<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>
RENEX 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
RENEX CORP.
201 ALHAMBRA CIRCLE, SUITE 800
CORAL GABLES, FLORIDA 33134
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 30, 1999
---------------------
To the Stockholders of Renex Corp.
NOTICE is hereby given that the Annual Meeting of Stockholders of Renex
Corp., a Florida corporation (the "Company") will be held at the Coral Gables
Hyatt, 50 Alhambra Plaza, Coral Gables, Florida 33134, on Wednesday, June 30,
1999 at 10:00 A.M., for the following purposes:
1. To elect three (3) Class III directors, each for a term of three
(3) years.
2. To act upon a proposal to adopt an amendment to the Company's
Director Stock Option Plan.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on May 4, 1999 shall
be entitled to receive notice of, and to vote at, the Annual Meeting, or any
postponements or adjournments thereof. A complete list of the stockholders
entitled to vote at the Annual Meeting will be available for inspection by
stockholders at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, please vote, date,
sign, and return the enclosed proxy as promptly as possible to assure
representation of your shares at the meeting. You may revoke your proxy at any
time prior to its exercise by written notice to the Company prior to the Annual
Meeting, or by attending the Annual Meeting in person and voting.
By Order of the Board of Directors
MARK D. WALLACE,
Secretary
Coral Gables, Florida
Dated: May 7, 1999
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
RENEX CORP.
201 ALHAMBRA CIRCLE, SUITE 800
CORAL GABLES, FLORIDA 33134
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1999
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being furnished to stockholders of Renex Corp., a Florida
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Company's 1999 Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 A.M., local
time, on June 30, 1999 at the Coral Gables Hyatt, 50 Alhambra Plaza, Coral
Gables, Florida, and at any and all postponements or adjournments thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting.
This Proxy Statement, Notice of Annual Meeting, and the accompanying Proxy
Card are first being mailed to stockholders on or about May 7, 1999 to all
stockholders of record as of May 4, 1999. At the annual meeting, stockholders
will be asked to elect three Class III directors, approve an amendment to the
Director Stock Option Plan and to vote on such other matters as may properly
come before the Annual Meeting.
Because many of the Company's stockholders are unable to attend the Annual
Meeting in person, the Board of Directors solicits proxies by mail to give each
stockholder an opportunity to vote on all matters that will come before the
Annual Meeting. Stockholders are urged to:
1. Read this Proxy Statement carefully;
2. Specify their choice on each matter by marking the appropriate box
on the enclosed Proxy Card; and
3. Sign, date and return the Proxy Card in the enclosed envelope.
If Proxy Cards are returned properly signed, the shares represented thereby
will be voted by the persons named in the Proxy Card, or their substitute, in
accordance with the stockholder's directions. If the Proxy Card is signed and
returned without instructions marked on it, it will be voted FOR the nominees
for Class III directors listed on the Proxy, FOR the amendment to the Director
Stock Option Plan and as recommended by the Board of Directors with respect to
any other matters which may properly come before the Annual Meeting. A
stockholder must return a signed Proxy Card to permit the proxy holders to vote
the shares owned by such stockholder.
A stockholder granting a proxy may revoke it at any time prior to the
Annual Meeting by giving written notice of its revocation to the Company, by
submission of another duly executed proxy dated after the Proxy Card to be
revoked, or by attending the Annual Meeting and voting in person. The mere
presence at the Annual Meeting by a stockholder who has appointed a proxy will
not revoke the prior appointment.
The Board of Directors has designated James P. Shea and Arthur G. Shapiro
and each or either of them, as proxies to vote the shares of common stock
solicited on its behalf.
Only stockholders of record as of the close of business on May 4, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting and
any adjournment thereof. On the Record Date, there were issued and outstanding
6,977,466 shares of common stock, $.001 par value (the "Common Stock"). Each
stockholder is entitled to one vote for each share of Common Stock registered in
his name on the Record Date for each matter brought before the stockholders at
the Annual Meeting. The presence, in person or by proxy, of a majority of the
Common Stock entitled to vote is required for a quorum at the Annual Meeting. In
determining whether a quorum exists at the Annual Meeting, all votes "for" or
"against," as well as
<PAGE> 4
abstentions, will be counted. Broker non-votes will also be counted as present
or represented for the purpose of determining whether a quorum is present for
the transaction of business.
ELECTION OF DIRECTORS
The Board of Directors is currently divided into three classes, having
three year terms that expire in successive years. The term of office of Class
III directors expires at the 1999 Annual Meeting. The Board of Directors
proposes that the nominees described below, all of whom are currently serving as
Class III directors, be re-elected as Class III directors for a new term of
three years and until their respective successors are duly elected and
qualified, except in the event of their earlier death, resignation or removal.
Each of the nominees has consented to serve a three year term. The Company has
no reason to believe that any of the nominees will be unable or unwilling to
serve, if elected. If any nominee should become unavailable prior to the
election, the accompanying Proxy Card will be voted for the election in his
stead, of such other person as the Board of Directors may recommend.
NOMINEES FOR CLASS III DIRECTOR
Information regarding the Board's nominees for election as Class III
directors is set forth below:
MILTON J. WALLACE
DIRECTOR SINCE 1993
AGE 63
Mr. Wallace is a co-founder of the Company and has been Chairman of the
Board of the Company since its inception in July 1993. Mr. Wallace has been a
practicing attorney in Miami for over 30 years, and is currently a shareholder
in the law firm of Wallace, Bauman, Legon, Fodiman & Shannon, P.A. He was a co-
founder and a member of the Board of Directors of Home Intensive Care, Inc., a
provider of home infusion and dialysis services, serving as Chairman of its
Executive Committee from 1985 through July 1993 and Chairman of the Board from
December 1989 until July 1993 when Home Intensive Care, Inc. was acquired by
W.R. Grace & Co. Mr. Wallace is Chairman of the Board of Med/Waste, Inc., a
provider of medical waste management services and a director of Imperial
Industries, Inc., a provider of construction materials. He is a director of
several private companies and is Chairman of the Dade County Florida, Housing
Finance Authority. Mr. Wallace is a member of the Executive Committee. Mr.
Wallace is the father of Mark D. Wallace, a Director of the Company.
ARTHUR G. SHAPIRO, M.D.
DIRECTOR SINCE 1993
AGE 60
Dr. Shapiro is a co-founder of the Company and has been Vice Chairman of
the Company's Board and Director of Medical Affairs since the Company's
inception in July 1993. Dr. Shapiro has held an appointment to the University of
Miami School of Medicine as a professor of clinical obstetrics and gynecology
since January 1995. From 1985 until 1995, he was engaged in the private practice
of medicine. He is board certified in obstetrics and gynecology, reproductive
endocrinology and laser surgery. He is a Fellow in the American College of
Obstetrics and Gynecology and the American College of Endocrinology. Dr. Shapiro
was a co-founder of Home Intensive Care, Inc. and served on its Board of
Directors from 1985 until July 1993. Dr. Shapiro also served as Home Intensive
Care, Inc.'s Medical Director from 1990 until July 1993. He is a Director of
Med/Waste, Inc. Dr. Shapiro is a member of the Executive Committee.
