<PAGE> 1
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 Section 240.14a-11(c) or Section 240.14a-12
AMERICAN HOMEPATIENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 9:00 A.M. CENTRAL DAYLIGHT TIME
ON APRIL 29, 1999
LOCATION: OFFICES OF HARWELL HOWARD HYNE GABBERT & MANNER, P.C.
1800 FIRST AMERICAN CENTER
315 DEADERICK STREET
NASHVILLE, TENNESSEE 37238
To American HomePatient, Inc. Stockholders:
The Board of Directors of American HomePatient, Inc. invites you to the
Company's Annual Meeting of Stockholders next month. At the meeting, you and
other stockholders will be able to vote on the following matters:
1. Election of "Class 2" Directors to the Board of Directors. The Board
has nominated for re-election Morris A. Perlis and Joseph F. Furlong,
III. The Directors elected will serve three (3) year terms and until
their successors are duly elected and qualified.
2. Approval of an Amendment to the Company's Articles of Incorporation to
effect, at any time prior to the Company's Annual Meeting of
Stockholders in 2000 or at no time, in the sole discretion of the
Board, a one-for-four reverse stock split whereby the Company would
issue one (1) new share of the Company's Common Stock in exchange for
four (4) shares of the Company's outstanding Common Stock.
3. Any other business that properly comes before the Annual Meeting. The
Board does not know of any other business to be considered.
Only stockholders of record at the close of business on March 8, 1999
are entitled to vote at the meeting.
The Board urges you to exercise your right to vote at the meeting,
either personally or by proxy. Whether or not you plan to attend the meeting,
please complete the enclosed proxy card promptly and return it in the enclosed,
self-addressed, stamped envelope to ensure that your shares will be represented
and voted at the meeting as you instruct. If you attend the meeting, you may
withdraw the proxy and vote your shares if you want.
The Proxy Statement accompanying this notice describes the matters to
be acted upon at the meeting. Please review it thoroughly.
By Order of the Board of Directors,
-----------------------------------
Marilyn O'Hara, Secretary
Brentwood, Tennessee
March __, 1999
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AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1999
SOLICITATION OF PROXIES
The Board of Directors of American HomePatient, Inc. (the "Company") is
furnishing this Proxy Statement to you in connection with its solicitation of
proxies for the 1999 Annual Meeting of Stockholders, and any adjournment
thereof. The Annual Meeting will be held at the offices of Harwell Howard Hyne
Gabbert & Manner, P.C., 1800 First American Center, 315 Deaderick Street,
Nashville, Tennessee 37238 on Thursday, April 29, 1999, at 9:00 a.m. Central
Daylight Time. This Proxy Statement and the accompanying proxy card are being
mailed to you and the Company's other stockholders on or about March 26, 1999.
We encourage you to participate in voting at the Annual Meeting. You
are invited to attend the meeting and vote your shares directly by submitting a
ballot. Ballots will be provided at the meeting. You may instead vote by proxy,
which allows you to direct someone else to vote your shares at the meeting on
your behalf.
To vote by proxy, you must complete, execute and return the
accompanying proxy card before the Annual Meeting. Specific instructions are on
the proxy card. Proxies will be voted in accordance with instructions noted on
the proxy cards. If you do not complete the voting instructions, the persons
named on the proxy card will vote your shares (1) FOR the election of both of
the nominees standing for re-election as Class 2 Directors, and (2) FOR the
approval of an amendment to the Company's Articles of Incorporation to effect a
one-for-four reverse stock split, as more fully described in this Proxy
Statement. We do not know of any other matters to be presented for action at the
Annual Meeting. If any other matter does properly come before the meeting,
however, the persons named on the proxy card will vote in accordance with their
best judgment on the matter.
You may revoke your proxy at any time before it is exercised by doing
one of the following:
- Notifying the Company's Secretary in writing;
- Submitting a new proxy bearing a later date;
- Attending the Annual Meeting and properly voting in
person. (Attendance alone will not revoke your proxy.)
The Company will pay for this proxy solicitation. It is expected that
proxies will be solicited by mail only. The Company will ask banks, brokers and
other custodians to forward this Proxy Statement, with attachments, to their
customers who beneficially own the Company's stock, and the Company will
reimburse such banks, brokers and custodians for their reasonable out-of-pocket
expenses in doing so.
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VOTING
The Annual Meeting will be held on Thursday, April 29, 1999 in
Nashville, Tennessee. A majority of the Company's Common Stock must be
represented at the Annual Meeting, either in person or by proxy, in order to
transact business.
At the Annual Meeting of Stockholders, you and the Company's other
stockholders will be asked to vote on the re-election of two nominees to serve
as Class 2 Directors for a three (3) year term and until their successors are
duly elected and qualified (See Proposal 1: "Re-Election of Directors" starting
on page 4 of this Proxy Statement). You and the Company's other stockholders
will also be asked to vote on the approval of an Amendment to the Company's
Articles of Incorporation to effect a one-for-four reverse stock split whereby
the Company would issue one (1) new share of the Company's Common Stock in
exchange for four (4) shares of the Company's outstanding Common Stock (See
Proposal 2: "Approval of One-For-Four Reverse Stock Split" starting on page 9 of
this Proxy Statement).
We know of no other matters to be brought before the 1999 Annual
Meeting. If any other matter is duly presented for action, the persons named on
the enclosed proxy card to vote on such matter will vote in accordance with
their best judgment, unless you direct them to do otherwise on the proxy card.
All stockholders of record on March 8, 1999 will be entitled to vote at
the Annual Meeting. You and the Company's other stockholders are entitled to one
vote for each share of the Company's common stock, par value $.01 per share (the
"Common Stock") owned of record at the close of business on March 8, 1999. The
Company has no other classes of voting stock issued. Although the Company has
the authority to issue shares of preferred stock in one or more series, it has
not designated or issued any series of preferred stock. There were 14,985,959
shares of the Common Stock outstanding on February 17, 1999.
The Director nominees will be elected by a plurality of the votes of
the shares of Common Stock present or represented by proxy and entitled to vote
at the Annual Meeting. The approval of the proposed reverse stock split will be
determined by a majority of the votes of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. There are no
cumulative voting rights. There is no appraisal or similar right of dissenters
respecting the two matters to be voted upon. Any other matters which may be
properly submitted to the stockholders will be approved by the affirmative vote
of a majority of shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining whether there is a quorum, but will have no legal effect on the
election of Directors. On any other matter requiring majority vote for approval,
including approval of the proposed one-for-four reverse stock split, abstentions
will have the effect of negative votes.
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MISCELLANEOUS MATTERS CONCERNING
THE ANNUAL MEETING
INDEPENDENT PUBLIC ACCOUNTANTS
The Board appointed the accounting firm of Arthur Andersen LLP to serve
as the Company's independent public accountants for the 1998 fiscal year, and
Arthur Andersen LLP is currently serving as the Company's independent auditor
for the 1999 fiscal year. A representative of Arthur Andersen LLP will attend
the Annual Meeting, will have the opportunity to make a statement if he or she
so desires, and will be available to respond to appropriate questions.
DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
There were no stockholder proposals submitted for this Annual Meeting.
We must receive stockholder proposals for the 2000 Annual Meeting at the
Company's principal executive offices (5200 Maryland Way, Suite 400, Brentwood,
Tennessee 37027-5018) no later than November 26, 1999 in order for the proposals
to be eligible for inclusion in the Company's proxy materials for the 2000
Annual Meeting.
1998 ANNUAL REPORT
Along with this Proxy Statement, we are mailing to you and our other
stockholders a copy of the Company's 1998 Annual Report on Form 10-K.
PROPOSAL 1: RE-ELECTION OF DIRECTORS
The Company's Board of Directors consists of eight members and is
divided into three classes (Class 1, Class 2 and Class 3), as nearly equal in
number as possible. All Directors generally hold office for three-year terms and
then until their successors have been duly elected and qualified. The term of
Class 2 Directors, Morris A. Perlis and Joseph F. Furlong, III, is set to expire
at this Annual Meeting of Stockholders.
The Board has nominated Messrs. Perlis and Furlong for re-election as
Class 2 Directors to serve for a three (3) year term expiring at the 2002 Annual
Meeting, or until their successors are duly elected and qualified. If any
nominee becomes unable to accept nomination or re-election, which is not
anticipated, the persons named on the proxy card intend to vote for the election
of such other person as the Board may nominate, unless otherwise specifically
instructed in the proxy.
A plurality of the votes of the shares of Common Stock present or
represented by proxy at the Annual Meeting and entitled to vote is required to
elect the two nominees as Directors of the Company. AHOM Holdings, Inc., an
indirect, wholly-owned subsidiary of Counsel Corporation, intends to vote all of
its shares in favor of the re-election of the nominees. (See "Stock Ownership of
Directors, Executive Officers and Principal Holders" appearing on page 14 of
this Proxy Statement.) The persons named on the proxy card intend to vote all
valid proxies they receive in accordance with the instructions of the
stockholders giving the proxies and, in the absence of instructions, for the
re-election of the nominees.
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NOMINEES FOR RE-ELECTION AS CLASS 2 DIRECTORS
The following table provides biographical information of the nominees
for re-election to the Company's Class 2 Board of Directors.
<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
NOMINEE'S NAME HIS AGE DURING THE LAST FIVE YEARS
- -------------- ------- ----------------------------------------------------------
<S> <C> <C>
Morris A. Perlis (1) 50 Mr. Perlis has served as Chairman of the Board of Directors
of the Company since May 1994 and as a Director of the
Company since March 1993. He has served as President of
Counsel Corporation since February 1994 and as director
of and consultant to Counsel Corporation since September 1992.
He served as Chief Executive Officer and Secretary of
Stadtlander Drug Co., Inc. ("Stadtlander"), a mail order
pharmacy company, from September 1996 to January
1999, as a director of Stadtlander from June 1996 to
January 1999, and as its President from November 1997
to January 1999. Mr. Perlis has served as a director
of PharMerica, Inc., formerly known as Capstone Pharmacy
Services, Inc. ("PharMerica"), an institutional pharmacy
company, from December 1994 to July 1998. Mr. Perlis
served as Vice Chairman of PharMerica from May 1995 to
December 1997, and as its interim Chief Executive Officer
from December 1994 to May 1995. He served as a director
of Advocat Inc., a long term care company, from
March 1994 to May 1995. From September 1992 to January
1994, he served as President of Morris A. Perlis
& Assoc., an executive management consulting firm.
From September 1993 to July 1996, he served as a
director of NOMA, Inc., a manufacturer of consumer wire
and cable.
Joseph F. Furlong, III (1)(2) 50 Mr. Furlong has served as a Director of the Company since
June 1994 and as its President and Chief Executive Officer
since November 1998. He has served as President of Adirondack
Capital Advisors, LLC, a financial advisory firm, since
May 1996. Since June 1996, he has served as a director of
Healthy Planet, Inc., an environmentally friendly
manufacturer of greeting cards.
