<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-12
ProVantage Health Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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MW408523_1.DOC
<PAGE>
PROVANTAGE HEALTH SERVICES, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
To The Stockholders of ProVantage Health Services, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
ProVantage Health Services, Inc. will be held on Tuesday, May 23, 2000 at
10:00 a.m., Wisconsin time, at the Radisson Inn--Green Bay, 2040 Airport
Drive, Green Bay, Wisconsin 54313, for the following purposes:
(1) To elect two directors of the Company to serve for three-year terms;
(2) To ratify the appointment of Deloitte & Touche LLP to audit the
financial statements of the Company for the fiscal year ending February 3,
2001; and
(3) To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 31, 2000 are
entitled to one vote for each share held of record at that time.
IMPORTANT: We hope you will be able to attend the meeting in person and you
are cordially invited to attend. If you expect to attend the meeting, please
check the appropriate box on the proxy card when you return your proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
YOUR PROXY PROMPTLY. It is important that all stockholders execute, date and
return the proxy, using the enclosed envelope to which no postage need be
affixed if mailed in the United States.
By Order of the Board of Directors
Patricia A. Nussle
Secretary
April 19, 2000
<PAGE>
PROVANTAGE HEALTH SERVICES, INC.
N19 W24130 RIVERWOOD DRIVE
WAUKESHA, WISCONSIN 53188
PROXY STATEMENT
This proxy statement is furnished for solicitation by the Board of
Directors of ProVantage Health Services, Inc. (the "Company") of proxies in
the enclosed form from holders of Common Stock to be voted at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on May 23, 2000 at
10:00 a.m., Wisconsin time, at the Radisson Inn--Green Bay, 2040 Airport
Drive, Green Bay, Wisconsin 54313, and at any adjournment of that meeting.
A stockholder may revoke his or her proxy at any time before it is voted by
written notice to the Secretary, or by filing with the Secretary another proxy
bearing a later date, or by appearing and voting at the meeting. All proxies
which are not so revoked will be voted in accordance with the terms thereof.
Unless otherwise indicated, all proxies will be voted for the individuals
nominated to serve as directors and for ratification of the appointment of the
independent auditors. The Board knows of no other matters to be presented for
stockholder action at the Annual Meeting. If any other matters properly come
before the Annual Meeting, or if any of the persons named to serve as
directors or as auditors should decline or be unable to serve, the persons
named in the proxy will vote on the same in their discretion.
This proxy statement and accompanying form of proxy will be first mailed or
given to stockholders on or about April 19, 2000.
The Company's Common Stock, $0.01 par value (the "Common Stock"), is the
only class of capital stock currently outstanding, and only the holders of
Common Stock of record at the close of business on March 31, 2000 are entitled
to vote at the meeting. Each stockholder is entitled to one vote for each
share held of record on each proposal being voted upon. As of the record date,
18,150,000 shares of Common Stock are eligible to vote at the meeting. A
majority of the shares entitled to vote constitutes a quorum. Abstentions and
broker non-votes (i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote shares as to a matter with respect to which brokers
or nominees do not have discretionary power to vote) will be treated as
present for purposes of determining the quorum. Abstentions will be treated as
votes against matters considered at the Annual Meeting. Broker non-votes will
not be counted as present and entitled to vote on any matter at the Annual
Meeting.
ITEM 1
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, the Board
is divided into three classes with the number of directors to be divided as
equally as possible among the three classes. Directors are elected for
staggered terms of three years. Jeffrey A. Jones and Terry R. Thompson are
nominated to serve three-year terms expiring at the 2003 Annual Meeting of
Stockholders.
Vote Requirement to Elect Nominees; Board Recommendation
Directors are elected by a plurality of the votes cast by holders of the
Common Stock entitled to vote at a meeting at which a quorum is present. In
other words, the two directors who receive the largest number of votes will be
elected as directors. Any votes attempted to be cast "against" a candidate are
not given legal effect and are not counted as votes cast.
The Board recommends a vote FOR these nominees. In the absence of
instructions to the contrary, the persons named in the accompanying proxy will
vote for the election of these nominees. The Board is informed that Messrs.
