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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240.14a-11(c) or ss. 240.14a-12
IATROS HEALTH NETWORK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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IATROS HEALTH NETWORK, INC.
11910 GREENVILLE AVENUE, SUITE 300
DALLAS, TEXAS 75243
March [ ], 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held Thursday, April 29, 1999 at 11:00 A.M., CDT, at the Fairmont Hotel, 1717
North Akard Street, Dallas, Texas. The Notice of the Annual Meeting of
Shareholders and the Proxy Statement accompanying this letter describe the
business to be transacted at the meeting and the nominees for election as
directors.
Your participation in the Annual Meeting is important. Whether or not you
plan to attend, you are urged to complete, sign and return the enclosed proxy
card at your earliest convenience. This will help to establish a quorum and
avoid the cost of further solicitation. We hope that you will be able to attend
the meeting and encourage you to read the enclosed materials describing the
meeting agenda and the Company in detail.
We look forward to seeing you on April 29.
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Sincerely,
Ronald E. Lusk
Chairman and Chief Executive Officer
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IATROS HEALTH NETWORK, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, APRIL 29, 1999
March [ ], 1999
TO OUR SHAREHOLDERS:
Consistent with the By-laws of Iatros Health Network, Inc. (the "Company"),
notice is hereby given on behalf of the Board of Directors that the Annual
Meeting of Shareholders of the Company will be held in on April 29, 1999, at
11:00 A.M. CDT, at the Fairmont Hotel, 1717 North Akard Street, Dallas, Texas
for the purpose of considering and voting on:
1. The election of three Directors to the Board of Directors (Proposal 1);
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 25,000,000 to 50,000,000 (Proposal 2);
3. Approval of an amendment to the Company's Restated Certificate of
Incorporation to change the name of the Company to Phoenix Healthcare
Corporation (Proposal 3);
4. Approval of the Company's 1999 Stock Option Plan (Proposal 4);
5. Approval of the Company's Employee Stock Purchase Plan (Proposal 5);
6. Ratification of the appointment of Weaver and Tidwell, L.L.P. as
independent auditors for the Company (Proposal 6); and
7. Such other business as may properly come before the Annual Meeting or any
adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed the close of business on March 18, 1999 as
the Record Date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting, and only Stockholders of record at such time will
be entitled to vote at the Annual Meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting are the form of proxy (the "Proxy
Card"), the Proxy Statement describing in detail the business to come before the
Annual Meeting of Shareholders and the Company's Annual Report on Form 10-K.
You are invited to attend the Annual Meeting in person, but if you are
unable to do so, please complete, sign, date and promptly return the enclosed
Proxy Card in the enclosed, pre-addressed, postage paid envelope. If you attend
the Annual Meeting and desire to vote in person you may do so. In any event, a
Proxy may be revoked at any time before it is voted.
In order to assure your representation at the annual meeting, PLEASE
COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY CARD, whether or not
you plan to attend the Annual Meeting.
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By Order of the Board of Directors,
Albert Sousa
Secretary
Enclosures
Dallas, Texas
March [ ], 1999
</TABLE>
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IATROS HEALTH NETWORK, INC.
11910 GREENVILLE AVENUE, SUITE 300
DALLAS, TEXAS 75243
PROXY
STATEMENT
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IATROS HEALTH NETWORK, INC.
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
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PAGE
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ANNUAL MEETING OF SHAREHOLDERS............................................ 1
VOTING RIGHTS AND PROXY INFORMATION....................................... 1
VOTING STOCK INFORMATION.................................................. 2
CHANGE IN CONTROL IN 1998................................................. 2
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS............ 3
Security Ownership of Management........................................ 3
Other Beneficial Owners................................................. 3
DIRECTORS AND EXECUTIVE OFFICERS.......................................... 4
PROPOSAL 1--ELECTION OF DIRECTORS......................................... 5
Board and Committee Meetings............................................ 5
Director Remuneration................................................... 5
Section 16(a) Beneficial Ownership Reporting Compliance................. 5
EXECUTIVE COMPENSATION.................................................... 5
Report of the Board of Directors........................................ 5
Compensation Policies................................................... 6
Chairman and Chief Executive Officer's Compensation..................... 6
Summary Compensation Table.............................................. 7
1998 Option Exercise and Year-End Value Table........................... 8
EMPLOYMENT AGREEMENTS..................................................... 8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 9
STOCKHOLDER RETURN PERFORMANCE PRESENTATION............................... 9
PROPOSAL 2-- AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK............................. 10
PROPOSAL 3-- AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE NAME
OF THE COMPANY................................................ 11
NEW PLAN BENEFITS......................................................... 11
PROPOSAL 4--TO APPROVE THE COMPANY'S 1999 STOCK OPTION PLAN............... 12
Tax Information......................................................... 13
Registration Of Shares.................................................. 13
Summary of Benefits under the Stock Option Plan......................... 13
PROPOSAL 5-- TO APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN........ 14
General................................................................. 14
Purpose................................................................. 14
Eligibility............................................................. 14
Offering Dates.......................................................... 14
Participation In The Stock Purchase Plan................................ 14
Purchase Price.......................................................... 14
</TABLE>
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<TABLE>
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Payment Of Purchase Price; Payroll Deductions........................... 14
Purchase Of Stock; Exercise of Options.................................. 15
Termination Of Contributions............................................ 15
Adjustments Upon Changes In Capitalization.............................. 15
Nonassignability........................................................ 15
Amendment And Termination Of The Stock Purchase Plan.................... 15
Registration of Shares.................................................. 16
Tax Information......................................................... 16
PROPOSAL 6--TO RATIFY THE APPOINTMENT OF AUDITORS......................... 16
SHAREHOLDER PROPOSALS..................................................... 16
SOLICITATION OF PROXIES................................................... 17
OTHER MATTERS............................................................. 17
FINANCIAL AND OTHER INFORMATION........................................... 17
APPENDIX A--PHOENIX HEALTHCARE CORPORATION 1999 STOCK OPTION PLAN......... A-1
APPENDIX B-- PHOENIX HEALTHCARE COPORATION EMPLOYEE STOCK PURCHASE PLAN... B-1
</TABLE>
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IATROS HEALTH NETWORK, INC.
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1999
------------------------
This Proxy Statement is furnished to holders on the Record Date (as defined
below) of the Company's Series A Senior Convertible Preferred Stock and Common
Stock (the "Shareholders") in connection with the solicitation of proxies on
behalf of the Board of Directors of Iatros Health Network, Inc. (the "Company")
to be voted at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Thursday, April 29, 1999 at 11:00 A.M., CDT, at the
Fairmont Hotel, 1717 North Akard Street, Dallas, Texas, or at any adjournment
thereof. This Proxy Statement and the accompanying form of proxy (the "Proxy
Card") and the Company's 1999 Annual Report on Form 10-K are first being sent to
Shareholders on or about March 29, 1999. The principal offices of the Company
are located at 11910 Greenville Avenue, Suite 300, Dallas, Texas 75243.
At the Annual Meeting, the Shareholders will be asked to (1) elect three
directors to the Board of Directors; (2) approve an amendment to the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 25,000,000 to 50,000,000; (3) approve an amendment
to the Company's Restated Certificate of Incorporation to change the name of the
Company to Phoenix Healthcare Corporation; (4) approve the Company's 1999 Stock
Option Plan; (5) approve the Company's Employee Stock Purchase Plan; (6) ratify
the appointment of Weaver and Tidwell, L.L.P. as independent auditors for the
Company for the fiscal year ended December 31, 1998; and (7) transact such other
business as may properly come before the Annual Meeting or any adjournment(s) or
postponements(s) thereof.
In order to transact business at the Annual Meeting, a majority of the
outstanding shares of the Company's common stock, par value $.001 (the "Common
Stock") and the Company's Series A Senior Convertible Preferred Stock, par value
$.001 (the "Preferred Stock" and, together with the Common Stock, the "Voting
Stock"), whether represented in person or by proxy, must be present at the
Annual Meeting. If such a quorum is not present, a majority of shares so
represented may adjourn the Annual Meeting to a further date. Abstentions and
broker non-votes are counted when determining the presence or absence of a
quorum for the transaction of business. Abstentions are counted in tabulations
of the votes cast on proposals presented at the Annual Meeting, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved.
The only business that will be conducted at the Annual Meeting is business
that is brought forward either by the Board of Directors or by any Shareholder,
if such Shareholder has given timely written notice to the Secretary of the
Company. At the close of business on March 18, 1999 (the "Record Date"), the
Secretary has not received notice from any Shareholder of any proper business to
come before the Annual Meeting other than those items specified above.
VOTING RIGHTS AND PROXY INFORMATION
Shareholders are entitled to vote at the 1999 Annual Meeting and any
adjournment thereof. Shares of Voting Stock may be voted in person or by proxy.
A Shareholder may revoke a proxy at any time before its exercise by giving
written notice of such revocation, by executing and delivering a new proxy or by
voting in person his or her shares at the Annual Meeting. Shares of Voting Stock
held on the Record Date through a bank, brokerage firm or other intermediary may
be voted in person at the Annual Meeting by obtaining a legal proxy from such
bank, brokerage firm or other intermediary. At the Annual Meeting, the Chairman
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and Chief Executive Officer shall designate the time that the polls shall close.
Only those proxies received or votes cast prior to the closing of the polls
shall be valid.
The election of directors and the approval of other matters indicated above
for consideration at the Annual Meeting requires an affirmative vote of at least
a majority of the votes cast and entitled to be voted at the Annual Meeting,
with each share of Voting Stock entitled to one vote.
PROXIES THAT ARE PROPERLY EXECUTED AND TIMELY RECEIVED WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES AND FOR THE OTHER MATTERS DESCRIBED HEREIN, UNLESS
SHAREHOLDERS SPECIFY A CONTRARY CHOICE ON THEIR PROXY CARD.
VOTING STOCK INFORMATION
At March 18, 1999, the Record Date, 20,944,958 shares of Common Stock and
533,333 shares of Preferred Stock were outstanding and eligible to be voted. The
Common Stock is traded on the NASD OTC Bulletin Board, symbol "IHNI."
CHANGE IN CONTROL IN 1998
On November 17, 1998, Match, Inc. ("Match"), a corporation wholly owned by
Ronald E. Lusk, acquired 533,333 shares of the Preferred Stock, representing
100% of the issued and outstanding shares of that class of stock, for a purchase
price of $1 million. The shares were acquired in a private transaction from The
Presbyterian Foundation for Philadelphia, Inc. (the "Presbyterian Foundation")
at a price per share of $1.875.
The $1 million purchase price was paid partly in cash ($200,000) and partly
in the form of a non-recourse, non-interest bearing promissory note from Match
to the Presbyterian Foundation (for $800,000, payable in semi-annual
installments over two years and secured by a pledge of the purchased Preferred
Stock). The source of the funds was from Match's working capital which was
provided through an investment by Mr. Lusk from his personal funds.
The terms of the Preferred Stock provide that at any time that cumulative
dividends on the Preferred Stock remain in arrears for more than two quarters,
the owners of the Preferred Stock will have the right to elect, voting as a
separate class, one additional director to the Board. In addition, the holders
of the Preferred Stock have the right to elect an additional director each time
the cumulative dividends remain in arrears for two additional quarters, except
that the maximum number of directors the holders of the Preferred Stock may
elect, voting as a separate class, is seven.
