SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ___)
Filed by Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as
permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Mid Atlantic Medical Services, Inc.
(Name of Registrant as Specified in its Charter)
Mid Atlantic Medical Services, Inc.
(Name of Person(s) Filing Proxy Statement)
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 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: _______________________________<PAGE>
2) Form, Schedule or Registration Statement Number: ______
_______________________________________________________
3) Filing Party: _________________________________________
4) Date Filed: ___________________________________________<PAGE>
<PAGE> 1
MID ATLANTIC MEDICAL SERVICES, INC.
4 Taft Court
Rockville, Maryland 20850
(301) 762-8205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1997
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders
("Annual Meeting") of Mid Atlantic Medical Services, Inc. ("Company")
will be held on April 29, 1997 at 10:00 a.m., Rockville time, at the
offices of the Company's subsidiary, Optimum Choice, Inc., located at
405 East Gude Drive, Suite 7, Rockville, Maryland 20850 for the
following purposes:
1. To elect four directors for a three year term (Proposal
1);
2. To ratify the adoption of the 1997 Bonus Plan for all
executive officers (Proposal 2);
3. To transact such other business and other matters and
proposals as may properly come before the meeting or any adjournment or
adjournments thereof.
Pursuant to the Company s Bylaws, the Board of Directors has
fixed the close of business on March 31, 1997, as the record date for
the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only record holders of the Company's Common Stock
at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting or any adjournments thereof.
In the event that there are not sufficient votes to approve any
one or more of the foregoing proposals at the time of the Annual
Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by the Company.
By Order of the Board of Directors,
/s/ Joseph L. Guarriello
------------------------
By: Joseph L. Guarriello
Secretary
Rockville, Maryland
April 4, 1997
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY.
THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL
MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD(S) AND
RETURN IT (THEM) IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.<PAGE>
<PAGE> 2
MID ATLANTIC MEDICAL SERVICES, INC.
4 Taft Court
Rockville, Maryland 20850
(301) 762-8205
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1997
This Proxy Statement is furnished to stockholders of Mid
Atlantic Medical Services, Inc., a Delaware corporation ("Company"), in
connection with the solicitation by the Board of Directors of the
Company of proxies to be used at the 1997 annual meeting of stockholders
of the Company ("Annual Meeting"), to be held on April 29, 1997, at
10:00 a.m., Rockville time, at the offices of the Company's subsidiary,
Optimum Choice, Inc., located at 405 East Gude Drive, Suite 7,
Rockville, Maryland 20850 and at any adjournments thereof. It is
anticipated that the mailing of this Proxy Statement and the form of
proxy to stockholders will commence on or about April 4, 1997.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
If the enclosed form of proxy is properly executed and returned
to the Company in time to be voted at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions
marked thereon. Executed but unmarked proxies will be voted (1) FOR
Proposal 1 to elect the designated nominees for directors; and (2) FOR
Proposal 2 to ratify the adoption of the 1997 Bonus Plan for all
executive officers. If any other matters are properly brought before
the Annual Meeting that require a stockholders' vote, the persons named
in the accompanying proxy will vote the shares represented by such
proxies on such matters in accordance with the determination of a
majority of the Board of Directors.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder
may revoke a proxy at any time prior to its exercise by filing a written
notice of revocation with, or by delivering a duly executed proxy
bearing a later date to, the Secretary of the Company or by attending
the Annual Meeting and voting in person.
The cost of solicitation of proxies will be borne by the
Company. In addition to the solicitation of proxies by mail, the
Company or one of its subsidiaries, MD-Individual Practice Association,
Inc. ("MD-IPA"), Physicians Health Plan of Maryland, Inc. ("PHP-MD"),
Optimum Choice, Inc. ("OCI"), MD-IPA Surgicenter, Inc. ("Surgicenter"),
HomeCall, Inc. ("HomeCall"), HomeCall Pharmaceutical Services, Inc.
("HPS," formerly known as HomeCall Infusion Services, Inc.), HomeCall
Hospice Services, Inc. ("HHS"), Mid Atlantic Psychiatric Services, Inc.
("MAPSI"), Alliance PPO, Inc. ("Alliance"), MAMSI Life and Health
Insurance Company ("MLH"), FirstCall, Inc. ("FirstCall"), Optimum
Choice, Inc. of Pennsylvania ("OCIPA"), Optimum Choice of the Carolinas,
Inc. ("OCCI"), MAMSI Insurance Agency of the Carolinas, Inc. ("MIACI"),
or MAMSI Insurance Resources, Inc. ("MIRI," formerly known<PAGE>
<PAGE> 3
as MAMSI Insurance Agency, Inc.) (collectively, "Subsidiaries"), through
its directors, officers and regular employees, may also solicit proxies
personally or by telephone or telegraph. The Company will also request
persons, firms and corporations holding shares in their names or in the
names of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial owners and
will reimburse such holders for their reasonable expenses in doing so.
The securities that can be voted at the Annual Meeting consist
of shares of Common Stock of the Company. Each share entitles its owner
to one vote on each matter presented at the Annual Meeting. The close
of business on March 31, 1997 has been fixed by the Board of Directors
as the record date ("Record Date") for determination of stockholders
entitled to receive notice of and to vote at the Annual Meeting. There
were approximately 790 record holders of Common Stock as of such date.
The number of shares of Common Stock outstanding on the Record Date was
54,677,862. The presence, in person or by proxy, of at least a majority
of the total number of outstanding shares of Common Stock is necessary
to constitute a quorum at the Annual Meeting. In the event that less
than a majority of the outstanding shares are present at the Annual
Meeting, either in person or by proxy, a majority of the shares so
represented may vote to adjourn the Annual Meeting from time to time
without further notice. A plurality of the total number of shares
present or represented by proxy will be necessary to elect directors
(Proposal 1) and a simple majority of the total number of shares present
or represented by proxy will be necessary to approve Proposal 2.
A copy of the Annual Report to Stockholders, including
certified financial statements, for the fiscal year ended December 31,
1996, accompanies this Proxy Statement. The Company is required to file
an Annual Report on Form 10-K for its fiscal year ended December 31,
1996 with the Securities and Exchange Commission ("SEC"). Stockholders
may obtain, free of charge, a copy of such Annual Report by writing to
Joseph L. Guarriello, Secretary, Mid Atlantic Medical Services, Inc., 4
Taft Court, Rockville, Maryland 20850.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of February 26,
1997 with respect to the shares of the Company s Common Stock
beneficially owned by each current director of the Company, by each
nominee who is not currently a director, by each executive officer
listed in the Summary Compensation Table below and by all directors and
executive officers of the Company as a group. There are no arrangements
known to the Company, including any pledge by any person of securities
of the Company, the operation of which may at a subsequent date result
in a change in control of the Company. All ownership consists of sole
voting and dispositive power, except as noted.<PAGE>
<PAGE> 4
<TABLE>
<CAPTION>
Amount and Nature Percent of
of Beneficial Common Stock
Name Ownership(1) Outstanding
---- ----------------- ------------
<S> <C> <C>
Thomas P. Barbera 108,500(2) **
Francis C. Bruno, M.D. 55,152(3) **
John L. Cook, III, M.D. 15,900(4) **
Stanley M. Dahlman, Ph.D. 13,620(5) **
Peter L. Flaherty, Jr., M.D. 232,842(6) **
Robert E. Foss 52,400(7) **
Walter Girardin 13,620(8) **
Mark D. Groban, M.D.* 217,446(9) **
Joseph L. Guarriello 267,400(10) **
Donald R. Hammett 14,837(11) **
George T. Jochum 1,181,560(12) 2.2%
John P. Mamana, M.D.* 20,420(13) **
William M. Mayer, M.D.* 57,580(14) **
Gretchen P. Murdza* 81,520 **
Creighton R. Schneck 15,420(15) **
Stanley F. Smith, R.Ph. 53,420(16) **
Alfred Talamantes 96,730(17) **
James A. Wild 15,758(18) **
All current directors and
executive officer as a
group (23 persons) 3,232,778(19) 5.9%
</TABLE>
---------------------------------------
*Nominee for director
**Represents less than 1% of the outstanding shares of Common Stock.
(1) This number will include shares of Common Stock over which the
director or officers will have voting power under the Amended
and Restated Mid Atlantic Medical Services, Inc. Stock
Compensation Trust Agreement ("Trust"). Under the Trust, each<PAGE>
of the persons who holds an option granted under the Company's
1990 Non-Qualified Stock Option Plan, 1991 Non-Qualified Stock
Option Plan, 1992 Non-Qualified Stock Option Plan, 1993 Non-
Qualified Stock Option Plan, 1994 Non-Qualified Stock Option
Plan, 1995 Non-Qualified Stock Option Plan, or 1996 Non-
Qualified Stock Option Plan (collectively, the "Plans") has
the right to one equal vote of the Common Stock held in the
Trust. As the Trust held 8,964,625 shares of Common Stock on
February 26, 1997 and there were 668 option holders under the
Plans as of such date, each option holder has the right to
vote 13,420 shares of Common Stock held by the Trust. Shares
for which the trustee of the Trust does not receive voting
instructions will be voted by the trustee of the Trust for,
against or withheld in the same proportions as those shares of<PAGE>
<PAGE> 5
Common Stock for which the trustee does receive voting
instructions. As the number of shares held by the Trust
that each option holder has the right to vote (13,420
shares) is less than the number of presently exercisable
options held by each current director, executive officer or
nominee (other than Dr. Bruno, Dr. Cook, Dr. Dahlman, Dr.
