<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
CHAMPION HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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
CHAMPION HEALTHCARE CORPORATION
14340 Torrey Chase, Suite 320
Houston, Texas 77014
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1995
To the Stockholders of
Champion Healthcare Corporation:
You are cordially invited to attend the 1995 Annual Meeting of
Stockholders of Champion Healthcare Corporation (the "Company") to be held at
the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas, on May
25, 1995 at 11:00 a.m., Texas time, for the following purposes:
(1) To elect ten directors to serve until the next annual meeting
of stockholders and until their respective successors are
elected and qualified;
(2) To consider and vote upon a proposal to approve the Selected
Executive Stock Option Plan No. 5;
(3) To ratify the appointment of Coopers & Lybrand, L.L.P., as the
Company's auditors for 1995; and
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on
April 10, 1995 as the record date for determination of stockholders entitled to
notice of and to vote at such meeting.
Regardless of whether you expect to attend the meeting in
person, you are requested to fill in, date and sign the enclosed proxy card and
promptly return it in the enclosed postage paid envelope.
By the order of the Board of Directors,
/s/ JAMES G. VANDEVENDER
James G. VanDevender,
Secretary
Houston, Texas
Date: May 1, 1995
<PAGE> 3
CHAMPION HEALTHCARE CORPORATION
14340 Torrey Chase, Suite 320
Houston, Texas 77014
________________________________________________________________________________
PROXY STATEMENT
________________________________________________________________________________
This proxy statement and the accompanying proxy card are solicited
by the Board of Directors of Champion Healthcare Corporation (the "Company")
for use in connection with the 1995 Annual Meeting of Stockholders of the
Company to be held at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive,
Houston, Texas, on May 25, 1995 at 11:00 a.m., and any adjournment or
postponement thereof. Although proxies will be solicited primarily by mail,
regular employees of the Company may personally aid in such solicitation. The
Company will make arrangements with brokerage houses for forwarding proxy
materials to the beneficial owners of shares of Common Stock registered in
brokers' names. All solicitation costs will be borne by the Company. All
properly signed proxies will be voted, and where a choice has been specified by
the stockholder as provided on the proxy, it will be voted in accordance with
the specification so made. If any proxies do not contain voting instructions,
the shares of Common Stock or voting Preferred Stock, as the case may be,
represented by such proxies will be voted (1) FOR the election of the nominees
for the Board of Directors, (2) FOR the approval and adoption of the Selected
Executive Stock Option Plan No. 5 and (3) FOR the ratification of the
appointment of Coopers & Lybrand, L.L.P., as the Company's independent
certified public accountants for 1995. Any stockholder giving a proxy may
revoke it at any time before it is used at the meeting by giving written notice
of revocation or by signing and delivering to the secretary of the Company a
proxy bearing a later date. Proxy materials are expected to be mailed or
delivered to stockholders on or about May 1, 1995.
VOTING AT THE MEETING
The record date for the determination of stockholders entitled to
notice of and to vote at the meeting was the close of business on April 10,
1995, at which time there were outstanding 4,243,975 shares of Common Stock,
$.01 par value ("Common Stock"), 3,500,000 shares of Series A Convertible
Preferred Stock, $.01 par value ("Series A"), 2,769,109 shares of Series A-1
Convertible Preferred Stock, $.01 par value ("Series A-1"), 1,577,546 shares of
Series BB Cumulative Convertible Preferred Stock, $.01 par value ("Series BB"),
448,811 shares of Series C Cumulative Convertible Preferred Stock, $.01 par
value ("Series C"), and 2,112,819 shares of Series D Cumulative Convertible
Preferred Stock, $.01 par value ("Series D") (collectively the "Preferred
Stock"). At the meeting, shares of Common Stock and Preferred Stock are
entitled to vote as follows: Common Stock - 1 vote per share, Series A-1
vote for each 3.685 shares, Series A-1 - 1 vote for each 4 shares, Series BB,
Series C and Series D-2 votes per share. The presence in person or by proxy
of the holders of shares of stock having a majority of the votes which could
be cast by the holders of all outstanding shares of stock entitled to vote at
the meeting will be necessary to constitute a quorum for the transaction of
business at the meeting. Once a quorum has been established, the affirmative
vote of a majority of shares entitled to vote that are present in person or by
proxy will be necessary to approve the Selected Executive Stock Option Plan No.
5, and to ratify the appointment of Coopers & Lybrand, L.L.P., as the
Company's independent certified public accountants for fiscal year 1995.
Stockholders do not have the right to cumulate their votes with respect to the
election of directors. The Directors are elected by a plurality of the votes
present in person or by proxy. Any shares not voted (whether by abstention,
broker
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non-vote or votes withheld) are not counted as votes cast for such individuals
and will be excluded from the vote.
ELECTION OF DIRECTORS
Ten directors are to be elected at the meeting. Each director will
hold office until the next annual meeting of stockholders and until his
successor is elected and qualified. Each person proposed to be elected as
director has consented to serve if elected. If prior to the meeting any
nominee should become unavailable to serve for any reason, the proxies will be
voted for a nominee selected by the Board of Directors. The persons named as
proxies in the accompanying form of proxy intend to vote each properly signed
and submitted proxy for the election as a director of each of the following
nominees unless authority to vote for all or any of the nominees is withheld on
the proxy.
CHARLES R. MILLER (Age 56, Director since 1990)
Chairman, President and Chief Executive Officer of the Company, since
its founding in February 1990. Mr. Miller has over 30 years of experience in
the hospital industry. In 1981, he co-founded Republic Health Corporation
("Republic"), serving as President and a director of the company. In less than
three years, Republic had revenues of $540 million and was the fifth largest
publicly-held hospital management company owning 23 acute hospitals, 20
psychiatric and substance abuse facilities and managing 18 hospitals and 3
specialty units. In 1986, the company was acquired in a leveraged buy-out for
$800 million. Mr. Miller resigned as an officer and director of Republic in
1986. After leaving Republic, Mr. Miller and another individual acquired in
1987 a general acute care hospital in El Paso, Texas and subsequently sold that
facility in late 1988. During 1989, Mr. Miller did limited healthcare
consulting and developed the business plan for the Company. Prior to
co-founding Republic, Mr. Miller was employed for seven years by Hospital
Affiliates International ("HAI"). Mr. Miller received a BBA in Personnel
Management from Texas Tech University in 1968 and a Masters degree in Public
Health Administration from the University of Texas in 1974.
JAMES G. VANDEVENDER (Age 47, Director since 1990)
Executive Vice President, Chief Financial Officer, Secretary and
Director of the Company since its formation in February 1990. From 1987 until
1990 Mr. VanDevender pursued private investments. Mr. VanDevender has
approximately 23 years of experience in the hospital industry, including
management positions in accounting and finance at the hospital level, and
senior executive positions in accounting, finance, acquisitions and
development, and operations at the corporate level of multi-hospital companies.
Mr. VanDevender was employed with Republic Health Corporation from 1981 until
1987 and was Senior Vice President in charge of Republic's acquisition and
development function and its management contract division in 1987. Before
joining Republic, Mr. VanDevender was employed for four years by HAI. He
received his undergraduate degree in Accounting from Mississippi State
University in 1970.
NOLAN LEHMANN (Age 50, Director since 1991)
President of Equus Capital Management Corp., an investment advisor
firm located in Houston, Texas, since 1983. Mr. Lehmann also serves as
President and a director of Equus II Incorporated, a registered investment
company traded on the American Stock Exchange; Allied Waste Industries, Inc.,
which deals with solid waste; and Drypers Corporation, which manufactures
disposable baby diapers.
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<PAGE> 5
Both Allied Waste Industries, Inc. and Drypers Corporation are traded on
NASDAQ. Mr. Lehmann holds graduate and undergraduate degrees in accounting and
economics from Rice University and is a Certified Public Accountant.
PAUL B. QUEALLY (Age 30, Director since 1991)
Since 1986, Mr. Queally has been employed by Sprout Group, the venture
capital affiliate of Donaldson, Lufkin & Jenrette, a major investment banking
firm, and is currently a General Partner. Sprout Group has participated in the
financing of over 100 companies with aggregate annual sales in excess of $8
billion. Presently, Sprout's assets under management approach $500 million.
Mr. Queally is also a director of E&B Marine, a retail marine supply company
listed on NASDAQ. Mr. Queally received a BA from the University of Richmond
and a MBA from Columbia University.
JAMES A. CONROY (Age 34, Director since 1992)
Mr. Conroy has been a general partner of OGP Partners, L.P., the
General Partner of The Olympus Private Placement Fund, L.P., since 1990.
Olympus invests in the growing domestic and international private placement
markets through purchases of equity and mezzanine securities and manages
capital for U.S. American Residential Holding Corporation. From 1988 through
1990, Mr. Conroy was employed by Bain & Co., Inc. Mr. Conroy received his BBA
degree from the University of Virginia and a MBA from Dartmouth's Amos Tuck
School of Business.
DAVID S. SPENCER (Age 54, Director since 1992)
Mr. Spencer has over 25 years experience as a health care executive.
He is founder and Chief Executive Officer of Management Prescriptives, Inc.
("MPI"), an education and information services company specializing in
improving the quality of care and financial performance in hospitals through a
systematic program for identifying and eliminating adverse patient events.
Prior to founding MPI in 1988, Mr. Spencer was President of Voluntary Hospitals
of America Management Services from 1982-1988. Before that, he was President
and Chief Executive Officer of Hospital Affiliates Management Corporation,
which was responsible for the contract management of 129 hospitals in 39
states. He also served on the faculty of Vanderbilt University and is a former
member of the Board of Directors of Tulane University Medical Center. Mr.
Spencer received a BS in Economics from the University of Illinois and a
Masters Degree in Health Care Administration from the University of Minnesota.
MANUEL M. FERRIS (Age 61, Director since 1992)
Mr. Ferris has been President and Chief Executive Officer of the
Harvard Community Health Plan, a health maintenance organization, since 1991.
Mr. Ferris was the Westin Hotels Distinguished Professor at Washington State
University from 1990 until 1991. During 1986 through 1989, Mr. Ferris pursued
a number of personal interests. Prior to 1986, Mr. Ferris served for almost 30
years in senior executive positions with the Sonesta, Sheraton and Howard
Johnson hotel corporations. He served as President of the North American
Division of Sheraton Hotels and President of the Accommodation Group for the
Howard Johnson hotel chain. Mr. Ferris received Bachelor's and Master's
degrees in Education from Boston University.
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<PAGE> 6
SCOTT F. MEADOW (Age 41, Director since 1994)
Mr. Meadow has been a General Partner with Frontenac Company, a
venture capital firm with over $500 million under management since 1992. Mr.
Meadow was previously a Partner of William Blair & Co. from 1982 until 1992,
and was a management consultant with Booz, Allen & Hamilton. In addition to
participating in the private funding of Staples, Petstuff and A Pea in the Pod,
he has organized such companies as The Sports Authority, Inc., and KidSource,
Inc., and served as a director of CompUSA, Inc., Ulta3, Inc., and Leewards
Creative Crafts, Inc. Mr. Meadow is a graduate of the Harvard Graduate School
of Business Administration.
WILLIAM G. WHITE (Age 55, Director since 1994)
Prior to the Champion/AmeriHealth Merger in December 1994, Mr. White
had served as Chairman of the Board, President and Chief Executive Officer of
AmeriHealth since June 1983, and he also served as Chief Financial Officer of
AmeriHealth from February 1991 to September 1991.
RICHARD D. SAGE (Age 54, Director since 1994)
Prior to the Champion/AmeriHealth Merger in December 1994, Mr. Sage
had served as Vice Chairman of the Board and Executive Vice President of
AmeriHealth from June 1983 until October 1985. He also served as Treasurer of
AmeriHealth from April 1983 to October 1985. Mr. Sage served from June 1988 to
June 1993 as a Vice President and Regional Vice President of HHL Financial
Services Company, which specializes in the collection of health care accounts
receivable. Since June 1993 he has been associated with Sage Law Offices in
Miami, Florida.
BOARD ATTENDANCE AND COMMITTEES
Other than actions taken by consent resolution, during 1994 the Board
of Directors met three times. No director attended fewer than 75% of the
meetings. The Board of Directors has a standing Option and Compensation
Committee composed of David S. Spencer, Paul B. Queally, and Scott F. Meadow
and an Audit Committee composed of Nolan Lehmann, James A. Conroy and Manuel M.
Ferris. The principal function of the Audit Committee is to meet with and
discuss the annual audit with the outside auditors and review internal
accounting and fiscal controls. The Audit Committee met once during 1994. The
principal function of the Option and Compensation Committee is to determine
issues regarding compensation of executive officers, including granting of
options pursuant to the Company's various stock option plans. During 1994, the
Option and Compensation Committees met two times, and no director attended
fewer than 75% of the meetings of any committee. The Board does not have a
nominating committee.
CHANGE IN CONTROL EVENT
On December 6, 1994, Champion Healthcare Corporation ("Champion"), a
Texas corporation, merged with and into AmeriHealth, Inc.("AmeriHealth"), a
Delaware corporation, with AmeriHealth being the surviving entity, and the
name of the surviving corporation was changed to Champion Healthcare
Corporation (the "Champion/AmeriHealth Merger"). The merger was accounted for
as a recapitalization of the Company with Champion as the acquirer (a reverse
acquisition). As part of the merger transaction described in the Company's
proxy statement dated November 11, 1994:
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<PAGE> 7
1. each 5.70358 shares of AmeriHealth Common Stock outstanding prior to
December 6, 1994 was converted into one share of the Company Common
Stock;
2. a new Board of Directors was ratified, consisting of the existing
eight Champion board members and the continuance of William G. White
and Richard D. Sage as members of the board (although there was no
requirement in the merger agreement for the election of Messrs. White
and Sage to future terms);
3. new officers, consisting mainly of Champion's officers took office;
4. all outstanding shares of AmeriHealth's $2.125 Increasing Rate
Cumulative Convertible Preferred Stock, Series B, $.01 par value were
canceled in exchange for cash equal to the redemption price of such
shares plus accrued dividends;
5. a new Certificate of Incorporation was approved which, among other
changes, authorized the Champion Preferred Stock;
6. the former Champion shareholders received one share of the Company's
Common Sock in exchange for each one share of Champion common stock
they held and one share of Preferred Stock of the Company in exchange
for each one share of Champion preferred stock with terms
substantially similar to those of the former Champion preferred
shares;
7. the existing Champion stock option plans were adopted and approved;
and
8. the selection of Coopers & Lybrand, L.L.P., the Company's independent
auditors was approved.
