<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AmSurg Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AMSURG CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1999
To our Shareholders:
The 1999 annual meeting of shareholders of AmSurg Corp. will be held
Friday, May 21, 1999, at 9:00 a.m., local time, at the SunTrust Center, 5th
Floor Auditorium, 424 Church Street, Nashville, Tennessee. At the meeting,
shareholders will act on the following matters:
1. Election of two directors in Class II, each for a term of three
years;
2. Approval of an amendment to our Amended and Restated Charter to
increase the authorized shares of Class A common stock from
20,000,000 to 35,000,000;
3. Re-approval of our 1997 Stock Incentive Plan to ensure compliance
with Section 162(m) of the Internal Revenue Code and allow for the
deductibility of certain compensation under the plan;
4. Approval of an amendment to our 1997 Stock Incentive Plan to
increase the number of shares reserved for issuance thereunder from
650,000 to 1,120,000; and
5. Any other matters which may properly come before the meeting.
Shareholders of record at the close of business on April 2, 1999 are
entitled to notice of and to vote at the meeting.
Your vote is important. Please COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY in the enclosed stamped envelope in order that as many shares as
possible will be represented.
By Order of the Board of Directors,
Claire M. Gulmi
Secretary
Nashville, Tennessee
April 20, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ABOUT THE MEETING...............................................................1
What is the purpose of the annual meeting?................................1
Who is entitled to vote?..................................................1
What constitutes a quorum?................................................1
How do I vote?............................................................1
Can I change my vote after I return my proxy card?........................2
What are the Board's recommendations?.....................................2
What vote is required to approve each item?...............................2
STOCK OWNERSHIP.................................................................3
Who are the largest owners of the Company's stock?........................3
How much stock do our directors and executive officers own?...............4
Section 16(a) Beneficial Ownership Reporting Compliance...................5
ITEM 1 - ELECTION OF DIRECTORS..................................................5
Directors Standing for Election...........................................5
Directors Continuing in Office............................................6
How are our directors compensated?........................................7
What committees has the Board established?................................7
How often did the Board meet during fiscal 1998?..........................8
Certain Relationships and Related Transactions............................8
Report of the Compensation Committee on Executive Compensation............9
Employment Agreements....................................................12
ITEM 2 - APPROVAL OF AMENDMENT TO OUR AMENDED AND RESTATED CHARTER TO
INCREASE AUTHORIZED SHARES OF CLASS A COMMON STOCK....................15
ITEM 3 - RE-APPROVAL OF THE 1997 STOCK INCENTIVE PLAN TO ENSURE
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE...........16
ITEM 4 - APPROVAL OF AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN................21
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS...............................21
OTHER MATTERS..................................................................22
ADDITIONAL INFORMATION.........................................................22
</TABLE>
<PAGE> 4
AMSURG CORP.
ONE BURTON HILLS BOULEVARD, SUITE 350
NASHVILLE, TENNESSEE 37215
PROXY STATEMENT
The Board of Directors is soliciting proxies to be used at the 1999
annual meeting of shareholders. This proxy statement and the enclosed proxy will
be mailed to shareholders on or about April 20, 1999.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, shareholders will act upon the matters outlined
in the accompanying notice of meeting, including the election of directors, the
approval of a charter amendment, the re-approval of the 1997 Stock Incentive
Plan and the approval of an amendment to the 1997 Stock Incentive Plan. In
addition, our management will report on our performance during fiscal 1998 and
respond to questions from shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record at the close of business on the record
date, April 2, 1999, are entitled to receive notice of the annual meeting, and
to vote the shares of common stock that they held on that date at the meeting,
or any postponement or adjournment of the meeting. Each outstanding share of our
Class A common stock entitles its holder to cast one vote on each matter to be
voted upon. Each share of our Class B common stock entitles its holder to cast
ten votes on the election of directors and one vote on all other matters to be
voted upon.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting us to conduct the business of the meeting. As of
the record date, 9,539,049 shares of our Class A common stock and 4,787,131
shares of our Class B common stock were outstanding. Proxies received but marked
as abstentions will be included in the calculation of the number of shares
considered to be present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to us, it will be voted as you direct. If you are a registered
shareholder and attend the meeting, you may deliver your completed proxy card in
person. "Street name" shareholders who wish to vote at the meeting will need to
obtain a proxy form from the institution that holds their shares.
1
<PAGE> 5
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You can revoke your proxy at any time before it is exercised in any
of three ways:
- by submitting written notice of revocation to the Secretary;
- by submitting another proxy that is later dated and properly signed;
or
- by voting in person at the meeting.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendations are set
forth below together with the description of each item in this proxy statement.
In summary, the Board recommends a vote:
- for election of the nominated slate of directors (see page 5);
- for approval of the amendment to the Amended and Restated Charter
(see page 15);
- for re-approval of our 1997 Stock Incentive Plan (see page 16); and
- for approval of the amendment to our 1997 Stock Incentive Plan (see
page 21).
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast by the shareholders entitled to vote at the meeting is required for the
election of directors. A properly executed proxy marked "WITHHOLD AUTHORITY"
with respect to the election of one or more directors will not be voted with
respect to the director or directors indicated.
APPROVAL OF THE CHARTER AMENDMENT, THE 1997 STOCK INCENTIVE PLAN AND
THE AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN; OTHER ITEMS. The charter
amendment, the 1997 Stock Incentive Plan, the amendment to the 1997 Stock
Incentive Plan, and any other item will each be approved if the number of
shares of common stock voted in favor of the proposal exceeds the number of
shares of common stock voted against it. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to any such item will not be voted on any of
these proposals.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may or may not be permitted to exercise voting
discretion with respect to the approval of the charter amendment, the
re-approval of the 1997 Stock Incentive Plan, the approval of the amendment to
the 1997 Stock Incentive Plan or another item to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those items and will not be counted in determining the number of shares
necessary for approval.
2
<PAGE> 6
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
The following table shows those shareholders, other than our directors
and executive officers, who beneficially own more than 5% of either class of our
common stock.
<TABLE>
<CAPTION>
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CLASS A CLASS B
COMMON PERCENT OF COMMON PERCENT OF
NAME AND ADDRESS STOCK(1) CLASS STOCK(1) CLASS
-------------------------------------------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Wasatch Advisors, Inc. ........................... 1,359,053 14.2% 588,475 12.3%
150 Social Hall Avenue
Salt Lake City, UT 84111
Waddell & Reed, Inc............................... 804,457 8.4 729,661 15.2
6300 Lamar Avenue, P.O. Box 29217
Shawnee Mission, KS 66201-9217
Provident Investment Counsel ..................... 850,700 8.9 -- --
300 North Lake Avenue
Pasadena, CA 91101-4106
Electra Investment Trust P.L.C.................... 717,738 7.5 -- --
65 Kingsway
London, England WC 2B6QT
The Capital Research and Management Co. .......... 250,000 2.6 310,000 6.5
333 South Hope Street
Los Angeles, CA 90071
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This information is based on the following sources:
- Wasatch Advisors, Inc. - Form 13G dated February 12, 1999;
- Waddell & Reed, Inc. - Form 13G dated February 12, 1999;
- Provident Investment Counsel - Form 13G dated January 10, 1999;
- Electra Investment Trust P.L.C. - Provided by a representative
of Electra; and
- The Capital Research and Management Co. - Form 13G dated
February 8, 1999.
3
<PAGE> 7
HOW MUCH STOCK DO OUR DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of our common stock beneficially owned
(unless otherwise indicated) by our directors, our executive officers named in
the Summary Compensation Table below and our directors and executive officers as
a group. Except as otherwise indicated, all information is as of the record
date, April 2, 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
--------------------------------------- ----------------------------
ACQUIRABLE
OUTSTANDING WITHIN 60 PERCENT OF OUTSTANDING PERCENT OF
NAME SHARES (1) DAYS (2) CLASS (3) SHARES (1) CLASS
---------------------------------------- -------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Ken P. McDonald......................... 2 105,000 1.1% -- --
Claire M. Gulmi......................... -- 37,083 * -- --
Royce D. Harrell........................ -- 97,832 1.0 -- --
Rodney H. Lunn ......................... 56,613 227,207 2.9 59 *
David L. Manning ....................... 52,000 236,999 3.0 -- --
Thomas G. Cigarran ..................... 84,069 -- * 363,554 7.6%
One Burton Hills Boulevard
Nashville, TN 37215
James A. Deal........................... 29,995 -- * 179,728 3.8
Steven I. Geringer...................... 10,560 -- * -- --
Debora A. Guthrie....................... 182,684 -- 1.9 890 *
Henry D. Herr........................... 55,645 -- * 221,558 4.6
Bergein F. Overholt, M.D................ 142,637 5,415 1.6 340 *
All directors and executive officers
as a group (11 persons).............. 614,205 709,536 12.9 766,134 16.0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents less than 1% of each class of our outstanding common stock.
(1) The number of shares shown includes shares that are individually or
jointly owned, as well as shares over which the individual has either
sole or shared investment or voting authority. Certain of our
directors and executive officers disclaim beneficial ownership of some
of the shares included in the table, as follows:
- Mr. McDonald - 2 shares of Class A common stock held by Mr.
McDonald's wife;
- Mr. Lunn - 999 shares of Class A common stock held for the benefit
of Mr. Lunn's children and 1,800 shares of Class A common stock
held in a family trust;
- Mr. Deal - 1,089 shares of Class A common stock held by Mr. Deal's
children and 7,013 shares of Class B common stock held by Mr.
Deal's children;
- Mr. Geringer - 8,460 shares of Class A common stock held in a
family trust;
- Ms. Guthrie - 179,434 shares of common stock held by Capitol
Health Partners, L.P. attributable to Ms. Guthrie, who is
President and Chief Executive Officer of the general partner
of Capitol Health Partners, L.P.; and
- Dr. Overholt - 21,000 shares of Class A common stock owned by
The Endoscopy Center, Knoxville, Tennessee, of which Dr. Overholt
is a partner, 8,482 shares of Class A common stock owned by
Gastrointestinal Associates, P.C., of which Dr. Overholt is
President, and 29,083 shares of Class A common stock held in trust
for Dr. Overholt's grandchildren.
(2) Reflects the number of shares that could be purchased by exercise
of options available on April 2, 1999 or within 60 days thereafter
under our stock option plans.
4
<PAGE> 8
(3) Pursuant to the rules of the Securities and Exchange Commission,
or the SEC, shares of common stock which an individual owner set
forth in this table has a right to acquire within 60 days after
the record date pursuant to the exercise of stock options are
deemed to be outstanding for the purpose of computing the
ownership of that owner, but are not deemed outstanding for the
purpose of computing the ownership of any other individual owner
shown in the table. Likewise, the shares subject to options held
by our directors and executive officers which are exercisable
within 60 days of the record date are all deemed outstanding for
the purpose of computing the percentage ownership of all executive
officers and directors as a group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require our directors and executive officers,
and persons who own more than 10% of either class of our common stock, to file
initial reports of ownership and reports of changes in ownership with us, the
SEC and The Nasdaq National Market. Based solely upon a review of filings with
the SEC and written representations that no other reports were required, we
believe that all of our directors and executive officers complied during fiscal
1998 with their reporting requirements, with the exception of a late filing made
by Ms. Guthrie in June 1998 relating to a transaction in March 1998.
ITEM 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors is divided into three classes (Class I, Class II
and Class III). At each annual meeting of shareholders, directors constituting
one class are elected for a three-year term. The current Board of Directors is
comprised of seven members. Two members will be elected at the annual meeting.
