<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
American Healthcorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AMERICAN HEALTHCORP LOGO
One Burton Hills Boulevard
Nashville, Tennessee 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of American Healthcorp, Inc.:
The Annual Meeting of Stockholders of American Healthcorp, Inc., a Delaware
corporation (the "Company"), will be held at the Loews Vanderbilt Plaza Hotel,
2100 West End Avenue, Nashville, Tennessee 37203, at 9:00 a.m., local time, on
Wednesday, January 21, 1998 for the following purposes:
(1) To elect two (2) directors, to hold office for a term of three (3)
years or until their successors have been elected and qualified;
(2) To amend the Company's 1996 Stock Incentive Plan (the "1996 Plan") to
increase the number of shares of the Company's common stock, $.001 par
value, available for grant under the 1996 Plan by 350,000 shares; and
(3) To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
The proxy statement and form of proxy accompanying this Notice are being
mailed to stockholders on or about December 17, 1997. Only stockholders of
record at the close of business on November 25, 1997 are entitled to notice of
and to vote at the meeting or any adjournment or postponement thereof.
Your attention is directed to the Proxy Statement accompanying this notice
for a more complete statement regarding the matters to be acted upon at the
meeting.
We hope very much that you will be able to be with us. If you do not plan
to attend the meeting in person, you are requested to complete, sign and date
the enclosed proxy and return it promptly in the enclosed addressed envelope,
which requires no postage if mailed in the United States.
By Order of the Board of Directors
/s/ THOMAS G. CIGARRAN
Thomas G. Cigarran
Chairman
December 17, 1997
<PAGE> 3
AMERICAN HEALTHCORP, INC.
One Burton Hills Boulevard
Nashville, Tennessee 37215
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JANUARY 21, 1998
The enclosed proxy is solicited by the Board of Directors on behalf of
American Healthcorp, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held on Wednesday, January 21, 1998, at 9:00 a.m., local
time, at the Loews Vanderbilt Plaza Hotel, 2100 West End Avenue, Nashville,
Tennessee 37203, and at all adjournments or postponements thereof, for the
purposes set forth in the foregoing Notice of Annual Meeting of Stockholders.
Copies of the proxy, this Proxy Statement and the attached Notice are being sent
to stockholders on or about December 17, 1997.
Proxies may be solicited by the Company's officers or employees personally
or by mail, telephone or telegraph. All costs of this solicitation will be borne
by the Company, including expenses in connection with preparing, assembling and
mailing this Proxy Statement. The Company does not anticipate paying any
compensation to any party other than its regular employees for the solicitation
of proxies, but may reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to beneficial owners.
Shares represented by such proxies will be voted in accordance with the
choices specified thereon. If no choice is specified, the shares represented by
such proxies will be voted FOR the election of the director nominees set forth
under Proposal No. 1 and FOR the amendment to the 1996 Stock Incentive Plan set
forth under Proposal No. 2. The Board of Directors does not know of any other
matters which will be presented for action at the meeting, but the persons named
in the proxy intend to vote or act with respect to any other proposal which may
be properly presented for action according to their best judgment in light of
the conditions then prevailing.
A proxy may be revoked by a stockholder at any time before its exercise by
attending the meeting and electing to vote in person, by filing with the
Secretary of the Company a written revocation or by duly executing a proxy
bearing a later date.
Each share of the Company's common stock, $.001 par value (the "Common
Stock") issued and outstanding on the record date, November 25, 1997, will be
entitled to one vote on all matters to come before the meeting. Cumulative
voting is not permitted. As of November 25, 1997, there were outstanding
8,061,624 shares of Common Stock.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to those
persons known to the Company to be the beneficial owners (as defined by certain
rules of the Securities and Exchange Commission (the "Commission")) of more than
five percent (5%) of the Company's Common Stock, its only voting security, and
with respect to the beneficial ownership of the Company's Common Stock by all
directors and nominees, each of the executive officers named in the Summary
Compensation Table and all executive officers and directors of the Company as a
group. The information set forth below is based on ownership information
received by the Company as of November 11, 1997. Unless specified otherwise, the
shares indicated are presently outstanding, and each of the stockholders listed
below has sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK PERCENT OF
NAME AND ADDRESS BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER OWNED(1) COMMON STOCK(1)
------------------- ------------ ---------------
<S> <C> <C>
Waddell & Reed, Inc......................................... 817,500(2) 10.14%
6300 Lamar Avenue
Post Office Box 29217
Shawnee Mission, Kansas 66201-9217
Thomas G. Cigarran****...................................... 795,540(3) 9.65
One Burton Hills Blvd.
Nashville, TN 37215
Henry D. Herr****........................................... 474,649(4) 5.82
One Burton Hills Blvd.
Nashville, TN 37215
Equitable Asset Management.................................. 441,950(5) 5.48
3495 Piedmont Rd., Ste. 810
Atlanta, GA 30305
James A. Deal***............................................ 433,297(6) 5.29
Robert E. Stone***.......................................... 303,825(7) 3.73
William C. O'Neil, Jr.**.................................... 144,140(8) 1.79
Martin J. Koldyke**......................................... 69,541(9) *
David A. Sidlowe***......................................... 57,015(10) *
C. Warren Neel**............................................ 15,331(11) *
Frank A. Ehmann**........................................... 13,981(12) *
All directors and executive officers as a
group (9 persons)......................................... 2,307,319(13) 26.73
</TABLE>
- ---------------
* Indicates ownership of less than one percent of the Company's outstanding
Common Stock.
** Director of the Company
*** Named Executive Officer
**** Director and Named Executive Officer
(1) Pursuant to the rules of the Commission, certain shares of the Company's
Common Stock which an individual owner set forth in this table has a right
to acquire within 60 days after the record date hereof pursuant to the
exercise of stock options are deemed to be outstanding for the purpose of
computing the ownership of that owner, but are not deemed outstanding for
the purpose of computing the ownership of
2
<PAGE> 5
any other individual owner shown in the table. Likewise, the shares subject
to options held by the other directors and executive officers of the
Company which are exercisable within 60 days of the record date hereof, are
all deemed outstanding for the purpose of computing the percentage
ownership of all executive officers and directors as a group.
(2) Information with respect to stock ownership is based upon the Form 13F
dated June 30, 1997 filed with the Commission.
(3) Includes 183,087 shares issuable upon the exercise of outstanding options.
(4) Includes 7,225 shares owned by Mr. Herr's daughter and 94,095 shares
issuable upon the exercise of outstanding options.
(5) Information with respect to stock ownership is based upon the Form 13F
dated June 30, 1997 filed with the Commission.
(6) Includes 11,819 shares owned by Mr. Deal's children and 130,403 shares
issuable upon the exercise of outstanding options.
(7) Includes 84,893 shares issuable upon the exercise of outstanding options.
(8) Includes 7,500 shares issuable upon the exercise of outstanding options.
(9) Includes 3,438 shares owned by an affiliate of Mr. Koldyke. Also includes
7,500 shares issuable upon the exercise of outstanding options held by Mr.
Koldyke.
(10) Includes 2,140 shares owned by Mr. Sidlowe's children and 40,425 shares
issuable upon the exercise of outstanding options.
(11) Includes 12,000 shares issuable upon the exercise of outstanding options.
(12) Includes 12,000 shares issuable upon the exercise of outstanding options.
(13) Includes 571,903 shares issuable upon the exercise of outstanding options.
3
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a
staggered Board of Directors. Each director serves a three-year term and until
his successor is elected and qualified. The two directors to be elected at the
1998 Annual Meeting will serve until the Annual Meeting of Stockholders in 2001
(the "Class I" directors), two directors currently serving on the Board will
continue to serve until the Annual Meeting of Stockholders in 1999 (the "Class
II" directors), and two directors currently serving on the Board will continue
to serve until the Annual Meeting of Stockholders in 2000 (the "Class III"
directors).