Flaherty, Mr. Girardin, Mr. Hammett, Mr. Mackail, Dr.
Mamana, Dr. Mayer, Mr. Schneck, Mr. Smith, and Mr. Wild),
the beneficial ownership of each person (other than Dr.
Bruno, Dr. Cook, Dr. Dahlman, Dr. Flaherty, Mr. Girardin,
Mr.Hammett, Mr. Mackail, Dr. Mamana, Dr. Mayer, Mr.
Schneck, Mr. Smith, and Mr. Wild) did not increase as a
result of the Trust.
(2) Represents presently exercisable options to purchase
105,700 shares of Common Stock.
(3) Includes 2,306 shares of Common Stock held by his spouse
and 13,420 shares that he has the right to direct the
voting of under the Trust.
(4) Includes 434 shares of Common Stock held by his spouse and
13,420 shares that he has the right to direct the voting of
under the Trust.
(5) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(6) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(7) Includes presently exercisable options to purchase 52,000
shares of Common Stock.
(8) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(9) Includes 9,500 shares of Common Stock held by his spouse
and presently exercisable options to purchase 142,400
shares of Common Stock.
(10) Includes 30,000 shares of Common Stock held by his spouse
and presently exercisable options to purchase 106,400
shares of Common Stock.
(11) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(12) Includes 11,640 shares of Common Stock held by his spouse,
3,420 shares in his IRA, and presently exercisable options
to purchase 631,500 shares of Common Stock.
(13) Includes 6,000 shares indirectly owned and 13,420 shares
that he has the right to direct the voting of under the
Trust.
(14) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(15) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(16) Includes 3,000 shares of Common Stock in his IRA and 13,420
shares that he has the right to direct the voting of under
the Trust.
(17) Includes presently exercisable options to purchase 96,700
shares of Common Stock.
(18) Includes 13,420 shares that he has the right to direct the
voting of under the Trust.
(19) This number also includes 60,300 shares of Common Stock
held by the spouses of executive officers, 13,420 shares
that an executive officer has the right to direct the
voting of under the Trust, and presently exercisable<PAGE>
options to purchase 1,626,550 shares of Common Stock.<PAGE>
<PAGE> 6
PRINCIPAL STOCKHOLDERS
As of February 26, 1997, no persons or groups within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended ("1934 Act"), were known by management to beneficially own more
than five percent of the Company's Common Stock except as follows:
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Outstanding
of Common Stock Common Stock
<S> <C> <C>
Franklin Resources, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin Mutual Advisors, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078 6,039,950(1) 11.1%
Neuberger & Berman, L.L.C.
605 Third Avenue
New York, New York 10158-3698 3,864,400(2) 7.1%
Massachusetts Financial Services Company
MFS Series Trust II - MFS Emerging Growth Fund
500 Boylston Street
Boston, Massachusetts 02116 2,467,600(3) 4.5%
</TABLE>
----------------------------------
(1) Franklin Mutual Advisers, Inc. reports that it has sole voting and
dispositive power with respect to 6,028,700 shares. Franklin Resources,
Inc. reports that it is the parent holding company of Franklin Mutual
Advisers, Inc. and Templeton Global Advisors Limited, and that Templeton
Global Advisors Limited has sole voting and dispositive power with
respect to 11,250 shares. Charles B. Johnson and Rupert H. Johnson, Jr.
report that they are principal shareholders of Franklin Resources, Inc.
This information is based on a Schedule 13G dated February 12, 1997.
(2) Neuberger & Berman, LLC reports that it has sole voting power with
respect to 944,400 shares, shared voting power with respect to 2,716,800
shares, and shared dispositive power with respect to 3,864,400 shares.
This information is based on a Schedule 13G dated February 10, 1997.
(3) Massachusetts Financial Services Company ("MFS") reports that it has
sole voting and dispositive power with respect to 2,467,600 shares and
that these shares are also beneficially owned by MFS Series Trust II -
MFS Emerging Growth Fund. This information is based on a Schedule 13G
dated February 8, 1994, as amended on February 6, 1995, March 1, 1995,
February 12, 1996 and February 12, 1997.<PAGE>
<PAGE> 7
ELECTION OF DIRECTORS
(Proposal 1)
The terms of office of John H. Cook, III, M.D., Mark D. Groban,
M.D., Donald R. Hammett, and Stanley F. Smith, R.Ph. expire at the
Annual Meeting. Mark D. Groban, M.D., John P. Mamana, M.D., William M.
Mayer, M.D. and Gretchen P. Murdza have been nominated by the Board of
Directors for election to the Board, each to serve for a three-year
term. The terms of approximately one-third of the Board expire each
year at the Annual Meeting. Directors serve until their successors are
duly elected and qualified. Following the Annual Meeting, the size of
the Board of Directors will remain at 13 and, if the nominees are
elected, there will be no vacancies on the Board.
Except as stated above, there are no arrangements or
understandings between the Company and any person pursuant to which such
person has been or will be elected as a director. If any nominee
becomes unavailable for election for any reason, or if any other vacancy
in the class of directors to be elected at the Annual Meeting should
occur before the election, the shares represented by the proxy will be
voted by any of the persons serving as proxies for the person designated
by the Company's Board of Directors to replace the nominee or to fill
such other vacancy on the Board. The Board of Directors has no reason
to believe that any of the nominees will be unavailable or that any
other such vacancy on the Board will occur. Each nominee has consented
to be named and has indicated his or her intent to serve if elected.
Except as noted below, there are no family relationships among any
director, nominee for director or executive officer of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF ALL NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names of the four nominees
for election as director and of those directors who will continue to
serve as such after the Annual Meeting, as well as the executive
officers who are not directors, or will not continue to serve as
directors following the Annual Meeting. Also set forth is certain other
information with respect to each such person's age, the periods during
which he or she has served as a director of the Company and positions
currently held with the Company and its Subsidiaries.<PAGE>
<PAGE> 8
<TABLE>
<CAPTION>
Term of
Office
Expires
Director Annual
Name and Age (1) Since Meeting Directorships, Positions with the Company
---------------- -------- ------- -----------------------------------------
<S> <C> <C> <C>
Continuing Directors:
Thomas P. Barbera, 46 1996 1999 Director of the Company, MLH, MD-IPA and MIACI; Vice
Chairman and Executive Vice President, Governmental
Services of the Company and MLH; Executive Vice President,
Government Services and Secretary of MLH; Executive Vice
President, Governmental Services and Assistant Secretary
of HPS, HHS, MIRI and Surgicenter; Executive Vice
President, Governmental Services of the Company, MD-IPA,
OCI, OCCI, OCIPA, Alliance, FirstCall, HomeCall and
MAPSI.
Francis C. Bruno, M.D., 55 1986 1999(2) Director of the Company, MLH and PHP-MD; Chairman of
PHP-MD. Co-Medical Director of HHS.
Stanley M. Dahlman, Ph.D., 62 1986 1999(3) Director of the Company, MLH and MD-IPA.
Peter L. Flaherty Jr., M.D., 59 1986 1998 Director of the Company and MLH.
Walter Girardin, 77 1995 1998 Director of the Company and MLH.
George T. Jochum, 64 1987 1999 Director of the Company, MLH, Alliance, MAPSI, MD-IPA,
OCI, OCIPA, OCCI, HomeCall, FirstCall, Surgicenter, HPS,
HHS, MIACI, and MIRI; Chairman, President and Chief
Executive Officer of the Company, MIRI, OCI, OCIPA and
OCCI; Chairman and Chief Executive Officer of Alliance,
MAPSI, MD-IPA, HPS, HHS, MIACI, and MLH; Chairman of
Surgicenter, HomeCall and FirstCall; Chief Executive
Officer of PHP-MD.
Creighton R. Schneck, 51 1995 1998 Director of the Company, MLH, and MD-IPA.
Alfred Talamantes, 60 1995 1998 Director of the Company, MLH, MD-IPA, OCI, OCCI, and
OCIPA; Executive Vice President and Chief Operating
Officer of the Company, MLH, Alliance, MAPSI, FirstCall,
HomeCall, HPS, HHS, MD-IPA, Surgicenter, OCI, OCCI, OCIPA,
and PHP-MD.
James A. Wild, 45 1989 1999(4) Director of the Company and MLH.
Nominees (for a three-year term expiring in 2000):
Mark D. Groban, M.D., 55 1990 2000(5) Director of the Company, MLH, PHP-MD, Alliance, MAPSI,
and MIRI; President of Alliance, MAPSI, and MIACI;
Executive Vice President and Medical Director of the
Company, MLH, PHP-MD, FirstCall, HomeCall, HPS, HHS,
MDIPA, Surgicenter, OCI, OCCI, and OCIPA.<PAGE>
John P. Mamana, M.D. 2000 Director of PHP-MD and MD-IPA.
William M. Mayer, M.D., 50 1993 2000(6) Director of PHP-MD.
Gretchen P. Murdza, 49 2000 Director of HomeCall, FirstCall, HPS, and HHS; Chief
Executive Officer of FirstCall and HomeCall; President
of HPS and HHS.<PAGE>
<PAGE> 9
Executive Officers Who Are Not Current Directors or Nominees or Whose
Terms as Director Will Not Continue After the 1997 Shareholders Meeting:
Paul E. Dillon, 45 Director of MD-IPA; Senior Vice President and
Treasurer of the Company, MLH, Alliance, MAPSI, FirstCall,
HomeCall, HPS, HHS, Surgicenter, MD-IPA, OCI, OCIPA and
OCCI.
