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
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 Rule 14a-11(c) or Rule 14a-12
APPLE ORTHODONTIX, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
APPLE ORTHODONTIX, INC.
2777 ALLEN PARKWAY, SUITE 700
HOUSTON, TEXAS 77019
DEAR STOCKHOLDER: June 24, 1998
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Apple Orthodontix, Inc. (the "Company") to be held in the Plaza
Room, Riviana Building, 2777 Allen Parkway, Houston, Texas 77019 on Monday, July
27, 1998 at 9:00 a.m., Houston time.
This booklet includes the notice of the meeting and the proxy statement,
which contains information respecting the Annual Meeting. The Company's 1997
Annual Report to Stockholders, which is not a part of the Proxy Statement, is
also enclosed and provides information regarding the Company's financial results
in 1997.
We hope you will attend the Annual Meeting in person. Whether or not you
plan to attend in person, please sign, date and promptly return the enclosed
proxy card in the enclosed prepaid return envelope. Your shares will be voted at
the Annual Meeting in accordance with your proxy. If you sign and return your
proxy card without specifying your choices, your shares will be voted in
accordance with the recommendations of the Board of Directors.
On behalf of the Board of Directors, thank you for your continued support.
John G. Vondrak, D.D.S.
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
APPLE ORTHODONTIX, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 27, 1998
To the Stockholders of
Apple Orthodontix, Inc.:
The 1998 Annual Meeting of Stockholders of Apple Orthodontix, Inc. (the
"Company") will be held in the Plaza Room, Riviana Building, 2777 Allen Parkway,
Houston, Texas 77019, on Monday, July 27, 1998 at 9:00 a.m., Houston time, for
the following purposes:
1. To elect two Class I directors of the Company to hold office until
the third succeeding annual meeting of stockholders after their
election (the 2001 Annual Meeting) or until their respective
successors have been duly elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for 1998.
3. To transact such other business as may properly come before the
meeting or any reconvened meeting after an adjournment or
postponement thereof.
The Board of Directors has fixed the close of business on June 12, 1998 as
the record date for determining stockholders of the Company entitled to notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of the Company of record at the close of business on that date
will be entitled to notice of and to vote at that meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors,
W. Daniel Cook
SECRETARY
June 24, 1998
2777 Allen Parkway, Suite 700
Houston, Texas 77019
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE
MEETING. RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO
ATTEND THE ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU DO NOT
ATTEND. IF YOU HAVE SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED
IN MORE THAN ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL.
IF SO, PLEASE SIGN AND RETURN EACH OF THE PROXY CARDS YOU RECEIVE SO THAT ALL
YOUR SHARES MAY BE VOTED. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS
USE.
<PAGE>
APPLE ORTHODONTIX, INC.
2777 ALLEN PARKWAY, SUITE 700
HOUSTON, TEXAS 77019
----------------
PROXY STATEMENT
-----------------
INTRODUCTION
Apple Orthodontix, Inc. (the "Company") is mailing this Proxy Statement
and the accompanying proxy card to holders of its Class A Common Stock, par
value $.001 per share ("Common Stock"), and its Class B Common Stock, par value
$.001 per share ("Class B Stock"), beginning on or about June 24, 1998 in
connection with the solicitation of proxies by its Board of Directors for its
1998 Annual Meeting of Stockholders (the "Annual Meeting"). The Company will
hold the Annual Meeting on Monday, July 27, 1998 at the time and place and for
the purposes the accompanying notice sets forth. Shares can be voted at the
meeting only if the owner is represented by proxy or is present. The Board of
Directors is soliciting proxies to give all stockholders an opportunity to vote
and to meet the legal requirements respecting the number of shares that must be
represented in order to hold the meeting. The presence at the meeting, in person
or by proxy, of the holders of a majority of the outstanding shares of capital
stock of the Company entitled to vote at the Annual Meeting is necessary for
this purpose.
When a proxy card is returned properly signed, the shares it represents
will be voted in accordance with the choices it specifies and, in connection
with any other business that may properly come before the meeting, in the
discretion of the persons named in the proxy. If a proxy card is signed and
returned without specifying choices, the shares it represents will be voted as
recommended by the Board of Directors. Abstentions and broker "non-votes" marked
on a proxy card are voted neither "for" nor "against" any proposal to be voted
on at the Annual Meeting, but are counted as "present" in the determination of a
quorum. A stockholder giving a proxy may revoke it at any time before it is
voted at the meeting by executing a later-dated proxy, by voting by ballot at
the meeting or by filing a written revocation with the Corporate Secretary of
the Company at the address shown above. Attendance at the Annual Meeting will
not in itself, however, constitute the revocation of a proxy.
If the shares represented in person or by proxy at the meeting are not
sufficient to constitute a quorum, the Company may adjourn the meeting from time
to time, without notice other than by announcement at the meeting adjourned
(unless the adjournment is for more than 30 days or the Board of Directors fixes
a new record date), to permit the Company to continue soliciting proxies.
Proxies given pursuant to this solicitation and not revoked will be voted at any
postponement or adjournment of the Annual Meeting in the manner set forth above.
At the close of business on June 12, 1998, the record date for determining
stockholders eligible to vote at the Annual Meeting, the Company had outstanding
and entitled to vote 10,584,052 shares of Common Stock and 3,048,107 shares of
Class B Stock. Each share of Common Stock is entitled to one vote on each matter
subjected to a vote of stockholders at the Annual Meeting. Each share of Class B
Stock is entitled to three-tenths of one vote on each matter, other than the
election of directors, submitted to a vote of stockholders. Holders of Class B
Stock currently are entitled to elect one director to the Board of Directors of
the Company, and previously elected Mr. William W. Sherrill to the Board of
Directors. Mr. Sherrill's term expires at the 1999 Annual Meeting of
Stockholders.
