SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
AVESIS INCORPORATED
- --------------------------------------------------------------------------------
(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:
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<PAGE>
AVESIS INCORPORATED
3724 NORTH THIRD STREET, SUITE 300
PHOENIX, ARIZONA 85012
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 1999
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Avesis Incorporated, a Delaware
corporation (the "Company"), will be held on Monday, December 13, 1999 at 11:00
a.m. local time, at 10324 S. Dolfield Road, Owings Mills, MD 21117, for the
following purposes:
1. To elect seven directors for the ensuing year and until their successors
are elected and qualified; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. A copy of the Company's Annual Report on
Form 10-KSB for the year ended May 31, 1999, which includes audited financial
statements, also accompanies this Notice.
Only stockholders of record at the close of business on October 21, 1999
are entitled to receive notice of and to vote at the Annual Meeting or any
adjournment thereof. A list of stockholders entitled to vote at the meeting will
be open for inspection at the Company's corporate headquarters for any purpose
germane to the meeting during ordinary business hours for ten days prior to the
meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person.
Sincerely,
/s/ Alan S. Cohn
Alan S. Cohn
President and Chief Executive Officer
Phoenix, Arizona
November 5, 1999
- --------------------------------------------------------------------------------
Please complete, date and sign the enclosed proxy and mail it promptly in the
enclosed envelope to assure representation of your shares, whether or not you
expect to attend the Annual Meeting. If you attend the Annual Meeting, you may
revoke the proxy and vote your shares in person.
- --------------------------------------------------------------------------------
<PAGE>
AVESIS INCORPORATED
3724 NORTH THIRD STREET, SUITE 300
PHOENIX, ARIZONA 85012
- --------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 1999
- --------------------------------------------------------------------------------
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Avesis Incorporated (the "Company"). All
shares represented by properly executed proxies, unless such proxies have
previously been revoked, will be voted in accordance with the direction on the
proxies. If no direction is indicated, the shares will be voted for the
Company's nominees for election as directors at the Annual Meeting. The Board of
Directors is not aware of any other matter that may come before the meeting. If
any other matters are properly presented at the meeting for action, including a
question of adjourning the meeting from time to time, the persons named in the
proxies and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
When stock is in the name of more than one person, the proxy is valid if
signed by any of such persons unless the Company receives written notice to the
contrary. If the stockholder is a corporation, an executive or other authorized
officer should sign the proxy in the name of such corporation. If signed as
attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
This Proxy Statement and the form of proxy that is enclosed are being
mailed to the Company's stockholders commencing on or about November 3, 1999.
A stockholder executing and returning a proxy has the power to revoke it at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company prior to the vote at the Annual Meeting, by
written notice of revocation received by the Secretary prior to the vote at the
Annual Meeting or by appearing in person at the Annual Meeting, filing a written
notice or revocation and voting in person the shares to which the proxy relates.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by the directors, officers and regular
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements will also be made with certain brokerage firms
and certain other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of Common Stock held of record
by such persons, and such brokers, custodians, nominees and fiduciaries will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
therewith. All expenses incurred in connection with this solicitation will be
borne by the Company.
The mailing address of the principal corporate office of the Company is
3724 North Third Street, Suite 300, Phoenix, Arizona 85012.
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on October 21, 1999
(the "Record Date"), will be entitled to vote at the meeting. On the Record
Date, there were issued and outstanding 7,343,297 shares of Common Stock, 5,000
shares of $10 Class A Nonvoting Cumulative Convertible Preferred Stock, Series 2
("Series 2 Shares") and 297,660 shares of $3.75 Class A Senior Nonvoting
Cumulative Convertible Preferred Stock, Series A ("Series A Shares"). Each
holder of Common Stock is entitled to one vote, exercisable in person or by
proxy, for each share of the Company's Common Stock held of record on the Record
Date. The Series 2 Shares and Series A Shares do not have voting rights with
respect to the matters included on the Annual Meeting agenda. The presence of a
majority of the Common Stock, in person or by proxy, is required to constitute a
quorum for the conduct of business at the Annual Meeting. The Inspector of
Election appointed by the Board of Directors shall determine the shares
represented at the meeting and the validity of proxies and ballots, and shall
count all votes and ballots. The affirmative vote of a majority of such quorum
is required with respect to the approval of the proposal set forth herein.
