<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Response Oncology, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $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
RESPONSE ONCOLOGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of the
Shareholders of Response Oncology, Inc. (the "Annual Meeting") will be held at
the offices of Response Oncology, Inc. (the "Company"), 1775 Moriah Woods
Blvd., Memphis, Tennessee 38117 on Thursday, May 16, 1996, at 11:00 a.m., local
time, for the following purposes:
1. To elect three Class III directors to serve one year terms
ending in 1997 and one Class I director to serve the balance
of a three year term ending in 1998, or until their successors
have been duly elected and qualified;
2. To ratify the selection of KPMG Peat Marwick LLP as the
Company's independent auditors for 1996;
3. To consider and act upon a proposal to adopt the 1996 Stock
Incentive Plan providing for the issuance to officers,
employees, directors, consultants and other designated persons
of up to 630,000 shares of Common Stock; and
4. To consider and act upon a proposal to amend the 1990
Non-Qualified Stock Option Plan to authorize the issuance of
an additional 265,000 shares of Common Stock.
Only shareholders of the Company of record as of the close of business
on April 5, 1996, will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournment thereof.
There is enclosed, as a part of this Notice, a Proxy Statement which
contains further information regarding the meeting and the above proposals.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daryl P. Johnson
--------------------
DARYL P. JOHNSON
Secretary
April 22, 1996
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. SHAREHOLDERS WHO ATTEND THE
MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE ALREADY SENT IN A
PROXY.
<PAGE> 3
RESPONSE ONCOLOGY, INC.
1775 MORIAH WOODS BLVD.
MEMPHIS, TENNESSEE 38117
PROXY STATEMENT
GENERAL INFORMATION
THIS PROXY STATEMENT is provided in connection with the solicitation
of proxies by the Board of Directors of Response Oncology, Inc. (the "Company")
for use at the annual meeting of shareholders to be held on May 16, 1996, (the
"Annual Meeting") and any adjournment thereof. The mailing address of the
principal executive offices of the Company is 1775 Moriah Woods Blvd., Memphis,
Tennessee 38117. This Proxy Statement and the Proxy Form, Notice of Meeting
and the Company's Annual Report, all enclosed herewith, are first being mailed
to the shareholders of the Company on or about April 22, 1996.
THE PROXY
The solicitation of proxies is being made primarily by the use of the
mails. The cost of preparing and mailing this Proxy Statement and accompanying
material, and the cost of any supplementary solicitations, which may be made by
mail, telephone, telegraph or personally by officers and employees of the
Company, will be borne by the Company. The shareholder giving the proxy has
the power to revoke it by delivering written notice of such revocation to the
Secretary of the Company prior to the Annual Meeting or by attending the
meeting and voting in person. The proxy will be voted as specified by the
shareholder in the spaces provided on the Proxy Form or, if no specification is
made, it will be voted in accordance with the terms thereof.
Shares of the Company's common stock, $.01 par value per share
("Common Stock") represented by properly executed proxies, unless previously
revoked, will be voted in accordance with the instructions on such proxies. If
no instruction is indicated on the proxy, the named holders of the proxies will
vote such shares of Common Stock (i) FOR the election of all Class III director
nominees and the Class I director nominee named in this Proxy Statement; (ii)
FOR the ratification and selection of KPMG Peat Marwick LLP as the Company's
independent auditors for 1996; (iii) FOR the adoption of the 1996 Stock
Incentive Plan; and (iv) FOR the amendment to the 1990 Non-Qualified Stock
Option Plan providing an additional 265,000 shares of Common Stock for issuance
pursuant thereto. The named holders of proxies also will use their discretion
in voting the shares of Common Stock in connection with any other business that
properly may come before the Annual Meeting.
VOTING RIGHTS
Each outstanding share of Common Stock is entitled to one vote. Only
shareholders of record at the close of business on April 5, 1996 will be
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof. As of the close of business on April 5, 1996, the Company had
outstanding 7,371,589 shares of Common Stock. Of the total number of
outstanding shares of Common Stock on April 5, 1996, the Directors and
executive officers of the Company, consisting of 13 persons, owned 774,221
shares comprising 10.5% of such total.
<PAGE> 4
REQUIRED VOTE
Approval of each matter submitted to the shareholders of the Company
for a vote at the Annual Meeting will require the affirmative vote of a
majority of the shares of Common Stock voting at the Annual Meeting in person
or by proxy.
OWNERSHIP OF THE COMPANY'S COMMON STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth information as of February 15, 1996,
regarding each person known to the Company to be the beneficial owner of more
than five percent of its Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
------------------------ --------------------- ----------
<S> <C> <C>
William H. West, M.D. 817,760 (2) 11.09%
Seafield Capital Corporation 4,121,700 (3) 55.91%
P.O. Box 410949
Kansas City, Missouri 64141
</TABLE>
(1) The percentages shown are based on 7,371,589 shares of Common Stock
outstanding on February 15, 1996 plus, as to each individual and group
listed, the number of shares of Common Stock deemed to be owned by
such holder for purposes of Rule 13d-3 under the Securities Exchange
Act of 1934, assuming conversion of the Company's Series A Stock and
exercise of all options and warrants held by such holder, which stock,
options and warrants may be converted or exercised within sixty (60)
days of February 15, 1996.
(2) Includes 157,780 shares of Common Stock which Dr. West has the right
to acquire pursuant to the exercise of options and warrants.
(3) W. Thomas Grant, P. Anthony Jacobs, and James R. Seward, directors of
the Company, are officers and directors of Seafield Capital
Corporation. Each such director disclaims beneficial ownership in the
Common Stock owned by Seafield Capital Corporation.
The following table sets forth, as of February 15, 1996, certain
information regarding the beneficial ownership of common stock of Seafield
Capital Corporation ("Seafield") by each director (including the nominees for
election as directors) of the Company and by all directors and executive
officers of the Company as a group. Messrs. Bumstead, Bovender, Clark, Hutts
and Weaver and Drs. Kalman and West were not beneficial owners of any Seafield
common stock as of February 15, 1996. Mr. Johnson owned 500 shares of Seafield
common stock on that date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (5) CLASS (1)
------------------------ ------------------------ ----------
<S> <C> <C>
W. Thomas Grant II 156,141 (2) 2.4%
P. Anthony Jacobs 49,867 (3) *
James R. Seward 44,940 (4) *
All directors and executive
officers as a group (13 persons) 251,448 3.9%
</TABLE>
(1) The percentages shown are based on 6,462,933 shares of Seafield common
stock outstanding on February 15, 1996 plus, as to each individual
listed, the number of shares of Seafield common stock deemed to be
owned by such holder for purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, assuming exercise of all stock options held by
such holder(s) which may be exercised on or within sixty (60) days of
February 15, 1996.
(2) Includes 30,293 shares held by Mr. Grant as custodian for his
children; includes 45,000 held in a family trust for which Mr. Grant
serves as a co-trustee, and, in that capacity, shares voting and
investment power; and includes 11,585 shares owned by Mr. Grant's
spouse, with respect to which Mr. Grant disclaims beneficial
ownership.
3
<PAGE> 5
(3) Includes 1,000 shares owned by Mr. Jacobs' spouse and 200 shares owned
by Mr. Jacobs' son, with respect to which Mr. Jacobs disclaims
beneficial ownership.
(4) Includes 1,500 shares held in a family trust for which Mr. Seward
serves as a co-trustee, and in that capacity shares voting and
investment powers.
(5) With respect to each listed individual and directors and executive
officers as a group, includes shares of Seafield common stock issuable
upon the exercise of options under Seafield's stock option and
incentive plans that were exercisable on or within 60 days of February
15, 1996, as follows: Mr. Grant, 5,000 shares; Mr. Seward, 5,000
shares; directors and executive officers as a group (13 persons),
10,000 shares. Also includes, with respect to each listed individual
and directors and executive officers as a group, the following numbers
of shares held in their respective accounts under the Seafield Capital
Corporation 401(k) Plan and Trust as of December 31, 1995 (based upon
the Plan statement as of that date), as to which shares of common
stock the individual shares investment power but, except in the case
of Mr. Seward, who shares voting power with respect to all 10,346
shares held in the Plan, does not have voting power: Mr. Grant, 1,066
shares; Mr. Jacobs, 1,786 shares; Mr. Seward, 640 shares (plus an
additional 9,706 shares with respect to which Mr. Seward shares voting
power as a member of the 401(k) Plan Administrative Committee);
directors and executive officers as a group, 10,346 shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock as of February 15, 1996 by (i) each director, (ii) each
director nominee, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all directors, nominees and executive officers as
a group. None of the Company's officers or directors are beneficial owners of
any of the Company's Series A Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
------------------------ -------------------- ---------
<S> <C> <C>
Jack O. Bovender, Jr 5,000 (3) *
Director
Frank M. Bumstead 104,781 (4) 1.42%
Director
Joseph T. Clark 124,640 (5) 1.66%
Director, President and Chief
Executive Officer
W. Thomas Grant II (2) 5,400 (6) *
Director
Joseph C. Hutts 5,000 (7) *
Director
P. Anthony Jacobs (2) 9,400 (8) *
Director
Daryl P. Johnson 28,440 (9) *
Chief Financial Officer
Leonard A. Kalman, M.D. 107,163 (10) 1.43%
Director
James R. Seward (2) 9,400 (11) *
Director
Charles H. Weaver, M.D. 31,000 (12) *
Chief Medical Officer
William H. West, M.D. 817,760 (13) 10.86%
Chairman
ALL DIRECTORS AND EXECUTIVE 1,242,984 (14) 15.85%
OFFICERS AS A GROUP (13 PERSONS)
</TABLE>
4
<PAGE> 6
(1) The percentages shown are based on 7,371,589 shares of Common Stock
outstanding on February 15, 1996 plus, as to each individual and group
listed, the number of shares of Common Stock deemed to be owned by
such holder for purposes of Rule 13d-3 under the Securities Exchange
Act of 1934 assuming exercise of all options, conversion rights and
warrants held by such holder pursuant to which such holder may
acquire Common Stock through the exercise thereof on or within sixty
(60) days of February 15, 1996.
(2) W. Thomas Grant, P. Anthony Jacobs, and James R. Seward, directors of
the Company, are officers and directors of Seafield Capital
Corporation. Each such director disclaims beneficial ownership in the
Common Stock owned by Seafield Capital Corporation.
(3) Represents shares of Common Stock which Mr. Bovender has the right to
acquire pursuant to the exercise of options.
(4) Includes 5,000 shares of Common Stock which Mr. Bumstead has the right
to acquire pursuant to the exercise of options and warrants.
(5) Includes 119,840 shares of Common Stock which Mr. Clark has the right
to acquire pursuant to the exercise of options.
(6) Includes 5,000 shares of Common Stock which Mr. Grant has the right to
acquire pursuant to the exercise of options.
(7) Represents shares of Common Stock which Mr. Hutts has the right to
acquire pursuant to the exercise of options.
(8) Includes 5,000 shares of Common Stock which Mr. Jacobs has the right
to acquire pursuant to the exercise of options.
(9) Includes 28,000 shares of Common Stock which Mr. Johnson has the right
to acquire pursuant to the exercise of options.