Unless contrary instructions are received, shares of voting securities of
the Company represented by duly executed proxies will be voted in favor of the
election of the nominees named below. If for any reason a nominee is unable to
serve as a director, it is intended that the proxies solicited hereby will be
voted for such substitute nominee as the Board of Directors of the Company may
propose. The Board of Directors has no reason to expect that the nominees will
be unable to serve, and therefore, at this time does not have any substitute
nominees under consideration.
A nominee for election must receive a plurality of the votes cast to be
elected as a director. Stockholders have no right to vote cumulatively for
directors, but rather each stockholder shall have one vote for each share of
Common Stock held by such stockholder for each director.
The following persons are the nominees for election to serve as Class I
directors. Both nominees are presently directors of the Company. Certain
information relating to the nominees, which has been furnished to the Company by
the individuals named, is set forth below.
<TABLE>
<CAPTION>
CLASS OF
DIRECTOR;
ANNUAL MEETING
AT WHICH
NAME OF DIRECTOR TERM WILL EXPIRE BACKGROUND INFORMATION
---------------- ---------------- ----------------------
<S> <C> <C>
Frank A. Ehmann I; 2001 Mr. Ehmann, 63, has been a director of the Company
since September 1991. Mr. Ehmann was a partner of
RCS Health Care Partners Ltd., an affiliate of
Robertson Stephens Co., from 1990 to 1994. From 1987
to 1989, he was President and Chief Operating
Officer of United Stationers, Inc. He served as
President and Co-Chief Operating Officer of
Baxter-Travenol Laboratories, Inc. from 1986 to
1987, and as President and Chief Operating Officer
of American Hospital Supply Corporation in 1985,
when it merged with Baxter-Travenol. Mr. Ehmann also
serves as a director of Kinetic Concepts, Inc., SPX
Corp and AHA Investment Funds.
William C. O'Neil, Jr. I; 2001 Mr. O'Neil, 63, has served as a director of the
Company since 1985. Mr. O'Neil is the founder,
Chairman, President and Chief Executive Officer of
ClinTrials Research, Inc., a pharmaceutical clinical
research services company. Prior thereto, Mr. O'Neil
was Chairman, President and Chief Executive Officer
of International Clinical Laboratories, Inc., a
national laboratory testing company. Mr. O'Neil is
also a Director of Atrix Laboratories, Inc.,
Advocat, Inc., Sigma Aldrich Corporation and Central
Parking Corporation.
</TABLE>
4
<PAGE> 7
The following four persons currently are members of the Board of Directors
and will continue in their present positions after the Annual Meeting. The
following persons are not nominees, and stockholders are not being asked to vote
for them. Certain information relating to the following persons has been
furnished to the Company by the individuals named.
<TABLE>
<CAPTION>
CLASS OF
DIRECTOR;
ANNUAL MEETING
AT WHICH
NAME OF DIRECTOR TERM EXPIRES BACKGROUND INFORMATION
---------------- -------------- ----------------------
<S> <C> <C>
Thomas G. Cigarran II; 1999 Mr. Cigarran, 55, has served as Chairman, President
and Chief Executive Officer of the Company since
September 1988 and as a director since 1981. Mr.
Cigarran also is Chairman of AmSurg Corp.
("AmSurg"). Mr. Cigarran served as President and
Chief Operating Officer of the Company from its
founding in September 1981 until September 1988. Mr.
Cigarran is also a director of ClinTrials Research,
Inc.
Dr. C. Warren Neel II; 1999 Dr. Neel, 58, has been a director since October 1991.
Since 1977, Dr. Neel has served as Dean of the
College of Business Administration at The University
of Tennessee in Knoxville. Dr. Neel is also a
director of Proffitt's, Inc., O'Charley's, Inc. and
Clayton Homes, Inc.
Henry D. Herr III; 2000 Mr. Herr, 51, has served as Executive Vice President
of Finance and Administration and Chief Financial
Officer of the Company since February 1986 and as a
director since 1988. Mr. Herr also is a director of
AmSurg. Mr. Herr served as Senior Vice President of
Finance and Administration and Chief Financial
Officer of the Company from its founding in
September 1981 until February 1986.
Martin J. Koldyke III; 2000 Mr. Koldyke, 65, has been a director since 1981. Mr.
Koldyke has been a general partner of Frontenac
Company, a venture capital management partnership,
since 1971. Mr. Koldyke also is a director of Rand
McNally & Company and GenDerm Corporation, Inc., a
former Chairman of the Illinois Health Finance
Authority, a Trustee of WTTW Channel 11, Chicago, a
Trustee of Northwestern University, a Trustee of the
Brookings Institution and Chairman Emeritus of the
Golden Apple Foundation for Excellence in Teaching.
</TABLE>
The Board of Directors of the Company held five meetings during the fiscal
year ended August 31, 1997. The Board of Directors has Nominating, Audit and
Compensation Committees. The Audit Committee is comprised of Messrs. Ehmann,
Koldyke, O'Neil and Dr. Neel. The Audit Committee meets with the Company's
independent auditors to review the Company's consolidated financial statements.
It is the function
5
<PAGE> 8
of this committee to ensure that the Company's financial statements accurately
reflect the Company's financial position and results of operations. The Audit
Committee held one meeting during fiscal 1997.
The Compensation Committee is responsible for the periodic review of
management's compensation and administration of the Company's compensation
plans. The Compensation Committee consists of Messrs. Ehmann, Koldyke and Dr.
Neel. The Compensation Committee held three meetings during fiscal 1997.
The Nominating Committee consists of Messrs. Cigarran, O'Neil and Dr. Neel.
The Nominating Committee recommends to the Board of Directors nominees for
election to the Board. The Nominating Committee will consider nominees
recommended by the Company's stockholders provided such proposed nominations are
submitted to the Company in the manner and within the time limits for
stockholder proposals as set forth on page 23 of this Proxy Statement. The
Nominating Committee held one meeting during fiscal 1997.
Each of the incumbent directors of the Company attended at least 75% of the
aggregate of the total number of meetings held during fiscal 1997 by the Board
of Directors and any committees.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or other
compensation during fiscal years 1997, 1996 and 1995 for the Company's Chief
Executive Officer and the persons who, at the end of fiscal 1997, were the other
four most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
----------------------- ------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas G. Cigarran.................... 1997 $295,000 $ 0 25,000 $45,761(2)
Chairman of the Board, President, 1996 286,250 100,188 25,000 22,168
Chief Executive Officer 1995 275,250 96,338 22,000 52,604
Henry D. Herr......................... 1997 242,000 0 15,000 36,009(3)
Executive Vice President -- Finance
and 1996 235,200 82,320 12,500 17,685
Administration, Chief Financial
Officer, 1995 226,160 79,156 12,500 41,064
Secretary
James A. Deal......................... 1997 231,000 0 12,500 33,807(4)
Executive Vice President, President
of 1996 224,500 76,965 17,500 17,585
Diabetes Treatment Centers of
America, 1995 215,880 75,558 10,000 41,067
Inc. ("DTCA")
Robert E. Stone....................... 1997 180,000 0 12,500 30,112(5)
Vice President, Executive Vice 1996 163,800 56,203 12,500 16,716
President of DTCA 1995 157,540 55,139 10,000 32,605
David A. Sidlowe...................... 1997 125,000 0 4,500 19,400(6)
Vice President, Controller 1996 120,400 31,304 4,500 10,696
1995 115,750 31,253 0 22,632
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $3,600 per year automobile allowance for each Named Executive
Officer.