J. Stevens Dufresne, 41 Director of Alliance, MAPSI, PHP-MD, OCI, OCCI, OCIPA,
Surgicenter and MIRI; Chief Executive Officer and
President of Surgicenter; President of OCIPA; Executive
Vice President, Provider Networks of the Company, MLH,
Alliance, FirstCall, HomeCall, HPS, HHS, MAPSI, MDIPA,
OCI, OCCI and PHP-MD.
Vera C. Dvorak, M.D., 50 Director of PHP-MD, HomeCall, and FirstCall; President
of PHP-MD; Executive Vice President and Medical Director
of Alliance, MAPSI, HomeCall, FirstCall, MD-IPA, OCI,
OCCI, OCIPA and Surgicenter. Senior Vice President and
Assistant Medical Director of the Company, MLH, HPS, and
HHS.
Robert E. Foss, 46 Director of MD-IPA and Surgicenter; Executive Vice President
and Chief Financial Officer of the Company, MLH, Alliance,
MAPSI, MD-IPA, HomeCall, FirstCall, HPS, HHS, Surgicenter,
OCI, OCIPA, OCCI, MIRI, PHP-MD and MIACI.
Susan D. Goff, 51 Director of Alliance, MAPSI, MD-IPA, MIACI and MIRI;
President of MD-IPA; Vice President of the Company, MLH,
OCI, OCIPA and OCCI.
Richard W. Gorenflo, 42 Senior Vice President of the Company, Alliance, FirstCall,
HomeCall, HPS, HHS, MAPSI, MD-IPA, Surgicenter, MIRI,
MLH, OCI, OCCI, OCIPA and PHP-MD.
Joseph L. Guarriello, 47 1991 1994 Director of MD-IPA, HomeCall, and FirstCall; President
of MLH; Executive Vice President, General Counsel and
Secretary of the Company, Alliance, MD-IPA, OCI, OCIPA,
OCCI, HomeCall, FirstCall, HPS, HHS, MAPSI, Surgicenter,
PHP-MD, MIACI and MIRI.
Christopher E. Mackail, 38 Vice President of Finance of the Company.
Mary E. Shocklee, 34 Vice President, Controller and Chief Accounting Officer
of the Company, MLH, Alliance, MAPSI, HPS, HHS, MD-IPA,
Surgicenter, MIACI, MIRI, OCI, OCCI, OCIPA and PHP-MD.
Catherine F. Tyser, 39 Director of MD-IPA; Executive Vice President of Claims
of the Company, MLH, Alliance, FirstCall, HomeCall,
HPS, HHS, MAPSI, MD-IPA, Surgicenter, OCI, OCCI, OCIPA
and PHP-MD.
</TABLE>
---------------------------------------------
(1) Signifies age as of December 31, 1996.
(2) Dr. Bruno was not a Director of the Company from April 1991 to
April 1992 or from April 1994 to April 1995. <PAGE>
(3) Dr. Dahlman was not a Director of the Company from April 1991
to April 1992 or from April 1994 to April 1995.
(4) Mr. Wild was not a Director of the Company from April 1992 to
April 1993.
(5) Dr. Groban was not a Director of the Company from April 1993
to April 1994.
(6) Dr. Mayer was not a Director of the Company from April 1995 to
April 1996.
Information concerning the principal occupations or employment
of the directors, nominees for director and executive officers of the
Company for the past five years and other biographical data are set
forth below.<PAGE>
<PAGE> 10
Continuing Directors and Nominees:
Thomas P. Barbera was elected Vice Chairman of the Company on
May 6, 1996. Mr. Barbera became Executive Vice President of Government
Relations and Assistant Secretary for the Company and MLH in May of
1993. From December 1987 until May 1993, Mr. Barbera was a partner at
Weinberg and Green, a general practice law firm in Baltimore, Maryland.
Francis C. Bruno, M.D. received a B.S. from Kings College in
1964 and an M.D. from New York Medical College in 1968. He is Board
certified in family practice and has practiced medicine since 1972.
Stanley M. Dahlman, Ph.D. received a B.A. from the University
of Cincinnati in 1955 and a Ph.D. from Catholic University of America in
1976. He began serving Montgomery College as a faculty member in 1963
and retired on June 30, 1992 as the Provost (Chief Executive Officer) of
the Germantown Campus of Montgomery College. His former positions
include Chancellor, Associate Dean and Executive Director for
Facilities.
Peter L. Flaherty, Jr., M.D. received a B.S. from Georgetown
University in 1959 and an M.D. from Georgetown University in 1963. He
is Board certified in obstetrics/gynecology and has practiced medicine
since 1963.
Walter Girardin is presently retired. Prior to his retirement
in 1981, he served as President, Chief Operating Officer and as a
director of Western Union Telegraph Company. Mr. Girardin is the uncle
of Susan Goff's husband.
Mark D. Groban, M.D. is a Board certified psychiatrist who
joined the Company full time on December 1, 1990 after being in full
time practice since 1973. Dr. Groban served as a consultant from
February 1988 to October 1989 for MD-IPA's managed mental health
program. He became President of MAPSI in October 1989. In May 1991, he
became President of Alliance. Dr. Groban received his M.D. degree from
Albany Medical College in Albany, New York and psychiatric training at
Sheppard-Pratt Hospital in Towson, Maryland from 1970 to 1973. Dr.
Groban is a member of the American Psychiatric Association.
George T. Jochum became President of MD-IPA effective March 9,
1987, President of the Company effective July 20, 1988 and Chief
Executive Officer of the Company effective April 18, 1989. Mr. Jochum
was named Chairman of the Board of Directors of the Company effective
January 16, 1991.
John P. Mamana, M.D. received his B.A. from Harvard University
and his M.D. degree from Boston University School of Medicine. He
completed his internship and residency in internal medicine at
Pennsylvania Hospital, a University of Pennsylvania Hospital, in 1971
and 1974, respectively. Dr. Mamana has practiced internal medicine in
Springfield, Virginia since 1974. In 1978, he founded, and has served
since as the President, Chief Executive Officer, and Chairman of the
Board of Virginia Medical Associates, P.C., a multi-specialty group
practice. Since August 1994, he has served as the Chief Executive
Officer and Chairman of the Board for Gateway Physicians Services
(formerly Virginia Health Partners). Dr. Mamana has been a Clinical
Associate Professor of Medicine at Georgetown University Medical School<PAGE>
since 1987. Dr. Mamana has also served as the Chief Medical Officer of
Health Partners, Inc. in Norwalk, Connecticut since 1994.
William M. Mayer, M.D. received a B.S. from Georgetown
University in 1967 and his M.D. degree from New York Medical College in
1971. He completed an internal medicine internship at the Cornell
Cooperating Hospitals and completed his Ob-Gyn residency at New York
Medical College. Following completion of his residency, he was the
chief of Ob-Gyn at Kimbrough Army Hospital, serving as a major in the
U.S. Army. Upon completion of his tour of duty, he entered private
practice in the field of Ob-Gyn in Columbia, Maryland and has practiced
in Columbia since 1977. He served as President of the Medical Staff of
Howard County General Hospital from 1982 to 1983 and served on the Board
of Trustees of Howard County General Hospital from 1982 to 1984.<PAGE>
<PAGE> 11
Gretchen P. Murdza was employed by the Company as the Director
of Professional Recruitment in October 1989, became the Senior Director
of Professional Recruitment in April 1990, Vice President, Provider
Networks in July 1991 and Senior Vice President responsible for the
development of Home Health Service on March 9, 1994. In October 1994,
she became Chief Executive Officer of HomeCall, Inc. and subsequently
President of HomeCall Pharmaceutical Services, Inc. and HomeCall Hospice
Services, Inc. From 1986 to 1989, she served as Executive Vice
President of MedCare Associates\Imaging and Carroll County Health Care
Inc. in Westminster, Maryland. She was educated at the College of Notre
Dame of Maryland located in Baltimore, Maryland.
Creighton R. Schneck has served as the Vice President-
Development at Studio Plus Hotels since September 1996. In such
capacity, Mr. Schneck is responsible for the acquisition and
development of hotels throughout the United States. Prior to joining
Studio Plus, Mr. Schneck was a mortgage banker with Towle Financial
Group of Vienna, Virginia. Between 1990 and 1993, he was a principal
with the Palisades Development Corporation of Bethesda, Maryland. Mr.
Schneck has an M.B.A. from Adelphi University and a Bachelor's degree
from Belmont Abby College.
Alfred Talamantes joined the Company in March of 1992 as
Director of Claims Services. He subsequently became Senior Vice
President of Operations in January of 1993 and Chief Operating Officer
in December of 1993. Prior to joining the Company, Mr. Talamantes was
the President of Advanced Direct Marketing, Inc., a full service direct
marketing firm. Mr. Talamantes served Western Union Corporation from
1961 to 1989. His final position with Western Union Corporation was
that of President, Western Union Priority Mail Services. In this
capacity, Mr. Talamantes had bottom line responsibility for all aspects
of the corporation's Priority Mail Services product line.
James A. Wild received a B.A. in accounting from Franklin and
Marshall College in 1973. He has been Vice President and Director of
Waterview Investment Corporation (a holding company whose 100% owned
subsidiary, Almag, is a metal finishing company) since February 1988.
