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
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(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
AVESIS INCORPORATED
3724 NORTH THIRD STREET, SUITE 300
PHOENIX, ARIZONA 85012
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 21, 2000
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TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Avesis Incorporated, a Delaware
corporation (the "Company"), will be held on Friday, July 21, 2000 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;
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the authorized number of shares of Common stock of the
Company from 20,000,000 to 30,000,000;
3. To approve amendments to the Company's 1993 Stock Option Plan,
including an increase in the number of shares for the plan from
600,000 to 900,000; and
4. 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 transition period, of seven months, ended December 31, 1999,
which includes audited financial statements, also accompanies this Notice.
Only stockholders of record at the close of business on June 5, 2000
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,
Alan S. Cohn
President and Chief Executive Officer
Phoenix, Arizona
June 19, 2000
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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>
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AVESIS INCORPORATED
3724 NORTH THIRD STREET, SUITE 300
PHOENIX, ARIZONA 85012
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 21, 2000
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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 and for the
other two proposals. 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 June 19, 2000.
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
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements may 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, whereby 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.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on June 5, 2000
(the "Record Date"), will be entitled to vote at the meeting. On the Record
Date, there were issued and outstanding 7,619,297 shares of Common Stock, 5,000
shares of $10 Class A Nonvoting Cumulative Convertible Preferred Stock, Series 2
("Series 2 Shares") and 270,260 shares of $3.75 Class A Senior Nonvoting
Cumulative Convertible Preferred Stock, Series A ("Series A Shares" or "Series A
Preferred"). 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 May 18, 2000 there were 7,619,297 shares of Common Stock, 5,000
Series 2 Shares and 270,260 Series A Shares outstanding. The table below sets
forth as of May 18, 2000, 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.
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<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 Preferred Stock Pref. Options Owned (1) Common (2)
---------------- ----- ------ ---------------- ----- ------- --------- ----------
(actual shares)
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald L. Cohen* 253,359 3.3 22,274 (7) 8.2 -- 476,099 6.1
William R. Cohen* 161,117 (4) 2.1 10,552 3.9 -- 266,637 3.5
William L. Richter 1,194,620 (3) 15.7 50,099 (3) 18.5 -- 1,695,610 (3) 20.9
Richter Investment Corp.
450 Park Ave., 28th Floor
New York, NY 10022
Kenneth L. Blum, Sr. 140,000 (6) 1.8 2,000 0.7 -- 160,000 2.1
17133 Ericarose Street
W. Boca Raton, FL 33496
Kenneth L. Blum, Jr. 1,814,750 23.8 -- -- -- 1,814,750 23.8
10324 S. Dolfield Rd.
Owings Mills, MD 21117
Alan S. Cohn 1,804,750 23.7 -- -- -- 1,804,750 23.7
10324 S. Dolfield Rd.
Owings Mills, MD 21117
Brent Layton 46,376 0.6 -- -- -- 46,376 0.6
3600 Dallas Highway, N.W.
Suite 230-393
Marietta, GA 30064
Sam Oolie 220,021 (5) 2.9 24,023 8.9 100,000 560,251 7.0
Oolie Enterprises
11 Industrial Avenue
Upper Saddle River, NJ 07458
All directors and Executive 5,414,972 (4)(5) 71.1 84,925 31.4 405,000 6,669,222 75.2
officers as a group
(9 persons)
</TABLE>
* Business Address: 3724 North Third Street, Suite 300, Phoenix, Arizona 85012.
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(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 share of Series A Preferred Stock 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 26,183 shares of Series A indirectly owned via an
affiliated corporation, Richter Investment Corp. ("RIC"), which thereby
beneficially owns in its own name 724,330 shares or 9.2% of the Company's
Common Stock. Also includes shares of Common Stock issuable upon conversion
of 4,530 shares of Series A Preferred held via a related corporation. Also
includes shares of Common Stock issuable upon conversion of 2,500 shares of
Series A Preferred 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 shares of
Series A Preferred stock 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 shares of
Series A Preferred stock 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) The indicated shares are held by Mr. Blum's spouse.