The Board of Directors has nominated and recommends to the shareholders Henry D.
Herr and Ken P. McDonald, each of whom is an incumbent Class II director, for
election as Class II directors to serve until the annual meeting of shareholders
in 2002 and until such time as their respective successors are duly elected and
qualified.
If either of the nominees should become unable to accept election, the
persons named in the proxy may vote for such other person or persons as may be
designated by the Board of Directors. Management has no reason to believe that
either of the nominees named above will be unable to serve. Certain information
with respect to the nominees for election as Class II directors and with respect
to the Class I and Class III directors (who are continuing in office) is set
forth below.
CLASS II DIRECTORS. The directors standing for election are:
HENRY D. HERR Director since 1992
Mr. Herr, 53, has served as Executive Vice President of Finance and
Administration and Chief Financial Officer of American Healthcorp, Inc., or AHC,
since 1986 and a director of AHC since 1988. Since December 1997, Mr. Herr has
served as an advisor to us. Mr. Herr served as our Chief Financial Officer from
April 1992 until September 1994 and as our Secretary from April 1992 until
December 1997.
KEN P. MCDONALD Director since 1996
Mr. McDonald, 58, has served as our Chief Executive Officer since December 1997
and our President since July 1996, previously having served as our Executive
Vice President and Chief Operating Officer since December 1994. Mr. McDonald
joined us in 1993 as a Vice President.
5
<PAGE> 9
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS. The following Class III directors are serving terms ending
in 2000:
THOMAS G. CIGARRAN Director since 1992
Mr. Cigarran, 57, has served as our Chairman of the Board since 1992. Mr.
Cigarran served as our Chief Executive Officer from January 1993 until December
1997, and as our President from January 1993 to July 1996. Since December 1997,
Mr. Cigarran has served as an advisor to us. Mr. Cigarran is a co-founder of AHC
and has served as Chairman of the Board, President and Chief Executive Officer
of AHC since 1988.
DEBORA A. GUTHRIE Director since 1996
Ms. Guthrie, 43, has served as President and Chief Executive Officer of the
general partner of Capitol Health Partners, L.P., a Washington, D.C.-based
venture fund specializing in healthcare industries since October 1995. Prior to
forming Capitol Health Partners, L. P. in 1995, Ms. Guthrie was President and
Chief Executive Officer of Guthrie Capital Corporation, a venture management
company providing financial advisory and investment banking services to
healthcare companies in the Mid-Atlantic and Southeastern United States. Ms.
Guthrie is a member of the Executive Committee and Board of Directors of the
National Association of Small Business Investment Companies and the Board of
Directors of the Center for International Private Enterprise, an arm of the U.S.
Chamber of Commerce. Ms. Guthrie, an affiliate of Capitol Health Partners, L.P.,
was appointed to the Board of Directors in connection with our preferred stock
equity financing in November 1996.
BERGEIN F. OVERHOLT, M.D. Director since 1992
Dr. Overholt, 61, has served as President of Gastrointestinal Associates, P.C.,
a gastrointestinal specialty group, and a partner in The Endoscopy Center,
Knoxville, Tennessee, which owns a limited partnership interest in an ambulatory
surgery center that is majority-owned and managed by us, since 1992. Dr.
Overholt also serves as our Medical Director, is Chairman of the Laser
Department at the Thompson Cancer Survival Center in Knoxville, Tennessee and is
an Associate Professor of Clinic Medicine at the University of Tennessee in
Knoxville, Tennessee.
CLASS I DIRECTORS. The following Class I directors are serving terms ending in
2001:
JAMES A. DEAL Director since 1992
Mr. Deal, 49, serves as President and Chief Executive Officer of CDI, Inc., a
national network of outpatient diagnostic imaging centers. Mr. Deal served as
Executive Vice President of AHC from May 1991 to August 1998 and as President of
Diabetes Treatment Centers of America, Inc., an AHC subsidiary, from 1985 to
August 1998.
STEVEN I. GERINGER Director since 1997
Mr. Geringer, 53, has been a private investor since June 1996, previously having
served as President and Chief Executive Officer of PCS Health Systems, Inc., a
unit of Eli Lilly & Company and provider of managed pharmaceutical services to
managed care organizations and health insurers, from June 1995 until June 1996,
and President and Chief Operating Officer of PCS from May 1993 through May 1995.
6
<PAGE> 10
HOW ARE OUR DIRECTORS COMPENSATED?
BASE COMPENSATION. Each non-employee director receives an annual fee of
$10,000, adjusted annually to reflect changes in the Consumer Price Index, U.S.
All City Average Report, of the U.S. Bureau of Labor Statistics, or CPI, for
their services as directors and as members of any committees of the Board of
Directors on which they serve. In addition, each non-employee director is
reimbursed for out-of-pocket expenses incurred in attending Board of Directors'
meetings and committee meetings.
RESTRICTED STOCK. On the date of each annual meeting of shareholders,
each non-employee director who is elected or reelected to the Board of Directors
or who otherwise continues as a director shall automatically receive on the date
of the annual meeting of shareholders a grant of that number of shares of
restricted Class A common stock having an aggregate fair market value on such
date equal to $10,000, adjusted annually for changes in the CPI. A director
serving as medical director of the Company but not as an employee of the Company
will be treated as a non-employee director for purposes of these restricted
stock grants.
Each grant of restricted stock shall vest in one-third increments with
the one-third vesting equally on the date of grant and the first and second
anniversary of the date of grant, if the grantee is still a director on each of
such dates. Until the earlier of (i) five years from the date of grant and (ii)
the date on which the non-employee director ceases to serve as a director, no
restricted stock may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution. Upon termination of a non-employee director's service as a
director for any reason other than death, disability or retirement, all shares
of unvested non-employee director restricted stock will be forfeited. Upon
resignation of a non-employee director as a director due to death, disability or
retirement, all shares of restricted stock will immediately vest.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Audit, Compensation and Nominating
Committees.
AUDIT COMMITTEE. The principal functions of the Audit Committee are to
recommend to the full Board of Directors the engagement or discharge of our
independent auditors; to review the nature and scope of the audit, including but
not limited to a determination of the effectiveness of the audit effort through
meetings held at least annually with independent auditors and a determination
through discussion with the auditors that no unreasonable restrictions were
placed on the scope or implementation of their examinations; to review the
qualifications and performance of the auditors, including but not limited to a
review of the plans and results of the auditing engagement and each professional
service provided by the independent auditors; to review our financial
organization and accounting practices, including but not limited to a review of
our financial statements with the auditors and an inquiry into the effectiveness
of our financial and accounting functions and internal controls through
discussions with our auditors and officers; and to recommend to the full Board
of Directors policies concerning avoidance of employee conflicts of interest and
to review the administration of such policies. Members of the Audit Committee
are Debora A. Guthrie, James A. Deal and Henry D. Herr. In fiscal 1998, the
Audit Committee met two times.
COMPENSATION COMMITTEE. The functions of the Compensation Committee
include recommending to the full Board of Directors the compensation
arrangements for senior management and directors, adopting compensation and
benefit plans in which officers and directors are eligible to participate and
granting options or other benefits under (and otherwise administering) such
plans, including our 1992 Stock Option Plan and the 1997 Stock Incentive Plan.
Members of the Compensation Committee are Steven I. Geringer, Debora A.
7
<PAGE> 11
Guthrie and James A. Deal. No member of this committee is a former or current
officer or employee. The Compensation Committee met two times during fiscal
1998.
NOMINATING COMMITTEE. The Nominating Committee is responsible for
soliciting recommendations for candidates for the Board of Directors; developing
and reviewing background information for candidates; making recommendations to
the Board regarding such candidates; and reviewing and making recommendations to
the Board with respect to candidates for directors proposed by shareholders. Any
shareholder wishing to propose a nominee should submit a recommendation in
writing to our Secretary, indicating the nominee's qualifications and other
relevant biographical information and providing confirmation of the nominee's
consent to serve as a director. Members of the Nominating Committee are Ken P.
McDonald, Thomas G. Cigarran and Bergein F. Overholt, M.D. The Nominating
Committee did not meet during fiscal 1998.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1998?
The Board of Directors met six times during fiscal 1998. Each of the
directors attended at least 75% of the aggregate of all meetings of the Board of
Directors and all meetings of the committees of which the director was a member.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT. In December 1997, we entered into a management
agreement with AHC pursuant to which AHC provided certain financial and
accounting services to us and our subsidiaries on a transitional basis, with the
intent that we would acquire the personnel, systems and expertise necessary to
become self-sufficient in the provision of these services during the period
beginning on the date of the management agreement and ending no later than one
year thereafter. Pursuant to the management agreement, AHC provided us with
services, including assistance with respect to processing payroll and associated
payroll tax returns and accounts payable for our corporate office, maintaining
general accounting records for our corporate operations and operations of our
subsidiaries (including the partnerships and limited liability companies),
preparing our consolidated financial statements, preparing our corporate tax
returns and tax returns for our subsidiaries, preparing estimated tax reports,
and preparing financial statements in connection with periodic reports required
to be filed by us with the SEC. As compensation for such services, we paid AHC
$105,504 in 1998. This management agreement was terminated on December 31, 1998.
ADVISORY AGREEMENTS. Effective December 1997, we entered into advisory
agreements with each of Thomas G. Cigarran and Henry D. Herr, pursuant to which
Messrs. Cigarran and Herr provide continuing services to us through December
1999. Immediately prior to December 1997, Mr. Cigarran served as our Chief
Executive Officer, and Mr. Herr served as our Vice President and Secretary.
Pursuant to the advisory agreements, Messrs. Cigarran and Herr provide advisory
services to our senior management in the areas of strategy, operations,
management and organizational development. As compensation for these services
during the two-year term, in December 1997 we paid $200,000 to Mr. Cigarran and
$150,000 to Mr. Herr in the form of shares of Class A common stock, which were
issued as restricted stock. One-third of the shares paid as compensation vested
immediately, one-third vested December 3, 1998 and the remaining one-third of
the shares will vest December 3, 1999. The Advisory Agreements provide that
Messrs. Cigarran and Herr will not sell the shares of our Class A common stock
received pursuant to these agreements until December 1999, subject to certain
limited exceptions. The advisory agreements also contain certain non-compete and
confidentiality provisions. In addition, Messrs. Cigarran and Herr are eligible
to receive compensation as non-
8
<PAGE> 12
employee directors. Messrs. Cigarran and Herr are also entitled to
indemnification as provided in the indemnification agreement that each entered
into with us in December 1997.
LEASE ARRANGEMENT. We lease approximately 15,400 square feet of space
from AHC in Nashville, Tennessee, where our corporate headquarters are located,
pursuant to a sublease dated June 9, 1996. We are required to make an aggregate
of $990,076 in rental payments to AHC over the three-year term of the sublease,
which expires December 31, 1999.
OTHER ARRANGEMENTS. Bergein F. Overholt, M.D. is a director, our
Medical Director and President and a 14% owner of The Endoscopy Center. The
Endoscopy Center is a limited partner, and one of our subsidiaries is the
general partner and majority owner of, The Endoscopy Center of Knoxville, L.P.,
which owns and operates an ambulatory surgery center. The aggregate amount of
distributions made by The Endoscopy Center of Knoxville, L.P. to The Endoscopy
Center in 1998 was $1,249,500, of which Dr. Overholt received his pro rata
ownership percentage. During 1998, Dr. Overholt was paid $50,000 for his
services as the Company's Medical Director and he participated in the 1997 Stock
Incentive Plan as a non-employee director. See "Compensation of Directors."
