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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[X] PRELIMINARY PROXY STATEMENT [ ] CONFIDENTIAL, FOR USE OF THE
[ ] DEFINITIVE PROXY STATEMENT COMMISSION ONLY (AS PERMITTED
[ ] DEFINITIVE ADDITIONAL MATERIALS BY RULE 14A-6(E)(2))
[ ] SOLICITING MATERIAL PURSUANT TO
RULE 14A-11(C) OR RULE 14A-12
ACCREDO HEALTH, INCORPORATED
(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
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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:
ACCREDO HEALTH, INCORPORATED
1640 CENTURY CENTER PARKWAY
SUITE 101
MEMPHIS, TENNESSEE 38134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 16, 2000
To the Stockholders of Accredo Health, Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Accredo Health, Incorporated (the "Company" or "Accredo"), will be
held at the Accredo Health offices, 1640 Century Center Parkway, Suite 102,
Memphis, Tennessee, 38134, on Thursday, November 16, 2000 at 10:00 a.m. (Central
Time) for the following purposes:
(1) To elect two Class II directors to serve for a term of three
(3) years and until their successors are elected;
(2) To ratify the selection of Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending June 30,
2001;
(3) To approve the proposed amendment to the Company's Amended and
Restated Certificate of Incorporation which increases the
number of authorized shares of the Company's Common Stock,
$.01 par value from 30,000,000 to 50,000,000;
(4) To approve the proposed amendment to the Company's Amended and
Restated Certificate of Incorporation which eliminates the
Company's Non-Voting Common Stock, $.01 par value;
(5) To approve the proposed amendment to the Company's Amended and
Restated Certificate of Incorporation which eliminates the
Company's Series A Cumulative Preferred Stock;
(6) To consider and vote upon a proposal to approve an amendment
to the Accredo Health, Incorporated 1999 Long-Term Incentive
Plan (the "Long-Term Incentive Plan") to increase the number
of shares available for issuance thereunder; and
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(7) To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on September 18,
2000 are entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof.
Your attention is directed to the Proxy Statement accompanying this
Notice for more complete information regarding the matters to be acted upon at
the Annual Meeting.
The Board of Directors of the Company unanimously recommends that
stockholders vote FOR the director nominees named in the Proxy Statement, FOR
approval of the appointment of Ernst & Young LLP as auditors for the Company,
FOR approval of the proposed amendments to the Company's Amended and Restated
Certificate of Incorporation and FOR approval of the proposed amendment to the
Long-Term Incentive Plan.
Stockholders are cordially invited to attend the meeting in person.
By Order of the Board of Directors
Thomas W. Bell, Jr.,
Secretary
October 20, 2000
IMPORTANT
YOUR PROXY IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PERSONALLY
PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
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ACCREDO HEALTH, INCORPORATED
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 2000
This Proxy Statement is being furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Accredo Health,
Incorporated (the "Company" or "Accredo") from holders of the Company's common
stock, $0.01 par value (the "Common Stock"). These proxies will be voted at the
2000 annual meeting of stockholders of the Company (the "Annual Meeting") to be
held at 10:00 a.m. (Central Time) on Thursday, November 16, 2000, at the offices
of the Company, 1640 Century Center Parkway, Suite 102, Memphis, Tennessee
38134, and at any adjournments or postponements thereof. The mailing address of
the principal executive offices of the Company is 1640 Century Center Parkway,
Suite 101, Memphis, Tennessee 38134.
Only holders of record of shares of Common Stock outstanding as of the
close of business on September 18, 2000 (the "Record Date"), are entitled to
notice of and to vote on each matter submitted to a vote at the Annual Meeting
and any adjournment(s) or postponement(s) thereof. Each share of Common Stock is
entitled to one vote on all matters presented at the Annual Meeting.
Stockholders do not have the right to cumulate their votes for directors. As of
the close of business on September 18, 2000, the Company had 16,901,404 shares
of Common Stock outstanding. The Notice of Annual Meeting, this Proxy Statement,
and the proxy are being first mailed to stockholders on or about October 20,
2000.
A majority of the outstanding shares of Common Stock entitled to vote
at the meeting, represented in person or by proxy, is required to constitute a
quorum. If a quorum is not present at the Annual Meeting, or if for any reason
the Company believes that additional time should be allowed for the solicitation
of proxies, the Company may adjourn or postpone the Annual Meeting with or
without a vote of the stockholders. If adjournment is proposed by the Company,
the persons named on the enclosed proxy will vote such shares for which they
have voting authority in favor of adjournment.
All shares of Common Stock represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
properly revoked will be voted at the Annual Meeting in accordance with the
instructions indicated thereon. If no specification is made, the proxies will be
voted in favor of the matters listed on the proxy card. Directors must be
elected by a plurality of votes cast (in person or by proxy) by the holders of
Common Stock entitled to vote at the Annual Meeting if a quorum is present.
Approval of the amendments to the Company's Amended and Restated Certificate of
Incorporation (proposals 3, 4 and 5) will require the affirmative vote of the
majority of shares of Common Stock outstanding as of the record date. Approval
of other matters will be determined based upon the affirmative vote of the
majority of shares present (in person or by proxy) held by the holders of Common
Stock entitled to vote at the Annual Meeting if a quorum is present.
Shares represented by proxies that are marked "withhold authority" or
"abstain" will be counted as shares present for purposes of establishing a
quorum. Shares represented by proxies that include broker nonvotes will also be
counted as shares present for purposes of establishing a quorum. A broker
nonvote occurs when a broker or nominee holding shares for a beneficial owner
votes on one proposal but does not vote on another proposal because the broker
or nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Neither withholding authority to vote
with respect to one or more nominees or a broker nonvote will have an effect on
the outcome of the election of directors,
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the approval of auditors for Accredo, the approval of amendments to the
Company's Amended and Restated Certificate of Incorporation or the approval of
the amendment to the Long-Term Incentive Plan.
All expenses of the Annual Meeting, including the cost of soliciting
proxies, will be paid by the Company. The Company may reimburse persons holding
shares in their names for others, or holding shares for the others who have the
right to give voting instructions, such as brokers, banks, fiduciaries and
nominees, for such persons' reasonable expenses in forwarding the proxy
materials to their principals.
Any stockholder returning the accompanying proxy card may revoke that
proxy at any time prior to its exercise by (a) giving written notice to the
Company of such revocation, (b) voting in person at the meeting, or (c) the
executing and delivering to the Company a proxy card bearing a later date.
PROPOSALS FOR STOCKHOLDER ACTION
PROPOSAL #1
ELECTION OF DIRECTORS
The Company's Board of Directors is composed of three classes,
designated Class I, Class II, and Class III. The term of the Class II directors
expires at the Annual Meeting. The current Class II directors are Andrew M. Paul
and Kyle J. Callahan. Mr. Paul is not standing for re-election as a director and
the Board of Directors by action taken at a meeting on October 4, 2000,
designated Kyle J. Callahan and Dick R. Gourley as the nominees for election as
Class II directors at the annual meeting. The term of the Class III directors
will expire at the 2001 annual meeting of the stockholders of the Company and
the term of the Class I directors will expire at the 2002 annual meeting of the
stockholders of the Company. Each succeeding term of a director in Class I,
Class II, or Class III shall be for three years or until his or her successor is
elected. The Class I directors are David D. Stevens, Kenneth J. Melkus and Kevin
L. Roberg, and the Class III directors are Patrick J. Welsh, John R. ("Randy")
Grow, and Kenneth R. Masterson.
The Amended and Restated Certificate of Incorporation of the Company
presently provides that the Board of Directors shall consist of between five and
twelve members, and that the actual number of members shall be determined within
such minimum and maximum by resolutions adopted by an affirmative vote of at
least two-thirds (2/3) of the total number of directors then in office. The
Amended and Restated Certificate of Incorporation of the Company further
provides that any vacancy in the Board created by an increase in the number of
directors, death, resignation, retirement, disqualification, removal from office
or otherwise may be filled, until the next election of directors by the
stockholders, by the affirmative vote of at least two-thirds (2/3) of the total
number of directors then remaining in office, though they may constitute less
than a quorum of the Board.
Each nominee for election at the Annual Meeting has consented to be a
candidate and to be so named in this Proxy Statement and to serve, if elected.
If any nominee becomes unable or unwilling to serve, although not anticipated,
the persons named as proxies will have the discretionary authority to vote for a
substitute. Directors will be elected by a plurality of the votes cast by the
shares of Common Stock represented in person or by proxy at the Annual Meeting.
Therefore, the two nominees for election as Class II directors who receive the
greatest number of votes cast at the Annual Meeting will be elected to the Board
of Directors as Class II directors. Unless otherwise specified, the accompanying
proxy will be voted FOR Kyle J. Callahan and Dick R. Gourley as Class II
directors.
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Information as to each nominee and as to directors continuing as Class
I directors and Class III directors follows:
CLASS II DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING -- TERM
EXPIRING AT THE 2003 ANNUAL MEETING
KYLE J. CALLAHAN
Age -- 34
Mr. Callahan has served as Senior Vice President and a Director of
Accredo since Accredo's wholly owned subsidiary, Hemophilia Health Services,
Inc. ("HHS") was acquired by the Company in June 1997. Mr. Callahan has served
as President of HHS since June 1997. From HHS's inception in 1990 until June
1997, Mr. Callahan served in several management and executive positions with
HHS, including Vice President of Operations.
DICK R. GOURLEY
Age - 55
Dr. Gourley has served as Dean and Professor of Pharmacy Practice and
Pharmacoeconomics with Tenure at the College of Pharmacy, University of
Tennessee, Memphis, Tennessee, since December 1989. Dean Gourley has previously
served as Provost at Mercer University, Atlanta, Georgia and as a Professor in
the Colleges of Pharmacy at Mercer University and University of Nebraska. He has
been a visiting professor at the Universities of Sydney, Otago and Hirshomia. He
has published over 50 referred manuscripts and is the co-editor of the Textbook
of Therapeutics. Dr. Gourley is a licensed pharmacist and holds a Doctor of
Pharmacy degree from the College of Pharmacy, University of Tennessee. Dr.
Gourley is a director of several private companies, is a member of the Medical
Advisory Board on Education and Research, PlanetRX, Inc., and has served on the
Dean's Advisory Council of Walgreens Company, Chicago, Illinois.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NOMINEES AS CLASS II DIRECTORS.
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CURRENT DIRECTORS WHOSE TERMS ARE NOT EXPIRING AT THE ANNUAL MEETING:
CLASS III DIRECTORS -- TERM EXPIRING AT THE 2001 ANNUAL MEETING
PATRICK J. WELSH
Age - 57
Mr. Welsh has been a Director of Accredo since June 1997. Mr. Welsh was
a founder of Welsh Carson Anderson & Stowe in 1979 and is a general partner of
the sole general partner of Welsh Carson Anderson & Stowe VII, L.P. Prior to
1979, Mr. Welsh was president and a Director of Citicorp Venture Capital, Ltd.,
an affiliate of Citicorp engaged in venture capital investing. Mr. Welsh is a
director of Savvis Communications Corporation and also serves as a director of
several private companies.