Executive Officers:
Paul E. Dillon became the Company's Senior Vice President and
Treasurer in April 1994. From January 1994 through April 1994, he
served as the Company's Senior Vice President, Quality Assurance and
Quality Improvement. From November 1990 through January 1994, he served
as the Company's Vice President, Enrollment and Billing; from April 1990
to November 1990, he served as the Company's Senior Director, Enrollment
and Billing; and from November 1989 to April 1990, he served as the
Company's Director of Enrollment. Mr. Dillon graduated from St. Francis
College in Loretto, Pennsylvania in 1973 and received his MBA in
International Business and Finance from Pace University in New York City
in 1983.
J. Stevens Dufresne was employed by the Company as Senior Vice
President of Provider Networks effective February 1989. He became
Executive Vice President of Provider Networks for the Company, MLH and
PHP-MD in April 1993. From June 1987 to February 1989, he served as
Senior Director of Professional Recruitment. Mr. Dufresne graduated
from Florida Southern College in 1977 and received his Masters of Health<PAGE>
Services Administration from George Washington University in 1982.
Vera C. Dvorak, M.D. joined the Company in August 1994 as an
Associate Medical Director. She became Senior Vice President and
Medical Director of the Company, MLH, PHP-MD, HomeCall, FirstCall and
HPS in April 1996. In November 1996 Dr. Dvorak was promoted to
Executive Vice President and Medical Director of the Company. Dr.
Dvorak is Board certified in Internal Medicine and Geriatrics. She was
recertified by the American Board of Internal Medicine in 1987 and 1993.
Dr. Dvorak was a practicing physician for 18 years (1976-1994); the last
6 years she served as Chief of Department of Internal Medicine of Kaiser
Permanente. Dr. Dvorak received her M.D. degree from Charles University
in Prague, Czechoslovakia and trained in internal medicine and
infectious diseases at the University of Oklahoma and the University of
Pennsylvania.<PAGE>
<PAGE> 12
Robert E. Foss joined the Company on July 1, 1994 as its
Executive Vice President and Chief Financial Officer. For more than
five years prior to July 1, 1994, Mr. Foss was a partner with Ernst &
Young LLP's Washington, D.C. office. Ernst & Young LLP has served as
the Company's independent public accountants since June 2, 1989 and Mr.
Foss was the audit partner on the Company's account. Mr. Foss received
a BSBA from the University of Colorado in 1971 and became a CPA in 1972.
Susan D. Goff was employed by Alliance and MAPSI as Vice
President on August 1, 1989, became Executive Vice President of MD-IPA
on April 26, 1993 and President of MD-IPA on November 15, 1993. Ms.
Goff graduated from the University of California at Los Angeles in 1967
with a B.S. in Nursing and received a Masters in Science Administration
with a concentration in Health Care from Central Michigan University in
1989. Ms. Goff is a director of Sandy Spring National Bank. Ms. Goff's
husband is the nephew of Mr. Girardin.
Richard W. Gorenflo has been the Senior Vice President,
Regulatory Affairs for the Company since November 1996. He has
previously served the Company from February through June 1989 as
Division Vice President- W.V. IPA, and from July 1989 through October
1996 as Vice President, Regulatory Affairs. Mr. Gorenflo received his
BSBA from Franklin University in Columbus, Ohio in 1976.
Joseph L. Guarriello began his employment with MD-IPA in 1987
as the Vice President of Corporate Affairs. He was the Chief Financial
Officer of MD-IPA from May 9, 1988 to February 29, 1992 and Chief
Financial Officer of the Company from April 18, 1989 to February 29,
1992. Mr. Guarriello was named General Counsel of the Company and
MD-IPA, effective November 26, 1990. Mr. Guarriello was named President
of MLH on May 6, 1996. Mr. Guarriello received a B.S. from Georgetown
University in 1971 and a J.D. from Georgetown University in 1974.
Christopher E. Mackail joined the Company in October 1996 as
the Vice President of Finance. Prior to joining the Company, Mr.
Mackail a Senior Manager with Ernst & Young LLP's Washington, D.C.
office. Ernst & Young LLP has served as the Company's independent
public accountants since June 2, 1989 and Mr. Mackail was the audit
Senior Manager on the Company's account. Mr. Mackail graduated from the
University of Richmond in 1981 with a B.S in accounting and became a CPA
in 1983.
Mary E. Shocklee became Controller of the Company effective
January 1993 and a Vice President of the Company effective April 1996.
From September 1988 to January 1993, Ms. Shocklee managed the Accounting
Department of the Company and served as the Director of Accounting since
September 1990. Ms. Shocklee graduated magna cum laude from Georgetown
University with a BS/BA degree in Accounting in 1983 and became a CPA in
1985.
Catherine F. Tyser joined the Company in February 1992 as
Senior Supervisor in Claims Production. Subsequently, Ms. Tyser has
held the following positions within the Claims Department: Manager
beginning September 1992, Director beginning November 1993, Senior
Director beginning November 1994, Vice President beginning March 1995,
Senior Vice President beginning July 1995 when she also assumed the
additional responsibilities of managing the Alliance PPO Claims
Department. In November 1996, Ms. Tyser was promoted to Executive Vice<PAGE>
President assuming responsibility for Operations in North Carolina and
Pennsylvania. Prior to joining the Company, Ms. Tyser worked at Nations
Bank for 15 years holding various positions within the Consumer Credit
Division. Her last position held was Assistant Vice President, Consumer
Credit Automation Manager responsible for the functioning of an
automated loan processing system and related support personnel for the
Metropolitan Washington Consumer Credit Division.<PAGE>
<PAGE> 13
Board Meetings and Committees
The Company's Board of Directors met 6 times in fiscal 1996.
The standing committees of the Board include the Executive Committee,
the Finance Committee, the Audit Committee, the Stock Option Committee,
and the Compensation Committee. During fiscal 1996, the Executive
Committee held 4 meetings, the Finance Committee held 4 meetings, the
Audit Committee held 3 meetings, the Stock Option Committee held 3
meetings, and the Compensation Committee held 2 meetings. The Board
does not have a standing Nominating Committee.
All Directors attended at least 75 percent of the aggregate of
the total number of meetings of the Company's Board of Directors and the
total number of meetings held by all committees on which they served.
The Executive Committee of the Board of Directors has general
oversight functions relating to the operation of the Company and its
Subsidiaries and functions as the Company's Board when the Company's
Board is not in session, with all powers of the Company's Board, except
those of removing or nominating Directors, filling vacancies on the
Board of Directors, and as otherwise limited by the Delaware General
Corporation Law. Its members are George T. Jochum (Chairman), Stanley
M. Dahlman, Ph.D., Stanley F. Smith, R.Ph, Alfred Talamantes and James
A. Wild.
The Finance Committee of the Company oversees the projections
and assumptions of the Company in preparing its financial goals each
year. The Audit Committee interfaces with the Company s independent
public accountants to determine if the financial accounting practices of
the Company are in compliance with generally accepted accounting
principles. The Finance Committee's members are James A. Wild
(Chairman), Thomas P. Barbera, Donald R. Hammett, George T. Jochum,
Creighton R. Schneck, and Stanley F. Smith, R.Ph. The Audit Committee's
members are James A. Wild (Chairman), Donald R. Hammett, Creighton R.
Schneck, and Stanley F. Smith, R.Ph.
The Stock Option Committee grants options under and otherwise
implements the 1989, 1990, 1991, 1992, 1993, 1994, 1995 and 1996
Non-Qualified Stock Option Plans. The members of the Stock Option
Committee are James A. Wild (Chairman), Walter Girardin, and Creighton
R. Schneck.
The Compensation Committee oversees the development and
implementation of the Company's compensation program for executive
officers and the Chief Executive Officer. Its members are James A. Wild
(Chairman), Walter Girardin, and Creighton R. Schneck.
Section 16(a) Beneficial Ownership Reporting Compliance
John H. Cook, III, M.D., Paul Dillon, and Mark Groban, M.D.
each failed to file on a timely basis one Form 4 Report, Statement of
Changes in Beneficial Ownership, reporting one transaction each as
required by Section 16(a) of the 1934 Act. Donald Hammett failed to
file on a timely basis two Form 4 Reports. All of the aforementioned
forms have subsequently been filed.
Directors' Compensation<PAGE>
For the fiscal year ended December 31, 1996, the directors of
the Company were compensated according to the following table:
Per Person
Compensation(1)
Chairman & Vice Chairman of the Board $52,000/yr(2)
Director Attendance at Board Meeting 1,450
Director Attendance as Chairman of a Committee Meeting 1,325
Director Attendance at a Committee Meeting 850
--------------------------------------
(1) Employees of the Company receive no annual fees and no
compensation for Board or Committee meeting attendance.
(2) Any director compensated as a Chairman or Vice Chairman does
not receive additional compensation from the Company or any of
its Subsidiaries for attending Board or Committee meetings. If
the position is held by an employee of the Corporation, no
compensation in addition to his or her employee compensation is
paid.<PAGE>
<PAGE> 14
Under the Company's 1996 Non-Qualified Stock Option Plan ("1996
Plan"), each person who was a director of the Company or one of its
Subsidiaries on May 1, 1996 but who was not an employee of the Company
or one of its Subsidiaries on such date ("Non-Employee Director")
received a Non-Employee Director Option to purchase shares of Common
Stock at an exercise price of $20.00 per share (which was the fair
market value of a share of Common Stock on May 1, 1996). The number of
shares of Common Stock covered by each Non-Employee Director Option was
based on a formula specified in the 1996 Plan.
