<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:
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(4) Date Filed:
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<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
16825 NORTHCHASE DRIVE, SUITE 1300
HOUSTON, TEXAS 77060
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
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 14, 1998, 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 amendments to the Company's
1993 Non-Employee Director Stock Option Plan, as amended;
3. To consider and act upon a proposal to approve an amendment to the Company's
1993 Key Employee Stock Option Plan, as amended;
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 31,
1998 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, THE COMPANY 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,
LEO E. SANDS
SECRETARY
Houston, Texas
April 16, 1998
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
To Our Stockholders:
This Proxy Statement is furnished to stockholders of American Oncology
Resources, Inc. (the "Company") for use at the 1998 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 have been
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, 1997, including financial statements, is enclosed with this proxy
statement, which is first being mailed to stockholders on or about April 17,
1998. 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
31, 1998. As of March 31, 1998, there were 31,538,426 shares of common stock,
par value $.01 per share ("Common Stock"), of the Company issued and
outstanding. In accordance with Delaware law and the Company's Certificate of
Incorporation and Bylaws, each such share of Common Stock is entitled to one
vote on each matter to be acted upon at the Annual Meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those votes cast for or withheld from a nominee for director or those cast for
or against the matter to be voted upon are included. Abstentions and broker
non-votes are counted only for the purposes of determining whether a quorum is
present. 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.
As of March 31, 1998, the Company had agreed to deliver 17,034,781
shares of its Common Stock on certain future dates for no additional
consideration. These shares are not deemed outstanding until actually
delivered, and until such date, no rights of ownership (including the right to
vote) attach to such shares.
<PAGE>
Based on the records of the Company as of March 31, 1998, 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.......................... 1,818,428(1) 5.5%
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
Russell L. Carson..................... 1,861,432(2)(3)(4)(5) 5.9%
1 World Financial Center, Suite 3601
New York, New York 10281
____________________
(1) Consists of options to purchase 1,818,428 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(2) Includes 1,452,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 1,017 shares owned by WCA Management Corporation. Mr. Carson
disclaims beneficial ownership of such shares that exceed his pecuniary
interest therein.
(3) Includes options to purchase 4,000 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(4) Includes 2,933 shares owned by Carson Associates, Inc. Mr. Carson disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(5) Includes 4,000 shares held by family trusts. Mr. Carson disclaims
beneficial ownership of such shares.
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 31, 1998, by (i) each director, director
nominee and executive officer of the Company and (ii) all such persons 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........................................ 1,818,428(1) 5.5%
Lloyd K. Everson, M.D............................... 336,166(2) 1.1%
David S. Chernow.................................... 49,373(3) *
L. Duane Choate..................................... 4,400(4) *
Larry D. Gray....................................... 40,500(5) *
R. Allen Pittman.................................... 67,753(6) *
L. Fred Pounds...................................... 304,067(7) *
Leo E. Sands........................................ 154,716(8) *
Russell L. Carson................................... 1,861,432(9)(10)(11)(12) 5.9%
James E. Dalton, Jr................................. 0 *
Kyle M. Fink, M.D................................... 506,258(10) 1.6%
Stanley M. Marks, M.D............................... 83,266(13) *
Richard B. Mayor.................................... 85,454(14) *
Magaral S. Murali, M.D.............................. 193,684(10)(15) *
Robert A. Ortenzio.................................. 58,997(14)(16) *
Edward E. Rogoff, M.D............................... 38,007(17)(18) *
All directors and officers as a group (16 persons).. 5,602,501(19) 16.3%
</TABLE>
- -------------------
* Less than one percent.
(1) Consists of options to purchase 1,818,428 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(2) Includes options to purchase 297,864 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(3) Includes options to purchase 12,242 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(4) Includes options to purchase 3,600 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(5) Includes options to purchase 40,000 shares that are currently exercisable
or will become exercisable within 60 days after the date hereof.