(10) Includes 30,000 shares of Common Stock which Dr. Kalman has the right
to acquire pursuant to the exercise of options. Includes 77,143
shares of Common Stock which Dr. Kalman has the right, pursuant to a
power of attorney, to acquire upon conversion of a convertible note
issued by the Company. Incudes 20 shares held by Dr. Kalman's wife in
an individual retirement account, with respect to which Dr. Kalman
disclaims beneficial ownership.
(11) Includes 5,000 shares of Common Stock which Mr. Seward has the right
to acquire pursuant to the exercise of options.
(12) Represents shares of Common Stock which Dr. Weaver has the right to
acquire pursuant to the exercise of options and warrants.
(13) Includes 157,780 shares of Common Stock which Dr. West has the right
to acquire pursuant to the exercise of options and warrants.
(14) Includes 468,763 shares of Common Stock which directors and executive
officers as a group have rights to acquire pursuant to the exercise of
options and the conversion of convertible notes of the Company.
* Represents less than 1% of total outstanding shares of Common Stock
PROPOSAL NO. 1
ELECTION OF DIRECTORS
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Director Meetings. The business of the Company is under the general
management of its Board of Directors as provided by the Company's by-laws and
the laws of Tennessee, the Company's state of incorporation. The Board of
Directors regularly meets quarterly during the Company's fiscal year. There
are presently nine directors, seven of whom are not executive officers or
employees of the Company ("Independent Directors"). The Board of Directors
held six meetings during fiscal 1995. Mr. Hutts attended fewer than 75% of the
meetings of the board of directors and committees during the year.
Executive Committee. The Board of Directors has established an
Executive Committee, which currently consists of Messrs. Bumstead, Jacobs and
Seward, each of whom is an Independent Director. The Executive Committee was
created to have more routine, detailed meetings with management and is
empowered to act on behalf of the Board of Directors between meetings when such
action is considered necessary. The Executive Committee met three times during
fiscal 1995.
5
<PAGE> 7
Audit Committee. The Board of Directors has established an Audit
Committee, which currently consists of Messrs. Bovender, Bumstead, Hutts,
Jacobs and Seward (Chairman), each of whom is an Independent Director. The
Audit Committee provides assistance and advice to the board of directors on
auditing and related matters and reviews management's selection of independent
auditors. The Audit Committee met one time during fiscal 1995.
Nominating and Compensation Committee. The Board of Directors has
established a Compensation Committee, which currently consists of Messrs.
Bovender, Bumstead, Grant, Hutts, Jacobs (Chairman), Kalman and Seward, each of
whom is an Independent Director. The Compensation Committee reviews
compensation, including stock incentives, of the Company's executive officers,
and makes recommendations to the board of directors with respect to such
compensation matters. The Compensation Committee also administers the
Company's 1990 Non-Qualified Stock Option Plan and will administer the 1996
Stock Incentive Plan. The Compensation Committee serves as the Nominating
Committee of the Company. The Compensation Committee met three times during
fiscal 1995.
COMPENSATION OF DIRECTORS
Directors who are executive officers or employees of the Company do
not receive additional remuneration as directors. Independent Directors who
are not also executive officers or directors of Seafield receive an annual
retainer fee of $7,500 and $750 for each board meeting attended, exclusive of
meetings by telephone conference call. Independent Directors are granted
options to purchase 5,000 shares of Common Stock at the time of election to the
board of directors of the Company and are granted options to purchase 1,000
shares of Common Stock during each calendar quarter of service as a director of
the Company. To ensure compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, no options granted to such Independent Directors may be
exercised earlier than six months from the date of the grant. All directors of
the Company are eligible to receive reimbursement of expenses, if any, incurred
in attending meetings of the board of directors and committees thereof.
NOMINEES FOR DIRECTORS.
The Company's Charter divides the board of directors into three
classes, with each class having not less than one director nor more than five
directors. Class I directors are elected for terms of three years; Class II
directors for terms of two years; and Class III directors for terms of one
year. The board of directors has set at nine the number of directors
constituting the full board of directors.
The following four individuals have been nominated for election to
serve as directors of the Company. Dr. Kalman was appointed to the board of
directors in January 1996 to fill a vacancy as a Class I director to serve the
balance of a three year term expiring at the 1998 annual meeting and is
standing for election by the shareholders for the first time. See "Certain
Transactions with Directors" and "Business Relationships between Company and
Directors." Messrs. Clark, Seward and Grant are currently directors of the
Company. Messrs. Seward and Grant are designees of Seafield. See "Business
Relationships between Company and Directors." The remaining members of the
Board of Directors listed below will continue as members thereof until their
respective terms expire as indicated below.
Unless a shareholder specifies otherwise, it is intended that such
shareholder's shares of Common Stock will be voted for the election of the
nominees to serve as directors until the expiration of their respective terms
and until their successors are elected and qualified. If any nominee shall
become unavailable or unwilling to serve the Company as a director for any
reason, the persons named in the Proxy Form are expected to consult with the
management of the Company in voting the shares represented by them. The Board
of Directors has no reason to doubt the availability of any of the nominees,
and each has indicated his willingness to serve as a director of the Company if
elected.
6
<PAGE> 8
DIRECTOR NOMINEES - CLASS III
(TERMS EXPIRING 1997)
JOSEPH T. CLARK, age 40, has been a director of the Company since 1988. Mr.
Clark has served as the Chief Executive Officer of the Company since January
1996 and as President of the Company since February 1993. Mr. Clark was
formerly the Executive Vice President and Chief Operating Officer of the
Company from May 1989 to February 1993 and Secretary of the Company from
September 1988 to February 1993. Mr. Clark also served as Chief Financial
Officer of the Company from March 1988 to May 1989.
Committees: None
JAMES R. SEWARD, age 43, has been a director of the Company since 1990. Mr.
Seward has served as the Executive Vice President of Seafield since May 1993
and was the Senior Vice President of Seafield from August 1990 to May 1993.
Mr. Seward has also served as the Chief Financial Officer of Seafield since
February 1991. Mr. Seward is a director of Seafield and Lab One, Inc.
(approximately 82% of the common stock of which is owned by Seafield).
Committees: Audit (Chairman), Compensation and Executive
W. THOMAS GRANT II, age 45, has been a director of the Company since 1991. Mr.
Grant is the Chief Executive Officer of Seafield and has served as the Chairman
of the Board of Seafield since May 1993, prior to which time he served as the
President. Mr. Grant is a director of Kansas City Power & Light Company,
Commerce Bancshares, Inc., Seafield and Lab One, Inc.
Committees: Compensation
DIRECTOR NOMINEE - CLASS I
(TERM EXPIRING 1998)
LEONARD A. KALMAN, M.D., age 45, was appointed a director by the board of
directors of the Company in January 1996 and is standing for election for the
first time. Dr. Kalman is a practicing medical oncologist with Oncology
Hematology Group of South Florida, P.A., where he has practiced for more than
five years.
Committees: Compensation
7
<PAGE> 9
INCUMBENT DIRECTORS - CLASS II
(TERMS EXPIRING 1997)
P. ANTHONY JACOBS, age 54, has been a director of the Company since 1990. Mr.
Jacobs has served as the President of Seafield since May 1993 and the Chief
Operating Officer of Seafield since August 1990. Mr. Jacobs was the Executive
Vice President of Seafield from August 1990 to May 1993 and has been a Director
of Seafield since 1987. Mr. Jacobs is a director of Trenwick Group Inc.,
serving on its compensation committee, Seafield and Lab One Inc.
Committees: Audit, Compensation (Chairman) and Executive
JOSEPH C. HUTTS, JR., age 54, has been a director of the Company since 1993.
Mr. Hutts is the President, Chief Executive Officer and director of PhyCor,
Inc., a physician practice management company which operates multi-specialty
medical clinics, since 1988. Mr. Hutts is also a director of Renal Care Group,
Inc. and Quorum Health Group, serving on its compensation committee.
Committees: Audit, Compensation
JACK O. BOVENDER, age 50, has been a Director of the Company since 1994. Mr.
Bovender formerly served as the Chief Operating Officer of Hospital Corporation
of America from December 1992 until his retirement in March 1994. He was also
the President, Eastern Group Operations, Hospital Corporation of America from
June 1987 to December 1992. Mr. Bovender is also a Director of Quorum Health
Group.
Committees: Compensation
INCUMBENT DIRECTORS - CLASS I
(TERMS EXPIRING 1998)
WILLIAM H. WEST, M.D., age 48, has been a director of the Company since 1985.
He has served as Chairman of the Board of Directors of the Company since
February 1993. Dr. West served as Chief Executive Officer of the Company from
May 1989 to January 1996 and Medical Director of the Company from 1985 to
February 1996. Dr. West served as President of the Company from May 1989 to
February 1993.
Committees: None
FRANK M. BUMSTEAD, age 54, has been a director of the Company since 1985. He
has served as the Vice-Chairman of the Board of the Company since February
1993. Mr. Bumstead was the Chairman of the Board of the Company from January
1989 to February 1993. He has been the Chairman and Chief Executive Officer of
FBMS Financial, Inc., a financial management and business consulting firm,
since January 1990. Mr. Bumstead is also a director of First Union National
Bank of Tennessee, Nashville Country Club, Inc. and Veritus Music
Entertainment, Inc., serving on the compensation committees of the latter two
companies.
Committees: Audit, Compensation, Executive (Chairman)
Unless a shareholder specifies otherwise, it is intended that such
shareholder's shares will be voted FOR the election of the foregoing nominees
to serve as directors until the next annual meeting and until their successors
are elected and qualified. If any nominee shall become unavailable or
unwilling to serve the Company as a director for any reason, the persons named
in the Proxy Form are expected to consult with the management of the
8
<PAGE> 10
Company in voting the shares represented by them. The Board of Directors has
no reason to doubt the availability of any of the nominees, and each has
indicated his willingness to serve as a director of the Company if elected.
CERTAIN TRANSACTIONS WITH DIRECTORS.
The Company operates outpatient cancer treatment centers, one of which
is located in Memphis, Tennessee adjacent to The West Clinic, P.C., an oncology
practice in which Dr. West is a shareholder. The West Clinic provides space
and other support services to the Company in the West Clinic premises. During
the year ended December 31, 1995, the Company paid $59,000 to The West Clinic,
P.C. for the use of space and support services. In addition, the Company
provides pharmacy services to The West Clinic, P.C. and received $3,032,000
from The West Clinic, P.C. for these services during the year ended December
31, 1995. As of December 31, 1995, the Company carried an account receivable
balance with The West Clinic, P.C. in the amount of $636,000, all of which was
paid in March 1996.
In January 1996, the Company acquired from Dr. Kalman all common stock
owned by Dr. Kalman in Oncology Hematology Group of South Florida, P.A. (the
"Group") for an aggregate purchase price of approximately $1,540,000. As
partial consideration for the acquisition, the Company executed a promissory
note payable to the stockholders of the Group in the principal amount of
approximately $5,960,000, of which Dr. Kalman's beneficial interest is
approximately $745,000. The note bears interest at the rate of 9% per annum
and is payable in 59 consecutive equal amortized installments of principal and
interest. Payments on the note may be received, at the election of the Group,
in shares of Common Stock based on a conversion rate of $17.50 per share.
