SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934 (Amendment No.__)
AVESIS INCORPORATED
-------------------
(Name of issuer)
COMMON STOCK
------------
(Title of Class of Securities)
053650107
---------
(CUSIP Number)
Neal Kempler
100 West Clarendon, Suite 2300, Phoenix Arizona 85013; (602) 240-9061
---------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notes and Communications)
January 27, 1997
----------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-l(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 5 Pages
<PAGE>
CUSIP No. 053650107 Page 2 of 5 Pages
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS SS. OR I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSON
Neal A. Kempler
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
Number of 7 SOLE VOTING POWER
Shares 255,000
------------------------------------------------------------
Beneficially 8 SHARED VOTING POWER
Owned by
------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting 255,000
------------------------------------------------------------
Person 10 SHARED DISPOSITIVE POWER
With
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
255,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Issuer.
This Statement relates to Common Stock of Avesis Incorporated (the
"Issuer"). The principal executive offices of the Issuer are located at 100 West
Clarendon Avenue, Suite 2300, Phoenix, Arizona 85013.
Item 2. Identity and Background.
This statement is being filed by:
(a) Neal Kempler.
(b) Filing person's address: 100 West Clarendon Avenue, Suite 2300,
Phoenix, Arizona 85013.
(c) Mr. Kempler is the Corporate Secretary of the Issuer.
(d) During the last five years, the filing person has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, the filing person has not been and
is not subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Mr. Kempler is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
All Issuer common shares reported herein are beneficially owned by Mr.
Kempler because he holds stock purchase options related to his employment with
the Issuer. Mr. Kempler's ownership of the options was not acquired by purchase.
Item 4. Purpose of Transaction.
Mr. Kempler's options were originally issued by the Issuer to National
Health Enterprises, Inc. ("NHE") in connection with the retention by the Issuer
of NHE to perform management services for the Issuer pursuant to a management
contract (the "Management Agreement"). NHE subsequently transferred portions of
its options to Mr. Kempler for management services he performed for the Issuer.
Page 3 of 5
<PAGE>
All of the Issuer's shares held by Mr. Kempler are held for investment
purposes only. Except as described above and that Mr. Kempler is the Corporate
Secretary of the Issuer, he has no present plan or proposal that relates to or
would result in any of the actions described in clauses (a) through (j) of Item
4 of Schedule 13D, although he may from time to time in the future acquire
additional shares of Common Stock or securities convertible into Common Stock.
At present, Mr. Kempler contemplates that such additional shares, if any, would
also be purchased for investment purposes only.
Item 5. Interest In Securities of the Issuer.
(a) The aggregate number and percentage of Issuer Common Stock
beneficially owned by Mr. Kempler is 255,000 and 5.9%, respectively. All such
shares are deemed to be beneficially owned by Mr. Kempler pursuant to Rule 13d-3
because the shares underlie presently exercisable stock purchase options owned
by Mr. Kempler.
(b) See Items 7 through 10 on the Cover Pages of this Schedule 13D.
(c) Mr. Kempler effected the following transaction since 60 days
prior to the date of the event which requires filing of this statement:
(i) NHE transferred 200,000 fully vested stock purchase options to
Mr. Kempler on January 27, 1997 at an exercise price of $0.48 per
share, which were originally granted to NHE from the Issuer.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
The shares reported herein are beneficially owned by virtue of fully
vested stock purchase options. There are no other contracts,
arrangements, understandings, or relationships among Mr. Kempler and
any other person with respect to any securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
1. Stock Option Grant letter issued to Neal A. Kempler, dated
January 27, 1997 for the purchase of 200,000 shares of the
Issuer's Common Stock.
2. Stock Option Grant letter issued to Neal A. Kempler, dated
April 30, 1994 for the purchase of 5,000 shares of the Issuer's
Common Stock.
Page 4 of 5
<PAGE>
3. Stock Option Grant letter issued to Neal A. Kempler, dated
March 31, 1993 for the purchase of 50,000 shares of the
Issuer's Common Stock.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
February 5____, 1997
/s/ Neal A. Kempler
-------------------------
NEAL A. KEMPLER
Page 5 of 5
<PAGE>
EXHIBIT 1
NATIONAL HEALTH ENTERPRISES INC.