(6) Includes options to purchase 21,800 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(7) Includes options to purchase 299,770 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(8) Includes options to purchase 97,008 shares of Common Stock that are
currently exercisable or will be exercisable within 60 days after the date
hereof.
(9) Includes 1,452,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
and 1,017 shares owned by WCA Management Corporation. Mr. Carson disclaims
beneficial ownership of such shares that exceed his pecuniary interest
therein.
(10) Includes options to purchase 4,000 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(11) Includes 2,933 shares owned by Carson Associates, Inc. Mr. Carson
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(12) Includes 4,000 shares held by family trusts. Mr. Carson disclaims
beneficial ownership of such shares.
(13) Dr. Marks is entitled to receive 23,266 shares, 46,530 shares and 116,326
shares of Common Stock on April 1, 1998,
3
<PAGE>
1999 and 2000, respectively, for no additional consideration. The shares
deliverable on April 1, 1998 are included in the table, and those
deliverable on April 1, 1999 and 2000 are excluded from the table.
(14) Includes options to purchase 28,000 shares that are currently exercisable
or will be exercisable within 60 days after the date hereof.
(15) Dr. Murali is entitled to receive 107,962 and 323,890 shares of Common
Stock on April 1, 1998 and 1999, respectively, for no additional
consideration. The shares deliverable on April 1, 1998 are included in the
table, and the shares deliverable on April 1, 1999 are excluded from the
table.
(16) Includes 14,990 shares, owned by Mr. Ortenzio's father, in which Mr.
Ortenzio has a remainder interest.
(17) Dr. Rogoff is entitled to receive 72,728 and 218,180 shares of Common Stock
on January 31, 1999 and 2000, respectively, for no additional
consideration. These shares are excluded from the table.
(18) Includes options to purchase 5,500 shares of Common Stock that are
currently exercisable or will become exercisable within 60 days after the
date hereof.
(19) Includes options to purchase 2,664,212 shares of Common Stock that are
currently exercisable or that will become exercisable within 60 days after
the date hereof, and 131,228 shares of Common Stock deliverable within 60
days after the date hereof for no additional consideration.
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. 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 five
meetings during fiscal 1997. Each incumbent director, except Russell Carson,
attended in 1997 seventy-five percent or more of the meetings of the Board of
Directors and any committee on which such director served.
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. Currently,
the members of the committee are Richard B. Mayor and Robert A. Ortenzio,
neither of whom is an employee or has a significant relationship with the
Company's senior management. Mr. Mayor is the Chairman of the Audit Committee.
The Audit Committee met four times during fiscal 1997.
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
approval of compensation, benefits, incentives 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 and Robert A. Ortenzio, neither of whom is an employee or has
a significant relationship with the Company's senior management. Mr. Carson is
the Chairman of the Compensation Committee. The committee met four times during
fiscal 1997. 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 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 $3,500 per fiscal quarter
plus an additional $1,500 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, as
amended. See "Proposal 2: Amendments to 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. Except for James E. Dalton, Jr. and Stanley M. Marks, M.D., 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 BUSINESS EXPERIENCE
- -------------------------------------------- -------------------
<S> <C>
R. DALE ROSS, age 51 From April 1990, until joining the Company, Mr. Ross was
Chairman of the Board of Directors and self-employed. From December 1982 until April 1990, Mr. Ross was
Chief Executive Officer since December employed by HMSS, Inc., a home infusion therapy company. Mr. Ross
1992 founded HMSS, Inc. and served as its President and Chief Executive
Officer and as a director.
RUSSELL L. CARSON, age 54 Since 1978, Mr. Carson has been a general partner of Welsh, Carson,
Director since December 1992 (Chairman, Anderson & Stowe. Mr. Carson is a director of Health Management
Compensation Committee) Systems, Inc., National Surgery Centers, Inc. and Quorum Health
Group, Inc.