(7) Includes 43.75% of the 4,530 shares of Series A Preferred 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 2000 Annual
Meeting as directors for terms expiring at the 2001 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, 57, Co-Chairman of the Board, has been a Director
of the Company since August 1993. Mr. Richter has been President of Richter
Investment Corp., a merchant and investment banking firm, (or its predecessor
organization) for the past ten years and has been a Senior Managing Director of
Cerberus Capital Management, L.P., an asset management organization (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 Leasing, Inc., an
automobile wholesaler, since its inception during 1998. Mr. Blum has been the
President of KAB, Inc., a management company, since 1990. Mr. Blum co-founded
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<PAGE>
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 Services 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.
Alan S. Cohn, 44, became the President and CEO of the Company as of
June 1998 and a Director of the Company as of August 1998. Mr. Cohn is providing
management services on behalf of the Company through an arrangement with
National Health Enterprises, Inc. ("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.
Kenneth L. Blum, Jr., 36, became a Director of the Company as of 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
Services Agreement."
Brent Layton, 32, became a Director of the Company as of April 2000.
Mr. Layton has been the President of Layton & Associates, Inc., a Health Care
Consulting Firm, since 1995, and has been a consultant to the Company since
September 1999. Most recently he was the General Manager of SouthernStates Eye
Care and has been an owner of five different IPAs. He served as a Deputy
Insurance Commissioner in Georgia from 1991 to 1995.
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" for additional
information.
Neal Kempler, 32, has been the Corporate Secretary of the Company since
June 1996, the Vice President of Marketing & Operations of the Company since
August 1996 and 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
January 1993.
Shannon R. Barnett, 32, has been the Controller of the Company
(Principal Accounting Officer) since August 1996 and was a 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, the Chief Financial Officer of the Company since December 1999
and the Director of Finance of the Company from January 1997 until December
1999. Mr. Alperstein has been a management consultant to American Business
Information Systems, Inc., a high-volume laser printing company, since March
1999 and Rent-A-Wreck of America, Inc., an automobile franchiser, since December
1999. 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 Transition Period. In making these
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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 William Cohen. 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
June 2000, to discuss the December 31, 1999 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 two meetings
(including telephonic meetings) during the seven-month transition period ended
December 31, 1999. During the transition period ended December 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.
STOCK OPTIONS
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 December 31, 1999 by each of the
named executive officers and the fiscal year-end value of unexercised options.
There are no SARs.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Name Shares Options/SARs at FY-End (#) Options/SARs at FY-End ($)
---- Acquired on Value --------------------------- ------------------------------
Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan S. Cohn -- -- -0- -0- -- --
Neal A. Kempler -- -- 255,000 -0- $0 --
Shannon R. Barnett -- -- 50,000 -0- $0 --
Joel H. Alperstein -- -- 150,000 -0- $0 --
</TABLE>
9
<PAGE>
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 transition period ended December 31, 1999, and the fiscal
years ended May 31, 1999 and 1998. No executive officer that was serving as an
executive officer during the transition period or the prior two years received
salary and bonus that aggregated at least $100,000 for services rendered to the
Company.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- --------------------------------------
Name and Principal Position Year Salary ($) Securities Underlying Options/SARs (#)
--------------------------- ---- ---------- --------------------------------------
<S> <C> <C> <C>
Alan S. Cohn, CEO (1) Transition $0 --
Period
1999 $0 --
Kenneth L. Blum, Sr., Acting CEO 1998 $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 - Management
Agreement."
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.
On April 5, 2000, the Board of Directors voted to compensate all
outside Directors $5,000 for their service to the Company during calendar year
1999. For purposes of this vote, outside Directors were defined as Directors not
otherwise receiving compensation from the Company, including through any
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consulting arrangement. All of the outside Directors, except Mr. Oolie, declined
receipt of the payment and no payment to present outside Directors was made.