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
Neal A. Kempler
c/o Avesis Incorporated
100 West Clarendon Avenue
Suite #2300
Phoenix, Arizona 85013
re: Option Transfer
Dear Neal:
Pursuant to a Stock Option Grant (the "Grant Letter") dated
March 18, 1993, National Health Enterprises Inc., a Maryland corporation
("NHE") acquired options (the "Options") to purchase up to 4,400,000 shares of
the Common Stock of Avesis Incorporated, a Delaware corporation (the
"Company") subject to the terms and conditions set forth in the Grant Letter.
A copy of the Grant Letter is attached hereto.
Pursuant to Section 4 of the Grant Letter, and in
consideration for services performed and to be performed on behalf of NHE in
connection with the Management Agreement dated March 18, 1993 between NHE and
the Company, NHE hereby transfers to you Options (the "Transferred Options")
for the purchase of 200,000 shares of the Company's Common Stock. The terms
and conditions of the Transferred Options shall be identical to the terms and
conditions set forth In the Letter of Grant except as follows:
1. The options are fully vested as a result the Board of
Directors resolution included in the minutes of the December 5, 1994 meeting,
and are transferred as such to the optionee.
2. The limited transfer right set forth in Section 4 of the
Letter of Grant is not available to you.
3. Any rights you may have under the Transferred Options shall
terminate, and the Transferred Options shall once again be exercisable (if at
all) solely by NHE, within 90 days after you cease performing substantial
services for or on behalf of the Company, provided that your rights under the
Transferred Options shall terminate immediately if the cessation is for cause,
and further provided that this clause shall not extend the exercise period set
forth in the Letter of Grant.
<PAGE>
4. You acknowledge that the Company has advised you that all
transactions associated with the Transferred Options have complex and material
tax consequences, the effect of which can vary according to your personal
circumstances, and that the Company has advised you to obtain independent tax
advice as to all matters relating to the Transferred Options.
5. You acknowledge and agree to all of the terms and
conditions of the attached Letter of Grant, as Modified by the above terms and
conditions.
6. This Transfer shall be effective as of January 27, 1997.
Please indicate your acknowledgment and acceptance of the
foregoing by executing this letter in the space indicated below.
Sincerely,
NATIONAL HEALTH ENTERPRISES, INC.
By: /s/ Kenneth L. Blum, Jr.
-------------------------------------------
Kenneth L. Blum, Jr., President
Acknowledged and accepted:
/s/ Neal A. Kempler
- ----------------------------
Neal A. Kempler
<PAGE>
STOCK OPTION GRANT
March 18, 1993
National Health Enterprises, Inc.
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
Attention: President
Re: Avesis Incorporated - Options to Acquire Common Stock
Ladies and Gentlemen:
This is to confirm the grant to National Health Enterprises,
Inc. by Avesis Incorporated, a Delaware corporation (the "Company"), of options
to acquire shares of the Company's Common Stock, subject to the following terms
and conditions:
1. Grant of Options: Effective Date. The Company grants to you
options to acquire from the Company an aggregate of 4,400,000 shares of the
Common Stock, $.01 par value, of the Company (the "Shares"). Each option shall
be exercisable for the purchase of one Share. This grant is effective as of the
date set forth above (the "Effective Date of Grant").
2. Purchase Price. The purchase price for each Share that may be
acquired upon the exercise of an option shall be determined according to the
following table:
Options which become
exercisable for the first time
during the year ended March 18, Exercise Price
------------------------------- --------------
1994 $.40
1995 $.432
1996 $.467
1997 $.504
1998 $.544
1999 $.588
2000 $.635
2001 $.686
2002 $.740
2003 $.80
<PAGE>
The purchase price of a Share shall not increase after the
year in which such Share may first be purchased.
