<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
Physicians Resource Group, 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:
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(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:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Physicians Resource Group, Inc.
Three Lincoln Centre
5430 LBJ Freeway
Suite 1540
Dallas, TX 75240
April 22, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Physicians Resource Group, Inc., a Delaware corporation ("PRG") to
be held 10:00 a.m., local time, on Wednesday, May 21, 1997, at the Doubletree
Hotel at Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240.
The attached Notice of Annual Meeting and Proxy Statement fully describe
the formal business to be transacted at the Meeting, which includes (i) the
election of nominees for the class of Directors whose term expires in 1997, (ii)
the approval of the Employee Stock Purchase Plan and Amendment One thereto,
(iii) the approval of amendments to the 1995 Health Care Professionals Stock
Option Plan and the Amended and Restated 1995 Stock Option Plan, (iv) the
approval of new stock option grants in connection with the cancellation of
existing stock option grants, (v) the approval of an arrangement related to the
purchase of PRG Convertible Preferred Stock by Emmett E. Moore, Chairman of the
Board of Directors and Chief Executive Officer of PRG and (vi) such other
matters as may properly come before the Meeting or any adjournments thereof.
Directors and officers of PRG will be present to help host the Meeting and
to respond to any questions that our stockholders may have. I hope that you
will be able to attend.
PRG's Board of Directors believes that a favorable vote on each of the
matters to be considered at the Meeting is in the best interest of PRG and its
stockholders and unanimously recommends a vote "FOR" each such matter.
Accordingly, we urge you to review the attached material carefully and to return
the enclosed Proxy promptly. Whether or not you plan to attend the Meeting,
please complete, sign, date and return your proxy in the enclosed envelope. If
you attend the Meeting, you may vote in person if you wish, even though you have
previously returned your proxy. It is important that your shares be represented
and voted at the Meeting.
On behalf of your Board of Directors, thank you for your support.
Sincerely,
/S/ Emmett E. Moore
-------------------------------------
Emmett E. Moore
Chief Executive Officer
and Chairman of the Board of Directors
<PAGE>
Physicians Resource Group, Inc.
Three Lincoln Centre
5430 LBJ Freeway
Suite 1540
Dallas, TX 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Physicians Resource Group, Inc. ("PRG") will be held at 10:00
a.m., local time, on Wednesday, May 21, 1997, at the Doubletree Hotel at Lincoln
Centre, 5410 LBJ Freeway, Dallas, Texas 75240, for the following purposes:
(1) The election of nominees for the class of Directors whose term
expires in 1997.
(2) The approval of the Employee Stock Purchase Plan and Amendment
One thereto.
(3) The approval of amendments to the 1995 Health Care Professionals
Stock Option Plan and the Amended and Restated 1995 Stock Option Plan.
(4) The approval of new stock option grants in connection with the
cancellation of existing stock option grants.
(5) The approval of an arrangement related to the purchase of PRG
Convertible Preferred Stock by Emmett E. Moore, Chairman of the Board of
Directors and Chief Executive Officer of PRG.
(6) Such other matters as may properly come before the Meeting or any
adjournments thereof.
The close of business on April 11, 1997 has been fixed as the record date
for determining stockholders entitled to notice of and to vote at the Meeting or
any adjournments thereof. For a period of at least 10 days prior to the
Meeting, a complete list of stockholders entitled to vote at the Meeting will be
open for examination by any stockholder during ordinary business hours at the
offices of PRG at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1540, Dallas, TX
75240.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY TO ASSURE THAT YOUR SHARES ARE REPRESENTED
AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE
UNITED STATES) IS PROVIDED. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL
VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR
SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO
VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN
YOUR NAME.
BY ORDER OF THE BOARD OF DIRECTORS
Dallas, Texas
April 22, 1997 /S/ Richard J. D'Amico
----------------------------
Richard J. D'Amico
Secretary
<PAGE>
Physicians Resource Group, Inc.
Three Lincoln Centre
5430 LBJ Freeway
Suite 1540
Dallas, TX 75240
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
This Proxy Statement is being first mailed on or about April 22, 1997 to
stockholders of Physicians Resource Group, Inc., a Delaware corporation ("PRG")
by the Board of Directors (the "Board") to solicit proxies (the "Proxies") for
use at the Annual Meeting of Stockholders (the "Meeting") to be held at 10:00
a.m., local time, on Wednesday, May 21, 1997, at the Doubletree Hotel at Lincoln
Centre, 5410 LBJ Freeway, Dallas, Texas 75240, or at such other time and place
to which the Meeting may be adjourned (the "Meeting Date").
The purpose of the Meeting is to consider and act upon (i) the election of
nominees for the class of Directors whose term expires in 1997, (ii) the
approval of the Employee Stock Purchase Plan and Amendment One thereto, (iii)
the approval of amendments to the 1995 Health Care Professionals Stock Option
Plan (the "Health Care Professionals Plan") and the Amended and Restated 1995
Stock Option Plan (the "Amended and Restated PRG Plan"), (iv) the approval of
new stock option grants in connection with the cancellation of existing stock
option grants, (v) the approval of an arrangement related to the purchase of PRG
Convertible Preferred Stock by Emmett E. Moore, Chairman of the Board and Chief
Executive Officer of PRG and (vi) such other matters as may properly come before
the Meeting or any adjournments thereof.
All shares represented by valid Proxies, unless the stockholder otherwise
specifies, will be voted (i) FOR the election of the persons named herein under
"Election of Directors" as nominees for election as directors of PRG for the
term described therein, (ii) FOR the approval of the Employee Stock Purchase
Plan and Amendment One thereto, as described herein under "Employee Stock
Purchase Plan", (iii) FOR the amendments to the Health Care Professionals Plan
and the Amended and Restated PRG Plan, as described herein under "Amendments to
the 1995 Health Care Professionals Stock Option Plan and the Amended and
Restated 1995 Stock Option Plan", (iv) FOR the approval of new stock option
grants in connection with the cancellation of existing stock option grants, as
described herein under "New Stock Option Grants in Connection with the
Cancellation of Existing Stock Option Grants", (v) FOR the approval of the
purchase of PRG Convertible Preferred Stock by Emmett E. Moore, as described
herein under "Sale of Shares to Emmett E. Moore" and (vi) at the discretion of
the Proxy holders with regard to any other matter that may properly come before
the Meeting or any adjournments thereof.
Where a stockholder has appropriately specified how a Proxy is to be voted,
it will be voted accordingly. The Proxy may be revoked at any time by providing
written notice of such revocation to Chase Mellon Shareholder Services, L.L.C.,
600 Willow Tree Road, Leonia, New Jersey 07605, Attention: Norma Cianfaglione at
any time prior to the meeting. If notice of revocation is not received prior to
the meeting, a stockholder may nevertheless revoke a Proxy if the stockholder
attends the Meeting and desires to vote in person; however, if your shares are
held of record by a broker, bank or other nominee and you wish to vote at the
meeting, you must obtain from the record holder a proxy issued in your name.
RECORD DATE AND VOTING SECURITIES
The record date for determining the stockholders entitled to vote at the
Meeting is the close of business on Friday, April 11, 1997 (the "Record Date"),
at which time PRG had issued and outstanding 29,990,676 shares of Common Stock.
Common Stock is the only class of outstanding voting securities of PRG.
<PAGE>
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum to transact business. Each share represented at the Meeting
in person or by proxy will be counted toward a quorum. In deciding all
questions and other matters, a holder of Common Stock on the Record Date shall
be entitled to cast one vote for each share of Common Stock registered in his or
her name.
In order to be elected a director, a nominee must receive a plurality of
the votes of the shares of Common Stock present in person or represented by
proxy at the Meeting. Adoption of the proposal to (i) approve the grant of new
stock options in connection with the cancellation of existing stock option
grants (ii) approve the Employee Stock Purchase Plan and Amendment One thereto
and (iii) approve the amendments to the Health Care Professionals Plan and
Amended and Restated PRG Plan require, with respect to such proposal, the
affirmative vote of the holders of the majority of the shares of Common Stock,
present in person or represented by proxy at the Meeting, which are entitled to
vote and are voted either for or against such proposal. Adoption of the
arrangement related to the purchase of PRG Convertible Preferred Stock by Emmett
E. Moore requires the affirmative vote of the holders of the majority of the
shares of Common Stock, present in person or represented by proxy at the
Meeting, which are entitled to vote and are voted either for or against such
proposal, provided that the total vote cast on such proposal represents a
majority in interest of all securities entitled to vote on such proposal. Votes
that are withheld and broker non-votes will not be counted in the election of
directors or in the vote to approve any proposal set forth herein, but will be
counted toward a quorum. Abstentions may be specified and will have the same
effect as a vote against a proposal. Broker non-votes will not be counted as
having been voted with respect to a proposal.
PROPOSAL I - ELECTION OF DIRECTORS
The Board is divided into three classes. The Board of PRG presently
consists of seventeen directors, with two classes consisting of six directors
and one class consisting of five directors. Members of each class of directors
serve for a term of three years. Each director shall serve until the Annual
Meeting of Stockholders in the year in which his term expires or until his
successor is elected and shall have qualified.
Six directors, Emmett E. Moore, Joe E. Ellis, O.D., Charles D. Fritch,
M.D., Bruce E. Herron, M.D., James W. Rayner, M.D. and Kenneth C. Westfield,
M.D., are in the class whose term of office expires in 1997. The Board has
nominated Messrs. Moore, Ellis, Fritch, Herron, Rayner and Westfield for
reelection as directors at the Meeting to serve for a three-year term expiring
at PRG's Annual Meeting of Stockholders in 2000 or until their successors are
elected and shall have qualified.
Each of the nominees has indicated his willingness to serve as a member of
the Board if reelected; however, in case any nominee shall become unavailable
for reelection to the Board for any reason not presently known or contemplated,
the Proxy holders have discretionary authority to vote the Proxy for a
substitute nominee or nominees. Proxies cannot be voted for more than six
nominees. The following sets forth information as of April 1, 1997 as to the
nominees for reelection at the Meeting and each of the directors whose term of
office will continue after the Meeting, including their ages, present principal
occupations, other business experience during the last five years, membership on
committees of the Board and directorships in other publicly-held companies.
<TABLE>
<CAPTION>
Term as
Director
Name Age Position Expires
- ---- --- -------- --------
<S> <C> <C> <C>
Nominees for a three-year term ending in 2000:
Emmett E. Moore................................. 55 Chairman of the Board and Chief Executive 1997
Officer
Joe E. Ellis, O.D............................... 40 Director 1997
Charles D. Fritch, M.D.......................... 56 Director 1997
Bruce E. Herron, M.D............................ 53 Director 1997
James W. Rayner, M.D............................ 57 Director 1997
Kenneth C. Westfield, M.D....................... 52 Director 1997
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Continuing Directors:
Alan C. Baum, M.D............................... 55 Director 1998
Lucius E. Burch, III............................ 55 Director 1998
Richard A. Gilleland ........................... 52 Director 1998
David Meyer, M.D................................ 59 Director 1998
David M. Schneider, M.D......................... 50 Director 1998
P. Harold Wallar, M.D........................... 53 Director 1998
Richard M. Owen................................. 43 President and Director 1999
James E. McDonald, II, M.D...................... 52 Director 1999
Joseph C. Noreika, M.D.......................... 46 Director 1999
Paul M. Shimoff, M.D............................ 49 Director 1999
Ronald L. Stanfa, M.D........................... 49 Director 1999
</TABLE>
Alan C. Baum, M.D. has served as a director of PRG since June 28, 1995.
Dr. Baum served as Vice President of Texas Eye Institute and Associates from
1973 to date, where he has been in the practice of general ophthalmology with an
emphasis on oculoplastic surgery. Dr. Baum is the chairman of the Board of
Trustees of the Texas Medical Association and Past President of the Texas
Ophthalmological Association. He has served as President of the Southwest
Branch of the Harris County Medical Society. Dr. Baum has acted as chief of
staff for Memorial Southeast Hospital, as well as chairman of Ophthalmology
sections at both Memorial SE and SW hospitals in Houston. Dr. Baum received his
M.D. Degree in 1968 from the University of Texas Medical Branch at Galveston,
and completed his residency in 1972 from the University of Texas Medical School,
Houston.
Lucius E. Burch, III has served as a director of PRG since March 18, 1996.
Mr. Burch is Chairman of the Board of Directors of Massey Burch Investment
Group, Inc., Nashville, Tennessee, a southeast merchant banking firm. He has
been with Massey Burch since 1968, served as President from 1981 to 1990, and
has an extensive background in management consulting and corporate finance. Mr.
Burch serves as a director of Titan Holdings, Inc., a company that operates
property and casualty insurance companies, Norrell Corporation, an office
staffing and services company, and QMS, Inc., a designer and manufacturer of
computer graphics and imaging controllers.