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Decisions on compensation of our executive officers are made by the
Compensation Committee of our Board of Directors. Each member of the
Compensation Committee is a non-employee director. It is the responsibility of
the Compensation Committee to determine whether in its judgment the executive
compensation policies are reasonable and appropriate, meet their stated
objectives and effectively serve our best interests and the best interests of
our shareholders.
WHAT IS OUR PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
The Compensation Committee believes that the primary objectives of the
Company's executive compensation policies should be:
- To attract and retain talented executives by providing
compensation that is, overall, highly competitive with the
compensation provided to executives at companies of comparable
position in the health care services industry, while
maintaining compensation within levels that are consistent
with the Company's annual budget, financial objectives and
operating performance;
- To provide appropriate incentives for executives to work
toward the achievement of the Company's annual financial
performance and business goals based on the Company's annual
budget; and
- To more closely align the interests of executives with those
of shareholders and the long-term interests of the Company by
providing long-term incentive compensation in the form of
non-qualified stock options or other equity-based long-term
incentive compensation.
9
<PAGE> 13
The Compensation Committee believes that the Company's executive
compensation policies should be reviewed annually and should be reviewed in
light of the Company's financial performance, its annual budget and its position
within the health care services industry, as well as the compensation policies
of similar companies in the health care services business. The compensation of
individual executives should then be reviewed annually by the Compensation
Committee in light of its executive compensation policies for that year.
In reviewing the comparability of the Company's executive compensation
policies, the Compensation Committee reviews executive compensation for other
comparable companies. In light of factors that are unique to the Company, the
Compensation Committee believes that, while the Company competes generally with
these other health care service companies, the Company is the leader in the
development of a relatively new method of delivery for outpatient surgical
procedures, and its rapid and high growth history, provides unique circumstances
that should be taken into account. These differences are important factors,
which the Compensation Committee expects to consider in determining executive
compensation and in analyzing comparable financial performance.
The Compensation Committee believes that in addition to corporate
performance, it is appropriate to consider in setting and reviewing executive
compensation the level of experience and responsibilities of each executive as
well as the personal contributions a particular individual may make to the
success of the corporate enterprise. Such qualitative factors as leadership
skills, analytical skills, organizational development, public affairs and civic
involvement are deemed to be important qualitative factors to take into account
in considering levels of compensation. No relative weight is assigned to these
qualitative factors, which are applied subjectively by the Compensation
Committee.
BASE SALARY. Base compensation for executive officers of the Company is
based on the terms of employment agreements between the Company and the
executives. These agreements provide for a minimum base salary adjusted for
increases in the CPI and such other increases as the Compensation Committee
shall determine to be appropriate. In determining whether an increase in base
compensation for the executive officers is appropriate, the Compensation
Committee may review recommendations of management and consult with the chief
executive officer. After taking into consideration these recommendations and
consultations, the contributions of each executive and the performance of the
Company, the Compensation Committee will subjectively determine appropriate
levels of base compensation. In 1998, the Compensation Committee changed the
review date of executive officers from July to January of each year to coincide
with the Company's fiscal year. In fiscal 1998, the Compensation Committee
awarded increases in the annual base compensation for executive officers,
excluding the chief executive officer, of 2 1/2%. The minimum increase mandated
by the employment agreements with the executive officers is the annual CPI
increase. The Compensation Committee did not assign any relative weight to the
quantitative and qualitative factors it applied in reaching its base
compensation decisions.
ANNUAL BONUS. The Compensation Committee considers that compensation
should be linked primarily to operating performance. To achieve this link with
regard to short-term performance, the Compensation Committee relies on cash
bonuses awarded under the bonus plan under which cash awards can be granted to
executive officers based upon: (a) the extent to which actual earnings of the
Company during a fiscal year meets or exceeds the earnings targets approved by
the Compensation Committee for such fiscal year and (b) other specific targets
related to an executive officer's specific area of responsibility, including
surgery center profits and new acquisition and development transactions. These
elements of the bonus plan were established in advance of the beginning of the
fiscal year. The maximum total bonus award that executive officers could receive
ranged from 50% to 55% of base salary for 1998. Total combined awards for all
components of the bonus plan for 1998 ranged from 15% to 44% of base salary for
1998.
10
<PAGE> 14
STOCK OPTIONS. Stock options are the principal vehicle for payment of
long-term compensation. The Compensation Committee considers that an integral
part of the Company's executive compensation program is equity-based
compensation plans which align executives' long-range interests with those of
the shareholders. This long-term incentive program is principally reflected in
the 1992 Stock Option Plan and the 1997 Stock Incentive Plan.
The Compensation Committee believes that long-term stock-based
incentive compensation should be structured so as to closely align the interests
of the executives with the interests of the Company's shareholders and, in
particular, to provide only limited value in the event that the Company's stock
price fails to increase over time. The Compensation Committee determines the
award of stock option grants to the executive officers and takes into account
the recommendations of the chief executive officer prior to approving annual
awards of long-term stock-based incentive compensation. These stock options are
granted in part to reward the senior executives for their long-term strategic
management of the Company, and to motivate the executives to improve shareholder
value, and they reflect the committee's objective to provide a greater portion
of compensation for executives in the form of long-term equity-linked awards.
During fiscal 1998, the Committee awarded options to purchase Class A common
stock with an exercise price of $9.13 per share to the following executive
officers in the following amounts: Ms. Gulmi 28,333 shares; Mr. Harrell 5,000
shares; Mr. Lunn 7,500 shares; and Mr. Manning 6,667 shares.
HOW IS OUR CHIEF EXECUTIVE OFFICER COMPENSATED?
The Compensation Committee believes that the compensation of our chief
executive officer is consistent with its general policies concerning executive
compensation and is appropriate in light of the Company's financial objectives
and performance. Awards of long-term incentive compensation to our chief
executive officer are considered concurrently with awards to other executive
officers and follow the same general policies as such other long-term incentive
awards.
Mr. McDonald's fiscal 1998 compensation package was determined prior
to the establishment of the Compensation Committee. Mr. McDonald's compensation
package for 1998 was tied directly to corporate profits, an element of the
specific quantitative performance criteria appied to the other executive
officers and included an increase of 9% over his 1997 compensation.
HOW ARE WE ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code of 1986, enacted as part of
the Omnibus Budget Reconciliation Act of 1993, generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to the chief
executive officer and four other most highly compensated executive officers.
Under IRS regulations, qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Compensation
Committee does not believe that any of the executive compensation arrangements
for fiscal 1998 will result in the loss of a tax deduction pursuant to Section
162(m). The Compensation Committee expects to continue to monitor the
application of Section 162(m) to executive compensation and will take
appropriate action if it is warranted in the future.
Steven I. Geringer
Deborah A. Guthrie
James A. Deal
11
<PAGE> 15
EMPLOYMENT AGREEMENTS
We have employment agreements with each of Mr. McDonald, Ms. Gulmi, Mr.
Harrell, Mr. Lunn and Mr. Manning. The employment agreements have an initial
one-year term, but contain a provision that automatically extends the term for
an additional one year on the first and each successive anniversary date until
such employee reaches age 65, after which term the employment agreement shall
not be automatically extended. We can cancel the automatic renewal provision
prior to each anniversary date. The employment agreements provide that if we
elect not to extend the executive's employment, the executive will be considered
to have been terminated without cause and will receive his or her base salary,
reduced by any salary earned by the executive from another employer, plus
certain benefits for a period of one year. The executive will also receive the
same compensation as provided above if the executive terminates his or her
employment with us under certain circumstances at any time within 12 months
following a change in control (as defined in the employment agreements). The
employment agreements also contain a restrictive covenant pursuant to which each
executive has agreed not to compete with us during the time we are obligated to
compensate him or her pursuant to his or her employment agreement.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table provides information as to annual, long-term or
other compensation during fiscal years 1998, 1997 and 1996 for the persons who,
at the end of fiscal 1998, were the chief executive officer and the other four
most highly compensated executive officers (the "named executive officers").
Prior to December 1997, Thomas G. Cigarran served as our chief executive officer
but received no compensation from us or with respect to his service to us.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
------------------------------ NUMBER OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS GRANTED COMPENSATION
----------------------------- -------- -------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
Ken P. McDonald 1998 $175,007 $77,003 -- --
President and Chief 1997 156,253 13,461 88,333 $4,000(3)
Executive Officer(1) 1996 139,050 41,905 69,999 4,000
Claire M. Gulmi 1998 $134,535 $41,084 28,333 --
Senior Vice President, 1997 124,796 9,984 16,666 --
Chief Financial Officer and 1996 100,000 28,292 6,666 --
Secretary(2)
Royce D. Harrell 1998 $145,940 $41,717 5,000 --
Senior Vice President, 1997 138,190 11,055 8,333 --
Operations 1996 130,788 38,471 8,333 --
Rodney H. Lunn 1998 $145,697 $39,411 7,500 $4,320(3)
Senior Vice President, 1997 139,597 26,872 38,333 4,320
Center Development 1996 132,108 29,169 5,000 4,320
David L. Manning 1998 $145,697 $22,507 6,667 $4,320(3)
Senior Vice President, 1997 139,597 7,782 43,333 4,320
Development 1996 132,108 106,460 8,333 4,320
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. McDonald became Chief Executive Officer in December 1997.
(2) Ms. Gulmi became Senior Vice President in March 1997 and Secretary in
December 1997.
(3) Automobile allowance.
12
<PAGE> 16
OPTION GRANTS FOR FISCAL 1998
The following table provides information as to options granted to the
named executive officers during fiscal 1998.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES OF TOTAL OPTIONS VALUES AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF
OPTIONS EMPLOYEES IN PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME GRANTED FISCAL YEAR PER SHARE DATE FOR OPTION TERM
-------------------- -------------- ----------------- ------------- ------------- ---------------------------
5% 10%
------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ken P. McDonald -- -- -- -- -- --
Claire M. Gulmi 28,333(1) 12.1% $9.13 02/23/08 $162,683 $412,270
Royce D. Harrell 5,000(1) 2.1 9.13 02/23/08 28,709 72,754
Rodney H. Lunn 7,500(1) 3.2 9.13 02/23/08 43,064 109,132
David L. Manning 6,667(1) 2.9 9.13 02/23/08 38,281 97,011
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents options to purchase shares of Class A common stock which
vest in four equal annual installments beginning on the first
anniversary of the date of grant. If there is a change in control or a
potential change in control as defined in the 1997 Stock Incentive
Plan, any stock options which are not then exercisable, in the
discretion of the Board of Directors, may become fully exercisable and
vested.
OPTION EXERCISES AND VALUES FOR FISCAL 1998
None of the named executive officers exercised options during fiscal
1998. The following table provides information with respect to the status at
December 31, 1998 of the options held by named executive officers. The aggregate
dollar value of the options held at year-end are calculated as the difference
between the fair market value of the Class A common stock ($7.375 as reported on
The Nasdaq National Market on December 31, 1998) and the respective exercise
prices of the stock options.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
------------------------------------ ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- --------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Ken P. McDonald 98,750 101,248 $260,373 $88,846
Claire M. Gulmi 24,166 44,165 84,101 27,293
Royce D. Harrell 92,416 15,415 429,825 20,382
Rodney H. Lunn 225,332 7,500 1,244,179 --
David L. Manning 235,332 6,667 1,267,229 --
----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 17
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following graph compares the performance of our Class A common
stock and Class B common stock with the performance of a market index and a peer
group index. The market index is the Center for Research in Security Prices
Index for NASDAQ Stock Market (U.S. Companies) and the peer group index is the
Center for Research in Security Prices Index for NASDAQ Health Services Stocks.