3. Exercise Term. Subject to Section 5 herein, the Shares may be
purchased at any time after the respective vesting dates or events set forth
below and on or prior to March 18, 2003:
Number of Shares Vesting Date or Event:
---------------- ----------------------
1,400,000 March 18, 1993
500,000 Completion of first fiscal quarter in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $350,000
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $750,000
1,000,000 Completion of the first fiscal year in which the
Company has Profits exceeding $1,000,000
More than one condition of vesting may be satisfied at the
same time.
"Profits" of the Company in any fiscal period shall mean the
Company's pretax operating profit during such period as determined in accordance
with generally accepted accounting principles ("GAAP") based on the Company's
books and records, and excluding (i) any profit or loss from financial
transactions; (ii) any charge for compensation expense relating to these or
other stock options; (iii) one-time expenses incurred to achieve Knox-Keene
compliance; (iv) one-time expenses incurred in transferring computer processing
to an outside vendor; (v) severance packages payable to employees terminated
during 1993 (unless hired on the recommendation of NHE); and (vi) one-time lease
settlement charges.
4. Non-Transferability, The options shall not be transferable
except to employees or affiliates of National Health Enterprises, Inc.
performing substantial services for or on behalf of the Company or to employees
of the Company in transactions complying with applicable state and federal
securities laws.
2
<PAGE>
5. Vesting Requirements. (a) Except as provided in Section 5(c),
options can become exercisable only during the period that National Health
Enterprises, Inc. is retained to perform management services for the Company.
(b) Once exercisable, in accordance with the terms hereof,
options shall remain exercisable until March 18, 2003 except that exercisable
options shall terminate 120 days after the date (if any) that the Company
terminates National Health Enterprises, Inc.'s management services agreement for
cause (as defined therein) or the date that National Health Enterprises, Inc.
terminates such agreement in violation of the terms thereof.
(c) Notwithstanding Section 5(a), if the Company terminates
National Health Enterprises, Inc.'s management services agreement without cause
(as defined therein), the options shall continue to become exercisable after
such termination if and to the extent that the targets set forth in Section 3
are met and subject to the other terms and conditions set forth herein.
6. Manner of Exercise. You may exercise options only by giving the
Company written notice by certified mail, with return receipt requested, postage
prepaid, at the following address, of your intent to exercise the options,
including in such notice the number of Shares that you intend to acquire and the
full consideration therefor in cash:
Avesis Incorporated
4201 North 24th Street
Suite 300
Phoenix, Arizona 85016
7. 0eorganizations, Etc. If the outstanding shares of the Common
Stock are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or securities, as a result of one or more
stock splits, reverse stock splits, stock dividends, spin-offs, spin-outs or
other distributions of assets to shareholders, or assumption and conversion of
outstanding grants due to an acquisition or the like, appropriate adjustments
shall be made with respect to the options and/or the number and/or type of
Shares for which the options may thereafter be exercised.
8. Restrictions on Shares.
(a) Shares shall not be issued unless the issuance and delivery
thereof shall comply with all relevant provisions of law
including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended,
the rules and regulations promulgated thereunder, any
applicable state securities or "Blue Sky" law or laws, and
the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
3
<PAGE>
(b) Unless the Shares shall have been registered with the
Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of 1933, as amended, you represent and
agree that the Shares will be acquired for investment and not
for resale or distribution. Upon exercise of any portion of
an option, the person entitled to exercise the same shall
upon request of the Company furnish evidence satisfactory to
the Company (including a written and signed representation)
to the effect that the Shares are being acquired in good
faith for investment and not for resale or distribution. The
certificates representing the Shares may bear a legend
referencing applicable transfer restrictions.
(c) No transfer of any Shares will be permitted by the Company
unless any request for transfer is accompanied by evidence
satisfactory to the Company that the proposed transfer will
not result in a violation of any applicable law, rule or
regulation, whether federal or state, including in the
discretion of the Company an opinion of counsel reasonably
acceptable to the Company.
9. Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of options. The value of any fractional
share subject to an option shall be paid in cash in connection with the exercise
that results in all full shares subject to the options having been exercised.
10. Miscellaneous. You will have no rights as a shareholder with
respect to the Shares until the exercise of the options and payment of the full
purchase price therefor in accordance with the terms of this Letter of Grant.
