<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] 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
-----------------
ORTHALLIANCE, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ORTHALLIANCE, INC.
21535 HAWTHORNE BOULEVARD, SUITE 200
TORRANCE, CALIFORNIA 90503
April 29, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of OrthAlliance, Inc. ("OrthAlliance") to be held on Thursday,
June 3, 1999 at the Torrance Hilton Hotel, 21333 Hawthorne Blvd., Torrance,
California 90503. The meeting will begin promptly at 9:00 a.m., local time.
The items of business to be addressed at the Annual Meeting are listed
in the attached Notice of Annual Meeting of Stockholders and are more fully
described in the Proxy Statement provided herewith. In addition to these
matters, members of management will report on the Company's operations,
followed by a period for questions and discussion.
Management hopes that you will be able to attend the Annual Meeting.
However, whether or not you plan to attend the Annual Meeting, please date,
sign, and return your proxy card in the enclosed envelope as soon as possible
to ensure that your shares will be represented and voted at the Annual Meeting.
If you do attend the Annual Meeting, you may vote your shares in person even
though you have previously signed and returned your proxy.
On behalf of your Board of Directors, thank you for your continued
support and interest in OrthAlliance.
Sincerely,
Sam Westover
President and
Chief Executive Officer
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
OrthAlliance, Inc. (the "Company") will be held at the Torrance Hilton Hotel,
21333 Hawthorne Boulevard, Torrance, California 90503 on Thursday, June 3, 1999
at 9:00 a.m., local time, for the following purposes as more fully described in
the Proxy Statement provided herewith:
(1) To elect three (3) directors to serve until the 2002 Annual
Meeting of Stockholders;
(2) To consider and act upon a proposal to amend the 1997
Non-Employee Director Stock Plan to provide that each
director who is not a full-time employee of the Company shall
receive an automatic grant of 10,000 options to purchase
Class A Common Stock upon election or appointment of the
director (pro-rated to the next annual meeting if appointed
mid-term) and 10,000 options to purchase Class A Common Stock
at the end of each year such director serves as a member of
the Board of Directors in lieu of discretionary grants of
options to any directors as determined by the Compensation
Committee and to change the name of such plan to the "1997
Director Stock Plan";
(3) To consider and act upon a proposal to amend the 1997
Orthodontist Stock Option Plan to expand the group of
eligible participants in the plan to include consultants of
the Company and to increase the number of shares of Class A
Common Stock authorized to be issued pursuant to grants under
the 1997 Orthodontist Stock Option Plan from 100,000 to
300,000;
(4) To consider and act upon a proposal to amend the 1997
Employee Stock Option Plan to increase the number of shares
of Class A Common Stock authorized to be issued pursuant to
grants under the 1997 Employee Stock Option Plan from
1,500,000 to 2,000,000.
(5) To ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors; and
(6) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only the holders of record of Class A Common Stock and/or Class B
Common Stock of the Company at the close of business on April 19, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A list of stockholders as of the close of business on April 19, 1999,
will be available at the Annual Meeting for examination by any stockholder, his
agent, or his attorney.
By Order of the Board of Directors,
Paul H. Hayase
Senior Vice President,
General Counsel and Secretary
Torrance, California
April 29, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED AND
ADDRESSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND
VOTE YOUR SHARES IN PERSON.
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ORTHALLIANCE, INC.
21535 HAWTHORNE BOULEVARD, SUITE 200
TORRANCE, CALIFORNIA 90503
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of
OrthAlliance, Inc. (the "Company") will be held on Thursday, June 3, 1999, for
the purposes set forth in the Notice of Annual Meeting of Stockholders attached
hereto and as described herein. The enclosed form of proxy is solicited by the
Board of Directors of the Company (the "Board" or "Board of Directors") and the
cost of the solicitation will be borne by the Company. When a proxy is properly
executed and returned, the shares of Class A Common Stock, $.001 par value per
share ("Class A Common Stock"), and/or Class B Common Stock, $.001 par value
per share ("Class B Common Stock") (Class A Common Stock and Class B Common
Stock are sometimes hereinafter referred to collectively, as the "Common
Stock") represented thereby will be voted as directed at the Annual Meeting or
any adjournment thereof or, if no direction is indicated, such shares of Common
Stock will be voted in favor of the proposals set forth in the Notice of Annual
Meeting of Stockholders attached hereto (collectively, the "Proposals") and any
other matter that may properly come before the Annual Meeting. Any Stockholder
giving a proxy has the power to revoke it at any time before it is voted. All
proxies delivered pursuant to this solicitation are revocable at any time at
the option of the persons executing them by giving written notice to the
Secretary of the Company, by delivering a later-dated proxy to the Company or
by voting in person at the Annual Meeting.
Only holders of Common Stock of record as of the close of business on
April 19, 1999 (the "Record Date") will be entitled to vote at the Annual
Meeting. As of the Record Date, the Company had outstanding 13,099,021 shares
of Class A Common Stock and 249,292 shares of Class B Common Stock. The Class A
Common Stock and Class B Common Stock vote together as a class on all
Proposals. Holders of Common Stock of record as of the close of business on the
Record Date are entitled to cast one vote for each share held. No cumulative
voting rights are authorized and dissenters' rights for Stockholders are not
applicable to the matters being proposed. It is anticipated that this Proxy
Statement and the accompanying proxy card will first be mailed to holders of
Common Stock of the Company on or about April 30, 1999.
The presence in person or by proxy of holders of a majority of the
shares of Common Stock outstanding on the Record Date will constitute a quorum
for the transaction of business at the Annual Meeting or any adjournment
thereof. The affirmative vote of a plurality of the shares of Common Stock
present in person or by proxy and entitled to vote is required to elect
directors. With respect to the other Proposals and any other matter that may
properly come before the Annual Meeting, the approval of such Proposals or such
other matter requires the affirmative vote of a majority of the shares of
Common Stock present in person or by proxy and entitled to vote thereon. The
New York Stock Exchange does not permit any of its member organizations to
allow brokers who hold shares of Common Stock in street name to exercise
discretionary voting power with respect to any proposal that authorizes the
issuance of stock or options to purchase stock to directors, officers, or
employees in an amount which exceeds 5% of the total amount of the class of
stock outstanding. In the aggregate, the Proposals to amend the 1997
Orthodontist Stock Option Plan and the 1997 Employee Stock Option Plan would
exceed 5% of the total amount of the Class A Common Stock outstanding.
Therefore, with respect to these Proposals, brokers
<PAGE> 5
may not exercise discretionary voting power ("broker non-votes"); provided,
however, that brokers may exercise discretionary voting power for the remaining
Proposals if the member organization has not received voting instructions by the
date specified herein and the member organization has no knowledge of any
contest as to the action and the action is adequately disclosed to the
shareholders. Broker non-votes will not be counted as votes for or against the
Proposals. Abstentions with respect to a Proposal are counted for purposes of
establishing a quorum. If a quorum is present, abstentions have no effect on the
outcome of any vote on any Proposal, including the election of directors.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation
provides for up to nine (9) directors and divides the Board into three classes
with the directors in each class serving a term of three years. The Company's
Amended and Restated Bylaws (the "Bylaws") provide for the Company's Board of
Directors (the "Board") to determine the actual number of directors and there
are currently eight (8) directors serving on the Board. The terms of Randall K.
Bennett, G. Harry Durity and Randall A. Schmidt, the Class II members, expire
at the Annual Meeting. Dr. Schmidt has declined to stand for re-election.
Messrs. Bennett and Durity have been nominated by the Nominating Committee of
the Board to stand for re-election, and Dr. Raymond G. W. Kubisch has been
nominated for election, as directors at the Annual Meeting to serve until the
2002 Annual Stockholders' Meeting or until their successors are duly elected
and qualified.
