SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant
Check the appropriate box:
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 ss. 240.14a-11(C) or ss. 240.14a-12
Prime Medical Services, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(I)(3).
Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRIME MEDICAL SERVICES, INC.
1301 S. Capital of Texas Highway
Suite C-300
Austin, TX 78746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 14, 2000
Notice is hereby given that the Annual Meeting of Shareholders of Prime
Medical Services, Inc., a Delaware corporation (the "Company"), will be held at
Lakeway Inn Conference Resort, 101 Lakeway Drive, Austin, Texas 78734, on
Wednesday, June 14, 2000 at 8:30 a.m. Austin, Texas time for the following
purposes:
a) To elect seven directors to serve on the Board of Directors;
b) To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
The accompanying Proxy Statement contains information regarding, and a more
complete description of, the items of business to be considered at the meeting.
The close of business on April 27, 2000, has been fixed as the record date
for the determination of Shareholders entitled to receive notice of, and to vote
at, the Annual Meeting of Shareholders or any adjournment(s) thereof.
You are cordially invited and urged to attend the meeting, but if you are
unable to attend the meeting, you are requested to sign and date the
accompanying proxy and return it promptly in the enclosed self-addressed
envelope. If you attend the meeting, you may vote in person, if you wish,
whether or not you have returned your proxy. In any event, a proxy may be
revoked at any time before it is exercised.
By Order of the Board of Directors
/s/ Cheryl L. Williams
----------------------
CHERYL L. WILLIAMS, Secretary
Austin, Texas
May 10, 2000
<PAGE>
PRIME MEDICAL SERVICES, INC.
1301 S. Capital of Texas Highway
Suite C-300
Austin, Texas 78746
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 14, 2000
This Proxy Statement is sent to shareholders of Prime Medical Services,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders of the Company to be held at the Lakeway Inn
Conference Resort, 101 Lakeway Drive, Austin, Texas 78734, on Wednesday, June
14, 2000 at 8:30 a.m. Austin, Texas time and any adjournment(s) thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone, or telecopy
by directors, officers, and regular employees of the Company. The Company may
also request banking institutions, brokerage firms, custodians, nominees, and
fiduciaries to forward solicitation material to the beneficial owners of common
stock of the Company held of record by such persons, and the Company will
reimburse the forwarding expenses. The Company will pay the cost of solicitation
of proxies. This Proxy Statement was first mailed to shareholders on or about
May 10, 2000.
Unless the context indicates otherwise, "Prime" or the "Company" includes
the Company and all of the other direct and indirect wholly owned subsidiaries
of the Company on a consolidated basis.
ANNUAL REPORT
Enclosed is an Annual Report to Shareholders for the year ended December
31, 1999 including audited financial statements. Such Annual Report to
Shareholders does not form any part of the material for the solicitation of
proxies.
REVOCATION OF PROXY
Any shareholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise by (a) giving written notice to the Secretary of
the Company of such revocation, (b) voting in person at the meeting, or (c)
executing and delivering to the Secretary of the Company a later dated proxy.
1
<PAGE>
OUTSTANDING COMMON STOCK; CERTAIN SHAREHOLDERS
The voting securities of the Company are shares of its common stock, $.01
par value per share (the "Common Stock"), each share of which entitles the
holder thereof to one vote. As of April 27, 2000, there were outstanding and
entitled to vote 16,215,034 shares of Common Stock. Only shareholders of record
at the close of business on April 27, 2000 are entitled to notice of, and to
vote at, the Annual Meeting of Shareholders and any adjournment(s) thereof.
The following table sets forth certain information regarding certain owners
of Common Stock as of April 27, 2000, with respect to (a) each person who is
known by the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, (b) each director and nominee for director
of the Company, (c) certain officers of the Company, and (d) all executive
officers and directors of the Company as a group. Unless otherwise indicated,
the Company believes that each person or entity named below has sole voting and
investment power with respect to all shares shown as beneficially owned by such
person or entity, subject to community property laws where applicable and the
information set forth in the footnotes to the table below.