Abstentions and broker non-votes are each included in the determination of the
number of shares present for quorum purposes. Because abstentions represent
shares entitled to vote, the effect of an abstention will be the same as a vote
cast against a proposal. A broker non-vote, on the other hand, will not be
regarded as representing a share entitled to vote on the proposal and,
accordingly, will have no effect on the voting for such proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of October 15, 1999 there were 7,343,297 shares of Common Stock, 5,000
Series 2 Shares and 297,660 Series A Shares outstanding. The table below sets
forth as of September 22, 1999, certain information regarding the shares of
Common Stock and Series A Preferred Stock beneficially owned by each director of
the Company and each named executive officer in the Summary Compensation Table,
by all of the Company's executive officers and directors as a group, and by
those persons known by the Company to have owned beneficially 5% or more of the
outstanding shares of Common Stock, which information as to beneficial ownership
is based upon statements furnished to the Company by such persons. None of the
directors or executive officers owns any Series 2 Shares.
3
<PAGE>
<TABLE>
<CAPTION>
Common issuable upon conversion or
exercise of: (1)
----------------------------------
Total Common
Common % of Series A % of Beneficially Percent of
Name and Address Stock Common Shares Pref. Options Owned (1) Common (2)
- ---------------- ----- ------ -------- ----- ------- ------------ -----------
(actual shares)
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald L. Cohen* 253,359 3.5 22,274(7) 7.5 -- 476,099 6.3
William R. Cohen* 161,117(4) 2.2 10,552 3.5 -- 266,637 3.6
William L. Richter 1,194,620(3) 16.3 50,099(3) 16.8 -- 1,695,610(3) 21.6
c/o Richter & Co., Inc.
450 Park Ave., 28th Floor
New York, NY 10022
Sam Oolie* 220,021(5) 3.0 24,023 8.1 100,000 560,251 7.3
Kenneth L. Blum, Sr. 140,000(6) 1.9 2,000 0.7 -- 160,000 2.2
17133 Ericarose Street
W. Boca Raton, FL 33496
Kenneth L. Blum, Jr. 1,814,750 24.7 -- -- -- 1,814,750 24.7
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117
Alan S. Cohn 1,804,750 24.6 -- -- -- 1,804,750 24.6
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117
------------------------------------------------------------------------------------
All directors and 5,588,617(4)(5) 76.1 108,948 36.6 505,000 7,183,097 80.4
Executive officers as
a group (9 persons)
</TABLE>
* Business Address: 3724 North Third Street, Suite 300, Phoenix, Arizona
85012.
4
<PAGE>
(1) Includes shares of Common Stock with respect to which the identified person
had the right to acquire beneficial ownership on or within 60 days of the
date of the above table pursuant to the Series A Shares or Options, as
indicated. Each Series A Share indicated in the table is convertible into
10 shares of Common Stock and such shares of Common Stock are included in
the total Common Stock beneficially owned.
(2) The percentages shown include Common Stock actually owned as of the date of
the above table and Common Stock as to which the person had the right to
acquire beneficial ownership within 60 days of such date pursuant to the
Series A Shares or Options, as indicated. In calculating the percentage of
ownership, all shares of Common Stock which the identified person had the
right to acquire within 60 days of the date of the above table are deemed
to be outstanding when computing the percentage of Common Stock owned by
such person but are not deemed to be outstanding when computing the
percentage of Common Stock owned by any other person.
(3) Includes 462,500 shares of Common Stock and shares of Common Stock issuable
upon conversion of 22,300 Series A Shares indirectly owned via an
affiliated corporation, Richter & Co., Inc. ("RCI"), which thereby
beneficially owns in its own name 685,500 shares or 9.1% of the Company's
Common Stock. Also includes shares of Common Stock issuable upon conversion
of 3,883 and 4,530 Series A Shares held via two other corporations. Also
includes shares of Common Stock issuable upon conversion of 2,500 Series A
Shares and 15,169 shares of Common Stock held by family members, as to
which Mr. Richter disclaims beneficial ownership.