In April 1996, the Company borrowed the principal amount of
$10,000,000 from Seafield in order to finance acquisitions. The Company
executed an unsecured promissory note for the entire principal amount of the
loan, which note bears interest at the annual rate of prime plus 1% and matures
on December 31, 1996, subject to acceleration in certain events. The
promissory note is convertible into shares of Common Stock on and after August
1, 1996 at the option of Seafield at a conversion price equal to the fair
market value of the Common Stock at the time of conversion.
BUSINESS RELATIONSHIPS BETWEEN COMPANY AND DIRECTORS
In September 1991, the Company and Seafield executed an agreement (the
"Offering Agreement") pursuant to which Seafield purchased a controlling block
of the Common Stock and warrants to purchase additional shares of Common Stock.
Pursuant to the Offering Agreement, the Company is required to obtain
Seafield's consent prior to any of the following: (i) the sale or issuance of
any options, warrants, convertible securities or other equity or ownership
interests in the Company, other than specified options and warrants; (ii)
declaration of any dividend or other distribution in respect of any class of
the Company's capital stock, except for dividends in respect of the Company's
Class A Preferred Stock; (iii) taking any action, except to the extent required
by the fiduciary obligations of the board of directors of the Company, which
would result in the vesting of any dissenters' or appriasal rights in favor of
any holder of the Company's capital stock; (iv) consummation of any transaction
with any officer, director or affiliate of the Company on terms and conditions
less favorable than those available to the Company from unaffiliated third
parties; or (v) taking any action that would cause the Company to become
subject to the Tennessee Control Share Act. Pursuant to the Offering
Agreement, the Company is required to use its best efforts to nominate at least
two representatives designated by Seafield for election to the Company's board
of directors. Presently, Messrs. Grant, Jacobs and Seward are Seafield
designees serving as directors of the Company, with Messrs. Grant and Seward
being nominated for reelection to a term of one year.
The Company and the Group, of which Dr. Kalman is a stockholder, are
parties to a management services agreement, executed in January 1996 in
connection with the above-described acquisition, pursuant to which the Group
pays the Company a management fee in exchange for the Company managing all of
the non-medical aspects of the Group's oncology practice. The agreement
presently provides for the payment by the Group of $720,000 in management fees,
plus incentive fees in the event certain performance criteria are met by the
Group.
9
<PAGE> 11
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS OF THE COMPANY
DARYL P. JOHNSON, age 36, has served as Executive Vice President and Chief
Financial Officer of the Company since October 1991 and has served as
Secretary of the Company since February 1993. Prior to being appointed to his
current position, Mr. Johnson was Controller of the Company from June 1990
until October 1991.
CHARLES H. WEAVER, M.D., age 34, has served as the Chief Medical Officer of the
Company since February 1996. Prior to being appointed to his current position,
Dr. Weaver was the Scientific Director of the Company from February 1994 until
February 1996. Prior to joining the Company, Dr. Weaver was the Acting
Instructor, Department of Internal Medicine at the University of Washington
from 1991 until 1994.
JEFFREY H. WINOKUR, age 37, has served as Executive Vice President of Marketing
of the Company since February 1996. Prior to joining the Company at that time,
Mr. Winokur served as Vice President of Managed Care with Medpartners/Mullikin,
Inc., a physician practice management company, since December 1993. From March
1991 until December 1993, Mr. Winokur served as a consultant for Performance
Group, a healthcare consulting firm.
JOHN A. GOOD, age 38, has served as Executive Vice President, General Counsel
of the Company since April 1, 1996. Prior to joining the Company at that time,
Mr. Good was a corporate/securities partner in the Memphis, Tennessee law firm
of Baker, Donelson, Bearman & Caldwell, P.C. from March 1994 until April 1996.
Prior to that, Mr. Good was a corporate/securities partner in the Memphis,
Tennessee law firm of McDonnell Boyd from July 1990 until March 1994.
EMPLOYMENT CONTRACTS; CHANGE OF CONTROL ARRANGEMENTS
The Company has employment agreements with Mr. Clark and Dr. Weaver
that expire December 31, 1997, subject to extension for consecutive one year
periods at the election of the parties. Pursuant to such contracts, Mr. Clark
and Dr. Weaver are paid a base salary of $200,000 and $208,000, respectively.
Mr. Clark participates in a bonus plan that potentially pays him up to 100% of
his base salary upon achievement of certain predetermined goals. The
agreements are terminable by the Company only for cause. In the event of a
change in control of the Company, if either officer's employment is terminated
within one year after such change in control, Mr. Clark and Dr. Weaver will be
entitled to severance payments equal to 300% and 200%, respectively, of their
then-current base salary, subject to limitations consistent with the provisions
of Section 280G of the Internal Revenue Code of 1986, as amended. In the
event the officer's employment is terminated by the Company without cause,
then the officer will be entitled to receive his base compensation for the
duration of the term of the agreement, provided he does not compete with the
Company during such period. However, the officer may, in his sole discretion,
waive his right to receive additional compensation following such termination
of employment, in which event there will be no restriction upon his competing
with the Company.
The Company also has an employment agreement with Dr. West and Mr. Johnson
that expire December 31, 1996, subject to extension for additional one year
periods at the election of the parties. The Company shall pay Dr. West and Mr.
Johnson annual minimum base salaries of $150,000 and $75,000, respectively, to
be reviewed annually and subject to an increase or decrease according to the
policies and practices adopted by the Board. In addition, each are eligible to
receive annual incentive compensation awards. If the named executives are
terminated without cause, the Company will pay Dr. West 150% of his then
current base salary, and Mr. Johnson 50% of his then current base salary. With
respect to Dr. West, he may elect to terminate his employment with the Company
at any time within six months after the Company experiences a change in control
from Seafield selling shares of their stock to an unaffiliated entity
sufficient to give such entity greater than fifty percent (50%) voting control
of the Company. Upon such termination the Company will pay Dr. West 150% of
his then current base salary. At December 31, 1995 the base salaries of Dr.
West, Mr. Clark, and Mr. Johnson were $225,000 and $140,000, respectively. This
severance payment is payable in a lump sum, or at the option of the Company,
over an eighteen (18) month period for Dr. West and over a six (6) month period
for Mr. Johnson. The named executives are not entitled to any severance
payment in the event they are terminated for "cause", as defined in the
Agreements. The named executives' employment agreements also contain
restrictive covenants pursuant to which the executives have agreed not to
divulge confidential information of the Company and not to compete with the
Company or hire or solicit employees or clients of the Company during the term
of their employment by the Company and for a period of 24 months for Dr. West
and 12 months for Mr. Johnson after their employment terminates.
The Compensation Committee is currently negotiating replacement employment
agreements with Dr. West and Mr. Johnson.
10
<PAGE> 12
COMPENSATION TABLES
The following table sets forth the compensation for services rendered
for each of the Company's last three fiscal years, of the Chief Executive
Officer and its other most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation Awards
ANNUAL COMPENSATION -------------------
NAME AND PRINCIPAL ------------------- OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS SARs (1) PAYOUTS COMPENSATION
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
William H. West, M.D. 1995 $209,726 $148,250 62,500 0 $ 102 (2)
Chairman 1994 185,000 0 0 0 102 (2)
1993 185,000 0 73,600 0 102 (2)
- -----------------------------------------------------------------------------------------
Joseph T. Clark, 1995 $182,343 $135,000 83,400 0 $ 1,102 (2)
President and CEO 1994 155,000 0 0 0 852 (2)
1993 136,397 0 126,800 0 602 (2)
- -----------------------------------------------------------------------------------------
Daryl P. Johnson, 1995 $129,653 $ 76,250 27,200 0 $ 1,102 (2)
Executive Vice 1994 104,109 20,000 13,000 0 852 (2)
President and CFO 1993 93,846 10,000 23,000 0 21,470 (3)
- -----------------------------------------------------------------------------------------
Charles H. Weaver, 1995 $214,398 $ 77,250 15,000 0 $ 2,995 (2)
M.D., Chief Medical 1994 182,154 11,640 10,000 0 27,013 (4)
Officer 1993 0 0 20,000 0 0
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Reflects adjustment for a one-for-five reverse stock split effected by
the Company on November 1, 1995.
(2) Reflects Company contributions paid or accrued to the named
executive's account in the Company's 401(k) Profit Sharing Plan and
Trust and premiums paid for term life insurance.
(3) Includes $20,868 of reimbursement for moving expenses, with balance
reflecting Company contributions paid or accrued to the named
executive's account in the Company's 401(k) Profit Sharing Plan and
Trust and premiums paid for term life insurance.
(4) Includes $26,342 of reimbursement for moving expenses, with balance
reflecting Company contributions paid or accrued to the named
executive's account in the Company's 401(k) Profit Sharing Plan and
Trust and premiums paid for term life insurance.
11
<PAGE> 13
Option Grants for the Year Ended December 31, 1995. The following
table provides information on option grants by the Company to executive
officers listed in the table above for the year ended December 31, 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realization
Value at
Individual Grants Assumed Rates of
------------------------------------------------------------- Annual Stock Price
% of Total Options (1) Appreciation for
Granted to Exercise Option Term (2)
Options Employees in Price Expiration ----------------------
Granted Fiscal Year ($/Share) Date 5% 10%
------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Clark 83,400 (3) 20.80% $12.50 09/07/05 $660,717 $1,669,588
- --------------------------------------------------------------------------------------------------------------
Daryl P. Johnson 22,200 (3) 5.54% $12.50 09/07/05 $175,874 $ 444,423
- --------------------------------------------------------------------------------------------------------------
Charles H. Weaver 15,000 (3) 3.74% $12.50 09/07/05 $118,834 $ 300,286
- --------------------------------------------------------------------------------------------------------------
William H. West 62,500 (3) 15.59% $12.50 09/07/05 $495,142 $1,251,190
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Exercise price represents fair market value of the Common Stock at the
date the stock option was granted.
(2) The amounts reflected were computed pursuant to Instruction 7 to Item
402(c) of Regulation S-K and are not intended to be a prediction of
future appreciation in the market value of the Common Stock. No gain
to the recipient of the foregoing options is realizable by the named
executive without an increase in the market value of the Common Stock
that benefits all shareholders.
(3) Options are vested in and exercisable by the recipient upon the
achievement of certain performance goals established by the
Compensation Committee and set forth in the individual option
agreements between the Company and the named executives.
Aggregated Option Exercises for the year ended December 31, 1995.
The following table provides information with respect to the exercise of stock
options by the executive officers listed above for the year ended December 31,
1995, and the value of each of their unexercised options at December 31, 1995.
No executive officer exercised any options during the year ended December 31,
1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Exercised Options Number of Shares Underlying Value of Unexercised
----------------- Unexercised Options In-the-Money Options
Shares at Fiscal Year End (#) at December 31, 1995(1)
acquired on Value ---------------------- -----------------------
Name exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Clark - - 119,840 130,360 $529,675 59,500
- --------------------------------------------------------------------------------------------------------------
Daryl P. Johnson - - 27,400 39,200 $ 68,438 29,250
- --------------------------------------------------------------------------------------------------------------
Charles H. Weaver - - 31,000 14,000 $ 66,250 52,500
- --------------------------------------------------------------------------------------------------------------
William H. West - - 95,280 92,220 $470,500 17,500
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the closing price of $12.50 per share of the Common Stock
on the National Market of The Nasdaq Stock Market on December 31, 1995.
