ORION HEALTHCORP, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ORION HEALTHCORP, 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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (set forth the
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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. |
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April 20, 2006
To Our Stockholders:
On behalf of the board of directors and management of Orion HealthCorp, Inc. (the Company),
I cordially invite you to attend the Annual Meeting of Stockholders to be held on Friday, May 12,
2006, at 8:00 a.m. local time, at 1805 Old Alabama Road, Roswell, Georgia 30076.
The attached Notice of Annual Meeting and Proxy Statement describe the formal business to be
transacted at the Annual Meeting. Also included in this mailing is a copy of our 2006 Annual
Report to Stockholders and a form of proxy for use in voting at the Annual Meeting. Once the
business of the Annual Meeting is concluded, I will report on the operations of the Company.
Directors and officers of the Company, as well as a representative of UHY Mann Frankfort Stein &
Lipp CPAs, L.L.P., the Companys independent public auditors, will be available to respond to any
questions stockholders may have.
The matters to be considered by stockholders at the Annual Meeting are described in the
accompanying Notice of Annual Meeting and Proxy Statement. The board of directors of the Company
has determined that the matters to be considered at the Annual Meeting are in the best interests of
the Company and its stockholders. For the reasons set forth in the Proxy Statement, the board of
directors unanimously recommends a vote FOR each director nominee, FOR ratification of the
appointment of UHY Mann Frankfort Stein & Lipp CPAs, L.L.P. as the Companys independent public
auditors and for each other matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This
will not prevent you from voting in person at the Annual Meeting, but will assure that your vote is
counted if you are unable to attend the Annual Meeting. YOUR VOTE IS VERY IMPORTANT TO OUR
COMPANY.
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Sincerely, |
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Terrence L. Bauer
President and Chief Executive Officer |
ORION HEALTHCORP, INC.
1805 OLD ALABAMA ROAD, SUITE 350
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 12, 2006
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the Annual Meeting) of Orion
HealthCorp, Inc. (the Company) will be held on Friday, May 12, 2006, at 8:00 a.m. local time, at
1805 Old Alabama Road, Roswell, Georgia 30076, or at any adjournments or postponements thereof. The
Proxy Statement and a proxy card for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon the following matters:
1. Election of five directors of the Company to serve until the 2007 annual meeting of
stockholders or until their respective successors are elected and qualified;
2. Ratification of the appointment of UHY Mann Frankfort Stein & Lipp CPAs, L.L.P. as the
Companys independent public auditors; and
3. Such other business as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
Execution of a proxy in the form enclosed also permits the proxy holders to vote, in their
discretion, upon such other matters that may properly come before the Annual Meeting or any
adjournment or postponement thereof. As of the date of mailing, the board of directors is not
aware of any other matters that may come before the Annual Meeting. Any action may be taken on the
foregoing proposals at the Annual Meeting on the date specified above or on any date or dates to
which, by original or later adjournment or postponement, the Annual Meeting may be adjourned or
postponed. Stockholders of record at the close of business on March 27, 2006 are the stockholders
entitled to vote at the Annual Meeting and any adjournments or postponements thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY YOU
GIVE MAY BE REVOKED BEFORE THE VOTE AT THE ANNUAL MEETING BY DELIVERING TO THE CORPORATE SECRETARY
OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. IF YOU ARE
PRESENT AT THE ANNUAL MEETING YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT
BEFORE THE ANNUAL MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE IN PERSON AT
THE ANNUAL MEETING.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Stephen H. Murdock
Corporate Secretary |
Roswell, Georgia
April 20, 2006
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR
PROXIES IN ORDER TO INSURE A QUORUM AT THE ANNUAL MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
1
PROXY STATEMENT
OF
ORION HEALTHCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2006
GENERAL
Our board of directors is soliciting your proxy in connection with our 2006 Annual Meeting of
Stockholders (the Annual Meeting), which will be held on Friday, May 12, 2006, at 8:00 a.m. local
time, at 1805 Old Alabama Road, Roswell, Georgia 30076, and at any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
All stockholders are entitled and encouraged to attend the Annual Meeting in person. This Proxy
Statement and the accompanying Notice of Annual Meeting are being first mailed to stockholders on
or about April 20, 2006.
BACKGROUND
On December 15, 2004, Orion HealthCorp, Inc. (then operating under the name SurgiCare, Inc.)
(the Company) underwent a restructuring (the Restructuring) whereby the Company: (i) acquired
three healthcare service companies, Integrated Physician Solutions, Inc. (IPS), Medical Billing
Services, Inc. (MBS) and Dennis Cain Physician Solutions, Ltd. (DCPS); (ii) issued new equity
securities for cash and contribution of outstanding debt; (iii) restructured its debt facilities;
(iv) completed a one-for-ten reverse stock split (the Reverse Stock Split); (v) created three new
classes of common stock (Class A, Class B and Class C); and (vi) changed its name to Orion
HealthCorp, Inc. As a result of the Restructuring, IPS and MBS became wholly owned subsidiaries of
the Company and DCPS became a wholly owned subsidiary of MBS.
Prior to the Restructuring, the Companys common stock was traded on the American Stock
Exchange (AMEX) under the symbol SRG. As part of the Restructuring, (i) the Companys common
stock was reclassified as Class A Common Stock, resulting in the Class A Common Stock being traded
on AMEX under the symbol ONH, (ii) the Company issued additional shares of Class A Common Stock to
the former stockholders and certain creditors of IPS, (iii) the Company issued shares of its newly
created Class B Common Stock to certain investors, including Brantley Partners IV, L.P. (Brantley
IV) and Brantley Capital Corporation (Brantley Capital), and (iv) the Company issued shares of
its newly created Class C Common Stock to the former equity owners of MBS and DCPS. Also, from the
time of completion of the Restructuring, Brantley IV and its affiliates, Brantley Venture Partners
III, L.P. (Brantley III) and Brantley Capital, owned a majority of the voting power of the equity
securities of the Company, making the Company a controlled company under the listing rules of
AMEX. On April 12, 2006, Brantley IV and Brantley III filed with the Securities and Exchange
Commission (SEC) an amendment to their Schedule 13D relating to the Company indicating that
Brantley Capital had terminated its investment advisory relationship with Brantley Capital
Management, L.L.C. (Brantley Capital Management) on September 28, 2005, which resulted in
Brantley Capital no longer being an affiliate of Brantley III or Brantley IV. Therefore, no
individual or group now owns a majority of the voting power of the equity securities of the Company
and the Company is no longer a controlled company under the listing rules of AMEX.
ABOUT THE MEETING
Why am I receiving this Proxy Statement and proxy card?
You are receiving a Proxy Statement and proxy card because you own shares of Class A Common
Stock of the Company, shares of Class B Common Stock of the Company, and/or shares of Class C
Common Stock of the Company (collectively, Common Stock). This Proxy Statement describes
proposals on which we would like you, as a stockholder, to vote. It also gives you information on
the proposals so that you can make an informed decision.
When you sign the proxy card, you appoint Terrence L. Bauer and Stephen H. Murdock, and each
of them, as your proxies to vote your shares of Common Stock at the Annual Meeting and at all
adjournments or postponements of the Annual Meeting. All properly executed proxy cards delivered
pursuant to this solicitation and not revoked will be voted in accordance with the directions
given. Other than the proposals described in this Proxy Statement, we do not know of any other
matters that will be considered at the Annual Meeting. Execution of a proxy card, however, confers
on the designated proxy holders discretionary authority to vote the shares represented by the proxy
on other business, if any, that may properly come before the Annual Meeting or any adjournment or
postponement thereof.
1
What am I voting on?
You are being asked to vote on the following proposals:
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Proposal I
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To elect five directors to serve until the 2007 annual meeting
of stockholders or until their successors are elected and
qualified; and |
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Proposal II
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To ratify the appointment of UHY Mann Frankfort Stein & Lipp
CPAs, L.L.P. (UMFSL) as the Companys independent public
auditors. |
Who is entitled to vote?
Our board of directors has fixed the close of business on March 27, 2006, as the record date
for determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. As of
the record date, there were 24,314,084 shares of Common Stock outstanding that were held by
approximately 469 stockholders of record, including 12,428,042 shares of our Class A Common Stock
issued and outstanding that were held by approximately 459 stockholders of record, 10,448,470
shares of our Class B Common Stock issued and outstanding that were held by approximately 4
stockholders of record, and 1,437,572 shares of our Class C Common Stock issued and outstanding
that were held by approximately 6 stockholders of record. Stockholders of record as of the close of
business on the record date are entitled to one vote for each share of Common Stock (regardless of
class) of the Company then held.
How many shares must be represented to have a quorum?
The holders of a majority of the total shares of our Common Stock outstanding on the record
date, whether present at the Annual Meeting in person or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. The shares held by each stockholder
who signs and returns the enclosed form of proxy card will be counted for the purposes of
determining the presence of a quorum at the Annual Meeting, whether or not the stockholder abstains
on all matters or any matter to be acted on at the meeting. Abstentions and broker non-votes both
will be counted toward fulfillment of quorum requirements. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner. In the event there are not sufficient votes for a quorum
or to approve any proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned
or postponed in order to permit the further solicitation of proxies.
How many votes are required to approve the proposals?
As to the election of directors (Proposal I) the proxy being provided by the board of
directors enables a stockholder to vote FOR any or all of the director nominees or WITHHOLD your
vote as to any or all of the nominees. Directors are elected by a plurality of votes of the shares
present in person or represented by proxy at the Annual Meeting and entitled to vote in the
election of directors. As a result, the five nominees receiving the highest number of votes cast
at the Annual Meeting will be elected, regardless of whether that number represents a majority of
the votes cast or a majority of the total votes entitled to be cast. Thus, a WITHHELD vote will
have no impact on the election of directors. Stockholders may not cumulate votes in the election
of directors (Proposal I).
The affirmative vote of a majority of the total number of shares of Common Stock represented
in person or by proxy at the Annual Meeting and entitled to vote is needed to approve the
ratification of the appointment of UMFSL as the Companys independent public auditors (Proposal
II). With respect to Proposal II, you have the opportunity to vote FOR, AGAINST or ABSTAIN.
Abstentions and broker non-votes are not counted in the tally of votes FOR or AGAINST a
proposal. As a result, abstentions and broker non-votes will have the following effects on the
outcome of each of the proposals to be considered at the Annual Meeting:
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With respect to Proposal I, abstentions and broker non-votes will have no impact on
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With respect to Proposal II, abstentions and broker non-votes will have the same
effect as a vote AGAINST the proposal. |
2
What if I return my proxy card but do not provide voting instructions?
If you sign and return your proxy card, but do not include instructions, your proxy will be
voted FOR the election of each nominee for director identified in Proposal I and FOR Proposal II.
Additionally, your proxy will be voted in the discretion of the proxies with respect to any other
business that properly comes before the meeting.
Stockholders may vote part of their shares in favor of the proposal and refrain from voting
the remaining shares or, except in the election of directors (Proposal I), may vote them against
the proposal. If you execute a proxy card and do not specify the number of shares that you are
voting affirmatively, the proxy will be voted with respect to all shares that you are entitled to
vote.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts at the transfer agent and/or with brokers or that you
own shares of more than one class of Common Stock. Please sign and return all proxy cards to
ensure that all your shares are voted. You may wish to consolidate as many of your transfer agent
or brokerage accounts as possible under the same name and address for better customer service.
What if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time before the polls close at the
Annual Meeting. You may do this by:
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Sending written notice to our Corporate Secretary at 1805 Old Alabama Road, Suite
350, Roswell, Georgia 30076; |
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Signing and returning another proxy with a later date; or |
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Voting in person at the Annual Meeting. |
Attendance at the Annual Meeting will not, in itself, constitute revocation of a proxy.
Will my shares be voted if I do not sign and return my proxy card?
If your shares are held in street name (i.e., in the name of your brokerage firm), your
brokerage firm may vote your shares under certain circumstances. These circumstances include
certain routine matters, such as the election of directors (Proposal I) and the ratification of
the appointment of UMFSL as the Companys independent public auditors (Proposal II). Therefore, if
you do not vote your proxy, your brokerage firm may either vote your shares on routine matters, or
leave your shares unvoted. When a brokerage firm votes its customers shares on routine matters
without having received voting instructions, these shares are counted for purposes of establishing
a quorum to conduct business at the meeting.
What happens if the Annual Meeting is postponed or adjourned?
If the Annual Meeting is postponed or adjourned for any reason, including permitting the
further solicitation of proxies, at any subsequent reconvening of the meeting all proxies will be
voted in the same manner as they would have been voted at the original Annual Meeting. However, as
described above, you may revoke your proxy and change your vote at any time before the polls are
closed at the reconvened meeting.
How do I vote?
You may vote by mail. You do this by signing your proxy card and mailing it in the enclosed,
prepaid and self-addressed envelope.
You may vote in person at the Annual Meeting. Written ballots will be passed out to anyone who
wants to vote at the meeting. If you hold your shares in street name (through a broker or other
nominee), you must request a legal proxy from your stockbroker in order to vote at the meeting.