(4) Includes 6.67% of the 6,337 shares of Common Stock and 19,412 Series A
Shares held by an affiliated corporation, with respect to which William R.
Cohen owns 6.67% of the outstanding stock.
(5) Includes 20% of the 6,337 shares of Common Stock and 19,412 Series A Shares
held by an affiliated corporation, with respect to which Mr. Oolie owns 20%
of the outstanding stock. Also includes 8,679 shares owned by Mr. Oolie's
wife, as to which Mr. Oolie disclaims beneficial ownership.
(6) Mr. Blum's spouse holds the indicated shares.
(7) Includes 43.75% of the 4,530 Series A Shares held by an affiliated
corporation.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
VOTE REQUIRED; NOMINEES
The Company has nominated seven persons for election at the 1999 Annual
Meeting as directors for terms expiring at the 2000 Annual Meeting and until
their successors have been duly elected and qualified. Each of the nominees
currently is a director of the Company.
SHARES REPRESENTED BY THE ENCLOSED PROXY WILL BE VOTED FOR THE COMPANY'S
NOMINEES, UNLESS OTHERWISE SPECIFIED ON THE PROXY. If any of the nominees shall
be unable or unwilling to serve as a director, it is intended that the proxy
will be voted for the election of such other person or persons as the Company's
management may recommend in the place of such nominee. The management has no
reason to believe that any of the nominees will not be candidates or will be
unable to serve.
All directors will hold office until the next Annual Meeting of
Stockholders and the election and qualification of their successors. Officers
are elected annually and serve at the pleasure of the Board of Directors.
Set forth below is certain biographical information (including principal
occupations) relating to the nominees.
William R. Cohen, 68, Co-Chairman of the Board, has served as a Director of
the Company since April 1986. Mr. Cohen is the Chairman of Go Lightly Candy
Company. Mr. Cohen has served as Chairman of American Mobile Communications, a
cellular communications company, and has also held various positions with CFC
Associates, a venture capital partnership, and its predecessor organizations.
Mr. Cohen serves as a lifetime trustee of the Hospital Center, Orange, New
Jersey. Mr. Cohen is not related to Gerald L. Cohen.
William L. Richter, 56, Co-Chairman of the Board, has been a Director of
the Company since August 1993. Mr. Richter has been President of Richter
Investment Corp. and its wholly-owned subsidiary, Richter & Co., Inc., a
registered broker-dealer and investment banking firm (or its predecessor
organization) for the past nine years and has been a Senior Managing Director of
Cerberus Capital Management, L.P. (or its predecessor organizations) since their
founding in late 1992. Mr. Richter was Co-Chairman of Rent-A-Wreck of America,
Inc., a franchiser of automobile rental agencies, from November 1989 to June
1993 and has been Vice Chairman of that Company since June 1993.
Kenneth L. Blum, Sr., 73, has served as a Director of the Company since
August 1993. Mr. Blum was acting President and Chief Executive Officer of the
Company from September 1996 to May 1998. Mr. Blum has been Chairman of the Board
of Rent-A-Wreck of America, Inc., an automobile rental franchiser, since June
1993, President from June 1993 to October 1994, and Chief Executive Officer
since January 1994. Mr. Blum has been the President of KAB, Inc., a management
6
<PAGE>
company, since 1990. Mr. Blum co-founded United HealthCare, Inc., a Baltimore,
Maryland-based healthcare company, in 1974 and served as its President and Chief
Executive Officer until 1990. Since 1990, Mr. Blum has been a management
consultant to a variety of companies, including National Computer Services,
Inc., a computer service bureau; American Business Information Systems, Inc., a
high-volume laser printing company; and Mail-Rx, a mail-order prescription drug
company. Mr. Blum is the father of Kenneth L. Blum, Jr. and the father-in-law of
Alan S. Cohn. See - "Management Agreement."