Nothing herein shall impose any obligation on the Company or any parent or
subsidiary of the Company with respect to your continued retention to perform
management services for the Company or any parent or subsidiary of the Company.
11. Governing Law. This Letter of Grant shall be subject to and
construed and enforced in accordance with the laws of the State of Arizona.
12. Withholding. You hereby authorize the Company to withhold in
accordance with applicable law from any compensation otherwise payable to you
any amounts required to be withheld by federal, state or local law as a result
of this option.
Please execute the Acceptance on the enclosed copy of this Letter of
Grant, date your signature and return such copy to the Company.
AVESIS INCORPORATED
By: /s/ William R. Cohen
---------------------------
Its: Chairman
4
<PAGE>
ACCEPTANCE
The undersigned National Health Enterprises, Inc. understands,
acknowledges and agrees to the terms and conditions of the options granted
pursuant to this Letter of Grant.
NATIONAL HEALTH ENTERPRISES,
INC.
By: /s/ Kenneth L. Blum, Jr.
-------------------------------
Its: President
Date: March 18, 1993
5
<PAGE>
EXHIBIT 2
Mr. Neal Kempler
re: Option Transfer
Dear Neal:
Pursuant to a Stock Option Grant (the "Grant Letter") dated
March 18, 1993, National Health Enterprises Inc., a Maryland corporation ("NHE")
acquired options (the "Options") to purchase up to 4,400,000 shares of the
Common Stock of Avesis Incorporated, a Delaware corporation (the "Company")
subject to the terms and conditions set forth in the Grant Letter. A copy of the
Grant Letter is attached hereto. Certain of the Options have been transferred to
me by NHE.
Pursuant to Section 4 of the Grant Letter, and in
consideration for services performed and to be performed on behalf of NHE in
connection with the Management Agreement dated March 18, 1993 between NHE and
the Company, I hereby transfer to you Options (the "Transferred Options") for
the purchase of 5,000 shares of the Company's Common Stock. The terms and
conditions of the Transferred Options shall be identical to the terms and
conditions set forth in the Letter of Grant except as follows:
1. The vesting dates for the Transferred Options shall be
spread among the vesting dates and events set forth in Section 3 of the Letter
of Grant as follows:
Number of Shares Vesting Date or Event:
---------------- ----------------------
850 Completion of first fiscal quarter in which the
Company has Profits
850 Completion of the first fiscal year in which the
Company has Profits
850 Completion of the first fiscal year in which the
Company has Profits exceeding $350,000
850 Completion of the first fiscal year in which the
Company has Profits exceeding $750,000
1,600 Completion of the first fiscal year in which the
Company has Profits exceeding $1,000,000
<PAGE>
2. The limited transfer right set forth in Section 4 of the
Letter of Grant is not available to you.
3. Any rights you may have under the Transferred Options
shall terminate, and the Transferred Options shall once again be exercisable (if
at all) solely by me, within 90 days after you cease performing substantial
services for or on behalf of the Company, provided that your rights under the
Transferred Options shall terminate immediately if the cessation is for cause,
and further provided that this clause shall not extend the exercise period set
forth in the Letter of Grant.
4. You acknowledge that the Company has advised you that all
transactions associated with the Transferred Options have complex and material
tax consequences, the effect of which can vary according to your personal
circumstances, and that the Company has advised you to obtain independent tax
advice as to all matters relating to the Transferred Options.
5. You acknowledge and agree to all of the terms and
conditions of the attached Letter of Grant, as Modified by the above terms and
conditions. You acknowledge in particular Section 8(a) of the attached Letter of
Grant, and acknowledge and agree that any right to acquire shares hereunder
shall be void unless the requested issuance of shares in connection with any
proposed acquisition complies with all applicable laws and regulations.
6. This Transfer shall be effective as of April 30, 1994.
Please indicate your acknowledgment and acceptance of the
foregoing by executing this letter in the space indicated below.
Sincerely,
/s/ Alan S. Cohn
---------------------------
Alan S. Cohn
Acknowledged and accepted:
/s/ Neal Kempler
- -------------------------
Neal Kempler
<PAGE>
STOCK OPTION GRANT
March 18, 1993
National Health Enterprises, Inc.