As a result of the merger, the former Champion shareholders as a group
received shares of the Company that gave them over 75% of the voting shares of
the Company, and Champion was considered the effective survivor.
ARRANGEMENTS WITH RESPECT TO THE ELECTION OF DIRECTORS:
D STOCKHOLDERS AGREEMENT
The holders of the Common Stock and all classes of the Preferred
Stock executed on December 31, 1993 the "D Stockholders Agreement" (the "D
Agreement") in connection with the sale of approximately $90 million in Series
D Preferred Stock and subordinated notes pursuant to the Series D Note and
Stock Purchase Agreement (the "Purchase Agreement") executed on the same date.
The D Agreement contains a voting agreement, restrictions on transfer of stock,
and limited preemptive rights to future Common Stock issues or sales.
The D Agreement provides certain shareholders and shareholder groups
with Board nominee designation rights (and agreed voting) for eight Board
positions. The schedule below reflects the incumbent director nominated by
each of these shareholders and shareholder groups and the current amount of
indebtedness owed by the Company to each shareholder or group thereof.
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<TABLE>
<CAPTION>
CURRENT DIRECTOR INDEBTEDNESS OWED TO
STOCKHOLDER SERIES(1) REPRESENTATIVE SHAREHOLDER OR GROUP(2)
----------- ------ -------------- --------------------
<S> <C> <C> <C>
Olympus Private Placement "BB" James A. Conroy $ 1,500,000
Fund, L.P.(3)
Series BB and C Preferred "BB" Manuel M. Ferris $ 10,993,000
Stockholders, as a group(4) "C"
Equus(5) "A, A-1" Nolan Lehmann $ 1,500,000
Sprout(6) "A, A-1" Paul B. Queally $ 4,434,000
Frontenac VI Limited Partner- "D" Scott F. Meadow $ 10,000,000
ship; Frontenac Diversified
III Limited Partnership(7)
Charles R. Miller, James G. Common Charles R. Miller --
VanDevender(8) James G. VanDevender
David S. Spencer
</TABLE>
- -----------------
(1) Preferred Stock of the Company.
(2) Principal amount outstanding of 11% Senior Subordinated Notes Due
December 31, 2003.
(3) Olympus must hold at least one-third of the Common Equivalent Stock
(outstanding common stock and common stock issuable upon the exercise
of all classes of outstanding preferred stock and warrants), as
defined in the D Agreement, held by Olympus on December 31, 1993 to
maintain this nomination right. If Olympus no longer owns one-third
of the Common Equivalent Stock it owned on December 31, 1993, then the
holders of Series BB and C Preferred Stock exercise the same right,
voting together as a class by a two-thirds vote, so long as the Series
BB and C stockholders own one-third of the Proforma Conversion Stock
purchased by them pursuant to the Purchase Agreement.
(4) The right exists so long as the holders collectively of Series BB and
C Preferred Stock hold one-third of the Proforma Conversion Stock
initially purchased by them, provided the nominee is not an Affiliate
of any Series BB or Series C stockholder, and the nominee is approved
in writing by a majority of the directors who are also the Company's
senior management. Olympus Private Placement Fund, L.P., owns some
Series C; Equus and Sprout also own some Series BB and C; and
Frontenac owns some Series C.
(5) Equus Capital Partners and Equus II Incorporated ("Equus"). The right
also exists so long as Equus is the holder of one-third of the Common
Equivalent Stock held by it on December 31, 1993 or purchased pursuant
to the Purchase Agreement.
(6) Sprout Growth, L.P., Sprout Capital, VI L.P., DLJ Venture Capital Fund
II, L.P., DLJ Capital Corporation, Sprout Growth II L.P.
(collectively, "Sprout"). The right exists so long as Sprout is the
holder of one-third of the Common Equivalent Stock held by it on
December 31, 1993 as purchased pursuant to the Purchase Agreement.
Other affiliates of Sprout are also owed amounts of such indebtedness.
(7) The right exists so long as these two holders of Series D Preferred
Stock hold at least one-third of the stock initially purchased by
them, provided the nominee is a general partner in Frontenac Company.
(8) The right exists so long as Messrs. Miller and VanDevender are holders
of at least 50% of the Common Equivalent Stock held by them on
December 31, 1993 for the nomination of two directors; and for the
nomination of one director subject to the written approval of Equus
and Sprout, provided that if Messrs. Miller and VanDevender do not
continue to hold at least 50%
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of the Common Equivalent Stock held on December 31, 1993 and Mr.
Miller ceases to devote full time efforts to the Company, this
nomination right for one director becomes the joint right of Equus and
Sprout, collectively, provided they still hold at least one-third of
the Common Equivalent Stock held by them on December 31, 1993.
The voting agreement within the D Agreement requires the parties to
vote their shares for the election of the nominees made by the shareholders
listed above, subject to the conditions stated in the D Agreement. The voting
agreement will terminate no later than June 1, 2000 unless extended by mutual
agreement of the stockholder parties at the time of the extension agreement
holding not less than a majority of the Common Equivalent Stock.
Messrs. Miller, VanDevender, Ronald R. Patterson and one other Company
employee stockholder (the "Restricted Stockholders"), are restricted in the
sale of their stock to third parties by the D Agreement so that the Company
first and the other stockholders second have the right to purchase the
Restricted Stockholders' shares offered to a third party. All parties to the D
Agreement are restricted from selling any shares prior to December 31, 1995 to
any competitor or person who owns a controlling interest in any competitor of
the Company. Mr. Miller has stock transfer restrictions prior to the second
anniversary of the closing date of a Successful Secondary Public Offering. If
parties to the D Agreement holding 75% of the Common Equivalent Stock ("Selling
Group") agree to sell such stock to a non-affiliate of any member of the
Selling Group in a bona fide third party transaction then if (a) such sale is
before December 31, 1996 and the price per Common Equivalent Share is at least
$28.00 per share of Series D Preferred Stock (if before December 31, 1996) or
(b) such sale is after December 31, 1996 and regardless of the price, the
Selling Group shall have the option to acquire or require the buyer to purchase
all other Common Equivalent Stock held by the non-Selling Group parties to the
D Agreement. If such option by the Selling Group is not exercised or is
unavailable to be exercised, then the non-Selling Group parties shall have the
right to require the Selling Group to purchase their Common Equivalent Stock at
the price at which the Selling Group has agreed to sell.
All parties to the D Agreement have a limited preemptive right to
purchase shares issued by the Company to a New Purchaser, as defined in the D
Agreement. This limited preemptive right does not apply to certain exempted
transactions, to public offerings, and to mergers, acquisitions, or similar
transactions.
The Purchase Agreement provides that holders of Series D Preferred
Stock with an aggregate stated value of $2,000,000, holders of Notes issued
under that agreement in an aggregate amount of $5,000,000 and holders of
warrants issued under that agreement which if exercised would result in
proceeds to the Company of $2,000,000, shall have the right to attend Board
meetings and receive information sent to the Board members.
CERTIFICATE OF INCORPORATION
The holders of the Company's Preferred Stock have the right to elect a
majority of the Board of Directors upon the occurrence of a "Default Event" as
defined in the Certificate of Incorporation and they retain that right
throughout the default period.
One of the Default Events set forth in the Certificate of
Incorporation is a "Change in Control Event", as defined. A Change in Control
Event occurs when (1) Charles R. Miller owns less than
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80% of the stock he beneficially owned on December 28, 1993 at any time prior
to the first anniversary of a secondary offering of Company Common Stock which
shall have resulted in receipt by the Company of gross proceeds of a minimum of
$15,000,000 (a "Successful Secondary Public Offering"); (2) Charles R. Miller
has less than 40% of the stock he beneficially owned on December 28, 1993 at
any time prior to the second anniversary of a Successful Secondary Public
Offering; (3) the acquisition by one person or group of 50% or more of the
combined voting power of the then outstanding voting securities; (4) the sale
or disposition of all or substantially all of the Company's assets; (5) the
merger of the Company with or into another person; (6) any attempts by the
Company to reduce substantially or eliminate a public market for the Company
stock, to require a filing under Section 13(e) of the Exchange Act, or to cause
the delisting of the Company Common Stock from a national securities exchange;
(7) the material or complete liquidation of the Company. No Change of Control
Event regarding Charles R. Miller will occur after his termination subject to
certain specified conditions, his permanent disability that prevents continued
employment, or his death.
Other Default Events that trigger the rights of the Company's
Preferred Stock to elect a majority of the Board of Directors include: failure
of the Company to redeem the Preferred Stock as required; any payment default
under any material indebtedness of the Company; any acceleration of any such
indebtedness; any breach by the Company of covenants in the notes issued
pursuant to the Note and Stock Purchase Agreement dated May 27, 1992; an Event
of Default in the Company's Loan Agreement dated November 5, 1993; any breach
of covenants in the Series D Note and Stock Purchase Agreement dated December
31, 1993; and any insolvency or bankruptcy proceedings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of April 10, 1995, certain
information regarding beneficial ownership of Common Stock by (a) each person
known by the Company to own beneficially more than 5% of each class of voting
securities, (b) each director and director nominee of the Company, (c) each
executive officer named in the Summary Compensation Table, and (d) all
directors and officers as a group. Each party listed below has sole voting and
investment power except as noted.