(2) Includes $32,366 contributed by the Company to the Company's Corporate and
Subsidiary Officer Capital Accumulation Plan (the "Capital Accumulation
Plan"), $4,940 contributed by the Company to the Company's Retirement
Savings Plan (the "401(k) Plan") and $4,855 in life insurance premiums
paid by the Company on behalf of Mr. Cigarran.
(3) Includes $25,579 contributed by the Company to the Capital Accumulation
Plan, $4,940 contributed by the Company to the 401(k) Plan and $1,890 in
life insurance premiums paid by the Company on behalf of Mr. Herr.
(4) Includes $22,932 contributed by the Company to the Capital Accumulation
Plan, $4,940 contributed by the Company to the 401(k) Plan and $2,335 in
life insurance premiums paid by the Company on behalf of Mr. Deal.
(5) Includes $17,502 contributed by the Company to the Capital Accumulation
Plan and $4,940 contributed by the Company to the 401(k) Plan and $4,070
in life insurance premiums paid by the Company on behalf of Mr. Stone.
(6) Includes $11,900 contributed by the Company to the Capital Accumulation
Plan and $3,900 contributed by the Company to the 401(k) Plan on behalf of
Mr. Sidlowe.
7
<PAGE> 10
OPTION GRANTS TABLE
The following table provides information as to options granted to the Named
Executive Officers during fiscal 1997. No separate stock appreciation rights
("SARS") were granted during fiscal 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION TERM
- ----------------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Cigarran................... 25,000 20.28% $10.70 10/16/06 $168,229 $426,326
Henry D. Herr........................ 15,000 12.17 10.70 10/16/06 100,938 255,796
James A. Deal........................ 12,500 10.14 10.70 10/16/06 84,115 213,163
Robert E. Stone...................... 12,500 10.14 10.70 10/16/06 84,115 213,163
David A. Sidlowe..................... 4,500 3.65 10.70 10/16/06 30,281 76,739
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options granted to the Named Executive Officers generally vest at the
rate of 25% per year over a four year period beginning on the date of the
grant. If there is a change in control or a potential change in control (as
defined in the 1996 Stock Incentive Plan (the "1996 Plan")), any stock
options which are not then exercisable, in the discretion of the Board, may
become fully exercisable and vested, and stock options will, unless
otherwise determined by the Compensation Committee in its sole discretion,
be cashed out on the basis of the change in control price, as defined in
the 1996 Plan.
8
<PAGE> 11
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information as to options exercised by the
Named Executive Officers during fiscal 1997. None of the Named Executive
Officers has held or exercised separate SARs. In addition, this table includes
the number of shares covered by both exercisable and unexercisable stock options
as of the record date. Also reported are the values for "in-the-money" options,
which represent the positive spread between the exercise price of any existing
stock options and the year-end price of the Company's Common Stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FISCAL VALUE OF UNEXERCISED
YEAR-END(#) IN-THE-MONEY
---------------------------- OPTIONS AT FISCAL
SHARES YEAR-END($)
ACQUIRED ON VALUE ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Cigarran.................. 0 0 103,337 54,750 $101,840 $141,094
Henry D. Herr....................... 0 0 63,420 30,625 139,375 74,516
James A. Deal....................... 0 0 79,778 30,625 243,695 86,178
Robert E. Stone..................... 0 0 48,018 26,875 162,665 68,609
David A. Sidlowe.................... 0 0 26,925 9,000 110,702 23,569
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
DIRECTORS COMPENSATION
Directors who are officers or employees of the Company receive no
compensation, as such, for serving as members of the Board. Directors who are
not officers or employees of the Company ("Outside Directors") receive (i) a
$10,000 annual cash retainer; and (ii) pursuant to the 1996 Plan, a restricted
stock award of that number of shares of Common Stock with a fair market value
(as defined in the 1996 Plan) of $10,000, which are awarded on the date of each
Annual Meeting of Stockholders. The dollar value of the annual restricted stock
award to Outside Directors will be adjusted annually by the percentage change
from the previous year in the Consumer Price Index, Urban Wage Earners and
Clerical Workers (1982-1984=100), All Cities Average (the "Consumer Price
Index"); provided, however, the annual increase shall in no event be more than
6%. The Company may also grant options to Outside Directors pursuant to the
Discretionary Stock Option Plan for Outside Directors; no such grants were made
during fiscal 1997.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with all of its executive officers.
The employment agreements, as amended and restated (the "Agreements"), with
Messrs. Cigarran, Herr, Deal and Stone currently expire in August 2000, but
contain a provision that automatically extends the term for one year on each
successive anniversary date of the Agreements (so that the term on such
anniversary date will always be three years) unless canceled by the Company. In
addition, the Agreements are renewable for an additional five years at each
executive's option upon the acquisition (as defined in the Agreements) of the
Company by another entity and provide that upon such an acquisition the
executive may resign and receive up to 30 months of his base salary in a
lump-sum payment. The Agreements provide that if the Company elects not to
extend the executive's employment or to otherwise terminate the executive
without just cause as defined in the Agreements, the executive will receive his
base salary, reduced by any salary earned by the executive from another
employer, plus certain benefits for a period of the greater of two years or the
remaining term of the
9
<PAGE> 12
respective Agreement. The Agreements also provide for certain payments upon
disability of the executive and require the Company to purchase a term life
insurance policy on each executive's life in a minimum amount of $500,000 which
is payable to the executive's estate or beneficiaries upon his death. The
Agreements contain restrictive provisions relating to the use of confidential
information and competing against the Company within one year after termination
of the executive's employment. The Agreements expire in all respects on the date
the executive becomes 65 years of age.
The Company's employment agreement with David A. Sidlowe, the Company's
Vice President and Controller, currently expires in June 1999, but contains a
provision that automatically extends the term for one year on the first and each
successive anniversary date of the agreement unless canceled by the Company. The
agreement provides that if the Company elects not to extend Mr. Sidlowe's
employment, he will be considered to have been terminated without just cause and
will receive his base salary, reduced by any salary earned from another
employer, plus certain benefits for the remaining term of the agreement.
COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Company's Board of Directors. Each member of
the Compensation Committee is a non-employee director. It is the responsibility
of the Compensation Committee to determine whether in its judgment the executive
compensation policies are reasonable and appropriate, meet their stated
objectives and effectively serve the best interests of the Company and its
stockholders.
Compensation Philosophy and Policies for Executive Officers
The Compensation Committee believes that the primary objectives of the
Company's executive compensation policies should be:
- to attract and retain talented executives by providing compensation that
is, overall, highly competitive with the compensation provided to
executives at companies of comparable position in the health care services
industry, while maintaining compensation within levels that are consistent
with the Company's annual budget, financial objectives and operating
performance;
- to provide appropriate incentives for executives to work towards the
achievement of the Company's annual financial performance and business
goals based on the Company's annual budget; and
- to more closely align the interests of executives with those of
stockholders and the long-term interests of the Company by providing
long-term incentive compensation in the form of non-qualified stock
options or other equity-based long-term incentive compensation.
The Compensation Committee believes that the Company's executive
compensation policies should be reviewed annually and should be reviewed in
light of the Company's financial performance, its annual budget and its position
within the health care services industry, as well as the compensation policies
of similar companies in the health care services business. The compensation of
individual executives should then be reviewed annually by the Compensation
Committee in light of its executive compensation policies for that year.