Mr. Furlong was a partner of Colman Furlong & Co., a merchant
banking firm, from February 1991 to May 1996. He served
as a director of PharMerica from December 1994 until
December 1997.
</TABLE>
- ---------------------
The nominees are currently members of certain standing committees of
the Board, which are described more fully on page 8 of this Proxy Statement. The
footnotes indicate committee membership as follows:
(1) Member of the Executive Committee
(2) Member of the Audit Committee
Malcolm MacKenzie, former President and Chief Executive Officer of the
Company, served on the Company's Board as a Class 2 Director from July 6, 1998
through February 16, 1999.
CONTINUING CLASS 1 AND 3 DIRECTORS
The Class 1 and Class 3 Directors will continue to serve on the
Company's Board following the 1999 Annual Meeting. The term of the Class 1
Directors will expire at the 2001 Annual Meeting, and the term of the Class 3
Directors will expire at the 2000 Annual Meeting. The following table contains
biographical information of the continuing Directors.
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<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
DIRECTOR'S NAME HIS AGE DURING THE LAST FIVE YEARS
- --------------- ------ ---------------------------------------------------------
<S> <C> <C>
Allan C. Silber (2)(3)(4) 50 Mr. Silber has served as a Director of the Company since
September 1991 and was its Chairman of the Board from
September 1991 to May 1994. He has served as Chairman,
Chief Executive Officer and a director of Counsel
Corporation since August 1979 and was its President
from August 1979 to January 1994. He has served as
Chairman of DCAmerica Inc. and other subsidiaries
of Counsel Corporation since October 1988.
Mr. Silber has been President of DCAmerica Inc.
since May 1994. He has served as director of Faro
Pharmaceuticals, a pharmaceutical distribution
company, since August 1998 and as its Chairman of
the Board since December 1998. Since December 1993,
the has been a member of the Advisory Committee
of RioCan Real Estate Investment Trust, a
Canadian real estate company ("RioCan").
Mr. Silber served as a director of PharMerica
from December 1994 to January 1999 and as its Chairman
of the Board from February 1995 to July 1998.
Mr. Silber served as a director of Stadtlander from
July 1996 to January 1999 and as Stadtlander's Chairman
of the Board from September 1996 to January 1999.
He was a director of Advocat Inc. from
March 1994 to November 1996. He served as a
director of O&Y Properties, Inc., a retail and office
property management company, from November 1995 to
November 1996.
Edward Sonshine (2)(5)(6) 52 Mr. Sonshine has served as a Director of the Company since
October 1991. He has served as Vice Chairman of Counsel
Corporation since January 1995 and as a director since August
1979. He has served as a director of Counsel Healthcare Assets,
an affiliate of Counsel Corporation, since March 1983. He has
served as President and Chief Executive Officer of RioCan since
July 1995.
Mr. Sonshine has served as Chief Executive Officer of Counsel
Management Services, Inc., an affiliate of Counsel Corporation,
from January 1992 to June 1995. He served as a director of
Stadtlander from July 1996 to January 1999, and as a director of
PharMerica from December 1994 to July 1998. Mr. Sonshine
served as Executive Vice President of Counsel Corporation from
February 1987 to January 1994. He served as a director of O&Y
Properties, Inc. from November 1995 to November 1996. From
May 1995 until November 1996, he served as a director of
Advocat Inc.
Edward K. Wissing (2) 61 Mr. Wissing served as the President and Chief Executive Officer
of the Company from May 1994 until July 1998 and was the
President and Chief Executive Officer of American HomePatient,
Inc., a Tennessee corporation and wholly-owned subsidiary of
the Company ("AHPT"), from February 1983 to July 1998. From
October 1991 to May 1994, he was Executive Vice President of
Diversicare Inc., a long term care company. Since August 1997,
he has been a director of Psychiatric Solutions, Inc., a
psychiatric and behavioral health practice management company.
Henry T. Blackstock (1)(5)(6) 55 Mr. Blackstock has served as a Director of the Company since
September 1991. He has served as Vice President and Director of
Research of SouthTrust Asset Management, a banking institution,
since January 1999. He was Chairman and Chief Executive Officer
of Tucker Management Group, a hedge fund management firm, from
July 1989 to January 1999.
</TABLE>
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<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
DIRECTOR'S NAME HIS AGE DURING THE LAST FIVE YEARS
- --------------- ------- --------------------------------------------------------
<S> <C> <C>
Thomas A. Dattilo (1)(4) 47 Mr. Dattilo has served as a Director of the Company since
June 1994. He has been President and Chief Operating
Officer of Cooper Tire and Rubber Company since
January 1999 and a director since February 1999.
He was President of Dana Corporation-Sealing Products
Group, a manufacturing company, from January 1998
until December 1998. From January 1993 to December
1997, he was President of Dana Corporation, Victor
Products Division, a manufacturer and distributor
of sealing and other products.
Mark Manner (1) 47 Mr. Manner has served as a Director of the Company since
May 1995. He has been a shareholder of the
Nashville-based law firm Harwell Howard Hyne Gabbert &
Manner, P.C. since February 1988.
</TABLE>
Except for Directors Wissing and Manner, each continuing Class 1 and
Class 3 Director is a member of at least one of the Board's standing committees.
The footnotes indicate committee membership as follows:
(1) Class 1 Director
(2) Class 3 Director
(3) Member of the Executive Committee
(4) Member of the Compensation Committee
(5) Member of the Audit Committee
(6) Member of the Disinterested Stock Option Committee
DIRECTOR COMPENSATION
The Company pays Directors who are not its officers or employees
(currently Directors Blackstock, Dattilo, Sonshine, Manner and Wissing) the
following fees: (i) an annual director's fee of $10,000.00, (ii) a fee of
$500.00 for each Board or Board committee meeting attended by telephone, and
(iii) a fee of $1,000.00 for each Board or Board committee meeting attended in
person. The Company, however, pays no fees for attendance at a Committee meeting
occurring on the same day as a meeting of the Board. In addition, the Company
reimburses all Directors for actual expenses incurred in connection with
attendance at Board or Committee meetings. Director Furlong received Director
fees during 1998, until he became employed by the Company as President and Chief
Executive Office in November 1998. Director Wissing began receiving Director
fees following his retirement as the Company's President and Chief Executive
Officer in July 1998.
In 1995, the Company adopted a nonqualified stock option plan for
Directors (the "1995 Plan"). Under the 1995 Plan, a Director receives an option
to acquire 7,500 shares of Common Stock upon initial election to the Board. Each
Director also receives an additional option to acquire 3,000 shares of Common
Stock on December 31 of each year following the year he was first elected to the
Board, so long as he served as a Director for at least six (6) months during
that year. In all cases, the per share exercise price of the options equals the
closing market price of the Common Stock on the day immediately before the date
of grant.
Since June 1, 1994, the Company has paid Director Perlis a monthly fee
of $8,500.00 for serving as Chairman of the Board. During 1998, the Company paid
to Director Silber compensation pursuant to a consulting agreement (See
"Compensation Committee Interlocks and Insider Participation" on page 29 of this
Proxy Statement).
Director Manner is a shareholder of the law firm Harwell Howard Hyne
Gabbert & Manner, P.C. ("Harwell Howard"). The Company engaged Harwell Howard
during 1998 to give legal advice in a variety of activities, for which the firm
was paid legal fees (exclusive of expenses) of approximately $1.58 million.
Harwell Howard continues to give legal advice to the Company and, during 1999,
has been paid legal fees (exclusive of expenses) in excess of $66,640.90. Board
members not affiliated with Mr. Manner's law firm periodically review and
approve the terms of Harwell Howard's engagement by the Company.
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<PAGE> 9
AFFILIATIONS
Director Silber is a director and Chief Executive Officer of Counsel
Corporation, and he also serves as Chairman and President of DCAmerica Inc.
Director Sonshine is also a director and Vice Chairman of Counsel Corporation,
Chief Executive Officer of Counsel Management Services, Inc., and is a director
of Counsel Healthcare Assets, Inc. Director Perlis, the Chairman of the Board,
is also a director and President of Counsel Corporation and consultant to
Counsel Corporation. AHOM Holdings, Inc., which beneficially owns 26.6% of the
Company's Common Stock, is an indirect, wholly-owned subsidiary of Counsel
Corporation.
MEETINGS AND COMMITTEES
During 1998, the Board of Directors held six meetings and adopted four
written consent actions. Each Director attended meetings or executed written
consent actions with respect to at least 75% of the meetings and consent actions
of the Board and its committees held or taken in 1998 while he served as a
Director.
The Board has standing Audit, Executive, Compensation and Disinterested
Stock Option Plan Committees. The Board does not have a nominating committee.
The Executive Committee is presently composed of Directors Perlis,
Silber and Furlong. During 1998, Director Wissing and Mr. MacKenzie also served
on the Executive Committee. Director Wissing served from January 1998 to July
1998. Mr. MacKenzie served from July 1998 to November 1998, when he was replaced
by Director Furlong. The Board has the authority to designate an executive
committee to carry out any functions of the Board. Between meetings of the
Board, the Executive Committee may exercise all powers of the Board. During
1998, the Executive Committee held no meetings, however, the Committee did adopt
ten written consent actions.
The Compensation Committee is composed of Directors Dattilo, Blackstock
and Silber. This Committee approves remuneration arrangements for the Company's
executive officers, administers the Company's Supplemental Executive Retirement
Plan (which presently is being eliminated), and reviews compensation plans
relating to executive officers, Directors and employees generally. In 1998, the
Compensation Committee held three meetings and adopted one written consent
action.
The Audit Committee is composed of Directors Blackstock, Furlong and
Sonshine. This Committee engages independent auditors, reviews audit fees,
supervises matters relating to audit functions, and reviews and sets internal
polices and procedures regarding audits, accounts and other financial controls.
In 1998, the Audit Committee held two meetings and adopted no written consent
actions.
The Disinterested Stock Option Plan Committee is composed of Directors
Blackstock and Sonshine. This Committee grants options to the Company's
Directors, employees and agents under the Company's 1991 Nonqualified Stock
Option Plan (the "1991 Plan"). In 1998, the Disinterested Stock Option Plan
Committee held no meetings and adopted three written consent actions.
THE BOARD RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN FAVOR OF THE
RE-ELECTION OF THE NOMINEES FOR CLASS 2 DIRECTORS.
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<PAGE> 10
PROPOSAL 2: APPROVAL OF ONE-FOR-FOUR REVERSE STOCK SPLIT
BACKGROUND
The Board has approved, subject to stockholder approval, an Amendment
to the Company's Articles of Incorporation (the "Articles") to effect, at any
time prior to the Company's Annual Meeting of Stockholders in 2000 or no time,
in the sole discretion of the Board, a one-for-four reverse stock split whereby
the Company would issue one (1) new share of the Common Stock of the Company in
exchange for four (4) shares of the Company's outstanding Common Stock (the
"Reverse Split"). The Board has directed that the Reverse Split be submitted to
the stockholders of the Company for consideration and action.