The Company will pay the cost of soliciting proxies in the accompanying
form. Employees of the Company may solicit proxies by mail, in person or by
facsimile transmission or telephone. The Company will reimburse brokers, banks
and other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxies and proxy material to the beneficial owners of Common Stock.
-1-
<PAGE>
The Company is mailing its 1997 Annual Report to Stockholders, including
consolidated financial statements, simultaneously with this Proxy Statement to
all stockholders of record as of the close of business on June 12, 1998. That
report does not constitute a part of this proxy solicitation material.
ELECTION OF DIRECTORS
PROPOSAL 1: THE BOARD OF DIRECTORS OF THE COMPANY URGES YOU TO VOTE FOR
THE NOMINEES FOR CLASS I DIRECTOR DESCRIBED BELOW. PROXIES WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
The Company's Certificate of Incorporation provides for the classification
of directors into three classes. The term of office of the Class I directors
expires at this Annual Meeting, the term of office of the Class II directors
expires at the Company's 1999 Annual Meeting of Stockholders and the term of
office of the Class III directors expires at the Company's 2000 Annual Meeting
of Stockholders. Two Class I nominees are proposed to be elected at this Annual
Meeting to serve for a three-year term to last until the 2001 Annual Meeting of
Stockholders or until their successors are duly elected and have been qualified.
Only votes cast by Common Stock holders will be counted. Holders of Class B
Stock are not entitled to vote on Proposal 1. Nominees for Class I director will
be elected by a plurality of the votes cast. Accordingly, abstentions and broker
nonvotes will have no effect. The Board of Directors has nominated Messrs. Rod
L. Crosby, Jr. and Richard J. Marxen to serve as Class I Directors. Messrs.
Crosby and Marxen are currently directors of the Company.
The Board of Directors has no reason to believe that either nominee for
election as a director will not be a candidate or will be unable to serve, but
if for any reason one or both of the nominees are unavailable as a candidate or
unable to serve when election occurs, the persons designated as proxies in the
enclosed proxy card, in the absence of contrary instructions, will in their
discretion vote the proxies for the election of any other nominee or for a
substitute nominee, if any, selected by the Board of Directors. Management is
currently unaware of any circumstances likely to render either of the nominees
unavailable for election or unable to serve.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
CLASS I - TERMS EXPIRING AT THE 2001 ANNUAL MEETING
ROD L. CROSBY, JR. has served as a director of the Company since July
1997. Mr. Crosby has served as the Senior Vice President of Business Development
of Corporate Express, a supplier of office products and services, since 1995.
From 1994 to 1995, Mr. Crosby served as a director of U.S. Delivery Systems,
Inc., a delivery service company formed as a result of a combination in November
1993 of a number of delivery companies, including ViaNet, Inc., a company
founded by Mr. Crosby. Prior to that time, Mr. Crosby served as Chairman and
Chief Executive Officer of ViaNet, Inc. from 1986 until 1993. Mr. Crosby serves
on the board of directors of e-CommLink, a software company serving the banking
and medical industries.
RICHARD J. MARXEN has served as a director of the Company since February
1998. Mr. Marxen is the founder of Connective Technologies, Inc., a
privately-held business solutions provider for systems integration, and has
served as its chairman, president and chief executive officer since 1990. Prior
to that time, Mr. Marxen founded a business consulting firm and a management
systems consulting firm.
DIRECTORS WITH TERMS EXPIRING IN 1999 AND 2000
CLASS II - TERMS EXPIRING AT THE 1999 ANNUAL MEETING
ROBERT L. BREWTON has served as a director of the Company since February
1998. Since January 1996, Mr. Brewton has served as the Chief Investment Officer
of Residential Company of America, Ltd., a privately-held real estate investment
and management company. From 1987 until January 1996, Mr. Brewton served as
President of the
-2-
<PAGE>
multifamily division of the Transwestern Property Company, the predecessor of
Residential Company of America, Ltd.
W. DANIEL COOK has served as a director of the Company since October 1996
and as Chief Administrative Officer from February 1997 to May 1998. He has
served as Senior Vice President of Practice Affiliations since May 1998. From
December 1996 to May 1997, Mr. Cook served as a consultant to the Company on
various legal matters. Prior thereto he was a partner at the law firm of Breard,
Raines & Cook, P.L.L.C. from March 1996 to May 1997 and was associated with the
law firm of Page, Mannio, Peresich, Dickinson & McDermott, P.L.L.C. from 1991 to
1995.
WILLIAM W. SHERRILL has served as a director of the Company since October
1996. He is an Executive Professor at the University of Houston College of
Business Administration and is the Director for the University of Houston's
Center for Entrepreneurship & Innovation. Mr. Sherrill was formerly the
principal of William W. Sherrill, Financial Consultants from 1974 to 1981. From
1971 to 1974, Mr. Sherrill served as the President of Associates Corporation of
North America and was a director of Gulf and Western Industries, Inc. Before
joining Associates Corporation, he was appointed by the President of the United
States in 1967 to fill an unexpired term as Governor of the Federal Reserve
Board in Washington, D.C. and was reappointed to a full 14-year term on the
Board of Governors. Prior to his Federal Reserve appointment, he was the
Director of the Federal Deposit Insurance Corporation. Mr. Sherrill initially
was appointed to the Company's Board of Directors pursuant to the provisions of
a funding agreement between the Company and TriCap Funding I, L.L.C. ("TriCap").
See "Certain Relationships and Related Party Transactions".
CLASS III - TERMS EXPIRING AT THE 2000 ANNUAL MEETING
JOHN G. VONDRAK, D.D.S. is the founder of the Company and has been
Chairman of the Board of Directors and Chief Executive Officer of the Company
since October 1996 and President of the Company since May 1998. He has served as
a director of the Company since July 1996. Dr. Vondrak was the President and
sole shareholder of John G. Vondrak Apple Orthodontix, Inc. ("JGVAOI"), one of
the founding affiliated practices, for more than the past five years. Dr.