Joe E. Ellis, O.D. has served as a director of PRG since June 23, 1996.
Dr. Ellis currently serves as the Chief of Staff of Kentucky Eyehealth Center.
He has been in the practice of optometry since 1986. He has been a member of
the Kentucky Optometric Association Board of Trustees since 1990 and from 1994
until 1995, served as president of that association. Dr. Ellis received his
B.S. from Murray State University and his O.D. from the Southern College of
Optometry.
Charles D. Fritch, M.D., F.A.C.S. has served as a director of PRG since
June 28, 1995. Dr. Fritch has been the President of the Fritch Eye Care Center,
a PRG affiliate, since 1974 and Chairman of the Board of Superior Vision
Services, Inc. since October 1994. In addition, Dr. Fritch has been a director
of Benson Eyecare Corporation and its successor company since May 1993. Dr.
Fritch serves on the teaching staffs of University of Southern California,
University of California, Los Angeles and University of California, Irvine. He
is an invited lecturer for domestic and international seminars and is the author
of research and instructional publications as well as ophthalmic textbooks. Dr.
Fritch is on the research and development committees for several ophthalmic
manufacturing companies and is a developer of intraocular lenses, ophthalmic
instruments, and holds a patent on an ophthalmic endoscopic laser. Dr. Fritch
received his medical degree from the University of Nebraska in 1968 and is
certified by the American Board of Ophthalmology and the American Board of Eye
Surgery.
Richard A. Gilleland has served as a director of PRG since June 28, 1995.
Mr. Gilleland served as Chairman, President and Chief Executive Officer of
Kendall International Inc., a manufacturer and distributor of disposable medical
supplies and devices and home health care products from July 1990 until July
1995. From January to November 1989, he was president, chief executive officer
and chairman of the board of American Medical International, Inc., which owns
and operates acute care hospitals. Mr. Gilleland also has served as a director
of OrNda HealthCorp, a provider of acute medical, surgical and hospital
operation and management services, since 1992, and since 1994, as a director of
Tyco International, Ltd., a manufacturer of bioprotection and flow control
equipment. Mr. Gilleland also serves as a director of DePuy Inc., a
manufacturer of orthopedic supplies and equipment and Remington Arms Co.,
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<PAGE>
a manufacturer of sporting arms and equipment. Mr. Gilleland served as Chief
Executive Officer and President of Amsco International Inc. (which has been
acquired by Steris Corp.), a manufacturer of orthopedic supplies and equipment
from July 1995 to July 1996. Mr. Gilleland served as a director of Bird Medical
Technologies, Inc., a manufacturer of inhalation therapy and equipment from 1994
to 1996 and as Interim Chairman of Quest Medical, a manufacturer of proprietary
products for the health care industry, from July 1996 to November 1996. Mr.
Gilleland received his B.A. from the University of Minnesota in 1967.
Bruce E. Herron, M.D. has served as a director of PRG since June 28, 1995.
Dr. Herron has been in the practice of general ophthalmology at the Skyline Eye
Clinic, P.C. in Jackson, Tennessee since 1995 and was in practice at its
predecessor entity, the Eye Clinic, P.C., from 1976 to 1995. Dr. Herron has
served on the Board of Directors of the Tennessee Academy of Ophthalmology for
the past fifteen years and was president in 1989. He served as Tennessee's
representative to the Council of the American Academy of Ophthalmology from 1990
to 1992, and served on the Executive Committee of the Council in 1992.
Currently he is in active practice as one of six ophthalmologists at the Skyline
Eye Clinic, P.C. He received his medical degree from Vanderbilt Medical School
in 1969. His residency in ophthalmology was completed at the University of Iowa
Hospitals and Clinics in 1974.
James E. McDonald, II, M.D. has served as a director of PRG since June 28,
1995. Dr. McDonald has practiced general ophthalmology at McDonald Eye
Associates in Fayetteville, Arkansas since 1976. Dr. McDonald serves on the
Board of Directors of the American College of Eye Surgeons and is past president
of the Arkansas Ophthalmology Society. Dr. McDonald has been a member of the
Board of Governors for the Washington Regional Medical Center since 1987,
serving as chairman in 1993 and a director of the World Eye Foundation since
1981, serving as Medical Director from 1986-1992. In addition, Dr. McDonald has
been an assistant clinical professor in the Department of Ophthalmology at the
University of Arkansas, AHEC Residency Program since 1976. Dr. McDonald
received his medical degree in 1969 from the University of Arkansas Medical
Center in Little Rock, Arkansas. He completed his internship at the University
of Alabama, Birmingham in 1970 and performed his residency at the University of
Arkansas Medical Center, Little Rock, from 1970 to 1974.
David Meyer, M.D. has served as a director of PRG since March 18, 1996.
Dr. Meyer was Chairman of EyeCorp, Inc., a Tennessee based management services
organization ("EyeCorp"), from February 1994 until its acquisition by PRG in
March 1996. Dr. Meyer has served since 1968 as the director of the
retinoblastoma service within the Solid Tumor Division of St. Jude's Children
Research Hospital. The Vitreoretinal Foundation, which he founded in 1968,
serves as director of the Retina Service of the Department of Ophthalmology
within the University of Tennessee College of Health Sciences. In 1970, he
founded the Vitreoretinal Research Foundation in support of basic science
research in retina and fellowship training. Dr. Meyer received his medical
degree in 1962 from the University of Tennessee, College of Medicine, completed
his internship the following year, completed his graduate studies at the
University of Pennsylvania Graduate School of Ophthalmology in 1964 and
completed his residency training in ophthalmology in 1967 at the Wills Eye
Hospital in Philadelphia, Pennsylvania.
Emmett E. Moore has served as the Chairman of the Board and Chief Executive
Officer of PRG since September 17, 1995 and as a director of PRG since April 20,
1995. Mr. Moore also serves as a director of both Castle Dental Centers, Inc.,
a public company that develops and operates integrated dental networks through
practice affiliations, and Amerigyn, Inc., a privately held corporation. Mr.
Moore served as President of PRG from April 20, 1995 until December 31, 1996.
From March 1995 to April 20, 1995, he served as a consultant to PRG. From
August 1983 to December 1994, Mr. Moore served in various capacities with
Medical Care America, Inc. ("Medical Care"), a publicly traded company that was
acquired in September 1994 by Columbia/HCA Healthcare Corporation and was an
owner and operator of outpatient surgery centers. Medical Care also owned and
managed numerous ophthalmic physician practices, dedicated eye surgery centers
and optical networks as well as imaging and physical therapy businesses. Mr.
Moore was responsible for Medical Care's acquisition and development activities,
most recently serving as its Senior Vice President and had previously served as
its Executive Vice President and Chief Financial Officer since joining Medical
Care. From 1981 to 1983, Mr. Moore was engaged in consulting and private
investments. From 1972 through 1981, Mr. Moore served as Senior Vice President
and Chief Financial Officer for Hycel, Inc., a publicly traded company that
manufactured and marketed clinical products used in the healthcare industry.
Additionally, Mr. Moore was employed with Arthur Andersen, received his J.D.,
M.B.A. and B.B.S. degrees from the University of Texas, and is a C.P.A.
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<PAGE>
Joseph C. Noreika, M.D. has served as a director of PRG since June 28,
1995. Dr. Noreika began practicing ophthalmology in August 1981. Since 1984 he
has headed Eye Care of Medina, a PRG affiliate. He practices general
ophthalmology with an emphasis on small-incision cataract surgery. He is
fellowship trained in oculoplastic surgery and received his board certificate in
ophthalmology in 1981. His special interests include areas of practice
management, health care policy and negotiation theory. Dr. Noreika received his
M.D. degree from Jefferson Medical College in Philadelphia in 1976. Between
1976 and 1981, he completed postgraduate medical training at Dartmouth, the
University of Pittsburgh, and the University of California, San Francisco. In
1988, he received his M.B.A. at the Weatherhead School of Management at Case
Western Reserve University in Cleveland. He has completed post-graduate
business studies at the Weatherhead School and the Sloan School of Management at
M.I.T.
Richard M. Owen has served as President of PRG since January 1, 1997 and as
a director since April 20, 1995. Mr. Owen served as Senior Vice President of
PRG from January 1, 1996 until December 31, 1996, as Chief Financial Officer of
PRG from April 20, 1995 until March 30, 1997, and as Executive Vice President of
PRG from April 20 through December 31, 1995. From September 1994 to April 20,
1995, Mr. Owen served as a consultant to PRG on financial and accounting
matters. From June 1976 through August 1994, Mr. Owen held various positions in
the accounting and business advisory division of Arthur Andersen where he had
been a partner since 1988. Mr. Owen is a C.P.A. and graduated from Baylor
University in 1976.
James W. Rayner, M.D. has served as a director of PRG since March 18, 1996.
Dr. Rayner currently serves as the Chairman of the Eyecare Providers of
Mississippi and is a member of the Board of the Bank of Mississippi. In
addition, Dr. Rayner serves as the president of Grand Oaks, Inc., a land
development corporation and as president of the Rayner Surgery Center, Inc. Dr.
Rayner is a director of and practices medicine at the Rayner Eye Clinic in
Oxford, Mississippi, which was one of the founding practices of EyeCorp. He has
served on the Advisory Committee to the American Academy of Ophthalmology and on
the boards of directors of Medical Marketing and the University of Mississippi
Foundation. He is past Chairman of the Board of the Oxford University School.
Dr. Rayner received his medical degree from the University of Mississippi School
of Medicine in 1966 and served his internship and residency at the University of
Tennessee City of Memphis Hospitals. He served fellowships at both Johns
Hopkins Medical School and the Smith-Kettle Well Institute.
David M. Schneider, M.D. has served as a director of PRG since June 28,
1995. Dr. Schneider also serves as a director of LCA-Vision Inc., a company
that owns and manages surgery centers that provide excimer laser refractive
surgery. Dr. Schneider has been the President of the Midwest Eye Center since
1985, serving as Surgeon and Director. He has been in practice since 1981
specializing in refractive surgery. He is an American Board of Ophthalmology
Diplomate and an Active Fellow of the American Academy of Ophthalmology. Dr.
Schneider received his M.D. degree from the University of Cincinnati. He
completed his residency at the University of Cincinnati, with post residency
fellowship training at the Mary Shiels Eye Hospital in Dallas, Texas and the
University of Cincinnati.
Paul M. Shimoff has served as a director of PRG since June 28, 1995. Mr.
Shimoff has been engaged in the private practice of law since 1972 and currently
practices with McPeters McAlearney Shimoff & Hatt. Mr. Shimoff has served as a
director of San Bernardino Community Hospital since 1992 and San Bernardino
Community Hospital Foundation since 1990. He is also a Fellow of The American
College of Trust and Estate Counsel, a California Board of Legal Specialization
Certified Specialist in Taxation Law and a former President of the San
Bernardino County Bar Association. Mr. Shimoff received his J.D. from the
University of California, Hastings College of Law in 1972 and received his B.A.
in Economics from U.C.L.A. in 1969.
Ronald L. Stanfa has served as a director of PRG since June 28, 1995. Mr.
Stanfa has served as a Managing Director of Notre Capital Ventures II, L.L.C.
since July 1995. From June 1993 to July 1995, Mr. Stanfa was an independent
business consultant and investor. Mr. Stanfa was a founder and served as a
director of Allwaste, Inc., an environmental services company, from 1986 to
1995. From October 1988 to June 1993, Mr. Stanfa was the Vice President-
Corporate Development of Allwaste, Inc. Mr. Stanfa also served as a director of
U.S. Delivery Systems, Inc., a same day delivery company, from 1994 until its
sale in February 1996. Mr. Stanfa received his B.A. in Economics from Northern
Illinois University in 1969.
P. Harold Wallar, M.D. has served as a director of PRG since June 28, 1995.
Dr. Wallar has served as President of the Inland Eye Institute and of the Loma
Linda Ophthalmology Medical Group since January 1, 1993. Dr. Wallar currently
serves as a Clinical Associate Professor of Ophthalmology at Loma Linda
University. Dr. Wallar has also
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<PAGE>
served as President of the Tri-County Eye Society. Dr. Wallar received his M.D.
degree from Loma Linda University, performed his internship at the University of
California, Davis' Sacramento Medical Center and completed his residency at Loma
Linda University. Dr. Wallar furthered his training with a fellowship in
Strabismus and Pediatric Ophthalmology at the University of Pittsburgh Eye and
Ear Hospital, where he also held a university faculty appointment.