The complete text of the form of Amendment to the Company's Articles
that would be filed with the office of the Secretary of State of the State of
Delaware to effect the Reverse Split (the "Certificate of Amendment") is set
forth in Appendix A to this Proxy Statement. The text of the Certificate of
Amendment as shown in Appendix A, however, is subject to modification to include
such changes as may be required by the office of the Secretary of State of the
State of Delaware and as the Board deems necessary and advisable to effect the
Reverse Split.
REASONS FOR THE REVERSE SPLIT
The Board believes that the Reverse Split will enhance the Company's
ability to maintain the listing of the Common Stock on the Nasdaq National Stock
Market ("NASDAQ").
The Company's shares of Common Stock have been listed on NASDAQ since
1991 when the Company completed its initial public offering. NASDAQ rules
require that, as a condition of the continued listing of a company's securities
on NASDAQ, a company satisfy listing requirements relating to its financial
condition, results of operations and trading market for its listed securities.
There are two alternative sets of listing criteria: Listing Standard 1 and
Listing Standard 2. The Company does not meet the requirements of Listing
Standard 1, because its net tangible assets are less than $4,000,000. Listing
Standard 2 consists of maintaining: (i) a public float of at least 1,100,000
shares, (ii) a market value of the public float of at least $15 million, (iii) a
minimum bid price equal or greater than $5.00 per share, (iv) at least 400
stockholders (round-lot holders), (v) a market capitalization or total assets of
at least $50 million and total revenue of at least $50 million, (vi) at least
four (4) registered market makers, and (vii) compliance with certain corporate
governance requirements. The Company does not satisfy Listing Standard 2,
because the minimum bid price of its Common Stock is less than $5.00 per share.
Other than the minimum bid price requirement, the Company believes that it
satisfies all other items included in Listing Standard 2.
On November 11, 1998, NASDAQ sent the Company a letter noting that the
Common Stock had failed to maintain a closing bid price greater than or equal to
$5.00 for the last thirty (30) consecutive trading dates. The letter further
noted that the Company's securities would be subject to delisting if the Company
was unable to demonstrate compliance with the minimum bid price requirement or
any other listing criteria by February 8, 1999. In response to such letter, the
Company requested a hearing before the NASDAQ Listing Qualifications Hearing
Panel (the "Panel") . The Panel granted the Company a hearing, which is
scheduled to take place on April 9, 1999, and postponed delisting the Company's
securities. At such hearing, the Company intends to explain its strategy (i) to
increase the bid price of its Common Stock by, among other things, effecting
(subject to stockholder approval) the Reverse Split and (ii) to continue to
satisfy the other listing criteria. There can be no assurance, however, that
NASDAQ will not delist the Company from NASDAQ following such hearing.
The Company believes that if the Reverse Split is approved by the
stockholders at the Annual Meeting and the Reverse Split is effectuated, the
shares of Common Stock likely will have a minimum bid price in excess of $5.00
per share with sufficient consistency to satisfy NASDAQ listing criteria. The
reduction in the number of outstanding shares of Common Stock caused by the
Reverse Split is anticipated to increase the per share market price of the
Common Stock, although not necessarily on a proportional basis. However, (i)
because some investors may view the Reverse Split negatively since it reduces
the number of shares available in the public market, and (ii) for other reasons
such as the Company's financial results, market conditions, regulatory changes
affecting the health care industry and other factors, there can be no assurance
that the market price of the Common Stock will not
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<PAGE> 11
decline in the future. In addition to satisfying the minimum bid price
requirement, the Company would also need to continue to satisfy all other
applicable listing criteria. There can be no assurance that the Company will be
successful in meeting these other maintenance criteria or that, even if these
listing criteria are met, the Common Stock will continue to be listed on NASDAQ.
If the Reverse Split is not approved by the stockholders at the Annual
Meeting, then it is likely, depending on the volatility of the Common Stock and
the Company's ability to meet the listing criteria described above, that the
Company will not satisfy the requirements for continued listing and will be
delisted from NASDAQ. In the event of delisting, the shares of Common Stock
would likely be listed on the Nasdaq Small-Cap Market (the "Small-Cap Market").
The Board believes that it is preferable for the Common Stock to be listed on
NASDAQ, rather than being listed on the Small-Cap Market. The delisting of the
Common Stock from NASDAQ could adversely affect the liquidity of the Common
Stock and the ability of the Company to raise capital. If the Common Stock is
quoted in the Small-Cap Market, the spread between the bid and ask price of the
shares of Common Stock is likely to be greater than the current spread on
NASDAQ. Consequently, stockholders may experience a greater difficulty in
trading shares of the Common Stock.
The effect of the Reverse Split upon the market prices for the Common
Stock cannot be accurately predicted. In particular, there is no assurance that
prices for shares of the Common Stock after the Reverse Split will be four (4)
times the prices for shares of the Common Stock immediately prior to the Reverse
Split. Furthermore, there can be no assurance that the proposed Reverse Split
will achieve the desired results outlined above. In addition, there can be no
assurance that the Reverse Split will not adversely impact the market price of
the Common Stock or, alternatively, that any increased price per share of the
Common Stock immediately after the proposed Reverse Split will be sustained for
any prolonged period of time.
BOARD DISCRETION TO IMPLEMENT REVERSE SPLIT
If the Reverse Split is approved by the stockholders of the Company at
the Annual Meeting, the Reverse Split will be effected, if at all, only upon a
determination by the Board in its sole discretion, that the Reverse Split is in
the best interests of the Company and its stockholders. Such determination shall
be based upon certain factors, including but not limited to, existing and
expected marketability and liquidity of the Common Stock, NASDAQ continued
listing requirements, prevailing market conditions and the likely effect on the
market price of the Common Stock. Notwithstanding approval of the Reverse Split
by the stockholders, the Board may, in its sole discretion, determine not to
effect the Reverse Split prior to the Company's Annual Meeting of Stockholders
in 2000. If the Board does not implement the Reverse Split prior to such
meeting, stockholder approval again would be required prior to implementing any
reverse stock split.
EFFECTS OF THE REVERSE SPLIT ON REGISTRATION, VOTING RIGHTS AND PREFERRED STOCK
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") , and the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Split will not affect the registration of the Common
Stock under the Exchange Act. After the Reverse Split, the Common Stock will
continue to be reported on NASDAQ under the symbol "AHOM" (although NASDAQ will
add the letter "D" to the end of the trading symbol for a period of 20 trading
days to indicate the Reverse Split has occurred).
Proportionate voting rights and other rights of the holders of Common
Stock will not be affected by the Reverse Split (other than as a result of
rounding as described below). For example, a holder of 2% of the voting power of
the outstanding shares of Common Stock immediately prior to the effective time
of the Reverse Split will generally continue to hold 2% of the voting power of
the outstanding shares of Common Stock after the Reverse Split. Although the
Reverse Split will not affect the rights of stockholders or any stockholder's
proportionate equity interest in the Company (subject to rounding as described
below), the number of authorized shares of Common Stock will not be reduced and
will increase the ability of the Board to issue such authorized and unissued
shares without further stockholder action. The effective increase in the number
of authorized but unissued shares of Common Stock may be construed as having an
anti-takeover effect by permitting the issuance of shares to purchasers who
might oppose a hostile takeover bid or oppose any efforts to amend or repeal
certain provisions of
10
<PAGE> 12
the Company's Articles or Bylaws. The number of stockholders of record will not
be affected by the Reverse Split (See "Exchange for Fractional Shares" below).
EFFECT ON STOCK OPTIONS AND WARRANTS
The Reverse Split will effect a reduction in the number of shares of
Common Stock available for issuance under the Company's 1991 Plan and 1995 Plan
(collectively, the "Option Plans") in proportion to the exchange ratio of the
Reverse Split. The aggregate number of shares of Common Stock currently
authorized for issuance under the Option Plans is 3,700,000 (prior to giving
effect to the Reverse Split). The issuance of such additional authorized shares,
if such shares were issued, may have the effect of diluting the earnings per
share and book value per share, as well as the stock ownership and voting
rights, of outstanding Common Stock.
The Company also has outstanding stock options and warrants to purchase
shares of the Common Stock. Under the terms of the outstanding stock options and
warrants, the Reverse Split will effect a reduction in the number of shares of
Company Common Stock issuable upon exercise of such stock options and warrants
in proportion to the exchange ratio of the Reverse Split and will effect a
proportionate increase in the exercise price of such outstanding stock options
and warrants. For example, an option or warrant to purchase 100 shares of Common
Stock at $1.20 per share would become an option to purchase 25 shares of Common
Stock at an exercise price of $4.80 per share. In connection with the Reverse
Split, the number of shares of Common Stock issuable upon exercise of
outstanding stock options and warrants will be proportionately adjusted to the
nearest whole share, and no cash payment will be made in respect of such
adjustment.
EFFECTIVE DATE
The Reverse Split would become effective as of the close of business on
the date of filing the Certificate of Amendment with the office of the Secretary
of State of the State of Delaware (the "Effective Date"). Except as explained
below with respect to fractional shares, on the Effective Date, every four (4)
shares of Common Stock issued and outstanding immediately prior thereto (the
"Old Common Stock") will be, automatically and without any action on the part of
the stockholders, converted into one (1) share of the Common Stock, proposed to
be issued in connection with the Reverse Split (the "New Common Stock").
EXCHANGE FOR FRACTIONAL SHARES
No fractional shares of New Common Stock will be issued as a result of
the Reverse Split and no cash will be paid in lieu of fractional shares. The
number of shares of New Common Stock issuable in exchange for shares of Old
Common Stock pursuant to the Reverse Split will be rounded to the nearest whole
share. For example, a holder of 4 or 5 shares of Old Common Stock would receive
one share of New Common Stock upon exchanges and a holder of 6, 7 or 8 shares of
Old Common Stock would receive 2 shares of New Common Stock upon exchange.
Further, in order that the number of the Company's shareholders will not
decrease as a result of the Reverse Split, any holder who beneficially owns 3 or
fewer shares of Old Common Stock prior to the Reverse Split will receive in
exchange for such share(s) one share of New Common Stock pursuant to the Reverse
Split.
EXCHANGE OF STOCK CERTIFICATES
Shortly after the Effective Date, each holder of an outstanding
certificate theretofore representing shares of Old Common Stock will receive
from SunTrust Bank, Inc., the Company's exchange agent (the "Exchange Agent")
for the Reverse Split, instructions for the surrender of such certificate to the
Exchange Agent. Such instructions will include a form of Transmittal Letter to
be completed and returned to the Exchange Agent. As soon as practicable after
the surrender to the Exchange Agent of any certificate which prior to the
Reverse Split represented shares of Old Common Stock, together with a duly
executed Transmittal Letter and any other documents the Exchange Agent may
specify, the Exchange Agent shall deliver to the person in whose name such
certificate had been issued certificates registered in the name of such person
representing the number of full shares of New Common Stock into which the shares
of Old Common Stock previously represented by the surrendered certificate shall
have been reclassified. Each certificate representing shares of New Common Stock
issued in connection with the Reverse Split will continue to bear any legends
restricting the transfer of such shares that were borne by the surrendered
11
<PAGE> 13
certificates representing the shares of Old Common Stock. Until surrendered as
contemplated herein, each certificate which immediately prior to the Reverse
Split represented any shares of Old Common Stock shall be deemed at and after
the Reverse Split to represent the number of full shares of New Common Stock
contemplated by the preceding sentence.
