<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 (S) 240.14a-11(c) or (S) 240.14a-12
U.S. ONCOLOGY, 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] 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.:
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(4) Date Filed:
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<PAGE>
[Logo of US ONCOLOGY]
US ONCOLOGY, INC.
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
We cordially invite you to attend the 2000 Annual Meeting of Stockholders
of US Oncology, Inc. The meeting will be held on Thursday, May 18, 2000, at
10:00 a.m., local time, at the Wyndham Hotel Greenspoint, 13400 Greenspoint
Drive, Houston, Texas. At the meeting we will:
1. Elect four Class I directors to the Board of Directors;
2. Vote on a proposal to approve an amendment to US Oncology's 1993 Non-
Employee Director Stock Option Plan;
3. Vote on a proposal to ratify the appointment of PricewaterhouseCoopers
LLP as US Oncology's independent accountants; and
4. Transact any other business as may properly come before the meeting.
Stockholders who owned US Oncology stock at the close of business on
Monday, April 3, 2000, may attend and vote at the meeting. If you cannot attend
the meeting, you may vote by completing the enclosed Proxy Card as instructed
and mailing the Proxy Card in the enclosed postage-prepaid envelope. Any
stockholder attending the meeting may vote in person, even though he or she has
already returned a Proxy Card.
We look forward to seeing you at the meeting.
Sincerely,
Leo E. Sands
Executive Vice President, Chief
Compliance Officer and Secretary
Houston, Texas
April 17, 2000
________________________________________________________________________________
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting in person, we urge you to sign,
date, and return the enclosed Proxy at your earliest convenience. This will
ensure the presence of a quorum at the meeting. Promptly signing, dating and
returning the Proxy will save us the expense and extra work of additional
solicitation. Enclosed for that purpose is an addressed envelope for which no
postage is required if mailed in the United States. Sending in your Proxy will
not prevent you from voting your stock at the meeting if you desire to do so, as
your Proxy is revocable at your option.
________________________________________________________________________________
<PAGE>
US ONCOLOGY, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
Our Board of Directors is soliciting proxies for the 2000 Annual Meeting of
Stockholders. This Proxy Statement contains important information for you to
consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
Voting materials, which include this Proxy Statement, the Proxy Card and
the 1999 Annual Report to Stockholders, will be mailed to stockholders on or
about April 17, 2000. Our principal executive offices are located at 16825
Northchase Drive, Suite 1300, Houston, Texas 77060. Our telephone number is
(281) 873-2674. Throughout this Proxy Statement, we refer to US Oncology, Inc.
and its subsidiaries as "US Oncology" or the "Company".
US Oncology will pay the costs of soliciting proxies from stockholders.
We may also reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding the voting materials to the
beneficial owners. Directors, officers and regular employees of US Oncology may
solicit proxies on behalf of US Oncology, without additional compensation,
personally or by telephone.
QUESTIONS AND ANSWERS
Q: Who can vote at the meeting?
A: The Board set April 3, 2000 as the record date for the meeting. All
stockholders who owned US Oncology Common Stock on April 3, 2000 may attend
and vote at the meeting. Each stockholder is entitled to one vote for each
share of Common Stock held by that stockholder on all matters to be voted
on. On April 3, 2000, approximately 89,831,290 shares of US Oncology Common
Stock were outstanding.
Q: How many votes does US Oncology need to hold the meeting?
A: Shares are counted as present at the meeting if you:
. are present and vote in person at the meeting; or
. have properly submitted a proxy card.
A majority of US Oncology's outstanding shares of Common Stock as of the
record date must be present at the meeting in order to hold the meeting and
conduct business. This is called a quorum.
Q: What proposals will be voted on at the meeting?
A: There are three proposals scheduled to be voted on at the meeting:
. Election of Class I Directors;
. Approval of an amendment to the Company's 1993 Non-Employee Director
Stock Option Plan; and
. Ratification of PricewaterhouseCoopers LLP as US Oncology's independent
accountants.
Q: What is the voting requirement to approve each of the proposals?
A: For the election of the Class I Directors, the four (4) individuals
receiving the highest number of "FOR" votes will be elected. The proposal to
amend the Company's 1993 Non-Employee Director Stock Option Plan requires
the affirmative vote of a majority of the shares outstanding and entitled to
vote at the meeting. The proposal to ratify the appointment of
PricewaterhouseCoopers LLP as US Oncology's independent accountants requires
the affirmative vote of a majority of the shares present at the meeting,
either in person or by proxy, and entitled to vote.
Q: How are votes counted?
A: You may vote either "FOR" or "AGAINST" each nominee for the Board of
Directors. You may vote "FOR," "AGAINST" or "ABSTAIN" on the other
proposals. If you abstain from voting on the amendment to the 1993 Non-
Employee Director Plan, it has the same effect as a vote against. If you
abstain from voting on the ratification of the Company's independent
accountants, it will not affect the outcome of that proposal. If you just
sign your Proxy Card with no further instructions, your shares will be
counted as a yes vote "FOR" each Director, "FOR" the amendment to the
2
<PAGE>
1993 Non-Employee Director Stock Option Plan and "FOR" the ratification of
the appointment of PricewaterhouseCoopers LLP as US Oncology's independent
accountants. If you do not vote and you hold your shares in a brokerage
account in your broker's name (this is called "street name"), your shares
will not be counted in the tally of the number of shares cast "FOR,"
"AGAINST" or "ABSTAIN" on any proposal where your broker does not have
discretionary authority to vote. However, these shares may be counted for
the purpose of establishing a quorum at the meeting. Voting results will be
tabulated and certified by our transfer agent, American Stock Transfer &
Trust Company.