<TABLE>
<CAPTION>
COMMON STOCK ---------------CONVERTIBLE PREFERRED STOCK-------------- FULLY
FOOTNOTE (I) (H) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES A SERIES A-1 SERIES BB SERIES C SERIES D OWNERSHIP
- ----------- ---------- --------- -------- ---------- --------- -------- -------- ---------
(A) (B) (C) (D) (E) (F) (G)
------------------------------------MANAGEMENT------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles R. Miller (1),(2),(23) 729,775 729,775
16.36% 4.06%
James G. (1),(2),(24) 364,667 364,667
VanDevender 7.95% 2.03%
Nolan Lehmann (2),(5),(8), 1,389,197 1,750,000 1,384,557 39,740 4,901 83,333 1,389,197
(28),(37) 25.85% 50.00% 50.00% 2,52% 1.09% 3.94% 7.73%
Paul B. Queally (2),(4),(7) 2,057,986 1,735,298 1,383,809 224,476 33,616 174,962 2,057,986
(j),(k) 33.71% 49.58% 49.97% 14.23% 7.49% 8.28% 11.45%
James A. Conroy (2),(3),(6), 1,662,456 533,229 103,773 83,334 1,662,456
(31),(j),(k) 28.15% 33.80% 23.12% 3.94% 9.25%
</TABLE>
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<TABLE>
<CAPTION>
COMMON STOCK ---------------CONVERTIBLE PREFERRED STOCK-------------- FULLY
FOOTNOTE (I) (H) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES A SERIES A-1 SERIES BB SERIES C SERIES D OWNERSHIP
- ----------- ---------- --------- -------- ---------- --------- -------- -------- ---------
(A) (B) (C) (D) (E) (F) (G)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David S. Spencer (2),(9),(41) 30,000 30,000
(*) (*)
Manuel M. Ferris (2),(10),(26) 30,000 30,000
(*) (*)
Scott F. Meadow (2),(19),(29), 888,890 55,556 388,889 888,890
(50)(j),(k) 17.32% 12.38% 18.47% 4.95%
William G. White (2),(25),(38) 227,209 227,209
5.24% 1.26%
Richard D. Sage (2),(36),(59) 110,235 110,235
2.60% (*)
Ronald R. Patterson (1),(57) 174.540 14,702 743 67 174,540
3.95% (*) (*) (*) (*)
Kenneth D. Hawkins (1),(58) 39,449 39,449
(*) (*)
Deborah H. Frankovich (1) 3,331 3,331
(*) (*)
All officers and (1),(27) 7,762,224 3,500,000 2,769,109 792,973 197,166 750,012 7,762,224
directors as a group 72.06% 100.00% 100.00% 50.27% 43.93% 35.50% 43.19%
(20 persons)
-------------------------------NON-MANAGEMENT----------------------------------------------------
Bahrain International (18),(21) 372,222 111,111 372,222
Bank, E.C. 8.06% 5.28% 2.07%
Baker Fentress (22),(32) 462,222 111,111 462,222
& Company 9.82% 5.26% 2.57%
William Blair (17),(35) 631,458 157,681 30,675 83,334 631,458
Venture Partners III (j),(k) 12.95% 10.00% 6.83% 3.96% 3.51%
Limited Partnership
+ William Blair (17),(35) 631,458 157,681 30,675 83,334 631,458
Venture Mgmt (j),(k) 12.95% 10.00% 6.83% 3.96% 3.51%
Company
+ Samuel B. Guren (17),(35) 631,458 157,681 30,675 83,334 631,458
(j),(k) 12.95% 10.00% 6.83% 3.96% 3.51%
+ William Blair (17),(35) 631,458 157,681 30,675 83,334 631,458
& Company (j),(k) 12.95 10.00% 6.83% 3.96% 3.51%
DLJ Venture Capital (7),(30) 31,984 34,780 27,953 4,540 680 31,984
Fund II, L.P. (*) (*) 1.01% (*) (*) (*)
+ DLJ Fund (7),(30) 31,984 34,780 27,953 4,540 680 31,984
Associates II (*) (*) 1.01% (*) (*) (*)
Sprout Growth, L.P (7),(30) 662,286 694,664 553,869 89,857 13,456 662,288
13.77% 19.85% 15.82% 2.57% (*) (*)
+ DLJ Growth (7),(30) 662,286 694,664 553,869 89,857 13,456 662,288
Associates 13.77% 19.85% 15.82% 2.57% (*) 18.92%
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
COMMON STOCK ---------------CONVERTIBLE PREFERRED STOCK-------------- FULLY
FOOTNOTE (I) (H) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES A SERIES A-1 SERIES BB SERIES C SERIES D OWNERSHIP
- ----------- ---------- --------- -------- ---------- --------- -------- -------- ---------
(A) (B) (C) (D) (E) (F) (G)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sprout Capital (7),(30) 990,452 1,005,854 801,987 130,079 19,480 27,389 990,452
VI, L.P. 19.30% 28.74% 28.96% 8.25% 4.34% 1.30% 2.51%
Sprout Growth II, (7),(30) 504,708 198,699 504,708
L.P. 10.63% 9.40% 2.81%
DLJ Capital (7),(30) 2,240,796 20,233 2,240,796
Corporation 35.66% (*) 12.47%
DLJ First ESC (7),(30) 1,605 633 1,605
L.L.C. 0.04% (*) (*)
+ DLJ LBO Plans (7),(30) 1,605 633 1,605
Management (*) (*) (*)
Corporation
Dnaldson, Lufkin (7),(30) 82,765 32,597 82,765
& Jenrette 1.91% 1.54% (*)
Securities
Corporation
+ Donaldson, Lufkin (7),(30) 2,325,166 53,463 2,325,166
& Jenrette, Inc. 35.50% 2.54% 12.70%
+ The Equitable (7),(30) 2,325,166 53,463 2,325,166
Companies 35.50% 2.54% 12.70%
Incorporated
Equity-Linked (20),(11) 497,584 161,552 497,584
Investors, L.P. (j),(k) 10.49% 7.65% 2.77%
Equity-Linked II, (20),(12) 357,972 116,226 357,972
L.P. (j),(k) 7.78% 5.50% 1.99%
+ Rohit M. Desai (20),(56) 855,556 277,778 855,556
(j),(k) 16.84% 13.89% 4.67%
+ Desai Capital (20),(56) 855,556 277,778 855,556
Mgmt, Inc. (j),(k) 16.84% 13.89% 4.67%
Equus II (8),(37) 1,091,147 1,286,000 1,017,380 29,202 3,601 83,333 1,091,147
Incorporated 21.27% 36.74% 36.74% 1.85% 0.80% 3.94% 6.09%
Equus Capital (8),(28) 296,034 464,000 367,177 10,538 1,300 296,034
Partners, L.P. 6.60% 13.26% 13.26% 0.67% 0.29% 1.65%
+ Equus Capital (8),(28),(37), 296,034 464,000 367,177 10,538 1,300 296,034
Corporation (j),(k) 6.60% 13.26% 13.26% 0.67% 0.29% 1.65%
+ Equus Capital (8),(28),(37), 296,034 464,000 367,177 10,538 1,300 296,034
Management (j),(k) 6.60% 13.26% 13.26% 0.67% 0.29% 1.65%
Corporation
+ Equus Corporation (8),(28),(37), 296,034 464,000 367,177 10,538 1,300 296,034
International (j),(k) 6.60% 13.26% 13.26% 0.67% 0.29% 1.65%
+ Douglass Trust (8),(28),(37), 148,016 232,000 183,589 5,269 650 148,016
FBO Brooke (j),(k) 2.28% 6.63% 6.63% 0.34% 0.15% (*)
+ Douglass Trust (8),(28),(37), 148,016 232,000 183,589 5,269 650 148,016
FBO Preston (j),(k) 2.28% 6.63% 6.63% 0.34% 0.15% (*)
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
COMMON STOCK ---------------CONVERTIBLE PREFERRED STOCK-------------- FULLY
FOOTNOTE (I) (H) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES A SERIES A-1 SERIES BB SERIES C SERIES D OWNERSHIP
- ----------- ---------- --------- -------- ---------- --------- -------- -------- ---------
(A) (B) (C) (D) (E) (F) (G)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frontenac VI (19), (50) 888,890 55,556 388,889 888,890
Limited 17.32% 12.38% 18.41% 4.95%
Partnership
Frontenac Diversified (19),(29) 466,666 83,333 466,666
III Limited 9.91% 3.94% 2.60%
Partnership
+ Frontenac (19),(29),(50) 1,355,556 55,556 472,222 1,355,556
Company (j),(k) 27.23% 12.38% 22.35% 7.55%
+ Frontenac VI (19),(29) 466,666 83,333 466,666
Partners, L.P. 9.91% 3.94% 2.60%
Hancock Venture (16),(48) 539,036 94,609 20,874 111,111 539,036
Partners III, L.P. 11.27% 6.00% 4.65% 5.26% 3.00%
John Hancock (16),(49) 282,222 111,111 282,222
Venture Capital 6.24% 5.26% 1.57%
Fund Limited
Partnership II
+ Back Bay Partners (47), (48), 821,258 94,609 20,874 222,222 821,258
V L.P. (49)(j),(k) 17.51% 6.00% 4.65% 10.52% 4.57%
+ Back Bay Partners (47), (48), 821,258 94,609 20,874 222,222 821,258
L.P. II (49),(j),(k) 17.51% 6.00% 4.65% 10.52% 4.57%
+ Hancock Venture (47), (48), 821,258 94,609 20,874 222,222 821,258
Partners Inc. (49),(j),(k) 17.51% 6.00% 4.65% 10.52% 4.57%
+ John Hancock (47), (48), 821,258 94,609 20,874 222,222 821,258
Subsidiaries, (49),(j),(k) 17.51% 6.00% 4.65% 10.52% 4.57%
Inc.
+ John Hancock (47), (48), 821,258 94,609 20,874 222,222 821,258
Mutual Life (49),(j),(k) 17.51% 6.00% 4.65% 10.52% 4.57%
Insurance Company
Olympus Private (6),(31) 1,662,456 533,229 103,773 83,334 1,662,456
Placement Fund, L.P 28.15% 33.80% 23.12% 3.94% 9.25%
+ OGP Partners, L.P. (6),(31), 1,662,456 533,229 103,773 83,334 1,662,456
(j),(k) 28.15% 33.80% 23.12% 3.94% 9.25%
+ Robert S. Morris (6),(31), 1,662,456 533,229 103,773 83,334 1,662,456
(j),(k) 28.15% 33.80% 23.12% 3.94% 9.25%
RFE Capital (15),(34) 594,474 16,949 135,453 594,476
Partners, L.P. 12.29% 1.07% 6.43% 3.31%
+ Norcon Associates (15),(34) 594,474 16,949 135,453 594,474
(j),(k) 12.29% 1.07% 6.43% 3.31%
RFE Investment (15),(40) 347,424 123,657 347,424
Partners IV, L.P. 7.57% 5.85% 1.93%
+ RFE Associates (15),(40) 347,424 123,657 347,424
IV, L.P. (j),(k) 7.57% 5.85% 1.93%
+ RFE Management (15),(34),(40) 941,898 16,949 123,657 941,898
Corp. (j),(k) 19.86% 1.07% 5.85% 5.24%
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
COMMON STOCK ---------------CONVERTIBLE PREFERRED STOCK-------------- FULLY
FOOTNOTE (I) (H) DILUTED
SHAREHOLDER REFERENCES OWNERSHIP SERIES A SERIES A-1 SERIES BB SERIES C SERIES D OWNERSHIP
- ----------- ---------- --------- -------- ---------- --------- -------- -------- ---------
(A) (B) (C) (D) (E) (F) (G)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
+ Robert M. (15),(34),(40), 583,337 16,949 123,657 583,337
Williams (71),(k),(m) 12.13% 1.07% 5.85% 3.25%
+ Howard C. (15),(34),(40) 578,954 16,949 123,657 578,954
Landis (j),(k) 12.05% 1.07% 5.85% 3.22%
+ James A. Parsons (15),(34),(40) 578,954 16,949 123,657 578,954
(j),(k) 12.05% 1.07% 5.85% 3.22%
+ Knute C. Albrecht (15),(34),(40), 581,934 16,949 123,657 581,934
(73),(k),(m) 12.11% 1.07% 5.85% 3.24%
+ Michael J. Foster (15),(34),(40) 580,707 16,949 123,657 580,707
(72),(k),(m) 12.09% 1.07% 5.85% 3.23%
+ A. Dean Davis (15),(34),(40) 578,954 16,949 123,657 578,954
(j),(k) 12.05% 1.07% 5.85% 3.22%
WPG Corporate (14),(39) 503,184 100,687 20,738 91,666 503,184
Development (j),(k) 10.60% 6.38% 4.62% 4.34% 2.80%
Associates III, L.P.
+ WPG CDA (14),(42) 503,184 100,687 20,738 91,666 503,184
III, L.P. (j),(k) 10.64% 6.38% 4.62% 4.34% 2.75%
WPG Corporate (54), (55) 106,746 21,358 4,399 6,317 106,746
Development (j),(k) 2.46% 1.35% (*) (*) (*)
Associates III
(Overseas), L.P.
+ WPG CDA III (14),(43) 106,746 21,358 4,399 6,317 106,746
(Overseas), Ltd. (j),(k) 2.46% 1.35% (*) (*) (*)
+ Philip Greer (14),(44) 609,930 122,358 25,137 97,983 609,930
(j),(k) 12.62% 7.76% 5.60% 4.64% 3.39%
Wesley W. Lang, Jr. (14),(45) 612,332 122,358 25,137 97,983 612,332
(j),(k) 12.66% 7.76% 5.60% 4.64% 3.41%
+ Steven N. (14),(46) 609,930 122,358 25,137 97,983 609,930
Hutchinson (j),(k) 12.62% 7.76% 5.60% 4.64% 3.39%
Virginia (13),(33) 1,383,386 380,237 172,956 1,383,386
Retirement 24.58% 24.10% 38.54% 7.70%
System
</TABLE>
____________________________________________________________________________
*) Less than 1% of the class.
+) Not held of record but may be deemed beneficially owned.
a) Total shares of Company Common Stock outstanding as of April 10, 1995 is
4,243,975.
b) 3,500,000 shares outstanding as of April 10, 1995, convertible into
949,796 shares of Company Common Stock at the rate of one common share
for each 3.685 preferred shares.
12
<PAGE> 15
c) 2,769,109 shares outstanding as of April 10, 1995, convertible into
692,277 shares of Company Common Stock at the rate of one common share
for each 4.0 preferred shares.
d) 1,577,546 shares outstanding as of April 10, 1995, convertible into
3,155,092 shares of Company Common Stock on a 2 for 1 basis.
e) 448,811 shares outstanding as of April 10, 1995, convertible into
897,622 shares of Company Common Stock on a 2 for 1 basis.
f) 2,112,819 shares outstanding as of April 10, 1995, convertible into
4,225,638 shares of Company Common Stock on a 2 for 1 basis.
g) On a fully diluted basis as of April 10, 1995, a total of 17,973,885
shares of Common Stock will be outstanding. This amount is composed
of (i) the 4,243,975 shares of Common Stock identified in footnote (a)
above; plus (ii) the following shares of Common Stock issuable upon
the exercise or conversion, as applicable, of the following securities
of the Company: (A) 80,000 shares underlying Champion stock
subscriptions; plus (B) 1,039,872 shares underlying Champion options;
plus (C) 2,683,892 shares underlying Champion Warrants; plus (D)
9,920,422 shares underlying Champion Preferred Stock; plus (E) 5,724
shares underlying certain warrants remaining outstanding after
Champion's acquisition of Psychiatric Healthcare Corporation.
h) All direct and beneficial holders of each series of Preferred Stock,
Common Stock issuable upon conversion of Preferred Stock, Common Stock
issuable upon exercise of Warrants held by Preferred Stock holders,
and Common Stock issuable upon the exercise of Options are subject to
the D Stockholders Agreement.
i) With the exception of Messrs. White and Sage, all shares of Common
Stock beneficially owned are subject to the D Stockholders Agreement.
j) Shared voting power.
k) Shared investment power.
m) Includes sole voting and investment power for 4,383 shares and shared
voting and investment power for 578,954 shares.
(1) Officer. Business address is 14340 Torrey Chase, Suite 320, Houston,
Texas 77014.
(2) Director and nominee.
(3) Mr. Conroy is a vice president of Olympus Private Placement Fund, L.P.
and disclaims beneficial ownership of the Company's securities owned
by that fund.
(4) Mr. Queally is a General Partner of Sprout Group, a division of DLJ
Capital Corp. and is a general partner of the general partner of
Sprout Growth, L.P., Sprout Growth II, L.P., Sprout Capital VI, L.P.
and DLJ Venture Capital Fund II, L.P., D.L.J. Securities Corporation,
and D.L.J. Capital Corporation and disclaims beneficial ownership of
the Company's securities owned by such funds.
13
<PAGE> 16
(5) Mr. Lehmann is president of Equus Capital Management Corporation, the
financial advisor and manager of Equus II Incorporated and Equus
Capital Partners, L.P. and disclaims beneficial ownership of the
Company's securities owned by Equus II Incorporated and Equus Capital
Partners, L.P. Mr. Lehmann owns directly 2,016 shares of the Common
Stock.
(6) Metro Center, One Station Place, Stamford, CT 06902.
(7) 140 Broadway, 42nd floor, New York, NY 10005.
(8) 2929 Allen Parkway, Suite 2500, Houston, TX 77019.