Except as otherwise provided herein, the proxy solicited hereby cannot
be voted for the election of a person to fill a directorship for which no
nominee is named in this Proxy Statement. The Board has no reason to believe
that any director nominee will be unavailable to serve as a director, if
elected. However, if at the time of the Annual Meeting any nominee should be
unable to serve or, for good cause, will not serve, the persons named proxies
will vote as recommended by the Board to elect a substitute nominee recommended
by the Board. In no event, however, will a proxy be voted to elect more than
three (3) directors.
Set forth below is information concerning the incumbent directors and
the nominees for election or reelection to the Board to serve until the 2002
Annual Meeting of Stockholders or until their successors are duly elected and
qualified. Such information includes for the nominees, and for each of the
incumbent directors, certain biographical information, a brief description of
each such individual's principal occupation and business experience during the
past five years, and directorships of companies (other than the Company)
presently held, which information has been provided by the respective
individuals.
NOMINEES FOR ELECTION -- CURRENT TERM EXPIRING 1999
RANDALL K. BENNETT, D.D.S., M.S. (age 43), has served as a Director of
the Company since its inception in October 1996. Dr. Bennett has practiced
orthodontics in Salt Lake City, Utah since 1989 and he practiced in Beverly
Hills, California from 1988 to 1989. Dr. Bennett graduated from Loma Linda
University in 1988 with an M.S. degree in orthodontics and from the University
of Alberta in 1981 with a D.D.S. degree.
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G. HARRY DURITY (age 52), has served as a Director of the Company
since December 1998. Since August 1994, Mr. Durity has served as Corporate Vice
President/Worldwide Business Development for Automatic Data Processing, Inc., a
payroll service company. From 1992 to August 1994, Mr. Durity was Senior Vice
President/Corporate Development for Revlon Consumer Products Company, a
personal care products company, and prior thereto was Vice President/Corporate
Development for RJR Nabisco, Inc., a consumer products company.
RAYMOND G.W. KUBISCH, D.D.S., M.S.D., (age 54), has practiced
orthodontics in the Seattle, Washington area since 1976. Dr. Kubisch graduated
from Indiana University in 1968 with a Bachelor of Science in Marketing, and in
1974 graduated with a D.D.S. degree from Indiana University as Valedictorian.
In 1976, Dr. Kubisch received his M.S.D. and Certificate in Orthodontics from
the University of Washington. From 1986 to 1993, Dr. Kubisch was an Assistant
Clinical Professor for the University of Washington.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RANDALL K. BENNETT, G.
HARRY DURITY, AND RAYMOND G.W. KUBISCH TO HOLD OFFICE UNTIL THE 2002 ANNUAL
MEETING OF STOCKHOLDERS OR UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
INCUMBENT DIRECTORS -- TERM EXPIRING 2000
CRAIG L. MCKNIGHT (age 48) has been a director of the Company since
completion of the initial public offering of Class A Common Stock (the
"Offering") in August 1997. Since March 1995, Mr. McKnight has served as
Executive Vice President of Magellan Health Services ("Magellan"), a specialty
managed care company, which was previously known as Charter Medical
Corporation. Mr. McKnight practiced public accounting with Coopers & Lybrand,
LLP from 1985 through 1995. From June 1994 to March 1995, Mr. McKnight was
responsible for the Health Care Practice of Coopers & Lybrand, L.L.P. in
Philadelphia, Pennsylvania, and prior thereto was responsible for the Health
Care Practice of Coopers & Lybrand, L.L.P. in California.
SAM WESTOVER (age 43) has served as a director, President and Chief
Executive Officer of the Company since October 1996. From August 1993 until
July 1996, Mr. Westover served as President and Chief Executive Officer of
SysteMed Inc., a pharmacy benefit management company, where he also served as a
director from July 1992 until February 1997. From January 1993 until August
1993, Mr. Westover served as Senior Vice President, Chief Financial Officer and
Treasurer of Wellpoint Health Networks, Inc., a health insurance company. Prior
to joining Wellpoint, Mr. Westover served as Chief Financial Officer and Senior
Vice President of Corporate Financial Services of Blue Cross of California, a
position to which he was named in May 1990.
JONATHAN E. WILFONG (age 50) has served as a director and Chairman of
the Board since May 1997. Mr. Wilfong's term as Chairman will expire after the
1999 Annual Meeting of Stockholders. Mr. Wilfong served as an executive
consultant to the Company from its inception until September 1997 and served as
consultant to US Orthodontic Care, Inc., a predecessor to the Company, from
June 1996 to August 1997. Mr. Wilfong is the founder and a principal of
Newfound Capital Associates, an investment banking advisory firm founded in
1996 that specializes in advising high growth businesses on capital formation
strategies and acquisition transactions. Mr. Wilfong is a Certified Public
Accountant, and from 1983 to 1996 was a partner with Price Waterhouse LLP in
Atlanta, Georgia and Greenville, South Carolina.
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INCUMBENT DIRECTORS-TERM EXPIRING 2001
DOUGLAS D. DURBIN, D.M.D., M.S.D. (age 44) has been a director of the
Company since the completion of the Offering in August 1997. Dr. Durbin has
served as President of The Kentucky Center for Orthodontics, P.S.C. and its
predecessors since 1983. Dr. Durbin is a member of the American Association of
Orthodontics, the American Dental Association and the Kentucky Association of
Orthodontists, a Diplomate of the American Board of Orthodontics and has served
as President, Treasurer, and Secretary of the Bluegrass Dental Society. Dr.
Durbin graduated from the University of Kentucky College of Dentistry with a
D.M.D. degree in 1978 and received his M.S.D. and Certificate in Orthodontics
from the University of Kentucky College of Dentistry in 1983.
W. DENNIS SUMMERS (age 50) has been a director of the Company since
completion of the Offering in August 1997. Mr. Summers will serve as Chairman
of the Board effective after the 1999 Annual Meeting of Stockholders. Since
1984, Mr. Summers has served as a principal of Roberts, Isaf & Summers, P.C.
(and its predecessor firms), a law firm located in Atlanta, Georgia. Mr.
Summers specializes in corporate and business matters.
With the exception of Mr. Westover, none of the directors are, or have
been, employed by any parent, subsidiary or other affiliate of the Company;
provided, however, that Dr. Bennett entered into a part-time employment
arrangement with the Company effective February 20, 1998. Mr. Wilfong received
compensation under consulting arrangements with the Company that expired in
September 1997. There are no family relationships between any directors or
executive officers.
MEETINGS OF THE BOARD OF DIRECTORS
During 1998, the Board met five (5) times (including regularly
scheduled and special meetings). All of the directors attended at least 75% of
all meetings of the Board held during the period that they served as directors,
except for Craig McKnight who attended 60% of the meetings. The Board also
acted by written consent on nine (9) occasions.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The Audit Committee currently consists of Messrs.
McKnight. Summers, and Wilfong. Mr. Wilfong is chairman of the Audit Committee.
The Audit Committee is responsible for (a) recommending to the Board the firm
to be employed as independent auditors of the Company, and (b) meeting with the
Company's independent auditors at least annually to review (i) the scope of
audit and non-audit assignments and related fees, (ii) accounting principles
used by the company in financial reporting, and (iii) the adequacy of the
Company's internal control procedures. During 1998, the Audit Committee held
one (1) meeting.
COMPENSATION COMMITTEE. The Compensation Committee currently consists
of Messrs. Wilfong, McKnight and Summers. Mr. Summers is chairman of the
Compensation Committee. The Compensation Committee is responsible for (a)
reviewing, approving, recommending and reporting to the Chief Executive Officer
and the Board of Directors matters regarding the compensation of the Company's
executive officers and other key employees and compensation levels or plans
affecting the compensation of the Company's other employees and (b)
administering the Company's 1997 Employee Stock Option Plan, 1997 Non-Employee
Director Stock Plan and 1997 Orthodontist Stock Plan. During
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1998, the Compensation Committee held one (1) meeting and acted by unanimous
written consent on twenty-eight (28) occasions.
EXECUTIVE COMMITTEE. The Executive Committee currently consists of
Messrs. Westover and Wilfong and Drs. Bennett and Durbin. The Executive
Committee is authorized by the Board to take all action which may be delegated
by the Board under the Delaware General Corporation Law. During 1998, the
Executive Committee acted by unanimous written consent on three (3) occasions.
