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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Pediatric Services of America, 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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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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[LOGO OF PEDIATRIC SERVICES OF AMERICA, INC.]
December 29, 2000
Dear Stockholder;
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders. It will be held in the Medlock Auditorium at the Northeast
Atlanta Hilton Hotel, 5993 Peachtree Industrial Boulevard, Norcross, Georgia.
It will begin at 9:00 a.m. on Wednesday, February 21, 2001.
The Notice of Meeting and the Proxy Statement on the following pages cover
the formal business of the meeting, which includes the election of directors,
the selection of auditors, and such other business as may be properly brought
before the meeting.
At the Annual Meeting, James M. McNeill and I will report on the current
operations of the Company. Following our presentation, representatives of our
independent auditors, Ernst & Young LLP, will be available to respond to
questions from stockholders.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. You are urged to
complete, sign, date and return the enclosed proxy card even if you plan to
attend the meeting. Return of the proxy card will not prevent you from voting
in person at the meeting should you later decide to do so. For your
convenience a postage paid envelope is enclosed.
We hope you will plan to join us.
Sincerely,
/s/ Joseph D. Sansone
Joseph D. Sansone
Chairman of the Board, Chief
Executive Officer and President
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PEDIATRIC SERVICES OF AMERICA, INC.
310 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092-2929
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 21, 2001
To the Stockholders of Pediatric Services of America, Inc.:
The 2001 Annual Meeting of Stockholders of Pediatric Services of America,
Inc. will be held in the Medlock Auditorium of the Northeast Atlanta Hilton
Hotel, 5993 Peachtree Industrial Boulevard, Norcross, Georgia, on the 21st day
of February, 2001, at 9:00 a.m., for the purpose of considering and voting
upon:
1. A proposal to elect two Class I members of the Board of Directors for a
three year term;
2. A proposal to approve and ratify the Board of Directors' selection of Ernst
& Young LLP as the independent auditors of the Company for the fiscal year
ending September 30, 2001; and
3. To transact such other business as may properly come before the meeting or
any adjournments thereof. The Board of Directors is not aware of any other
business to be presented to a vote of the stockholders at the Annual
Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. The Board of Directors has fixed December 29, 2000, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting and, accordingly, only holders of record of
Pediatric Services of America, Inc. Common Stock at the close of business on
that date will be entitled to notice of and to vote at the meeting. A list of
stockholders of the Company as of the close of business on December 29, 2000
will be available for inspection during normal business hours from February 7,
2001 through February 21, 2001 at the headquarters of the Company located at
310 Technology Parkway, Norcross, Georgia 30092-2929.
Management would appreciate your signing and returning the accompanying
proxy card promptly so that if you do not attend the meeting, your shares will
be voted.
By Order of the Board of Directors
/s/ James M. McNeill
James M. McNeill,
Secretary
Norcross, GA
December 29, 2000
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PEDIATRIC SERVICES OF AMERICA, INC.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement, mailed on or about December 29, 2000, is furnished to
the stockholders of Pediatric Services of America, Inc. (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company to be voted at the 2001 Annual Meeting of Stockholders and at any
adjournments thereof (the "Annual Meeting"). The Annual Meeting will be held
at 9:00 a.m., local time, on Wednesday, February 21, 2001, in the Medlock
Auditorium at the Northeast Atlanta Hilton Hotel located at 5993 Peachtree
Industrial Boulevard, Norcross, Georgia.
VOTING
General
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share (the "Common Stock"), with each
share entitling its owner to one vote on each matter properly submitted to the
stockholders. The record date for determining the holders of Common Stock who
are entitled to receive notice of and to vote at the Annual Meeting is
December 29, 2000. On the record date, 6,658,680 shares of Common Stock were
outstanding and eligible to be voted at the Annual Meeting.
Quorum and Vote Required
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. In counting the votes to determine whether a quorum exists at the
Annual Meeting, the proposal receiving the greatest number of all votes cast
"for" or "against", as well as abstentions (including instructions to withhold
authority to vote) and broker non-votes (which occur when shares held by
brokers or nominees for beneficial owners are voted on some matters but not on
others), will be used.
In voting for the proposal to elect two directors (Proposal 1),
stockholders may vote in favor of the nominee(s), or withhold their votes as
to the nominee(s). In voting with regard to the proposal to ratify the
selection of Ernst & Young LLP as independent auditors (Proposal 2),
stockholders may vote in favor of the proposal or against the proposal, or may
abstain from voting. Pursuant to the Bylaws of the Company, the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy at the Annual Meeting is required to approve each of the
two proposals. As a result, shares which are withheld or abstained from voting
and any broker non-votes with regard to a proposal will have the same legal
effect as a vote against the proposal.
The Company believes that approximately 486,610 shares owned or controlled
on the record date by directors and executive officers of the Company,
constituting approximately 7.3% of the outstanding Common Stock, will be voted
in favor of each of the proposals.
Proxies
The accompanying form of proxy card is for use at the Annual Meeting if a
stockholder is unable to attend in person or is able to attend but does not
wish to vote in person. Stockholders should specify their choices with regard
to each of the two proposals on the enclosed proxy card. All properly executed
proxy cards delivered by stockholders to the Company in time to be voted at
the Annual Meeting and not revoked will be voted at the Annual Meeting in
accordance with the directions noted thereon. In the absence of such
instructions, the shares
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represented by a signed and dated proxy card will be voted "FOR" the election
of the director nominees named in Proposal 1 and "FOR" the selection of Ernst
& Young LLP as independent auditors in Proposal 2. In all other matters that
properly come before the Annual Meeting, the persons named as proxies will
vote upon such matters according to their judgment.
Any stockholder delivering a proxy has the power to revoke it at any time
before it is voted by giving written notice to James M. McNeill, Secretary of
the Company, at 310 Technology Parkway, Norcross, Georgia 30092-2929, by
executing and delivering to Mr. McNeill a proxy card bearing a later date, or
by voting in person at the Annual Meeting.
