<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act 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 JUNE 11, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of the Shareholders
of Response Oncology, Inc. (the "Annual Meeting") will be held at the offices of
Response Oncology, Inc. (the "Company"), 1755 Moriah Woods Blvd., Memphis,
Tennessee 38117 on Thursday, June 11, 1998, at 11:00 a.m., local time, for the
following purposes:
1. To elect three Class I directors to serve two year terms
ending in 2001 and three Class III directors to serve one year
terms ending in 1999, 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 1998.
Only shareholders of the Company of record as of the close of business
on April 27, 1998, 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
Mary E. Clements
Secretary
April 30, 1998
- --------------------------------------------------------------------------------
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 June 11, 1998, (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 May 11, 1998.
No person is authorized to give any information or to make any representation
not contained in this Proxy Statement and, if given or made, such information or
representation should not be relied upon as having been authorized. This Proxy
Statement does not constitute the solicitation of a proxy in any jurisdiction
where, or from any person to whom it is unlawful to make such proxy
solicitation. The delivery of this Proxy Statement shall not, under any
circumstances, imply that there has not been any change in the information set
forth herein since the date of the Proxy Statement.
THE PROXY
The solicitation of proxies is being made on behalf of the Board of
Directors of the Company 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 solicitation, which may be made by mail, telephone,
telegraph or personally by officers and employees of the Company (who will
receive no additional compensation for such activities), 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.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of shares held of record by such persons.
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 I director
nominees and all Class III director nominees named in the Proxy Statement; and
(ii) FOR the ratification and selection of KPMG Peat Marwick LLP as the
Company's independent auditors for 1998. 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.
Cumulative voting is not permitted. Only shareholders of record at the close of
business on April 27, 1998 will be entitled to notice of, and to vote at, the
Annual
2
<PAGE> 4
Meeting and any adjournment thereof. As of the close of business on April 27,
1998, the Company had outstanding 12,021,828 shares of Common Stock. Of the
total number of outstanding shares of Common Stock on April 27, 1998, the
directors and executive officers of the Company, consisting of 12 persons, owned
897,502 shares comprising 7.47% of such total.
No specific provision of the Tennessee Business Corporation Act, the
Company's charter or the Company's Bylaws addresses the issue of abstentions or
broker non-votes. Brokers holding shares for beneficial owners must vote those
shares according to the specific instructions they receive from the owners.
However, brokers or nominees holding shares for beneficial owner may not have
discretionary voting power and may not have received voting instructions from
the beneficial owner with respect to voting on certain proposals. In such cases,
absence specific voting instructions from the beneficial owner, the broker may
not vote on these proposals. This results in what is known as a "broker
non-vote". A "broker non-vote" will not be counted as votes cast but will be
counted for the purposes of determining the existence of the quorum. Because the
election of directors and ratification of the selection of independent auditors
or routine matters for which specific instructions from beneficial owners will
not be required, the Company does not anticipate that any "broker non-votes"
will arise in the context of the election of directors or the ratification of
the selection of independent auditors. Votes "withheld" from a director-nominee
or from the ratification of the selection of independent auditors have the
effect of a negative vote because a plurality of the shares casts at the Annual
Meeting is required for the election of each director and the ratification of
the selection of independent auditors.
3
<PAGE> 5
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 April 27, 1998,
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
NAME OF BENEFICIAL OWNER BENEFICIAL OWNER PERCENT OF CLASS (1)
- ------------------------ -------------------- --------------------
<S> <C> <C>
William D. Grant
One Ward Parkway, Ste. 130
Kansas City, MO 64112 995,577 8.28%
William H. West, M.D.
1775 Moriah Woods Blvd.
Memphis, TN 38117 900,129 (2) 7.33%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 799,549 6.65%
Southern Fiduciary Trust
2325 Crestmoor Road, Ste. 202
Nashville, TN 37215 707,029 5.88%
</TABLE>
(1) The percentages shown are based on 12,021,828 shares of Common Stock
outstanding on April 27, 1998 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 Preferred 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 April 27, 1998.
(2) Includes 259,149 shares of Common Stock which Dr. West has the right to
acquire pursuant to the exercise of option.