Kenneth C. Westfield, M.D. has served as a director of PRG since June 28,
1995. Dr. Westfield has served since 1995 as Director and President of
Westfield Eye Center, Kenneth C. Westfield, M.D., Ltd. and has served since 1990
as Director and President of the Mohave Eye Surgery Center and as Director for
the Rudy Manthei, D.O. and Kenneth C. Westfield, M.D. Nevada Eye Care Network,
Ltd. Dr. Westfield served from 1981 to 1995 as Director and President of the
Southern Nevada Eye Clinic, Kenneth C. Westfield, M.D., Ltd. and as Vice
President and Treasurer of the Nevada Institute of Ambulatory Surgery. Dr.
Westfield has been in private practice since 1980. Dr. Westfield received his
M.B.A. from the University of California, Irvine, in 1991. Dr. Westfield
completed his residency in Ophthalmology at the Kresse Eye Institute of Wayne
State University and completed his internship at the Henry Ford Hospital in
Detroit, Michigan. Dr. Westfield received his medical degree from Wayne State
University in 1976.
MEETINGS AND COMMITTEES OF THE BOARD
The business of PRG is managed under the direction of the Board. The Board
meets on a regularly scheduled basis to review significant developments
affecting PRG and to act on matters requiring Board approval. It also holds
special meetings when an important matter requires Board action between
scheduled meetings. The Board met seven times during the fiscal year ended
December 31, 1996 ("1996") and acted two times by written consent. During such
period, all members of the Board participated in at least 75% of the aggregate
of all Board and applicable committee meetings.
The Board is divided into three classes with 5 or 6 directors in each
class, each class serving for a term of three years. At each annual meeting of
stockholders, directors of the class the term of which then expires will be
elected by the holders of the Common Stock to succeed those directors whose
terms are expiring. PRG's Bylaws provide that a majority of the Board must be
licensed to practice medicine.
Drs. Baum, Fritch, Herron, McDonald, Noreika, Schneider, Wallar and
Westfield and Messrs. Gilleland, Shimoff and Stanfa agreed with PRG and Notre
Capital Ventures, Ltd. ("Notre") (PRG's founding stockholder) to serve as a
director of PRG upon the consummation of the initial public offering of the
Company's Common Stock. At the time of the EyeCorp Merger, the Board of
Directors was increased to seventeen and Mr. Burch and Drs. Meyer and Rayner
agreed with PRG and EyeCorp to serve as directors. Dr. Ellis was later elected
to fill the remaining vacancy.
The Board has five standing committees (excluding certain advisory
committees): an Acquisition Committee, an Audit Committee, a Compensation and
Stock Option Committee, an Executive Committee and a Nominating Committee. The
function of these committees is described below.
ACQUISITION COMMITTEE. The function of the Acquisition Committee is to
evaluate and approve acquisitions; however, potential acquisitions that exceed a
specified dollar threshold are approved by the entire Board. The Acquisition
Committee has the authority to authorize the issuance of capital stock of PRG in
connection with acquisitions. The Acquisition Committee met 15 times and acted
one time by written consent in 1996. The Acquisition Committee is comprised of
Charles D. Fritch, M.D., Richard A. Gilleland, Emmett E. Moore, P. Harold
Wallar, M.D. and Kenneth C. Westfield, M.D.
AUDIT COMMITTEE. The function of the Audit Committee is to recommend to
the Board the appointment of the firm selected to be independent auditors for
PRG, to review the plan and scope of any audit of PRG's financial statements and
to review PRG's significant accounting policies and related matters. The Audit
Committee met four times in 1996. The Audit Committee is comprised of Lucius E.
Burch, III, Paul M. Shimoff and Ronald L. Stanfa.
COMPENSATION AND STOCK OPTION COMMITTEE. The function of the Compensation
and Stock Option Committee is to establish the compensation of executive
officers and the employee benefit plans to be adopted or established from time
to time by PRG, and to administer and determine the options to be granted
pursuant to the Amended and Restated PRG Plan and the Health Care Professionals
Plan. The Compensation Committee met 11 times
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and acted one time by written consent during 1996. The Compensation Committee
is comprised of Richard A. Gilleland, Paul M. Shimoff and Ronald L. Stanfa.
EXECUTIVE COMMITTEE. The function of the Executive Committee is to direct
and manage the business and affairs of PRG in the intervals between meetings of
the Board. The Executive Committee is empowered with all of the authority of
the Board in the management and affairs of PRG, except where action of the Board
as a whole is expressly required by law, PRG's Restated Certificate of
Incorporation or PRG's Bylaws. The Executive Committee met 15 times and acted
two times by written consent during 1996. The Executive Committee is comprised
of Alan C. Baum, M.D., Emmett E. Moore, David M. Schneider, M.D. and Ronald L.
Stanfa.
NOMINATING COMMITTEE. The function of the Nominating Committee is to
develop a policy relating to the size and composition of the Board, to formulate
the criteria relating to candidate selection, to propose to the Board a slate of
Director nominees for election at the annual meeting of the stockholders of PRG,
to recommend candidates to fill vacancies on the Board and to suggest members to
serve on the various committees of the Board. The Nominating Committee met one
time during 1996. The Nominating Committee is comprised of Bruce E. Herron,
M.D., James E. McDonald, II, M.D., Joseph C. Noreika, M.D., David M. Schneider,
M.D., and Paul M. Shimoff.
PROPOSAL II - EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF THE PLAN
On August 19, 1996, the Board approved, subject to the consideration and
approval of the stockholders of PRG, a proposed Employee Stock Purchase Plan
(the "Plan"). The Plan's effective date is January 1, 1997. In addition,
effective January 1, 1997, the Executive Committee adopted, subject to the
consideration and approval of the stockholders, Amendment One to the Plan
reducing the time period which an employee must be employed by PRG to be
eligible to participate in the Plan from one year to six months. The purpose of
the Plan is to allow eligible employees to purchase the Company's Common Stock
through accumulated payroll withholding amounts. As of March 31, 1997,
approximately 4,000 persons were eligible to participate in the Plan, of which
approximately 530 persons held options under the Plan. The aggregate number of
shares of Common Stock that may be issued pursuant to the Plan is 1,000,000
shares.
The Plan is administered by a committee (the "Committee"). The members of
the Committee are appointed by the Board and serve at the discretion of the
Board. The Committee has full power and authority, subject to the provisions of
the Plan, to construe and interpret the Plan and to make all other
determinations and take any and all actions necessary or advisable for the
administration of the Plan.
On the first business day of each calendar year (the "Commencement Date"),
the Company will grant each eligible employee an option to purchase, on the last
business day of such calendar year (the "Exercise Date"), the greatest number of
shares of the Company's Common Stock that may be purchased with accumulated
amounts withheld from the employee's pay. Each calendar year is considered an
"Offering Period."
Generally, any person who, as of the Commencement Date of an Offering
Period, (i) has been an employee of the Company or a subsidiary of the Company
for six months, (ii) normally works more than 20 hours per week and (iii)
normally works more than 5 months in a calendar year may participate in the Plan
for such Offering Period. In addition, a person who was an employee of the
Company or a subsidiary immediately prior to January 1, 1997 may participate in
the Plan for the Offering Period that begins January 1, 1997. However, no
employee may participate in the Plan for an Offering Period if (i) such
employee's rights to purchase stock pursuant to all employee stock purchase
plans (within the meaning of Section 423 of the Internal Revenue Code of 1986,
as amended (the "Code")) of the Company and any subsidiary of the Company would
accrue at a rate that exceeds $25,000 of the fair market value of the stock
(determined on the date of grant) for each calendar year in which such option is
outstanding at any time or (ii) after grant of the option the employee will own,
directly or indirectly, stock or options to purchase stock possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or a subsidiary of the Company.
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<PAGE>
Eligible employees may purchase Common Stock subject to options granted
pursuant to the Plan by authorizing payroll withholding of up to 10% of their
after-tax base pay. The purchase price for the Common Stock will be 85% of the
lesser of (i) the Fair Market Value of the Common Stock on the Commencement Date
of the Offering Period or (i) the Fair Market Value of the Common Stock on the
Exercise Date of the Offering Period. "Fair Market Value" means, on any date,
the closing price per share of the Common Stock on the New York Stock Exchange
on such date.
SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The Plan is intended to qualify as an "employee stock purchase plan" as
defined in Code Section 423. Under Code Section 423, a participant in the Plan
will not recognize taxable income upon the grant of options or the purchase of
Common Stock pursuant to the Plan. If a participant (i) sells or otherwise
disposes of Common Stock purchased pursuant to the Plan more than two years
after the Commencement Date of the Offering Period in which the options were
granted and more than one year after the Exercise Date of such Offering Period
or (ii) dies while holding Common Stock purchased pursuant to the Plan, the
participant must recognize as ordinary taxable income an amount equal to the
lesser of (A) the excess of the Fair Market Value of the Common Stock on the
date of disposition over the purchase price of the Common Stock or (B) the
excess of the Fair Market Value of the Common Stock on the Commencement Date of
the Offering Period over the purchase price of the Common Stock. The Company is
not entitled to a corresponding tax deduction. If a participant sells or
otherwise disposes of Common Stock purchased pursuant to the Plan within two
years after the Commencement Date of the Offering Period in which the options
were granted or within one year after the Exercise Date of such Offering Period,
the participant must recognize as ordinary taxable income an amount equal to the
excess of the Fair Market Value of the Common Stock on the Exercise Date over
the purchase price of the Common Stock. The Company is entitled to a
corresponding tax deduction.
A participant's basis for determining gain or loss upon the disposition of
Common Stock purchased pursuant to the Plan will be the purchase price of the
Common Stock plus any amount the participant recognizes as ordinary taxable
income. The difference between any amount realized upon the disposition of the
Common Stock and the participant's basis in the Common Stock will be taxable as
long-term or short-term capital gain depending on the participant's holding
period for the Common Stock. Common Stock must have been held for more than one
year to qualify for long-term capital gain or loss treatment.
RECOMMENDATION FOR APPROVAL
Management believes that implementation of the Plan would benefit PRG by
providing greater incentive to employees to increase their proprietary interest
in PRG, thereby increasing such employees' motivation and incentive to exert
their best efforts on behalf of the Company through the opportunity to benefit
from the appreciation in value of the Common Stock of PRG.
The Board has approved the Plan and the Executive Committee has approved
Amendment One thereto. The Board and Executive Committee are seeking approval
of such Plan and Amendment by the stockholders. If the Plan is approved,
generally, no stockholder approval would be solicited for the issuance of stock
to employees under such Plan unless required by law or any rules or regulations
to which PRG is subject. Any issuance that does not require stockholder
approval may be authorized by the Board.
Adoption of the proposal to adopt the Plan and Amendment One thereto
requires the affirmative vote of the holders of the majority of the shares of
Common Stock, present in person or represented by proxy at the Meeting, which
are entitled to vote and are voted either for or against such proposal. Unless
otherwise instructed, it is the intent of the persons named in the Proxy to vote
all proxies "FOR" the adoption of this proposal.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE PHYSICIANS RESOURCE
GROUP, INC. EMPLOYEE STOCK PURCHASE PLAN AND AMENDMENT ONE TO THE PHYSICIANS
RESOURCE GROUP, INC. EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE>
PROPOSAL III - AMENDMENTS TO THE 1995 HEALTH CARE PROFESSIONALS STOCK OPTION
PLAN AND THE AMENDED AND RESTATED 1995 STOCK OPTION PLAN
STOCK OPTION PLANS
In March 1995, the Board adopted, and the stockholders of PRG approved, the
1995 Stock Option Plan (the "Plan"). The Board subsequently approved an
amendment to the Plan to increase the total number of shares of Common Stock
with respect to which options may be granted under the Plan (as amended, the
"Amended and Restated PRG Plan") to 2,000,000 shares and limiting the number of
options which may be granted to any individual participant under the Amended and
Restated PRG Plan to options to purchase 1,000,000 shares of Common Stock. The
Amended and Restated PRG Plan was approved by the stockholders of PRG at a
special meeting of stockholders held March 7, 1996. The purpose of the Amended
and Restated PRG Plan is to provide directors, key employees and certain
advisors (the "Participants") with additional incentives by increasing their
proprietary interest in PRG. As of April 1, 1997, approximately 4,000 persons
were eligible for participation in the Amended and Restated PRG Plan, of which
approximately 83 persons held options. The aggregate amount of Common Stock
with respect to which options may be granted may not exceed 2,000,000 shares.
The maximum number of shares of Common Stock with respect to which any
Participant may receive options during the term of the Plan is 1,000,000.
Grants of options under the Amended and Restated PRG Plan are intended to
qualify for favorable treatment under Section 16 of the Securities and Exchange
Act of 1934 pursuant to Rule 16b-3 promulgated thereunder ("Rule 16b-3").
