<PAGE> 1
SCHEDULE 14A INFORMATION
(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:
<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
3841 Green Hills Village Drive
Nashville, Tennessee 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Stockholders of American Healthcorp, Inc.:
The Annual Meeting of Stockholders of American Healthcorp, Inc., a Delaware
corporation (the "Company"), will be held at the SunTrust Center, 5th Floor
Auditorium, 424 Church Street, Nashville, Tennessee 37219, at 9:00 a.m., local
time, on Tuesday, January 25, 2000 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 issuance under the 1996 Plan by 400,000 shares;
(3) To adopt an amendment to the Company's Restated Certificate of
Incorporation to change the Company's name from American Healthcorp,
Inc. to American Healthways, Inc.; and
(4) 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 20, 1999. Only stockholders of
record at the close of business on November 30, 1999 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 20, 1999
<PAGE> 3
AMERICAN HEALTHCORP, INC.
3841 Green Hills Village Drive
Nashville, Tennessee 37215
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, JANUARY 25, 2000
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 Tuesday, January 25, 2000, at 9:00 a.m., local time,
at the SunTrust Center, 5th Floor Auditorium, 424 Church Street, Nashville,
Tennessee 37219, 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 20, 1999.
The Company's officers or employees may solicit proxies personally or by
mail, telephone or facsimile. 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, FOR the amendment to the 1996 Plan set forth under
Proposal No. 2, and FOR the adoption of an amendment changing the name of the
Company set forth under Proposal No. 3. 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 30, 1999, will be
entitled to one vote on all matters to come before the meeting. Cumulative
voting is not permitted. As of November 30, 1999, there were outstanding
8,237,015 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 30, 1999. 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 PERCENT OF
STOCK OUTSTANDING
NAME AND ADDRESS BENEFICIALLY COMMON
OF BENEFICIAL OWNER OWNED(1) STOCK(1)
------------------- ------------ -----------
<S> <C> <C>
Waddell & Reed, Inc......................................... 1,101,100(2) 13.37%
6300 Lamar Avenue
Post Office Box 29217
Shawnee Mission, KS 66201-9217
Thomas G. Cigarran****...................................... 795,615(3) 9.50
One Burton Hills Blvd.
Nashville, TN 37215
Capital Research and Management Co.......................... 522,000(4) 6.34
333 South Hope Street
Los Angeles, CA 90071
Henry D. Herr****........................................... 483,952(5) 5.81
One Burton Hills Blvd.
Nashville, TN 37215
STI Capital Management...................................... 447,800(6) 5.44
200 South Orange Avenue
Orlando, FL 32801
Safeco Asset Management..................................... 441,600(7) 5.36
601 Union Street
Suite 2500
Seattle, WA 98101-4074
Robert E. Stone***.......................................... 206,843(8) 2.48
William C. O'Neil, Jr.**.................................... 157,340(9) 1.91
Martin J. Koldyke**......................................... 70,482(10) *
David A. Sidlowe***......................................... 60,616(11) *
C. Warren Neel**............................................ 18,447(12) *
Frank A. Ehmann**........................................... 17,975(13) *
All directors and executive officers as a group (8
persons).................................................. 1,811,270(14) 20.98
</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
2
<PAGE> 5
(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 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 September 1999 filed with the Commission.
(3) Includes 138,750 shares issuable upon the exercise of outstanding options.
(4) Information with respect to stock ownership is based upon the Form 13F
dated September 1999 filed with the Commission.
(5) Includes 89,488 shares owned by Mr. Herr's wife and 87,439 shares issuable
upon the exercise of outstanding options.
(6) Information with respect to stock ownership is based upon the Form 13F
dated September 1999 filed with the Commission.
(7) Information with respect to stock ownership is based upon the Form 13F
dated September 1999 filed with the Commission.
(8) Includes 94,800 shares issuable upon the exercise of outstanding options.
(9) Includes 8,230 shares issuable upon the exercise of outstanding options.
(10) Includes 3,438 shares owned by an affiliate of Mr. Koldyke. Also includes
1,500 shares issuable upon the exercise of outstanding options held by Mr.
Koldyke.
(11) Includes 2,140 shares owned by Mr. Sidlowe's children and 37,718 shares
issuable upon the exercise of outstanding options.
(12) Includes 12,565 shares issuable upon the exercise of outstanding options.