3
FORWARD LOOKING STATEMENTS
Certain statements in this Proxy Statement constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act) and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act, and
collectively, with the Securities Act, the Acts). Forward-looking statements include statements
preceded by, followed by or that include the words may, will, would, could, should,
estimates, predicts, potential, continue, strategy, believes, anticipates, plans,
expects, intends and similar expressions. Any statements contained herein that are not
statements of historical fact are deemed to be forward-looking statements.
The forward-looking statements in this Proxy Statement are based on current beliefs, estimates
and assumptions concerning the operations, future results, and prospects of the Company and its
affiliated companied described herein. As actual operations and results may materially differ from
those assumed in forward-looking statements, there is no assurance that forward-looking statements
will prove to be accurate. Forward-looking statements are subject to the safe harbors created in
the Acts. Any number of factors could affect future operations and results, including, without
limitation, changes in federal or state healthcare laws and regulations and third party payer
requirements, changes in costs of supplies, the loss of major customers, labor and employee
benefits, forbearance on the Companys revolving lines of credit as a result of the Companys
default on its financial covenants, increases in interest rates on the Companys indebtedness as
well as general market conditions, competition and pricing, integration of business and operations
and the success of the Companys business strategies. The Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new information or future
events.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The board of directors has set March 27, 2006, as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. Stockholders of record as of
the close of business on the record date are entitled to one vote for each share of Common Stock
(regardless of class) of the Company then held. As of the record date, the Company had 24,314,084
shares of Common Stock issued and outstanding, including 12,428,042 shares of Class A Common Stock
of the Company, 10,448,470 shares of Class B Common Stock of the Company, and 1,437,572 shares of
Class C Common Stock of the Company. The Amended and Restated Certificate of Incorporation of the
Company (the Charter) provides that all holders of all classes of Common Stock shall vote
together as a single class with respect to Proposals I and II.
The following table sets forth certain information with respect to Common Stock beneficially
owned as of April 12, 2006, by (i) each person known to us to be the beneficial owner of more than
5% of the issued and outstanding Common Stock, (ii) each of the members or nominees of the board of
directors, (iii) each of the executive officers of the Company named in the summary compensation
table below, and (iv) all directors and executive officers as a group. Beneficial ownership has
been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain
shares may be deemed beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are deemed beneficially
owned by a person if the person has the right to acquire shares (for example, upon the exercise of
an option or warrant) within sixty days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares is deemed to include the
amount of shares beneficially owned by such person by reason of such acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in the following table does not
necessarily reflect the persons actual voting power at any particular date. The information in
the table is based on information provided to the Company by the person or group, including filings
made by such person with the SEC. Other than as noted below, management knows of no person or
group that owns more than 5% of the outstanding shares of Common Stock at the record date.
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Class A Common Stock |
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Name of Beneficial Owner |
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Shares(3) |
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Class(3) |
Robert P. Pinkas(4) |
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46,419,197 |
(5) |
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63.42 |
% |
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7,863,996 |
(6) |
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75.26 |
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Pinkas Family Partners, L.P.(4) |
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46,419,197 |
(7) |
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63.42 |
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7,863,996 |
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75.26 |
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Brantley Venture Partners III, L.P.(4) |
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2,321,649 |
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3.17 |
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Brantley Venture Management III, L.P.(4) |
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2,321,649 |
(9) |
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3.17 |
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Brantley Capital Corporation(10) |
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11,003,509 |
(11) |
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15.03 |
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1,722,983 |
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16.49 |
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Brantley Partners IV, L.P.(4) |
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44,097,548 |
(12) |
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60.25 |
% |
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7,863,996 |
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75.26 |
% |
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4
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Class A Common Stock |
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Class C Common Stock |
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Beneficially Owned |
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Beneficially Owned |
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Class(3) |
Brantley Venture Management IV, L.P.(4) |
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44,097,548 |
(13) |
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60.25 |
% |
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7,863,996 |
(14) |
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75.26 |
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Terrence L. Bauer(15) |
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13,461 |
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* |
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Paul H. Cascio(4) |
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Michael J. Finn(4) |
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David Crane |
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2,272 |
(16) |
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* |
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|
|
|
|
|
|
|
|
|
|
|
|
Joseph M. Valley, Jr.(17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crossroads 1999 Direct/ Co-investment
Portfolio A, L.P. |
|
|
2,539,629 |
(18) |
|
|
3.47 |
% |
|
|
467,033 |
|
|
|
4.47 |
% |
|
|
|
|
|
|
|
|
Crossroads Cornerstone Direct/ Co-investment
Fund V, L.P. |
|
|
2,144,981 |
(19) |
|
|
2.93 |
% |
|
|
394,348 |
|
|
|
3.78 |
% |
|
|
|
|
|
|
|
|
D/V Cain Family, L.P. |
|
|
1,191,918 |
(20) |
|
|
1.63 |
% |
|
|
|
|
|
|
|
|
|
|
718,789 |
|
|
|
50.00 |
% |
Dennis M. Cain |
|
|
1,191,918 |
(21) |
|
|
1.63 |
% |
|
|
|
|
|
|
|
|
|
|
718,789 |
|
|
|
50.00 |
% |
Tommy M. Smith |
|
|
963,070 |
(22) |
|
|
1.32 |
% |
|
|
|
|
|
|
|
|
|
|
580,780 |
|
|
|
40.40 |
% |
Stephen H. Murdock (23) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith G. LeBlanc |
|
|
461,462 |
(24) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a
group (9 persons) |
|
|
2,632,183 |
(25) |
|
|
3.60 |
% |
|
|
|
|
|
|
|
|
|
|
1,299,569 |
|
|
|
90.40 |
% |
* |
|
Indicates beneficial ownership of less than 1%. |
|
(1) |
|
For purposes of calculating the number of shares of Class A Common Stock and the percentage
beneficially owned, the number of shares of Class A Common Stock for each person or group
deemed outstanding includes: (i) 12,428,042 shares of Class A Common Stock outstanding as of
April 12, 2006, (ii) any shares of Class A Common Stock issuable by us pursuant to options and
warrants held by the respective person or group which may be exercised within 60 days
following April 12, 2006 (Presently Exercisable Options), (iii) any shares of Class Common
Stock issuable by us upon conversion of convertible debt of the Company as of April 12, 2006;
and (iv) shares of Class A Common Stock issuable by us upon conversion of shares of Class B
Common Stock and Class C Common Stock, which are convertible into 56,816,628 shares and
1,437,572 shares of Class A Common Stock, respectively, as of April 12, 2006. The shares of
Class B Common Stock and the shares of Class C Common Stock are convertible at the option of
the holder into shares of Class A Common Stock at a variable rate determined pursuant to a
formula as described under the caption Item 5. Market for Common Equity and Related
Stockholder Matters Recent Sales of Unregistered Securities of the Companys Form 10-KSB,
which was filed on March 31, 2006. As of April 12, 2006, each share of Class B Common Stock
was convertible into 5.437794048181 shares of Class A Common Stock and each share of Class C
Common Stock was convertible into one share of Class A Common Stock. |
(2) |
|
For purposes of calculating the number of shares of Class B Common Stock and the percentage
beneficially owned, the number of shares of Class B Common Stock outstanding as of April 12,
2006 was 10,448,470. |
(3) |
|
For purposes of calculating the number of shares of Class C Common Stock and the percentage
beneficially owned, the number of shares of Class C Common Stock outstanding as of April 12,
2006, was 1,437,572. |
(4) |
|
The business address of Robert P. Pinkas (Mr. Pinkas), Pinkas Family Partners, L.P.
(Pinkas Partners), Brantley III, Brantley Venture Management III, L.P. (Brantley Management
III), Brantley IV, Brantley Venture Management IV, L.P. (Brantley Management IV), Paul H.
Cascio, and Michael J. Finn is 3201 Enterprise Parkway, Suite 350, Beachwood, OH 44122. Mr.
Cascio and Mr. Finn each serve as general partner of Brantley Management III, which is the
sole general partner of Brantley III, and Brantley Management IV, which is the sole general
partner of Brantley IV. These relationships do not provide either Messr. Cascio or Finn with
shared voting or dispositive power with respect to the shares held by Brantley III and
Brantley IV and therefore neither Mr. Cascio nor Mr. Finn is deemed to beneficially own the
shares held by Brantley III or Brantley IV. Pursuant to a Stockholders Agreement, dated as of
December 15, 2004 (the Stockholders Agreement), as amended from time to time, each of
Brantley III, Brantley IV and Brantley Capital have agreed to cast all votes necessary to
elect as members of the board of directors of the Company one director as shall have been
nominated by each of Brantley III, Brantley IV and Brantley Capital. Brantley III and
Brantley IV disclaim that they are part of a group by virtue of the Stockholders Agreement
for purposes of Section 13(d)(3) of the Exchange Act, and each disclaims beneficial ownership
of all securities of the Company held by any other party to the Stockholders Agreement. |
(5) |
|
The shares consist of (a) 2,321,649 shares of Class A Common Stock owned by Brantley III; (b)
42,762,791 shares of Class A Common Stock issuable upon conversion of 7,863,996 shares of
Class B Common Stock owned by Brantley IV; (c) 20,455 shares of Class A Common Stock issuable
upon exercise of warrants to purchase Class A
Common Stock owned by Brantley IV; and (d) 1,314,302 shares of Class A Common Stock issuable
upon |
5
|
|
conversion of $1,250,000 of convertible debt of the Company held by Brantley IV. Mr.
Pinkas is the sole general partner of Pinkas Partners. Pinkas Partners is a general partner
of, and holds a majority of the general partnership interests of, Brantley Management III,
which is the sole general partner of Brantley III; and is a general partner of and holds a
majority of the general partnership interests of Brantley Management IV, which is the sole
general partner of Brantley IV. Due to Mr. Pinkas relationships with Brantley III and
Brantley IV, he may be deemed to share voting and dispositive power with respect to the
shares held by Brantley III and Brantley IV. Mr. Pinkas disclaims beneficial ownership of
any shares except to the extent of a pecuniary interest therein. |
|
(6) |
|
The shares are the 7,863,996 shares of Class B Common Stock owned by Brantley IV. See
footnote (5) above for an explanation of Mr. Pinkass relationship to Brantley IV. Mr. Pinkas
disclaims beneficial ownership of any shares except to the extent of a pecuniary interest
therein. |
|
(7) |
|
The shares consist of (a) 2,321,649 shares of Class A Common Stock owned by Brantley III; (b)
42,762,791 shares of Class A Common Stock issuable upon conversion of 7,863,996 shares of
Class B Common Stock owned by Brantley IV; (c) 20,455 shares of Class A Common Stock issuable
upon exercise of warrants to purchase Class A Common Stock owned by Brantley IV; and (d)
1,314,302 shares of Class A Common Stock issuable upon conversion of $1,250,000 of convertible
debt of the Company held by Brantley IV. See footnote (5) above for an explanation of Pinkas
Partners relationship to these entities. As a result of these relationships, Pinkas Partners
may be deemed to share voting and dispositive power of, and therefore beneficially own, the
shares held by Brantley III and Brantley IV. Pinkas Partners disclaims beneficial ownership
of any shares except to the extent of its pecuniary interest therein. |
|
(8) |
|
The shares are the 7,863,996 shares of Class B Common Stock owned by Brantley IV. See
footnote (5) above for an explanation of Mr. Pinkass relationship to Brantley IV. As a
result of this relationship, Pinkas Partners may be deemed to share voting and dispositive
power of, and therefore beneficially own, the shares held by Brantley IV. Pinkas Partners
disclaims beneficial ownership of any shares except to the extent of its pecuniary interest
therein. |
|
(9) |
|
The shares are the 2,321,649 shares of Class A Common Stock owned by Brantley III, which
Brantley Management III may be deemed to beneficially own in its capacity as sole general
partner of Brantley III. Brantley Management III disclaims beneficial ownership of any shares
except to the extent of its pecuniary interest therein. |
|
(10) |
|
The business address of Brantley Capital is c/o MVC Capital, 287 Bowman Avenue, Purchase, New
York 10577. Pursuant to the Stockholders Agreement, each of Brantley III, Brantley IV and
Brantley Capital have agreed to cast all votes necessary to elect as members of the board of
directors of the Company, one director as shall have been nominated by each of Brantley III,
Brantley IV and Brantley Capital. Brantley Capital disclaims that it is part of a group by
virtue of the Stockholders Agreement for purposes of Section 13(d)(3) of the Exchange Act, and
it disclaims beneficial ownership of all securities of the Company held by any other party to
the Stockholders Agreement. |
|
(11) |
|
The shares consist of (a) 1,629,737 shares of Class A Common Stock; (b) 9,369,227 shares of
Class A Common Stock issuable upon conversion of 1,722,983 shares of Class B Common Stock; and
(c) 4,545 shares of Class A Common Stock issuable upon exercise of warrants to purchase Class
A Common Stock. All shares are owned directly by Brantley Capital. Brantley Capital has sole
voting and dispositive power with respect to such shares. |
|
(12) |
|
The shares consist of (a) 42,762,791 shares of Class A Common Stock issuable upon conversion
of 7,863,996 shares of Class B Common Stock; (b) 20,455 shares of Class A Common Stock
issuable upon exercise of warrants to purchase Class A Common Stock; and (c) 1,314,302 shares
of Class A Common Stock issuable upon conversion of $1,250,000 of convertible debt of the
Company held by Brantley IV. The shares are directly owned by Brantley IV and Brantley IV has
sole voting and dispositive power with respect to such shares. As part of the Restructuring,
the Company granted Brantley IV the right to purchase shares of Class A Common Stock for cash
in an amount up to an aggregate of $3 million after the closing of the Restructuring (the
Purchase Right). Brantley IV may exercise the Purchase Right at any time after December 15,
2004. Each additional investment will be: (i) subject to the approval of a majority of the
members of the board of directors of the Company that are not affiliated with Brantley IV,
(ii) consummated on a date mutually agreed by the Company and Brantley IV, and (iii)
accomplished with documentation reasonably satisfactory to the Company and Brantley IV.