Gerald L. Cohen, 55, has served as a Director of the Company since March
1985. Mr. Cohen is a managing director of Greenley Capital Company, a limited
partnership which is a New York-based investment banking firm. Mr. Cohen is the
sole shareholder of the general partner (Greenley Corp.) of Greenley Capital
Company. From August 1982 through April 1989, Mr. Cohen was a managing director
of Richter, Cohen & Co., a New York-based investment banking firm. Mr. Cohen
also serves as a Director of Marketing Systems of America. Mr. Cohen is not
related to William R. Cohen.
Sam Oolie, 63, has served as a Director of the Company since March 1985.
Mr. Oolie has been Chairman of NoFire Technologies, Inc., a manufacturer of fire
retardant coatings and textiles, since August 1995 and has been Chairman of
Oolie Enterprises, an investment company, since July 1985. Mr. Oolie has held
various positions with CFC Associates, a venture capital partnership, and its
predecessor companies since January 1984. He was Vice Chairman of American
Mobile Communications, Inc. a cellular telephone company, from February 1986
until July 1989 and Chairman of the Nostalgia Network, a 24-hour cable
television program service, from April 1987 until January 1990. Mr. Oolie also
serves as a Director of NCT Group, Inc. (formerly Noise Cancellation
Technologies, Inc.) and Comverse Technology, Inc.
Alan S. Cohn, 44, has served as the President and CEO of the Company since
June 1998 and as a Director of the Company since August 1998. Mr. Cohn is
providing management services on behalf of the Company through an arrangement
with NHE. Mr. Cohn has been a management consultant for NHE and KAB, Inc. since
1993 and 1990, respectively. Since 1990, Mr. Cohn has been a principal or
management consultant to a variety of companies, including National Computer
Services, Inc., a computer service bureau; American Business Information
Systems, Inc., a high-volume laser printing company; Rent-A-Wreck of America,
Inc., an automobile franchiser; Allscripts, Inc., formerly Physician Dispensing
Systems, Inc., a pharmaceutical dispensing company; Lawphone, Inc., a prepaid
legal fee company; and Mail-Rx, a mail-order prescription drug company. Mr. Cohn
is the son-in-law of Kenneth L. Blum, Sr., the Company's former acting President
and CEO, and a member of the Board of Directors. See - "Management Agreement."
Kenneth L. Blum, Jr., 36, has served as a Director of the Company since
August 1998. Mr. Blum is the President, Chief Executive Officer and the sole
stockholder of NHE. Mr. Blum is also President and Secretary of Rent-A-Wreck of
America, Inc., an automobile rental franchiser, President of National Computer
Services, Inc., a computer service bureau, and President of American Business
Information Systems, Inc., a high-volume laser printing company. Kenneth L.
Blum, Sr., the Company's former acting President and CEO, and a member of the
Board of Directors, is the father of Kenneth L. Blum, Jr. See - "Management
Agreement."
7
<PAGE>
EXECUTIVE OFFICERS; NHE
Alan S. Cohn, 44, has been President and Chief Executive Officer of the
Company since June 1998. See - "Vote Required; Nominees."
Neal A. Kempler, 31, has been the Corporate Secretary of the Company since
June 1996. Mr. Kempler has been the Vice President of Operations of the Company
since August 1996 and was the Assistant to the President/Director of Marketing
from January 1993 until August 1996. Mr. Kempler served as Account Executive of
National Health Enterprises, Inc., a management company, from June 1990 until
1993.
Shannon R. Barnett, 31, has been Controller of the Company (Principal
Accounting Officer) since August 1996 and was Senior Accountant of the Company
from November 1995 until August 1996. Ms. Barnett was Assistant Controller of
Quality Hotel and Marlyn Nutraceuticals, a vitamin manufacturer, from September
1994 until November 1995 and Staff Accountant of General Atlantic Resources,
Inc., an oil and gas company, from November 1992 until June 1994.
Joel H. Alperstein, 31, has been the Treasurer of the Company since
December 1997 and the Director of Finance of the Company (Principal Financial
Officer) since January 1997. Since March 1999, Mr. Alperstein has been a
management consultant to American Business Information Systems, Inc., a
high-volume laser printing company. Mr. Alperstein was a self-employed financial
consultant from September 1996 until December 1996. Mr. Alperstein was a Manager
at Stout, Causey & Horning, P.A., a full service public accounting firm, from
September 1992 until August 1996, and a Senior Accountant at Arthur Andersen,
LLP, from July 1990 until September 1992. Mr. Alperstein has a Masters of
Business Administration from Loyola College of Maryland and is a Certified
Public Accountant.
