<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN ONCOLOGY RESOURCES, INC.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
.........................................................................
(2) Aggregate number of securities to which transaction applies:
.........................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
.........................................................................
(4) Proposed maximum aggregate value of transaction:
.........................................................................
(5) Total fee paid:
.........................................................................
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.........................................................................
(2) Form, Schedule or Registration Statement No.:
.........................................................................
(3) Filing Party:
.........................................................................
(4) Date Filed:
.........................................................................
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
16825 NORTHCHASE DRIVE, SUITE 1300
HOUSTON, TEXAS 77060
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
As a stockholder of American Oncology Resources, Inc. (the "Company"), you
are hereby given notice of and invited to attend in person or by proxy the
Annual Meeting of Stockholders of the Company to be held at the Wyndham Hotel,
12400 Greenspoint Drive, Houston, Texas 77060 on May 8, 1997, at 9:00 a.m., for
the following purposes:
1. To elect ten directors for one-year terms or until their successors
are duly elected and qualified;
2. To consider and act upon a proposal to approve an amendment to the
Company's Certificate of Incorporation increasing the amount of Common
Stock authorized to be issued by the Company;
3. To consider and act upon a proposal to approve an amendment to the
Company's 1993 Key Employee Stock Option Plan;
4. To consider and act upon a proposal to ratify the appointment of the
Company's independent accountants, Price Waterhouse LLP; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 24, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. Only stockholders of
record at the close of business on such record date are entitled to notice of
and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING, MANAGEMENT DESIRES TO HAVE THE MAXIMUM
REPRESENTATION AT THE ANNUAL MEETING AND RESPECTFULLY REQUESTS THAT YOU DATE,
EXECUTE AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED STAMPED ENVELOPE
FOR WHICH NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. A
proxy may be revoked by a stockholder at any time prior to its use as specified
in the enclosed proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ LEO E. SANDS
----------------------------
LEO E. SANDS
SECRETARY
Houston, Texas
April 7, 1997
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
To Our Stockholders:
This Proxy Statement is furnished to stockholders of American Oncology
Resources, Inc. (the "Company") for use at the 1997 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the date, time and place and
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders, or at any adjournment or adjournments thereof.
The accompanying proxy is solicited by the Board of Directors of the
Company, to be voted at the Annual Meeting. All shares represented by a
properly completed and executed proxy will be voted at the Annual Meeting in
accordance with the specifications set forth therein. If no contrary
specification is made, all shares represented by an executed proxy will be voted
for the nominees for the Board of Directors named therein and for the approval
of the other proposals identified therein. If the enclosed form of proxy is
executed and returned, it may nevertheless be revoked by you at any time before
it is exercised by giving notice to the Secretary of the Company, or by giving a
later proxy or voting in person at the Annual Meeting.
In addition to the solicitation of proxies by use of the mail, officers and
regular employees of the Company may aid in such solicitation by personal
contact, telephone and telecopy. Georgeson & Company Inc., a proxy solicitation
firm, has been retained by the Company to assist in the solicitation of proxies
for a fee of $5,000 plus reimbursement of expenses. Brokerage firms and other
custodians, nominees or fiduciaries will be requested to forward proxy materials
to beneficial owners of shares registered in the names of such firms and will be
reimbursed for their expenses. The cost of solicitation will be borne by the
Company.
The Company's Annual Report to Stockholders for the year ended December 31,
1996, including financial statements, is enclosed with this proxy statement,
which is first being mailed to stockholders on or about April 7, 1997. The
Annual Report to Stockholders does not constitute a part of the proxy soliciting
material.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting is the close of business on March 24, 1997.
As of March 24, 1997, there were 26,643,582 shares of common stock, par value
$.01 per share, of the Company ("Common Stock") issued and outstanding. In
accordance with Delaware law and the Company's Certificate of Incorporation and
Bylaws, each of such shares of Common Stock is entitled to one vote on each
matter to be acted upon at the Annual Meeting. In establishing the presence of
a quorum, abstentions and broker non-votes will be included in the determination
of the number of shares represented at the Annual Meeting. Abstentions will
have the same effect as a vote against a proposal. Broker non-votes will have
the same effect as a vote against the proposal to approve an amendment to the
Company's Certificate of Incorporation; however, because broker non-votes are
not included in the tally of votes present, they will not affect the outcome of
any other proposal. During the ten days prior to the Annual Meeting, a list of
the stockholders entitled to vote at the Annual Meeting will be available at the
principal offices of the Company during ordinary business hours for examination
by any stockholder for any purpose germane to the Annual Meeting.
<PAGE>
Based on the records of the Company as of March 24, 1997, the following
persons were known by the Company to own beneficially more than 5% of the Common
Stock of the Company then outstanding.
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
OWNERSHIP OF CLASS
--------------------- -----------
R. Dale Ross.............................. 2,376,818(1)(2) 8.2%
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
Russell L. Carson......................... 6,793,196(3)(4) 25.5%
1 World Financial Center, Suite 3601
New York, New York 10281
Andrew M. Paul............................ 6,540,878(4)(5) 24.5%
1 World Financial Center, Suite 3601
New York, New York 10281
Welsh, Carson, Anderson & Stowe........... 6,496,104(6) 24.4%
1 World Financial Center, Suite 3601
New York, New York 10281
Welsh, Carson, Anderson & Stowe V, L.P.... 6,352,154 23.8%
1 World Financial Center, Suite 3601
New York, New York 10281
- ----------------
(1) Includes options to purchase 2,238,428 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(2) Includes 69,196 shares and 69,194 shares of Common Stock held by the David
J. Ross 1993 Trust and the Michael A. Ross 1993 Trust, respectively. Mr.
Ross disclaims beneficial ownership of such shares.
(3) Includes 6,352,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 143,950 shares owned by WCAS Healthcare Partners, L.P. Mr. Carson is a
general partner of such entities and shares voting and dispositive power
with respect to such shares.
(4) Includes options to purchase 2,000 shares of Common Stock that are currently
exercisable or will become exercisable within 60 days after the date hereof.
(5) Includes 6,352,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 143,950 shares owned by WCAS Healthcare Partners, L.P. Mr. Paul is a
general partner of such entities and shares voting and dispositive power
with respect to such shares.