No service charges, brokerage commissions or transfer taxes shall be
payable by any holder of any certificate which prior to approval of the Reverse
Split represented any shares of Old Common Stock, except that if any
certificates of New Common Stock are to be issued in a name other than that in
which the certificates for shares of Old Common Stock surrendered are
registered, it shall be a condition of such issuance that (i) the person
requesting such issuance shall pay to the Company any transfer taxes payable by
reason thereof (or prior to transfer of such certificate, if any) or establish
to the satisfaction of the Company that such taxes have been paid or are not
payable, (ii) such transfer comply with all applicable federal and state
securities laws, and (iii) such surrendered certificate be properly endorsed and
otherwise be in proper form for transfer.
NO DISSENTERS' RIGHTS
Under Delaware law, stockholders of the Company are not entitled to
dissenters' rights or any comparable appraisal rights with respect to the
proposed Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
A summary of the federal income tax consequences of the proposed
Reverse Split to the Company and to individual stockholders is set forth below.
The following discussion is based upon present federal income tax law. The
discussion is not intended to be, nor should it be relied on as, a comprehensive
analysis of the tax issues arising from or relating to the proposed Reverse
Split. In addition, the Company has not and will not seek an opinion of counsel
or a ruling from the Internal Revenue Service regarding the federal income tax
consequences of the proposed Reverse Split. Accordingly, stockholders are
advised to consult their own tax advisors for more detailed information
regarding the effects of the proposed Reverse Split under applicable federal,
state, local and foreign income tax laws.
It is intended that the Reverse Split will constitute a reorganization
(a "Reorganization") within the meaning of Section 368 (a) (1) (E) of the
Internal Revenue Code of 1996, as amended. Assuming that the Reverse Split
qualifies as a Reorganization, the following federal income tax consequences
should result:
(i) A stockholder will not recognize any gain or loss as a result
of the Reverse Split. To the extent a stockholder receives
additional stock in lieu of a fractional share, for tax
purposes, the stockholder will receive a distribution of stock
in the Company which is not included in gross income. To the
extent a stockholder receives a smaller proportionate interest
in the company in lieu of a fractional share, such stockholder
will have an unrealized loss.
(ii) The aggregate tax basis of the shares of New Common Stock
received by the stockholder pursuant to the Reverse Split will
equal the aggregate tax basis of the shares of Old Common
Stock held by the stockholder immediately prior to the
Effective Date of the Reverse Split. The stockholder will be
able to "tack" the holding period of the Old Common Stock
prior to the Reverse Split to the holding period of the New
Common Stock received by the stockholder as a result of the
Reverse Split, provided that the shares of Old Common Stock
were capital assets in the hands of the stockholder; and
(iii) The Company will not recognize gain or loss as a result of the
Reverse Split.
12
<PAGE> 14
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding and entitled to vote is necessary to approve the
Reverse Split and the Amendment to the Articles. AHOM Holdings, Inc. intends to
vote all of its shares in favor of the Reverse Split and the Amendment to the
Articles. (See "Stock Ownership of Directors, Executive Officers and Principal
Holders" appearing on page 14 of this Proxy Statement.) The persons named on the
proxy card intend to vote all valid proxies they receive in accordance with the
instructions of the stockholders giving the proxies and, in the absence of
instructions, for the Reverse Split and the Amendment to the Articles.
THE BOARD RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN FAVOR
OF THE ONE-FOR-FOUR REVERSE STOCK SPLIT.
13
<PAGE> 15
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The following table contains stockholding information as of February
17, 1999 for (i) persons known to us to be holders of 5% or more of the
Company's Common Stock, (ii) each Director, including those nominated for
re-election, (iii) each of the executive officers named in the Summary
Compensation Table on page 20, and (iv) all Directors and executive officers as
a group. Unless otherwise indicated, all holdings are of record and beneficial.
Ownership of the Company's Common Stock is shown on a "beneficial"
basis. Generally, a person "beneficially owns" shares if he or she either has
the right to vote those shares or dispose of them. Consequently, more than one
person may be considered beneficially to own the same shares.
In this Proxy Statement, unless otherwise specifically noted, a person
has sole voting and dispositive power for the shares shown as beneficially owned
by him or her. Shares shown as beneficially owned may include shares that a
person has a right to acquire by exercising options on or before April 18, 1999.
The percentages shown in the table compare a person's beneficially owned shares
with the total number of shares of the Company's Common Stock outstanding on
February 17, 1999 (being 14,985,959 shares), plus, as to each person, the number
of shares deemed owned by him because of his right to acquire them by exercising
options and warrants on or before April 18, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED TOTAL SHARES
- ---- ------------------ -------------
<S> <C> <C>
Counsel Corporation(1)............................. 3,979,625 26.6%
130 King Street West, Suite 1300
Toronto, Ontario, Canada MX5 1E3
J.&W. Seligman & Co. Incorporated(2)............... 2,120,772 14.2
100 Park Avenue
New York, New York 10017
Putnam Investments Inc.(3)......................... 929,900 6.2
One Post Office Square
Boston, Massachusetts 02109
Thomson Horstmann & Bryant, Inc.(4)................ 885,200 5.9
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Joseph F. Furlong, III(5).......................... 364,551 2.4
Thomas E. Mills(6)................................. 17,500 *
Kathey S. Palmer(7)................................ 50,043 *
Mary Ellen Rodgers(8).............................. 58,132 *
David R. Gnass(9).................................. 817 *
Rita N. Hill(10)................................... 72,639 *
Edward K. Wissing(11).............................. 406,564 2.7
Allan C. Silber(1,12).............................. 12,000 *
Henry T. Blackstock(13)............................ 12,000 *
Edward Sonshine(13)................................ 12,000 *
Morris A. Perlis(14)............................... 12,000 *
Thomas A. Dattilo(15).............................. 34,500 *
Mark Manner(16).................................... 27,000 *
Malcolm MacKenzie(17).............................. 7,500 *
All Directors and named executive officers
as a group (18) (14 persons)..................... 1,080,246 7.2
</TABLE>
- -----------------
* Indicates less than 1% ownership.
14
<PAGE> 16
(1) Counsel Corporation, a Toronto, Ontario, Canada corporation, owns 100% of
Counsel Healthcare Assets Inc., which owns 100% of Counselcare Ltd., which
owns 100% of DCAmerica Inc., which owns 100% of AHOM Holdings, Inc., which
directly beneficially owns the shares of Common Stock listed in the table.
Directors Silber, Sonshine and Perlis are directors of Counsel Corporation
and Counsel Healthcare Assets, Inc., and Directors Silber and Perlis are
directors of Counselcare Ltd., DCAmerica Inc. and AHOM Holdings, Inc.
Director Silber beneficially owns or controls approximately 17% of the
common stock of Counsel Corporation. Director Sonshine owns approximately
1% of Counsel Corporation's common stock, and Director Perlis owns
approximately 2% of Counsel Corporation's common stock. All of the
Directors listed in this footnote (1) disclaim beneficial ownership of
shares of the Company's Common Stock in their capacity as directors of
Counsel Corporation, Counselcare Healthcare Assets Inc., Counselcare Ltd.,
DCAmerica Inc. and AHOM Holdings, Inc. Director Silber also disclaims
beneficial ownership of shares of the Company's Common Stock in his
capacity as a shareholder of Counsel Corporation.
(2) Ownership information included in the table is based on a Schedule 13G
filed on February 10, 1999 by J. & W. Seligman & Co. Incorporated claiming
no shared voting and dispositive power of the 2,120,772 shares beneficially
owned directly and by William C. Morris, as owner of a majority of the
outstanding voting securities of J. & W. Seligman & Co. Incorporated, who
may be deemed to beneficially own the shares reported therein.
(3) Ownership information included in the table is based on a Schedule 13G
filed on February 4,1999 by Putnam Investments, Inc., claiming shared
voting power of 451,100 shares and dispositive power of 929,900 shares
directly and through its subsidiary.
(4) Ownership information included in the table is based on a Schedule 13G/A
filed on January 22, 1999 by Thomson Horstmann & Bryant, Inc., claiming
sole voting power of 614,200 shares and dispositive power of 885,200
shares.
(5) The amount shown includes 16,006 shares subject to a stock purchase warrant
with an exercise price of $7.33 per share, which warrant was granted in
connection with consulting services provided to the Company. The amount
also includes 15,000 shares purchasable upon exercise of options at $10.04
per share, 7,500 shares purchasable upon exercise of options at $16.50 per
share and 300,000 shares purchasable upon exercise of options at $2.125 per
share, all such options being issued under the 1991 Nonqualified Stock
Option Plan (the "1991 Plan"). The amount also includes shares purchasable
upon exercise of options issued under the 1995 Nonqualified Stock Option
Plan for Directors (the "1995 Plan"), being 3,000 shares at a $19.67
per-share exercise price, 3,000 shares at a $26.25 per-share exercise
price, 3,000 shares at a $21.06 per-share exercise price and 3,000 shares
at a $1.69 per-share exercise price.
(6) The amount shown includes represents 17,500 shares issued under the 1991
Plan purchasable at a $2.125 per-share exercise price.
(7) The amount shown includes shares purchasable upon exercise of options
issued under the 1991 Plan: 7,500 shares at a $10.00 per-share exercise
price, 9,000 shares at a $16.50 per-share exercise price, 7,500 shares at a
$17.50 per-share exercise price, 6,000 shares at a $21.50 per-share
exercise price, 10,000 shares at a $18.125 per-share exercise price and
8,750 at a $2.125 per-share exercise price.
(8) The amount shown includes shares purchasable upon exercise of options
issued under the 1991 Plan: 30,000 shares at a $22.50 per-share exercise
price, 12,000 shares at a $21.50 per-share exercise price, and 15,000
shares at a $18.125 per-share exercise price.
(9) The amount shown excludes options to purchase 59,168 shares that expired
in February 1999.
(10) The amount shown includes shares purchasable upon exercise of options
issued under the 1991 Plan, 15,000 shares at $16.50 per-share exercise
price, 30,000 shares at a $17.50 per-share exercise price, 12,000 shares at
a $21.50 per-share exercise price, and 15,000 shares at a $18.125 per-share
exercise price.