Q: How can I vote my shares in person at the meeting?
A: Shares held directly in your name as the stockholder of record may be voted
in person at the meeting. If you choose to do so, please bring the enclosed
Proxy Card or proof of identification to the meeting. If you hold your
shares in street name, you must request a legal proxy from your stockbroker
in order to vote at the meeting.
Q: How can I vote my shares without attending the meeting?
A: Whether you hold shares directly as a stockholder of record or beneficially
in street name, you may vote without attending the meeting. You may vote by
granting a proxy or, for shares held in street name, by submitting voting
instructions to your broker or nominee. Please refer to the summary
instructions included on your proxy card. For shares held in street name,
the voting instruction card will be included by your broker or nominee. You
may vote your shares by mail by signing your Proxy Card or, for shares held
in the street name, by following the voting instruction card included by
your broker or nominee and mailing in the enclosed potage-prepaid envelope.
If you provide specific voting instructions, your shares will be voted as
you have instructed.
Q: How can I change my vote after I return my proxy?
A: You may revoke your proxy and change your vote at any time before the final
vote at the meeting. You may do this by signing a new Proxy Card with a
later date or by attending the meeting and voting in person. Attending the
meeting will not revoke your proxy unless you specifically request it.
Q: What is US Oncology's voting recommendation?
A: Our Board of Directors recommends that you vote your shares "FOR" each of
the nominees to the Board and "FOR" each of the other proposals described in
this Proxy Statement.
Q: Where can I find the voting results of the meeting?
A: The preliminary voting results will be announced at the meeting. The final
results will be published in our quarterly report on Form 10-Q for the
quarter ended June 30, 2000.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF CLASS I DIRECTORS
General
In June 1999, Physician Reliance Network, Inc. ("PRN") merged into a
subsidiary of American Oncology Resources, Inc. ("AOR"), and, as part of the
merger, AOR changed its name to US Oncology, Inc. In connection with the
merger, US Oncology implemented a staggered, or classified, board. Our Board of
Directors is divided into three classes. Each class serves three years with the
terms of office of the respective classes expiring in successive years. The
present term of office for the Class I directors expires at the 2000 Annual
Meeting. At the Annual Meeting, stockholders will vote for the four nominees
for Class I director listed below. The term of each of the Class I directors
elected at the meeting will continue until the annual meeting of stockholders in
2003 or until his successor has been duly elected and qualified.
Nominees to Serve a Three-Year Term Expiring at the 2003 Annual Meeting (Class I
Directors)
<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupation Director Since
--------------- --- -------------------- ---------------
<S> <C> <C> <C>
J. Taylor Crandall 46 Managing Partner, Oak Hill Capital Management, Inc., 1999
an investment company.
James E. Dalton 57 President, Chief Executive Officer and a Director, 1998
Quorum Health Group, Inc., a health care company.
Edward E. Rogoff, M.D. 57 Physician, Arizona Oncology Associates, P.C., an 1995
oncology practice in Tucson, Arizona.
Burton S. Schwartz, M.D. 58 President, Minnesota Oncology Hematology, P.A., an 1999
oncology practice in Minneapolis, Minnesota.
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
J. Taylor Crandall has been Managing Partner of Oak Hill Capital Management,
Inc. since January 1999. Also, he is currently Vice President and Chief
Operating Officer of Keystone, Inc., an investment company, where he has been a
Managing Partner since 1986 and was formerly Chief Financial Officer. Mr.
Crandall is a director of Sunterra Corporation, Washington Mutual, Inc.,
Specialty Foods, Inc. and Bell & Howell Operating Company. Mr. Crandall was
formerly a director of PRN.
James E. Dalton 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.
Edward E. Rogoff, M.D. obtained his medical degree from the State University of
New York, Downstate Medical School, and his training in radiation oncology from
Memorial Sloan Kettering Cancer Center. He is board certified in radiation
oncology. Dr. Rogoff's oncology group, Arizona Oncology Associates, P.C., has
been managed by US Oncology since January 1995. Dr. Rogoff is a member of
numerous professional societies, including the American Society of Therapeutic
Radiology and Oncology and the American Society of Clinical Oncology.
Burton S. Schwartz, M.D. received his medical degree from Meharry Medical
College in 1968 and is a board certified medical oncologist. Dr. Schwartz's
oncology group, Minnesota Oncology Hematology, P.A., has been managed by PRN
since February 1995. Dr. Schwartz was formerly a director of PRN.
Vote Required for Approval
The four nominees receiving the highest number of votes will be elected as
Class I directors.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES LISTED ABOVE. DULY EXECUTED PROXIES WILL BE SO VOTED UNLESS A
CONTRARY INDICATION IS MADE.
4
<PAGE>
Continuing Directors
The following describes current directors of the Company whose terms will
continue after the annual meeting.
Directors Serving a Term Expiring at the 2001 Annual Meeting (Class II
Directors)
<TABLE>
<CAPTION>
Name of Director Age Principal Occupation Director Since
---------------- --- -------------------- ---------------
<S> <C> <C> <C>
Nancy G. Brinker 53 Founding Chair of the Susan G. Komen Breast Cancer 1999
Foundation.
Stephen E. Jones, M.D. 58 Physician, Texas Oncology, P.A., an oncology 1999
practice with locations throughout Texas.
Robert A. Ortenzio 42 President and Chief Operating Officer, Select 1992
Medical Corporation.