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 later 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.
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. During the Transition Period and years ended May 31,
1999 and 1998, the Company paid approximately $155,167, $310,000 and $211,000,
respectively, to NHE under the Marketing Agreement. For the Transition Period
and years ended May 31, 1999 and 1998, the Company paid approximately $9,976,
$13,446 and $8,000, respectively, in reimbursable marketing expenses to NHE
under the Marketing Agreement.
REAL ESTATE LEASE. On June 3, 1999, the Company entered into a lease
agreement with KA Real Estate Associates, LLC, for office space in Owings Mills,
Maryland. KA Real Estate Associates, LLC is owned by Messrs. Cohn and Blum, Jr.
The Company paid $3,060 in rent during the Transition Period. See Item 2 -
"Description of Properties."
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.
11
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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 Investment
Banking Agreement. Mr. Richter abstained from voting due to his relationship to
Richter & Co., Inc. The payment commenced as of June 1, 1999. Richter & Co.,
Inc. was merged into its parent company, Richter Investment Corp., as of
December 31, 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 the transition
period and the years ended May 31, 1999 and 1998. Additionally, the Company has
contracted with NCS to lease its computer system for approximately $1,000 per
month. The Company paid $7,000 of computer lease charges for the Transition
period and $12,000 of computer lease charges for the years ended May 31, 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.
LAYTON CONSULTING AGREEMENT. On September 9, 1999 the Company entered
into a consulting agreement with Brent Layton, a Director. The Consulting
Agreement originally called for a monthly cash payment of $2,000, which was
increased to $3,000 per month as of April 2000. The Consulting Agreement
contains a stock option grant for 100,000 shares of the Company's Common Stock.
The exercise price of such options is $.60 per share, which was at least the
fair market value of the Company's Common Stock on the date of grant. Options
for 10,000 shares of Common Stock automatically vest at the end of 2 years of
continuous service to the Company. The balance of the options vest in increments
of 10,000 shares of Common Stock for each $1,000,000 of new annualized revenue
of which Mr. Layton is the proximate cause. As of April 28, 2000, none of the
options were exercisable. The Consulting Agreement also provides Mr. Layton with
a commission arrangement for sales activities.
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PROPOSAL 2
PROPOSED INCREASE IN AUTHORIZED COMMON SHARES
The authorized capital stock of the Company presently consists of
20,000,000 shares of Common Stock, $.01 par value, and 12,000,000 shares of
Preferred Stock, $.01 par value, issuable in series. The following statements
are brief summaries of certain provisions relating to the Company's capital
stock contained in its Certificate of Incorporation (the "Certificate") and
Bylaws and in the laws of Delaware.
COMMON STOCK
The Company's authorized Common Stock consists of 20,000,000 shares,
$.01 par value, of which 7,619,297 shares are issued and outstanding as of May
18, 2000. The issued and outstanding shares of Common Stock are fully paid and
non-assessable. Holders of the Company's Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote of the
stockholders. As of May 18, 2000 there were 161 record holders of the Company's
Common Stock. Each share of the Company's Common Stock is entitled to equal
dividend rights and to equal rights in the assets of the Company available for
distribution to holders of Common Stock upon liquidation, subject to the rights
of outstanding shares of Preferred Stock. The Company's Certificate and Bylaws
do not provide for preemptive rights of the holders of its Common Stock.
PREFERRED STOCK
The Company's authorized Preferred Stock presently consists of
12,000,000 shares, $.01 par value. The Company's Board of Directors, may without
further action by the Company's stockholders, from time to time direct the
issuance of Preferred Stock in series and may, at the time of issuance,
determine the rights, preferences and limitations of each series. Satisfaction
of any dividend preferences of outstanding Preferred Stock would reduce the
amount of funds available for the payment of dividends on Common Stock. Also,
holders of Preferred Stock would normally be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding up of the
Company before any payment is made to the holders of Common Stock. The issuance
of Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting powers of the holders of Common Stock, including the loss of
voting control to others.