(13) Includes 13,443 shares issuable upon the exercise of outstanding options.
(14) Includes 394,445 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
2000 Annual Meeting will serve until the Annual Meeting of Stockholders in 2003
(the "Class III" directors), two directors currently serving on the Board will
continue to serve until the Annual Meeting of Stockholders in 2001 (the "Class
I" directors), and two directors currently serving on the Board will continue to
serve until the Annual Meeting of Stockholders in 2002 (the "Class II"
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 III
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>
Henry D. Herr III; 2003 Mr. Herr, 53, 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 Corp. ("AmSurg"), a majority owned
subsidiary of the Company until December 3, 1997 when all stock
owned by the Company was distributed to the Company's
stockholders.
Martin J. Koldyke III; 2003 Mr. Koldyke, 67, 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 is a former
Chairman of the Illinois Health Finance Authority, Chairman and
a Trustee of WTTW Channel 11, Chicago, a Trustee of
Northwestern University and Chairman Emeritus of the Golden
Apple Foundation.
</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>
Frank A. Ehmann I; 2001 Mr. Ehmann, 65, has been a director of the Company since 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
SPX Corp and AHA Investment Funds.
William C. O'Neil, Jr. I; 2001 Mr. O'Neil, 65, has served as a director of the Company since
1985. From 1989 to 1998, Mr. O'Neil was the 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.
Thomas G. Cigarran II; 2002 Mr. Cigarran, 57, 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 and a
director of AmSurg.
Dr. C. Warren Neel II; 2002 Dr. Neel, 60, has been a director since October 1991. Dr. Neel
serves as Dean of the College of Business Administration at The
University of Tennessee in Knoxville. Dr. Neel is also a
director of Saks, Inc., O'Charley's, Inc. and Clayton Homes,
Inc.
</TABLE>
The Board of Directors of the Company held six meetings during the fiscal
year ended August 31, 1999. The Board of Directors has Nominating, Audit and
Compensation Committees. The Audit Committee is comprised of Messrs. Ehmann,
Koldyke and 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 of this committee to ensure that the Company's financial
statements accurately reflect the Company's financial position and results of
operations. In fulfilling its fiduciary duty of care and as part of its role as
the Audit Committee, the Audit Committee has considered and reviewed with the
Company's auditors their
5
<PAGE> 8
independence and has received confirmatory advice from the auditors with respect
to their independence. The Audit Committee held one meeting during fiscal 1999.
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 and Koldyke and Dr.
Neel. The Compensation Committee held two meetings during fiscal 1999.
The Nominating Committee consists of Messrs. Cigarran and 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 1999.
Each of the incumbent directors of the Company attended at least 75% of the
aggregate of the total number of meetings held during fiscal 1999 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 1999, 1998 and 1997 for the Company's Chief
Executive Officer and each of the other 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.................... 1999 $325,000 $48,750 25,000 $38,463(2)
Chairman of the Board, President, 1998 310,000 130,200 25,000 49,683
Chief Executive Officer 1997 295,000 0 25,000 45,761
Henry D. Herr......................... 1999 $260,000 $39,000 12,500 $27,660(3)
Executive Vice President-Finance and 1998 250,000 105,000 0 36,448
Administration, Chief Financial 1997 242,000 0 15,000 36,009
Officer, Secretary
Robert E. Stone....................... 1999 $200,000 $30,000 10,000 $29,479(4)
Senior Vice President 1998 189,000 79,382 10,000 33,136
1997 180,000 0 12,500 30,112
David A. Sidlowe...................... 1999 $136,500 $16,380 4,500 $17,356(5)
Vice President, Controller 1998 130,000 43,680 4,500 20,689
1997 125,000 0 4,500 19,400
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $3,600 per year automobile allowance for each Named Executive
Officer.
(2) Includes $25,819 contributed by the Company to the Company's Corporate and
Subsidiary Officer Capital Accumulation Plan (the "Capital Accumulation
Plan"), $4,991 contributed by the Company to the Company's Retirement
Savings Plan (the "401(k) Plan") and $4,053 of life insurance premiums paid
by the Company on behalf of Mr. Cigarran.
(3) Includes $17,245 contributed by the Company to the Capital Accumulation
Plan, $4,995 contributed by the Company to the 401(k) Plan and $1,820 of
life insurance premiums paid by the Company on behalf of Mr. Herr.