In addition to soliciting proxies through the mail, the Company has
requested brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares held of record by them.
Their expenses and all other expenses incurred in connection with the
solicitation of proxies will be borne by the Company. The Company also may
solicit proxies through its directors, officers and employees in person and by
telephone and facsimile, without payment of additional compensation to such
persons.
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STOCK OWNERSHIP
The table below sets forth information regarding the beneficial ownership
of the Company's Common Stock, as of the record date, by (i) each person known
to the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each of the Company's directors, (iii) each executive officer of the
Company named in the Summary Compensation Table on page 8, and (iv) all
directors and executive officers of the Company as a group, based on data
furnished to the Company by the named persons.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Beneficial Owner Ownership(1) Class(1)
---------------- ------------ ----------
<S> <C> <C>
Dimensional Fund Advisors, Inc.(2)................... 371,500 5.6%
Beneficial Owner
David Nierenberg(3).................................. 1,024,930 15.4%
Beneficial Owner
Joseph D. Sansone(4)................................. 331,586 4.9%
Chairman of the Board of Directors, President
and Chief Executive Officer
James M. McNeill(5).................................. 17,499 *
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
John M. Harrington(6)................................ 1,000 *
Chief Operating Officer
Robert P. Pinkas(7).................................. 124,680 1.9%
Director
Richard S. Smith(8).................................. 153,593 2.3%
Director
Adam O. Holzhauer(9)................................. 158,000 2.4%
Director
Michael J. Finn(10).................................. 41,300 *
Director
All executive officers and directors as a group (7
persons) (11)....................................... 827,658 11.8%
</TABLE>
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* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Except as indicated in the footnotes set forth below, the persons named
in the table, to the Company's knowledge, have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them. The numbers of shares shown include shares that are not
currently outstanding but which certain stockholders are entitled to
acquire or will be entitled to acquire within 60 days from the record
date upon the exercise of stock options. Such shares are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Common Stock owned by the particular stockholder or group but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Dimensional Fund Advisors, Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the
"Portfolios"). In its role as investment advisor and investment manager,
Dimensional possessed both voting and investment power over 371,500
shares of Common Stock as of 09/30/00. The Portfolios own all securities
reported in this proxy statement, and Dimensional disclaims beneficial
ownership of such securities.
(3) David Nierenberg is President of Nierenberg Investment Management
Company, the General Partner of The D3 Family Fund, L.P. (the "Fund").
The Fund has sole voting and dispositive power over 994,930 shares of
Common Stock. The address for the Fund is 19605 North East 8th Street,
Camas, Washington 98607. In addition, Mr. Nierenberg has sole voting and
dispositive power over 30,000 shares of Common Stock owned by Haredale,
Ltd, a Bahamian corporation. The address for Haredale, Ltd is P.O. Box N-
4465, Nassau, New Providence, The Bahamas. Mr. Nierenberg disclaims
beneficial ownership of the 30,000 shares of Common Stock held by
Haredale, Ltd.
(4) Consists of options to purchase 171,549 shares of Common Stock, 157,788
shares of Common Stock held directly and 2,249 shares of Common Stock
held indirectly through Mr. Sansone's spouse.
(5) Consists entirely of options to purchase shares of Common Stock.
(6) Consists entirely of Common Stock held jointly with spouse.
(7) Consists of options to purchase 38,000 shares of Common Stock, 7,115
shares of Common Stock owned by Pinkas Family Partners, of which Mr.
Pinkas is general partner, 69,565 shares of Common Stock owned by
Brantley Venture Management, L.P. of which Pinkas Family Partners is the
general partner, and 10,000 shares of Common Stock owned by Madaket
Investments, LLC, of which Mr. Pinkas is the managing member.
(8) Consists of options to purchase 38,000 shares of Common Stock, 102,500
shares of Common Stock held directly, and 13,093 shares of Common Stock
held by Smith Family Investment Partnership, LP, of which Mr. Smith is
general partner, and he therefore may be deemed to beneficially own the
shares held by Smith Family Investment Partnership, LP. Mr. Smith
disclaims any beneficial ownership of the shares held by Smith Family
Investment Partnership, LP.
(9) Consists of options to purchase 38,000 shares of Common Stock and 120,000
shares of Common Stock held directly.
(10) Consists of options to purchase 38,000 shares of Common Stock and 3,300
shares of Common Stock held directly.
(11) Includes options to purchase 341,048 shares of Common Stock.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
provides that the Board of Directors shall consist of not less than three nor
more than fifteen members as fixed from time to time by vote of a majority of
the entire Board of Directors. The Amended and Restated Certificate of
Incorporation further provides that the Board of Directors shall be divided
into three classes as nearly equal in number as possible. The term of office of
one of the classes of directors expires each year and a new class of directors
is elected each year by the stockholders for a term of three years or until
their successors are elected and qualified.
At the Annual Meeting the terms of the two Class I directors expire. Mr.
Richard S. Smith has decided not to stand for re-election. The Board has
nominated Mr. Edward K. Wissing to serve as a Class I director for a three-year
term expiring at the 2004 Annual Meeting of Stockholders. The Board of
Directors has also nominated Robert P. Pinkas, who is currently serving as a
Class I director, to continue to serve as such for a three year term expiring
at the 2004 Annual Meeting of Stockholders. If either of the nominees should
become unavailable to serve for any reason (which is not anticipated), the
Board of Directors, in its discretion, may designate a substitute nominee or
nominees (in which case the persons named as proxies on the enclosed Proxy Card
will vote all valid proxy cards for the election of such substitute nominee or
nominees), or allow the vacancy to remain open until the Board of Directors
locates a suitable candidate, or by resolution reduce the authorized number of
directors.
The following is certain information concerning the nominee for election as
well as the directors whose terms of office will continue after the Annual
Meeting.