C. DAVID FINCH, M.D.
DIRECTOR SINCE 1995
AGE 39
Dr. Finch has been a Director of the Company since December 1995, when the
Company acquired Dialysis Facilities, Inc., a dialysis company he co-founded in
1990. He is a board certified nephrologist and
2
<PAGE> 5
maintains a private practice of medicine in nephrology and hypertension in
Jackson, Mississippi. Dr. Finch serves as the Medical Director of the Company's
dialysis facilities in the Jackson, Mississippi area. He also serves as Director
of Dialysis at Vicksburg Medical Center and Parkview Regional Medical Center. He
is a principal in JCD Partnership, a real estate and property management firm,
and the brother of Jeffery C. Finch, a Vice President of the Company.
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS. The following Class I directors were elected at the
Company's 1997 Annual Meeting, for terms ending in 2000:
EUGENE P. CONESE, SR.
DIRECTOR SINCE 1996
AGE 69
Since September 1997, Mr. Conese has been Chairman of the Board of World
Air Lease, Inc. and serves as a consultant to General Electric Company's Engine
Services division. From 1987 until September 1997, he served as Chairman of the
Board of Directors and Chief Executive Officer of Greenwich Air Services, Inc.,
a provider of repair and overhaul services for gas turbine aircraft engines
which he founded in 1977. Greenwich Air Services, Inc. was acquired by General
Electric Company in September 1997. Mr. Conese was the founder of The Greenwich
Company, Ltd. and served as its Chairman of the Board and Chief Executive
Officer from August 1980 until 1995, when it merged with Greenwich Air Services,
Inc. Mr. Conese is a Director of Trans World Airlines, Inc., a member of the
Board of Trustees of Iona College and of the Board of the Conese Foundation and
the Jackson Memorial Foundation. Mr. Conese is Chairman of the Company's
Compensation and Stock Option Committee.
CHARLES J. SIMONS
DIRECTOR SINCE 1993
AGE 80
Mr. Simons is the Vice Chairman of the Board of G. W. Plastics, Inc., a
plastics manufacturer, and is an independent management and financial
consultant. From 1940 to 1981, he was employed by Eastern Airlines, last serving
as Vice Chairman, Executive Vice President and as a Director. Mr. Simons is a
Director of Bessemer Trust of Florida, an investment management firm, Med/Waste,
Inc., Viragen, Inc., a pharmaceutical company and a number of private companies.
Mr. Simons is the Chairman of the Board of the Matthew Thornton Health Plan. Mr.
Simons is Chairman of the Company's Audit Committee and a member of the
Compensation and Stock Option Committee.
JEFFREY H. WATSON
DIRECTOR SINCE 1994
AGE 40
Mr. Watson has been Chairman of the Board and President of J. Watson & Co.,
a government relations and business consulting firm since December 1995. From
June 1994 until December 1995, he was Vice President for Government Relations of
the Jefferson Group, an independent public affairs firm. From January 1993 until
June 1994, Mr. Watson served as Deputy Assistant for Inter-Governmental Affairs
for the Clinton Administration. From December 1991 through November 1992, Mr.
Watson was employed by the election campaign for President Clinton. From 1989
until November 1991, Mr. Watson served as Finance Administrator for the City of
Miami, Florida's Department of Development and Housing Conservation. From 1986
until January 1989, he served as an Administrative Assistant for the Mayor of
Miami, Florida. From September 1985 through March 1986, he was a Managing
Partner and Chief Financial Manager of J. Howard Industries, a company involved
in low-income housing redevelopment and construction. Mr. Watson is a member of
the Company's Audit Committee.
3
<PAGE> 6
CLASS II DIRECTORS. The following Class II directors were elected at the
1998 Annual Meeting for terms ending in 2001:
JAMES P. SHEA
DIRECTOR SINCE 1993
AGE 57
Mr. Shea has been President and Chief Executive Officer of the Company
since August 1993. From July 1992 until June 1993, he served as Director General
for Home Intensive Care, Inc.'s international division. From 1986 to 1990, he
was Senior Vice President of Protocare, Inc., an infusion therapy and
respiratory care provider, which he helped establish. From 1985 to 1986, he was
General Manager of the health care products division of The Norton Company, a
manufacturer of engineered materials. From 1983 to 1985, he was President of the
infusion division of National Medical Care, Inc., a kidney dialysis and infusion
therapy provider, which is now owned by Fresenius Medical Care AG. Mr. Shea is a
member of the Company's Executive Committee.
JOHN E. HUNT, SR.
DIRECTOR SINCE 1993
AGE 81
Since August 1983, Mr. Hunt has been Chairman of the Board of Hunt
Insurance Group, Inc., an insurance agency holding company. For the previous 40
years, Mr. Hunt was President of John E. Hunt & Associates, a Tallahassee and
Miami, Florida insurance agency. For the past 13 years, he has also been
President of Insurance Consultants and Analysis, Inc., an insurance consulting
firm. Mr. Hunt serves as Chairman of the Board of Trustees of the Florida Police
Chiefs' Education and Research Foundation, Inc., and as a trustee of Florida
Southern College. Mr. Hunt was a Director of Home Intensive Care, Inc. from 1985
until July 1993. Mr. Hunt is a member of the Compensation and Stock Option
Committee.
MARK D. WALLACE
DIRECTOR SINCE 1993
AGE 31
Mr. Wallace has been Secretary of the Company since the Company's inception
in July 1993. Since July 1992, Mark Wallace has been a practicing attorney and
is currently a partner at the law firm of Stack, Fernandez, Anderson, Harris &
Wallace, P.A. Mr. Wallace is the son of Milton J. Wallace, Chairman of the Board
of the Company. Mr. Wallace is a member of the Audit Committee.
DIRECTORS' REMUNERATION; ATTENDANCE
DIRECTORS' COMPENSATION. Directors who are officers or employees of the
Company receive no additional compensation for their service as members of the
Board of Directors. Non-employee directors receive an annual retainer of $5,000;
$500 per board meeting attended and $500 for each committee meeting attended.
Directors are reimbursed for expenses which may be incurred by them in
connection with the business and affairs of the Company. Non-employee directors
also receive annual grants of options under the Director Stock Option Plan
("Director Plan") described below. See "Compensation -- Director Stock Option
Plan".
BOARD ATTENDANCE. The Board of Directors met five (5) times in 1998. In
addition, the Board of Directors took action by unanimous written consent once
during 1998. Every director attended in excess of 75% of meetings of the Board
during 1998.
COMMITTEES OF THE BOARD
The Board has established a number of standing committees to assist it in
the discharge of its responsibilities. The principal responsibilities of each
standing committee are described below. Actions taken
4
<PAGE> 7
by any committee of the Board are reported to the Board of Directors, usually at
the next Board meeting. The Board has standing Executive, Compensation and Stock
Option and Audit Committees.