Effective March 18, 1993, the Company entered into a Management Agreement
(the "Management Agreement") with National Health Enterprises, Inc., a Maryland
corporation ("NHE") pursuant to which NHE agreed to manage substantially all
aspects of the Company's business, subject to certain limitations and the
direction of the Company's Board of Directors. On December 12, 1997 the
Company's Board of Directors extended the term of the Company's Management
Agreement with NHE to March 18, 2003. See - "Certain Relationships and Related
Transactions."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common and Preferred Stock are required to report their initial
ownership of the Company's Common and Preferred Stock and any subsequent changes
in that ownership to the Securities and Exchange Commission. Specific due dates
for these reports have been established and the Company is required to disclose
any failure to file by these dates. The Company believes that all of these
filing requirements were satisfied during the year ended May 31, 1999, except
that no Form 4 was received from an otherwise unrelated more than 10%
shareholder in connection with the Company's August 1998 repurchase of his
8
<PAGE>
shares. In making these disclosures, the Company has relied solely on
representations obtained from certain of its former and current directors,
executive officers and ten percent holders and/or copies of the reports that
they have filed with the Commission.
MEETINGS AND COMMITTEES
The Audit Committee of the Board of Directors consists of Gerald Cohen and
Sam Oolie. This committee recommends engagement of the Company's independent
public accountants and is primarily responsible for approving the services
performed by the Company's independent public accountants and for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. A meeting of the audit committee was held during fiscal
1999 to discuss the May 31, 1998 financial statements.
Currently, there is no nominating or compensation committee or other
committee performing similar functions.
The Board of Directors of the Company held a total of five meetings
(including telephonic meetings) during the fiscal year ended May 31, 1999.
During the fiscal year ended May 31, 1999, all directors attended at least 75%
of the aggregate of all meetings of the Board of Directors and the committees,
if any, upon which such director served, except for Gerald Cohen who attended
three of the five meetings of the Board of Directors.
STOCK OPTIONS
On July 30, 1998, the Company's Board of Directors approved a modification
providing all outstanding stock option and warrant holders the opportunity to
exercise any or all of their vested options and warrants at a discounted
exercise price from their original grant, during the period from August 1, 1998
to August 31, 1998. The modification was deemed necessary to provide incentive
for the exercise of outstanding stock options and warrants, thereby raising
capital to repurchase the outstanding common stock held by the founder of the
Company and removing a significant amount of the Company's stock option and
warrant overhang. The discounted price was calculated by discounting the stated
exercise price of each stock option or warrant by 10% per annum from the
expiration date back to August 1998, and rounding the calculated price to the
nearest whole cent. The discounted price was not less than the prevailing market
price of the Company's common stock at the time of exercise of the options,
defined as the high bid price, and rounded to the nearest whole cent. The
modification expired on August 31, 1998, and all terms returned to the original
exercise terms for all unexercised stock options and warrants.
9
<PAGE>
Ten-Year Option/SAR Repricings
The following table sets forth information concerning all repricings of
options and SARs held by executive officers during the last ten completed fiscal
years.