(6) Includes 6,352,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 143,950 shares owned by WCAS Healthcare Partners, L.P.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
Common Stock ownership as of March 24, 1997, by (i) each director, director
nominee and executive officer of the Company and (ii) all directors and officers
as a group. Except as otherwise indicated, the persons listed below have sole
voting and investment power with respect to all shares shown to be beneficially
owned by them, except to the extent such power is shared by a spouse under
applicable law.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
- ------------------------ ----------------------- -------------
<S> <C> <C>
R. Dale Ross............................................. 2,376,818(1)(2) 8.2%
Lloyd K. Everson, M.D.................................... 808,766(3) 3.0%
David S. Chernow......................................... 67,716(4) *
L. Duane Choate.......................................... 74,416(5) *
Larry D. Gray............................................ 0 *
R. Allen Pittman......................................... 87,153(6) *
L. Fred Pounds........................................... 330,272(7)(8) *
Leo E. Sands............................................. 63,648(9) *
Russell L. Carson........................................ 6,793,196(10)(11) 25.5%
Kyle M. Fink, M.D........................................ 622,258(10) 2.3%
Richard B. Mayor......................................... 77,454(5) *
Magaral S. Murali, M.D................................... 7,760(10)(12) *
Robert A. Ortenzio....................................... 80,188(5)(13) *
Andrew M. Paul........................................... 6,540,878(10)(14) 24.5%
Leonard M. Riggs, M.D.................................... 39,710(5) *
Edward E. Rogoff, M.D.................................... 10,292(10)(15) *
All directors and officers as a group (16 persons)....... 11,484,421(16) 38.2%
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes options to purchase 2,238,428 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(2) Includes 69,196 shares and 69,194 shares of Common Stock held by the David
J. Ross 1993 Trust and the Michael A. Ross 1993 Trust, respectively. Mr.
Ross disclaims beneficial ownership of such shares.
(3) Includes options to purchase 765,464 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(4) Includes options to purchase 15,240 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(5) Includes options to purchase 20,000 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(6) Includes options to purchase 51,200 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(7) Includes options to purchase 258,487 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(8) Includes 3,744 shares and 3,744 shares held by the Keith C. Pounds 1994
Trust and the Lisa N. Pounds 1994 Trust, respectively. Mr. Pounds disclaims
beneficial ownership of such shares.
(9) Includes options to purchase 52,966 shares of Common Stock that are
currently exercisable or will be exercisable within 60 days after the date
hereof.
(10) Includes options to purchase 2,000 shares of Common Stock that are
currently exercisable or will be exercisable within 60 days after the date
hereof.
(11) Includes 6,352,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 143,950 shares owned by WCAS Healthcare Partners, L.P. Mr. Carson is a
general partner of such entities and shares voting and dispositive power
with respect to such shares.
(12) Dr. Murali is entitled to receive 107,962, 107,962 and 323,890 shares of
Common Stock on April 8, 1997, 1998 and 1999, respectively. These shares
are excluded from the table.
(13) Includes 45,198 shares, owned by Mr. Ortenzio's father, in which Mr.
Ortenzio has a remainder interest.
(14) Includes 6,352,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 143,950 shares owned by WCAS Healthcare Partners, L.P. Mr. Paul is a
general partner of such entities and shares voting and dispositive power
with respect to such shares.
3
<PAGE>
(15) Dr. Rogoff is entitled to receive 72,728, 72,728 and 218,180 shares of
Common Stock on January 31, 1998, 1999 and 2000, respectively. These
shares are excluded from the table.
(16) Includes options to purchase 3,403,785 shares of Common Stock that are
currently exercisable or that will become exercisable within 60 days after
the date hereof.
The Company is not aware of any contractual arrangement, the operation of
which may at a subsequent date result in a change in control of the Company.
GENERAL INFORMATION
ROLE OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for establishing broad corporate
policies and for the overall performance of the Company, although it is not
involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business by various reports made at meetings of the
Board of Directors and its committees.
Regular meetings of the Board of Directors are generally held four times per
year and special meetings are scheduled when required. The Board held four
meetings during fiscal 1996.
COMMITTEES OF THE BOARD
The Audit Committee has the authority and power to act on behalf of the Board
of Directors with respect to the appointment of independent accountants for the
Company and with respect to authorizing any special audit or audit related
activities that in its discretion are deemed necessary to perform its functions.
The committee monitors the audit activities of the Company and its subsidiaries
to assure that the Company and its subsidiaries have installed reasonable
internal controls, confirms the independence of the Company's independent
accountants and reviews the scope of audits and reports. The committee is
required to be comprised of at least three directors, a majority of whom have no
significant relationship with senior management of the Company. Currently, the
members of the committee are Richard B. Mayor, Andrew M. Paul and Robert A.
Ortenzio, none of whom is an employee or affiliate of the Company. Mr. Mayor is
the Chairman of the Audit Committee. The Audit Committee met three times during
fiscal 1996.
The Compensation Committee has the authority and power to act on behalf of
the Board of Directors with respect to all matters relating to the compensation
of employees and directors of the Company or its subsidiaries, including, but
not limited to, approval of compensation, benefits, incentives, employment
contracts and loans to officers or employees. The committee is also charged
with ensuring that executive compensation is linked to stockholder value and is
consistent with the Company's business strategy and performance. Currently, the
members of the committee are Russell L. Carson, Robert A. Ortenzio and Leonard
M. Riggs, Jr., M.D., none of whom is an employee or affiliate of the Company.
Mr. Carson is the Chairman of the Compensation Committee. The committee met
four times during fiscal 1996. See "Compensation Committee Report on Executive
Compensation."
The Company does not have a nominating committee or a committee performing
similar functions.
4
<PAGE>
COMPENSATION OF DIRECTORS
Each director of the Company who is not an employee or affiliate of the
Company is reimbursed for expenses incurred in attending meetings of the Board
of Directors. Each director who is not an employee of the Company receives a
director fee of $1,500 per quarter plus an additional $1,000 per meeting
attended. Directors who are not employees of the Company also receive options
to purchase shares of the Company's Common Stock under the Company's 1993 Non-
Employee Director Stock Option Plan.
PROPOSAL 1: ELECTION OF DIRECTORS
At the annual meeting, the stockholders will elect the ten individuals who
are to serve as directors during the coming year. Directors will be elected by
the plurality vote of the shares of Common Stock represented at the Annual
Meeting and entitled to vote. The persons named as proxies in the enclosed
proxy, unless otherwise directed, intend to vote the shares represented by such
proxy for the election of the nominees listed below.
The following table sets forth, with respect to each nominee, (i) such
person's name and age, (ii) the period for which such person has served as a
director of the Company, (iii) all positions and offices with the Company
currently held by such person and such person's principal occupation over the
last five years (including other directorships and business experience), and
(iv) the standing committees of the Board of Directors of which such person is a
member. Each of the nominees is currently a director of the Company. The
nominees elected as directors of the Company will serve until the next annual
meeting of stockholders or until their respective successors are duly elected
and qualified.
