<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
TRICARE, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
TRICARE, INC.
3353 PEACHTREE ROAD, N.E., SUITE 1000
ATLANTA, GEORGIA 30326
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1995
---------------------
To the Stockholders:
The annual meeting of stockholders (the "Annual Meeting") of TriCare, Inc.
will be held on Wednesday, May 10, 1995, at the Terrace Garden Hotel, 3405 Lenox
Road, NE, Atlanta, Georgia 30326 at 9:00 a.m. local time for the following
purposes:
1. To elect a Board of Directors consisting of five members to hold
office until the next annual meeting of stockholders or until their
successors are elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as independent
public accountants to audit the accounts of the Company and its
subsidiaries for the year ending December 31, 1995.
3. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
Only stockholders of record at the close of business on March 27, 1995
shall be entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please complete, sign, date and mail the
enclosed proxy card promptly in the enclosed postage-paid envelope.
By Order of the Board of Directors,
RICHARD L. KLEIN
----------------
RICHARD L. KLEIN
Secretary
April 3, 1995
<PAGE> 3
TRICARE, INC.
3353 PEACHTREE ROAD, N.E., SUITE 1000
ATLANTA, GEORGIA 30326
---------------------
PROXY STATEMENT
---------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1995
---------------------
GENERAL
This proxy statement and the accompanying form of proxy are being furnished
to the stockholders of TriCare, Inc. (the "Company") on or about April 4, 1995
in connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held on May 10, 1995
at 9:00 a.m. local time at the Terrace Garden Hotel, Atlanta, Georgia 30326 and
any adjournment thereof. Any stockholder who executes and delivers a proxy may
revoke it at any time prior to its use by (i) giving written notice of
revocation to the Secretary of the Company; (ii) executing a proxy bearing a
later date; or (iii) appearing at the meeting and voting in person.
Unless otherwise specified, all shares represented by effective proxies
will be voted in favor of (i) election of the five nominees as Directors; and
(ii) ratification of the selection of Arthur Andersen LLP to serve as the
independent public accountants for the Company for fiscal 1995. The Board of
Directors does not know of any other business to be brought before the meeting,
but as to any such other business, proxies will be voted upon any such matters
in accordance with the best judgement of the person or persons acting
thereunder.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited in person or by telephone or telegram
by Directors and officers of the Company who will not receive addition
compensation for such services. Brokerage houses, nominees, custodians and
fiduciaries will be requested to forward soliciting material to beneficial
owners of stock held of record by them, and the Company will reimburse such
persons for their reasonable expenses in doing so.
Only holders of record of outstanding shares of Common Stock of the Company
at the close of business on March 27, 1995 are entitled to notice of, and to
vote at the meeting. Each stockholder is entitled to one vote for each share
held on the record date. There were 17,533,454 shares of Common Stock
outstanding and entitled to vote of March 27, 1995.
When a quorum is present at the meeting, the vote of the holders of a
majority of the stock having voting power present in person or by proxy shall
decide the action proposed in each matter listed in the accompanying Notice of
Annual Meeting of Stockholders except the election of Directors, who are elected
by a plurality of all votes cast. Abstentions and broker "non-votes" will be
counted as present in determining whether the quorum requirement is satisfied. A
"non-vote" occurs when a nominee holding shares for a beneficial owner votes on
one proposal pursuant to discretionary authority or instructions from the
beneficial owner, but does not vote on another proposal because the nominee has
not received instruction from the beneficial owner, and does not have
discretionary power. The aggregate number of votes entitled to be cast by all
stockholders present in person or represented by proxy at the meeting, whether
those stockholders vote "For", "Against" or abstain from voting, will be counted
for purposes of determining the minimum number of affirmative votes required for
approval of such proposals, and the total number of votes cast "For" each of
these proposals will be counted for purposes of determining whether sufficient
affirmative votes have been cast. An abstention from voting by a stockholder on
a proposal has the same effect as a vote "Against" such proposal. Broker "non-
votes" are not counted for purposes of determining whether a proposal has been
approved.
<PAGE> 4
ELECTION OF DIRECTORS
The Bylaws of TriCare currently provide that the Board of Directors shall
consist of not less than one director, subject to increase or decrease in such
number within legal limits by action of the Board of Directors or stockholders.
