of the
Participant's employment and any additional Shares which the
Participant may have received as a result of any stock splits, stock
dividends, or similar sources as a result of receiving Shares under
the Plan).
In order to exercise its purchase option under this subsection, the
Company shall give written notice to the Selling Stockholder, stating
that the Company thereby exercises its option under this subsection,
at any time after termination of the Participant's status as an
Eligible Director. The purchase price per Share for the Shares under
this subsection shall be equal to: (i) the fair market value of the
total stockholders' equity of the Company, as determined by an
appraisal which shall be made by an independent firm of certified
public accountants selected by the Board and which shall be approved
by the Board, if such appraisal was so made and approved not earlier
than 15 months prior to the termination of the Participant's status as
an Eligible Director or, if not, a new appraisal
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<PAGE>
made by such an independent firm and approved by the Board, plus or
minus any increases or decreases in the book value of the total
stockholders' equity of the Company from the effective date of such
appraisal to the last day of the calendar month of termination of the
Participant's status as an Eligible Director (whether such termination
was before or after the effective date of such appraisal), divided by
(ii) the total outstanding shares of common stock of the Company as of
the last day of that calendar month, calculated on a fully diluted
basis under generally accepted accounting principles. In the event of
any disagreement between the Selling Stockholder and the Company
concerning calculation of the purchase price for the Shares under this
subsection, the calculation shall be made by any independent firm of
certified public accountants selected by the Board, whose
determination shall be final and conclusive on all interested parties.
All costs of any such appraisal shall be borne by the Company, and all
costs of any calculation of the purchase price by an independent firm
of certified public accountants to resolve any such disagreement shall
be borne equally by the Selling Stockholder and the Company.
If the Company exercises its option under this subsection, the
purchase and sale of the Shares shall be closed within 20 business
days after determination of the purchase price, at a time and place
reasonably specified by the Company. At the closing, the Selling
Stockholder shall assign and transfer the Shares to the Company free
and clear of all encumbrances or other claims, and the Company shall
execute and deliver to the Selling Shareholder the Company's
promissory note: (i) dated as of the closing date, (ii) payable to
the order of the Selling Shareholder, (iii) in a principal amount
equal to the full purchase price, (iv) payable on or before the fourth
anniversary of the closing date, (v) with interest payable at maturity
calculated on the unpaid principal amount from the closing date to the
payment date at a rate per annum equal to the then-applicable federal
rate, determined in good faith by the Company. The Company may elect,
in its discretion, to pay all or any part of the purchase price by
good and sufficient check at the closing, in which event the Company's
promissory note shall be eliminated or reduced by that amount, as the
case may be. The Company may prepay its promissory note at any time
without penalty.
(c) Restriction on Transfers.
------------------------
No Shares issued upon exercise of an Option may be sold or otherwise
transferred while the holder of those Shares is an Eligible Director
without the prior written consent of the Company.
(d) First-Refusal Option.
--------------------
If the holder of any Shares issued upon exercise of one or more
Options desires to sell, and receives a bona fide written offer to
buy, all or any part of his Shares, for a price computed and payable
in dollars, and if such holder is not an Eligible Director, such
holder may sell such Shares, but only pursuant to the following
provisions of this subsection. Such holder shall obtain from the
person or persons who propose to buy such Shares (collectively, the
"Buyer") a written offer to buy such Shares (the "Offer") which shall
include the following provisions: (i) the number of Shares to be
purchased, the price, the terms of payment, and the other terms and
conditions of the proposal; (ii) agreement by the Buyer that the Offer
shall be irrevocable for a specified period of time expiring not
earlier than 20 business days after the date that notice of the Offer
is given to
Page 10
<PAGE>
the Company; and (iii) the consideration received from such holder for
the Buyer's agreement that the Offer shall be irrevocable for the
specified period of time. At the time of obtaining the Offer, such
holder shall part with adequate consideration to bind the Buyer to his
agreement that the Offer shall be irrevocable for the specified period
of time.