Pursuant to the terms of the Purchase Right, the purchase price per share of the Class A
Common Stock will be equal to the lesser of (a) $1.25, and (b) 70% multiplied by the average
of the daily average of the high and low price per share of the Class A Common Stock on AMEX
or a similar system on which the Class A Common Stock shall be listed at the time, for the
twenty trading days immediately preceding the date of the closing of the exercise of the Purchase
Right. The shares do not |
6
|
|
include shares that Brantley IV may have the right to purchase
pursuant to the Purchase Right because the purchase and sale of the shares is subject to
approval of the unaffiliated members of the board of directors. |
|
(13) |
|
The shares consist of (a) 42,762,791 shares of Class A Common Stock issuable upon conversion
of 7,863,996 shares of Class B Common Stock owned by Brantley IV; (b) 20,455 shares of Class A
Common Stock issuable upon exercise of warrants to purchase Class A Common Stock owned by
Brantley IV; and (c) 1,314,302 shares of Class A Common Stock issuable upon conversion of
$1,250,000 of convertible debt of the Company held by Brantley IV. Brantley Management IV is
the sole general partner of Brantley IV and, in such capacity, may be deemed to share voting
and dispositive power with respect to, and to beneficially own, the shares held by Brantley
IV. Brantley Management IV disclaims beneficial ownership of any such shares except to the
extent of its pecuniary interest therein. |
|
(14) |
|
The shares are the 7,863,996 shares of Class B Common Stock owned by Brantley IV. Brantley
Management IV is the sole general partner of Brantley IV and, in such capacity, may be deemed
to share voting and dispositive power with respect to, and to beneficially own, the shares
held by Brantley IV. Brantley Management IV disclaims beneficial ownership of any such shares
except to the extent of its pecuniary interest therein. |
|
(15) |
|
Mr. Bauer is the President and Chief Executive Officer and a director of the Company. The
address of Mr. Bauer is 1805 Old Alabama Road, Suite 350, Roswell, GA 30076. |
|
(16) |
|
The shares include 1,136 shares of Class A Common Stock owned by Mr. Cranes spouse through
an individual retirement account. Because of the family relationship, Mr. Crane may be deemed
to beneficially own all such shares. Mr. Crane is a member of the board of directors of the
Company. The address for Mr. Crane is 8329 Providence Road, Charlotte, North Carolina 28277. |
|
(17) |
|
Mr. Valley is a member of the board of directors of the Company and beneficially owned no
shares as of April 12, 2006. The address for Mr. Valley is 10817 Southern Loop Boulevard,
Pineville, North Carolina 28134. |
|
(18) |
|
The address of Crossroads 1999 Series Direct/ Co-investment Portfolio A, L.P. is 1717 Main
Street, Suite 2500, Dallas, Texas 75201. The shares are the 2,539,629 shares of Class A Common
Stock issuable upon conversion of 467, 033 shares of Class B Common Stock. |
|
(19) |
|
The address of Crossroads Cornerstone Direct/ Co-investment Fund V, L.P. is 1717 Main Street,
Suite 2500, Dallas, Texas 75201. The shares are the 2,144,981 shares of Class A Common Stock
issuable upon conversion of 394,458 shares of Class B Common Stock. |
|
(20) |
|
Consists of (a) 330,266 shares of Class A Common Stock owned by D/V Cain Family, L.P.; (b)
718,789 shares of Class A Common Stock issuable upon conversion of 718,789 shares of Class C
Common Stock owned by D/V Cain Family, L.P.; and (c) 142,863 shares of Class A Common Stock
issuable to D/V Cain Family, L.P. as a result of the purchase price adjustment described under
the caption CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS. D/V Cain Family, L.P. holds the
shares formerly held in the names of Dennis M. Cain and his spouse, Valerie Cain. Mr. Cain
may be deemed to beneficially own the shares owned by D/V Cain Family, L.P. as he is the
manager of the general partner of the partnership. The address of D/V Cain Family, L.P. is
10700 Richmond Avenue, Suite 300, Houston, Texas 77024. |
|
(21) |
|
Consists of (a) 330,266 shares of Class A Common Stock owned by D/V Cain Family, L.P.; (b)
718,789 shares of Class A Common Stock issuable upon conversion of 718,789 shares of Class C
Common Stock owned by D/V Cain Family, L.P.; and (c) 142,863 shares of Class A Common Stock
issuable to D/V Cain Family, L.P. as a result of the purchase price adjustment described under
the caption CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS. D/V Cain Family, L.P. holds the
shares formerly held in the names of Dennis M. Cain and his spouse, Valerie Cain. Mr. Cain
may be deemed to beneficially own the shares owned by D/V Cain Family, L.P. as he is the
manager of the general partner of the partnership. The address of Mr. Cain is 10700 Richmond
Avenue, Suite 300, Houston, Texas 77024. |
|
(22) |
|
Consists of (a) 266,857 shares of Class A Common Stock owned by Mr. Smith; (b) 580,780 shares
of Class A Common Stock issuable upon conversion of 580,780 shares of Class C Common Stock
owned by Mr. Smith; and (c) 115,433 shares of Class A Common Stock issuable to Mr. Smith as a
result of the purchase price adjustment described under the caption CERTAIN RELATIONSHIP AND
RELATED TRANSACTIONS. Mr. Smiths address is 10700 Richmond Avenue, Suite 300, Houston, Texas 77024. |
7
(23) |
|
Mr. Murdock is the Chief Financial Officer and Corporate Secretary of the Company and
beneficially owned no shares as of April 12, 2006. The address for Mr. Murdock is 1805 Old
Alabama Road, Suite 350, Roswell, Georgia 30076. |
(24) |
|
Consists of (a) 8,000 shares of Class A Common Stock owned by Mr. LeBlanc; (b) 328,462 shares
of Class A Common Stock issuable upon exercise of warrants to purchase Class A Common Stock
owned by Mr. LeBlanc; and (c) 125,000 shares of Class A Common Stock issuable pursuant to
restricted stock units owned by Mr. LeBlanc. Mr. LeBlanc is a former director and President
of the Company. The address for Mr. LeBlanc is 1516 River Oaks Road West, Harahan, Louisiana
70123. |
(25) |
|
The shares include (a) an aggregate of 620,856 shares of Class A Common Stock; (b) an
aggregate of 1,299,569 shares of Class A Common Stock issuable upon conversion of 1,299,569
shares of Class C Common Stock; (c) an aggregate of 258,296 shares of Class A Common Stock
issuable as a result of the purchase price adjustment described under the caption CERTAIN
RELATIONSHIP AND RELATED TRANSACTIONS; (d) an aggregate of 328,462 shares of Class A Common
Stock issuable upon exercise of warrants to purchase Class A Common Stock; and (e) 125,000
shares of Class A Common Stock issuable pursuant to restricted stock units. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys officers and directors, and persons
who own more than 10% of the Common Stock, to file reports of ownership and changes in ownership of
the Common Stock, on Forms 3, 4, and 5, with the SEC and to provide copies of these Forms 3, 4, and
5 to the Company. Other than as set forth in the stock ownership table above, the Company is not
aware of any beneficial owner, as defined under Section 16(a), of more than 10% of the Common
Stock.
Based solely upon a review of the copies of the forms furnished to the Company, or written
representations from certain reporting persons, the Company believes that all Section 16(a) filing
requirements of the Exchange Act applicable to its officers, directors and greater than 10%
beneficial owners were complied with during the fiscal year ended December 31, 2005, except that
late filings to report the initial statement of beneficial ownership on Form 3 and statement of
changes in beneficial ownership on Form 4 were made as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Filing |
|
Transaction |
|
|
|
|
|
|
|
|
Date |
|
Date |
|
Form |
|
Name |
|
Title |
|
Transaction |
7/21/05
|
|
6/17/05
|
|
|
4 |
|
|
David Crane
|
|
Director
|
|
Stock option grant 10,000 shares |
3/27/06
|
|
6/17/05
|
|
|
4 |
|
|
Terrence L. Bauer
|
|
President and Chief
Executive Officer
|
|
Stock option grant 300,000 shares |
3/27/06
|
|
8/31/05
|
|
|
4 |
|
|
Terrence L. Bauer
|
|
President and Chief
Executive Officer
|
|
Restricted stock unit grant
300,000 units |
3/27/06
|
|
6/17/05
|
|
|
3 & 4 |
|
|
Dennis Cain
|
|
CEO, MBS
|
|
Stock option grant 150,000 shares |
3/27/06
|
|
6/17/05
|
|
|
4 |
|
|
Michael Finn
|
|
Director
|
|
Stock option grant 17,000 shares |
3/27/06
|
|
8/31/05
|
|
|
4 |
|
|
Keith G. LeBlanc
|
|
Former President and
Director
|
|
Restricted stock unit grant
250,000 units |
3/27/06
|
|
6/17/05
|
|
|
4 |
|
|
Stephen H. Murdock
|
|
Chief Financial
Officer and Corporate
Secretary
|
|
Stock option grant 200,000 shares |
3/27/06
|
|
8/31/05
|
|
|
4 |
|
|
Stephen H. Murdock
|
|
Chief Financial
Officer and Corporate
Secretary
|
|
Restricted stock unit grant
100,000 units |
3/27/06
|
|
6/17/05
|
|
|
4 |
|
|
Robert Pinkas
|
|
10% Beneficial Owner
|
|
Stock option grant 17,000 shares |
3/27/06
|
|
6/17/05
|
|
|
3 & 4 |
|
|
Tom Smith
|
|
President & COO, MBS
|
|
Stock option grant 150,000 shares |
3/27/06
|
|
6/17/05
|
|
|
4 |
|
|
Joseph Valley, Jr.
|
|
Director
|
|
Stock option grant 20,000 shares |
3/31/06
|
|
6/17/05
|
|
|
4 |
|
|
Gerald McIntosh
|
|
Former Director
|
|
Stock option grant 10,000 shares |
4/12/06
|
|
9/28/05
|
|
|
4 |
|
|
Paul H. Cascio
|
|
Non-Executive Chairman
|
|
Change in beneficial ownership |
4/12/06
|
|
6/17/05
|
|
|
4/A |
|
|
Michael J. Finn
|
|
Director
|
|
Change in beneficial ownership |
4/12/06
|
|
9/28/05
|
|
|
4 |
|
|
Michael J. Finn
|
|
Director
|
|
Change in beneficial ownership |
4/12/06
|
|
6/17/05
|
|
|
4/A |
|
|
Robert Pinkas
|
|
10% Beneficial Owner
|
|
Change in beneficial ownership |
4/12/06
|
|
9/28/05
|
|
|
4 |
|
|
Robert Pinkas
|
|
10% Beneficial Owner
|
|
Change in beneficial ownership |
8
PROPOSAL I
Election of Directors
Our Bylaws provide that our board of directors will consist of not less than three members,
the exact number to be determined by resolution adopted by our board of directors. The number of
directors is currently set at five. Directors are elected for a one-year term and hold office
until the next annual meeting of stockholders and until their successors are elected and qualified.
The directors are elected by plurality vote, which means that the five director nominees receiving
the highest number of affirmative votes at the Annual Meeting shall be elected to the board of
directors. Votes withheld from any director are counted for purposes of determining the presence
or absence of a quorum, but have no other legal effect under Delaware law.
Terrence L. Bauer, Keith G. LeBlanc, Paul H. Cascio, Michael J. Finn, David Crane, Gerald M.
McIntosh, and Joseph M. Valley, Jr., were elected at the May 31, 2005 annual meeting of the
stockholders to serve until their terms expire at the Annual Meeting. Messrs. McIntosh and LeBlanc
resigned their position as directors effective November 3, 2005 and November 8, 2005, respectively.
The board of directors determined not to fill the vacancies created by the resignations of Messrs.
LeBlanc and McIntosh and to set the number of members of the board of directors at five.
Pursuant to the Stockholders Agreement, each of Brantley III, Brantley IV and Brantley Capital
(i) is entitled to nominate one person to become a member of the board of directors and (ii) has
agreed to cast all votes necessary to elect as members of the board of directors of the Company the
three people who have been nominated by Brantley III, Brantley IV and Brantley Capital. In
accordance with the Stockholders Agreement, Brantley III, Brantley IV and Brantley Capital have
nominated Paul Cascio, Michael Finn and David Crane as directors to be elected at the Annual
Meeting. In accordance with the requirements of AMEX, the remaining two board nominees, Terrence
L. Bauer and Joseph M. Valley, Jr., have been selected by the board of directors, as recommended by
all of the independent directors. Each of the nominees have been nominated to serve until the 2007
annual meeting of stockholders or until his successor has been duly elected and qualified. All of
these nominees of the board of directors are presently directors of the Company and have consented
to be named as nominees and to serve as directors if elected. Should a nominee be unable or
unwilling to serve as a director, the enclosed proxy will be voted for such other person or persons
as the board of directors may recommend. Management does not anticipate that such an event will
occur.