Nominees for Election as Directors at the 2001 Annual Meeting
CLASS I--NOMINEES TO SERVE AS DIRECTORS UNTIL THE 2004 ANNUAL MEETING
ROBERT P. PINKAS (47) is a General Partner of Brantley Partners, a private
equity organization based in Cleveland, Ohio, of which he was the founding
partner in 1987. Mr. Pinkas has been a director, officer and investor in a
variety of businesses since 1981, including Quad Systems Corporation, Brantley
Capital Corporation, Caredata.com and Gliatech, Inc. He currently serves as
Chairman of the Board of Waterlink, Inc.
Member:Compensation Committee (Chairman)
First became a director:1989
EDWARD K. WISSING (63) is a founder and former CEO of American HomePatient,
Inc., a national provider of home healthcare products and services. Under Mr.
Wissing's leadership, American HomePatient grew from 20 operating locations in
1992 to over 300 locations by the end of 1997, with over 400 million dollars in
revenues at his retirement in May 1998. Prior to his employment with American
HomePatient, Mr. Wissing held several senior executive positions in healthcare
related firms, including Becton Dickinson, Sandoz/Rhone Poulene and Glasrock
HomeHealth. He has maintained a very active role in the home healthcare
industry and has twice chaired the Health Industry Distributor's Association
(HIDA). Mr. Wissing has also served as Chairman of HIDA's Educational
Foundation. He currently serves on several other healthcare boards, including
Simione Central Holdings, Inc. and the Nashville Health Care Council.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF MR. WISSING AND THE RE-ELECTION OF MR. PINKAS AS DIRECTORS OF THE COMPANY
FOR A THREE YEAR TERM, TO HOLD OFFICE UNTIL THE 2004 ANNUAL MEETING OR UNTIL
THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
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Continuing Directors of the Company
CLASS II--TERM EXPIRING AT THE 2002 ANNUAL MEETING
ADAM O. HOLZHAUER (54) is Senior Vice President of Business Development for
Premium Asset Recovery Corporation, Inc., a wholly owned subsidiary of
Finantra Capital, Inc. Mr. Holzhauer is also President of Adam Holzhauer,
Inc., a private investment company. From 1988 until 2000, Mr. Holzhauer served
as Chairman of the Board and Chief Executive Officer of Royale Healthcare,
Inc., a hospital management company which he founded in 1988. From 1985 until
1994, Mr. Holzhauer served as President of Master Ventures, Inc., a division
of Master Collectors, which provides accounts receivable management and
collection services for health care providers, government agencies, major
retailers, banks and national credit card companies.
Member:Audit Committee (Chairman) First became a director:1989
MICHAEL J. FINN (51) has been a General Partner of Brantley Venture
Partners, L.P., a venture capital firm based in Cleveland, Ohio, since May
1995. Mr. Finn served from 1987 until May 1995 as Vice President--Venture
Capital and Emerging Growth for Sears Investment Management Co., and during
his tenure presided over the Venture Capital Group for the firm. Previously,
Mr. Finn was Deputy Director of the Bureau of Investments, Michigan Department
of Treasury. In this capacity, Mr. Finn presided over the Venture Capital
Group. Mr. Finn is also a director of MediRisk, Inc., Silvon Software and The
Rhomas Group.
Member:Compensation Committee First became a director:1989
Audit Committee
CLASS III--TERM EXPIRING AT THE 2003 ANNUAL MEETING
JOSEPH D. SANSONE (57) has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since its formation in
1989. From September 1987 until the formation of the Company, Mr. Sansone was
President of Ambulatory Services of America, Inc., a wholly owned subsidiary
of Charter Medical Corporation ("Charter Medical"), the Company's former
parent. Prior to joining Charter Medical, Mr. Sansone was employed by American
Medical International, Inc. ("AMI"). From 1985 to 1987, he served as Vice
President of AMI Home Health Equipment Centers, a division of AMI,
specializing in durable medical equipment sales and rentals.
First became a director:1989
COMMITTEES OF THE BOARD
The Company's Board of Directors has two standing committees: the Audit
Committee and the Compensation Committee. In addition, the Board of Directors
as a whole acts as a nominating committee to select nominees for election as
directors of the Company. The Board of Directors will consider nominees
recommended by stockholders if submitted to the Board of Directors in
accordance with the procedures specified in the Company's Bylaws. See
"Stockholders' Proposals for 2002 Annual Meeting" below. During fiscal 2000,
the Board of Directors held 10 meetings.
Audit Committee
The Audit Committee makes recommendations concerning the selection of
independent auditors of the Company and their duties and fees; reviews their
audit plan, the scope and results of their audit engagement and the
accompanying management letter, if any; reviews the scope and results of the
Company's internal auditing procedures; consults with the independent auditors
and management with regard to the Company's accounting methods and the
adequacy of its internal accounting controls; approves professional services
provided by the independent auditors; reviews the independence of the
independent auditors; and reviews the range of the independent auditors' audit
and non-audit fees. The current members of the Audit Committee are Adam O.
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Holzhauer (Chairman), Michael J. Finn and Richard S. Smith. The members of the
Audit Committee are independent directors as defined in the NASD listing
standards. During fiscal 2000, the Audit Committee adopted a formal written
charter dated March 7, 2000 (the "Audit Committee Charter") (See Appendix I),
which was recommended by the Blue Ribbon Committee on Improving the
Effectiveness of Corporate Audit Committees with respect to audit committee
composition and practices. The Audit Committee Charter governs the Audit
Committee and its central purpose is to promote accurate, high-quality and
timely disclosure of financial and other information to the Board of
Directors, the public markets and stockholders. The Company also maintains an
internal audit function which reports directly to the Audit Committee. The
Board has nominated Mr. Edward K. Wissing, subject to Stockholder approval at
the Annual Meeting, to serve on the Audit Committee during his term. The Audit
Committee held 4 meetings during fiscal 2000.
Compensation Committee
The Compensation Committee formulates executive compensation policy,
reviews and approves compensation plans relating to officers and administers
the Company's stock option plans. The current members of the Compensation
Committee are Robert P. Pinkas (Chairman), Richard S. Smith and Michael J.