JOHN R. (RANDY) GROW
Age - 52
Mr. Grow has served as President of Accredo since it was acquired from
LeBonheur Health Systems, Inc. ("LHS") in 1996 and has served as a Director of
Accredo since June 1997. Mr. Grow has also served as President of Accredo's
indirect subsidiary, Nova Factor, Inc. ("Nova Factor") since 1996, and Chief
Operating Officer and Director since 1990. Previously, Mr. Grow was employed in
the home infusion industry as President of Curaflex Health Infusion Services,
Inc. from 1988 to 1989 and as Area Vice President of Caremark, Inc. from 1985 to
1988.
KENNETH R. MASTERSON
Age - 56
Mr. Masterson has been a Director of Accredo since April 1998. Mr.
Masterson joined Federal Express Corporation in 1980 and in 1996 he became
Executive Vice President, General Counsel and Secretary of Federal Express
Corporation. In 1998, Mr. Masterson assumed the same duties for FedEx
Corporation, a transportation holding company and the parent company of the
FedEx family of corporations worldwide. Mr. Masterson is also a director of
Thomas & Betts Corporation.
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CLASS I DIRECTORS -- TERM EXPIRING AT THE 2002 ANNUAL MEETING
KENNETH J. MELKUS
Age -- 54
Mr. Melkus has been a Director of Accredo since October, 1997. Mr.
Melkus currently serves as a consultant to Welsh Carson Anderson & Stowe. From
its founding in 1993 to its sale in 1996, Mr. Melkus served as Chairman of the
Board and Chief Executive Officer of HealthWise of America, Inc., an operator of
health maintenance organizations. From 1986 until 1993, Mr. Melkus served as
Vice Chairman and President of Surgical Care Affiliates, Inc., an operator of
outpatient surgery centers. Mr. Melkus is also a director of Quorum Health
Group, Inc.; OrothoLink, Inc.; Cardiology Partners of America; MedSynergies,
Inc.; Emerald Health Network; Physicians Healthcare Plans, Inc.; United Surgical
Partners; and Behavioral Health.
KEVIN L. ROBERG
Age -- 49
Mr. Roberg has been a Director of Accredo since November, 1999. Mr.
Roberg is a general partner of Delphi Ventures, a healthcare focused venture
capital firm. From 1995 to 1998 Mr. Roberg served as the Chief Executive Officer
and President of ValueRX and Medintell Systems Corporation, which was acquired
by ValueRX. Mr. Roberg has held numerous positions with healthcare companies
since 1974, including positions with United Healthcare Corporation, Partners
National Health Plans, American MedCenters, Inc., and MedCenters Health Care,
Inc. Mr. Roberg serves as a director of Duane Reade Drug Stores; Dignified
Assisted Living, Inc.; JLJ Medical Devices, Inc.; OmniCell Technologies, Inc.;
and ViTec, Inc.
DAVID D. STEVENS
Age -- 47
Mr. Stevens has served as Chief Executive Officer of Accredo since it
was acquired from LHS in 1996 and has served as a Director of Accredo since June
1997. Previously, Mr. Stevens served as Chief Operating Officer of Accredo's
wholly owned subsidiary, Southern Health Systems, Inc. ("SHS") since its
inception in 1983. Mr. Stevens has served as President of SHS since 1993 and
Director since 1996. He has served as Chief Executive Officer of SHS's wholly
owned subsidiary Nova Factor since 1996 and as a Director since 1990.
BOARD COMMITTEES, ATTENDANCE, AND COMPENSATION OF DIRECTORS
COMMITTEES
The Board of Directors has established two Committees, the Audit
Committee and the Compensation Committee, each of which is briefly described
below.
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The Company's Audit Committee, composed solely of non-employee
directors, recommends the annual appointment of the Company's independent
auditors and, in conjunction with such auditors, reviews the scope of audit and
other assignments and related fees. The Audit Committee also reviews the
accounting principles used by the Company in financial reporting and the
adequacy of the Company's internal control procedures, all in conjunction with
the Company's auditors. The Audit Committee currently consists of Kenneth J.
Melkus, Kenneth R. Masterson and Kevin L. Roberg.
The Company's Compensation Committee, composed solely of non-employee
directors, is responsible for reviewing and approving salaries, bonuses, and
other compensation for the Company's executive officers and administering any
stock option and other employee benefit plans of the Company. The Compensation
Committee currently consists of Patrick J. Welsh and Kenneth J. Melkus.
MEETINGS
During the Company's fiscal year ended June 30, 2000 ("Fiscal 2000"),
the Board of Directors of the Company held seven meetings. In addition, the
Compensation Committee met four times and the Audit Committee held four
meetings. During Fiscal 2000, each incumbent director attended 75% or more of
the aggregate number of meetings held by the Board of Directors and its
committees on which he served, with the exception of Mr. Masterson and Mr.
Roberg who because of an unavoidable prior commitment or illness were unable to
attend two of the Board meetings held in fiscal 2000.
COMPENSATION OF DIRECTORS
Employees of the Company who are members of the Board of Directors of
the Company do not receive any compensation for serving on the Company's Board
of Directors. Each non-employee member of the Board of Directors, received a fee
for serving as a director prior to December 1, 1999 equal to $1,500.00 for each
meeting of the Board of Directors attended by such director. During the period
December 1, 1999 to November 30, 2000 each non-employee director received a fee
for serving as a director in the form of non-qualified stock options for 15,000
shares of Accredo common stock (taking into account the 3 for 2 stock split that
occurred in February 2000). These options were 100% vested on the date of grant
and are exercisable at an exercise price of $19.33 per share. The options expire
on November 10, 2009. For the period December 1, 2000 to November 30, 2001, each
non-employee member of the Board of Directors will receive options for 10,000
shares of Accredo common stock, plus a cash payment of $10,000.00. These options
are 100% vested on the date of grant and are exercisable at an exercise price
per share equal to the fair market value of Accredo stock on the date of the
grant. These options will expire 10 years after the date of grant. All directors
of the Company, including members who are employees, receive reimbursement of
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors or committees thereof.
In May 1996, the Company adopted the Nova Holdings, Inc. and its
Subsidiaries Stock Option and Restricted Stock Purchase Plan ("1996 Option
Plan") to provide for grants of options to its officers, employees and
directors. The 1996 Option Plan was amended in 1997.
The 1996 Option Plan provides for the discretionary grant of options to
Directors of the Company who are not employees of the Company (each an "Eligible
Director"). Pursuant to the 1996 Option Plan each then Eligible Director was, in
February 1998, awarded an initial grant of non-qualified options to purchase
30,000 shares on a post-split basis. Mr. Masterson was granted non-qualified
options to purchase 30,000 shares in April 1998 on a post-split basis. Mr.
Roberg was granted nonqualified options to purchase 15,000 shares on November
18, 1999 on a post-split basis. The Option Price for each option granted to a
director under the 1996 Option Plan in 1998 was
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$6.00 and the Option Price for each option granted to Mr. Roberg on November 18,
1999 was $19.58, each price respectively having been determined to be the fair
market value per share at the time of the grant. Such options are vested ratably
each year on the anniversary of the grant date over the four year period
commencing on the grant date. If elected as a director by the shareholders at
the Annual Meeting, Dr. Gourley will be granted nonqualified options to purchase
10,000 shares of Accredo stock at an option price equal to the fair market value
of the stock on the date of grant. These options will also vest ratably over
four years. Directors of the Company are eligible for future grants of stock
awards under the 1996 Option Plan and the Company's 1999 Long-Term Incentive
Plan.
PROPOSAL #2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The independent accounting firm of Ernst & Young LLP has served as the
Company's independent auditors since its inception and the Company's Board of
Directors has selected Ernst & Young LLP to conduct the annual audit of the
financial statements of the Company for its fiscal year ending June 30, 2001.
Ernst & Young LLP has no financial interest, direct or indirect, in the Company
and does not have any connection with the Company except in its professional
capacity as an independent auditor. The ratification by the stockholders of the
selection of Ernst & Young LLP as independent auditors is not required by law or
by the Bylaws of the Company. The Board of Directors, consistent with the
practice of many publicly held corporations, is nevertheless submitting this
selection to its stockholders. If this selection is not ratified at the Annual
Meeting, the Board of Directors intends to reconsider its selection of
independent auditors for the fiscal year ending June 30, 2001. Even if the
selection is ratified, the Board of Directors in its sole discretion may direct
the appointment of a different independent accounting firm at any time during
the fiscal year if the Board determines that such a change would be in the best
interest of the Company and its stockholders. Representatives of Ernst & Young
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement, if they so desire, and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS.
PROPOSAL #3
APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
On October 4, 2000, the Board of Directors of the Company approved an
amendment to Article IV of the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock, $.01 par value which the Company has authority to issue from
30,000,000 to 50,000,000 (the "Amendment").
As of September 18, 2000, 16,901,404 shares of the Company's Common
Stock were issued and outstanding and 1,854,550 shares of the Company's Common
Stock were reserved for issuance under the Company's 1996 Option Plan, the 1999
Long-Term Incentive Plan and the Accredo Health, Incorporated 1999 Employee
Stock Purchase Plan. Therefore 11,244,046 shares of the Company's Common Stock
were authorized but unissued and unreserved.
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The Amendment will ensure that shares of the Company's Common Stock
will be available, if needed, for issuance in connection with stock splits,
stock dividends, acquisitions and other corporate purposes. The Board of
Directors believes that the availability of the additional shares for such
purposes without delay or the necessity for a shareholders' meeting would be
beneficial to the Company. The Company has no immediate plans to issue any of
the additional shares of its Common Stock that would be authorized by the
Amendment.
No further action by the shareholders of the Company would be necessary
prior to the issuance of the additional shares of the Company's Common Stock,
except as may be required by applicable law or any stock exchange on which the
Company's securities may then be listed. Neither the shares of the Company's
Common Stock presently authorized nor the shares of the Company's Common Stock
to be authorized by the Amendment have preemptive rights.
If someone attempted a hostile takeover of the Company, the use of the
additional authorized shares to make a counteroffer for the shares of the bidder
or to sell shares to dilute the voting power of the bidder could make the
takeover attempt more difficult. The Amendment is not part of a plan by the
Company to adopt a series of antitakeover amendments, and the Company's Board of
Directors presently is unaware of any effort to accumulate shares of the
Company's Common Stock or to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise.
The Company's Amended and Restated Certificate of Incorporation and
By-Laws presently contain certain provisions which could be construed as
antitakeover measures. The Company's Amended and Restated Certificate of
Incorporation and By-Laws provide that the Board of Directors of the Company
will be divided into three classes of directors, with each class to be as nearly
equal in number as possible. The term of the office of one class of directors
expires each year in rotation so that one class is elected at each annual
meeting of shareholders for a full three-year term. A director may be removed
from office prior to the expiration of his or her term only "for cause". Under
the classified board of directors provision described above, it would take at
least two elections of Directors for anyone to gain control of the Company's
Board of Directors. Accordingly, these provisions would tend to discourage
unfriendly takeovers. Cumulative voting is not provided for by either the
Amended and Restated Certificate of Incorporation or the By-Laws of the Company.