There are currently outstanding 270,260 shares of an aggregate of
1,000,000 authorized shares of Series A Preferred. The Series A Preferred
carries a cumulative semi-annual cash dividend at the fixed annual rate of
$.3375 per share, payable at the discretion of the Board of Directors. If the
Company does not pay all or any part of any such dividends, they will
accumulate. The Series A Preferred has a liquidation preference that entitles
the holders thereof to receive, upon liquidation of the Company, out of the
assets thereof, the amount of $3.75 per share plus all accrued and unpaid
dividends, before any amounts are distributed to the holders of the Company's
Series 2 Preferred or Common Stock. In addition, each share of Series A
Preferred is initially convertible at any time at the option of the holders of
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the Series A Preferred into 10 shares of Common Stock of the Company. The
conversion ratio is subject to adjustment for stock splits and combinations,
stock dividends, reclassifications, exchanges or substitutions relating to the
Company's Common Stock, and any reorganization, merger, consolidation or sale of
assets of the Company.
The Company may redeem shares of the Series A Preferred at any time or
from time to time upon payment of the amount of $3.75 per share plus all accrued
and unpaid dividends, provided one of the following events has occurred: (i) the
Common Stock is then quoted at $.75 or more (based on the highest closing bid
price) over a 30 day average prior to the redemption notice, if listed on an
exchange or quoted on the NASDAQ bulletin board or another market or exchange
or, if not quoted or listed on an exchange, then valued by the Board of
Directors in their good faith judgment at $.75 or more per share, (ii) any time
after May 31, 2005, or (iii) the commencement of any fiscal year after two
consecutive fiscal years in which the Company had net income and net cash flow
in each year in excess of $1.5 million and the Company's tangible net equity at
the end of the second fiscal year is at least $5 million. The holders of the
Series A Preferred are not entitled to vote, except as required by law. On
matters subject to vote by holders of the Series A Preferred, the holders are
entitled to one vote per share.
There are currently outstanding 5,000 shares of an aggregate of
1,000,000 authorized shares of Series 2 Preferred. The Series 2 Preferred
carries a cumulative quarterly cash dividend at the fixed annual rate of $.90
per share, subject to the Series A Preferred dividend payment preference
discussed below. If the Company does not pay all or any part of any such
dividends, they will accumulate. Accrued dividends at March 31, 2000 equaled
$33,750, or $6.75 per share. The Series A Preferred has a dividend payment
preference that states, until the earlier of (i) as long as any Series A Share
remains outstanding, (ii) any date after May 31, 2005 or (iii) the first date of
any new fiscal year after two consecutive fiscal years in which the Company had
net income and net cash flow in each year in excess of $1.5 million and the
Company's tangible net equity amount at the end of the second year is at least
$5 million, the Company shall not declare or pay any dividend, whether in cash
or other property (other than in shares of stock junior to the Series A Shares
in the payment of dividends), on the Company's Series 2 Preferred or the common
stock of the Company, or any other stock of the Company junior to or in parity
with the Series A Preferred in the payment of dividends and thereafter shall not
pay dividends on such classes, unless the full dividends on the Series A Shares
for all past dividend periods and the then current dividend period shall have
been paid or declared and a sum set aside for payment therefor. The Series 2
Preferred has a liquidation preference that entitles the holders thereof to
receive, upon liquidation of the Company, out of the assets thereof, the amount
of $10 per share plus all accrued and unpaid dividends, before any amounts are
distributed to the holders of Common Stock. In addition, each share of Series 2
Preferred is convertible at any time at the option of the holders of the Series
2 Preferred into the number of shares of Common Stock of the Company that
results from dividing the conversion price per share in effect at the time of
conversion into $10. The initial conversion price is $4.00 per share and is
subject to adjustment for stock splits and combinations, stock dividends,
reclassifications, exchanges or substitutions relating to the Company's Common
Stock, and any reorganization, merger, consolidation or sale of assets of the
Company.