Each Non-Employee Director Option becomes exercisable
cumulatively in three equal installments on June 1, 1997, 1998 and 1999
and has a five year term. If a Non-Employee Director's service with the
Company terminates (other than as a result of a removal for cause) or if
such person ceases to be a Non-Employee Director, the option will
continue to become exercisable and may be exercised until the stated
term of the option. If a Non-Employee Director is removed for cause,
the Non-Employee Director Option held by such person will cease to
continue to become exercisable on or after the date of such removal.
Set forth below is the number of shares covered by each Non-
Employee Director Options received by current Company directors and
nominees on May 1, 1996 under the 1996 Plan:
Number of Shares
Francis C. Bruno, M.D. 4,980
John L. Cook, III, M.D. 4,380
Stanley M. Dahlman, Ph.D. 5,430
Peter L. Flaherty, Jr., M.D. 5,880
Walter Girardin 3,480
Donald R. Hammett 3,330
John P. Mamana, M.D.* 3,264
William M. Mayer, M.D.* 3,540
Creighton R. Schneck 3,480
Stanley F. Smith, R.Ph. 4,080
James A. Wild 4,380
* Nominee
EXECUTIVE MANAGEMENT COMPENSATION
Report of the Compensation Committee on Executive Compensation
The role of the Compensation Committee is to set salary for
individuals who are Senior Vice Presidents and above, and to review any
employment agreements or revisions thereto entered into with the
Company's officers; and to establish the bonus goal for the Chief
Executive Officer and other employees.
The Committee uses a common set of criteria for evaluating all
executives. The criteria are:
1. Individual performance
2. Individual responsibility
3. Corporate performance<PAGE>
4. Potential for growth
In evaluating the executive's individual performance, the following
criteria is reviewed:
5. Selection, placement and evaluation of personnel
under the executive's supervision;
6. Education of personnel under the executive's
supervision;
7. Control of corporate expenditures;
8. Customer service;<PAGE>
<PAGE> 15
9. Job performance;
10. Acceptance of and ability to accomplish special
tasks, and
11. Establishment and completion of specific goals.
Salary. The pay-for-performance concept is most clearly
exemplified in the compensation of the Company's Chief Executive
Officer. Mr. Jochum's employment contract was executed on December 18,
1990 after approval of the Board of Directors of the Company. In 1992,
the term of Mr. Jochum's contract was extended by the Board to December
31, 1998. The contract includes a provision under which post-1990
changes to Mr. Jochum's base compensation, whether that change is an
increase or decrease, is directly affected by the earnings of the
Company. Mr. Jochum's employment contract provides that his base salary
will increase or decrease each year by an amount equal to 75% of the
percentage change in the Company's consolidated net after tax income
during the previous year. The employment contract further provides that
his salary cannot be reduced by more than 25% in any one year. Mr.
Jochum is the only executive officer who has an employment contract.
Mr. Jochum's salary for 1996 was determined based upon the
formula described above. The Company's net income after tax grew from
$54,530,000 in 1994 to $61,124,000, an increase of 12.09% and Mr.
Jochum's 1996 base salary was increased by 75% of that percentage, or
9.07%.
With respect to those executive officers other than Mr. Jochum,
the CEO, Mr. Jochum presented a recommendation to the Committee
regarding such individuals' 1996 salary based on his evaluation of each
individual's performance, using the criteria stated above. The
Committee discussed these recommendations and the Committee set 1996
salary levels in accordance with Mr. Jochum's recommendations.
Bonus. Bonus compensation for management is based on the
ability of the Company to attain a predetermined net income goal. The
bonus plan includes a minimum net income (prior to the return of amount
withheld by PHP-MD as part of the claims reserve risk pool and before
deductions for income tax and expansion and acquisition costs) goal.
For 1996, the minimum net income goal was $106 million. As net income
did not exceed this amount, no bonuses have been paid under the 1996
Bonus Plan. Executive Officers are covered under the same bonus plan as
are the rest of the Company's salaried employees. The 1996 Bonus Plan
was adopted by the Company's Board of Directors and approved by the
Company's stockholders at the 1996 Annual Meeting. The goal was
established at the beginning of 1996 by the Compensation Committee and
was approved by the Company's Board of Directors.
Some executive officers and other salaried employees do not
receive the full amount of their bonus even if the minimum net income
level is achieved. For these individuals, a portion of their bonus
compensation is determined based on other measurable criteria. For
1996, one of the Company's executive officers received a bonus other
than the 1996 Bonus Plan because other goals were met.
In addition, under the 1996 bonus plan, Mr. Jochum had the
potential of an additional bonus equal to a maximum of 50% of his base
salary if the Company's HMO membership grew in 1996 to a prescribed<PAGE>
level. This criterion was established as the basis for the additional
bonus since membership is an important factor in the growth in value of
the Company. Furthermore, since Mr. Jochum's base salary adjustment (up
or down) and his management bonus are tied to growth in income,
additional compensation tied to that criterion would be of little
incremental value to the Company. During 1996, the growth in membership
required to attain the minimum bonus was not achieved.<PAGE>
<PAGE> 16
Stock Options. The total compensation program for executives
also includes equity-based compensation. The Company's shareholders
have approved a series of non-qualified stock option plans. These plans
encourage and create ownership and retention of the Company's stock by
the vast majority of salaried employees. The equity portion of the
executives' compensation provides a tool to recruit and retain
employees, as well as to align the interest of the employees with those
of the non-employee stockholders. The individuals constituting the
Compensation Committee also constitute the Stock Option Committee and,
as such, administer these stock option plans. The Stock Option
Committee determines the amount of stock options awarded to individual
executives. In general, options are granted to executives annually.
Although, under the Company's existing stock option plans (other than
the 1994, 1995 and 1996 Non-Qualified Stock Option Plans), there is no
limitation, either a minimum or maximum, on the number of options that
can be granted to an individual, usually individuals of the same salary
grade level receive approximately the same number of options. Variations
from this standard are based upon individual performance using the
criteria stated above. Mr. Jochum recommended the number of options to
be granted to each executive officer, including himself, during 1996,
considering the criteria for performance listed above, as well as such
factors as the potential of the recipient and prior grants. The Stock
Option Committee granted options in the amounts recommended by Mr.
Jochum. The number of options granted to Mr. Jochum in 1996 is
consistent with the amount received by him in prior years, and in
relation to the amounts received by other executive officers.
Section 162(m). Section 162(m) of the Internal Revenue Code of
1986, as amended ("Code"), limits the ability of a public company, such
as the Company, to deduct, in 1994 and subsequent years, compensation
paid to executive officers who are named in its "Summary Compensation
Table" in excess of $1 million per year unless certain conditions are
met. What the requirements are vary depending on the type of
compensation paid. One requirement applicable to both stock option and
bonus plans is that the material terms of the plan must be disclosed to,
and approved by, the public company's stockholders in a separate vote.
Accordingly, the Company is soliciting stockholder approval of its 1997
Management Bonus Plan. The Company generally intends to take steps so
that its stock option and bonus programs generally available to all
employees comply with the requirements of Section 162(m).
James A. Wild (Chairman)
Walter Girardin
Creighton R. Schneck
Stock Performance Graph
The following graph compares the change in the Company s
cumulative total return on its Common Stock [ ] with (a) the
change in the cumulative total return on the stocks included in the New
York Stock Exchange Stock Market Index [ -- -- -- ], (b) a customized
peer index including certain companies in the Standard & Poors Midcap
400 Health Care Services Index [ - - - - ] (which was discontinued on
June 30, 1996) and (c) the Standard & Poors MidCap Health Care Managed
Care Index [ - - - - ]. The discontinued Standard & Poors Midcap 400
Health Care Services index is weighed according to each peer company's
stock market capitalization at the beginning of each period for which a
return is indicated. This discontinued index is shown through June 30,<PAGE>
1996, the date it was discontinued.
These comparisons assume an investment of $100 made on December
31, 1991 and compares relative values on a semi-annual basis for the
years ending December 31, 1992, 1993, 1994, 1995 and 1996. All of these
cumulative total returns are computed assuming the reinvestment of
dividends at the frequency with which dividends were paid during this
period. The Common Stock price performance shown below should not be
viewed as being indicative of future performance.<PAGE>
<PAGE> 17
(Stock Performance Graph is Shown here containing plot points below.)
<TABLE>
<CAPTION>
Dec-91 Jun-92 Dec-92 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid Atlantic Medical Svcs $100 $ 82 $178 $216 $334 $580 $597 $483 $633 $372 $349
NYSE Composite Index $100 $ 99 $108 $114 $120 $116 $121 $141 $158 $174 $192
S&P MidCap Health Care
(Mgd Care) Index $100 $105 $131 $105 $117 $117 $138 $115 $169 $136 $136
S&P(R) MidCap HealthCare
Services Index* $100 $ 86 $102 $ 90 $108 $123 $133 $122 $160 $146 N/A*
</TABLE>
*Index discontinued. Performance calculated through June 30, 1996.
Compensation Committee Interlocks and Insider Participation
During 1996, the members of the Company s Compensation
Committee were Creighton Schneck, Walter Girardin and James A. Wild
(Chairman). No member of the Committee is a former employee of the
Company or any of its Subsidiaries.