Upon obtaining an Offer that such holder desires to accept, such
holder shall give written notice of the Offer and its acceptability to
the Company, enclosing a photocopy of the Offer, and shall make the
signed original of the Offer available to the Company for examination
upon request. The Company shall have the exclusive right and option
to purchase all, but only all, of the Shares described in the Offer
under whichever of the following three sets of price and terms and
conditions that it elects, in its discretion: (i) for the purchase
price and upon the other terms and conditions specified in the Offer,
or (ii) for the purchase price and upon the other terms and conditions
which would be applicable under (S)23(b), above, if such holder's
status as an Eligible Director had terminated on the date when such
holder gave written notice of the Offer, or (iii) for the purchase
price specified in the Offer and upon the other terms and conditions
which would be applicable under (S)23(b), above, if such holder's
status as an Eligible Director had terminated on the date when such
holder gave written notice of the Offer (including without limitation
execution and delivery of the Company's promissory note meeting the
requirements of (S)23(b), above).
In order to exercise its purchase option under this subsection, the
Company shall give written notice to such holder, stating that the
Company thereby exercises its option under this subsection, at any
time not later than 10 business days after the Company receives the
written notice from such holder. If the Company exercises its option
under this subsection, the purchase and sale of such shares shall be
closed, at a time and place reasonably specified by the Company,
within 20 business days after the later of: (i) the date when the
Company exercises its option under this subsection, or (ii) the date
when the purchase price has been determined. In that event, the terms
for payment of the purchase price and the other terms and conditions
for purchase shall be not less favorable to the Company that those
specified in the Offer.
If the Company fails to exercise its purchase option under this
subsection, such holder may sell the Shares specified in the Offer to
the Buyer at the price and on the terms and conditions of the Offer,
subject to compliance with all other requirements in the Plan. Upon
completion of the sale of the Shares pursuant to the preceding
sentence, the Shares shall remain subject to all requirements and
restrictions of the Plan, including without limitation the Company's
option to purchase the Shares in the event of any subsequent sale or
other transfer, as described in this (S)23(d).
(S)25. Savings Clause.
--------------
In case any one or more of the provisions of this Plan shall be held
invalid, illegal, or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and the invalid, illegal, or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted, or
revised retroactively to permit this Plan to be construed so as to foster the
intent of this Plan. This Plan and all transactions pursuant to this Plan are
intended to comply in all respects with applicable law and regulation,
including, with respect to persons subject to Section 16 of the 1934 Act
("Reporting Persons"), Rule 16b-3 under the 1934 Act. In case any
Page 11
<PAGE>
one or more of the provisions of this Plan or any transaction pursuant to this
Plan shall be held to violate or be unenforceable in any respect under Rule 16b-
3, then, to the extent permissible by law, any provision which could be deemed
to violate or be unenforceable under Rule 16b-3 shall first be construed,
interpreted, or revised retroactively to permit the Plan or transaction to be in
compliance with Rule 16b-3.
Page 12
<PAGE>
AMENDMENT NO. 1
TO
AMERICAN DENTAL PARTNER, INC.
AMENDED AND RESTATED 1996 DIRECTORS STOCK OPTION PLAN
-----------------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Directors
Stock Option Plan (the "Plan") is hereby amended pursuant to the following
provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Administration
--------------
Section 2 of the Plan is hereby amended by deleting the first sentence
thereof in its entirety and replacing it with the following:
The Plan shall be administered by a committee (the "Committee")
of one or more directors, none of whom shall be an Eligible Director.
3. Effective Date; Construction
----------------------------
The effective date of this amendment is October 27, 1997, and this
amendment shall be deemed to be a part of the Plan as of such date. In the
event of any inconsistencies between the provisions of the Plan and this
amendment, the provisions of this amendment shall control. Except as modified
by this amendment, the Plan shall continue in full force and effect without
change.
<PAGE>
AMENDMENT NO. 2
TO
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 DIRECTORS STOCK OPTION PLAN
-----------------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Directors
Stock Option Plan, as previously amended (the "Plan"), is hereby amended
pursuant to the following provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Change in Control.