JAMES E. DALTON, JR., age 55 Mr. Dalton has served as President, Chief Executive Officer and a
Nominee director of Quorum Health Group, Inc. since 1990. Prior to joining
Quorum, Mr. Dalton served as regional vice president with
HealthTrust, Inc., as division vice president of Hospital
Corporation of America and as regional vice president with HCA
Management Company. Prior to joining HCA, he held management
positions with American MediCorp, Inc., Humana, Inc. and hospitals
in Virginia and West Virginia. He serves on the board of directors
of the Nashville Branch of the Federal Reserve Bank of Atlanta,
AmSouth Bank, Housecall Medical Resources, Inc. and The Nashville
Health Care Council. He also serves on the Board of Trustees of
Universal Health Realty Income Trust and Randolph-Macon College.
Mr. Dalton is a Fellow of the American College of Healthcare
Executives and is on the board of directors and past chairman of the
Federation of American Health Systems.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION AND COMMITTEE MEMBERSHIP BUSINESS EXPERIENCE
- -------------------------------------------- -------------------
<S> <C>
LLOYD K. EVERSON, M.D., age 55 Dr. Everson received his medical degree from Harvard Medical School
President and Director 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 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 55 Dr. Fink obtained his medical degree from Indiana University and his
Director since December 1992 oncology 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.
STANLEY M. MARKS, M.D., age 50 Dr. Marks obtained his medical degree from the University of
Nominee Pittsburgh School of Medicine and additional training at Peter Bent
Brigham Hospital, Harvard Medical School and Sidney Farber Cancer
Center. Dr. Marks is a member of numerous professional societies,
including the American Society of Hematology and the American
Society of Clinical Oncology. Dr. Marks is a practicing physician
in Pittsburgh, Pennsylvania with Oncology-Hematology Associates, a
physician group affiliated with the Company since April 1995.
RICHARD B. MAYOR, age 64 Mr. Mayor has been a partner in the Houston law firm of Mayor, Day,
Director since February 1993 Caldwell & Keeton, L.L.P. since its formation in February 1982.
(Chairman, Audit Committee) Mayor, Day, Caldwell & Keeton, L.L.P. serves as outside legal
counsel to the Company.
MAGARAL S. MURALI, M.D., age 54 Director Dr. Murali obtained his medical degree from Madras Medical College,
since April 1994 Madras, 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 41 Mr. Ortenzio has been President and Chief Operating Officer of
Director since December 1992 Select Medical Corporation since February 1997. Prior to that time,
(Member, Audit Committee; Member, Mr. Ortenzio was a co-founder and President of Continental Medical
Compensation Committee) Systems, Inc., a provider of comprehensive 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
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION AND COMMITTEE MEMBERSHIP BUSINESS EXPERIENCE
- -------------------------------------------- -------------------
<S> <C>
director of Concentra Managed Care, Inc. and Centennial Healthcare
Corp.
EDWARD E. ROGOFF, M.D., age 55 Dr. Rogoff obtained his medical degree from the State University of
Director since July 1995 New York, Downstate Medical School, and his training in radiation
oncology from 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
The following table sets forth certain information with respect to the
Company's current executive officers.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE
- -------------------------------------- -------------------
<S> <C>
R. DALE ROSS, age 51 From April 1990, until joining the Company, Mr. Ross was
Chairman of the Board of Directors self-employed. From December 1982 until April 1990, Mr. Ross was
and Chief Executive Officer since employed by HMSS, Inc., a home infusion therapy company. Mr. Ross
December 1992 founded HMSS, Inc. and served as its President and Chief Executive
Officer and as a director.
LLOYD K. EVERSON, M.D., age 55 Dr. Everson received his medical 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 40 From March 1992 until joining the Company, Mr. Chernow was a Real
Vice President of Corporate Estate Development Consultant at Hematology Oncology Associates, an
Development and Chief Development oncology group affiliated with the Company in Denver, Colorado.
Officer since January 1993 From March 1990 until March 1992, he was employed by Lamar
Companies, a real estate investment company
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE
- -------------------------------------- -------------------
<S> <C>
located in Denver, as Vice President of Operations.