(11) The amount shown includes shares purchasable upon exercise of options
issued under the 1991 Plan and additional shares purchasable upon exercise
of options issued under the 1995 Plan. Such number of shares and respective
per-share exercise prices are as follows: Under the 1991 Plan - 37,500
shares at $15.83, 75,000 shares at $16.50, 225,000 shares at $17.50 and
50,000 at $18.125. Under the 1995 Plan - 3,000 shares at $19.67, 3,000
shares at $26.25, 3,000 shares at $21.06 and 3,000 at $1.69.
(12) The amount shown excludes options issued under the 1991 Plan to purchase
350,000 shares voluntarily surrendered in December 1998 and includes shares
purchasable upon exercise of options issued under the 1995 Plan. Such
number of shares and respective per-share exercise prices under the 1995
Plan are as follows: 3,000 shares at a $19.67 per-share exercise price,
3,000 shares
15
<PAGE> 17
at a $26.25 per-share exercise price, 3,000 shares at a $21.06 per-share
exercise price and 3,000 at a $1.69 per-share exercise price. The amount
shown does not include shares of Common Stock beneficially owned by
Counsel. See footnote (1) above.
(13) The amount shown includes shares purchasable upon exercise of options
issued under the 1995 Plan, being 3,000 shares at a $19.67 per-share
exercise price, 3,000 shares at a $26.25 per-share exercise price, 3,000
shares at a $21.06 per-share exercise price and 3,000 at a $1.69 per-share
exercise price.
(14) The amount shown excludes options issued under the 1991 Plan to purchase
350,000 shares voluntarily surrendered in December 1998 and includes shares
purchasable upon exercise of options issued under the 1995 Plan, 3,000
shares at a $19.67 per-share exercise price, 3,000 shares at a $26.25
per-share exercise price, 3,000 shares at a $21.06 per-share exercise price
and 3,000 shares at a $1.69 per-share exercise price.
(15) The amount shown includes shares purchasable upon exercise of options
issued under the 1991 Plan and additional shares purchasable upon exercise
of options issued under the 1995 Plan. Such number of shares and respective
per-share exercise prices are as follows: Under the 1991 Plan - 15,000
shares at $10.04 and 7,500 shares at $16.50. Under the 1995 Plan - 3,000
shares at $19.67, 3,000 shares at $26.25, 3,000 shares at $21.06 and 3,000
at $1.69.
(16) The amount shown includes 7,500 shares purchasable upon exercise of options
at $20.67 issued under the 1991 Plan and additional shares purchasable upon
exercise of options issued under the 1995 Plan, being 7,500 shares at a
$20.67 per-share exercise price, 3,000 shares at a $19.67 per-share
exercise price, 3,000 shares at a $26.25 per-share exercise price, 3,000
shares at a $21.06 per-share exercise price and 3,000 shares at a $1.69
per-share exercise price.
(17) The amount shown includes 7,500 shares issued under the 1995 Plan
purchasable at a $19.00 per-share exercise price.
(18) The amount shown includes 924,750 shares purchasable upon exercise of
options issued under the 1991 Plan, 121,500 shares purchasable upon
exercise of options issued under the 1995 Plan, and 16,006 shares
purchasable upon exercise of a warrant.
16
<PAGE> 18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, its Directors, and
persons who own more than 10% of its Common Stock to file reports regarding
their stockholdings in the Company with the Securities and Exchange Commission
("SEC") and NASDAQ. They are required to send the Company copies of all Section
16(a) reports they file.
Based solely on representations of the Company's Directors and
executive officers and our review of reports on file, we believe that all such
reports were timely filed.
EXECUTIVE OFFICERS
This table provides biographical information regarding the Company's
executive officers:
<TABLE>
<CAPTION>
HIS OR PRINCIPAL OCCUPATIONS
OFFICER'S NAME HER AGE DURING THE LAST FIVE YEARS
- -------------- ------- ----------------------------------------------------
<S> <C> <C>
Joseph F. Furlong 50 Mr. Furlong has served as a Director of the Company
since June 1994 and as its President and Chief
Executive Officer since November 1998. He has
served as President of Adirondack Capital
Advisors, LLC, a financial advisory firm, since May
1996.
Mr. Furlong was a partner of Colman Furlong &
Co., a merchant banking firm, from February 1991 to
May 1996. He served as a director of Pharmerica from
December 1994 until December 1997.
Malcolm MacKenzie 43 Mr. MacKenzie served as a Director of the Company from
July 1998 to February 1999 and the President and Chief
Executive Officer of the Company from July 1998 to
November 1998. From 1994 through July 1998, Mr.
MacKenzie was affiliated with Monitor Company, a
corporate consulting company, and from 1990 through 1995
was President of Arcama Recycling Corporation.
Edward K. Wissing 61 Mr. Wissing served as the President and Chief Executive
Officer of the Company from May 1994 until July 1998 and was
the President and Chief Executive Officer of AHPT, from
February 1983 to July 1998. From October 1991 to May 1994,
he was Executive Vice President of Diversicare Inc., a
long-term care company. Since August 1997, he has been a
director of Psychiatric Solutions, Inc., a psychiatric and
behavioral health practice management company.
Marilyn O'Hara 53 Ms. O'Hara has been the Company's Senior Vice President,
Chief Financial Officer and Secretary since January 1999.
Ms. O'Hara was Chief Financial Officer for U.S. Laboratory
Corp., a clinical laboratory, from May 1996 to December
1998. Ms. O'Hara was the Treasurer of Medicalab, Inc.,
a clinical laboratory, from October 1988 to April 1996.
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
HIS OR PRINCIPAL OCCUPATIONS
OFFICER'S NAME HER AGE DURING THE LAST FIVE YEARS
- -------------- ------- -------------------------------------------------------
<S> <C> <C>
Thomas E. Mills 44 Mr. Mills rejoined the company as Senior Vice President
and Chief Operating Officer in November 1998.
Mr. Mills served as a consultant with INCON Care Group,
Inc., a consulting company, during portions of 1998.
Mr. Mills was the Company's Senior Vice President-Strategic
Alliances from February 1996 until December 1997.
He was the Company's Senior Vice President and Chief
Operating Officer from May 1994 to February 1996, and
its Secretary from May 1994 to June 1994. Mr. Mills was
Chief Operating Officer and Vice President of AHPT from
August 1992 to May 1994, and Senior Vice President
of AHPT from February 1992 to August 1992.
Kathey S. Palmer 41 Ms. Palmer has been the Company's Senior Vice President of
Marketing, Investor Relations and Sales Support since August
1997. From December 1994 to August 1997, she served as
Vice President of Marketing and Investor Relations, and
from November 1991 to December 1994 she was Vice
President of Marketing.
Mary Ellen Rodgers 46 Ms. Rodgers was the Company's Senior Vice President, Chief
Financial and Accounting Officer and Secretary from April
1996 through December 1998. She was Financial
Director/Controller of Eli Lilly and Company (Information
Technology Division), an international pharmaceutical
company, from September 1994 to October 1995, and Controller
of Eli Lilly and Company (Lilly Research Laboratories) from
March 1990 to May 1994. She has served on the board of
Peoples Bank & Trust Company, Indianapolis, Indiana since
April 1991.
David R. Gnass 45 Mr. Gnass served as the Company's Senior Vice President from
June 1996 until November 1998, and as its Chief Operating
Officer from October 1997 until November 1998. He was Senior
Vice President of Homedco, Inc., a home health care company,
from April 1993 to June 1995, and Vice President and General
Manager of Homedco, Inc. from January 1992 to April 1993.
Rita N. Hill 43 Ms. Hill served as the Company's Senior Vice President-
Business Development from February 1997 until October 1998,
Vice President and Assistant Secretary from July 1996 until
February 1997, and the Vice President and Assistant Secretary
of AHPT from April 1996 until October 1998. She was the
Company's Vice President-Business Development from April
1994 to February 1997, Vice President - Development of
Diversicare Inc. from January 1994 to April 1994, and Vice
President - Finance of Diversicare Inc. from March 1992 to
January 1994.
</TABLE>
18
<PAGE> 20
EXECUTIVE COMPENSATION
The following table provides compensation information for the 1998,
1997 and 1996 fiscal years regarding the Company's present and former chief
executive officers and, on December 31, 1998, the Company's three other named
executive officers. The principal positions given in the table are as of
December 31, 1998. Also listed is compensation information for the 1998, 1997
and 1996 fiscal years regarding other of the Company's named executive officers
in 1998 (Mr. Gnass and Ms. Hill) who were not serving as executive officers on
December 31, 1998. Mr. Wissing's employment terminated on July 6, 1998, Ms.
Hill's employment terminated effective October 16, 1998, Mr. MacKenzie's
employment terminated on November 6, 1998, Mr. Gnass' employment terminated on
November 25, 1998, and Ms. Rodgers' employment terminated on December 31, 1998.
Instead of awarding annual bonuses in cash for 1996 performance, the
Company purchased split-dollar life insurance policies for the benefit of
certain management personnel, including the named executive officers. The
Company decided to purchase such insurance policies again to award certain
management personnel for 1997 performance, however, each employee was entitled
to elect to receive up to one-half (1/2) of his or her annual incentive bonus in
cash instead. Each eligible named executive officer elected to receive one-half
(1/2) of the 1997 annual incentive bonus in cash. Each amount listed under the
column titled "Other Annual Compensation" is the imputed income received by the
named executive officer due to the insurance policies' death benefit, as
calculated according to the Internal Revenue Service. In addition, each amount
listed under the column titled "All Other Compensation" reflects additional
benefits attributed to the named executive officer based on the premium paid by
the Company to buy the policies. For 1997 one-half (1/2) of the annual incentive
bonus is reflected in the "Bonus" column based on each executive's election
described above. The Company is not awarding annual bonuses to management
personnel for 1998 performance.
19
<PAGE> 21
Perquisites for each executive officer are in amounts which do not
require disclosure.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------------
Awards Payouts
------------------------ ---------
Securities Long-Term
Other Restricted Underlying Incentive
Annual Stock Options/ Plan All Other
Name and Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation(1)
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ---- -------- ------- ------------ ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph F. Furlong III 1998 55,000* -0- -0- -0- 303,000(2) -0- -0-
President and CEO 1997 -0- -0- -0- -0- 3,000(3) -0- -0-
1996 -0- -0- -0- -0- 3,000(3) -0- -0-
Malcolm MacKenzie, 1998 117,640* -0- -0- -0- 7,500(3) -0- -0-
Former President and 1997 -0- -0- -0- -0- -0- -0- -0-
CEO 1996 -0- -0- -0- -0- -0- -0- -0-
Edward K. Wissing 1998 243,750* -0- 925 -0- 3,000(3) -0- 1,142,750
Former President and 1997 300,000 48,750 880 -0- 53,000(3)(5) -0- 66,750
CEO 1996 275,000 -0- 952 -0- 3,000(3) -0- 140,250
Thomas E. Mills 1998 27,972* -0- 182 -0- 70,000(6) -0- -0-
Senior Vice President - 1997 156,000 -0- 167 -0- -0- -0- 43,890
Strategic Alliances 1996 154,000 -0- 155 -0- 8,000(4) -0- 9,240
Kathey S. Palmer 1998 122,597 -0- 76 -0- 35,000(6) -0- 6,744
Senior Vice President 1997 100,000 10,150 75 -0- 15,000(5) -0- 16,487
of Marketing, Investor 1996 91,592 -0- 68 -0- 8,000(4) -0- 23,895
Relations and Sales
Support
Mary Ellen Rodgers 1998 157,500* -0- 129 -0- -0- -0- 232,615
Former Senior Vice 1997 157,500 17,916 122 -0- 15,000(5) -0- 27,704
President, Chief 1996 112,500* -0- 116 -0- 42,000(4) -0- 40,814
Financial Officer
and Secretary
David R. Gnass 1998 160,685* -0- 168 -0- -0- -0- 190,000
Former Senior Vice 1997 170,000 10,413 154 -0- 25,000(5) -0- 10,412
President and Chief 1996 80,000* -0- 153 -0- 57,500(4) -0- 33,000
Financial Officer
Rita N. Hill 1998 104,083* -0- 237 -0- -0- -0- 212,124
Former Senior Vice 1997 131,250 26,300 223 -0- 15,000(5) -0- 34,158
President Business 1996 125,000 -0- 222 -0- 12,000(4) -0- 69,663
Development and
Assistant Secretary
</TABLE>
- ---------------------
* The Company employed Mr. Furlong on November 6, 1998, Mr.