There are presently five directors. With the exception of Mr. Caldwell, each of
the nominees presently serves as a director of TriCare. Directors shall be
elected to serve until the next annual meeting of stockholders or until their
successors are elected and qualified.
In the event that any nominee withdraws, or for any reason is unable to
serve as a director, the proxies will be voted for such other person as may be
designated by the Board of Directors as substitute nominee, but in no event will
proxies be voted for more than five nominees. Management of TriCare has no
reason to believe that any nominee will not continue to be a candidate or will
not serve if elected.
DONALD L. LUCAS............ Mr. Lucas (age 65) has served as a director of
TriCare since December 1985 and has served as
Chairman since August 1989. Mr. Lucas has been a
venture capitalist for more than twenty-five
years. Mr. Lucas serves on the boards of
directors of Cadence Design Systems, Inc., Delphi
Information Systems, Inc., ICOT Corporation,
Kahler Corporation, Macromedia, Inc., Oracle
Systems Corporation, Quantum Health Resources,
Inc., Racotek, Inc. and TriCord Systems, Inc.
LARRY G. GERDES............ Mr. Gerdes (age 46) has served as Chief Executive
Officer of TriCare since May, 1993. Since 1991,
Mr. Gerdes has been a general partner of Gerdes
Huff Investments ("GHI"), an Atlanta based
partnership which invests in predominantly
southeastern based early to middle stage
companies. For the five years prior to 1991 Mr.
Gerdes held various executive positions with HBO
& Company, a provider of information services to
the healthcare industry, the last of which was
Executive Vice President. Mr. Gerdes has served
as a director of TriCare since June 1985. Mr.
Gerdes also serves as a director of Delphi
Information Systems, Inc.
GEORGE C. CALDWELL......... Mr. Caldwell (age 64) is the President Emeritus of
Lutheran General HealthSystem in Park Ridge,
Illinois. Mr. Caldwell served as President and
Chief Executive Officer of Lutheran General
Health Care System from 1979 to 1989. Prior to
1979, Mr. Caldwell served as the President and
Chief Executive Officer of The Greater Southeast
Community Hospital Foundation of Washington,
D.C., and as President and Chief Executive
Officer of Lake Forest Hospital, Lake Forest,
Illinois. Mr. Caldwell is presently the Chairman
of The Collier Company, a health care consulting
company in Chicago, Illinois. Mr. Caldwell serves
on boards and advisory boards for several
companies involved in the health care industry.
WALTER S. HUFF, JR......... Mr. Huff (age 60) was the founder of HBO & Company,
a provider of information services to the
healthcare industry and served as Chairman from
1974 until 1990 and Chief Executive Officer from
1974 to 1984 and 1986 until 1989. Since 1990 Mr.
Huff has been a private investor. In addition, he
has been a general partner of GHI since 1991. Mr.
Huff has served as a director of TriCare since
October 1993.
CHARLES E. THOELE.......... Mr. Thoele (age 60) has been a consultant to and
director of Sisters of Mercy Health Systems since
February 1991. From July 1986 to January 1991, he
served as the Chief Operating Officer of Sisters
of Mercy Health Systems. Mr. Thoele is a director
of HBO & Company. Mr. Thoele has served as a
director of TriCare since October 1993.
2
<PAGE> 5
Directors are elected annually to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. In the seven
months ended December 31, 1994, directors who are not executive officers of the
Company were not paid cash fees. The Board commenced paying cash fees to
directors who are not executive officers of TriCare in fiscal 1995 in the amount
of $8,000 per annum. Each person who first becomes a non-employee director is
granted, as of the date such person becomes a director of TriCare, an option to
purchase 10,000 shares of TriCare's Common Stock. In addition, each non-employee
director will be granted an option to purchase 6,000 shares of the TriCare's
Common Stock, except the Chairman who will be granted an option to purchase
9,000 shares upon election or reelection at the annual stockholders' meeting
provided they have served on the board a minimum of six months. TriCare's
officers serve at the pleasure of the Board of Directors.