<TABLE>
<CAPTION>
Number of
Securities Exercise Length of Original
Underlying Market Price of Price at Time Option Term
Options/SARs Stock at Time of Repricing Revised Remaining at Date
Repriced or of Repricing or or Amendment Exercise of Repricing or
Name Date Amended (#) Amendment ($) ($) Price ($) Amendment
- ---- ---- ----------- ------------- --- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alan S. Cohn August 1, 1998 1,054,750 $0.22 $0.48 $0.31 4 Years, 7 Months
Alan S. Cohn August 1, 1998 700,000 $0.22 $0.40 $0.26 4 Years, 7 Months
Neal A. Kempler August 1, 1998 255,000 $0.22 $0.48 $0.31 4 Years, 7 Months
Neal A. Kempler August 31, 1998 255,000 $0.22 $0.31 $0.48 None
Shannon R. Barnett August 1, 1998 33,334 $0.22 $0.48 $0.22 9 Years
Shannon R. Barnett August 31, 1998 33,334 $0.22 $0.22 $0.48 None
Joel H. Alperstein August 1, 1998 100,000 $0.22 $0.48 $0.31 4 Years, 7 Months
Joel H. Alperstein August 1, 1998 33,334 $0.22 $0.48 $0.22 9 Years
Joel H. Alperstein August 31, 1998 100,000 $0.22 $0.31 $0.48 None
Joel H. Alperstein August 31, 1998 33,334 $0.22 $0.22 $0.48 None
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Value Table
The following table sets forth information concerning each exercise of
stock options during the fiscal year ended May 31, 1999 by each of the named
executive officers and the fiscal year-end value of unexercised options. There
are no SARs.
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired on Underlying Unexercised Value of Unexercised In-the-Money
Name Exercise (#) Value Realized($) Options/SARs at FY-End (#) Options/SARs at FY-End ($)
- ---- ------------ ----------------- --------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan S. Cohn 1,754,750 $0 -0- -0- -- --
Neal A. Kempler -- -- 255,000 -0- $0 --
Shannon R. Barnett -- -- 33,334 16,666 $0 $0
Joel H. Alperstein -- -- 133,334 16,666 $0 $0
</TABLE>
10
<PAGE>
Pursuant to the revised terms, the following individuals exercised their
stock options or warrants during August 1998, in the following amounts at the
following exercise prices per option or warrant:
Number of Number of Modified
Option/Warrant Holder Options Warrants Exercise Price
--------------------- --------- --------- --------------
Alan S. Cohn 1,054,750 $0.31
Alan S. Cohn 700,000 $0.26
Kenneth L. Blum, Jr. 1,064,750 $0.31
Kenneth L. Blum, Jr. 700,000 $0.26
William L. Richter 50,000 $0.31
William L. Richter 109,091 $0.31
William L. Richter 50,909 $0.26
Richter & Co., Inc. 72,500 $0.31
Richter & Co., Inc. 163,636 $0.31
Richter & Co., Inc. 76,364 $0.26
William R. Cohen 100,000 $0.26
Gerald L. Cohen 100,000 $0.26
The total cash received by the Company from the exercise of the above stock
options and warrants was $1,228,657. Of the preceding amount, approximately
$400,712 was used to repurchase all 931,888 shares of the Company's common stock
held by the founder of the Company, at a price of $0.43 per share. The excess
funds received from these transactions were used as working capital.
Summary Compensation Table
The following table and related notes set forth information regarding the
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer during the year ended May 31, 1999. No executive officer who was serving
as an executive officer during fiscal 1999 received salary and bonus which
aggregated at least $100,000 for services rendered to the Company during the
year ended May 31, 1999.
<TABLE>
<CAPTION>
Annual Long Term Compensation
Compensation Awards
------------ -------------------------------------
Name and Principal Position Year Salary ($) Securities Underlying Options/SARs (#)
- --------------------------- ---- ---------- --------------------------------------
<S> <C> <C> <C>
Alan S. Cohn, CEO (1) 1999 $0 --
Kenneth L. Blum, Sr., Acting CEO 1998 $0 --
1997 $0 --
</TABLE>
(1) Mr. Cohn became CEO of the Company as of June 1, 1998. Mr. Cohn is
compensated through the Management Agreement with National Health
Enterprises, Inc.
See also - "Certain Relationships and Related Transactions - Agreements
with National Health Enterprises, Inc. -- Stock Option Grant."
11
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
No employment contracts, termination of employment, or change-in-control
arrangements currently exist except for the National Health Enterprises, Inc.
arrangement described below.
DIRECTOR COMPENSATION
Directors are reimbursed for out-of-pocket expenses incurred in connection
with each Board of Directors or committee meeting attended. Directors who also
are employees of the Company are eligible to participate in the Company's
Incentive Stock Option Plan and the Company's 401(k) Plan, and all directors are
eligible to participate in the Company's 1993 Stock Option Plan (the "1993
Plan"). Pursuant to the 1993 Plan, options for 100,000 shares of the Company's
Common Stock were granted on April 8, 1993 to each of directors William R.