12
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of independent outside directors. The Committee meets
periodically to review and recommend for Board approval the Company's
compensation program for senior executives and other key employees and
independently administers the stock option and other incentive plans of the
Company.
The guiding principle of the Committee is to establish a compensation
program which aligns executive compensation with the Company's objectives,
business strategies and financial and operational performance. In connection
with this principle, the Committee seeks to:
(1) Attract and retain qualified executives in the highly competitive
health care industry who will play a significant role in the achievement of the
Company's goals.
(2) Create a performance orientated environment that rewards
performance with respect to the financial and operational goals of the Company
and which takes into account industry-wide trends and performance levels.
(3) Reward executives for the strategic management and the long-term
enhancement of stockholder value.
Compensation for the key executives consists of three elements: base
salary and benefits, a performance based annual cash bonus and stock-based
compensation.
While the Committee seeks to weigh each element separately, it is
their collective value that is considered in ensuring that the executive
officers are appropriately compensated in a manner that advances both the
short-term and long-term interests of the stockholders.
BASE SALARY
The base salary for each executive officer is set on the basis of the
salary levels in effect for comparable positions in the industry, adjusted for
the executive's experience and performance level and internal comparability
considerations. The Company monitors industry salary levels with the
assistance of a compensation consultant. For 1995, executive officers' base
salaries were competitive with salaries for individuals in comparable positions
based on an industry survey commissioned by the Compensation Committee.
INCENTIVE COMPENSATION
An executive officer's performance-based annual cash bonus is based
upon pre-established financial goals as well as the achievement of strategic
objectives and milestones. The primary financial goals set by the compensation
committee have been target levels of earnings before interest and taxes (EBIT).
An aggregate incentive pool is determined by taking a percentage of EBIT and
allocating it among participants. In establishing a minimum level of EBIT
before any bonuses are earned the Committee considers prior fiscal year
performance and the amount of increase budgeted for the coming year. The
percentage of EBIT credited to the bonus pool may be increased if actual EBIT
exceeds budgeted EBIT. Based upon the CEO's recommendation as to the
participant's contribution to the overall success in achieving the EBIT
results, officers may earn from 10% to 100% of base salary. Achievement of
strategic objectives and milestones may also be a portion of an individual's
performance based annual cash bonus including the number of new IMPACT Center
openings, development of infrastructure necessary to sustain future growth,
obtaining financing on favorable terms, or more recently with diversification
into the physician practice management business, the number of physicians under
management.
13
<PAGE> 15
STOCK INCENTIVES
Pursuant to the Company's various stock option and incentive plans, the
compensation committee periodically awards stock options to executive officers,
key employees, and consultants to the Company and its subsidiaries. Pursuant
to the 1996 Stock Incentive Plan, if approved by the shareholders at the Annual
Meeting, the compensation committee will have the ability to award shares of
restricted stock, stock appreciation rights (whether separate or in tandem with
stock options) in addition to stock options. Such stock based compensation
provides for a long-term incentive for each participant to become a meaningful
stockholder of the Company and provides a mechanism for aligning those
participant's interests with those of the stockholders. The committee believes
that such stock option grants are the foundation in the overall compensation
packages because such grants recognize both productivity and profitability,
while at the same time giving recipients a vested long term interest in the
success of the Company through stock ownership.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Clark's base salary was increased to $200,000 in July 1995 in
recognition of the Company's achievement of profitability and growth in its
IMPACT Center network and for the purpose of bringing Mr. Clark's salary to a
level more commensurate with companies with which the Company competes. Mr.
Clark also assumed the title of Chief Executive Officer in January 1996 to
provide focused leadership of the Company's diversification into the physician
practice management business.
COMPENSATION COMMITTEE
Jack O. Bovender
Frank M. Bumstead
W. Thomas Grant II
Joseph C. Hutts
P. Anthony Jacobs (Chairman)
James R. Seward
14
<PAGE> 16
PERFORMANCE GRAPH
The graph below sets forth the cumulative total return to Response
Oncology, Inc.'s shareholders during the five year period ended December 31,
1995, as well as an overall stock market index (Nasdaq Stock Market Total
Return Index) and a peer group index (S&P Health Care Composite Index). The
stock performance graph assumes $100 was invested on December 31, 1990:
[GRAPH]
<TABLE>
<CAPTION>
Year End Date 1990 1991 1992 1993 1994 1995
- ------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Response Oncology, Inc. $100 $1,150.00 $675.00 $325.00 $337.50 $500.00
Nasdaq Stock Market Total Return Index 100 160.56 186.87 214.51 209.69 296.30
S & P Health Care Composite Index 100 156.01 128.92 118.09 133.58 210.85
</TABLE>
15
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
During the year ended December 31, 1995, the Compensation Committee of
the board of directors of the Company consisted of Messrs. Bovender, Bumstead,
Grant, Hutts, Jacobs and Seward, each of whom is an Independent Director.
Messrs. Grant, Jacobs and Seward are executive officers of Seafield, which as
of February 15, 1996 beneficially owned 55.91% of the Common Stock. No
executive officer of the Company participates in the compensation decisions of
Seafield.
COMPLIANCE WITH SECTION 16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of
the registered class of the Company's equity securities to file reports of
ownership with the Securities and Exchange Commission. Such directors,
executive officers and shareholders are required pursuant to Securities and
Exchange Commission regulations to furnish the Company with copies of all
reports filed pursuant to Section 16(a) of the Securities Exchange Act of 1934.
Based solely on a review of the Forms 3 and 4, and amendments thereto,
furnished to the Company during the fiscal year ended December 31, 1995 and
Form 5, and amendments thereto, furnished to the Company with respect to such
fiscal year, and certain representations furnished to the Company, the Company
believes that during the fiscal year ended December 31, 1995 all reports under
Section 16(a) of the Securities Exchange Act of 1934 required to be filed by
directors, executive officers and 10% shareholders of the Company were timely
filed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 1.
16
<PAGE> 18
PROPOSAL 2.
RATIFICATION OF SELECTION OF KPMG PEAT MARWICK LLP
AS THE 1996 INDEPENDENT ACCOUNTANTS AND AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the
Company's independent auditors for 1996. The selection is subject to approval
by the shareholders not later than the date of the Annual Meeting. KPMG Peat
Marwick LLP served as independent auditors of the Company for the years ended
December 31, 1993, 1994 and 1995. Representatives of the firm will be present
at the Annual Meeting and will have an opportunity to make a statement if they
so desire and are expected to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is required to ratify
the selection of KPMG Peat Marwick LLP as the Company's independent auditors
for 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 2.
17
<PAGE> 19
PROPOSAL NO. 3
ADOPTION OF 1996 STOCK INCENTIVE PLAN
GENERAL
The Board of Directors has approved and submits to the Shareholders
for approval the 1996 Stock Incentive Plan (the "1996 Plan") to provide
directors, officers, key employees, medical directors, consultants and certain
advisors with additional incentives by increasing their proprietary interest in
the Company. The aggregate amount of Common Stock with respect to which grants
may be made under the 1996 Plan may not exceed 630,000 shares. The 1996 Plan
is intended to qualify for favorable treatment under Section 16 of the Exchange
Act pursuant to Rule 16b-3 promulgated thereunder ("Rule 16b-3").
The 1996 Plan provides for the grant of (i) shares of restricted stock
("Restricted Stock"); (ii) stock appreciation rights ("SARs"); (iii) incentive
stock options ("ISOs") as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and non-qualified stock options ("NQSOs")
(collectively "Awards"). The 1996 Plan will be administered by the
Compensation Committee. The Compensation Committee has, subject to the terms
of the 1996 Plan, the sole authority to grant Awards under the 1996 Plan, to
construe and interpret the Plan and to make all other determinations and take
any and all actions necessary or advisable for the administration of the 1996
Plan.
All of the Company's directors, officers, employees, medical
directors, consultants and advisors are eligible to receive Awards under the
1996 Plan, but only employees of the Company are eligible to receive ISOs. The
terms of each award will be set forth in an award agreement between the Company
and the recipient. All awards under the 1996 Plan will vest upon a change in
control or imminent change in control, as defined in the Plan.
STOCK OPTIONS
The Compensation Committee may grant ISOs and NQSOs pursuant to the
1996 Plan, and Options may be issued in tandem with SARs. The Compensation
Committee is authorized to issue "reload options" under the 1996 Plan. Options
will be exercisable during the period specified in each option agreement and
will generally be exercisable in installments pursuant to a vesting schedule to
be designated by the Committee. Notwithstanding the provisions of any award
agreement, options will become immediately exercisable in the event of a change
or threatened "change in control" (each as defined in the 1996 Plan) of the
Company and in the event of certain mergers and reorganizations of the Company.
No option will remain exercisable later than ten years after the date of grant
(or five years from the date of grant in the case of ISOs granted to holders of
more than 10% of the Common Stock).
The exercise price for ISOs granted under the 1996 Plan may be no less
than the fair market value of the Common Stock on the date of grant (or 110% in
the case of ISOs granted to employees owning more than 10% of the Common
Stock). The exercise price for non-qualified options granted under the 1996
Plan will be at the discretion of the Committee.
There are no federal income tax consequences upon the grant of an
option under the 1996 Plan, and the company will not be entitled to a federal
income tax deduction by reason of such exercise. A sale of shares of Common
Stock acquired upon exercise of an ISO that does not occur within one year
after the exercise or within two years after the grant of the option generally
will result in the recognition of long-term capital gain or loss in the amount
of the difference between the amount realized on the sale and the exercise
price, and the Company is not entitled to any tax deduction in connection
therewith. If a sale of shares of Common Stock acquired upon exercise of an
ISO occurs within one year from the date of exercise of the option or within
two years from the date of the option grant (a "disqualifying disposition"),
the optionee generally will recognize ordinary income equal to the lesser of
(i) the excess of the fair market value of the shares on the date of exercise
of the option over the exercise price or (ii) the excess of the amount realized
on the sale of the shares over the exercise price Any amount
18
<PAGE> 20
realized on a disqualifying disposition in excess of the amount treated as
ordinary income will be long-term or short-term capital gain, depending upon
the length of time the shares were held. The Company generally will be
entitled to a tax deduction on a disqualifying disposition corresponding to the
ordinary income recognized by the optionee.
RESTRICTED STOCK
The Compensation Committee may issue shares of Restricted Stock to
eligible persons in such amounts and subject to such terms and conditions as
the Compensation Committee may, in its sole discretion, determine.
Restrictions and other conditions may include, without limitation, restrictions
on transferability and forfeiture upon the termination of employment of the
holder of Restricted Stock during any vesting period specified by the
Compensation Committee.
Holders of Restricted Stock awarded pursuant to the 1996 Plan will be
entitled to vote the shares of Restricted Stock and to receive dividends with
respect thereto unless otherwise provided in the award agreement or unless such
shares shall have been forfeited or the Compensation Committee shall otherwise
have terminated such voting rights and right to receive dividends.