EXECUTIVE COMMITTEE. The Executive Committee is composed of Dr. Shapiro as
Chairman and Messrs. Wallace and Shea. When the Board of Directors is not in
session, the Executive Committee possesses all of the powers of the Board, other
than certain powers reserved by Florida law to the Board. Although the Executive
Committee has broad powers, in practice it takes formal action in a specific
matter only when it would be impractical to call a meeting of the Board. The
Executive Committee met three (3) times during 1998. All members of the
Executive Committee attended 100% of such meetings.
COMPENSATION AND STOCK OPTION COMMITTEE. The Compensation and Stock Option
Committee, composed of Messrs. Conese, as Chairman, Hunt and Simons met five (5)
times during 1998. Every member attended in excess of 75% of such meetings. The
Compensation Committee reviews the Company's general compensation policies and
procedures; establishes salaries and benefit programs for the Chief Executive
Officer and other executive officers of the Company and its subsidiaries;
reviews, approves and establishes performance targets and awards under incentive
compensation plans for its executive officers; and reviews and approves
employment agreements. The Compensation and Stock Option Committee also
administers the Company's Employee Stock Option Plan and has the authority to
determine, among other things, to whom to grant options, the amount of options,
the terms of options and the exercise prices thereof.
AUDIT COMMITTEE. The Audit Committee is presently composed of Charles J.
Simons, as Chairman, Mark D. Wallace and Jeffrey H. Watson. Mark D. Wallace was
appointed to the Audit Committee on October 1, 1998. The Audit Committee met
four (4) times during 1998. Every member attended in excess of 75% of such
meetings while such directors were members of the Audit Committee. The principal
duties of the Audit Committee are to recommend the appointment of independent
auditors; meet with the Company's independent auditors to review the
arrangements for, and scope of, the audit by the independent auditors and the
fees related to such work; review the independence of the independent auditors;
consider the adequacy of the system of internal accounting controls; review and
monitor the Company's policies regarding conflicts of interest; and discuss with
management and the independent accountants the Company's annual financial
statements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. None of the
members of the Board's Compensation and Stock Option Committee is, or has been,
an officer or employee of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
The Company's officers and directors are required to file Forms 3, 4 and 5
with the Securities and Exchange Commission in accordance with Section 16(a) of
the Securities and Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder. Based solely on a review of such reports
furnished to the Company as required by Rule 16(a)-3, no director or executive
officer failed to timely file such reports in 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
"FOR" THE ELECTION OF ALL CLASS III NOMINEES.
The three nominees for Class III directors receiving the greatest number of
affirmative votes of the shares of Common Stock represented at the Annual
Meeting will be elected as Class III directors. Stockholders are not entitled to
cumulate their votes for the election of directors. Proxies received by the
Board of Directors will be so voted in favor of all Class III nominees above,
unless stockholders specify a contrary choice in their proxies.
5
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by, and paid to, the
Company's President and Chief Executive Officer and each other executive officer
for the two years ended December 31, 1997 and 1998 who received compensation in
excess of $100,000 for any such periods (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARD
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS(#)
- --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James P. Shea............................... 1998 $205,200 $190,000 $12,540 92,176
President and CEO 1997 128,465 -- 8,630 33,334
Orestes L. Lugo............................. 1998 $167,400 $124,000 $10,800 25,235
V.P. Finance and CFO 1997 114,617 -- 7,110 26,667
Milton J. Wallace........................... 1998 $ 73,077 $100,000 $ 7,940 54,255
Chairman of the Board 1997 -- -- -- 1,667
Patsy L. Anders............................. 1998 $ 97,200 $ 41,985 $ 8,004 8,000
V. P. Business Development 1997 70,769 8,600 5,400 20,000
Mignon B. Early............................. 1998 $ 93,846 $ 38,000 -- 8,000
V. P. Operations 1997 77,580 12,000 -- 20,000
</TABLE>
- ---------------
(1) The Company provides its officers with certain non-cash group life and
health benefits generally available to all salaried employees. Such benefits
are not included in the above table pursuant to applicable Securities and
Exchange Commission rules. No Named Executive Officer received aggregate
personal benefits or perquisites that exceed the lesser of $50,000 or 10% of
his total annual salary and bonus for such year.
6
<PAGE> 9
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the CEO and each other Named Executive Officer named on the Summary
Compensation Table above, for the year ended December 31, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL
NUMBER OF % OF TOTAL RATE OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR(3) ($/SHARE) DATE 5% 10%
- ---- ------------- -------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
James P. Shea(2)....... 16,176 5.0% $7.19 2/25/00 $12,000 $24,400
16,000 5.0 6.00 4/22/03 26,600 58,600
60,000 18.6 5.63 12/4/03 93,600 206,400
Orestes L. Lugo(2)..... 13,235 4.1% $7.19 2/25/00 $ 9,800 $20,000
12,000 3.7 6.00 4/22/03 19,900 43,900
Milton J. Wallace(2)... 12,255 3.8% $7.19 2/25/00 $ 9,100 $18,500
12,000 3.7 6.00 4/22/03 19,900 43,900
30,000 9.3 5.63 12/4/03 46,800 103,200
Patsy L. Anders........ 8,000 2.5% $6.00 4/22/03 $13,300 $29,300
Mignon B. Early........ 8,000 2.5% $6.00 4/22/03 $13,300 $29,300
</TABLE>
- ---------------
(1) All such options were granted pursuant to the 1994 Employee Stock Option
Plan. Unless otherwise noted all Options vest over three years, with 25% of
such options vesting six months following the date of grant, 25% on the
first anniversary from the date of grant and 25% at the end of each
succeeding year from the grant date.
(2) Options held by such individuals vest 100% immediately but are not
exercisable for six months following grant.
(3) Based on an aggregate of 321,931 options granted to employees in 1998,
including the Named Executive Officers.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain aggregated option information for
the CEO and each Named Executive Officer named in the Summary Compensation Table
for the year ended December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS(#) IN-THE-MONEY OPTIONS(2)
--------------------------- ---------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Shea............................ 98,845 60,000 $62,600 $97,200
Orestes L. Lugo.......................... 71,903 -- 40,800 --
Milton J. Wallace........................ 45,091 30,000 39,700 48,600
Patsy L. Anders.......................... 29,500 18,500 24,400 10,600
Mignon B. Early.......................... 19,084 17,250 11,400 9,100
</TABLE>
- ---------------
(1) No options were exercised by the above Named Executive Officers during the
fiscal year ended December 31, 1998.
(2) The value of unexercised options represents the difference between the
exercise price of the options and the closing sales price of the Company's
Common Stock on December 31, 1998 of $7.25 as reported by NASDAQ/NMS.
7
<PAGE> 10
EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into two year employment agreements with
James P. Shea, the Company's President and Chief Executive Officer, and Orestes
L. Lugo, Vice President -- Finance and Chief Financial Officer. In 1998, the
terms of these agreements were amended to five years for Mr. Shea and three
years for Mr. Lugo. In January 1998, the Company entered into a five year
employment agreement with Milton J. Wallace, the Company's Chairman of the
Board. The employment agreements provide for base salaries of $190,000, $155,000
and $100,000 for Messrs. Shea, Lugo and Wallace, respectively. Mr. Wallace's
base salary commenced April 1998. Base salary for each officer is increased on
each anniversary date of each agreement during the term by a minimum of 6%. Each
officer receives an automobile allowance and certain other non-cash benefits,
including life, health and disability insurance. The employment agreements for
Messrs. Wallace and Shea are automatically renewed for five years at the end of
the initial term and each extended term, unless either party provides notice of
termination at least 180 days prior to the expiration of such term. Mr. Lugo's
employment agreement is automatically renewed for three years at the end of the
initial term and each extended term, unless either party provides notice of
termination at least 120 days prior to the expiration of such term.