In reviewing the comparability of the Company's executive compensation
policies, the Compensation Committee reviews executive compensation for other
comparable companies. Some of the comparable companies the Compensation
Committee reviews are included among the Composite Group used in the Performance
Graph presented in this proxy statement, but in light of factors that are unique
to the Company,
10
<PAGE> 13
the Compensation Committee believes that, while the Company competes generally
with such other health care service companies, the position of Diabetes
Treatment Centers of America, Inc., the Company's wholly-owned subsidiary
("DTCA"), as the leading provider of diabetes treatment services in the United
States, DTCA's development of unique diabetes population management products for
managed care payors and the Company's direct involvement through its
majority-owned subsidiary, AmSurg, in the development of a relatively new method
of delivery for certain surgical procedures, provide unique circumstances, and
these differences are important factors which the Compensation Committee expects
to consider in determining executive compensation and in analyzing comparable
financial performance.
The Compensation Committee believes that in addition to corporate
performance, it is appropriate to consider in setting and reviewing executive
compensation the level of experience and responsibilities of each executive as
well as the personal contributions a particular individual may make to the
success of the corporate enterprise. Such qualitative factors as leadership
skills, analytical skills, organization development, public affairs and civic
involvement are deemed to be important qualitative factors to take into account
in considering levels of compensation. No relative weight is assigned to these
qualitative factors, which are applied subjectively by the Compensation
Committee.
Compensation of Executive Officers
The Compensation Committee believes that the compensation of executive
officers should be comprised of base compensation, annual incentive compensation
and intermediate and long-term incentive compensation and has applied the
policies described herein to fiscal 1997 compensation for executive officers as
described below.
Base Compensation. Base compensation for executive officers of the Company
is based on the terms of employment agreements between the Company and the
executives. These agreements provide for a minimum base salary adjusted for
increases in the Consumer Price Index and such other increases as the
Compensation Committee shall determine to be appropriate. In determining whether
an increase in base compensation for the executive officers was appropriate for
fiscal 1997, the Compensation Committee reviewed recommendations of management
and consulted with the Chief Executive Officer. The Compensation Committee
subjectively determined on the basis of discussions with the Chief Executive
Officer, its experience in business generally and with the Company specifically
what it viewed to be appropriate levels of base compensation after taking into
consideration the contributions of each executive and the performance of the
Company. As a result of this review, the Compensation Committee awarded
increases in the annual base compensation for executive officers in fiscal 1997
ranging from 2.9% to 9.9%. The minimum increase mandated by the employment
agreements with the executive officers was 2.9%. The Compensation Committee did
not assign any relative weight to the quantitative and qualitative factors which
it applied in reaching its base compensation decisions.
Annual Incentive Compensation. The Compensation Committee considers that
compensation should be mainly linked to operating performance. To achieve this
link with regard to short-term performance, the Compensation Committee relies on
cash bonuses awarded under the Annual Incentive Compensation plan under which
cash awards can be granted to executive officers based upon: (a) the extent to
which actual earnings of DTCA during fiscal 1997 compare to the earnings targets
approved by the Compensation Committee for such fiscal year and (b) progress
made toward managed care market penetration by DTCA as measured by the number of
new managed care contracts signed during fiscal 1997. These two elements of the
Annual Incentive Compensation plan were established in advance of the beginning
of the fiscal year and were weighted for fiscal 1997 so that 50% of any award
was based on achievement of earnings targets and 50% was based on managed care
market penetration. For fiscal 1997, provided that a minimum level of pretax
11
<PAGE> 14
profitability was achieved, the potential amount of any award under the portion
of the plan relating to the earnings performance of DTCA ranged from 10% of an
executive's annual base salary to a maximum of 30% of annual base salary
depending on the level of earnings performance that was achieved. If actual
earnings for DTCA were less than the minimum level of earnings designated in the
plan, no bonus would be paid under this portion of the Annual Incentive
Compensation plan. For fiscal 1997, the minimum levels of DTCA earnings were not
achieved and no bonuses were paid to executive officers under this portion of
the Annual Incentive Compensation plan.
For fiscal 1997, provided that a minimum number of new DTCA managed care
contracts were signed, the potential amount of any award under the portion of
the Annual Incentive Compensation plan relating to managed care market
penetration ranged from 10% to 30% of an executive officer's annual base salary
depending on the number of new contracts actually signed. Because the minimum
number of new DTCA managed care contracts was not signed during fiscal 1997, no
bonuses were paid to executive officers under this portion of the Annual
Incentive Compensation plan.
Intermediate and Long-Term Incentive Compensation. Stock options,
contributions under the Company's 401(k) Plan and contributions under the
Company's Capital Accumulation Plan are the principal vehicles for payment of
intermediate and long-term compensation. The 401(k) Plan, which is based on a
calendar year, provides for a matching contribution by the Company of 52% of the
participant's voluntary salary contributions with the Company's contribution
limited to the lesser of 3.12% of the executive officer's salary and an annual
maximum Company contribution of $4,940, based on a maximum voluntary salary
contribution established by the U.S. Department of Labor. Approximately 29% of
this matching contribution was in the form of Company Common Stock. All matching
Company contributions to the 401(k) Plan vest immediately to each executive
officer and are payable pursuant to the provisions of the plan.
Under the Company's Capital Accumulation Plan, which is based on a calendar
year, the Company makes contributions to the Capital Accumulation Plan on behalf
of the executive officers that are based (a) on the executive officer's
voluntary salary deferrals into the Capital Accumulation Plan and (b) on
comparison against specific criteria for the Company's performance established
prior to the start of the Capital Accumulation Plan year by the Compensation
Committee. The portion of the Company's contribution that is based on the
executive officer's voluntary salary deferrals provides that to the extent the
executive officer cannot defer at least 6% of his base salary under the 401(k)
Plan because of U.S. Department of Labor maximum contribution limits, then the
executive officer can defer the difference between his actual deferral and 6% of
his annual base salary into the Capital Accumulation Plan and the Company will
provide a matching contribution of 52% of the amount deferred. The executive
officer is also eligible to contribute up to an additional 4% of base salary
into the Capital Accumulation Plan but no matching contribution will be made by
the Company for this portion of the salary deferral.
Pursuant to the portion of the Capital Accumulation Plan contribution that
is based on performance criteria established by the Compensation Committee,
executive officers are eligible to receive a Company contribution, provided that
a minimum level of Company performance is attained, of between 3.5% and 18.5% of
annual base salary. Awards are made as of December 31 of each year but are based
on Company performance criteria for the fiscal year ended August 31 during that
year. Therefore, the actual performance award under the Capital Accumulation
Plan credited to executive officers during fiscal 1997 was the award of 8.5% of
base salary for the calendar year 1996 based on profitability performance for
the Company during the fiscal year ended August 31, 1996. In addition, executive
officers still employed by the Company as of December 31, 1997 will receive an
award of 10% of base salary earned during calendar 1997 based on the
12
<PAGE> 15
Compensation Committee's subjective review of performance for the Company for
the fiscal year ended August 31, 1997.
The Company's contributions to the Capital Accumulation Plan vest equally
over four years and vested amounts are paid out upon the earliest of (1) one
year following an executive's termination of employment, (2) retirement or (3)
upon a date selected at the beginning of each Capital Accumulation Plan year by
the executive, but in no event will this selected date be earlier than four
years from the beginning of the Capital Accumulation Plan year. Capital
Accumulation Plan account balances earn interest at a rate equal to the
prevailing prime rate of interest as of November 1 of each year for the
succeeding calendar year.
The Compensation Committee considers that an integral part of the Company's
executive compensation program is equity-based compensation plans which align
executives' long-range interests with those of the stockholders. This long-term
incentive program is principally reflected in the 1991 Employee Stock Incentive
Plan (the "1991 Plan") and the 1996 Plan.