NOMINATING COMMITTEE. The Nominating Committee currently consists of
Messrs. Summers, Westover and Wilfong. The Nominating Committee is responsible
for (a) recommending candidates for election to the Board, and (b) examining
the performance of incumbent directors and making recommendations concerning
the retention of such directors. During 1998, the Nominating Committee held one
(1) meeting and acted by unanimous written consent on one occasion.
The Bylaws require an advance notice procedure for the nomination,
other than by or at the direction of the Board of Directors or the Nominating
Committee, of candidates for election as directors (the "Nomination
Procedure"), as well as for other stockholder proposals to be considered at
annual stockholders' meetings. Notice to the Company from a stockholder who
proposes to nominate a person at a meeting for election as a director generally
must be given not less than 120 nor more than 150 days prior to the anniversary
of the date notice of the annual meeting of stockholders was given in the
preceding year and must contain: (i) the name and record address of the
stockholder who intends to make the nomination; (ii) the name, age and
residence address of the nominee; (iii) the principal occupation or employment
of the nominee; (iv) the class, series and number of shares held of record,
beneficially and by proxy, by the stockholder and the nominee as of the record
date of such meeting (if such record date is publicly available) and as of the
date of such notice; and (v) such other information relating to the nominee
proposed by such stockholder as is required to be included if the Company is
then subject to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including the written consent of each nominee to
be named in the proxy statement and to serve as a director of the Company if so
elected. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the Nomination Procedure.
Similar advance notice must be given of any other business which a stockholder
proposes to bring before an annual meeting of stockholders. Such notice must
contain (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class, series and number of shares of the Company's stock which are held of
record, beneficially and by proxy by the stockholder as of the record date of
such meeting (if such record date is publicly available) and as of the date of
such notice, (iv) a description of all arrangements or understandings between
the stockholder and any other person or persons (naming such person or persons)
in connection with the proposing of such business by the stockholder, and (v)
any material interest of the stockholder in such business. The purpose of
requiring advance notice is to afford the Board an opportunity to consider the
qualifications of the proposed nominees or the merits of other stockholder
proposals and, to the extent deemed necessary or desirable by the Board, to
inform stockholders about those matters. Although the advance notice provisions
do not give the Board any power to approve or disapprove stockholder
nominations or proposals for action by the Company, they may have the effect of
precluding a contest for the election of directors or the consideration of
stockholder proposals if the procedures established by the Bylaws are not
followed and the effect of discouraging or deterring a third party from
conducting a solicitation of proxies to elect its
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own slate of directors or to approve its own proposals, without regard to
whether consideration of such nominees or proposals might be harmful or
beneficial to the Company and its stockholders.
COMPENSATION OF DIRECTORS
Members of the Board are reimbursed for expenses incurred in
connection with attendance at Board and committee meetings. Pursuant to the
1997 Non-Employee Director Stock Plan, the Company made the following grants of
options during 1998 to directors: Dr. Schmidt, Dr. Bennett, Dr. Durbin and Mr.
Wilfong each received options to acquire 15,000 shares of Class A Common Stock,
Messrs. McKnight and Summers each received options to acquire 10,000 shares of
Class A Common Stock and Mr. Durity received options to acquire 5,000 shares of
Class A Common Stock. If the Stockholders approve the amendment to the 1997
Non-Employee Director Stock Plan, as described in this Proxy Statement, each
director, who is not a full-time employee of the Company, will automatically
receive options to acquire 10,000 shares of Class A Common Stock at an exercise
price of 100% of the fair market value of the Company's Class A Common Stock at
the time of election or appointment to the Board, and options to acquire 10,000
shares of Class A Common Stock at an exercise price of 100% of the fair market
value on the date of the annual meeting of the Stockholders for each year in
which a director serves as a member of the Board of Directors. Directors
appointed mid-term will receive a prorated initial grant of options, as
determined by multiplying 10,000 by a fraction, the numerator of which is the
number of months remaining in the director's term until the next annual meeting
of stockholders and the denominator of which is 12.
PROPOSAL 2:
APPROVAL OF THE AMENDMENT OF THE
1997 NON-EMPLOYEE DIRECTOR STOCK PLAN
The primary purpose of the Company's 1997 Non-Employee Director Stock
Plan, as amended (the "Director Plan"), which was previously approved by the
Board of Directors and the Stockholders, is to attract and retain directors of
the Company. The Board has adopted and recommends that the Stockholders approve
amendments to the Director Plan to change the name of the Director Plan to the
"Director Stock Option Plan" and provide that the Compensation Committee will
no longer have authority and discretion to administer the Director Plan and
provide for automatic formula grants of options to acquire 10,000 shares of
Class A Common Stock to directors who are not full-time employees of the
Company ("Eligible Directors") upon election or appointment to the Board
(subject to pro-ration if appointed mid-term) and options to acquire 10,000
shares of Class A Common Stock for each year served as director (the "Director
Plan Amendment"). All other provisions of the Director Plan will remain
unchanged.
The material features of the Director Plan are described below.
ADMINISTRATION
Currently the Director Plan is administered by the Compensation
Committee (composed solely of Non-Employee Directors as defined pursuant to
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) and provides for discretionary grants to any director.
Subject to the provisions of and in accordance with the Director Plan, the
Compensation
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Committee currently has the power to (i) grant options, (ii) determine those
directors to whom options will be granted, (iii) interpret the Director Plan,
(iv) promulgate rules and regulations relating to the Director Plan, and (v)
make all other determinations and take all other actions necessary or desirable
for the administration of the Director Plan. As amended, the Director Plan will
be a self-governing "formula" plan. Upon election or appointment, each Eligible
Director will receive options to purchase 10,000 shares of Class A Common Stock
at an exercise price of 100% of the fair market value of the Class A Common
Stock on the date of election or appointment and will receive additional
options to purchase 10,000 shares of Class A Common Stock at an exercise price
of 100% of the fair market value of the Class A Common Stock on the date of the
annual meeting of stockholders for each year in which such director remains a
director of the Company. Eligible Directors appointed mid-term will receive a
pro-rated initial grant of options, as determined by multiplying 10,000 by a
fraction, the numerator of which is the number of months remaining until the
next annual meeting of stockholders, and the denominator of which is 12.
TERMINATION AND AMENDMENT
The Board has the right to amend the Director Plan at any time and
from time to time and the right to terminate the Director Plan at any time,
provided, however, that no such termination shall terminate any outstanding
options granted under the Director Plan and provided further that no amendment
to the Director Plan shall, without the written consent of a participant,
adversely affect the rights of such participant with respect to any outstanding
options granted under the Director Plan. No amendment to the Director Plan may
be made without stockholder approval if stockholder approval is required for
options granted thereunder to qualify or continue to qualify for exemption
under Rule 16b-3 of the Exchange Act.
ELIGIBILITY
The class of persons eligible to participate in the Director Plan, as
amended, will consist of all Eligible Directors of the Company.
STOCK SUBJECT TO THE PLAN
As of April 19, 1999, 100,000 shares of Class A Common Stock were
reserved for issuance upon exercise of options previously granted under the
Director Plan and 100,000 shares of Class A Common Stock remained available for
the grant of future options under the Director Plan. Current directors who are
not executive officers have received options to acquire 100,000 shares of Class
A Common Stock pursuant to the Director Plan.
TERMS
All options under the Director Plan are non-qualified stock options
("NSOs"). Under the Director Plan, as amended, the Board will have no
discretion as to persons to whom options are granted, the timing of grants,
number of shares subject to any option, the exercise price of any option, the
periods during which any option may be exercised or the expiration date of any
option. The exercise price will be as described above, options will vest on the
first anniversary of the date of the grant and the exercise period will be ten
years from the date of the grant. Prior to the amendment, the Compensation
Committee had the authority to grant options to any director and set the
exercise price of options granted;
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provided, however, that the exercise price of a share of Class A Common Stock
subject to a NSO could not be less than the fair market value of a share of
Class A Common Stock on the date granted. The Compensation Committee
established the exercise period for each option grant, which period could not
exceed ten years.