As a result of the nature of the business conducted by the
Company, certain members of the Board of Directors of the Company have
received fees for physician services rendered on behalf of persons
enrolled in the HMO plans run by the Company and its Subsidiaries
("Enrollees") and consulting fees. Such persons were compensated at the
same rate as were non-director primary care and specialist physicians
("Participating Physicians"). Compensation from PHP-MD for medical
services rendered by all Participating Physicians (or corporations or
partnerships of which they were partners, affiliates or stockholders)
ranged from $0 to $5,123,967 in 1996. MD-IPA also provides health
coverage to members of the Board of Directors of the Company who are
members of the Board of Directors of PHP-MD or MD-IPA at reduced rates.
The following table sets forth the total 1996 compensation from PHP-MD
earned by members of the Board of Directors and nominees for director
for medical services rendered to Enrollees, for services rendered as
directors and consultants and for health coverage. Consultants were
compensated at the same rate that the Company would compensate
non-directors in a similar capacity.
<TABLE>
<CAPTION>
Medical Services Total Compensation
---------------- ------------------
<S> <C> <C>
Francis C. Bruno, M.D. $ 130,741(1) $ 186,406
John H. Cook, III, M.D. $ 3,177(2) $ 19,502
Peter L. Flaherty, Jr., M.D. $ 73,836(3) $ 107,809
John P. Mamana, M.D. $ 599(4) $ 8,274
William M. Mayer M.D. $ 1,065,800(5) $ 1,086,302
Stanley F. Smith, R.Ph. $ 2,164,539(6) $ 2,184,108<PAGE>
James A. Wild $ 21,800(7)
</TABLE>
-------------------------------------
(1) Paid to the Francis C. Bruno, M.D., P.A. partnership.
(2) Paid to Loudoun Internal Medicine Associates.
(3) Paid to the Peter J. Flaherty, Jr., M.D. and Charles R.
Tuegel, M.D. partnership.
(4) Paid to Virginia Medical Associates.
(5) Paid to Drs. Esposito, Mayer, Hogan and Associates, P.A.
partnership for medical services for enrollees of MD-IPA
Health Plan and OCI.
(6) Paid to Bradley Drugs and HomeRx for pharmaceutical services
for enrollees of MD-IPA and OCI.
(7) Of that amount, $1,350 was paid to Mr. Wild for consulting
services in evaluating controls and procedures of various of
the Company's Departments, and giving advice as to how those
Departments could improve their controls and procedures.<PAGE>
<PAGE> 18
In April 1996, the Company purchased HomeRx from Stanley Smith,
a director of the Company and 100% owner of HomeRx, for $140,000. The
purchase was in an effort to begin to provide direct mail order
PHARMACEUTICALS to the enrollees of MD-IPA and OCI. The Company
believes that the business opportunity including an existing computer
system created by Mr. Smith and inventory (appraised by an independent
reviewer for approximately $105,000) was a more effective manner to
begin to participate in this market, rather than beginning a new similar
operation.
A wholly owned subsidiary of MD-IPA, MD-IPA Surgicenter,
entered into a general partnership agreement with a wholly owned
subsidiary of Surgical Care Affiliates, and such general partnership
entered into a limited partnership agreement to form the Montgomery
Surgery Center Limited Partnership. The limited partnership owns one
ambulatory surgery center ("Montgomery Surgicenter"). As of February
26, 1997, the following table sets forth the limited partnership
interests that members of the Board of Directors, nominees for director
and executive officers of the Company hold in the Montgomery Surgery
Center Limited Partnership, the partnership which owns the Montgomery
Surgicenter.
Name Limited Partnership Interest
(in Units)(1)
Peter L. Flaherty, Jr., M.D. 1.0
------------------------------------
(1) One Unit entitles a person to approximately 1.7 percent of the
cash distributions made by the Montgomery Surgery Center Limited
Partnership. The cost of a Unit was approximately $15,000. 32.5 Units
are outstanding.
Summary Compensation Table
The following table shows the compensation paid to the
Company's Chief Executive Officer and the four other most highly
compensated executive officers whose salary exceeded $100,000 during
1996.
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Annual Compensation Awards
--------------------------------------------- ------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options (#) Compensation ($)
------------------ ---- ---------- ---------- --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
George T. Jochum 1996 $1,828,280 -0- $ 876(2) 200,000 $ 826,918(4)(5)(7)
Chairman of the 1995 $1,663,566 -0- (2) 148,500 $1,859,452(4)(5)(6)
Board, President 1994 $ 878,495 $ 439,247 $ 1,176(2)(3) 198,000 $ 852,688(4)(5)
and Chief Executive
Officer
Thomas P. Barbera 1996 $ 305,930 -0- $ 834(2) 36,000 -0-<PAGE>
Executive Vice 1995 $ 283,103 -0- (2) 42,000 $ 9,160(6)
President, Governmental 1994 $ 221,308 $ 77,458 $ 382(2)(3) 39,600 -0-
Services
Mark D. Groban 1996 $ 283,943 $ 20,185 -0- 30,000 -0-
President of MAPSI 1995 $ 295,442 $ 117,669(1) -0- 24,000 $ 53,787(6)
and Alliance 1994 $ 234,486 $ 232,124 -0- 39,600 -0-
Robert E. Foss 1996 $ 280,020 -0- -0- 30,000 -0-
Executive Vice President, 1995 $ 269,632 -0- -0- 36,000 -0-
Chief Financial Officer 1994 $ 106,615 $ 37,315 -0- 60,000 -0-
Joseph L. Guarriello 1996 $ 277,867 -0- -0- 24,000 -0-
Executive Vice President, 1995 $ 291,172 -0- -0- 24,000 $ 55,318(6)
President, General 1994 $ 229,279 $ 80,248 -0- 39,600 -0-
Counsel and Secretary
</TABLE>
--------------------------------------<PAGE>
<PAGE> 19
(1) Bonus paid under the 1994 Bonus Plan.
(2) Perquisites and other personal benefits represented the lesser of
$50,000 or 10% of annual salary and bonus.
(3) Represents amounts reimbursed to executive during year for payment
of taxes.
(4) $818,290, $1,681,605 and $844,060 were accrued in 1996, 1995 and
1994, respectively, relating to Mr. Jochum's augmented retirement
benefit provided by his Employment Agreement. See "Management
Employment Agreement" below.
(5) Includes $8,628 in premiums paid by the Company in 1996, 1995 and
1994 for life insurance for which Mr. Jochum may designate the
beneficiary.
(6) As of December 31, 1994, the Company terminated its defined
benefit pension plan. On December 22, 1995, participants received
termination distributions from the plan. Each named executive
officers termination distribution is included the "All Other
Compensation" column. Mr. Jochum's termination distribution was
$169,219.
(7) Mr. Jochum has been named a defendant in certain litigation filed
against the Company by two shareholders of the Company in the
Circuit Court for Montgomery County, Maryland. The Company is
advancing the cost defense to Mr. Jochum in connection with such
litigation in accordance with the requirements of the Company's
Certificate of Incorporation and Bylaws, and the Delaware General
Corporation Law. Mr. Jochum is obligated and has undertaken to
repay the amounts advanced in certain circumstances. At this
time, the costs of defense have not been allocated between the
Company and Mr. Jochum so no amounts have been included in the
"all Other Compensation" Column.
Management Employment Agreement
The Company and MD-IPA have entered into an Employment
Agreement with Mr. Jochum for the period January 1, 1991 through
December 31, 1998. Mr. Jochum's annual base salary under the agreement
was $1,831,204 for 1996. His base salary for 1997 will be $1,373,403.
The Employment Agreement provides that, each year, Mr. Jochum's base
salary will increase or decrease by an amount equal to 75% of the
percentage change in the Company's consolidated net after-tax income;
provided that his salary cannot be reduced by more than 25% in any one
year.
Mr. Jochum is entitled to participate in the Company's
management bonus program. The amount available for Mr. Jochum is
calculated based on the Company's income before income taxes and is
prior to the return of the amount withheld, if any, by PHP-MD as part of
the claims reserve risk pool. His minimum bonus amount is 25% of that
year s base salary and his maximum bonus is 50% of base salary.
Additionally, Mr. Jochum is entitled to a special bonus not to exceed
50% of his base salary should he accomplish special performance criteria
identified by the Company's Board of Directors. For 1996, the
performance criteria was based on HMO membership and no amount was paid
under the special bonus. Mr. Jochum waived receipt of his special bonus
with respect to 1997.
The Employment Agreement may be terminated by the Company or
MD-IPA in the event of a material breach thereof by Mr. Jochum or for
cause; however, termination of the Employment Agreement by the Company<PAGE>
other than for material breach or cause does not effect any obligation
of MD-IPA arising under the Employment Agreement. The Company may also,
with cause, reassign Mr. Jochum from his position as Chairman, Chief
Executive Officer and President of the Company. In such event, he is no
longer entitled to any special incentive bonus under the terms of the
Employment Agreement. Further, MD-IPA may also, with cause, reassign Mr.
Jochum from his position as Chief Executive Officer of MD-IPA, in which
case he is also no longer entitled to any special incentive bonus under
the terms of the Employment Agreement.<PAGE>
<PAGE> 20
In the event of a "change of control" as defined in the
Employment Agreement, Mr. Jochum will receive cash equal to twice his
base salary for the year in which such "change in control" occurs. In
addition, all stock options to which Mr. Jochum is entitled will
immediately vest and become exercisable. In the event of a "change in
control," the value of all payments, benefits and other consideration
received and contingent upon a change in control and any additional
payments in the nature of compensation described by Section 280G(b)(2)
of the Code may not exceed an amount that is equal to three times the
average taxable compensation to Mr. Jochum from the Company for the
"base period" as that term is defined in Section 280G(d)(2) of the Code.