The Company has no set policy as to when stock options should be awarded,
although historically the Company has awarded stock options to its executive
officers annually. The Committee believes that the Company should continue to
make it a part of its regular executive compensation policies to consider
granting awards of non-qualified stock options to executive officers to provide
long-term incentives as part of the compensation package that is reviewed
annually for each executive officer. This grant should be made within guidelines
established at the time of the annual review. The Company's stock option
agreements generally have provided that the exercise price of each stock option
was the average of the closing bid price of the Company's Common Stock on the
first five trading days of the month in which the options were granted; each
grant was subject to vesting conditions established at the date of grant; and
stock options vested on an equal basis over a period of four years. The
Committee's policy is that the material terms of stock options for executive
officers should not be amended after grant.
The Committee believes that long-term stock-based incentive compensation
should be structured so as to closely align the interests of the executives with
the interests of the Company's stockholders and, in particular, to provide only
limited value (if any) in the event that the Company's stock price fails to
increase over time. The Committee determines the award of stock option grants to
the executive officers and takes into account the recommendations of the Chief
Executive Officer prior to approving annual awards of long-term stock-based
incentive compensation to the other executive officers. These stock options are
granted in part to reward the senior executives for their long-term strategic
management of the Company, and to motivate the executives to improve stockholder
value by increasing this component of their compensation package, and reflect
the Committee's objective to provide a greater portion of compensation for
executives in the form of long-term equity-linked awards. During fiscal 1997,
the Committee awarded options to purchase Common Stock at an exercise price of
$10.70 per share to the following executive officers and in the following
amounts: Mr. Herr, 15,000; Mr. Deal, 12,500; Mr. Stone, 12,500; and Mr. Sidlowe
4,500.
Compensation of Chief Executive Officer
The Committee believes that the compensation of the Chief Executive Officer
is consistent with its general policies concerning executive compensation and is
appropriate in light of the Company's financial objectives and performance.
Awards of intermediate and long-term incentive compensation to the Chief
Executive Officer are considered concurrently with awards to other executive
officers and follow the same general policies as such other intermediate and
long-term incentive awards.
13
<PAGE> 16
In reviewing and approving Mr. Cigarran's fiscal 1997 compensation package,
the Compensation Committee subjectively took into account the Company's
performance in fiscal 1996 as well as the Company's progress in developing its
diabetes disease management business and its practice-based ambulatory surgery
center business. Mr. Cigarran's compensation package for fiscal 1997 was
directly tied to the same specific quantitative performance criteria as the
other executive officers. In light of these factors, the Compensation Committee
determined that Mr. Cigarran would receive an increase in his annual base
compensation of 3.1%. Mr. Cigarran received no Annual Incentive Compensation
plan award for fiscal 1997 based on the same criteria as described above for
other executive officers. Mr. Cigarran received a Company performance
contribution pursuant to the Capital Accumulation Plan for calender 1996 equal
to 8.5% of his base salary during that period of time (in addition to the fixed
matching contribution required thereunder) and will receive a Company
performance award pursuant to the Capital Accumulation Plan equal to 10% of his
base salary earned during calender 1997 (this award will not be contributed to
his account until December 31, 1997); a matching contribution of $4,940 to the
Company's 401(k) Plan on his behalf for the period September 1, 1996 through
August 31, 1997; and long-term stock-based incentives in the form of an option
to purchase 25,000 shares of the Company's Common Stock at an exercise price of
$10.70 per share.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, enacted as part of the
Omnibus Budget Reconciliation Act of 1993, generally disallows a tax deduction
to public companies for compensation over $1,000,000 paid to the Chief Executive
Officer and four other most highly compensated executive officers. Under IRS
regulations, qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. The Compensation Committee
does not believe that any of the executive compensation arrangements for fiscal
1997 will result in the loss of a tax deduction pursuant to Section 162(m). The
Committee expects to continue to monitor the application of Section 162(m) to
executive compensation.
Respectfully submitted,
Frank A. Ehmann
Martin J. Koldyke
C. Warren Neel
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the total stockholder return of $100 invested
on August 31, 1992 in (a) the Company, (b) the Center for Research in Security
Prices ("CRSP") Index for NASDAQ Stock Market (U.S. Companies) ("NASDAQ Stock
Index") and (c) the CRSP Index for NASDAQ Health Services Stocks ("NASDAQ Health
Services Index"), assuming the reinvestment of all dividends.
AMERICAN HEALTHCORP, INC.
COMPARATIVE CUMULATIVE TOTAL RETURNS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
8/31/92 8/31/93 8/31/94 8/31/95 8/31/96 8/31/97
<S> <C> <C> <C> <C> <C> <C>
AMHC 100.0 96.2 51.0 45.2 84.6 85.6
NASDAQ Stocks 100.0 131.9 137.3 184.9 208.6 290.9
NASDAQ Health Services 100.0 109.2 140.1 150.4 291.0 191.2
</TABLE>
Notes:
A. The lines represent annual index levels derived from compounded daily returns
that include all dividends.
B. The indexes are reweighted daily, using the market capitalisation on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 08/31/92.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement dated November 30, 1992 which expired December 31,
1996 and thereafter pursuant to a letter agreement dated January 1, 1997,
between the Company and AmSurg, Thomas G. Cigarran and Henry D. Herr provided
general supervision and business management services to AmSurg, a 58% owned
subsidiary as of August 31, 1997 and, in addition, the Company provided certain
accounting, financial and administrative services for the operations of AmSurg
and each of the ambulatory surgery centers,
15
<PAGE> 18
physician practices and networks managed by AmSurg. Mr. Cigarran served as
Chairman and Chief Executive Officer of AmSurg and Mr. Herr served as Secretary
for AmSurg during fiscal 1997 and through the date of the Distribution (as
defined below). For fiscal 1997, the Company was paid $350,918 by AmSurg for
services under these agreements. Mr. Cigarran and Mr. Herr, individually,
received no direct compensation for serving in their capacities with AmSurg.
In early December 1997, the Company distributed all of the shares of common
stock of AmSurg owned by the Company to its stockholders (the "Distribution").
The letter agreement dated January 1, 1997 expired on the Distribution date when
AmSurg became a separately traded public company. On the Distribution date
Messrs. Cigarran and Herr entered into Advisory Agreements (the "Advisory
Agreements") with AmSurg pursuant to which they will provide certain continuing
services to AmSurg for two years following the Distribution. Under the terms of
the Advisory Agreements, Messrs. Cigarran and Herr will provide advisory
services to the senior management of AmSurg in the areas of strategy,
operations, management and organizational development. As compensation for these
services, AmSurg will pay compensation totalling $200,000 to Mr. Cigarran and
totaling $150,000 to Mr. Herr during the two-year period of the Advisory
Agreements. This compensation will be payable in shares of AmSurg common stock,
one-third of which will vest immediately, one third of which will vest upon the
first anniversary of the Distribution and the remaining one-third of which will
vest on the second anniversary of the Distribution. Messrs. Cigarran and Herr
will also serve on the Board of Directors of AmSurg (Mr. Cigarran will serve as
Chairman of the Board) and will be eligible to receive compensation as outside
directors which will currently consist of an annual cash fee of $10,000 adjusted
annually to reflect changes in the Consumer Price Index and an annual award of
restricted AmSurg common stock equal in value to $10,000 with subsequent annual
awards adjusted for changes in the Consumer Price Index.