An option granted under the Director Plan cannot be sold or
transferred except by will or the laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
A participant in the Director Plan is not taxed on the grant of an
option. Upon exercise, however, the participant generally recognizes ordinary
income equal to the excess, if any, of the fair market value of the shares of
stock transferred on the date of the exercise over the exercise price. The
Company is generally entitled to an income tax deduction in the year of
exercise in an amount equal to the ordinary income recognized by the
participant. The Company's deduction, however, is subject to a $1 million
limitation on the deduction of certain employee remuneration under Section
162(m) of the Internal Revenue Code, unless an exemption for performance-based
compensation under such section applies. Depending upon the period that the
shares of stock were held after exercise, the sale or other taxable disposition
of shares acquired through the exercise of an option generally will result in a
short-term or long-term capital gain or loss equal to the difference between
the amount realized on such disposition and the fair market value of the shares
when the option was exercised.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE DIRECTOR PLAN
AMENDMENT.
PROPOSAL 3:
APPROVAL OF THE AMENDMENT OF
THE 1997 ORTHODONTIST STOCK OPTION PLAN
The primary purpose of the Company's 1997 Orthodontist Stock Option
Plan (the "Orthodontist Plan"), which was previously approved by the Board and
the Stockholders, is to advance the interests of the Company, its subsidiaries
and its stockholders by affording certain Allied Orthodontists (as defined
below) an opportunity to acquire or increase their proprietary interests in the
Company. The Board has adopted and recommends that the Stockholders approve
amendments to the Orthodontist Plan to change the class of person eligible to
participate in the Orthodontist Plan from only Allied Orthodontists to include
consultants of the Company who engage in recruiting prospective Allied
Orthodontists and increase the number of shares subject to the Orthodontist
Plan from 100,000 shares to 300,000 shares (the "Orthodontist Plan
Amendments"). All other provisions of the Orthodontist Plan remain unchanged.
The material features of the Orthodontist Plan are described below.
ADMINISTRATION
The Orthodontist Plan is administered by the Compensation Committee.
The Compensation Committee has the power to determine the Allied Orthodontists
to whom options to purchase shares of Class A Common Stock will be granted, the
number of shares of Class A Common Stock subject to each option and such other
matters as are specified in the Orthodontist Plan. As amended, the
-8-
<PAGE> 12
Compensation Committee will have the power to determine the Allied
Orthodontists and consultants to whom options to purchase shares of Class A
Common Stock will be granted, the number of such shares subject to each option
and such other matters as are specified in the Orthodontist Plan. To the extent
not inconsistent with the provisions of the Orthodontist Plan, the Compensation
Committee may give an option holder an election to surrender an option in
exchange for the grant of a new option, and shall have the authority to amend
or modify an outstanding stock option agreement or to waive any provision
thereof, provided that the option holder consents to such action. The
Compensation Committee establishes the exercise period for each option grant,
which period may not exceed five years.
TERMINATION AND AMENDMENT
The Orthodontist Plan may be amended by the Board from time to time to
the extent that the Board deems necessary or appropriate. Stockholder approval
is required for any amendment (a) to materially increase the number of shares
of stock reserved for issuance, (b) to materially change the class of persons
eligible to receive options or (c) to otherwise materially increase the
benefits accruing to participants. The Board may suspend the granting of
options under the Orthodontist Plan and may terminate the Orthodontist Plan at
any time.
ELIGIBILITY
Prior to amendment, the class of persons eligible to participate in
the Orthodontist Plan are determined by the Compensation Committee, in its sole
discretion, and consist of certain Allied Orthodontists. An "Allied
Orthodontist" is an orthodontist or dentist who (i) holds an equity interest in
an Allied Practice (as defined below), or (ii) is a party to an existing
employment agreement with an Allied Practice. An "Allied Practice" is a
professional business entity that provides orthodontic or dental services to
the public and is a party to an existing service agreement or consulting and
business services agreement with the Company, whereby the Company provides
management or consulting services to such entity in exchange for a service or
consulting fee. An Allied Orthodontist may be eligible to participate in the
Orthodontist Plan if the Compensation Committee determines, in its sole
discretion, that such Allied Orthodontist recruited or referred an orthodontist
or dentist to the Company who consummates a business combination with the
Company or a subsidiary and becomes an Allied Orthodontist. As amended, the
class of persons eligible to participate in the Orthodontist Plan will be
determined by the Compensation Committee, in its sole discretion, and shall
consist of Allied Orthodontists and consultants engaged by the Company to
recruit prospective Allied Orthodontists.
STOCK SUBJECT TO THE PLAN
An aggregate of 100,000 shares of Class A Common Stock has been
reserved for issuance upon the exercise of options under the Orthodontist Plan.
As of April 19, 1999, 100,000 shares of Class A Common Stock were reserved for
issuance upon exercise of options previously granted under the Orthodontist
Plan and no shares of Class A Common Stock remained available for options yet
to be granted under the Orthodontist Plan. At April 19, 1999, one (1) Allied
Orthodontist, also a director of the Company, had been granted options to
purchase 107,753 shares of Class A Stock under the Orthodontist Plan (subject
to Stockholder approval of the Orthodontist Plan Amendments with respect to
7,753 of such options). As amended, an aggregate of 300,000 shares of Class A
Common Stock will be reserved for issuance upon the exercise of options under
the Orthodontist Plan.
-9-
<PAGE> 13
TERMS
All options under the Orthodontist Plan are NSOs. The exercise price
of the Class A Common Stock subject to each option shall be the same as the
Closing Stock Price (as hereinafter defined) used for the Allied Orthodontist
that the participant in the Orthodontist Plan recruited or referred to the
Company. The "Closing Stock Price" shall mean the price used to determine the
number of shares of Class A Common Stock that a recruited or referred Allied
Orthodontist received upon the closing of the affiliation of such Allied
Orthodontist with the Company.
An option granted under the Orthodontist Plan cannot be sold or
transferred except by will or the laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
A participant in the Orthodontist Plan is not taxed on the grant of an
option. Upon exercise, however, a participant generally recognizes ordinary
income equal to the excess, if any, of the fair market value of the shares of
stock transferred on the date of the exercise over the exercise price. The
Company is generally entitled to an income tax deduction in the year of
exercise in an amount equal to the ordinary income recognized by the
participant. The Company's deduction, however, is subject to a $1 million
limitation on the deduction of certain employee remuneration under Section
162(m) of the Internal Revenue Code unless an exemption for performance-based
compensation under such section applies. Depending upon the period that the
shares of stock were held after exercise, the sale or other taxable disposition
of shares acquired through the exercise of an option generally will result in a
short-term or long-term capital gain or loss equal to the difference between
the amount realized on such disposition and the fair market value of the shares
when the option was exercised.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
ORTHODONTIST PLAN AMENDMENTS.
PROPOSAL 4:
APPROVAL OF THE AMENDMENT OF THE 1997
EMPLOYEE STOCK OPTION PLAN
The primary purpose of the 1997 Employee Stock Option Plan, as amended
(the "Employee Plan"), which was previously approved by the Board and the
Stockholders, is to advance the interests of the Company, its subsidiaries and
its stockholders by affording certain officers and employees of the Company and
its subsidiaries an opportunity to acquire or increase their proprietary
interests in the Company. The Board has adopted and recommends that the
Stockholders approve an amendment to the Employee Plan to increase the number
of shares of Class A Common Stock which may be issued subject to options
granted under the Employee Plan from 1,500,000 to 2,000,000, subject to certain
anti-dilution provisions set forth in the Employee Plan (the "Employee Plan
Amendment"). All other provisions of the Employee Plan will remain unchanged.
The material features of the Employee Plan are described below.