(4) Includes $14,471 contributed by the Company to the Capital Accumulation
Plan, $4,992 contributed by the Company to the 401(k) Plan and $6,416 of
life insurance premiums paid by the Company on behalf of Mr. Stone.
(5) Includes $9,497 contributed by the Company to the Capital Accumulation Plan
and $4,259 contributed by the Company to the 401(k) Plan on behalf of Mr.
Sidlowe.
7
<PAGE> 10
OPTION GRANTS TABLE
The following table provides information as to options granted to the Named
Executive Officers during fiscal 1999. No separate stock appreciation rights
("SARs") were granted during fiscal 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Cigarran................ 25,000 8.61% $7.42 09/29/08 $116,660 $295,639
Henry D. Herr..................... 12,500 4.31 7.42 09/29/08 58,330 147,820
Robert E. Stone................... 12,500 4.31 7.42 09/29/08 58,330 147,820
David A. Sidlowe.................. 4,500 1.55 7.42 09/29/08 20,999 53,215
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options granted to the Named Executive Officers generally vest at the
rate of 25% per year over a four year period beginning on the date of the
grant. If there is a change in control or a potential change in control (as
defined in the 1996 Plan), any stock options which are not then exercisable,
in the discretion of the Board, may become fully exercisable and vested, and
stock options will, unless otherwise determined by the Compensation
Committee in its sole discretion, be cashed out on the basis of the change
in control price, as defined in the 1996 Plan.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information as to options exercised by the
Named Executive Officers during fiscal 1999. None of the Named Executive
Officers has held or exercised separate SARs. In addition, this table includes
the number of shares covered by both exercisable and unexercisable stock options
as of the record date. Also reported are the values for "in-the-money" options,
which represent the positive spread between the exercise price of existing stock
options and the year-end price of the Company's Common Stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF NUMBER OF UNEXERCISED OPTIONS AT FISCAL
SHARES OPTIONS AT FISCAL YEAR-END YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Cigarran.................. 62,395 $439,261 132,500 25,000 $136,368 0
Henry D. Herr....................... 25,668 163,828 84,314 12,500 184,750 0
Robert E. Stone..................... 0 0 91,675 12,500 270,102 0
David A. Sidlowe.................... 14,001 112,753 36,593 4,500 119,255 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the 4:00 p.m. closing price of the Company's Common Stock on The
Nasdaq Stock Market on August 31, 1999 of $6.69 per share.
8
<PAGE> 11
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") each receive (i)
a $15,000 cash retainer; and (ii) pursuant to the 1996 Plan, a restricted stock
award of 1,042 shares of Common Stock with a fair market value (as defined in
the 1996 Plan) of $10,674, which is awarded on the date of the Annual Meeting of
Stockholders.
In addition, the dollar value of the annual restricted stock award to
Outside Directors under the 1996 Plan is 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 1999.
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 and Stone currently expire in August 2002, 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 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 2001, 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
The Compensation Committee of the Company's Board of Directors makes
decisions on compensation of the Company's executive officers. 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
9
<PAGE> 12
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 toward 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 industry. 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, the Compensation Committee believes that, while the Company
competes generally with such other health care service companies, the position
of the Company as a leading provider of diabetes treatment services in the
United States and DTCA's development of diabetes and cardiac management services
for health plans provide unique circumstances. These differences are important
factors that 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
10
<PAGE> 13
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 compensation and has applied the policies
described herein to fiscal 1999 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 1999, the Compensation Committee reviewed recommendations of management
and consulted with the Chief Executive Officer. The Compensation Committee
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 1999
ranging from 4.0% to 5.8%. The minimum increase mandated by the employment
agreements with the executive officers was 1.7%. The Compensation Committee did
not assign any relative weight to the quantitative and qualitative factors 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 for
fiscal 1999 relied on cash bonuses awarded under the Annual Incentive
Compensation plan under which cash awards could be earned by executive officers
based upon the extent to which actual earnings per share of the Company during
fiscal 1999 compared to the targeted earnings per share approved by the
Compensation Committee for such fiscal year. The maximum total Annual Incentive
Compensation award that executive officers could receive ranged from 48% to 60%
of base salary for fiscal 1999. The actual awards under the Annual Incentive
Compensation plan for fiscal 1999 based on actual earnings ranged from 12% to
15% of base salary for fiscal 1999.