The Audit and Finance Committee (the "Audit Committee") of the Board of
Directors, comprised of Messrs. Lucas and Huff, reviews TriCare's audit
procedures and reports from TriCare's independent public accountants. The Stock
Option and Compensation Committee (the "Compensation Committee"), comprised of
Messrs. Huff and Thoele acts as administrator of TriCare's stock option plans
and makes recommendations concerning the establishment of additional employee
benefit plans and compensation for the TriCare's executive officers. The Audit
and Finance Committee did not meet in the seven months ended December 31, 1994.
The Compensation Committee held four meetings in the seven months ended December
31, 1994.
TriCare has no standing nominating committee. The Board of Directors held
nine meetings in the seven months ended December 31, 1994. During the last
fiscal year, no director attended fewer than 75% of the total number of meetings
of the Board of Directors and any committee on which he served. No director or
executive officer of TriCare is related to any other director or executive
officer of TriCare.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE NOMINEES.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 3, 1995, certain information
with respect to all stockholders known to TriCare to beneficially own more than
five percent of TriCare Common Stock, and information with respect to TriCare
Common Stock beneficially owned by each director of TriCare, each nominee, the
executive officers included in the Summary Compensation Table set forth under
the caption "MANAGEMENT -- Executive Compensation" and all directors and
executive officers of TriCare as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(1)
----------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Garces Group Limited Partnership................................. 1,228,500(2) 7.0%
Robert Garces.................................................... 1,287,000(2) 7.3
Gerdes Huff Investments.......................................... 3,500,001(3) 19.9
Donald L. Lucas.................................................. 571,087(4) 3.2
Larry G. Gerdes.................................................. 4,479,642(5) 24.9
Richard L. Klein................................................. 59,300(6) *
Stephen F. Bullock............................................... 195,212(7) 1.1
George C. Caldwell............................................... 50,989 *
Walter S. Huff, Jr. ............................................. 4,217,839(8) 24.0
Charles E. Thoele................................................ 10,000(9) *
All Directors and Officers as a group (10 persons)............... 6,339,946(10) 34.5
</TABLE>
---------------
* Represents less than 1%.
(1) Unless otherwise indicated, each person has sole voting and dispositive
power with respect to all shares listed opposite his name.
(2) Includes 1,228,500 shares owned of record of Garces Group Limited
Partnership, of which Robert Garces is the general partner and has sole
dispositive power with respect to all such shares.
(3) Such shares are owned of record by Gerdes Huff Investments, a general
partnership the sole general partners of which are Messrs. Gerdes and Huff.
As a result, each of Messrs. Gerdes and Huff is deemed the beneficial owner
of all of such shares.
(4) Includes 466,606 shares with respect to which Mr. Donald L. Lucas is
trustee of the Donald L. Lucas and Lygia S. Lucas Trust dated December 3,
1984, 45,000 shares with respect to which Mr. Lucas is Successor Trustee of
the Donald L. Lucas Profit Sharing Trust, 21,481 shares held by the Donald
L. Lucas Remuneration Account dated July 7, 1993, and 38,000 shares which
Mr. Lucas has the right to acquire pursuant to presently exercisable stock
options.
(5) Includes 3,500,001 shares held by Gerdes Huff Investments, a general
partnership of which Mr. Gerdes is a general partner, 93,600 shares held by
Mr. Gerdes' spouse and 93,950 shares held by Mr. Gerdes as custodian for
his minor children and 432,667 shares purchasable pursuant to presently
exercisable stock options.
(6) Includes 12,500 shares purchasable pursuant to presently exercisable
options.
(7) Includes 185,212 shares held jointly with Mr. Bullock's spouse and 10,000
shares which Mr. Bullock has the right to acquire pursuant to presently
exercisable stock options.
(8) Includes 3,500,001 shares held by Gerdes Huff Investments, a general
partnership of which Mr. Huff is a general partner, 62,650 shares held by
Laumar Corporation which is wholly owned by Mr. Huff, 10,000 shares
purchasable pursuant to presently exercisable options and 56,300 shares
held by the Larry G. Gerdes Trust of which Mr. Huff is the trustee.
(9) Includes 10,000 shares purchasable pursuant to presently exercisable stock
options.
(10) Includes 548,167 shares purchasable pursuant to presently exercisable stock
options and shares held by all current directors and officers.