4
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock
all as of April 27, 1998 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
executive officers or directors is a beneficial owner 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>
Frank M. Bumstead 112,781(2) *
Director
Joseph T. Clark 388,349(3) 3.13%
Director, President and Chief
Executive Officer
Mary E. Clements 130,000(4) 1.07%
Chief Financial Officer
W. Thomas Grant II 117,378(5) *
Director
P. Anthony Jacobs 42,026(6) *
Director
Leonard A. Kalman, M.D 45,047(7) *
Director
Lawrence N. Kugelman 13,000(8) *
Director
Kenneth L. Scott 157,731(9) 1.30%
Chief Operating Officer
James R. Seward 35,117(10) *
Director
Charles H. Weaver, M.D 183,061(11) 1.50%
Chief Medical Officer
William H. West, M.D 900,129(12) 7.33%
Chairman
ALL DIRECTORS AND OFFICERS AS A 2,251,174(13) 16.83%
GROUP (12 PERSONS)
</TABLE>
5
<PAGE> 7
(1) The percentages shown are based on 12,021,828 shares of Common Stock
outstanding on April 27, 1998 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 Preferred Stock and
exercise of all options held by such holder, which stock options may be
converted or exercised within sixty (60) days of April 27, 1998.
(2) Includes 14,000 shares of Common Stock which Mr. Bumstead has a right
to acquire pursuant to the exercise of options and warrants.
(3) Includes 383,549 shares of Common Stock which Mr. Clark has the right
to acquire pursuant to the exercise of options.
(4) Represents shares of Common Stock which Ms. Clements has the right to
acquire pursuant to the exercise of options.
(5) Includes 14,000 shares of Common Stock which Mr. Grant has the right to
acquire pursuant to the exercise of options.
(6) Includes 14,000 shares of Common Stock which Mr. Jacobs has the right
to acquire pursuant to the exercise of options.
(7) Includes 6,027 shares of Common Stock which Dr. Kalman has the right,
pursuant to a power of attorney, to acquire pursuant to the conversion
of convertible debt issued in connection with the acquisition of the
assets of the Group, 39,000 shares of Common Stock which Dr. Kalman has
the right to acquire pursuant to the exercise of options, and 20 shares
held by his wife in an IRA.
(8) Represents shares of Common Stock which Mr. Kugelman has the right to
acquire pursuant to the exercise of options.
(9) Includes 157,331 shares of Common Stock which Mr. Scott has the right
to acquire pursuant to the exercise of options.
(10) Includes 14,000 shares of Common Stock which Mr. Seward has the right
to acquire pursuant to the exercise of options.
(11) Represents shares of Common Stock which Dr. Weaver has the right to
acquire pursuant to the exercise of options and warrants.
(12) Includes 259,149 shares of Common Stock which Dr. West has the right to
acquire pursuant to the exercise of options.
(13) Includes 1,347,645 shares of Common Stock as to which various officers
and directors have rights to acquire pursuant to the exercise of
options and conversion rights on note payments.
* Represents less than 1% of total outstanding Common Stock
6
<PAGE> 8
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 eight directors, six of whom are not executive officers or employees
of the Company ("Independent Directors"). The Board of Directors held four
meetings during fiscal 1997. No director 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, Mr. Clark and Dr. West. 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 1997.
Audit Committee. The Board of Directors has established an Audit
Committee, which currently consists of Messrs. Bumstead, 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 1997.
Nominating and Compensation Committee. The Board of Directors has
established a Compensation Committee, which currently consists of Messrs.
Bumstead, Kugelman, Jacobs (Chairman) 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 the 1996 Stock Incentive Plan. The Compensation Committee serves
as the Nominating Committee of the Company. The Compensation Committee met three
times during fiscal 1997.
COMPENSATION OF DIRECTORS
Directors who are executive officers or employees of the Company do not
receive additional remuneration as directors. Independent Directors receive an
annual retainer fee of $10,000, $1,500 for each board meeting attended, and $750
for each committee meeting attended. Such compensation is payable in respect of
all duly noticed meetings and is payable whether the director attends in person
or by telephone. Such compensation may be deferred at the election of the
director and paid later in cash or in shares of Common Stock. Independent
Directors 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 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 eight the number of directors constituting the
full Board of Directors.