The board of directors recommends a vote FOR each named nominee.
Information About the Director Nominees
The table below sets forth the name of each of the five nominees for re-election as directors,
as well as their age as of January 1, 2006, and the positions and offices held by such persons.
|
|
|
|
|
|
|
Name of Director |
|
Age |
|
Position |
Terrence L. Bauer
|
|
|
49 |
|
|
Director, President, Chief Executive Officer |
Paul H. Cascio
|
|
|
44 |
|
|
Director, Non-Executive Chairman of the Board, General
Partner of Brantley III and Brantley IV |
David Crane (1)(2)
|
|
|
49 |
|
|
Director |
Michael J. Finn
|
|
|
56 |
|
|
Director, General Partner of Brantley III and Brantley IV |
Joseph M. Valley, Jr. (1)(2)
|
|
|
58 |
|
|
Director |
(1) Member of Compensation Committee
(2) Member of Audit Committee
Biographical Information
Set forth below is certain information with respect to the directors and the Named Executive
Officers (as defined herein) of the Company.
Directors
Terrence L. Bauer
Director, President and Chief Executive Officer
Terrence L. Bauer has served as Chief Executive Officer and director of the Company since
December 2004 and as President of the Company since November 2005. Prior to joining the Company, Mr. Bauer served
as President, Chief
9
Executive Officer and director of IPS since co-founding IPS in 1996, and served
as Chairman of the board of directors of IPS since 1999. Prior to co-founding IPS, Mr. Bauer was
President and Chief Operating Officer of Allegiant Physician Services, a multi-specialty physician
practice management company, from 1995 through mid-1996. Mr. Bauers tenure with Allegiant
involved restructuring Allegiant. From 1991 until 1995, Mr. Bauer served as President and Chief
Executive Officer of ATC Healthcare Services, Inc., a national healthcare staffing firm. Mr. Bauer
arranged the successful sale of ATC in 1994 and supervised the transition of ATC into a new
organizational structure in 1995. From 1987 through 1991, Mr. Bauer held various senior management
positions at Critical Care America, a high technology, home infusion therapy company.
Paul H. Cascio
Director and Non-Executive Chairman of the Board
Paul H. Cascio has served as a director and the non-executive Chairman of the board of
directors since December 2004. Mr. Cascio serves as a general partner of the general partner of
Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P. and Brantley Partners IV,
L.P. Principals of Brantley Management Company, including Mr. Cascio, serve as investment adviser
for Brantley Venture Partners, L.P., Brantley Venture Partners II, L.P., Brantley Venture Partners
III, L.P. and Brantley Partners IV, L.P. These Brantley entities are part of a private equity
organization founded in 1987 with approximately $300 million of committed capital under management,
which has been a lead investor in over 40 privately-held companies throughout the United States.
Mr. Cascio has served in various capacities with these Brantley entities and their portfolio
companies from 1996 to the present. Prior to joining Brantley in May 1996, Mr. Cascio was a
Managing Director and head of the General Industrial Manufacturing and Services Group in the
Corporate Finance Department at Dean Witter Reynolds Inc. Mr. Cascio has a wide range of
investment banking experience, having completed public debt and equity, private debt and equity,
mergers and acquisitions and fairness opinion assignments for a variety of industrial, consumer
product and health care related companies.
David Crane
Director
David Crane has served as a director of the Company since December 2004. Since November, 2005
Mr. Crane has served as the President and Chief Executive Officer of NewHope Bariatrics, LLC, a
start-up healthcare services company. In October 2003, Mr. Crane was appointed to the board of
directors of Pediatric Services of America, Inc. (NASDAQ: PSAI), which provides a combination of
pediatric home health care services through its network of branch offices. In 1989, Mr. Crane
joined the original management team of MedCath Incorporated, a healthcare provider with
approximately $550 million in annual revenues and served as its Chief Operating Officer until 1999
and as its President and Chief Executive Officer from 2000 until September 2003. Mr. Crane also
served as a director of MedCath.
Michael J. Finn
Director
Michael J. Finn has served as a director of the Company since December 2004. Mr. Finn
currently serves as a general partner of the general partner of Brantley Venture Partners II, L.P.,
Brantley Venture Partners III, L.P. and Brantley Partners IV, L.P. Principals of Brantley
Management Company, including Mr. Finn, serve as investment advisers for Brantley Venture Partners,
L.P., Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P. and Brantley Partners
IV, L.P. Mr. Finn has served in various capacities with these Brantley entities and their portfolio
companies from 1995 to the present, including as a member of the board of directors of Pediatric
Services of America, Inc. (NASDAQ: PSAI), which provides a combination of pediatric home health
care services through its network of branch offices. From 1987 to 1995, Mr. Finn served as
portfolio manager and vice president of the Venture Capital Group of Sears Investment Management
Company in Chicago. In this capacity, Mr. Finn managed the development of a $150 million portfolio
of private equity investments, including the investment of over $24 million directly in 25
operating companies.
Joseph M. Valley, Jr.
Director
Joseph M. Valley, Jr. has served as director of the Company since December 2004. From
December 1999 until December 2004, Mr. Valley was a director of IPS. Mr. Valley currently serves
as Chairman and Chief Executive Officer of NCT, Inc., a networking connectivity services provider,
and as a director for Agnes.com in Bridgewater, New Jersey. Mr. Valley formerly served as Chief
Executive Officer of Seranin Software Corporation, a privately held company based in Dallas, Texas
from 2002 to December 2004. Prior to Seranin Software, Mr. Valley served as President and Chief
Operations Officer from 2001 to 2002 for QueryObject Systems Corporation, a global business
intelligence software company providing
analytical infrastructure solutions traded on the AMEX. From 1998 until 2001, Mr. Valley
served as Chief Executive Officer
10
and President of MIS USA. While at MIS USA, Mr. Valley was
responsible for gaining global recognition and introducing the first solution for collaborative
analytical processing.
Executive Officers Who Do Not Serve as Directors
Stephen H. Murdock
Chief Financial Officer and Corporate Secretary
Stephen H. Murdock, C.P.A. has served as Chief Financial Officer and Corporate Secretary of
the Company since December 2004. Prior to joining the Company, Mr. Murdock served as Chief
Financial Officer and Treasurer of IPS since July 2002. Mr. Murdock has over 20 years of
healthcare finance and accounting experience. Prior to joining IPS, Mr. Murdock served as Chief
Financial Officer and Senior Vice President of Administration for SmartMail, LLC, a venture capital
backed shipping and transportation company. Prior to SmartMail, he was Chief Financial Officer for
Nations Healthcare, Inc. Previously, Mr. Murdock was Chief Financial Officer and Vice President of
Administration for Visiting Nurse Health System, Inc. and Senior Audit Manager, Audit Manager and
Staff Auditor for KPMG. Mr. Murdock is a certified public accountant.
Dennis M. Cain
Chief Executive Officer of MBS
Dennis M. Cain has served as Chief Executive Officer of MBS since its acquisition in December
2004. Mr. Cain was founder and President of Dennis Cain Physician Solutions, LTD from 1983 through
the time of its merger with MBS in December 2004. Mr. Cain has over 30 years of direct billing and
account receivable management service for hospital-based physicians, specifically in the practice
areas of anesthesia, pathology and radiology, primarily in the Houston and South Texas region.
Tommy M. Smith
President and Chief Operating Officer of MBS
Tommy M. Smith has served as President and Chief Operating Officer of MBS since its
acquisition in December 2004. Mr. Smith co-founded MBS in 1985, and served as President and CEO of
MBS from July 1989 through the Companys acquisition of MBS in December 2004. Mr. Smith has over
25 years of billing and healthcare accounts receivable management experience. Prior to 1985, Mr.
Smith held various management positions at Computer Concepts, Inc., a computer service and medical
billing firm. Mr. Smith has been a Charter Member of the Healthcare Billing and Management
Association since 1993, where he attained the Certified Healthcare Billing Management Executive
certification.
Meetings of the board of directors
The current board of directors is comprised of five directors, two of whom are independent
as defined under the corporate governance rules of AMEX. As a result of the Company no longer
being a controlled company under the corporate governance rules of AMEX, the Company will be
required to have at least 50% of its directors be independent as defined under the corporate
governance rules of AMEX within one year from April 12, 2006. The current board of directors held
five meetings during the fiscal year ended December 31, 2005, and acted pursuant to written consent
on four occasions. During fiscal year 2005, each incumbent director attended at least seventy-five
percent of the aggregate of (1) the total number of meetings of the board of directors and (2) the
total number of meetings held by all committees of the board of directors on which he served.
In compliance with the AMEX corporate governance rules, the independent members of the board
of directors will at least annually schedule an executive session without the non-independent
directors or management.
Communications with Directors
The board of directors provides that a stockholder may send written communications to the
board or any of the individual directors by addressing such written communication to the Corporate
Secretary, Orion HealthCorp, Inc., 1805 Old Alabama Road, Suite 350, Roswell, Georgia, 30076. All
communications will be compiled by the Corporate Secretary of the Company and submitted to the
board or the individual directors on a periodic basis.
11
Director Attendance at the Annual Meeting
While the Company does not have a policy requiring the members of the board of directors
to attend its annual meetings of stockholders, it encourages its directors to attend and it is
anticipated that most of its directors will attend the annual meetings of stockholders. Of the
directors in office at the time of the 2005 annual meeting of stockholders, only Terrence L. Bauer
attended the meeting.
Controlled Company Status
AMEX has adopted minimum requirements for director independence and nominating and
compensation committee membership. These requirements do not apply to any company whose ownership
is controlled by a single owner or group. Prior to April 12, 2006, Brantley III, Brantley IV and
Brantley Capital were affiliated entities that owned over a majority of the voting power of the
issued and outstanding Common Stock of the Company. Until that time, the Company was considered a
controlled company under the AMEX rules and, as such, was not required to comply with certain of
AMEXs rules regarding director independence and nominating and compensation committee membership.
On April 12, 2006, Brantley IV and Brantley III filed with the SEC an amendment to their
Schedule 13D relating to the Company indicating that Brantley Capital had terminated its investment
advisory relationship with Brantley Capital Management on September 28, 2005, which resulted in
Brantley Capital no longer being an affiliate of Brantley III or Brantley IV. Therefore, no
individual or group now owns a majority of the voting power of the equity securities of the Company
and the Company is no longer a controlled company under the listing rules of AMEX. The board of
directors has since modified its nominating procedures and Compensation Committee membership to
comply with the AMEX rules and the Company has one year from April 12, 2006 within which to
establish a board consisting of 50% directors who are independent for purposes of the corporate
governance standards for small business issuers of AMEX.
The board of directors currently has two standing committees, the Compensation Committee and
the Audit Committee.
Compensation Committee
Prior to April 17, 2006, the Compensation Committee consisted of Mr. Cascio, who was the
Chairman, and Mr. Valley, who is independent for purposes of the corporate governance standards
for small business issuers of AMEX. In order to comply with the corporate governance standards for
small business issuers of AMEX as a result of the change in controlled company status, the board of
directors has since named Mr. Crane and Mr. Valley as the members of the Compensation Committee.
Both Messrs. Crane and Valley are independent for purposes of the corporate governance standards
for small business issuers of AMEX. The Compensation Committee provides recommendations to, and
may act on behalf of, the board of directors regarding compensation matters, and administers the
Companys stock option and compensation plans. The Compensation Committee held two meetings during
the fiscal year ended December 31, 2005. A copy of the Compensation Committee charter is available
on the Companys website at www.orionhealthcorp.com.
Audit Committee
The current Audit Committee consists of Messrs. Crane and Valley, each of whom is
independent for purposes of the corporate governance standards for small business issuers of
AMEX. The Company is a small business issuer that files reports under the SEC Regulation S-B,
and thus, is only required to have an audit committee composed of two or more independent
directors. The board of directors has determined that the Audit Committee Chairman, Mr. Crane, is
financially sophisticated and qualifies as an audit committee financial expert for purposes of the
AMEX corporate governance rules. The Audit Committee held six meetings during the fiscal year
ended December 31, 2005. A copy of the Audit Committee charter is available on the Companys
website at www.orionhealthcorp.com.
Report of the Audit Committee
As set forth in more detail in the Audit Committee charter, the Audit Committees primary
responsibilities include:
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Ensuring the adequacy of the Companys internal controls and financial reporting process
and the reliability of the Companys financial statements; |
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Engaging independent public auditors to audit our financial statements and perform other
services related to the audit, including determining the compensation to be paid to such
independent public auditors; |
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Monitoring the independence and performance of the Companys internal auditors and
independent public auditors; |
12
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Pre-approving all non-audit services provided to the Company by the independent public auditors; |
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Monitoring the Companys compliance with legal and regulatory requirements; and |
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Reviewing any correspondence, report, complaint or concern that raises issues regarding
the Companys financial statements or accounting policies and establishing procedures for
(1) the receipt, retention and treatment of such complaints, and (2) the confidential,
anonymous submission by employees of such concerns. |
The Audit Committee recommends the selection of the Companys independent public auditors to
the board of directors and meets with the Companys independent public auditors to discuss the
scope and to review the results of the annual audit.