The Amended and Restated PRG Plan provides for the grant of incentive stock
options ("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and nonqualified stock options ("Nonqualified Options")
(collectively "Awards"). The Amended and Restated PRG Plan is administered by
the Compensation and Stock Option Committee (the "Committee"), which is
comprised of two or more nonemployee directors who are "disinterested" within
the meaning of Rule 16b-3 as it was in effect prior to certain amendments to
such rule (the "Rule 16b-3 Amendments") that became effective in August 1996.
Subject to the terms of the Amended and Restated PRG Plan, the Committee has the
sole authority to grant Awards under the Amended and Restated PRG Plan, to
construe and interpret the Amended and Restated PRG Plan, and to make all other
determinations and take any and all actions necessary or advisable for the
administration of the Amended and Restated PRG Plan.
All of PRG's employees, nonemployee Directors, and advisors are eligible to
receive Awards under the Amended and Restated PRG Plan, but only employees of
PRG are eligible to receive ISOs. No Participant may receive awards covering an
aggregate of more than 1,000,000 shares of PRG Common Stock under the Amended
and Restated PRG Plan. Options issued under the Amended and Restated PRG Plan
will be exercisable in installments pursuant to a vesting schedule to be
designated by the Committee. Notwithstanding the provisions of any option
agreement, options will become immediately exercisable in the event of a change
or threatened "change in control" (each as defined in the Amended and Restated
PRG Plan) of PRG and in the event of certain mergers and reorganizations of PRG.
No option will remain exercisable later than ten years after the date of grant
(or five years after the date of grant in the case of ISOs granted to holders of
more than 10% of the Common Stock).
The exercise price for ISOs and nonqualified options granted under the Plan
may be no less than the fair market value of the Common Stock on the date of
grant (or 110% in the case of ISOs granted to employees owning more than 10% of
the Common Stock). The last reported sales price of a share of the Common Stock
on the New York Stock Exchange on April 1, 1997, was $13.00.
The Amended and Restated PRG Plan provides for automatic grants ("Automatic
Grants") of (a) Nonqualified Options to purchase 10,000 shares of Common Stock
to nonemployee Directors who are not physicians employed by an Affiliated
Practice, upon each such person's initial election to the Board, and (b)
nonqualified options to purchase 5,000 shares of Common Stock to nonemployee
Directors (whether or not employed as physicians by an Affiliated Practice), on
the date of each annual stockholders meeting thereafter. Each such option (i)
entitles the director to purchase shares of Common Stock at an exercise price
equal to the fair market value of the Common Stock on the date of grant, (ii) is
first exercisable with respect to half of the option on the anniversary of the
date of grant and is exercisable with respect to the remaining half on the
second anniversary of the date of grant, and (iii) terminates on the day prior
to the tenth anniversary of the date of grant.
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<PAGE>
In March 1995, the Board adopted, and the stockholders of PRG approved, the
Health Care Professionals Plan. The Health Care Professionals Plan permits PRG
to grant stock options to employees and to advisors and consultants of PRG, who
PRG expects generally will be physicians and optometrists, who both (i) provide
advisory or consulting services to PRG and (ii) are employed by an Affiliated
Practice. The aggregate amount of Common Stock with respect to which options
may be granted may not exceed 1,000,000 shares. As of April 1, 1997,
approximately 4,600 persons were eligible for participation in the Health Care
Professionals Plan, of which approximately 214 held options. Options granted
under the Health Care Professionals Plan will vest over a period designated by
the Committee, which in general will be over a period of five years from the
date of grant. Generally, such options will expire upon the termination of
employment or the advisory or consultant relationship with PRG or on the day
prior to the tenth anniversary of the date of grant, whichever occurs first.
The Health Care Professionals Plan provides for the grant of Nonqualified
Options. The Health Care Professionals Plan is administered by the Committee.
Subject to the terms of the Health Care Professionals Plan, the Committee has
the sole authority to grant options under such plan, to construe and interpret
such plan, and to make all other determinations and take all actions necessary
or advisable for the administration of such plan. The exercise price for
options granted under the Health Care Professionals Plan may be no less than the
fair market value of the Common Stock on the date of grant.
PROPOSED AMENDMENTS TO STOCK OPTION PLANS
On February 2, 1997, the Board approved additional amendments to the
Amended and Restated PRG Plan (the "Proposed PRG Plan Amendments"). If approved
by the stockholders of PRG, the Proposed PRG Plan Amendments would (i) increase
the number of shares of Common Stock with respect to which options may be
granted under the Amended and Restated PRG Plan from 2,000,000 to 3,000,000;
(ii) increase the maximum number of shares with respect to which Awards may be
made to any Participant under the Amended and Restated PRG Plan from 1,000,000
to 2,000,000; (iii) remove certain references in the plan document for the
Amended and Restated PRG Plan to Rule 16b-3 and remove certain limitations in
such document upon the use of shares to satisfy a tax withholding requirement,
which references and limitations are no longer required in light of the Rule
16b-3 Amendments; (iv) replace the requirement that members of the Committee be
"disinterested" within the meaning of Rule 16b-3 as in effect prior to the Rule
16b-3 Amendments with a requirement that Committee members be both (a) "Non-
Employee Directors" within the meaning of Rule 16b-3 as in effect following the
Rule 16b-3 Amendments and (b) "outside directors" within the meaning of Section
162(m) of the Code (see "Deduction Limitation," below); (v) extend the term of
the Amended and Restated PRG Plan until January 1, 2007; (vi) delete the
requirement of stockholder approval of any amendment to the Amended and Restated
PRG Plan that materially increases the benefits available under such plan or
materially modifies the requirements for eligibility under such plan, since Rule
16b-3 as in effect following the Rule 16b-3 Amendments no longer requires such
approval; and (vii) delete the prohibition against amending the terms governing
Automatic Grants more frequently than every six months, since Rule 16b-3 as in
effect following the Rule 16b-3 Amendments no longer requires such a
prohibition. If approved by the stockholders of PRG, the Proposed PRG Plan
Amendments would be effective as of January 1, 1997. The stockholders of PRG
are being asked in this proxy statement to vote to approve the Proposed PRG Plan
Amendments.
On February 2, 1997, the Board approved amendments to the Health Care
Professionals Plan (the "Proposed Health Care Professionals Plan Amendments").
If approved by the stockholders of PRG, the Proposed Health Care Professionals
Plan Amendments would (i) increase the number of shares of Common Stock with
respect to which options may be granted under the Health Care Professionals Plan
from 1,000,000 to 2,000,000; (ii) add nonemployee Directors to the class of
persons eligible to receive options under the Health Care Professionals Plan;
(iii) add a provision limiting the number of shares with respect to which any
Participant may receive options under the Health Care Professionals Plan to
1,000,000, for the purpose of complying with the requirements of the
Performance-Based Compensation Exception to Section 162(m) of the Code (see
"Deduction Limitation," below); and (iv) add a requirement that Committee
members be both (a) "Non-Employee Directors" within the meaning of Rule 16b-3 as
in effect following the Rule 16b-3 Amendments and (b) "outside directors" within
the meaning of Section 162(m) of the Code. If approved by the stockholders of
PRG, the Proposed Health Care Professionals Plan Amendments would be effective
as of January 1, 1996. The stockholders of PRG are being asked in this proxy
statement to vote to approve the Proposed Health Care Professionals Plan
Amendments.
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<PAGE>
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTION PLANS
Summary of Certain Federal Income Tax Consequences Relating to ISOs. A
Participant realizes no taxable income, and no income tax deduction is available
to PRG, upon either the grant or the exercise of an ISO. If a Participant holds
the shares acquired upon the exercise of an ISO for more than one year after the
issuance of the shares upon exercise of the ISO and more than two years after
the date of the grant of the ISO (the "holding period"), the difference between
the exercise price and the amount realized upon the sale of the shares will be a
long-term capital gain or loss, and no income tax deduction will be available to
PRG. If the Participant disposes of the shares before the expiration of the
holding period, the Participant will realize ordinary income and PRG will be
entitled to a deduction on the portion of the gain, if any, equal to the
difference between the ISO exercise price and the fair market value of the
shares on the date of exercise or, if less, the difference between the amount
realized on the disposition and the Participant's adjusted basis in the shares;
provided that the deduction will not be available to PRG to the extent the
amount so included in the Participant's income causes the Participant's total
compensation for the year to exceed the $1,000,000 limit on the deductibility of
compensation paid to certain executive officers under Section 162(m) of the Code
(the "Deduction Limitation"), if an exception to the Deduction Limitation does
not apply. Any further gain or loss from an arm's-length sale or exchange of
the shares will be long-term or short-term capital gain or loss depending upon
the length of time the Participant has held the shares before the disposition.
Certain special rules apply if an ISO is exercised by tendering shares. The
difference between the ISO exercise price and the fair market value of the PRG
Common Stock acquired upon the exercise of an ISO, determined as of the time of
exercise, may constitute alternative minimum taxable income subject to an
alternative minimum tax.
Summary of Certain Federal Income Tax Consequences Relating to Nonqualified
Options. A Participant generally realizes no taxable income upon the grant of a
Nonqualified Option, and no deduction generally is then available to PRG. Upon
exercise of a Nonqualified Option, the excess of the fair market value of the
shares on the date of exercise over the exercise price will be taxable to the
Participant as ordinary income. This amount also will be deductible by PRG
unless the amount so included in the Participant's income causes the
Participant's total compensation for the year to exceed the Deduction Limitation
and an exception to the Deduction Limitation does not apply. The tax basis of
shares acquired by the Participant will be the fair market value of the shares
on the date of exercise. When a Participant disposes of shares acquired upon
exercise of a Nonqualified Option, any amount realized in excess of the fair
market value of the shares on the date of exercise generally will be long-term
or short-term capital gain, depending upon the length of time the Participant
has held the shares since the exercise of the Nonqualified Option. If the
amount received is less than such fair market value, the loss will be long-term
or short-term capital loss, depending upon the length of time the Participant
has held the shares. The exercise of a Nonqualified Option will not trigger the
alternative minimum tax consequences applicable to ISOs.
Deduction Limitation. Section 162(m) of the Code provides an exception
(the "Performance Based Compensation Exception") to the Deduction Limitation for
options granted under stock option plans that meet certain requirements. The
Amended and Restated PRG Plan and the Health Care Professionals Plan are
intended to comply with the requirements for the Performance Based Compensation
Exception to the Deduction Limitation. The Board of PRG believes that it is in
the best interests of PRG and its stockholders to comply with the requirements
for the Performance Based Compensation Exception.
NEW PLAN BENEFITS
As the Compensation Committee grants options under both the Health Care
Professionals Plan and the Amended and Restated PRG Plan based on performance,
the benefits that will accrue to certain employees of PRG upon approval of the
amendments are not readily determinable with the exception of certain automatic
grants to members of the Board. See "Proposal III - Approval of Amendments to
the 1995 Health Care Professionals Stock Option Plan and the Amended and
Restated 1995 Stock Option Plan - Stock Option Plans.". In addition, subject to
approval of the stockholders of the amendments set forth in this proposal,
certain directors and executive officers will be granted options under the
Amended and Restated PRG Plan upon acceptance of new employment agreements with
PRG as set forth in the section headed, "Certain Grants Under the Amended and
Restated PRG Plan."
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CERTAIN GRANTS UNDER THE AMENDED AND RESTATED PRG PLAN
Effective as of February 21, 1997, the Board of Directors approved the
grant to certain executive employees of PRG, under the Amended and Restated PRG
Plan, of options to purchase shares of Common Stock of the Company in the
amounts set forth in the table below. The options were granted subject to the
approval by the stockholders of PRG of the Proposed PRG Plan Amendments. The
options so granted and subject to stockholder approval of the foregoing proposal
are as follows:
EXECUTIVE OFFICERS OPTIONS GRANTED
------------------ ---------------
Emmett E. Moore, Chairman of the Board, CEO 100,000(1)
Richard M. Owen 66,940(1)
Executive Officers Group 166,940(1)
Director Nominees 100,000(1)
(1) Contingent on acceptance of new Employment Agreement
The grant of the options set forth in the table above is contingent upon
the acceptance by Messrs. Moore and Owen of the terms and conditions of the
employment agreements proposed to such individuals by the Company. The
execution of such employment agreement shall serve as consideration for the
grant of the options by the Company. All such options shall be effective as of
February 21, 1997 and shall vest and become exercisable over a period of five
(5) years, 20% per year, on each of February 21, 1997, 1998, 1999, 2000 and
2001. The exercise price of such options shall be $15.25. The closing price
for the Common Stock as listed on the New York Stock Exchange on April 1, 1997
was $13.00. See "Management Compensation - Employment Agreements." The federal
income tax consequences of the issuance and exercise of the options is explained
herein in the section headed "Summary of Federal Income Tax Consequences
Relating to Stock Option Plans."