On the date of the Distribution, the Company and AmSurg entered into a
Management and Human Resources Agreement (the "Management Agreement"), pursuant
to which the Company will provide certain financial and accounting services to
AmSurg and to its subsidiaries on a transitional basis, with the intent that
AmSurg will become self-sufficient in the provision of these services within one
year or earlier if so elected by AmSurg. Under the Management Agreement, the
Company shall provide AmSurg with services, including processing payroll and
associated payroll tax returns and accounts payable for the AmSurg corporate
office, maintaining general accounting records for the AmSurg corporate
operations and operations of AmSurg's subsidiaries, preparing consolidated
AmSurg financial statements, preparing AmSurg corporate tax returns and tax
returns for AmSurg subsidiaries, preparing estimated tax reports, and preparing
financial statements in connection with periodic reports required to be filed by
AmSurg with the Commission. As compensation for these services, AmSurg will pay
the Company a fixed fee of $4,166.67 per month and a variable fee of $625 per
month for each ambulatory surgery center in operation and certain multiples
thereof for the corporate office and other operations, subject to increase if
AmSurg requests certain additional services. The Company believes that these
fees approximate its cost of providing these services. The Company anticipates
that several of its administrative employees who provide these services will
become employees of AmSurg during the twelve month term of the Management
Agreement and that fees will be adjusted downward to reflect the assumption of
responsibilities by AmSurg during this period.
Pursuant to a sublease dated June 9, 1996 between the Company and AmSurg,
AmSurg leases 15,417 square feet of space from the Company in Nashville,
Tennessee where AmSurg's corporate headquarters are located. The Company passes
through the cost of such leased space to AmSurg and, for fiscal 1997, AmSurg
paid the Company $301,384 in rental payments.
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<PAGE> 19
PROPOSAL NO. 2: AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends that its stockholders
approve an amendment of the 1996 Plan to increase the number of shares of Common
Stock available for grant under the 1996 Plan by 350,000 shares, for a total of
730,000 shares subject to option thereunder. Of the original 380,000 shares
authorized under the 1996 Plan, 50,000 of such shares are reserved for issuance
in connection with restricted stock awards to Outside Directors as part of their
annual compensation for serving as directors of the Company; no additional
shares are being reserved for such restricted stock awards as part of the
proposed amendment. The status of the options outstanding and available for
grant under the Company's various stock option plans as of November 15, 1997 is
as follows:
<TABLE>
<CAPTION>
SHARES
SHARES SUBJECT TO AVAILABLE FOR
PLAN OUTSTANDING OPTIONS OPTION GRANTS
- ---- ------------------- -------------
<S> <C> <C>
1988 Plan................................................ 161,715 --
1991 Plan................................................ 829,806 --
1996 Plan................................................ 320,840 9,010
</TABLE>
Stock options have been granted pursuant to the Non-Statutory Stock Option
Plan of 1988, 1991 Plan and 1996 Plan to the Company's management employees to
provide them with additional incentive to contribute to the best interests of
the Company by aligning their interests with the interests of the Company's
stockholders. During the period from September 1, 1995 through November 1997,
approximately 66% of the options granted were granted to management employees
other than executive officers. Approximately 105 management employees currently
own stock options.
The Board of Directors and management of the Company believe that it is
important to make stock options grants on an annual basis to its management
employees and also to grant options to newly hired employees. The Company
believes that its competitive advantage is primarily the result of the
knowledge, experience and commitment of its management employees. The rapidly
changing healthcare environment creates numerous opportunities for individuals
with the skills needed by the Company to realize its potential in DTCA's
hospital business and in DTCA's rapidly developing disease management business
with managed care payors. The Company's ability to grant options to purchase
Common Stock is an essential element to assure that existing management
employees remain committed to the Company as well as to assure that the Company
can recruit additional management employees needed to fully develop these
businesses. Other health care businesses, including health care businesses that
may compete with the Company, are offering stock option grants as part of their
compensation program and therefore it is essential that the Company continue to
be able to offer stock options to assure that it has the management employees
that it needs to realize its growth potential.
Accordingly, on November 20, 1997, the Company's Board of Directors adopted
a resolution amending the 1996 Plan, subject to stockholder approval, to
increase the number of shares authorized for issuance thereunder by 350,000. If
the amendment as proposed is approved, there will be 680,000 shares (not
including the 50,000 shares reserved for issuance in connection with restricted
stock awards to Outside Directors) available for issuance under the 1996 Plan,
of which options for 320,840 shares are currently outstanding. A copy of the
proposed amendment to the 1996 Plan is attached as Exhibit A.
A majority of the votes of all shares present, represented and entitled to
vote is necessary for approval of this proposal. The Board recommends that
stockholders vote FOR this proposal. Unless contrary instructions
17
<PAGE> 20
are received, shares of Common Stock of the Company represented by duly executed
proxies will be voted in favor of the amendment to the 1996 Plan.
SUMMARY OF MATERIAL PROVISIONS OF THE 1996 PLAN
The following is a summary of the material provisions of the 1996 Plan, as
amended by Proposal No. 2:
Shares. The 1996 Plan authorizes the issuance of up to 730,000 shares of
the Company's Common Stock. 50,000 of such shares shall be reserved for issuance
in connection with restricted stock awards to Outside Directors as part of their
annual compensation for serving as directors of the Company. Shares awarded
under the 1996 Plan may consist, in whole or in part, of any combination of
authorized and unissued shares of Common Stock or treasury shares. If shares
subject to an option under the 1996 Plan cease to be subject to such option, or
if shares awarded under the 1996 Plan are forfeited, or otherwise terminate
without a payment being made to the participant in the form of Common Stock and
without the payment of any dividends thereon, such shares will again be
available for future distribution under the 1996 Plan.
Participation. Awards may be made to key employees, including officers,
and consultants of the Company, its subsidiaries and affiliates, but (except for
automatic annual grants of restricted stock to Outside Directors as described
below) may not be granted to any director who is a member of the Committee
administering the 1996 Plan or to any other director unless the director is also
a regular employee of the Company, its subsidiaries or affiliates. No employee
is eligible for awards relative to shares of Common Stock which exceed 100,000
shares in any three year period. The number of officers and other key employees
currently eligible for awards pursuant to the 1996 Plan is approximately 105.
As part of their compensation for serving as directors of the Company,
Outside Directors will receive an annual grant of restricted stock equal in
value to $10,000. The dollar amount of the annual grants shall be adjusted by
the percentage change from the previous year in the Consumer Price Index,
subject to a maximum 6% annual increase. For purposes of determining the amount
of restricted stock to be granted to each Outside Director, the value of the
Company's Common Stock shall be equal to the average of the closing bid price of
such stock for the first five trading days of the month in which the Annual
Meeting of Stockholders is held. The grant of restricted stock shall be awarded
to each Outside Director annually on the date of the Company's Annual Meeting of
Stockholders. There are currently four Outside Directors eligible to participate
in the 1996 Plan.
Administration. The Stock Incentive Plan will be administered by a
Committee of no less than two disinterested individuals appointed by the Board
of Directors, which Committee is currently the Compensation Committee. The
Compensation Committee shall have no authority to determine the terms or
conditions of any awards to Outside Directors.
Awards Under the Plan. The Compensation Committee will have the authority
to grant the following types of awards to officers and key employees under the
Stock Incentive Plan: (1) Stock Options, (2) Stock Appreciation Rights, (3)
Restricted Stock, and (4) Other Stock-Based Awards.
1. Stock Options. Incentive stock options ("ISO") and non-qualified
stock options may be granted for such number of shares of Common Stock as
the Compensation Committee will determine and may be granted alone, in
conjunction with, or in tandem with, other awards under the 1996 Plan, but
subject to the per person limitation on awards.
A stock option will be exercisable at such times and subject to such
terms and conditions as the Compensation Committee will determine and over
a term to be determined by the Compensation Committee, which term will be
no more than ten years after the date of grant. The option price for any
ISO will not be less than 100% (110% in the case of certain 10%
stockholders) of the fair market value of
18
<PAGE> 21
the Common Stock as of the date of grant and for any non-qualified stock
option will be not less than 50% of the fair market value as of the date of
grant.