</TABLE>
Except as set forth below, each of the Class II Directors has been engaged
in his or her principal occupation set forth above during the past five years.
Nancy G. Brinker is the Founding Chair of the Susan G. Komen Breast Cancer
Foundation, one of the nation's leading sponsors of breast cancer research and
awareness programs. Ms. Brinker is also a consultant and public speaker on
healthcare issues. Ms. Brinker currently serves as a director of The Meditrust
Companies. Ms. Brinker was Chief Executive Officer of In Your Corner, Inc., a
wellness products and information company from 1995 to 1998. Ms. Brinker was
formerly a director of PRN.
Stephen E. Jones, M.D. received his medical degree from Case Western Reserve
School of Medicine and post-doctoral training and education at Stanford
University. Dr. Jones is a board certified medical oncologist and internist and
a member of the American Society of Clinical Oncology and the American Society
of Hematology. Dr. Jones' medical practice, Texas Oncology, P.A., is managed by
PRN. Dr. Jones was formerly a director of PRN.
Robert A. Ortenzio has been President and Chief Operating Officer of Select
Medical Corporation since February 1997. Prior to that time, Mr. Ortenzio was a
co-founder and president of Continental Medical 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.
Directors Serving a Term Expiring at the 2002 Annual Meeting (Class III
Directors)
<TABLE>
<CAPTION>
Name of Director Age Principal Occupation Director Since
---------------- --- -------------------- ---------------
<S> <C> <C> <C>
Russell L. Carson 56 General partner of Welsh, Carson, Anderson & Stowe, 1992
an investment partnership.
Richard B. Mayor 66 Of Counsel, Mayor, Day, Caldwell & Keeton, L.L.P., 1993
a law firm.
Boone Powell, Jr. 63 President and Chief Executive Officer of Baylor 1999
Health Care System and Baylor University Medical
Center.
R. Dale Ross 53 Chairman of the Board of Directors and Chief 1992
Executive Officer of US Oncology.
</TABLE>
Except as set forth below, each of the Class III Directors has been
engaged in his principal occupation set forth above during the past five years.
Russell L. Carson is a director of Quorum Health Group, Inc.
5
<PAGE>
Richard B. Mayor has been of counsel to the Houston law firm of Mayor, Day,
Caldwell & Keeton, L.L.P. since January 1999, and prior to that he was a partner
at that firm since its formation in February 1982. Mayor, Day, Caldwell &
Keeton, L.L.P. serves as principal outside legal counsel to US Oncology.
Boone Powell, Jr. serves as an active member of Voluntary Hospitals of America.
He is a director of Abbott Laboratories and Comerica Bank - Texas and is a
fellow of the American College of Health Care Executives. Mr. Powell was
previously a director of PRN.
R. Dale Ross has been Chairman of the Board of Directors and Chief Executive
Officer of US Oncology since December 1992.
Board Meetings and Committees
The board held four meetings in 1999. Each director attended at least 75%
of the Board meetings and committee meetings held during 1999 while he or she
was a member of the Board or relevant committee. The Board has an Audit
Committee, Compensation Committee, Nominating Committee and Executive Committee.
Each committee is described as follows:
The audit committee reviews external and internal audit plans and
activities, annual financial statements, and the Company's system of internal
financial controls, and approves all significant fees for audit, audit-related
and non-audit services provided by independent accountants. In addition, the
audit committee oversees the Company's risk management and compliance programs.
The audit committee members are Richard B. Mayor (Chairman), James E. Dalton and
Robert A. Ortenzio. The audit committee met four times in 1999.
The compensation committee reviews and recommends compensation for officers
and employees of US Oncology and recommends to the Board of Directors changes in
the Company's incentive compensation plans. The compensation committee is also
responsible for the administration of the Company's various stock option plans.
The members of the compensation committee are Russell L. Carson (Chairman),
Robert A. Ortenzio and Boone Powell, Jr. The compensation committee met four
times in 1999.
The executive committee has all of the powers of the Board of Directors as
a whole, other than the power to amend the Company's bylaws or to vote on any
matter which under Delaware corporate law requires stockholder approval. The
members of the executive committee are R. Dale Ross (Chairman), Russell L.
Carson, Richard B. Mayor and Boone Powell, Jr. The executive committee did not
meet during 1999.
The nominating committee has the power to nominate directors to be voted
upon by stockholders and to fill all vacancies on the Board of Directors or any
committee. The members of the nominating committee are Russell L. Carson
(chairman), R. Dale Ross, James E. Dalton, Richard B. Mayor and Boone Powell,
Jr. The nominating committee did not meet during 1999.
Stockholder Nominations for Director
As described above, the nominating committee of the Board of Directors is
responsible for selecting the board's nominees to serve as directors of the
Company. Stockholders of the Company may also nominate individuals to serve as
directors provided that they comply with the procedures set forth in the
Company's Certificate of Incorporation and Bylaws. In addition, the nominating
committee will consider any nominations submitted by stockholders in compliance
with the procedures described below.
Under the Company's Certificate of Incorporation and Bylaws, notice of
proposed stockholder nominations for the election of directors must be timely
given in writing to the Company's Secretary or Board of Directors prior to the
meeting at which directors are to be elected. To be timely, a notice given with
respect to any matter to be considered at an annual meeting of the stockholders
(including nominations of director candidates) must be received at the Company's
principal executive offices at least 120 days before the anniversary of the date
on which the Company's proxy statement was released to its stockholders in
connection with the previous year's annual meeting of stockholders or, if no
annual meeting was held the previous year or the date of the annual meeting has
been changed by more than 30 days, no later than ten days following the earlier
of the date a notice of meeting is mailed or given to stockholders or the date
when public disclosure of the meeting is otherwise made.