-----------------
Section 10 of the Plan is hereby deleted from the Plan in its entirety and
replaced with the following:
(S)10. Change in Control.
-----------------
(a) Accelerated Vesting and Company Purchase Option.
-----------------------------------------------
Notwithstanding any provision of the Plan or any Stock Option
Agreement to the contrary (unless such Stock Option Agreement contains a
provision referring specifically to this (S)10 and stating that this (S)10
shall not be applicable to the Option evidenced by such Stock Option
Agreement), if a Change in Control (as defined below) occurs, then:
(i) Any and all Options theretofore granted and not fully
vested shall thereupon become vested and exercisable in full and
shall remain so exercisable in accordance with their terms;
provided that no Option which has previously been exercised or
otherwise terminated shall become exercisable; and
(ii) The Company may, at its option, terminate any or all
unexercised Options and portions thereof not more than 30 days
after such Change in Control; provided that the Company shall, upon
such termination and with respect to each Option so terminated, pay
to the optionee (or such optionee's transferee, if applicable)
theretofore holding such Option cash in an amount equal to the
difference between the fair market value (as defined in (S)5(b),
above) of the Shares subject to the Option at the time the Company
exercises its option under this (S)10(a)(ii) and the exercise price
of the Option, less applicable withholding taxes; and provided
further that if such fair market value is less than such exercise
price, then the Board may, in its sole discretion, terminate such
Option without any payment.
<PAGE>
(b) Definition of Change in Control.
-------------------------------
For purposes of the Plan, a "Change in Control" shall mean the
happening of any of the following:
(i) The direct or indirect acquisition by any "person" as
defined in (S)3(a)(9) of the 1934 Act and as used in (S)(S)13(d) and
14(d) thereof, including a "group" within the meaning of (S)13(d) of
the 1934 Act (hereinafter, simply a "Person"), of "beneficial
ownership" (within the meaning of Rule 13d-3 under the 1934 Act) of
securities of the Company representing more than 50% of the combined
voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors of the Company
(the "Company Voting Securities"); provided that: (A) the Company, any
subsidiary of the Company, any employee benefit plan sponsored or
maintained by the Company or any subsidiary of the Company (including
any trustee of such plan acting as trustee), any person who was a
stockholder of the Company on the effective date of the Plan (an
"Existing Stockholder"), and any affiliate of an Existing Stockholder;
and (B) the provisions of this subsection (i) shall not apply to (1)
any acquisition of securities from the Company or any of its
subsidiaries, or (2) any acquisition of securities pursuant to a
Business Combination (as defined below) which satisfies clauses (A),
(B), and (C) of subsection (iii) of this (S)10(b);
(ii) When, during any period of 24 consecutive months during
the existence of the Plan, the individuals who, at the beginning of
such period constitute the Board (the "Incumbent Directors") cease for
any reason other than death to constitute at least at least a majority
of the Board; provided, however, that a director who was not a
director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24-month period) or by prior
operation of this (S)10 (b)(ii); or
(iii) Approval by the stockholders of the Company of a
reorganization, merger, consolidation, or recapitalization of the
Company, or a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of the assets of another
corporation (any such transaction, a "Business Combination"), or the
consummation of a business Combination for which stockholder approval
is not obtained, unless, in any such case, following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the beneficial o wners of the Company Voting
Securities outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, immediately following such
Business Combination, more than 50% of the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such
Business Combination in substantially the same proportions as their
ownership of the Company Voting Securities immediately prior to such
Business Combination,
- 2 -
<PAGE>
and (B) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were
Incumbent Directors at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
4. Effective Date; Construction
----------------------------
The effective date of this amendment is November 6, 1998, and this
amendment shall be deemed to be a part of the Plan as of such date and shall be
applicable to all Options granted prior to that date, as well as Options
hereafter granted. In the event of any inconsistencies between the provisions
of the Plan and this amendment, the provisions of this amendment shall control.
Except as modified by this amendment, the Plan shall continue in full force and
effect without change.
- 3 -
<PAGE>
AMENDMENT NO. 3
TO
AMERICAN DENTAL PARTNERS, INC.