(9) 5909-G Breckenridge Parkway, Tampa, FL 33610.
(10) 10 Brookline Place West, Brookline Village, MA 02146.
(11) Equity-Linked Investors, L.P. owns directly 161,552 shares of Series D
Preferred Stock and warrants to purchase 174,480 shares of Common
Stock. Such holdings would enable Equity-Linked Investors, L.P. to
directly control 497,584 shares of Common Stock, subject to
adjustment.
(12) Equity-Linked Investors II, L.P. owns directly 116,226 shares of
Series D Preferred Stock and warrants to purchase 125,520 shares of
Common Stock. Such holdings would enable Equity-Linked Investors II,
L.P. to directly control 357,972 shares of Common Stock, subject to
adjustment.
(13) 1200 E. Main Street, Richmond, VA 23219.
(14) One New York Plaza, 30th Floor, New York, NY 10004.
(15) 36 Grove Street, New Canaan, CT 06840.
(16) One Financial Center, 44th Floor, Boston, MA 02111.
(17) 222 West Adams Street, Chicago, IL 60606.
(18) Bahrain International Bank, E.C. is the beneficial owner of 372,222
shares of Common Stock through its direct ownership of (i) 150,000
shares of Common Stock that may be acquired within 60 days upon the
exercise of Series D Warrants, and (ii) 111,111 shares of Series D
Preferred Stock, which may be converted at any time at the option of
the holder into 222,222 shares of Common Stock.
(19) 135 S. LaSalle St., 38th Floor, Chicago, IL 60604.
(20) c/o Desai Capital Management, Inc., 540 Madison Avenue. - 36th Floor,
New York, NY 10022.
(21) c/o Dilmun Investments, Inc., Metro Center, One Station Place,
Stamford, CT 06902.
(22) 200 W. Madison Street, Chicago, IL 60606.
14
<PAGE> 17
(23) Includes 215,749 shares that may be acquired by Mr. Miller within 60
days upon the exercise of stock options and warrants.
(24) Includes 20,000 shares of common stock held directly, and 344,667
shares that may be acquired by Mr. VanDevender within 60 days upon the
exercise of stock options and subscriptions.
(25) Includes 92,481 shares that may be acquired by Mr. White within 60
days upon the exercise of stock options; does not include 1,753 shares
owned by Mr. White's spouse, as to which shares he disclaims
beneficial ownership.
(26) Includes 30,000 shares that may be acquired by Mr. Ferris within 60
days upon the exercise of stock options.
(27) Includes 900,667 shares that may be acquired by all directors and
officers as a group within 60 days upon the exercise of stock options,
warrants, or subscriptions.
(28) Equus Capital Partners, L.P. is the beneficial owner of 296,034 shares
of Common Stock through its direct ownership of (i) 52,752 shares of
Common Stock, (ii) 1,894 shares of Common Stock that may be acquired
within 60 days upon the exercise of warrants, (iii) 464,000 shares of
Series A Preferred Stock which may be converted at any time at the
option of the holder into 125,915 shares of Common Stock, (iv) 367,177
shares of Series A-1 Preferred Stock which may be converted at any
time at the option of the holder into 91,794 shares of Common Stock,
(v) 10,538 shares of Series BB Preferred Stock which may be converted
at any time at the option of the holder into 21,076 shares of Common
Stock, and (vi) 1,300 shares of Series C Preferred Stock which may be
converted at any time at the option of the holder into 2,600 shares of
Common Stock. Equus Capital Corporation, Equus Capital Management
Corporation, Equus Corporation International, Douglass Trust FBO
Brooke and Douglass Trust FBO Preston may be deemed to beneficially
own the shares of Common Stock beneficially owned by Equus Capital
Partners, L.P. By reason of his status as President of Equus Capital
Corporation, which is the managing general partner of Equus Capital
Partners, L.P., Mr. Lehmann may be deemed to be the beneficial owner
of the 296,032 shares held by Equus Capital Partners, L.P. In
addition, Mr. Lehmann holds 2,016 shares which he beneficially owns in
his own capacity. Accordingly, Mr. Lehmann may be deemed to be the
beneficial owner of 298,048 shares in the aggregate. Mr. Lehmann
disclaims beneficial ownership of the 296,032 shares beneficially
owned (except for Equus II Incorporated), except to the extent of his
indirect beneficial interest as President of Equus Capital
Corporation.
(29) Frontenac Diversified III Limited Partnership is the beneficial owner
of 466,666 shares of Common Stock through its direct ownership of (i)
300,000 shares of Common Stock that may be acquired within 60 days
upon the exercise of Warrants into 300,000 shares of Common Stock and
(ii) 83,333 shares of Series D Preferred Stock which may be converted
at any time at the option of the holder into 166,666 shares of Common
Stock. Frontenac Company and Frontenac VI Partners, L.P. may be
deemed to beneficially own the shares of Common Stock beneficially
owned by Frontenac Diversified III Limited Partnership.
(30) DLJ Venture Capital Fund II, L.P. ("DLJ II") may be deemed to be the
beneficial owner of the 3,748 shares directly owned by it and the
28,506 shares issuable upon conversion or exercise of the 34,780
shares of Series A Preferred Stock, 27,953 shares of Series A-1
Preferred
15
<PAGE> 18
Stock, 4,540 shares of Series BB Preferred Stock, 680 shares of Series
C Preferred Stock and warrants to purchase 1,640 shares directly owned
by it. Accordingly, DLJ II may be deemed to beneficially own an
aggregate of 32,254 shares (the "DLJ II Shares").
DLJ Fund Associates II ("Associates II"), as the
general partner of DLJ II, may be deemed to beneficially own
indirectly the DLJ II Shares.
Sprout Growth, L.P. ("Growth") may be deemed to be
the beneficial owner of the 96,316 shares directly owned by it and the
565,970 shares issuable upon conversion or exercise of the 694,664
shares of Series A Preferred Stock, 553,869 shares of Series A-1
Preferred Stock, 89,857 shares of Series BB Preferred Stock, 13,456
shares of Series C Preferred Stock and warrants to purchase 32,366
shares directly owned by it. Accordingly, Growth may be deemed to
beneficially own an aggregate of 662,286 shares (the "Growth Shares").
DLJ Growth Associates ("Associates"), as a general
partner of Growth, may be deemed to beneficially own indirectly the
Growth Shares, or approximately 4.8% of the shares.
Sprout Capital VI, L.P. ("Sprout VI") may be deemed
to be the beneficial owner of the 101,456 shares directly owned by it
and the 888,996 shares issuable upon the conversion or exercise of the
1,005,854 shares of Series A Preferred Stock, 801,987 shares of Series
A-1 Preferred Stock, 130,079 shares of Series BB Preferred Stock,
19,480 shares of Series C Preferred Stock, 27,389 shares of Series D
Preferred Stock and warrants to purchase 61,644 shares directly owned
by it. Accordingly, Sprout VI may be deemed to beneficially own an
aggregate of 990,452 shares (the "Sprout VI Shares").
Sprout Growth II, L.P. ("Growth II") may be deemed to
be the beneficial owner of the 504,708 shares (the "Growth II Shares")
issuable upon the conversion or exercise of the 198,699 shares of
Series D Preferred Stock and warrants to purchase 107,310 shares
directly owned by it.
DLJ Capital Corporation ("DLJCC") may be deemed to be
the beneficial owner of the 51,366 shares issuable upon the conversion
or exercise of the 20,233 shares of Series D Preferred Stock and
warrants to purchase 10,920 shares directly owned by it. DLJCC,
because of its relationships with DLJ II and Associates II, and Growth
and Associates, and as the managing general partner of each Sprout VI
and Growth II, also may be deemed to beneficially own indirectly the
DLJ II Shares, the Growth Shares, the Sprout VI Shares and the Growth
II Shares, for an aggregate of 2,240,796 shares (the "DLJCC Shares").
DLJ First ESC L.L.C. ("ESC") may be deemed to be the
beneficial owner of the 1,605 shares (the "ESC Shares") issuable upon
the conversion or exercise of the 633 shares of Series D Preferred
Stock and warrants to purchase 339 shares directly owned by it.
DLJ LBO Plans Management Corporation ("LBO"), as the
manager of ESC, may be deemed to beneficially own indirectly the ESC
shares.
Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC") may be deemed to be the beneficial owner of the 82,765
shares (the "DLJSC Shares") issuable upon the conversion or exercise
of the 32,597 shares of Series D Preferred Stock and warrants to
purchase 17,571 shares directly owned by it.
16
<PAGE> 19
As the sole stockholder of DLJCC and DLJSC,
Donaldson, Lufkin & Jenrette, Inc. ("DLJ") may be deemed to
beneficially own indirectly the DLJCC Shares and the DLJSC Shares. In
addition, as the sole stockholder of LBO, DLJ may be deemed to
beneficially own indirectly the shares that are beneficially owned
indirectly by LBO. Because of The Equitable Companies Incorporated
("Equitable")'s ownership of DLJ, Equitable may be deemed to
beneficially own indirectly the DLJCC Shares, the DLJSC Shares and the
shares attributed to LBO that may be deemed to be beneficially owned
by DLJ.
(31) Olympus Private Placement Fund, L.P. is the beneficial owner of
1,662,456 shares of Common Stock through its direct ownership of (i)
221,784 shares of Common Stock that may be acquired within 60 days
upon the exercise of Warrants, (ii) 533,229 shares of Series BB
Preferred Stock, which may be converted at any time at the option of
the holder into 1,066,458 shares of Common Stock, (iii) 103,773 shares
of Series C Preferred Stock, which may be converted at any time at the
option of the holder into 207,546 shares of Common Stock, and (iv)
83,334 shares of Series D Preferred Stock, which may be converted at
any time at the option of the holder into 166,668 shares of Common
Stock. OGP Partners, L.P., James A. Conroy, and Robert S. Morris may
be deemed to beneficially own the shares of Common Stock beneficially
owned by Olympus Private Placement Fund, L.P.
(32) Baker, Fentress & Company is the beneficial owner of 462,222 shares of
common stock through its direct ownership of (i) 240,000 shares that
may be acquired within 60 days upon the exercise of stock warrants,
and (ii) 111,111 shares of Series D Preferred Stock, which may be
converted into 222,222 shares of common stock.
(33) Virginia Retirement System is the beneficial owner of 1,383,386 shares
of Common Stock through its direct ownership of (i) 380,237 shares of
Series BB Preferred Stock, which may be converted at any time at the
option of the holder into 760,474 shares of Common Stock, (ii) 172,956
shares of Series C Preferred Stock, which may be converted at any time
at the option of the holder into 345,912 shares of Common Stock, and
(iii) 277,000 shares of Common Stock that may be acquired within 60
days upon the exercise of warrants.
(34) RFE Capital Partners, L.P. is the beneficial owner of 594,476 shares
of Common Stock through its direct ownership of (i) 197,632 shares of
Common Stock that may be acquired within 60 days upon the exercise of
Warrants, (ii) 16,949 shares of Series BB Preferred Stock, which may
be converted at any time at the option of the holder into 33,898
shares of Common Stock, and (iii) 135,453 shares of Series D Preferred
Stock, which may be converted at any time at the option of the holder
into 270,906 shares of Common Stock. Norcon Associates, RFE
Investment Partners IV, L.P., RFE Associates IV, L.P., RFE Management
Corp., Robert M. Williams, Howard C Landis, James A. Parsons, Knute
C. Albrecht, A. Dean Davis and Michael J. Foster may be deemed to
beneficially own the shares of Common Stock beneficially owned by RFE
Capital Partners, L.P.
(35) William Blair Venture Partners III Limited Partnership beneficially
owns 631,458 shares of Common Stock consisting of (i) 315,362 shares
issuable upon conversion of Series BB Preferred Stock, (ii) 61,348
shares issuable upon conversion of Series C Preferred Stock, (iii)
166,668 shares issuable upon conversion of Series D Preferred Stock,
and (iv) shares issuable upon exercise of Warrants to purchase 88,080
shares of Common Stock, which may collectively be converted and
exercised into 631,458 shares of Common Stock. By virtue of being
General Partner of William Blair Venture Partners III Limited
Partnership, William Blair Venture Management Company may be deemed to
possess indirect beneficial ownership of such shares. By virtue of
being Managing Partner of William Venture Management Company, Mr.
Guren may be deemed to possess indirect beneficial ownership of
17
<PAGE> 20
such shares. By virtue of being General Partner with the right to
veto investment decisions made by William Blair Venture Management
Company, William Blair & Company may be deemed to possess indirect
beneficial ownership of such shares.
(36) Does not include 175 shares owned by Mr. Sage's wife, as to which
shares he disclaims beneficial ownership.
(37) Equus II Incorporated is the beneficial owner of 1,091,147 shares of
Common Stock through its direct ownership of (i) 205,292 shares of
Common Stock, (ii) 50,256 shares of Common Stock that may be acquired
within 60 days upon the exercise of warrants, (iii) 1,286,000 shares
of Series A Preferred Stock, which may be converted at any time at the
option of the holder into 348,982 shares of Common Stock, (iv)
1,017,380 shares of Series A-1 Preferred Stock which may be converted
at any time at the option of the holder into 254,345 shares of Common
Stock, (v) 29,202 shares of Series BB Preferred Stock which may be
converted at any time at the option of the holder into 58,404 shares
of Common Stock, (vi) 3,601 shares of Series C Preferred Stock which
may be converted at any time at the option of the holder into 7,202
shares of Common Stock, and (vii) 83,333 shares of Series D Preferred
Stock which may be converted at any time at the option of the holder
into 166,666 shares of Common Stock.
(38) 1670 Tyler Green Trail, Smyrna, GA. 30080.