6
<PAGE>
With the notice, the stockholder must furnish the proposed nominee's
written consent to being named as a nominee for election as a director and to
serve as a director if elected. The stockholder must also provide the following
information about the proposed nominee for director:
. the name, age, business address and residence address of such person,
. the principal occupation or employment of such person,
. the class and number of shares of capital stock of the Company which are
then beneficially owned by such person, and
. any other information relating to such person that is required by law or
regulation to be disclosed in solicitations of proxies for the election
of directors of the Company.
In addition, the stockholder must furnish the following information:
. the name and address, as they appear in the stock records of the
Company, of such stockholder,
. the class and number of shares of capital stock of the Company which are
then beneficially owned by such stockholder,
. a description of all arrangements or understandings between such
stockholder and each nominee for election as a director and any other
person or persons (naming such person or persons) relating to the
nomination proposed to be made by such stockholder, and
. any other information required by law or regulation to be provided by a
stockholder intending to nominate a person for election as a director of
the Company.
Any nominee for director may also be required, at the request of the Board
of Directors, to furnish to the Secretary of the Company any other information
concerning such nominee which is required to be included in a stockholder's
notice of a proposed nomination. No person will be eligible for election as a
director of the Company unless nominated in compliance with the foregoing
procedures. The chairman of a meeting of stockholders of the Company must
refuse to accept the nomination of any person not made in compliance with the
procedures described above. Any such defective nomination will be disregarded.
Director Compensation
During 1999, each member of the Board was paid $6,000 per quarter and
$1,500 for each meeting attended and was reimbursed for his or her reasonable
expenses in connection with attending board and committee meetings. Nonemployee
directors are also eligible to participate in US Oncology's 1993 Non-Employee
Director Stock Option Plan. Under that Plan, in 1999 each director other than
R. Dale Ross, was granted an option to purchase 15,000 shares of US Oncology
Common Stock. In addition, each director, other than Mr. Ross, was granted an
option to purchase 2,000 shares of US Oncology Common Stock for each committee
on which such director served.
7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND CERTAIN
STOCKHOLDERS
The following table shows how much US Oncology Common Stock was owned as of
April 3, 2000 by each director, each executive officer named in the Summary
Compensation Table, all directors and executive officers as a group, and each
holder of 5% or more of US Oncology's Common Stock.
<TABLE>
<CAPTION>
Number of Shares Owned Number of Shares that May
(including shares that may be Acquired Within 60 Days Percentage of
be acquired within 60 days Through Option Outstanding
Name through option exercises) Exercises Common Stock
- ----------------------------------- -------------------------- --------------------------- -------------
<S> <C> <C> <C>
R. Dale Ross 2,048,428 2,048,428 2.2%
Lloyd K. Everson, M.D. 502,166 457,864 *
L. Fred Pounds(3) 436,699 294,698 *
David S. Chernow 166,373 164,242 *
Joseph S. Bailes, M.D. 472,087 339,299(4) *
O. Edwin French(3) 18,460 0 *
Nancy G. Brinker 68,954 62,608 *
Russell L. Carson 1,987,157(5) 26,000 *
J. Taylor Crandall 3,735,288(6) 50,938 4.1%
James E. Dalton, Jr. 26,000 26,000 *
Robert W. Daly 40,869(7) 29,370 *
Stephen E. Jones, M.D. 89,419 15,000 *
Richard B. Mayor 122,454 51,000 *
Robert A. Ortenzio 82,007(8) 24,000 *
Boone Powell, Jr. 79,730(9) 55,930 *
Edward E. Rogoff, M.D. 380,078(10) 26,500 *
Burton S. Schwartz, M.D. 23,994 15,000 *
All directors and executive officers 10,804,673 4,191,485 11.5%
as a group (23 persons)
Texas Oncology, P.A. 8,252,093 0 9.1%
Two Lincoln Centre, Suite 900
5420 LBJ Freeway
Dallas, Texas 75240
The Kaufmann Fund, Inc. 4,859,000 0 5.4%
140 E. 45th Street
New York, NY 10017
_______________________
</TABLE>
* Less than one percent
1 Includes shares listed in column 2 that may be acquired through option
exercises.
2 Shares that can be acquired within 60 days through option exercises.
3 Individual has resigned from the Company.
4 Includes 10,000 options granted by Texas Oncology, P.A.
5 Includes 1,452,154 shares owned by Welsh, Carson, Anderson & Stowe V, L.P.
Mr. Carson disclaims beneficial ownership of such shares that exceed his
pecuniary interest therein. Includes 11,000 shares held by family trusts.
Mr. Carson disclaims beneficial ownership of such shares.
6 All shares are beneficially owned by FW Physicians Investors, L.P., an
investment limited partnership ("FW Physicians"). Mr. Crandall serves as
President of Group 31, Inc., the general partner of FW Physicians.
7 Includes 1,499 shares representing Mr. Daly's pro rata ownership of a
partnership.
8 Excludes 14,990 shares of US Oncology Common Stock with respect to which Mr.
Ortenzio has a remainder interest.
9 Does not include 2,311,054 shares owned by Baylor University Medical Center,
for which Mr. Powell serves as President and Chief Executive Officer. Mr.
Powell disclaims beneficial ownership of such shares.
10 Includes 20,000 shares held by the Miked Profit Sharing Plan, of which Dr.
Rogoff is a trustee and beneficiary.