-10-
<PAGE> 14
ADMINISTRATION
The Employee Plan is administered by the Compensation Committee. The
Compensation Committee has the power to (i) grant options in accordance with
the Employee Plan, (ii) determine those persons to whom options will be
granted, subject to the provisions of the Employee Plan, (iii) interpret the
Employee Plan, (iv) promulgate rules and regulations relating to the Employee
Plan, and (v) make all other determinations and take all other actions
necessary or desirable for the administration of the Employee Plan. Decisions
of the Compensation Committee regarding the interpretation and administration
of the Employee Plan are binding upon all interested persons.
TERMINATION AND AMENDMENT
The Employee Plan may be terminated or amended at any time and from
time to time by the Board. The Board may not, however, amend the Employee Plan
without the approval or ratification of the Stockholders if such amendment
would (i) increase the total number of shares of stock issuable pursuant to
ISOs (as defined below) or materially increase the number of shares of stock
subject to the Employee Plan, (ii) materially change the class of employees
eligible to receive ISOs or participate, or (iii) otherwise materially increase
the benefits accruing to employees.
ELIGIBILITY
The class of persons eligible to participate in the Employee Plan
consists of all officers and employees of the Company whose participation the
Compensation Committee determines to be in the best interests of the Company.
STOCK SUBJECT TO THE EMPLOYEE PLAN
As of April 19, 1999, an aggregate of 1,210,213 shares of Class A
Common Stock were reserved for issuance upon exercise of options previously
granted under the Employee Plan and an aggregate of 289,783 shares of Class A
Common Stock remained available for the grant of future options. If the
amendment is approved, 789,783 shares of Class A Common Stock will be available
for the grant of future options under the Employee Plan. Mr. Westover (Chief
Executive Officer and President) has received options to acquire 500,000 shares
of Class A Common Stock pursuant to the Employee Plan. Mr. Hayase (Senior Vice
President, Secretary and General Counsel) has received options to acquire
250,000 shares of Class A Common Stock pursuant to the Employee Plan. Mr. Toon
(Senior Vice President and Chief Development Officer) has received options to
acquire 83,175 shares of Class A Common Stock pursuant to the Employee Plan.
TERMS
Under the Employee Plan, the Compensation Committee may grant either
options intended to qualify as incentive stock options ("ISOs") under the
Internal Revenue Code (as defined below) or options that do not qualify as ISOs
("NSOs"). ISOs involve certain tax implications under the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"). The Compensation Committee
establishes the exercise period for each option grant, which period may not
exceed 10 years.
-11-
<PAGE> 15
The Employee Plan provides that the exercise price for each share of
Class A Common Stock subject to an ISO shall be no less than the fair market
value of a share of Class A Common Stock on the date the ISO is granted or, if
the ISO is granted to a key employee who is a 10% holder of Class A Common
Stock, the exercise price for each share of Class A Common Stock subject to
such ISO shall be no less than 110% of the fair market value of a share of
Class A Common Stock on the date the ISO is granted. In addition, the exercise
price for each share of Class A Common Stock subject to a NSO shall be no less
than the fair market value of a share of Class A Common Stock on the date the
NSO is granted.
An option granted under the Employee Plan is not transferable other
than by will or by the laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
NSOs. An individual receiving a NSO under the Employee Plan does not
recognize taxable income on the date of grant of the option, assuming that the
option does not have a readily ascertainable fair market value at the time it
is granted. However, the individual must generally recognize ordinary income at
the time of exercise of the NSO in the amount of the difference between the
option exercise price and the fair market value of the Class A Common Stock on
the date of exercise. The amount of ordinary income recognized by an individual
is deductible by the Company in the year that the income is recognized by the
individual. The Company's deduction, however, is subject to a $1 million
limitation on the deduction of certain employee remuneration under Section
162(m) of the Internal Revenue Code, unless an exemption for performance-based
compensation under such section applies. Upon subsequent disposition, any
further gain or loss is taxable either as a short-term or long-term capital
gain or loss, depending upon the length of time that the shares of Class A
Common Stock are held.
ISOs. An individual who is granted an ISO under the Employee Plan does
not recognize taxable income either on the date of grant or on the date of its
timely exercise. However, the excess of the fair market value of the Class A
Common Stock received upon the exercise of the ISO over the option exercise
price is includable in such individual's alternative minimum taxable income and
may be subject to the alternative minimum tax ("AMT"). For AMT purposes only,
the basis of stock acquired by the exercise of an ISO is increased by the
amount of such excess.
Upon the disposition of the stock acquired upon exercise of an ISO,
long-term capital gain or loss will be recognized in an amount equal to the
difference between the sales price and the option exercise price (except that
for AMT purposes, the gain or loss would be the difference between the sales
price and the individual's basis increased as described in the preceding
paragraph), provided that such individual has not disposed of the stock within
the later of two years after the date of grant or one year after the date of
exercise. If an individual disposes of the stock without satisfying such
holding period requirements (a "Disqualifying Disposition"), the individual
will generally recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the lesser of (i) the difference between the
exercise price and the fair market value of the stock on the date the ISO is
exercised or (ii) the difference between the exercise price and the amount
realized on such Disqualifying Disposition. Any remaining gain or any net loss
is treated as a short-term or long-term gain or loss, depending upon the length
of time that the stock is held. Unlike the case in which a NSO is exercised,
the Company is not entitled to a tax deduction upon either the timely exercise
of an ISO or upon disposition of the stock acquired
-12-
<PAGE> 16
pursuant to such exercise, except to the extent that the individual recognizes
ordinary income in a Disqualifying Disposition.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE EMPLOYEE PLAN
AMENDMENT.
PROPOSAL 5:
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited the accounts of the Company and its
subsidiaries for fiscal years 1997 and 1998 and has been appointed by the Audit
Committee to continue in that capacity for the Company's fiscal year ending
December 31, 1999, subject to ratification by the stockholders at the Annual
Meeting. Should this firm be unable to perform the requested services for any
reason or not be ratified by the stockholders, the Audit Committee will appoint
other independent auditors to serve for the remainder of the year. A
representative of Arthur Andersen LLP will be present at the Annual Meeting,
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
-13-
<PAGE> 17
COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of shares of
Class A Common Stock and Class B Common Stock as of April 19, 1999 for (i)
directors of the Company, (ii) the Chief Executive Officer and each of the
three most highly compensated executive officers of the Company (collectively
the "Named Executive Officers"), (iii) the directors and executive officers of
the Company as a group and (iv) each person who is a stockholder of the Company
holding more than a five percent (5%) interest in the Company.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF PERCENT OF
CLASS A PERCENT OF CLASS CLASS B CLASS B
COMMON A COMMON COMMON COMMON
STOCK STOCK STOCK STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED (1) OWNED OWNED (1) OWNED
- ------------------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Sam Westover 306,814 (2) 2.3% 33,000 13.2%
Robert S. Chilton 25,000 (3) * -- --
Paul H. Hayase 85,704 (4) * 6,000 2.4%
Stephen M. Toon 18,635 (5) * -- --
Randall K. Bennett, D.D.S., M.S. 363,396 (6) 2.8% 24,000 9.6%
Douglas D. Durbin, D.M.D., M.S.D. 110,068 (7) * 1,062 *
G. Harry Durity 5,000 (8) *
Craig L. McKnight 15,000 (9) * -- --
Randall A. Schmidt, D.D.S., M.S.D. 535,129(10) 4.0% 3,043 1.2%
W. Dennis Summers 15,000 (9) * -- --
Jonathan E. Wilfong 463,962(11) 3.5% 15,930 6.4%
Robert N. Pickron, D.D.S. 972,180(12) 7.4% 91,632 35%
All executive officers & directors as a 2,915,888 20% 174,667 67.8%
group (12 persons)
</TABLE>
- -------------------
* Less than 1.0%.
(1) Based on an aggregate of 13,099,021 shares of Class A Common Stock and
249,242 shares of Class B Common Stock issued and outstanding as of
April 19, 1999. Includes shares of Class A Common Stock that may be
acquired upon the exercise of stock options and warrants exercisable
within 60 days. Each share of Class B Common Stock automatically
converts into 8 shares of Class A
-14-
<PAGE> 18
Common Stock upon the attainment of certain average closing price
calculations for the Class A Common Stock in 5 increments of 20% each.