The graph covers the period from the inception of trading in our common stock,
December 4, 1997, through the end of fiscal 1998. The graph assumes that $100
was invested on December 4, 1997 in our Class A and Class B common stock, the
NASDAQ Index and the NASDAQ Health Services Index, and that all dividends were
reinvested.
<TABLE>
<CAPTION>
Class A Class B
Date Common Stock Common Stock Market Index Peer Index
<S> <C> <C> <C> <C>
12/04/1997 100.000 100.000 100.000 100.000
12/31/1997 85.714 86.111 97.493 100.670
03/31/1998 101.429 100.000 114.007 110.416
06/30/1998 87.143 77.778 117.199 100.209
09/30/1998 78.571 68.056 105.871 75.292
12/31/1998 84.286 75.000 137.373 85.286
</TABLE>
14
<PAGE> 18
ITEM 2 - APPROVAL OF AMENDMENT TO OUR AMENDED AND RESTATED CHARTER
TO INCREASE AUTHORIZED SHARES OF CLASS A COMMON STOCK
We are presently authorized to issue 20,000,000 shares of Class A
common stock, 4,800,000 shares of Class B common stock and 5,000,000 shares of
Preferred Stock. As of April 2, 1999, we had 9,539,049 shares of Class A common
stock issued and outstanding. An additional 1,327,825 shares of Class A common
stock were reserved for issuance upon the exercise of options which have been
granted pursuant to our stock option plans and were outstanding on the record
date. Thus at April 2, 1999, there were approximately 9,100,000 authorized
shares of Class A common stock unissued and not reserved for issuance pursuant
to outstanding options.
At the annual meeting there will be submitted to shareholders a
proposal to amend Article 7 of our Amended and Restated Charter in order to
increase the number of shares of Class A common stock we have the ability to
issue from 20,000,000 shares to 35,000,000 shares. If the proposed amendment is
approved, the first paragraph of Article 7 would be deleted and replaced by the
following:
"7. The aggregate number of shares of capital stock the Corporation is
authorized to issue is 44,800,000 shares, of which 35,000,000 shares
shall be Class A Common Stock, no par value, 4,800,000 shares shall be
Class B Common Stock, no par value (collectively the "Common Stock"),
and 5,000,000 shares shall be preferred stock, no par value (the
"Preferred Stock") of which 500,000 shares are designated as Series A
Redeemable Preferred Stock and 416,666 shares are designated as Series
B Convertible Preferred Stock. The Board of Directors may determine, in
whole or in part, the preferences, limitations, and relative rights of
any class of shares before the issuance of any shares of that class or
one or more series within a class before the issuance of any shares
within that series."
The proposed increase in the number of authorized shares of Class A
common stock has been recommended by the Board of Directors to assure that an
adequate supply of authorized unissued shares is available for general corporate
needs, such as future stock dividends or stock splits, or issuance under the
1997 Stock Incentive Plan. The additional authorized shares of Class A common
stock could also be used for such purposes as raising additional capital for our
operations, or financing the acquisition of other businesses.
Although the Board of Directors has no present intention of issuing
additional shares of Class A common stock other than in connection with the
acquisition of surgery centers, the proposed increase in the number of
authorized shares of Class A common stock could enable the Board of Directors to
render more difficult or discourage an attempt by another person or entity to
obtain control of the Company. Such additional shares could be issued by the
Board in a public or private sale, merger or similar transaction, increasing the
number of outstanding shares and thereby diluting the equity interest and voting
power of a party attempting to obtain control of the Company.
If the amendment is approved by the holders of a majority of the issued
and outstanding shares of Class A common stock entitled to vote on the
amendment, it will become effective upon the filing of an amendment to the
Amended and Restated Charter with the Secretary of State of the State of
Tennessee, which is expected to be accomplished as promptly as practicable after
such approval is obtained.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
PROPOSED AMENDMENT TO OUR AMENDED AND RESTATED CHARTER.
15
<PAGE> 19
ITEM 3 - RE-APPROVAL OF THE 1997 STOCK INCENTIVE PLAN
TO ENSURE COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE
INTRODUCTION
An item will be presented at the annual meeting to re-approve our 1997
Stock Incentive Plan. The plan was originally adopted by our Board of Directors
on February 7, 1997 and approved by our shareholders on December 1, 1997, prior
to our becoming a publicly traded company as a result of the distribution by AHC
to its stockholders of all its holdings of our common stock.
Section 162(m) of the Internal Revenue Code generally disallows a
corporate deduction for compensation over $1.0 million paid to a company's chief
executive officer and any of the four other most highly compensated officers.
The $1.0 million limitation applies to amounts realized on the exercise of stock
options, unless, among other conditions, the options are granted pursuant to a
plan that has been approved by the company's public shareholders. Although the
1997 Stock Incentive Plan was approved by our shareholders prior to the spinoff,
the plan has not been approved by our public shareholders. The Board of
Directors is submitting the 1997 Stock Incentive Plan for approval by our
shareholders to ensure compliance with Section 162(m) of the Internal Revenue
Code.
If the plan is not approved by our shareholders, the plan and options
previously granted or granted in the future under the plan will not be affected.
We will not, however, be permitted to deduct compensation over $1.0 million
realized by certain employees in connection with their exercise of certain
options granted under the plan. The Board of Directors believes that it is in
our best interests and the best interests of our shareholders to re-approve the
plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RE-APPROVAL OF THE
1997 STOCK INCENTIVE PLAN.
SUMMARY OF THE MATERIAL PROVISIONS OF THE PLAN
The following summary of the material provisions of the 1997 Stock
Incentive Plan is qualified in its entirety by reference to the text of the
plan, which is attached to this proxy statement as Exhibit A.
GENERALLY. Under the 1997 Stock Incentive Plan, the Compensation
Committee has the authority to grant to our officers, other key employees,
non-employee directors and consultants the following types of awards: (1) stock
options; (2) stock appreciation rights; (3) restricted stock; and/or (4) other
stock-based awards.
The aggregate number of shares of Class A common stock that may be
issued under the plan is 650,000 shares. The maximum number of shares of Class A
common stock for which awards may be made under the plan to any officer or other
person whose compensation may be subject to the limitations on deductibility
under Section 162(m) of the Internal Revenue Code is 200,000 during any single
fiscal year. As of April 2, 1999, options to purchase an aggregate of 482,164
shares were outstanding under the plan, options relating to an aggregate of
1,031 shares of Class A common stock had been exercised and 57,301 restricted
shares had been issued. Accordingly, 109,504 shares of Class A common stock are
currently available for issuance under the plan.
16
<PAGE> 20
Any shares as to which an option or other award expires, lapses
unexpired, or is forfeited, terminated, or canceled may become subject to a new
option or other award. The plan will terminate on, and no award may be granted
later than, December 2007, but the exercise date of awards granted prior to such
tenth anniversary may extend beyond such date.
AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. The plan provides for
automatic grants of restricted Class A common stock to our non-employee
directors as described in detail under the heading "How are our directors
compensated?"
STOCK OPTIONS. Incentive stock options and non-qualified stock options
may be granted for such number of shares as the Compensation Committee may
determine and may be granted alone, in addition to, or in tandem with other
awards under the plan or cash awards outside the plan. A stock option will be
exercisable at such times and subject to such terms and conditions as the
Compensation Committee will determine. The term may not be more than ten years
after the date of grant (five years in the case of incentive stock options for
certain 10% shareholders). The option price for an incentive stock option will
not be less than 100% (110% in the case of certain 10% shareholders) of the fair
market value of our Class A common stock as of the date of grant and for any
non-qualified stock option will not be less than 50% of the fair market value as
of the date of grant. Stock options and stock appreciation rights granted under
the plan may not be transferred or assigned without the prior written consent of
the Compensation Committee other than (i) transfers by the optionee to a member
of his or her immediate family or a trust for the benefit of the optionee or a
member of his or her immediate family or (ii) transfers by will or by the laws
of descent and distribution.
Stock appreciation rights may be granted under the plan in conjunction
with all or part of a stock option and will be exercisable only when the
underlying stock option is exercisable. Once a stock appreciation right has been
exercised, the related portion of the stock option underlying the stock
appreciation right will terminate. Upon the exercise of a stock appreciation
right, the Compensation Committee will pay to the employee or consultant in
cash, Class A common stock or a combination thereof (the method of payment to be
at the discretion of the Compensation Committee), in an amount equal to the
excess of the fair market value of the Class A common stock on the exercise date
over the option price, multiplied by the number of stock appreciation rights
being exercised.
RESTRICTED STOCK. Restricted stock awards may be granted alone, in
addition to, or in tandem with other awards under the plan or cash awards made
outside the plan. The provisions attendant to a grant of restricted stock may
vary from participant to participant. In making an award of restricted stock,
the Compensation Committee will determine the periods during which the
restricted stock is subject to forfeiture and may provide such other awards
designed to guarantee a minimum value for such stock.
OTHER STOCK-BASED AWARDS. The Compensation Committee also may grant
other types of awards, such as performance shares, convertible preferred stock,
convertible debentures, or exchangeable securities that are valued, in whole or
in part, by reference to earnings per share or performance of our subsidiaries.
These awards may be granted alone, in addition to, or in tandem with, stock
options, restricted stock, or cash awards outside of the plan. Awards will be
made upon such terms and conditions as the Compensation Committee may determine.
EFFECTS OF A CHANGE IN CONTROL. If there is a change of control or a
potential change of control of the Company, stock appreciation rights and
limited stock appreciation rights outstanding for at least six months and any
stock options that are not then exercisable, in the discretion of the Board, may
become fully exercisable and vested and the restrictions and deferral
limitations applicable to restricted stock and other
17
<PAGE> 21
stock-based awards may lapse and such shares and awards will be deemed fully
vested. For purposes of the plan, a change of control is defined generally to
include:
- any person or entity, other than the Company or a wholly-owned
subsidiary of the Company, becoming the beneficial owner of our
securities having 35% or more of the combined voting power of the
then outstanding securities that may be cast for the election of
directors;
- as a result of, or in connection with, a cash tender, exchange
offer, merger, or other business combination, sale of assets, or
contested election, less than a majority of the combined voting
power of our then outstanding securities entitled to vote
generally in the election of directors being held in the aggregate
by the holders of our securities entitled to vote generally in the
election of our directors immediately prior to such transaction;
and
- during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors
ceasing to constitute at least a majority thereof, unless the
election of each director first elected during such period was
approved by a vote of at least two-thirds of our directors then
still in office who were our directors at the beginning of any
such period.
Stock options, stock appreciation rights, limited stock appreciation
rights, restricted stock, and other stock-based awards will, unless otherwise
determined by the Compensation Committee in its sole discretion, be cashed out
on the basis of the change in control price (as defined in the plan and as
described below). The change of control price will be the highest price per
share paid in any transaction reported on The Nasdaq National Market or paid or
offered to be paid in any bona fide transaction relating to a change in control
or potential change in control at any time during the immediately preceding
60-day period, as determined by the Compensation Committee.
AMENDMENTS AND TERMINATION. Our Board of Directors may amend, alter, or
discontinue the plan, provided that no amendment may be made that would impair
the rights of an optionee or participant under an award made under the plan
without the participant's consent.