Vondrak is a licensed dentist, a graduate of an American Dental Association
accredited orthodontic program and has maintained a private orthodontic practice
for over 24 years. He is a member of the American Association of Orthodontists
and the Southwest Society of Orthodontists and served as President of the New
Mexico Orthodontic Society in 1979.
CLYDE C. WADDELL, JR. has served as a director of the Company since July
1997. Mr. Waddell is the owner, President and Chief Executive Officer of
Hester's Office Center, Inc., an office supply company, and has served in such
capacity for more than the past five years. Mr. Waddell is a certified public
accountant.
BOARD ORGANIZATION AND MEETINGS
During 1997, the Board of Directors of the Company (the "Board") held
seven meetings and acted by unanimous written consent on more than one occasion.
The Board has an Audit Committee and a Compensation Committee, each of
which was initially constituted on September 17, 1997.
AUDIT COMMITTEE. The Audit Committee recommends the independent public
accountants to be selected by the Board for stockholder approval each year and
acts on behalf of the Board in reviewing with the independent public
accountants, the chief financial and chief accounting officer and other
corporate officers various matters relating to the adequacy of the Company's
accounting policies and procedures and financial controls and the scope of the
annual audits by the independent public accountants. The Audit Committee
consists of Messrs. Crosby, Sherrill and Waddell (chairman). During 1997, the
Audit Committee held three meetings.
COMPENSATION COMMITTEE. The Compensation Committee is authorized to
establish the general compensation policy for the officers and directors of the
Company and annually reviews and establishes officers' salaries and
participation in benefit plans, prepares reports required by the Securities and
Exchange Commission (the "SEC") and approves the directors' compensation. The
Compensation Committee consists of Messrs. Brewton, Crosby, Marxen,
-3-
<PAGE>
Waddell and Sherrill (chairman). During 1997, the Compensation Committee acted
one time by unanimous written consent.
During 1997, each director attended at least 75% of the aggregate of the
total number of Board meetings and of meetings of committees of the Board on
which he served.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives a fee of $2,000 for attendance at each Board meeting and
$1,000 for each committee meeting (unless held on the same day as a Board
meeting). All directors are reimbursed for their out-of-pocket expenses and
other expenses incurred in attending meetings of the Board or committees thereof
and for other expenses incurred in their capacity as directors. Under the
Company's 1997 Stock Compensation Plan (the "Stock Plan"), each nonemployee
director automatically is granted nonqualified options to purchase 10,000 shares
of Common Stock on the date that person first becomes a nonemployee director of
the Company. Thereafter, each nonemployee director automatically will be granted
nonqualified options to purchase 5,000 shares of Common Stock on the first
business day of the month following the date of the Company's annual meeting of
stockholders. Each option will have an exercise price per share equal to the
fair market value of the Company's Common Stock on the date of grant. On
completion of the Company's initial public offering ("IPO") in May 1998, Mr.
Sherrill was granted an option to purchase 10,000 shares of Common Stock at an
exercise price per share equal to the initial public offering price to the
public. Each of Messrs. Brewton, Crosby, Marxen and Waddell received an option
to purchase 10,000 shares of Common Stock on his appointment to the Board of
Directors (July 1997 for Messrs. Crosby and Waddell and February 1998 for
Messrs. Brewton and Marxen) at an exercise price per share equal to the fair
market value of the Common Stock on the date of grant. All the options granted
to the nonemployee directors have a term of ten years, and become exercisable as
to one-quarter on the date of grant, and thereafter in cumulative annual
installments of one-quarter beginning on the first anniversary of the date of
grant.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL 2: THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND URGES YOU
TO VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS TO EXAMINE THE COMPANY'S FINANCIAL
STATEMENTS FOR THE YEAR 1998. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
On the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as independent public accountants to examine the
Company's financial statements for the year 1998. Arthur Andersen LLP has served
as the Company's independent public accountants since the Company's inception in
June 1996. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement, if they so
desire, and to respond to appropriate questions from those attending the
meeting.
In accordance with the Company's Bylaws, approval of the ratification of
the appointment of independent public accountants will require the affirmative
vote of a majority of the voting power of the capital stock voted at the
meeting, which includes Common Stock and Class B Stock. Accordingly, abstentions
and broker non-votes applicable to shares present at the meeting will not be
included in the tabulation of votes cast with respect to Proposal 2.
OTHER BUSINESS
The Company's management is not aware of any matters, other than as
indicated above, that will be presented for action at the meeting. If any other
matters properly come before the meeting, the persons appointed as proxies in
the accompanying proxy will vote on such matters according to their best
judgment.
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<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of Common Stock and the Class B
Stock of the Company beneficially owned directly or indirectly as of May 31,
1998 (i) by each person who is known to the Company to own beneficially more
than 5% of the Common Stock and the Class B Stock, (ii) each of the Company's
directors, (iii) the Company's chief executive officer and other executive
officers who were serving as such at December 31, 1997 (the "Named Executive
Officers") and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED
-------------------------------------------------
PERCENT PERCENT COMBINED
COMMON OF CLASS B OF VOTING
STOCK(2) CLASS STOCK CLASS POWER
-------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
John G. Vondrak, D.D.S.(1)......... 477,481 4.4% 1,293,377 42.4% 7.3%
Robert J. Syverson (3)............. 50,000 * 130,809 4.3 *
Michael W. Harlan.................. 45,000 * 76,850(4) 2.5 *
H. Steven Walton (3)............... 120,850 1.1 -- -- 1.0
W. Daniel Cook(1).................. 60,198 * 171,687 5.6 *
Robert L. Brewton.................. 2,500 * -- -- *
Rod L. Crosby, Jr.................. 18,906 * 28,167 * *
Richard J. Marxen.................. 2,500 * -- -- *
William W. Sherrill................ 66,250 * 137,350 4.5 1.1
Clyde C. Waddell, Jr............... 2,500 * -- -- *
All executive officers and
directors as a group (10 persons).. 846,185 7.1 1,838,240 60.3 11.8
- ----------------------
</TABLE>
* less than 1%.