Upon the lapse of any risk of forfeiture with respect to Restricted
Stock, the holder of the Restricted Stock will recognize taxable income in an
amount equal to the fair market value of the Restricted Stock at the time of
such lapse, unless the holder made an election upon receipt of the Restricted
Stock to recognize such taxable income at the time of the award, based on the
fair market value of the Common Stock at that time. In the event any shares of
Restricted Stock are forfeited for any reason by the holder thereof, the
Company shall refund to such holder, without interest, all amounts paid for
such shares.
STOCK APPRECIATION RIGHTS
The Compensation Committee may grant SAR to any holder of an Option.
Each SAR shall be for such term and shall be subject to such other conditions
and terms as the Compensation Committee may determine. Such terms may include
limitations on the amount of appreciation that may be recognized with respect
to SAR and a specification of the portion of each SAR that is to be settled
in cash and Common Stock or additional Options. Upon the exercise of SAR,
the Option or portion thereof with respect to which such right is exercised
shall be surrendered and shall not thereafter be exercisable.
ADJUSTMENTS TO NUMBER OF SHARES ISSUABLE UNDER THE 1996 PLAN
The number of shares of Common Stock that may be subject to awards
pursuant to the 1996 Plan is subject to adjustment on account of stock splits,
stock dividends, recapitalizations, reclassifications, reorganizations and
similar transactions.
The Board of Directors believes it to be in the best interest of the
Company and its shareholders to adopt the 1996 Plan providing for the award of
up to 630,000 shares of Common Stock to directors, officers, key employees,
medical directors, consultants and certain advisors and the Board of Directors
adopted resolutions to that effect at its February 8, 1996 regular meeting.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is required to authorize
the 1996 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 3
19
<PAGE> 21
PROPOSAL NO. 4
AMENDMENT TO 1990 NON-QUALIFIED STOCK OPTION PLAN
On February 8, 1996, the Company's Board of Directors approved an
amendment to the 1990 Non-Qualified Stock Option Plan (the "1990 Plan") to
increase the number of shares issuable under the 1990 Plan from 860,000 shares
to 1,125,000 shares of Common Stock upon shareholder approval, to reserve the
additional 265,000 shares for issuance and to amend correlating limitations in
section 7(b) of the 1990 Plan.
The purpose of the Amendment is to continue to aid the Company in
motivating, attracting and retaining personnel of exceptional ability and to
substitute options as deemed appropriate by the Board of Directors (or
governing committee). If the Amendment is approved by the shareholders, (1)
the total number of shares of Common Stock issuable under the plan will be
1,125,000, and (2) the total number of shares available for purchase upon
exercise of options by any single director or officer and by all directors and
officers as a group will be 375,000 and 750,000, respectively.
On July 6, 1990, the Company's Board of Directors approved the
adoption of the 1990 Plan, providing for the issuance of non-qualified stock
options; the 1990 Plan was subsequently approved by the Company's Common
Stockholders at the 1990 Annual Meeting and amended by the Board of Directors
on January 31, 1992 to conform to Rule 16b-3 as promulgated under the
Securities Exchange Act of 1934.
Options under the 1990 Plan may be granted to directors, other than
those designated by Seafield under the Offering Agreement, executive officers,
key employees, and outside consultants of the Company and its affiliates. A
"key employee" is a full-time salaried employee of the Company or one of its
affiliates who is instrumental to the success of the Company or one of its
affiliates. An "affiliate" means any person or entity which controls, is
controlled by, or under common control with, the Company. There are six
independent directors, four executive officers, two of whom are also directors,
seven independent contractors who serve as medical directors, and 27 key
employees currently eligible to participate under the 1990 Plan.
The total number of shares which may be issued under the 1990 Plan as
amended in 1995 is a maximum of 860,000. The proposed Amendment would increase
this maximum amount of shares issuable under the 1990 Plan by 265,000 to
1,125,000 shares. The number of shares which may be granted under the 1990
Plan or under any outstanding options will be proportionately adjusted, to the
nearest whole share, in the event of any stock dividend, stock split, share
combination or similar recapitalization involving the Common Stock. If any
option granted under the 1990 Plan expires or terminates for any reason without
having been exercised in full, unpurchased shares will again become available
for option.
Under section 7(b) of the 1990 Plan as currently in effect, the
maximum number of shares of Common Stock as to which any director or officer of
the Company may be granted options is limited to one-third (1/3) of the total
number of shares issuable under the 1990 Plan, not to exceed 286,667. The
maximum number of shares of Common Stock as to which all directors and officers
may be granted options is limited to two-thirds (2/3) of the total number of
shares issuable under the 1990 Plan, not to exceed 573,333 shares. The
proposed Amendment will retain the 1/3 and 2/3 limitations but will increase
the numerical limitations to 375,000 and 750,000, respectively.
The 1990 Plan is administered by the Compensation Committee whose
decisions are approved by the Board of Directors. Subject to the 1990 Plan,
the Compensation Committee has full authority to determine the directors,
officers, key employees and outside consultants of the Company and its
affiliates to whom options will be granted, the number of shares to be subject
to each such option, the option price, and the exercise period of the options.
In making such determinations, the Compensation Committee takes into account
the market value of the Common Stock, the nature of the services rendered and
to be rendered by such individuals, their present and potential contributions
to the Company and any other factors which the Compensation Committee deems
relevant. Pursuant to an Offering Agreement with Seafield, the Company had to
obtain the approval from the designees of Seafield who sit on the Company's
Board of Directors before options to acquire more than 850,000 shares could be
20
<PAGE> 22
granted. The current designees are P. Anthony Jacobs and James R. Seward, both
of whom are members of the Compensation Committee.
Payment for shares of Common Stock to be issued upon exercise of an
option may be made either in cash, Common Stock or any combination thereof, at
the discretion of the option holder. No option may be exercised until the holder
shall have been employed or retained by, or served as a directors of, the
Company or one of its affiliates continuously for at least three (3) months
from the date of grant. In the event the option holder is terminated as an
employee, director or consultant of the Company by reason of disability or
death, the holder or his representative may exercise the option for a period of
twelve (12) months following termination unless the Board of Directors elects,
in its sole discretion, to extend the exercise period. In the event the
holders' relationship with the Company or its affiliates is terminated for any
reason other than disability, death or willful misconduct, the holder may
exercise his option for a period of three (3) months following termination. In
all other circumstances, the option shall expire upon termination of the
relationship between the option holder and the Company.
If the employment, directorship or retention as a consultant of an
option holder is terminated for "cause", as defined in the 1990 Plan, the
Company may elect to purchase from the holder any Common Stock held by the
holder at the time of termination for a price per share equal to the fair
market value of the stock at the time the Company exercises its repurchase
option. The Company shall have the right to repurchase such stock for a period
of one year from the date of termination.
The Non-qualified Plan will terminate on July 5, 2000, unless sooner
terminated by the Board of Directors.
The Board of Directors may amend or alter the 1990 Plan, but may not,
so long as prohibited by law, (1) increase the aggregate number of shares of
Common Stock which may be issued under the 1990 Plan, other than an increase
merely reflecting a recapitalization (as discussed above), (2) modify the
designation of persons eligible to receive options under the 1990 Plan, or (3)
materially increase the benefits accruing to directors or officers who hold
options without the approval of the holders of a majority of outstanding Common
Stock of the Company. In addition, neither the Board of Directors nor the
shareholders may modify the 1990 Plan in a way which adversely affects a
holder's rights under an option, unless such holder consents to the
modification.
The holder of a non-qualified stock option shall not recognize income
for federal income tax purposes on the grant of the option unless the option
has a readily ascertainable fair market value. If the option does not have a
readily ascertainable fair market value, income is recognized on the exercise
of the option in an amount equal to the difference between the fair market
value of the shares received as of the date of exercise and the exercise price.
If, however, the underlying shares are subject to a substantial risk of
forfeiture, as defined under the Internal Revenue Code, the holer will not
recognize income upon the exercise of the option unless he so elects under
Section 83(b) of the Code. If such an election is not made, the holder will
instead recognize income when the risk of forfeiture lapses. The Company will
be entitled to a corresponding deduction for federal income tax purposes in the
year the income is to be included by the holder, provided the Company satisfies
the applicable federal income tax withholding requirements. Upon the sale of
Common Stock acquired as a result of the exercise of an option under the 1990
Plan, the holder will recognize gain or loss equal to the difference between
the net sales price and the value of the Common Stock which had been recognized
at the exercise date as income by the holder for federal income tax
purposes, which gain or loss will either be short term or long term depending
upon the period that the Common Stock was held after the option was exercised.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is required to authorize
the proposed amendment to the 1990 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 4.
21
<PAGE> 23
SHAREHOLDER PROPOSALS FOR 1996
Pursuant to the Securities Exchange Act of 1934, shareholder proposals
intended to be presented at the 1996 annual meeting of shareholders of the
Company must be received by the Company at its executive offices on or before
December 15, 1996.
OTHER MATTERS
The Board of Directors knows of no other business to be brought
before the meeting. If any other matters properly come before the meeting, the
proxies will be voted on such matters in accordance with the judgment of the
persons named as proxies therein, or their substitutes, present and acting at
the meeting.
INCORPORATION BY REFERENCE
The consolidated financial statements of the Company, included in the
Company's 1996 Annual Report which accompanies this Proxy Statement, are hereby
incorporated by reference into this Proxy Statement as if stated verbatim
herein.
BY ORDER OF THE BOARD OF DIRECTORS
DARYL P. JOHNSON
Secretary
April 22, 1996
22
<PAGE> 24
EXHIBIT A
RESPONSE ONCOLOGY, INC.
1996 STOCK INCENTIVE PLAN
1. PURPOSE OF PLAN AND EFFECTIVE DATE.
1.1 PURPOSE. The purpose of this 1996 Stock Incentive Plan
(hereinafter called the "Plan") is to further the success and advance the
interests of Response Oncology, Inc. and its subsidiaries and affiliates,
including, without limitation, consolidated joint ventures (collectively, the
"Company," where the context so requires) by making available shares of common
stock of the Company, $.01 par value per share ("Common Stock") for purchase by
or grants to eligible directors, officers, advisors, medical directors,
consultants and key employees of the Company and thus to provide an additional
incentive to such personnel to exert maximum effort toward the success of the
Company and to give them a greater interest as shareholders in the success of
the Company and in maximizing shareholder value.
1.2 AWARDS. The Company intends this Plan to enable the Company
to issue pursuant hereto (i) incentive stock options ("Incentive Stock
Options") to purchase Common Stock, as such term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended from time to time (the "Code");
(ii) similar options to purchase Common Stock which will not, however, be
qualified as Incentive Stock Options (also known as "Non-Statutory" or
"Non-Qualified" stock options); (iii) shares of Common Stock that are subject
to limitations and restrictions as to encumbrance and transfer ("Restricted
Stock"); and (iv) stock appreciation rights ("SAR") pursuant to which a
recipient may recognize in cash the benefit from appreciation in the price of
Common Stock.
1.3 EFFECTIVENESS. The Plan shall become effective on the date of
approval by the Board of Directors of the Company, which date is February 8,
1996; provided, however, that the Plan shall be subject to approval and
ratification by shareholders of the Company holding a majority of its voting
stock, voting in person or by proxy, at a meeting of shareholders to be held
within twelve months after February 8, 1996.
2. DEFINITIONS.
2.1 As used in this Plan, the following terms have the following
respective meanings:
"1933 Act" means the Securities Act of 1933, as amended from
time to time. References to any provision of the 1933 Act shall be
deemed to include successor provisions thereto and rules and
regulations thereunder.