(39) WPG Corporate Development Associates III, L.P. is the beneficial owner
of 503,184 shares of Common Stock through its direct ownership of (i)
77,002 shares of Common Stock that may be acquired within 60 days upon
the exercise of Warrants, (ii) 100,687 shares of Series BB Preferred
Stock, which may be converted at any time at the option of the holder
into 201,374 shares of Common Stock, (iii) 20,738 shares of Series C
Preferred Stock, which may be converted at any time at the option of
the holder into 41,476 shares of Common Stock, and (iv) 91,666 shares
of Series D Preferred Stock, which may be converted at any time at the
option of the holder into 183,332 shares of Common Stock.
(40) RFE Investment Partners IV, L.P. is the beneficial owner of 347,424
shares of Common Stock through its direct ownership of (i) 100,100
shares of Common Stock that may be acquired within 60 days upon the
exercise of Warrants into 100,100 shares of Common Stock and (ii)
123,657 shares of Series D Preferred Stock, which may be converted at
any time at the option of the holder into 247,314 shares of Common
Stock. RFE Capital Partners, L.P., Norcon Associates, RFE Associates
IV, L.P. RFE Management Corp., Robert M. Williams, Howard C. Landis,
James A. Parsons, Knute C. Albrecht, Michael J. Foster, and A. Dean
Davis may be deemed to beneficially own the shares of Common Stock
beneficially owned by RFE Investment Partners IV, L.P.
(41) Includes 30,000 shares that may be acquired by Mr. Spencer within 60
days upon the exercise of stock options.
(42) WPG CDA III, L.P., as the sole general partner of WPG Corporate
Development Associates III, L.P., may be deemed to own beneficially
the 503,184 shares held by WPG Corporate Development Associates III,
L.P.
18
<PAGE> 21
(43) WPG CDA III (Overseas), Ltd. as the sole investment advisor of WPG
Corporate Development Associates III (Overseas), Ltd., may be deemed
to own beneficially the 106,746 shares owned by WPG Corporate
Development Associates III (Overseas), Ltd. WPG CDA III (Overseas),
Ltd. disclaims beneficial ownership of all such shares.
(44) By reason of his status as a managing general partner of WPG CDA III,
L.P., which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Greer may be deemed to be the beneficial
owners of the 503,184 shares held by WPG Corporate Development
Associates III, L.P. By reason of his status as a managing general
partner of WPG CDA III (Overseas), L.P., Mr. Greer may also be deemed
to be the beneficial owner of the 106,746 shares held by WPG Corporate
Development Associates III (Overseas), L.P. Accordingly, Mr. Greer may
be deemed to be the beneficial owner of 609,930 shares. Mr. Greer
disclaims beneficial ownership of all shares beneficially owned by WPG
Corporate Development Associates III, L.P. and WPG Corporate
Development Associates III (Overseas), L.P., except to the extent of
his indirect beneficial interest as a managing general partner of WPG
CDA III, L.P. in shares held by WPG Corporate Development Associates
III, L.P.
(45) By reason of his status as a managing partner of WPG CDA III, L.P.,
which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Lang may be deemed to be the beneficial
owner of the 503,184 shares held by WPG Corporate Development
Associates, L.P. By reason of his status as a managing general
partner of WPG CDA III (Overseas), L.P., Mr. Greer may also be deemed
to be the beneficial owner of the 106,746 shares held by WPG Corporate
Development Associates III (Overseas), L.P. In addition, pursuant to
the distributions described herein, Mr. Lang received 2,402 shares of
Common Stock which he beneficially owns in his individual capacity and
has the sole power to vote or direct the vote of and the sole power to
dispose or direct the disposition of the 2,402 shares. Accordingly,
Mr. Lang may be deemed to be the beneficial owner of 612,332 shares.
Mr. Lang disclaims beneficial ownership of all shares beneficially
owned by WPG Corporate Development Associates III, L.P. and WPG
Corporate Development Associates III (Overseas), L.P., except to the
extent of his indirect beneficial interest as a managing general
partner of WPG CDA III, L.P. in shares held by WPG Corporate
Development Associates III, L.P.
(46) By reason of his status as a managing partner of WPG CDA III, L.P.,
which is the sole general partner of WPG Corporate Development
Associates III, L.P., Mr. Hutchinson may be deemed to be the
beneficial owners of the 503,184 shares held by WPG Corporate
Development Associates III, L.P. By reason of his status as a
managing general partner of WPG CDA III (Overseas), L.P., Mr.
Hutchinson may also be deemed to be the beneficial owner of the
106,746 shares held by WPG Corporate Development Associates III
(Overseas), L.P. Accordingly, Mr. Hutchinson may be deemed to be the
beneficial owner of 609,930 shares. Mr. Hutchinson disclaims
beneficial ownership of all Shares beneficially owned by WPG Corporate
Development Associates III, L.P. and WPG Corporate Development
Associates III (Overseas), L.P., except to the extent of his indirect
beneficial interest as a managing general partner of WPG CDA III, L.P.
in shares held by WPG Corporate Development Associates III, L.P.
(47) John Hancock Place, Boston, Massachusetts 02117.
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<PAGE> 22
(48) Hancock Venture Partners III, L.P. is the beneficial owner of 539,036
shares of Common Stock through its direct ownership of (i) 85,848
shares of Common Stock that may be acquired within 60 days upon the
exercise of Warrants, (ii) 94,609 shares of Series BB Preferred Stock,
which may be converted at any time at the option of the holder into
189,218 shares of Common Stock, (iii) 20,874 shares of Series C
Preferred Stock, which may be converted at any time at the option of
the holder into 41,748 shares of Common Stock, and (iv) 111,111 shares
of Series D Preferred Stock, which may be converted at any time at the
option of the holder into 222,222 shares of Common Stock of the
outstanding shares of Common Stock. Back Bay Partners V, L.P., Back
Bay Partners, Hancock Venture Partners Inc., John Hancock
Subsidiaries, Inc., and John Hancock Mutual Life Insurance Company may
be deemed to beneficially own the shares of Common Stock beneficially
held by Hancock Venture Partners III, L.P.
(49) John Hancock Venture Capital Fund Limited Partnership II is the
beneficial owner of 282,222 shares of Common Stock through its direct
ownership of (i) 60,000 shares of Common Stock that may be acquired
within 60 days upon the exercise of Warrants and (ii) 111,111 shares
of Series D Preferred Stock, which may be converted at any time at the
option of the holder into 222,222 shares of Common Stock. Back Bay
Partners V, L.P., Back Bay Partners L.P. II, Hancock Venture Partners
Inc., John Hancock Subsidiaries, Inc., and John Hancock Mutual Life
Insurance Company may be deemed to beneficially own the shares of
Common Stock beneficially held by John Hancock Venture Capital Fund
Limited Partnership II.
(50) Frontenac VI Limited Partnership is the beneficial owner of 888,890
shares of Common Stock through its direct ownership of (i) 55,556
shares of Series C Preferred Stock, which may be converted at any time
at the option of the holder into 111,112 shares of Common Stock and
(ii) 388,889 shares of Series D Preferred Stock, which may be
converted at any time at the option of the holder into 777,778 shares
of Common Stock. Frontenac Company may be deemed to beneficially own
the shares of Common Stock beneficially owned by Frontenac VI Limited
Partnership.
(51) Mr. Williams is the beneficial owner of 580,337.21 shares of Common
Stock through his direct ownership of 4,383.21 shares of Common Stock.
(52) Mr. Foster is the beneficial owner of 580,707.28 shares of Common
Stock through his direct ownership of 1,753.28 shares of Common Stock.
(53) Mr. Albrecht is the beneficial owner of 581,934.58 shares of Common
Stock through his direct ownership of 2,980.58 shares of Common Stock.
(54) c/o Walker & Company, Caledonian House, Grand Cayman, Cayman Islands,
British West Indies.
(55) WPG Corporate Development Associates III (Overseas), Ltd., is the
beneficial owner of 106,746 shares of Common Stock through its direct
ownership of (i) 16,342 shares of Common Stock that may be acquired
within 60 days upon the exercise of Warrants, (ii) 21,358 shares of
Series BB Preferred Stock, which may be converted at any time at the
option of the holder into 42,716 shares of Common Stock, (iii) 4,399
shares of Series C Preferred Stock, which may be converted at any time
at the option of the holder into 8,798 shares of Common Stock, and
(iv) 6,317 shares of Series D Preferred Stock, which may be converted
any time at the option of the holder into 12,634 shares of Common
Stock.
20
<PAGE> 23
(56) Each of Desai Capital Management, Inc. and Rohit M. Desai may be
deemed to be the beneficial owner of the entire 855,556 shares of
Common Stock held by Equity-Linked Investors, L.P. and Equity-Linked
Investors II, L.P.
(57) Includes 170,230 shares that may be acquired by Mr. Patterson within
60 days upon the exercise of stock options and warrants.
(58) Includes 39,449 shares that may be acquired within 60 days upon
exercise of options.
(59) 6100 S.W. 128th Street, Miami, FL 33156.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Option and Compensation Committee of the Board of Directors of the
Company (the "Committee") develops recommendations for compensation and benefit
levels for the executive officers, including the individuals named in the
Summary Compensation Table above. The Committee's recommendations are subject
to approval by the full Board of Directors.
In determining its recommendations, the Committee's objectives are to:
(i) target executive compensation at a level sufficient to ensure
the Company's ability to attract and retain superior executive
talent;
(ii) motivate executives to advance shareholder interests with
compensation plans that are tied to the Company's operating
performance and achievement of strategic objectives;
(iii) provide a compensation package that balances individual
contributions with overall business results and is competitive
within the healthcare industry; and
(iv) align the interests of the Company's employees with those of
shareholders through potential stock ownership.
The Committee applies these objectives to the Company's executive
management through (i) annual merit increases based upon operating performance,
(ii) market adjustments to benefit programs based upon industry practices, and
(iii) the availability of stock option grants.
During 1994, the Company did not have a formal annual bonus program
for executive management. However, based on exceptional performance, the
Company awarded a $100,000 discretionary bonus to the Chief Financial Officer
in recognition of the extraordinary effort expended and his key role in
successfully orchestrating, negotiating and completing a $91 million private
offering of subordinated debt and equity that closed effective December 31,
1993. Given the Company's status as a privately held corporation in 1993 with
limited access to the capital markets, the Board of the Company believed this
offering was critical to the Company's future growth and earnings improvement.
Through the end of 1993 this is the only bonus which has been granted to an
executive of the Company.
In determining executive salary and benefit recommendations and option
awards for 1994, the Committee considered (i) management's performance during
1993, (ii) the Company's performance during 1993, (iii) data developed by
independent consultants, (iv) and/or its own
21
<PAGE> 24
surveys of compensation and benefit practices of healthcare companies similar
in size to the Company. For purposes of determining 1994 salaries for
executive management, comparable sized companies were considered to be
investor-owned hospital management companies, both public and privately held,
which for their 1993 fiscal year end had annual net revenues below $200
million.
As compared to 1992, in 1993 the Company (i) doubled its net revenues,
(ii) increased EBITDA before nonrecurring charges by 365%, and (iii) before
nonrecurring charges, improved pre-tax income to $5,542,000 compared to a
pre-tax loss of $229,000 in 1992. For fiscal year 1994, the salaries of the
Chief Executive Officer, Chief Operating Officer and Chief Financial Officer
were increased by 25%, 33% and 30% respectively in recognition of the Company's
improvement of 1993 over 1992. Since the Company's corporate executives and
management were not on a formal bonus plan for 1994, the Committee believes
that the total compensation paid to its corporate executives during 1994, with
the exception of its Chief Financial Officer who received a discretionary bonus
of $100,000 for the reasons described above, is significantly below the average
total compensation for executives of comparable sized investor-owned companies,
as defined above, all of whom had annual bonus plans for corporate executives
and management in fiscal year 1993. In partial recognition of this
compensation disparity and to avoid significant dilution in the ownership
percentage of its three most senior executives as a result of new shares issued
in the private subordinated debt offering referred to above, in January 1994
the Company awarded additional options at $9 per share as follows: (i) Chief
Executive Officer - 13,876, (ii) Chief Operating Officer - 150,690, and (iii)
Chief Financial Officer - 128,000.
Respectfully submitted,
David S. Spencer
Paul B. Queally
Scott F. Meadow
22
<PAGE> 25
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid by the
Company to its Chief Executive Officer and the next most highly compensated
officers whose compensation exceeded $100,000 during the year ended December
31, 1994:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(2)
ANNUAL COMPENSATION(1) AWARDS
-------------------------------- ---------------
SECURITIES
UNDERLYING
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(3) BONUS ($) SARS (#) COMPENSATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Miller, . . . 1994 $ 295,000 $ -- 13,876 $ --
Chairman of Board, . . . 1993 $ 234,167 $ -- -- $ --
President & CEO . . . . . 1992 $ 168,808 $ -- 90,000 $ --
James G. VanDevender, . . 1994 $ 235,417 $ -- 128,000 $ --
Executive Vice President 1993 $ 181,667 $ 100,000 -- $ --
and Chief Financial . . . 1992 $ 143,729 $ -- 150,000 $ --
Officer
Ronald R. Patterson, . . 1994 $ 235,000 $ -- 150,690 $ 2,250
Executive Vice President 1993 $ 176,007 $ -- -- $ 76,782(4)
and Chief Operating . . 1992 $ 130,000 $ -- 120,000 $ --
Officer
Kenneth D. Hawkins . . 1994 $ 138,354 $ 60,000 12,630 $ 1,800
Vice President of . . 1993 $ 118,888 $ 7,500 1,754 $ 1,800
Operations-Development(5) 1992 $ 102,314 $ 20,000 -- $ --
Deborah H. Frankovich . 1994 $ 150,492 $ -- 20,000 $ 7,726(4)
Vice President and
Treasurer(6)
</TABLE>
_____________________
(1) The column for Other Annual Compensation provided in the SEC's standard
summary compensation table is omitted because no such benefits or other
compensation were provided.