7
<PAGE> 9
The following six individuals have been nominated for election to serve
as directors of the Company. Messrs. West, Bumstead, Clark, Seward, Grant and
Dr. Kalman are currently directors of the Company. Dr. Kalman is a stockholder
of Oncology Hematology Group of South Florida, P.A., with whom the Company has
entered a long term contract to provide management services. See "Certain
Transactions with Directors" and "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.
DIRECTOR NOMINEES - CLASS III
(TERMS EXPIRING 1999)
- --------------------------------------------------------------------------------
JOSEPH T. CLARK, age 42, 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 45, has been a director of the Company since 1990. Mr.
Seward has served as the President and Chief Executive Officer of SLH
Corporation since July 1997. Mr. Seward previously served as the Executive Vice
President of Seafield Capital Corporation from May 1993 to July 1997 and was the
Senior Vice President of Seafield Capital Corporation from August 1990 to May
1993. Mr. Seward also served as the Chief Financial Officer of Seafield Capital
Corporation from February 1991 to July 1997.
Committees: Compensation, Executive, and Audit (Chairman)
- --------------------------------------------------------------------------------
W. THOMAS GRANT II, age 47, has been a director of the Company since 1991. Mr.
Grant has been the Chief Executive Officer of Lab One, Inc. since July 1997. Mr.
Grant was the Chief Executive Officer of Seafield Capital Corporation and served
as the Chairman of the Board of Seafield Capital Corporation from May 1993 to
July 1997, prior to which time he served as the President. Mr. Grant serves as a
director for AMC Entertainment, Inc., Kansas City Power & Light Company,
Commerce Bancshares, Inc., Lab One, Inc. and SLH Corporation.
Committees: None
- --------------------------------------------------------------------------------
DIRECTOR NOMINEES - CLASS I
(TERMS EXPIRING 2001)
- --------------------------------------------------------------------------------
WILLIAM H. WEST, M.D., age 50, 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
- --------------------------------------------------------------------------------
8
<PAGE> 10
FRANK M. BUMSTEAD, age 56, 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. Prior to that, Mr. Bumstead was the President of Bumstead Co., a
financial consulting company, from 1986 to December 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: Compensation, Executive (Chairman), and Audit
- --------------------------------------------------------------------------------
LEONARD A. KALMAN, M.D., age 47, has been a director of the Company since 1996.
Dr. Kalman is a practicing medical oncologist with Oncology Hematology Group of
South Florida, P.A., where he has practiced for more than 5 years.
Committees: None
- --------------------------------------------------------------------------------
INCUMBENT DIRECTORS - CLASS II
(TERMS EXPIRING 2001)
- --------------------------------------------------------------------------------
P. ANTHONY JACOBS, age 56, has been a director of the Company since 1990. Mr.
Jacobs has served as the Chairman of SLH Corporation since July 1997. Mr. Jacobs
also served as the President of Seafield Capital Corporation from May 1993 to
July 1997 and the Chief Operating Officer of Seafield Capital Corporation from
August 1990 to July 1997. Mr. Jacobs was the Executive Vice President of
Seafield Capital Corporation from August 1990 to May 1993 and was a Director of
Seafield Capital Corporation from 1987 to 1997. Mr. Jacobs is a director for
Trenwick Group Inc., serving on its compensation committee, Lab One, Inc. and
SLH Corporation.
Committees: Compensation (Chairman), Executive, and Audit
- --------------------------------------------------------------------------------
LAWRENCE N. KUGELMAN, age 55, has been a director of the Company since August
1996. Mr. Kugelman has been a self-employed health care consultant since October
1996. From December 1995 to October 1996, he served as President and Chief
Executive Officer of Coventry Corp. From April 1995 to December 1995, Mr.
Kugelman was a self-employed health care consultant. From January 1993 to April
1995, he was Executive Vice President of American Medical International, and
prior to that he was President and Chief Executive Officer of Health Plan of
America. Mr. Kugelman is also a director of Coventry Corp.
Committees: Compensation
- --------------------------------------------------------------------------------
9
<PAGE> 11
CERTAIN TRANSACTIONS WITH DIRECTORS
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 $11.50 per share. As of
the date hereof approximately $1,500,000 remains payable to the Group of which
Dr. Kalman's beneficial interest is approximately $190,000.