Cohen, Gerald L. Cohen, and Sam Oolie. The exercise price of such options is
$.40 per share, which was at least the fair market value of the Company's Common
Stock on the date of grant. Options for 25,000 shares of Common Stock were
exercisable by each of the optionees as of the date of grant, with the balance
vesting in equal parts at the end of each of the 10 three-month periods
following the date of grant. As of May 31, 1998 options for 100,000 shares of
Common Stock were exercisable by each of the optionees.
During August 1998, William R. Cohen and Gerald L. Cohen each exercised
their 100,000 stock options pursuant to the reduced pricing as approved by the
Board of Directors.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT. On December 12, 1997 the Company's Board of Directors
agreed to extend the term of the Company's Management Agreement with NHE to
March 18, 2003. Also, effective March 18, 1998, the Company's Board of Directors
agreed to increase the cash compensation paid to NHE under the Management
Agreement by $50,000 per year to $250,000 per year. On May 3, 1999, the
Company's Board of Directors agreed to increase the cash compensation paid to
NHE under the Management Agreement by an additional $50,000 per year to $300,000
per year. Messrs. Blum Sr., Blum Jr. and Cohn abstained from voting due to their
relationship to National Health Enterprises. The increase became effective as of
June 1, 1999.
STOCK OPTION GRANT. Pursuant to the Management Agreement, on March 18,
1993, the Company issued options (the "Options") to NHE for the purchase of up
to 4,400,000 shares of the Company's Common Stock. Also pursuant to the
Management Agreement, the Company entered into a Registration Rights Agreement
effective March 18, 1993 with NHE, Mr. Blum, Jr. and Mr. Cohn.
During August 1998, Messrs. Blum, Jr., Cohn and Richter exercised all of
their outstanding options from the March 18, 1993 Stock Option Grant.
SUBORDINATED PROMISSORY NOTES. On March 18, 1993, the Company obtained
loans in the amount of $80,000 from each of Mr. Blum, Jr. and Mr. Cohn. The
notes were due March 18, 1998 and accrued interest at the rate of 6% per annum,
provided that the holders could accelerate the notes if the Company terminated
the Management Agreement without cause. Interest was payable semiannually in
arrears, commencing September 18, 1993. The notes were unsecured and
subordinated to the Company's outstanding 9 1/2% Debentures and future
indebtedness of the Company for borrowed money. The Company paid $8,416 in
interest under the terms of these notes in fiscal 1998. On March 18, 1998 the
Company paid Mr. Blum, Jr. and Mr. Cohn the outstanding principal and accrued
interest amounts on the subordinated promissory notes.
MARKETING AGREEMENT. Effective March 18, 1993, the Company and NHE entered
into a Marketing Representation Agreement (the "Marketing Agreement") pursuant
to which NHE is entitled to receive a commission equal to 7 1/2% of the
enrollment fees (as defined) from Sponsor contracts generated by NHE. The
Company also agreed to pay NHE commissions equal to 2 1/2% of the enrollment
fees from Sponsor contracts with respect to which NHE provides marketing
assistance in procuring the contract, but does not itself generate the initial
Sponsor contact. The term of the Marketing Agreement is coextensive with that of
the Management Agreement. In fiscal 1999 and 1998, the Company paid
approximately $310,000 and $211,000, respectively, to NHE under the Marketing
Agreement. In fiscal 1999 and 1998, the Company paid approximately $13,446 and
$8,000, respectively, in reimbursable marketing expenses to NHE under the
Marketing Agreement.
INVESTMENT BANKING SERVICES. On April 23, 1998, the Company entered into a
Supplemental Agreement with Richter & Co., Inc. ("RCI") for Investment Banking
services related to the Exchange Offer for the Company's Series 2 Preferred
shares. RCI received cash consideration of $50,000 and 250,000 shares of the
Company's Common Stock. RCI assigned 100,000 shares of the Company's Common
Stock received under this agreement to William L. Richter.