MacKenzie from July 8, 1998 until November 6, 1998, Mr.
Wissing until July 6, 1998, Mr. Mills on November 26, 1998,
Ms. Rodgers from April 1996 through December 1998, Mr. Gnass
from June 1996 until November 25, 1998, and Ms. Hill until
October 16, 1998. Accordingly, each of these individuals,
except Ms. Rodgers, were paid less than a full year's
compensation for 1998 and, in the case of Ms. Rodgers and Mr.
Gnass, less than a full year's compensation in 1996. Ms.
O'Hara was employed January 1999 and, therefore, is not
included in this table.
(1) Amounts listed reflect matching contributions made by the
Company under its Supplemental Executive Retirement Plan
("SERP") in 1997 and 1996. The Company terminated the SERP in
1999. In addition, amounts for 1996 and 1997, set forth below,
also reflect additional benefits based on premiums paid by the
Company to buy split-dollar life insurance policies
benefitting the named executive officers. The Company did not
buy split-dollar life insurance policies in 1998. The
following is a breakdown of the such amounts:
<TABLE>
<CAPTION>
SERP Matching Benefit Based on Insurance
Year Contributions Premium
---- ------------- --------------------------
<S> <C> <C> <C>
Joseph F. Furlong 1998 $ -0- -0-
1997 -0- -0-
1996 -0- -0-
Malcolm MacKenzie 1998 -0- -0-
1997 -0- -0-
1996 -0- -0-
Edward K. Wissing 1998 71,500 -0-
1997 18,000 48,750
1996 16,500 123,750
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
SERP Matching Benefit Based on Insurance
Year Contributions Premium
---- ------------- --------------------------
<S> <C> <C> <C>
Thomas E. Mills 1998 -0- -0-
1997 9,360 -0-
1996 9,240 34,650
Kathey S. Palmer 1998 6,744 -0-
1997 6,337 10,150
1996 5,595 18,300
Mary Ellen Rodgers 1998 9,115 -0-
1997 9,789 17,915
1996 3,014 37,800
David R. Gnass 1998 -0- -0-
1997 -0- 10,412
1996 -0- 33,000
Rita N. Hill 1998 7,874 -0-
1997 7,858 26,300
1996 7,413 62,250
</TABLE>
Amounts listed under "All Other Compensation" additionally include
severance payments made to Messrs. Wissing and Gnass, and severance
and consulting payments made to Ms. Rodgers and Ms. Hill. (See
"Employment and Other Agreements" herein below.)
(2) Amounts include options granted under 1991 Plan upon employment and
1995 Plan for services as Director.
(3) Amounts reflect options granted under the 1995 Plan for services
as a Director.
(4) Amounts include options granted in the first fiscal quarter of 1997
that relate to 1996 performance.
(5) Amounts include options granted in the first fiscal quarter of 1998
that relate to 1997 performance.
(6) Amounts include options granted in the last fiscal quarter of 1998
that relate to 1998 performance.
EMPLOYMENT AND OTHER AGREEMENTS
Joseph F. Furlong, III
Mr. Furlong assumed the positions of President and Chief Executive
Officer of the Company on November 6, 1998. Under the terms of Mr. Furlong's
Employment Agreement, he receives an annual base salary of $360,000.
Additionally, the Company granted him options pursuant to the 1991 Nonqualified
Stock Option Plan to acquire 300,000 shares of the Company's Common Stock,
subject to the conditions of that Plan.
Both Mr. Furlong and the Company can terminate the Employment Agreement
without cause at any time upon four (4) weeks prior written notice to the other.
The Company may also terminate the Employment Agreement at anytime upon written
notice for "cause" which is defined as (i) gross or willful misconduct, (ii)
being charged or convicted of either a felony or a misdemeanor involving moral
turpitude, (iii) disability to such an extent that Mr. Furlong is unable to
perform services hereunder for a period of one month, or (iv) Mr. Furlong's
death.
Edward K. Wissing
On July 6, 1998, the Company and Mr. Wissing entered into a Separation
Agreement wherein Mr. Wissing resigned from his positions as President and Chief
Executive Officer and from all positions that he held as a director, officer or
employee of any subsidiary of the Company, effective September 30, 1998. Mr.
Wissing remains a director of the Company. The Company agreed to pay Mr. Wissing
his regular salary through September 30, 1998, plus $1,087,917, comprised of the
following components: (i) $975,000 being 300% of his current base salary, (ii)
$16,667, being deferred compensation, (iii) $65,000, being incentive
compensation earned in 1997, and (iv) $31,250, being accrued vacation pay.
All options granted to Mr. Wissing under the Company's option plans
fully vested on September 30, 1998 and remain exercisable for the terms set
forth in each grant. The Company shall continue in force certain benefits and
perquisites to be received by Mr. Wissing through September 30, 2001 or pay in
lump sum the value of such benefits and perquisites.
Upon his resignation of employment, Mr. Wissing is prohibited from
competing with the Company through September 30, 2000.
21
<PAGE> 23
Malcolm MacKenzie
On July 6, 1998, Malcolm MacKenzie agreed to serve as President and
Chief Executive Officer of and a Director of the Company. On November 6 1998,
Mr. Furlong assumed the positions of Mr. MacKenzie when the Company and Mr.
MacKenzie were unable to reach agreement on the terms of an employment
agreement. During 1998, Mr. MacKenzie was paid $117,640 in compensation by the
Company, and was granted options to acquire 7,500 shares of the Company's Common
Stock pursuant to the 1995 Plan. On February 16, 1999, the Company and Mr.
MacKenzie entered into a Separation and Release Agreement wherein Mr. MacKenzie
will be paid $275,000 over a twelve month period. The stock options granted to
Mr. MacKenzie under the 1995 Plan will expire on May 16, 1999.
Kathey S. Palmer
On December 23, 1997, the Company entered into a confidentiality,
non-competition and severance pay agreement with Kathey S. Palmer. If the
Company terminates Ms. Palmer's employment either (i) "without cause" or (ii)
within one year after a change in control, Ms. Palmer will receive a severance
payment in an amount equal to the following: (i) her annual base salary
(currently $130,000), plus $6,000, her annual vehicle allowance, plus (ii) an
incentive compensation amount equal to the annual incentive bonus she received
during the last fiscal year ($0.00 in 1998 and $10,150 in 1997) multiplied by a
fraction, the numerator of which is the number of months Ms. Palmer is employed
by the Company during the current year, and the denominator of which is twelve.
In addition, upon termination resulting from a change in control of the Company,
the Company will continue all Ms. Palmer's employee benefits for one year. Upon
a change in control, Ms. Palmer will be entitled to receive her vested account
balances under the Company's Stock Purchase Plan.
Upon a change in control of the Company, any stock options granted to
Ms. Palmer will be fully vested, whether or not she is terminated, subject to
the terms of the 1991 Plan.
Termination "without cause" shall not include: (i) termination "for
cause," (ii) resignation by Ms. Palmer or (iii) her death or disability. "Cause"
shall mean: (i) insubordination, malfeasance or misconduct by Ms. Palmer, (ii)
Ms. Palmer being charged with or conviction of felony offense or misdemeanor
involving moral turpitude, and (iii) material breach of her employment
agreement.
Upon termination of employment, Ms. Palmer is prohibited from competing
with the Company for one year.
Mary Ellen Rodgers
In December 1998, the Company entered into a severance agreement with
Mary Ellen Rodgers. Under the terms of that agreement, Ms. Rodgers resigned from
her position as an officer of the Company, effective December 31, 1998, and
received a severance payment equaling (i) $157,500, being 12 times her current
monthly base salary (not including incentive compensation or benefits), plus
(ii) $6,000, being 12 times her monthly vehicle allowance. In addition, in
January 1999, Ms. Rodgers was paid $50,000 in lieu of incentive compensation. In
addition to such 12-month severance, if Ms. Rodgers has not then secured
employment with annualized compensation of at least $125,000, the Company will
pay her additional severance, for up to six (6) months, a monthly amount equal
to her last monthly base salary (not including incentive compensation or
benefits) plus $500. The Company will continue medical and dental insurance
employee benefits to which Ms. Rodgers was entitled immediately prior to her
resignation for up to 18 months.
Pursuant to the terms of Ms. Rodgers' severance agreement, on December
31, 1998, all unvested options granted under the Company's 1991 Plan immediately
vested and shall remain exercisable until December 31, 2001.
The Company agreed to pay, beginning on January 1, 1999, $24,000 to Ms.
Rodgers in exchange for 12 months of consulting services to the Company, and
agreed to pay her up to $10,000 for services provided as reimbursement for any
outplacement services which may be engaged by Ms. Rodgers. Upon termination of
employment, Ms. Rodgers is prohibited from competing with the Company for one
year.
David R. Gnass
In November 1998, Mr. Gnass resigned from his position as an officer of
the Company. Pursuant to the Employment Evaluation Agreement entered into by Mr.
Gnass and the Company on July 15, 1998, Mr. Gnass received a severance payment
in the amount of $190,000. In addition, the Company agreed to continue for 12
months following his resignation, all employee benefits to which he was entitled
immediately prior to his resignation. Upon termination of employment, Mr. Gnass
is prohibited from competing with the Company for one year.
22
<PAGE> 24
Rita N. Hill
Ms. Hill resigned from her position as an officer of the Company
effective October 16, 1998. Under the terms of her severance agreement, Ms. Hill
received a severance payment equaling (i) $131,250, being 12 times her current
monthly base salary (not including incentive compensation or benefits), plus
(ii) $6,000, being 12 times her monthly vehicle allowance. In addition, in
January 1999, the Company paid Ms. Hill $50,000 in lieu of incentive
compensation. The Company will continue medical and dental employee insurance
benefits to which Ms. Hill was entitled on the effective date of her
resignation, until the earlier of (i) October 16, 1999 or (ii) when Ms. Hill
receives medical, dental and/or life insurance benefits from a third party.