"Award" means any grant of a Stock Option or SAR, and any
award of Restricted Stock under the Plan, whether singly, in
combination, or in tandem, to an Eligible Person by the Compensation
Committee pursuant to such terms, conditions, restrictions, and/or
limitations, if any, as the Compensation Committee may establish.
"Award Agreement" means a written agreement setting forth the
terms of an Award.
"Board" means the Board of Directors of the Company.
"Change in Control" means any transaction pursuant to which
(i) the Company merges with another corporation, limited partnership,
limited liability company or other business entity and is not the
surviving entity; (ii) substantially all of the Company's assets are
sold to persons or entities not affiliated with the Company; (iii)
shares of Common Stock are issued to or acquired by persons (as
defined in Section 13(d)(3) under the Securities Exchange Act of
1934), their Affiliates and associates (as defined in Rule 12b-2 under
the Securities Exchange Act of 1934) not affiliated with the Company
who, immediately
<PAGE> 25
after such issuance or acquisition, own Common Stock comprising more
than 20% of the number of shares of Common Stock issued and
outstanding immediately after such issuance or acquisition; or (iv)
any other transaction of a nature similar to the foregoing.
"Code" means the Internal Revenue Code of 1986, as amended.
References to any provisions of the Code shall be deemed to include
successor provisions.
"Committee" shall mean the Compensation Committee of the Board
as from time to time constituted; provided, however, that for purposes
of administration of this Plan, no person shall be a member of the
Committee unless such person shall be a person who shall not cause the
Plan to fail the "disinterested administration" test set forth in Rule
16b-3(c)(ii) under the Exchange Act.
"Common Stock" has the meaning set forth in SECTION 1.1 hereof.
"Company" means Response Oncology, Inc., and, where the
context so requires, such term shall include subsidiaries of Response
Oncology, Inc. and consolidated joint ventures in which Response
Oncology, Inc. is a party.
"Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.
"Eligible Persons" means all persons described in SECTION 5
hereof who are eligible to receive Awards pursuant to this Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the
Exchange Act shall be deemed to include successor provisions thereto
and rules and regulations thereunder.
"Fair Market Value" unless otherwise required by an applicable
provision of the Code, as of any date, means the mean between the high
and low sales price of the Common Stock on any exchange upon which the
Common Stock is traded or on the National Market of the Nasdaq Stock
Market on the date of an Award or, if there are no sales on said date,
then on the next prior business day on which there was a sale. If no
such sales price is available, then the price per share shall be
determined by the Committee. If the Committee, in its sole
discretion, shall determine that the average high and low sales price
for a particular day is not, due to low trading volume or other
factors which the Committee deems appropriate, indicative of Fair
Market Value, then the Committee may use an average of the
high and low sales prices of the Common Stock over a period not to
exceed thirty (30) trading days immediately preceding the date of the
Award in determining Fair Market Value.
"Imminent Change in Control" means any offer or announcement,
oral or written, by any person or persons acting as a group, the
intention of whom is to effect a Change in Control of the Company.
The decision of the Committee whether an Imminent Change in Control
has occurred shall be conclusive and binding.
"Incentive Stock Option" means any Incentive Stock Option
granted pursuant to this Plan which is intended to be, and designated
and qualifying as, an "incentive stock option" within the meaning of
Section 422 of the Code.
"Modification" means any change in the terms of an Option
which would constitute a "modification" as defined in Section
424(h)(3) of the Code, including, without limitation, such a
modification to an Option as effected by a change in the Plan and any
other change in the Plan which would increase the number of shares
reserved for Options under the Plan, materially change the
administration of the Plan or that would otherwise materially increase
the benefits accruing to, or
<PAGE> 26
available for, participants in the Plan; provided, however, that
registration of Option Stock under the 1933 Act, as amended, shall not
be deemed a Modification.
"Non-Statutory Stock Option" and "Non-Qualified Stock Option"
means any option granted under this Plan other than an Incentive Stock
Option.
"Option" or "Stock Option" means a right granted pursuant to
the Plan to purchase shares of Common Stock, and includes the terms
Incentive Stock Option and Non-Qualified Stock Option.
"Option Price" or "Exercise Price" means the price per share
at which Common Stock may be purchased upon the exercise of an Option.
"Option Stock" means Common Stock subject to an option granted
under this Plan.
"Participant" means any individual to whom an Option has been
granted by the Committee under the Plan.
"Restricted Stock" means Common Stock issued to a Participant
that is subject to restrictions on transfer or alienation, vesting and
forfeitability provisions and such other terms and conditions as the
Committee may determine and as may be set forth in an Award Agreement
in respect thereof.
"Retirement" means retirement from active employment under a
retirement plan of the Company, or pursuant to an employment agreement
with any of the aforementioned, or termination of employment at or
after age 65 under circumstances which the Committee, in its sole
discretion, deems equivalent to retirement.
"SAR" means a right to surrender to the Company all or a
portion of a Stock Option and to be paid therefor an amount, in cash
or shares of Common Stock (which may be Restricted Stock), as
determined by the Committee, provided that the amount of cash or the
Fair Market Value of any Common Stock, as the case may be, shall be no
greater than the excess, if any, of (i) the Fair Market Value of the
Option Stock to which the Option or portion thereof relates,
determined on the date such right is exercised, over (ii) the
aggregate Option Price of the Option Stock.
"Subsidiary" or "Subsidiaries" means any corporation which is
a "subsidiary corporation" as defined in Section 424(f) of the Code,
and the regulations thereto.
"Tax Date" means the date on which the amount of tax to be
withheld with respect to any Award is determined.
"Termination for Cause" shall have the same meaning as in any
employment agreement between any Participant and the Company, or, in
the absence of such employment agreement, shall mean the termination
of employment of a Participant due to (i) any illegal or dishonest
conduct which adversely affects or may adversely affect the
reputation, good will, or business position of the Company or which
involves Company funds or assets; (ii) any intentional or material
damage to property or business of the Company; (iii) theft,
embezzlement or misappropriation of the Company's property; or (iv)
the willful failure of the Participant to carry out his or her duties
as an employee of the Company.
"10% Shareholder" means a person who owns stock possessing
more than 10% of the total combined voting power of all classes of
stock of Company or of any parent or subsidiary of the Company after
giving effect to the attribution of stock ownership provisions of
Section 424(d) of the Code.
2.2 References in these definitions to provisions of the Code
shall, when appropriate to effectuate the purpose of this Plan, be deemed to be
references to such provisions of the Code and regulations promulgated
<PAGE> 27
thereunder as the same may be from time to time amended or to successor
provisions to such provisions. Terms defined elsewhere in this Plan shall have
the meanings set forth in such respective definitions.
3. STOCK SUBJECT TO PLAN.
3.1 NUMBER OF SHARES. Subject to the provisions of SECTION 12
hereof, there shall be reserved for issuance or transfer in connection with
Restricted Stock or SAR Awards or upon the exercise of the Options to be
granted from time to time under the Plan an aggregate of 630,000 shares of
Common Stock.
3.2 EXCESS SHARES. Shares of stock which are attributable to
Restricted Stock, SARs or Options which expire or are otherwise terminated,
cancelled, surrendered or forfeited, during a calendar year, are available for
issuance or use in connection with future Awards or the exercise of Options
beginning in the calendar year in which they expire or otherwise become
available.
3.3 SOURCE OF STOCK. Shares of Common Stock to be issued under
the Plan may be authorized and unissued shares of Common Stock, treasury stock
or a combination thereof.
3.4 ADJUSTMENT. In the event of a merger, consolidation,
reorganization, recapitalization, stock split, stock dividend, other
extraordinary dividend or other change in corporate structure or capitalization
affecting the Common Stock, the Committee may, in its discretion, make
appropriate adjustment in the number or kind of shares subject to Options or
SARs granted under the Plan, and/or the exercise price and other terms and
conditions of Options or SARs or appropriate adjustment in the maximum number
of shares referred to in SECTION 3.1 of the Plan, as provided in SECTION 12
hereof.
4. ADMINISTRATION.
4.1 COMPOSITION OF COMMITTEE. The Plan shall be administered by
the Committee, which at all times shall be comprised solely of disinterested
persons (as defined by Rule 16b-3(c)(ii) promulgated under the Exchange Act),
each of whom shall be a member of the Board, and appointed by the Board, as
constituted from time to time. Members of the Committee shall serve until they
resign or they are removed by the vote of a majority of the Board.
4.2 AUTHORITY OF COMMITTEE. The Committee shall have the
authority to (a) establish such rules and regulations as it deems necessary for
the proper operation and administration of the Plan; (b) select the persons to
receive Awards under the Plan; (c) determine the form of an Award and whether,
if such Award is an Option, such Option is to operate on a tandem basis and/or
in conjunction with or apart from other Awards made by the Company, either
within or outside of this Plan; (d) determine the number of shares of Common
Stock to be covered by each Award hereunder; (e) determine the terms and
conditions, not inconsistent with the terms of this Plan, of any Award
hereunder (including, but not limited to, any restriction or limitation on
transfer, any vesting schedule or acceleration thereof, any forfeiture
provision or waiver thereof and any "reload" upon exercise of any Option
granted), regarding any Award and the shares of Common Stock relating thereto,
based on such factors as the Committee shall determine, in its sole and
absolute discretion; and (f) make any other determination or take any action
that the Committee deems necessary or desirable for the administration of the
Plan.
4.3 DECISIONS OF COMMITTEE FINAL. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
5. ELIGIBILITY.
Incentive Stock Options under this Plan may be granted only to
officers (who are employees) and to other employees of the Company and
Subsidiaries, as determined by the Committee. A director of the Company may
receive an Incentive Stock Option under this Plan only if such person is
otherwise an employee of the Company or a Subsidiary. In addition, employees,
directors or officers of the Company (including Subsidiaries and other
<PAGE> 28
affiliates, including consolidated joint ventures), consultants, non-employee
directors of the Company and advisors who the Committee determines are
providing bona fide services to the Company, whether or not otherwise
compensated, may receive any form of Award except an Incentive Stock Option at
the discretion of the Committee. In determining the persons to whom Awards
shall be made and the number of shares to be covered by each Award, the
Committee may take into account the nature of the services rendered by, and the
responsibilities borne by, such eligible persons, their present and potential
contributions to the Company's success and such other factors as the Committee
in its discretion shall deem relevant. Subject to the provisions of SECTION 7
hereof, Awards may be made to persons who hold or have held options, restricted
stock and/or stock appreciation rights under previous plans, and a person who
has received an Award under the Plan may receive additional Awards under the
Plan or under any future stock or option plan if the Committee shall so
determine.
6. AWARDS UNDER THE PLAN.
6.1 TERM OF PLAN. The Committee may award Incentive Stock
Options, Non-Qualified Stock Options, Restricted Stock, SARs or any combination
of the foregoing to such Eligible Persons, in such amounts and subject to such
terms and conditions, as the Committee shall determine in its sole discretion,
subject to the provisions of the Plan, provided, however, that in no event may
any Stock Option be granted hereunder after the expiration of 10 years after
the date of the Plan. The automatic or discretionary grant of "reload" Stock
Options is specifically authorized.