L. DUANE CHOATE, age 39 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 47 From April 1996 until April 1997, Mr. Gray was President and Chief
Chief Operating Officer since April Executive Officer of FHP of California, a wholly owned subsidiary
1997 of FHP International, a health care company. From March 1993 to
January 1996, Mr. Gray was 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 50 From May 1991 until joining the Company, Mr. Pittman was employed
Vice President of Corporate Services as Vice President of Human Resources by Option Care, Inc., a
since January 1993 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 50 From June 1990 until joining the Company, Mr. Pounds was principal
Vice President of Finance, Chief of Pounds & Associates, a health care consulting company. From
Financial Officer and Treasurer January 1987 to May 1990, Mr. Pounds was President and Chief
since January 1993 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 50 From July 1991 until joining the Company, Mr. Sands was principal
Vice President of Planning, Chief of Altech, Inc., a health care consulting company. From March 1983
Compliance Officer and Secretary to April 1986 and from May 1988 to June 1991, Mr. Sands was
since November 1992 employed by HMSS, Inc., in various positions and ultimately served
as Vice President of Business Development of HMSS Infusion
Affiliates, Inc.
</TABLE>
8
<PAGE>
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, 1997 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 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
---------------------------------------- ------------
COMMON
STOCK
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS
------ -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
R. Dale Ross................. 1997 $399,000 $ 0 0 200,000
Chairman of the Board, 1996 $350,000 $ 0 0 0(1)
Chief Executive Officer 1995 $250,000 $129,000 0 450,479
and Director
Lloyd K. Everson, M.D........ 1997 $334,875 $ 0 0 175,000
President and Director 1996 $293,750 $ 0 0 0(2)
1995 $250,000 $150,000 0 286,402
L. Fred Pounds............... 1997 $274,986 $ 0 0 100,000
Chief Financial Officer 1996 $239,119 $ 0 0 0(3)
1995 $193,809 $ 72,450 0 106,794
Larry D. Gray (4)............ 1997 $215,961 $ 0 $ 31,953 200,000
Chief Operating Officer 1996 - - - -
1995 - - - -
David S. Chernow............. 1997 $200,000 $ 0 0 100,000
Chief Development Officer 1996 $135,000 $ 42,800 0 60,000
1995 $107,000 $ 40,000 0 20,000
</TABLE>
- --------------
(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.
(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.
(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.
(4) Mr. Gray commenced employment with the Company in April 1997, and the
amounts listed consist of the actual amounts paid to Mr. Gray in 1997,
including relocation expenses of $31,953.
9
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1997
<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........... 200,000 15% $15.71 August 14, 2007 $5,117,987 $8,149,539
Lloyd K. Everson, M.D.. 175,000 13.2% $15.71 August 14, 2007 $4,478,239 $7,130,846
L. Fred Pounds......... 100,000 7.5% $15.71 August 14, 2007 $2,558,993 $4,074,769
Larry D. Gray.......... 200,000 15% $ 8.70 April 16, 2007 $2,834,277 $4,513,112
David S. Chernow....... 100,000 7.5% $10.56 February 13, 2007 $1,720,113 $2,738,992
</TABLE>
- ------------
(1) The exercise price per share for each option granted in 1997 is the market
value of the Company's Common Stock as of the date such option was granted,
as determined in accordance with the 1993 Key Employee Stock Option Plan.
1997 OPTION EXERCISES AND DECEMBER 31, 1997 OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
SHARES ACQUIRED VALUE -------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross............ 20,000 $ 330,800 2,218,428 200,000 $28,105,240 $ 58,000
Lloyd K. Everson, M.D... 297,600 $ 3,853,351 497,864 175,000 $ 5,730,299 $ 50,750
L. Fred Pounds.......... 0 $ - 261,691 294,721 $ 3,481,926 $2,469,751
Larry D. Gray........... 0 $ - 0 200,000 $ 0 $1,460,000
David S. Chernow........ 15,240 $ 242,277 12,000 171,242 $ 86,520 $ 890,080
</TABLE>
_______________
(1) Based upon a closing price of the Company's Common Stock on December 31,
1997, as reported by The Nasdaq Stock Market, of $16.00 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 six months 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
In 1997, 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. The Compensation Committee is currently comprised of Messrs. Carson
and Ortenzio.