Since the Company had not paid dividends on the Preferred Stock since its
issuance in 1994, Match, as the holder of the Preferred Stock, was entitled to
elect up to seven members of the Company's Board of Directors. On November 17,
1998, in accordance with rights granted to holders of the Preferred Stock, Match
executed a consent of sole holder of the Preferred Stock expanding the size of
the Board from three to seven and electing Mr. Lusk, Robert L. Woodson, III,
Albert Sousa and Joe C. Williams, Jr. to the Board. At a meeting of the Board of
Directors on the same day, the Board appointed Mr. Lusk as Chairman of the
Board.
On November 20, 1998, members of senior management, including Reginald D.
Strickland the then President and Chief Executive Officer, resigned and the
Board of Directors appointed Mr. Woodson as President and Chief Executive
Officer of the Company.
Under the terms of the Stock Purchase Agreement and the Stock Pledge
Agreement between Match and the Presbyterian Foundation, the Presbyterian
Foundation would reacquire all rights with respect to the Preferred Stock owned
by Match, including the rights to vote and dispose of the Preferred Stock, in
the event that Match defaults on its obligations under its promissory note to
the Presbyterian Foundation or the Stock Pledge Agreement.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth at December 31, 1998 certain information with
respect to the beneficial ownership of Voting Stock by all Directors, each of
the Named Officers in the Summary Compensation Table below and Directors and
executive officers of the Company as a group.
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COMMON STOCK
BENEFICIALLY % OF
NAME OWNED CLASS(1)
- ---------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
Ronald E. Lusk(2)................................................................. 1,408,666 6.4%
Robert L. Woodson III............................................................. 76,310 *
Albert Sousa...................................................................... -- --
Joseph C. McCarron, Jr.(3)........................................................ 1,060,000 4.8%
John D. Higgins................................................................... 3,540 *
Joe C. Williams, Jr............................................................... 9,320 *
FORMER EXECUTIVES
Reginald D. Strickland............................................................ 5,700 *
Judson H. Simmons(3).............................................................. 405,000 1.9%
William Filippone(3).............................................................. 300,000 1.4%
Directors and Executive Officer as a group........................................ 2,557,836 11.2%
</TABLE>
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(1) An asterisk indicates that shareholder owned less than one percent (1%) of
the class.
(2) Includes Common Stock owned by members of Mr. Lusk's family and by Barrier
Corporation, a corporation wholly owned by Mr. Lusk and 533,333 shares of
Preferred Stock owned by Match, Inc., a company wholly owned by Mr. Lusk and
as to which Mr. Lusk has sole voting and investment power. The holders of
the Preferred Stock are entitled to one vote for each share of Common Stock
issuable upon the conversion of the Preferred Stock. Each share of Preferred
Stock is currently convertible into [1.7] shares of Common Stock.
(3) Includes shares of Common Stock which may be purchased pursuant to stock
options or warrants granted by the Company.
OTHER BENEFICIAL OWNERS
The following table sets forth information with respect to stockholders of
the Company who were known to own more than 5% of the outstanding Voting Stock
as of December 31, 1998. The information set forth below is based solely upon
information furnished by such shareholders or contained in filings made by such
persons with the Commission. The Company is not aware of any other beneficial
owner who became the beneficial owner of 5% or more of the Voting Stock between
December 31, 1998 and the Record Date.
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PRINCIPAL SHAREHOLDER AND ADDRESS SHARES OWNED OWNERSHIP PERCENTAGE
- ---------------------------------------------------------------------------- ------------- -----------------------
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NewCare Health Corporation.................................................. 4,000,000 19.1%
6000 Lake Forrest Drive Suite
200 Atlanta, GA 30328
Health Care Holding, Ltd.(1)................................................ 1,345,000 6.4%
611 North Canon Drive
Suite A
Beverly Hills, CA 90210
</TABLE>
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(1) Includes 345,000 shares of Common Stock which may be purchased pursuant to
warrants granted by the Company to Robert Kasirer, a general partner of
Healthcare Holding, Ltd.
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DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company at December 31, 1998,
their ages, their titles, their years of employment with the Company, and their
principal occupations for the past five years are as follows:
Ronald E. Lusk, 42, has served as the Chairman of the Board of Directors of
the Company since November 1998 and Chairman and Chief Executive Officer since
January 1, 1999. Mr. Lusk is also President of Match, Inc., a holding company
(since 1998), President of Barrier, Inc., a holding company (since 1996),
President of AMI Aviation, Inc., an aviation company (since 1994), President of
Citation Properties, Inc., an operator of nursing homes (since 1994), and
President of Westlake Management Company, an operator of nursing homes (since
1992). Mr. Lusk is also a director of each of the above companies. From March
1998 to February 1999 Mr. Lusk served as Chairman, President and Chief Executive
Officer of Hospital Staffing Services, Inc., a home healthcare provider.
Robert L. Woodson III, 50, has served as President and Chief Operating
Officer since January 1, 1999. Mr. Woodson was President and Chief Executive
Officer from November, 1998 to January 1999. Prior to joining Iatros, Mr.
Woodson was President of HFI Home Care Management LP, a company which acquires
and manages home health agencies, from 1994 through 1997, and Executive Vice
President and Secretary of HealthFirst, Inc., a company which manages home
health agencies, from 1992 through 1994.
Albert Sousa, 44, has served as Executive Vice President of the Company and
President of Trinity Rehab, Inc. since November, 1998. Prior to joining Iatros,
he was employed by Benneth Medical Consultants from November 1997 to November
1998. From May 1994 to November 1997, Mr. Sousa was Vice President of the
Medical Specialty Services Division of Horizon/CMS Healthcare Corporation, a
healthcare services company. From July 1995 to November 1997, Mr. Sousa was also
the Chief Operating Officer of Medical Innovations, Inc., a home care company.
Joseph C. McCarron, Jr., 44, has served as Executive Vice President since
1995. In addition, Mr. McCarron currently serves as President of OHI Corporation
(d/b/a Oasis Healthcare), the Company's New England based operating subsidiary.
Prior to his current position, Mr. McCarron served as Chief Executive Officer
and President of the Company from July 1994 to January 1995 and as Chief
Financial Officer from July 1994 to September 1996. Prior to joining Iatros, Mr.
McCarron served as President of Healthcare Concepts, Inc., a health care
financial advisory and management consulting firm from 1989 through 1994.
Joe C. Williams, Jr., 50, has been a Director of the Company since November
1998. From March 1998 to February 1999, Mr. Williams was a Director and Chief
Operating Officer of Hospital Staffing Services, Inc., a home healthcare
provider. From 1996 to 1997, Mr. Williams served as Chief Operating Officer of
HealthFirst, Inc., a company which manages home health agencies. Prior to that,
Mr. Williams was Vice President of Business Development of Care One, Inc., a
home healthcare provider, from 1993 to 1995.
John D. Higgins, 66, has been a Director of the Company since 1994. Since
October 1994, Mr. Higgins has served as Vice President and Senior Vice
President--Corporate Finance of Royce Investment Group, Inc., an investment
banking firm. Mr. Higgins is a director of Digital Recorders, Inc., IRATA, Inc.
and Birman Managed Care, Inc.
In addition, on January 11, 1999, the Company announced that Michael H.
Seeliger, 42, was appointed as Executive Vice President of the Company. Prior to
joining Iatros, Mr. Seeliger was Director and then Vice President of Investor
and Corporate Relations of Horizon/CMS Healthcare Corporation, a healthcare
services company from 1990 to 1998.
4
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PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors, acting pursuant to the Bylaws of the Company, has
determined that the number of Directors constituting the full Board of Directors
shall be three at the present time. At the Annual Meeting, Shareholders will
elect three directors to serve on the Board of Directors in accordance with the
terms of the Company's Bylaws. Ronald E. Lusk, Robert L. Woodson III, and Albert
Sousa (the "Nominees") have been nominated for reelection to the Board of
Directors and each has agreed to serve if elected. Each Director shall hold
office from the time of his election until the election of his successor.
Each of the Nominees was first elected to the Board of Directors on November
17, 1998 by Match as described above (SEE, "Change in Control").
Proxies received in response to this solicitation will be voted in favor of
the election of the Nominees named herein unless authority to vote is withheld.
The Board does not anticipate that any Nominee will be unable to or will decline
to serve. However, if such a situation should arise, the proxies will be voted
for such substitute nominee(s) as the Board may designate, unless the Board
takes prior action to reduce the size of the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A CONTRARY CHOICE
ON THEIR PROXY CARD.
BOARD AND COMMITTEE MEETINGS
During 1998, the Board of Directors met four times. Prior to November 17,
1998, the Board had a Compensation Committee and an Audit Committee. Neither the
Compensation nor Audit Committee met in 1998. As described above, each of the
Nominees was first elected to the Board on November 17, 1998. Between November
17, 1998 and December 31, 1998, each of the Nominees attended at least 75% of
the total number of meetings of the Board and committees of which they were
members.
DIRECTOR REMUNERATION
In 1998, Directors of the Company did not receive any cash compensation from
the Company for their services as a director. Directors were reimbursed for
expenses incurred in connection with their duties as Board members. The Board of
Directors does not anticipate that directors will receive any compensation in
1999 from the Company for their services as a director.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file reports on their holdings of and
transactions in the Company's Voting Stock. To the Company's knowledge, during
1998 all of the Company's executive officers and directors timely filed all
required reports under Section 16, except that Forms 4 stating changes in
beneficial ownership of Mr. Lusk and Mr. Woodson were not filed on a timely
basis.
EXECUTIVE COMPENSATION
REPORT OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for reviewing all elements of the
total compensation program for all officers of the Company and sets compensation
packages for each of the Company's officers. Although certain executive officers
served on the Company's Board, they did not participate in any decisions
regarding their own compensation as an executive officer.
5
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COMPENSATION POLICIES.
The policy of the Company and the guidelines followed by the Board are
intended to achieve the following objectives:
- Assist the Company in attracting and retaining talented and well-qualified
executives.
- Reward performance and initiative.
- Be competitive with other companies in the long-term care and ancillary
health care services industries.
- Be significantly related to accomplishments and the Company's short-term
and long-term successes, particularly measured in terms of growth in net
operating income and cash flow from operations.
- Encourage executives to achieve meaningful levels of ownership of the
Company's stock.
The Company's compensation practices embody the principles that compensation
should be set to link management's interests to those of long-term stockholders
and to encourage management to enhance shareholder value. Accordingly, the
Company encourages meaningful stock ownership by management, including
participation in various benefit plans providing for stock or stock options.
The Company's approach to base compensation levels is to offer competitive
salaries in comparison with prevailing market practices. The Board examines
market compensation levels and trends. Additionally, for this purpose, the Board
also considers the pool of executives who are currently employed in similar
positions in public companies with emphasis on salaries paid by other companies
in the long-term care and ancillary health care services industries.
In order to improve the Company's cash flow and financial condition,
following the change in control described above (SEE, Change in Control), the
executive officers of the Company, other than Mr. McCarron, received no salary.
Mr. McCarron was employed by the Company for the full year and, following the
change in control, continued to receive his previously established salary (as
described in the Summary Compensation Table below).
The Board has approved employment agreements with certain executive officers
(SEE, Employment Agreements) establishing, among other things, future
compensation. According to the agreements, compensation will be paid in cash,
Common Stock, or a combination thereof, taking into account the Company's cash
flow requirements and any other aspect of the Company's financial condition
deemed relevant by the Chairman and Chief Executive Officer, or, in the case of
the Chairman and Chief Executive Officer, by the Board.
The Board annually evaluates executive officer salary decisions. This annual
review considers the prior year's performance, decision-making responsibilities
of each position and the experience, and team-building skills of each incumbent.