Messrs. Shea, Lugo and Wallace are entitled to receive bonuses in each
fiscal year during the term of their agreements. Such agreements require the
Board of Directors to establish incentive bonus plans for each fiscal year which
would provide a means for each officer to earn a bonus upon the achievement of
established goals and criteria. The respective employment agreements grant to
each of Messrs. Shea, Lugo and Wallace the right to terminate his employment
agreement within eighteen months following a "change of control," and to receive
an amount equal to the greater of: (i) base salary due for the remainder of the
term of the agreement and three times the bonus amount paid in the last 12
months had it not been terminated; or (ii) $500,000. Such change of control
severance is payable 100% in cash on the effective date of such termination. If
Messrs. Shea, Lugo or Wallace is terminated without cause during the term of
their respective agreements, such officer will be entitled to the same severance
mentioned above for a "change of control".
In April 1997, the Company entered into a two year employment agreement
with Patsy L. Anders, Vice President -- Business Development. The agreement
currently provides for a base salary of $90,000 per year. Base salary is
increased on the anniversary of each year during the term by a minimum of 6%.
Ms. Anders receives an automobile allowance and certain other non-cash benefits,
including life, health and disability insurance. Ms. Anders, upon the
achievement of established goals and criteria, is entitled to receive a bonus in
each fiscal year during the term of the agreement. Such agreement requires the
Board of Directors to establish an incentive bonus plan for each fiscal year.
Her employment agreement is automatically renewed for two years at the end of
the initial term and each extended term, unless either party provides written
notice of termination at least 120 days prior to the expiration of such term.
If Ms. Anders is terminated without cause prior to a "change of control,"
she will be entitled to severance equal to the greater of the remaining base
salary due under the agreement or one year's base salary. If Ms. Anders is
terminated without cause following a "change of control," she will be entitled
to severance equal to the greater of (i) two times the remaining base salary
which would have been paid for the remainder of the term of the agreement or
(ii) two times the sum of one year's base salary then in effect, and any and all
bonuses paid to Ms. Anders in the eighteen months prior to the effective date of
termination. Ms. Anders' employment agreement grants her the right to terminate
the agreement within 180 days following a "change of control," and entitles her
to the same severance as mentioned above under termination without a cause
following a "change of control." Such "change of control" severance is payable
50% in cash on the effective date of such termination, with the balance payable
over a twelve month period.
In March 1997, the Company entered into a three year employment agreement
with Mignon B. Early, Vice President -- Operations. The agreement provides for a
base salary of $80,000 and certain other non-cash benefits, including life,
health and disability insurance. Ms. Early is entitled to receive a bonus in
each fiscal year during the term of her agreement. Such agreement requires the
Board of Directors to establish an incentive bonus plan for each fiscal year
which would provide a means for her to earn a bonus up to 50% of her respective
base salary upon the achievement of established goals and criteria.
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<PAGE> 11
If Ms. Early is terminated without cause prior to a "change of control,"
she will be entitled to severance equal to the base salary accrued through the
effective date of termination and six months base salary. If Ms. Early is
terminated without cause following a "change of control," she will be entitled
to severance equal to all accrued base salary through the date of termination
and one year's base salary. In April 1998, Ms. Early's base annual salary was
increased to $100,000.
For the purposes of the employment agreements, "change of control" is
defined as: (i) the acquisition, other than from the Company directly, by any
person, entity or group, within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership of
25% or more of the outstanding Common Stock; (ii) if the individuals who serve
on the Board as of the date of the employment agreement, no longer constitute a
majority of the members of the Board; provided, however, any person who becomes
a director subsequent to such date, who was elected to fill a vacancy by a
majority of the individuals then serving on the Board, shall be considered as if
a member prior to such date; (iii) approval by a majority of the voting stock of
the Company of a merger, reorganization or consolidation whereby the
shareholders of the Company immediately prior to such approval do not,
immediately after consummation of such reorganization, merger or consolidation
own more than 50% of the voting stock of the surviving entity; or (iv) a
liquidation or dissolution of the Company, or the sale of all or substantially
all of the Company's assets.
STOCK OPTION PLANS
Employee Plan
The Company maintains a 1994 Employee Stock Option Plan ("Employee Plan").
The Employee Plan is designed as an incentive program to cause employees to
increase their interest in the Company's performance and to attract and retain
qualified personnel. Subject to certain anti-dilution provisions, the Employee
Plan consists of 1,000,000 shares of Common Stock reserved for issuance upon the
exercise of options which may be granted, including 619,376 shares subject to
outstanding options as of December 31, 1998.
The Employee Plan is administered by the Compensation and Stock Option
Committee. The Compensation and Stock Option Committee has the discretion, among
other things, as to whom to grant options, the amount of options, the terms of
options and the exercise prices. All employees of the Company are eligible to
receive options under the Employee Plan. Such employees are eligible to receive
either "incentive" or "nonqualified" stock options, subject to the limitations
of the Internal Revenue Code of 1986, as amended (the "Code"). The exercise
price of an incentive stock option may not be less than 100% of the market price
of the underlying Common Stock as of the date of grant. No option may be granted
which has a term longer than 10 years. Stock options may have vesting
requirements as established by the Compensation and Stock Option Committee, but,
except in the case of an employee's death or permanent disability, in no event
may the options be exercisable until six months after grant. All unvested
options under the Employee Plan become immediately vested in full upon a change
of control of the Company, as such term is defined in the Employee Plan.
Upon termination of an optionee's employment with the Company for any
reason, all options granted to such employee under the Employee Plan would
terminate immediately, except that the Compensation and Stock Option Committee
has the discretion to permit such holder to exercise vested options for a period
of 90 days after termination. Options granted under the Employee Plan may not be
transferred and are not exercisable except by the employee.
The Employee Plan provides for the automatic grant of "reload" options to
an employee, who pays all, or a portion of, an exercise price by delivery of
shares of Common Stock then owned by such employee. Reload options are granted
for each share of Common Stock so tendered. The exercise price of such reload
option is the then fair market value of the Common Stock. All other terms of the
reload options would be identical to the original options; provided, however,
that if the expiration date is less than one year, the expiration date is
extended to one year from the date of issuance of the reload options.
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<PAGE> 12
As of December 31, 1998, options to purchase a total of 619,376 shares of
Common Stock, with a weighted average exercise price of $6.51 have been granted
to executive officers and other employees of the Company. Each option granted
has a term of five years. Options granted to Messrs. Shea, Lugo and Wallace are
vested 100%. For all other officers and employees, options vest 25% at the end
of six months and 25% on each anniversary of such grant until 100% are vested.