Our Amended and Restated Certificate of Incorporation and By-Laws
provide that the number of directors will be fixed from time to time with the
consent of two-thirds of the Board. Moreover, our Amended and Restated
Certificate of Incorporation provides that directors may only be removed "for
cause" by the affirmative vote of the holders of at least a majority of the
outstanding shares of our capital stock then entitled to vote at an election of
directors. This provision prevents stockholders from removing any incumbent
director without cause and allows two-thirds of the incumbent directors to add
additional directors without the approval of stockholders until the next annual
meeting of stockholders at which directors of that class are elected.
The Company's Amended and Restated Certificate of Incorporation and
By-Laws establish an advance notice procedure for shareholders to make
nominations of candidates for election as Directors, or to bring other business
before an annual meeting of the Company's shareholders. The Company's Amended
and Restated Certificate of Incorporation and By-Laws provide that any persons
who are nominated by, or at the direction of, the Company's Board of Directors,
by a nominating committee appointed by the Board of Directors, or by a
shareholder who has given timely written notice to the Company's Secretary prior
to the meeting at which Directors are to be elected, will be eligible for
election as Directors of the Company. The Company's Amended and Restated
Certificate of Incorporation and By-Laws also provide that at an annual meeting
only such business may be conducted as has been brought before the meeting by,
or at the direction of, the Company's Board of Directors, or by a shareholder
who
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has given timely written notice to the Secretary of the Company of such
shareholder's intention to bring such business before such meeting. Under the
Amended and Restated Certificate of Incorporation and By-Laws, a shareholder's
notice must also contain certain information specified in the By-Laws. These
provisions would prevent a stockholder from making a proposal or a director
nomination at a stockholder meeting without us having advance notice of the
proposal or director nomination. This provision could make a change in control
more difficult by providing our Board of Directors with more time to prepare an
opposition to a proposed change in control.
The Company's Amended and Restated Certificate of Incorporation
authorizes the Board of Directors (without shareholder approval) to issue shares
of Preferred Stock from time to time in one or more series, each series to have
such powers, designations, preferences and rights, and qualifications,
limitations or restrictions thereof, as may be determined by the Board of
Directors by adoption of an amendment to the Restated Certificate of
Incorporation that specifies the terms of the series of Preferred Stock. Because
the Board of Directors has the power to establish the preferences and rights of
each series of Preferred Stock, it may afford the holders of any series of
Preferred stock preference and rights, voting or otherwise, that are senior to
the rights of holders of Common Stock. The Company currently has no shares of
Preferred Stock outstanding.
Our by-laws also contain a provision requiring the vote of the holders
of two-thirds of the outstanding common stock in order to call a special meeting
of stockholders. This provision would prevent a stockholder with less than a
two-thirds interest from calling a special meeting to consider a merger unless
such stockholder had first garnered adequate support from a sufficient number of
other shareholders.
The Delaware Business Corporation Law (the "DBCL") applies to the
Company as a Delaware corporation. Under certain circumstances, the following
provisions of the DBCL may delay, prevent or make more difficult unsolicited
acquisitions or changes of control of the Company. Such provisions also may have
the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which shareholders may otherwise deem to be in their best
interests.
Subject to some exceptions, Section 203 of the DBCL prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a definitive period of time. That period is
three years from the date of the transaction in which the person became an
interested stockholder, unless the interested stockholder attained such status
with the approval of the Board of Directors or unless the business combination
is approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to some exceptions, an "interested
stockholder" is a person who, together with his, her or its affiliates and
associates, owns, or owned within three years prior, 15% or more of the
corporation's voting stock. The above provisions do not apply to corporations
that so elect in an amendment to their articles of incorporation approved by a
majority of the disinterested shares. Such an amendment, however, would not
become effective until 12 months after its passage and would apply only to stock
acquisitions occurring after its effective date. The Company's Restated Articles
of Incorporation do not exclude the Company from the restrictions imposed by
such provisions.
The overall effect of the provisions of the statutes, the Company's
Restated Articles of Incorporation and By-Laws described above may be to render
more difficult or to discourage a merger, tender offer, proxy contest, the
assumption of control of the Company by a holder of a large block of the
Company's Common Stock or other person, or the removal of incumbent management,
even if such actions may be beneficial to the Company's shareholders generally.
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<PAGE> 13
If the Amendment to increase the number of authorized shares of the
Company's Common Stock and the amendment to Article IV of the Company's Amended
and Restated Certificate of Incorporation set forth in proposals 4 and 5 below
are approved, Article IV of the Company's Amended and Restated Certificate of
Incorporation will read as set forth on Appendix A hereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT.
PROPOSAL #4
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO ELIMINATE NON-VOTING COMMON STOCK
Article IV of the Company's Amended and Restated Certificate of
Incorporation provides for 2,500,000 shares of Non-Voting Common Stock. On
October 4, 2000, the Board of Directors of the Company approved an Amendment to
Article IV of the Company's Amended and Restated Certificate of Incorporation to
eliminate the authorized shares of the Company's Non-Voting Common Stock which
the Company has authority to issue.
The Non-Voting Common Stock was originally authorized and issued to
Welsh Carson Anderson & Stowe VII in April 1999. Welsh Carson Anderson & Stowe
VII converted the Non-Voting Common Shares to Common Stock on August 13, 1999.
There are currently no shares of Non-Voting Common Stock outstanding. The
Company does not anticipate a need for Non-Voting Common Stock in the future and
the elimination of Non-Voting Common Stock from the Amended and Restated
Certificate of Incorporation will reduce certain future tax liabilities which
would otherwise be owed to the states in which the Company is incorporated or
otherwise qualified to do business as a foreign corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT.
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<PAGE> 14
PROPOSAL #5
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO ELIMINATE SERIES A CUMULATIVE PREFERRED STOCK.
Article IV of the Company's Amended and Restated Certificate of
Incorporation states that the Company has authority to issue 300,000 shares of
Series A Cumulative Preferred Stock, $1.00 par value. On October 4, 2000, the
Board of Directors of the Company approved an amendment to Article IV of the
Company's Amended and Restated Certificate of Incorporation to delete and
eliminate the Company's authority to issue authorized shares of the Series A
Cumulative Preferred Stock.
The Company has authority under Article IV of its Amended and Restated
Certificate of Incorporation to issue up to 300,000 shares of Series A
Cumulative Preferred Stock. The Company issued 255,361 shares of Series A
Cumulative Preferred Stock to certain individuals on May 31, 1996. The
Corporation redeemed all of the outstanding Series A Cumulative Preferred Stock
from stockholders of record on March 22, 1999 in accordance with, and at a
redemption price, as set out in the Amended and Restated Certificate of
Incorporation. The Company used part of the proceeds from its initial public
offering on April 16, 1999 to redeem all of the outstanding Series A Cumulative
Preferred Stock.
Section A.7. of Article IV provides that shares of Series A Cumulative
Preferred Stock which are redeemed or otherwise acquired by the Company in any
manner shall be retired and cancelled promptly after the acquisition thereof and
the number of authorized shares of Series A Cumulative Preferred Stock shall be
reduced accordingly. As a result, the Company currently has authority to only
issue 44,639 shares of Series A Cumulative Preferred Stock.
The purpose of this proposed amendment to the Amended and Restated
Certificate of Incorporation is to eliminate not only the reference to the
Series A Cumulative Preferred Stock that was redeemed, but also those remaining
shares that are authorized, but that have not been issued. The Company's state
tax liability in various states is calculated based upon the number of
authorized shares contained in its Articles of Incorporation. This Amendment to
the Company's Articles of Incorporation to eliminate the reference to Series A
Cumulative Preferred Stock will reduce future tax liabilities which would
otherwise be owed to certain states in which the Company is incorporated or
otherwise qualified to do business as a foreign corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT.
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<PAGE> 15
PROPOSAL #6
APPROVAL OF PROPOSED AMENDMENT TO THE
LONG-TERM INCENTIVE PLAN
The Accredo Health, Incorporated 1999 Long-Term Incentive Plan (the
"Long-Term Incentive Plan") was adopted by the Board of Directors on April 9,
1999 and approved by the stockholders of the Company on April 12, 1999. Under
the Long-Term Incentive Plan, the Company has reserved for issuance upon the
grant or exercise of awards a total of 750,000 shares of the authorized but
unissued shares of Common Stock (taking into account the 3 for 2 stock split in
February 2000). On October 4, 2000, the Board of Directors adopted a resolution
approving and recommending to the stockholders for their approval an amendment
to the Long-Term Incentive Plan which would increase the number of shares of
Common Stock reserved for issuance under the Long-Term Incentive Plan from
750,000 to 2,250,000 shares. The Board of Directors has approved the proposed
amendment to the Long-Term Incentive Plan for submission to the stockholders at
the Annual Meeting. If approved by the stockholders, the proposed Amendment will
be effective as of the date of the Annual Meeting.
If the amendment to increase the number of shares of Common Stock
reserved for issuance under the Long Term Incentive Plan is approved, the
Amended and Restated Long Term Incentive Plan will read as set forth on Appendix
B hereto. A summary of the Long-Term Incentive Plan is set forth below. The
summary is qualified in its entirety by reference to the full text of the plan
as set forth on Appendix B.
GENERAL
The purpose of the Long-Term Incentive Plan is to promote the success,
and enhance the value, of the Company by linking the personal interest of
employees, officers, consultants and directors to those of the stockholders, and
by providing such employees, officers, consultants and directors with an
incentive for outstanding performance. As of September 30, 2000, there were
approximately 190 persons eligible to participate in the Long-Term Incentive
Plan.
The Long-Term Incentive Plan authorizes the granting of awards to
employees, officers, consultants and directors of the Company or its
subsidiaries in the following forms: (i) options to purchase shares of Common
Stock which may be incentive stock options or nonqualified stock options; (ii)
stock appreciation rights ("SARs"); (iii) performance units; (iv) restricted
stock; (v) dividend equivalents; (vi) other stock-based awards; or (vii) any
other right or interest relating to Common Stock or cash. The maximum number of
shares of Common Stock with respect to one or more options and/or SARs that may
be granted during any one calendar year under the Long-Term Incentive Plan to
any one participant is 500,000.
Pursuant to Section 162(m) of the Code, the Company may not deduct
compensation in excess of $1 million paid to the President and the four next
most highly compensated executive officers of the Company. The Long-Term
Incentive Plan is designated to comply with Code Section 162(m) so that the
grant of options and SARs under the Long-Term Incentive Plan, and other awards,
such as performance units, that are conditioned on the performance goals
described in Section 13.12 of the Long-Term Incentive Plan, will be excluded
from the calculation of annual compensation for purposes of Code Section 162(m)
and will be fully deductible by the Company.