The Board views performance as the single most important measurement factor.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S COMPENSATION.
In determining the compensation of the Chairman and Chief Executive Officer,
the Board takes into account various qualitative and quantitative indicators of
corporate and individual performance in determining the level and the
composition of compensation. While the Board considers more or less equally such
performance measures as growth in revenues, market capitalization, net operating
income, cash flow from operations, and earnings, the Board does not apply any
specific quantitative formula in making compensation decisions. The Board also
values achievements that may be difficult to quantify and recognizes the
importance of qualitative factors.
6
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The base salary for Ronald E. Lusk, the Company's Chairman and Chief
Executive Officer, was established at $250,000 for 1999, to be paid in cash,
Common Stock, or a combination thereof, taking into account the Company's cash
flow requirements and any other aspect of the Company's financial condition. In
addition, Mr. Lusk was granted Common Stock and stock options as provided in his
employment agreement (SEE, Employment Agreements).
Mr. Lusk's base salary was established in light of his duties and the scope
of his responsibilities in the context of the policies and guidelines enumerated
above. In the Board's evaluation of total compensation for Mr. Lusk, appropriate
weight is given to his leadership in growth of the Company's revenues, in
obtaining financing for such growth, in returning the Company to profitability,
in increasing shareholder value and in accomplishing the Company's short-term
and long-term objectives.
By: The Board of Directors
Ronald E. Lusk
John Higgins
Joseph McCarron, Jr.
Albert Sousa
Joe Williams
Robert Woodson
SUMMARY COMPENSATION TABLE
The tables below set forth certain compensation information as to (1) the
Company's chief executive officer, (2) the Company's next three highest
compensated executive officers employed by the Company at the end of the 1998
fiscal year, (3) the Company's former chief executive officer, and (4) two
additional executive officers, each of whom would have been one of the three
highest compensated executive officers
7
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but for the fact that the individual was not serving as an executive officer at
December 31, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------ RESTRICTED UNDERLYING -----------
OTHER ANNUAL STOCK OPTIONS/ LTIP
NAME AND SALARY COMPENSATION AWARD(S) SAR(1) PAYOUTS
PRINCIPAL POSITION FISCAL YEAR ($) BONUS ($) $ ($) (#) ($)
- ---------------------------------- ----------- ---------- --------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald E. Lusk.................... 1998 $0 $0 $0 $0 0 $0
Chairman and Chief Executive
Officer
Robert L. Woodson III............. 1998 0 0 0 0 0 0
President and Chief Operating
Officer
Albert Sousa...................... 1998 0 0 0 0 0 0
Executive Vice President and
Secretary
Joseph C. McCarron, Jr............ 1998 163,079 0 9,000 0 0 0
Executive Vice President 1997 200,000 0 9,000 0 300,000 0
1996 196,154 0 0 0 40,000 0
FORMER EXECUTIVES(1)
Reginald D. Strickland............ 1998 135,000 0 6,750 0 0 0
President and Chief Executive 1997 245,000 50,000 9,000 0 420,000 0
Officer
Judson H. Simmons................. 1998 121,155 0 6,750 0 0 0
EVP, Strategic Planning / Corp. 1997 225,000 0 9,000 0 360,000 0
Dev. and Secretary 1996 66,346 0 150,000 0 40,000 0
William Filippone................. 1998 98,560 0 4,500 0 0 0
Executive Vice President & Chief 1997 131,250 45,000 9,000 0 200,000 0
Operating Officer
<CAPTION>
ALL OTHER
NAME AND COMPENSATION(1)
PRINCIPAL POSITION ($)
- ---------------------------------- --------------
<S> <C>
Ronald E. Lusk.................... $0
Chairman and Chief Executive
Officer
Robert L. Woodson III............. 0
President and Chief Operating
Officer
Albert Sousa...................... 0
Executive Vice President and
Secretary
Joseph C. McCarron, Jr............ 0
Executive Vice President 0
0
FORMER EXECUTIVES(1)
Reginald D. Strickland............ 60,000
President and Chief Executive 0
Officer
Judson H. Simmons................. 0
EVP, Strategic Planning / Corp. 0
Dev. and Secretary 0
William Filippone................. 0
Executive Vice President & Chief 25,000
Operating Officer
</TABLE>
- ------------------------
(1) Reginald Strickland and Judson Simmons served as executive officers of the
Company until November 20, 1998. William Filippone served as an executive
officer of the Company until July 3, 1998.
(2) Includes severance payments made to certain former executives upon
termination of their employment.
8
<PAGE>
1998 OPTION EXERCISE AND YEAR-END VALUE TABLE
The following table sets forth information with respect to the named
executive officers concerning the exercises of options during 1998 and the
number and value of unexercised options held as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL THE-MONEY OPTIONS AT
NUMBER OF SHARES YEAR FISCAL YEAR END ($);
ACQUIRED ON END; (EXERCISABLE/ (EXERCISABLE/
NAME OF EXECUTIVE OFFICER EXERCISE VALUE REALIZED ($) UNEXERCISABLE) UNEXERCISABLE)
- ----------------------------------- --------------------- ------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Ronald E. Lusk..................... -- -- -- --
Robert L. Woodson III.............. -- -- -- --
Albert Sousa....................... -- -- -- --
Joseph C. McCarron, Jr............. -- -- 1,060,000/0 $ 0 / $0
FORMER EXECUTIVES
Reginald D. Strickland............. -- -- -- --
Judson H. Simmons.................. -- -- 400,000/0 $ 0 / $0
William Filippone.................. -- -- 200,000/0 $ 0 / $0
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Ronald Lusk, Robert Woodson, Albert Sousa, and Michael
Seeliger. The term of employment under each such Employment Agreement shall be
for three years, commencing on January 1, 1999, and shall automatically renew
for additional terms of one year each, unless terminated by the Company upon 90
days' prior notice. An Employment Agreement may also be terminated by the
Company for cause (as defined in the Employment Agreement). Pursuant to the
Employment Agreements, Ronald Lusk will receive a base annual salary of
$250,000, Robert Woodson will receive a base annual salary of $225,000, Albert
Sousa will receive a base annual salary of $200,000 and Michael Seeliger will
receive a base annual salary of $200,000. Such annual base salary will paid in
stock, cash or a combination of the two as determined by the Chairman and Chief
Executive Officer in his sole discretion (or, in the case of the Chairman and
Chief Executive Officer, by the Board in its sole discretion) taking into
account the Company's cash flow requirements and any other appropriate factors.
Upon execution of his Employment Agreement, each individual received a
one-time grant of 500,000 shares of Common Stock which he is restricted from
trading for a period of one year from the date of the Employment Agreement and
which is subject to forfeiture in the event the executive terminates employment
with the Company for any reason other than on account of death, disability or
termination other than for cause after six months of employment.
Notwithstanding, the grants will fully vest and will no longer be restricted or
subject to forfeiture in the event of a change in control of the Company.
In the event of a change in control on account of a merger or other stock
transaction, executives will have the right to "put" (sell back) all or any
portion of the stock granted to them by, or otherwise acquired from, the Company
prior to the change in control at 105% of the per share price of the
transaction. In addition, any executive whose employment is terminated by the
Company (other than for "cause") after a change in control will be entitled to a
single lump sum cash payment equal to two and one half times the executive's
average annual compensation (including base salary and bonuses) paid to him, in
cash, during the three years preceding the change in control. The executive also
will be entitled to continued health and related benefits for a period of two
years after the change in control.
In addition, the Employment Agreement provides for the grant of incentive or
performance bonuses payable in the discretion of the Chairman and Chief
Executive Officer and for the grant of stock options (SEE, Proposal 4).
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a credit agreement entered into between the Company and Match, a
corporation wholly owned by Mr. Lusk, Match will provide to the Company a line
of credit with an aggregate principal amount not to exceed $1,000,000 ("Line of
Credit"). The Line of Credit will be used for the operation of the Company's
business, to settle certain claims, and any other general corporate purpose
permitted by its articles of incorporation and applicable law. The Line of
Credit will bear an interest rate equal to the annual commercial prime rate
charged by Chase Manhattan Bank plus 1%. As collateral for the Line of Credit,
the Board of Directors has pledged the outstanding and issued stock of OHI
Corporation, its wholly-owned subsidiary.
In addition, Royce Investment Group, Inc., an investment banking firm whose
Senior Vice President, John Higgins, is also a member of the Company's Board of
Directors, has provided investment banking services to the Company.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on the Common Stock to that of Standard &
Poor's 500 Stock Index and a Peer Group of the Company. The graph assumes a base
investment of $100 at December 31, 1993 and reinvestment of dividends through
December 31, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURNS
<S> <C> <C> <C>
IATROS S&P 500 PEER GROUP
1993 $100.00 $100.00 $100.00
1994 $83.33 $101.31 $126.24
1995 $312.50 $139.40 $102.60
1996 $43.75 $171.40 $104.79
1997 $18.75 $228.59 $111.73
1998 $5.17 $293.91 $38.80
</TABLE>
10
<PAGE>
PROPOSAL 2-- AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
On February 18, 1999, the Board of Directors approved an amendment to the
Company's Restated Certificate of Incorporation to increase the authorized
shares of Common Stock from 25,000,000 to 50,000,000 and recommended that the
amendment be submitted to the Shareholders for approval.
The Board believes it is in the best interest of the Company and the
Shareholders to increase the number of authorized shares of Common Stock so that
additional shares will be available for appropriate corporate purposes,
including, but not limited to, establishing certain stock-based benefit plans
for employees and directors, for raising capital and for continuing the
Company's expansion through acquisitions. The Company does not anticipate any
acquisition at this time which would involve issuance of additional shares of
Common Stock, nor has the Company decided to raise capital through a stock
offering. However, it is the Company's belief and experience that favorable
market conditions for acquisition transactions and public offerings often occur
quickly and that it is in the Company's best interest to have sufficient
authorized shares available to take advantage of such market conditions if and
when they occur. The additional unissued shares of Common Stock may be available
for issuance by the Board without further vote of the stockholders of the
Company.
The Company's Restated Certificate of Incorporation currently authorize the
issuance of an aggregate of 25,000,000 shares of Common Stock, $.001 par value.
As of December 31, 1998, 20,944,958 shares of Common Stock were issued and
outstanding.
The additional shares of Common Stock authorized for issuance pursuant to
this amendment will have all of the rights and privileges which the presently
outstanding shares of Common Stock possess; the increase in authorized shares of
Common Stock will not affect the terms, or rights of holders, of existing shares
of Common Stock. All outstanding shares would continue to have one vote per
share on all matters to be voted on by the Shareholders, including the election
of directors. Holders of Common Stock have no preemptive or conversion rights
and are not subject to further calls or assessments by the Company. Because
stockholders do not have preemptive rights, the interests of existing
stockholders may (depending on the particular circumstances in which additional
capital stock is issued) be diluted by any issuance of the proposed additional
shares of Common Stock.
It is possible that additional shares of Common Stock could be issued for
the purpose of making an acquisition by an unwanted suitor of a controlling
interest in the Company more difficult, time-consuming or costly or to otherwise
discourage an attempt to acquire control of the Company. Under such
circumstances, the availability of authorized and unissued shares may make it
more difficult for stockholders of the Company to obtain a premium for their
shares. Such authorized and unissued shares could be used to create voting or
other impediments or to frustrate a person or other entity seeking to obtain
control of the Company by means of a merger, tender offer, proxy contest or
other means. For instance, such shares could be privately placed with purchasers
who might cooperate with the Company's Board of Directors in opposing an attempt
by a third party to gain control of the Company by voting such shares against
the transaction with the third party could be used to dilute the stock ownership
or voting rights of a person or entity seeking to obtain control of the Company.