<TABLE>
<CAPTION>
NAME, AGE, POSITION AND COMMITTEE MEMBERSHIP TERM OF OFFICE AND BUSINESS EXPERIENCE
- -------------------------------------------- --------------------------------------
<S> <C>
R. DALE ROSS, age 50 From April 1990, until joining the Company, Mr. Ross was self-employed. From
Chairman of the Board of Directors and Chief December 1982 until April 1990, Mr. Ross was employed by HMSS, Inc., a home
Executive Officer since December 1992 infusion therapy company. Mr. Ross founded HMSS, Inc. and served as its
President and Chief Executive Officer and as a director.
RUSSELL L. CARSON, age 53 Since 1978, Mr. Carson has been a general partner of Welsh, Carson, Anderson
Director since December 1992 & Stowe. Mr. Carson is a director of Health Management Systems, Inc.,
(Chairman, Compensation Committee) National Surgery Centers, Inc., Staris Corporation and Quorum Health Group,
Inc.
LLOYD K. EVERSON, M.D., age 54 President and Dr. Everson received his medical degree from Harvard Medical School and his
Director since November 1993 oncology training at Memorial Sloan Kettering National Cancer Institute. He
is board certified in medical oncology. Prior to joining the Company, Dr.
Everson served as the Medical Director for the Indiana Regional Cancer Center
and was President of LKE Consulting Services. Dr. Everson has been published
widely in the field of oncology and is a member of numerous professional
associations, including the American Society of Clinical Oncology,
Association of Community Cancer Centers and the American College of
Physicians. He also has served as President of the Association of Community
Cancer Centers and as Associate Chairman for Community Programs for the
Eastern Cooperative Oncology Group.
KYLE M. FINK, M.D., age 54 Dr. Fink obtained his medical degree from Indiana University and his oncology
Director since December 1992 training at Memorial Sloan Kettering National Cancer Institute. He is board
certified in medical oncology. Since 1975, Dr. Fink has been a practicing
physician and member of Hematology Oncology Associates, an oncology group in
Denver, Colorado, that is affiliated with the Company. Dr. Fink has served
on numerous boards and professional societies, and has been a member of the
Board of Directors of Presbyterian St. Luke's Medical Center in Denver,
Colorado since 1991.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION AND COMMITTEE MEMBERSHIP TERM OF OFFICE AND BUSINESS EXPERIENCE
- -------------------------------------------- --------------------------------------
<S> <C>
RICHARD B. MAYOR, age 63 Mr. Mayor has been a partner in the Houston law firm of Mayor, Day, Caldwell
Director since February 1993 & Keeton, L.L.P. since its formation in February 1982. Mayor, Day, Caldwell
(Chairman, Audit Committee) & Keeton, L.L.P. serves as outside legal counsel to the Company.
MAGARAL S. MURALI, M.D., age 53 Dr. Murali obtained his medical degree from Madras Medical College, Madras,
Director since April 1994 India and his hematology/oncology training at Long Island Jewish/Hillside
Medical Center and Catholic Medical Center. He is board certified in
hematology and medical oncology. Since 1978, Dr. Murali has been a
practicing physician affiliated with Oncology and Hematology Associates, a
physician group affiliated with the Company in Indianapolis, Indiana.
ROBERT A. ORTENZIO, age 40 Mr. Ortenzio has been President and COO of Select Medical Corporation since
Director since December 1992 February 1997. Prior to that time, Mr. Ortenzio was a co-founder and
(Member, Audit Committee; Member, Compensation president of Continental Medical Systems, Inc., a provider of comprehensive
Committee) medical rehabilitation programs and services and a director of Horizon/CMS
Healthcare Corporation, and served in various capacities at Continental
Medical Systems, Inc. since February 1986. Mr. Ortenzio is currently a
director of Occusystems, Inc.
ANDREW M. PAUL, age 41 Since 1984, Mr. Paul has been affiliated with Welsh, Carson, Anderson, &
Director since December 1992 Stowe, the Company's principal stockholder, and is one of its general
(Member, Audit Committee) partners. Mr. Paul is a director of EmCare, Inc., Lincare, Inc., MedCath,
Inc., Quorum Health Group, Inc. and several private companies.
LEONARD M. RIGGS, JR., M.D., Dr. Riggs obtained his medical degree from the University of Texas
age 54 Southwestern Medical School. Dr. Riggs has served as President, Chairman and
Director since December 1992 Chief Executive Officer of Emergency Healthcare Associates and EmCare, Inc.,
(Member, Compensation Committee) an organization that he founded that provides emergency department management
services. Dr. Riggs has also served as Chairman and Chief Executive Officer
of Emquest, EmCare Government Services and EmCare Radiology Services, and
since 1982 as Chief of Emergency Medicine for Baylor University Medical
Center, Dallas, Texas.
EDWARD E. ROGOFF, M.D., Dr. Rogoff obtained his medical degree from the State University of New York,
age 54 Downstate Medical School, and his training in radiation oncology from
Director since July 1995 Memorial Sloan Kettering Cancer Center. He is board certified in radiation
oncology. Since 1978, Dr. Rogoff has been affiliated with Southwest
Radiation Oncology, Ltd., an oncology group in Tucson, Arizona managed by the
Company since January 1995. Dr. Rogoff is a member of numerous professional
societies including American Society of Therapeutic Radiology and Oncology
and the American Society of Clinical Oncology.
</TABLE>
Management of the Company has no reason to believe that any of the above
nominees will be unavailable or unwilling to serve as director. However, in the
event any of the above nominees should become unavailable or unwilling to serve
if elected, proxies will be voted for the election of substitute nominees
selected by the Board of Directors.
THE DIRECTORS RECOMMEND A VOTE "FOR" THE ELECTION OF THE NOMINEES NAMED
ABOVE. DULY EXECUTED PROXIES WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS
MADE.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information with respect to the Company's
current executive officers.
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
- ---------------------- --------------------------------------
<S> <C>
R. DALE ROSS, age 50 From April 1990, until joining the Company, Mr. Ross was
Chairman of the Board of Directors and Chief Executive self-employed. From December 1982 until April 1990, Mr. Ross was
Officer since December 1992 employed by HMSS, Inc., a home infusion therapy company. Mr. Ross
founded HMSS, Inc. and served as its President and Chief Executive
Officer and as a director.
LLOYD K. EVERSON, M.D., age 54 Dr. Everson received his M.D. Degree from Harvard Medical School
President since November 1993 and his oncology training at Memorial Sloan Kettering National
Cancer Institute. He is Board Certified in Medical Oncology.
Prior to joining the Company, Dr. Everson served as the Medical
Director for the Indiana Regional Cancer Center and was President
of LKE Consulting Services. Dr. Everson has published widely in
the field of oncology and is a member of numerous professional
associations, including the American Society of Clinical Oncology,
Association of Community Cancer Centers and American College of
Physicians. He also has served as President of the Association of
Community Cancer Centers and as Associate Chairman for Community
Programs for the Eastern Cooperative Oncology Group.