BUSINESS RELATIONSHIPS BETWEEN COMPANY AND DIRECTORS
The Company and the Group, of which Dr. Kalman is a stockholder, are
parties to a management services agreement, executed in January 1996 and amended
in August 1997 in connection with the above-described physician practice
affiliation transaction, pursuant to which the Group pays the Company service
fees 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 service fees equal to a percentage of the practice's net operating
income plus clinic expenses. During 1997, the Group paid the Company aggregate
service fees of $7,899,629.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS OF THE COMPANY
WILLIAM H. WEST, M.D., CHAIRMAN: Dr. West has served as Chairman of the Board
since February 1993. Previously, he served as Chief Executive Officer from May
1989 to January 1996 and as Chief Medical Officer from 1985 to February 1996.
Dr. West, who is a medical oncologist and founder of the West Clinic (an
eight-physician oncology clinic in Memphis), has been a Director of the Company
since 1985. In addition, Dr. West has served as a Senior Researcher at the
National Cancer Institute and he has had numerous articles published in major
industry publications, including THE NEW ENGLAND JOURNAL OF MEDICINE.
JOSEPH T. CLARK, PRESIDENT AND CHIEF EXECUTIVE OFFICER: Mr. Clark has served as
Chief Executive Officer of the Company since January 1996 and President since
February 1993. From 1978 to 1982, Mr. Clark served as a hospital administrator
with Humana. From 1982 to 1988, he was with American Medical International in
various capacities, including Regional Director of Finance. Mr. Clark has been a
Director of the Company since 1988.
MARY E. CLEMENTS, CHIEF FINANCIAL OFFICER: Ms. Clements has been Chief Financial
Officer in the Company since June 1997. Before joining Response Oncology in June
1996, she served in a number of capacities at Coopers & Lybrand L.L.P.,
performing various auditing and consulting functions for several physician
practice management companies. From June 1996 to September 1996, Ms. Clements
served as Director of Development for the Company's Practice Management
Division. In September 1996, she was appointed Chief Operating Officer of that
Division.
KENNETH L. SCOTT, CHIEF OPERATING OFFICER: Mr. Scott has been Chief Operating
Officer of the Company since January 1997. From February 1996 to January 1997,
he served as Chief Operating Officer of the Company's IMPACT division.
Previously, Mr. Scott was President and CEO of American Health Care Management
Services, Inc., an oncology healthcare management consulting company, from June
1993 to February 1996.
CHARLES H. WEAVER, M.D., CHIEF MEDICAL OFFICER: Dr. Weaver has served as Chief
Medical Officer of the Company since February 1996. From February 1994 to
February 1996, he served as the Company's Chief Scientific Officer. Dr. Weaver
finished his residency in Internal Medicine at the University of Pennsylvania in
1991, and from 1991 to 1994 was a fellow in the Autologous Bone Marrow
Transplantation Department at the Fed Hutchinson Cancer Research Center in
Seattle, Washington.
10
<PAGE> 12
EMPLOYMENT CONTRACTS; CHANGE OF CONTROL ARRANGEMENTS
Each of the executive officers named in the tables above has executed,
effective as of January 1, 1998, an employment contract providing for the
continued employment of each of the named executives. Each contract is for a
term of three years and is automatically renewed for a one year period unless
notice of termination is given on the anniversary date preceding its expiration.
The employment contracts provide for the following base salaries, plus in each
case a bonus of up to 100% of the executive's base salary: Dr. West - $234,000;
Mr. Clark - $234,000; Dr. Weaver - $226,750; Mr. Scott - $185,000; Ms. Clements
- - $150,000. Annual bonuses are determined in accordance with policies, and are
based on performance targets, established by the Compensation Committee. In
addition, each executive is entitled to all other employee benefits for which
any salaried employee of the Company is eligible.
Each employment contract provides for termination of salary as of the
date of termination due to death or disability, as well as upon a termination
for cause by the Company or voluntary termination by the executive. Cause is
defined as conviction of a felony, perpetration of fraud, embezzlement or other
act of dishonesty or the executive's breach of trust or fiduciary duties in a
manner that materially adversely affects the Company or its shareholders.
If an executive's employment is terminated by the Company without cause
or the executive suffers a "constructive termination" of employment (defined as
(a) a declined reassignment to a job that is not the equivalent of the
executive's then-current position either in terms of scope of duties or location
of employment, or (b) conduct by the Company or the board of directors that is a
continuous and material interference with the executive's ability to perform the
duties of his position), and there has not been a change in control of the
Company, then the executive is entitled a lump sum severance payment equal to
100% of his or her then-current base salary plus 100% of the average annual
incentive bonus paid to the executive during the two year immediately preceding
such termination.