Although the Company's Board of Directors does not currently anticipate issuing
additional shares of Common Stock for purposes of preventing a takeover of the
Company, the Company's Board of Directors reserves its right (consistent with
its fiduciary responsibilities) to issue shares for such purpose.
If this amendment is adopted, the first sentence of the Fourth Article of
the Company's Restated Certificate of Incorporation would be amended to read as
follows:
FOURTH: THE TOTAL NUMBER OF SHARES OF STOCK WHICH THE CORPORATION SHALL HAVE
AUTHORITY TO ISSUE IS FIFTY-FIVE MILLION (55,000,000), CONSISTING OF FIFTY
MILLION (50,000,000) SHARES OF COMMON STOCK, PAR VALUE $.001 AND FIVE
MILLION (5,000,000) SHARES OF PREFERRED STOCK, PAR VALUE $.001.
11
<PAGE>
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for approval of the proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 3-- AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY
The Board of Directors recommends to the Shareholders for their adoption at
the Annual Meeting an amendment to the Company's Restated Certificate of
Incorporation to change the Company's name from "Iatros Health Network, Inc." to
"Phoenix Healthcare Corporation." The Board of Directors believes that changing
the name of the Company will improve the Company's marketing and public
relations efforts and will more properly reflect the Company's goals and
strategy of the Board of Directors.
The change of the Company's name will not affect, in any way, the validity
or transferability of currently outstanding stock certificates. Stockholders are
not required to surrender or exchange any stock certificates that they currently
hold.
If the amendment is adopted, the Company's Restated Certificate of
Incorporation would be amended to read as follows:
"FIRST: THE NAME OF THE CORPORATION IS PHOENIX HEALTHCARE CORPORATION."
Approval of the amendment requires the affirmative vote of a majority of the
issued and outstanding shares of the Voting Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
NEW PLAN BENEFITS
Proposals 4 and 5 relate to Shareholder approval of the proposed 1999 Stock
Option Plan and the Employee Stock Purchase Plan. The following table sets forth
the total number of options granted to certain participants under the foregoing
plans which are the subject of Shareholder action and identifies the plan with
respect to which Shareholder approval is sought.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING PROPOSAL
NAME AND POSITION OPTIONS PLAN NAME NUMBER
- ------------------------------------------- ------------- ------------------------------------------- ---------------
<S> <C> <C> <C>
Ronald E. Lusk............................. 420,000 1999 Stock Option Plan 4
Robert L. Woodson.......................... 360,000 1999 Stock Option Plan 4
Albert Sousa............................... 300,000 1999 Stock Option Plan 4
Michael H. Seeliger........................ 300,000 1999 Stock Option Plan 4
Joseph C. McCarron, Jr..................... --
Executive Group (excluding those named
above)................................... --
Non-Executive Director Group............... --
Non-Executive Officer Employee Group....... --
</TABLE>
PROPOSAL 4-- TO APPROVE THE COMPANY'S 1999 STOCK OPTION PLAN
On February 18, 1999, the Board of Directors of the Company adopted the
Iatros Health Network, Inc. 1999 Stock Option Plan (the "Stock Option Plan")
subject to approval of Shareholders being sought herein. The Stock Option Plan
is intended to reward the contributions made to the Company by
12
<PAGE>
employees, directors and consultants, to provide such persons with additional
incentive to devote themselves to the future success of the Company, and to
improve the ability of the Company to attract, retain and motivate individuals
upon whom the Company's sustained growth and financial success depend. The Stock
Option Plan does this by providing such persons with an opportunity to acquire
or increase their proprietary interests in the Company through the grant of
options to acquire Common Stock. Options granted under the Stock Option Plan to
employees may be "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), or may be options
not intended to be ISOs ("non-qualified stock options", or "NQSOs"); options
granted to non-employee directors or consultants would be NQSOs.
A summary of the Stock Option Plan is set forth below. The summary is
qualified in its entirety by the full text of the Stock Option Plan, which is
attached hereto as Appendix A.
The key provisions of the Stock Option Plan are as follows:
1. The effective date of the Stock Option Plan would be January 1, 1999,
and the Stock Option Plan would terminate effective December 31, 2008.
Upon termination, no further grants of options would be made, although
outstanding options would continue to be exercisable under the terms of
the individual option agreements.
2. Pursuant to the terms of the Stock Option Plan, officers and key
employees of the Company will be eligible to receive awards of stock
options. Options granted under the Stock Option Plan may be ISOs within
the meaning of Section 422 of the Code (if granted to employees), or
NQSOs. The Company has reserved 3,000,000 shares of the Common Stock for
issuance of awards under the Stock Option Plan, subject to anti-dilution
and similar adjustments.
3. The Stock Option Plan will be administered by the Company's Board of
Directors. Subject to the provisions of the Stock Option Plan, the Board
will determine the type of award, when and to whom awards will be
granted, and the number of shares covered by each award. The Board also
will determine the terms, provisions and kind of consideration payable
with respect to awards. In addition, the Board will have sole
discretionary authority to interpret the Stock Option Plan and to adopt
rules and regulations for administering the Stock Option Plan. In
determining the persons to whom awards will be granted and the number of
shares covered by each award, the Board may take into account the
contribution to the management, growth and/or profitability of the
business of the Company by the respective persons, and such other
factors as the Board may consider relevant. The Board may delegate all
or a portion of its authority under the Stock Option Plan to a committee
of the Board or a designated Company officer.
4. An option may be granted on such terms and conditions as the Board may
impose, and generally may be exercised for a specified period not to
exceed (in the case of an ISO) 10 years from the date of grant. Options
must be granted with an exercise price at least equal to, in the case of
an ISO, the "Fair Market Value" (as defined in the Stock Option Plan) on
the date of grant or, in the case of an NQSO, 80% of Fair Market Value.
In the case of ISOs, certain limitations will apply with respect to the
aggregate value of option shares which can become exercisable for the
first time during any one calendar year, and certain additional
limitations will apply to "Ten Percent Stockholders" (as defined in the
Stock Option Plan). The Board may provide for the payment of the option
price in cash, by delivery of other Common Stock having a Fair Market
Value equal to such option price, or by a combination of these two
payment methods.
5. The Board may at any time suspend, amend, modify or terminate the Stock
Option Plan. However, unless required by the Securities Exchange Act of
1934 or approved by the Company's Shareholders, no change may (i)
increase the number of shares as to which options may be granted under
the Stock Option Plan (except for adjustments provided for in the Stock
Option Plan to reflect stock dividends or other recapitalizations
affecting the number or kind of
13
<PAGE>
outstanding shares), (ii) change in any way the class of employees
eligible to receive ISOs under the Stock Option Plan, (iii) extend the
duration of the Stock Option Plan, or (iv) become effective if advance
Shareholder approval is required by law, regulation, rule or order. In
addition, no such change may adversely affect any option previously
granted, except with the written consent of the optionee or as required
by law.
TAX INFORMATION
TAXATION OF ISOS. In general, a recipient of an ISO will not recognize
taxable income upon either the grant or exercise of the ISO. Instead, the option
holder will recognize long-term capital gain or loss on the disposition of the
shares acquired under an ISO, so long as the option holder does not dispose of
those shares within two years from the date the ISO was first granted or within
one year after the shares were transferred to such option holder. Currently for
regular federal income tax purposes, long-term capital gain is taxed at a
maximum rate of 28%, while ordinary income may be subject to a maximum rate of
39.6%. If the option holder satisfies both the foregoing holding periods, the
Company will not be entitled to a deduction by reason of the grant or exercise
of an ISO.
As a general rule, if the option holder disposes of the shares acquired
through the exercise of an ISO before satisfying the holding period requirements
(a "disqualifying disposition"), the gain recognized by the option holder on the
disqualifying disposition will be taxed as ordinary income to the extent of the
difference between (a) the lesser of the fair market value of the shares on the
date of exercise or the amount received for the shares in the disqualifying
disposition, and (b) the adjusted basis of the shares. The Company also will be
entitled to an income tax deduction in that amount. The gain (if any) in excess
of the amount recognized as ordinary income on a disqualifying disposition will
be long-term or short-term capital gain, depending on the length of time the
option holder held the shares prior to the disposition.
The amount by which the fair market value of a share at the time of exercise
exceeds the option price will be included in the computation of the option
holder's "alternative minimum taxable income" in the year the option holder
exercises the ISO. Currently, the maximum alternative minimum tax rate is 28%.
If an option holder pays alternative minimum tax with respect to the exercise of
an ISO, the amount of the tax paid will be allowed as a credit against regular
tax liability in subsequent years.
TAXATION OF NON-QUALIFIED STOCK OPTIONS. A recipient of a non-qualified
stock option will not recognize taxable income at the time of grant, and the
Company will not be allowed a deduction by reason of the grant. Instead, the
option holder will recognize ordinary income in the taxable year in which the
option holder exercises the non-qualified stock option, in an amount equal to
the excess of the fair market value of the shares received upon exercise at the
time of exercise of such options over the option price of the option. The
Company will also be entitled to an income tax deduction in that amount. Upon
disposition of the shares acquired under an option, an option holder will
recognize long-term or short-term capital gain or loss, depending upon the
length of time the shares were held prior to disposition, equal to the
difference between the amount realized on disposition and the option holder's
basis in a share subject to the option (which ordinarily would be the fair
market value of the option shares on the date the option was exercised).
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company for shares acquired pursuant to an option
granted under the Stock Option Plan.
REGISTRATION OF SHARES
If the amendment to the Stock Option Plan is approved by the Company's
Shareholders, the Company intends to register the shares reserved for issuance
promptly after the 1999 Annual Meeting on Form S-8 Registration Statement under
the Securities Act of 1933, as amended.
14
<PAGE>
SUMMARY OF BENEFITS UNDER THE STOCK OPTION PLAN
It is not possible to state the number of options or awards that may be
granted in the future to any particular individual. No options were granted
under the Stock Option Plan during the last fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 5-- TO APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board of Directors of the Company believes that the continued growth and
profitability of the Company depends, in large part, on the ability of the
Company to maintain a competitive position in attracting and retaining quality
personnel. The Board therefore adopted the Iatros Health Network, Inc. Employee
Stock Purchase Plan (the "Stock Purchase Plan") on February 18, 1999, and
authorized the Company to reserve 1,000,000 shares of Common Stock for issuance
to employees under the Stock Purchase Plan. The Stock Purchase Plan has not yet
been implemented pending approval by the Company's Shareholders as requested
herein. Upon approval by the Company's Shareholders, the Board of Directors
shall determine when the Stock Purchase Plan will go into effect.
A summary of the Stock Purchase Plan is set forth below. The summary is
qualified in its entirety by the full text of the Stock Purchase Plan, which is
attached hereto as Appendix B.
PURPOSE
The purpose of the Stock Purchase Plan is to provide employees of the
Company and its subsidiaries with an opportunity to purchase Common Stock of the
Company through payroll deductions. The Stock Purchase Plan provides for one
offering during each six-month period.
ELIGIBILITY
Any person who is employed by the Company, or any subsidiary of the Company
designated by the Company's Board of Directors, prior to the first day of each
offering period is eligible to participate in the Stock Purchase Plan. As of
February 1, 1999, approximately 1,143 persons were employed by the Company and
its designated subsidiaries.