The Audit Committee has implemented procedures to ensure that during the course of each fiscal
year it devotes the attention that it deems necessary or appropriate to each of the matters
assigned to it under the Audit Committees charter. The Audit Committee held six meetings during
2005. All of the directors who serve on the Audit Committee are independent for purposes of the
corporate governance standards for small business issuers of AMEX.
The Audit Committee has reviewed the Companys financial statements and met with both
management and UMFSL, the Companys independent public auditors, to discuss those financial
statements. Management has represented to the Audit Committee that the financial statements were
prepared in accordance with generally accepted accounting principles.
The Audit Committee has received from and discussed with UMFSL the written disclosure and the
letter required by Independence Standards Board Standard No. 1 Independence Discussions with Audit
Committees. These items relate to that firms independence from the Company. The Audit Committee
has also discussed with UMFSL any matters required to be discussed by Statement on Auditing
Standards No. 61 Communication with Audit Committees, as amended.
On the basis of these reviews and discussions, the Audit Committee recommended to the board of
directors that the board of directors approve inclusion of the Companys audited financial
statements in the Companys Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005, for filing with the SEC.
Members of the Audit Committee
David Crane, Chairman
Joseph M. Valley, Jr.
The foregoing report should not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the Acts, except to the
extent that we specifically incorporate this information by reference, and shall not otherwise be
deemed filed under such Acts.
Director Nominations
Prior to April 12, 2006, the Company was a controlled company, and, therefore, was not
required by AMEX to maintain a nominating committee or to have the majority of the independent
directors on the board perform the functions of a nominating committee. The Company does not have
a standing nominating committee and thus, does not have a nominating committee charter. In order
to comply with the corporate governance standards for small business issuers of AMEX as a result of
the change in controlled company status, the board of directors has since adopted a board
resolution providing that all nominations for director, other than those submitted pursuant to the
Stockholders Agreement or other binding obligations of the Company, must be recommended by a
majority of the independent directors on the board of directors and, setting forth procedures to be
followed with respect to the director nomination process.
The board of directors does not have a policy with regard to the consideration of any director
candidate recommended by a stockholder of the Company. The board of directors has determined that
it is appropriate to not have such a policy given the infrequency of such recommendations being
submitted to the board of directors. However, the board of directors will consider any director
candidate recommended by a stockholder when such recommendation is submitted in accordance with the
Bylaws and the applicable rules of the SEC.
The Bylaws contain detailed provisions regarding nominations by stockholders. The Bylaws
provide that director nominations may be made by any stockholder of the Company who was a
stockholder of record at the time the required
13
notice is delivered to the Corporate Secretary, who
is entitled to vote in the election of directors at the meeting, and who complies with the notice
procedures. Such nominations must be made by timely notice in writing delivered or mailed to the Corporate Secretary by first-class United States mail, postage prepaid, and received by the
Corporate Secretary at the principal executive offices of the Company not less than ninety (90)
calendar days nor more than one hundred twenty (120) calendar days prior to the anniversary date of
the immediately preceding annual meeting of stockholders; provided, however, that if the annual
meeting is not held within thirty (30) days before or after such anniversary date, then for the
notice by the stockholder to be timely it must be so received not later than the close of business
on the 10th day following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice must include (a) as to each proposed
nominee (i) the name, age, business address and, if known, residence address of each such nominee,
(ii) the principal occupation or employment of each such nominee, (iii) the number of shares of
Common Stock of the Company which are beneficially owned by each such nominee, (iv) a description
of all arrangements or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nominations are to be made by the
stockholder, and (iv) any other information concerning the nominee that must be disclosed as to
nominees in proxy solicitations pursuant to Regulation 14A under the Exchange Act, including such
persons written consent to be named as a nominee and to serve as a director if elected; and (b) as
to the stockholder giving the notice, (i) their name and address, as they appear on the Companys
books, of the stockholder proposing such nomination, (ii) the class and number of shares of Common
Stock of the Company which are beneficially owned by the stockholder, and (iii) any material
interest of the stockholder in such nomination.
All director candidates, other than those candidates nominated and/or appointed by third
parties to which the Company has granted, by contract or otherwise, the legal right to nominate
and/or appoint director candidates, are evaluated initially by those members of the board of
directors who qualify as independent for purposes of the corporate governance standards for small
business issuers of AMEX. From those candidates, the independent directors recommend, by majority
vote, the director candidates from whom the full board of directors selects nominees to stand for
election as directors of the Company. Those candidates receiving the recommendation of a majority
of the independent directors are further evaluated by the full board of directors at that time, as
necessary.
The board of directors has identified certain qualifications that a director candidate must
possess before it nominates said candidates for a position on the board of directors. The board
believes that nominees for director should possess the highest personal and professional ethics,
integrity and values, and be committed to representing the long-term interests of the stockholders
of the Company. The board also strives to ensure that the composition of the board of directors at
all times adheres to independence requirements of AMEX and reflects a range of talents, ages,
skills, character, and expertise, particularly in the areas of management, leadership and corporate
governance, the healthcare industry and related industries sufficient to provide sound and prudent
guidance with respect to the operations and interests of the Company.
Pursuant to the Stockholders Agreement, each of Brantley III, Brantley IV and Brantley Capital
(i) is entitled to nominate one person to become a member of the board of directors and (ii) has
agreed to cast all votes necessary to elect as members of the board of directors of the Company the
three people who have been nominated by each of Brantley III, Brantley IV and Brantley Capital. In
accordance with the Stockholders Agreement, Brantley III, Brantley IV and Brantley Capital have
nominated Messrs. Cascio, Finn and Crane to be elected as directors at the Annual Meeting. In
accordance with the requirements of AMEX and the procedures set forth above, the remaining two
board nominees, Messrs. Bauer and Valley, have been nominated by the board of directors, as
recommended by the independent directors, to be elected at the Annual Meeting.
Code of Ethics
The board of directors has adopted a Corporate Code of Business Conduct and Ethics that is
applicable to all of our officers and employees. We have posted the Corporate Code of Business
Conduct and Ethics in the Investor Relations section of the Companys website at
www.orionhealthcorp.com. If, in the future, we amend, modify or waive a provision in the
Corporate Code of Business and Ethics, rather than filing a Form 8-K, we may satisfy the disclosure
requirement under Item 10 of Form 8-K by posting such information on our website as necessary.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
Director Compensation
Current directors of the Company who are not employees or affiliates of the Company receive
compensation of up to $5,000 per meeting for meetings held in person and up to $500 per meeting for
meetings held telephonically. Additionally, the members of the Audit Committee receive
compensation of up to $1,000 per Audit Committee meeting. The
14
Chairman of the Audit Committee
receives compensation of up to $2,500 per quarter.
In addition, the Company granted the following stock options during the year ended December
31, 2005 to directors of the Company who are not employees of the Company as compensation for
service.
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Percent of Total |
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Number of Securities |
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Options/SARS |
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Underlying Options/SARS |
|
Granted to Employees |
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Exercise or |
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Expiration |
Name |
|
Granted |
|
In Fiscal Year |
|
Base Price |
|
Date |
|
|
($) |
|
(%) |
|
($/sh) |
|
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Joseph M. Valley, Jr. |
|
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20,000 |
(1) |
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1.9 |
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0.84 |
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|
6/17/2015 |
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Michael J. Finn |
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17,000 |
(2) |
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1.6 |
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0.84 |
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|
6/17/2015 |
|
David Crane |
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10,000 |
(3) |
|
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0.9 |
|
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0.84 |
|
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|
6/17/2015 |
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Gerald M. McIntosh |
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10,000 |
(4) |
|
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0.9 |
|
|
|
0.84 |
|
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6/17/2015 |
|
Robert P. Pinkas |
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17,000 |
(5) |
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1.6 |
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0.84 |
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6/17/2015 |
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(1) |
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Mr. Valley was granted 20,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and will vest fully on the first anniversary of the
date of the grant. |
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(2) |
|
Mr. Finn was granted 17,000 options to acquire Class A Common Stock on June 17, 2005 pursuant
to a Stock Option Agreement (Incentive Stock Option). The options were issued in accordance
with the 2004 Incentive Plan, and will vest fully on the first anniversary of the date of the
grant. |
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(3) |
|
Mr. Crane was granted 10,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and will vest fully on the first anniversary of the
date of the grant. |
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(4) |
|
Mr. McIntosh was granted 10,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan. The options were cancelled in connection with Mr.
McIntoshs resignation from the board of directors on November 3, 2005. |
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(5) |
|
Mr. Pinkas was granted 17,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan as compensation for Mr. Pinkass service as a director
of IPS prior to the Companys acquisition of IPS on December 15, 2004, and will vest fully on
the first anniversary of the date of the grant. |
Executive Officer Compensation
Summary Compensation Table. The following table presents the total compensation paid during
each of the Companys last three fiscal years to each of the Companys Chief Executive Officer, the
other most highly compensated executive officers who were serving as executive officers on December
31, 2005 and whose salary and bonus exceeded $100,000, and one individual for whom disclosure would
have been provided but for the fact that the individual was not serving as an executive officer on
December 31, 2005 (collectively, the Named Executive Officers). All amounts include aggregate
compensation paid by the Company and its subsidiaries.
15
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Long Term |
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Compensation |
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Annual Compensation |
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Awards |
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Payouts |
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Restricted |
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Securities |
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Other Annual |
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Stock |
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|
Underlying |
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All Other |
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Name and Principal Position |
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Year |
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Salary |
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Bonus |
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Compensation |
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Award(s) |
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Options/SARs |
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Compensation |
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($) |
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($) |
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($) |
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($) |
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(#) |
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($) |
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Terrence L. Bauer(1) |
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2005 |
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240,000 |
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6,000 |
(3) |
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|
(2) |
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300,000 |
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Chief Executive Officer |
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2004 |
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12,000 |
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25,000 |
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300 |
(3) |
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and President |
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2003 |
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Stephen H. Murdock(4) |
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2005 |
|
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189,423 |
|
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6,000 |
(5) |
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|
|
(6) |
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|
200,000 |
|
|
|
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Chief Financial Officer |
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2004 |
|
|
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7,308 |
|
|
|
15,000 |
|
|
|
231 |
(5) |
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and Corporate Secretary |
|
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2003 |
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Dennis M. Cain (7) |
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2005 |
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175,000 |
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25,000 |
(8) |
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150,000 |
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Chief Executive Officer of MBS |
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2004 |
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6,731 |
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962 |
(8) |
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2003 |
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|
Tommy M. Smith(9) |
|
|
2005 |
|
|
|
175,000 |
|
|
|
|
|
|
|
25,000 |
(10) |
|
|
|
|
|
|
150,000 |
|
|
|
|
|
President and Chief Operating |
|
|
2004 |
|
|
|
6,731 |
|
|
|
|
|
|
|
962 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
Officer of MBS |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith G. LeBlanc(11) |
|
|
2005 |
|
|
|
212,390 |
|
|
|
|
|
|
|
4,000 |
(12) |
|
|
|
(13) |
|
|
|
|
|
|
134.313 |
(14) |
Former President |
|
|
2004 |
|
|
|
199,615 |
|
|
|
100,000 |
|
|
|
16,191 |
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
188,942 |
|
|
|
|
|
|
|
28,828 |
(16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Bauer joined the Company as Chief Executive Officer on December 15, 2004, and was
named President in November 2005. |
|
(2) |
|
Mr. Bauer was granted an aggregate of 300,000 restricted stock units for Class A Common Stock
under the 2004 Incentive Plan on August 31, 2005 pursuant to a Restricted Stock Unit Award Agreement. The
restricted stock units vest in equal parts on each of December 23, 2005, December 23, 2006 and
December 23, 2007. Mr. Bauer elected to defer the vesting of such restricted stock units
until January 1, 2008, January 1, 2009 and January 1, 2010, respectively, pursuant to the
Restricted Stock Unit Deferral Plan adopted by the Company on August 31, 2005 (the Deferral
Plan). Until the Class A Common Stock underlying the restricted stock units is issued to Mr.
Bauer, dividends will not be paid with respect to the restricted stock units; however, Mr.