Beneficial Ownership
--------------------
Number of
Name Shares Percent
- ---- --------- -------
American Physicians Service Group, Inc. 2,343,803 14.5%
1301 Capital of Texas Highway
Austin, Texas 78746 ("APS")
Goldman, Sachs Asset Management 1,338,900 8.3%
. New York Plaza
New York, New York 10004
SAFECO Common Stock Trust, 1,545,150 9.5%
SAFECO Asset Management Company and
SAFECO Corporation
SAFECO Plaza
Seattle, WA 98185
Joseph Jenkins, M.D. (1) 299,773 1.8%
Stan Johnson (1) 19,667 *
J.A. McEntire IV (1) 110,000 *
William A. Searles (1)(2) 165,100 1.0%
Kenneth S. Shifrin (1)(2) 500,900 3.0%
Michael J. Spalding, M.D. (1) 130,000 *
Alan Terry (1) 19,917 *
David Vela, M.D. (1) 14,971 *
Cheryl Williams (1) 221,435 1.3%
All directors and executive officers
as a group (15 persons) 1,489,387 8.5%
* Less than 1%
(1) Includes the following number of shares subject to options that are
presently exercisable or exercisable within 60 days after April 27, 2000:
Dr. Jenkins, 240,000; Mr. Johnson, 19,667; Mr. McEntire, 110,000; Mr.
Searles, 165,000; Mr. Shifrin, 385,000; Dr. Spalding, 130,000; Mr. Terry,
19,917; Dr. Vela, 14,667; and Ms. Williams, 198,666.
(2) Mr. Searles and Mr. Shifrin are each directors of APS and, together with
the other officers and directors of APS, may share in the voting and
investment power with respect to the shares of common stock of the Company
owned by APS. Each of such persons disclaims the beneficial ownership of
any such shares.
2
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
- --------------------------
Set forth below is information concerning aggregate compensation paid
during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's other most highly compensated
executive officers who received in excess of $100,000 in salary and bonuses
during any of the last three fiscal years (collectively, the "Named
Executives").
<TABLE>
<S> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Awards
Compensation Securities
------------ Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($)(1) Options (#)(2) Compensation ($)
- --------------------------- ---- ---------- ------------ --------------- ----------------
Kenneth S. Shifrin - Chairman of the Board 1999 325,272 162,500 175,000
1998 244,874 208,711 140,000
1997 183,336 327,000 25,000
Joseph Jenkins, M.D. President and 1999 325,000 138,125 175,000
Chief Executive Officer 1998 325,000 105,824 125,000
1997 325,000 185,000 25,000
Cheryl Williams - Chief Financial Officer, 1999 150,096 75,000 60,000
Sr. Vice President, Finance and Secretary 1998 123,730 143,740 65,000
1997 100,000 150,000 25,000
Thomas J. Driber, Ph.D. - Vice President (3) 1999 154,992 -- --
1998 103,846 72,724 25,000
1997 98,962 73,108 2,500
Stan Johnson - Vice President 1999 172,391 35,000 --
1998 164,604 20,000 25,000
1997 165,006 17,500 5,000
Alan Terry - Vice President 1999 165,960 25,000 --
1998 165,000 20,000 25,000
1997 225,000 -- --
David Vela, M.D. - Vice President 1999 115,422 25,000 --
1998 99,828 30,000 25,000
1997 67,692 17,500 10,000
</TABLE>
(1) Reflects bonuses earned during the year.
(2) Options to acquire Common Stock.
(3) Mr. Driber's employment with the Company ended March 3, 2000.
3
<PAGE>
Option Grants During 1999
- -------------------------
The following table provides information related to options granted to the Named
Executives during 1999. The Company does not have any outstanding stock
appreciation rights.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Potential Realizable Value at Assumed
Number of Percent of Annual Rates of Stock Price Appreciation for
Securities Total Options Option Term (a)
Underlying Granted to Exercise --------------------------------------------
Options Employees in Price (b) Expiration 0 % ($) 5 % ($) 10 % ($)
Name Granted (#) Fiscal Year ($/Sh) Date
- ---- ----------- ------------- --------- ---------- ---------- ---------- ----------
Kenneth S. Shifrin 175,000 24.6% $7.25 06/10/04 -- 350,532 774,585
Chairman of the Board
Joseph Jenkins, M.D. 175,000 24.6% $7.25 06/10/04 -- 350,532 774,585
President and Chief
Executive Officer
Cheryl Williams 60,000 8.5% $7.25 06/10/04 -- 120,182 265,572
Chief Financial Officer,
Sr. Vice President,
Finance and Secretary
Thomas J. Driber, Ph.D.