OFFERING DATES
The Stock Purchase Plan provides for one offering, of six months duration,
during each six-month period. Each such offering period is of six (6) months
duration. The offering periods commence on January 1 and July 1 of each year and
terminate on the last day of each six-month offering. The Board of Directors has
the power to alter the duration of the offering periods without Shareholder
approval.
PARTICIPATION IN THE STOCK PURCHASE PLAN
Eligible employees become participants in the Stock Purchase Plan by
delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date. An employee who becomes
eligible to participate in the Stock Purchase Plan after the commencement of an
offering can elect to participate in the Stock Purchase Plan upon the
commencement of the next offering.
PURCHASE PRICE
The purchase price per share in an offering under the Stock Purchase Plan is
the lower of 85% of the fair market value of a share of Common Stock on the
first date of an offering period, or 85% of the fair market value of a share of
Common Stock on the last date of the offering period. The fair market value of
15
<PAGE>
a share of Common Stock on a given date is based upon the last trade reported on
the OTC Bulletin Board for that day. The fair market value of the Company's
stock on February 18, 1999 was $.30.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. The deductions cannot exceed ten percent (10%), or such
other rate as determined from time to time by the Board of Directors, of a
participant's compensation. Participants may discontinue their participation at
any time during an offering period, but may not otherwise change their rate of
payroll deduction during an offering period. Payroll deductions commence on the
first payday following the offering date and continue at the same rate until the
end of the offering period, unless sooner terminated as provided in the Stock
Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Stock Purchase
Plan, an employee in effect is entitled to have shares placed under option. The
maximum number of shares placed under option to a participant in an offering is
that number arrived at by dividing the amount representing accumulated payroll
deductions which the participant has elected to have withheld for the offering
period by the purchase price for that offering period. Unless an employee's
participation is discontinued, the option for the purchase of shares is
exercised automatically at the end of the offering period at the applicable
price.
Notwithstanding the foregoing, no employee is permitted to subscribe for
shares under the Stock Purchase Plan if, immediately after the grant of the
option, the employee would own five percent (5%) or more of the voting stock or
value of all classes of stock of the Company or its majority-owned subsidiaries
(including stock which can be purchased through subscriptions under the Stock
Purchase Plan or pursuant to any other option), or if the grant of the option
would permit the employee to buy more than $25,000 worth of stock in any
calendar year under this and any other Company stock purchase plan. Furthermore,
if the number of shares placed under option at the beginning of an offering
period exceeds the number of shares available under the Stock Purchase Plan, a
pro rata allocation of the shares remaining is made in an as equitable a manner
as is practicable.
TERMINATION OF CONTRIBUTIONS
While each participant in the Stock Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest in a given offering can be terminated in whole, but not in part, by
signing and delivering to the Company a notice of withdrawal from the Stock
Purchase Plan. Such withdrawal is permitted at any time prior to the end of the
applicable offering period. Shares are purchased using the payroll deductions
that accumulated prior to the withdrawal, unless the employee elects prior to
the end of the offering period to have the payroll deductions paid out in cash.
In addition, payroll deductions terminate automatically upon termination of
employment and the accumulated payroll deductions of a terminated employee are
returned to that person upon termination.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any changes in the capitalization of the Company, such as
stock splits or stock dividends, resulting in an increase or decrease in the
number of shares of Common Stock, appropriate adjustments will be made by the
Company in the shares subject to purchase and in the purchase price per share.
NONASSIGNABILITY
No rights or accumulated payroll deductions of an employee under the Stock
Purchase Plan may be pledged, assigned, or transferred for any reason.
16
<PAGE>
AMENDMENT AND TERMINATION OF THE STOCK PURCHASE PLAN
The Board of Directors has the authority to amend or terminate the Stock
Purchase Plan at any time. No amendment may be made to the Stock Purchase Plan
without the approval of the holders of a majority of the shares of the Company
entitled to vote if such amendment would increase the number of shares reserved
under the Stock Purchase Plan, materially modify the eligibility requirements,
or materially increase the benefits which may accrue to participants under the
Stock Purchase Plan.
REGISTRATION OF SHARES
If the amendment to the Stock Purchase Plan is approved by the Company's
Shareholders, the Company intends to register the shares reserved for issuance
promptly after the 1999 Annual Meeting on Form S-8 Registration Statement under
the Securities Act of 1933, as amended.
TAX INFORMATION
The Stock Purchase Plan, and the right of the participant to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Internal Revenue Code. Under these provisions, no income is taxable to a
participant at the time of grant of the option or purchase of shares. Upon
disposition of the shares, the participant generally is subject to tax and the
amount of the tax depends upon the holding period. If the shares are held by the
participant for more than two (2) years after the date of the beginning of the
offering period in which those shares were purchased, the lesser of (a) the
excess of the sales price over the option price, or (b) fifteen percent (15%) of
the fair market value of the shares at the time the option was granted, will be
treated as ordinary income to the participant, and any remaining gain will be
treated as a long term capital gain. If the shares are disposed of before the
expiration of this holding period, the excess of the fair market value of the
shares on the exercise date over the option price is treated as ordinary income,
and any further gain or any loss on such disposition is a capital gain or loss.
The Company is not entitled to a deduction in the amount of a participant's
ordinary income or capital gain except to the extent of ordinary income reported
by participant upon disposition of shares within two (2) years from the date of
grant, to the extent allowed under Section 162(m) of the Internal Revenue Code.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company as to the shares purchased under the Stock
Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 6--TO RATIFY THE APPOINTMENT OF AUDITORS
On January 7, 1999, the Company terminated its relationship with Asher &
Company, Ltd. as the Company's independent certified public accountants. During
the two most recent fiscal years or any subsequent interim period, except for
the auditors' report dated April 23, 1998 which included a going concern
qualification, there have been no adverse opinions, disclaimers of opinion or
qualifications or modifications as to uncertainty, audit scope or accounting
principles regarding the reports of Asher & Company, and there have been no
disagreements between management and Asher & Company on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure of a nature which if not resolved to the satisfaction of Asher &
Company, Ltd. would have caused it to make reference to the subject matter of
such disagreement in connection with its report.
On January 11, 1999, the Company's Board of Directors approved the
engagement of Weaver and Tidwell L.L.P. as the Company's independent certified
public accountants to audit the Company's consolidated financial statements.
During the last two fiscal years and each subsequent interim period, the Company
has not consulted with Weaver and Tidwell, L.L.P. regarding the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might
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be rendered on the Company's financial statements or on any matter that was the
subject of a disagreement or a reportable event.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Voting Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under Delaware
law, an abstention would have the same effect as a vote against this proposal,
but a broker non-vote would not be counted for purposes of determining whether a
majority has been achieved.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. A representative of
Weaver and Tidwell, L.L.P. is expected to attend the Annual Meeting and will
have the opportunity to make a statement, if such representative desires to do
so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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SHAREHOLDER PROPOSALS
Any person who is a Shareholder on both the Record Date for the 1999 Annual
Meeting and the date that notice of the Annual Meeting is given by the Company
and who wishes to submit either a proposal of business to be conducted or
nominations for election at the Annual Meeting must provide notice of such
proposal or nomination to the Secretary not less than 60 nor more than 90 days
prior to the date of the Annual Meeting or within ten days after the date on
which notice or prior public disclosure of the date of the Annual Meeting is
given, whichever is earlier.
Nominations and/or Shareholder proposals must contain specified information
regarding the nominee or other business proposed and regarding the proposing
Shareholder. These requirements are set forth in the Bylaws of the Company, a
copy of which is available from the Secretary at no cost. To be included in the
Company's Proxy Statement and Proxy Card for the 2000 Annual Meeting,
Shareholder proposals must be received by the Secretary prior to December 31,
1999 and must conform to the requirements set forth in the Bylaws of the Company
and the rules and regulations of the U.S. Securities and Exchange Commission.
The submission of a Shareholder proposal does not guarantee that it will be
included.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited by mail, telecopy, telegraph or telex, or by directors, officers and
regular employees of the Company in person or by telephone. The Company has
retained Georgeson & Company, Inc. to assist in the solicitation of proxies at a
cost of approximately $7,000, plus out of pocket expenses. The Company will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding soliciting material to
the beneficial owners of Voting Stock.
OTHER MATTERS
As of the date hereof, there are no matters that the Board of Directors
intends to present for a vote at the Annual Meeting other than (i) the election
of directors; (ii) the approval of an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized shares Common
Stock from 25,000,000 to 50,000,000; (iii) the approval of an amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company to Phoenix Healthcare Corporation; (iv) the approval of the Company's
1999 Stock Option Plan; (v) the approval of the Company's Employee Stock
Purchase Plan; and (vi) the ratification of the appointment of Weaver and
Tidwell, L.L.P. as independent auditors for the Company for the fiscal year
ended December 31, 1998. In addition, the Company has not been notified of any
other business that is proposed to be presented at the Annual Meeting. If other
matters now unknown to the Board come before the Annual Meeting, the
accompanying Proxy Card confers discretionary authority on the persons named
therein to vote such proxies on any such matters in accordance with their best
judgment.
FINANCIAL AND OTHER INFORMATION
A copy of the Company's Form 10-K for the fiscal year ended December 31,
1998 as filed with the Securities and Exchange Commission accompanies this Proxy
Statement. Upon written request, the Company will provide each Shareholder being
solicited by this Proxy Statement with a free copy of any exhibits and schedules
thereto. All such requests should be directed to Iatros Health Network, Inc.,
11910 Greenville Avenue, Suite 300 Dallas, Texas 75243, attn: Albert Sousa,
Secretary.
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APPENDIX A
IATROS HEALTH NETWORK, INC. 1999 STOCK OPTION PLAN
ARTICLE 1
THE PLAN
1.1. NAME. The name of this Plan is the Iatros Health Network, Inc. 1999
Stock Option Plan.
1.2 PURPOSE AND SCOPE. (a) The purposes of the Plan are to (i) attract
and retain the best available personnel for positions of substantial
responsibility, (ii) reward past and future contributions to the Company (or any
Parent or Subsidiary), (iii) encourage ownership of the Company's common stock
by key employees, directors and consultants of the Company (and of any current
or future Parent or Subsidiary), and (iv) promote the Company's business success
by creating a long-term mutuality of interests between Plan participants and the
Company's shareholders.
(b) The Plan provides for the granting of both Incentive Stock Options
and Nonqualified Stock Options. Grants can be made to Employees, Directors and
Consultants; provided, that Incentive Stock Options may only be granted to
Employees.
1.3 EFFECTIVE DATE AND DURATION OF PLAN. This Plan is effective for a
10-year period commencing on January 1, 1999, and ending on December 31, 2008,
provided that any Options which are granted under the Plan prior to the
termination date shall continue to be exercisable in accordance with the terms
of the Stock Option Agreement after that date.
ARTICLE 2
DEFINITIONS
Capitalized terms in this Plan shall have the following meanings:
2.1 BOARD. The Board of Directors of the Company.
2.2 CODE. The Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, or any replacement
legislation.
2.3 COMMON STOCK. The common stock, par value $0.001 per share, of
Iatros Health Network, Inc..
2.4 COMPANY. Iatros Health Network, Inc. and any successor to such
corporation, whether by merger, consolidation, liquidation or otherwise.
2.5 CONSULTANT. Any person engaged by the Company (or any Parent or
Subsidiary) as a non-Employee service provider pursuant to the terms of a
written contract or otherwise.
2.6 DIRECTOR. A member of the Board.
2.7 DISABILITY. Permanent and total disability within the meaning of
Section 22(e)(3) of the Code.