Bauer is entitled to receive in cash a dividend equivalent, which shall equal the value of all
cash or stock dividends or other distributions that would have been paid on the Class A Common
Stock underlying the restricted stock units. |
|
(3) |
|
Includes $6,000 auto allowance paid in 2005 and $300 auto allowance paid in December 2004. |
|
(4) |
|
Mr. Murdock joined the Company as Chief Financial Officer and Corporate Secretary on December
15, 2004. |
|
(5) |
|
Includes $6,000 auto allowance paid in 2005 and $231 auto allowance paid in December 2004. |
|
(6) |
|
Mr. Murdock was granted an aggregate of 100,000 restricted stock units for Class A Common
Stock under the 2004 Incentive Plan on August 31, 2005 pursuant to a Restricted Stock Unit
Award Agreement. The restricted stock units vest in equal parts on each of December 23, 2005,
December 23, 2006 and December 23, 2007. Mr. Murdock elected to defer the vesting of such
restricted stock units until January 1, 2008, January 1, 2009 and January 1, 2010,
respectively, pursuant to the Deferral Plan. Until the Class A Common Stock underlying the
restricted stock units is issued to Mr. Murdock, dividends will not be paid with respect to
the restricted stock units; however, Mr. Murdock is entitled to receive in cash a dividend
equivalent, which shall equal the value of all cash or stock dividends or other distributions
that would have been paid on the Class A Common Stock underlying the restricted stock units. |
|
(7) |
|
Mr. Cain joined the Company as Chief Executive Officer of MBS on December 15, 2004 in
connection with the Companys acquisition of DCPS. |
|
(8) |
|
Includes $25,000 personal expense allowance paid in 2005 and $962 personal expense allowance
paid in December 2004. |
|
(9) |
|
Mr. Smith joined the Company as President and Chief Operating Officer of MBS on December 15,
2004 in connection with the Companys acquisition of MBS. |
|
(10) |
|
Includes $25,000 personal expense allowance paid in 2005 and $962 personal expense allowance
paid in December 2004. |
|
(11) |
|
Mr. LeBlanc joined the Company as President and Chief Executive Officer of SurgiCare on
November 10, 2002, resigned as Chief Executive Officer of SurgiCare on December 15, 2004 and
resigned as President and a director of the Company effective November 8, 2005. |
|
(12) |
|
Includes $4,000 auto allowance paid in 2005. |
|
(13) |
|
Mr. LeBlanc was granted an aggregate of 250,000 restricted stock units for Class A Common
Stock under the 2004 Incentive Plan on August 31, 2005 pursuant to a Restricted Stock Unit
Award Agreement. Pursuant to the terms of the Separation Agreement and General Release, dated
November 8, 2005, between Mr. LeBlanc and the Company, (the Separation Agreement) the
restricted stock units vest in equal parts on each of January 1, 2006 and January 1, 2007.
Until the Class A Common Stock underlying the restricted stock units is issued to Mr. LeBlanc,
dividends will not be paid with respect to the restricted stock units; however, Mr. LeBlanc is
entitled to receive in cash a dividend |
16
|
|
|
|
|
equivalent, which shall equal the value of all cash or
stock dividends or other distributions that would have been paid on the Class A Common Stock
underlying the restricted stock units. |
|
(14) |
|
Pursuant to the terms of the Separation Agreement, Mr. LeBlanc received a lump sum payment of
$125,000 upon termination. Mr. LeBlanc also received a lump sum payment, less applicable
withholding, of $9,313 for accrued but unused paid time off, which represented 80.72 hours as
of October 31, 2005. |
|
(15) |
|
Includes vacation payout for unused vacation time. |
|
(16) |
|
Includes $11,120 for living expenses, $11,372 for moving expenses and $6,336 for auto
allowance. |
Option Grants in Last Fiscal Year. The following table sets forth all information concerning
individual grants of stock options to any of the Named Executive Officers during the year ended
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Percent of Total |
|
|
|
|
|
|
Underlying |
|
Options/SARS |
|
|
|
|
|
|
Options/Sars |
|
Granted to Employees |
|
Exercise or |
|
Expiration |
Name |
|
Granted |
|
In Fiscal Year |
|
Base Price |
|
Date |
|
|
($) |
|
(%) |
|
($/sh) |
|
|
|
|
Terrence L. Bauer |
|
|
300,000 |
(1) |
|
|
28.4 |
|
|
|
0.84 |
|
|
|
6/17/2015 |
|
Stephen H. Murdock |
|
|
200,000 |
(2) |
|
|
18.9 |
|
|
|
0.84 |
|
|
|
6/17/2015 |
|
Dennis M. Cain |
|
|
150,000 |
(3) |
|
|
14.2 |
|
|
|
0.84 |
|
|
|
6/17/2015 |
|
Tommy M. Smith |
|
|
150,000 |
(4) |
|
|
14.2 |
|
|
|
0.84 |
|
|
|
6/17/2015 |
|
|
|
|
(1) |
|
Mr. Bauer was granted 300,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and vest in 1/4 increments on an annual basis
commencing on the first anniversary of the date of grant. |
|
(2) |
|
Mr. Murdock was granted 200,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and vest in 1/4 increments on an annual basis
commencing on the first anniversary of the date of grant. |
|
(3) |
|
Mr. Cain was granted 150,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and vest in 1/4 increments on an annual basis
commencing on the first anniversary of the date of grant. |
|
(4) |
|
Mr. Smith was granted 150,000 options to acquire Class A Common Stock on June 17, 2005
pursuant to a Stock Option Agreement (Incentive Stock Option). The options were issued in
accordance with the 2004 Incentive Plan, and vest in 1/4 increments on an annual basis
commencing on the first anniversary of the date of grant. |
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values. The following
table sets forth all information concerning option exercises during the fiscal year ended December
31, 2005 and option holdings as of December 31, 2005 with respect to our Named Executive Officers.
No stock appreciation rights were outstanding at the end of the fiscal year. No shares were
acquired on exercise of options by our Named Executive Officers during 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
Value of Unexercised |
|
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised |
|
|
In-the-Money Options |
|
|
|
|
|
|
|
|
|
|
|
Options at Fiscal Year-End |
|
|
at Fiscal Year-End |
|
|
|
Shares Acquired |
|
|
Value |
|
|
(#) |
|
|
($)(1) |
|
|
|
on Exercise |
|
|
Realized |
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
(#) |
|
|
($) |
|
|
Exercisable |
|
|
Unexercisable |
|
|
Exercisable |
|
|
Unexercisable |
|
Terrence L. Bauer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
Stephen H. Murdock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
Dennis M. Cain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
Tommy M. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
Keith G. LeBlanc |
|
|
|
|
|
|
|
|
|
|
328,462 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The values of the unexercised options and warrants above are based on the difference
between the exercise price of the options and warrants, as applicable, and the fair market
value of the Companys Class A Common Stock at the end of the fiscal year ended December 31,
2005, which was $0.34 per share. |
|
(2) |
|
Consists of the following: |
|
|
|
Warrants for 4,000 shares of the Companys Class A Common Stock were issued to
Mr. LeBlanc in January 2003, have an exercise price of $4.50 per share and expire on
January 31, 2008. |
|
|
|
|
Warrants for 324,462 shares of the Companys Class A Common Stock were issued to
Mr. LeBlanc in November 2002, with an original exercise price of $3.20 per share,
vesting through November 2006, and an original expiration date of November 12, 2012.
Pursuant to the terms of the Separation Agreement, the vesting of these warrants
was accelerated and 100% of these warrants were fully vested at December 31, 2005. |
17
Employment and Other Agreements
Employment Agreements. Effective December 15, 2004, the Company entered into an employment
agreement with Terrence L. Bauer, for the position of Chief Executive Officer of the Company. In
November 2005, Mr. Bauer was named President of the Company. The initial term of the agreement is
five years, with automatic renewal at the end of the initial term and each successive renewal term
thereafter for successive two-year terms. The agreement provides for a base salary of $240,000 for
each of the five years in the initial term. The board of directors will review the base salary
annually, and may, in its reasonable discretion, adjust the base salary. Mr. Bauers base salary
for 2006 is $260,000. In addition, the Company may pay an annual bonus to Mr. Bauer upon the
attainment of objectives determined by the board of directors. Mr. Bauers employment agreement
includes post-employment restrictive covenants not to disclose our confidential information, or
engage in activity that interferes with the Company. If Mr. Bauer is terminated without cause, the
agreement provides for, among other things, a continuation of base salary through and until the end
of the non-competition period, which for purposes of the employment agreement shall mean the period
during the term of employment and thereafter until the second anniversary of the date of
termination of Mr. Bauers employment with the Company. All equity incentives, including warrants,
would also vest at that time.
Effective December 15, 2004, the Company entered into an employment agreement with Keith G.
LeBlanc, for the position of President of the Company. On November 8, 2005, the Company entered
into the Separation Agreement with Mr. LeBlanc terminating his employment with the Company
effective as of October 31, 2005. Pursuant to the terms of the Separation Agreement, Mr. LeBlanc
resigned his positions as President and a director of the Company and received a lump sum payment
of $125,000. Mr. LeBlanc also received a lump sum payment, less applicable withholding, of $9,313
for accrued but unused paid time off, which represented 80.72 hours as of October 31, 2005. Mr.
LeBlanc was retained as a consultant to the Company, on an independent contractor basis, to assist
with certain transition matters in exchange for a payment of $215,000 to be paid in equal incremental payments through October 31, 2006. In
addition, Mr. LeBlanc was entitled to receive an aggregate lump sum payment totaling $125,000 at
the time of the closing of the sales by the Company of its Memorial Village and San Jacinto
ambulatory surgery centers, assuming the terms of the sales were substantially the same as those
set forth in the letters of intent for those sales. In lieu of this lump sum payment, Mr. LeBlanc
will receive payments totaling $125,000 in equal incremental payments commencing on November 1,
2006 and continuing through October 31, 2007. The vesting of the restricted stock units granted to
Mr. LeBlanc in August, 2005 was accelerated to vest in equal parts on each of January 1, 2006 and
January 1, 2007. Likewise, warrants previously issued to Mr. LeBlanc were modified to vest in full
and be exercisable until November 2013 at a price of $0.34 per share. In exchange for these
benefits, the Separation Agreement included a general release of all claims by Mr. LeBlanc against
the Company arising from his employment and a restriction on his ability to engage in certain
activities competitive with the Company prior to November 1, 2007.
Effective December 15, 2004, the Company entered into an employment agreement with Stephen H.
Murdock, for the position of Chief Financial Officer of the Company. The initial term of the
agreement is five years, with automatic renewal at the end of the initial term and each successive
renewal term thereafter for successive two-year terms. The agreement provides for a base salary of
$175,000 for each of the five years in the initial term. The board of directors will review the
base salary annually, and may, in its reasonable discretion, adjust the base salary. Mr. Murdocks
base salary for 2006 is $205,000. In addition, the Company may pay an annual bonus to Mr. Murdock
upon the attainment of objectives determined by the board of directors. Mr. Murdocks employment
agreement includes post-employment restrictive covenants not to disclose our confidential
information, or engage in an activity that interferes with the Company. If Mr. Murdock is
terminated without cause, the agreement provides for, among other things, a continuation of base
salary through and until the end of the non-competition period, which for purposes of the
employment agreement shall mean the period during the term of employment and thereafter until the
second anniversary of the date of termination of Mr. Murdocks employment with the Company. All
equity incentives, including warrants, would also vest at that time.
Effective December 15, 2004, the Company and MBS entered into an employment agreement with
Dennis M. Cain, for the position of Chief Executive Officer of MBS. The initial term of the
agreement is five years, with automatic renewal at the end of the initial term and each successive
renewal term thereafter for successive two-year terms. The agreement provides for a base salary of
$175,000 for each of the five years in the initial term. The board of directors will review the
base salary annually, and may, in its reasonable discretion, adjust the base salary. Mr. Cains
base salary for 2006 is $190,000. In addition, the Company may pay an annual bonus to Mr. Cain
upon the attainment of objectives determined by the board of directors. Mr. Cains employment
agreement includes post-employment restrictive covenants not to disclose our confidential
information, or engage in an activity that interferes with the Company. If Mr. Cain is terminated
without cause, the agreement provides for, among other things, a continuation of base salary
through and until the end of the non-competition
18
period, which for purposes of the employment
agreement shall mean the period during the term of employment and thereafter until the second
anniversary of the date of termination of Mr. Cains employment with the Company. All equity
incentives, including warrants, would also vest at that time.
Effective December 15, 2004, the Company and MBS entered into an employment agreement with
Tommy M. Smith, for the position of President and Chief Operating Officer of MBS. The initial term
of the agreement is five years, with automatic renewal at the end of the initial term and each
successive renewal term thereafter for successive two-year terms. The agreement provides for a base
salary of $175,000 for each of the five years in the initial term. The board of directors will
review the base salary annually, and may, in its reasonable discretion, adjust the base salary.
Mr. Smiths base salary for 2006 is $190,000. In addition, the Company may pay an annual bonus to
Mr. Smith upon the attainment of objectives determined by the board of directors. Mr. Smiths
employment agreement includes post-employment restrictive covenants not to disclose our
confidential information, or engage in an activity that interferes with the Company. If Mr. Smith
is terminated without cause, the agreement provides for, among other things, a continuation of base
salary through and until the end of the non-competition period, which for purposes of the
employment agreement shall mean the period during the term of employment and thereafter until the
second anniversary of the date of termination of Mr. Smiths employment with the Company. All
equity incentives, including warrants, would also vest at that time.