DAVID S. CHERNOW, age 39 From March 1992 until joining the Company, Mr. Chernow was a Real
Vice President of Corporate Development and Chief Estate Development Consultant at Hematology Oncology Associates,
Development Officer since January 1993 an oncology group affiliated with the Company located in Denver,
Colorado. From March 1990 until March 1992, he was employed by
Lamar Companies, a real estate investment company located in
Denver, as Vice President of Operations.
L. DUANE CHOATE, age 38 Mr. Choate has been employed by the Company in various finance
Vice President of Financial Operations positions since March 1993. From 1991 to 1993, Mr. Choate was
since March 1996 employed by Discovery Group, Inc., a direct marketing company, as
President. From October 1984 until April 1990, he was employed by
HMSS, Inc., in various finance positions.
LARRY D. GRAY, age 46 From April 1996 until April 1997, Mr. Gray was President and
Chief Operating Officer Chief Executive Officer of FHP of California, a wholly owned
since April 1997 subsidiary of FHP International, a health care company. From
March 1993 to January 1996, Mr. Gray was founder, President and
Chief Executive Officer of Health Visions Corporation, a health
care company. From January 1987 to March 1993, Mr. Gray was
President and Chief Executive Officer of CareAmerica Health Plans,
Inc., a health care company.
R. ALLEN PITTMAN, age 49 From May 1991 until joining the Company, Mr. Pittman was employed
Vice President of Corporate Services since January 1993 as Vice President of Human Resources by Option Care, Inc., a
national home infusion therapy franchisor. From November 1987
until April 1991, Mr. Pittman was employed by HMSS, Inc., where he
served as Vice President of Human Resources.
L. FRED POUNDS, age 49 From June 1990 until joining the Company, Mr. Pounds was principal
Vice President of Finance, Chief Financial Officer and of Pounds & Associates, a health care consulting company. From
Treasurer since January 1993 January 1987 to May 1990, Mr. Pounds was President and Chief
Operating Officer of Avanti Health Systems, Inc., a managed care
and physician practice management company. From September 1969 to
January 1987, Mr. Pounds was employed by Price Waterhouse LLP, in
various positions, including partner in charge of the Southwest
Area Health Care Group.
LEO E. SANDS, age 49 From July 1991 until joining the Company, Mr. Sands was principal
Vice President of Planning and Marketing, Chief Planning of Altech, Inc., a health care business development consulting
Officer and Secretary since November 1992 company. From March 1983 to April 1986 and from May 1988 to June
1991, Mr. Sands was employed by HMSS, Inc., in various positions
and ultimately served as Vice President of Business Development of
HMSS Infusion Affiliates, Inc.
</TABLE>
CERTAIN SIGNIFICANT EMPLOYEES
7
<PAGE>
The following table sets forth information with respect to certain significant
employees of the Company.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
- ---------------------- --------------------------------------
<S> <C>
GEORGE S. CARR, age 41 Mr. Carr joined the Company in April 1994 and serves as Vice
Vice President of Information Systems President of Information Systems. Prior to joining AOR, from June
since November 1996 1986 to April 1994, Mr. Carr served as Senior Vice
President-Information Services of St. Luke's Episcopal Hospital of
Houston.
MARCELLUS I. KERLIN, IV, age 34 Mr. Kerlin joined the Company in July 1994 and serves as Vice
Vice President of Managed Care President of Managed Care. From July 1993 until joining the
since November 1996 Company Mr. Kerlin was Principal of Gemini Consulting Group, a
national managed care consulting firm. From January 1990 to July
1993, Mr. Kerlin was employed by Sisters of Charity Healthcare
System as an Assistant Administrator.
BETTY L. STRECKFUSS, age 63 Ms. Streckfuss joined the Company in March 1994 and serves as Vice
Vice President of Clinical Operations President of Clinical Operations. From June 1993 until joining
since November 1996 the Company, Ms. Streckfuss was a Principal of Clinical
Consultants, a private healthcare consulting firm in the United
States and Japan. From May 1982 until June 1993 she was Vice
President of Clinical Practice for HMSS, Inc. where she was a
founding member.
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth (i) the aggregate amount of remuneration paid
by the Company for the three fiscal years ended December 31, 1996 to the Chief
Executive Officer and the four most highly compensated executive officers other
than the Chief Executive Officer, (ii) the number of shares of Common Stock that
are subject to options granted to such individuals during the last fiscal year
and the hypothetical value thereof assuming specified annual rates of Common
Stock price appreciation and (iii) the value at the end of the last fiscal year
of all stock options held by such individuals.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
SECURITIES
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS
- --------------------------------- ---------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
R. Dale Ross.......................... 1996 $350,000 $ 0 0 0 (1)
Chairman of the Board,............... 1995 $250,000 $129,000 0 450,479
Chief Executive Officer.............. 1994 $215,000 $ 0 0 532,835
and Director
Lloyd K. Everson, M.D................. 1996 $293,750 $ 0 0 0 (2)
President and Director............... 1995 $250,000 $150,000 0 286,402
1994 $250,000 $300,000 0 249,303
L. Fred Pounds........................ 1996 $239,119 $ 0 0 0 (3)
Vice President of Finance,........... 1995 $193,809 $ 72,450 0 106,794
Treasurer and Chief.................. 1994 $181,125 $ 0 0 85,012
Financial Officer
R. Allen Pittman...................... 1996 $142,947 $ 43,565 0 44,000
Vice President of Corporate.......... 1995 $136,140 $ 50,800 0 22,000
Services............................. 1994 $127,300 $ 0 0 0
Leo E. Sands.......................... 1996 $135,000 $ 45,813 0 44,000
Vice President of Planning and....... 1995 $114,533 $ 42,816 0 22,000
Marketing, Chief Development......... 1994 $107,040 $ 0 0 0
Officer and Secretary
</TABLE>
8
<PAGE>
- -----------------------
(1) Options to purchase 17,000 shares were granted to Mr. Ross on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing
of Stock Options."
(2) Options to purchase 4,200 shares were granted to Dr. Everson on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing
of Stock Options."
(3) Options to purchase 8,800 shares were granted to Mr. Pounds on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing
of Stock Options."
9
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------------
Name GRANTED YEAR SHARE(1) DATE 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross............... 0(2) 0 $ --- ---- $ --- $ ---
Lloyd K. Everson, M.D...... 0(3) 0 $ --- ---- $ --- $ ---
L. Fred Pounds............. 0(4) 0 $ --- ---- $ --- $ ---
R. Allen Pittman........... 44,000(5) 2% $8.79 November 7, 2006 $629,993 $1,003,193
Leo E. Sands............... 44,000(5) 2% $8.79 November 7, 2006 $629,993 $1,003,193
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The exercise price per share for each option granted in 1996 is the market
value of the Company's Common Stock as of the date such option was
granted, as determined in accordance with the applicable stock option plan.