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. Each member of
the Compensation Committee must be a "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 of Directors.
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 1997. The committee reports and makes recommendations to the Board of
Directors.
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
11
<PAGE>
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,
1997, 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 1998 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.
Compensation of the Chief Executive Officer. The Chief Executive Officer's
salary in 1997 was based upon the Compensation Committee's evaluation of his
performance and the Company's performance. He did not receive a bonus during
1997.
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
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the value as of December 31, 1995, December 31,
1996 and December 31, 1997 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
(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]
June 13, 1995 DECEMBER DECEMBER DECEMBER
31, 1995 31, 1996 31, 1997
------------- -------- -------- --------
AOR(1) 100 173.66 73.21 114.29
Nasdaq Stock Market Index 100 113.41 139.49 171.17
Nasdaq Health Services Index 100 134.68 134.75 137.18
- -----------
(1) Total return for AOR 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
Common 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.
13
<PAGE>
PROPOSAL 2: AMENDMENTS TO THE COMPANY'S
1993 NON-EMPLOYEE DIRECTOR 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 Non-Employee
Director Stock Option Plan (as amended, the "Director Plan") (i) providing for a
grant to each director who is an Eligible Director (a director who is not an
officer or employee of the Company or any subsidiary) and who has not previously
been elected by the stockholders to the Board of Directors, at the time of his
or her election, of an option to purchase 5,000 shares of the Company's Common
Stock, at a price determined in accordance with the Director Plan; (ii)
increasing the amount of the automatic annual grant to each other Eligible
Director from an option to purchase 2,000 shares to an option to purchase 3,000
shares, at a price determined in accordance with the Director Plan; and (iii)
providing for an additional automatic annual grant to each Eligible Director of
an option to purchase 1,000 shares for each Board committee that such Eligible
Director is appointed to. If the ten nominees to the Board of Directors are
elected, there would be eight Eligible Directors, two of whom would have not
previously been elected to the Board of Directors. The text of the Amendments
is attached hereto as Exhibit A.
Amendment to Provide for Grant to New Directors
The first proposed amendment to the Director Plan would provide for a
grant to each director who is an Eligible Director and who has not previously
been elected by the stockholders to the Board of Directors, at the time of his
or her election, of an option to purchase 5,000 shares of the Company's Common
Stock. The number of shares subject to this grant would be adjusted as more
fully described in the Director Plan to reflect changes in the Company's capital
stock, such as stock splits or recapitalizations. Such options would be
exercisable for a purchase price equal to the fair market value (as defined in
the Director Plan) of shares subject to the option on the date the option is
granted, and would be fully exercisable six months from the date of grant.
Under the Director Plan as currently in effect, a new director would be eligible
to receive an option to purchase 2,000 shares.
Amendment to Increase the Amount of the Automatic Annual Grant
The second proposed amendment to the Director Plan would increase the
amount of the automatic annual grant to each Eligible Director who has
previously been electd by the stockholders to serve on the Board of Directors
from an option to purchase 2,000 shares to an option to purchase 3,000 shares of
the Company's Common Stock. The option would be granted to such Eligible
Director on the date of the annual meeting of stockholders at which such
Eligible Director is elected. The number of shares subject to this grant would
be adjusted as more fully described in the Director Plan to reflect changes in
the Company's capital structure, such as stock splits or recapitalizations.
Such options would be exercisable for a purchase price equal to the fair market
value (as defined in the Director Plan) of shares subject to option on the date
the option is granted, and would be fully exercisable six months from the date
of grant.
Amendment to Provide for Automatic Grant for Service on Board Committees
The third proposed amendment would provide for an additional automatic
annual grant of an option to purchase 1,000 shares of Common Stock to each
Eligible Director who is appointed to serve on a committee of the Board of
Directors for each such committee to which such Eligible Director is appointed.