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
Attention: President
Re: Avesis Incorporated - Options to Acquire Common Stock
Ladies and Gentlemen:
This is to confirm the grant to National Health Enterprises,
Inc. by Avesis Incorporated, a Delaware corporation (the "Company"), of options
to acquire shares of the Company's Common Stock, subject to the following terms
and conditions:
1. Grant of Options: Effective Date. The Company grants to you
options to acquire from the Company an aggregate of 4,400,000 shares of the
Common Stock, $.01 par value, of the Company (the "Shares"). Each option shall
be exercisable for the purchase of one Share. This grant is effective as of the
date set forth above (the "Effective Date of Grant").
2. Purchase Price. The purchase price for each Share that may be
acquired upon the exercise of an option shall be determined according to the
following table:
Options which become
exercisable for the first time
during the year ended March 18, Exercise Price
------------------------------- --------------
1994 $.40
1995 $.432
1996 $.467
1997 $.504
1998 $.544
1999 $.588
2000 $.635
2001 $.686
2002 $.740
2003 $.80
<PAGE>
The purchase price of a Share shall not increase after the
year in which such Share may first be purchased.
3. Exercise Term. Subject to Section 5 herein, the Shares may be
purchased at any time after the respective vesting dates or events set forth
below and on or prior to March 18, 2003:
Number of Shares Vesting Date or Event:
---------------- ----------------------
1,400,000 March 18, 1993
500,000 Completion of first fiscal quarter in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $350,000
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $750,000
1,000,000 Completion of the first fiscal year in which the
Company has Profits exceeding $1,000,000
More than one condition of vesting may be satisfied at the
same time.
"Profits" of the Company in any fiscal period shall mean the
Company's pretax operating profit during such period as determined in accordance
with generally accepted accounting principles ("GAAP") based on the Company's
books and records, and excluding (i) any profit or loss from financial
transactions; (ii) any charge for compensation expense relating to these or
other stock options; (iii) one-time expenses incurred to achieve Knox-Keene
compliance; (iv) one-time expenses incurred in transferring computer processing
to an outside vendor; (v) severance packages payable to employees terminated
during 1993 (unless hired on the recommendation of NHE); and (vi) one-time lease
settlement charges.
4. Non-Transferability, The options shall not be transferable
except to employees or affiliates of National Health Enterprises, Inc.
performing substantial services for or on behalf of the Company or to employees
of the Company in transactions complying with applicable state and federal
securities laws.
2
<PAGE>
5. Vesting Requirements. (a) Except as provided in Section 5(c),
options can become exercisable only during the period that National Health
Enterprises, Inc. is retained to perform management services for the Company.
(b) Once exercisable, in accordance with the terms hereof,
options shall remain exercisable until March 18, 2003 except that exercisable
options shall terminate 120 days after the date (if any) that the Company
terminates National Health Enterprises, Inc.'s management services agreement for
cause (as defined therein) or the date that National Health Enterprises, Inc.
terminates such agreement in violation of the terms thereof.
(c) Notwithstanding Section 5(a), if the Company terminates
National Health Enterprises, Inc.'s management services agreement without cause
(as defined therein), the options shall continue to become exercisable after
such termination if and to the extent that the targets set forth in Section 3
are met and subject to the other terms and conditions set forth herein.
6. Manner of Exercise. You may exercise options only by giving
the Company written notice by certified mail, with return receipt requested,
postage prepaid, at the following address, of your intent to exercise the
options, including in such notice the number of Shares that you intend to
acquire and the full consideration therefor in cash:
Avesis Incorporated
4201 North 24th Street
Suite 300
Phoenix, Arizona 85016
7. Reorganizations, Etc. If the outstanding shares of the Common
Stock are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or securities, as a result of one or more
stock splits, reverse stock splits, stock dividends, spin-offs, spin-outs or
other distributions of assets to shareholders, or assumption and conversion of
outstanding grants due to an acquisition or the like, appropriate adjustments
shall be made with respect to the options and/or the number and/or type of
Shares for which the options may thereafter be exercised.