Stock Option Plans
2004 Incentive Plan. On September 7, 2004, the Companys board of directors adopted the Orion
HealthCorp, Inc. 2004 Incentive Plan (the 2004 Incentive Plan), which was approved by the
Companys stockholders at the special meeting in lieu of annual meeting of stockholders held on
October 6, 2004. The 2004 Incentive Plan provides for the grant of stock incentive awards for up
to 2.2 million shares of Class A Common Stock to key employees, directors and consultants of the
Company. The purpose of the 2004 Incentive Plan is to enable the Company to attract and retain key
personnel and directors. Awards may consist of stock options (incentive and nonstatutory), stock
appreciation rights, stock awards, performance share awards, Section 162(m) awards or other awards
determined by the board of directors or a committee appointed by the board of directors. Incentive
stock options granted pursuant to the 2004 Incentive Plan cannot be granted at an exercise price
which is less than 100% of the fair market value of the Class A Common Stock on the date of the
grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made
pursuant to the 2004 Incentive Plan are determined by the board of directors or a committee
appointed by the board of directors. The 2004 Incentive Plan was amended on June 1, 2005 to
include restricted stock units as permissible awards to be issued under the plan. See the sections
above titled DIRECTOR AND EXECUTIVE COMPENSATION Director Compensation and DIRECTOR AND
EXECUTIVE COMPENSATION Executive Compensation for a listing of the specific grants that were
made under the 2004 Incentive Plan in 2005. None of the employment agreements with Messrs. Bauer,
Murdock, Cain and Smith obligate the Company to grant any incentive awards under the 2004 Incentive
Plan.
SurgiCare, Inc. 2001 Stock Option Plan. In October 2001, the Companys board of directors
adopted the SurgiCare, Inc. 2001 Stock Option Plan (the 2001 Plan), which was approved by the
Companys stockholders at the annual meeting of stockholders held on November 13, 2001. Initially
140,000 shares of stock (adjusted for the Reverse Stock Split) were reserved for issuance pursuant
to the 2001 Plan. Options to acquire approximately 575,786 shares of the Companys Class A Common
Stock were outstanding under the 2001 Plan at December 31, 2005. The purposes of the 2001 Plan are
to advance the best interest of our stockholders and to attract, retain and motivate key employees
and persons affiliated with us, and provide such persons with additional incentive to further the
business, promote long-term financial success and increase stockholder value by increasing their
proprietary interest in our success. The 2001 Plan permits the Company to grant stock option
grants, stock appreciation rights, restricted stock awards and performance stock awards to key
employees, officers, directors, and consultants. Incentive stock options granted pursuant to the
2001 Plan cannot be granted at an exercise price which is less than 100% of the fair market value
of the Common Stock on the date of the grant.
Limitation of Liability and Indemnification of Officers and Directors
The Charter and the Bylaws provide that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. We believe that the provisions in the Charter and the
Bylaws are necessary to attract and retain qualified persons as directors and officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following parties have a direct or indirect material interest in transactions with the
Company since the beginning of the most recently completed fiscal year and such transactions are
described below:
19
Paul H. Cascio and Michael J. Finn, each of whom is a director of the Company, are general
partners of the general partner of Brantley Venture Partners II, L.P. (Brantley II), Brantley III
and Brantley IV and limited partners of those funds. Mr. Cascio is a shareholder of Brantley
Capital, and vice president and secretary of Brantley Capital Management. Mr. Finn is a
shareholder of Brantley Capital and a manager and co-owner of Brantley Capital Management.
Brantley Capital Management serves as investment adviser for, and receives advisory fees from,
Brantley Venture Partners, L.P., Brantley II, Brantley III and Brantley IV.
As of the consummation of the Restructuring, Brantley IV and its co-investors, including
Brantley Capital, owned shares of Class B Common Stock and Brantley III and Brantley Capital owned
shares of Class A Common Stock. By virtue of their affiliations with Brantley III, Brantley IV and
Brantley Capital Management, Messrs. Cascio and Finn may be deemed to have a pecuniary interest in
the shares of Class B Common Stock held by Brantley IV and the shares of Class A Common Stock held
by Brantley III. (See VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF)
During 2004 and prior years, each of the Company and IPS issued promissory notes to an
affiliate of Brantley IV, as part of a bridge financing, the aggregate amount of such debt,
including interest, was $6,037,111 as of December 15, 2004. Such bridge loans were paid by the
Company with a portion of the cash invested by Brantley IV in the Restructuring. At the time the
bridge loans were made, Mr. Cascio, Mr. Finn and Brantley IV were unrelated third parties with
respect to the Company, and the loans were made after arms length negotiations on terms the
Company believes were as favorable as could be obtained from other unrelated third parties.
Brantley Capital and Brantley III each held debt of IPS and are party to the Amended and
Restated Debt Exchange Agreement dated February 9, 2004, as amended on July 16, 2004 (the Debt
Exchange Agreement). Pursuant to the Debt Exchange Agreement, Brantley Capital and Brantley III
received Class A Common Stock with a fair market value equal to the amount owing to it under its
loan to IPS in exchange for contribution of such debt to the Company. Pursuant to the Debt
Exchange Agreement, Brantley Capital also received Class A Common Stock with a fair market value
equal to the amount of certain accrued dividends owed to it by IPS in exchange for the contribution
of such indebtedness. The aggregate amount of debt exchanged by the parties to the Debt Exchange
Agreement was $4,375,229, which included accrued interest as of December 15, 2004, and $593,100 of
debt in respect of accrued dividends.
Brantley Capital and Brantley III previously owned an aggregate of 1,653,000 shares of the
Series A-2 convertible preferred stock of IPS with a liquidation preference of approximately
$6,705,037, and received 2,312,081 shares of Class A Common Stock in the Companys acquisition of
IPS. Such shares were intended to approximate the value of such liquidation preference, but were
subject to reduction to the extent necessary to achieve the guaranteed allocation to holders of
certain classes of IPS common stock.
Following certain assignments of rights and additional investments pursuant to the
Supplemental Stock Subscription Agreement, dated as of December 15, 2004, by and among SurgiCare,
Brantley IV and certain other investors (the Supplemental Stock Subscription Agreement) and the
Second Amendment and Supplement to Stock Subscription Agreement (the Second Amendment and
Supplement to Stock Subscription Agreement), dated as of December 15, 2004, by and among
SurgiCare, Brantley IV, Brantley Capital and certain other investors, the shares of Class B Common
Stock of the Company received by Brantley IV and its co-investors constituted approximately 69.6%
of the Companys outstanding equity immediately after the consummation of the Restructuring on an
as-converted basis. Brantley IV also received the option to purchase additional shares of Class A
Common Stock for cash in an amount up to an aggregate of $3,000,000 from time to time after the
consummation of the Restructuring, subject to the approval of a majority of the unaffiliated
members of the board of directors, at a price equal to the lesser of $1.25 per share or 70% of the
daily average of the high and low trading prices of the Class A Common Stock for the twenty trading
days preceding the date of the closing of such investment. Brantley IV and Brantley Capital used
its own cash for the acquisition of the Class B Common Stock.
In the Restructuring, pursuant to a Registration Rights Agreement, dated as of December 15,
2004, by and among the Company, Brantley IV and certain other investors (the Registration Rights
Agreement), Brantley IV and its co-investors and/or their permitted transferees were granted the
right to request that the Company effect the registration of shares of Class A Common Stock
currently issued, or issued in the future, to Brantley IV, its co-investors and/or their permitted
transferees (including shares of Class A Common Stock into which shares of Class B Common Stock or
other securities of the Company are convertible, collectively, Registerable Securities) having an
anticipated net aggregate offering price of at least $5,000,000. At any time the Company otherwise
proposes to register any of its equity securities, Brantley IV and its co-investors and/or their
permitted transferees may request the registration of Registrable Shares. Brantley IV and its
co-investors have registration rights for all of the shares of Class A Common Stock issuable upon
conversion of its shares of Class B Common Stock. As of the consummation of the Restructuring,
this was approximately 16,033,984 shares of Class A Common Stock but, assuming everything else
remains the same, the number of shares of Class A Common Stock as to which
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Brantley IV and its
co-investors have registration rights will continually increase, since the conversion factor for
the Class B Common Stock is designed to yield additional shares of Class A Common Stock over time
pursuant to the terms thereof. The third-party beneficiaries will have registration rights for one
year with respect to an aggregate of up to approximately 6,122,172 shares of Class A Common Stock.
The Company entered into the Stockholders Agreement with Brantley III, Brantley IV and
Brantley Capital, pursuant to which each of Brantley III, Brantley IV and Brantley Capital (i) is
entitled to nominate one person to become a member of the board of directors and (ii) has agreed to
cast all votes necessary to elect as members of the board of directors of the Company the three
people who have been nominated by Brantley III, Brantley IV and Brantley Capital. In accordance
with the Stockholders Agreement, Paul Cascio, Michael Finn and David Crane have been nominated to
be elected as directors at the Annual Meeting.
As part of the Restructuring, the Company entered into employment agreements with Terrence L.
Bauer, a director, President and Chief Executive Officer of the Company and a stockholder of the
Company, Stephen H. Murdock, the Chief Financial Officer and Corporate Secretary of the Company,
Dennis M. Cain, the Chief Executive Officer of MBS and a stockholder of the Company and Tommy M.
Smith, the President and Chief Operating Officer of MBS and a stockholder of the Company. (See
DIRECTOR AND EXECUTIVE COMPENSATION Employment and Other Agreements)
As part of the Restructuring, holders of MBS common stock, DCPS limited partnership interests
and Dennis Cain Management, LLC limited liability company interests received an aggregate of
$3,000,000 in cash, promissory notes of Orion in the aggregate principal amount of $1,000,000 and
1,575,760 shares of the Companys Class C Common Stock. The purchase price was subject to
retroactive increase (including issuance of up to 450,000 additional shares of Class A Common
Stock) or decrease based on the financial results of the newly formed company and its predecessors
in 2004 and 2005. Pursuant to the merger agreement governing the acquisition of MBS and DCPS
(DCPS/MBS Merger Agreement) by the Company, the adjustments were based on whether DCPS and MBS,
on a combined basis, meet an earnings before income taxes, depreciation and amortization (EBITDA)
target of $2 million for the fiscal years ended December 31, 2004 and 2005. Additionally, two of
the principal owners of DCPS and MBS Dennis M. Cain, the Chief Executive Officer of MBS and a
stockholder of the Company, and Tommy M. Smith, the President and Chief Operating Officer of MBS
and a stockholder of the Company as part of the employment agreements executed in connection with
the DCPS/MBS Merger, were entitled to receive additional payments up to $175,000 each based on the
amount by which EBITDA of DCPS and MBS, on a combined basis, exceeded $1.2 million for the year
ended December 31, 2005. The Company has accrued a liability in the amount of $840,286 as of December 31, 2005 based on this provision of the
DCPS/MBS Merger Agreement and adjusted the purchase price accordingly. The Company will also issue
285,726 shares of Class A Common Stock as a result of this purchase price adjustment. In addition,
75,758 shares of Orions Class A Common Stock were reserved for issuance at the direction of the
sellers of the DCPS and MBS equity, which includes Mr. Cain and Mr. Smith. Each share of Class C
Common Stock was convertible into one share of Class A Common Stock at December 31, 2005.
In connection with the Restructuring, the Company entered into the Loan and Security Agreement
dated as of December 15, 2004, by and among the Company, certain of its affiliates and subsidiaries
and CIT Healthcare, LLC (formerly known as Healthcare Business Credit Corporation) (CIT) (the
Loan and Security Agreement) and revolving credit note with CIT. Pursuant to the Guaranty
Agreement (the Brantley IV Guaranty), dated as of December 15, 2004, provided by Brantley IV to
CIT, Brantley IV agreed to provide a deficiency guaranty in the amount of $3,272,727. Pursuant to
the Guaranty Agreement (the Brantley Capital Guaranty; and together with the Brantley IV
Guaranty, collectively, the Guaranties), dated as of December 15, 2004, provided by Brantley
Capital to CIT, Brantley Capital agreed to provide a deficiency guaranty in the amount of $727,273.
The Company issued warrants to purchase an aggregate of 25,000 shares of Class A Common Stock, at
an exercise price of $0.01 per share, to Brantley IV and Brantley Capital in consideration for
deficiency Guaranties in the aggregate amount of $4,000,000 by Brantley IV and Brantley Capital in
connection with the new credit facility.
On March 16, 2005, Brantley IV loaned the Company an aggregate of $1,025,000 (the First
Loan). On June 1, 2005, the Company executed a convertible subordinated promissory note in the
principal amount of $1,025,000 (the First Note) payable to Brantley IV to evidence the terms of
the First Loan. The material terms of the First Note are as follows: (i) the First Note is
unsecured; (ii) the First Note is subordinate to the Companys outstanding loan from CIT and other
indebtedness for monies borrowed, and ranks pari passu with general unsecured trade liabilities;
(iii) principal and interest on the First Note is due in a lump sum on April 19, 2006 (the First
Note Maturity Date); (iv) the interest on the First Note accrues from and after March 16, 2005, at
a per annum rate equal to nine percent (9.0%) and is non-compounding; (v) if an event of default
occurs and is continuing, Brantley IV, by notice to the Company, may declare the principal of the
First Note to be due and immediately payable; and (vi) on or after the First Note Maturity Date,
Brantley IV, at its option, may convert all or a portion of the outstanding principal and interest
due of the First Note into shares of Class A Common Stock of the
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Company at a price per share equal
to $1.042825 (the First Note Conversion Price). The number of shares of Class A Common Stock to
be issued upon conversion of the First Note shall be equal to the number obtained by dividing (x)
the aggregate amount of principal and interest to be converted by (y) the First Note Conversion
Price (as defined above); provided, however, the number of shares to be issued upon conversion of
the First Note shall not exceed the lesser of: (i) 1,159,830 shares of Class A Common Stock, or
(ii) 16.3% of the then outstanding Class A Common Stock. As of March 31, 2006, if Brantley IV were
to convert the First Note, the Company would have to issue 1,076,283 shares of Class A Common
Stock. The Company is in the process of negotiating an extension on the First Note.