Jones and Thompson are willing to serve as directors. If, however, they are
unable to serve or for good cause will not serve, the proxy may be voted for
such other person or persons as the proxies shall, in their discretion,
determine.
1
<PAGE>
Set forth below is certain information, as of January 29, 2000, concerning
Messrs. Jones and Thompson and the four directors of the Company whose terms
of office will continue after the Annual Meeting:
Nominees for Election as
Directors for Terms Expiring at the
Annual Meeting in 2003
Jeffrey A. Jones; 52; director of the Company since July, 1999; he has been
the President and Chief Executive Officer of the Company since July, 1999;
Executive Vice President and Chief Operating Officer from November, 1997 to
July, 1999; prior thereto, he served as the Senior Vice President and Chief
Financial Officer of ShopKo Stores, Inc. from November, 1993 to August, 1998.
Mr. Jones had 11 years of executive and chief financial officer experience and
11 years of experience with Arthur Andersen & Co. Mr. Jones is a director and
the chairman-elect of Pharmacy Care Management Association and a director of
Boys and Girls Club of Green Bay.
Terry R. Thompson; 42; director of the Company since August, 1999; he has
been the Chairman and Chief Executive Officer of Medical Logistics, a provider
of transportation and logistics service to institutional pharmacies, drug
wholesalers, clinical laboratories and other health care entities, since
March, 1997; prior thereto, Mr. Thompson served as the Executive Vice
President, Business Operations and a director of Merit Behavioral Care
Corporation, Inc., a provider of specialty outpatient clinics, from September,
1996 to March, 1997. Prior to joining Merit, Mr. Thompson had been employed by
Merck & Co. and its affiliates since 1990, where he served as Executive Vice
President of Operations for Merck-Medco Managed Care, LLC, as well as
President of its subsidiary companies Paid Prescriptions, National Pharmacies
and National Rx Services.
Directors Whose Terms Expire at the
Annual Meeting in 2001
Jeffrey C. Girard; 52; director of the Company since July, 1999; he has
been a director of ShopKo since June, 1991 and the President of Girard & Co.
of Minneapolis, Minnesota, a private consulting company, and an Adjunct
Professor at the Carlson School of Management, University of Minnesota since
1997; Executive Vice President and Chief Financial Officer of Supervalu Inc.
from October, 1992 to July, 1997; prior thereto, he held the positions of
Executive Vice President, Chief Financial Officer and Treasurer of
Supermarkets General Holdings Corporation and Senior Vice President and Chief
Financial Officer of Supervalu.
Gregory H. Wolf; 43; director of the Company since July, 1999; he has been
a director of ShopKo since November, 1998 and Chairman and Chief Executive
Officer of nextHR.com, an application service provider of human resource asset
management services, since January, 2000; prior thereto, he served as an
officer of Humana, Inc., a provider of managed healthcare products and
services, from October, 1995 to August, 1999, having first served as Senior
Vice President of Sales and Marketing; as Chief Operating Officer from July,
1996 to September, 1996; as President from September, 1996 through November,
1997; and as President, Chief Executive Officer and Director from December,
1997 to August, 1999. Prior to joining Humana, Mr. Wolf had been employed by
EMPHESYS Financial Group, Inc. and its affiliates since 1988, where he most
recently served as President. In October, 1995, EMPHESYS was acquired by
Humana. Mr. Wolf is also a director of InSystems Technologies and Shreyer
Honors College and Institute for Innovation in Learning and a national trustee
for the Boys and Girls Clubs of America.
Directors Whose Terms Expire at
the Annual Meeting in 2002
Dale P. Kramer; 60; director of the Company since January, 1998; Chairman
of the Board of the Company from January, 1998 to March, 2000 and he has been
a director of ShopKo since August, 1991, Chairman of the Board of ShopKo from
July, 1997 to March, 2000, President and Chief Executive Officer of ShopKo
from February, 1991 to March, 1999; prior thereto, he served as ShopKo's
Executive Vice President from April, 1983 to February, 1986 and as its
Executive Vice President and Chief Operating Officer from February, 1986 to
February, 1991. Mr. Kramer was employed by ShopKo in various other positions
since 1971.