8. Restrictions on Shares.
(a) Shares shall not be issued unless the issuance and delivery
thereof shall comply with all relevant provisions of law
including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended,
the rules and regulations promulgated thereunder, any
applicable state securities or "Blue Sky" law or laws, and
the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
3
<PAGE>
(b) Unless the Shares shall have been registered with the
Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of 1933, as amended, you represent and
agree that the Shares will be acquired for investment and
not for resale or distribution. Upon exercise of any portion
of an option, the person entitled to exercise the same shall
upon request of the Company furnish evidence satisfactory to
the Company (including a written and signed representation)
to the effect that the Shares are being acquired in good
faith for investment and not for resale or distribution. The
certificates representing the Shares may bear a legend
referencing applicable transfer restrictions.
(c) No transfer of any Shares will be permitted by the Company
unless any request for transfer is accompanied by evidence
satisfactory to the Company that the proposed transfer will
not result in a violation of any applicable law, rule or
regulation, whether federal or state, including in the
discretion of the Company an opinion of counsel reasonably
acceptable to the Company.
9. Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of options. The value of any
fractional share subject to an option shall be paid in cash in connection with
the exercise that results in all full shares subject to the options having been
exercised.
10. Miscellaneous. You will have no rights as a shareholder with
respect to the Shares until the exercise of the options and payment of the full
purchase price therefor in accordance with the terms of this Letter of Grant.
Nothing herein shall impose any obligation on the Company or any parent or
subsidiary of the Company with respect to your continued retention to perform
management services for the Company or any parent or subsidiary of the Company.
11. Governing Law. This Letter of Grant shall be subject to and
construed and enforced in accordance with the laws of the State of Arizona.
12. Withholding. You hereby authorize the Company to withhold in
accordance with applicable law from any compensation otherwise payable to you
any amounts required to be withheld by federal, state or local law as a result
of this option.
Please execute the Acceptance on the enclosed copy of this
Letter of Grant, date your signature and return such copy to the Company.
AVESIS INCORPORATED
By: /s/ William R. Cohen
---------------------------
Its: Chairman
4
<PAGE>
ACCEPTANCE
----------
The undersigned National Health Enterprises, Inc.
understands, acknowledges and agrees to the terms and conditions of the options
granted pursuant to this Letter of Grant.
NATIONAL HEALTH ENTERPRISES,
INC.
By: /s/ Kenneth L. Blum, Jr.
-------------------------------
Its: President
Date: March 18, 1993
5
<PAGE>
EXHIBIT 3
NATIONAL HEALTH ENTERPRISES INC.
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
Mr. Neal Kempler
c/o National Health Enterprises
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
re: Option Transfer
Dear Neal:
Pursuant to a Stock Option Grant (the "Grant Letter") dated
March 18, 1993, National Health Enterprises Inc., a Maryland corporation ("NHE")
acquired options (the "Options") to purchase up to 4,400,000 shares of the
Common Stock of Avesis Incorporated, a Delaware corporation (the "Company")
subject to the terms and conditions set forth in the Grant Letter. A copy of the
Grant Letter is attached hereto.
Pursuant to Section 4 of the Grant Letter, and in
consideration for services performed and to be performed on behalf of NHE in
connection with the Management Agreement dated March 18, 1993 between NHE and
the Company, NHE hereby transfers to you Options (the "Transferred Options") for
the purchase of 50,000 shares of the Company's Common Stock. The terms and
conditions of the Transferred Options shall be identical to the terms and
conditions set forth in the Letter of Grant except as follows:
1. The vesting dates for the Transferred Options shall be
spread among the vesting dates and events set forth in Section 3 of the Letter
of Grant as follows:
Number of Shares Vesting Date or Event:
---------------- ----------------------
8,334 Completion of first fiscal quarter in which the
Company has Profits
8,333 Completion of the first fiscal year in which the
Company has Profits
8,333 Completion of the first fiscal year in which the
Company has Profits exceeding $350,000
<PAGE>
8,333 Completion of the first fiscal year in which the
Company has Profits exceeding $750,000
16,667 Completion of the first fiscal year in which the
Company has Profits exceeding $1,000,000
2. The limited transfer right set forth in Section 4 of the
Letter of Grant is not available to you.