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The Company may redeem shares of the Series 2 Preferred, subject to the
above mentioned dividend payment restriction, in its sole discretion, upon
payment of the amount of $10 per share plus all accrued and unpaid dividends.
The holders of the Series 2 Preferred are not entitled to vote, except as
required by law. On matters subject to vote by holders of the Series 2
Preferred, the holders are entitled to one vote per share.
COMMON SHARES RESERVED FOR ISSUANCE
As of May 18, 2000, (i) 2,702,600 shares of Common Stock are reserved
for issuance pursuant to conversions of Series A Preferred; (ii) 12,500 shares
of Common Stock are reserved for issuance pursuant to conversions of Series 2
Preferred; (iii) 350,000 shares of Common Stock are reserved for issuance upon
exercise of stock options granted under the Incentive Stock Option Plan; (iv)
758,000 shares of Common Stock are reserved for issuance upon exercise of stock
options granted to NHE (see "Certain Relationships and Related Transactions -
Stock Option Grant") and subsequently transferred by NHE to various key
employees of the Company.
INCREASED COMMON SHARES
From time to time, the Board has authorized the issuance or reservation
of shares of Common Stock in connection with the offering of Common Stock, the
exercise of employee options or warrants, and the issuance of securities
convertible into Common Stock. In the future, the Board may from time to time
conclude that the issuance of additional shares of Common Stock for such
purposes and potential acquisitions and private stock placements is in the best
interest of the Company.
At the present time there is no specific transaction under
consideration by management that could result in the issuance of shares not
presently available for issuance without further stockholder approval. To enable
the Board to issue additional shares in connection with future transactions, the
Board is submitting for stockholder approval proposed amendments to the
Certificate that would increase from 20,000,000 to 30,000,000 the number of
shares of Common Stock that the Board is authorized to issue without further
stockholder approval. The availability of authorized shares makes it possible to
consummate potential transactions, including public and private offerings and
acquisitions, without the cost and delays that could result if the Board were
required to obtain stockholder authorization of additional shares in the context
of a particular transaction. However, such availability, if approved, could have
the effect of depriving the stockholders of the opportunity to consider the
merits of individual transactions.
While the Board's purpose in proposing the increase in authorized
shares of Common Stock is to provide the Company flexibility in meeting its
future capital needs and in accomplishing potential acquisitions, it might be
possible for the Board to issue a large number of shares of Common Stock to
impede completion of a proposed hostile merger, tender offer or other takeover
attempt which some stockholders may at the time deem to be in their best
interest. A similar result might also be achieved by the issuance, without
stockholder approval, of a series of Preferred Stock (which is already
authorized for Board issuance without stockholder approval) vested with special
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voting rights, conversion rights or other rights and preferences to a party
believed to be friendly to management.
The effect of available authorized shares as an anti-takeover device is
limited by the Board's duties with respect to the terms under which shares would
be issued in takeover-related circumstances. Further, the Board has not
considered this possibility as a reason for increasing the number of authorized
shares, and it is not proposing the increase for the purpose of enhancing the
Company's ability to resist an unwanted takeover attempt. In addition, the
Company is unaware of any proposal or plan of any third party to seek control of
the Company.
The proposed amendment would modify the first paragraph of Article Four
of the Certificate to read as follows:
Article 4. The Corporation shall have authority to issue Thirty Million
(30,000,000) shares of common stock, par value $.01 per share, and
Twelve Million (12,000,000) shares of preferred stock, par value $.01
per share.
Approval of the proposal requires the affirmative vote of the holders
of at least a majority of the outstanding voting shares.
RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" approval of
the amendment to the Certificate to increase the number of shares of Common
Stock that the Company is authorized to issue.