Finn. The Board has nominated Mr. Edward K. Wissing, subject to Stockholder
approval at the Annual Meeting, to serve on the Compensation Committee during
his term. The Compensation Committee held 4 meetings during fiscal 2000.
Compensation Committee Interlocks and Insider Participation
During fiscal 2000, the members of the Compensation Committee of the
Company consisted of Messrs. Pinkas, Finn and Smith. Messrs. Pinkas, Finn and
Smith have never been employees of the Company, and there were no reportable
business relationships between the Company and such individuals.
Report of the Audit Committee of the Board of Directors
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process including the systems
of internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the audited financial statements in the Annual Report with
management, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the
United States, their judgments as to the quality of the Company's accounting
principles and such other matters as are required to be discussed with the
Committee under auditing standards generally accepted in the United States
including those described in Statement on Auditing Standards No. 61, as
amended, "Communication with Audit Committees." In addition, the Committee has
discussed with the independent auditors the auditors' independence from
management and the Company, including matters in the written disclosures
provided to the Committee as required by the Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees."
The Committee also discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. During
fiscal 2000, the Committee met with the internal and independent auditors,
with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended September 30, 2000, for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
stockholder approval, the selection of the Company's independent auditors for
fiscal year 2001.
Audit Committee: Adam O. Holzhauer (Chairman), Michael J. Finn and Richard
S. Smith.
6
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Report of the Compensation Committee of the Board of Directors on Executive
Compensation
This report discusses the Compensation Committee's objectives and policies
regarding executive compensation. The report specifically reviews the bases
for the compensation for the Company's President and Chief Executive Officer
for fiscal 2000 and its policy generally with respect to the compensation of
all executive officers for fiscal 2000.
Chief Executive Officer Compensation
For fiscal 2000, the base salary for Mr. Sansone was set at $275,000
pursuant to an employment agreement between the Company and Mr. Sansone,
effective October 1, 1999. See "Employment Agreements" below. The Compensation
Committee determines any annual salary increase, incentive bonus and stock
option grants based on the performance of the Company measured against an
annual plan submitted and approved by the full Board and the Committee's
subjective evaluation of Mr. Sansone's performance as it relates to the
performance of the Company. The Compensation Committee believes that this
relationship between performance and pay is appropriate and serves the
stockholders' interests. The Compensation Committee then submits Mr. Sansone's
compensation package to the Board of Directors for ratification. Members of
the Compensation Committee have extensive experience in serving on
compensation committees at other companies, which provides the Company with
knowledge of comparable compensation policies.
The Compensation Committee awarded an incentive bonus of $68,750 to Mr.
Sansone for fiscal 2000, and voted to increase Mr. Sansone's salary to
$300,000 for fiscal 2001. See "Summary Compensation Table" below.
Compensation Policy for Executive Officers
The Company's executive officers receive base salaries that are considered
by management to be on the low end of an average base salary for executive
officers in comparable positions at other growth companies in the health care
industry. This reflects the Compensation Committee's desire to place more
emphasis on the non-cash incentive portion of the compensation package.
Because the Company is a growth company, the Compensation Committee seeks to
use non-cash compensation such as the grant of stock options as a long-term
performance incentive for the executive officers. Stock options enable the
Company's executive officers to benefit from their efforts to improve the
Company's financial results, consistent with the interests of all
stockholders, because improved financial results are likely to be reflected in
the Company's stock price and would thereby increase stockholder value. It is
the Compensation Committee's belief that the granting of stock options will
encourage performance by the Company's executive officers that contributes to
the long-term growth of the Company.
For fiscal 2000, the compensation of the Company's executive officers other
than the Chief Executive Officer was recommended by the Chief Executive
Officer to the Compensation Committee, subject to ratification by the Board of
Directors. Recommendations for annual increases in salary and incentive
bonuses are generally based on the Chief Executive Officer's review and
evaluation of each executive officer's performance as it relates to the goals
of the Company. Measures of performance include divisional results for which
each executive officer is responsible, Company-wide results, and individual
goals and objectives set by the Chief Executive Officer and the individual
executive officer prior to the beginning of the fiscal year. The Compensation
Committee reviews the Chief Executive Officer's recommendations, makes any
changes it believes necessary, approves the compensation packages and presents
them to the Board for ratification.
Omnibus Budget Reconciliation Act of 1993 Implications for Executive
Compensation
It is the responsibility of the Compensation Committee to address the
issues raised by changes in the tax laws which made certain non-performance
based compensation to executives of public companies in excess of $1,000,000
non-deductible beginning in 1994. In this regard, the Committee must determine
whether any actions with respect to this limit should be taken by the Company.
Based on the Company's current level of compensation it is not necessary to
consider this issue at this time. The Company intends to take the necessary
steps to ensure its executive officers' compensation policies comply with the
cap at the appropriate time.
Compensation Committee: Robert P. Pinkas (Chairman), Richard S. Smith, and
Michael J. Finn.
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DIRECTORS' COMPENSATION AND ATTENDANCE
Under the Directors' Stock Option Plan, as amended (the "Directors' Stock
Option Plan"), directors of the Company who are not officers or employees of
the Company each receive, in lieu of cash fees, annual grants of options to
purchase 6,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant and which expire ten
years after issuance. The Compensation Committee has the authority and sole
discretion to make grants of options under the Plan in addition to the annual
grants described above. The options vest on the first anniversary of their
issuance, provided that the grantee is then a director of the Company. A total
of 300,000 shares of Common Stock have been reserved for issuance pursuant to
options granted and to be granted under the Directors' Stock Option Plan. In
fiscal 2000, a total of 40,000 options were granted to directors under the
Directors' Stock Option Plan. Directors who are not salaried employees of the
Company receive no additional compensation for their services as directors.