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 $4,995, 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 for 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 for calendar 1999 (a) on the executive
officer's voluntary salary deferrals into the Capital Accumulation Plan and (b)
on performance against targeted Company earnings per share for fiscal 1999
established prior to the start of the Capital Accumulation Plan year by the
Compensation Committee. The portion of the Company's
11
<PAGE> 14
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 for fiscal 1999 established by the Compensation
Committee, executive officers were eligible to receive a Company contribution,
provided that a minimum level of Company earnings per share for fiscal 1999 were
attained, of between 3.5% and 18.5% of base salary for calendar 1999. Awards are
made as of December 31 of each year but are based on 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 1999 was an award of 10% of base salary earned during
calendar 1998 based on performance during the fiscal year ended August 31, 1998.
In addition, executive officers still employed by the Company as of December 31,
1999, will receive an award of 5.5% of base salary during that calendar year
based on the Company's actual earnings per share performance for fiscal 1999 in
comparison to criteria established by the Compensation Committee.
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 plus 1% 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. 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 the 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-
12
<PAGE> 15
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 1999, the Committee awarded options to purchase Common Stock at an
exercise price of $7.42 per share to the following executive officers in
addition to the Chief Executive Officer and in the following amounts: Mr. Herr,
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.
In reviewing and approving Mr. Cigarran's fiscal 1999 compensation, the
Compensation Committee subjectively took into account the Company's performance
in fiscal 1998 as well as the Company's progress in developing its diabetes
disease management business. In light of these factors, the Compensation
Committee determined that Mr. Cigarran would receive an increase in his annual
base compensation of 4.8%. Mr. Cigarran received an Annual Incentive
Compensation plan award for fiscal 1999 of 15% of base salary based on the same
Company earnings per share criteria as described above for other executive
officers. Mr. Cigarran also received a Company performance contribution pursuant
to the Capital Accumulation Plan for calendar 1998 equal to 10% 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 5.5% of his base salary
earned during calendar 1999 (this award will not be contributed to his account
until December 31, 1999); a matching contribution of $4,991 to the Company's
401(k) Plan on his behalf for the period September 1, 1998 through August 31,
1999; 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 $7.42 per
share.
13
<PAGE> 16
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), 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 1999 will result in
the loss of a tax deduction pursuant to Section 162(m). The Compensation
Committee will 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, 1994 in (a) the Company, (b) the Center for Research in Security
Prices ("CRSP") Index for NASDAQ Stock Market (U.S. Companies) ("NASDAQ U.S.
Stocks") and (c) the CRSP Index for NASDAQ Health Services Stocks ("NASDAQ
Health Services"), assuming the reinvestment of all dividends.
AMERICAN HEALTHCORP, INC.
COMPARATIVE CUMULATIVE TOTAL RETURNS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
8/31/94 8/31/95 8/31/96 8/31/97 8/31/98 8/31/99
<S> <C> <C> <C> <C> <C> <C>
AMHC 100.000 88.700 166.000 167.900 220.300 196.500
NASDAQ U.S. Stocks 100.000 134.700 151.900 211.900 200.500 371.400
NASDAQ Health Services 100.000 107.200 139.600 136.200 88.100 96.900
</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 capitalization 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 08/31/94.
15
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 3, 1997, the Company distributed all of the shares of common
stock of AmSurg owned by the Company to its stockholders (the "Distribution").
On the Distribution date, Messrs. Cigarran and Herr entered into Advisory
Agreements (the "Advisory Agreements") with AmSurg pursuant to which they agreed
to provide certain continuing services to AmSurg for two years following the
Distribution. Under the terms of the Advisory Agreements, Messrs. Cigarran and
Herr have provided advisory services to the senior management of AmSurg in the
areas of strategy, operations, management and organizational development. As
compensation for these services, AmSurg paid compensation totaling $200,000 to
Mr. Cigarran and totaling $150,000 to Mr. Herr during the two-year period of the
Advisory Agreements. This compensation was payable in shares of AmSurg Class A
common stock, one-third of which vested immediately, one-third of which vested
upon the first anniversary of the Distribution and the remaining one-third of
which vested on the second anniversary of the Distribution. Messrs. Cigarran and
Herr also serve on the Board of Directors of AmSurg (Mr. Cigarran serves as
Chairman of the Board) and are eligible to receive compensation as outside
directors which currently consists 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 Class A common stock equal in value to $10,000 with subsequent
annual awards adjusted for changes in the Consumer Price Index.