6.2 CODE COMPLIANCE. In the case of Incentive Stock Options, the
terms and conditions of such grants, including the exercise price of the
purchase of Common Stock, shall be subject to and comply with the requirements
of Section 422 of the Code, as from time to time amended, and any implementing
regulations.
6.3 EXERCISE PRICE. The Exercise Price at which shares of Common
Stock may be purchased pursuant to the grant of an Option shall be fixed by the
Committee at the time of grant; however, the Option Price of an Incentive Stock
Option must be equal to or greater than the Fair Market Value of the shares of
Common Stock covered thereby. The Exercise Price of an Incentive Stock Option
granted to any Participant who is a 10% Shareholder must be at least equal to
110% of the fair market value of the shares of Common Stock on the date of
grant. Options granted under the Plan will not be Incentive Stock Options to
the extent that the Fair Market Value of the shares of Common Stock with
respect to which such Options first become exercisable in any year exceeds
$100,000.
6.4 VESTING. Except as set forth in the next sentence, awards of
Options, Restricted Stock or SARs will vest and become non-forfeitable as
determined by the Committee and set forth in an Award Agreement. Subject to
the provisions of Section 422 of the Code, Options and SARs shall become
exercisable in accordance with their terms and shares of Restricted Stock shall
no longer be forfeitable in the event of Death, Disability or Retirement of a
Participant or upon a Change in Control or Imminent Change in Control.
7. GRANTING AND EXERCISE OF OPTIONS.
7.1 LIMITATIONS ON EXERCISE OF OPTIONS. Notwithstanding any other
provision of this Plan to the contrary, the granting and exercise of Options
hereunder shall be subject to the following limitations (which shall be in
addition to the limitations, provisions and conditions contained elsewhere in
this Plan):
(a) The aggregate Fair Market Value (determined at the
time the option is granted) of the Option Stock for which Incentive
Stock Options are exercisable for the first time by any employee
during any calendar year (under all such Plans of the Company and its
subsidiaries) shall not exceed $100,000. Any option granted in excess
of this $100,000 threshold shall be specifically designated
Non-Qualified Options.
(b) Options may be granted as soon as practicable after
the date of the adoption of the Plan by the Board, and Award
Agreements evidencing such Grant(s) and the terms and conditions
thereof may
<PAGE> 29
similarly be so executed, but in each case, such Options and such
instruments shall be subject to the approval and ratification of the
Plan by the shareholders of the Company as provided in SECTION 1.3.
Notwithstanding anything in the Plan that may be deemed to be to the
contrary, no Option may be exercised unless and until such approval
and ratification is obtained. In the event such approval and
ratification shall not be obtained, the Plan and all Options that may
have been granted pursuant thereto shall be null and void.
7.2 DURATION OF OPTIONS. The term of Options granted under the Plan
shall be fixed by the Committee at the time of grant and set forth in an
Award Agreement; provided, however, that the term of an Incentive Stock Option
shall not exceed 10 years from the date of grant. In the case of 10%
Shareholders, the term of an Incentive Stock Option shall not exceed five (5)
years from the date of grant. The terms of Options may, however, be shortened
as provided in SECTION 11 hereof. No Option may be exercised after expiration
of such Option's term.
7.3 EXERCISE OF OPTIONS. An Option granted under the Plan shall be
exercisable at such time or times, whether or not in installments, as the
Committee shall prescribe at the time the Option is granted and as set forth in
and subject to the provisions of any Award Agreement. An Option which has
become exercisable may be exercised in accordance with its terms as to any or
all full shares purchasable under the provisions of the Option, but not at any
time as to less than 100 shares unless the remaining shares which have become
so purchasable are less than 100 shares. The purchase price of the shares
shall be paid in full as provided in SECTION 13 hereof upon the exercise of the
Option, and the Company shall not be required to deliver certificates for such
shares until such payment has been made. Except as provided in SECTION 11, an
Incentive Stock Option may not be exercised at any time unless the holder
thereof is then an employee of the Company or any Subsidiary and shall have
been continuously employed by the Company or any Subsidiary since the date of
grant.
8. STOCK APPRECIATION RIGHTS (SARS).
8.1 GRANTING OF SARS. The Committee may, in its discretion, grant a
SAR to the holder of an Option either at the time the Option is granted or by
amending the instrument evidencing the grant of the Option at any time after
the Option is granted, so long as the grant is made during the period in which
grants of SARs may be made under the Plan and, if made to a person subject to
Section 16(b) of the Exchange Act, is made more than six months before the end
of the term of the Option.
8.2 EXERCISE OF SARS. Each SAR shall be for such term and shall be
subject to such other terms and conditions as the Committee shall impose and as
may be set forth in an Award Agreement. The terms and conditions may include
Committee approval of the exercise of the SAR, limitations on the amount of
appreciation which may be recognized with regard to such SAR, and specification
of what portion, if any, of the amount payable to the Participant upon his
exercise of a SAR shall be paid in cash and what portion, if any, shall be
payable in Common Stock or additional Options. If and to the extent that
shares of Common Stock are issued in satisfaction of amounts payable on
exercise of a SAR, the shares of Common Stock so issued shall be valued at
their Fair Market Value on the date of exercise. Upon exercise of a SAR, the
Option or portion thereof with respect to which such right is exercised shall
be surrendered and shall not thereafter be exercisable. Upon exercise of any
Option, any SAR or portion thereof granted with respect to such Option shall
expire and shall not thereafter be exercisable.
9. RESTRICTED STOCK AWARDS.
9.1 RESTRICTED STOCK AWARDS. The Committee may grant Restricted
Stock Awards to such Eligible Persons, in such amounts and subject to such
terms and conditions, as the Committee may determine in its sole discretion,
including such restrictions on transferability and other restrictions as the
Committee may impose, which restrictions may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee shall determine.
9.2 ISSUANCE OF RESTRICTED STOCK. Restricted Stock awarded under the
Plan shall be evidenced by certificates registered in the name of the
Participant and bearing an appropriate legend referring to the terms,
<PAGE> 30
conditions, and restrictions applicable to such Restricted Stock. The Company
shall retain physical possession of any such certificates, and each Participant
awarded Restricted Stock shall have delivered a stock power to the Company,
endorsed in blank, relating to the Restricted Stock for so long as the
Restricted Stock is subject to a risk of forfeiture.
9.3 VOTING RIGHTS OF RESTRICTED STOCK. Unless otherwise determined
by the Committee at the time of an Award, the holder of Restricted Stock shall
have the right to vote the Restricted Stock and to receive dividends, if any,
thereon, unless and until such shares are forfeited.
9.4 REFUND OF CASH PAID FOR RESTRICTED STOCK. In the event all or
any of the shares of Restricted Stock awarded to a Participant are forfeited
due to failure to meet or comply with restrictions imposed by the Committee at
the time of the award prior to the lapse of such restrictions, the Company
shall repay to the Participant (or the Participant's estate) any cash amount
paid by the Participant for such forfeited shares.
10. TERMINATION OF EMPLOYMENT.
10.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event
of the Termination for Cause or the voluntary termination of employment of any
Participant to whom an Incentive Stock Option has been granted under the Plan,
such Incentive Stock Options held by him under the Plan, to the extent vested
and not theretofore exercised, shall be null and void. Incentive Stock Options
granted under the Plan shall not be affected by any change of employment so
long as the holder continues in the employ of the Company or any Subsidiary.
Nothing in the Plan or in any Award pursuant to the Plan shall confer on any
individual any right to continue in the employ of or continue any other legal
or contractual relationship with the Company or interfere in any way with the
right of the Company to terminate his or her employment or occupancy of any
corporate office or any other legal or contractual relationship at any time.
10.2 DEATH OF PARTICIPANT. In the event of the death of a
Participant, any Incentive Stock Options granted to such Participant may be
exercised by the person or persons to whom the Participant's rights under any
such Incentive Stock Options pass by will or by the laws of descent and
distribution (including the Participant's estate during the period of
administration) at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of death of such Participant.
10.3 DISABILITY OF PARTICIPANT. In the event that any
Participant's employment with the Company shall terminate as a result of the
Disability of such Participant, such Participant may exercise any Incentive
Stock Options granted to him pursuant to the Plan at any time prior to the
earlier of (i) the respective expiration dates of any such Incentive Stock
Options or (ii) the date which is one (1) year after the date of such
termination of employment.
10.4 TERMINATION WITHOUT CAUSE. In the event of termination
without cause of the employment of a person to whom an Incentive Stock Option
has been granted under the Plan, any Incentive Stock Options held by him under
the Plan, shall immediately vest and shall be exercisable for a period of three
(3) months following the date of termination.
10.5 NON-QUALIFIED OPTIONS, RESTRICTED STOCK AND SARS. The terms
and conditions of Non-Qualified Stock Options, Restricted Stock and SARs
relating to the effect of the termination of a Participant's employment, or
association with the Company, Disability of a Participant or his death shall be
such terms and conditions as the Committee shall, in its sole and absolute
discretion, determine at the time of termination, as specifically provided for
in the Award Agreement executed by the Participant at the time of an Award.
11. NON-TRANSFERABILITY OF RIGHTS
No Award and no right under any Award shall be assignable or
transferable otherwise than by will or the laws of descent and distribution
and, except to the extent otherwise provided in SECTION 13, the rights and
benefits
<PAGE> 31
of any such Award may be exercised and received, respectively, during the
lifetime of the Participant only by him or by his guardian or legal
representative.
12. RECAPITALIZATION, MERGER, CONSOLIDATION, CHANGE IN CONTROL AND SIMILAR
TRANSACTIONS.
12.1 ADJUSTMENT. Subject to any required action by the
shareholders and Board of the Company, within the sole and absolute discretion
of the Committee, the aggregate number of shares of Common Stock for which
Awards may be made hereunder, the number of shares of Common Stock covered by
each outstanding Option or SAR and the exercise price per share of Common Stock
of each such Option or SAR, shall all be equitably adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock
resulting from a subdivision or consolidation of shares (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise) or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares of Common Stock affected without the receipt of consideration by
the Company (other than shares held by dissenting shareholders).
12.2 CHANGE IN CONTROL. All outstanding Options, SARs and
Restricted Stock shall automatically vest and, in the case of Options and SARs,
become immediately exercisable in the event of a Change in Control or Imminent
Change in Control of the Company.
12.3 EXTRAORDINARY CORPORATE ACTION. Subject to any required
action by the shareholders of the Company, in the event of any Change in
Control, recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, liquidation or other extraordinary corporate
action or event, the Committee, in its sole and absolute discretion, shall have
the power, prior or subsequent to such action to:
(i) appropriately adjust the number of shares of Common
Stock subject to each Option or SAR, the exercise price per share of
Common Stock and the consideration to be given or received by the
Company upon the exercise of any outstanding Options or SARs;
(ii) cancel any or all previously granted Options or SARs,
provided that appropriate consideration is paid to the Participants in
connection therewith; and/or
(iii) make such other adjustments in connection with the
Plan as the Committee in its sole and absolute discretion, deems
necessary, desirable, appropriate or advisable; PROVIDED, however,
that no action shall be taken by the Committee which would cause
Incentive Stock Options granted pursuant to this plan to fail to
meet the requirements of Section 422 of the Code.