RECOMMENDATION FOR APPROVAL
The Board has approved the amendments to the Health Care Professionals Plan
and the Amended and Restated PRG Plan. The Board is seeking approval of the
amendments by the stockholders.
Adoption of the proposal to amend the Health Care Professionals Plan and
the Amended and Restated PRG Plan requires the affirmative vote of the holders
of the majority of the shares of Common Stock, present in person or represented
by proxy at the Meeting, which are entitled to vote and are voted either for or
against such proposal. Unless otherwise instructed, it is the intent of the
persons named in the Proxy to vote all proxies "FOR" the adoption of this
proposal.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED PRG PLAN AMENDMENTS TO THE
1995 HEALTH CARE PROFESSIONALS STOCK OPTION PLAN AND THE AMENDED AND RESTATED
1995 STOCK OPTION PLAN.
PROPOSAL IV - NEW STOCK OPTION GRANTS IN CONNECTION WITH THE CANCELLATION OF
EXISTING STOCK OPTION GRANTS
The Amended and Restated PRG Plan has been utilized to provide directors,
executives and other key employees with increased motivation and incentive to
exert their best efforts on behalf of the Company through the opportunity to
benefit from appreciation in the value of the Common Stock. Due to a decline in
the price of the Common Stock in fiscal 1996, certain options granted on April
17, 1996 to Emmett E. Moore, Richard M. Owen, Richard J. D'Amico, Mark P.
Kingston, John N. Bingham, Richard Talbot and Michael Casas are exercisable at
prices which exceed the current market value of the Common Stock. In order to
restore the incentive value to such options, effective February 21, 1997, the
Board approved, subject to the consideration and approval of the stockholders of
PRG, the issuance of new option grants to Emmett E. Moore, Richard M. Owen,
Richard J. D'Amico, Mark P. Kingston, John N. Bingham, Richard Talbot and
Michael Casas with an exercise price equal to the market price on February 21,
1997 of $15.25. The grant of the new options to the above-named parties is
conditioned upon the surrender, on or before May
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<PAGE>
21, 1997, of the option agreement evidencing such party's April 17, 1996 option
and the concurrent cancellation of such option. Such surrender and cancellation
are also subject to stockholder approval.
The options granted on April 17, 1996 which shall be subject to
cancellation upon surrender of such option are set forth in the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES FOR
--------------------
WHICH APRIL 17, 1996
--------------------
NAME OF OFFICER OPTION MAY BE EXERCISED PLAN EXERCISE PRICE
- --------------- ----------------------- ---- --------------
<S> <C> <C> <C>
Emmett E. Moore 445,000 Amended and Restated PRG Plan $27.625
Richard M. Owen 45,000 Health Care Professional Plan "
Richard J. D'Amico 150,000 Amended and Restated PRG Plan "
Mark P. Kingston 45,000 Health Care Professionals Plan "
John N. Bingham 50,000 Amended and Restated PRG Plan "
Richard Talbot 30,000 Amended and Restated PRG Plan "
Michael Casas 30,000 Amended and Restated PRG Plan "
</TABLE>
Upon such surrender and cancellation of the options, each of the above-
named parties shall receive the following options, which shall vest and become
exercisable over a period of four (4) years, 25% per year on each of February
21, 1998, 1999, 2000 and 2001:
<TABLE>
<CAPTION>
NUMBER OF SHARES FOR
--------------------
WHICH FEBRUARY 21, 1997
-----------------------
NAME OF OFFICER OPTION MAY BE EXERCISED PLAN EXERCISE PRICE
- --------------- ----------------------- ---- --------------
<S> <C> <C> <C>
Emmett E. Moore 267,000 Amended and Restated PRG Plan $15.25
Richard M. Owen 27,000 " "
Richard J. D'Amico 90,000 " "
Mark P. Kingston 27,000 " "
John N. Bingham 30,000 " "
Richard Talbot 18,000 " "
Michael Casas 18,000 " "
</TABLE>
RECOMMENDATION FOR APPROVAL
Management believes that the approval of the new stock option grants is
advisable to restore the incentive value to those options granted to the above-
named directors, officers and key employees on April 17, 1996. It is
anticipated that the approval of this proposal will benefit PRG by providing the
above-named individuals with increased motivation and incentive to exert their
best efforts on behalf of the Company through the opportunity to benefit from
appreciation in the value of the Common Stock. The above-named individuals have
a substantial interest in the approval of this proposal.
The Board has approved the grant of the new stock options in connection
with the cancellation of existing stock option grants and is seeking approval of
such by the stockholders.
Adoption of the proposal to grant new stock options to Emmett E. Moore,
Richard M. Owen, Richard J. D'Amico, Mark P. Kingston, John N. Bingham, Richard
Talbot and Michael Casas requires the affirmative vote of the holders of the
majority of the shares of Common Stock, present in person or represented by
proxy at the Meeting, which are entitled to vote and are voted either for or
against such proposal. Unless otherwise instructed, it is the intent of the
persons named in the Proxy to vote all proxies "FOR" the adoption of this
proposal.
THE BOARD RECOMMENDS A VOTE FOR THE GRANT OF NEW STOCK OPTIONS IN
CONNECTION WITH THE CANCELLATION OF EXISTING STOCK OPTION GRANTS.
-13-
<PAGE>
PROPOSAL V - SALE OF SHARES TO EMMETT E. MOORE
The Board has created a series of Preferred Stock, par value $.01 per
share, of the Company and authorized 200,000 shares of convertible preferred
stock designated as "Series B Convertible Preferred Stock" (hereinafter the
"Shares"). The holders of such Shares are not entitled to dividends nor do they
have voting rights, except as provided by law. Each Share is convertible, at
any time, into one share of the Common Stock of PRG, subject to certain
adjustments. The Shares are not redeemable and they are non-cumulative. The
Board may issue shares senior in preference to the Shares. Upon liquidation,
dissolution or winding-up of PRG, the holders of the Shares are entitled to
receive the liquidation value of such Shares ($.01 per share) in preference to
and in priority over distributions upon the Common Stock of PRG.
Effective February 21, 1997, the Board approved, subject to the
consideration and approval of the stockholders of PRG, a grant of the right to
purchase up to 200,000 of the Shares to Emmett E. Moore, Chairman of the Board
and Chief Executive Officer of PRG during the two (2) year period beginning
February 21 , 1997 and ending at 5:00 p.m. C.S.T. on February 20, 1999 on the
terms and conditions set forth in that certain letter agreement dated effective
as of February 21, 1997 by and between Mr. Moore and PRG (the "Letter
Agreement"). The Letter Agreement provides that Mr. Moore shall pay to PRG an
amount equal to (i) the closing sales price of PRG's Common Stock on the New
York Stock Exchange on the date of delivery of notice to the Secretary of PRG of
Mr. Moore's intention to purchase the Shares times (ii) the number of Shares
purchased. The purchase of the Shares shall be funded by a loan from PRG to Mr.
Moore, the principal of which is nonrecourse and the interest payable with
respect to which is recourse (the "Loan"), evidenced by the execution of the
Note (defined below) and the Stock Pledge Agreement (defined below) by Mr.
Moore.
In order to facilitate the purchase of the shares by Mr. Moore, the Board
approved, subject to the consent of the stockholders of PRG, a Loan to Mr. Moore
in an amount up to $5,000,000.00. The Loan is evidenced by a promissory note
(the "Note") executed by Mr. Moore in favor of PRG. The Note is in the
principal amount of $5,000,000.00 and bears interest at the applicable Federal
rate, as that term is defined in Section 7872(f)(2)(A) of the Internal Revenue
Code of 1986, as amended, (the "Code") applicable to term loans, as that term is
defined in Section 7872(f)(6) of the Code or the Maximum Lawful Rate, defined as
the maximum nonusurious rate of interest per annum permitted by whichever of
applicable United States federal law or Texas law permits the higher interest
rate, including, to the extent permitted by applicable law, any amendments
thereof or any new law coming into effect to the extent a higher Maximum Lawful
Rate is permitted thereby. PRG shall make advances directly to itself for the
account of Mr. Moore under the Note in order to facilitate the purchase of any
or all of the Shares in an aggregate amount not to exceed $5,000,000.00. The
Note is not a revolving note and amounts repaid under the Note may not be
reborrowed by Mr. Moore. The obligation of PRG to make advances under the Note
shall expire automatically on February 21, 1999. All advances under the Note
must be repaid (both principal and interest on such advance) on the fourth
anniversary of the advance. All outstanding principal and interest due under
the Note is due and payable in full on February 21, 2003. The Note is secured
by the pledge of any and all Series B Convertible Preferred Stock purchased by
Mr. Moore with the proceeds of the Note. Mr. Moore is not be personally liable
for the payment of sums of principal due under the Note, but is personally
liable for the payment of interest accrued under the Note.
In addition, the Board has approved, subject to the consent of the
stockholders of PRG, the Stock Pledge Agreement (herein so called) dated
February 21, 1997 by and between Mr. Moore and PRG whereby Mr. Moore pledges all
Series B Convertible Preferred Stock purchased with the proceeds of the Note to
PRG as security for the repayment of the Note. The Stock Pledge Agreement
provides that, in addition to the Shares, (i) all cash, securities, dividends
and other property of any kind at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the Shares
and any other property substituted or exchanged therefor and (ii) any and all
proceeds, monies, income benefits and other sums arising from or by virtue of,
and all dividends and distributions (cash or otherwise) payable and/or
distributable with respect to, all or any of the Shares or other property
described in (i) hereof shall be pledged as security for the payment of the
Note. Upon payment of the Note, the security interest is to be released. PRG
must release all or a portion of the Shares from the lien upon written request
of Mr. Moore and the occurrence of one of the following: (i) Mr. Moore agrees to
be personally bound for payment of an amount equal to the net after tax proceeds
that would be realized by Mr. Moore from a sale of the Shares on the date of the
release of the Shares at a per share sales price equal to the closing sale price
for shares of common stock of PRG on the day before the release of the Shares or
(ii) Mr. Moore executes a written agreement whereby Mr. Moore agrees to sell the
Shares within ten (10) days and pay the net after tax proceeds of such sale to
PRG for application as provided in the Note. All
-14-
<PAGE>
proceeds received by PRG from the disposition of any of the Shares or from the
exercise of any other right pursuant to the Stock Pledge Agreement shall be
applied to the obligation evidenced by the Note.
On March 25, 1997, subject to stockholder approval, Mr. Moore exercised his
right to purchase 200,000 of the Shares at a price of $11.125 per share on the
terms and conditions set forth in the Letter Agreement.
RECOMMENDATION FOR APPROVAL
Management believes that the approval of the sale of the Shares to Mr.
Moore is beneficial to PRG because it will maximize the incentive for Mr.
Moore, Chairman of the Board and Chief Executive Officer of PRG, to remain in
the employ of the Company and work to maximize stockholder value. The general
effect of the issuance on the current stockholders should be minimal in light of
the fact that Mr. Moore will not receive dividends on the Shares. The principal
effects of the adoption of the proposal are (i) Mr. Moore will receive the
liquidation value of the Shares prior to the receipt of the liquidation value of
the Common Stock by the holders thereof upon the liquidation, dissolution or
winding-up of PRG and (ii) a potential slight dilutive effect on outstanding
shares of Common Stock. Mr. Moore has a substantial interest in the approval of
this proposal because he will be given the opportunity to acquire the Shares
with funds loaned to him by the Company.
The Board has approved the sale of the Shares to Mr. Moore pursuant to the
terms and conditions of the Letter Agreement, the Note and the Stock Pledge
Agreement and is seeking approval of such sale by the stockholders.
Adoption of the proposal to sell the Shares to Mr. Moore pursuant to the
terms and conditions of the Letter Agreement, the Note and the Stock Pledge
Agreement requires the affirmative vote of the holders of the majority of the
shares of Common Stock, present in person or represented by proxy at the
Meeting, which are entitled to vote and are voted either for or against such
proposal, provided that the total vote cast on such proposal represents a
majority in interest of all securities entitled to vote on such proposal.
Unless otherwise instructed, it is the intent of the persons named in the Proxy
to vote all proxies "FOR" the adoption of this proposal.
THE BOARD RECOMMENDS A VOTE FOR THE SALE OF PRG CONVERTIBLE PREFERRED STOCK
TO EMMETT E. MOORE ON THE TERMS AND CONDITIONS SET FORTH IN THE LETTER
AGREEMENT, NOTE AND STOCK PLEDGE AGREEMENT.
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 31, 1997 by (i) all persons known to PRG
to be the beneficial owner of 5% or more of the Common Stock, (ii) each director
of PRG, (iii) each of the Chief Executive Officer and the four highest paid
executive officers other than the Chief Executive Officer (the "Named Executive
Officers"); and (iv) all PRG directors and executive officers as a group. This
table does not include shares of Common Stock that may be purchased pursuant to
options not exercisable within 60 days of March 31, 1997. All persons listed
have sole voting and investment power with respect to their shares unless
otherwise indicated.