Vice President -- -- -- -- -- -- --
Stan Johnson -- -- -- -- -- -- --
Vice President
Alan Terry -- -- -- -- -- -- --
Vice President
David Vela, M.D -- -- -- -- -- -- --
Vice President
All Employees as a Group 710,000 100.0% (c) (c) -- 1,489,613 3,291,655
- ------------------------------------------
0% 5% 10%
-- -- ---
Total potential stock price appreciation from June 11, 1999 to June 10, 2004 for
all shareholders at assumed rates of stock price appreciation. -- $32,677,350 $72,208,397
Potential actual realizable value of options granted to all employees,
as a percentage of total potential stock price appreciation from June 11,
1999 to June 10, 2004 for all shareholders at assumed rates of stock price
appreciation. -- 4.6% 4.6%
</TABLE>
(a) The dollar amounts in these columns represent potential value that might be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming that the market price of the Company's common stock
appreciates in value from the date of grant at the 5% and 10% annual
appreciation rates from the exercise price as prescribed by the regulations, and
therefore are not intended to forecast possible future appreciation, if any, of
the price of the Company's common stock. The calculation does not take into
account any taxes or other expenses, which might be owed.
(b) The exercise price of the option was equal to the fair market value of the
common stock on the date of the grant. (c) Options were granted under the
Company's stock option plan throughout 1999 with various vesting schedules and
expiration dates through the year 2004. The average price of all options granted
to employees in 1999 is $7.59.
4
<PAGE>
Option Exercises During 1999 and Option Values at December 31, 1999
- -------------------------------------------------------------------
The following table provides information related to options exercised by
the Named Executives during 1999 and the value of options held at December 31,
1999. The Company does not have any outstanding stock appreciation rights.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Value Options/SAR at Fiscal the-Money Options/SARs
Acquired on Realized Year End at Fiscal Year-End ($) (2)
Name Exercise (#) ($) (1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------- ----------------------------- -----------------------------
Kenneth S. Shifrin -- -- 270,000 245,000 953,906 394,531
Joseph Jenkins, M.D. -- -- 112,500 262,500 54,688 382,813
Cheryl Williams -- -- 155,333 106,667 443,375 145,625
Thomas J. Driber, Ph.D. 4,000 18,250 15,667 20,833 34,917 20,833
Stan Johnson 8,000 32,000 17,667 28,333 35,497 45,913
Alan Terry -- -- 15,167 24,833 10,417 20,833
David Vela, M.D. -- -- 11,667 23,333 10,417 20,833
</TABLE>
(1) Calculated by subtracting the per share exercise price of the option from
the closing price for the Company's Common Stock on the date of exercise
and multiplying the difference by the number of shares of Common Stock
purchased upon the exercise of the option.
(2) Calculated by subtracting the per share exercise price of the option from
the closing price for the Company's Common Stock on December 31, 1999
($9.125) and multiplying the difference by the number of shares of Common
Stock underlying the option.
(3) Subsequent to December 31, 1999, Mr. Shifrin, Dr. Jenkins, and Ms.
Williams, surrendered for cancellation, options for 25,000 shares each.
Noncompetition Agreements
- -------------------------
The Company entered into noncompetition agreements with Dr. Jenkins, Mr.
Johnson, and Mr. Terry. While the terms of such agreements vary, they generally
provide that each such person, during the period specified in his agreement,
will not own, manage or control any business that competes with the Company and
will not advise a customer or supplier of the Company to cancel or curtail its
dealings with, or influence any employee of the Company to terminate his or her
employment with, the Company.