3. Any rights you may have under the Transferred Options
shall terminate, and the Transferred Options shall once again be exercisable (if
at all) solely by NHE, within 90 days after you cease performing substantial
services for or on behalf of the Company, provided that your rights under the
Transferred Options shall terminate immediately if the cessation is for cause,
and further provided that this clause shall not extend the exercise period set
forth in the Letter of Grant.
4. You acknowledge that the Company has advised you that all
transactions associated with the Transferred Options have complex and material
tax consequences, the effect of which can vary according to your personal
circumstances, and that the Company has advised you to obtain independent tax
advice as to all matters relating to the Transferred Options.
5. You acknowledge and agree to all of the terms and
conditions of the attached Letter of Grant, as modified by the above terms and
conditions.
6. This Transfer shall be effective as of March 31, 1993.
Please indicate your acknowledgment and acceptance of the
foregoing by executing this letter in the space indicated below.
Sincerely,
NATIONAL HEALTH ENTERPRISES, INC.
/s/ Kenneth L. Blum, Jr.
------------------------------------
Kenneth L. Blum, Jr., President
Acknowledged and accepted:
/s/ Neal Kempler
- -------------------------
Neal Kempler
<PAGE>
STOCK OPTION GRANT
March 18, 1993
National Health Enterprises, Inc.
11460 Cronridge Drive
Suite 120
Owings Mills, Maryland 21117
Attention: President
Re: Avesis Incorporated - Options to Acquire Common Stock
Ladies and Gentlemen:
This is to confirm the grant to National Health Enterprises,
Inc. by Avesis Incorporated, a Delaware corporation (the "Company"), of options
to acquire shares of the Company's Common Stock, subject to the following terms
and conditions:
1. Grant of Options: Effective Date. The Company grants to you
options to acquire from the Company an aggregate of 4,400,000 shares of the
Common Stock, $.01 par value, of the Company (the "Shares"). Each option shall
be exercisable for the purchase of one Share. This grant is effective as of the
date set forth above (the "Effective Date of Grant").
2. Purchase Price. The purchase price for each Share that may be
acquired upon the exercise of an option shall be determined according to the
following table:
Options which become
exercisable for the first time
during the year ended March 18, Exercise Price
------------------------------- --------------
1994 $.40
1995 $.432
1996 $.467
1997 $.504
1998 $.544
1999 $.588
2000 $.635
2001 $.686
2002 $.740
2003 $.80
<PAGE>
The purchase price of a Share shall not increase after the
year in which such Share may first be purchased.
3. Exercise Term. Subject to Section 5 herein, the Shares may be
purchased at any time after the respective vesting dates or events set forth
below and on or prior to March 18, 2003:
Number of Shares Vesting Date or Event:
---------------- ----------------------
1,400,000 March 18, 1993
500,000 Completion of first fiscal quarter in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $350,000
500,000 Completion of the first fiscal year in which the
Company has Profits exceeding $750,000
1,000,000 Completion of the first fiscal year in which the
Company has Profits exceeding $1,000,000
More than one condition of vesting may be satisfied at the
same time.
"Profits" of the Company in any fiscal period shall mean the
Company's pretax operating profit during such period as determined in accordance
with generally accepted accounting principles ("GAAP") based on the Company's
books and records, and excluding (i) any profit or loss from financial
transactions; (ii) any charge for compensation expense relating to these or
other stock options; (iii) one-time expenses incurred to achieve Knox-Keene
compliance; (iv) one-time expenses incurred in transferring computer processing
to an outside vendor; (v) severance packages payable to employees terminated
during 1993 (unless hired on the recommendation of NHE); and (vi) one-time lease
settlement charges.
4. Non-Transferability, The options shall not be transferable
except to employees or affiliates of National Health Enterprises, Inc.
performing substantial services for or on behalf of the Company or to employees
of the Company in transactions complying with applicable state and federal
securities laws.