(2) Options to purchase 17,000 shares were granted to Mr. Ross on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing of
Stock Options."
(3) Options to purchase 4,200 shares were granted to Dr. Everson on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing of
Stock Options."
(4) Options to purchase 8,800 shares were granted to Mr. Pounds on March 20,
1996, but were subsequently surrendered and canceled on November 7, 1996.
See "Compensation Committee Report on Executive Compensation -- Repricing of
Stock Options."
(5) These options were granted in connection with the Company's repricing of
certain options previously granted under the 1993 Key Employee Stock
Option Plan. See "Compensation Committee Report on Executive Compensation --
Repricing of Stock Options."
1996 OPTION EXERCISES AND DECEMBER 31, 1996 OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END (1)
--------------------------- ----------------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross............... 400,000 $8,466,000 2,238,428 0 $ 15,527,706 $ 0
Lloyd K. Everson, M.D...... 410,406 $7,994,500 795,464 0 $ 5,150,418 $ 0
L. Fred Pounds............. 0 $ - 170,408 286,004 $ 1,317,537 $ 1,980,771
R. Allen Pittman........... 0 $ - 36,400 81,600 $ 313,346 $ 354,804
Leo E. Sands............... 0 $ - 37,724 82,484 $ 325,149 $ 362,685
</TABLE>
- ---------------
(1) Based upon a closing price of the Company's Common Stock on December 31,
1996, as reported by The Nasdaq Stock Market, of $ 10.25 per share.
10
<PAGE>
401(K) PLAN
Effective January 1, 1994, the Company adopted a 401(k) plan (the
"401(k) Plan") covering substantially all employees who have completed at least
1,000 hours of service. The 401(k) Plan is administered by the Company and
permits covered employees to contribute up to 15% of their annual compensation
up to the maximum legally allowable contribution per year, as adjusted for
inflation, through salary reduction on a pre-tax basis in accordance with
Section 401(k) of the Internal Revenue Code, as amended. Company contributions
to the 401(k) Plan are permitted, but are not required. No contributions have
been made by the Company to date.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation provides that no director
of the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases as
provided in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above. The Securities and Exchange Commission has
taken the position that the provision will have no effect on claims arising
under federal securities laws.
The Company's Bylaws provide that the Company will indemnify its
directors and officers to the fullest extent permissible under Delaware law.
These indemnification provisions require the Company to indemnify such persons
against certain liabilities and expenses to which they may become subject by
reason of their service as a director or officer of the Company or any of its
affiliated enterprises. The provisions also set forth certain procedures,
including the advancement of expenses, that apply in the event of a claim for
indemnification.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Between January 1 and May 9, 1996, the Compensation Committee was
comprised of Russell L. Carson, Richard B. Mayor and Leonard M. Riggs, Jr.,
M.D., none of whom was employed by the Company. From May 9 until December 31,
1996, the Compensation Committee was comprised of Russell L. Carson, Robert A.
Ortenzio and Leonard M. Riggs, Jr., M.D., none of whom was employed by the
Company.
Committee Charter. The Committee's charter provides that the
Committee is responsible for ensuring that the Company is able to attract and
retain qualified people to serve as officers and in key management positions
through the effective use of competitive compensation, benefits and management
development programs. The Compensation Committee's responsibilities include
ensuring that executive compensation is linked to stockholder value and is
consistent with the Company's business strategy and performance. The
Compensation Committee is required to be composed of no fewer than three members
of the Board of Directors, each of whom must be "non-employee director," as
defined under rules adopted under Section 16 of the Securities Exchange Act of
1934, as amended, and must be an "outside director," as defined under Section
162(m) of the Internal Revenue Code of 1986, as amended. Committee members and
the Chairman serve at the pleasure of the Board.
The Compensation Committee is expected to counsel the chief executive
officer regarding employment and compensation matters; develop, review, evaluate
policies and make recommendations with respect to benefit plans and programs or
other compensation arrangements; review and approve discretionary grants and the
terms thereof under the Company's stock option plans and report to stockholders
in the proxy statement on the Company's compensation policies. In carrying out
its duties, the committee may retain outside consultants, although it did not do
so in 1996. The committee reports and makes recommendations to the Board of
Directors.
11
<PAGE>
Compensation Policy for Officers. The Company hopes to select and
retain high-quality, talented individuals to serve as officers and employees of
the Company. To that end, the compensation offered by the Company is designed
to be competitive and to reward superior individual and Company performance with
superior levels of compensation. The principal components of the executive
compensation program are base salary, cash bonus compensation and stock-based,
longer-term incentives. Base salary levels are intended to be competitive and
are based upon the executive's background, qualifications and job performance at
the Company. Cash bonuses are awarded based upon achievement of individual and
Company goals.
Stock-based incentives are used to reward officers and to motivate
them to achieve the Company's longer-term goals. The Company has generally
placed greater emphasis on stock-based incentives than on cash bonuses in its
compensation strategy for executive officers and will continue to do so.
Company and individual performance results are considered when determining
discretionary stock-based incentive awards, although no pre-determined
performance criteria are utilized. During the fiscal year ended December 31,
1996, the Committee awarded stock options to selected officers and key employees
under the 1993 Key Employee Stock Option Plan.
By relying on long-term stock-based compensation, the Company puts a
significant portion of each executive officer's total compensation at risk,
based upon the financial performance of the Company. Furthermore, each
executive's personal net worth may increase with any long-term appreciation of
the Company's stock. In this manner, the Company seeks to align the long-term
interests of its executive officers with the interest of the Company and its
stockholders.
For 1997 the Committee intends to continue its present performance-
based compensation strategy. Our compensation philosophy will continue to
reward performance for executive and broad-based employees tied to both
corporate goals and individual benchmarks.
Repricing of Stock Options. The Company's Key Employee Stock Option
Plan ("Employee Plan") and Affiliate Stock Option Plan ("Affiliate Plan")
(together, the "Plans") are designed to attract and retain the services of the
Company's employees and affiliates for the successful conduct, operation and
administration of the Company, to provide an incentive to the employees and
affiliates and to align the interests of the employees and affiliates with those
of the stockholders. In November 1996, the Committee observed that the decline
in the market price of the Company's Common Stock had frustrated these purposes
and diminished the value of the Company's stock option program as an element of
the Company's compensation arrangements. The decline in the market price per
share to an extent that the price was significantly and consistently below the
exercise price of stock options granted under the Plans from December 8, 1995 to
May 9, 1996 had caused those stock options to lose their incentive and
motivational value. The Committee determined that a stock option repricing
program was the most cost-effective method to retain and motivate key employees
and affiliates. At the time of the repricing, each stock option granted between
December 8, 1995 and May 9, 1996 had an exercise price higher than the then
market price, with an average exercise price of $ 19.96 per share as compared
to a market price of $8.79.