If not converted on or before August 21, 2003, each share of Class B
Common Stock automatically converts into 1 share of Class A Common
Stock. Each person named above has sole voting and dispositive power
with respect to all shares listed opposite such person's name, except
as otherwise noted. The address of all persons listed, except Mr.
Wilfong and Dr. Pickron, is 21535 Hawthorne Boulevard, Suite 200,
Torrance, California 90503.
(2) Includes 160,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Employee Plan.
(3) Includes 25,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Employee Plan.
(4) Includes 65,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Employee Plan.
(5) Includes 16,635 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Employee Plan.
(6) Includes 30,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within sixty days pursuant to the Employee Plan and 15,000
shares of Class A Common Stock purchasable upon exercise of stock
options that are currently exercisable or exercisable within 60 days
pursuant to the Director Plan.
(7) Includes 15,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Director Plan.
(8) Includes 5,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Director Plan.
(9) Includes 15,000 shares of Class A Common Stock purchasable upon
exercise of stock options that are currently exercisable or
exercisable within 60 days pursuant to the Director Plan.
(10) Includes 30,000 shares of Class A Common Stock, 15,000 shares of Class
A Common Stock and 107,758 shares of Class A Common Stock purchasable
upon exercise of stock options (7,758 subject to Stockholder approval
of the Director Plan Amendments) that are currently exercisable or
exercisable within 60 days pursuant to the Employee Plan, the Director
Plan and Orthodontist Plan, respectively. Includes 31,478 shares of
Class A Common Stock and 354 shares of Class B Common Stock held by a
profit sharing plan for Dr. Schmidt's benefit and 31,600 shares of
Class A Common Stock subject to warrants that are currently
exercisable. (Includes warrants to purchase 20,000 shares of Class A
Common Stock held by Dr. Schmidt's minor children. Dr. Schmidt
disclaims beneficial ownership of the shares of Class A Common Stock
subject to these warrants).
(11) The business address of Mr. Wilfong is 536 Manor Ridge Drive, N.W.,
Atlanta, Georgia 30305. Includes 318,750 shares of Class A Common
Stock subject to warrants that are currently exercisable and 15,000
shares of Class A Common Stock purchasable upon exercise of stock
options that are currently exercisable or exercisable within 60 days
pursuant to the Director Plan.
(12) The business address of Dr. Pickron is 3294 Medlock Bridge Road,
Building A, Norcross, Georgia 30092. Includes an aggregate of 84,252
shares of Class A Common Stock and 12,036 shares of Class B Common
Stock held in separate trusts by a third party trustee for the benefit
of each of Dr. Pickron's children and a niece. Dr. Pickron disclaims
beneficial ownership of the shares of Common Stock held in such
trusts.
-15-
<PAGE> 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation paid to the Company's Chief Executive Officer and each of the
Named Executive Officers whose salary and bonus compensation for the year ended
December 31, 1998 exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------------- -----------------------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($) OPTIONS(#) COMPENSATION($)
------------------ ---- ----------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sam Westover.................... 1998 250,000 117,857 -- 100,000 --
President and Chief 1997 84,615 75,000 271,461(3) 300,000 --
Executive Officer 1996 -- -- -- -- --
P. Craig Hethcox (6)............ 1998 118,500 -- 250,000 -- --
Chief Operating 1997 62,615 -- 107,916(4) 100,000 --
Officer 1996 -- -- -- -- --
Paul H. Hayase.................. 1998 165,000 77,786 -- 75,000 --
Senior Vice President 1997 55,846 49,500 172,647(5) 75,000 --
- Human Resources 1996 -- -- -- -- --
General Counsel
and Secretary
Robert S. Chilton (7)........... 1998 135,000 63,643 -- 50,000 --
Chief Financial Officer 1997 85,153 27,000 -- 50,000 --
1996 -- -- -- -- --
Stephen M. Toon ................ 1998 63,327 92,500 -- 75,000 --
Senior Vice President
Chief Development
Officer
</TABLE>
- --------------------
(1) Represents annual salary.
(2) Represents annual bonuses earned for the periods indicated.
(3) Represents fees for consulting services provided to Premier
Orthodontic Group, Inc., which company merged with and into the
Company.
(4) Represents fees for consulting services provided to U.S. Orthodontic
Care, Inc., which company merged with and into the Company.
-16-
<PAGE> 20
(5) Represents fees for consulting services provided to Premier
Orthodontic Group, Inc. which company merged with and into the
Company.
(6) Mr. Hethcox resigned effective January 31, 1998 and received severance
pay of $250,000.
(7) Mr. Chilton resigned effective February 18, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock option
grants for the year ended December 31, 1998 to the Chief Executive Officer and
each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM (1)
NUMBER OF PERCENT OF --------------------------
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
GRANTED FISCAL 1998 SHARE DATE 5% 10%
---------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SAM WESTOVER........................ 100,000 20.93% $14.625 5/28/08 2,382,252 3,793,345
PAUL H. HAYASE...................... 75,000 15.69% $14.625 5/28/08 1,786,639 2,845,009
ROBERT S. CHILTON................... 50,000 10.46% $14.625 5/28/08 1,191,126 1,896,673
STEPHEN M. TOON..................... 75,000 15.69% $9.00 8/31/08 1,099,501 1,750,775
</TABLE>
(1) THE 5% AND 10% ASSUMED ANNUAL RATES OF COMPOUNDED STOCK PRICE
APPRECIATION ARE MANDATED BY RULES OF THE SEC. THERE CAN BE NO
ASSURANCE PROVIDED TO ANY EXECUTIVE OFFICER OR ANY OTHER HOLDER OF THE
COMPANY'S SECURITIES THAT THE ACTUAL STOCK PRICE APPRECIATION OVER THE
TERM WILL BE AT THE ASSUMED 5% AND 10% LEVELS OR AT ANY OTHER DEFINED
LEVEL. UNLESS THE MARKET PRICE OF THE CLASS A COMMON STOCK APPRECIATES
OVER THE OPTION TERM, NO VALUE WILL BE REALIZED FROM THE OPTION GRANTS
MADE TO THE CHIEF EXECUTIVE OFFICER OR THE NAMED EXECUTIVE OFFICERS.
-17-
<PAGE> 21
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
The following table sets forth certain information with respect to the
value of unexercised in-the-money options held by the Named Executive Officers
of the Company at December 31, 1998. No options were exercised by the Named
Executive Officers of the Company during 1998.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END (#) AT FY-END ($) (1)
--------------------- -----------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sam Westover 130,000 270,000 0 0
Paul H. Hayase 37,500 112,500 0 0
Robert S. Chilton 25,000 75,000 0 0
Stephen M. Toon 15,000 60,000 $30,000 $120,000
</TABLE>
- ------------------
(1) Based on a closing price of $11.00 per share of Class A Common Stock
on December 31, 1998, 15,000 of the options were in-the-money.
NONCOMPETITION AND EMPLOYMENT CONTRACTS
The Company entered into employment agreements with Messrs. Westover
and Hayase providing for annual base salaries of $250,000 and $165,000,
respectively, with each person being eligible for a cash bonus of up to 30% of
his base salary (the "Employment Agreements"). Additionally, the Employment
Agreements provided for the grant of options for the purchase of Class A Common
Stock to each of Messrs. Westover and Hayase for 300,000 and 75,000 shares,
respectively, which such options (i) vested 20% on August 21, 1997 and (ii)
will vest 20% per year on the first through the fourth anniversary dates
thereof. These options expire ten years from the date of grant and are
exercisable at $12.00 per share.