4
<PAGE> 7
EXECUTIVE COMPENSATION
Cash Compensation. The following table sets forth certain information as
to the Chief Executive Officer, and the other persons who served as executive
officers of TriCare during the seven month period ended December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION SECURITIES
PERIOD ------------------ UNDERLYING
PRINCIPAL POSITION ENDED(1) SALARY $ BONUS $ OPTIONS/SAR'S
----------------------------------------------------- -------- -------- ------- -------------
<S> <C> <C> <C> <C>
Larry G. Gerdes(2)................................... 12/31/94 116,700 750,000
President and Chief Executive Officer 5/31/94 200,000
5/31/93 3,100
5/31/92 --
Stephen F. Bullock(3)................................ 12/31/94 56,000 54,000 45,000
Chief Operating Officer 5/31/94 170,000
5/31/93 170,000
5/31/92 170,000
Richard L. Klein(4).................................. 12/31/94 61,250 15,000 50,000
Executive Vice-President, Chief Financial Officer, 5/31/94 89,000
Treasurer & Secretary 5/31/93 --
5/31/92 --
Julian L. Cohen(5)................................... 12/31/94 39,600 100,000
Chief Operating Officer 5/31/94 --
5/31/93 --
5/31/92 --
</TABLE>
---------------
(1) Information relates to the fiscal years ended May 31, 1992, 1993 and 1994
and the seven months ended December 31, 1994.
(2) Mr. Gerdes served as a non-officer director from June 1985 until he became
President and Chief Executive Officer May 26, 1993. Mr. Gerdes's annualized
compensation (excluding bonus) for the period ended December 31, 1994 was
$200,000.
(3) Mr. Bullock served as TriCare's President and Chief Executive Officer from
May 1985 until May 26, 1993 and served as Chief Operating Officer from May
1993 until his resignation in September 1994. Excludes severance payments
received commencing in October 1994. See "Executive Officer Compensation
Agreement" below.
(4) Mr. Klein joined TriCare on July 12, 1993. Mr. Klein's annualized
compensation (excluding bonus) for the periods ended May 31, 1994 and
December 31, 1994 was $100,000 and $105,000 respectively.
(5) Mr. Cohen joined TriCare on October 15, 1994. Mr. Cohen's annualized
compensation (excluding bonus) for the period ended December 31, 1994 was
$190,000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding individual grants of
options for TriCare Common Stock during the seven months ended December 31, 1994
to each of the executive officers named in the Summary Compensation Table above.
All such grants were made pursuant to the TriCare, Inc. 1992 Stock Option Plan,
as amended (the "1992 Stock Option Plan"). In accordance with the rules of the
Commission, the table sets forth the hypothetical gains or "option spreads" that
would exist for the options at the end of their respective ten-year terms based
on assumed annualized rates of compound stock price appreciation of 5% and 10%
from the dates the options were granted to the end of the respective option
terms. Actual gains, if any, on option exercises are dependent on the future
performance of TriCare Common Stock and overall
5
<PAGE> 8
market condition. There can be no assurance that the potential realizable values
shown in this table will be achieved.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
GAIN AT
ASSUMED ANNUAL
RATES
% OF TOTAL OF STOCK PRICE
NUMBER OF OPTIONS/SAR'S APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM(4)
OPTIONS/SAR'S IN FISCAL BASE PRICE EXPIRATION -----------------
NAME GRANTED(#)(1) YEAR(3) ($/SHARE) DATE 5% 10%
------------------------------ ------------- ------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Julian L. Cohen(2)............ 100,000 60% 1.875 11/09/04 118,000 299,000
</TABLE>
---------------
(1) Stock options are granted with an exercise price equal to the fair market
value of the TriCare Common Stock on date of grant.
(2) Mr. Cohen was granted options on November 9, 1994 which vest annually in
equal increments over the following four years.
(3) TriCare granted options to purchase 166,000 shares to employees in the seven
months ended December 31, 1994 of which 3,000 were regranted options
exchanged for cancellation of previously granted options (none of which
repriced options was granted to an executive officer).
(4) The 5% and 10% assumed rates of annual compound stock appreciation are
mandated by rules of the Commission and do not represent TriCare's estimate
or projection of future prices for TriCare Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information concerning the
unexercised stock options of the executive officers named in the Summary
Compensation Table above. None of the named individuals exercised any options
during the seven months ended December 31, 1994.