For these reasons, in November 1996, the Committee adopted a stock
option repricing program with the following elements: (i) each person, other
than R. Dale Ross, Lloyd K. Everson, M.D. and L. Fred Pounds, who received stock
options under the Plans between December 8, 1995 and May 9, 1996 would be
eligible to participate in the program, (ii) each such person would have the
opportunity to exchange previously granted stock options for a grant of new
options to purchase the same number of shares at an exercise price of $8.79, the
then market price per share, and (iii) the repriced stock options, like most
other options under the Plan, vest as to twenty percent on each of the first
five anniversaries of the grant date of the repriced stock option.
In connection with the repricing, the Compensation Committee also
accepted the offer by Lloyd K. Everson, M.D. to relinquish and terminate the
stock options granted to him by the Company between August 15, 1995 and May 9,
1996, and the offer by R. Dale Ross and L. Fred Pounds to relinquish and
terminate the stock options granted to such persons by the Company between
December 8, 1995 and May 9, 1996. The shares of Common Stock that were subject
to these relinquished and terminated stock options will be available for future
grants of stock options under the Key Employee Stock Option Plan. All repriced
options were granted as of November 7, 1996.
12
<PAGE>
OPTION REPRICING TABLE
<TABLE>
<CAPTION>
Length of Original
Number of Securities Market Price of Exercise Price New Option Term
Underlying Repriced Stock at Time at Time Exercise Remaining at
Name Date Options of Repricing of Repricing Price Date of Repricing
- ------------------ -------------- ------------------- ------------ -------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
David S. Chernow Nov. 7, 1996 20,000 $8.79 $24.18 $8.79 9.5 years
Nov. 7, 1996 40,000 $8.79 $18.10 $8.79 9 years
L. Duane Choate Nov. 7, 1996 20,000 $8.79 $24.18 $8.79 9.5 years
Nov. 7, 1996 20,000 $8.79 $18.10 $8.79 9 years
R. Allen Pittman Nov. 7, 1996 20,000 $8.79 $24.18 $8.79 9.5 years
Nov. 7, 1996 24,000 $8.79 $18.10 $8.79 9 years
Leo E. Sands Nov. 7, 1996 20,000 $8.79 $24.18 $8.79 9.5 years
Nov. 7, 1996 24,000 $8.79 $18.10 $8.79 9 years
</TABLE>
Compensation of the Chief Executive Officer. The Chief Executive
Officer's salary in 1996 was based upon the Compensation Committee's evaluation
of his performance and the Company's performance. He did not receive a bonus
during 1996.
Company performance is measured by, among other things, corporate net
earnings, revenues and a comparison to the Company's peer group. Measurements
used to evaluate the Chief Executive Officer include stock price performance and
development of sound strategic, operating and expansion plans.
Omnibus Budget Reconciliation Act of 1993. The Omnibus Budget
Reconciliation Act of 1993 (the "Budget Act") imposes a limit of $1,000,000,
with certain exceptions, that a publicly held corporation may deduct in any year
for the compensation paid with respect to each of its five most highly
compensated officers. The Committee intends to try to comply with the
provisions of the Budget Act that would preserve the deductibility of executive
compensation payments to the greatest extent possible under the Company's
compensation policy.
Russell L. Carson, Chairman
Robert A. Ortenzio
Leonard M. Riggs, Jr., M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since July 1995, Russell L. Carson has served on the Compensation
Committee. Mr. Carson is affiliated with Welsh, Carson, Anderson & Stowe, the
Company's principal stockholder. See "Certain Relationships and Related
Transactions."
From January 1 to May 9, 1996, Mr. Mayor served on the Compensation
Committee. Mr. Mayor is a partner at Mayor, Day, Caldwell & Keeton, L.L.P., the
Company's principal outside legal counsel. See "Certain Relationships and
Related Transactions."
PERFORMANCE GRAPH
The following graph compares the value as of June 30, 1995, December
31, 1995 and December 31, 1996 of $100 invested on June 13, 1995, the date of
the Company's initial public offering of its Common Stock (the "IPO"), in each
of
13
<PAGE>
(a) the Company's Common Stock; (b) the CRSP Index for the Nasdaq Stock
Market; and (c) the CRSP Index for Nasdaq Health Services Stocks, in each case
assuming reinvestment of all dividends.
COMPARISON OF TOTAL STOCKHOLDER RETURN
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
JUNE 13, 1995 JUNE 30, 1995 DECEMBER DECEMBER
31, 1995 31, 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AORI(1) 100 99.11 173.66 73.21
Nasdaq Stock Market Index 100 104.48 118.49 145.74
Nasdaq Health Services Index 100 95.74 128.84 129.07
-------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Total return for AORI assumes a purchase price for the Company's Common
Stock on June 13, 1995 of $14.00, which was the closing price of the Company's
Stock, as reported on the Nasdaq Stock Market, on such date. The price to the
public in the IPO on such date was $10.50. In each case such prices have been
adjusted to reflect the two-for-one stock split of the Company's Common Stock
that was effected as a stock dividend on June 10, 1996.
14
<PAGE>
PROPOSAL 2: AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously approved and recommended the
adoption by the stockholders of the following amendment to the Company's
Certificate of Incorporation, as amended, which would increase the number of
shares of Common Stock authorized to be issued by the Company from 60,000,000 to
80,000,000.
"The first paragraph of Article Fourth of the Company's Certificate of
Incorporation, as amended to date, is hereby amended to read as follows:
The total number of shares of capital stock which the Corporation shall
have authority to issue is eighty-one million (81,000,000) shares,
consisting of one million (1,000,000) shares of preferred stock, par value
$.01 per share, and eighty million (80,000,000) shares of common stock, par
value $.01 per share."
As of March 24, 1997, the Company had outstanding 26,643,582 shares of
Common Stock, with 33,356,418 shares of Common Stock remaining available for
issuance. The Company is obligated to issue an aggregate of 17,462,782 shares
of Common Stock at specified future dates to affiliated physicians and 6,237,544
shares of Common Stock are reserved for issuance under its various stock option
plans. The amendment would provide additional shares of Common Stock issuable
from time to time by the Company for corporate purposes without the necessity of
obtaining stockholder approval, unless such approval is required by applicable
law or regulation.
The Company may utilize the additional authorized shares of Common Stock,
among other things, in connection with stock splits or dividends, as
consideration in acquisition transactions, upon the exercise of stock options,
for the issuance of restricted and bonus stock awards, for the issuance of
shares as a result of the conversion or exchange of convertible or exchangeable
securities issued in connection with acquisition and financing transactions, or
in connection with public offerings to fund the continued growth of the Company.