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 were located until July 1999.
The Company passes through the cost of such leased space to AmSurg and, for
fiscal 1999, AmSurg paid the Company $303,339 in rental payments. This sublease
agreement expires on December 31, 1999, and thereafter AmSurg will no longer
lease any space from the Company.
PROPOSAL NO. 2
AMENDMENT NO. 2 TO THE 1996 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends that its stockholders
approve an amendment to the 1996 Plan to increase the number of shares of Common
Stock available for issuance under the 1996 Plan by 400,000 shares, for a total
of 1,130,000 shares subject to option thereunder. Of the original 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, 1999 is
as follows:
<TABLE>
<CAPTION>
SHARES SUBJECT TO SHARES AVAILABLE
PLAN OUTSTANDING OPTIONS FOR OPTION GRANTS
---- ------------------- -----------------
<S> <C> <C>
1988 Plan 102,194 --
1991 Plan 677,924 --
1996 Plan 621,460 --
</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. Options to purchase 224,996 shares were granted pursuant to the
1996 Plan by the Company's Board of Directors in November 1999 consistent with
the Company's annual stock grant program but are
16
<PAGE> 19
subject to the approval of Amendment No. 2 to the 1996 Plan. Of all options
granted under the 1996 Plan, including those granted in November 1999,
approximately 79% of the options granted were granted to management employees
other than executive officers. Approximately 140 management employees currently
own stock options.
The Board of Directors and management of the Company believe that it is
important to make stock option 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 its hospital
business and in its rapidly developing disease management business with health
plans. 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
services businesses, including health care services 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 the Company's growth potential.
Accordingly, on November 12, 1999, 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 400,000. If
the amendment as proposed is approved, there will be 1,080,000 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 846,656 shares will be outstanding; options for 58,540
shares authorized under this Plan have been exercised since adoption of the 1996
Plan. 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 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 1,130,000 shares of
the Company's Common Stock. 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. 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. Options to purchase
224,996 shares of Common Stock were granted in November 1999 as part of the
Company's annual stock option grant program that are subject to the approval of
Proposal No. 2 to increase the number of authorized shares under the 1996 Plan.
17
<PAGE> 20
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 140.
As part of their compensation for serving as directors of the Company,
Outside Directors receive an annual grant of restricted stock equal in value to
$10,000. The dollar amount of the annual grants is adjusted by the percentage
change from the previous year in the Consumer Price Index, subject to a maximum
6% annual increase. The grant of restricted stock made in January 1999 was equal
in value to $10,674. 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 is 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 1996 Plan is 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
has no authority to determine the terms or conditions of any awards to Outside
Directors.
Awards Under the Plan. The Compensation Committee has the authority to
grant the following types of awards to officers and key employees under the 1996
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 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. 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.
18
<PAGE> 21
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 is 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 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.
19
<PAGE> 22
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 1996 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 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 1996 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.
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
20
<PAGE> 23
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.
OPTIONS GRANTED UNDER THE PLAN
Because awards under the 1996 Plan are at the discretion of the
Compensation Committee, the benefits that will be awarded under the 1996 Plan
are not currently determinable. The following table shows as to each of the
Named Executive Officers, as to all executive officers as a group, as to all
non-executive officer directors as a group and as to all other employees as a
group, the aggregate number of shares of Common Stock subject to options granted
under the 1996 Plan on November 12, 1999, including those which are subject to
the approval of this Proposal No. 2, and the weighted average per share exercise
price. As of November 15, 1999, the market value of a share of the Company's
Common Stock based on the closing price for such stock on The Nasdaq Stock
Market was $5.00.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
NUMBER OF AVERAGE
STOCK OPTIONS EXERCISE
NAME GRANTED PRICE PER SHARE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas G. Cigarran.......................................... 50,000 $6.20
Henry D. Herr............................................... 15,000 $6.20
Robert E. Stone............................................. 20,000 $6.20
David A. Sidlowe............................................ 5,000 $6.20
All Executive officers as a group (4 persons)............... 90,000 $6.20
All Non-executive officer directors as a group.............. -- --
All other employees as a group.............................. 193,615 $6.20
- --------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
PROPOSAL NO. 3
TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME
The Board of Directors has unanimously approved and recommended the
adoption by the stockholders of the following amendment to the Company's
Restated Certificate of Incorporation which would change the Company's name from
American Healthcorp, Inc. to American Healthways, Inc.