OPTIONS GRANTED UNDER THE PLAN
Because awards under the plan are at the discretion of the Compensation
Committee, the benefits that will be awarded under the plan to persons other
than non-employee directors are not currently determinable. The following table
shows as to each of the named executive officers, as to all executive officers
as a group and as to all other employees as a group, the aggregate number of
shares of Class A common stock subject to options granted under the plan,
excluding options that have been canceled or forfeited unexercised, and the
weighted average per share exercise price. As of April 1, 1999, the market value
of a share of Class A common stock based on the closing price for such stock on
The Nasdaq National Market was $7.125.
18
<PAGE> 22
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NUMBER OF
STOCK
OPTIONS AVERAGE EXERCISE
NAME GRANTED PRICE PER SHARE
----------------------------------------------- ------------ -----------------
<S> <C> <C>
Ken P. McDonald.................................. 88,333 $8.28
Claire M. Gulmi.................................. 44,999 7.94
Royce D. Harrell................................. 13,333 7.12
Rodney H. Lunn................................... 45,833 6.61
David L. Manning................................. 50,000 6.50
All executive officers as a group (6 persons).... 242,498 7.47
All other employees as a group................... 239,666 7.75
--------------------------------------------------------------------------------------
</TABLE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. federal income tax
aspects of options and shares of restricted stock awarded under the plan based
upon the federal income tax laws in effect on the date hereof. This summary is
not intended to be exhaustive and the exact tax consequences to any grantee will
depend upon his or her particular circumstances and other facts. The plan
participants must consult their tax advisors with respect to any state, local,
and foreign tax considerations or particular federal tax implications of options
granted under the plan.
INCENTIVE STOCK OPTIONS. Neither the grant nor the exercise of an
incentive stock option will result in taxable income to the employee. The tax
treatment on sale of shares of common stock acquired upon exercise of an
incentive stock option depends on whether the holding period requirement is
satisfied. The holding period is met if the disposition by the employee occurs
(i) at least two years after the date of grant of the option; (ii) at least one
year after the date the shares were transferred to the employee; and (iii) while
the employee remains employed by us or not more than three months after his or
her termination of employment (or not more than one year in the case of a
disabled employee). In the case of a deceased employee, the incentive stock
option may be exercised by the deceased employee's legal representative or heir
provided the option was an incentive stock option in the hands of the deceased
employee and the deceased employee was employed by us for at least three months
before his or her death. However, the plan limits the right of the legal
representative of any deceased employee to exercise an option to one year
following death. If the holding period requirement is satisfied, the excess of
the amount realized upon sale of the shares of common stock acquired upon the
exercise of the incentive stock option over the price paid for these shares will
be treated as a capital gain. If the employee disposes of the common stock
acquired upon the exercise of the incentive stock option before the holding
period requirement is met (a "disqualifying disposition"), the excess of the
fair market value of the shares on the date of exercise or, if less, the fair
market value on the date of disposition, over the exercise price will be taxable
as ordinary compensation income to the employee at the time of disposition, and
we will be entitled to a corresponding deduction. The balance of the gain, if
any, will be a capital gain for the employee. Any capital gain recognized by the
employee will be a long-term capital gain if the employee's holding period for
the shares of common stock at the time of disposition is more than one year;
otherwise it will be short-term.
Although the exercise of an incentive stock option will not result in
taxable income to the employee, the excess of the fair market value of the
common stock on the date of exercise over the exercise price will be included in
the employee's "alternative minimum taxable income" under the Internal Revenue
Code. This inclusion might subject the employee to, or increase his or her
liability for, the alternative minimum tax under Section 55 of the Internal
Revenue Code.
19
<PAGE> 23
NONQUALIFIED STOCK OPTIONS. There will be no federal income tax
consequences to us or to the grantee upon the grant of non-qualified stock
options under the plan. However, upon the exercise of a non-qualified stock
option under the plan, the grantee will recognize ordinary compensation income
for federal income tax purposes in an amount equal to the excess of the fair
market value of the shares of common stock purchased over the exercise price. We
will generally be entitled to a tax deduction at such time and in the same
amount that the employee realizes ordinary income. If the shares of common stock
so acquired are later sold or exchanged, the difference between the amount
realized from such sale or exchange and the fair market value of such stock on
the date of exercise of the option is generally taxable as long-term or
short-term capital gain or loss depending upon the length of time the common
stock has been held after such date.
EXERCISE WITH SHARES. A grantee who pays the exercise price upon
exercise of an incentive stock option or non-qualified stock option, in whole or
in part, by delivering shares of common stock already owned by him or her will
realize no gain or loss for federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above.
Shares of common stock acquired upon exercise that are equal in number to the
shares surrendered will have a tax basis equal to the tax basis of the shares
surrendered, and (except as noted below with respect to disqualifying
dispositions) the holding period of such shares will include the holding period
of shares surrendered. In the case of a non-qualified stock option, the basis of
additional shares received upon exercise of the non-qualified stock option will
be equal to the fair market value of such shares on the date of exercise, and
the holding period for such additional shares will commence on the date the
option is exercised. In the case of an incentive stock option, the tax basis of
the additional shares received will be zero, and the holding period of such
shares will commence on the date of the exchange. If any of the shares received
upon exercise of the incentive stock option are disposed of within two years of
the date of the grant of the incentive stock option or within one year after
exercise, the shares with the lowest basis (i.e., zero basis) will be deemed to
be disposed of first, and such disposition will be a disqualifying disposition
giving rise to ordinary income as previously discussed above.
RESTRICTED STOCK. A participant receiving restricted stock generally
will recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. However, a participant may elect, under
Section 83(b) of the Internal Revenue Code within 30 days of the grant of the
stock, to recognize taxable ordinary income on the date of grant equal to the
excess of the fair market value of the shares of restricted stock (determined
without regard to the restrictions) over the purchase price of the restricted
stock. Thereafter, if the shares are forfeited, the participant will be entitled
to a deduction, refund, or loss, for tax purposes only, in an amount equal to
the purchase price of the forfeited shares regardless of whether she or he made
a Section 83(b) election. With respect to the sale of shares after the
forfeiture period has expired, the holding period to determine whether the
participant has long-term or short-term capital gain or loss generally begins
when the restriction period expires and the tax basis for such shares will
generally be based on the fair market value of such shares on such date. If the
participant makes an election under Section 83(b), however, the holding period
will commence on the date of grant, the tax basis will be equal to the fair
market value of shares on such date (determined without regard to restrictions),
and we generally will be entitled to a deduction equal to the amount that is
taxable as ordinary income to the participant in the year that such income is
taxable.
DIVIDENDS AND DIVIDEND EQUIVALENTS. Dividends paid on restricted stock
generally will be treated as compensation that is taxable as ordinary income to
the participant, and will be deductible by us. If the participant makes a
Section 83(b) election, however, the dividends will be taxable as ordinary
income to the participant but will not be deductible by us.
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OTHER STOCK-BASED AWARDS. The federal income tax treatment of other
stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
conditions applicable to the award, be taxable as an option, an award of
restricted stock, or in a manner not described herein.
The plan is not intended to be a "qualified plan" under Section 401(a)
of the Internal Revenue Code.
ITEM 4 - APPROVAL OF AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends that the
shareholders approve an amendment to our 1997 Stock Incentive Plan to increase
the number of shares of Class A common stock reserved for issuance pursuant to
the exercise of options granted under the plan and shares of restricted stock
issuable under the plan from a maximum of 650,000 shares to 1,120,000 shares.
The major features of the plan are summarized in Item 3 above.
As of the record date, options to purchase 482,164 shares of our Class
A common stock were outstanding under the plan, options to purchase 1,031 shares
had been exercised, 57,301 restricted shares had been issued and 109,504 shares
remained available for the grant of options under the plan. The proposed
amendment would increase to 1,061,668 the number of shares of our Class A common
stock reserved for issuance pursuant to awards granted or to be granted under
the plan. If the proposed amendment is approved, Paragraph (a) of Section 3 of
the plan would be deleted and replaced with the following:
"(a) The aggregate number of shares of Common Stock that may be issued
under the Plan shall be 1,120,000 shares. The shares of Common Stock
issuable under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. No officer of the Corporation
or other person whose compensation may be subject to the limitations or
deductibles under Section 162(m) of the Code shall be eligible to
receive awards pursuant to this Plan relating to in excess of 200,000
shares of Common Stock in any fiscal year (the "Section 162(m)
Maximum")."
The Board of Directors believes that it is in our best interests and
the best interests of our shareholders to approve the amendment to allow us to
continue to grant options under the plan to secure the benefits of the
additional incentive inherent in the ownership of our common stock by our key
employees, to help secure and retain the services of our key employees and to
have a sufficient number of shares of common stock available for reissue as
restricted stock to our non-employee directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
We have appointed Deloitte & Touche LLP as our independent public
accountants for 1999. Deloitte & Touche LLP served as our independent public
accountant for 1998. A representative of Deloitte & Touche LLP is expected to be
present at the annual meeting to make a statement if they desire to do so and to
respond to questions from the shareholders.
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OTHER MATTERS
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the annual meeting other than the items
referred to above. If any other matter is properly brought before the meeting
for action by shareholders, proxies in the enclosed form returned to us will be
voted in accordance with the recommendation of the Board of Directors or, in the
absence of such a recommendation, in accordance with the judgment of the proxy
holder.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING. Pursuant to Rule
14a-8(e) of the Securities Exchange Act of 1934, shareholder proposals submitted
in accordance with applicable rules and regulations for presentation at our next
annual meeting and received at our executive offices no later than December 22,
1999 will be considered for inclusion in our proxy statement and form of proxy
relating to the 2000 annual meeting.
For other shareholder proposals to be timely (but not considered for
inclusion in our proxy statement), a shareholder's notice must be received at
our executive offices no later than December 22, 1999 and should otherwise
comply with the advance notice provisions of our bylaws. For proposals that are
not timely filed, we retain discretion to vote proxies we receive. For proposals
that are timely filed, we retain discretion to vote proxies we receive provided
(1) we include in our proxy statement advice on the nature of the proposal and
how we intend to exercise our voting discretion and (2) the proponent does not
issue a proxy statement.
PROXY SOLICITATION COSTS. The proxies being solicited hereby are being
solicited by us. We will bear the cost of soliciting proxies in the enclosed
form. Our officers and regular employees may, but without compensation other
than their regular compensation, solicit proxies by further mailing or personal
conversations, or by telephone, telex, facsimile or electronic means. We will,
upon request, reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation material to the beneficial owners of stock.
FINANCIAL STATEMENTS AVAILABLE. A copy of our 1998 Annual Report to
Shareholders containing audited financial statements accompanies this proxy
statement. The 1998 Annual Report does not constitute a part of the proxy
solicitation material.
April 20, 1999
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Exhibit A
AMSURG CORP.
1997 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the AmSurg Corp. 1997 Stock Incentive Plan (the "Plan")
is to enable AmSurg Corp., a Tennessee corporation (the "Corporation") to
attract, retain and reward key employees of and consultants to the Corporation
and its Subsidiaries and Affiliates, and directors who are not also employees of
the Corporation, and to strengthen the mutuality of interests between such key
employees, consultants, and directors by awarding such key employees,
consultants, and directors performance-based stock incentives and/or other
equity interests or equity-based incentives in the Corporation, as well as
performance-based incentives payable in cash. The creation of the Plan shall not
diminish or prejudice other compensation programs approved from time to time by
the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 10(b) of
the Plan.
E. "Change in Control Price" has the meaning provided in Section 10(d)
of the Plan.
F. "Common Stock" means (i) prior to the Distribution, the
Corporation's Common Stock, without par value, and (ii) following the
Distribution, the Corporation's Class A Common Stock, without par value.
G. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of the
Plan.
I. "Corporation" means AmSurg Corp., a corporation organized under the
laws of the State of Tennessee or any successor corporation.
J. "Disability" means disability as determined in accordance with
Corporation's policies in effect from time to time.
<PAGE> 27
K. "Distribution" means the Distribution contemplated by that certain
Distribution Agreement, dated as of March 7, 1997, by and between American
Healthcorp, Inc. and the Corporation.
L. "Early Retirement" means retirement, for purposes of this Plan with
the express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
M. "Effective Date" has the meaning provided in Section 14 of the Plan.
N. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
O. "Fair Market Value" means with respect to the Common Stock, as of
any given date or dates, unless otherwise determined by the Committee in good
faith, the reported closing price of a share of Common Stock on The Nasdaq Stock
Market National Market or such other market or exchange as is the principal
trading market for the Common Stock, or, if no such sale of a share of Common
Stock is reported on The Nasdaq Stock Market National Market or other exchange
or principal trading market on such date, the fair market value of a share of
Common Stock as determined by the Committee in good faith.
P. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
Q. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
R. "Non-Employee Director" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under
the Exchange Act and an outside director within the meaning of Treasury
Regulation Sec. 162-27(e)(3) promulgated under the Code.
S. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
T. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
U. "Other Stock-Based Award" means an award under Section 8 below that
is valued in whole or in part by reference to, or is otherwise based on, the
Common Stock.
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V. "Outside Director" means a member of the Board who is not an officer
or employee of the Corporation or any Subsidiary or Affiliate of the
Corporation. A Board member who serves as a medical director but is not either
an officer or employee will be deemed to be an Outside Director.
W. "Outside Director Restricted Stock" means an award to an Outside
Director under Section 9 below.
X. "Plan" means this 1997 Stock Incentive Plan, as amended from time
to time.
Y. "Restricted Stock" means an award of shares of Common Stock that is
subject to restrictions under Section 7 of the Plan.
Z. "Restriction Period" has the meaning provided in Section 7 of the
Plan.
AA. "Retirement" means Normal or Early Retirement.
BB. "Section 162(m) Maximum" has the meaning provided in Section 3(a)
hereof.
CC. "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to surrender to the Corporation all (or a portion)
of a Stock Option in exchange for an amount equal to the difference between (i)
the Fair Market Value, as of the date such Stock Option (or such portion
thereof) is surrendered, of the shares of Common Stock covered by such Stock
Option (or such portion thereof), subject, where applicable, to the pricing
provisions in Section 6(b)(ii), and (ii) the aggregate exercise price of such
Stock Option (or such portion thereof).
DD. "Stock Option" or "Option" means any option to purchase shares of
Common Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 below.
EE. "Subsidiary" means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. Decisions of the Committee may be ratified by the
Board. The functions of the Committee specified in the Plan may be exercised by
an existing Committee of the Board composed exclusively of Non-Employee
Directors. The initial Committee shall be the Compensation Committee of the
Board.
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The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees, Outside Directors and consultants
eligible under Section 4: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, and/or (iv) Other Stock-Based Awards; provided, however,
that the power to grant and establish the terms and conditions of awards to
Outside Directors under the Plan other than pursuant to Section 9 shall be
reserved to the Board.
In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees and Outside
Directors of and consultants to the Corporation and its Subsidiaries
and Affiliates to whom Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards may from time to time
be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards, or any combination
thereof, are to be granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, the share price and any restriction or limitation,
or any vesting acceleration or waiver of forfeiture restrictions
regarding any Stock Option or other award and/or the shares of Common
Stock relating thereto, based in each case on such factors as the
Committee shall determine, in its sole discretion); and to amend or
waive any such terms and conditions to the extent permitted by Section
11 hereof;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Restricted Stock under Section 5(m) or
(n), as applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan are to
be made, and operate, on a tandem basis vis-a-vis other awards under
the Plan and/or cash awards made outside of the Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral period);
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(h) to determine whether to require payment of tax withholding
requirements in shares of Common Stock subject to the award; and
(i) to impose any holding period required to satisfy Section
16 under the Exchange Act.
The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be subject to ratification by the Board, which shall act only on the
recommendation of the Committee as to all matters as to which the Committee has
discretion pursuant to the provisions of the Plan. Subject to such ratification,
the decisions of the Committee shall be final and binding on all persons,
including the Corporation and Plan participants.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) The aggregate number of shares of Common Stock that may be issued
under the Plan shall be 650,000 shares. The shares of Common Stock issuable
under the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares. No officer of the Corporation or other person whose
compensation may be subject to the limitations on deductibility under Section
162(m) of the Code shall be eligible to receive awards pursuant to this Plan
relating to in excess of 200,000 shares of Common Stock in any fiscal year (the
"Section 162(m) Maximum").
(b) If any shares of Common Stock that have been optioned cease to be
subject to a Stock Option, or if any shares of Common Stock that are subject to
any Restricted Stock or Other Stock-Based Award granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to such
shares of Common Stock, or any such award otherwise terminates without a payment
being made to the participant in the form of Common Stock, such shares shall
again be available for distribution in connection with future awards under the
Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan, in the number and option price of shares subject
to outstanding Options granted under the Plan, in the number of shares
underlying grants of Restricted Stock and Outside Director Restricted Stock, the
Section 162(m) Maximum and in the number of shares subject to other outstanding
awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject to
any award shall always be a whole number. An adjusted option price shall also be
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used to determine the amount payable by the Corporation upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees and Outside Directors of and consultants
to the Corporation and its Subsidiaries and Affiliates who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Corporation and/or its Subsidiaries and Affiliates are eligible to be
granted awards under the Plan. Outside Directors are eligible to receive awards
pursuant to Section 9 and as otherwise determined by the Board.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the Plan.
Any Stock Option granted under the Plan shall be in such form as the Committee
may from time to time approve.
Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Incentive
Stock Options may be granted only to individuals who are employees of the
Corporation or any Subsidiary of the Corporation.
The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors and
consultants under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee
at the time of grant but shall be not less than 100% (or, in the case
of any employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or of
any of its Subsidiaries, not less than 110%) of the Fair Market Value
of the Common Stock at grant, in the case of Incentive Stock Options,
and not less than 50% of the Fair Market Value of the Common Stock at
grant, in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years (or, in the case of an employee who owns stock
possessing more than 10% of the total combined
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voting power of all classes of stock of the Corporation or any of its
Subsidiaries or parent corporations, more than five years) after the
date the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant; provided, however, that
except as provided in Section 5(g) and (h) and Section 10, unless
otherwise determined by the Committee at or after grant, no Stock
Option shall be exercisable prior to the first anniversary date of the
granting of the Option. The Committee may provide that a Stock Option
shall vest over a period of future service at a rate specified at the
time of grant, or that the Stock Option is exercisable only in
installments. If the Committee provides, in its sole discretion, that
any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after
grant, in whole or in part, based on such factors as the Committee
shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment
exercise restrictions apply under Section 5(c), Stock Options may be
exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Corporation specifying the
number of shares to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, either by check, note, or such
other instrument as the Committee may accept. As determined by the
Committee, in its sole discretion, at or (except in the case of an
Incentive Stock Option) after grant, payment in full or in part may
also be made in the form of shares of Common Stock already owned by the
optionee or, in the case of a Non-Qualified Stock Option, shares of
Restricted Stock or shares subject to such Option or another award
hereunder (in each case valued at the Fair Market Value of the Common
Stock on the date the Option is exercised). If payment of the exercise
price is made in part or in full with Common Stock, the Committee may
award to the employee a new Stock Option to replace the Common Stock
which was surrendered. If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part in the form of
Restricted Stock, such Restricted Stock (and any replacement shares
relating thereto) shall remain (or be) restricted in accordance with
the original terms of the Restricted Stock award in question, and any
additional Common Stock received upon the exercise shall be subject to
the same forfeiture restrictions, unless otherwise determined by the
Committee, in its sole discretion, at or after grant. No shares of
Common Stock shall be issued until full payment therefor has been made.
An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid in
full for such shares, and, if requested, has given the representation
described in Section 13(a).
(e) Transferability of Options. No Non-Qualified Stock Option
shall be transferable by the optionee without the prior written consent
of the Committee other than (i) transfers by the Optionee to a member
of his or her Immediate Family or a trust for the benefit of the
optionee or a member of his or her Immediate Family, or (ii) transfers
by will
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<PAGE> 33
or by the laws of descent and distribution. No Incentive Stock Option
shall be transferable by the optionee otherwise than by will or by the
laws of descent and distribution and all Incentive Stock Options shall
be exercisable, during the optionee's lifetime, only by the optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock
Option or an optionee who elects to make a disqualifying disposition
(as defined in Section 422(a)(1) of the Code) of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option, the Committee in
its discretion may award at the time of grant or thereafter the right
to receive upon exercise of such Stock Option a cash bonus calculated
to pay part or all of the federal and state, if any, income tax
incurred by the optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k), if an
optionee's employment by the Corporation and any Subsidiary or (except
in the case of an Incentive Stock Option) Affiliate terminates by
reason of death, any Stock Option held by such optionee may thereafter
be exercised, to the extent such option was exercisable at the time of
death or (except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after grant (or
except in the case of an Incentive Stock Option, as may be determined
in accordance with procedures established by the Committee) by the
legal representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of one year (or such other
period as the Committee may specify at or after grant) from the date of
such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section
5(k), if an optionee's employment by the Corporation and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or (except in the case of an
Incentive Stock Option) on such accelerated basis as the Committee may
determine at or after grant (or, except in the case of an Incentive
Stock Option, as may be determined in accordance with procedures
established by the Committee), for a period of (i) three years (or such
other period as the Committee may specify at or after grant) from the
date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter, in
the case of a Non-Qualified Stock Option and (ii) one year from the
date of termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is shorter, in the case of
an Incentive Stock Option; provided however, that, if the optionee dies
within the period specified in (i) above (or other such period as the
committee shall specify at or after grant), any unexercised
Non-Qualified Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is shorter. In the event of termination of employment by reason
of Disability, if an Incentive Stock Option is exercised after the
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<PAGE> 34
expiration of the exercise period applicable to Incentive Stock
Options, but before the expiration of any period that would apply if
such Stock Option were a Non-Qualified Stock Option, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section
5(k), if an optionee's employment by the Corporation and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Normal or Early Retirement, any Stock Option
held by such optionee may thereafter be exercised by the optionee, to
the extent it was exercisable at the time of such Retirement or (except
in the case of an Incentive Stock Option) on such accelerated basis as
the Committee may determine at or after grant (or, except in the case
of an Incentive Stock Option, as may be determined in accordance with
procedures established by the Committee), for a period of (i) three
years (or such other period as the Committee may specify at or after
grant) from the date of such termination of employment or the
expiration of the stated term of such Stock Option, whichever period is
the shorter, in the case of a Non-Qualified Stock Option and (ii) three
months from the date of such termination of employment or the
expiration of the stated term of such Stock Option, whichever period is
the shorter, in the event of an Incentive Stock Option; provided
however, that, if the optionee dies within the period specified in (i)
above (or other such period as the Committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is shorter. In the event of termination
of employment by reason of Retirement, if an Incentive Stock Option is
exercised after the expiration of the exercise period applicable to
Incentive Stock Options, but before the expiration of the period that
would apply if such Stock Option were a NonQualified Stock Option, the
option will thereafter be treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless
otherwise determined by the Committee (or pursuant to procedures
established by the Committee) at or (except in the case of an Incentive
Stock Option) after grant, if an optionee's employment by the
Corporation and any Subsidiary or (except in the case of an Incentive
Stock Option) Affiliate is involuntarily terminated for any reason
other than death, Disability or Normal or Early Retirement, the Stock
Option shall thereupon terminate, except that such Stock Option may be
exercised, to the extent otherwise then exercisable, for the lesser of
three months or the balance of such Stock Option's term if the
involuntary termination is without Cause. For purposes of this Plan,
"Cause" means (i) a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or (ii) a
participant's willful misconduct or dishonesty, which is directly and
materially harmful to the business or reputation of the Corporation or
any Subsidiary or Affiliate. If an optionee voluntarily terminates
employment with the Corporation and any Subsidiary or (except in the
case of an Incentive Stock Option) Affiliate (except for Disability,
Normal or Early Retirement), the Stock Option shall thereupon
terminate; provided, however, that the Committee at grant or (except in
the case
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of an Incentive Stock Option) thereafter may extend the exercise period
in this situation for the lesser of three months or the balance of such
Stock Option's term.