(2) The Company did not award restricted stock or stock appreciation rights
("SARs") during fiscal years 1991 through 1993, nor did it make any
payouts pursuant to long-term incentive plans during such period.
Accordingly, the columns for such items provided in the SEC's standard
summary compensation table have been omitted.
(3) Does not include amounts attributable to group life, health or
relocation plans that are non-discriminatory in scope, terms or
operation and are available generally to all salaried employees. Does
not include premiums for a long term disability plan available
generally to all management personnel.
23
<PAGE> 26
(4) Includes $76,782 and $7,726 paid to Mr. Patterson and Ms. Frankovich
respectively, as reimbursement of relocation expenses.
(5) Formerly Chief Financial Officer, Senior Vice President, Treasurer and
Secretary of AmeriHealth. Received $60,000 as an incentive bonus.
Mr. Hawkins agreed to continue his employment as Vice
President-Operations with the Company following the merger.
(6) Joined the Company as an officer in July, 1994. Includes $86,000 paid
during 1984 as consulting fees prior to joining the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
This table provides information on stock options granted in 1994 to the
named executive officers of the Company. The Company has never granted any
SARs, and the exercise prices on stock options previously granted were not
amended or adjusted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
-------------------------------------------------------- --------------------------
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL EXERCISE(3) STOCK PRICE
SECURITIES OPTIONS/SARS OR APPRECIATION
UNDERLYING GRANTED TO BASE FOR OPTION TERM(4)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED (#) 1994(4) ($/SH.) DATE 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Miller . . . . . 13,876(1) 3.4 % $ 9.00 1/4/2004 $ 78,538 $ 198,982
James G. VanDevender . . . 128,000(1) 30.9% $ 9.00 1/4/2004 $ 724,480 $ 1,835,520
Ronald R. Patterson . . . . 150,690(1) 36.4% $ 9.00 1/4/2004 $ 852,905 $ 2,160,895
Kenneth D. Hawkins . . . . 10,000(1) 2.4% $ 9.00 12/6/2004 $ 56,601 $ 143,437
2,630(2) 0.6% $ 3.56 7/7/2004 $ 5,888 $ 14,922
Deborah H. Frankovich . . . 20,000(1) 4.8% $ 9.00 7/1/2004 $ 113,201 $ 286,874
</TABLE>
________________
(1) One third of the options vest each year beginning one year after the
date of grant.
(2) Such options were issued by AmeriHealth and became fully vested
pursuant to AmeriHealth's merger with the Company on December 6, 1994.
(3) The grants occurred prior to the merger on December 6,1994, and the
Option and Compensation Committee believed the exercise price was equal
to the fair market value of the underlying stock. There was at such
time no public market for the pre-merger Champion Common Stock.
(4) For a ten-year term, a 5% annual rate of appreciation equals total
appreciation of 63% (or $5.66/share based upon an exercise price of
$9.00/share), and a 10% annual rate of appreciation equals total
appreciation of 159% (or $14.34/share based upon an exercise price of
$9.00/share). These potential realizable values are based solely upon
arbitrarily assumed rates of appreciation required by applicable SEC
regulations and are not intended to forecast possible future
appreciation, if any, of the market price of the Common Stock.
24
<PAGE> 27
(5) Includes options to acquire 46,024 shares of Common Stock granted by
AmeriHealth prior to the Champion/AmeriHealth Merger on December 6,
1994, pursuant to the AmeriHealth 1988 Non-Qualified Stock Option Plan.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
The following table gives information with respect to the named
executive officers concerning unexercised options at December 31, 1994. The
Company has never issued any SARs, and none of the named executive officers
exercised any stock options during 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
NAME (#) EXERCISABLE/UNEXERCISABLE ($)(1)EXERCISABLE/UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles R. Miller . . . . . . . 198,000/ 13,876 $ 1,120,750/0
James G. VanDevender . . . . . 222,000/128,000 $ 971,750/0
Ronald R. Patterson . . . . . . 120,000/150,690 $ 415,000/0
Kenneth D. Hawkins . . . . . . 39,449/ 10,000 $ 201,230/0
Deborah H. Frankovich . . . . . 0/ 20,000 $ 0/0
</TABLE>
- --------------------
(1) Based upon a closing stock price of $8.125 as of December 30, 1994.
LONG-TERM INCENTIVE PLAN AWARDS/PENSION PLANS
The Company has no long-term incentive plans other than its stock
option plans described below, and the Company has no pension plan.
Accordingly, disclosure regarding such matters is omitted as inapplicable.
COMPENSATION OF DIRECTORS
The Company does not compensate directors but does reimburse their out
of pocket expenses for attending board meetings. In 1992, the Company adopted
a Directors Stock Option Plan whereby certain "non-management" directors would
yearly receive options to purchase 10,000 shares of Common Stock, up to a
maximum of 30,000 shares. Messrs. Spencer and Ferris were the only directors
eligible to participate in this plan, and each has received options to acquire
30,000 shares of Common Stock at an exercise price of $9.00 per share. The
options expire December 9, 2002.
EMPLOYMENT CONTRACTS
Messrs. Miller and VanDevender executed three-year employment
agreements dated December 31, 1990 which renewed and now expire February 10,
1996. Under the terms of these agreements, each agreed that under certain
conditions he will not compete with the Company for two years following an
involuntary termination for cause. These agreements contain a provision that
upon a merger, either may terminate his agreement and receive his compensation
for three years. Their salaries are currently established by the Company's
Option and Compensation Committee.
25
<PAGE> 28
Ronald R. Patterson entered into an employment agreement effective
January 1, 1992 for three years at an initial salary of $130,000 per year plus
options to acquire 60,000 shares of Common Stock at a purchase price of $4.00
per share until September 30, 2001. Under the terms of this agreement, he
agreed that under certain conditions he would not compete with the Company for
one year following an involuntary termination for cause. This agreement
contains a provision that upon a merger, he may terminate his agreement and
receive his compensation for one year. Mr. Patterson's salary is currently
established by the Company's Option and Compensation Committee.
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common
Stock to the Dow Jones Equity Market Index and the Dow Jones Healthcare
Providers Index as of December 31 for the last five years. The graph assumes
that the value of the investments in the Company's Common Stock and each index
was $100 at January 1, 1990. The graph has been adjusted for the 5.70358 to 1
reverse stock split effective December 6, 1994.
[GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Champion Healthcare Corporation 100 40 140 300 180 456
Dow Jones Equity Market Index 100 90 117 123 132 129
Dow Jones Health Care Providers Index 100 103 111 115 176 190
</TABLE>
26
<PAGE> 29
CERTAIN TRANSACTIONS
STOCK REGISTRATION RIGHTS
The Company and the holders of the Series A, Series BB, Series C,
Series D Preferred Stock and the outstanding Warrants have rights to both
require and participate in the filing of registration statements by the Company
with the Securities and Exchange Commission.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Management Prescriptives, Inc., a company owned by David S. Spencer, a
Director of the Company, has provided specialized consulting services to
certain of the Company's hospitals. During 1993 and 1994 this company received
approximately $167,000 and $283,000, respectively, in fees from the Company.
Paul B. Queally, a Director, has been employed by and is currently a
General Partner of the Sprout Group, the venture capital affiliate of
Donaldson, Lufkin & Jenrette, a major investment banking firm that has
received compensation for acting as an underwriter for the Company during 1994.
Effective December 31, 1994, Michael M. Brooks' position with the
Company changed from Vice President to Director of Special Projects. In
connection with the change in his duties, he received a modified termination
benefit, payable upon any subsequent termination, that provides for 24 monthly
payments of $8,333 each rather than a lump sum payment equal to his current
annual salary for 1994 of $165,000. The Company and Mr. Brooks believe this
modification to be substantially the economic equivalent to the previous
provision in his employment contract
Upon the effectiveness of the Champion/AmeriHealth Merger on December
6, 1994, certain previously agreed to benefits that were to accrue only if the
merger occurred were paid to certain officers and directors of AmeriHealth and
other transactions were entered into as follows:
1. William G. White, formerly Chairman of the Board, President and Chief
Executive Officer of AmeriHealth, received $222,097 as salary
payments, $79,335 as vacation and deferred compensation payments,
$510,400 in severance pay, $152,285 as an incentive bonus, other annual
compensation payments of $19,903 and other compensation of $4,367. In
addition Mr. White executed a three year consulting agreement with the
Company at an annual rate of $200,000;
2. Steven M. Dick, formerly Vice President of AmeriHealth and President
and Chief Executive Officer of AmeriHealth Management Company,
received $133,400 in severance pay, $57,500 as an incentive bonus, and
Mr. Dick executed an agreement to purchase certain hospital consulting
contracts from AmeriHealth in exchange for his promissory note in the
principal amount of $75,000. The Company executed a two year limited
services consulting agreement with Mr. Dick to provide services similar
to those provided pursuant to the contracts he purchased, to all the
Company's hospitals at a per hospital per month rate of $2,500; and
3. A total of $145,000 was paid to nonofficer personnel of AmeriHealth as
incentive bonuses and approximately $44,500 was paid in severance pay
to nonofficer personnel. Effective December 6, 1994, all outstanding
stock options of AmeriHealth vested.
27
<PAGE> 30
APPROVAL OF CHAMPION HEALTHCARE CORPORATION
SELECTED EXECUTIVE STOCK OPTION PLAN NO. 5
GENERAL
The Board of Directors has approved the Selected Executive Stock
Option Plan No. 5 (the "Plan"). In structuring the Plan, the Company sought to
provide for a variety of awards that could be flexibly administered in order to
carry out the purposes of the Plan. This authority permits the Company to keep
pace with changing developments in compensation programs and make the Company
more competitive with those companies that offer creative incentives to attract
and keep employees. The flexibility of the Plan allows the Company to respond
to changing circumstances such as changes in tax laws, accounting rules,
securities regulations and other rules regarding benefit plans. A copy of the
Plan is attached hereto as Attachment 1.
PURPOSE
The purpose of the Plan is to give qualified officers, and executive
personnel of the Company and its subsidiaries an opportunity to acquire shares
of the Company's Common Stock to provide an incentive for such key employees to
continue to promote the best interests of the Company and enhance its long-term
performance, and to provide an incentive for key employees to join or remain
with the Company and its subsidiaries.
PARTICIPANTS
The Plan is available to executive personnel of the Company and its
subsidiaries.
SHARES AVAILABLE
The aggregate amount of shares (subject to adjustment for certain
transactions affecting the Common Stock) of Common Stock available for awards
under the Plan is 144,500 shares.
Under the Plan, shares covered by any stock option or stock
appreciation right or other stock award that expire or terminate unexercised or
are canceled or forfeited would again be available for awards under the Plan.
ADMINISTRATION
The Plan provides for administration by the Company's Board of
Directors, which may be delegated by the Board of Directors to a committee of
the Board of Directors, which is presently the Option and Compensation
Committee (the "Committee"). Among the powers granted to the Committee are the
authority to interpret the Plan, establish rules and regulations for its
operation, select employees of the Company and its subsidiaries to receive
awards, and determine the form, amount and other terms and conditions of
awards. The Committee also has the power to modify or waive restrictions on
awards, to amend awards and to grant extensions and accelerate awards.
ELIGIBILITY FOR PARTICIPATION
Officers and other key employees of the Company and subsidiary
companies (in which the Company owns directly or indirectly more than a 50%
voting equity interest) are eligible to be selected to participate in the Plan.
The selection of participants from eligible persons is within the
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sole discretion of the Option and Compensation Committee. The Company
estimates that approximately 25 persons are currently eligible to receive
awards under the Plan.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards: (1) nonstatutory or nonqualified stock options; and (2) stock
appreciation rights, in tandem with stock options or freestanding. The Plan
does not provide for stock options granted in the form of an incentive stock
option which satisfy the applicable requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). Awards may be granted
individually, in combination, or in tandem as determined by the Committee.
OPTIONS. Options granted under the Plan are nonstatutory stock options
("Nonstatutory Stock Options") not qualifying for treatment as Incentive Stock
Options (ISOs"), as defined in Section 422 of the Code. The Committee
determines the recipients of Options and the terms of the Options, including
the number of shares for which an Option is granted, the term of the Option and
the time(s) when the Option can be exercised. Conditions respecting the
exercise of an Option may, in the discretion of the Committee, be contained in
the Agreement with the participant or in the Committee's procedures. The
Committee may in its discretion waive any condition respecting the exercise of
any Option and may accelerate the time at which any Option is exercisable.
The price per share of Common Stock subject to an Option (the "Option
Price") shall not be less than 80% of the fair market value of Common Stock on
the date of the grant of the Option. As of April 18, 1995, the fair market
value of a share of Common Stock was found by the Company's Board of Directors
to be $8.00. The Committee also determined the manner in which the Option
Price of an Option may be paid, which may include the tender of cash or
securities or the withholding of Common Stock or cash to be received through
grants or any other arrangements satisfactory to the Committee.
The Plan provides that no Nonstatutory Stock Option shall be
exercisable later than 10 years and 1 day from the date of grant. Options are
not transferable except by will or the laws of descent and distribution.
STOCK APPRECIATION RIGHTS. In the discretion of the Committee, Stock
Appreciation Rights ("SARs") may be granted separately or in tandem with the
grant of an Option. An SAR is a grant entitling the participant to receive an
amount in cash or shares of Common Stock or a combination thereof, as the
Committee may determine, having a value equal to the excess of (i) the fair
market value on the date of exercise of the shares of Common Stock with respect
to which the SAR is exercised over (ii) the Option Price.