5
<PAGE>
Indemnity Agreements
- --------------------
The Company has entered into indemnity agreements with its officers and
directors. The agreements generally provide that, to the extent permitted by
law, the Company must indemnify each such person for judgments, expenses, fines,
penalties and amounts paid in settlement of claims that result from the fact
that such person was an officer, director or employee of the Company. In
addition, the Company's and certain of its subsidiaries' certificates of
incorporation provide for certain indemnifications and limitations on director
liability.
REPORT OF THE COMPENSATION COMMITTEE
OF THE
BOARD OF DIRECTORS
The business the Company is engaged in is highly competitive. In order to
succeed, the Company believes that it must be able to attract and retain
qualified executives. To achieve this objective, the Company has structured an
executive compensation system tied to operating performance that the Company
believes has enabled it to attract and retain key executives.
During 1999, the Compensation Committee was comprised of Michael Spalding,
M.D. and William A. Searles, both of whom are outside directors.
The Compensation Committee has primary responsibility for determining
executive compensation levels. The Board as a whole maintains a philosophy that
compensation of executive officers, specifically including that of the Chairman
and President, should be linked to both operating and stock price performance. A
portion of the management compensation has been comprised of bonuses, based on
operating and stock performance, with a particular emphasis on the attainment of
planned objectives. Accordingly, in years in which performance goals are
achieved or exceeded, executive compensation tends to be higher than in years in
which performance is below expectations. In addition, the Company has utilized
stock options to link executive compensation to stock price performance. The
Committee feels that options are an effective incentive for managers to create
value for shareholders since the value of an options bears a direct relationship
to the Company's stock price.
For 1999, the Company's executive compensation program consisted of base
salary and a bonus based upon the achievement of specific goals.
6
<PAGE>
The Company's objective is financial performance that achieves several
goals over time, including earnings-per-share growth, stock price growth and a
proper diversification of business risks. The Committee believes that
compensation levels during 1999 adequately reflect the Company's compensation
goals and policies.
Compensation Committee: Michael Spalding M.D. and
William A. Searles
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Joseph Jenkins, President and Chief Executive Officer, currently owns
limited partner interests in eleven of the partnerships managed by the Company.
During 1999, Dr. Jenkins received $65,357 in cash distributions from such
partnerships.
Mr. Alan Terry, Vice President, currently owns limited partner interests in
eleven of the partnerships managed by the Company. During 1999, Mr. Terry
received $65,357 in cash distributions from such partnerships.
David Dulaney, M.D., a nominee for election as a director, is an owner in
two separate entities that own a 40% interest in two of the Company's
subsidiaries.
The Company's principal executive office is located in Austin, Texas in an
office building owned by APS. The Company pays APS approximately $16,700 per
month, which includes rental payments for approximately 8,100 square feet of
office space, reception and telephone services, and certain other services and
facilities. This lease expires in December 2002. Brad A. Hummel, the Company's
Chief Operating Officer, is a Director of APS.
SECTION 16 FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC") and the NASDAQ National market. Such persons are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it with
respect to 1999, or written representations from certain reporting persons, the
Company believes that all filing requirements applicable to its directors,
officers and persons who own more than 10% of a registered class of the
Company's equity securities have been complied with.
7
<PAGE>
QUORUM; VOTING
The presence, in person or by proxy, of the holder of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the meeting. If a quorum is not present or represented at the meeting,
the shareholders entitled to vote thereat, present in person or represented by
proxy, have the power to adjourn the meeting from time to time, without notice
other than an announcement at the meeting, until a quorum is present or
represented. At any such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified.
Cumulative voting is not permitted in the election of directors of the
Company. On all matters (including election of directors) submitted to a vote of
the shareholders at the meeting or any adjournment(s) thereof, each holder of
Common Stock will be entitled to one vote for each share of Common Stock owned
of record by such shareholder at the close of business on April 27, 2000.