In the event the executive's employment is terminated without cause or
the executive suffers a constructive termination within one year following a
change in control, the executive is entitled to a lump sum severance payment
equal to (1) 200% (299% in the case of Dr. West and Mr. Clark) of the sum of the
executive's base salary as in effect at the time of termination plus the
executive's average annual incentive bonus for the two years immediately
preceding such termination, plus (2) the amount of any excise tax incurred by
the executive pursuant to the "excess parachute payment" rules under the
Internal Revenue Code of 1996, as amended; provided that the foregoing excise
tax gross-up is limited for all executives of the Company to an aggregate
amount of $5 million.
While the executive is employed by the Company and for a period of one
year following termination of employment for any reason (except upon the
Company's failure to renew), the executive has agreed not to compete with the
Company.
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 the Company's other four most highly compensated executive officers
whose total annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ANNUAL Long Term
COMPENSATION Compensation Awards
- ----------------------------------------------------------------------------------
NAME AND PRINCIPAL OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS SARs PAYOUTS COMPENSATION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Clark, 1997 $212,954 $110,837 344,749 0 $1,250(2)
President and CEO 1996 205,231 50,800 25,000 0 1,358(2)
1995 182,343 135,000 83,400 0 1,102(2)
- ----------------------------------------------------------------------------------------------------
Mary E. Clements 1997 $127,539 $ 62,421 130,000 0 $1,154(2)
Chief Financial Officer 1996 38,462 15,000 75,000 0 0
1995 0 0 4,000 0 0
- ----------------------------------------------------------------------------------------------------
Kenneth L. Scott 1997 $175,000 $90,030 157,331 0 $1,250(2)
Chief Operating Officer 1996 120,192 25,850 120,000 0 1,053(2)
1995 0 0 5,000 0 0
- ----------------------------------------------------------------------------------------------------
Charles H. Weaver, M.D., 1997 $195,786 $281,465 183,061 0 $1,250(2)
Chief Medical Officer 1996 223,702 68,660 55,000 0 1,358(2)
1995 214,398 77,250 15,000 0 2,995(2)
- ----------------------------------------------------------------------------------------------------
William H. West, M.D. 1997 $234,000 $110,837 209,149 0 $ 0
Chairman 1996 230,885 49,300 25,000 0 108(2)
1995 209,726 148,250 62,500 0 102(2)
- ----------------------------------------------------------------------------------------------------
</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.
11
<PAGE> 13
Option Grants as of December 31, 1997. The following table provides
information on option grants during the 1997 fiscal year to the executive
officers listed in the table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Potential
Realization Value
Individual Grants at Assumed Rates of
---------------------------------------------------------- Annual Stock Price
Options % of Total Appreciation for
Granted(3) Options Granted Exercise Option Term (2)
to Employees in Price Expiration --------------------------
Fiscal Year ($/Share)(1) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Clark 344,749 20.68% $6.00 05/01/07 $1,160,475 $3,073,099
- --------------------------------------------------------------------------------------------------------------------
Mary E. Clements 130,000 7.80% $6.00 05/01/07 $ 432,837 $1,144,062
- --------------------------------------------------------------------------------------------------------------------
Kenneth L. Scott 159,457 9.57% $6.00 05/01/07 $ 536,755 $1,421,403
- --------------------------------------------------------------------------------------------------------------------
Charles H. Weaver 183,061 10.98% $6.00 05/01/07 $ 616,210 $1,631,809
- --------------------------------------------------------------------------------------------------------------------
William H. West 209,149 12.55% $6.00 05/01/07 $ 704,026 $1,864,358
- --------------------------------------------------------------------------------------------------------------------
</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 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 individual option agreements
between the Company and the named executives.