Options are not exercisable until six months after the date of grant.
Director Plan
The Company maintains a Director Stock Option Plan (the "Director Plan").
Subject to certain anti-dilution provisions in the Plan, there are 166,667
shares of Common Stock reserved for issuance upon the exercise of options which
may be granted pursuant to the Director Plan, including 43,366 shares subject to
outstanding options. All non-employee directors are eligible to receive grants
of options ("Eligible Director"). Each Eligible Director receives automatic,
non-discretionary grants of options based upon specific criteria set forth in
the Director Plan. Prior to October 1998, on April 27 of each year, each
Eligible Director received non-qualified options to purchase 834 shares of
Common Stock for service on the Board of Directors and additional options to
purchase 334 shares for service on each committee of the Board, other than the
Executive Committee, for which members would receive options to purchase 834
shares. Also, additional options to purchase 334 shares are granted to an
Eligible Director who serves as a chairman of a standing committee of the Board,
other than the chairman of the Executive Committee, who would receive options to
purchase 834 shares. In October 1998, the Board of Directors authorized an
amendment to the Director Plan providing for a special grant of options based on
the formula of annual grants on October 1, 1998. In addition, commencing April
27, 1999, annual option grants are double the amount of options granted in April
1998. The amendment to the Director Plan is subject to stockholder approval. See
"Proposal to Adopt Amendment to Director Stock Option Plan" below.
The exercise price of each option granted under the Director Plan is equal
to the fair market value of the Common Stock on the date of grant as determined
in accordance with the provisions of the Director Plan. All options granted have
a term of five years, but, except in the case of an Eligible Director's death or
permanent disability, are not exercisable until six months after the date of
grant. No option is transferable by the Eligible Director, except by the laws of
descent and distribution. If the Eligible Director's membership on the Board
terminates, including by reason of death, such options are exercisable for the
lesser of the remaining term of such option, or one year.
The Director Plan provides for the automatic grant of "reload" options to
an Eligible Director, who pays all, or a portion of, an exercise price by
delivery of shares of Common Stock then owned by such Eligible Director. Reload
options are granted for each share of Common Stock so tendered. The exercise
price of such reload option is the then fair market value of the Common Stock.
All other terms of the reload options, including the expiration date, would be
identical to the original options, provided, however, that if the expiration
date is less than one year, the expiration date is extended to one year from the
date of issuance of the reload options.
As of December 31, 1998, options to purchase 43,366 shares of Common Stock,
with a weighted average exercise price of $6.37 per share, have been
automatically granted to Eligible Directors as a group and remain outstanding.
401(k) PLAN
As of January 1997, the Company adopted a tax-qualified employee savings
and retirement plan (the "401(k) Plan") covering the Company's employees.
Pursuant to the 401(k) Plan, eligible employees may elect to contribute to the
401(k) Plan up to the lesser of 15% of their annual compensation or the
statutorily prescribed annual limit ($10,000 in 1998). The Company matches 25%
of the contributions of employees up to 4% of each employee's salary. All
employees who attain at least one year's service are eligible to participate in
the 401(k) Plan.
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<PAGE> 13
The Trustees of the 401(k) Plan, at the direction of each participant,
invest the assets of the 401(k) Plan in designated investment options. The
401(k) Plan is intended to qualify under Section 401 of the Code, so that
contributions to the 401(k) Plan, and income earned on the 401(k) Plan
contributions are not taxable until withdrawn. Matching contributions by the
Company are deductible when made.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee, and the Stock
Performance Graph included elsewhere in this Proxy Statement do not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Report in the Stock Performance Graph by reference therein.
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee (the "Compensation Committee") of the
Company's Board of Directors. The Compensation Committee is comprised entirely
of outside, non-employee directors, whose role is to review and approve salaries
and other compensation of the executive officers of the Company. The
Compensation Committee also reviews and approves various other Company
compensation policies and matters and administers the Company's Employee Stock
Option Plan, including the review and approval of stock option grants to the
executive officers of the Company.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The primary goal of the Compensation Committee is to establish a
relationship between executive compensation and the creation of shareholder
value, while motivating and retaining key employees. The Company's compensation
program for executives consists of two key components:
- Cash compensation, consisting of (a) a base salary and (b) annual
incentive compensation based principally on targeted profitability
of the Company; and
- Long-term incentive compensation through the periodic grant of stock
options. The grants are made based upon achieving certain
predetermined long term corporate goals.
In order to assist the Compensation Committee in its responsibility, the
Compensation Committee commissioned studies by an expert outside independent
consultant to provide surveys of companies in the same general business segment,
revenue and employee size, related to base salary, annual incentive cash
compensation payments and long-term incentive option grants. In this survey, the
Company's key executives were matched on a "best fit" basis to the key
executives of the surveyed companies. The Compensation Committee also reviewed
the recommendations of the outside consultant as part of its deliberation in
overall compensation matters.
The Company believes that this approach best serves the interests of the
Company and its shareholders. The base salary enables the Company to meet the
requirements of the highly competitive industry environment, while ensuring that
executive officers are compensated in a way that advances both the short and
long term interests of shareholders. Cash bonuses are intended to reward
executive officers for meeting or exceeding current year corporate performance
goals, as measured by financial results of the Company. Long-term incentives
consist of grants of stock options based on the current corporate long-term
goals as established by the Board of Directors.
BASE SALARY
The Compensation Committee is responsible for establishing base salaries
for the Company's executive officers, as well as changes in such salaries (other
than as required by contracts), based upon the recommendation of the Chief
Executive Officer. The Compensation Committee considers such factors as
competitive industry salaries; a subjective assessment of the nature of the
position; the contributions and experience of such officer and the length of the
officers' service with the Company.
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<PAGE> 14
PERFORMANCE-BASED CASH COMPENSATION
The Compensation Committee believes that a significant portion of the total
cash compensation for its executive officers should be based upon the Company's
achievement of specific performance criteria, and in particular the Company's
earnings. Annual cash bonuses are paid through a Management Incentive Bonus Plan
("MIBP") adopted by the Compensation Committee prior to the commencement of each
fiscal year. The purpose of the MIBP is to motivate and reward eligible
employees for good performance for the year by making a major portion of their
cash compensation dependent on overall corporate profitability.
Pursuant to the terms of the MIBP, the Compensation Committee establishes
an annual minimum corporate profit target, below which no bonus will be paid.
Using a predetermined formula, additional higher corporate profittiers are also
established. Upon the attainment of the minimum corporate profit target, each
eligible officer receives a cash bonus equal to a percentage of base salary. The
percentage of base salary earned increases as higher corporate profit tiers are
achieved. The maximum percentage of base salary that can be earned as a cash
bonus is established by the Compensation Committee for each executive officer,
with maximum bonuses ranging from 50% for vice presidents to 100% for the Chief
Executive Officer. The Compensation Committee awarded at or near the maximum
cash bonus available to each of the Company's executive officers based on the
MIBP adopted for the fiscal year ended 1998.