AMENDED AND RESTATED 1996 DIRECTORS STOCK OPTION PLAN
-----------------------------------------------------
The American Dental Partners, Inc. Amended and Restated 1996 Directors
Stock Option Plan, as previously amended by Amendment No. 1 dated October 27,
1997 and Amendment No. 2 dated November 6, 1998 (collectively, the "Plan"), is
hereby amended pursuant to the following provisions:
1. Definitions
-----------
All capitalized terms used in this amendment which are not otherwise
defined herein shall have the respective meanings given such terms in the Plan.
2. Shares Subject To Plan
----------------------
The total number of Shares for which Options may be granted under the Plan,
as provided under (S)4 of the Plan, as previously adjusted pursuant to (S)9 of
the Plan, is increased by 25,000 Shares to a total of 85,000 Shares.
3. Effective Date; Construction
----------------------------
The effective date of this amendment is February 26, 1999, and this
amendment shall be deemed to be a part of the Plan as of such date. In the
event of any inconsistencies between the provisions of the Plan and this
amendment, the provisions of this amendment shall control. Except as modified
by this amendment, the Plan shall continue in full force and effect without
change.
This amendment shall be submitted to the stockholders of the Company for
approval as soon as reasonably practicable, but in any event not later than 12
months after the date of this amendment. Notwithstanding the preceding
paragraph or any other provisions of this amendment to the contrary, if this
amendment is not approved by the stockholders of the Company within such 12-
month period, this amendment and all options granted with respect to the
additional shares of Common Stock subject to the Plan as a result of this
amendment shall automatically become null and void and have no further force or
effect.
<PAGE>
PROXY
AMERICAN DENTAL PARTNERS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Ron Levenson and Lee Feldman, and each of them,
attorneys and proxies of the undersigned, with full power of substitution, to
attend the annual meeting of shareholders of American Dental Partners, Inc. to
be held at the offices of Summit Partners located at 600 Atlantic Avenue, Suite
2800, Boston, Massachusetts 02210, on Friday, May 7, 1999, at 2:00 p.m., local
time, or any adjournment thereof, and to vote the number of shares of the
Company which the undersigned would be entitled to vote, and with all the power
the undersigned would possess if personally present.
- ------------- ---------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- ---------------
_____
(Please sign exactly as your name or names appear hereon,
indicating where proper, official position or representa-
tive capacity).
Signature:______________ Date:_________ Signature:_______________ Date:_________
<PAGE>
AMERICAN DENTAL PARTNERS, INC.
c/o EquisServe
P.O. Box 8040
Boston, Ma 02266-8040
(1965 - AMERICAN DENTAL PARTNERS, INC. - NAME: ADP53A.ELX] [VERSION 32]
[03/23/99]
DETACH HERE
- --------------------------------------------------------------------------------
PLEASE MARK
[X] votes as in
this example
The Proxies will vote as specified below, or if a choice is not specified, they
will vote FOR the nominees listed in Item 1 and FOR Item 2 and Item 3.
<TABLE>
<S> <C> <C>
1. Election of Class II Directors, each to serve a
term of three years, expiring in 2002 and until
his successor has been duly elected and
qualified.
2. Proposal to amend the American Dental Partners, FOR AGAINST ABSTAIN
Nominees: James T. Kelly and Martin J. Mannion Inc. 1996 Stock Option Plan to increase by
300,000 shares the total number of shares of [_] [_] [_]
FOR WITHHELD common stock available for issuance thereunder.
[_] [_]
3. Proposal to amend the American Dental Partners, FOR AGAINST ABSTAIN
[_] ________________________________________ Inc. 1996 Directors Stock Option Plan to
For both nominees except as noted before increase by 25,000 shares the total number [_] [_] [_]
of shares of common stock available for
issuance thereunder.
4. On such other business as may properly come before
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
(Please sign exactly as your name or names appear hereon,
indicating where proper, official position or representative
capacity).
Signature: _____________________________ Date: _______________ Signature: _____________________________ Date: __________________
</TABLE>