ADMINISTRATION
The Long-Term Incentive Plan provides that it will be administered by a
committee designated by the Board of Directors of the Company (the "Committee"),
or at the discretion of the Board from time to
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<PAGE> 16
time, by the Board. The Board of Directors has designated the Compensation
Committee to serve as the Committee under the Long-Term Incentive Plan. The
Committee has the power, authority and discretion to designate participants;
determine the type or types of awards to be granted to each participant and the
number, terms and conditions thereof; establish, adopt or revise any rules and
regulations as it may deem necessary or advisable to administer the Long-Term
Incentive Plan; and make all other decisions and determinations that may be
required under, or as the Committee deems necessary or advisable to administer,
the Long-Term Incentive Plan.
AWARDS
Stock Options. The Committee is authorized to grant options, which may
be incentive stock options or nonqualified stock options, to participants. All
options must be evidenced by a written award agreement between the Company and
the participant, which will include such provisions as may be specified by the
Committee. The Long-Term Incentive Plan provides that the exercise price of an
option will not be less than the fair market value of the underlying Common
Stock as of the date of the grant. The terms of any incentive stock option must
meet the requirements of Section 422 of the Code, including stockholder approval
requirements.
Stock Appreciation Rights. The Committee may grant SARs to
participants. Upon the exercise of the SAR, the participant has the right to
receive the excess, if any, of: the fair market value of one share of Common
Stock on the date of exercise, over the grant price of the SAR as determined by
the Committee, which will not be less than the fair market value of one share of
Common Stock on the date of grant. All awards of SARs must be evidenced by an
award agreement, reflecting the terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of the SAR, as determined by the Committee at the time of grant.
Performance Units. The Committee may grant performance units to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
performance units granted to each participant and to set performance goals and
other terms or conditions to payment of the performance units in its discretion
which, depending on the extent to which they are met, will determine the number
and value of performance units that will be paid to the participant.
Restricted Stock Awards. The Committee may make awards of restricted
stock to participants, which will be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote restricted stock or the
right to receive dividends, if any, on the restricted stock).
Dividend Equivalents. The Committee is authorized to grant dividend
equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Common Stock subject to an Award under the Long-Term
Incentive Plan, as determined by the Committee. The Committee may provide that
dividend equivalents be paid or distributed when accrued or be deemed to have
been reinvested in additional shares of Common Stock or otherwise reinvested.
Other Stock-Based Awards. The Committee may, subject to limitations
under applicable law, grant to participants such other awards that are payable
in, valued in whole or in part by reference to, or otherwise based on or related
to shares of Common Stock as deemed by the Committee to be consistent with the
purposes of the Long-Term Incentive Plan, including without limitation shares of
Common Stock awarded purely as a bonus and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Common Stock and awards valued
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<PAGE> 17
by reference to book value of shares of Common Stock or the value of securities
of or the performance of specified subsidiaries of the Company. The Committee
will determine the terms and conditions of any such awards.
Performance Goals. The Committee may determine that any award will be
determined solely on the basis of (a) the achievement by the Company or a
subsidiary company of a specified target return, or target growth in return, on
equity or assets, (b) the Company's or subsidiary's stock price, (c) the
Company's total shareholder return (stock price appreciation plus reinvested
dividends) relative to a defined comparison group or target over a specific
performance period, (d) the achievement by a business unit of the Company or
subsidiary of a specified target, or target growth in, net income or earnings
per share, (e) the achievement of objectively determinable goals with respect to
service or product delivery, service or product quality, customer satisfaction,
meeting budgets and/or retention of employees, or (f) any combination of the
goals set forth in (a) through (e) above. If an award is made on such basis, the
Committee will establish goals prior to the beginning of the period for which
such performance goal relates (or such later date as may be permitted under Code
Section 162(m) or the regulations thereunder), and the Committee may reduce (but
not increase) the award, notwithstanding the achievement of a specified goal.
Any payment of an award granted with performance goals will be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied.
Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an incentive stock option, pursuant to a
qualified domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not result in accelerated taxation, (ii) does not cause
any option intended to be an incentive stock option to fail to be described in
Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking
into account any factors deemed relevant, including without limitation, state or
federal tax or securities laws applicable to transferable awards.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding options, SARs, and other awards in the nature of
rights that may be exercised will become fully exercisable and all restrictions
on outstanding awards will lapse. Any options or SARs will thereafter continue
or lapse in accordance with the other provisions of the Long-Term Incentive Plan
and the award agreement. Unless otherwise provided in an Award Agreement
approved by the Committee, if a Change in Control (as defined in the Long-Term
Incentive Plan) occurs, then all outstanding Awards that may be exercised shall
become fully exercisable and all restrictions on outstanding Awards shall lapse.
Under certain conditions, the Board of Directors may determine that events not
otherwise constituting a Change in Control will be considered a Change in
Control.
TERMINATION AND AMENDMENT
The Board of Directors or the Committee may, at any time and from time
to time, terminate, amend or modify the Long-Term Incentive Plan without
stockholder approval. The Committee may, however, condition any amendment on the
approval of the stockholders of the Company if such approval is necessary or
deemed advisable with respect to tax or securities or if modification of the
Long-Term Incentive Plan may, without the written consent of the participant,
adversely affect any award previously granted under the Long-Term Incentive
Plan.
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<PAGE> 18
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified stock options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of a non-discounted nonqualified stock
option. However, the participant will realize ordinary income on the exercise of
the nonqualified stock option in an amount equal to the excess of the fair
market value of the Common Stock acquired upon the exercise of such option over
the exercise price, and the Company will receive a corresponding deduction
(subject to Code Section 162(m) limitations). The gain, if any, realized upon
the subsequent disposition by the participant of the Common Stock will
constitute short-term or long-term capital gain, depending on the participant's
holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an incentive stock option or the exercise thereof
by the participant, except that upon exercise of an incentive Stock option, the
participant may be subject to alternative minimum tax on certain items of tax
preference. If the participant holds the shares of Common Stock for the greater
of two years after the date the option was granted or one year after the
acquisition of such shares of Common Stock (the "required holding period"), the
difference between the aggregate option price and the amount realized upon
disposition of the shares of Common Stock will constitute long-term capital gain
or loss, and the Company will not be entitled to a federal income tax deduction.
If the shares of Common Stock are disposed of in a sale, exchange or other
"disqualifying disposition" during the required holding period, the participant
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the Common Stock purchased at the time of exercise over the
aggregate option price, and the Company will be entitled to a federal income tax
deduction in that amount (subject to Code Section 162(m) limitations).
SARs. Under present federal income tax regulations, a participant
receiving a SAR will not recognize income, and the Company will not be allowed a
tax deduction, at the time the award is granted. When a participant exercises a
SAR, the amount of cash and the fair market value of any shares of Common Stock
received will be ordinary income to the participant, and the Company will be
allowed a deduction in that amount for federal income tax purposes (subject to
Code Section 162(m) limitations).
Performance units. Under present federal income tax regulations, a
participant receiving performance units will not recognize income, and the
Company will not be allowed a tax deduction, at the time the award is granted.
When a participant receives payment of performance units, the amount of cash and
the fair market value of any shares of Common Stock received will be ordinary
income to the participant, and the Company will be allowed a deduction in that
amount for federal income tax purposes (subject to Code Section 162(m)
limitations).
Restricted Stock. Under present federal income tax regulations, and
unless the participant makes an election to accelerate recognition of the income
to the date of grant, a participant receiving a restricted stock award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Common Stock,
and the Company will be entitled to a tax deduction in that amount (subject to
Code Section 162(m) limitations).
BENEFITS TO NAMED EXECUTIVE OFFICERS, DIRECTORS AND OTHERS
As of September 30, 2000, awards had been granted under the Long-Term
Incentive Plan to the persons and groups shown in the table below. In addition,
the Company has agreed to grant awards to (i) Dick R. Gourley, if he is elected
a director of the Company at the Annual Meeting, and (ii) the outside directors
for service on the Board during the period December 1, 2000 through November 30,
2001. Any future awards under the Long-Term Incentive Plan will be made at the
discretion of the Committee or the Board, as the case may be. Consequently, the
Company cannot determine, with respect to (1) the
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<PAGE> 19
executive officers of the Company, (2) all current executive officers as a
group, (3) all non-executive directors, as a group, or (4) all eligible
participants, including all current officers who are not executive officers, as
a group, either the benefits or amounts that will be received in the future by
such persons or groups pursuant to the Long-Term Incentive Plan.
1999 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
STOCK OPTION GRANTS
NAME AND POSITION DOLLAR VALUE NUMBER OF
OF OPTIONS OPTIONS
<S> <C> <C>
Kenneth R. Masterson, Director (2) 15,000
Kenneth J. Melkus, Director (2) 15,000
Andrew M. Paul, Director (2) 15,000
Kevin L. Roberg, Director (2) 30,000
Patrick J. Welsh, Director (2) 15,000
All Executive Officers as a Group (2) --
All Non-Executive Directors as a Group (2) 90,000
All Non-Executive Employees as a Group (2) 104,289
</TABLE>
(1) The options granted to such persons named in this table become
exercisable on various dates ranging from immediately upon issuance to
the first four anniversaries of the date of grant. The exercise price
per share for options granted was the fair market value per share on
the date of grant.
(2) The dollar value of the above options is dependent on the difference
between the exercise price and the fair market value of the underlying
shares on the date of exercise.
REASONS FOR AMENDMENT OF THE LONG-TERM INCENTIVE PLAN
The Company believes that granting awards under the Long-Term Incentive
Plan is necessary to attract, retain and motivate qualified employees and
consultants, including but not limited to individuals who are or will be
employed by Accredo. Accredo may also grant awards to new employees joining the
Company through acquisitions. Management believes that grants to employees of
acquired companies are an important tool, enhancing Accredo's ability to acquire
companies and pursue its growth strategy, by aligning the interests of these new
employees with those of Accredo's stockholders.
There are currently fewer than 560,000 shares available for grant under
the Company's Long-Term Incentive Plan and the Company's 1996 Stock Option Plan,
which are the only plans under which the Company will make grants to current
officers, employees and consultants. The Company has determined not to make
future grants under option plans of acquired companies.
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<PAGE> 20
The Company believes it is important to make annual grants that vest
over a period of time to current officers and employees, so that they have a
continuing incentive to improve the Company's performance and mirror the results
for the Company's shareholders. To be able to continue to use stock-based
incentives to attract new employees, to incent and retain existing employees,
and to align the incentives of employees of acquired companies with those of
Accredo's stockholders, the Board of Directors has recommended an amendment to
increase the number of shares of Common Stock reserved for issuance under the
Long-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE LONG-TERM INCENTIVE PLAN
SECURITY OWNERSHIP OF DIRECTORS,
OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
held beneficially, directly or indirectly, as of the Record Date (September 18,
2000) by (a) each person known by the Company to be the beneficial owner of more
than five percent of the Common Stock, (b) each director and director nominee of
the Company, (c) the Company's Chief Executive Officer and the Company's four
most highly compensated executive officers other than the Chief Executive
Officer whose total salary and bonus for fiscal 2000 exceeded $100,000
(collectively, the "Named Executive Officers"), and (d) all directors, nominees
and officers of the Company as a group, together with the percentage of the
outstanding shares of Common Stock which such ownership represents.
COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
NAME NUMBER PERCENT
<S> <C> <C>
Janus Capital Corporation (2) 895,257 5.3
David D. Stevens (3) 418,394 2.4
John R. Grow (4) 156,441 *
Joel R. Kimbrough (5) 170,652 1.0
Kyle J. Callahan (6) 97,429 *
Thomas W. Bell, Jr. (7) 35,080 *
Kenneth R. Masterson (8) 55,500 *
Kenneth J. Melkus (9) 30,000 *
Andrew M. Paul (10)(11) 47,684 *
Patrick J. Welsh (10)(12) 151,578 *
Kevin L. Roberg (13) 22,500 -
Dick R. Gourley 150 -
All executive officers, directors and nominees as a group 1,185,408 6.7
(11 persons) (14)
</TABLE>
* Less than 1%.
(1) Information relating to the beneficial ownership of Common Stock by the
above individuals is based upon information furnished by each such
individual using "beneficial ownership" concepts set forth in rules
promulgated by the Securities and Exchange Commission (the
"Commission") under
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<PAGE> 21
Section 13(d) of the Exchange Act. Beneficial ownership includes shares
as to which such person or group, directly or indirectly, through any
contract, management, understanding, relationship, or otherwise has or
shares voting power and/or investment power as those terms are defined
in Rule 13d-3(a) of the Exchange Act. Except as indicated in other
footnotes to this table, each individual listed above possesses sole
voting and investment power with respect to all shares set forth by his
or its name, except to the extent such power is shared by a spouse
under applicable law. Any security that any person named above has the
right to acquire within 60 days is deemed to be outstanding for
purposes of calculating the ownership percentage by the particular
person or group, but are not deemed outstanding for any other purpose.
(2) The address of Janus Capital Corporation is 100 Fillmore Street,
Denver, Colorado 80206-4923. This information is derived from a 13F
filing made by such holder as to shares as to which it exercises shared
investment discretion as of June 30, 2000. We make no representation as
to the accuracy and completeness of this information regarding Janus.
(3) Includes options to purchase 286,144 shares granted under our stock
option plan.
(4) Includes options to purchase 108,546 shares granted under our stock
option plan.
(5) Includes options to purchase 151,071 shares granted under our stock
option plan.
(6) Includes options to purchase 49,125 shares granted under our stock
option plan.
(7) Includes options to purchase 24,375 shares granted under our stock
option plan.
(8) Includes options to purchase 30,000 shares granted under our stock
option plan. The address for Mr. Masterson is c/o FedEx Corporation,
942 S. Shady Grove Road, Memphis, Tennessee 38120.
(9) Includes options to purchase 15,000 shares granted under our stock
option plan. The address for Mr. Melkus is 102 Woodmont Blvd., Suite
110, Nashville, Tennessee 37205.
(10) The address of the named person is 320 Park Avenue, Suite 2500, New
York, New York 10022.
(11) Includes options to purchase 30,000 shares granted under our stock
option plan.
(12) Includes options to purchase 30,000 shares granted under our stock
option plan.
(13) Includes options to purchase 18,750 shares granted under our stock
option plan. The address for Mr. Roberg is 1695 Hunter Drive, Medina,
Minnesota 55391.
(14) Includes options to purchase an aggregate of 743,011 shares granted
under our stock option plan.
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<PAGE> 22
MANAGEMENT
The Named Executive Officers of the Company are listed in the table
below. Biographical information concerning David D. Stevens, John R. ("Randy")
Grow, and Kyle Callahan, who are also directors of the Company, is set forth
under Proposal 1 in this Proxy Statement. Biographical information concerning
all other executive officers of the Company is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
David D. Stevens 47 Chairman of the Board of Directors and Chief Executive
Officer
John R. ("Randy") Grow 52 President and Director
Joel R. Kimbrough 42 Senior Vice President, Chief Financial Officer and
Treasurer
Kyle J. Callahan 34 Senior Vice President and Director
Thomas W. Bell, Jr. 49 Senior Vice President, General Counsel and
Secretary
</TABLE>
Mr. Kimbrough has served as Senior Vice President and Chief Financial
Officer and Treasurer of Accredo since it was acquired from LHS in 1996. He has
also served as Chief Financial Officer and Director of Nova Factor since its
inception in 1990, as Chief Financial Officer of SHS since 1989, and as a
Director of SHS since 1996. Previously, Mr. Kimbrough, a certified public
accountant, was employed by Ernst & Young LLP from 1980 to 1989.
Mr. Bell joined Accredo as Senior Vice President and General Counsel in
July 1998 and was elected Secretary of the Company in October 1998. Prior to
joining the Company, Mr. Bell practiced law from 1976 to 1998 as a member of the
firm of Armstrong Allen Prewitt Gentry Johnston & Holmes, PLLC in Memphis,
Tennessee, where Mr. Bell represented Nova Factor and SHS since their inception
in 1990 and 1983, respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs.
Stevens, Grow, Kimbrough, Bell and Callahan. The terms of such employment
agreements expire on August 31, 2001 with respect to Messrs. Stevens, Bell and
Kimbrough, and the terms expire on August 31, 2002 with respect to Messrs. Grow
and Callahan, although each employment agreement is subject to automatic
one-year renewals. The Company may terminate the employment agreements at any
time. Each employment agreement provides that in the event the Company
terminates the executive's employment without "cause" (as defined therein) and
other than by reason of his death or disability, or in the event the executive
terminates his employment for "good reason" (as defined therein), the executive
shall continue to receive his salary as a severance payment for one year. In
addition, upon such termination, Messrs. Stevens, Grow, Kimbrough, Callahan and
Bell would be entitled to continue to participate in the Company's benefit plans
for a period of one year (or until the commencement of other full-time
employment, whichever is earlier).
The employment agreements entitle Messrs. Stevens, Grow, Kimbrough,
Bell and Callahan to annual base salaries which for the twelve month period
ending August 31, 2001 are presently set at $308,629, $203,410, $202,137,
$191,444, and $195,632, respectively. Each employment agreement
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<PAGE> 23
also provides for the payment of an annual bonus of up to 75% of salary with
respect to Messrs. Grow, Kimbrough, Callahan and Bell, and up to 100% of salary
with respect to Mr. Stevens, based upon the extent to which the Company achieves
certain performance goals based upon target earning levels established by the
Board of Directors. Each of the employment agreements entitles the executive to
all benefits provided by the Company for its senior executives. In addition, the
Company has agreed to maintain $500,000 in term life insurance for each of
Messrs. Stevens, Grow, Kimbrough and Bell, payable to their respective named
beneficiaries.
Each of the employment agreements prohibits the executive's disclosure
and use of confidential information and restricts, for twelve months following
termination of employment, the executive's solicitation of certain employees of
the Company, conduct of certain business with the Company's five largest
suppliers, or competition with the Company.
23
<PAGE> 24
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual salaries paid to the
Company's Chief Executive Officer and the Company's Named Executive Officers for
the fiscal years ended June 30, 1998, 1999, and 2000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- --------------------------
RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARD(S)($) OPTIONS(#) COMPENSATION(S)
---- --------- ------- ------------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Stevens(2) 2000 $284,547 214,326 $ -- $ -- -- $ 4,795
Chairman of the Board and 1999 263,534 132,300 -- -- -- 4,224
Chief Executive Officer 1998 250,938 45,360 -- -- -- 4,657
John R. ("Randy") Grow(3) 2000 189,690 95,051 -- -- -- 4,813
President 1999 177,780 89,250 -- -- -- 4,611
1998 167,269 30,600 -- -- -- 4,525
Joel R. Kimbrough(4) 2000 186,364 93,582 -- -- -- 5,343
Senior Vice President, 1999 172,345 86,650 -- -- -- 3,782
Chief Financial Officer and 1998 159,306 29,430 -- -- -- 3,587
Treasurer
Kyle J. Callahan(5) 2000 183,294 91,417 -- -- -- 3,455
Senior Vice President 1999 170,983 85,838 -- -- -- 3,520
1998 160,621 29,430 -- -- 60,000 3,740
Thomas W. Bell, Jr.(6) 2000 178,532 89,460 -- -- -- 3,214
Senior Vice President, 1999 138,923 67,200 -- -- 75,000 1,799
General Counsel and 1998 -- -- -- -- -- --
Secretary
</TABLE>
(1) Excludes perquisites and other personal benefits which for each Named
Executive Officer during any such year did not exceed the lesser of
$50,000 or 10% of such individuals salary plus annual bonus.
(2) All other compensation for fiscal year 2000 includes Company
contributions of $3,411 under its 401(k) Plan and $1,384 for
Company-paid life insurance. All other compensation for fiscal year
1999 includes Company contributions of $3,316 under its 401(k) Plan and
$908 for Company-paid life insurance. All other compensation for fiscal
year 1998 includes Company contributions of $3,749 under its 401(k)
plan and $908 for Company-paid life insurance.
(3) All other compensation for fiscal year 2000 includes Company
contributions of $2,644 under its 401(k) Plan and $2,169 for
Company-paid life insurance. All other compensation for fiscal year
1999 includes Company contributions of $3,278 under its 401(k) Plan and
$1,333 for Company-paid life insurance. All other compensation for
fiscal year 1998 includes Company contributions of $3,192 under its
401(k) plan and $1,333 for Company-paid life insurance.
(4) All other compensation for fiscal year 2000 includes Company
contributions of $3,339 under its 401(k) Plan and $2,004 for
Company-paid life insurance. All other compensation for fiscal year
1999 includes Company contributions of $3,104 under its 401(k) Plan and
$678 for Company-paid life insurance. All other compensation for fiscal
year 1998 includes Company contributions of $2,909 under its 401(k)
plan and $678 for Company-paid life insurance.
(5) All other compensation for fiscal year 2000 includes Company
contributions of $3,311 under its 401(k) Plan and $144 for Company-paid
life insurance. All other compensation for fiscal year 1999 includes
Company contributions of $3,376 under its 401(k) Plan and $144 for
Company-paid life insurance. All other compensation for fiscal year
1998 includes Company contributions of $3,592 under its 401(k) Plan and
$148 for Company-paid life insurance.
24
<PAGE> 25
(6) All other compensation for fiscal year 2000 includes Company
contributions of $1,890 under its 401(k) Plan and $1,324 for
Company-paid life insurance. All other compensation for fiscal year
1999 includes Company contributions of $775 under its 401(k) Plan and
$1,024 for Company-paid life insurance. Mr. Bell joined the Company in
July 1998 and received a prorated salary during the fiscal year ended
June 30, 1999.
25
<PAGE> 26
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant stock options to the Named Executive Officers
during the fiscal year ended June 30, 2000.