A SAR granted in tandem with a Nonstatutory Stock Option may be
granted either at or after the time of the grant of the Nonstatutory Stock
Option. A SAR granted in tandem with an Option terminates and is no longer
exercisable upon the termination or exercise of the related Option. Subject to
the limitations set forth in the Plan, SARs are subject to such terms and
conditions as shall be determined from time to time by the Committee. The
Committee at any time may accelerate the exercisability of any SAR and
otherwise waive or amend any conditions to the grant of a SAR.
SARs are not transferable except by will or the laws of descent and
distribution.
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FEDERAL TAX CONSEQUENCES. Under the Code, a participant receiving a
Nonstatutory Stock Option ordinarily does not realize taxable income upon the
grant of the Option. A participant does, however, realize ordinary income upon
the exercise of a Nonstatutory Stock Option to the extent that the fair market
value of the Common Stock on the date of exercise exceeds the Option Price. The
Company is entitled to a Federal income tax deduction for compensation in an
amount equal to the ordinary income so realized by the participant, provided
that the Company withholds Federal incometax with respect to the amount of such
compensation. Upon the subsequent sale of the shares acquired pursuant to a
Nonstatutory Stock Option, any gain or loss will be capital gain or loss,
assuming the shares represent a capital asset in the hands of the participant,
although there will be no tax consequences for the Company.
Generally, a recipient does not realize taxable income upon the grant
of a SAR but realizes ordinary income upon its exercise in an amount equal to
the cash received and/or the fair market value of any Common Stock received.
The Company is entitled to a Federal income tax deduction in an amount equal to
the ordinary income realized by the participant, provided that the Company
withholds Federal income tax with respect to the amount of such compensation.
Upon the subsequent sale of shares acquired pursuant to a SAR, any gain or loss
will be capital gain or loss, assuming the shares represent a capital asset in
the hands of the participant.
If the exercisability of an Option or a SAR, or special cash settlement
rights are triggered and exercised, as a result of a Change in Control of the
Company, all or a portion of the value of the relevant award at that time may
be a "parachute payment" for purposes of determining whether a 20% excise tax
(in addition to income tax otherwise owed) is payable by the participant as a
result of the receipt of an "excess parachute payment" pursuant to Section 4999
of the Code. The Company will not be entitled to a deduction for that portion
of any parachute payment which is subject to the excise tax.
Recent tax legislation limits the Company's tax deduction for all
compensation paid to certain executive officers in any one year to $1,000,000.
The Company's deductions related to grants under the Plan would be subject to
this limitation.
ACCOUNTING TREATMENT AND OTHER MATTERS. Under present accounting
rules, a grant or exercise of an Option with an Option Price not less than the
fair market value of the underlying Common Stock does not result in any charge
to the Company's earnings (although a change in accounting rules which would
require a charge is pending). The mere grant of a SAR does not, at the time of
such grant, result in such a charge. After the date of grant, however,
outstanding SARs may from time to time give rise to compensation expense to
reflect changes in the market price of the Company's Common Stock. Dividend
equivalents on Options and SARs will give rise to compensation expense.
Rule changes proposed by the Financial Accounting Standards Board and
currently pending would change certain aspects of the accounting treatment of
awards under the Plan.
The Plan should not affect any other incentive or compensation plan
(including plans providing for the grant of stock options, stock appreciation
rights or restricted stock) which may at a later date become effective for
directors, officers or employees of the Company or its subsidiaries. In
addition, the Plan does not preclude the Company or its subsidiaries from
establishing any other form of incentive or other compensation (including stock
options, stock appreciation rights or restricted stock awards) for their
Directors, officers or employees, or from
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assuming any form of incentives or other compensation of any person or entity
in connection with the acquisition of the business of assets or any person or
entity.
The Board of Directors recommends that shareholders vote for the
approval of the Selected Executive Stock Option Plan No. 5.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The board of directors has appointed Coopers & Lybrand, L.L.P., as
independent auditors of the Company for 1995. Coopers & Lybrand, L.L.P., has
served as the Company's independent auditor since 1990. A representative of
Coopers & Lybrand, L.L.P., is expected to be present at the meeting and will be
given the opportunity to make a statement if he desires to do so and will
respond to appropriate questions. The Board of Directors recommends that
shareholders vote for the ratification of the appointment of Coopers & Lybrand,
L.L.P., as independent certified public accountants for the Company.
COMPLIANCE WITH STOCK OWNERSHIP REPORTING REQUIREMENTS
Based on the Company's review of copies of all Section 16(a) filings by
the officers and directors of the Company, the Company believes that in 1994,
all filing requirements applicable to its officers and directors were complied
with.
TRANSACTION OF OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors has no
knowledge of business other than that described above which will be presented
for consideration at the meeting. With respect to any other business which may
properly come before the meeting, it is intended that proxies will be voted in
accordance with the judgment of the person or persons voting them.
PROPOSALS BY STOCKHOLDERS FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
Stockholders desiring to present proposals to the stockholders of the
Company at the 1996 annual meeting of stockholders, and to have such proposals
included in the Company's proxy statement and proxy, must submit their
proposals to the Company so as to be received no later than December 29, 1995.
By the order of the Board of Directors,
/s/ CHARLES R. MILLER
CHARLES R. MILLER
President
Date: May 1, 1995
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY PERSON WHOSE PROXY IS SOLICITED,
ON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K FOR 1994. REQUESTS SHOULD BE SENT TO CHAMPION
HEALTHCARE CORPORATION, 14340 TORREY CHASE, SUITE 320, HOUSTON, TEXAS 77014,
ATTENTION: JAMES G. VANDEVENDER.
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ATTACHMENT 1
CHAMPION HEALTHCARE CORPORATION
SELECTED EXECUTIVE STOCK OPTION PLAN NO. 5
PREAMBLE. The Board of Directors of Champion Healthcare Corporation adopted
the hereinbelow described Selected Executive Stock Option Plan No. 5 effective
as of May 25, 1995 and it was approved by the shareholders on __________, 1995.
1. PURPOSE
The purpose of this Selected Executive Stock Option Plan No. 5 (the
"Plan") is to give the Selected Executive officers ("key executives") of
Champion Healthcare Corporation, a Delaware corporation (the "Company"), an
opportunity to acquire shares of the common stock of the Company, $.01 par
value ("Common Stock"), to provide an incentive for selected executives to
continue to promote the best interests of the Company and enhance its long-term
performance, and to provide an incentive for such selected executives to remain
with the Company.
2. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be administered
by the Board of Directors of the Company (the
"Board"), which, to the extent it shall determine,
may delegate its powers with respect to the
administration of the Plan (except its powers under
Section 12(c)) to a committee of directors (the
"Committee") appointed by the Board and composed of
not less than two members of the Board. If the Board
chooses to appoint a Committee, references
hereinafter to the Board (except in Section 12(c))
shall be deemed to refer to the Committee.
Notwithstanding the preceding provisions of this
Section, no member of the Board may exercise
discretion with respect to, or participate in, the
administration of the Plan if, at any time within one
year prior to such exercise or participation, he or
she has received stock, stock options, stock
appreciation rights or any other derivative security
pursuant to the Plan or any other plan of the Company
or any affiliate thereof as to which any discretion
is exercised.
(b) POWERS. Within the limits of the express provisions
of the Plan, the Board shall determine: (i) the
selected executives to whom awards hereunder shall be
granted, (ii) the time or times at which such awards
shall be granted, (iii) the form and amount of the
awards, and (iv) the limitations, restrictions and
conditions applicable to any such award. In making
such determinations, the Board may take into account
the nature of the services rendered by such
executives, or classes of executives, their present
and potential contributions to the Company's success
and such other factors as the Board in its discretion
shall deem relevant.
(c) INTERPRETATIONS. Subject to the express provisions
of the Plan, the Board may interpret the Plan,
prescribe, amend and rescind rules and regulations
relating to it, determine the terms and provisions of
the respective awards and make all other
determinations it deems necessary or advisable for
the administration of the Plan.
(d) DETERMINATIONS. The determinations of the Board on
all matters regarding the Plan shall be conclusive. A
member of the Board shall only be liable for any
action taken or determination made in bad faith.
(e) NONUNIFORM DETERMINATIONS. The Board's
determinations under the Plan, including without
limitation, determinations as to the persons to
receive awards, the terms and
Selected Executive Stock Option Plan Page 1
<PAGE> 35
provisions of such awards and the agreements
evidencing the same, need not be uniform and may be
made by it selectively among persons who receive or
are eligible to receive awards under the Plan,
whether or not such persons are similarly situated.
3. AWARDS UNDER THE PLAN.
(a) TYPE OF AWARD. Awards under the Plan may be granted
in either or both of the following forms: (i)
Nonstatutory Stock Options, as described in Section
4, and (ii) Stock Appreciation Rights, as described
in Section 6. Nonstatutory Stock Options shall be
referred to herein as "Stock Options."
(b) MAXIMUM LIMITATIONS. The aggregate number of shares
of Common Stock available for grant under the Plan is
144,500, subject to adjustment pursuant to Section 8.
Shares of Common Stock issued pursuant to the Plan
may be either authorized but unissued shares or
shares now or hereafter held in the treasury of the
Company. In the event that, prior to the end of the
period during which Stock Options may be granted
under the Plan, any Stock Option under the Plan
expires unexercised or is terminated, surrendered or
canceled (other than in connection with the exercise
of a Stock Appreciation Right) without being
exercised, in whole or in part, for any reason, the
number of shares theretofore subject to such Stock
Option or the unexercised, terminated, forfeited or
unearned portion thereof, shall be added to the
remaining number of shares of Common Stock available
for grant as a Stock Option under the Plan, including
a grant to a former holder of such Stock Option, upon
such terms and conditions as the Board shall
determine, which terms may be more or less favorable
than those applicable to such former Stock Option.
4. STOCK OPTIONS.
(a) CONDITIONS. Stock Options may be granted under the
Plan for the purchase of shares of Common Stock.
Stock Options shall be in such form and upon such
terms and conditions as the Board shall from time to
time determine, subject to the following.
(i) OPTION PRICE. The option price of each
Stock Option to purchase Common Stock
shall be determined by the Board, but
shall not be less than 80% of the fair
market value of the Common Stock subject
to such Stock Option on the date of
grant or $9.00, whichever is greater.
(ii) TERM OF OPTIONS. No Stock Option shall
be exercisable after the date ten (10)
years and one (1) day from the date such
Stock Option is granted.
(iii) CONDITIONS OF GRANT. The Board, in its
discretion, may, as a condition to the
grant of a Stock Option, require a
selected executive who is the recipient
of such Stock Option to enter into one
or more of the following agreements with
the Company on or prior to the date of
grant of such Option:
a) A covenant not to compete
with the Company and its
subsidiaries which shall
become effective on the date
of termination of employment
of the selected executive
with the Company and which
shall contain such terms and
conditions as shall be
specified by the Board;
Selected Executive Stock Option Plan Page 2
<PAGE> 36
b) An agreement to cancel any
employment agreement, fringe
benefit or compensation
arrangement in effect between
the Company and the selected
executive.
c) The D Stockholders
Agreement dated effective
December 31, 1993 as amended,
among the Company and Company
Shareholders set forth in
Schedule I to that agreement.
If the selected executive shall fail to enter into any such agreement at the
request of the Board, then no Stock Option shall be granted hereunder to such
selected executive and the number of shares of Common Stock which would have
been subject to such Option shall be added to the remaining number of shares of
Common Stock available for grant as a Stock Option under the Plan.
(b) FORM. The form of the stock option agreement shall
subject to paragraph (a) immediately above, be
substantially in the form as Exhibit 1 hereto.
5. PROVISIONS APPLICABLE TO STOCK OPTIONS.
(a) EXERCISE. Stock Options shall be subject to such
terms and conditions, shall be exercisable at such
time or times, and shall be evidenced by such form of
written option agreement between the optionee and the
Company, as the Board shall determine; provided, that
such determinations are not inconsistent with the
other provisions of the Plan.
(b) MANNER OF EXERCISE OF OPTIONS AND PAYMENT FOR COMMON
STOCK. Stock Options may be exercised by an optionee
by giving written notice to the Secretary of the
Company stating the number of shares of Common Stock
with respect to which the Stock Option is being
exercised and tendering payment therefor. At the time
that a Stock Option granted under the Plan, or any
part thereof, is exercised, payment for the Common
Stock issuable thereupon shall be made in full in
cash or by certified check or, if the Board in its
discretion agrees to accept, in shares of Common
Stock of the Company (the number of such shares paid
for each share subject to the Stock Option, or part
thereof, being exercised shall be determined by
dividing the option price by the fair market value
per share of the Common Stock on the date of
exercise). As soon as reasonably possible following
such exercise, a certificate representing shares of
Common Stock purchased, registered in the name of the
optionee, shall be delivered to the optionee.
(c) CANCELLATION OF STOCK APPRECIATION RIGHTS. The
exercise of any Stock Option shall cancel that
number, if any, of Stock Appreciation Rights (as
defined in Section 6) included in such Stock Option,
which is equal to the excess of (i) the number of
shares of Common Stock subject to Stock Appreciation
Rights included in such Stock Option, over (ii) the
number of shares of Common Stock which remain subject
to such Stock Option after such exercise.
6. STOCK APPRECIATION RIGHTS.
(a) AWARD. If deemed by the Board to be in the best
interest of the Company, any Stock Option granted
under the Plan may include a stock appreciation right
("Stock Appreciation Right"), either at the time of
grant or thereafter while the Stock Option is
outstanding.
(b) TERMS OF RIGHTS. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent
with the other provisions of the Plan as the Board
shall determine; provided that:
Selected Executive Stock Option Plan Page 3
<PAGE> 37
(i) LIMITATIONS. A Stock Appreciation Right
shall be exercisable to the extent, and
only to the extent, the Stock Option in
which it is included is exercisable and
shall be exercisable only for such
period as the Board may determine (which
period may expire prior to the
expiration date of such Stock Option).