<TABLE>
<CAPTION>
NUMBER VALUE OF UNEXERCISED(1)
OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT FY-END($)
OPTIONS AT FY-END(#) IN-THE-MONEY OPTIONS
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Larry G. Gerdes(2)................................. 416,667/333,333 --/--(3)
Stephen F. Bullock(2).............................. --/-- --/--
Richard L. Klein................................... 12,500/ 37,500 --/--(3)
Julian L. Cohen.................................... --/100,000 --/--(3)
</TABLE>
---------------
(1) Computed based upon the difference between the price of the TriCare Common
Stock at December 31, 1994, which was $1.6875 and the aggregate exercise
price of the options.
(2) Excluded from the above table are options to purchase 16,000 shares Mr.
Gerdes received as a non-officer director under the 1992 Stock Option Plan
which have an exercise price of $3.75 and 10,000 shares and 6,000 shares
Mr. Bullock received as a non-officer director under the 1992 Stock Option
Plan which has an exercise price of $2.625 and $1.875 respectively.
(3) None of these options were In-The-Money.
Change In Control Arrangements. TriCare has one compensatory arrangement
with Mr. Gerdes which will result from a "Change in Control" of TriCare. Under
the terms of Mr. Gerdes' stock option agreement ("Option Agreement"), in the
event there is a Change of Control, Mr. Gerdes shall have the immediate right to
exercise the option with respect to all shares granted pursuant thereto at any
time whether or not then exercisable. See "Aggregated Option/SAR Exercises In
Last Fiscal Year and Fiscal Year-End Option/SAR Values." A "Change of Control"
shall have occurred (i) if any person acquires 30% or more of the outstanding
TriCare Common Stock and at any time thereafter, Mr. Gerdes' employment as
President and Chief Executive Officer is involuntarily terminated (a
"Termination") or (ii) if during any period of two
6
<PAGE> 9
consecutive years, individuals who at the beginning of such period constitute
the directors of TriCare cease for any reason to constitute at least a majority
thereof and at any time thereafter a Termination occurs; provided, however, that
for such purposes each director who is first elected, or first nominated for
election by TriCare's stockholders, by a vote of at least two-thirds of the
directors of TriCare (or a committee thereof) then still in office who were
directors of TriCare at the beginning of any such period will be deemed to have
been a director of TriCare at the beginning of such period.
Executive Officer Compensation Arrangement. The Committee developed a
severance plan for Mr. Bullock, former Chief Operating Officer of TriCare, due
to his resignation concurrently with the sale of one of TriCare's operating
subsidiaries. Mr. Bullock's compensation was adjusted to $200,000 from $170,000
annually, under the terms of the severance arrangement. The Committee determined
that Mr. Bullock should receive his base compensation for twelve months
following the sale of TriCare's subsidiary or until he secures further
employment, whichever occurs first. During this transition period, Mr. Bullock
will function in a consulting role to the Company and may be paid additional
financial consideration dependent upon his continued services rendered to
TriCare.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the seven months ended December 31, 1994, the members of the Stock
Option and Compensation Committee (the "Committee") included Messrs. Huff and
Thoele, neither of whom is or has served as an officer or employee of TriCare.
Mr. Gerdes, President, Chief Executive Officer and a director of TriCare
also served as Chief Executive Officer and Chairman of Transcend Services, Inc.
("Transcend") which was acquired by the Company in a merger effective January
10, 1995 (the "Merger"). Mr. Huff was also a director of Transcend. Messrs.
Gerdes and Huff, together with Gerdes Huff Investments, a partnership in which
they are partners, were principal stockholders of Transcend.
During the seven months ended December 31, 1994, TriCare sublet office
space from Transcend for approximately $5,000. Also, during the seven months
ended December 31, 1994, TriCare utilized the secretarial and administrative
services of Transcend staff and paid Transcend approximately $21,000 for such
services. Transcend has utilized the services of TriCare's financial and
management staff and paid TriCare approximately $117,000 for such services.