Currently, there are two committees, the Audit Committee and the Compensation
Committee. The option would be granted on the date on which the Eligible
Director is appointed to a committee, typically the first meeting of the Board
of Directors following the annual meeting of stockholders. The number of shares
subject to this grant would be adjusted as more fully described in the Director
Plan to reflect changes in the Company's capital structure, such as stock splits
or recapitalizations. Such options would be exercisable for a purchase price
equal to the fair market value (as defined in the Director Plan) of shares
subject to option on the date the option is granted, and would be fully
exercisable six months from the date of grant.
14
<PAGE>
The purposes of the Director Plan are to provide an additional
incentive for securing and retaining qualified non-employee persons to serve on
the Board of Directors, and committees thereof, of the Company and to enhance
the future growth of the Company by furthering such persons' identification with
the interests of the Company and its stockholders.
DESCRIPTION OF THE DIRECTOR PLAN
The following is a description of the Director Plan, as amended by the
proposed amendments.
The Company's Director Plan was adopted by the Board of Directors in
June 1993 and by the Company's stockholders in February 1994. The Director Plan
provides for the automatic grant of options to each director of the Company who
is not an employee or officer of the Company. On the date of each Annual
Meeting of Stockholders of the Company after January 1, 1998, each Eligible
Director elected at such meeting will receive a grant of options to purchase
3,000 shares of the Company's Common Stock, unless such Eligible Director had
not previously been elected by the stockholders to serve on the Company's Board
of Directors, in which case the Eligible Director would receive an option to
purchase 5,000 shares of Common Stock. In addition, each Eligible Director who
is appointed to a Board committee would receive an option to purchase 1,000
shares of Common Stock for each such committee to which such Eligible Director
is appointed. The purchase price of shares subject to stock options granted
pursuant to the Director Plan must be the fair market value (as defined in the
Director Plan) of the shares on the date the option is granted. The number of
shares subject to stock options granted pursuant to the Director Plan is subject
to adjustment in the event of a subdivision or consolidation of shares, other
capital readjustment or payment of a stock dividend. Each stock option granted
under the Director Plan has a term of ten years from its grant date. The
exercise price of an option may be paid in cash, in shares of Common Stock or in
a combination thereof. If the termination of directorship occurs by reason of
death of an Eligible Director, all unexercised stock options become immediately
exercisable and may be exercised until one year from the date of death or until
the earlier expiration of the stock option. If the termination of a
directorship occurs other than by reason of death of the Eligible Director, all
unexercised options expire three months following the termination of the
directorship, unless the stock option terminates earlier pursuant to the
Director Plan. Pursuant to the Director Plan, as of the date hereof, options to
purchase an aggregate of 100,000 shares of Common Stock have been granted to the
Eligible Directors at a weighted average exercise price of $5.48 per share.
Under the Director Plan, a total of 200,400 shares of Common Stock are
authorized for issuance.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Director Plan is not a qualified plan under Section 401(a) of the
Internal Revenue Code, as amended (the "Code"). Options granted under the
Director Plan are "nonstatutory stock options" and not "restricted," "qualified"
or "incentive" stock options, nor is the Director Plan an "employee stock
purchase plan," under Sections 422 through 424 of the Code. Recipients of
options under the Director 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 Director 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.
15
<PAGE>
Director Plan Benefits Table
It is expected that the following grants would be made under the
Director Plan, as amended, during fiscal 1998:
NAME AND POSITION TOTAL SHARES UNDERLYING OPTION GRANTS (1)
- ----------------- -----------------------------------------
Non-Executive Directors as a group 34,000
_____________
(1) No dollar value or exercise price is assigned to the stock options because
the exercise price will be the fair market value of the underlying Common Stock
of the Company on the date of grant.