(1) The address of such person is 2777 Allen Parkway, Suite 700, Houston, Texas
77019.
(2) Includes shares subject to outstanding options that are or will become
exercisable within 60 days of May 1, 1998, as follows: Dr. Vondrak --
67,500; Mr. Syverson -- 50,000; Mr. Harlan -- 45,000; Mr. Walton -- 119,350;
Mr. Cook -- 35,000 shares; and Messrs. Brewton, Crosby, Marxen, Sherrill and
Waddell -- 2,500 each. In addition, the shares shown for Mr. Sherrill
include 60,000 shares subject to an outstanding exercisable warrant.
(3) No longer an executive officer of the Company. In May 1998, the Company
undertook a management reorganization, as follows: Dr. Vondrak was given
added responsibilities as President and the chief operating officer,
replacing Robert J. Syverson; Mr. Yavorsky, formerly head of real estate
operations, replaced H. Steven Walton as a vice president of business
development; and Mr. Cook was elected to the new position of Senior Vice
President of Practice Affiliations.
(4) Includes 16,350 shares held of record by the Michael and Bonnie Harlan 1996
Family Trust. Mr. Harlan disclaims beneficial ownership of those shares.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The following table sets forth the names, ages (as of May 1, 1998) and
positions of the Company's executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C>
John G. Vondrak, D.D.S.............. 57 Chairman of the Board, President and
Chief Executive Officer
W. Daniel Cook...................... 43 Senior Vice President of Practice Affiliations and
Director
Michael W. Harlan................... 37 Vice President and Chief Financial Officer
Stephen T. Yavorsky................. 47 Vice President of Business Development
</TABLE>
The executive officers of the Company are elected annually by the Board of
Directors of the Company and serve at the discretion of the Board.
JOHN G. VONDRAK, D.D.S. See "Election of Directors -- Directors With Terms
Expiring in 1999 and 2000."
W. DANIEL COOK. See "Election of Directors -- Directors With Terms Expiring
in 1999 and 2000."
MICHAEL W. HARLAN has been Vice President and Chief Financial Officer of the
Company since March 1997. From December 1996 to February 1997, Mr. Harlan served
as a consultant to the Company on financial and accounting matters. From April
1991 through December 1996, Mr. Harlan held various positions in the finance and
acquisition departments of Sanifill, Inc., an international environmental
services company that was acquired by USA Waste Services, Inc. in 1996. He
served as the Treasurer of Sanifill, Inc. beginning in September 1993. While at
Sanifill, Inc., Mr. Harlan participated in numerous acquisitions and was
actively involved in raising public and private capital.
STEPHEN T. YAVORSKY has served as Vice President of Business Development
since May 1998. From December 1997 to May 1998, he was an employee of the
Company who developed new offices. From March 1995 to December 1997, Mr.
Yavorsky served as Executive Vice President of The Walters Group, a real estate
development company. From 1988 to 1995, Mr. Yavorsky served as Chairman, Chief
Executive Officer and President of Union Land Title Company.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of the
Company's Named Executive Officers for the year ended December 31, 1997 and the
period from the Company's inception (July 15, 1996) through December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION(1) -----------------------------
---------------------- SHARES
OTHER ANNUAL RESTRICTED UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS COMPENSATION STOCK AWARDS OPTIONS
--------------------------- ---- --------- ----- ------------ ------------ -----------
<S> <C> <C> <C> <C>
John G. Vondrak, D.D.S. 1997 $ 176,763 -- $2,054(3) -- 135,000
Chairman of the Board and Chief 1996 75,000 $52,000 -- -- --
Executive Officer
Robert J. Syverson (4) 1997 159,455 -- -- -- 100,000
President and Chief Operating 1996 56,000 48,000 -- (5) --
Officer
Michael W. Harlan 1997 135,049 -- -- -- --
Vice President and Chief 1996 7,688 48,000 -- (5) 90,000
Financial Officer
H. Steven Walton (4) 1997 404,447(6) 37,000 -- -- 161,850
Vice President of Business 1996 -- -- -- -- --
Development
W. Daniel Cook 1997 117,564 -- -- -- 70,000
Chief Administrative Officer 1996 10,000 48,000 -- (5) --
</TABLE>
- ------------------
(1) Excludes any perquisites and other benefits that do not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus reported for any
Named Executive Officer.
(2) Amounts shown for 1996 consist of fees earned as a consultant to the
Company. Amounts shown for 1997 include (i) fees earned as a consultant to
the Company from January 1997 to April 1997 of $62,500, $62,500, $51,021
and $40,000 for Dr. Vondrak, Mr. Syverson, Mr. Harlan and Mr. Cook,
respectively.
(3) Consists of moving expenses reimbursed by the Company in 1997. Does not
include amounts for shares of stock purchased by Dr. Vondrak in October
1996 in respect of which the Company recorded a special compensation
expense of $9,052,346 in 1996.
(4) No longer an executive officer of the Company. In May 1998, the Company
undertook a management reorganization, as follows: Dr. Vondrak was given
added responsibilities as President and the chief operating officer,
replacing Robert J. Syverson; Mr. Yavorsky, formerly head of real estate
operations, replaced H. Steven Walton as a vice president of business
development; and Mr. Cook was elected to the new position of Senior Vice
President of Practice Affiliations.
(5) Does not include amounts for shares of restricted stock purchased by
Messrs. Syverson and Cook in October 1996 and Mr. Harlan in December 1996.
For federal income tax purposes, the Company valued the shares purchased
in October 1996 at their purchase price ($1,030 for Mr. Syverson and
$1,202 for Mr. Cook) and the shares purchased by Mr. Harlan at $16,139.
For financial statement purposes, the Company recorded special
compensation expense for 1996 of $1,029,980 (Mr. Syverson), $537,873 (Mr.
Harlan) and $1,201,637 (Mr. Cook). See "Certain Relationships and Related
Party Transactions--Organization of the Company."