An increase in the number of authorized shares of Common Stock could enable
the Board of Directors to take certain actions making it more difficult for a
third party to acquire control of the Company even though stockholders of the
Company may deem such an acquisition to be desirable. To the extent that the
issuance of additional shares impedes any such attempts to acquire control of
the Company, the amendment may serve to perpetuate existing management. The
issuance of additional shares by the Company could have a dilutive effect on
earnings per share and on the percentage ownership interest of the present
holders of the Company's Common Stock.
The Board of Directors does not intend to issue any Common Stock to be
authorized pursuant to the amendment except upon terms that the Board of
Directors deems to be in the best interest of the Company and its stockholders.
REQUIRED VOTE
Approval of the proposed amendment to the Company's Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION. DULY EXECUTED PROXIES
WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
15
<PAGE>
PROPOSAL 3: APPROVAL OF AMENDMENTS TO THE COMPANY'S 1993 KEY EMPLOYEE
STOCK OPTION PLAN
The Company's Board of Directors has adopted, subject to approval by the
stockholders of the Company, amendments to the Company's 1993 Key Employee Stock
Option Plan (as amended and currently in effect, the "Key Employee Plan")
amending the Key Employee Plan to increase the number of shares available for
grants under the Key Employee Plan from 5% of the Company's outstanding Common
Stock (including, for purposes of such calculation, shares to be issued to
affiliated physicians at specified future dates) to 7% of the Company's
outstanding Common Stock (including, for purposes of such calculation, shares to
be issued to affiliated physicians at specified future dates). The text of the
amendment is attached hereto as Exhibit A.
DESCRIPTION OF THE KEY EMPLOYEE PLAN
The following is a description of the Key Employee Plan, as amended by the
proposed amendment.
The Key Employee Plan was adopted by the Board of Directors in March 1993
and approved by the Company's stockholders in February 1994. The Key Employee
Plan provides for the grant of nonqualified stock options and incentive stock
options to employees (including officers who may be members of the Board of
Directors) of the Company and its subsidiaries, with the number of shares of
Common Stock available for such stock options equal to 7% of the shares of
Common Stock outstanding (including shares to be issued to affiliated physicians
at specified future dates) at the time of any such grant.
The Key Employee Plan is administered by the Compensation Committee. The
Compensation Committee is authorized, subject to the terms of the Key Employee
Plan, to adopt rules and regulations for carrying out the Key Employee Plan, to
select eligible participants and to determine all appropriate terms and
conditions of the grant of options thereunder, with the decisions of the
Compensation Committee binding on the Company and the participants under the Key
Employee Plan.
The Key Employee Plan provides for the grant of both "incentive stock
options" ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and non-qualified stock options to acquire shares of
Common Stock. ISOs may not be granted with an exercise prices less than 100% of
the fair market value per share of Common Stock at the date of grant, and non-
qualified options may not be granted with an exercise price less than 85% of the
fair market value per share of Common Stock at the date of grant. The exercise
price of an option may be paid in cash, in shares of Common Stock or in a
combination thereof. Vested options may be exercised during the participant's
continued employment with the Company and for a period expiring on the earliest
of (i) the terms fixed by the Compensation Committee (which term shall not
exceed ten years from the grant date), (ii) if the Compensation Committee fails
to fix a term, ten years from the grant date or (iii) 30 days following
termination of such employment, unless the participant's employment is
terminated for cause, in which case vested options terminate at 12:01 a.m. on
the date of the participant's termination, or by reason of death, disability or
retirement. If the participant's employment is terminated by reason of death,
disability or retirement, any vested nonqualified options expire on the earliest
of (i) the term fixed by the Compensation Committee (which term shall not exceed
ten years from the grant date), (ii) if the Compensation Committee fails to fix
a term, ten years from the grant date or (iii) three months after such
termination of employment as a result of death or (iv) three months after such
termination of employment as a result of death or retirement and the first
anniversary of such termination of employment as a result of disability. In the
event of a participant's death or disability, 50% of all shares covered by stock
options that are not vested as of the date of such event may be exercised fully
and immediately without regard to vesting schedules for the terms described
above.
As of March 24, 1997 options to purchase 1,840,002 shares of Common Stock
are outstanding under the Key Employee Plan with a weighted average exercise
price of $6.23.
16
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Key Employee Plan is not a qualified plan under Section 401(a) of the
Code. To date, options granted under the Key Employee Plan are "nonstatutory
stock options" and not "restricted," "qualified" or "incentive" stock options,
nor is the Key Employee Plan an "employee stock purchase plan," under Sections
422 through 424 of the Code. Recipients of options under the Key Employee Plan
recognize no income for federal income tax purposes when options are granted,
but recognize ordinary income on the date of exercise to the extent that the
fair market value of Common Stock on such date exceeds the exercise price of the
options.
The Company is authorized to withhold any tax required to be withheld from
the amount considered as ordinary income to the recipient of shares issued under
the Key Employee Plan. In the event that funds are not otherwise available to
cover any required withholding tax, the recipient will be required to provide
such funds before the shares are issued. The Company will ordinarily be
entitled to a deduction equivalent to the amount of ordinary income recognized
by optionees.
REQUIRED VOTE.
Approval of the proposed amendments to the Key Employee Plan requires the
affirmative vote of the holders of a majority of the votes cast (in person or by
proxy) on the proposal if a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENTS TO THE COMPANY'S 1993 KEY EMPLOYEE STOCK OPTION PLAN. DULY EXECUTED
PROXIES WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
17
<PAGE>
PROPOSAL 4: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The accounting firm of Price Waterhouse LLP has been the Company's
independent accountants since 1992, and the Board of Directors desires to
continue the services of this firm for the fiscal year ending December 31, 1997.
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed Price Waterhouse LLP to audit the consolidated financial statements
of the Company and its subsidiaries for fiscal 1997 and report thereon.
Although action by the stockholders in this matter is not required, the Board
believes that it is appropriate to seek stockholder ratification of this
appointment in light of the critical role played by independent accountants in
maintaining the integrity of the Company's financial controls and reporting. In
the event the stockholders do not approve such appointment, the Audit Committee
and Board will reconsider such appointment.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting and will be available to respond to appropriate questions and make a
statement should they so desire.
REQUIRED VOTE
Ratification of the appointment of Price Waterhouse LLP as independent
accountants of the Company requires the affirmative vote of the holders of a
majority of the votes cast (in person or by proxy) on the proposal if a quorum
is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE SELECTION OF THE INDEPENDENT ACCOUNTANTS. DULY EXECUTED PROXIES WILL BE SO
VOTED UNLESS A CONTRARY INDICATION IS MADE.