On April 19, 2005, Brantley IV loaned the Company an additional $225,000 (the Second Loan).
On June 1, 2005, the Company executed a convertible subordinated promissory note in the principal
amount of $225,000 (the Second Note) payable to Brantley IV to evidence the terms of the Second
Loan. The material terms of the Second Note are as follows: (i) the Second Note is unsecured; (ii)
the Second Note is subordinate to the Companys outstanding loan from CIT and other indebtedness
for monies borrowed, and ranks pari passu with general unsecured trade liabilities; (iii) principal
and interest on the Second Note is due in a lump sum on April 19, 2006 (the Second Note Maturity
Date); (iv) the interest on the Second Note accrues from and after April 19, 2005, at a per annum
rate equal to nine percent (9.0%) and is non-compounding; (v) if an event of default occurs and is
continuing, Brantley IV, by notice to the Company, may declare the principal of the Second Note to
be due and immediately payable; and (vi) on or after the Second Note Maturity Date, Brantley IV, at
its option, may convert all or a portion of the outstanding principal and interest due of the
Second Note into shares of Class A Common Stock of the Company at a price per share equal to
$1.042825 (the Second Note Conversion Price). The number of shares of Class A Common
Stock to be issued upon conversion of the Second Note shall be equal to the number obtained by
dividing (x) the aggregate amount of principal and interest to be converted by (y) the Second Note
Conversion Price (as defined above); provided, however, the number of shares to be issued upon
conversion of the Second Note shall not exceed the lesser of: (i) 254,597 shares of Class A Common
Stock, or (ii) 3.6% of the then outstanding Class A Common Stock. As of March 31, 2006, if
Brantley IV were to convert the Second Note, the Company would have to issue 234,423 shares of
Class A Common Stock. The Company is in the process of negotiating an extension on the Second
Note.
Additionally, in connection with the First Loan and the Second Loan, the Company entered into
a First Amendment to the Loan and Security Agreement (the First Amendment), dated March 22, 2005,
with certain of the Companys affiliates and subsidiaries, and CIT, whereby its $4,000,000 secured
two-year revolving credit facility has been reduced by the amount of the loans from Brantley IV to
$2,750,000. As a result of the First Amendment, the Brantley IV Guaranty was amended by the
Amended and Restated Guaranty Agreement, dated March 22, 2005, which reduced the deficiency
guaranty provided by Brantley IV by the amount of the First Loan to $2,247,727. Also as a result
of the First Amendment, the Brantley Capital Guaranty was amended by the Amended and Restated
Guaranty Agreement, dated March 22, 2005, which reduced the deficiency guaranty provided by Brantley Capital by the amount of the Second Loan
to $502,273.
On June 17, 2005, the Company granted stock options to certain employees, officers, directors
and former directors of the Companys 2004 Incentive Plan, including Terrence L. Bauer, a director,
President and Chief Executive Officer of the Company and a stockholder of the Company, Stephen H.
Murdock, Chief Financial Officer and Corporate Secretary of the Company, Dennis M. Cain, the Chief
Executive Officer of MBS and a stockholder of the Company and Tommy M. Smith, the President and
Chief Operating Officer of MBS and a stockholder of the Company. (See DIRECTOR AND EXECUTIVE
COMPENSATION Executive Officer Compensation) As part of the aforementioned stock option grants,
the Company granted stock options to Joseph M. Valley, Jr., current director of the Company and
former director of IPS, Michael J. Finn, current director of the Company and former director of
IPS, David Crane, current director of the Company, Gerald M. McIntosh, former director of the
Company, and Robert P. Pinkas, former director of IPS. The options granted to Mr. McIntosh were
cancelled in connection with Mr. McIntoshs resignation from the board of directors on November 3,
2005. (See DIRECTOR AND EXECUTIVE COMPENSATION Director Compensation)
On August 31, 2005, the Company granted restricted stock units to Terrence L. Bauer, a
director, President and Chief Executive Officer of the Company and a stockholder of the Company,
Stephen H. Murdock, Chief Financial Officer and Corporate Secretary of the Company, and Keith G.
LeBlanc, former President of the Company. (See DIRECTOR AND EXECUTIVE COMPENSATION Executive
Officer Compensation)
Our Corporate Code of Business Conduct and Ethics addresses any conflicts of interests on the
part of any employees that might cast doubt on an employees ability to act objectively when
representing us. In addition to setting guidelines, the Corporate Code of Business Conduct and
Ethics provides that each potential conflict of interest will be reviewed and the final decision as
to the existence of a conflict made by our chief executive officer. Further, the Audit Committee,
in accordance with the AMEX corporate governance rules, reviews all related party transactions
involving our directors or executive officers.
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Election of each of the nominated directors requires the approval of a plurality of the votes
cast by the stockholders of the Company at the Annual Meeting. The board of directors recommends
that stockholders vote FOR the election of each of the individuals named herein as nominees for
directors of the Company.
PROPOSAL II
Appointment of Our Independent Public Auditors
Subject to stockholder approval, the Audit Committee of the board of directors has appointed
the firm of UMFSL, independent certified public accountants, to be the Companys independent
certified public auditors for the fiscal year ending December 31, 2006. UMFSL also served as the
Companys independent certified public auditors for the fiscal years ended December 31, 2005 and
2004. A representative of UMFSL is expected to be available at the Annual Meeting to respond to
stockholders questions and will have the opportunity to make a statement if he or she so desires.
Audit Fees
The aggregate fees billed by UMFSL for professional services rendered for the audit of the
Companys annual financial statements included in the Companys Annual Reports on Form 10-KSB for
the fiscal years ended December 31, 2005 and 2004 and for the reviews of the Companys financial
statements included in the Companys Quarterly Reports on Form 10-QSB during the fiscal years ended
December 31, 2005 and 2004 totaled $276,465 and $332,034, respectively. The 2004 fees include
$131,534 that was billed in 2004 related to services rendered in 2004 and $200,500 that was billed
in 2005 related to services rendered in 2004.
Audit-Related Fees
The aggregate fees billed by UMFSL for professional services rendered for assurance and
related services that are reasonably related to the performance of the audit or review of the
Companys financial statements for the fiscal years ended December 31, 2005 and 2004 and that are
not included in the Audit Fees listed above were approximately $0 and $8,349, respectively. These
audit-related fees were for services including research and consultation in connection with the
agreement and plan of merger with DCPS and MBS.
Tax Fees
The aggregate fees billed by UMFSL for professional services rendered for tax compliance, tax
advice, and tax planning for the fiscal years ended December 31, 2005 and 2004 were approximately
$2,211 and $111,074, respectively.
These tax fees were for services related to the preparation of Federal and State income tax
returns, calculation of quarterly estimated tax payments and the calculation of bonus depreciation.
The 2004 fees include $36,343 that was billed in 2004 related to services rendered in 2004 and
$74,731 that was billed in 2005 related to services rendered in 2004.
All Other Fees
There were no fees billed by UMFSL for all other services rendered for 2005 and 2004, other
than as stated in the above sections.
Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permissible non-audit services provided by the
independent public auditors. These services may include audit services, audit related services, tax
services and other services. In 2005, the Audit Committee pre-approved 100% of all audit services
performed by the independent public auditors. There were no hours expended, billed or performed by
any persons other than the full time, permanent employees of the independent public auditors.
Vote Required and Board Recommendation
Approval of the ratification of the appointment of our independent public auditors will
require the affirmative vote of a majority of the total number of shares of Common Stock
represented in person or by proxy at the Annual Meeting and entitled to vote.
The board of directors recommends that the stockholders vote FOR ratification of the
appointment of
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UHY Mann Frankfort Stein & Lipp CPAs, L.L.P., as the Companys independent public
auditors for the year ending December 31, 2006.
MISCELLANEOUS
The cost of soliciting proxies will be borne by the Company. The Company may reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to the beneficial owners of Common Stock.
The Companys Annual Report to Stockholders for the year ended December 31, 2005, including
financial statements, is being mailed with this proxy statement to all stockholders of record as of
the close of business on the record date for the Annual Meeting. Any stockholder who has not
received a copy of the Annual Report may obtain a copy by writing to the Corporate Secretary of the
Company.
The board of directors provides that a stockholder may send written communications to the
Board or any of the individual directors by addressing such written communication to the Corporate
Secretary, Orion HealthCorp, Inc., 1805 Old Alabama Road, Suite 350, Roswell, Georgia, 30076. All
communications will be compiled by the Corporate Secretary of the Company and submitted to the
Board or the individual directors on a periodic basis.
STOCKHOLDER PROPOSALS
The board of directors is not aware of any business to come before the Annual Meeting other
than those matters described above in this Proxy Statement. However, if any other matters should
properly come before the Annual Meeting, it is intended that proxies in the accompanying form will
be voted in respect thereof in accordance with the judgment of the persons named in the
accompanying proxy.
In order to be eligible for inclusion in the Companys proxy materials for next years annual
meeting of stockholders, any stockholder proposal to take action at that meeting must be received
at the Companys executive offices at 1805 Old Alabama Road, Suite 350, Roswell, Georgia, 30076, no
later than December 21, 2006.
In the event the Company receives notice of a stockholder proposal to take action at next
years annual meeting of stockholders that is not submitted for inclusion in the Companys proxy
material, or is submitted for inclusion but is properly excluded from the proxy material, the
persons named in the proxy sent by the Company to its stockholders may exercise their discretion to
vote on the stockholder proposal in accordance with their best judgment if notice of the proposal
is not received at the Companys executive offices by February 4, 2007.
FORM 10-KSB
A COPY OF THE COMPANYS ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
2005, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE FOR THE ANNUAL MEETING
UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, ORION HEALTHCORP, INC., 1805 OLD ALABAMA ROAD,
SUITE 350, ROSWELL, GEORGIA 30076.
INCORPORATION BY REFERENCE
We have elected to incorporate by reference certain information into this Proxy Statement.
The information incorporated by reference is deemed to be part of this Proxy Statement, except for
information incorporated by reference that is superseded by information contained in this Proxy
Statement, any applicable supplements to this Proxy Statement or any document we subsequently file
with the SEC that is incorporated or deemed to be incorporated by reference in this Proxy
Statement. This Proxy Statement incorporates by reference the Companys Form 10-KSB included in
our 2005 Annual Report to Stockholders, a copy of which is enclosed.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Stephen H. Murdock |
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Corporate Secretary |
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Roswell, Georgia |
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April 20, 2006 |
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ORION HEALTHCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 2006
The undersigned hereby appoints Terrence L. Bauer and Stephen H. Murdock, and each of them or
their designees, with full powers of substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of Class A Common Stock, Class B Common Stock and Class C Common
Stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders (Annual
Meeting), to be held on Friday, May 12, 2006, at 8:00 a.m. local time, at 1805 Old Alabama Road,
Roswell, Georgia 30076, or at any and all adjournments or postponements thereof, in the following
manner:
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FOR ALL NOMINEES |
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(EXCEPT AS MARKED |
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WITHHOLD FOR ALL |
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BELOW) |
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NOMINEES |
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Proposal I The
election as director
of the nominees listed
below with terms
expiring in 2007: |
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Terrence L. Bauer |
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Paul H. Cascio |
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Michael J. Finn |
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David Crane |
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Joseph M. Valley, Jr. |
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Instructions: To withhold your vote for a nominee, write the nominees or nominees name(s) on
the line provided below.
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FOR |
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AGAINST |
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ABSTAIN |
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Proposal II Ratification of the
Appointment of UHY Mann Frankfort Stein & Lipp CPAs, L.L.P. |
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In their discretion, these attorneys and proxies are authorized to vote in their discretion
upon any other business as may properly come before the Annual Meeting and all adjournments or
postponements thereof.
The board of directors recommends a vote FOR each of the above listed nominees and the
indicated proposition.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS SIGNED PROXY WILL
BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING,
THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present and elect to vote at the Annual Meeting, or at any
adjournment thereof, and after notification to the Corporate Secretary of the Company at the Annual
Meeting of the stockholders decision to terminate this proxy, the power of said attorneys and
proxies shall be deemed terminated and of no further force and effect. The undersigned may also
revoke this proxy by filing a subsequently dated proxy or by written notification to the Corporate
Secretary of the Company of his or her decision to terminate this proxy. Such subsequently dated
proxy must be received by the Corporate Secretary of the Company prior to the date of the Annual
Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of this proxy of
the Notice of Annual Meeting of Stockholders and Proxy Statement dated April 20, 2006 and the
Companys 2005 Annual Report to Stockholders.
Dated: , 2006
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SIGNATURE OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER |
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PRINT NAME OF STOCKHOLDER
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PRINT NAME OF STOCKHOLDER |
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Please sign exactly as your name appears on this proxy. When signing as attorney, executor,
administrator, trustee, or guardian, please give your full title. If shares are held jointly, each
holder should sign.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS
PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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