2.8 EMPLOYEE. All persons employed by the Company or any Parent or
Subsidiary, including officers, whether full-time or part-time.
2.9 EXCHANGE ACT. The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, or any replacement
legislation.
2.10 FAIR MARKET VALUE. As of any given date, (a) the price of the last
trade of a Share as reported on NASDAQ or the OTC bulletin board, as applicable,
for that date (or if Shares were not traded on such date, for the closest
preceding date on which a trade occurred), or (b) if the Shares are not publicly
traded,
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the fair market value of a Share as determined by the Board in good faith, using
such criteria as the Board may, in its sole discretion, deem appropriate.
2.11 INCENTIVE STOCK OPTION. Any stock Option granted under this Plan
which is intended to qualify as an "incentive stock option" under Section 422 of
the Code.
2.12 NONQUALIFIED STOCK OPTION. Any stock Option granted under this Plan
which is not intended to qualify as an "incentive stock option" under Section
422 of the Code.
2.13 OPTIONED SHARES. Those Shares subject to a stock Option granted
pursuant to this Plan.
2.14 OPTIONEE. An individual who has received a stock Option pursuant to
this Plan.
2.15 OPTION PRICE. The payment to the Company for the Shares upon the
exercise of an Option.
2.16 OPTION. An Option granted hereunder to purchase Shares.
2.17 PARENT. A parent corporation, whether now or hereafter existing,
within the meaning of Section 424(e) of the Code.
2.18 PLAN. The Iatros Health Network, Inc. 1999 Stock Option Plan, as
amended from time to time.
2.19 SHARE. One share of the Company's Common Stock, as adjusted in
accordance with Section 5.5 of this Plan.
2.20 STOCK OPTION AGREEMENT. The Agreement containing the terms and
conditions of a stock Option grant.
2.21 SUBSIDIARY. A subsidiary corporation, whether now or hereafter
existing, within the meaning of Section 424(f) of the Code.
ARTICLE 3
PLAN ADMINISTRATION
3.1 ADMINISTRATION. (a) The Plan shall be administered by the Board. The
Board shall have full discretion to administer and interpret the Plan and to
adopt such rules, regulations, and procedures as it deems necessary or
advisable. The Board may engage a qualified brokerage or other financial
services firm to assist it in the administration of the Plan.
(b) Records shall be kept of any actions taken by the Board. A
majority of the Board shall constitute a quorum at any meeting. Any acts
approved either (i) by a majority of the Directors present at any meeting at
which there is a quorum or (ii) in writing by all Directors, shall be deemed to
be acts of the Board for purposes of this Plan.
(c) The Board may delegate any or all of its powers and duties
hereunder to one or more (i) committees consisting of such members of the Board
as it may designate, or (ii) Employees. The interpretation of, and all actions
taken under, the Plan by the Board or its delegate shall be final, binding, and
conclusive on all interested parties, including the Company, its shareholders,
and all former, present, and future Employees, Directors and Consultants. The
Board may, as to questions of accounting, rely conclusively upon any
determinations made by independent public accountants of the Company.
ARTICLE 4
ELIGIBILITY FOR GRANTS
4.1 ELIGIBILITY AND TERMS OF GRANTS. Subject to Section 4.3, the Board
shall have full discretionary authority to determine the persons eligible to
receive an Option, the time or times at which the Optioned Shares may be
purchased, and whether all of the Options may be exercised at one time or in
increments.
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4.2 GRANTING OF OPTIONS. (a) Subject to Section 4.3, the granting of any
Option shall be entirely in the discretion of the Board and nothing in the Plan
shall be construed as giving any Employee, Director or Consultant any right to
participate under this Plan or to receive any Option or right under it.
(b) The Board may, in its sole discretion, accept the cancellation of
outstanding Options in return for the grant of new Options for the same or
different number of Shares and at the same or different Option Price.
(c) No person may be granted options under this Plan for more than
seven hundred and fifty thousand (750,000) Shares. This limitation shall be
construed and applied in accordance with Section 162(m) of the Code.
ARTICLE 5
GENERAL PROVISIONS
5.1 STOCK SUBJECT TO PLAN. Subject to the provisions of Section 5.5, the
maximum number of Shares for which Options may be granted pursuant to this Plan
is three million (3,000,000). Shares subject to any unexercised Option granted
under this Plan which has expired or terminated shall again become available
under this Plan. The Shares which may be issued or delivered under the Plan may,
as determined by the Board from time to time in its sole discretion, be
authorized but unissued Shares, reacquired Shares or both.
5.2 TERM AND EXPIRATION OF OPTIONS. Each Option granted under this Plan
shall be evidenced by a Stock Option Agreement, shall be subject to such
amendment or modification from time to time as the Board shall deem necessary or
appropriate to comply with or take advantage of applicable laws or regulations,
and shall, in addition to such other terms as the Board may include, provided:
(a) that, subject to Section 5.2(b), the Option may be exercised only
by the Optionee or Optionee's personal representative;
(b) that no Option shall be transferable by the Optionee or by
operation of law other than by will of, or by the laws of descent and
distribution applicable to, a deceased Optionee and that the Option and any and
all rights granted to the Optionee thereunder and not previously exercised shall
automatically terminate and expire upon any sale, transfer, or hypothecation or
any attempted sale, transfer, or hypothecation of such rights or upon the
bankruptcy or insolvency of the Optionee or Optionee's estate;
(c) that subject to the foregoing provisions, a Option may be
exercised at different times for portions of the total number of Shares which
have vested, provided that no Option may be exercised for a fraction of a Share;
(d) that no Optionee shall have the right to receive any dividend on
or to vote or exercise any right in respect to any Shares unless and until the
certificates for such Shares have been issued to such Optionee;
(e) that the Option shall expire at the earliest of the following:
(i) the date specified in the Stock Option Agreement;
(ii) with respect to any Optionee,
(A) three (3) months after voluntary or involuntary termination
of Optionee's position as Employee, Director or Consultant
other than termination as described in subparagraph (B) or
(C) below;
(B) upon the discharge of Optionee for dishonesty, gross
negligence, willful misconduct, or conduct that adversely
affects the interests of the Company (or any Parent or
Subsidiary); or
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(C) twelve (12) months after Optionee's death or Disability.
(f) that, to the extent an Option provides for the vesting thereof in
increments, such vesting shall cease as of the date of the Optionee's death,
Disability, or ceasing to be an Employee, Director or Consultant, as applicable;
(g) that the terms of the Option shall not be affected by any change
of duties or position so long as the Optionee shall continue to be employed by,
or be a Director of, or a Consultant to the Company or a Parent or Subsidiary.
5.3 NOTICE OF INTENT TO EXERCISE OPTION. An Option may be exercised in
whole or in part by notifying the Board (or its designee) in the manner and upon
the terms as may be provided in the Optionee's Stock Option Agreement.
5.4 EXERCISE OF OPTION. Upon receipt by the Board (or its designee) of
the notice provided in Section 5.3, an Option shall deemed to be exercised as to
the number of Shares specified in such notice and Shares in that amount shall be
issued to the Optionee upon payment to the Company of the Option Price as
specified in Section 6.2 hereof. Payment of the Option Price shall be made in
cash (or cash equivalent) in United States dollars or already-owned Shares
(provided such shares have been owned by the Optionee for at least six months),
and may (as permitted by the Board in its sole discretion) be done in accordance
with any procedures for a "cashless exercise" established by the Company with a
brokerage or other qualified financial services company.
5.5 RECAPITALIZATION. Subject to any required action by the stockholders
of the Company, the aggregate number of Shares for which Options may be granted
hereunder, the number of Shares covered by any outstanding Option, and the price
per Share thereof under each such Option shall be proportionately adjusted for
the following: (a) Any dividend or other distribution declared as to Common
Stock which is payable in Shares; and (b) an increase or decrease in the number
of outstanding shares of Common Stock resulting from a stock split or reverse
split of shares, recapitalization or other capital adjustment. All fractional
Shares or other securities which result from such an adjustment shall be
eliminated and not carried forward to any subsequent adjustment.
5.6 SUBSTITUTIONS AND ASSUMPTIONS. The Board shall have the right to
substitute or assume Options in connection with a stock dividend, stock split,
share combination, share exchange, recapitalization, merger, consolidation,
reorganization, or like corporate transaction which affects the number or nature
of the Shares. The number of Shares reserved pursuant to Section 5.1 may be
increased without further action by the stockholders by the corresponding number
of Options assumed and, in the case of a substitution, by the net increase in
the number of Shares subject to Options before and after the substitution. All
fractional Shares or other securities which result from such substitution shall
be eliminated and not carried forward to any subsequent substitution.
5.7 WITHDRAWAL. An Optionee may at any time elect in writing to abandon
an Option with respect to the number of Shares as to which the Option shall not
have been exercised.
5.8 COMPLIANCE WITH APPLICABLE LAWS AND CERTIFICATE OF
INCORPORATION. (a) The Company shall have the right to place appropriate
legends upon the certificate for any Shares issued pursuant to this Plan and
take such other acts as it may deem necessary or appropriate to ensure that the
issuance of Optioned Shares complies with applicable provisions of state and
federal securities laws.
(b) The Company shall not be obligated to issue Shares under any
Option granted under this Plan that would violate any law, rule or regulation.
Each Optionee may be required to make representations and warranties, enter into
restrictive agreements, or take such other actions as may be deemed necessary or
appropriate by the Company to ensure compliance with applicable law and the
Company's Certificate of Incorporation and By-laws.
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ARTICLE 6
RULES FOR NONQUALIFIED STOCK OPTIONS
6.1 OPTION PRICE. The purchase price of Shares subject to a Nonqualified
Stock Option shall be determined by the Board at the time the Option is granted;
provided, that the purchase price shall not be less than eighty percent (80%) of
the Fair Market Value of such Shares on the date of the grant.
6.2 PAYMENT UPON EXERCISE OF OPTION. The amount to be paid by the
Optionee upon exercise of a Nonqualified Stock Option shall be the full purchase
price for the Optioned Shares, together with the amount of any required federal,
state, and local tax withholding (as determined by the Company in its sole
discretion). The Company may, in its sole discretion, permit an Optionee to
elect to pay the required tax withholding by having the Company withhold Shares
having a Fair Market Value at the time of exercise equal to the amount required
to be withheld. An election by an Optionee to have Shares withheld for this
purpose will (together with such additional restrictions as the Company may
impose) be subject to the following:
(a) If an Optionee has received multiple Option grants, a separate
election must be made for each grant;
(b) The election must be made prior to the date the Option is
exercised;
(c) The election will be irrevocable; and
(d) The election may be rejected by the Company.
ARTICLE 7
SPECIAL RULES FOR INCENTIVE STOCK OPTIONS
7.1 CONFORMANCE WITH CODE REQUIREMENTS. Incentive Stock Options granted
under this Plan shall conform to, be governed by, and be interpreted in
accordance with Section 422 of the Code and any regulations thereunder
including, without limitation, those provisions of Section 422 of the Code that
prohibit an option by its terms to be exercisable after ten (10) years from the
date that it was granted. Only Employees may be granted Incentive Stock Options.
To the extent that any option granted as an Incentive Stock Option fails to
conform to the applicable requirements, it shall be treated and honored by the
Company as a Nonqualified Stock Option.
7.2 OPTION PRICE. The purchase price of each Share optioned under the
Incentive Stock Option provisions of this Plan shall be determined by the Board
in its sole discretion but shall, in no event, be less than the Fair Market
Value on the date of grant.