8
<PAGE>
Compensation of Executive Officers
The following tables set forth (i) the remuneration paid by the Company for
the three fiscal years ended December 31, 1999 to the Chief Executive Officer
and the five 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 amount realized upon the exercise of stock options
during the last fiscal year and 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 1999 $528,592 $337,178 0 700,000
Chairman of the Board, 1998 $399,000 $ 0 0 200,000
Chief Executive Officer 1997 $350,000 $ 0 0 0
and Director
Lloyd K. Everson, M.D. 1999 $410,698 $254,783 0 400,000
President 1998 $334,875 $ 0 0 175,000
1997 $293,750 $ 0 0 0
David S. Chernow 1999 $265,763 $124,667 0 400,000
President, Physician Services 1998 $200,000 $ 0 0 100,000
Group 1997 $135,000 $ 42,800 0 60,000
Joseph S. Bailes, M.D. 1999 $291,924 $ 67,500 76,153(1) 400,000
Executive Vice President 1998 $248,072 $ 0 0 21,000
1997 $225,000 $ 0 0 160,000
L. Fred Pounds 1999 $336,069 $147,355 0 200,000
Former Vice President of Finance,.. 1998 $274,986 $ 0 0 100,000
Treasurer and Chief 1997 $239,119 $ 0 0 0
Financial Officer
(resigned from the Company
effective March 31, 2000)
O. Edwin French 1999 $316,944 $ 75,000 600,000(2) 200,000
Former Chief Operating Officer 1998 $276,920 $ 0 0 60,000
(resigned from the Company 1997 $ 59,169 $ 0 0 350,000
in November 1999)
</TABLE>
________________________________________
(1) Relocation expenses.
(2) Represents a severance payment paid to Mr. French as a result of his
departure from the Company within six months after a "change of control" as
defined in his employment agreement .
9
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Individual Grants
----------------------------------
% of Total
Number of Options Potential Realizable Value
Securities Granted to at Assumed Annual Rates
Underlying Employees Exercise Stock Price Appreciation
Options in Fiscal Price Per Expiration for Option Term
----------------------------
Granted Year Share (1) Date 5% 10%
---------- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross 160,000 2.6% $ 7.70 3/22/09 $ 774,798 $1,963,491
240,000 3.9% $10.08 6/15/09 $1,584,828 $3,855,582
300,000 4.8% $ 4.05 11/29/09 $ 764,107 $1,936,397
Lloyd K. Everson, M.D. 80,000 1.3% $ 7.70 3/22/09 $ 387,399 $ 981,745
120,000 1.9% $10.08 6/15/09 $ 792,414 $1,927,791
200,000 3.2% $ 4.05 11/29/09 $ 509,405 $1,290,931
David S. Chernow 80,000 1.3% $ 7.70 3/22/09 $ 387,399 $ 981,745
120,000 1.9% $10.08 6/15/09 $ 792,414 $1,927,791
200,000 3.2% $ 4.05 11/29/09 $ 509,405 $1,290,931
Joseph S. Bailes, M.D. 200,000 3.2% $10.08 6/15/09 $1,267,862 $3,212,985
200,000 3.2% $ 4.05 11/29/09 $ 509,405 $1,290,931
L. Fred Pounds 80,000 1.3% $ 7.70 3/22/09 $ 387,399 $ 981,745
120,000 1.9% $10.08 6/15/09 $ 792,414 $1,927,791
200,000 3.2% $ 4.05 11/29/09 $ 509,405 $1,290,931
O. Edwin French 200,000 3.2% $10.08 6/15/09 $1,267,862 $3,212,985
- --------------
</TABLE>
(1) The exercise price per share for each option granted in 1999 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.
1999 OPTION EXERCISES AND DECEMBER 31, 1999 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 Value -------------------------- ---------------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------- -------- ----------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Dale Ross 0 $0 1,918,428 900,000 $ 1,818,860 $266,250
Lloyd K. Everson 0 $0 382,864 565,000 $ 10,000 $177,500
David S. Chernow 0 $0 54,400 364,600 $ 300 $177,800
Joseph S. Bailes, M.D. 0 $0 269,299 400,000 $ 58,400 $177,500
L. Fred Pounds 0 $0 356,695 534,717 $ 369,195 $179,739
O. Edwin French 0 $0 385,400 0 $ 0 $000,000
- --------------
</TABLE>
(1) Based upon a closing price of the Company's Common Stock on December 31,
1999, as reported by The Nasdaq Stock Market, of $4.9375 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 US Oncology and its
stockholders (through stockholders' derivative suits on behalf of US Oncology)
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.
US Oncology's Bylaws provide that US Oncology will indemnify its directors
and officers to the fullest extent permissible under Delaware law. These
indemnification provisions require US Oncology 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 US Oncology 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.
Employment Contracts and Change in Control Agreements
The Company has entered into employment agreements with each of the
executive officers named in the summary compensation table above. Generally, the
employment agreements establish the executive's base salary and contain a
noncompetition agreement for a period of one year following termination. The
employment agreement can be terminated at any time by the Company for "cause,"
as defined in the employment agreement, and by the employee upon 30 days written
notice. Each agreement can also be terminated if the employee is disabled or
unable to perform his assigned duties for a continuous period of six months. In
the event the employee is terminated by the Company without cause, or in the
event that the employee terminates his or her employment within six months of a
"change of control," the Company will continue to pay the employee a salary for
a period of two years following such termination. A "change of control" occurs
for purposes of the employment agreements if (i) the transfer of beneficial
ownership of a majority of the outstanding US Oncology shares to any person,
entity, or group (as defined in Section 13(d)(3)of the Securities Exchange Act
of 1934, as amended; (ii) the stockholders of the Company prior to any merger,
consolidation or other transaction do not continue to own at least fifty percent
(50%) of the surviving entity following such merger, consolidation or other
transaction; (iii) the Company sells all or substantially all of its assets to
another entity that is not a subsidiary of the Company; (iv) the Company is
materially or completely liquidated; or (v) during any consecutive two-year
period, individuals who constituted the Board of Directors of the Company
(together with any new directors whose election by the Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of at least three quarters of the directors still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office. A "change of control" shall
not be deemed to have occurred in the event of a tender offer, leveraged buyout,
leveraged recapitalization or similar transaction in which one or more then
executive officers of the Company participates directly or indirectly as an
investor or participant in such transaction.