--------------------------------------------------------------------------------
<PAGE> 27
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END VALUES
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table summarizes options exercised during fiscal year
2000 and presents the value of unexercised options held by the Named Executive
Officers at fiscal year end (1):
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS HELD AT OPTIONS HELD AT
SHARES JUNE 30, 2000 JUNE 30, 2000(3)
ACQUIRED ON VALUE ---------------------------- -------------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David D. Stevens 121,000 $ 2,531,500 225,071 61,073 $ 7,328,874 $ 1,988,690
John R. ("Randy") Grow 95,025 2,610,653 78,010 30,536 2,540,201 994,329
Joel R. Kimbrough 52,500 1,117,800 120,535 30,536 3,924,921 994,329
Kyle J. Callahan -- -- 35,625 24,375 1,088,789 744,961
Thomas W. Bell, Jr 24,375 524,212 13,125 37,500 401,133 1,146,094
</TABLE>
(1) The table reflects the impact of a 3 for 2 stock split that occurred
during fiscal year 2000.
(2) Based upon the difference between fair market value and the exercise
price on the exercise dates.
(3) Based upon the closing price of the Common Stock of $34.5625 per share
as reported on the NASDAQ National Market on June 30, 2000, less the
exercise price of the options.
27
<PAGE> 28
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
This report is submitted by the Company's Compensation Committee at the
direction of the Board of Directors. It provides information regarding the
compensation and benefits provided to the Company's Chief Executive Officer and
other executive officers. The Compensation Committee of the Board of Directors
is responsible for reviewing and approving compensation for the Company's
executive officers. The Compensation Committee is composed of two non-employee
directors. Because the Compensation Committee believes that each executive
officer has the potential to affect the short-term and long-term profitability
of the Company, the Committee places considerable importance on the task of
creating and implementing the Company's executive compensation program.
The Company's executive compensation program is focused on stockholder
value, the overall performance of the Company, the effect of the executive's
performance on the success of the Company and the individual performance of the
particular executive.
COMPENSATION PHILOSOPHY
The Compensation Committee's philosophy is to integrate the
compensation of the Company's executive officers with corporate performance. The
Committee's objectives are to (i) measure executive performance against
short-term and long-term goals, (ii) treat employees fairly and, at the same
time, be cost effective, (iii) reward performance, (iv) recognize individual
initiative and achievements, (v) foster teamwork within the Company so that
employees share in the rewards and risks of the Company, and (vi) assure that
executive compensation will be tax deductible to the maximum extent permissible.
The Compensation Committee is also focused on assisting the Company in
attracting, motivating, and retaining qualified executives, and aligning the
incentives of management with the interests of stockholders. In administering
the compensation policies and programs used by the Compensation Committee and
endorsed by the Board of Directors, the Compensation Committee reviews and
approves:
- total compensation of executive officers in relation to
Company performance;
- long-term incentive compensation in the form of stock awards;
and
- cash or other bonuses based upon a percentage of annual salary
to motivate and retain high quality executive officers.
The compensation program of the Company currently consists of base
salary, annual incentive compensation in the form of cash bonuses, and options.
Because the Company's compensation plan involves incentives contingent upon the
Company's performance and individual performance, an executive officer's actual
compensation level in any particular year may be above or below that of
similarly situated officers of competitors. The Compensation Committee reviews
each element of executive compensation annually.
The key components of the Company's executive compensation program are
described below.
28
<PAGE> 29
BASE SALARY
The Compensation Committee, along with the CEO of the Company, reviews
and approves an annual salary plan for the Company's executive officers
following a merit review conducted by the CEO. The salary plan is developed by
the Company's CEO. Many subjective factors are included in determining the
executive's base salary, such as (i) the executive officer's responsibilities,
(ii) the scope of the position, (iii) experience and length of service with the
Company, (iv) individual efforts and performance within the Company, the
industry and the community, (v) team building skills consistent with the
Company's best interests, (vi) observance of the Company's ethics and compliance
program, (vii) salaries paid by competitive companies to officers in similar
positions, and (viii) base compensation paid to other Company executives. While
these subjective factors are then integrated with other objective factors,
including the Company's net income, earnings per share, return on equity, and
growth, the overall assessment is primarily a subjective one, intended to
reflect the level of responsibility and individual performance of the particular
executive officer.
BONUSES
The Compensation Committee believes that a significant portion of the
total cash compensation for executive officers should be based on the Company's
achievement of specific performance criteria, including earnings, and that a
significant part of the cash compensation package should be at risk.
Accordingly, executive officers of the Company receive a cash bonus based on a
percentage of annual base salary if the Company meets an annual performance
target. The performance targets are established and communicated at the
beginning of each year. The executive officers' performance targets have
historically been, and are contractually, based on the achievement by the
Company of earnings per share goals. Bonuses for executive officers can be as
much as 100% of base salary with respect to Mr. Stevens and as much as 75% of
base salary with respect to other executives, depending on the percentage of the
earnings per share goal that is achieved. The calculation of the percentage of
annual base salary to be paid as bonus upon achievement of a certain percentage
of the goal for that year is set out in each executive's employment contract.
LONG-TERM COMPONENT -- STOCK INCENTIVE PLANS
To date, the Company has relied primarily upon stock option awards to
provide long-term incentives for executives and to align executives' incentives
more closely with the interests of stockholders. The Compensation Committee
continues to believe that stock option awards have been and remain an excellent
vehicle for providing financial incentives for management. In addition to the
1996 Option Plan, the Company has also adopted the Accredo Health, Incorporated
1999 Long-Term Incentive Plan which is also administered by the Compensation
Committee. The Company's stock incentive plans permit the Company to issue stock
options or other stock based awards to officers, key employees, and directors of
the Company. Subject to general limits prescribed by the stock incentive plans,
the Compensation Committee has the authority to determine the individuals to
whom stock awards will be granted, the terms of the awards, and the number of
shares subject to each award. The size of any particular stock award is based
upon the executive's position and the executive's individual performance during
the related evaluation period. Because the option exercise price is the price of
stock on the date of grant and the options generally carry a ten-year life,
under a stock option award executives benefit only if the value of the Company's
Common Stock increases.
29
<PAGE> 30
The Company has historically divided its options into two traunches.
Tranche A options previously granted vest over time while the exercisability of
previously granted Tranche B options accelerate if the Company achieves certain
preset performance goals. Thus, executives with stock options are rewarded for
their efforts to improve short and long-term performance. In this way, the
financial interests of management are aligned with those of the Company's
stockholders. For this reason, the Company uses stock options as its predominate
long-term incentive program.
As a result of the financial performance achieved by the Company during
the fiscal year ended June 30, 1999, the Board of Directors and Compensation
Committee approved the vesting on September 1, 1999 of 50% of outstanding
Tranche B options granted to the executives and the vesting of the remaining 50%
of outstanding Tranche B options on September 1, 2000.
Executive officers of the Company may also participate in the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan"). Executive officers are
entitled to participate in the Stock Purchase Plan on the same terms as
non-executive employees who meet the applicable eligibility criteria, subject to
any legal limitations on the amounts that may be contributed or the benefits
that may be payable under the Stock Purchase Plan. All contributions to the
Stock Purchase Plan are made or invested in the Company's Common Stock. These
features are intended to align further the executives' and stockholders'
long-term financial interests.
OTHER BENEFITS
The Company's executives are also entitled to participate in (i) the
Company's self insured group medical plan, and (ii) the Company's 401(k) plan.
In addition, the Company maintains $500,000.00 in term life insurance for each
of Messrs. Stevens, Grow, Kimbrough and Bell, payable to their respective named
beneficiaries. The Company makes only nominal use of perquisites in compensating
its executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's basis for compensation of the Chief
Executive Officer, David D. Stevens, is based on the compensation philosophy
discussed above. Mr. Stevens participates in the same executive compensation
plans available to the other executive officers. For the twelve months ending
August 31, 2001, the Compensation Committee set the base salary of Mr. Stevens
at $308,629. The compensation level established for Mr. Stevens was in response
to the Committee's and the Board's assessments of the Company's performance and
accomplishments in fiscal 2000, as well as Mr. Stevens' position in the Company
and the nature of his responsibilities and contributions. The Committee
considered Mr. Stevens' performance in terms of the Company's success in meeting
its performance targets, from both an operational and a financial standpoint,
and in executing its strategic plan. The Committee also considered the Company's
performance relative to its peers and competitors in the industry in evaluating
Mr. Stevens' compensation.
FEDERAL INCOME TAX DEDUCTIBILITY LIMITATIONS
The Compensation Committee intends to use its best efforts to structure
future compensation so that executive compensation paid by the Company is fully
deductible in accordance with Section 162(m) of the Internal Revenue Code
enacted in 1993, which generally disallows a tax deduction to public companies
for compensation over $1 million paid to certain executive officers unless
certain conditions
30
<PAGE> 31
are met. However, the Compensation Committee may, in a particular case, decide
to approve compensation that may prove not to be deductible.
SUMMARY
The Compensation Committee believes that the Company's compensation
policies are strongly linked to the Company's performance and the enhancement of
stockholder value. The Compensation Committee intends to continually evaluate
the Company's compensation policies and plans to ensure that they are
appropriately configured to align the interest of officers and stockholders and
that the Company can attract, motivate, and retain talented management
personnel.
Submitted by the Compensation Committee of the Company's Board of Directors.
Kenneth J. Melkus
Patrick J. Welsh
31
<PAGE> 32
STOCKHOLDER RETURN
PERFORMANCE GRAPH
The following is a comparative performance graph that compares the
percentage change of cumulative total stockholder return on the Company's Common
Stock with (a) the performance of a broad equity market indicator and (b) the
performance of a published industry index or peer group. The following graph
compares the percentage change of cumulative total stockholder return on the
Company's Common Stock with (1) the Nasdaq Stock Market Index (the "Broad
Index") and (2) the Hambrecht & Quist Healthcare Index (the "Industry Index").
The graph begins on April 16, 1999, the date on which the Company's Common Stock
first began trading on the Nasdaq National Market. For purposes of preparing the
graph, the Company assumed that an investment of $100 was made on April 16, 1999
in each of Company's Common Stock, the Broad Index, and the Industry Index and
that all dividends, if any, were reinvested at the time they were paid.
The Hambrecht & Quist Healthcare Index is comprised of approximately
100 stocks of publicly traded healthcare related companies in the Biotechnology,
Pharmaceuticals, Diagnostics and Imaging, Medical Products, and Healthcare
Services sectors. The components of the index portfolio are intended to be a
broad representative sample of the public companies in this specific industry
sector. Management believes that the Index includes companies that are
comparable to the Company in terms of their businesses, size and market
characteristics.
The comparison in the graph below is based on historical data and is
not intended to forecast the possible future performance of the Company's Common
Stock.
32
<PAGE> 33
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG ACCREDO HEALTH INCORPORATED, THE NASDAQ STOCK MARKET (U.S.) INDEX,
AND THE CHASE H & Q HEALTHCARE INDEX
[GRAPH]
33
<PAGE> 34
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Melkus and Welsh presently serve as members of the Compensation
Committee of the Board of Directors and Messrs. Paul and Welsh served on the
Compensation Committee during the fiscal year ended June 30, 1999. None of
Messrs. Melkus, Welsh or Paul, nor any executive officer of the Company, serves
as a member of a board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE OF REAL PROPERTY
Pursuant to a lease agreement dated September 1, 1994 and amended on
March 1, 1997 and May 25, 1999, the Company's subsidiary, HHS, leases from the
mother of Kyle J. Callahan (who is currently a director and executive officer of
the Company and HHS) approximately 28,000 square feet of administrative and
other space located at 6820 Charlotte Pike, Nashville, Tennessee. The lease
contains an initial term of 5 years and a five-year renewal option. The initial
5 year term expired October 31, 1999. During fiscal 2000, HHS paid Mr.