SHAREHOLDER PROPOSALS
Any shareholder of the Company meeting certain minimum stock ownership and
holding period requirements may present a proposal for action at the annual
meeting of shareholders to be held in 2001. Such shareholder must deliver the
proposal to the executive offices of the Company no later than January 15, 2001,
unless the Company notifies the shareholders otherwise. Only those proposals
that are proper for shareholder action and otherwise proper may be included in
the Company's proxy statement. The Board of Directors will consider nominations
for directors of the Company to be elected at the Annual Meeting of Shareholders
to be held in 2001 that are submitted in writing by any shareholder of the
Company prior to January 15, 2001.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form, which are properly executed and returned,
will be voted at the meeting and adjournment(s) thereof and will be voted in
accordance with the instructions thereon. Any proxy upon which no instructions
have been indicated with respect to a specified matter will be voted as follows
with respect to such matters: (a) "FOR" the seven persons for election to the
Board of Directors; and (b) in the transaction of such other business as may
properly come before the meeting or any adjournment(s) thereof. The Board of
Directors knows of no matters, other than those stated above, to be presented
for consideration at the meeting. If, however, other matters properly come
before the meeting or any adjournment(s) thereof, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their judgment on any such matters. The persons named in the accompanying proxy
may also, if it is deemed to be advisable, vote such proxy to adjourn the
meeting from time to time.
8
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors has, by
resolution, fixed the number of directors at seven and seven directors will be
elected. All nominees will be elected to hold office until the next annual
meeting of shareholders of the Company or until his successor is elected and
qualified. Each nominee is presently a director of the Company, except Dr.
Dulaney. The Board of Directors held 8 meetings during the year ended December
31, 1999, and each director attended at least 75% of the aggregate of (a) the
total number of meetings of the Board of Directors held during the period for
which he served as a director and (b) the total number of meetings held by all
committees of the board on which he served.
Director of
Name Age Company Since
- ---- --- -------------
David Dulaney, M.D. 63 N/A
Joseph Jenkins, M.D., J.D. 52 1996
J.A. McEntire IV 38 1996
William A. Searles 57 1989
Kenneth S. Shifrin 51 1989
Michael J. Spalding, M.D. 59 1993
James M. Usdan 50 2000
The Company pays Dr. Dulaney, Mr. McEntire, Mr. Searles, Dr. Spalding, and
Mr. Usdan a monthly fee of $1,250 for serving as a director of the Company. The
Company's directors are also eligible to receive stock options under the Option
Plan. The Company's directors receive reimbursement of all ordinary and
necessary expenses incurred in attending any meeting of the Board of Directors
or any committee of the Board of Directors.
David D. Dulaney, M.D. is a graduate of Jefferson Medical College,
Philadelphia, Pennsylvania and was a resident in ophthalmology at the Mayo
Clinic, Rochester, Minnesota. He has been a Board Certified Ophthalmologist
since 1972, and has been in practice in the Phoenix area since 1975. Dr. Dulaney
is an internationally recognized lecturer on Refractive Surgery. He is a
Founding Member of the American Society of Cataract and Refractive Surgery. He
served on the board of Laser Link.Net Inc., which was recently acquired by Covad
Communications Group, Inc. From 1998 to 1999 he served as a Director of
Physicians Resource Group, a publicly traded company.
Dr. Jenkins has been President and Chief Executive Officer and a Director
of the Company since April 1996. From May 1990 until 1996, Dr. Jenkins was an
officer of Lithotripters, Inc., which became a wholly owned subsidiary of the
Company in April 1996. Most recently, Dr. Jenkins has been President of
Lithotripters, Inc. Dr. Jenkins is a board certified urologist and is a founding
member, a past president and currently a director of the American Lithotripsy
Society.
9
<PAGE>
Mr. McEntire has been a Director of the Company since September 1996. Mr.
McEntire is currently CEO of Protrader Group, LP. From 1996 to 1999, Mr.
McEntire was a managing partner of M2 Capital Partners, a private equity
investment firm. From August 1994, to December 1996, Mr. McEntire served as Vice
President of Strategic Planning and Corporate Development for Parker and Parsley
Petroleum, Inc., and oil and gas exploration company. Prior to 1994, Mr.
McEntire spent 10 years in commercial banking and corporate finance.