Each Employment Agreement is for an initial term of five years with an
automatic renewal for successive 1 year terms unless prior notice of
termination is provided. The Company may terminate an Employment Agreement (i)
for cause, (ii) without cause upon 30 days prior notice, or (iii) upon death or
disability of the employee. The employee may terminate the Employment Agreement
within 120 days after a constructive termination (as defined therein). If the
employee is terminated by the Company without cause or the employee terminates
the Employment Agreement within 120 days following a constructive termination,
the Company is required to pay such employee a lump sum severance equal to 2
times the applicable annual base salary. Each Employment Agreement provides
that if the employee is terminated within a twelve-month period following a
change in control of the Company (as defined therein), the Company will pay
such employee three times the sum of (i) the employee's annual base
compensation, plus (ii) the maximum possible cash bonus for such year. In
addition, upon a change in control, the Company will pay the employee any
accrued salary, benefits or reimbursements and the employee's options will
fully vest and become immediately exercisable for the longer of (i) 90 days
from
-18-
<PAGE> 22
the change in control or (ii) the time period specified in the stock plan. Each
Employment Agreement prohibits the employee from competing with the Company for
a period of 2 years following termination of employment.
The Company entered into a letter agreement with Mr. Chilton providing
for an annual base salary of $135,000, and a cash bonus of up to 30% of his
annualized base salary. Additionally, the Company granted Mr. Chilton an option
to purchase 50,000 shares of Class A Common Stock, with a vesting schedule
consistent with the vesting schedule described above for the Employment
Agreements. Mr. Chilton resigned effective February 18, 1999, with options to
purchase 25,000 shares of Class A Common Stock vested on such date.
The Company entered into a letter agreement with Mr. Toon on May 22,
1998 providing for an initial base salary of $185,000 with a guaranteed
management bonus in the amount of $92,500, and such bonus was paid in February
of 1999. Thereafter, Mr. Toon will be eligible to receive a bonus of up to 50%
of his base salary, subject to the approval of the Board of Directors and the
achievement of certain financial goals of the Company established by the Board
of Directors and management. Additionally, the Company granted Mr. Toon an
option to purchase 75,000 shares of Class A Common Stock, 20% of which vested
on the date of grant, and 20% of which vests on each anniversary of the grant
date. The letter agreement term is for a two year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Wilfong,
Summers and McKnight. Mr. McKnight and Summers are not and have not been
officers or employees of the Company or any of its subsidiaries. Dr. Bennett
was a member of the Compensation Committee until April 30, 1998 and became a
part-time employee of the Company effective February 20, 1998, as Co-Chair of
the Clinical Advisory Committee to assist in the development of the Company's
practice improvement programs and training materials and such other projects as
the Company may request from time to time. A predecessor of the Company, U.S.
Orthodontic Care, Inc. ("USOC"), entered into a consulting agreement with
Newfound Capital Associates ("Newfound") and Newfound's president, Mr. Wilfong.
The Company succeeded to the rights and obligations of USOC with respect to
this agreement upon the merger of USOC with and into the Company and Mr.
Wilfong entered into a separate consulting agreement with the Company whereby
Mr. Wilfong agreed to provide financial and general business services to the
Company in return for consulting fees of $300,000. In addition to the
consulting fees, the Company granted Mr. Wilfong a warrant to purchase 150,000
shares of Class A Common Stock at an exercise price of $12.00 per share. A
warrant granted to Mr. Wilfong to purchase 168,750 shares of USOC's common
stock was converted in such merger to a warrant to purchase 168,750 shares of
Class A Common Stock at $11.16 a share. Both warrants are exercisable for five
(5) years from August 21, 1997. Mr. Wilfong's consulting agreements terminated
on September 30, 1997.
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<PAGE> 23
CERTAIN TRANSACTIONS
Effective August 21, 1997, the Company entered into an Employment
Agreement with Mr. Hethcox, the Chief Operating Officer, providing for an
annual base salary of $185,000. In connection with his employment, the Company
granted to Mr. Hethcox a warrant to purchase 50,000 shares of Class A Common
Stock, with an exercise price of $0.01 a share, exercisable for 5 years from
August 21, 1997. Mr. Hethcox terminated his employment with the Company
effective January 31, 1998. With respect to such termination, the Company and
Mr. Hethcox entered into a letter agreement dated January 14, 1998 which
provided for payment to Mr. Hethcox of his base salary through January 31, 1998
and a severance payment of $250,000 on January 31, 1998. The letter agreement
amended Mr. Hethcox's stock option agreement to extend the exercise period for
options vested on the termination date until January 31, 1999 and to provide
for accelerated vesting with respect to 20,000 shares of Class A Common Stock
and expiration of the exercise period for such shares on July 31, 1998.
On September 9, 1997, the Company loaned $114,927 to Orthodontic
Affiliates, P.C. ("OA") of which Dr. Schmidt, a director of the Company, is a
50% owner. Interest on the loan accrues at the prime rate plus 1% and the term
of the loan is 36 months. The loan reflects indebtedness of OA assumed by the
Company in the Acquisitions. At March 31, 1999, principal in the amount of
$57,463.55 was outstanding. Dr. Schmidt also received compensation in the
amount of $157,693 in consulting fees under an arrangement with the Company
during 1998.
On April 7, 1998, the Company loaned $49,885 to Randall K. Bennett,
D.D.S., M.S., P.C. of which Dr. Bennett, a director of the Company, is the 100%
owner to purchase office equipment. Interest in the loan accrues at the prime
rate plus 10% and the term of the loan is thirty-six months. At March 31, 1999,
principal in the amount of $34,642.37 was outstanding.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for ensuring that a proper
system of short and long-term compensation is in place to provide
performance-oriented incentives to management. Its report on compensation is as
follows:
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for administering the Company's executive compensation program.
None of the members of the Committee are officers or employees of the Company,
although Mr. Wilfong served as a consultant to the Company until September 30,
1997 and is Chairman of the Board of Directors.
EXECUTIVE COMPENSATION PROGRAM
The Committee believes that a portion of the compensation paid to
executive officers should relate to both the short-term and long-term
profitability of the Company. Therefore, the executive officers' compensation
program is composed of base salary, bonus and long-term incentive compensation.
Base Salary and Bonus. Base salaries for Messrs. Westover and Hayase
are paid pursuant to the Employment Agreements and the base salary for Mr. Toon
is paid pursuant to the Letter Agreement.
-20-
<PAGE> 24
Each of Messrs. Westover and Hayase is eligible for an annual cash
bonus of up to forty percent (40%) of his annualized base salary and Mr. Toon
is eligible for an annual cash bonus of up to 50% of his annualized base
salary. The individual bonus percentages for 1998 were established by the
Committee based upon each officer's level of responsibility within the Company
and his contributions toward improving operating performance and profitability.
The bonus percentages will be reviewed annually by the Committee and may be
adjusted in accordance with these factors or others that the Committee
determines to be relevant at the time.
The Committee believes that the bonus portion of the executive
compensation program is effective in motivating the executive officers of the
Company to improve the current profitability of the Company. The Committee also
believes that an adequate base salary is necessary to retain effective
executive officers and to discourage management decisions which might improve
short-term profitability but may not always be in the long-term best interest
of the Company.
Long-Term Incentives. The Committee believes that, in addition to the
annual cash bonus arrangements, it is appropriate for the Company to provide
long-term incentive awards to motivate the executive officers to improve
long-term profitability of the Company and create value for the stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation arrangements for Mr. Westover as President and Chief
Executive Officer were determined based on his Employment Agreement with
respect to base salary and long-term compensation and based on consideration of
the factors described above with respect to the bonus amounts. The Committee
noted the growth of the Company since the Offering and the increase in Mr.
Westover's responsibilities related thereto.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code, added as part of the
Omnibus Budget Reconciliation Act of 1993, imposes a limitation on deductions
that can be taken by a publicly held corporation for compensation paid to
certain of its executives. Under Section 162(m), a deduction is denied for
compensation paid in a tax year beginning on or after January 1, 1994, to a
corporation's chief executive officer or any of its other four most highly
compensated officers to the extent that such compensation exceeds $1 million.
Certain performance-based compensation, however, is specifically exempt from
the deduction limit.