Callahan's mother $409,064 under this lease. The Company believes that the
foregoing Lease was obtained on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
PAYMENT OF ESCROWED FUNDS
In June 1997, the Company purchased all of the outstanding shares of
common stock of HHS. The mother of Kyle J. Callahan (currently a director and
executive officer of the Company and HHS) was a significant stockholder of HHS.
Part of the consideration received by the selling shareholders was placed in two
escrow accounts to secure potential indemnification claims for breaches of the
seller's representations and warranties and to satisfy certain accounts payable
of HHS that had not been resolved at closing. $620,401 continues to be held in
escrow pending resolution of certain pending matters.
COMPANY POLICY
The Company has adopted a policy pursuant to which transactions with
affiliates (other than those entered into in connection with the formation of
the Company) must be reviewed by the Audit Committee and approved by a majority
of the disinterested members of the Board of Directors and will be made on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Exchange Act, the Company's directors,
executive officers and any person holding more than ten percent of the Common
Stock are required to report their ownership of the Common Stock and any changes
in that ownership to the SEC and the Nasdaq National Market. These persons also
are required by SEC regulations to furnish the Company with copies of these
reports. Specific due dates for these reports have been established, and the
Company must report in this Proxy Statement any failure to make required filings
in 2000. Based solely on a review of the reports furnished to the Company or
written representations from the Company's directors, officers, and ten percent
beneficial owners, all reporting requirements were satisfied.
34
<PAGE> 35
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Stockholders of the Company wishing to submit a proposal for action at
the Company's 2001 annual meeting of stockholders and to have the proposal
included in the Company's proxy materials relating to that meeting, must deliver
their proposals to the Company at its principal offices not later than June 22,
2001. Additional legal requirements apply to any inclusion of stockholder
proposals in proxy materials of the Company.
In order to be considered at the 2001 Annual Meeting, shareholder
proposals must comply with the advance notice and eligibility requirements
contained in the Company's By-Laws. The Company's By-Laws provide that
shareholders are required to give advance notice to the Company of any
nomination by a shareholder of candidates for election as directors and of any
business to be brought by a shareholder before an annual shareholders' meeting.
Specifically, the By-Laws provide that for a shareholder to nominate a person
for election to the Company's Board of Directors, the shareholder must be
entitled to vote for the election of directors at the meeting and must give
timely written notice of the nomination to the Secretary of the Company. The
By-Laws also provide that for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have the legal right and
authority to make the proposal for consideration at the meeting and the
shareholder must give timely written notice thereof to the Secretary of the
Company. In order to be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not less
than 60 days nor more than 90 days prior to the meeting. In the event that less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder must be received not
later than the close of business on the tenth day following the day on which
notice of the date of the meeting was mailed or public disclosure was made. The
notice must contain specified information about each nominee or the proposed
business and the shareholder making the nomination or proposal.
The specific requirements of these advance notice and eligibility
provisions are set forth in Section 11 and Section 12 of Article II of the
Company's By-Laws, a copy of which is available upon request. Such requests and
any shareholder proposals should be sent to the Secretary of the Company at the
principal executive offices of the Company.
ANNUAL REPORTS
The Company's fiscal 2000 Annual Report to stockholders is being mailed
to the Company's stockholders with this Proxy Statement. The Annual Report is
not part of the proxy soliciting material.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2000 as filed with the Securities and Exchange Commission may be
obtained by any stockholder, free of charge, upon written request to the Office
of the Secretary, Accredo Health, Incorporated, 1640 Century Center Parkway,
Suite 101, Memphis, Tennessee 38134.
OTHER MATTERS
The management of the Company knows of no other matters to be presented
and acted upon at the Annual Meeting other than those set forth in the
accompanying notice. However, if any other matters requiring a vote of the
stockholders should properly come before the Annual Meeting or any adjournment
thereof, each proxy will be voted with respect thereto in accordance with the
best judgment of the proxy holder.
35
<PAGE> 36
APPENDIX A
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting of
(a) 5,000,000 shares of preferred stock, $1.00 par value, which shares shall be
issued from time to time in one or more series, at the discretion of the Board
of Directors (the "Undesignated Preferred Stock"), and (b) 50,000,000 shares of
Common Stock, $.01 par value ("Common Stock"). Cross references in each
Subdivision A through B of this ARTICLE IV refer to the Sections within such
Subdivision unless otherwise indicated.
The following is a statement of the designations, and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:
A. UNDESIGNATED PREFERRED STOCK
The Undesignated Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is authorized to provide for the issuance
of shares of Undesignated Preferred Stock in series and, by filing a certificate
pursuant to the DGCL (hereinafter referred to as a "Preferred Stock
Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, privileges,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
(i) the designation of the series, which may be by distinguishing
number, letter or title;
(ii) the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in
the Preferred Stock Designation) increase or decrease (but not
below the number of shares thereof then outstanding);
(iii) whether dividends, if any, shall be cumulative or
noncumulative, and, in the case of shares of any series having
cumulative dividend rights, the date or dates or method of
determining the date or dates from which dividends on the
shares of such series shall be cumulative;
(iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such
series, any conditions upon which such dividends shall be paid
and the date or dates or the method for determining the date
or dates upon which such dividends shall be payable;
(v) the price or prices (or method of determining such price or
prices) at which the form of payment of such price or prices
(which may be cash, property or rights, including securities
of the same or another corporation or other entity) for which,
the period or periods within which and the terms and
conditions upon which the
<PAGE> 37
shares of such series may be redeemed, in whole or in part, at
the option of the Corporation or at the option of the holder
or holders thereof or upon the happening of a specified event
or events, if any;
(vi) the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the form of
payment of such price or prices (which may be cash, property
or rights, including securities of the same or another
corporation or other entity) for which, the period or periods
within which and the terms and conditions upon which the
shares of such series shall be redeemed or purchased, in whole
or in part, pursuant to such obligation;
(vii) the amount payable out of the assets of the Corporation to the
holders of shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(viii) provisions, if any, for the conversion or exchange of the
shares of such series, at any time or times at the option of
the holder or holders thereof or at the option of the
Corporation or upon the happening of a specified event or
events, into shares of any other class or classes or any other
series of the same or any other class or classes of stock, or
any other security, of the Corporation, or any other
corporation or other entity, and the price or prices or rate
or rates of conversion or exchange and any adjustments
applicable thereto, and all other terms and conditions upon
which such conversion or exchange may be made;
(ix) restrictions on the issuance of shares of the same series or
of any other class or series, if any; and
(x) the voting rights, if any, of the holders of shares of the
series.
B. COMMON STOCK
1. Dividends. The holders of shares of Common Stock shall be
entitled to receive such dividends as from time to time many be declared by the
Board of Directors of the Corporation, subject to the provisions of the
Preferred Stock Designation of any Undesignated Preferred Stock.
2. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of Common
Stock shall be entitled, to share ratably according to the number of shares of
Common Stock held by them in all remaining assets of the Corporation available
for distribution to its stockholders, subject to the provisions of the Preferred
Stock Designation of any Undesignated Preferred Stock.
3. Voting. Each holder of Common Stock shall be entitled to one
vote per share.
<PAGE> 38
APPENDIX B
ACCREDO HEALTH, INCORPORATED
1999 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the Accredo Health, Incorporated 1999
Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Accredo Health, Incorporated (the "Corporation"), by linking the
personal interests of its employees, officers, consultants and directors to
those of Corporation stockholders and by providing such persons with an
incentive for outstanding performance. The Plan is further intended to provide
flexibility to the Corporation in its ability to motivate, attract, and retain
the services of employees, officers, consultants and directors upon whose
judgment, interest, and special effort the successful conduct of the
Corporation's operation is largely dependent. Accordingly, the Plan permits the
grant of incentive awards from time to time to selected employees, officers,
directors, and consultants; provided, however, to the extent necessary to
preserve the employee benefits plan exemption under applicable state blue sky
laws, no non-employee director or consultant of the Corporation will be eligible
to receive Awards under the Plan until such time, if any, as the Corporation's
common stock shall be traded on a national securities exchange or on the Nasdaq
National Market.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be submitted to
the stockholders of the Corporation for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the stockholders and if the
stockholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
In the discretion of the Committee, Awards may be made to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Awards shall be contingent upon the stockholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section
1.1 unless a clearly different meaning is required by the context. The following
words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Unit Award, Dividend Equivalent
Award, or Other Stock-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" means and includes each of the
following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Corporation Voting
Securities, (ii) any acquisition directly from the
Corporation, (iii) any acquisition by the Corporation, (iv)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation, or (v) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of
this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Corporation's stockholders, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
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(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Corporation Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
(4) Approval by the stockholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Corporation" means Accredo Health, Incorporated, a
Delaware corporation.
(h) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3), provided that no employee shall be a Covered
Employee until the deduction limitation of Code Section 162(m) are
applicable to the Corporation and any reliance period under Code
Section 162(m) has expired, as described in Section 16.15 hereof.
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(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the
Corporation, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease or mental
disorder which, in the judgment of the Committee, is permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition. Notwithstanding the above, with respect to
an Incentive Stock Option, Disability shall mean Permanent and Total
Disability as defined in Section 22(e)(3) of the Code.
(j) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(k) "Effective Date" has the meaning assigned such term in
Section 2.1.
(l) "Fair Market Value", on any date, means (i) if the Stock
is listed on a securities exchange or is traded over the Nasdaq
National Market, the closing sales price on such exchange or over such
system on such date or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which
sales were reported, or (ii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between
the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(n) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(o) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
(q) "Parent" means a corporation which owns or beneficially
owns a majority of the outstanding voting stock or voting power of the
Corporation. For
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Incentive Stock Options, the term shall have the same meaning as set
forth in Code Section 424(e).
(r) "Participant" means a person who, as an employee, officer,
consultant or director of the Corporation or any Subsidiary, has been
granted an Award under the Plan.
(s) "Performance Unit" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(t) "Plan" means the Accredo Health, Incorporated 1999
Long-Term Incentive Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(v) "Retirement" means a Participant's voluntary termination
of employment with the Corporation, Parent or Subsidiary after
attaining age 55.
(w) "Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(x) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(y) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Corporation. For Incentive Stock Options, the term
shall have the meaning set forth in Code Section 424(f).