Moreover, in the event of any transaction, whether a merger, consolidation,
asset exchange, recapitalization or similar transaction, pursuant to which the
Company's Common Stock shall be reclassified as, converted into or otherwise
exchangeable for a different class of equity or debt security of the Company or
any other issuer, Options and SARs granted pursuant hereto shall likewise be,
without any action being required by a Participant or the Company, reclassified
as, converted into or otherwise exchangeable for rights or options to receive
such different security of the Company or any such successor or other issuer.
Except as expressly provided in SECTIONS 12.1, 12.2 and 12.3 hereof, no
Participant shall have any rights by reason of the occurrence of any of the
events described in this SECTION 12. In the event that the Company becomes a
wholly owned subsidiary of another corporation, the definitive agreement
regarding such transaction shall contain a provision which requires the new
parent company to adopt a plan substantially similar hereto and grant options
and/or stock appreciation rights substantially similar hereto to each
Participant herein as a condition precedent to the consummation of the
transaction.
12.4 ACCELERATED VESTING. The Committee shall at all times have
the power to accelerate the exercise date of Options and SARs and the vesting
date of Restricted Stock previously granted under the Plan.
<PAGE> 32
13. PAYMENT OF PURCHASE PRICE, FEDERAL INCOME TAX OR OTHER WITHHOLDING
AMOUNT.
The Common Stock to be purchased upon exercise of any Option shall be
paid for in full, in cash or as hereinafter provided at the time of such
exercise. In addition, in its sole discretion the Committee may determine
that it is an appropriate method of payment for grantees to pay for any shares
subject to an option by delivering (i) certificates for shares of Common Stock
having a value equal to the Exercise Price of the Options being exercised, or
(ii) a properly executed exercise notice together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of
proceeds for the sale of shares of Common Stock or margin credit extended on
shares of Common Stock (including the Common Stock to be acquired pursuant to
the exercise of Options) to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms. The value of Company Common Stock
surrendered in payment of the exercise price shall be its Fair Market Value,
determined pursuant to SECTION 2.1, on the date of exercise. Upon receipt of a
notice of exercise of a Stock Option and upon payment of the Option Price, the
Company shall promptly deliver to the Participant a certificate or certificates
for the shares of Common Stock purchased, without charge to him or her for
issue or transfer tax. The Committee in its sole discretion may from time to
time permit the method of exercising Options known as pyramiding or "cashless
exercise" (that is, the automatic application of shares received upon the
exercise of a portion of a Stock Option to satisfy the exercise price for
additional portions of the Option). In the event that the exercise of any
Non-Qualified Stock Option or any Incentive Stock Option which fails to qualify
as such for any reason, the lapse of any restriction on any Restricted Stock or
the grant or exercise of any other Award results in withholding of federal
income tax or other withholding with respect to such Participant, the amount of
such withholding shall be paid (in full) by the Participant to the Company in
cash or by certified check at the time of such exercise; provided, however,
that at the election of the Participant and with the consent of the Committee,
Participants may satisfy withholding obligations through the surrender of
certificates for shares of Common Stock having an aggregate fair market value
at least equal to the withholding obligation of the Participant. Any such
election to satisfy a withholding obligation through the surrender of shares of
Common Stock shall be made in writing delivered to the Company by the
Participant prior to the Tax Date, shall be irrevocable and shall be
accompanied or followed by such information and documents as the Committee or
the Company may reasonably require. The Committee may, in its sole discretion,
at any time or from time to time, withhold its consent to any such election or
suspend or terminate the right to make such election. In the event that the
Participant is a person subject to Section 16(b) of the Exchange Act, then the
foregoing election shall be subject to the following additional restrictions:
(i) no election shall be made within six months of the grant of an Award,
except that this limitation shall not apply in the event death or disability of
the Participant occurs prior to the expiration of such six month period; (ii)
the election must be made either six months prior to the Tax Date or within
such "window period" established by the Company from time to time during which
reporting persons may acquire the Company's Common Stock. The Company shall
not be required to deliver certificates for such shares until all such payments
have been made, and until the Company has had an opportunity (at its sole
option) to obtain verification from the Participant that all federal income tax
or other withholding amounts have been properly calculated and paid.
14. TERMINATION AND AMENDMENT.
14.1 TERMINATION DATE. Unless the Plan shall theretofore have been
terminated as hereinafter provided, it shall terminate on, and no Awards shall
be made hereunder after December 31, 2005. The Plan may be terminated earlier
by the shareholders of the Company or by the Board.
14.2 AMENDMENT. Modifications or other amendments to the Plan may
be made by the shareholders of the Company. The Plan may also be amended by
the Board; provided, however, that no amendment which shall constitute a
Modification shall be effective unless approved by the shareholders of the
Company within 12 months before or after the adoption of the Modification.
14.3 PARTICIPANT CONSENT. No termination, Modification, or
amendment of the Plan, may, without the consent of the Participant to whom any
Award shall theretofore have been made, adversely affect the rights of
<PAGE> 33
such Participant under such Award; nor shall any such Modification or amendment
be deemed to effect a Modification, extension or renewal of any such Award
previously made except pursuant to an express written agreement to such effect,
executed by the Company and the Participant.
15. TIME OF AWARDS.
Nothing contained in the Plan shall constitute an Award hereunder.
Any Award pursuant to the Plan shall take place only upon approval by the
Committee of a resolution recommending an Award under this Plan. Notice of the
determination shall be given to each person to whom an Award is so made within
a reasonable time after the date of such Award. After the making of an Award
under this Plan, a written Award Agreement shall be duly executed by or on
behalf of the Company and the Participant.
16. FORM AND TERMS OF AWARD AGREEMENT.
Award Agreements evidencing Awards pursuant to the Plan shall be in
such form and shall contain such terms not inconsistent with the Plan as the
Committee may approve. Award Agreements may contain such terms, conditions,
restrictions and limitations in respect of Options, SARs and/or Restricted
Stock (and such provisions for the enforcement of compliance with the
Securities Act of 1933, as amended, and/or with state "Blue Sky" laws) as the
Committee, in its sole discretion, may determine. To the extent any term in
any Award Agreement shall be inconsistent with any term of this Plan, the term
in this Plan shall govern.
17. PARTIAL INVALIDITY.
The invalidity or unenforceability of any particular provision of this
Plan or any Award Agreement shall not affect the other provisions of this Plan
or such Award Agreement nor affect the validity or enforceability of the other
provisions of Award Agreements under this Plan, and this Plan and Awards
hereunder shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
18. SPECIAL PROVISIONS WITH RESPECT TO INCENTIVE STOCK OPTIONS UNDER THIS
PLAN AND NON-QUALIFIED STOCK OPTIONS.
SECTION 5 describes the persons eligible to receive Awards under this
Plan. The Committee in making any Award of an Option shall indicate whether it
intends the Option to be an Incentive Stock Option under this Plan or a
Non-Qualified Stock Option and shall cause the Award Agreement with respect
thereto to indicate such intention. Should a person hold both one or more
Incentive Stock Options under this Plan and one or more Non-Qualified Stock
Options, all of such Options shall be exercisable in accordance with their
respective terms and limitations, and nothing in this Plan shall be construed
as causing the exercise of any such Option to preclude the exercise of any such
other Option in accordance with its terms.
19. NO OWNERSHIP OR SUBSCRIPTION RIGHTS.
Shares of Common Stock of the Company which are subject to an Option
or SAR but which have not yet been purchased or paid for shall have no
subscription rights and no Option or SAR holder shall be deemed to be a
shareholder of the Company for any purpose.
20. UNFUNDED PLAN.
The Plan is intended to constitute an "unfunded" plan. Unless
otherwise determined by the Board, the Plan shall be unfunded and shall not
create (or be construed to create) a trust or a separate fund or funds.
<PAGE> 34
21. RULE 16b-3 COMPLIANCE
21.1 HOLDING PERIOD. Unless a Participant could otherwise transfer
an equity security, derivative security, or shares issued upon exercise of a
derivative security granted under the Plan without incurring liability under
Section 16(b) of the Exchange Act, (i) an equity security issued under the
Plan, other than an equity security issued pursuant to the exercise of a
derivative security granted under the Plan, shall be held for at least six
months from the date of acquisition, and (ii) at least six months shall elapse
from the date of acquisition of a derivative security to the date of
disposition of the derivative security (other than upon exercise or conversion)
or disposition of any underlying equity security issued pursuant to the
exercise or conversion of such derivative security.
21.2 RULE 16b-3 SAVINGS PROVISION. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 and Rule 16a-1(c)(3) under the Exchange Act in connection with any
grant of Awards to or other transaction by a Participant who is subject to
Section 16 of the Exchange Act (except for transactions exempted under
alternative Exchange Act Rules or acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
Agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b).
22. GOVERNING LAW.
The validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan and any Award Agreement shall be determined in
accordance with the laws of the State of Tennessee and applicable federal law.
Plan Adopted by the Board of Directors on February 8, 1996 to be ratified by
the shareholders no later than December 31, 1996.
<PAGE> 35
APPENDIX A
RESPONSE ONCOLOGY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 1996
The Undersigned hereby appoints Daryl P. Johnson as true and lawful
attorney or attorney-in-fact of the undersigned, with full power of
substitution, to vote a proxy for the undersigned at the Annual Meeting of the
Shareholders for Response Oncology, Inc. (the "Company") to be held at the
Company's corporate offices located at 1775 Moriah Woods Boulevard, Memphis,
Tennessee at 11:00 a.m., local time, on May 16, 1996 and all adjournments
thereof, the number of shares of which the undersigned would be entitled to
vote if then personally present for the following purposes:
1. To elect three Class III directors to serve one-year terms
ending in 1997 and one Class I director to serve the balance
of a three year term ending in 1998, or until their successors
have been duly elected and qualified.
<TABLE>
<S> <C> <C>
FOR all nominees listed below AGAINST all nominees listed below ABSTAIN
- ---- ---- ----
(except as marked to the contrary below)
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in
the list below:
Class III Directors: Joseph T. Clark W. Thomas Grant, II James R. Seward
Class I Director: Leonard A. Kalman, MD
2. To ratify the selection of KPMG Peat Marwick LLP as the
Company's independent auditors for 1996.
FOR AGAINST ABSTAIN
---- ---- ----
3. To consider and act upon a proposal to adopt the 1996 Stock
Incentive Plan providing for the issuance to officers,
employees, directors, consultants, and other designated
persons of up to 630,000 shares of Common Stock.
FOR AGAINST ABSTAIN
---- ---- ----
4. To consider and act upon a proposal to amend the 1990
Non-Qualified Stock Option Plan to authorize the issuance of
an additional 265,000 shares of Common Stock.
FOR AGAINST ABSTAIN
---- ---- ----
5. To transact such other business as may properly be brought
before the Annual Meeting or any adjourment thereof.
(Continued on reverse side)
(Continued from other side)
This proxy, which is solicited on behalf of the Board of Directors of
Response Oncology, Inc. will be voted in the manner described herein. If no
direction is made, this proxy will be voted FOR all the proposals listed.
DATE: , 1996
-------------------------
-------------------------------
SIGNATURE
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Signature if Held Jointly
NOTE: Please date and sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign full name by
authorized officer.