REPORT OF STOCK OPTION AND COMPENSATION COMMITTEE
COMPENSATION COMMITTEE PHILOSOPHY
The Committee establishes the general compensation policy for all
executives of TriCare. The Committee administers the incentive plans, including
the 1992 Stock Option Plan, and the bonus program for executive officers. The
Committee believes TriCare must pay competitively to attract and retain
qualified executives. The Committee also believes that the Chief Executive
Officer ("CEO") and TriCare's other executive officers should be significantly
influenced by TriCare's as well as individual performance. In accordance with
such philosophy, a portion of the executives' compensation is contingent upon
corporate performance and adjusted where appropriate, based on an executive's
performance against personal performance objectives. Stock options are granted
to increase retention of the executives and link their long-term compensation to
TriCare's long-term corporate performance thereby aligning their interests with
those of TriCare's stockholders.
CASH COMPENSATION
The Committee establishes base salary levels and potential bonuses at or
near the beginning of each fiscal year. The Committee did not establish a bonus
nor increase the base compensation of Mr. Gerdes at the beginning of the seven
month period ended December 31, 1994 inasmuch as TriCare was continuing to
reposition its business and the Committee did not believe it could establish
meaningful performance criteria
7
<PAGE> 10
since it was in the midst of a merger, an acquisition and a divestiture of one
of the Company's subsidiaries. Subsequent to this period, the Committee
determined not to pay Mr. Gerdes a bonus for the seven month period ended
December 31, 1994.
The other executive officers of TriCare during the seven month period ended
December 31, 1994 were Mr. Bullock, Chief Operating Officer (until September
1994, the date of his resignation, which occurred in conjunction with the sale
of a subsidiary), Mr. Klein, Chief Financial Officer, and Mr. Cohen, Chief
Operating Officer (effective October, 1994). See "Executive Officer Compensation
Arrangement" above for further information. Mr. Klein's base compensation was
increased from $100,000 to $105,000 due to the Committee's subjective evaluation
of his contributions in connection with the restructuring of TriCare's business.
Mr. Cohen's base compensation for the seven months ended December 31, 1994 was
determined by negotiation with Mr. Gerdes and approved by the Committee. The
Committee determined not to pay the other executive officers a bonus for the
seven month period ended December 31, 1994 based on the Company's performance.
STOCK BASED COMPENSATION
Mr. Cohen joined the Company in October 1994 and the Company awarded him
stock options as part of his compensation package. The number of options granted
was initially determined by negotiation with Mr. Gerdes and was approved by the
Committee and reflected the Committee's consideration of TriCare's recent
difficulties. The options were granted at fair market value. The Committee made
no other awards to existing officers during the seven months ended December 31,
1994.
8
<PAGE> 11
TRICARE COMMON STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on TriCare
Common Stock from January 26, 1990 (the date of TriCare's initial public
offering) to December 31, 1994 with the cumulative return on the NASDAQ
Composite Index and the NASDAQ Health Services Index over the same period
(assuming investment of $100 in TriCare Common Stock and each of the other
Indexes on January 26, 1990, and reinvestment of all dividends).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Prepared by the Center for Research in Security Prices
<TABLE>
<CAPTION>
Nasdaq Health
Measurement Period Nasdaq Stock Services
(Fiscal Year Covered) TRICARE, INC. Market Stocks
<S> <C> <C> <C>
05/31/90 $135.8 $110.4 $120.2
05/31/91 $198.1 $125.4 $219.5
05/29/92 $220.8 $147.2 $258.0
05/28/93 $ 43.9 $177.0 $281.0
05/31/94 $ 62.3 $185.2 $340.5
12/30/94 $ 38.2 $191.0 $366.2
</TABLE>
NOTES:
<TABLE>
<S> <C>
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on January 26, 1990.
</TABLE>
CERTAIN TRANSACTIONS
During the seven months ended December 31, 1994, TriCare engaged in
transactions with Transcend as described below. Messrs. Gerdes and Huff,
directors of TriCare, are directors and (together with GHI) are principal
stockholders of Transcend. Mr. Lucas, Chairman of TriCare, and Mr. Klein, Chief
Financial Officer of TriCare, were stockholders of Transcend. Mr. Caldwell, a
nominee for director serves on Transcend's advisory board.