Upon her termination all unvested options granted to Ms. Hill under the
Company's 1991 Plan immediately vested and remain execisable until October 16,
2001. The Company also accelerated Ms. Hill's vesting schedule under its
Supplemental Executive Retirement Plan in order for her contribution account to
be fully vested. Ms. Hill is entitled to her account balances under the
Company's Supplemental Executive Retirement Plan and the Stock Purchase Plans as
of October 16, 1998.
The Company agreed to pay $24,000 to Ms. Hill in exchange for 2 years
consulting services to the Company, and agreed to pay her up to $10,000 for
services provided as reimbursement for any outplacement services which may be
engaged by Ms. Hill. Upon termination of employment, Ms. Hill is prohibited from
competing with the Company for one year.
23
<PAGE> 25
OPTION GRANTS
The following table provides information concerning stock option grants
made in 1998 under both the 1991 Plan and the 1995 Plan to each of the executive
officers named in the Summary Compensation Table. In 1998, the Company granted
to employees options to purchase a total of 1,274,500 shares of Common Stock
under the 1991 Plan and under the 1995 Plan options to purchase a total of
31,500 shares of Common Stock, for a total of options to purchase 1,306,000
shares of Common Stock. The Company grants no stock appreciation rights.
Messrs. Furlong's and Wissing's options to acquire 3,000 shares of
Common Stock were granted automatically on December 31, 1998 under the 1995
Plan. Malcolm MacKenzie, the Company's former director, President and Chief
Executive Officer during part of 1998, was granted options to acquire 7,500 of
the Company's Common Stock under the 1995 Plan.
On March 20, 1998, for services performed in 1997, the Company granted
Mr. Wissing, Mr. Gnass, Ms. Rodgers, Ms. Hill and Ms. Palmer options to acquire
shares of Common Stock. For services performed in 1998, on December 9, 1998, the
Company granted Mr. Furlong, Mr. Mills and Ms. Palmer options to acquire shares
of Common Stock. The terms of the options granted in 1998 provide that the
options vest one third upon grant and one third upon each of the first two
anniversaries thereof. However, per agreement with the Company dated July 6,
1998, Mr. Wissing's options fully vested on September 30, 1998. Per agreements
with the Company, Ms. Rodgers' and Ms. Hill's options fully vested on December
31, 1998 and October 16, 1998, respectively. (See "Employment and Other
Agreements" appearing on page 21 and the "Summary Compensation Table" appearing
on page 20 of this Proxy Statement.)
The dollar amounts appearing in the table's last two columns
are the result of calculations at the 5% and 10% rates as required by the SEC.
These amounts are not intended to forecast possible future appreciation, if any,
of the Company's Common Stock price.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rate
of Stock Price Appreciation
Individual Grants For Option Term
------------------------------------------------------------------- ------------------------------
Number % of Total
of Securities Options/SARs
Underlying Granted to Exercise or
Options/SARS(1) Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/SH) Date 5% ($) 10%($)
- --------------------- --------------- -------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph F. Furlong III 3,000 .3% $ 1.69 12/31/2008 $ 3,188.50 $ 8,080.27
300,000 25.1 2.125 12/09/2008 400,920.32 1,016,010.82
Malcolm MacKenzie 7,500 .6 19.00 05/16/1999 89,617.48 227,108.30
Edward K. Wissing 50,000 4.2 18.125 03/20/2008 569,935.76 1,444,329.10
3,000 .3 1.69 12/31/2008 3,188.50 8,080.27
Thomas E. Mills 70,000 5.9 2.125 12/09/2008 93,548.08 237,069.19
Kathey S. Palmer 15,000 1.3 18.125 03/20/2008 170,980.73 433,298.73
35,000 2.9 2.125 12/09/2008 46,774.04 118,534.60
Mary Ellen Rodgers 15,000 1.3 18.125 12/31/2001 170,980.73 433,298.73
David R. Gnass 25,000 2.1 18.125 02/25/1999 284,967.88 722,164.55
Rita N. Hill 15,000 1.3 18.125 10/15/2001 170,980.73 433,298.73
</TABLE>
24
<PAGE> 26
OPTION EXERCISES AND VALUES
The following table provides information concerning exercise
of options during 1998 by the executive officers named in the Summary
Compensation Table and the year-end value of unexercised options held by each
such officer. No named executive officer exercised any options during 1998.
The Company grants no stock appreciation rights.
Options are classified as "in-the-money" (a term used in the
last column of the table) if the market value of the underlying Common Stock
exceeds the exercise price of the option. The value of such in-the-money options
is the difference between the option exercise price and $1.81, the per-share
market value of the underlying Common Stock as of December 31, 1998. Such
amounts may not necessarily be realized. Actual values realized, if any, upon
the exercise of options will be based on the market price of shares of Common
Stock at the time of exercise, and are thus dependent upon future performance of
the Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Underlying Value of Unexercised
on Exercise Value Realized Unexercised Options/SARs at In-the-Money Options/SARs at
Name (#) ($) 1998 Fiscal Year-End(#) 1998 Fiscal Year End ($)
- --------------------- ----------- --------------- ------------------------------- ---------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Joseph F. Furlong III -0- -0- 334,500/-0- 360/-0-
Malcolm MacKenzie -0- -0- 7,500/-0- -0-/-0-
Edward K. Wissing -0- -0- 399,500/-0- 360/-0-
Thomas E. Mills -0- -0- 17,500/52,500 -0-/-0-
Kathey S. Palmer -0- -0- 41,750/40,250 -0-/-0-
Mary Ellen Rodgers -0- -0- 57,000/-0- -0-/-0-
David R. Gnass -0- -0- 59,166/23,334 -0-/-0-
Rita N. Hill -0- -0- 72,000/-0- -0-/-0-
</TABLE>
25
<PAGE> 27
COMPENSATION COMMITTEE REPORT
This Compensation Committee Report is not deemed to be part of any
document filed with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") or the Exchange Act and is not to be deemed incorporated by
reference in any documents filed under the Securities Act or the Exchange Act
without the express written consent of the members of the Compensation Committee
named below.
The Compensation Committee of the Board of Directors makes decisions on
compensation of the Company's senior executives, except for decisions related to
awards under the 1991 Plan (which are made by a separate committee of the
Board). The Committee's task is to establish reasonable and appropriate
executive compensation guidelines which meet their stated purposes and
effectively serve the needs of the Company and its stockholders. The Committee's
members are Henry T. Blackstock, Thomas A. Dattilo and Allan C. Silber.
Compensation Philosophy and Policies for Executive Officers
The Company's primary goal is to provide high quality patient care
while maximizing stockholder value. The Company believes the best way to achieve
this goal is twofold: (i) to be a leader in providing relevant, high quality
health services, and (ii) to establish a reputation as a desirable employer and
responsible corporate citizen. The Compensation Committee seeks to link this
goal and the Company's compensation programs by aligning the interests of its
stockholders and management personnel, including its executive officers, and
believes this alignment increases the likelihood of the Company's success on
both a short-term and long-term basis.
The Company's executive compensation program is consistent with its
compensation program for all management levels. For example, all key employees,
including executive officers, are eligible to participate in the 1991 Plan, and
the Company has an Employee Stock Purchase Plan in which approximately 14% of
the Company's eligible employees participate.
The Company's executive compensation program supports the Company's
objective of creating stockholder value by:
- Emphasizing pay for performance by making a significant
portion of executive compensation "at risk."
- Aligning the interest of executives with the long-term
interest of stockholders by awarding stock options at current
market prices which can only have value to the executives
through long-term stock appreciation.
- Providing compensation opportunities that attract and retain
talented and committed executives on a long-term basis.
- Balancing the Company's short-term and long-term business,
financial and strategic goals.
The Company's executive compensation program is comprised of three
principal components: base salary, annual incentive bonus, and long-term
incentive opportunity through nonqualified stock options. The combination of
these various compensation elements is designed to encourage management to
balance the Company's short-term and long-term goals.
The Company intends the annual executive pay targets (base salary plus
incentive bonus) to be competitive with executive compensation of other U.S.
public health care companies. The Compensation Committee compares the Company's
executive pay targets with the annual executive pay of those companies which are
included in the Home Health Care Services Group, the peer group used for
comparison purposes in the Stock Performance Graph appearing on page 30 of this
Proxy Statement. Because the Home Health Care Services Group is small and
complete information is not available, the Compensation Committee also compares
the Company's executive pay targets with those of companies outside of this
group. Since the Company's competitors for executive talent are more numerous
than the entities included in the Home Health Care Services Group, such
broader-based comparison is appropriate. By analyzing competing compensation
packages, the Compensation Committee hopes to attract and retain talented and
committed executives on a long-term basis.
Base Salary
With the help of the Chief Executive Officer, the Compensation
Committee evaluates all management salaries, including executive salaries, on a
regular basis. In these evaluations, the Compensation Committee considers levels
of responsibility, individual performance, internal equity, external pay
practices, and achievement of the Company's strategic goals. Regarding external
pay practices, the Compensation Committee seeks to set base
26
<PAGE> 28
salaries for executive officers at approximately the market rate of the
Company's competitors for executive talent, as determined based on information
gathered from outside sources.
Annual Incentives
Annual incentive bonus awards are designed to focus management
attention on key operational goals for the current fiscal year. In this way the
Company strives to meet the objective of emphasizing performance-based
compensation. The key operational goals are specific to each executive's area of
responsibility. Specific weighting is assigned for identified financial,
strategic and management practices goals. Up to 50% of the available bonus
percentage for each executive officer is tied to the Company's overall
profitability, generally defined by achievement of the annual budget as approved
by the Board.
Generally, Company executives may earn a bonus equal to between 20% and
35% of their annual base salaries based upon achievement of their specific
operational goals and achievement by the Company or business unit of its
financial targets. At the end of each fiscal year, the Compensation Committee
evaluates performance in light of these goals on an arithmetic scale with
pre-established weighting, and has the discretion to adjust these calculations
if circumstances warrant.
Criteria for the Company's 1998 annual incentive bonus awards were
based upon certain operational and financial goals. Upon evaluation of the
operational and financial performance of the Company during 1998, the
Compensation Committee determined not to award annual bonuses to the Company's
executive officers.
Long-Term Incentives
The Company's long-term incentive compensation program consists of
nonqualified stock options which are related to improvement in long-term
stockholder value. Options are the right to purchase shares of Common Stock at
their fair market value on the trading day immediately preceding the date the
option is granted. Options thus will only have value if the Company's stock
price increases. Stock option grants are designed to align executive interests
with the long-term interest of stockholders.
The Board of Directors' Disinterested Stock Option Committee grants
stock options, not the Compensation Committee. The Disinterested Stock Option
Committee selects the number of shares covered by each grant based on an
executive's level of responsibility and past and anticipated contributions to
the Company.