(6) Includes performance-based payment for successful completion of new
affiliations of orthodontists with the Company pursuant to Mr. Walton's
employment agreement with the Company. See "--Employment Agreements."
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<PAGE>
OPTION GRANTS
The following table sets forth certain information regarding grants of
stock options during 1997 to the Named Executive Officers reflected in the
Summary Compensation Table.
STOCK OPTIONS GRANTED IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES PRICE (PER EXPIRATION -----------------
GRANTED IN 1997 IN 1997 SHARE) (2) DATE 5% 10%
--------------- ------- ---------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
John G. Vondrak, D.D.S. 135,000(3) 14.6% $7.00 05/22/07 $594,305 $1,506,087
Robert J. Syverson 100,000(3) 10.8 7.00 05/22/07 440,226 1,115,620
H. Steven Walton 161,850(4) 17.5 7.00 05/22/07 712,506 1,805,631
W. Daniel Cook 70,000(3) 7.6 7.00 05/22/07 308,158 780,934
</TABLE>
- ----------------
(1) The exercise price of the options granted was equal to the fair market
value of the Common Stock on the date of grant.
(2) The potential realizable value through the expiration date of the options
has been determined on the basis of the per share market price at the time
the options were granted, compounded annually over 10 years, net of the
exercise price. These values have been determined based upon assumed rates
of appreciation and are not intended to forecast the possible future
appreciation, if any, of the price or value of the Company's Common Stock.
(3) These options were granted in April 1997 and became exercisable with
respect to 25% of the shares subject thereto on May 29, 1997. They become
exercisable in additional 25% increments on each May 29 in the period
ended May 29, 2000.
(4) Includes options to purchase 85,000 shares granted in April 1997 which
have the exercisability schedule described in Note (1) above. The
remaining options became exercisable with respect to 38,425 shares on each
of May 29, 1997 and 1998.
-8-
<PAGE>
OPTION EXERCISES AND 1997 YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
unexercised options to purchase Common Stock held by the Named Executive
Officers at December 31, 1997. None of the Named Executive Officers exercised
options in 1997.
YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
----------------- ---------------------
EXERCISABLE UNEXERCISABLE (2) EXERCISABLE UNEXERCISABLE (2)
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
John G. Vondrak 33,750 101,250 $164,531 $493,594
Robert J. Syverson 25,000 75,000 121,875 365,625
Michael W. Harlan 45,000 45,000 219,375 219,375
H. Steven Walton 59,675 102,175 290,916 498,103
W. Daniel Cook 17,500 52,500 85,313 255,938
</TABLE>
- -----------------
(1) Value of unexercised in-the-money options is calculated based upon the
difference between the option price and the closing price of the Common
Stock at year end, multiplied by the number of shares underlying the
options. The closing price of the Common Stock as reported on The American
Stock Exchange on December 31, 1997 was $11.875.
(2) All of these options become immediately exercisable upon a change in
control of the Company.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Dr. Vondrak and Messrs. Harlan
and Cook. Each of these agreements provides for an annual base salary in an
amount not less than $180,000, $130,000 and $120,000 for Dr. Vondrak, Mr. Harlan
and Mr. Cook, respectively, and entitles the employee to participate in all the
Company's compensation plans (as defined in the agreements) in which other
executive officers of the Company participate. Each of these agreements also has
a continuous three-year term, subject to the right of the Company and the
employee to terminate the employee's employment at any time. If the employee's
employment is terminated by the Company without cause (as defined in the
agreements) or by the employee with good reason (as defined in the agreements),
the employee will be entitled, during each of the years in the three-year period
beginning on the termination date, to (i) periodic payments equal to his average
annual cash compensation (as defined in the agreements) from the Company,
including bonuses, if any, during the two years (or the period of employment, if
shorter) preceding the termination date, and (ii) continued participation in all
the Company's compensation plans (other than the granting of new awards under
the Stock Plan or any other performance-based plan). Except in the case of a
termination for cause, any stock options previously granted to the employee
under the Stock Plan that have not been exercised and are outstanding as of the
time immediately prior to the date of his termination will remain outstanding
(and continue to become exercisable pursuant to their respective terms) until
exercised or the expiration of their term, whichever is earlier. If a change of
control (as defined in the agreements) of the Company occurs, the employee will
be entitled to terminate his employment at any time during the 365-day period
following that change of control and receive a lump-sum payment equal to three
times his highest annual base salary under the agreement (plus such amounts as
may be necessary to hold the employee harmless from the consequences of any
resulting excise or other similar purpose tax relating to "parachute payments"
under the Internal Revenue Code of 1986, as amended). Each employment agreement
contains a covenant limiting the employee's right to compete against the Company
for a period of one year following termination of employment.
-9-
<PAGE>
The Company had employment agreements with Messrs. Syverson and Walton.
Both agreements, as amended in February 1998, provided that if the Company
terminates the employee's employment or the employee resigns, the employee will
be entitled to a severance benefit keyed to his prior annual cash compensation
and payable ratably over the 12-month period beginning on the date of
termination. As of March 31, 1998, the severance benefit for Mr. Syverson would
have been $775,000. As of the same date, the severance benefit for Mr. Walton,
reflecting the commissions to which his employment agreement entitles him in
connection with the Company's new affiliations with orthodontists, would have
been a minimum of $1,600,000.
Mr. Walton's employment agreement obligated the Company to lend Mr.
Walton, on a nonrecourse unsecured basis, the amount necessary to enable him to
exercise options to purchase up to 76,850 shares of Common Stock at an exercise
price of $7.00 per share (a maximum of $537,950). The Company will treat this
loan (or loans) as compensation expense and ordinary income to Mr. Walton. In
that event, Mr. Walton's employment agreement would require the Company to
reimburse Mr. Walton in the amount necessary to place him in essentially the
same tax position had he purchased the optioned shares for a nominal amount in
December 1996.