(k) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive
Stock Options shall be interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as
to disqualify the Plan under Section 422 of the Code, or, without the
consent of the optionee(s) affected, to disqualify any Incentive Stock
Option under such Section 422. No Incentive Stock Option shall be
granted to any participant under the Plan if such grant would cause the
aggregate Fair Market Value (as of the date the Incentive Stock Option
is granted) of the Common Stock with respect to which all Incentive
Stock Options are exercisable for the first time by such participant
during any calendar year (under all such plans of the Company and any
Subsidiary) to exceed $100,000. To the extent permitted under Section
422 of the Code or the applicable regulations thereunder or any
applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is
terminated by reason of death, Disability, or Retirement and
(y) the portion of any Incentive Stock Option that is
otherwise exercisable during the post-termination period
specified under Section 5(g), (h) or (i), applied without
regard to the $100,000 limitation contained in Section 422(d)
of the Code, is greater than the portion of such Option that
is immediately exercisable as an "Incentive Stock Option"
during such post-termination period under Section 422, such
excess shall be treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option
is accelerated by reason of a Change in Control, any portion
of such Option that is not exercisable as an Incentive Stock
Option by reason of the $100,000 limitation contained in
Section 422(d) of the Code shall be treated as a Non-Qualified
Stock Option.
(l) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash, Common Stock, or Restricted Stock an
Option previously granted, based on such terms and conditions as the
Committee shall establish and communicate to the optionee at the time
that such offer is made.
(m) Settlement Provisions. If the option agreement so provides
at grant or (except in the case of an Incentive Stock Option) is
amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised
Option take the form of Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value (as determined
by the Committee) of such Restricted Stock determined without regards
to the forfeiture restrictions involved.
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(n) Performance and Other Conditions. The Committee may
condition the exercise of any Option upon the attainment of specified
performance goals or other factors as the Committee may determine, in
its sole discretion. Unless specifically provided in the option
agreement, any such conditional Option shall vest immediately prior to
its expiration if the conditions to exercise have not theretofore been
satisfied.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of such
Stock Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of the grant of such Stock Option. A Stock
Appreciation Right or applicable portion thereof granted with respect
to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject
to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number
of shares covered by a related Stock Option. A Stock Appreciation Right
may be exercised by an optionee, subject to Section 6(b), in accordance
with the procedures established by the Committee for such purpose. Upon
such exercise, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights
have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by the
Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this Section 6
of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right,
an optionee shall be entitled to receive an amount in cash
and/or shares of Common Stock equal in value to the excess of
the Fair Market Value of one share of Common Stock over the
option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
When payment is to be made in shares, the number of shares to
be paid shall be calculated on the basis of the Fair Market
Value of the shares on the date of exercise. When payment is
to be made in cash, such amount shall be calculated on the
basis of the Fair Market Value of the Common Stock on the date
of exercise.
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(iii) Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option
would be transferable under Section 5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right,
the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in
Section 3 of the Plan on the number of shares of Common Stock
to be issued under the Plan.
(v) The Committee, in its sole discretion, may also
provide that, in the event of a Change in Control and/or a
Potential Change in Control, the amount to be paid upon the
exercise of a Stock Appreciation Right shall be based on the
Change in Control Price, subject to such terms and conditions
as the Committee may specify at grant.
(vi) The Committee may condition the exercise of any
Stock Appreciation Right upon the attainment of specified
performance goals or other factors as the Committee may
determine, in its sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued
either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares of
Restricted Stock to be awarded to any person, the price (if any) to be
paid by the recipient of Restricted Stock (subject to Section 7(b)),
the time or times within which such awards may be subject to
forfeiture, and the other terms, restrictions and conditions of the
awards in addition to those set forth in Section 7(c). The Committee
may condition the grant of Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee may
determine, in its sole discretion. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement
evidencing the award and has delivered a fully executed copy thereof to
the Corporation, and has otherwise complied with the applicable terms
and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be established by the Committee and may be zero.
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(ii) Awards of Restricted Stock must be accepted
within a period of 60 days (or such shorter period as the
Committee may specify at grant) after the award date, by
executing a Restricted Stock Award Agreement and paying
whatever price (if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock
award shall be issued a stock certificate in respect of such
shares of Restricted Stock. Such certificate shall be
registered in the name of such participant, and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the
Corporation until the restrictions thereon shall have lapsed,
and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in
blank, relating to the shares of Common Stock covered by such
award.
(c) Restrictions and Conditions. The shares of Restricted
Stock awarded pursuant to this Section 7 shall be subject to the
following restrictions and conditions:
(i) In accordance with the provisions of this Plan
and the award agreement, during a period set by the Committee
commencing with the date of such award (the "Restriction
Period"), the participant shall not be permitted to sell,
transfer, pledge, assign, or otherwise encumber shares of
Restricted Stock awarded under the Plan, except to the extent
permitted under Section 13(h) below. Within these limits, the
Committee, in its sole discretion, may provide for the lapse
of such restrictions in installments and may accelerate or
waive such restrictions, in whole or in part, based on
service, performance, such other factors or criteria as the
Committee may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), the participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a
shareholder of the Corporation, including the right to vote
the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time
of award, may permit or require the payment of cash dividends
to be deferred and, if the Committee so determines,
reinvested, subject to Section 14(e), in additional Restricted
Stock to the extent shares are available under Section 3, or
otherwise reinvested. Pursuant to Section 3 above, stock
dividends issued with respect to Restricted Stock shall be
treated as additional shares of Restricted Stock that are
subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are issued. If the Committee so determines, the
award agreement may also impose restrictions on the right to
vote and the right to receive dividends.
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(iii) Subject to the applicable provisions of the
award agreement and this Section 7, upon termination of a
participant's employment with the Corporation and any
Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or
be forfeited, in accordance with the terms and conditions
established by the Committee at or after grant.
(iv) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, certificates for an appropriate
number of unrestricted shares shall be delivered to the
participant promptly.
(d) Minimum Value Provisions. In order to better ensure that
award payments actually reflect the performance of the Corporation and
service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Common Stock to the
recipient of a restricted stock award, subject to such performance,
future service, deferral, and other terms and conditions as may be
specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including,
without limitation, performance shares, convertible preferred stock,
convertible debentures, exchangeable securities and Common Stock awards
or options valued by reference to earnings per share or Subsidiary
performance, may be granted either alone, in addition to, or in tandem
with Stock Options, Stock Appreciation Rights, or Restricted Stock
granted under the Plan and cash awards made outside of the Plan;
provided that no such Other Stock-Based Awards may be granted in tandem
with Incentive Stock Options if that would cause such Stock Options not
to qualify as Incentive Stock Options pursuant to Section 422 of the
Code. Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at
which such awards shall be made, the number of shares of Common Stock
to be awarded pursuant to such awards, and all other conditions of the
awards. The Committee may also provide for the grant of Common Stock
upon the completion of a specified performance period. The provisions
of Other Stock-Based Awards need not be the same with respect to each
recipient.
(b) Terms and Conditions. Other Stock-Based Awards made
pursuant to this Section 8 shall be subject to the following terms and
conditions:
(i) Shares subject to awards under this Section 8 and
the award agreement referred to in Section 8(b)(v) below, may
not be sold, assigned, transferred, pledged, or otherwise
encumbered prior to the date on which the shares
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<PAGE> 40
are issued, or, if later, the date on which any applicable
restriction, performance, or deferral period lapses.
(ii) Subject to the provisions of this Plan and the
award agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under this
Section 8 shall be entitled to receive, currently or on a
deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by
the award, as determined at the time of the award by the
Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have
been reinvested in additional shares of Common Stock or
otherwise reinvested.
(iii) Any award under Section 8 and any shares of
Common Stock covered by any such award shall vest or be
forfeited to the extent so provided in the award agreement, as
determined by the Committee in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability, or death, or in cases of special circumstances,
the Committee may, in its sole discretion, waive in whole or
in part any or all of the remaining limitations imposed
hereunder (if any) with respect to any or all of an award
under this Section 8.
(v) Each award under this Section 8 shall be
confirmed by, and subject to the terms of, an agreement or
other instrument by the Corporation and the participant.
(vi) Common Stock (including securities convertible
into Common Stock) issued on a bonus basis under this Section
8 may be issued for no cash consideration. Common Stock
(including securities convertible into Common Stock) purchased
pursuant to a purchase right awarded under this Section 8
shall be priced at least 85% of the Fair Market Value of the
Common Stock on the date of grant.
SECTION 9. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this Section 9 shall apply only to
awards to Outside Directors in accordance with this Section 9. The
Committee shall have no authority to determine the timing of or the
terms or conditions of any award under this Section 9.
(b) Effective as of the Distribution, each person serving as
an Outside Director on such date will receive a grant of a number of
shares of Common Stock (rounded up to the next whole share) having an
aggregate Fair Market Value on such date equal to $10,000, which shares
shall be restricted as provided in this Section 9.
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(c) On the date of the Annual Meeting of Shareholders of the
Corporation occurring after the Distribution, unless this Plan has been
previously terminated, each Outside Director will receive an automatic
grant of a number of shares of Common Stock (rounded up to the next
whole share) having an aggregate Fair Market Value on such date equal
to $10,000 (subject to increase based upon any increase in the Consumer
Price Index for Urban Wage Earning and Clerical Workers, U.S. All City
Average Report, of the U.S. Bureau of Labor Statistics or, if such
index is no longer available, a similar index), which shares shall be
restricted as provided in this Section 9.
(d) Each grant of Outside Director Restricted Stock shall vest
in increments of one-third of the shares of Common Stock subject to
such grant with the first one-third increment vesting on the date of
grant, the second one-third increment on the first anniversary of the
date of grant and the final one-third increment on the second
anniversary of the date of grant, if the grantee is still a member of
the Board on such dates. Upon the vesting of the shares, the
Corporation will deliver the stock certificate(s) evidencing the vested
shares to the Outside Director, all restrictions on the shares imposed
by this Plan (other than pursuant to Section 13(a) below) will be
lifted and such shares will no longer be deemed to be "Outside
Directors Restricted Stock" hereunder.
(e) Until the earlier of (i) five years from the date of grant
and (ii) the date on which the Outside Director ceases to serve as a
director of the Corporation (the "Outside Director Period of
Restriction"), no Outside Director Restricted Stock may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution.