Amount and Nature
Name of Beneficial Owner or of Beneficial Percent
Number of Persons in Group Ownership of Class
- -------------------------- --------- --------
Emmett E. Moore............................ 390,000(1)(2) 1.3
Richard M. Owen............................ 141,247(3) *
Richard J. D'Amico......................... 58,000(4) *
Mark Kingston.............................. 126,247(5) *
Jonathan R. Bond........................... 22,500(6) *
Alan C. Baum, M.D.......................... 195,170(7) *
Lucius E. Burch, III....................... 18,000(4) *
Joe E. Ellis, O.D.......................... 8,963 *
Charles D. Fritch, M.D..................... 128,423(8) *
Richard A. Gilleland....................... 4,500(4) *
-15-
<PAGE>
Bruce E. Herron, M.D....................... 112,487(9) *
James E. McDonald, II, M.D................. 128,369(10) *
David Meyer, M.D........................... 1,879,749(11) 6.2
Joseph C. Noreika, M.D..................... 120,652(12) *
James W. Rayner, M.D....................... 487,876(13) 1.6
David M. Schneider, M.D.................... 341,020(13) 1.1
Paul M. Shimoff............................ 6,500(14) *
Ronald L. Stanfa........................... 31,500(14) *
P. Harold Wallar, M.D...................... 211,150(15) *
Kenneth C. Westfield, M.D.................. 304,330(13) 1.0
All directors and executive officers as a
group (25 persons).................... 4,951,822(16) 16
_______________
* Less than 1%.
(1) Includes 1,000 shares held by Mr. Moore's spouse and 169,000 shares which
may be purchased upon the exercise of options exercisable within 60 days of
March 31, 1997.
(2) Includes 200,000 shares which may be acquired by Mr. Moore upon conversion
of shares of Series B Convertible Preferred Stock. The issuance of the
Series B Convertible Preferred Stock is subject to stockholder approval.
(3) Includes 39,000 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(4) Consists entirely of shares which may be purchased upon the exercise of
options exercisable within 60 days of March 31, 1997.
(5) Includes 24,000 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(6) Includes 19,000 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(7) Includes 14,192 shares held by affiliated general partnerships in which Dr.
Baum is a general partner and 2,500 shares which may be purchased upon the
exercise of options exercisable within 60 days of March 31, 1997.
(8) Includes 116,923 shares held by a trust for which Dr. Fritch is a trustee
and 2,500 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(9) Includes 7,935 shares of Common Stock held by a general partnership in
which Dr. Herron is a partner and 2,500 shares which may be purchased upon
the exercise of options exercisable within 60 days of March 31, 1997.
(10) Includes 3,443 shares held by a general partnership in which Dr. McDonald's
children are partners, 17,109 shares of Common Stock held by Dr. McDonald's
spouse and 2,500 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(11) Includes 62,877 shares held by a general partnership in which Dr. Meyer is
a partner and 2,500 shares which may be purchased upon the exercise of
options exercisable within 60 days of March 31, 1997. Dr. Meyer's address
is 813 Ridge Lake Blvd., Suite 400, Memphis, Tennessee 38120.
-16-
<PAGE>
(12) Includes 13,030 shares held by Dr. Noreika's spouse and by trusts for which
Dr. Noreika's spouse is trustee and 2,500 shares which may be purchased
upon the exercise of options exercisable within 60 days of March 31, 1997.
(13) Includes 2,500 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(14) Includes 4,500 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(15) Includes 208,650 shares held by a trust of which Dr. Wallar is a trustee
and 2,500 shares which may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997.
(16) Includes 442,334 shares that may be purchased upon the exercise of options
exercisable within 60 days of March 31, 1997 and 200,000 shares that may be
purchased upon conversion of Series B Convertible Preferred Stock. The
issuance of the Series B Convertible Preferred Stock is subject to
stockholder approval.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid by PRG
for services rendered in all capacities to PRG during 1996 to the Named
Executive Officers.
-17-
<PAGE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ------------------------ --------
OTHER ANNUAL RESTRICTED SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($) AWARDS ($) OPTIONS ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emmett E. Moore 1995 100,885 200,000
Chairman of the Board 1996 315,000 50,000/(1)/ 500,000/(2) 8,269.23/(3)/
Chief Executive Officer
and President
Richard M. Owen 1995 84,462 75,000
Senior Vice President 1996 185,000 35,000/(1)/ 90,000/(4)/ 6,923.00/(3)/
and Treasurer
Richard J. D'Amico 1995 76,313 70,000
Senior Vice President 1996 150,000 110,000 195,000/(5)/ 50,000.38/(3)(6)/
and Secretary
Mark Kingston 1995 46,923 75,000
Senior Vice President 1996 140,000 105,000 70,000/(4)/ 3,846.07/(3)/
and Chief Development
Officer
Jonathan R. Bond 1995 19,673 95,000
Senior Vice President 1996 155,000 82,500 15,000 5,961.45/(3)/
- Operations
</TABLE>
- --------------------
(1) Mr. Moore waived the bonus of approximately $150,000, which would have
accrued pursuant to the terms of his old employment contract and, subject
to stockholder approval of the amendments to the Amended and Restated
Plan, will receive an option to purchase 100,000 shares of PRG Common
Stock at an exercise price of $15.25; Mr. Owen waived a bonus of
approximately $92,500, which would have accrued pursuant to the terms of
his old employment contract and, subject to stockholder approval of the
amendments to the Amended and Restated Plan, will receive an option to
purchase 66,940 shares of PRG Common Stock at an exercise price of
$15.25. See "Management Compensation-Employment Agreements."
(2) Includes an option to purchase 445,000 shares of PRG Common Stock at an
exercise price of $27.625, which, subject to stockholder approval, will
be cancelled and reissued as an option to purchase 267,000 shares of PRG
Common Stock at an exercise price of $15.25.
(3) Represents amounts paid by PRG for health insurance premiums.
(4) Includes an option to purchase 45,000 shares of PRG Common Stock at an
exercise price of $27.625, which, subject to stockholder approval, will
be cancelled and reissued as an option to purchase 27,000 shares of PRG
Common Stock at an exercise price of $15.25.
(5) Includes an option to purchase 150,000 shares of PRG Common Stock, which,
subject to stockholder approval, will be cancelled and reissued as an
option to purchase 90,000 shares of PRG Common Stock at an exercise price
of $15.25.
(6) Includes approximately $45,000 paid in connection with employee's
relocation pursuant to the terms of the employment agreement between
employee and PRG.
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<PAGE>
OPTION GRANTS DURING 1996
The following table presents information regarding 1996 grants of options
to purchase shares of Common Stock for each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM/(1)/
- --------------------------------------------------------------------------------------------- ------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH)/(2)/ DATE 5% ($) 10% ($)
- ---- ---------- ----------- ---------------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Emmett E. Moore 55,000 1.69% $21.875 12/04/06 $756,634 $1,917,468
445,000 13.69% $27.625 04/16/06 $7,731,035 $19,592,044
Richard J. D'Amico 45,000 1.38% $21.875 12/04/06 $619,064 $1,568,837
150,000 4.61% $27.625 04/16/06 $2,605,966 $6,604,060
Richard M. Owen 45,000 1.38% $21.875 12/04/06 $619,064 $1,568,837
45,000 1.38% $27.625 04/16/06 $781,790 $1,981,218
Jonathan R. Bond 15,000 0.46% $21.875 12/04/06 $206,353 $522,945
Mark Kingston 25,000 0.77% $21.875 12/04/06 $343,924 $871,576
45,000 1.38% $27.625 04/16/06 $781,790 $1,981,218
</TABLE>
- ------------------
/(1)/ The dollar amounts in these columns represent the potential realizable
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming that the market price of
Common Stock appreciates in from the date of grant at the 5% and 10%
annual rates prescribed by regulation and therefore are not intended to
forecast possible future appreciation, if any, of the price of Common
Stock. These numbers do not take into account provisions of certain
options providing for termination of the option following termination of
employment, nontransferability or vesting over periods.
/(2)/ The option exercise price may be paid in shares of Common Stock owned by
the executive officer, in cash, or in any other form of valid
consideration as determined by the Compensation Committee in its
discretion. The exercise price of each option was equal to the fair market
value of the Common Stock on the date of grant.
-19-
<PAGE>
AGGREGATED OPTION EXERCISES DURING 1996 AND YEAR-END OPTION VALUES
The following table presents information regarding options exercised in
1996 and the value of options outstanding at December 31, 1996 for each of the
Named Executive Officers:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($) /(1)/
--------------------- -------------------
Shares Acquired Value
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Emmett E. Moore 0 $ 0.00 40,000 660,000 $280,000 $1,120,000
Richard J. D'Amico 0 $ 0.00 14,000 251,000 $ 76,000 $ 304,000
Richard M. Owen 0 $ 0.00 15,000 150,000 $ 75,000 $ 300,000
Jonathan R. Bond 0 $ 0.00 19,000 91,000 $ 0 $ 0
Mark Kingston 15,000 $188,250 0 130,000 $ 0 $ 300,000
</TABLE>
- -------------------
/(1)/ The closing price for the Common Stock as listed on the New York Stock
Exchange on December 31, 1996, the last trading day of 1996 was $17.625.
Value is calculated on the basis of the difference between the option
exercise price and $17.625 multiplied by the number of shares of Common
Stock underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of PRG was, during
1996, an officer or employee of PRG or any of its subsidiaries, or was formerly
an officer of PRG or any of its subsidiaries or had any relationships requiring
disclosure by PRG.
During 1996, no executive officer of PRG served as (i) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee of the Board, (ii) a director of another entity, one of
whose executive officers served on the Compensation Committee of the Board, or
(iii) a member of the Compensation Committee (or other board committee
performing similar functions) of another entity, one of whose executive officers
served as a director of PRG.
COMPENSATION OF DIRECTORS
Directors who are employees of PRG or of a practice with which PRG has
entered a Service Agreement (each an "Affiliated Practice") do not receive
additional compensation for serving as directors. Each director who is neither
an employee of PRG nor of an Affiliated Practice receives a fee of $2,000 for
attendance at each Board of Directors meeting (whether the meeting is in person
or telephonic) and $1,500 (if in person; $500 if telephonic) for each committee
meeting (unless held on the same day as a Board meeting) and an initial grant of
nonqualified options to purchase 10,000 shares of Common Stock. Nonemployee
directors (whether or not employed by an Affiliated Practice) receive annual
grants of nonqualified options to purchase 5,000 shares of Common Stock. All
directors of PRG are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board or committees thereof, and for other expenses incurred in
their capacity as directors of PRG.
-20-
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Bond has entered into an employment agreement with PRG providing for a
base salary of $155,000 per annum or as increased from time to time by the Board
of Directors. Such employment agreement provides that in the event of a
termination of employment by PRG other than (i) for cause, (ii) upon death or
disability or (iii) upon notice 60 days prior to an automatic renewal date
occurring after five years from the date of first employment, Mr. Bond shall be
entitled to receive from PRG a payment equal to the amount of Mr. Bond's then
current annual salary, to be paid in twelve monthly installments, plus a payment
for accrued but unpaid wages and expense reimbursements. Mr. Bond's employment
agreement provides that in the event Mr. Bond's employment terminates within
twelve months following a change in control (as defined in such employment
agreement) of PRG, PRG shall pay Mr. Bond 2.99 times Mr. Bond's (i) base salary,
(ii) maximum potential bonus and (iii) certain other compensation, with certain
adjustments. The employment agreement provides that PRG will pay an amount
necessary to reimburse Mr. Bond, on an after tax basis, for any excise tax due
under Section 4999 of the Code, as a result of such payment being treated as a
"parachute payment" under Section 280G of the Code. The employment agreement
contains a covenant-not-to-compete with PRG for a period of two years following
termination of employment. However, the agreement does provide that Mr. Bond
may devote up to ten percent (10%) of his professional time or two (2) days per
month to a consulting business independent from PRG.
In addition to base salary, Mr. Bond through his employment agreement is
eligible for a bonus based on earnings per share growth. Bonuses are capped at
50% of base salary. Mr. Bond was granted an option to purchase 95,000 shares of
PRG Common Stock with the per share exercise price being the closing sale price
for PRG stock on the New York Stock Exchange on the date of the commencement of
the employment agreement. The options vest over a five (5) year period from the
commencement of the employment agreement; however, the options are immediately
exercisable upon a Change in Control. His agreement began in October 1995 and
is for a term of five years, automatically renewed thereafter for successive one
year terms unless either party gives 60 days notice of termination.