-10-
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Common Stock to the cumulative total return on the Standard &
Poor's 500 Stock Index ("S&P 500") and a peer group, selected in good faith,
comprised of Castle Dental Centers, Inc., Coast Dental Services, Inc., Gentle
Dental Service Corp., Monarch Dental Corp., Omega Orthodontics, Inc.,
Orthalliance, Inc. and Orthodontic Centers of America, Inc. (the "Peer Group"),
over the period from May 22, 1997, the date of the Company's IPO, to December
31, 1997. The graph assumes that $100 was invested on May 22, 1997 in the Common
Stock at its IPO price of $7.00 per share and in each of the other two indices
and the reinvestment of all dividends, if any.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
5/22/97 6/30/97 9/30/97 12/31/97
------- ------- ------- --------
The Company $100 $129 $232 $170
S&P 500 $100 $105 $112 $116
Peer Group $100 $116 $141 $107
-11-
<PAGE>
The graph is presented in accordance with SEC requirements. Stockholders
are cautioned against drawing any conclusions from the data contained therein,
as past results are not necessarily indicative of future financial performance.
The total return on investment for the period shown for the Company, the S&P 500
and the Peer Group is based on the stock price or composite index at May 22,
1997.
The performance graph appearing above will not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and will not be deemed filed under either of those Acts except
to the extent that the Company specifically incorporates this information by
reference.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") is responsible for establishing a general compensation
policy for officers and employees of the Company, preparing any reports that may
be required relating to officer compensation and approving any increases in
director's fees. The Compensation Committee consists of Messrs. Brewton, Crosby,
Marxen, Waddell and Sherrill. The Compensation Committee was appointed in
September 1997 and did not participate in deliberations regarding executive
compensation for 1997. Prior to the closing of the Company's IPO, executive
compensation was determined by the Board of Directors as a whole. Beginning in
1998, the Compensation Committee will approve, or in some cases recommend to the
Board, remuneration arrangements and compensation plans involving the Company's
directors, executive officers and certain other employees whose compensation
exceeds specified levels. The Compensation Committee will also act on the
granting of stock options to executive officers under the Company's Stock Plan.
To assist the Compensation Committee in carrying out its responsibilities, the
Company has retained an executive compensation consulting firm to review the
compensation paid to the Chief Executive Officer and its other executive
officers, and to provide a competitive assessment as to how the components of
the Company's compensation program compare to those of companies that compete
with the Company for executive employees.
The Company's executive compensation program has been designed to assist
the Company in attracting, motivating and retaining the executive talent
necessary for the Company to maximize its return to stockholders. To this end,
this program provides competitive compensation levels and incentive pay levels
that vary based on corporate and individual performance.
The Company's compensation program for executives consists of three key
elements: a base salary; a performance-based annual bonus; and periodic grants
of stock options.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the Company
to meet the requirements of the highly competitive environment in which the
Company operates while ensuring that executive officers are compensated in a way
that advances both the short-term and long-term interests of its stockholders.
Under this approach, compensation for these officers involves a high proportion
of pay that is dependent on maximizing long-term returns to stockholders. The
annual bonus payable for 1998 will depend on the Company's financial performance
in 1998.
BASE SALARY
Base Pay is designed to be competitive with salary levels for comparable
executive positions at other companies and the Compensation Committee reviews
such comparable salary information as one factor to be considered in determining
the base pay for the Company's executive officers. Other factors the
Compensation Committee considers in determining base pay for each of the
executive officers are that officer's responsibilities, experience, leadership,
potential future contribution and demonstrated individual performance. The
Company has employment agreements with its Chief Executive Officer, two of its
other executive officers named in the Summary Compensation Table and certain
-12-
<PAGE>
of its other officers. These agreements provide for minimum base annual salaries
the Company may increase, but cannot decrease. Any increases in these base
salaries, the base salaries of the Company's other executive officers and any
changes in those salaries will be based on recommendations by the Company's
Chief Executive Officer, taking into account such factors as competitive
industry salaries, a subjective assessment of the nature of the position and the
contribution and experience of the officer. Performance for base salary purposes
will be assessed on a qualitative, rather than a quantitative, basis. No
specific performance formula or weighting of factors will be used in determining
base salary levels.
ANNUAL BONUS
For 1997, the Company determined that, for 1997, it was their preference
to compensate the executive officers primarily in the form of long-term,
equity-based compensation, and accordingly, made awards of stock options rather
than cash bonuses. Additionally, Mr. Walton was awarded a performance-based cash
bonus pursuant to his employment agreement based on the successful completion of
new affiliations of orthodontists with the Company. The Compensation Committee
expects to base future annual bonuses on the Company's financial performance and
the individual performance of the awardees, and intends to use qualitative,
rather than quantitative, factors for this purpose.
STOCK PLAN
Prior to the IPO, the stockholders and the Board of Directors of the
Company approved the Stock Plan. The objectives of the Stock Plan are to (i)
attract and retain superior personnel for positions of substantial
responsibility and (ii) provide employees, nonemployee directors, advisors and
orthodontists with an additional incentive to contribute to the success of the
Company.
In May 1997, the Company granted to Dr. Vondrak and Messrs. Cook, Walton
and Syverson options to purchase 135,000, 100,000, 161,850 and 70,000 shares of
Common Stock, respectively, at per-share exercise prices of $7.00.
Stock options align the interests of employees and stockholders by
providing value to option holders through stock price appreciation only. The
Compensation Committee expects that it will make future stock option or other
long-term equity-based incentive awards periodically at its discretion based on
recommendations of the Chief Executive Officer. Stock option grant sizes, in
general, will be evaluated by regularly assessing competitive market practices,
the overall performance of the Company the, size of previous grants and the
number of options held. In addition, the Compensation Committee may consider
factors including that executive's current ownership stake in the Company, the
degree to which increasing that ownership stake would provide the executive with
additional incentives for future performance, the likelihood that the grant of
those options would encourage the executive to remain with the Company and the
value of the executive's service to the Company. This posture with regard to
stock options is intended to focus management's efforts on maximizing
stockholder returns. The number of options granted to a particular participant
will also be based on the Company's historical financial success, its future
business plans and the individual's position and level of responsibility within
the Company, but these factors will be assessed subjectively and not weighted.