Mr. Usdan has been a Director of the Company since March 2000. Mr. Usdan
has been President, CEO, and a Director of NextCARE Hospitals, Inc. since May
1998. From 1990 to 1998 he was President, CEO, and a Director of RehabCare
Group, Inc., a publicly traded company.
Mr. Searles has been a Director of the Company since October 1989. He has
been an independent business consultant since 1989. Prior to that he spent 25
years with various Wall Street firms, the last ten of which were with Bear
Stearns (an investment banking firm) as an Associate Director/Limited Partner.
He has served as a Director of APS since July 1989, as Chairman of the Board of
APS Investment Services since May 1998, as a Director of Uncommon Care since
September 1998, and as an Advisory Director of Probex Corp, a re-refiner, which
converts waste oil into premium quality base oil, since December 1999.
Mr. Shifrin has been Chairman of the Board since October 1989. Mr. Shifrin
has served in various capacities with APS since February 1985, and is currently
the Chairman of the Board, a Director, and Chief Executive Officer of APS. Mr.
Shifrin is a member of the World Presidents' Organization.
Dr. Spalding has been a Director since October 1993. Dr. Spalding has been
a practicing urologist since 1973. Dr. Spalding was the Chairman of Tennessee
Valley Lithotripters, which was acquired by the Company in 1993.
No family relationships exist among the officers or directors of the
Company. Except as indicated above, no Director of the Company is a director of
any company with a class of securities registered pursuant to Section 12 of the
Exchange Act, or subject to the requirements of Section 15(d) of the Exchange
Act or any company registered as an investment company under the Investment
Company Act of 1940.
Should any nominee named herein for the office of director become unwilling
or unable to accept nomination or election, it is intended that the persons
acting under the proxy will vote for the election, in his stead, of such other
persons as the Board of Directors of the Company may recommend. The Board of
Directors has no reason to believe that any nominee named above will be
unwilling or unable to serve.
The Board of Directors of the Company has established an Audit Committee, a
Compensation Committee and a Nominating Committee. The Audit Committee's
functions include recommending to the Board of Directors the engagement of the
Company's independent public accountants, reviewing with such accountants the
plans for and the results and scope of their auditing engagement and certain
other matters relating to their services to the Company, including matters
relating to the independence of such accountants. The Compensation Committee
makes recommendations to the Board of Directors with respect to the compensation
of executive officers, including issuance of options under the Options Plan. The
Nominating Committee has primary responsibility for nominating persons for
election to the Board of Directors. Mr. McEntire and Mr. Usdan serve on the
Audit Committee, which held one meeting during 1999. Dr. Spalding and Mr.
Searles serve on the Compensation Committee, which held one meeting during 1999.
Mr. McEntire and Mr. Searles serve on the Nominating Committee, which held no
meetings during 1999.
The Board recommends a vote FOR each nominee for Director.
10
<PAGE>
Performance Graph
The following graph compares the Company's cumulative total stockholder
return with the cumulative total stockholder returns of the NASDAQ Market Index
and the NASDAQ Health Secondary Index, for the period from January 1, 1994
through December 31, 1999.
[GRAPHIC OMITTED]
NASDAQ
Total US Health
December 31 PRIME NASDAQ Services
- ----------- ----- -------- --------
1994 100.0 100.0 100.0
1995 266.7 141.3 126.8
1996 322.2 173.9 126.6
1997 409.3 213.1 129.0
1998 216.7 300.2 109.3
1999 270.4 542.4 90.3
11
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected KPMG LLP as independent
auditors for the year ending December 31, 1999. KPMG LLP has advised the Company
that, in accordance with professional standards, it will not perform any
non-audit service that would impair its independence for purposes of expressing
an opinion on the Company's financial statements. A representative of KPMG LLP
will attend the meeting with the opportunity to make a statement if such
representative desires to do so and will be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the meeting and does not know of any matters that will be brought
before the meeting by others. However, if any other matters properly come before
the meeting, it is the intention of the persons named in the accompanying proxy
to vote such proxy in accordance with their judgment on such matters.
By Order of the Board of Directors
/s/ /Cheryl L. Williams
-----------------------
CHERYL L. WILLIAMS, Secretary
Austin, Texas
May 10, 2000
12