7.3 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. The aggregate Fair
Market Value (determined on the date of grant) of the Shares with respect to
which Incentive Stock Options are exercisable by any individual for the first
time during any calendar year under all plans of the Company (and any Parent or
Subsidiary) shall not exceed $100,000 (or such other limit as may be established
by law from time to time).
7.4 LIMITATION ON GRANTS TO SUBSTANTIAL SHAREHOLDERS. An Employee may
not, immediately prior to the grant of an Incentive Stock Option hereunder, own
stock in the Company representing more than ten percent (10%) of the voting
power of all classes of stock of the Company unless the per share option price
specified by the Board for the Incentive Stock Options granted such an Employee
is at least one hundred ten percent (110%) of the Fair Market Value of the
Company's stock on the date of grant and such option, by its terms, is not
exercisable after the expiration of five (5) years from the date such option is
granted. For purposes of this limitation, Section 424(d) of the Code governs the
attributes of stock ownership.
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7.5 PAYMENT UPON EXERCISE OF OPTION. The amount to be paid by the
Optionee upon exercise of an Incentive Stock Option shall be the full purchase
price thereof provided in the option.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 AMENDMENT. (a) The Board shall have the right to amend the Plan at
any time and from time to time; provided, that no such amendment of the Plan
shall, without stockholder approval, be effective if stockholder approval of the
amendment is required at such time to qualify for any available exemption from
Section 16 of the Exchange Act or by any other applicable law, regulation, rule
or order.
(b) No amendment may be made that would cause Options not to qualify
for exemption under Section 16 of the Exchange Act.
(c) No amendment of the Plan shall, without the written consent of the
holder of a Option awarded under the Plan prior to the date of the amendment or
termination, adversely affect the rights of such holder with respect to such
Option (except to the extent necessary to comply with any applicable law,
regulation, rule or order).
(d) Notwithstanding anything herein or in any Stock Option Agreement
to the contrary, the Board shall have the power to amend the Plan in any manner
deemed necessary or advisable for Options to qualify for any exemption provided
under Section 16 of the Exchange Act and any such amendment shall, to the extent
deemed necessary or advisable by the Board, be applicable to any outstanding
Options previously granted under the Plan. In the event of such an amendment to
the Plan, the holder of any Option shall, upon request of the Board and as a
condition for exercising of such Option, execute a conforming amendment in the
form prescribed by the Board to the Stock Option Agreement within such
reasonable period of time as the Board shall specify in such request.
8.2 TERMINATION. The Board shall have the right to terminate the Plan at
any time; provided, that no such termination shall terminate any outstanding
Option previously granted under the Plan or adversely affect the rights of such
holder without his or her written consent. No new Options may be granted under
the Plan on or after the date of termination.
ARTICLE 9
MISCELLANEOUS
9.1 REGISTRATION, LISTING AND QUALIFICATION OF SHARES. Each Option shall
be subject to the requirement that if at any time the Board shall determine that
the registration, listing, or qualification of the Shares covered thereby upon
any securities exchange or market or under any foreign, federal, state, or local
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the purchase of Shares thereunder, no such Option may be
exercised unless and until such registration, listing, qualification, consent,
or approval shall have been effected or obtained free of any condition not
acceptable to the Company. Any person exercising an Option shall make such
representations, warranties and agreements and furnish such information as the
Board or the Company may request to assure compliance with the foregoing or any
other applicable legal requirements.
9.2 NO RIGHTS TO CONTINUED EMPLOYMENT OR OTHER RETENTION; NO
RESTRICTIONS. Neither this Plan nor any action taken hereunder shall be
construed as giving any Employee, Director or Consultant any right to be
retained in such position or status by the Company or any Parent or Subsidiary.
Nothing in this Plan shall restrict the Company's rights to adopt other Option
plans pertaining to any or all of the Employees, Directors or Consultants
covered under this Plan or other Employees, Directors or Consultants not covered
under this Plan.
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9.3 COSTS AND EXPENSES. Except as provided herein, all costs and
expenses of administering the Plan shall be paid by the Company.
9.4 PLAN UNFUNDED. This Plan shall be unfunded. Except for the Board's
reservation of a sufficient number of authorized Shares to the extent required
by law to meet the requirements of the Plan, the Company shall not be required
to establish any special or separate fund or to make any other segregation of
assets to assure payment of any grant under the Plan.
9.5 GOVERNMENT REGULATIONS. The rights of Optionees and the obligations
of the Company hereunder shall be subject to all applicable laws, rules, and
regulations and to such approvals as may be required by any governmental agency.
9.6 PROCEEDS FROM SALE OF STOCK. Proceeds of the purchase of Optioned
Shares by an Optionee may be used by the Company for any business purpose.
9.7 GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
9.8 INVALIDITY. If any provision of the Plan shall be held invalid or
unlawful for any reason, such event shall not affect or render invalid or
unenforceable the remaining provisions of the Plan.
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APPENDIX B
IATROS HEALTH NETWORK, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Iatros Health Network, Inc. Employee
Stock Purchase Plan (the "Plan") is to provide a convenient means for Employees
of the Company and of any Subsidiary that elects to participate in the Plan
(with the consent of the Company) to acquire an ownership interest in the
Company. The Plan is intended to qualify as an Employee Stock Purchase Plan
under Section 423 of the Code.
2. DEFINITIONS. The following terms as used in this Plan shall have the
meaning specified below, unless the context clearly indicates otherwise.
(a) "Account" means the bookkeeping account established for an
Employee to which the funds deducted or paid from the Employee's Compensation
pursuant to the terms of the Plan to purchase Shares shall be credited. The
funds allocated to a Participant's Account shall at all times remain the
property of the Participant, but such funds may be commingled with the general
assets of the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
any regulations thereunder.
(d) "Company" means Iatros Health Network, Inc. and any successor to
such corporation, whether by merger, consolidation, liquidation or otherwise.
(e) "Compensation" means a Participant's total compensation from the
Company or any participating Subsidiary payable during the applicable
Semi-Annual Period.
(f) "Employee" means any officer or other common law employee of the
Company, or any Subsidiary of the Company which participates in the Plan with
the consent of the Company.
(g) "ESPP Broker" means a qualified stock brokerage or other financial
services firm that has been designated by the Board.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended (and any rules and regulations thereunder then in effect).
(i) "Fair Market Value" of a Share means, as of any given date, (i)
the price of the last trade of a Share as reported on NASDAQ or the OTC bulletin
board, as applicable, for that date (or if Shares were not traded on such date,
for the closest preceding date on which a trade occurred), or (ii) if the Shares
are not publicly traded, the fair market value of a Share as determined by the
Board in good faith, using such criteria as the Board may, in its sole
discretion, deem appropriate.
(j) "Holding Period" means the holding period that is set forth in
Section 423(a) of the Code, which, as of the date that the Company adopted this
Plan, is (i) the two (2) year period that begins on the first day of the
applicable Semi-Annual Period or (ii) the one (1) year period that begins on the
date the applicable Shares are transferred to the Participant under the Plan,
whichever end later.
(k) "Participant" means each (i) Employee who is eligible to, and
elects to, participate in the Plan in accordance with the terms of the Plan, and
(ii) any Employee or former Employee who has an Account under the Plan.
(l) "Plan" means the Iatros Health Network, Inc. Employee Stock
Purchase Plan, as amended from time to time.
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(m) "Semi-Annual Period" means the six (6) month period ending on the
last day of June and December of each year, with the first Semi-Annual Period to
begin on such date as may be established by the Board.
(n) "Shares" means the shares of the Common Stock of the Company,
subject to adjustment pursuant to Section 14 of the Plan.
(o) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing at least fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
3. SHARES SUBJECT TO THE PLAN. Subject to adjustment pursuant to Section
14 of the Plan, the aggregate number of Shares which may be purchased under the
Plan is one million (1,000,000). The Shares may be authorized but unissued
shares, reacquired shares, or any combination thereof.
4. ELIGIBILITY. Any Employee of the Company or a participating
Subsidiary is eligible to become a Participant on the first day of the
Semi-Annual Period following the Employee's date of hire.
5. JOINING THE PLAN.
(a) An eligible Employee's participation in the Plan shall be
effective as of the first day of the Semi-Annual Period following the date on
which the Employee completes, signs and returns to the Board such forms as may
be required to enroll in the Plan (or at such other time as may be permitted by
the Board in its sole discretion).
(b) Participation by any eligible Employee in the Plan is entirely
voluntary.
6. RESTRICTIONS ON PARTICIPATION. Notwithstanding anything herein to the
contrary:
(a) No Participant shall be permitted to contribute towards the
purchase of any Shares under the Plan if such Participant, immediately after
such contribution, would own Shares (including all Shares that may be purchased
under outstanding subscriptions under the Plan) that account for five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company or its Subsidiaries (as determined under the rules of Section
424(d)of the Code).
(b) No Participant shall be granted a right to contribute towards the
purchase of any Shares under the Plan that permits such Participant's rights to
purchase Shares under all "employee stock purchase plans" of the Company and its
Subsidiaries to accrue at a rate that exceeds $25,000 worth of such Shares
(determined using the Fair Market Value of a Share at the time such right to
contribute is granted) for each calendar year in which such right to contribute
is outstanding at any time.
7. EMPLOYEE CONTRIBUTIONS.
(a) Each Employee may elect (on such forms as may be required by the
Board in its sole discretion) to contribute by payroll deduction of up to 10% of
his or her Compensation payable during a Semi-Annual Period (or such other
amount or percentage as may be permitted by the Board in its sole discretion).
(b) Subject to the limits set forth in (a) above, an Employee may
elect at any time (on such forms as may be required by the Board in its sole
discretion) to increase or decrease his or her rate of contribution. Except as
otherwise provided in the Plan, any such change shall become effective as the
first day of the Semi-Annual Period following receipt of such election by the
Board (or at such other time as may be permitted by the Board in its sole
discretion).
(c) Any contributions made by an Employee under the Plan shall be
credited to the Employee's Account. No interest shall be paid on funds credited
to a Participant's Account.
B-2
<PAGE>
8. ISSUANCE OF SHARES.
(a) On the last trading day of each Semi-Annual Period, the
contributions credited to a Participant's Account as of that date shall be
applied to the purchase of Shares; provided that no such purchase shall be made
on the Participant's behalf if so required by an event described in Section 9
below. Except as otherwise provided by the Board, only whole Shares may be
purchased under the Plan.
(b) The per share cost for the Shares purchased pursuant to the Plan
shall be 85% of the lower of (i) the Fair Market Value of a Share on the first
trading day of the Semi-Annual Period (the "date of the grant"), or (ii) the
Fair Market Value of a Share on the last trading day of the Semi-Annual Period
(the "date of exercise").
(c) Any funds remaining in a Participant's Account after the purchase
of Shares at the conclusion of a Semi-Annual Period shall, unless otherwise
requested by the Participant, be carried over and applied in the next
Semi-Annual Period.
(d) If the aggregate number of Shares that all Participants in the
Plan desire to purchase in any Semi-Annual Period exceeds the number of Shares
then available under the Plan, the Shares available shall be allocated among
such Participants in proportion to their contributions during the Semi-Annual.
(e) Notwithstanding any other provision herein to the contrary, the
obligation to purchase, issue or deliver Shares under the Plan shall (to the
extent deemed necessary or appropriate by the Company or Board) be subject to
(i) the effectiveness of a registration statement under the Securities Act of
1933, as amended, with respect to such Shares, and (ii) any other applicable
law, regulation, rule or order.