12
<PAGE> 14
Aggregated Option Exercises through December 31, 1997. The following
table provides information with respect to the value of each of their
unexercised options at December 31, 1997. No executive officer exercised any
options during the year ended December 31, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Number of Shares Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year End(2) at December 31, 1997(1)
- -----------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph T. Clark 244,260 139,289 $746,468 $330,811
- -----------------------------------------------------------------------------------------
Mary E. Clements 66,471 63,529 157,869 150,881
- -----------------------------------------------------------------------------------------
Kenneth L. Scott 109,692 47,639 260,519 113,143
- -----------------------------------------------------------------------------------------
Charles H. Weaver 105,323 77,738 250,142 184,628
- -----------------------------------------------------------------------------------------
William H. West 177,934 81,215 541,393 192,886
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the closing price of $8.38 per share the Common Stock on the
National Market of The Nasdaq Stock Market on December 31, 1997.
(2) Adjusted for one-for-five reverse stock split in November 1995.
13
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of Independent 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.
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 1997, 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 achievement of 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 Compensation 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 and the number of physicians
under management. For 1997, the Compensation Committee placed significant
emphasis on the continuing efforts of certain executive officers in
repositioning the Company from a strategic and financial point of view to being
a complete provider of cancer care.
14
<PAGE> 16
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 the Compensation Committee has the ability to
award shares of restricted stock and stock appreciation rights (whether separate
or in tandem with stock options) in addition to stock options. Such stock based
compensation provides for an incentive for each participant to become a
meaningful stockholder of the Company and provides a mechanism for aligning
those participants's interests with those of the stockholders. The Compensation
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 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. Mr. Clark's base salary is set using the
same criteria as all other executive officers. His 1997 cash bonus primarily
reflected the achievement of the Company's EBIT targets. During 1997, the
Company had a record year in terms of earnings, achieved first-time coverage of
the Company's Common Stock by analysts at a major regional securities firm,
assimilated oncology practices with whom the Company affiliated in 1996, and
restructured certain oncology practice management agreements to benefit the
Company's earnings and limit its downside. Mr. Clark's cash bonus was
approximately 52% of the maximum bonus provided in his employment agreement.
COMPENSATION COMMITTEE
P. Anthony Jacobs (Chairman)
Frank M. Bumstead
Lawrence Kugelman
James R. Seward
15
<PAGE> 17
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,
1997, 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, 1992:
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Response Oncology $ 58.70 $ 28.26 $ 29.35 $ 43.48 $ 33.04 $ 29.14
- --------------------------------------------------------------------------------------------------
Nasdaq Composite $115.45 $132.48 $128.25 $179.44 $220.18 $267.82
- --------------------------------------------------------------------------------------------------
S&P H. C. Composite $ 86.81 $ 77.02 $ 84.36 $127.80 $156.86 $206.98
- --------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
There were no compensation interlocks in 1997, and no insider
participated in decisions relating to his compensation in 1997.
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, 1997 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, 1997 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" EACH OF THE NOMINEES FOR CLASS I
DIRECTORS AND CLASS III DIRECTORS.
17
<PAGE> 19
PROPOSAL 2.
RATIFICATION OF SELECTION OF KPMG PEAT MARWICK LLP
AS THE 1998 INDEPENDENT ACCOUNTANTS AND AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the
Company's independent auditors for 1998. 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 through 1997. Representatives of the firm will be present at
the Annual Meeting, 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
1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 2.
18
<PAGE> 20
SHAREHOLDER PROPOSALS FOR 1999
Pursuant to the Securities Exchange Act of 1934, shareholder proposals
intended to be presented at the 1999 annual meeting of shareholders of the
Company must be received by the Company at its executive offices on or before
January 11, 1999.
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 1997 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
MARY E. CLEMENTS
Secretary
April 30, 1998
19
<PAGE> 21
APPENDIX A
RESPONSE ONCOLOGY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 11, 1998
The Undersigned hereby appoints Mary E. Clements 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 June 11, 1998, 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 I directors to serve two year terms ending in 2001 and
three Class III directors to serve one year terms ending in 1998, or until
their successors have been duly elected and qualified.
<TABLE>
<S> <C> <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 I Directors: William H. West, M.D. Frank M. Bumstead
Leonard A. Kalman, M.D.
Class III Directors: Joseph T. Clark W. Thomas Grant, II
James R. Seward
2. To ratify the selection of KPMG Peat Marwick LLP as the Company's independent
auditors for 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
(Continued from other side)
3. To transact such other business as may properly be brought before the Annual
Meeting or any adjournment thereof.
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: , 1998
----------------
---------------------------
Signature
---------------------------
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.