"Article FIRST of the Company's Restated Certificate of Incorporation, is
hereby amended to read as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is American Healthways, Inc."
The Board of Directors and senior management of the Company believe that
the new name is a better reflection of the Company's leadership position in the
disease management business. This name will enable the Company to achieve better
customer and investor awareness of its family of disease management programs
including its Diabetes Healthways(SM), Cardiac HealthwaysSM and Respiratory
Healthways(SM) programs.
The new name identifies the Healthways family of products and services and
reflects the primary objective of the Company's disease management programs,
which is to provide individuals suffering from chronic disease with a way to
achieve better health. The Board of Directors and senior management believe that
the adoption of this name will result in improved corporate name recognition
because of the direct association with the family of programs that the Company
is marketing to its customers and potential customers.
The Company's Common Stock will continue to be traded on The Nasdaq
National Market under the symbol AMHC. During early December 1999 the Company
will begin to utilize the name American Healthways as a "doing business as" name
for American Healthcorp, Inc. pending approval of the proposed amendment.
The Board of Directors recommends that stockholders vote FOR the proposed
amendment. The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock is necessary to adopt the proposed
amendment. Abstentions and broker non-votes will have the effect of a vote
against the proposed amendment.
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 Commission. Officers, directors and greater than 10%
stockholders are required by regulation of the 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, 1999, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with, with the exception that Martin J. Koldyke failed to timely
file a Form 4 in connection with his exercise of 3,000 stock options on March 5,
1999. This exercise was reported on a Form 5 on November 12, 1999.
22
<PAGE> 25
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche, LLP, which was the Company's independent accountant for
fiscal 1999, has been selected as the independent public accountant of the
Company for the 2000 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.
DEADLINE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS TO BE PRESENTED AT THE
2001 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented for action at the 2001 Annual Meeting
of Stockholders by any stockholder of the Company must be received by the
Secretary of the Company not later than August 23, 2000, in order for such
proposal to be considered for inclusion in the Company's Proxy Statement and
proxy relating to its 2001 Annual Meeting of Stockholders. In the event that a
proposal intended to be presented for action at the 2001 Annual Meeting of
Stockholders by any stockholder of the Company is not received after October 28,
2000 and prior to November 27, 2000, then the management proxies will be
permitted to use their discretionary voting authority with respect to that
proposal, whether or not the proposal is discussed in the Proxy Statement.
Proposals should be sent to the Company by certified mail return receipt
requested. 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, 1999 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., 3841 GREEN HILLS VILLAGE DRIVE, 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 20, 1999.
23
<PAGE> 26
EXHIBIT A
AMENDMENT NO. 2 TO
AMERICAN HEALTHCORP, INC.
1996 EMPLOYEE STOCK INCENTIVE PLAN
Pursuant to subparagraph 11 of the American Healthcorp, Inc. 1996 Employee
Stock Incentive Plan ("1996" Plan"), the Board of Directors of American
Healthcorp, Inc. (the "Company") 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 1,130,000 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 1,130,000 shares. Such
shares of Common Stock may consist, in whole or in part, of authorized
and unissued shares or treasury shares."
<PAGE> 27
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 25, 2000.
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 SunTrust Center, 5th
Floor Auditorium, 424 Church Street, Nashville, Tennessee 37219, on January 25,
2000, 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. Herr, Mr. Koldyke
WITHHOLD AUTHORITY (ABSTAIN) to vote for the following nominees (please
print name or names)
---------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY (ABSTAIN) to vote for all nominees
PROPOSAL 2: AMENDMENT NO. 2 TO THE 1996 STOCK INCENTIVE PLAN:
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
PROPOSAL 3: AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE THE COMPANY'S NAME TO AMERICAN HEALTHWAYS, INC.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (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, FOR the amendment of the 1996 Plan and FOR the amendment to the
Company's Restated Certificate of Incorporation.
Date: ____________________ .
PLEASE SIGN HERE
AND RETURN PROMPTLY
-----------------------------
-----------------------------
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.
- --------------------------------------------------------------------------------
IF you have changed your address, please PRINT your new address on this line.