PROPOSAL 3
PROPOSED AMENDMENTS TO THE COMPANY'S 1993 STOCK OPTION PLAN
The Company's stockholders approved and adopted the Company's 1993
Stock Option Plan (the "Plan") at the December 1993 Annual Meeting. The Plan
provides for the grant of options which qualify as "incentive stock options"
(sometimes referred to herein as "ISOs") under Section 422 of the Internal
Revenue Code (the "Code") and nonstatutory stock options which do not
specifically qualify for favorable income tax treatment under the Code
(sometimes referred to herein as "NSOs"). The following statements are brief
summaries of certain current provisions of the Plan
STOCK SUBJECT TO THE PLAN
The aggregate number of shares which may be issued pursuant to the
exercise of options granted under the Plan is 600,000 shares of the Company's
common stock, subject to adjustments in certain circumstances, including stock
dividends, stock splits, reverse stock splits, reorganizations and
recapitalizations. If any outstanding option grant under the Plan for any reason
expires or is terminated, the shares of common stock allocable to the
unexercised portion of the option grant shall again be available for options
under the Plan as if no options had been granted with respect to such shares.
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During August 1998, 200,000 options granted under the Plan were
exercised, thereby leaving an aggregate of 400,000 shares to be issued pursuant
to the exercise of options granted. There are currently 350,000 options
outstanding under the Plan.
NONTRANSFERABILITY
No option shall be transferable by an optionee otherwise than by will
or the laws of descent and distribution.
TERM OF THE PLAN
The Plan is currently due to expire on April 8, 2003 solely with
respect to the granting of Incentive Stock Options or such later date as may be
permitted by the Code for Incentive Stock Options.
ACCELERATION OF EXERCISABILITY AND VESTING UNDER CERTAIN CIRCUMSTANCES
The Plan now states that unless the particular letter of grant provides
otherwise, 75% of the unvested options held by each optionee shall automatically
become exercisable and vested upon the occurrence, before the expiration or
termination of such option, of the acquisition by a third party of 100% of the
Company's outstanding equity securities, a merger in which the Company is not
the surviving corporation, a sale of all or substantially all of the Company's
assets, or a similar reorganization of the Company.
PROPOSED AMENDMENT TO THE PLAN
The proposed additions and changes to the Plan would modify the
Sections of the Plan listed below to read as follows:
SECTION 5. SHARES SUBJECT TO OPTIONS - The aggregate number of shares
which may be issued pursuant to the exercise of options granted under
the Plan is 900,000 shares of the Company's common stock; provided,
however, that no individual may be granted options to purchase more
than 100,000 shares in any calendar year. The foregoing number shall be
subject to adjustments in certain circumstances, including stock
dividends, stock splits, reverse stock splits, reorganizations and
recapitalizations. If any outstanding option grant under the Plan for
any reason expires or is terminated, the shares of common stock
allocable to the unexercised portion of the option grant shall again be
available for options under the Plan as if no options had been granted
with respect to such shares.
SECTION 6(F). TERMS AND CONDITIONS OF OPTIONS, TRANSFERABILITY - No
option shall be transferable by an optionee otherwise than by will or
the laws of descent and distribution, provided that the Board or
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Committee in its discretion may grant options that are transferable,
without payment of consideration, to immediate family members of the
optionee or to trusts or partnerships for such family members; the
Board or Committee may also amend outstanding options to provide for
such transferability.
SECTION 8. SHAREHOLDER APPROVAL AND TERM OF THE PLAN - The Plan was
initially effective as of April 8, 1993, the date as of which the Board
first adopted it. Unless sooner terminated by the Board, in its sole
discretion, the amended Plan will expire on April 8, 2008 solely with
respect to the granting of Incentive Stock Options or such later date
as may be permitted by the Code for Incentive Stock Options.