-21-
<PAGE> 25
The Committee's current policy with respect to the Section 162(m)
limitations is to preserve the federal income tax deductibility of executive
compensation payments when it is appropriate and in the best interests of the
Company and its stockholders. For the foreseeable future, the Committee does
not expect Section 162(m) to have any practical effect on the Company's
compensation program. However, the Committee reserves the right to approve the
payment of nondeductible compensation in the future if it deems such payment to
be appropriate.
COMPENSATION COMMITTEE
W. Dennis Summers, Chairman
Jonathan E. Wilfong
Craig L. McKnight
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY
ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE EXCHANGE ACT
(TOGETHER, THE "ACTS"), EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
-22-
<PAGE> 26
STOCK PRICE PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in
cumulative stockholder return on the Common Stock with (a) the performance of a
broad equity market indicator, and (b) the performance of a published industry
index. The graph compares the percentage change in the return on the Common
Stock since August 21, 1997 with the cumulative total return on the Nasdaq
Stock Market Index and Nasdaq Health Services Stock Index. The stock price
performance graph assumes an investment of $100 in the Company on August 21,
1997 and an investment of $100 in the two (2) indexes on August 21, 1997 and
further assumes the reinvestment of all dividends. Stock price performance,
presented monthly for the period from August 21, 1997 through December 31, 1998
is not necessarily indicative of future results.
COMPARISON OF 16 MONTH CUMULATIVE TOTAL RETURN*
AMONG ORTHALLIANCE, INC., THE NASDAQ STOCK MARKET (U.S.)INDEX,
THE NASDAQ HEALTH SERVICES INDEX AND A PEER GROUP
Research Data Group Peer Group Total Return Worksheet
Orthalliance Inc (ORAL)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
- -----------------------------------------------------------------------------------------------------------------------------------
8/21/97 8/97 9/97 10/97 11/97 12/97 1/98 2/98 3/98 4/98 5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ORTHALLIANCE, INC 100 116 123 113 93 76 91 107 117 130 120 121 96 75 68 88 95 92
PEER GROUP 100 100 120 104 105 98 99 112 123 123 111 110 91 73 84 95 99 97
NASDAQ STOCK MARKET (U.S.) 100 100 106 100 101 99 102 112 116 118 112 119 118 95 108 112 124 139
NASDAQ HEALTH SERVICES 100 98 107 100 95 96 93 102 105 105 96 96 82 64 72 78 76 82
</TABLE>
* $100 INVESTED ON 8/21/97 IN STOCK OR ON 7/31/97 IN INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
THE STOCK PRICE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE ACTS EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACT.
-23-
<PAGE> 27
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and
directors of the Company and persons who beneficially own more than ten percent
of the Company's Common Stock to file with the Securities and Exchange
Commission certain reports, and to furnish copies thereof to the Company, with
respect to each such person's beneficial ownership of the Company's equity
securities. Based solely upon a review of the copies of such reports furnished
to the Company and certain representations of such persons, the Company
believes that all filings were timely except as follows: (i) the initial
statement of beneficial ownership on Form 3 required to be filed by Mr. Durity
upon his becoming a director on December 3, 1998 was inadvertently not timely
filed until March 15, 1999; (ii) three purchases of an aggregate of 1,100
shares by Dr. Durbin's and his wife's individual retirement accounts occurring
in March 1998 were inadvertently reported late on a Form 4 filed in October
1998; (iii) options granted under the Director Plan granted to Messrs. Durbin,
Bennett, McKnight and Summers on June 5, 1998, required to be reported on a
Form 5 for December, 1998 due by February 16, 1998, were inadvertently filed
late on a Form 5 on April 23, 1999; (iv) options granted to Messrs. Bennett,
Hayase, Schmidt and Westover during 1998 under the Employee Plan required to be
reported on a Form 5 for December 1998 due by February 16, 1998 were
inadvertently not timely filed and for Messrs. Schmidt and Westover were
reported on Form 4 and filed in February 1998 and for Messrs. Hayase and
Bennett were reported on Form 5 for December 1998 filed on April 23, 1999; (v)
two purchases for an aggregate of 2,000 shares by Mr. Toon, one for 1,000
shares occurring on January 22, 1999 and the other for 1,000 shares occurring
on February 10, 1999 were untimely reported on a Form 4 filed on March 15,
1999; and (vi) options granted to Mr. Chilton during 1998 under the Employee
Plan required to be reported on a Form 5 for December 1998 due by February 16,
1998 was inadvertently not timely filed and is in the process of being filed at
the time of the filing of this Proxy Statement.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report of the Company for the year ended December 31, 1998,
including audited financial statements, accompanies this Proxy Statement. The
Annual Report does not form any part of the material for the solicitation of
proxies.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE, AT THE WRITTEN REQUEST OF ANY
RECORD HOLDER OF COMMON STOCK AS OF THE CLOSE OF BUSINESS ON THE RECORD DATE, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, EXCEPT EXHIBITS THERETO. The Company will provide copies
of the exhibits, should they be requested by eligible stockholders, and the
Company may impose a reasonable fee for providing such exhibits. Request for
copies of the Company's Annual Report on Form 10-K should be mailed to:
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
Attention: Investor Relations
-24-
<PAGE> 28
STOCKHOLDER PROPOSALS
Any stockholder proposals intended to be presented at the Company's
2000 Annual Meeting of Stockholders must be received by the Company on or
before December 31, 1999 to be eligible for inclusion in the Proxy Statement
and form of proxy to be distributed by the Board of Directors in connection
with such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. However, should any additional matters come before the
Annual Meeting, the enclosed proxy grants discretionary authority to the
proxies named therein with respect to any such matters.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In
an effort to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by 1 or more employees of the Company. The Company
also will reimburse brokers, banks, nominees and other fiduciaries for postage
and reasonable clerical expenses of forwarding the proxy material to their
principals who are beneficial owners of the Company's Common Stock.
By Order of the Board of Directors,
Paul H. Hayase
Secretary
Torrance, California
April 29, 1999
-25-
<PAGE> 29
ORTHALLIANCE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON THURSDAY, JUNE 3, 1999
The undersigned hereby appoints Sam Westover and Paul H. Hayase and each of
them, with full power of substitution and resubstitution, as proxies for and in
the name of the undersigned, to vote all shares of Class A Common Stock and
Class B Common Stock of OrthAlliance, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders to be held on June 3, 1999, at 9:00 a.m., local time, at the
Torrance Hilton Hotel, 21333 Hawthorne Boulevard, Suite 200, Torrance,
California 90503, or at any adjournment thereof, upon the matters described in
the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement,
receipt of which is hereby acknowledged, and upon any other business that may
properly come before the meeting or any adjournment thereof. Such proxies are
directed to vote on the matters described in the Notice of Annual Meeting of
Stockholders and Proxy Statement as follows, and otherwise in their discretion
upon such other business as may properly come before the meeting or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS LISTED BELOW.
1. To elect three (3) directors to serve until the 2001 Annual Meeting of
Stockholders:
Randall K. Bennett, D.D.S., M.S. G. Harry Durity Raymond G. W.
Kubisch, D.D.S., M.S.D.
[ ] FOR all nominees (except as marked to the contrary below) [ ] WITHHOLD
AUTHORITY to vote for all nominees listed
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. To approve the amendments to the 1997 Non-Employee Director Stock Plan as
described in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the amendments to the 1997 Orthodontist Stock Plan as described
in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve the amendments to the 1997 Employee Stock Plan as described in
the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
5. To ratify appointment of Arthur Andersen LLP as the Company's independent
public accountants:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS.
Date: , 1999
---------------------------
--------------------------------
(Signature)
--------------------------------
(Signature if held jointly)
--------------------------------
(Title or authority, if
applicable)
Please sign exactly as your name
or names appear hereon. Where
more than one owner is shown
above, each should sign. When
signing in a fiduciary or
representative capacity, please
give full title. If this proxy
is submitted by a corporation,
it should be executed in the
full corporate name by a duly
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ON JUNE 3, 1999.
IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