Chief Executive Officer Compensation
Mr. Furlong is the Company's Chief Executive Officer. Pursuant to the
terms of his Employment Agreement, Mr. Furlong does not receive the same
employee benefits as other senior executive officers of the Company. Mr. Furlong
receives $30,000 per month in compensation for his services under the Employment
Agreement. The Employment Agreement does not provide for provision of an annual
incentive bonus, however, the Company retains the right to award a bonus based
upon the Company's operational and financial performance (See "Employment and
other Agreements" appearing on page 21 in this Proxy Statement).
Mr. MacKenzie, former Chief Executive Officer of the Company, received
$117,640 in salary during 1998. Mr. MacKenzie was neither granted stock options
(except for those granted upon his appointment as a Director of the Company),
nor was he awarded an annual incentive bonus (See "Employment and other
Agreements" appearing on page 21 in this Proxy Statement).
In 1998, pursuant to his Employment Agreement, Mr. Wissing received
$243,750 in base salary. Mr. Wissing was neither granted stock options (except
for those granted as a Director under the 1995 Plan), nor was he awarded an
incentive bonus for 1998 (See "Employment and other Agreements" appearing on
page 21 in this Proxy Statement).
27
<PAGE> 29
Tax Regulations
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a tax deduction to public companies for executive
compensation in excess of $1 million. It is not anticipated that the Company
will pay any of its executive officers compensation in excess of $1 million in
the 1999 fiscal year and, accordingly, to date the Company has not adopted a
policy in this regard.
Report Submitted By:
Henry T. Blackstock
Thomas A. Dattilo
Allan C. Silber
28
<PAGE> 30
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee is currently composed of
Directors Blackstock, Dattilo and Silber. No member of the Compensation
Committee is or has been an employee of the Company. Director Silber, however,
has served as consultant to the Company.
Mr. Silber is a director and Chief Executive Officer of Counsel
Corporation, and he also serves as Chairman and President of DCAmerica Inc.
Since January 1992, the Company had a consulting agreement with Mr. Silber, a
Director of the Company and Chairman of the Board of Directors, Chief Executive
Officer and principal shareholder of Counsel, to provide certain services to the
Company, including the identification and analysis of potential businesses to be
considered for acquisition. The Consulting Agreement terminated by mutual
agreement on December 31, 1998. The Consulting Agreement provided for a base
monthly consulting fee of $20,000.00, with an annual performance bonus, at the
Board's discretion, of up to $60,000. The Board has not made a determination as
to whether Mr. Silber will be awarded a bonus for 1998 performance.
29
<PAGE> 31
STOCK PERFORMANCE GRAPH
The stock performance graph shown below is not deemed to be part of any
document filed with the SEC pursuant to the Securities Act or the Exchange Act
and is not to be deemed incorporated by reference in any documents filed under
the Securities Act or the Exchange Act without the express written consent of
the Company.
The following graph compares the cumulative total returns of the
Company's Common Stock with those of NASDAQ Market Index and the Home Health
Care Services Group (SIC Number 8082) Index, a peer group index compiled by
Media General Financial Services. The peer group includes approximately 25
companies, excluding the Company.
Cumulative return assumes $100.00 invested in the Company or respective
indices on January 1, 1994 with dividend reinvestment through December 31, 1998.
The comparisons in this table are required by the SEC and are not
indicative of possible future performance of the Company's Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
<TABLE>
<CAPTION>
------------------------------FISCAL YEAR ENDING---------------------------
COMPANY/INDEX/MARKET 12/31/1993 12/30/1994 12/29/1995 12/31/1996 12/31/1997 12/31/1998
<S> <C> <C> <C> <C> <C> <C>
American HomePat 100.00 179.24 222.64 462.27 398.66 30.75
Home Health Care Services 100.00 94.30 91.26 82.79 84.74 127.83
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: 1-(800) 446-7922
FAX: 1-(804) 649-6826
The graph presents information since January 1, 1994. The Company does
not directly tie executive compensation to stock performance. The Board's
Compensation Committee will determine the future impact, if any, of stock
performance on executive compensation.
30
<PAGE> 32
INFORMATION INCORPORATED BY REFERENCE
The Company has incorporated certain financial information by reference
to the Annual Report on Form 10-K, a copy of which is included with this Proxy
Statement. The financial information incorporated by reference includes (i)
Selected Consolidated Financial Data; (ii) Management's Discussion and Analysis
of Financial Condition and Results of Operations; (iii) Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure; and (iv)
Quantitative and Qualitative Disclosures about Market Risk.
31
<PAGE> 33
APPENDIX A
This amendment is subject to modification to include such changes as may be
required by the office of the Secretary of State of the State of Delaware and as
the Board deems necessary and advisable to effect the Reverse Split
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
AMERICAN HOMEPATIENT, INC.
American HomePatient, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
The amendment to the Corporation's Certificate of Incorporation set
forth in the following resolution approved by the Corporation's Board of
Directors and Shareholders was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
RESOLVED, that the Certificate of Incorporation be amended by
inserting at Article Fourth the sections below:
1. The Corporation shall effect a one (1) for four
(4) reverse split of all the Corporation's issued common
stock, par value $.01 per share (the "Common Stock"), hereby,
automatically upon the filing of this Amendment with the
Secretary of State of the State of Delaware, each four (4)
issued shares of Common Stock shall be changed into one (1)
share of Common Stock, and, in that connection, to reduce the
stated capital of the Corporation.
A. All of the Corporation's issued Common Stock,
having a par value of $.01 per share, is hereby changed into
new Common Stock, having a par value of $.01 per share, on the
basis of one (1) new share of Common Stock for each four (4)
shares of Common Stock issued as of the date of filing of the
Amendment with the Secretary of State for the State of
Delaware; provided, however, that no fractional shares of
Common Stock shall be issued pursuant to such change. Each
stockholder who would otherwise be entitled to a fractional
share as a result of such change shall have only a right to
receive one whole share, in lieu of any fractional share
otherwise issuable upon conversion.
B. The corporation's 35,000,000 authorized shares of
Common Stock, having a par value of $0.01 per share, shall not
be changed;
C. The Corporation's 5,000,000 authorized shares of
preferred stock having a par value of $.01 per share, shall
not be changed; and
D. The Corporations' stated capital shall be reduced
by an amount equal to the aggregate par value of the shares of
Common Stock issued prior to the effectiveness of this
Amendment which, as a result of the reverse split provided for
herein, are no longer issued shares of Common Stock.
32
<PAGE> 34
The foregoing amendment was adopted by the Corporation's Board of
Directors on April 29, 1999 and Shareholders on April 29, 1999.
This Certificate of Amendment is filed by authority of the duly elected
Board of Directors and Shareholders in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by
the Corporation's authorized officers this 29th day of April, 1999.
AMERICAN HOMEPATIENT, INC.
/s/ Joseph F. Furlong III
-------------------------------------
Joseph F. Furlong III
President and Chief Executive Officer
ATTEST:
/s/ Marilyn O'Hara
- -------------------------
Marilyn O'Hara, Secretary
33
<PAGE> 35
STATE OF ________________ )
COUNTY OF _______________ )
Before me, _____________________ of the state and county aforesaid,
personally appeared Joseph F. Furlong III, with whom I am personally acquainted,
or proved to me on the basis of satisfactory evidence and who, upon oath,
acknowledged himself to be President and Chief Executive Officer of American
HomePatient, Inc., the within named bargainor, a corporation, and that he as
such President and Chief Executive Officer, executed the foregoing instrument
for the purpose therein contained, by signing the name of the corporation by
himself as President and Chief Executive Officer.
Witness my hand and seal, at office in ___________________, this _____
day of ______________, 1999.
________________________________
Notary Public
My Commission Expires:
_________________________
STATE OF ________________ )
COUNTY OF _______________ )
Before me, _____________________ of the state and county aforesaid,
personally appeared Marilyn O'Hara, with whom I am personally acquainted, or
proved to me on the basis of satisfactory evidence and who, upon oath,
acknowledged herself to be Secretary of American HomePatient, Inc., the within
named bargainor, a corporation, and that she as such Secretary, executed the
foregoing instrument for the purpose therein contained, by signing the name of
the corporation by herself as Secretary.
Witness my hand and seal, at office in ___________________, this _____
day of __________________, 1999.
____________________________
Notary Public
My Commission Expires:
__________________________
34
<PAGE> 36
APPENDIX B
PROXY AMERICAN HOMEPATIENT, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, APRIL 29, 1999
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The Annual Meeting will be held on April 29, 1999, at 9:00 a.m. Central
Daylight Time, at 1800 First American Center, 315 Deaderick Street, Nashville,
Tennessee, 37238. The undersigned hereby appoints Kathey S. Palmer and Marilyn
O'Hara, or either of them, as proxies, with power of substitution, to vote all
shares of the undersigned at the Annual Meeting, and at any adjournments or
postponements thereof, in accordance with the following instructions:
<TABLE>
<S> <C> <C>
PROPOSAL 1 RE-ELECTION OF CLASS 2 DIRECTORS
|___| FOR both nominees listed below |___| WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees listed below
contrary below)
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
CHECK THE BOX TO VOTE "FOR" ALL NOMINEES AND STRIKE A LINE THROUGH THE
NAME OF THE NOMINEE LISTED BELOW FOR WHOM YOU WISH TO WITHHOLD
AUTHORITY TO VOTE.)
Morris A. Perlis Joseph F. Furlong, III
PROPOSAL 2 APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT, AT ANY TIME PRIOR TO THE COMPANY'S
ANNUAL MEETING OF STOCKHOLDERS IN 2000 OR AT NO TIME, IN THE
SOLE DISCRETION OF THE BOARD OF DIRECTORS, A ONE-FOR-FOUR
REVERSE STOCK SPLIT WHEREBY THE COMPANY WOULD ISSUE ONE (1)
NEW SHARE OF THE COMPANY'S COMMON STOCK IN EXCHANGE FOR
FOUR (4) SHARES OF THE COMPANY'S OUTSTANDING COMMON STOCK.
<TABLE>
<S> <C> <C>
|___| FOR approval of |___| AGAINST approval of |___| ABSTAIN from vote on the
the Reverse Stock Split the Reverse Stock Split the Reverse Stock Split
</TABLE>
PROPOSAL 3 In the discretion of the proxies on such other matters as may
properly come before the meeting.
|__| FOR |__| AGAINST |__| ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE> 37
- --------------------------------------------------------------------------------
(CONTINUED FROM OTHER SIDE)
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR PROPOSALS 1 AND 2, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT, AND IN THE DISCRETION OF THE
PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated:___________________________, 1999
_______________________________________________
Dated:___________________________, 1999
_______________________________________________
Signatures of stockholder(s) should correspond
exactly with the name printed hereon. Joint
owners should each sign personally. Executors,
administrators, trustees, etc., should give
full title and authority.
AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