(f) Unless otherwise provided by the Board, any Shares purchased by a
Participant shall be deposited into an account that is established in the
Participant's name with the ESPP Broker and shall be subject to the following:
(i) A Participant may direct, by written notice to the Company
prior to the conclusion of a Semi-Annual Period, that the ESPP
Broker account be established in the name of the Participant
and one such other person as may be designated by the
Participant as joint tenants with right of survivorship,
tenants in common, or community property, to the extent and in
the manner permitted by applicable law.
(ii) A Participant shall be free to undertake a disposition, as
that term is defined in Section 424(c) of the Code (which
generally includes any sale, exchange, gift or transfer of
legal title), of Shares in the Participant's ESPP Broker
account at any time, whether by sale, exchange, gift or other
transfer of title. Subject to subparagraph (iii) below, in the
absence of such a disposition of the Shares, all Shares must
remain in the Participant's account at the ESPP Broker until
the applicable Holding Period for the Shares has been
satisfied. For Shares for which the Holding Period has been
satisfied, a Participant may move such Shares to an account at
another brokerage firm of the Participant's choosing or
request that a certificate representing the Shares be issued
and delivered to the Participant.
(iii) A Participant who is not subject to United States taxation
may, at any time and without regard to the applicable Holding
Period, move his or her Shares to an account at another
brokerage firm of the Participant's choosing or request that a
certificate that represents the Shares be issued and delivered
to the Participant.
9. TERMINATION OF CONTRIBUTIONS.
(a) The contributions of an Employee under the Plan shall terminate
(and no further contributions shall be made on his or her behalf) as of the date
on which the Employee (i) elects to revoke
B-3
<PAGE>
his or her payroll deduction contribution for a Semi-Annual Period, (ii) ceases
to be an Employee, (iii) dies, (iv) ceases to receive Compensation for the
remainder of a Semi-Annual Period, or (v) to the extent required by law or
regulation, receives a hardship distribution under tax-qualified section 401(k)
plan sponsored by the Company or any affiliate. Upon ceasing contributions under
the Plan, an Employee shall (if applicable) be entitled to recommence
contributions in accordance with the terms of Section 5; provided that in the
case of a termination under (a)(v), the terminated Participant may not do so for
a period of 12 months following the date of the hardship withdrawal (or other
period specified under the section 401(k) plan).
(b) Other than for the cessation of contributions under Section 9(a)
(ii) and (iii), Shares shall (except as provided in Section 9(c)) be purchased
for the Participant for the Semi-Annual Period based upon the balance in the
Participant's Account as of that date, and payment of any funds remaining in the
Account (after the purchase of Shares) shall be made to the Participant as soon
as administratively feasible.
(c) In the case of a revocation of a payroll deduction election under
Section 9(a)(i), the Participant also may elect at any time prior to the last
trading day of the Semi-Annual Period (under such procedures as may be
established by the Board) to have any funds remaining in his or her Account paid
to him or her. Such payment shall be made as soon as administratively feasible
after such an election is submitted in accordance with any applicable
procedures.
(d) In the case of a cessation of contributions under Section
9(a)(iii), any funds remaining in the Participant's Account shall be applied in
accordance with Section 10(a).
(e) In the case of a cessation of contributions under Section
9(a)(ii), any funds remaining in the Participant's Account shall be returned to
the Participant as soon as administratively feasible after the date on which the
Participant terminates employment.
10. DEATH OF A PARTICIPANT.
(a) Upon the death of a Participant, the contributions credited to a
Participant's Account shall be retained and applied in accordance with Section 8
and the Participant's beneficiary (see Section 10(b)) shall thereafter be
entitled to the Shares (and cash, if any) credited to the Participant's Account.
Any distribution to a beneficiary hereunder shall be in full satisfaction of the
obligations owing to the deceased participant under the Plan. If more than one
beneficiary is designated, each beneficiary shall be entitled to the portion of
the Participant's Account designated by the Participant, or if no such
designation is made, each beneficiary shall receive an equal portion of the
Shares and proceeds.
(b) Each Participant may designate (on such forms as may be required
by the Board) a beneficiary under the Plan. A previous designation may be
changed by a Participant at any time by the submission of a new designation form
to the Board prior to the Participant's death. If a Participant has not
designated a beneficiary or the designated beneficiary is not living on the
Participant's date of death, the Participant's beneficiary shall be his or her
estate.
11. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board. The Board shall have
the full discretion to interpret and administer the Plan and to adopt such
rules, regulations and procedures as it deems necessary or advisable from time
to time. The Board may delegate any or all of its powers and duties hereunder to
one or more (i) committees consisting of such members of the Board as it may
designate, or (ii) Employees. The interpretation of, and all actions taken
under, the Plan by the Board or its delegate shall be final, binding, and
conclusive on all interested parties, including the Company, its shareholders,
and all former, present, and future Employees. The Board may, as to questions of
accounting, rely conclusively upon any determinations made by independent public
accountants of the Company.
B-4
<PAGE>
(b) A majority of the Board shall constitute a quorum, and the acts of
a majority of the members of the Board present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the members of the
Board, shall be deemed the acts of the Board.
(c) Unless otherwise directed by the Board, all costs and expenses of
administering the Plan shall be paid by the Company and the other participating
employers (as determined by the Board in its sole discretion).
12. AMENDMENT.
(a) The Board shall have the right to amend the Plan at any time and
from time to time; provided, that no such amendment of the Plan shall, without
stockholder approval, be effective if stockholder approval of the amendment is
required to comply with Section 423 of the Code or any other applicable law,
regulation, rule or order.
(b) No amendment may be made that would cause the purchase of Shares
under the Plan not to qualify for exemption under Section 16 of the Exchange
Act.
(c) Notwithstanding anything herein to the contrary, the Board shall
have the power to amend the Plan in any manner deemed necessary or advisable for
the purchase of Shares under the Plan to qualify for any exemption provided
under Section 16 of the Exchange Act and any such amendment shall, to the extent
deemed necessary or advisable by the Board, be applicable to any existing
Accounts.
13. TERMINATION. The Board shall have the right to terminate the Plan at
any time. Upon termination, each Participant shall be entitled to payment of his
or her Account balance as soon as administratively feasible after the date the
Plan is terminated and Participants shall have no further rights hereunder.
Unless terminated earlier by action of the Board, the Plan shall remain in
effect until such time as no Shares remain available for issuance under the Plan
and the Participants and their employers have no further rights or obligations
(as applicable) under the Plan.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Appropriate and
proportionate adjustments shall be made in the number and class of shares
subject to this Plan in the event of a share dividend, share split, reverse
share split, recapitalization, reorganization, merger, consolidation,
acquisition, separation or like change in the capital structure of the Company.
15. TRANSFERABILITY OF RIGHTS. No rights or interests of a Participant
under this Plan may be voluntarily or involuntarily transferred, by operation of
law or otherwise, other than by will or the laws of descent and distributions,
and such rights and interests shall not be subject to a Participant's debts,
contracts or liabilities.
16. PARTICIPATION IN OTHER BENEFIT PLANS. Nothing herein contained shall
affect an Employee's rights to participate in and receive benefits under and in
accordance with the then current provisions of any pension, insurance or other
employee benefit plan or program offered by his or her employer.
17. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Plan shall confer
upon any Employee any right to continued employment with the Company or any
affiliate, or interfere with or restrict in any way the rights of the Company or
affiliate to discharge the Employee at any time for any reason whatsoever, with
or without cause.
18. NO SHAREHOLDER RIGHTS CONFERRED. Nothing contained in the Plan shall
confer upon a Participant (or his or her beneficiary) any rights of a holder of
Shares unless and until Shares are issued to the Participant (or his or her
beneficiary).
19. GOVERNING LAW. To the extent not preempted by Federal law, the Plan
shall be construed in accordance with and governed by the internal laws of the
State of Delaware.
B-5
<PAGE>
20. SEVERABILITY. In the event any provision of the Plan or any action
taken pursuant to the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included, and the illegal or invalid action shall be deemed null
and void.
21. WITHHOLDING TAXES. To the extent required by applicable law or
regulation, each Participant shall arrange with his or her employer for the
payment of any required federal, state or local income or other tax withholding
applicable to the receipt of Shares under the Plan prior to the delivery of the
Shares to the Employee.
22. NOTICES. Any notice or other communication required or permitted to
be given pursuant to the Plan must be in writing and may be given by registered
or certified mail, and if given by registered or certified mail, shall be
determined to have been given and received on the date three days after a
registered or certified letter containing such notice, properly addressed with
postage prepaid, is deposited in the United States mails; and if given other
than by registered or certified mail, it shall be deemed to have been given when
delivered to and received by the party to whom addressed. Notice shall be given
to Participants at their most recent addresses shown in the Company's records.
Notice to the Board shall be sent to the Board at the Company's principal
executive offices to the attention of the Chairman and Chief Executive Officer
of the Company. Notice to an employer shall be sent to the employer's principal
executive offices to the attention of its Chief Financial Officer.
23. CONSTRUCTION. Titles and headings of sections and articles of this
Plan are for convenience of reference only and shall not affect the construction
of any provision of this Plan. Unless the context clearly requires otherwise,
the singular shall include the plural.
24. EFFECTIVE DATE OF PLAN. The Plan shall become effective as of the
date established by the Board.
B-6
<PAGE>
IATROS HEALTH NETWORK, INC.
PROXY - ANNUAL MEETING OF SHAREHOLDERS - APRIL 29, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE
The undersigned stockholder(s) of Iatros Health Network, Inc. (the
"Company"), revoking all other proxies heretofore given, hereby constitute(s)
and appoint(s) Ronald Lusk and Robert Woodson, III and each of them, with
full power of substitution, as proxy or proxies to represent and vote all the
shares of Common Stock, $.001 par value, or Series A Senior Convertible
Preferred Stock, $.001 par value, of the Company which the undersigned may be
entitled to vote, on the matters set out on the reverse side of this proxy
card and described in the Proxy Statement and, in their discretion, on any
other business which may properly come before the Annual Meeting of
Shareholders, or any adjournments or postponements thereof.
1. ELECTION OF DIRECTORS.
<TABLE>
<S> <C>
FOR ALL THE NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY / /
(EXCEPT AS MARKED TO THE CONTRARY BELOW) (TO VOTE FOR ALL THE NOMINEES LISTED BELOW)
</TABLE>
RONALD LUSK ROBERT WOODSON III ALBERT SOUSA
INSTRUCTION: To withhold authority to vote for either individual nominee, write
that nominee's name on the line provided:_________________________
2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 25,000,000 TO 50,000,000
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO PHOENIX HEALTHCARE
CORPORATION
FOR / / AGAINST / / ABSTAIN / /
4. APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
5. APPROVAL OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
FOR / / AGAINST / / ABSTAIN / /
6. RATIFICATION OF THE APPOINTMENT OF WEAVER AND TIDWELL, L.L.P. AS
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998
FOR / / AGAINST / / ABSTAIN / /
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement both dated MARCH [__], 1999.
The shares represented by this proxy card will be voted in accordance
with the directions given in this proxy. IF NOT OTHERWISE DIRECTED HEREIN,
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS. IF ANY
OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING, PROXIES WILL BE
VOTED ON SUCH MATTERS AS THE PROXIES NAMED HEREIN, IN THEIR SOLE DISCRETION, MAY
DETERMINE.
- ---------------------------------------- --------------------------------------
Signature(s) of Stockholder(s)
Please sign your name exactly as it appears hereon. Please manually date this
card. Joint owners must each sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give your full title as it appears
hereon.
Dated: ________________, 1999