2. Stock Appreciation Rights. Stock appreciation rights ("SARs") may
be granted in conjunction with all or part of a stock option and will be
exercisable only when the underlying stock option is exercisable. Once an
SAR has been exercised, the related portion of the stock option underlying
the SAR will terminate.
Upon the exercise of an SAR, the Company will pay to the employee in
cash, Common Stock, or a combination thereof (the method of payment to be
at the discretion of the Compensation Committee), an amount of money equal
to the excess between the fair market value of the stock on the exercise
date and the option exercise price, multiplied by the number of SARs being
exercised.
In addition to the foregoing SARs, the Compensation Committee may
grant limited SARs which will be exercisable only in the event of a change
in control or potential change in control of the Company, as defined in the
1996 Plan. In awarding SARs or limited SARs, the Compensation Committee may
provide that in the event of a change in control or potential change in
control, SARs or limited SARs may be cashed out on the basis of the change
in control price, as defined in the 1996 Plan.
3. Restricted Stock. Restricted stock may be granted alone, in
conjunction with, or in tandem with, other awards under the 1996 Plan and
may be conditioned upon the attainment of specific performance goals or
such other factors as the Compensation Committee may determine. The
provisions attendant to a grant of restricted stock may vary from
participant to participant.
Other than awards of restricted stock made to Outside Directors, in
making an award of restricted stock, the Compensation Committee will
determine the periods during which the stock is subject to forfeiture, and
may grant such stock at a purchase price equal to or less than the par
value of the Common Stock.
During the restriction period, the recipient may not sell, transfer,
pledge or assign the restricted stock. The certificate evidencing the
restricted stock will remain in the possession of the Company until the
restrictions have lapsed.
4. Other Stock-Based Awards. The Compensation Committee also may
grant other types of awards that are valued, in whole or in part, by
reference to or otherwise based on the Common Stock. These awards may be
granted alone, in addition to, or in tandem with, stock options, SARs and
restricted stock. Such awards will be made upon terms and conditions as the
Compensation Committee may in its discretion provide.
Automatic Annual Grants to Outside Directors. As part of the compensation
to Outside Directors for serving as directors of the Company, the 1996 Plan
provides for an automatic annual grant of restricted stock equal in value to
$10,000, to be awarded to each Outside Director on the date of the Company's
Annual Meeting of Stockholders. The value of the restricted stock grant to
Outside Directors will be adjusted annually on the date of grant by the
percentage change from the previous year in the Consumer Price Index, subject to
a maximum 6% annual increase. For purposes of determining the amount of the
restricted stock to be granted to each Outside Director, the value of the
Company's Common Stock shall be equal to the average of the closing bid price of
such stock on the first five trading days of the month in which the Annual
Meeting of Stockholders is held. The restricted stock granted to an Outside
Director will vest in three equal annual installments, beginning on the date of
grant and continuing on the first and second Annual Meeting of Stockholders
following the Annual Meeting of Stockholders at which the restricted stock grant
is made, if the
19
<PAGE> 22
Outside Director is still a director of the Company on such dates. The shares of
stock subject to the restricted stock award which have vested are not
transferable until the earlier of (i) five years from the date of grant and (ii)
the date on which the director ceases to serve as a director of the Company for
any reason. Outside Directors are not otherwise eligible to receive awards under
the 1996 Plan.
Change in Control Provisions. If there is a change in control or a
potential change in control, any SARs and stock options which are not then
exercisable, in the discretion of the Board of Directors, will become fully
exercisable and vested. Similarly, the restrictions applicable to restricted
stock and other stock-based awards will lapse and such shares and awards will be
deemed fully vested. Stock options, SARs, limited SARs, restricted stock and
other stock-based awards, will, unless otherwise determined by the Compensation
Committee in its sole discretion, be cashed out on the basis of the change in
control price described below. All restrictions imposed on restricted stock
granted to Outside Directors will expire upon a change in control.
The change in control price will be the highest price per share paid in any
transaction reported on The Nasdaq Stock Market, or paid or offered to be paid
in any bona fide transaction relating to a potential or actual change in control
of the Company, at any time during the immediately preceding 60 day period as
defined by the Compensation Committee. A change in control occurs if (1) any
person becomes a beneficial owner, directly or indirectly, of 35% or more of the
total voting stock of the Company (subject to certain exceptions), (2) as a
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination or similar transaction, less than a majority of the
combined voting power of the then outstanding securities of the Company are held
in the aggregate by the holders of Company securities entitled to vote generally
in the election of directors immediately prior to such transaction, or (3)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors cease for any reason to constitute
at least a majority thereof. A potential change in control means (1) approval by
the stockholders of an agreement which, if completed, would constitute a change
in control, or (2) the acquisition by a person of 5% or more of the total voting
stock of the Company and the adoption by the Board of Directors of a resolution
that a potential change in control, as defined in the Stock Incentive Plan, has
occurred.
Amendment. The 1996 Plan may be amended by the Board of Directors, except
that the Board of Directors may not, without the approval of the Company's
stockholders, increase the total number of shares reserved for the purposes of
the 1996 Plan, materially increase the benefits accruing to participants under
the 1996 Plan, or materially modify the requirements as to eligibility for
participation in the 1996 Plan. In addition, the provisions of the 1996 Plan
relating to grants to Outside Directors may not be amended more than once every
six months except to comply with changes in the Internal Revenue Code of 1986,
as amended (the "Code"), and the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
Adjustment. In the case of a stock split, stock dividend,
reclassification, recapitalization, merger, reorganization, or other changes in
the Company's structure affecting the Common Stock, appropriate adjustments will
be made by the Compensation Committee, in its sole discretion, in the number of
shares reserved under the 1996 Plan and in the number of shares covered by
options and other awards then outstanding under the 1996 Plan and, where
applicable, the exercise price for awards under the 1996 Plan.
Federal Income Tax Aspects with Respect to Stock Options and Restricted
Stock Awards. The following is a brief summary of the federal income tax
aspects of stock options and restricted stock awards made under the Stock
Incentive Plan based upon the federal income tax laws in effect on the date
hereof. This summary is not intended to be exhaustive, and does not describe
state or local tax consequences.
20
<PAGE> 23
1. Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Common Stock is issued
to a participant pursuant to the exercise of an ISO, and if no
disqualifying disposition of the shares is made by the participant within
two years of the date of grant or within one year after the transfer of the
shares to the participant, then: (a) upon the sale of the shares, any
amount realized in excess of the option price will be taxed to the
participant as a long-term capital gain, and any loss sustained will be a
capital loss, and (b) no deduction will be allowed to the Company for
federal income tax purposes. The exercise of an ISO will give rise to an
item of tax preference that may result in an alternative minimum tax
liability for the participant unless the participant makes a disqualifying
disposition of the shares received upon exercise.
If Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then
generally: (a) the participant will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market
value of the shares at exercise (or, if less, the amount realized on the
disposition of the shares) over the option price paid for such shares, and
(b) the Company will be entitled to deduct any such recognized amount. Any
further gain or loss realized by the participant will be taxed as
short-term or long-term capital gain or loss, as the case may be, and will
not result in any deduction by the Company.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the
participant's employment, the option will generally be taxed as a non-
qualified stock option.
2. Non-qualified Stock Options. Except as noted below, with respect
to non-qualified stock options: (a) no income is realized by the
participant at the time the option is granted; (b) generally upon exercise
of the option, the participant realizes ordinary income in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares on the date of exercise and the Company will be
entitled to a tax deduction in the same amount; and (c) at disposition, any
appreciation (or depreciation) after date of exercise is treated either as
short-term or long-term capital gain or loss, depending upon the length of
time that the participant has held the shares.