(ii) SURRENDER OR EXCHANGE. A Stock
Appreciation Right shall entitle the
optionee to surrender to the Company
unexercised the Stock Option, or portion
thereof, to which it is related, or any
portion thereof, and to receive from the
Company in exchange therefor that number
of shares of Common Stock having an
aggregate fair market value equal to the
excess of the fair market value on the
date of exercise of one share of Common
Stock over the option price per share
specified in such Stock Option,
multiplied by the number of shares of
Common Stock subject to the Stock
Option, or portion thereof, which is so
surrendered. The Board shall be entitled
to elect to settle any part or all of
the Company's obligation arising out of
the exercise of a Stock Appreciation
Right by the payment to the optionee of
cash or by check equal to the aggregate
fair market value on the date on which
the Stock Appreciation Right is
exercised of that part or all of the
shares of Common Stock the Company would
otherwise be obligated to deliver.
(c) CASH SETTLEMENT RESTRICTIONS.
(i) Notwithstanding Sections 6(b) and 9
hereof, so long as the grantee of a
Stock Appreciation Right is an officer,
an owner of 10% or more of an equity
security of the Company that is
registered under the Securities Exchange
Act of 1934, or a director of the
Company, the Company's right to elect to
settle any part or all of its obligation
arising out of the exercise of a Stock
Appreciation Right by the payment of
cash or by check shall not apply unless
such exercise occurs either: (1)
pursuant to the provisions of subsection
(ii) below, or (2) during the period
beginning on the third business day
following the date of release by the
Company for publication of its quarterly
or annual summary statements of sales
and earnings and ending on the twelfth
business day following such date.
(ii) In the event that, pursuant to Section
9, the Company shall cancel all
unexercised Stock Options as of the
effective date of a merger or other
transaction provided therein or in the
case of dissolution of the Company, then
each Stock Appreciation Right held by an
officer, an owner of 10% or more of an
equity security of the Company that is
registered under the Securities Exchange
Act of 1934, or a director of the
Company, shall be automatically
exercised on such date within 30 days
prior to the effective date of such
transaction or dissolution as the Board
shall determine and, in the absence of
such determination, on the last business
day immediately prior to such effective
date.
7. TRANSFERABILITY.
No Stock Option or Stock Appreciation Right may be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except as provided by will or the applicable laws of descent or distribution,
and no Stock Option or Stock Appreciation Right shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of a Stock Option or Stock Appreciation
Right, or levy of attachment or similar process upon the Stock Option or Stock
Appreciation Right not specifically permitted herein shall be null and void and
without effect. A Stock Option or Stock Appreciation Right may be exercised
only by a selected executive during his or her lifetime, or pursuant to Section
11 (c), by his or
Selected Executive Stock Option Plan Page 4
<PAGE> 38
her estate or the person who acquires the right to exercise such Stock Option
or Stock Appreciation Right upon his or her death by bequest or inheritance.
8. ADJUSTMENT PROVISIONS.
The aggregate number of shares of Common Stock with respect to
which Stock Options and Stock Appreciation Rights may be granted, the aggregate
number of shares of Common Stock subject to each outstanding Stock Option and
Stock Appreciation Right, and the option price per share of each such Stock
Option, may all be appropriately adjusted as the Board may determine for any
increase or decrease in the number of shares of issued Common Stock resulting
from a subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or the payment of a share dividend or other increase or decrease in the number
of such shares outstanding effected without receipt of consideration by the
Company. Adjustments under this Section 8 shall be made according to the sole
discretion of the Board, and its decisions shall be binding and conclusive.
9. DISSOLUTION, MERGER AND CONSOLIDATION.
Except as otherwise provided in Section 6(c)(ii), upon the
dissolution or liquidation of the Company, or upon a merger or consolidation of
the Company in which the Company is not the surviving corporation, each Stock
Option and Stock Appreciation Right granted hereunder shall expire as of the
effective date of such transaction; provided, however, that the Board shall
give at least 30 days prior written notice of such event to each optionee
during which time he or she shall have a right to exercise his or her (1)
vested or (2) if specifically provided in the option grant, vested and not
vested, wholly or partially unexercised Stock Option (without regard to
installment exercise limitations, if any) or Stock Appreciation Right and,
subject to prior expiration pursuant to Section 11(b) or (c), each Stock Option
and Stock Appreciation Right shall be exercisable after receipt of such written
notice and prior to the effective date of such transaction.
10. EFFECTIVE DATE AND CONDITIONS SUBSEQUENT TO EFFECTIVE DATE.
The Plan shall become effective on the date established by the
Board of Directors. No grant or award shall be made under the Plan more than
ten (10) years from the date of adoption hereof; provided, however, that the
Plan and all Stock Options and Stock Appreciation Rights granted under the Plan
prior to such date shall remain in effect and subject to adjustment and
amendment as herein provided until they have been satisfied or terminated in
accordance with the terms of the respective grants or awards and the related
agreements.
11. TERMINATION OF EMPLOYMENT.
(a) Each Stock Option and Stock Appreciation Right shall,
unless sooner expired pursuant to Section 11 (b) or
(c) below, expire on the first to occur of the date
one day after the tenth anniversary of the date of
grant thereof or the expiration date set forth in the
applicable option agreement.
(b) A Stock Option and Stock Appreciation Right shall
expire on the first to occur of the applicable date
set forth in paragraph (a) next above and the date
that the employment of the selected executive with
the Company and all subsidiaries terminates for any
reason other than death or disability. Upon receipt
of notice of termination of employment, whether
written or oral, Optionee shall not thereafter have
the right to exercise the Stock Option or Stock
Appreciation Rights. Notwithstanding the preceding
provisions of this paragraph, the Board, in its sole
discretion, may, by written notice given to a former
employee, permit the former employee to exercise
Stock Options or Stock Appreciation Rights during a
period following his or her termination of
employment, which period shall not exceed ninety (90)
days. In no event, however, may the Board permit a
former employee to exercise a Stock Option or Stock
Appreciation Right after the expiration date
contained in the agreement evidencing such Stock
Option or Stock Appreciation Right. Notwithstanding
the preceding provisions of this paragraph, if the
Board permits a former
Selected Executive Stock Option Plan Page 5
<PAGE> 39
employee to exercise Stock Options or Stock
Appreciation Rights during a period following his or
her termination of employment pursuant to such
preceding provisions, such Stock Options or Stock
Appreciation Rights shall, to the extent unexercised,
expire on the date that such former employee violates
(as determined by the Board) any covenant not to
compete in effect between the Company and/or its
subsidiaries and the former employee.
(c) If the employment of a selected executive with the
Company and all subsidiaries terminates by reason of
disability (as determined by the Board) or by reason
of death, his or her Stock Options and Stock
Appreciation Rights, if any, shall expire on the
first to occur of the date set forth in paragraph (a)
of this Section 11 or the first anniversary of such
termination of employment.
12. MISCELLANEOUS.
(a) LEGAL AND OTHER REQUIREMENTS. The obligation of the
Company to sell and deliver Common Stock under the
Plan shall be subject to all applicable laws,
regulations, rules and approvals, including, but not
by way of limitation, the effectiveness of a
registration statement under the Securities Act of
1933 if deemed necessary or appropriate by the
Company. Certificates for shares of Common Stock
issued hereunder may bear such legend as the Board
shall deem appropriate.
(b) NO OBLIGATION TO EXERCISE OPTIONS. The granting of a
Stock Option shall impose no obligation upon an
optionee to exercise such Stock Option.
(c) TERMINATION AND AMENDMENT OF PLAN. The Board, without
further action on the part of the shareholders of the
Company, may from time to time alter, amend or
suspend the Plan or any Stock Option or Stock
Appreciation Right granted hereunder or may at any
time terminate the Plan, except that, it may not
(except to the extent provided in Section 8 hereof):
(i) change the total number of shares of Common Stock
available for grant under the Plan; (ii) extend the
duration of the Plan; (iii) increase the maximum term
of Stock Options; or (iv) change the class of
employees eligible to be granted Stock Options or
Stock Appreciation Rights under the Plan. No action
taken by the Board under this Section may materially
and adversely affect any outstanding Stock Option or
Stock Appreciation Right without the consent of the
holder thereof.
(d) APPLICATION OF FUNDS. The proceeds received by the
Company from the sale of Common Stock pursuant to
Stock Options will be used for general corporate
purposes.
(e) WITHHOLDING TAXES. Upon the exercise of any Stock
Option or Stock Appreciation Right, the Company shall
have the right to require the optionee to remit to
the Company an amount sufficient to satisfy an
federal, state and local withholding tax requirements
prior to the delivery of any certificate or
certificates for shares of Common Stock. Whenever
under the Plan payments are to be made by the Company
in cash or by check, such payments shall be net of
any amounts sufficient to satisfy all federal, state
and local withholding tax requirements.
(f) RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan
or any agreement entered into pursuant to the Plan
shall confer upon any selected executive or other
optionee the right to continue in the employment of
the Company or any subsidiary or affect any right
which the Company or any subsidiary may have to
terminate the employment of such selected executive
or other optionee.
Selected Executive Stock Option Plan Page 6
<PAGE> 40
(g) RIGHTS AS A SHAREHOLDER. No optionee shall have any
right or privileges as a shareholder unless and until
certificates for shares of Common Stock are issued to
him or her.
(h) LEAVES OF ABSENCE AND DISABILITY. The Board shall be
entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan
in respect of any leave of absence taken by or
disability of any selected executive. Without
limiting the generality of the foregoing, the Board
shall be entitled to determine (I) whether or not any
such leaves of absence shall constitute a termination
of employment within the meaning of the Plan, and
(ii) the impact, if any, of any such leave of absence
on awards under the Plan theretofore made to any
selected executive who takes such leave of absence.
(i) FAIR MARKET VALUE. Whenever the fair market value of
Common Stock is to be determined under the Plan as of
a given date, such fair market value shall be:
(i) If the Common Stock is traded on the
over-the-counter market, the average of
the mean between the bid and the asked
price for the Common Stock at the close
of trading for the ten (10) consecutive
trading days immediately preceding such
given date;
(ii) If the Common Stock is listed on a
national securities exchange, the
average of the closing prices of the
Common Stock on the Composite Tape for
the ten (10) consecutive trading days
immediately preceding such given date;
and
(iii) If the Common Stock is neither traded on
the over-the-counter market nor listed
on a national securities exchange, such
value as the Board, in good faith, shall
determine.
(j) NOTICES. Every direction, revocation or notice
authorized or required by the Plan shall be deemed
delivered to the Company (a) on the date it is
personally delivered to the Secretary of the Company
at its principal executive offices or (b) three
business days after it is sent by registered or
certified mail, postage prepaid, addressed to the
Secretary at such offices; and shall be deemed
delivered to an optionee (a) on the date it is
personally delivered to him or her or (b) three
business days after it is sent by registered or
certified mail, postage prepaid, addressed to him or
her at the last address shown for him or her on the
records of the Company.
(k) APPLICABLE LAW. All questions pertaining to the
validity, construction and administration of the Plan
and Stock Options and Stock Appreciation Rights
granted hereunder shall be determined in conformity
with the laws of the State of Texas.
(l) ELIMINATION OF FRACTIONAL SHARES. If under any
provision of the Plan which requires a computation of
the number of shares of Common Stock subject to a
Stock Option or Stock Appreciation Right, the number
so computed is not a whole number of shares of Common
Stock, such number of shares of Common Stock shall be
rounded down to the next whole number.
(m) D STOCKHOLDERS AGREEMENT. Notwithstanding anything
to the contrary contained in the Plan, the Company
shall be under no obligation to sell or deliver
Common Stock under the Plan to an optionee unless
such optionee shall execute (i) the D Stockholders
Agreement dated effective in December 31, 1993 as
amended, with respect to such Common Stock, a copy of
which will be furnished Optionee reasonably prior to
any exercise.
Selected Executive Stock Option Plan Page 7
<PAGE> 41
This Plan, in accordance with Section 10, is effective as of the
date evidenced in the Preamble hereof.
CHAMPION HEALTHCARE CORPORATION
By: _______________________________
Its: _______________________________
Selected Executive Stock Option Plan Page 8
<PAGE> 42
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<S> <C> <C> <C>
PROXY CHAMPION HEALTHCARE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 25, 1995.
The undersigned hereby appoints Charles R. Miller and James G. VanDevender or any one of them, with full power of
substitution, attorneys and proxies of the undersigned to vote all shares of common stock of Champion Healthcare Corporation (the
"Company") which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held on May 25,
1995, at Houston, Texas at _*_:00 a.m. Texas time:
1. For the election (except as indicated below) of: Charles R. Miller, James G. VanDevender, Nolan Lehmann, Paul B.
Queally, James A. Conroy, David S. Spencer, Manuel M. Ferris, Scott F. Meadow, William G. White, and Richard D.
Sage.
Withhold authority for all nominees listed.
Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.
___________________________________________________________________________________________
2. FOR AGAINST ABSTAIN proposal to approve the Selected Executive Stock
[ ] [ ] [ ] Option Plan No.5.
3. FOR AGAINST ABSTAIN ratification of appointment for Coopers & Lybrand,
[ ] [ ] [ ] L.L.P., as the Company's auditors for 1995.
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All as described in the Notice of Meeting of Stockholders
and Proxy Statement, receipt of which is hereby acknowledged.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. IF NO CONTRARY SPECIFICATION IS MADE, IT WILL BE
VOTED "FOR" EACH OF THE PROPOSALS SET FORTH.
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<S> <C>
Dated this _____ day of __________, 1995
_______________________________________
_______________________________________
Signature(s) of stockholder(s)
Please sign exactly as your name appears on your stock certificate.
When signing as an executor, administrator, trustee or other
representative, please sign your full title. All joint owners should
sign.
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PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY.