18
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who own more than ten percent of a
registered class of the Company's securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Based soley upon a review of copies of reports filed with the SEC and written
representations from certain of the Company's directors and executive officers
that no other reports were required, the Company notes that all forms required
to be filed during 1996 under Section 16(c) were so filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not believe that any of the transactions described below
were made on terms less favorable to the Company than those that would have been
available from unaffiliated parties and does not anticipate entering into
transactions with affiliated parties in the future on terms less favorable than
those that would be available from unaffiliated parties.
AFFILIATED PHYSICIAN GROUP TRANSACTIONS
Dr. Fink, a director of the Company, is a practicing physician with
Hematology Oncology Associates, a physician group affiliated with the Company
since November 1992. During fiscal 1996, the Company recognized revenue of
$12.8 million from HOA. In addition, the Company leases office space from an
entity affiliated with Dr. Fink. Payments under this lease were approximately
$395,000 in 1996.
Dr. Murali, a director of the Company, is a practicing physician with
Oncology and Hematology Associates, Inc., a physician group affiliated with the
Company since April 1994. During fiscal 1996, the Company recognized revenue of
$11 million from Oncology and Hematology Associates, Inc.
Dr. Rogoff, a director of the Company, is a practicing physician with
Southwestern Radiation Oncology, Ltd., a physician group affiliated with the
Company since January 1995. During fiscal 1996 the Company recognized revenue
of $5.6 million from Southwestern Radiation Oncology, Ltd. In addition, the
Company leases office space from an entity affiliated with Dr. Rogoff. Payments
under this lease were approximately $177,000 in 1996.
LEGAL SERVICES
Richard B. Mayor, a director of the Company, is a partner of Mayor, Day,
Caldwell & Keeton, L.L.P., which is the Company's principal outside legal
counsel.
PROPOSALS OF SECURITY HOLDERS
Proposals that stockholders of the Company intend to present for inclusion
in the proxy statement with respect to the 1998 Annual Meeting of Stockholders
must be received by the Company at its principal executive offices no later than
December 1, 1997.
GENERAL
As of the date of this statement, the Board of Directors has no knowledge
of any business that will be presented for consideration at the meeting other
than the election of directors, the amendment to the Company's Certificate of
Incorporation, the amendments to the 1993 Key Employee Stock Option Plan and the
ratification of the appointment of the Company's independent auditors. With
respect to any other business that may properly come before the meeting or any
adjournment thereof, it is intended that proxies will be voted in accordance
with the judgment of the person or persons voting them.
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By Order of the Board of Directors,
/s/ R. DALE ROSS
-------------------------
R. DALE ROSS
Chairman of the Board of Directors and
Chief Executive Officer
Dated: April 7, 1997
THE COMPANY'S ANNUAL REPORT TO SECURITY HOLDERS SENT WITH THIS PROXY
STATEMENT INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996, INCLUDING THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS. THE COMPANY WILL FURNISH TO ANY SECURITY HOLDER ON
REQUEST ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT
OF REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS
FOR COPIES SHOULD BE DIRECTED TO L. FRED POUNDS, VICE PRESIDENT OF FINANCE,
AMERICAN ONCOLOGY RESOURCES, INC., 16825 NORTHCHASE DRIVE, SUITE 1300, HOUSTON,
TEXAS, 77060.
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EXHIBIT A
AMENDMENT TO THE AMERICAN ONCOLOGY RESOURCES, INC.
1993 KEY EMPLOYEE STOCK OPTION PLAN
The Board of Directors of the Company adopted the American Oncology
Resources, Inc. 1993 Key Employee Stock Option Plan (the "Plan") in March 1993
and the Company's stockholders approved the Plan in February 1994. Subject to
the provisions of the Plan, the Board retained the right to amend the Plan. On
March 22, 1996, the Board determined that the Plan be amended as follows,
subject to, and to be effective upon, approval by the Company's stockholders.
Capitalized terms not otherwise defined in this Amendment to the Plan have the
meanings assigned thereto in the Plan.
The Plan is hereby amended as follows:
The first sentence of Section 5 of the Plan is hereby amended to read in
its entirety as follows:
"The number of shares of Common Stock available for Stock Options shall
equal 7% of the sum of the Company's outstanding Common Stock as of the
effective date of the Plan plus the number of shares of Common Stock issued
by the Company after such effective date (including, solely for determining
the number of shares available for Stock Options, shares of Common Stock
agreed to be issued to physicians in connection with such physicians'
causing their respective professional corporations or other entities to
enter into management service agreements with the Company); provided,
however, that the number of shares available for Incentive Stock Options
shall not exceed 375,888 shares; and provided, further, however, that all
outstanding and previously exercised Stock Options shall be applied against
the number of shares of Common Stock available under the Plan."
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<TABLE>
<CAPTION>
FRONT SIDE OF PROXY
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<S> <C> <C> <C>
ANNUAL MEETING PROXY NO. SHARES
AMERICAN ONCOLOGY RESOURCES, INC. MAY 8, 1997 IN YOUR NAME
The undersigned hereby appoints R. DALE ROSS and LEO E. SANDS, or either of them, each with power to appoint his substitute, as
proxies of the undersigned and authorizes them to represent and vote, as designated below, all the shares of the Common Stock of
American Oncology Resources, Inc. that the undersigned would be entitled to vote if personally present, and to act for the
undersigned at the annual meeting to be held Thursday, May 8, 1997, or any adjournment thereof.
Dated: ________________________________________________ , 1997
______________________________________________________________
______________________________________________________________
Signature(s) of Stockholder(s)
(Please sign exactly as shown hereon. Executors,
administrators, guardians, trustees, attorneys, and officers
signing for corporations should give full title. If a
partnership or jointly owned, each owner should sign.)
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BACK SIDE OF PROXY
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AMERICAN ONCOLOGY RESOURCES, INC. ANNUAL MEETING
MAY 8, 1997 CONTINUED FROM OTHER SIDE
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN AND IN ACCORDANCE WITH THE ACCOMPANYING PROXY STATEMENT. RECEIPT OF THE
PROXY STATEMENT AND THE ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, IS HEREBY ACKNOWLEDGED. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4 WHICH ARE BEING PROPOSED BY THE BOARD OF DIRECTORS.
1. ELECTION OF TEN DIRECTORS:
Nominees: Russell L. Carson, Lloyd K. Everson, M.D., Kyle M. Fink, M.D, Richard B. Mayor, Magaral S. Murali, M.D.,
Robert A. Ortenzio, Andrew M. Paul, Leonard M. Riggs, Jr., M.D., Edward E. Rogoff, M.D., R. Dale Ross
(MARK ONLY ONE)
[ ] VOTE FOR all nominees listed, except as marked to the contrary above (if any).
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF AMENDMENT TO THE COMPANY'S 1993 KEY EMPLOYEE STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In accordance with their discretion upon such other business as may properly come before the meeting or any
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK, DATE AND SIGN THIS PROXY
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