During fiscal 2000, the Board of Directors held 10 meetings and the
Committees of the Board held 4 meetings, respectively. Each director attended
in excess of 75% of the total number of meetings of the Board and each
Committee on which he served in fiscal 2000.
EXECUTIVE COMPENSATION
Summary Compensation
The following table summarizes the total compensation paid or accrued by the
Company for each person who served as an executive officer during the fiscal
year ended September 30, 2000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual
Compensation(1)
------------------ Shares
Name and Fiscal Underlying All Other
Principal Position Year Salary(2) Bonus(3) Options Compensation(4)
------------------ ------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Joseph D. Sansone....... 2000 $275,000 $ 68,750 36,000 $ 38,110
Chairman of the Board, 1999 $275,000 $100,000 35,000 $ 17,133
President and Chief 1998 $275,000 $ -- 35,000 $ 12,968
Executive Officer
James M. McNeill........ 2000 $155,000 $ 38,750 40,000 $ 28,651
Senior Vice President, 1999 $122,962 $ 50,000 16,500 $ 1,083
Chief Financial
Officer, Secretary and
Treasurer
John M. Harrington(5)... 2000 $ 26,019 -- 40,000 $ 992
Chief Operating Officer
</TABLE>
--------
(1) Messrs. Sansone, McNeill and Harrington did not receive any perquisites,
other personal benefits, securities or property in the indicated fiscal
years in excess of 10% of their annual salary and bonus.
(2) Includes amounts deferred at the election of the executive officers
pursuant to the Company's Non-Qualified Deferred Compensation Plan. See
"Non-Qualified Deferred Compensation Plan" below.
(3) The compensation of the above-listed individuals, including bonuses, is
determined by the Compensation Committee of the Board of Directors. See
"Incentive Bonus Policy" and "Report of the Compensation Committee of the
Board of Directors on Executive Compensation".
(4) This amount reflects for fiscal 2000 (a) premiums of $5,300 paid by the
Company for a term life insurance policy on the life of Mr. Sansone, the
proceeds of which are payable to a beneficiary designated by Mr. Sansone,
(b) amounts contributed by the Company on behalf of Messrs. Sansone and
McNeill of $26,971 and $3,651, respectively, pursuant to the Company's Non-
Qualified Deferred Compensation Plan, (c) amounts reimbursed by the Company
to Messrs. Sansone and Harrington of $5,839 and $992, respectively,
pursuant to the Company's car allowance program, and (d) a retention
payment of $25,000 paid to Mr. McNeill.
(5) Mr. Harrington began employment on July 12, 2000.
8
<PAGE>
Incentive Bonus Policy
The Company has established an incentive bonus policy (the "Incentive Bonus
Policy") that provides for cash bonuses to certain employees of the Company,
including all executive officers. Payment of any bonus under the Incentive
Bonus Policy is at the discretion of the Compensation Committee, subject to
ratification by the Board of Directors, but is based generally on factors such
as increases in overall corporate profitability, divisional profitability and
achieving goals as outlined in the Company's annual financial and operational
plan. The Board of Directors may amend, suspend or discontinue the Incentive
Bonus Policy at any time. Cash bonuses aggregating $107,500 were paid to
executive officers under the Incentive Bonus Policy for fiscal 2000. Cash
bonuses paid under the Incentive Bonus Policy to the above individuals for
fiscal 2000 are included in the "bonus" amounts reported for them in the
Summary Compensation Table.
Employee Stock Options
The Company has adopted, and its stockholders have approved, the Pediatric
Services of America, Inc. Amended and Restated Stock Option Plan (the "Stock
Option Plan"). The Stock Option Plan is designed to provide a means by which
selected key persons may be given an opportunity to purchase stock of the
Company, to help secure and retain the services of key persons, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company. The Company has reserved 1,750,000 shares of Common Stock for
issuance pursuant to the Stock Option Plan. Options granted under the Stock
Option Plan may be either (i) options intended to qualify as incentive stock
options ("Incentive Stock Options") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or (ii) nonqualified stock options
("Nonqualified Stock Options").
Incentive Stock Options may be granted only to employees (including
officers) of the Company or its affiliates. Nonqualified Stock Options may be
granted only to key employees, directors or consultants or advisors of the
Company or its affiliates. A non-employee director is not eligible to
participate in the Stock Option Plan unless such director has expressly been
declared eligible to participate in the Stock Option Plan by the Board of
Directors or the Compensation Committee. The Board of Directors has the
authority to amend the Stock Option Plan, subject to stockholder approval for
certain material amendments, and may suspend or terminate the Stock Option
Plan at any time.
9
<PAGE>
The following table sets forth information regarding the number, terms and
potential realizable value of stock options granted to Messrs. Sansone,
McNeill and Harrington during fiscal 2000:
Options Granted in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Number of % of Total Appreciation
Securities Options for Option Term
Underlying Granted to Exercise (2)
Options Employees in Price Per Expiration ----------------
Name Granted(1) Fiscal Year Share(1) Date 5% 10%
---- ---------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph D. Sansone....... 36,000 12.14% $2.00 05/24/2010 $45,280 $114,749
James M. McNeill........ 21,000 7.08% $2.00 05/24/2010 $26,414 $ 66,937
19,000 6.41% $2.13 08/03/2010 $25,392 $ 64,347
John M. Harrington...... 40,000 13.49% $1.94 07/12/2010 $48,739 $123,515
</TABLE>
--------
(1) All options were granted at an exercise price equal to the fair market
value of the underlying shares as of the date of the grant and become
exercisable in one-fourth increments on each anniversary of the grant
date.
(2) Such value is based on the exercise price at the time of grant.