A "change in control" is deemed to occur under the Employment Agreement
if, at any time, (a) substantially all the assets of the Company or
MD-IPA shall have been sold or transferred by sale, merger or otherwise,
or if any "person" (as such term is used in Sections 13(d) or 14(d) of
the 1934 Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company or MD-IPA representing 50% or
more of the combined voting power of the then-existing outstanding
securities of the Company or MD-IPA; and (b) Mr. Jochum is reassigned in
accordance with the Employment Agreement within six months of such sale,
merger or other event; provided, however, that no "change in control" is
deemed to occur under the Employment Agreement if Mr. Jochum s
reassignment is on a temporary basis and is attributable to Mr. Jochum's
illness or other physical, mental or emotional disability or incapacity.
The Employment Agreement provides that, upon retirement, Mr.
Jochum is entitled to an augmented retirement benefit so that he will
receive in total, under the Employment Agreement and under all of the
Company s retirement plans, an annual benefit in an amount equal to
three per cent of his base salary during the final year of the
Employment Agreement multiplied by the number of years of service to the
Company. Payment, if any, of the augmented retirement benefit will be
made in the form of an annuity for a fixed term of years payable to Mr.
Jochum, or his estate, heirs, or assignees as determined by him. Such
terms of the annuity shall be the actuarial equivalent of a fixed and
certain term as compared to the average life expectancy for an
individual of the age and status of Mr. Jochum at the date of retirement
or death. The Company is not obligated to pay any augmented retirement
benefit under the Employment Agreement if Mr. Jochum is terminated for
cause by the Company or MD-IPA. Mr. Jochum's estimated annual
retirement benefit as of December 31, 1996 from this provision in the
Employment Agreement is $453,223. As of December 31, 1996, Mr. Jochum
had 9 years of credited service.
The Employment Agreement also provides that either Mr. Jochum
or his spouse at the time of his death is eligible for health coverage
from the Company or its successor during the term of their respective
lives, such health coverage to be paid for by Mr. Jochum or his spouse.
The Company has also agreed to obtain, pay all premiums for and maintain
a $200,000 whole life insurance policy on the life of Mr. Jochum for
which he may designate the beneficiary. The Company has no obligation
to provide such insurance if Mr. Jochum is not insurable at ordinary
market rates and without material cost or other adjustments.
1996 Options Grants Table
The following table shows certain information regarding the
options granted to the named executive officers of the Company in 1996.<PAGE>
The Company did not grant any stock appreciation rights to these
individuals in 1996.<PAGE>
<PAGE> 21
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/Sh) Date 5%($) 10%($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George T. Jochum 200,000 6.52% $19.25 5/13/2001 $1,063,684 $2,350,463
Thomas P. Barbera 36,000 1.17% $19.25 5/13/2001 $191,463 $ 423,083
Mark D. Groban 30,000 0.98% $19.25 5/13/2001 $159,553 $ 352,570
Robert E. Foss 30,000 0.98% $19.25 5/13/2001 $159,553 $ 352,570
Joseph L. Guarriello 24,000 0.78% $19.25 5/13/2001 $127,642 $ 282,056
</TABLE>
---------------------------------------
(1) Becomes exercisable in substantially equal installments on
June 1, 1997, 1998 and 1999. Each option becomes immediately
exercisable in the event of a change of control of the
Company.
Aggregated Option Exercises in 1996 and December 31, 1996 Option Values
The following table contains information regarding options
exercised by the named executive officers during 1996 and the number and
value of unexercised options at December 31, 1996. No information is
presented for stock appreciation rights as none have been granted by the
Company.
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Options at Options at
12/31/96 (1) 12/31/96 (1)
-------------------------------------------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George T. Jochum 270,000 3,869,991 631,500/365,000 $3,877,505/$0
Thomas P. Barbera -0- -0- 105,700/77,200 $ 429,888/$0
Mark D. Groban 77,500 1,090,353 142,400/59,200 $ 954,001/$0
Robert E. Foss -0- -0- 52,000/74,000 $ 0/$0
Joseph L. Guarriello 31,500 482,999 106,400/53,200 $ 597,000/$0
/TABLE
<PAGE>
------------------------------------------------------------
(1) Based on closing price on the New York Stock Exchange of $13.375 on
December 31, 1996.<PAGE>
<PAGE> 22
RATIFICATION OF ADOPTION OF THE 1997 MANAGEMENT BONUS PLAN
(Proposal 2)
The Company's Compensation Committee adopted the 1997
Management Bonus Plan ("1997 Bonus Plan") on February 26, 1997, the
Company's Board of Directors ratified the adoption of the 1997 Bonus
Plan on February 26, 1997 and the Company is submitting the 1997 Bonus
Plan to the stockholders at the Annual Meeting. The Company is
soliciting stockholder approval of the 1997 Bonus Plan so that the 1997
Bonus Plan complies with the requirements of Section 162(m) of the Code
and the Company's ability to deduct compensation paid to executive
officers under the 1997 Bonus Plan is preserved. Amounts payable to
participants under the 1997 Bonus Plan will not be paid unless and until
the 1997 Bonus Plan is approved by the Company's stockholders. Pursuant
to the 1997 Bonus Plan, participants will receive in cash a percentage
of their annual base compensation if a predetermined net income goal is
met. The net income goal is selected such that, if the goal is
achieved, the underlying value of the Company's Common Stock should
increase. Thus, the 1997 Bonus Plan provides an incentive for
management to perform in a way that directly benefits stockholders.
Terms
Generally, full-time salaried employees of the Company
(including executive officers) will receive a percentage of their base
annual cash compensation as a distribution from the 1997 Bonus Plan if
the Company's consolidated 1997 net income equals or exceeds $34.4
million (before income taxes, expansion and acquisition costs and prior
to the return of any portion or all of the physicians' withhold). The
percentage that a participant will receive is based upon that
individual's grade level. Salary percentages are as follows:
CEO 25 to 50%
Executive Staff (Level 18 and above) 12 to 35%
Senior Staff (Level 17) 11 to 30%
Level 16 10 to 28%
Level 15 9 to 21%
Level 14 8 to 16%
Levels 12 & 13 7 to 12%
Levels 10 & 11 5 to 7%
If the above mentioned net income target is met in 1997, the
minimum percentages as set forth above will be payable to participating
personnel. Alternatively, if consolidated net income (as adjusted)
equals or exceeds $46 million, then the maximum percentage set forth
above will be payable to participating employees. If the amount of such
consolidated net income is between $34.4 million and $46 million, then
the bonus is prorated.
Certain individuals who are assigned to particular departments
will not receive a bonus under the 1997 Bonus Plan based solely on the
achievement of the 1997 consolidated net income goal. 50% of these
individuals' 1997 cash bonuses will be based upon the achievement of
certain other measurable criteria and is not paid under the 1997 Bonus
Plan.
The Company's Board of Directors has reserved the right to
amend the 1997 Bonus Plan to materially increase the amounts payable<PAGE>
thereunder to participants, other than executive officers, or for any
other reason.
Eligibility
All full-time salaried personnel level 10 and above participate
in the 1997 Bonus Plan. As of January 1, 1997, approximately 700
individuals were eligible to participate in the 1997 Bonus Plan. Full-
time salaried employees who are hired during the course of 1997 are also
eligible to participate in the 1997 Bonus Plan, with their bonus being
prorated based upon their actual service during 1997. In general, bonus
payments will be calculated on cash payments made during the year for
base salary. Salaried employees who receive promotions or changes in
their base compensation will receive a prorated 1997 bonus based upon
the amount of salary and grade level during the course of the year.
However, with respect to executive officers hired prior to March 1,
1997, 1997 bonuses will disregard salary and grade level changes made
after March 1, 1997. For full-time executive officers, the salary
levels on March 1, 1997 were as follows:<PAGE>
<PAGE> 23
Name Base Salary
George T. Jochum $ 1,373,403
Thomas P. Barbera $ 308,700
J. Stevens Dufresne $ 257,250
Vera C. Dvorak, M.D. $ 245,000
Robert E. Foss $ 280,000
Mark D. Groban, M.D. $ 278,100
Joseph L. Guarriello $ 272,160
Richard K. Slater $ 222,300
Alfred Talamantes $ 220,500
No bonus is paid to participants who terminate employment with
or are terminated by the Company and its Subsidiaries prior to year end.
In the event of retirement or death of any employee during the year,
payments are made on a prorated basis. The following table shows
estimates of the bonuses payable to the named individuals and groups
under the 1997 Bonus Plan, assuming the minimum net income goal is
achieved and the maximum net income goal is achieved. The bonus listed
in the table for Mr. Jochum does not include his additional bonus based
on increases in membership.