SECTION 9. ACCELERATION OF EXERCISABILITY AND VESTING UNDER CERTAIN
CIRCUMSTANCES - Notwithstanding any provision in the Plan to the
contrary, unless the particular letter of grant provides otherwise,
100% of the unvested options held by each optionee shall automatically
become exercisable and vested upon the occurrence, before the
expiration or termination of such option, of the acquisition by a third
party of 100% of the Company's outstanding equity securities, a merger
in which the Company is not the surviving corporation, a sale of all or
substantially all of the Company's assets, or a similar reorganization
of the Company.
SECTION 10. MERGER, CONSOLIDATION OR REORGANIZATION - In the event of a
merger, consolidation or reorganization with another corporation in
which the Company is not the surviving corporation, the Board, the
Committee (subject to approval of the Board) or the board of directors
of any corporation assuming the obligations of the Company hereunder
shall take action regarding each outstanding and unexercised option
pursuant to either clause (a) or (b) below:
(a) Appropriate provision may be made for the protection of such
option by the substitution on an equitable basis of appropriate
shares of the surviving corporation, provided that the excess of
the aggregate fair market value of the shares subject to such
option immediately before such substitution over the exercise
price thereof is not more than the excess of the aggregate fair
market value of the substituted shares made subject to option
immediately after such substitution over the exercise price
thereof; or
(b) Appropriate provision may be made for the cancellation of such
option. In such event, the Company, or the corporation assuming
the obligations of the Company hereunder, shall pay the optionee
an amount of cash (less normal withholding taxes) equal to the
excess of the highest fair market value per share of the Common
Stock during the 60-day period immediately preceding the merger,
consolidation or reorganization over the option exercise price,
multiplied by the number of shares subject to such options
(whether or not then exercisable).
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SECTION 11. WITHHOLDING TAXES -
(a) General Rule. Pursuant to applicable federal and state laws, the
Company is or may be required to collect withholding taxes upon
the exercise of an option. The Company may require, as a
condition to the exercise of an option or the issuance of a stock
certificate, that the optionee concurrently pay to the Company
(either in cash or, at the request of the optionee but in the
discretion of the Board or the Committee and subject to such
rules and regulations as the Board or the Committee may adopt
from time to time, in shares of Common Stock of the Company) the
entire amount or a portion of any taxes which the Company is
required to withhold by reason of such exercise, in such amount
as the Committee or the Board in its discretion may determine.
(b) Withholding from Shares to be Issued. In lieu of part or all of
any such payment, the optionee may elect, subject to such rules
and regulations as the Board or the Committee may adopt from time
to time, or the Board or Committee may require the Company to
withhold from the shares to be issued that number of shares
having a fair market value equal to the amount which the Company
is required to withhold.
Approval of the proposal requires the affirmative vote of the holders
of at least a majority of the outstanding voting shares.
RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" approval of
the amendment to the 1993 Stock Option Plan.
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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 transition period ending December 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 transition
period ended December 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, Treasurer and 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 2001 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 February 18, 2001. 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 2001 Annual
Meeting, but which are not going to be presented to the Company for inclusion in
the proxy materials, will be considered untimely after May 5, 2001. 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
June 19, 2000
<PAGE>
LETTER TO THE STOCKHOLDERS
Dear Stockholders:
The seven-month period from June 1, 1999--December 31, 1999 marks the
changeover to a calendar fiscal year required by our incorporation of a
reinsurance company as a wholly-owned subsidiary. Net income for the short year
exceeded $1 million due to retention of more of our business with some of our
largest accounts than we had anticipated along with an adjustment requested by
our independent auditors asking us to book as income some amounts we had held
aside as reserves against possible future claims. December 31, 1999 found us
stronger than ever before in our history, with shareholders' equity (also known
as book value or net worth) of $3,128,646, or $.27 per common share after
allowance for redemption of all outstanding shares of preferred stock. We also
had no long-term debt, a current ratio of 3.88:1, and cash of $2,483,739 ($.33
per common share) as of the yearend.