The following table sets forth certain information with respect to
exercises of stock options during fiscal 2000 by each of the named executives
and the fiscal year-end value of unexercised stock options held by them:
Option Exercises
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal in-the-money Options at
Shares Year-End Fiscal Year-End
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joseph D. Sansone....... -- -- 162,799/59,001 $29,174/$101,700
James M. McNeill........ -- -- 8,875/53,625 $14,824/$71,830
John M. Harrington...... -- -- 0/40,000 $0/$52,400
</TABLE>
401(k) Savings Plan
The Company maintains the Pediatric Services of America, Inc. 401(k)
Savings Plan (the "401(k) Plan"), which became effective January 1, 1992. The
401(k) Plan covers all employees of the Company (except, among others, highly
compensated employees as defined in the Plan, certain employees designated as
part-time employees and employees deemed to be leased employees within the
meaning of certain provisions of the Code) who have completed at least 1,000
hours and one year of service with the Company. Under the 401(k) Plan, each
eligible employee may elect to contribute a portion of his compensation up to
a maximum of 20% of pre-tax compensation, not exceeding $10,500 for the 2000
calendar year, and 5% of after-tax compensation (or the maximum amount then
permitted by the Code). The Company may, in its discretion, make contributions
on behalf of eligible employees in an amount up to the employee's
contributions. All employees' contributions to the 401(k) Plan are 100%
vested. Company contributions vest 100% over a period of five years of service
with the Company. Distribution of accrued benefits normally will commence upon
the participants reaching age 65 (or if earlier, upon the participant's death
or disability).
Non-Qualified Deferred Compensation Plan
In October 1997, the Company amended the 401(k) Plan to remove certain
selected management or highly compensated employees earning more than $80,000
annually from being eligible to participate in the 401(k) Plan. The Company
adopted the Pediatric Services of America, Inc. Non-Qualified Deferred
Compensation Plan (the "Non-Qualified Plan") for those selected management or
highly compensated employees of the Company.
10
<PAGE>
On March 22, 1999, the Company terminated the Plan and distributed Plan
contributions to those employees who participated in the Plan. There were no
tax consequences attributable to the Company, but distributions to employees
who participated in the Plan were taxed as supplemental wages. As of January 1,
2000, a new Non-Qualified Deferred Compensation Plan was adopted with the same
benefits as the prior Plan.
The Compensation Committee administers the Non-Qualified Plan, and the Board
of Directors annually selects the employees who are eligible to participate in
the Non-Qualified Plan and the tier in which the employee will be a member. The
purposes of this plan are to provide the selected management or highly
compensated personnel of the Company with the opportunity to defer amounts of
their compensation which might not otherwise be deferrable under other Company
plans, including the 401(k) Plan, and to receive the benefit of additions to
their deferral, in the absence of certain restrictions and limitations in the
Code. Participants elect the amount of pay they wish to defer up to the maximum
percentage of compensation for the tier in which the employee is a member.
Maximum deferrals range from 10% to 100% of compensation. The Company may
contribute to the Plan an amount equal to a percentage of the amount each
Participant contributes to the Plan. The Non-Qualified Plan is intended to be
an unfunded plan for purposes of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Company contributions and voluntary compensation
deferrals are held in a "Rabbi Trust" as that term is defined in Revenue
Procedure 92-64, 1992-2 C.B. 422. Distributions of Plan contributions and
earnings will be made upon termination of employment, disability, retirement or
the financial hardship of the participant. In-service benefits are also
available to participants.
Employment Agreements
The Company has entered into an employment agreement with Joseph D. Sansone,
effective October 1, 1999, pursuant to which Mr. Sansone serves as Chief
Executive Officer and President of the Company. Under the terms of the
agreement, Mr. Sansone's annual base salary for fiscal 2001 is $300,000. The
agreement also provides that Mr. Sansone is entitled to participate in a bonus
plan, the terms of which are determined and approved by the Board of Directors,
and in all of the Company's employee benefit plans and programs for which he is
eligible under the terms of such plans or programs. In addition, the agreement
provides that Mr. Sansone is entitled to life insurance coverage in the amount
of $500,000, payable to the beneficiary of his choice, and certain long-term
disability insurance coverage. Mr. Sansone is entitled to receive an allowance
for expenses incurred in connection with owning, maintaining and operating an
automobile for business use. The agreement is for an initial term of two years
and is automatically renewed for successive one-year periods, subject to either
party terminating the agreement at the end of the initial term or additional
term, as the case may be. Mr. Sansone's salary for each additional term will be
equal to the salary paid to him on the last day of the three-year initial term
or the most recent additional term, unless otherwise agreed by the Company and
Mr. Sansone. The agreement is terminated upon the death or disability of Mr.
Sansone, and the Board of Directors may terminate Mr. Sansone's employment with
or without cause (as defined in the agreement). In the event Mr. Sansone's
employment is terminated without cause or terminated by Mr. Sansone for "good
reason," the Company is obligated to pay Mr. Sansone his full salary and
provide full benefits for the remainder of the contract term and for a period
of 18 months thereafter. "Good reason" is defined as certain events resulting
from a change in control of the Company or a failure by the Company to comply
with any material term of the agreement which has not been cured within 10 days
after notice. Under the terms of the agreement, Mr. Sansone is not entitled to
any severance benefits in the event his employment is terminated for cause or
in the event he voluntarily terminates his employment with the Company.
The Company has entered into an employment agreement with James M. McNeill,
dated May 1, 1999, pursuant to which he serves as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company. Under the terms of
the agreement, Mr. McNeill receives an annual base salary of $155,000 for the
initial two-year term, subject to increase at the end of the first year as
determined by the Board of Directors. Mr. McNeill's base salary for fiscal 2001
is $175,000. Mr. McNeill is also entitled to participate in a bonus plan, the
terms of which are determined and approved by the Board of Directors, and all
employee benefit plans and programs for which he is eligible under the terms of
such plans or programs. Pursuant to the agreement,
11
<PAGE>
Mr. McNeill receives an allowance for expenses incurred in connection with
owning, maintaining and operating an automobile for business use. The
agreement is for an initial term of two years and is automatically renewed for
successive one-year periods, subject to either party terminating the agreement
at the end of the initial term or additional term, as the case may be. Mr.