<TABLE>
<CAPTION>
Minimum Net Maximum
Income Goal Net Income
Name Achieved(1) Goal Achieved(1)
---- ----------- ----------------
<S> <C> <C>
George T. Jochum
Chairman of the Board,
President and Chief Executive Officer $ 343,351 $ 686,702
Thomas P. Barbera
Executive Vice President,
Government Services $ 37,044 $ 108,045
Mark D. Groban
President of MAPSI and Alliance $ 11,013 $ 32,121
Robert E. Foss
Executive Vice President,
Chief Financial Officer $ 33,600 $ 98,000
Joseph L. Guarriello
Executive Vice President,
General Counsel and Secretary $ 32,659 $ 95,256
All executive officers as a group $ 642,220 $1,550,012<PAGE>
All directors who are not executive $ 0 $ 0
officers as a group
All employees who are not executive $1,826,093 $3,538,534
officers as a group
</TABLE>
-------------------------------------
(1) The calculation is based on salaries for executive officers as
of March 1, 1997 and for all other employees as of December
31, 1996. No adjustments have been made for promotions,
salary adjustments, terminations or new hires that may occur
in 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF ADOPTION OF THE 1997 BONUS PLAN.<PAGE>
<PAGE> 24
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has been the Company's independent public
accountants since June 2, 1989. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, and will have an
opportunity, if they so desire, to make a statement and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to have presented at the
1998 Annual Meeting of stockholders of the Company and included in the
Company's Proxy Statement and proxy to be used in connection with such
meeting must be received at the main office of the Company no later than
December 5, 1997. Such proposals should be directed to the attention of
Joseph L. Guarriello, Secretary, at Mid Atlantic Medical Services, Inc.,
4 Taft Court, Rockville, Maryland 20850. If such proposal is in
compliance with all of the requirements of Rule 14a-8 of the 1934 Act,
it will be included in the Proxy Statement and set forth in the form of
proxy issued for the next annual meeting of stockholders. It is urged
that any such proposals be sent by certified mail, return receipt
requested.
The Bylaws of the Company require stockholders to provide
advance notice of all matters to be considered at annual stockholder
meetings, including director nominations. The Bylaws require that a
stockholder who wishes to propose new business or nominate individuals
to the Company's Board of Directors at an annual meeting of the
stockholders provide notice to the Company's Secretary of such a
proposal or nomination thirty days in advance of the date of the annual
meeting. A proposing stockholder can provide less than thirty days
notice only if the Company mails its notice of annual meeting less than
forty days in advance of the annual meeting date. In such case, the
proposing stockholder must give notice to the Company no later than the
tenth day on which the Company mails its notice of annual meeting.
Further, the Bylaws require that the proposing stockholder set
forth, in his or her notice to the Company's Secretary, (i) a brief
description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Company's
books, of the stockholder proposing such business, and (iii) the class
and number of the Company's capital stock that are beneficially owned by
such stockholder, and (iv) any material interest of such stockholder in
such business. In cases of a nomination for director, such
stockholder's notice shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
1934 Act (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected):
and (ii) as to the stockholder giving notice (A) the name and address,
as they appear on the Company's books, of such stockholder, and (B) the
class and number of shares of the Company's capital stock that are
beneficially owned by such stockholder.
The Bylaws also provide that, at any special meeting of the<PAGE>
Company's stockholders, only such business shall be conducted as shall
have been brought before the meeting by or at the direction of the
Company's Board of Directors.
OTHER BUSINESS
Management is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before
the Annual Meeting, it is intended that proxies solicited hereby will be
voted in accordance with the judgment of the persons voting the proxies.
After the business session and a report to the stockholders on
the progress of the Company and its Subsidiaries, a discussion period
will take place during which stockholders will have an opportunity to
discuss matters of interest concerning the Company and its Subsidiaries.<PAGE>
<PAGE> 25
VOTE REQUIRED FOR APPROVAL
A plurality of the shares present at the Annual Meeting
together with those present by proxy will be sufficient to elect
Directors (Proposal 1). As to Proposal 2 and other matters that may be
submitted to the Company's stockholders for approval, a simple majority
of the shares present at the Annual Meeting together with those present
by proxy will be sufficient to approve such proposals and other matters.
Votes cast "for" and "against" each proposal will be counted.
Abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which instructions have not been received from the
beneficial owners or the persons entitled to vote such shares and the
broker or nominee does not have discretionary voting power under the
applicable New York Stock Exchange rules) will also be counted.
Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. The vote of
a stockholder who abstains will, however, have the same effect as if he
or she had voted "against" a proposal. "Broker non-votes" will have no
effect on whether or not a proposal passes.
By Order of the Board of Directors,
/s/ Joseph L. Guarriello
------------------------
By: Joseph L. Guarriello
Secretary
Rockville, Maryland
April 4, 1997<PAGE>
MID ATLANTIC MEDICAL SERVICES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Thomas P. Barbera, Robert E.
Foss and George T. Jochum, and each of them individually, with the power
of substitution, to vote and otherwise represent all of the shares of
common stock ("Common Stock") of Mid Atlantic Medical Services, Inc.
("Company") held of record by the undersigned, at the Annual Meeting of
Stockholders of the Company ("Annual Meeting") to be held at the offices
of the Company's subsidiary, Optimum Choice, Inc., located at 405 East
Gude Drive, Suite 7, Rockville, Maryland 20850 on Monday, April 29, 1997
at 10:00 a.m., Rockville time, and any adjournment or adjournments
thereof, as follows:
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement for the Annual meeting. All
other proxies heretofore given by the undersigned to vote shares of
Common Stock of the Company are expressly revoked.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS REFERRED TO IN ITEMS 1 AND 2. THE BOARD OF
DIRECTORS RECOMMENDS VOTES "FOR" THE PROPOSALS REFERRED TO IN ITEMS 1
AND 2. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(Continued, and to be signed on the other side.)
MID ATLANTIC MEDICAL SERVICES, INC.
P. O. BOX 11176
NEW YORK, NY 10203-0176<PAGE>
(1) Election of Directors, FOR all nominees listed below [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
EXCEPTIONS [ ]
Nominees: Mark D. Groban, M.D.; John P. Mamana, M.D.;
William M. Mayer, M.D.; and Gretchen P. Murdza.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the "Exceptions" box and write that
nominee's name in the space provided below.)
_____________________________________________________________
(2) To ratify the adoption of the 1997 Bonus Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) In their discretion upon such other business and other matters
and proposals as may properly come before the Annual Meeting
or adjournment or adjournments thereof.
Change of Address or [ ]
Comments Mark Here
Please sign exactly as your name appears on this
card. When signing as attorney, executor,
administrator, trustee or guardian please
give full title as such. If a corporation,
please sign in partnership name by authorized
person. Whether or not you plan to attend the
Annual Meeting, you are urged to execute and
return your proxy, which may be revoked at any
time prior to its use.
Dated:______________________________, 1997
__________________________________________
Signature of Stockholder
__________________________________________
Signature of Additional Stockholder(s)
Votes must be indicated [X]
[X] in Black or Blue Ink
PLEASE SIGN, DATE AND RETURN CARD PROMPTLY USING THE ENCLOSED ENVELOPE.<PAGE>
1997 MANAGEMENT BONUS PROGRAM
Participants in the 1997 Management Bonus Program shall include all non-
sales positions from Level 10 up to Level 20 and the CEO. Certain
individuals who have Individual Performance Bonus Plans may be allocated
only a portion of the management bonus (generally 50%). Bonuses will be
solely predicated on the consolidated earnings performance of Mid
Atlantic Medical Services, Inc. (MAMSI) as documented by the year end
audited financial statements.
Bonuses shall be paid according to the following guidelines:
1. MINIMUM BONUS - Minimum bonuses shall be paid if the Company
(MAMSI) achieves a profit of $34.4 million before income taxes,
expansion or acquisition costs, and prior to the physicians'
return of withhold and payment of physicians' bonuses.
2. MAXIMUM BONUS - Maximum bonuses shall be paid if the Company
(MAMSI) achieves a profit of $46 million before income taxes,
expansion or acquisition costs, and prior to the physicians'
return of withhold and payment of physcians' bonuses.
3. PRO-RATION - In the event that the Company earns between
$34,400,000 and $46,000,000, bonuses will be pro-rated
accordingly.
4. BONUS BASE - In general, bonus payments will be calculated on
cash payments made during the year for base salary which would
take into account salary increases due to promotion or merit
increases. Pro-rated calculations will be made at each salary
level for the portion of the year that the new salary or level
is in effect. However, with respect to executive officers hired
prior to March 1, 1997, bonus payments will disregard salary and
grade level changes made after March 1, 1997.
5. NEW EMPLOYEES - New full-time employees are eligible to
participate in the plan during their first year of employment.
The bonus payment will be pro-rated accordingly for the portion
of the year that the employee was employed.
6. TERMINATION - No bonus shall be paid to bonus participants who
terminate or are terminated by the Company prior to the year
end. In the event of retirement, disability or death, the
employee or his/her beneficiary will receive a pro-rated
portion of the bonus.
7. TIME OF PAYMENT - Bonus payments shall be distributed
immediately following the receipt of the audited financial
statement(s) for MAMSI for the year 1997.
8. BONUS PERCENTAGES - The distribution of the bonus payments to
the Management personnel shall be limited according to the
following percentage ranges. The allocations will be reviewed
annually and adjusted if necessary.
CEO 25-50%
Executive Staff (Level 18 & above) 12-35%
Senior Staff (Level 17) 11-30%<PAGE>
Level 16 10-28%
Level 15 9-21%
Level 14 8-16%
Levels 12 and 13 7-12%
Levels 10 and 11 5- 7%
9. AMENDMENT- The Board of Directors may amend the 1997 Management
Bonus Plan to materially increase the amounts payable
thereunder to participants, other than executive officers, or
for any other reason.
February 26, 1997<PAGE>