The most important event of the first quarter of 2000 was completion of
the acquisition of Southern States Eye Care, L.L.C. for 350,000 shares of common
stock and $250,000. Southern States brings to us a substantial number of vision
Sponsors and providers, particularly in the Southeast. We expect the acquisition
to be accretive to earnings per share. Also of great importance to me is the
addition of Brent Layton, formerly the general manager of Southern States, to
our management team and to our Board of Directors. In addition to running
Southern States, Mr. Layton was formerly an owner of five different IPAs and a
Deputy Insurance Commissioner in Georgia. He shares many of my visions for
Avesis' future as well as bringing new vision of his own. I believe that going
forward we will only add to each other's effectiveness.
Despite this most important acquisition, which occurred too late in the
first quarter to have any impact on financial results, the first quarter was
marked by the loss of many members in both our vision and our dental programs,
as expected, from the large HMO accounts upon which we are overly dependent.
Even after this substantial loss of revenues and profits, we remain more
dependent on several large accounts than we would like. Although there can be no
assurance that our efforts will be successful, we are striving to achieve
greater customer diversification.
Once again, the most significant step we have taken toward achieving
greater customer diversification is the acquisition of Southern States. The
acquisition increased our vision care membership by approximately 977,000
Members. Its largest customer accounted for 44% of its gross revenues in
calendar year 1999, which would have been only 7% of the combined companies' pro
forma revenues for the same period.
We have been concentrating much of our marketing effort toward
development and sale of vision products aimed at newer and smaller HMO's as well
as small groups best reached by independent insurance brokers. Although we have
already implemented contracts with ten new clients in this segment, and we are
hopeful of adding many more, the potential revenues and profits from even ten of
<PAGE>
these new accounts does not yet come close to what we have lost through
cancellations by our largest account. Over time, however, as this segment grows,
we hope it will more than replace the lost business.
Another area we are exploring is the rapidly expanding business of
vision correction through laser surgery, which now is generally not covered by
insurance. With our large number of lives insured for vision care, we believe we
can develop a partially insured, discounted laser surgery business through a
select and limited number of surgeons in each geographic area.
We are contracting to become the administrator of the insured vision
program offered by a regional eyewear retail chain. Our experience, knowledge
and capital, along with our new, state-of-the-art computer systems, permit us to
assume the insurance risk for their covered lives and handle the administration
and adjudication of all claims while permitting the retailer to concentrate on
filling its customers' orders for glasses and lenses.
We are working with a major retailer toward development of a program
for their sales representatives to market our insured vision products in
conjunction with pharmaceutical benefits programs they currently offer. The
intention, of course, would be to utilize the extensive in-place facilities of
the retailer for fulfillment.
There is no assurance that all of these initiatives will overcome our
excessive dependence upon a few major accounts or our vulnerability to loss of
these accounts, but we shall not fail for lack of effort.
Finally, I would like to note the retirement from our Board of Sam
Oolie. Commencing even before our initial public offering in 1986, Mr. Oolie
served on our Board for fifteen years. We are most grateful for the guidance he
provided.
Sincerely,
/s/ Alan S. Cohn
Alan S. Cohn
President and CEO
<PAGE>
AVESIS INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS - JULY 21, 2000
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 Stockholders of Avesis Incorporated,
a Delaware corporation, to be held on Friday, July 21, 2000, 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 below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
KENNETH L. BLUM, JR., KENNETH L. BLUM, SR., GERALD L. COHEN, WILLIAM R. COHEN,
ALAN S. COHN, BRENT LAYTON, WILLIAM L. RICHTER
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
2. Approve an Amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 20,000,000 to
30,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
--------------------------------------------------------------------------------
<PAGE>
(Continued from reverse side)
3. Approve amendments to the Company's 1993 Stock Option Plan, including an
increase in the number of shares available under the Plan from 600,000 to
900,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
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 PROPOSALS 1, 2 AND 3.
Indicate changes by checking appropriate box Dated: ___________________ , 2000
-----------------------------------
-----------------------------------
Signature(s) of Shareholder(s)
Address Change [ ] Name Change [ ]
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