STOCK OPTIONS
Stock options are granted by the Company to aid in the hiring of new
employees and to reward key employees as a long-term incentive reward based upon
the Company's achieving certain current corporate long-term goals as established
by the Board of Directors. Stock options have value only if the price of the
Company's stock increases above the fair market value on the grant date and the
employee remains in the Company's employ until the stock options become
exercisable.
The Company has a 1994 Employee Stock Option Plan (the "Employee Plan") for
executive officers and other employees. The Employee Plan is generally used for
making grants to executive officers and other employees as part of the Company's
performance review. Stock option grants may be made to executive officers upon
initial employment, upon promotion to a new, higher level position that entails
increased responsibility, in connection with the execution of a new employment
agreement or as further incentive to such executive officers. Annual stock
option grants for executives are a key element of a market competitive total
compensation package. In determining the number of stock options to be granted,
the Compensation Committee receives recommendations from the Chief Executive
Officer, as well as its outside independent consultants, and then reviews the
current option holdings of the executive officers; their positions and length of
service with the Company and subjective criteria on their contribution in
realizing certain current long-term goals of the Company. It then determines the
number of options to be granted based upon the principle of rewarding
performance and providing continuing incentives to contribute to stockholder
value. Using these guidelines, the Compensation Committee granted options in
1998 to all executive officers and certain supervisory employees in varying
amounts. Options generally vest over a three year period. Stock options under
the Employee Plan are granted at a price equal to the fair market value of the
common stock on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's basis for compensation of the Chief Executive
Officer is based on the philosophy discussed above. James P. Shea has been the
Company's President and Chief Executive Officer since August 1993. In
recognition of his service and commitment to the past and future success of the
Company and to secure his services for the future, the Company entered into an
employment agreement in April 1997 which provided for a base salary of $190,000
and minimum annual increases. The term of the employment agreement was extended
to five (5) years in recognition of the Company's performance. In establishing
the Chief Executive Officer's base salary, the Compensation Committee reviewed
salaries of the chief executive officers of comparable companies within its
industry, as well as other industries, and Mr. Shea's responsibilities within
the Company. Factors taken into consideration included a subjective
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<PAGE> 15
evaluation of Mr. Shea's performance, changes in the cost of living,
competitors' size and performance and the Company's achievements.
Mr. Shea's employment agreement provides for the right to earn annual cash
bonuses of up to 100% of his base salary in effect at the beginning of the
fiscal year. Such bonus awards are based upon incentive bonus criteria
established by the Compensation Committee in each fiscal year in its discretion.
Mr. Shea participated in the MIBP for the fiscal year ended 1998. Under the
MIBP, Mr. Shea's actual cash bonus for 1998 was $190,000, 100% of his base
salary in effect on January 1, 1998. Such cash bonus was the maximum cash bonus
permitted under his MIBP.
In 1998, the Compensation Committee awarded Mr. Shea options to purchase
92,176 shares of common stock. These options are vested 100% and become
exercisable six months following the respective dates of grant. All such options
expire at the end of five (5) years following the dates of grant, if not
exercised.
EXECUTIVE SEVERANCE PACKAGES
In response to the increase in merger and acquisition activities in recent
years within the industry and to provide the Company's executive officers with
further incentive to remain with the Company, the Compensation Committee in 1997
granted executive severance packages to the Company's executive officers,
including the Chief Executive Officer, protecting them in the event of a change
of control of the Company. These severance packages are contained in the
executive officers' respective employment agreements. The Compensation Committee
reviewed executive severance packages granted by those companies whose
compensation practices were examined in connection with determining executive
officer salaries as described above. The Compensation Committee then determined
to grant the executive officers severance packages in varying amounts depending
on their relative position with the Company. The severance packages for the
Chief Executive Officer and the Chief Financial Officer were increased as a
result of the extension of the terms of their respective employment agreements
and are described in "Summary Compensation" above.
IMPACT OF SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly-held corporations for compensation in excess of $1,000,000
paid for any fiscal year to the Company's Chief Executive Officer and the four
(4) other most highly compensated officers. However, the statute exempts
qualifying performance-based compensation from the deduction limit if certain
requirements are met. The policy of the Compensation Committee is to structure
the compensation of the Company's executive officers to avoid the loss of the
deductibility of any compensation, even though Section 162(m) does not preclude
the payment of compensation in excess of $1,000,000. Notwithstanding, the
Compensation Committee reserves the authority to award non-deductible
compensation in circumstances as it deems appropriate. The Company believes that
Section 162(m) will not have any effect on the deductibility of the compensation
of any executive officer for 1998 or 1999.
Respectfully submitted,
Compensation Committee
Eugene P. Conese, Sr., Chairman
John E. Hunt, Sr.
Charles J. Simons
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<PAGE> 16
STOCK OWNERSHIP
The following table sets forth certain information as of December 31, 1998,
with respect to the beneficial ownership of the Company's Common Stock by: (i)
each person who is known by the Company to own more than 5% of such shares of
Common Stock; (ii) each Named Executive Officer; (iii) each of the Company's
directors; and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) OWNED
- --------------------------------------- --------------------- ------------------
<S> <C> <C>
Milton J. Wallace(4)........................................ 769,813 10.3%
Arthur G. Shapiro, M.D.(5).................................. 759,838 10.2
James P. Shea(6)............................................ 283,445 3.7
C. David Finch, M.D.(7)..................................... 198,197 2.7
Orestes L. Lugo(8).......................................... 113,554 1.5
John E. Hunt, Sr.(9)........................................ 82,155 1.1
Charles J. Simons(10)....................................... 56,041 *
Patsy L. Anders(11)......................................... 43,317 *
Eugene P. Conese, Sr.(12)................................... 28,836 *
Mignon B. Early (13)........................................ 20,284 *
Mark D. Wallace(14)......................................... 16,170 *
Jeffrey H. Watson(15)....................................... 8,170 *
William C. Morris (16)...................................... 662,400 8.9
J. & W. Seligman & Co., Inc. (17)........................... 662,400 8.9
All executive officers and directors as group
(13 persons)(18).......................................... 2,477,034 31.5%
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address for each beneficial owner is c/o
the Company at 201 Alhambra Circle, Suite 800, Coral Gables, Florida 33134.
(2) Except as set forth herein, all securities are directly owned and the sole
investment and voting power are held by the person named. A person is
deemed to be the beneficial owner of securities that can be acquired by
such person within 60 days of December 31, 1998 upon the exercise of
options or warrants.
(3) Based upon 7,422,966 shares of Common Stock issued and outstanding. Each
beneficial owner's percentage is determined by assuming that all such
exercisable options or warrants that are held by such person (but not those
held by any other person) have been exercised.
(4) Mr. Wallace's address is 1200 Brickell Avenue, Suite 1720, Miami, Florida
33131.Except as set forth herein, all shares of Common Stock are owned
jointly by Mr. Wallace and his wife. Includes: (i) 12,000 shares of Common
Stock owned by Milton J. Wallace and his wife as custodian for a minor
child; (ii) 35,600 shares of Common Stock owned by Mr. Wallace's Individual
Retirement Account; (iii) 106,122 shares of Common Stock (including 8,655
of Common Stock issuable upon exercise of warrants and Series B Warrants)
owned by a corporation, of which Mr. Wallace is an officer, director and
controlling stockholder, (iv) 45,091 shares of Common Stock issuable upon
exercise of stock options; and (v) 15,000 shares of Common Stock issuable
upon exercise of Series B Warrants owned by his Individual Retirement
Account.