1997 CHIEF EXECUTIVE OFFICER PAY
As described above, the Compensation Committee will consider several
factors in developing an executive compensation package. For the Chief Executive
Officer, these factors will include competitive market pay practices,
performance level, experience, contributions toward achievement of strategic
goals and the overall financial and operations success of the Company.
Concurrently with the Company's IPO, Dr. Vondrak was granted options to
purchase 135,000 shares of Common Stock at an exercise price of $7.00 per share.
The Compensation Committee believes the size of this initial
-13-
<PAGE>
award was consistent with grants made to other personnel and was appropriate
given Dr. Vondrak's significant efforts in connection with the founding and
development of the Company.
Since the IPO, the Compensation Committee has taken no action respecting
Dr. Vondrak's compensation for 1997. The Company's compensation consultant has
advised the Compensation Committee that Dr. Vondrak's total compensation (base
salary and bonus) paid for the last fiscal year was within an acceptable range
of competitive market levels for compensation paid to the executive officers of
comparable companies surveyed by the consultant.
Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation practices or its
philosophy. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.
This report will not be deemed incorporated by reference by any general
statement incorporating this Proxy Statement by reference into any filing under
the Securities Act or under the Exchange Act and will not be deemed filed under
either of such statutes except to the extent that the Company specifically
incorporates this information by reference.
The Compensation Committee
Robert L. Brewton
Rod L. Crosby
Richard J. Marxen
Clyde C. Waddell
William W. Sherrill
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In September 1997, the Company established a Compensation Committee to
make recommendations with respect to salaries and bonuses to be paid to officers
and other employees of the Company. The current members of the Compensation
Committee of the Board are Messrs. Brewton, Crosby, Marxen, Waddell and Sherrill
(chairman), each of whom is a nonemployee director. Prior to completion of the
Company's IPO, matters with respect to the compensation of executive officers
and other employees of the Company were determined by the members of the Board
of Directors as a whole. Messrs. Vondrak and Cook, who were members of the Board
of Directors and executive officers of the Company, participated in
deliberations concerning compensation.
-14-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ORGANIZATION OF THE COMPANY
The following table provides certain information concerning the shares of
Class B Stock the Company issued and sold to certain of its affiliates on
October 11 and December 9, 1996:
DATE OF NUMBER PURCHASE PRICE
NAME ISSUANCE OF SHARES PER SHARE
---- -------- --------- ---------
John G. Vondrak, D.D.S........... 10/11/96 1,358,782 $.001
TriCap Funding I, L.L.C.......... 10/11/96 1,373,498 .001
Robert J. Syverson............... 10/11/96 130,809 .001
W. Daniel Cook................... 10/11/96 171,687 .001
Michael W. Harlan................ 12/09/96 76,850 .001
The number of shares of Class B Stock issued on October 11, 1996 to each
of the founding stockholders shown in the table was determined by negotiations
among the founding stockholders. The number of shares of Class B Stock issued to
Michael W. Harlan on December 9, 1996 was determined by negotiations between the
Board of Directors and Mr. Harlan. Class B Stock is convertible into Common
Stock on a share-for-share basis under certain circumstances.
The shares of Class B Stock the Company sold to Messrs. Syverson and
Harlan, and 76% of the shares the Company sold to Mr. Cook, in 1996 were issued
subject to restrictions on transfer and risk of forfeiture if employment were
terminated in certain circumstances. When the IPO closed, these restrictions and
risk lapsed with respect to 50% of the restricted shares each employee owns and
on May 29, 1998 on the remaining restricted shares each employee owns.
In connection with the acquisition of the assets of JGVAOI, one of the
founding affiliated practices, Dr. Vondrak received approximately 259,981 shares
of Common Stock and $455,000, and entered into a Service Agreement providing for
service fee payments to the Company. In July 1997, Dr. Vondrak transferred his
practice to another orthodontist affiliated with the Company. As a result, Dr.
Vondrak is no longer a party to a Service Agreement with the Company and paid no
fees to the Company pursuant to that Service Agreement. The Company used its
proceeds from the IPO and funds advanced by TriCap to reimburse JGVAOI for the
Company's organizational expenses JGVAOI had incurred on the Company's behalf.
AGREEMENTS WITH TRICAP AND TRICAP PARTNERS
TriCap Partners, an affiliate of TriCap that is co-owned by Mr. Sherrill,
a director, was the exclusive financial advisor to the Company pursuant to a
consulting agreement that expired May 29, 1997. Pursuant to that agreement and
when the IPO closed, the Company (i) paid to TriCap Partners $500,000 and (ii)
issued to TriCap Partners a warrant to purchase 180,000 shares of Common Stock
at an exercise price per share of $7.00. The Company granted TriCap Partners
certain demand and piggyback registration rights respecting the warrant shares.
TriCap partners subsequently distributed this warrant to its investors,
including Mr. Sherrill.
Pursuant to a funding agreement between TriCap and the Company, TriCap
advanced to the Company approximately $2.6 million to fund transaction costs in
connection with the affiliation with the Founding Affiliated Practices and the
IPO. The Company used proceeds from the IPO to repay these advances, together
with expenses of approximately $400,000 incurred by TriCap on behalf of the
Company with interest. The funding agreement terminated
-15-
<PAGE>
pursuant to its terms on May 29, 1997. In connection with the funding agreement,
the Company granted TriCap and Dr. Vondrak certain piggyback registration
rights.
TriCap purchased 400,000 shares of Common Stock in the IPO. TriCap
subsequently distributed all the shares of the Company held by it, including
these shares, to its investors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC and The American Stock
Exchange initial reports of ownership and reports of changes in ownership of
Common Stock. Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all such reports they
file.