Mr. D'Amico has entered into an employment agreement with PRG providing for
a base salary of $120,000 per annum or as increased from time to time by the
Board of Directors. Such employment agreement provides that in the event of a
termination of employment by PRG other than (i) for cause or (ii) upon death or
disability, Mr. D'Amico shall be entitled to receive from PRG a payment equal to
the amount of Mr. D'Amico's then current annual salary, to be paid in twelve
monthly installments, plus a payment for accrued but unpaid wages and expense
reimbursements. Mr. D'Amico's employment agreement provides that in the event
Mr. D'Amico's employment terminates within twelve months following a change in
control (as defined in such employment agreement) of PRG, PRG shall pay Mr.
D'Amico 2.99 times Mr. D'Amico's (i) base salary, (ii) maximum potential bonus
and (iii) certain other compensation, with certain adjustments. The employment
agreement provides that PRG will pay an amount necessary to reimburse Mr.
D'Amico, on an after tax basis, for any excise tax due under Section 4999 of the
Code, as a result of such payment being treated as a "parachute payment" under
Section 280G of the Code. The employment agreement contains a covenant-not-to-
compete with PRG for a period of two years following termination of employment.
However, the agreement does provide that Mr. D'Amico may devote up to ten
percent (10%) of his professional time or two (2) days per month to a consulting
business independent from PRG.
In addition to base salary, Mr. D'Amico through his employment agreement is
eligible for a bonus based on earnings per share growth. Bonuses are capped at
50% of base salary. Mr. D'Amico was granted an option to purchase 70,000 shares
of PRG Common Stock with the per share exercise price for 3,750 of such shares
being $5.00 per share and the per share exercise price for the remaining 66,250
of such shares being the initial public offering price for the Company's Common
Stock. The options vest over a five (5) year period from the commencement of
the employment agreement; however, the options are immediately exercisable upon
a Change in Control. His agreement began in April 1995 and is for a term of
five years, automatically renewed thereafter for successive one year terms
unless either party gives 30 days notice of termination.
Mr. Kingston has entered into an employment agreement with PRG providing
for a base salary of $100,000 per annum or as increased from time to time by the
Board of Directors. Such employment agreement provides that in the event of a
termination of employment by PRG other than (i) for cause or (ii) upon death or
disability, Mr. Kingston shall be entitled to receive from PRG a payment equal
to the amount of Mr. Kingston's then current annual salary, to be paid in twelve
monthly installments, plus a payment for accrued but unpaid wages and expense
reimbursements. Mr.
-21-
<PAGE>
Kingston's employment agreement provides that in the event Mr. Kingston's
employment terminates within twelve months following a change in control (as
defined in such employment agreement) of PRG, PRG shall pay Mr. Kingston 2.99
times Mr. Kingston's (i) base salary, (ii) maximum potential bonus and (iii)
certain other compensation, with certain adjustments. The employment agreement
provides that PRG will pay an amount necessary to reimburse Mr. Kingston, on an
after tax basis, for any excise tax due under Section 4999 of the Code, as a
result of such payment being treated as a "parachute payment" under Section 280G
of the Code. The employment agreement contains a covenant-not-to-compete with
PRG for a period of two years following termination of employment. However, the
agreement does provide that Mr. Kingston may devote up to ten percent (10%) of
his professional time or two (2) days per month to a consulting business
independent from PRG.
In addition to base salary, Mr. Kingston through his employment agreement
is eligible for a bonus based on earnings per share growth. Bonuses are capped
at 50% of base salary. Under the Employment Agreement, an option to purchase
75,000 shares of Common Stock at a purchase price of $13.00 per share was
granted to Mr. Kingston. Such options shall vest over a five (5) year period;
however, the options are immediately exercisable upon a Change in Control. His
agreement began in April 1995 and is for a term of five years, automatically
renewed thereafter for successive one year terms unless either party gives 30
days notice of termination.
Mr. Moore has entered into an employment agreement with PRG providing for a
base salary of $215,000 per annum or as increased from time to time by the Board
of Directors. Such employment agreement provides that in the event of a
termination of employment by PRG other than (i) for cause, (ii) upon death or
disability or (iii) upon notice 30 days prior to an automatic renewal date
occurring after five years from the date of first employment, Mr. Moore shall be
entitled to receive from PRG a payment equal to the amount of Mr. Moore's then
current annual salary, to be paid in twelve monthly installments, plus a payment
for accrued but unpaid wages and expense reimbursements. Mr. Moore's employment
agreement provides that in the event Mr. Moore's employment terminates within
twelve months following a change in control (as defined in such employment
agreement) of PRG, PRG shall pay Mr. Moore 2.99 times Mr. Moore's (i) base
salary, (ii) maximum potential bonus and (iii) certain other compensation, with
certain adjustments. The employment agreement provides that PRG will pay an
amount necessary to reimburse Mr. Moore, on an after tax basis, for any excise
tax due under Section 4999 of the Code, as a result of such payment being
treated as a "parachute payment" under Section 280G of the Code. The employment
agreement contains a covenant-not-to-compete with PRG for a period of two years
following termination of employment. However, the agreement does provide that
Mr. Moore may devote up to ten percent (10%) of his professional time or two (2)
days per month to a consulting business independent from PRG.
In addition to base salary, Mr. Moore through his employment agreement is
eligible for a bonus based on earnings per share growth. Bonuses are capped at
50% of base salary. His agreement began in April 1995 and is for a term of five
years.
Mr. Moore entered into a new employment agreement effective February 21,
1997, which contains the same terms and conditions as the employment agreement
described above except that it is for a term of three (3) years from the
commencement date of the agreement, annual base salary is $315,000, there is no
provision for reimbursement of excise tax, the bonus calculation is subject to a
new formula and, contingent on the approval of the amendments to the Amended and
Restated PRG Plan, 100,000 options vesting 20% over a five (5) year period at an
exercise price of $15.25 will be granted to Mr. Moore as consideration for
entering into the agreement.
Mr. Owen has entered into an employment agreement with PRG providing for a
base salary of $180,000 per annum or as increased from time to time by the Board
of Directors. Such employment agreement provides that in the event of a
termination of employment by PRG other than (i) for cause, (ii) upon death or
disability or (iii) upon notice 30 days prior to an automatic renewal date
occurring after five years from the date of first employment, Mr. Owen shall be
entitled to receive from PRG a payment equal to the amount of Mr. Owen's then
current annual salary, to be paid in twelve monthly installments, plus a payment
for accrued but unpaid wages and expense reimbursements. Mr. Owen's employment
agreement provides that in the event Mr. Owen's employment terminates within
twelve months following a change in control (as defined in such employment
agreement) of PRG, PRG shall pay Mr. Owen 2.99 times Mr. Owen's (i) base salary,
(ii) maximum potential bonus and (iii) certain other compensation, with certain
adjustments. The employment agreement provides that PRG will pay an amount
necessary to reimburse Mr. Owen, on an after tax basis, for any excise tax due
under Section 4999 of the Code, as a result of such payment being treated
as a "parachute
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<PAGE>
payment" under Section 280G of the Code. The employment agreement contains a
covenant-not-to-compete with PRG for a period of two years following termination
of employment. However, the agreement does provide that Mr. Owen may devote up
to ten percent (10%) of his professional time or two (2) days per month to a
consulting business independent from PRG.
In addition to base salary, Mr. Owen through his employment agreement is
eligible for a bonus based on earnings per share growth. Bonuses are capped at
50% of base salary. Under the Employment Agreement, an option to purchase
75,000 shares of Common Stock at a purchase price of $13.00 per share was
granted to Mr. Owen. Such options shall vest over a five (5) year period;
however, the options are immediately exercisable upon a Change in Control. His
agreement began in April 1995 and is for a term of five years, automatically
renewed thereafter for successive one year terms unless either party gives 30
days notice of termination.
Mr. Owen entered into a new employment agreement effective February 21,
1997, which contains the same terms and conditions as the employment agreement
described above except that it would be for a term of two (2) years from the
commencement date of the agreement, annual base salary is $250,000, there is no
provision for reimbursement of excise tax, the bonus calculation is subject to a
new formula and, contingent on the approval of the amendments to the Amended and
Restated PRG Plan, 66,940 options vesting 20% over a five (5) year period at an
exercise price of $15.25 will be granted to Mr. Owen as consideration for
entering into the agreement.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee of the Board of
Directors of PRG shall not be deemed incorporated by reference by any general
statement incorporating this proxy statement by reference into any filing under
the Securities Act of 1933, as amended (the "Securities Act"), or under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and shall not
be deemed filed under either of the Securities Act or the Exchange Act except to
the extent that PRG specifically incorporates this information by reference.
Overview
The key components of executive officer compensation are salary, bonus and
stock option awards. Through 1996, each of PRG's named executive officers was a
party to a five year employment agreement (collectively the "Executive
Employment Agreements"). The Executive Employment Agreements for four of the
named executive officers were negotiated at arms-length and entered into prior
to PRG's initial public offering and the formation of the Compensation Committee
of the Board of Directors. The Executive Employment Agreement for the remaining
named executive officer was entered into in October 1995. Each Executive
Employment Agreement provides for a minimum base salary (subject to increase by
the Compensation Committee) and a bonus in the event that PRG experiences at
least 20% or greater growth in earnings per share. The amount of such bonus may
be up to 50% of base salary depending upon the amount of the growth in earnings
per share. Additionally, the Compensation Committee may provide for
discretionary bonuses. Certain other executive officers are also parties to
employment agreements, although in certain instances, the forms thereof may
differ from the Executive Employment Agreements. The Compensation Committee
believes that the base salary levels provided for in the Executive Employment
Agreements and the other employment agreements are below the base salary levels
paid to executives holding comparable positions with other publicly held
physician practice management companies.
The members of the Compensation Committee hold primary responsibility for
determining executive officer compensation levels, subject to the terms of the
Executive Employment Agreements and the other employment agreements. The
Compensation Committee is composed entirely of independent outside directors of
PRG, none of whom are or have been officers or employees of PRG. The
Compensation Committee has adopted a compensation philosophy intended to align
compensation with PRG's overall business strategy. The philosophy guiding the
executive compensation program is designed to link executive compensation and
stockholder value. The goals of the program are:
. To compensate executive employees in a manner that aligns the
employees' interests with the interests of the stockholders;
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<PAGE>
. To encourage continuation of PRG's entrepreneurial spirit;
. To reward executives for successful long-term strategic management;
. To recognize outstanding performance; and
. To attract and retain highly qualified and motivated executives.
The strategy established by the Compensation Committee with respect to
executive compensation includes maintaining base salaries for executives at a
level somewhat below the industry average, while providing bonuses which, when
combined with base salary amounts, give PRG's executives the potential to earn
in excess of competitive industry compensation if certain subjective and
objective performance goals for PRG are achieved. The Compensation Committee
intends to continue to grant to PRG's executives and other key employees stock
options at current market value, which options have no monetary value to the
executives unless and until the market price of PRG's Common Stock increases.
In this manner, PRG's executives will be well-compensated when PRG achieves its
operating and performance goals. On the other hand, in less successful years,
an executive's pay may be below competitive industry compensation. The mix of
base salary, bonuses and stock option awards reflects the Compensation
Committee's intention to link executive compensation to PRG's operational
performance and the price of its Common Stock. The Compensation Committee
anticipates that discretionary bonus payments and option grants made during 1997
and thereafter will be based on a subjective analysis of various performance
criteria and will not directly be tied to any one factor. The Compensation
Committee intends to continue to examine ways to more closely link its annual
bonus and long-term incentive plans to PRG's stock performance, with the
objective of creating plans that strengthen the relationship between stockholder
value and executive compensation.
In the latter part of 1996, the Compensation Committee engaged the services
of compensation consultants from Towers Perin for the purpose of assisting the
Compensation Committee with a full review of the competitiveness and
effectiveness of the Company's executive pay practices. This review covered base
salary levels and ranges for each executive position, annual incentive
practices, executive benefit arrangements and stock-based long-term incentives.
It also included a comparative analysis of key industry financial results in
order to evaluate the Company's relative achievement of the desired pay to
performance relationship. The results of this review were presented to the
Compensation Committee in 1997. Such review was not taken into consideration in
connection with the determination of any compensation for 1996.
1996 Compensation
Compensation paid during 1996 to Emmett E. Moore, PRG's Chief Executive
Officer, was composed of the base salary set forth in Mr. Moore's Executive
Employment Agreement and option grants made to Mr. Moore. The Compensation
Committee increased the base annual salary payable to Mr. Moore from $215,000 to
$315,000, effective January 1, 1996. Such increase was made partially in
recognition of the increased responsibilities undertaken by Mr. Moore as a
result of his assumption of the role of Chief Executive Officer of the Company
in September 1995. The Compensation Committee also granted options to Mr. Moore
(i) in April 1996, to purchase 445,000 shares of Common Stock, and (ii) in
December 1996, to purchase 55,000 shares of Common Stock. All options were
granted at exercise prices based upon the fair market value of the Company's
Common Stock on the date of grant.