11
<PAGE>
REPORT OF COMPENSATION COMMITTEE OF THE BOARD
ON EXECUTIVE COMPENSATION
The following is the Report of the Compensation Committee of US Oncology
describing the compensation policies and rationale applicable to US Oncology's
executive officers. This information shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission nor shall
this information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that US Oncology specifically incorporates it by
reference into a filing.
Until June 15, 1999, the Compensation Committee was comprised of Russell L.
Carson (Chairman), Robert A. Ortenzio and James E. Dalton. Since that date, the
Compensation Committee has been comprised of Russell L. Carson, Robert A.
Ortenzio and Boone Powell, Jr. None of them is employed by the Company. Each
of them is also an "outside director," as defined under Section 162(m) of the
Internal Revenue Code.
Compensation Philosophy and Committee Charter
US Oncology's philosophy in setting its compensation policies for executive
officers is to maximize stockholder value over time. The Compensation Committee
sets US Oncology's compensation policies for executive officers, including the
Chief Executive Officer, and evaluates the performance of the officers. Under
its charter, 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 Committee strongly believes
that executive compensation should be directly linked to improvements in
corporate performance and increases in stockholder value and should be
consistent with US Oncology's business strategy.
US Oncology needs to hire and retain high-quality, talented individuals to
serve as officers and employees. To that end, US Oncology offers compensation
that is designed to be competitive and to reward superior individual and company
performance with superior levels of compensation. The compensation committee is
expected to counsel the Chief Executive Officer regarding employment and
compensation matters, to develop, review and evaluate policies and make
recommendations with respect to benefit plans and programs or other compensation
arrangements, to review and approve discretionary grants under the Company's
stock option plans and to report to stockholders in the proxy statement on the
Company's compensation policies. The committee reports and makes
recommendations to US Oncology's Board of Directors.
Components of Executive Compensation
The compensation committee focuses primarily on the following three
components in forming compensation packages for executive officers:
. Base Salary
. Incentive Bonuses
. Long-Term Incentives
Base Salary
Base salary levels are intended to be competitive with companies in US
Oncology's peer group for employees in similar geographical locations. Salary
levels are based upon the executive's background, qualifications and job
performance at US Oncology.
Incentive Bonuses
Cash bonuses are awarded based upon achievement of individual and Company
goals. The primary basis for awarding cash bonuses is the achievement of
certain earnings per share goals for a given year.
Long-Term Incentives
Stock-based incentives are used to reward officers and to motivate them to
achieve US Oncology's longer-term goals. US Oncology has generally placed
greater emphasis on stock-based incentives than on cash bonuses in its
12
<PAGE>
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, 1999, 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, US Oncology puts a
significant portion of each executive officer's total compensation at risk,
based upon the financial performance of US Oncology. Furthermore, each
executive's personal net worth may increase with any long-term appreciation of
US Oncology's stock. In this manner, US Oncology seeks to align the long-term
interests of its executive officers with the interest of US Oncology and its
stockholders.
For 2000 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.
Compensation of the Chief Executive Officer is intended to be competitive
with compensation paid by companies in US Oncology's peer group in similar
geographical locations. The Chief Executive Officer's salary in 1999 was based
upon the Compensation Committee's evaluation of his performance and US
Oncology's performance, and the achievement of certain specified goals,
including the merger between AOR and PRN. Company performance is measured by,
among other things, corporate net earnings, revenues and a comparison to US
Oncology's peer group. Measurements used to evaluate the Chief Executive
Officer, in addition to earnings, 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 US
Oncology's compensation policy.
Russell L. Carson, Chairman
Robert A. Ortenzio
Boone Powell, Jr.
13
<PAGE>
PERFORMANCE GRAPH
The graph below compares the value as of December 31 of each of the five
years ending with 1999 of $100 invested on June 13, 1995 (the date of the
Company's initial public offering) in (a) US Oncology Common Stock; (b) the
Nasdaq Stock Market Index and (c) the Nasdaq Health Services Index, an index
that includes all U.S. and Canadian healthcare service companies listed on the
Nasdaq Stock Market. The values calculated assume the reinvestment of all
dividends. The information contained in the performance graph shall not be
deemed "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or the Exchange Act, as amended, except
to the extent that US Oncology specifically incorporates it by reference into
such a filing. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
[LINE GRAPH WITH THE FOLLOWING PLOT POINTS APPEARS HERE]
<TABLE>
<CAPTION>
June 13, December 31, December 31, December 31, December 31, December 31,
1995 1995 1996 1997 1998 1999
-------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
US Oncology 100 173.66 73.21 114.29 104.02 35.02
Nasdaq Stock Market Index 100 128.78 128.57 131.03 111.02 91.76
Nasdaq Health Services Index 100 118.49 145.78 178.63 251.71 454.74
</TABLE>
14
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1993
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
US Oncology's Board of Directors has adopted, subject to approval by US
Oncology's stockholders, an amendment to US Oncology's 1993 Non-Employee
Director Stock Option Plan (the "Director Plan") providing that at this 2000
annual meeting and at each subsequent annual meeting of stockholders, each
Eligible Director (as defined in the Director Plan) in office after giving
effect to the election of directors at such annual meeting shall receive an
option to purchase 5,000 shares of US Oncology Common Stock and shall also
receive an option to purchase 1,000 shares for each board committee to which
such director is appointed at the first board meeting following such annual
meeting. The options will have an exercise price of fair market value on the
date of grant, determined in accordance with the provisions of the Director
Plan. The amendment provides that the options would vest in their entirety six
months after the grant date.