McNeill's salary for each additional term will be equal to the salary paid to
him on the last day of the initial term or the most recent additional term,
unless otherwise agreed by the Company and Mr. McNeill. The agreement is
terminated upon the death or disability of Mr. McNeill, and the Board of
Directors also may terminate Mr. McNeill's employment under the agreement with
or without cause (as defined in the agreement). In the event Mr. McNeill's
employment is terminated by the Company without cause, or terminated by Mr.
McNeill for "good reason," the Company is obligated to pay Mr. McNeill his
full salary and benefits for a period of 12 months. "Good reason" is defined
as certain events resulting from a change in control of the Company or a
failure by the Company to comply with any material term of the agreement which
has not been cured within 10 days after notice. Under the terms of the
agreement, Mr. McNeill is not entitled to any severance benefits in the event
his employment with the Company is terminated with cause or in the event he
voluntarily terminates his employment with the Company.
The Company has entered into an employment agreement with John M.
Harrington, dated September 27, 2000, effective as of July 12, 2000, pursuant
to which he serves as Chief Operating Officer of the Company. Under the terms
of the agreement, Mr. Harrington receives a base salary of $165,000 for the
initial one-year term. After the initial term, Mr. Harrington shall continue
to serve the Company on an at-will basis. Mr. Harrington is also entitled to
participate in a bonus plan, the terms of which are determined and approved in
the discretion of the Board of Directors, and all employee benefit plans and
programs for which he is eligible under the terms of such plans and programs.
Pursuant to the agreement, Mr. Harrington receives an allowance for expenses
incurred in connection with owning, maintaining and operating an automobile
for business use. The agreement is terminated upon the death of Mr.
Harrington, and the Board of Directors also may terminate Mr. Harrington's
employment under the agreement with or without cause (as defined in the
agreement). In the event Mr. Harrington's employment is terminated by the
Company without cause, or terminated by Mr. Harrington for "good reason," the
Company is obligated to pay Mr. Harrington his full salary and benefits for a
period of six months if terminated during the initial term, nine months if
terminated after the initial term but prior to three years from employment,
and 12 months if terminated after three years of employment. "Good reason" is
defined, among other things, as certain events resulting from a change in
control of the Company or a failure by the Company to comply with any material
term of the agreement. Under the terms of the agreement, Mr. Harrington is not
entitled to any severance benefits in the event his employment with the
Company is terminated with cause or in the event he voluntarily terminates his
employment with the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions or relationships requiring disclosure under Item
404 of Regulation S-K for the 2000 fiscal year.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The Company completed an initial public offering of its Common Stock and
the Common Stock began trading on the Nasdaq National Market on June 10, 1994.
During fiscal 2000, the Company's Common Stock was moved to and currently
trades on the Over-the-Counter Bulletin Board. The price information reflected
for the Company's Common Stock in the following performance graph represents
the closing sales prices of the Common Stock for the period from June 10, 1994
through September 30, 2000 (the end of fiscal 2000). The graph and the
accompanying table compare the cumulative total stockholders' return on the
Company's Common Stock with the Standard & Poor's ("S&P") 500 Index, S&P
Health Care Sector, and a Health Care Composite Peer Group. The Health Care
Composite Peer Group is composed of companies within the following industries:
diversified health care, pharmaceuticals, miscellaneous health care, hospital
management, and medical products and supplies. The calculation in the
following graph and table assume that $100 was invested on June 10, 1994 in
each of the Company's Common Stock, the S&P 500 Index and the S&P 500 Health
Care Sector and the Health Care Composite Peer Group, and also assumes
dividend reinvestment.
<TABLE>
<CAPTION>
COMPARISON OF 75 MONTH CUMULATIVE TOTAL RETURN*
AMONG PEDIATRIC SERVICES OF AMERICA, INC., THE S & P 500 INDEX,**
THE S & P HEALTH CARE SECTOR INDEX AND
A HEALTH CARE COMPOSITE PEER GROUP (1)
Cumulative Total Return
______________________________________________________________________
6/10/94 9/94 9/95 9/96 9/97 9/98 9/99 9/00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PEDIATRIC SERVICES OF AMERICA, INC 100.00 160.94 240.63 231.25 292.19 42.97 15.23 56.25
S & P 500 100.00 104.89 136.09 163.77 280.01 250.81 820.55 868.13
S & P HEALTH CARE SECTOR 100.00 115.21 165.19 216.37 296.28 409.54 421.21 528.75
HEALTH CARE COMPOSITE PEER GROUP (1) 100.00 103.73 119.69 138.20 146.99 130.02 119.15 110.73
* $100 invested on 6/10/94 in stock or on 5/31/94 in Index --
including reinvestment of dividends.
** Fiscal year ending September 30.
(1) Based on a composite of prices weighted by market capitalization of: AMEDISYS, American Home Patient,
Apria Healthcare, Lincare Holdings, Inc., National Home Health Care, Option Care, Inc., Spherion
Corp., and Transworld Home Healthcare.
</TABLE>
13
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Ernst &
Young LLP to serve as independent auditors of the Company for fiscal 2001 and
has directed that such appointment be submitted to the stockholders of the
Company for ratification at the Annual Meeting. Ernst & Young LLP has served
as independent auditors of the Company since 1989 and is considered by
management of the Company to be well qualified. If the stockholders do not
ratify the appointment of Ernst & Young LLP, the Board of Directors will
reconsider the appointment.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
and will have an opportunity to make a statement if they desire. They also
will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY.
SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder require the Company's directors and executive officers and persons
who own more than 10% of the Company's Common Stock, as well as certain
affiliates of such persons, to file initial reports of their ownership of the
Company's Common Stock and subsequent reports of changes in such ownership
with the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. Directors, executive officers and persons owning more
than 10% of the Company's Common Stock are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on its review of the copies of such reports
received by it and written representations from the reporting persons that no
other reports were required of those persons, to the Company's knowledge
during and with respect to fiscal 2000, all filing requirements applicable to
its directors, executive officers and beneficial owners of more than 10% of
its Common Stock were complied with in a timely manner.
STOCKHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING
Proposals of stockholders, including nominations for the Board of
Directors, intended to be presented at the 2002 Annual Meeting of Stockholders
must be submitted to the Company in accordance with the procedures set forth
in Article II, Sections 5 and 6, respectively, of the Bylaws of the Company.
Accordingly, stockholders must submit such proposals and nominations in
writing to the Company no earlier than July 2, 2001 and no later than
August 31, 2001 in order for such matters to be included in the Company's
proxy materials for, and voted upon at, the 2002 Annual Meeting. All such
proposals and nominations should be submitted on or before such date by
certified mail, return receipt requested, and must be received by the
Secretary at the Company's corporate offices at 310 Technology Parkway,
Norcross, Georgia 30092-2929.
14
<PAGE>
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders which
may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual
Meeting or any adjournments thereof, it is the intention of the persons named
as proxies on the accompanying form of proxy card to vote the shares
represented by all valid proxy cards in accordance with their judgment of what
is in the best interest of the Company.
By Order of the Board of Directors
/s/ Joseph D. Sansone
Joseph D. Sansone
Chairman of the Board,
Chief Executive Officer and
President
Norcross, Georgia
December 29, 2000
----------------
The Company's 2000 Annual Report on Form 10-K, which includes audited
financial statements, has been mailed to stockholders of the Company with
these proxy materials. This Proxy Statement for the Annual Meeting of
Stockholders to be held on February 21, 2001 is incorporated by reference in
Part III of the Annual Report on Form 10-K.
15
<PAGE>
APPENDIX I
PEDIATRIC SERVICES OF AMERICA, INC.
Audit Committee Charter
Organization
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the
approval of the Board of Directors. The committee shall be appointed by the
Board of Directors and shall comprise at least three directors, each of whom
are independent of management and the Company. Members of the committee shall
be considered independent if they have no relationship that may interfere with
the exercise of their independence from management and the Company. All
committee members shall be financially literate, or shall become financially
literate within a reasonable period of time after appointment to the
committee, and at least one member shall have accounting or related financial
management expertise.
Statement of Policy
The audit committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the Board. In
so doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal
auditors and management of the Company. In discharging its oversight role, the
committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities, and personnel of the Company
and the power to retain outside counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of their activities to the Board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
In carrying out these responsibilities, the audit committee will:
. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its divisions
and subsidiaries.
. Meet with the independent auditors and financial management of the Company
to review the scope of the proposed audit for the current year and the
audit procedures to be utilized, and at the conclusion thereof review such
audit, including any comments or recommendations of the independent
auditors.
. Review with the independent auditors, the Company's internal auditor, and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit any
recommendations for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper. Further, the committee
periodically should review company policy statements to determine their
adherence to the code of conduct.
<PAGE>
. Review the internal audit function of the Company including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year, and the coordination of such plans with the
independent auditors.
. Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
. Review the interim financial statements and the financial statements
contained in the annual report to shareholders with management and the
independent auditors to determine that the independent auditors are
satisfied with the disclosure and content of the financial statements to be
presented to the shareholders. Any changes in accounting principles should
be reviewed.
. Provide sufficient opportunity for the internal and independent auditors to
meet with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's financial, accounting,
and auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
. Review accounting and financial human resources and succession planning
within the Company.
. Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
Approved and adopted this 7th day of March, 2000.
/s/ Adam O. Holzhauer
_____________________________________
Adam O. Holzhauer
Chairman
/s/ Michael J. Finn
_____________________________________
Michael J. Finn
Committee Member
/s/ Richard S. Smith
_____________________________________
Richard S. Smith
Committee Member
<PAGE>
PEDIATRIC SERVICES OF AMERICA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby acknowledges receipt of the Notice of the 2001
Annual Meeting of Stockholders and Proxy Statement and does hereby appoint Adam
O. Holzhauer and Michael J. Finn, and either of them, with full power of
substitution, as proxy or proxies of the undersigned to represent the
undersigned and to vote all shares of Pediatric Services of America, Inc. Common
Stock which the undersigned would be entitled to vote if personally present at
the 2001 Annual Meeting of Stockholders of Pediatric Services of America, Inc.,
to be held in the Medlock Auditorium at the Northeast Atlanta Hilton, 5993
Peachtree Industrial Boulevard, Norcross, Georgia, at 9:00 a.m. on Wednesday,
February 21, 2001, and at any adjournment(s) thereof, as indicated on the
reverse hereof:
<TABLE>
<S> <C> <C>
1. The election of two Class I Directors FOR the nominees listed below WITHHOLD AUTHORITY to
to serve until the 2004 Annual [_] vote for the nominees listed
Meeting of Stockholders: below [_]
ROBERT P. PINKAS and EDWARD K. WISSING
----------------------------------------------------------------------------------------------------------------
2. The ratification of the appointment of Ernst & Young LLP as independent auditors of the Company for
fiscal year 2001:
For [_] Against [_] Abstain [_]
</TABLE>
In their discretion, the proxies are authorized to vote on such other business
as may properly come before the Annual Meeting or any adjournment(s) thereof.
The Board of Directors knows of no other business to be presented at the Annual
Meeting.
TO BE SIGNED ON OTHER SIDE
<PAGE>
PLEASE COMPLETE, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY
This Proxy, when properly executed, duly returned and not revoked, will be
voted in accordance with the directions given by the undersigned stockholder.
If no direction is given, it will be voted "For" the nominees listed in Proposal
1 and "For" Proposal 2.
Signature(s)
_________________________________
_________________________________
_________________________________
Date:____________________________
Please sign exactly as your name(s) appears hereon. When shares are held
jointly, both holders should sign. When signing as attorney, executor,
administrator, trustee, custodian or guardian, give your full title as such. If
the signatory is a corporation or partnership, sign the full corporate or
partnership name by a duly authorized officer.