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<PAGE>
5. Vesting Requirements. (a) Except as provided in Section 5(c),
options can become exercisable only during the period that National Health
Enterprises, Inc. is retained to perform management services for the Company.
(b) Once exercisable, in accordance with the terms hereof,
options shall remain exercisable until March 18, 2003 except that exercisable
options shall terminate 120 days after the date (if any) that the Company
terminates National Health Enterprises, Inc.'s management services agreement for
cause (as defined therein) or the date that National Health Enterprises, Inc.
terminates such agreement in violation of the terms thereof.
(c) Notwithstanding Section 5(a), if the Company terminates
National Health Enterprises, Inc.'s management services agreement without cause
(as defined therein), the options shall continue to become exercisable after
such termination if and to the extent that the targets set forth in Section 3
are met and subject to the other terms and conditions set forth herein.
6. Manner of Exercise. You may exercise options only by giving
the Company written notice by certified mail, with return receipt requested,
postage prepaid, at the following address, of your intent to exercise the
options, including in such notice the number of Shares that you intend to
acquire and the full consideration therefor in cash:
Avesis Incorporated
4201 North 24th Street
Suite 300
Phoenix, Arizona 85016
7. Reorganizations, Etc. If the outstanding shares of the Common
Stock are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or securities, as a result of one or more
stock splits, reverse stock splits, stock dividends, spin-offs, spin-outs or
other distributions of assets to shareholders, or assumption and conversion of
outstanding grants due to an acquisition or the like, appropriate adjustments
shall be made with respect to the options and/or the number and/or type of
Shares for which the options may thereafter be exercised.
8. Restrictions on Shares.
(a) Shares shall not be issued unless the issuance and delivery
thereof shall comply with all relevant provisions of law
including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended,
the rules and regulations promulgated thereunder, any
applicable state securities or "Blue Sky" law or laws, and
the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
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<PAGE>
(b) Unless the Shares shall have been registered with the
Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of 1933, as amended, you represent and
agree that the Shares will be acquired for investment and
not for resale or distribution. Upon exercise of any portion
of an option, the person entitled to exercise the same shall
upon request of the Company furnish evidence satisfactory to
the Company (including a written and signed representation)
to the effect that the Shares are being acquired in good
faith for investment and not for resale or distribution. The
certificates representing the Shares may bear a legend
referencing applicable transfer restrictions.
(c) No transfer of any Shares will be permitted by the Company
unless any request for transfer is accompanied by evidence
satisfactory to the Company that the proposed transfer will
not result in a violation of any applicable law, rule or
regulation, whether federal or state, including in the
discretion of the Company an opinion of counsel reasonably
acceptable to the Company.
9. Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of options. The value of any
fractional share subject to an option shall be paid in cash in connection with
the exercise that results in all full shares subject to the options having been
exercised.
10. Miscellaneous. You will have no rights as a shareholder with
respect to the Shares until the exercise of the options and payment of the full
purchase price therefor in accordance with the terms of this Letter of Grant.
Nothing herein shall impose any obligation on the Company or any parent or
subsidiary of the Company with respect to your continued retention to perform
management services for the Company or any parent or subsidiary of the Company.
11. Governing Law. This Letter of Grant shall be subject to and
construed and enforced in accordance with the laws of the State of Arizona.
12. Withholding. You hereby authorize the Company to withhold in
accordance with applicable law from any compensation otherwise payable to you
any amounts required to be withheld by federal, state or local law as a result
of this option.
Please execute the Acceptance on the enclosed copy of this
Letter of Grant, date your signature and return such copy to the Company.
AVESIS INCORPORATED
By: /s/ William R. Cohen
---------------------------
Its: Chairman
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<PAGE>
ACCEPTANCE
----------
The undersigned National Health Enterprises, Inc.
understands, acknowledges and agrees to the terms and conditions of the options
granted pursuant to this Letter of Grant.
NATIONAL HEALTH ENTERPRISES,
INC.
By: /s/ Kenneth L. Blum, Jr.
-------------------------------
Its: President
Date: March 18, 1993
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