Text of the Amendment
The text of the amendment is as follows:
Capitalized terms not otherwise defined in this Amendment to the Director
Plan have the meanings assigned thereto in the Director Plan. The Director Plan
is hereby amended as follows:
Sections III (b), III (c) and III (f) of the Director Plan are hereby
amended and to read in their entirety as follows:
"(b) On the date of the 2000 annual meeting of stockholders of the
Company and each annual meeting of stockholders thereafter, each
Eligible Director who is in office after giving effect to the election
of directors at such meeting shall receive, without the exercise of the
discretion of any person or persons, an option to purchase 5,000 shares
of Common Stock."
"(c) At the first board meeting following the 2000 annual meeting
of stockholders and each annual meeting of stockholders thereafter, each
Eligible Director appointed at such meeting to any committee of the
Board of Directors 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."
"(f) 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."
Amendment to Provide for Annual Grants to all Eligible Directors
Under the Director Plan as currently in effect, there is no provision for
any further automatic or discretionary stock option grants. The amendment
provides for an annual grant of an option to purchase 5,000 shares of US
Oncology Common Stock immediately after each annual meeting to all Eligible
Directors (as defined in the Director Plan) who are in office after the meeting.
The proposed amendment would also provide for an option grant to directors for
serving on board committees by granting an option to purchase 1,000 shares to
each director appointed to a board committee for each committee such director is
appointed to at the first board meeting following each annual meeting of
stockholders. The number of shares subject to these grants would be adjusted as
more fully described in the Director Plan to reflect changes in US Oncology'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.
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 US Oncology and to enhance the future
growth of US Oncology by furthering such persons' identification with the
interests of US Oncology and its stockholders. The US Oncology board of
directors believes that the foregoing amendment will further these purposes.
The number of shares authorized to be issued under the Director Plan is not
being increased by the amendment.
15
<PAGE>
Description of the Director Plan
The following is a description of the Director Plan, as amended by the
proposed amendments.
The Director Plan was adopted by US Oncology's Board of Directors in
June 1993 and by US Oncology's stockholders in February 1994. The Director Plan
provides for the automatic grant of options to each director of US Oncology who
is not an employee or officer of US Oncology. On the date of each annual
meeting of stockholders of US Oncology, each Eligible Director who is in office
after giving effect to the elections held at such meeting will receive a grant
of options to purchase 5,000 shares of US Oncology Common Stock. In addition,
each Eligible Director who is appointed to a board committee at the first board
meeting after each annual meeting of stockholders would receive an option to
purchase 1,000 shares of US Oncology 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 US Oncology 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 April 17, 2000, options to purchase an aggregate of 316,000 shares
of US Oncology Common Stock had been granted (exclusive of cancellations) to the
Eligible Directors, and 262,000 were outstanding at a weighted average exercise
price of $10.05 per share. Under the Director Plan, a total of 600,000 shares
of US Oncology 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. 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 Internal Revenue 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 US Oncology Common Stock on such date
exceeds the exercise price of the options.
US Oncology 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. US Oncology will ordinarily be
entitled to a deduction equivalent to the amount of ordinary income recognized
by optionees.
Director Plan Benefits Table
It is expected that the following grants would be made under the
Director Plan, as amended, during 2000:
Total Shares
Underlying
Name and Position Option Grants(1)
----------------- ------------------
Non-Executive Directors as a group......... 62,000
_____________________
(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 US
Oncology Common Stock on the date of grant.
Vote Required for Approval
Approval of the proposed amendment to US Oncology's 1993 Non-Employee
Director Stock Option Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of US Oncology Common Stock.
16
<PAGE>
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO US ONCOLOGY'S 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. DULY
EXECUTED PROXIES WILL BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
General
The Company is asking its stockholders to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants for the year
2000. In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the selection is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors determines that such a change would be in the Company's best
interests.
PricewaterhouseCoopers LLP has audited the Company's financial statements
annually since its formation in 1992. Its representatives will be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
Vote Required for Approval
Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year 2000 requires the affirmative
vote of a majority of the Company's outstanding shares that are present and
entitled to vote at the meeting.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE YEAR 2000. DULY EXECUTED PROXIES WILL
BE SO VOTED UNLESS A CONTRARY INDICATION IS MADE.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
US Oncology does not believe that any of the transactions described below
were made on terms less favorable to US Oncology 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.
Dr. Rogoff, a director of US Oncology, is a practicing physician with
Arizona Oncology Associates, P.C., a physician group affiliated with US Oncology
since January 1995. During 1999, Arizona Oncology Associates, P.C. paid the
Company an aggregate of approximately $5.7 million in management fees. In
addition, US Oncology leases office space from an entity affiliated with Dr.
Rogoff. Payments under this lease were approximately $51,400 in 1999.