REQUIRED VOTE
Approval of the proposed amendments to the Company's 1993 Non-Employee
Director Stock Option Plan 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 AMENDMENTS TO THE COMPANY'S 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
DULY EXECUTED PROXIES WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
16
<PAGE>
PROPOSAL 3: AMENDMENT 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, an amendment to the Company's 1993 Key Employee
Stock Option Plan (as amended the "Key Employee Plan") amending the Key Employee
Plan to increase the number of shares available for grants under the Key
Employee Plan from 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) to 10% of the Company's outstanding Common Stock
(including, for purposes of such calculation, shares to be issued to affiliated
physicians at specified future dates). As of March 31, 1998, the Company had
31,538,426 shares of Common Stock issued and outstanding, and had agreed to
deliver 17,034,781 shares of its Common Stock to its affiliated physicians at
certain future dates for no additional consideration. Thus, if this amendment
to the Key Employee Plan is approved, then as of March 31, 1998, 4,857,321
shares of Common Stock would be reserved for grants of options. As of March 31,
1998, options to purchase 2,861,014 shares of Common Stock have been granted
under the Key Employee Plan, all of which are nonqualified options, with a
weighted average exercise price of $10.09. The text of the amendment is
attached hereto as Exhibit B.
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 10% 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 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 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) 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) one year after such termination
of employment as a result of death, disability or retirement. If the
participant's employment is terminated by reason of death, disability or
retirement, any ISOs terminate on the same schedule as nonqualified options,
except such options terminate three months after death, disability or retirement
instead of one year. 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.
17
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Key Employee Plan is not a qualified plan under Section 401(a) of
the Code. To date, all 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 such nonqualified
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 upon
exercise of such nonqualified options 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 amendment to the Key Employee Plan 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 1993 KEY EMPLOYEE STOCK OPTION PLAN. DULY
EXECUTED PROXIES WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
18
<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, 1998.
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 1998 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.
19
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 solely 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 1997 or relating to 1997 transactions
under Section 16 were so filed, except as follows: (i) Magaral S. Murali failed
to file a Form 4 to report a sale of Common Stock (which was subsequently
corrected on Dr. Murali's Form 5); and (ii) Andrew Paul (a director during 1997)
and Russell Carson each failed to timely file the Form 5 for 1997 transactions.
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 1997, the Company recognized revenue of
approximately $15,476,000 from HOA. In addition, the Company leases office
space from an entity affiliated with Dr. Fink. Payments under this lease were
approximately $528,000 in 1997.
Dr. Marks, a nominee for director of the Company, is a practicing
physician with Oncology-Hematology Associates, a physician group affiliated with
the Company since April 1995. During fiscal 1997, the Company recognized
revenue of approximately $22,599,000 from Oncology-Hematology Associates.
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 1997, the Company recognized revenue of
approximately $12,203,000 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 1997, the Company recognized revenue
of $4,216,000 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 $190,000 in 1997.
LEGAL SERVICES
Richard B. Mayor, a director of the Company, is a partner of Mayor,
Day, Caldwell & Keeton, L.L.P., 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 1999 Annual Meeting of
Stockholders must be received by the Company at its principal executive offices
no later than December 1, 1998.
20
<PAGE>
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 amendments to the Company's
1993 Non-Employee Director Stock Option Plan, the amendment 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.
By Order of the Board of Directors,
R. DALE ROSS
Chairman of the Board and
Chief Executive Officer
Dated: April 16, 1998
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED UPON
THE WRITTEN REQUEST OF ANY SUCH PERSON A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, INCLUDING THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS. THE COMPANY WILL ALSO FURNISH TO ANY SUCH
PERSON 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 PHILLIP H. WATTS, VICE
PRESIDENT & GENERAL COUNSEL, AMERICAN ONCOLOGY RESOURCES, INC., 16825 NORTHCHASE
DRIVE, SUITE 1300, HOUSTON, TEXAS, 77060.