3. Restricted Stock. A participant receiving restricted stock
generally will recognize ordinary income in the amount of the fair market
value of the restricted stock at the time the stock is no longer subject to
forfeiture, less the consideration paid for the stock. However, a
participant may elect, under Section 83(b) of the Code within 30 days of
the grant of the stock, to recognize taxable ordinary income on the date of
grant equal to the excess of the fair market value of the shares of
restricted stock (determined without regard to the restrictions) over the
purchase price of the restricted stock. Thereafter, if the shares are
forfeited, the participant will be entitled to a capital loss in an amount
equal to the purchase price of the forfeited shares regardless of whether
the participant made a Section 83(b) election.
On December 9, 1997, the closing purchase price of the Company's Common
Stock reported in the Nasdaq Stock Market was $6.63 per share.
ADJUSTMENT OF STOCK OPTIONS AS A RESULT OF THE DISTRIBUTION
As a result of the Distribution, all outstanding stock options will be
adjusted pursuant to the terms of the applicable stock option plans to maintain
the value of these options following the Distribution at pre-
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Distribution levels. Holders of Company stock options on the Distribution record
date will not be entitled to receive shares of AmSurg common stock in respect of
such options. The adjustment will take the form of a reduction in the exercise
price per share of outstanding stock options and in certain cases the number of
shares underlying such options will be increased. The amount by which the
options will be adjusted will depend on a comparison of the market price per
share of the Company's Common Stock for a period of time immediately before and
for a period of time after the Distribution. In addition, in order to avoid a
continuing charge to earnings that would result from this adjustment over the
time period that these options were originally scheduled to vest, the
Compensation Committee has accelerated vesting for all outstanding stock options
as of the date of Distribution. The adjustment and acceleration of options as
explained above will result in a noncash, nonrecurring charge at the time of the
Distribution. Because the amount of this charge will depend upon the market
price of the Company's Common Stock immediately prior to the Distribution, it is
not possible at this time to predict the amount of this charge. However, if the
distribution were to have occurred on November 14, 1997, on which date the
closing price of the Company's Common Stock was $11.75 the amount of the pretax
charge for this adjustment would have been approximately $4.5 million. Also,
because the potential adjustment in the number of shares subject to options
required to maintain post-Distribution stock option values at pre-Distribution
levels will depend upon the market price of the Company's Common Stock prior to
and after the Distribution, it is not possible to estimate at this time the
potential adjustment in the number of shares subject to outstanding options.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by regulation of the Securities and
Exchange Commission to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on a review of the Forms 3, 4 and 5 and amendments thereto and
certain written representations furnished to the Company, the Company believes
that during the fiscal year ended August 31, 1997, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche, LLP, which was the Company's independent accountant for
fiscal 1997, has been selected as the independent public accountant of the
Company for the 1998 fiscal year. The Company has been informed that
representatives of Deloitte & Touche, LLP plan to attend the Annual Meeting.
Such representatives will have the opportunity to make a statement if they
desire to do so and will be available to respond to questions by the
stockholders.
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DEADLINE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS TO BE PRESENTED AT THE
1999 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented for action at the 1999 Annual Meeting
of Stockholders by any stockholder of the Company must be received by the
Secretary of the Company not later than August 19, 1998, in order for such
proposal to be considered for inclusion in the Company's Proxy Statement and
proxy relating to its 1999 Annual Meeting of Stockholders. Nothing in this
paragraph shall be deemed to require the Company to include any stockholder
proposal which does not meet all the requirements for such inclusion established
by the Commission at the time in effect.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will be
voted in accordance with the instructions set forth on the back side of the
proxy card. Abstentions and "non-votes" will be counted as present only for the
purposes of determining a quorum. Abstentions and "non-votes" will not be
counted either for or against the election of directors. Abstentions will be
treated as votes against and "non-votes" will have no effect on the outcome of
proposals presented to stockholders other than election of directors. A
"non-vote" occurs when a nominee holding shares for a beneficial owner votes on
one proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
MISCELLANEOUS
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, stockholders who do not expect to attend in person are
urged, regardless of the number of shares of stock owned, to date, sign and
return the enclosed proxy promptly.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED AUGUST 31, 1997 MAY BE OBTAINED, WITHOUT CHARGE, BY ANY STOCKHOLDER TO
WHOM THIS PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO HENRY D. HERR,
SECRETARY, AMERICAN HEALTHCORP, INC., ONE BURTON HILLS BOULEVARD, NASHVILLE,
TENNESSEE 37215. COPIES OF EXHIBITS FILED WITH THE FORM 10-K ALSO WILL BE
AVAILABLE UPON WRITTEN REQUEST ON PAYMENT OF CHARGES APPROXIMATING THE COMPANY'S
COST.
Date: December 17, 1997.
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<PAGE> 26
EXHIBIT A
AMENDMENT NO. 1 TO
AMERICAN HEALTHCORP, INC.
1996 STOCK INCENTIVE PLAN
Pursuant to subparagraph 11 of the American Healthcorp, Inc. 1996 Stock
Incentive Plan ("1996 Plan"), the Board of Directors of American Healthcorp,
Inc. hereby amends the 1996 Plan so that the first paragraph of Section 3 shall
read as follows:
"The aggregate number of shares of Stock reserved and available
for distribution under the Plan shall not exceed 730,000 shares,
which includes 50,000 shares reserved for issuance pursuant to
Section 9 hereof. Any number of shares of Stock may be awarded
so long as the total shares of Stock awarded does not exceed
730,000 shares. Such shares of Common Stock may consist, in
whole or in part, of authorized and unissued shares or treasury
shares."
Dated: November 20, 1997
<PAGE> 27
APPENDIX A
P R O X Y
AMERICAN HEALTHCORP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 21, 1998.
The undersigned hereby appoints Thomas G. Cigarran and Henry D. Herr, and
either of them, as proxies, with full power of substitution, to vote all shares
of the undersigned as shown below on this proxy at the Annual Meeting of
Stockholders of American Healthcorp, Inc. to be held at the Loews Vanderbilt
Plaza Hotel, 2100 West End Avenue, Nashville, Tennessee 37203, on January 21,
1998, at 9:00 a.m., local time, and any adjournments thereof.
PROPOSAL 1: ELECTION OF DIRECTORS:
[ ] FOR all of the following nominees (except as indicated to the contrary
below):
Mr. Ehmann, Mr. O'Neil
WITHHOLD AUTHORITY (ABSTAIN) to vote for the following nominees (please
print name or names)
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[ ] WITHHOLD AUTHORITY (ABSTAIN) to vote for all nominees
PROPOSAL 2: AMENDMENT TO THE COMPANY'S 1996 STOCK INCENTIVE PLAN
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
IN THEIR DISCRETION ON ANY OTHER MATTER WHICH MAY PROPERLY COME
BEFORE SAID MEETING OR ANY ADJOURNMENT THEREOF.
IMPORTANT: PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE.
Your shares will be voted in accordance with your instructions. If
no choice is specified, shares will be voted FOR the nominees in the
election of directors and FOR the amendment to the Company's 1996 Stock
Incentive Plan.
Date: ____________________ .
PLEASE SIGN HERE
AND RETURN PROMPTLY
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Please sign exactly as your name appears at left. If registered in the
names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys should show their full
titles. If a corporation is stockholder, the corporate officer should
sign in full corporate name and title, such as President or other
officer. If a partnership is stockholder, please sign in partnership
name by authorized person.
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IF you have changed your address, please PRINT your new address on this
line.