Richard B. Mayor, a director of US Oncology, is of counsel to Mayor, Day,
Caldwell & Keeton, L.L.P., US Oncology's principal outside legal counsel.
The Company and Texas Oncology, P.A. are parties to a Service Agreement
pursuant to which the Company provides Texas Oncology, P.A. with facilities,
equipment, non-physician personnel, and administrative, a management, and non-
medical advisory services, as well as services relating to the purchasing and
administering of supplies. In 1999, Texas Oncology, P.A. paid the Company an
aggregate of approximately $270.0 million pursuant to the Texas Oncology, P.A.
Service Agreement. That fee amount is equal to 35% of the earnings before
interest and taxes of Texas Oncology, P.A., plus direct expenses of Texas
Oncology, P.A. Dr. Jones, who is a director of the Company, and Dr. Bailes, who
is an Executive Vice President of the Company, are employed by Texas Oncology,
P.A. Texas Oncology, P.A. beneficially owns approximately 9.1% of the Company's
outstanding Common Stock. At December 31, 1999, Texas Oncology, P.A. was
17
<PAGE>
indebted to the Company in the aggregate amount of approximately $10.1 million.
This indebtedness was incurred when the Company advanced working capital to
Texas Oncology, P.A. for various uses, including the development of new markets
and physician salaries and bonuses. This indebtedness bears interest at a rate
negotiated by the Company and Texas Oncology, P.A. that approximates the
published prime lending rate (8.5% at December 31, 1999). Effective November 1,
1998, the Company and Texas Oncology, P.A. entered into a Second Amended and
Restated Service Agreement. In consideration for entering into the amended
agreement, the Company paid Texas Oncology, P.A. $1.5 million in 1998 and $7.5
million in 1999.
The Company leases facilities from affiliates of Baylor University Medical
Center ("BUMC"). Additionally, affiliates of BUMC provide the Company various
services, including telecommunications and maintenance services. Mr. Powell, a
director of the Company, is president and chief executive officer of BUMC. In
1999, payments by the Company to BUMC totaled an aggregate of approximately $2.4
million for these services.
The Company and Minnesota Oncology Hematology, P.A. ("Minnesota Oncology")
entered into a Service Agreement effective July 1, 1996. Dr. Schwartz, a
director of the Company, is president and medical director of Minnesota
Oncology. During 1999, Minnesota Oncology paid the Company an aggregate of
approximately $3.8 million in management fees pursuant to its service agreement.
As part of the consideration for Minnesota Oncology entering into the
service agreement, the Company is required to make quarterly payments of
$463,996 to Minnesota Oncology through July 1, 2000. During 1999, the Company
paid Minnesota Oncology an aggregate of $1,855,984 pursuant to such quarterly
payments. In addition, the Company is required to issue a prescribed number of
shares of the Company Common Stock to Minnesota Oncology on July 1 of each year
through July 1, 2001. During 1999, the Company issued 104,356 shares of Common
Stock to Minnesota Oncology pursuant to such yearly issuances.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Under U.S. securities laws, the Company's directors, executive officers and
any persons holding more than ten percent (10%) of the Company's Common Stock
are required to report their initial ownership of the Company's Common Stock to
the Securities and exchange Commission (SEC). Specific due dates have been
established for the filing of these reports.
US Oncology believes that during 1999, its officers, directors and 10%
shareholder compiled with requirements for reporting ownership and ownership
change in US Oncology Common Stock pursuant to Section 16(a) of the Securities
Exchange Act of 1934, except that R. Allen Pittman, filed a report regarding his
purchase of 15,000 shares after the applicable deadline.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
In accordance with the rules established by the SEC, any stockholder
proposal intended for inclusion in the proxy statement for next year's annual
meeting of stockholders, which is anticipated to be held in May 2001, must be
received by the Company no later than December 17, 2000. Such proposal should
be sent to the Secretary of the Company at 16825 Northchase Drive, Suite 1300,
Houston, Texas.
OTHER MATTERS
We do not know of any other matters to be submitted to the stockholders at
the Annual Meeting.
18
<PAGE>
(FRONT SIDE OF PROXY)
US ONCOLOGY, INC.
ANNUAL MEETING
MAY 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 on the reverse, all the
shares of the Common Stock of US Oncology, 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 May 18, 2000, or any adjournment thereof.
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, 1999 IS HEREBY
ACKNOWLEDGED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 WHICH ARE BEING PROPOSED BY THE BOARD OF DIRECTORS OF
US ONCOLOGY, INC.
(TO BE SIGNED ON REVERSE SIDE)
_______________________________________________________________________________
(BACK SIDE OF PROXY)
PLEASE MARK, DATE AND SIGN THIS PROXY.
VOTE FOR all nominees WITHHOLD AUTHORITY
listed, except as marked to to vote for all nominees
the contrary below (if any) at right
1. ELECTION OF Nominees: J. Taylor Crandall
FOUR CLASS I [__] [__] James E. Dalton
DIRECTORS: Edward E. Rogoff, M.D.
Burton S. Schwartz, M.D.
(To withhold authority to vote for any individual nominee, strike a line through
the nominee's name in the list at right).
FOR AGAINST ABSTAIN
2. APPROVAL OF AMENDMENT TO THE [___] [___] [___]
COMPANY'S 1993 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
3. RATIFICATION OF APPOINTMENT OF [___] [___] [___]
PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S
4. In accordance with their discretion upon such other business as may properly
come before the meeting or any adjournment thereof.
Signature(s) of Stockholder(s)__________________________________________
Dated:_____________, 2000.
NOTE: (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.)