21
<PAGE>
EXHIBIT A
AMENDMENTS TO THE AMERICAN ONCOLOGY RESOURCES, INC.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors of the Company adopted the American Oncology
Resources, Inc. 1993 Non-Employee Director Stock Option Plan (the "Director
Plan") in June 1993, and the Company's stockholders approved the Director Plan
in February 1994. Amendments to the Director Plan were approved by the
Company's stockholders in May 1996. In February 1998, the Board determined that
the Director Plan be amended as follows, subject to and effective upon approval
by the Company's stockholders. Capitalized terms not otherwise defined in this
Amendment to the Director Plan have the meanings assigned thereto in the
Director Plan.
Section III of the Director Plan is hereby amended to read in its entirety
as follows:
"III. Grant of Stock Options; Option Price; Vesting Schedule
(a) Options will be granted only to individuals who are Eligible Directors
of the Company.
(b) On the date of each annual meeting of stockholders of the Company after
January 1, 1998, each Eligible Director elected at such annual meeting who
has not previously been elected by the stockholders to serve on the
Company's Board of Directors shall receive, without the exercise of the
discretion of any person or persons, an option to purchase 5,000 shares of
Common Stock.
(c) On the date of each annual meeting of stockholders of the Company after
January 1, 1998, each Eligible Director elected at such annual meeting who
has previously been elected by the stockholders to serve on the Company's
Board of Directors shall receive, without the exercise of the discretion of
any person or persons, an option to purchase 3,000 shares of Common Stock.
(d) After January 1, 1998, on the date of each meeting of the Board of
Directors at which any member to any committee of the Board of Directors is
appointed, each Eligible Director appointed at such meeting to any such
committee shall receive, without the exercise of the discretion of any
person or persons, an option to purchase 1,000 shares of Common Stock for
each such committee to which such Eligible Director is appointed.
(e) All Options granted under the Director Plan shall be at the Option
price set forth in the following subsection (f), shall be subject to
adjustment as provided in Section VII and to the terms and conditions set
forth in Section VIII and shall vest in the manner set forth in subsection
(g) below. All Options granted under the Plan shall be evidenced by a
written option agreement.
(f) The purchase price of Shares issued under each Option shall be the Fair
Market Value of Shares subject to the Option on the date the Option is
granted.
(g) Except to the extent otherwise provided herein, each Option granted
under this Article III shall vest and be exercisable as to all the Shares
covered thereby six months after the effective date of the grant of such
Option."
22
<PAGE>
EXHIBIT B
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 "Key Employee Plan") in
March 1993, and the Company's stockholders approved the Key Employee Plan in
February 1994. Amendments to the Key Employee Plan were approved by the
Company's stockholders in May 1997. In February 1998, the Board determined that
the Key Employee 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 Key Employee Plan have the meanings assigned
thereto in the Key Employee Plan.
The Key Employee Plan is hereby amended as follows:
The first sentence of Section 5 of the Key Employee Plan is hereby
amended to read in its entirety as follows:
"The number of shares of Common Stock available for Stock Options
shall equal 10% of the sum of the Company's outstanding Common Stock
as of the effective date of the Key Employee 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 (or their affiliates) in connection with such physicians'
(or their affiliates') direct or indirect agreement to enter into a
long-term management agreement with the Company (or a subsidiary
thereof)), 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."
23
<PAGE>
<TABLE>
<CAPTION>
FRONT SIDE OF PROXY
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<S> <C> <C> <C>
AMERICAN ONCOLOGY RESOURCES, INC. ANNUAL MEETING MAY 14, 1998 PROXY NO. SHARES 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 14, 1998, or any adjournment thereof.
Dated:______________________________________, 1998
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
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 14, 1998 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, 1997, 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, James E. Dalton, Jr., Lloyd K. Everson, M.D., Kyle M. Fink, M.D., Stanley M. Marks, M.D.,
Richard B. Mayor, Magaral S. Murali, M.D., Robert A. Ortenzio, Edward E. Rogoff, M.D., and 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 AMENDMENTS TO THE COMPANY'S 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
[_] 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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</TABLE>