(5) Except as set forth herein, all shares of Common Stock are owned jointly by
Dr. Shapiro and his wife. Includes: (i) 17,234 shares of Common Stock owned
by Dr. Shapiro's Individual Retirement Account; (ii) 28,376 shares of
Common Stock issuable upon exercise of Stock options; (iii) 106,122 shares
of Common Stock (including 8,655 shares of Common Stock issuable upon
exercise of warrants and Series B Warrants) owned by a corporation, of
which Dr. Shapiro is an officer and director; (iv) 3,750 shares of Common
Stock issuable upon exercise of Series B Warrants; and (v) 3,750 shares of
Common Stock issuable upon exercise of Series B Warrants owned by Dr.
Shapiro's Individual Retirement Account.
(6) Except as set forth herein all shares of Common Stock and warrants are
owned jointly by Mr. Shea and his wife. Includes: (i) 98,845 shares of
Common Stock issuable upon exercise of Stock options;
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<PAGE> 17
(ii) 33,334 shares of Common Stock issuable upon exercise of warrants; and
(iii) 15,000 shares of Common Stock issuable upon exercise of Series B
Warrants.
(7) Includes 6,000 shares of Common Stock issuable upon exercise of Stock
options.
(8) Includes: (i) 71,903 shares of Common Stock issuable upon exercise of Stock
options; (ii) 3,334 shares of Common Stock issuable upon exercise of
warrants; and (iii) 3,750 shares of Common Stock issuable upon exercise of
Series B Warrants.
(9) Includes: (i) 4,837 shares of Common Stock issuable upon exercise of Stock
options; (ii) 6,667 shares of Common Stock issuable upon exercise of
warrants; (iii) 11,667 shares of Common Stock owned by Mr. Hunt's spouse;
(iv) 1,667 shares of Common Stock issuable upon exercise of warrants owned
by his spouse; and (v) 3,750 shares of Common Stock issuable upon exercise
of Series B Warrants. Mr. Hunt disclaims beneficial ownership of the shares
owned by his spouse.
(10) Includes: (i) 6,838 shares of Common Stock issuable upon exercise of Stock
options; (ii) 1,667 shares of Common Stock issuable upon exercise of
warrants; and (iii) 7,500 shares of Common Stock issuable upon exercise of
Series B Warrants.
(11) Includes 29,500 shares of Common Stock issuable upon exercise of Stock
options.
(12) Includes: (i) 3,836 shares of Common Stock issuable upon exercise of Stock
options; and (ii) 5,000 shares of Common Stock issuable upon exercise of
warrants.
(13) Includes 19,084 shares of Common Stock issuable upon exercise of Stock
options.
(14) Includes 4,170 shares of Common Stock issuable upon exercise of Stock
options.
(15) Includes 5,170 shares of Common Stock issuable upon exercise of stock
options.
(16) Mr. Morris' address is 100 Park Avenue, New York, NY 10017. Mr. Morris is a
principal of J. & W. Seligman & Co., Inc. ("JWS"), an investment advisor.
The shares above include 662,400 shares beneficially owned by JWS, which
also includes 364,000 shares owned by Seligman Frontier Fund, Inc. (the
"Fund"), an investment company under the Investment Company Act of 1940.
JWS is an investment advisor to the Fund.
(17) JWS' address is 100 Park Avenue, New York, NY 10017. Includes 364,000
shares owned by the Fund, to which JWS is an investment advisor.
(18) Includes: (i) 325,650 shares of Common Stock issuable upon exercise of
options; (ii) 65,002 shares of Common Stock issuable upon exercise of
warrants; and (iii) 56,396 shares of Common Stock issuable upon exercise of
Series B Warrants.
PROPOSAL TO AMEND THE DIRECTOR STOCK OPTION PLAN
On October 1, 1998, the Board of Directors adopted an amendment (the
"Director Plan Amendment") to the Company's Director Stock Option Plan (the
"Director Plan"). The Director Plan Amendment must be approved by holders of a
majority of the Company's outstanding shares of common stock present at the
Annual Meeting. The Director Plan Amendment provides (i) authorization for a
special one time grant of options to eligible directors as of October 1, 1998
and (ii) a permanent change in the number of shares of Common Stock underlying
future annual grants of options automatically granted under the Director Plan,
effective with the April 1999 automatic grant date.
On October 1, 1998, the Compensation and Stock Option Committee authorized
the Director Plan Amendment, which provided for the grant of special options to
eligible directors for the same number of shares automatically granted in April
1998. Options to purchase 6,842 shares of common stock were granted on such
date. The exercise price of such options was the closing sale price of the
common stock on October 1, 1998, which was $5.25 per share. The special grant of
options is subject to the approval of the Director Plan Amendment. If the
Director Plan Amendment is not approved by the Company's stockholders, such
options will be canceled.
In addition, the Director Plan Amendment provides for an increase in the
number of shares underlying options pursuant to the automatic, non-discretionary
annual grants of options in April of each year. The Director Plan Amendment will
have the effect of doubling the number of shares of Common Stock underlying such
grants. Assuming stockholder approval of the Director Plan Amendment, each year
commencing April 1999, each Eligible Director would receive options to purchase
1,668 shares of Common Stock for service on
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<PAGE> 18
the Board, options to purchase 668 shares for service on each permanent
committee (other than the Executive Committee) and options to purchase 668
shares for service as a Committee Chairman (other than the Executive Committee).
Eligible Directors who serve on the Executive Committee would receive options to
purchase 1,668 shares, with additional options to purchase 1,668 shares for the
Chairman of the Executive Committee. See "Compensation-Director Stock Option
Plan" above for a description of the shares of common stock that Eligible
Directors received prior to the adoption of the Director Plan Amendment.
The Director Plan Amendment providing for the increase in the number of
options granted would be effective with the annual grant of options as of April
27, 1999 and for future years. Options outstanding prior to October 1, 1998, the
date the Compensation and Stock Option Committee approved the Director Plan
Amendment, are not affected.
The Compensation and Stock Option Committee commissioned a study of the
compensation of outside directors of competitive and comparable companies. The
study suggested that compensation paid to the Company's outside directors both
in the form of cash (at that time none) and in stock was low compared to other
similar companies. The Compensation and Stock Option Committee also determined
that the number of shares underlying options granted to the Board of Directors
was disproportionately low compared to the number of shares of Common Stock
outstanding. The Board of Directors believes that there is a continuing need,
and that it is in the best interests of the Company and its stockholders, to
make stock related awards to directors so that the Company will be able to
attract and retain highly qualified individuals. Accordingly, on October 1,
1998, it adopted the Director Plan Amendment authorizing an increase in the
number of annual options granted.