During the seven months ended December 31, 1994, TriCare sublet office
space from Transcend for approximately $5,000. Also, during the seven months
ended December 31, 1994, TriCare utilized the
9
<PAGE> 12
secretarial and administrative services of Transcend staff and paid Transcend
approximately $21,000 for such services. Transcend has utilized the services of
TriCare's financial and management staff and paid TriCare approximately $117,000
for such services.
Transcend is the sublessor of office space it previously occupied. The
sublessee of the office space is Morgan Health Group, of which Mr. Robert Garces
is a director. Mr. Garces is a beneficial owner of more than 5% of the Company's
Common Stock. The payments to the original lessor from Transcend are $67,000 for
1995. Transcend expects future lease income under the sublease of $67,000 for
1995. During 1994, Transcend paid the original lessor $76,000 and received
income under the sublease of $59,000. As a result, a loss occurred on the
sublease arrangement of $17,000, which was recognized by Transcend in 1993.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the TriCare Board has
appointed Arthur Andersen LLP as independent public accountants for TriCare for
the fiscal year ending December 31, 1995. The TriCare Board recommends that such
appointment be ratified.
Representatives of Arthur Andersen LLP will be present at the meeting and
shall have the opportunity to make a statement, if they desire to do so, and
respond to appropriate questions.
In December 1993, Transcend engaged Arthur Andersen LLP to replace Miller
Ray Healey & Houser as its independent public accountants, which change was
approved by Transcend's Board of Directors. Miller Ray Healey & Houser's report
on Transcend's financial statements for the fiscal year ended December 31, 1992
was unqualified. For the fiscal year ended December 31, 1992 and for the period
from January 1, 1993 until the date of the engagement of Arthur Andersen LLP,
Transcend had no disagreements with Miller Ray Healey & Houser with respect to
accounting principles and practices, financial statement disclosure, or auditing
scope or procedure. In connection with the change in auditors, Transcend did not
consult with Arthur Andersen LLP regarding any specific accounting principles
and practices.
THE TRICARE BOARD RECOMMENDS A VOTE "FOR" APPOINTMENT OF ARTHUR ANDERSEN
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR TRICARE.
PROPOSALS BY STOCKHOLDERS
Proposals by stockholders intended to be presented at the 1996 TriCare
annual meeting must be forwarded in writing and received at the principal
executive office of TriCare no later than December 16, 1995, directed to the
attention of the Secretary, for consideration for inclusion in the TriCare's
proxy statement for the annual meeting of stockholders to be held in 1996. Any
such proposals must comply in all respects with the rules and regulations of the
Commission.
OTHER MATTERS
The TriCare Board is not aware of any matter to be presented for action at
the Annual Meeting other than the approval and adoption of the election of
directors and the ratification of auditors. If any other matter comes before the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matter in accordance with their best judgment.
10
<PAGE> 13
APPENDIX A
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF TRICARE, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1995
<TABLE>
<S> <C> <C>
1. To elect five Directors:
/ / FOR all nominees listed below / /WITHHOLD AUTHORITY
(except as instructed below) to vote for all nominees listed below
</TABLE>
George C. Caldwell, Larry G. Gerdes, Walter S. Huff, Jr., Donald L. Lucas,
Charles E. Thoele.
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name here:
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
2. To ratify the appointment of Arthur Andersen LLP as independent public accountants.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
The shares represented by this proxy card will be voted as directed above. IF NO
DIRECTION IS GIVEN AND THE PROXY CARD IS VALIDLY EXECUTED, THE SHARES WILL BE
VOTED FOR ALL LISTED PROPOSALS. IN THEIR DISCRETION, THE PROXYHOLDERS ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
(Continued on reverse side)
(Continued from reverse side)
The undersigned hereby appoints Larry G. Gerdes and David Murphy, or either of
them, with full power of substitution as proxyholders to represent and to vote,
as designated on the reverse hereof, the common stock of the undersigned at the
Annual Meeting of Stockholders of the Company to be held on May 10, 1995 and any
adjournment thereof.
------------------------------
Signature of Stockholder
------------------------------
Signature of Stockholder
Dated: 199
--------------------------, -
IMPORTANT: Sign exactly as your
name appears above. Give full
title of executor,
administrator, trustee,
guardian, etc. Joint owners
should each sign personally.