(z) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(z) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
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ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board. It
is intended that the directors appointed to serve on the Committee shall be
"non-employee directors" (within the meaning of Rule 16b-3 promulgated under the
1934 Act) and "outside directors" (within the meaning of Code Section 162(m) and
the regulations thereunder) to the extent that Rule 16b-3 and, if necessary for
relief from the limitation under Code Section 162(m) and such relief is sought
by the Corporation, Code Section 162(m), respectively, are applicable. However,
the mere fact that a Committee member shall fail to qualify under either of the
foregoing requirements shall not invalidate any Award made by the Committee
which Award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time and from time to
time in the discretion of, the Board. During any time that the Board is acting
as administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section
4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of
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forfeiture restrictions or restrictions on the exercisability of an
Award, and accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Unit
Award) shall be 2,250,000, of which not more than 10% may be granted as Awards
of Restricted Stock or unrestricted Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be
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available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary (but subject to adjustment as provided in Section 14.1), the
maximum number of shares of Stock with respect to one or more Options and/or
SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 500,000. The maximum fair market value (measured as of the
date of grant) of any Awards other than Options and SARs that may be received by
any one Participant (less any consideration paid by the Participant for such
Award) during any one calendar year under the Plan shall be $2,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers, consultants or directors of the Corporation or a Parent or
Subsidiary; provided, however, that to the extent necessary to preserve the
employee benefits plan exemption under applicable state blue sky laws, no
non-employee director or consultant of the Corporation will be eligible to
receive Awards under the Plan until such time, if any, as the Corporation's
common stock shall be traded on a national securities exchange or on the Nasdaq
National Market.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee, provided that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exercisable at an earlier date.
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(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants; provided that if shares of Stock surrendered in payment
of the exercise price were themselves acquired otherwise than on the
open market, such shares shall have been held by the Participant for at
least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Corporation and the Participant.
The Award Agreement shall include such provisions, not inconsistent
with the Plan, as may be specified by the Committee.
(e) ADDITIONAL OPTIONS UPON EXERCISE. The Committee may, in
its sole discretion, provide in an Award Agreement, or in an amendment
thereto, for the automatic grant of a new Option to any Participant who
delivers shares of Stock as full or partial payment of the exercise
price of the original Option. Any new Option granted in such a case (i)
shall be for the same number of shares of Stock as the Participant
delivered in exercising the original Option, (ii) shall have an
exercise price of 100% of the Fair Market Value of the surrendered
shares of Stock on the date of exercise of the original Option (the
grant date for the new Option), and (iii) shall have a term equal to
the unexpired term of the original Option.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if the Option is exercised after the dates specified in
paragraphs (3), (4) and (5) below, it will automatically become a
Non-Qualified Stock Option:
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(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Award Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Corporation for
cause or by the Participant without the consent of the
Corporation, the Incentive Stock Option shall (to the extent
not previously exercised) lapse immediately.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
(5) If the Participant dies while employed, or during
the three-month period described in paragraph (3) or during
the one-year period described in paragraph (4) and before the
Option otherwise lapses, the Option shall lapse one year after
the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's estate.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Corporation or any Parent or Subsidiary
unless the exercise price per share of such Option is at least 110% of
the Fair Market Value per share of Stock at the date of grant and the
Option expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
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(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Corporation
or Parent or Subsidiary but only in that individual's position as an
employee and not as a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARS. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the
date of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the
Fair Market Value of one share of Stock on the date of grant.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE UNITS
9.1. GRANT OF PERFORMANCE UNITS. The Committee is authorized to grant
Performance Units to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Units granted to each Participant. All
Awards of Performance Units shall be evidenced by an Award Agreement.
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9.2. RIGHT TO PAYMENT. A grant of Performance Units gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Units are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Units in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Units
that will be paid to the Participant.
9.3. OTHER TERMS. Performance Units may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
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ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Award, as determined by
the Committee. The Committee may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made and after taking into account the tax, securities and accounting
effects of such an exchange.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive
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Stock Option or a Stock Appreciation Right granted in tandem with the Incentive
Stock Option exceed a period of ten years from the date of its grant (or, if
Section 7.2(e) applies, five years from the date of its grant).
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation or a Parent or Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Corporation or a Parent or Subsidiary. No
unexercised or restricted Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant to a domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, any state or federal tax or securities laws or regulations
applicable to transferable Awards.
13.6. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
13.7 ACCELERATION UPON DEATH, RETIREMENT OR DISABILITY. Notwithstanding
any other provision in the Plan or any Participant's Award Agreement to the
contrary, upon the Participant's death, Retirement or Disability during his
employment or service as a consultant or director, all outstanding Options,
Stock Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully exercisable and all restrictions on outstanding
Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall
thereafter continue or lapse in accordance with the other provisions of the Plan
and the Award Agreement. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
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13.8. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise
provided in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Corporation's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Corporation of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of the 1934
Act, the Committee may in its sole discretion declare all outstanding Options,
Stock Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 13.8 or 13.9 above, the Committee may
in its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.10.
13.11 EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.8 or 13.9, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and
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may be different for different Participants whether or not such Participants are
similarly situated.
13.12. PERFORMANCE GOALS. The Committee may (but need not) determine
that any Award granted pursuant to this Plan to a Participant (including, but
not limited to, Participants who are Covered Employees) shall be determined
solely on the basis of (a) the achievement by the Corporation or a Parent or
Subsidiary of a specified target return, or target growth in return, on equity
or assets, (b) the Company's total shareholder return (stock price appreciation
plus reinvested dividends) relative to a defined comparison group or target over
a specific performance period, (c) the Corporation's, Parent's or Subsidiary's
stock price, (d) the achievement by an individual or a business unit of the
Corporation, Parent or Subsidiary of a specified target, or target growth in,
revenues, net income or earnings per share, (e) the achievement of objectively
determinable goals with respect to service or product delivery, service or
product quality, customer satisfaction, meeting budgets and/or retention of
employees or (f) any combination of the goals set forth in (a) through (e)
above. If an Award is made on such basis, the Committee shall establish goals
prior to the beginning of the period for which such performance goal relates (or
such later date as may be permitted under Code Section 162(m) or the regulations
thereunder) and the Committee may for any reason reduce (but not increase) any
Award, notwithstanding the achievement of a specified goal. Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
13.13. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Corporation to one of its Parents or Subsidiaries, transfers from a
Parent or Subsidiary to the Corporation, or transfers from one Parent or
Subsidiary to another Parent or Subsidiary.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the authorization limits under Section 5.1 and 5.4 shall be increased
proportionately, and the shares of Stock then subject to each Award shall be
increased proportionately without any change in the aggregate purchase price
therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or securities of the Corporation or
of another corporation, whether through reorganization, recapitalization,
reclassification, share exchange, stock split-up, combination of shares, merger
or consolidation, the authorization limits under Section 5.1 and 5.4 shall be
increased proportionately, and there shall be substituted for each such share of
Stock then subject to each Award the number and class of shares into which each
outstanding share of Stock.
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shall be so exchanged, all without any change in the aggregate purchase price
for the shares then subject to each Award, or, subject to Section 15.2, there
shall be made such other equitable adjustment as the Committee shall approve.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate the
Plan without stockholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
stockholders of the Corporation if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies or
regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination. No termination,
amendment, or modification of the Plan shall adversely affect any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or any eligible participant
shall have any claim to be granted any Award under the Plan, and neither the
Corporation nor the Committee is obligated to treat Participants or eligible
participants uniformly.
16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall
have the authority and the right to deduct or withhold, or require a Participant
to remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount required to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
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16.4. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Corporation
or any Parent or Subsidiary to terminate any Participant's employment or status
as an officer, director or consultant at any time, nor confer upon any
Participant any right to continue as an employee, officer, director or
consultant of the Corporation or any Parent or Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Corporation or any Parent or
Subsidiary.
16.6. INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee shall be indemnified and held harmless by the
Corporation from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Corporation an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Corporation's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify them or hold
them harmless.
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.8. EXPENSES. The expenses of administering the Plan shall be borne
by the Corporation and its Parents or Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.10. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
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16.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid under the Plan. The shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the
Corporation may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
16.13. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Tennessee.
16.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
16.15 CODE SECTION 162(M). The deduction limits of Code Section 162(m)
and the regulation thereunder do not apply to the Corporation until such time,
if any, as any class of the Corporation's common equity securities is registered
under Section 12 of the 1934 Act or the Corporation otherwise meets the
definition of a "publicly held corporation" under Treasury Regulation
1.162-27(c) or any successor provision. Upon becoming a publicly held
corporation, the deduction limits of Code Section 162(m) and the regulations
thereunder shall not apply to compensation payable under this Plan until the
expiration of the reliance period described in Treasury Regulation 1.162-27(f)
or any successor regulation.
The foregoing is hereby acknowledged as being the Accredo Health,
Incorporated 1999 Long-Term Incentive Plan as adopted by the Board of Directors
of the Corporation on April 9, 1999 and approved by the stockholders of the
Corporation on April 12, 1999.
Accredo Health, Incorporated
By: /s/ Thomas W. Bell, Jr.
-----------------------------------
Its: Senior Vice President and Secretary
-----------------------------------
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<PAGE> 56
ACCREDO HEALTH, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Thomas W. Bell, Jr. and Joel R.
Kimbrough as Proxies, each with power to appoint his substitute, and hereby
authorizes either one or both of them to represent and to vote, as designated
below, all the shares of Common Stock of Accredo Health, Incorporated held of
record by the undersigned on September 18, 2000, at the Annual Meeting of
Stockholders to be held on November 16, 2000, and at any adjournment.
The Board of Directors recommends a vote "FOR" all of the following
proposals:
1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
Class II Directors to serve until the 2003 annual meeting of stockholders and
until their successors are elected and qualified:
Kyle J. Callahan and Dick R. Gourley
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
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2. SELECTION OF AUDITORS. On the proposal to ratify the selection of Ernst
& Young LLP as the Company's independent auditors for the fiscal year ending
June 30, 2001:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK. To approve the proposed amendment to the
Company's Amended and Restated Certificate of Incorporation which increases the
number of authorized shares of Common Stock from 30,000,000 to 50,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO ELIMINATE
NON-VOTING COMMON STOCK. To approve the proposed amendment to the Company's
Amended and Restated Certificate of Incorporation to eliminate Non-Voting Common
Stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO ELIMINATE
SERIES A CUMULATIVE PREFERRED STOCK. To approve the proposed amendment to the
Company's Amended and Restated Certificate of Incorporation to eliminate Series
A Cumulative Preferred Stock.
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<PAGE> 57
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. APPROVAL OF AN AMENDMENT TO THE ACCREDO HEALTH, INCORPORATED 1999
LONG-TERM INCENTIVE PLAN THAT WOULD INCREASE THE NUMBER OF SHARES AVAILABLE FOR
ISSUANCE FROM 750,000 TO 2,250,000. To approve the proposed amendment to the
Company's 1999 Long-Term Incentive Plan to increase the number of shares
available for issuance from 750,000 to 2,250,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. OTHER BUSINESS
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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<PAGE> 58
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTOR LISTED ABOVE AND FOR PROPOSALS 2 THROUGH 6
ABOVE.
Please sign exactly as name appears below. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
Address Change Requested
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Dated:
----------------------------------------
Signature
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Signature if held jointly
40