All other terms and conditions of the Director Plan will remain the same. A
summary of the terms and conditions of the Director Plan is set forth in the
Proxy Statement under the caption -- "Compensation -- Director Stock Option
Plan."
VOTE REQUIRED AND BOARD RECOMMENDATIONS. The adoption of the Director Plan
Amendment requires the affirmative vote of a majority of the Company's
outstanding shares of Common Stock present at the Annual Meeting. If the
proposed Director Plan Amendment is approved by the stockholders, it will become
effective retroactive to October 1, 1998, the date it was approved by the
Compensation and Stock Option Committee. If the Director Plan Amendment is not
approved, the Director Plan will not change and the options heretofore granted
on October 1, 1998 and the increased options granted on April 27, 1999 will be
canceled. The effect on an abstention or a broker non-vote is the same as that
of a vote against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE DIRECTOR PLAN AMENDMENT.
CERTAIN TRANSACTIONS
JCD Partnership, a real estate holding and property management firm, of
which C. David Finch, M.D., Jeffery Finch and Charles D. Finch, Sr. are the
principals, owns the real property and improvements at the Company's dialysis
facilities at Jackson, Mississippi and Delta, Louisiana. JCD Partnership leases
the properties to the Company pursuant to ten year leases, in which the Company
pays annual rent of $92,400 and $82,500, respectively. The Company paid $427,000
and $175,000 to JCD Partnership in connection with the leasehold improvements at
each facility.
C. David Finch, M.D. owed Dialysis Facilities, Inc. ("DFI") approximately
$85,000 at the time of the Company's acquisition of DFI evidenced by a note. The
note bears interest at the rate of 8% per annum and is payable upon demand by
the Company. As of December 31, 1997 and 1998, approximately $85,000 in
principal remained unpaid, together with accrued interest of $13,600 and $20,700
as of such dates, respectively.
Milton J. Wallace, Chairman of the Board of Directors of the Company, is a
shareholder of the law firm of Wallace, Bauman, Legon, Fodiman & Shannon, P.A.
The law firm serves as general counsel to the Company. The firm received legal
fees of $102,000 during 1998.
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<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company's Common Stock from October 8, 1997 (the date that trading of the Common
Stock commenced on the NASDAQ National Market System) to December 31, 1998 with
(a) the Standard and Poors 500 Stock Index; and (b) a Peer Group Index. The
graph assumes that $100 was invested on October 8, 1997 in the Company's Common
Stock, the S&P 500 Index and the Peer Group Index and that all dividends were
reinvested. The Peer Group Index on the graph includes the Common Stock of Renal
Care Group, Inc. and Total Renal Care Holdings, Inc., which the Company believes
are the most comparable to the Company's operations within the dialysis
industry.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RENEX STANDARD & PEER GROUP
(FISCAL YEAR COVERED) CORPORATION POORS 500 INDEX
<S> <C> <C> <C>
OCTOBER 1997 100.00 100.00 100.00
1997 65.62 102.87 90.68
1998 90.62 132.27 107.33
</TABLE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche, LLP served as the Company's independent
auditors for the years ended December 31, 1996, 1997 and 1998. Although the
Board of Directors has not yet selected a firm to serve as auditors for the year
ended December 31, 1999, it is expected that Deloitte & Touche, LLP will be
retained by the Company for such audit. Representatives of Deloitte & Touche,
LLP are expected to be present at the Annual Meeting and will be afforded the
opportunity to make a statement, if they desire, and to respond to appropriate
questions.
OTHER MATTERS
Management is not aware of any other matters which may come before the
Annual Meeting and which require the vote of stockholders in addition to those
matters indicated in the notice of meeting and this Proxy Statement. The
Company's By-Laws contain provisions relating to notices of stockholder meetings
which prohibit a stockholder from nominating a person for the Board of Directors
or proposing certain acts relating to the Company's business without advance
written notice to the Company. Such written notice must be given at least sixty
(60) days, but not more than ninety (90) days prior to the anniversary date of
the last annual meeting of stockholders and must contain specific information
about the nominee and the stockholder who
17
<PAGE> 20
makes such nomination or proposal. No nomination proposal was received by the
Company for the Annual Meeting. If any other matter calling for stockholder
action should properly come before the Annual Meeting or any adjournment
thereof, those persons named as proxies in the enclosed proxy will vote in
accordance with their best judgment.
STOCKHOLDER PROPOSALS
Stockholders who wish a proposal to be included in the Company's proxy
statement and form of proxy relating to the 2000 annual meeting must be received
by the Company by no earlier than March 20, 2000 and not later than April 20,
2000 for inclusion on the Company's proxy statement related to that meeting.
Such notice must include (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the number of shares of common stock of the Company which are owned
beneficially of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the Annual Meeting to bring valid business before the
meeting.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report, including audited financial
statements as of December 31, 1997 and 1998 and for each of the three (3) years
ending December 31, 1998 are being mailed to all stockholders. Copies of the
Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission may be obtained by writing to James P. Shea, President/Chief
Executive Officer, 201 Alhambra Circle, Suite 800, Coral Gables, Florida 33134.
COSTS OF SOLICITATION
All expenses in connection with this solicitation will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
directors, officers and other employees of the Company by telephone, telefax, in
person or otherwise, without additional compensation. The Company will also
request brokerage firms, nominees, custodians and fiduciaries to forward proxy
materials to the beneficial owners of shares held of record by such persons and
will reimburse such persons and the Company's transfer agent for their
reasonable out-of-pocket expenses in forwarding such materials. The Company
further reserves the right to retain the services of a proxy solicitation form
to solicit proxies and will pay all reasonable costs associated therewith.
18
<PAGE> 21
PROXY
RENEX CORP.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 30, 1999
The undersigned hereby appoints James P. Shea and Arthur G. Shapiro, or
either of them, as proxies, with full individual power of substitution to
represent the undersigned and to vote all shares of Common Stock of the Company
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at the Hyatt Regency Hotel, 50 Alhambra Plaza, Coral
Gables, Florida on June 30, 1999 at 10:00 A.M., and any and all adjournments
thereof, in the manner specified below:
1.ELECTION OF CLASS III DIRECTOR
NOMINEES:
Milton J. Wallace
Arthur G. Shapiro, M.D.
C. David Finch, M.D.
[ ] For all nominees listed above
[ ] Withhold authority to vote for the following:
- --------------------------------------------------------------------------------
[ ] Withhold authority to vote for all nominees
2. PROPOSAL TO AMEND THE COMPANY'S DIRECTOR EMPLOYEE STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on other side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, SHALL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. Should any
other matter requiring a vote of the stockholders arise, the persons named in
the Proxy or their substitutes shall vote in accordance with their best judgment
in the interest of the Company. The Board of Directors are not aware of any
matter which is to be presented for action at the meeting other than the matters
set forth herein.
Dated: , 1999
---------------------
----------------------------------
Signature
----------------------------------
Signature
Please sign the Proxy exactly as
name appears. When shares are held
by joint tenants, both should
sign. Executors, administrators,
trustees or otherwise signing in a
representative capacity should
indicate the capacity in which
signed.
PLEASE VOTE, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