Each certificate representing Outside Director Restricted Stock granted
pursuant to this Section 9 shall bear the following legend:
"The sale or other transfer of the shares represented by this
certificate, whether voluntary, involuntary, or by operation
of law, is subject to certain restrictions on transfer set
forth in the AmSurg Corp. 1997 Stock Incentive Plan (the
"Plan"). A copy of the Plan and the rules of such Plan may be
obtained from the Secretary of AmSurg Corp."
Once the Outside Director Period of Restriction has lapsed, the grantee
shall be entitled to have the legend required by this Section 9 removed
from such stock certificate(s); provided however, that such certificate
shall be subject to any legend required by applicable state or federal
law.
(f) Upon termination of an Outside Director's service as a
member of the Board for any reason other than death, disability or
retirement, all shares of Outside Restricted Stock not theretofore
vested will be forfeited. Upon termination of an Outside Director's
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<PAGE> 42
service as a member of the Board due to death, disability or
retirement, all shares of Outside Director Restricted Stock will
immediately vest.
(g) Grantees of Outside Director Restricted Stock shall enter
into a restricted stock agreement with the Corporation setting forth
the terms provided herein. Each participant receiving an award of
Outside Director Restricted Stock shall be issued one or more stock
certificates evidencing the shares of Outside Director Restricted
Stock. Such certificates shall be registered in the name of the Outside
Director, and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to the award. The stock
certificates shall be held in the custody of the Corporation until the
award or portion thereof represented by such certificate is vested. The
Corporation may require the Outside Director to deliver a stock power,
endorsed in blank, relating to the shares of Common Stock covered by
the award.
(h) Outside Directors will have the right to vote the shares
and to receive cash dividends with respect to the shares of Outside
Director Restricted Stock. Stock dividends issued with respect to
Outside Director Restricted Stock will be treated as additional shares
of Outside Director Restricted Stock subject to the same restrictions
and vesting schedule as the shares of Outside Director Restricted Stock
with respect to which they were received.
(i) Shares of Outside Director Restricted Stock shall be
subject to Section 10. The number of shares underlying each grant of
Outside Director Restricted Stock shall be adjusted automatically in
the same manner as the number of shares under Section 3 hereof at any
time that awards of Restricted Stock are adjusted as provided in
Section 3.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 10(b); or
(2) a "Potential Change in Control" as defined in
Section 10(c), but only if and to the extent so determined by
the Committee or the Board at or after grant (subject to any
right of approval expressly reserved by the Committee or the
Board at the time of such determination),
(i) Subject to the limitations set forth below in
this Section 10(a), the following acceleration provisions
shall apply:
(a) Any Stock Appreciation Rights or any Stock
Option awarded under the Plan not previously
exercisable and vested shall become fully exercisable
and vested.
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(b) The restrictions applicable to any Restricted
Stock , Outside Director Restricted Stock and Other
Stock-Based Awards, in each case to the extent not
already vested under the Plan, shall lapse and such
shares and awards shall be deemed fully vested.
(ii) Subject to the limitations set forth below in
this Section 10(a), the value of all outstanding Stock
Options, Stock Appreciation Rights, Restricted Stock, Outside
Director Restricted Stock and Other Stock-Based Awards, in
each case to the extent vested, shall, unless otherwise
determined Board or by the Committee in its sole discretion
prior to any Change in Control, be cashed out on the basis of
the "Change in Control Price" as defined in Section 10(d) as
of the date such Change in Control or such Potential Change in
Control is determined to have occurred or such other date as
the Board or Committee may determine prior to the Change in
Control.
(iii) The Board or the Committee may impose
additional conditions on the acceleration or valuation of any
award in the award agreement.
(b) Definition of Change in Control. For purposes of Section
10(a), a "Change in Control" means the happening of any of the
following:
(i) any person or entity, including a "group" as
defined in Section 13(d)(3) of the Exchange Act, other than
the Corporation or a wholly-owned subsidiary thereof or any
employee benefit plan of the Corporation or any of its
Subsidiaries, becomes the beneficial owner of the
Corporation's securities having 35% or more of the combined
voting power of the then outstanding securities of the
Corporation that may be cast for the election of directors of
the Corporation (other than as a result of an issuance of
securities initiated by the Corporation in the ordinary course
of business); or
(ii) as the result of, or in connection with, any
cash tender or exchange offer, merger or other business
combination, sales of assets or contested election, or any
combination of the foregoing transactions, less than a
majority of the combined voting power of the then outstanding
securities of the Corporation or any successor corporation or
entity entitled to vote generally in the election of the
directors of the Corporation or such other corporation or
entity after such transaction are held in the aggregate by the
holders of the Corporation's securities entitled to vote
generally in the election of directors of the Corporation
immediately prior to such transaction; or
(iii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute
the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Corporation's shareholders, of each director
of the Corporation first elected during such period was
approved by a vote of at least two-thirds of the directors of
the
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Corporation then still in office who were directors of the
Corporation at the beginning of any such period.
(c) Definition of Potential Change in Control. For purposes of
Section 10(a), a "Potential Change in Control" means the happening of
any one of the following:
(i) The approval by shareholders of an agreement by
the Corporation, the consummation of which would result in a
Change in Control of the Corporation as defined in Section
10(b); or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other
than the Corporation or a Subsidiary or any Corporation
employee benefit plan (including any trustee of such plan
acting as such trustee)) of securities of the Corporation
representing 5% or more of the combined voting power of the
Corporation's outstanding securities and the adoption by the
Committee of a resolution to the effect that a Potential
Change in Control of the Corporation has occurred for purposes
of this Plan.
(d) Change in Control Price. For purposes of this Section 10,
"Change in Control Price" means the highest price per share paid in any
transaction reported on The Nasdaq Stock Market National Market or such
other exchange or market as is the principal trading market for the
Common Stock, or paid or offered in any bona fide transaction related
to a Potential or actual Change in Control of the Corporation at any
time during the 60 day period immediately preceding the occurrence of
the Change in Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case as determined by the
Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the
optionee exercises such Stock Appreciation Rights or, where applicable,
the date on which a cash out occurs under Section 10(a)(ii).
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's shareholders,
no amendment or alteration may be made which would (a) except as a result of the
provisions of Section 3(c) of the Plan, increase the maximum number of shares
that may be issued under the Plan or increase the Section 162(m) Maximum, (b)
change the provisions governing Incentive Stock Options except as required or
permitted under the provisions governing incentive stock options under the Code,
or (c) make any change for which applicable law or regulatory authority
(including the regulatory authority of The Nasdaq Stock Market National Market
or any other market or exchange on which the Common Stock is traded) would
require shareholder approval or for which shareholder approval would be required
to secure full deductibility of compensation received under the Plan under
Section 162(m)
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of the Code. No amendment, alteration, or discontinuation shall be made which
would impair the rights of an optionee or participant under a Stock Option,
Stock Appreciation Right, Restricted Stock, Other Stock-Based Award or Outside
Director Restricted Stock theretofore granted, without the participant's
consent.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices. Solely
for purposes of computing the Section 162(m) Maximum, if any Stock Options or
other awards previously granted to a participant are canceled and new Stock
Options or other awards having a lower exercise price or other more favorable
terms for the participant are substituted in their place, both the initial Stock
Options or other awards and the replacement Stock Options or other awards will
be deemed to be outstanding (although the canceled Stock Options or other awards
will not be exercisable or deemed outstanding for any other purposes).
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements is consistent with the "unfunded" status of
the Plan.
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent
to and agree with the Corporation in writing that the optionee or
participant is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on
transfer. All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the
Common Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
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(b) Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in
specific cases.
(c) The adoption of the Plan shall not confer upon any
employee of the Corporation or any Subsidiary or Affiliate any right to
continued employment with the Corporation or a Subsidiary or Affiliate,
as the case may be, nor shall it interfere in any way with the right of
the Corporation or a Subsidiary or Affiliate to terminate the
employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income
tax purposes with respect to any award under the Plan, the participant
shall pay to the Corporation, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state, or local taxes
of any kind required by law to be withheld with respect to such amount.
The Committee may require withholding obligations to be settled with
Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the
Corporation under the Plan shall be conditional on such payment or
arrangements and the Corporation and its Subsidiaries or Affiliates
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the
participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or other types of Plan
awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Common Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock Options
and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Tennessee.
(g) The members of the Committee and the Board shall not be
liable to any employee or other person with respect to any
determination made hereunder in a manner that is not inconsistent with
their legal obligations as members of the Board. In addition to such
other rights of indemnification as they may have as directors or as
members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against
all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of
21
<PAGE> 47
a judgment in any such action, suit or proceeding, except in relation
to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding, the
Committee member shall in writing offer the Corporation the
opportunity, at its own expense, to handle and defend the same.
(h) In addition to any other restrictions on transfer that may
be applicable under the terms of this Plan or the applicable award
agreement, no Stock Option, Stock Appreciation Right, Restricted Stock
award, Other Stock-Based Award or Outside Director Restricted Stock
award or other right issued under this Plan is transferable by the
participant without the prior written consent of the Committee, or, in
the case of an Outside Director, the Board, other than (i) transfers by
a participant to a member of his or her Immediate Family or a trust for
the benefit of the participant or a member of his or her Immediate
Family or (ii) transfers by will or by the laws of descent and
distribution. The designation of a beneficiary will not constitute a
transfer.
(i) The Committee may, at or after grant, condition the
receipt of any payment in respect of any award or the transfer of any
shares subject to an award on the satisfaction of a six-month holding
period, if such holding period is required for compliance with Section
16 under the Exchange Act.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective upon adoption by the Board (the "Effective
Date"), subject to approval by the holders of a majority of the votes of the
Corporation's capital stock.
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock award,
Other Stock-Based Award or award of Outside Director Restricted Stock award
shall be granted pursuant to the Plan on or after the tenth anniversary of the
Effective Date of the Plan, but awards granted prior to such tenth anniversary
may be extended beyond that date.
22
<PAGE> 48
Appendix A
AMSURG CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 21, 1999
The undersigned hereby appoints Ken P. McDonald and Claire M. Gulmi and each
of them, as proxies, with full power of substitution, to vote all shares of
CLASS A COMMON STOCK and CLASS B COMMON STOCK of the undersigned as shown below
on this proxy at the Annual Meeting of Shareholders of AmSurg Corp. (the
"Company"), to be held on FRIDAY, MAY 21, 1999, at the SunTrust Center, 5th
Floor Auditorium, 424 Church Street, Nashville, Tennessee at 9:00 a.m., local
time (CST), and any adjournments thereof.
(1) ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
[ ] FOR both of the following nominees [ ] WITHHOLD AUTHORITY (ABSTAIN)
(except as indicated to the contrary below): to vote for both nominees
</TABLE>
Class I: Henry D. Herr and Ken P. McDonald
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
(2) APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED CHARTER:
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
(ABSTAIN)
(3) RE-APPROVAL OF THE 1997 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
(ABSTAIN)
(4) APPROVAL OF AN AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
(ABSTAIN)
(PLEASE DATE AND SIGN THIS PROXY BELOW.)
(5) In their discretion on any other matter which may properly come before the
meeting or any adjournment thereof.
Your shares will be voted in accordance with your instructions. If no choice is
specified your shares will be voted FOR approval of all of the proposals set
forth above.
Date: , 1999
--------------------
PLEASE SIGN HERE AND RETURN
PROMPTLY
-------------------------------
-------------------------------
Please sign exactly as your
name appears at left. If
registered in the names of two
or more persons, each should
sign. Executors,
administrators, trustees,
guardians, attorneys, and
corporate officers should show
their full titles.
- --------------------------------------------------------------------------------
If you have changed your address, please PRINT your new address on this line.