On May 3, 1999, the Company's Board of Directors approved a cash payment to
Richter & Co., Inc. at an annual rate of $30,000 under the Financial Advisory
Agreement. Mr. Richter abstained from voting due to his relationship to Richter
& Co., Inc. The payment commenced as of June 1, 1999.
SOFTWARE DEVELOPMENT SERVICES. During fiscal 1995, the Company contracted
with National Computer Services, Inc. ("NCS") to develop software related to the
Company's vision, dental and hearing programs. The Company did not pay any
development fees related to the software during fiscal 1999 and 1998.
Additionally, the Company has contracted with NCS to lease its computer system
for approximately $1,000 per month. The Company paid $12,000 of computer lease
charges in fiscal 1999 and 1998. Kenneth L. Blum, Jr., a Director, is President
and a stockholder of NCS and the son of Kenneth L. Blum, Sr., the former Acting
President and CEO, and a Director of the Company.
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OTHER MATTERS
At the date of this Proxy Statement, the Company is unaware of any other
matters that are to be presented for action at the meeting. Should any other
matter come before the meeting, however, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies with respect to such
matter in accordance with their judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected KPMG LLP to audit the consolidated financial
statements of the Company for the fiscal year ending May 31, 1999. KPMG LLP's
representatives are not expected to be present at the Annual Meeting.
REPORT ON FORM 10-KSB
A copy of the Company's Form 10-KSB without exhibits for the year ended May
31, 1999 has been enclosed with this Proxy Statement. Stockholders may request a
copy of the exhibits to the Form 10-KSB, free of charge, by writing to: Joel H.
Alperstein, Investor Relations, Avesis Incorporated, 3724 North Third Street,
Suite 300, Phoenix, Arizona 85012.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy material for
the 2000 Annual Meeting of Stockholders must be received in writing by the
Company, at the address set forth on the first page of the Proxy Statement, on
or before July 5, 2000. Any such proposal will be subject to Rule 14a-8
promulgated under the Securities Exchange Act of 1934.
Notice of Stockholder proposals for presentation at the 2000 Annual
Meeting, but which are not going to be presented to the Company for inclusion in
the proxy materials, will be considered untimely after September 18, 2000. If
the annual meeting date is changed, the Company shall disclose in the Form
10-QSB such revised dates.
AVESIS INCORPORATED
Alan S. Cohn
President and Chief Executive Officer
November 5, 1999
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[FRONT OF CARD]
AVESIS INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS - DECEMBER 13, 1999
PROXY
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
WILLIAM L. RICHTER AND ALAN S. COHN, and each of them, are hereby authorized as
Proxies, with full power of substitution, to represent and vote the Common Stock
of the undersigned at the Annual Meeting of Shareholders of Avesis Incorporated,
a Delaware corporation, to be held on Monday, December 13, 1999, or any
adjournment thereof, with like effect as if the undersigned were personally
present and voting, upon the following matters:
1. Election of Directors
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to to vote for all
the contrary below) nominees listed below
KENNETH L. BLUM, JR., KENNETH L. BLUM, SR., GERALD L. COHEN, WILLIAM R. COHEN,
ALAN S. COHN, SAM OOLIE, WILLIAM L. RICHTER
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
2. In their discretion, upon such other business as may properly come before
the Meeting or any adjournment thereof; all as set out in the Notice and
Proxy Statement relating to the Meeting, receipt of which is hereby
acknowledged.
(Continued on reverse side)
- --------------------------------------------------------------------------------
[BACK OF CARD]
(Continued from reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES.
Check appropriate box Dated:___________________________________, 1999
Indicate changes below:
Address Change? [ ]
Name Change [ ] _______________________________________________
_______________________________________________
Signature(s) of Shareholder(s)
PLEASE SIGN PERSONALLY AS NAME APPEARS AT
LEFT. When signing as attorney, executor,
administrator, personal representative,
trustee or guardian, give full title as such.
If signer is a corporation, sign full
corporate name by duly authorized officer. If
stock is held in the name of two or more
persons, all should sign.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IN ENCLOSED PREPAID
ENVELOPE - PLEASE DO NOT FOLD