Based solely on a review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all its directors and executive officers during 1997
complied on a timely basis with all applicable filing requirements under Section
16(a) of the Exchange Act.
REPORT ON FORM 10-K
The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1997 with the SEC on March 31, 1998. A copy of that report, as
amended by a Form 10-K/A filed with the SEC on April 30, 1998 and a Form 10-K/A
filed with the SEC on May 22, 1998, including a list describing any exhibits not
contained therein, may be obtained without charge by any stockholder of the
Company. Written requests for copies of the report should be directed to the
Corporate Secretary, Apple Orthodontix, Inc. 2777 Allen Parkway, Suite 700,
Houston, Texas 77019.
ADVANCE NOTICE REQUIRED FOR STOCKHOLDER
NOMINATIONS AND CERTAIN PROPOSALS
The Bylaws of the Company require timely advance written notice of
stockholder nominations of director candidates and of certain other proposals to
be presented at an annual meeting of stockholders. In the case of director
nominations by stockholders, the Bylaws require that 90 days' advance written
notice be delivered to the Company's Secretary at the Company's executive
offices at the address set forth on the first page of this Proxy Statement,
which should set forth for each person the stockholder proposes to nominate for
election or re-election as a director, (a) the name and address of such person,
(b) the information with respect to such person required to be provided in a
proxy statement prepared pursuant to Regulation 14A of the Exchange Act and (c)
a notarized affidavit of such person to the effect that such person is eligible
for election and will serve as a director if elected. The stockholder giving the
notice must also include the name and address, as they appear on the Company's
books, of such stockholder and of each person with whom such stockholder is
acting in concert and the number of shares of each class of voting stock of the
Company that are then beneficially owned by such stockholder and each person
with whom such stockholder is acting in concert.
In the case of a proposal to amend or supplement the Certificate of
Incorporation of the Company by a stockholder at an annual meeting, the Bylaws
require that 90 days' advance written notice be delivered to the Company's
Secretary at the Company's executive offices, which should set forth (a) the
text of the amendment or supplement desired to be brought before the annual
meeting, (b) evidence, reasonably satisfactory to the Secretary of the Company,
of such stockholder's status as such and of the number of shares of each class
of the capital stock of the Company of which such stockholder is the beneficial
owner, (c) a list of the names of other beneficial owners of shares of the
capital stock of the Company, if any, with whom such stockholder is acting in
concert and of the number of shares of each class of the capital stock of the
Company beneficially owned by each such beneficial owner, and (d) an opinion of
counsel, which counsel and the form and substance of which opinion shall be
reasonably satisfactory to the Board of Directors of the Company, to the effect
that the Certificate of Incorporation of the Company, as proposed to be so
-16-
<PAGE>
amended or supplemented, would not be in conflict with the laws of the State of
Delaware. A copy of the Bylaws of the Company setting forth the requirements for
the nomination of director candidates by stockholders and the requirements for a
proposal to amend or supplement the Certificate of Incorporation of the Company
by stockholders may be obtained from the Company's Corporate Secretary at the
address indicated on the first page of this Proxy Statement.
STOCKHOLDER PROPOSALS FOR 1999 MEETING
In order to be included in the Company's proxy material for its 1999
annual meeting of stockholders, eligible proposals of stockholders intended to
be presented at the annual meeting must be received by the Company on or before
February 22, 1999 (directed to the Corporate Secretary of the Company at the
address indicated on the first page of this Proxy Statement).
By Order of the Board of Directors,
W. Daniel Cook
SECRETARY
June 24, 1998
-17-
<PAGE>
P
R APPLE ORTHODONTIX, INC.
O
X CLASS A COMMON STOCK
Y
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JULY 27, 1998
The undersigned hereby appoints W. Daniel Cook and Michael W. Harlan,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to vote all shares of Class A Common Stock, par value
$.001 per share, that the undersigned is entitled to vote at the Annual Meeting
of Stockholders of Apple Orthodontix, Inc. (the "Company") to be held on Monday,
July 27, 1998, in the Plaza Room, Riviana Building 2777 Allen Parkway, Houston,
Texas 77019, at 9:00 a.m. Houston time, or at any adjournment thereof, hereby
revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS NAMED BELOW AND FOR THE APPROVAL OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1998.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual
Meeting.
1. ELECTION OF DIRECTORS, NOMINEES:
Rod L. Crosby, Jr. and Richard J. Marxen, as directors
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s): __________________
___________________________________________________________________________
2. APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly come
before the meeting.
Date: _______________________ , 1998
(Signature) __________________________
(Signature) __________________________
Sign exactly as name appears hereon. (Joint
owners should each sign. When signing as
attorney, executor, officer, administrator,
trustee, or guardian, please give full title as
such.)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
<PAGE>
P
R APPLE ORTHODONTIX, INC.
O
X CLASS B COMMON STOCK
Y
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JULY 27, 1998
The undersigned hereby appoints W. Daniel Cook and Michael W. Harlan, jointly
and severally, proxies, with full power of substitution and with discretionary
authority, to vote all shares of Class B Common Stock, par value $.001 per
share, that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Apple Orthodontix, Inc. (the "Company") to be held on Monday,
July 27, 1998, in the Plaza Room, Riviana Building 2777 Allen Parkway, Houston,
Texas 77019, at 9:00 a.m. Houston time, or at any adjournment thereof, hereby
revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED
FOR THE APPROVAL OF ARTHUR ANDERSEN LLP AS THE COMPANY'S ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meet
ing.
1. Holders of Class B Common Stock are not entitled to vote on Proposal 1.
2. APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly come
before the meeting.
Date: ______________________, 1998
(Signature) _______________________
(Signature) _______________________
Sign exactly as name appears hereon. (Joint
owners should each sign. When signing as
attorney, executor, officer, administrator,
trustee, or guardian, please give full title as
such.)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