Pursuant to the terms of Mr. Moore's Executive Employment Agreement, Mr.
Moore was entitled to receive a bonus of 50% of his base salary as a result of
the Company's achievement of certain performance goals set forth in his
Executive Employment Agreement. During the latter part of 1996 and continuing
into 1997, the Compensation Committee discussed with Mr. Moore other forms of
compensation that would make his compensation package more consistent with the
Compensation Committee's philosophy as outlined above. As a result of such
discussion, Mr. Moore entered into a new employment agreement with the Company
in 1997, as discussed elsewhere in the Proxy Statement of which this report is a
part. In connection with his execution of the new employment agreement, Mr.
Moore relinquished any rights he had to receive all bonuses under his Executive
Employment Agreement.
The cash compensation paid to PRG's other executive officers during 1996
was composed of the base salary under the terms of each executive officer's
Executive Employment Agreement and option grants made pursuant to the terms of
his Executive Employment Agreements. Effective January 1, 1997, the Company
promoted Richard M. Owen
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<PAGE>
from Chief Financial Officer to President, although such promotion did not
affect his compensation for 1996, which was set forth in his Executive
Employment Agreement. Mr. Owen also was entitled to receive a bonus payable to
him pursuant to his Executive Employment Agreement for 1996. However, Mr. Owen
also entered into a new employment agreement with the Company in 1997, and in
connection therewith, Mr. Owen also relinquished any rights he had to receive
all bonuses under his Executive Employment Agreement.
The Compensation Committee also made grants of options to Mr. Owen and
other executive officers. Options for an aggregate of 476,245 shares were
granted to the Company's executive officers (other than Mr. Moore) during 1996.
Such grants were based upon a subjective evaluation by the Compensation
Committee of the officer level, duties and responsibilities of the individual
and his present and potential contributions to the growth and success of the
Company, consistent with the compensation philosophy discussed above.
This report is submitted by the members of the Compensation Committee.
COMPENSATION COMMITTEE
Richard A. Gilleland
Paul M. Shimoff
Ronald L. Stanfa
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<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total stockholder return on Common Stock from January 1, 1996 through December
31, 1996, with the cumulative total return on the S&P 500 Index and the S&P
Health Care (Diversified) Index. The comparison assumes $100 was invested
immediately prior to the period in Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends. PRG's initial public offering
price of $13.00 was used as the beginning price of the Common Stock. Dates on
the following chart represent the last day of the indicated fiscal year. PRG
paid no dividends during such period.
[PERFORMANCE GRAPH APPEARS HERE]
(1) Total return assumes reinvestment of dividends, if applicable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Company/Index June 23, 1995 December 31, 1995 December 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Physicians Resource Group, Inc. $100 $152.88 $135.57
- --------------------------------------------------------------------------------------------
S&P Health Care (Diversified) Index 100 118.46 149.40
- --------------------------------------------------------------------------------------------
S&P 500 Index 100 113.41 139.45
- --------------------------------------------------------------------------------------------
</TABLE>
CERTAIN TRANSACTIONS
In connection with the acquisition of Sun Valley Acquisition Corp. and
certain practices in February, 1996, by PRG, Daniel Chambers, President and 25%
owner of Sun Valley Acquisition Corp., received an amount equal to approximately
$206,000 cash, and 8,851 shares of PRG Stock.
REAL ESTATE TRANSACTIONS
On June 28, 1995, PRG became the lessee under a variety of leases. PRG
assumed an office lease for which a partnership, in which Bruce E. Herron, M.D.
is a partner, is the lessor; the annual expenditures under the lease were
approximately $171,000. PRG assumed one office lease for which James E.
McDonald, II, M.D. is the lessor; the aggregate annual expenditures under the
lease were approximately $199,000. PRG assumed five office leases for which
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<PAGE>
various partnerships, in which P. Harold Wallar, M.D. is a partner, are the
lessors; the aggregate annual expenditures under these leases were approximately
$516,000. PRG assumed four office leases for which a partnership, in which
Kenneth C. Westfield, M.D. is a partner, is the lessor; the aggregate annual
expenditures under these leases were approximately $81,000.
CERTAIN INDEBTEDNESS
As part of the Reorganization, PRG assumed various obligations of Dr.
McDonald totaling $166,871 as of June 30, 1995 with interest rates ranging from
7.50% to 9.75%. On December 31, 1996, approximately $77,419 principal amount of
such balance was outstanding.
On April 8, 1994, the Vitreoretinal Foundation, of which Dr. Meyer is a
general partner, borrowed approximately $1,000,000 from EyeCorp at an annual
interest rate of 10.25% pursuant to a promissory note that matures on April 10,
1999. On December 31, 1996, approximately $1,000,000 principal amount of such
note was outstanding.
On June 28, 1995, PRG entered into an agreement (the "ASC Option") with the
stockholders of one of the initial Affiliated Practices of which Bruce E.
Herron, M.D. is a stockholder, pursuant to which such stockholders had the right
to require PRG to purchase from such stockholders their stock in the entity
owning such ASC. The ASC Option was exercised and the acquisition of the stock
of such entity by PRG was consummated on March 18, 1996.
In connection with the exercise of the ASC Option, PRG executed a promissory
note in favor of Dr. Herron in the principal amount of $601,300.00 bearing
interest at an annual rate of seven percent (7%). The principal balance of such
note in the amount of $487,620.96 and interest in the amount of $8,533.37 was
paid on April 1, 1997, extinguishing the debt.
SERVICE AGREEMENTS
PRG is a party to certain Service Agreements with affiliated practices in
which certain directors have an ownership interest. Service fees accrued to PRG
in 1996 by such affiliated practices in which certain directors have an
ownership interest were as follows: Alan C. Baum, M.D. (TEI & Assoc.)
$4,559,000; Charles D. Fritch, M.D. (Fritch Eye Care Center) $6,195,000; Bruce
E. Herron, M.D. (Eye Clinic, P.C.) $4,042,000; James E. McDonald, M.D. (McDonald
Eye Associates, P.A.) $1,912,000; Joseph C. Noreika, M.D. (TPZ, Inc.) $805,000;
David M. Schneider, M.D. (David M. Schneider, M.D., Inc.) $1,941,000; P. Harold
Wallar, M.D. (Inland Eye Institute Medical Group, Inc.) $2,089,000; Kenneth C.
Westfield, M.D. (Westfield Eye Center) $1,635,000; David Meyer, M.D.
(Vitroretinal Foundation) $14,138,000; James W. Rayner, M.D. (Rayner Eye
Clinic) $1,739,000; and Joe E. Ellis, O.D. (Primary Eye Care, P.S.C.) $593,000.
COMPANY POLICY
It is anticipated that future transactions with affiliates of PRG will be
minimal, will be approved by a majority of the disinterested members of the
Board and will be made on terms no less favorable to PRG than could be obtained
from unaffiliated third parties. PRG does not intend to make any further loans
to, or incur any indebtedness to, any of its executive officers or directors.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
PRG's officers and directors, and persons who own more than 10% of a registered
class of PRG's equity securities, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission (the
"SEC"). Such persons are required by SEC regulation to furnish PRG with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to 1996, or written representations from certain reporting persons, PRG
believes that all filing requirements applicable to its officers, directors and
persons who own more than 10% of a registered class of PRG's equity securities
have been complied with in a timely manner except that certain Form 4s filed on
behalf of each of Messrs. Owen and Kingston, relating to the exercise of stock
options, were filed late.
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Arthur Andersen LLP as independent auditors to
examine PRG's accounts for the current fiscal year. It is expected that
representatives of Arthur Andersen LLP will be present at the Meeting, will be
available to respond to appropriate questions of stockholders and will have an
opportunity to make a statement if they desire.
OTHER BUSINESS
PRG does not intend to bring any business before the Meeting other than
those described herein and at this date PRG has not been informed of any matters
that may be presented at the Meeting by others; however, if any other matters
properly come before the Meeting or any adjournment thereof, it is intended that
the persons named in the accompanying Proxy will vote pursuant to such Proxy in
accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of PRG consistent with Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended. For such
proposals to be considered in the Proxy Statement and Proxy relating to the 1998
Annual Meeting of Stockholders, such proposals must be received by PRG,
Attention: Secretary, at the address set forth on the first page of this proxy
statement, no later than December 23, 1997, in order to be included in PRG's
proxy materials and form of proxy relating to that meeting. Stockholder
proposals must also be otherwise eligible for inclusion.
MISCELLANEOUS
All costs of solicitation of Proxies will be borne by PRG. In addition to
solicitation by mail, the officers and employees of PRG may solicit Proxies by
telephone or personally, without additional compensation. PRG may also make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares of Common Stock held of record by such persons, and PRG may
reimburse them for their out-of-pocket expenses incurred in connection
therewith. PRG has engaged ChaseMellon Shareholder Services, L.L.C., as proxy
solicitor for approximately $6,500.
The Annual Report to Stockholders of PRG, including financial statements
for the fiscal year ended December 31, 1996, accompanies this Proxy Statement.
The Annual Report is not to be deemed part of this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Richard J. D'Amico
-----------------------------
Richard J. D'Amico
Secretary
Dallas, Texas
April 22, 1997
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<PAGE>
P R O X Y
PHYSICIANS RESOURCE GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders to be held on May 21, 1997
The undersigned hereby appoints Richard J. D'Amico and Emmett E. Moore, jointly
and severally, proxies, with full power of substitution and with discretionary
authority, to vote all shares of Common Stock that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Physicians Resource Group,
("PRG") to be held on Wednesday, May 21, 1997, at the Doubletree Hotel at
Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240, at 10:00 a.m., or at any
adjournment thereof, hereby revoking any proxy heretofore given.
(change of address)
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS ------------------------
VOTE FOR EACH DIRECTOR NOMINEE, FOR PROPOSAL 2,
FOR PROPOSAL 3, FOR PROPOSAL 4 AND FOR PROPOSAL 5. ------------------------
------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card)
The proxy, when properly executed, will be voted in the manner directed herein,
and in the absence of specific directions to the contrary, this proxy will be
voted (i) FOR the election of the six nominees for director, (ii) FOR the grant
of new stock options in connection with the cancellation of existing stock
option grants, (iii) FOR adoption of the Employee Stock Purchase Plan and
Amendment One thereto, (iv) FOR adoption of the amendments to the 1995 Health
Care Professionals Stock Option Plan and the Amended and Restated 1995 Stock
Option Plan, (v) FOR adoption of an arrangement related to the purchase of PRG
Convertible Preferred Stock by Emmett E. Moore, Chairman of the Board of
Directors and Chief Executive Officer of PRG and (vi) in the discretion of the
proxyholders on any other matters that may properly come before the meeting and
any adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
(continued and to be signed on reverse side)
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FOLD AND DETACH HERE
<PAGE>
Please mark your
vote as indicated [X]
in this example
1. Election as Directors of the six nominees listed below (except as indicated
to the contrary below.)
FOR all nominees WITHHOLD AUTHORITY INSTRUCTION: To withhold
listed below to vote on one or more nominees authority to vote for any
listed below, but vote FOR the individual nominee, check
remaining nominees. the withhold box and write
the nominee's name on the
[___] [___] space provided opposite
his name.
Emmett E. Moore
------------------------------------------
Joe E. Ellis, O.D.
------------------------------------------
Charles D. Fritch, M.D.
------------------------------------------
Bruce E. Herron, M.D.
------------------------------------------
James W. Rayner, M.D.
------------------------------------------
Kenneth C. Westfeld, M.D.
------------------------------------------
2. Approval of the Employee Stock Purchase Plan and Amendment One thereto.
FOR AGAINST ABSTAIN
[__] [__] [__]
3. Approval of the amendments to the 1995 Health Care Professionals Stock Option
Plan and Amended and Restated 1995 Stock Option Plan.
FOR AGAINST ABSTAIN
[__] [__] [__]
4. Approval of new stock option grants in connection with the cancellation of
existing stock option grants.
FOR AGAINST ABSTAIN
[__] [__] [__]
5. Approval of an arrangement related to the purchase of PRG Convertible
Preferred Stock by Emmett E. Moore, Chairman of the Board of Directors and
Chief Executive Officer of PRG.
FOR AGAINST ABSTAIN
[__] [__] [__]
6. With discretionary authority as to such other matters as may properly come
before the Annual Meeting.
CHANGE OF ADDRESS [____]
Signature Signature Date
-------------------- -------------------- ---------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