2
<PAGE>
William J. Podany; 53; director of the Company since July, 1999; he has
been the Chairman of the Board of the Company since March, 2000, Chairman of
the Board of ShopKo since March, 2000, and President and Chief Executive
Officer of ShopKo since March, 1999, and a director of ShopKo since July,
1997. He was President and Chief Operating Officer of ShopKo's retail stores
from November, 1997 to March, 1999, and was Executive Vice President of ShopKo
from November, 1994 to March, 1999. From 1992 to 1994, Mr. Podany was
Executive Vice President-Merchandise of Carter Hawley Hale, a federation of
four department store chains. He has held senior merchandising executive
officer positions with Allied Stores, May Department Stores and Carter Hawley
Hale since 1978.
Board of Directors Meetings and Committees
The Board of Directors held three meetings and acted by consent 11 times in
the fiscal year ended January 29, 2000. Each incumbent director participated
in 75 percent or more of the total number of the meetings of the Board and
those of the committees of which such director is a member held during the
period for which he was a director.
The Board has three standing committees: the Compensation Committee, the
Executive Committee and the Audit Committee. The Board does not have a
standing nominating committee.
The Compensation Committee is currently comprised of Messrs. Kramer
(Chairman), Girard and Wolf. The duties of the Compensation Committee are to
provide a general review of the Company's compensation and benefit plans to
ensure that they meet corporate objectives. The Compensation Committee has the
authority to administer the Company's employee stock option and stock
incentive plans. In addition, the Compensation Committee approves the (i)
compensation of all corporate officers, (ii) grant of awards under the
Company's compensation and benefit plans and (iii) adoption of and changes in
major corporate compensation policies and practices, and reports its
recommendations to the full Board of Directors for approval and to authorize
action. The Compensation Committee met one time in the fiscal year ended
January 29, 2000.
The Audit Committee is currently comprised of Messrs. Girard (Chairman) and
Thompson. The duties of the Audit Committee are to recommend to the full Board
of Directors the selection of independent certified public accountants, to
audit annually the financial statements of the Company, to review the
activities and the reports of the independent certified public accountants and
to report the results of such review to the full Board of Directors. The Audit
Committee also monitors the internal controls of the Company. The Audit
Committee met one time in the fiscal year ended January 29, 2000.
Director Compensation
Each director who is not an employee of the Company or ShopKo receives an
annual retainer fee of $10,000, a fee of $1,000 for each board meeting in
which the director participates, and a fee of $1,000 for each committee
meeting in which the director participates, if such committee meeting is not
held on the same day as a board meeting. The Company reimburses all non-
employee directors for travel and related expenses incurred in connection with
Board and committee meetings.
The Company's 1999 Stock Incentive Plan authorizes various stock incentive
awards to non-employee directors. Messrs. Kramer, Wolf and Girard were granted
options to purchase 4,762 shares of Common Stock, and Mr. Podany was granted
an option to purchase 11,905 shares of Common Stock, at $18.00 per share on
July 19, 1999. Additionally, on August 16, 1999, Mr. Thompson was granted an
option to purchase 4,762 shares of Common Stock at $12.125 per share.
3
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Set forth in the table below is information regarding the beneficial
ownership of shares of the Common Stock by each person or entity known by the
Company to beneficially own 5% or more of the total number of outstanding
shares of the Common Stock, and information regarding the beneficial ownership
of shares of the Common Stock and shares of ShopKo common stock by (i) each
director of the Company, (ii) the Company's Chief Executive Officer and four
most highly compensated executive officers other than the Chief Executive
Officer, and (iii) the directors and executive officers of the Company as a
group (11 persons). Except as otherwise noted, information with respect to
directors and executive officers is as of January 29, 2000.
<TABLE>
<CAPTION>
ProVantage Common Stock ShopKo Common Stock
------------------------- -------------------------
Amount and Nature Amount and Nature
Name of of Beneficial of Beneficial
Beneficial Owner Ownership(1) Percent Ownership(2)(4) Percent
---------------- ----------------- ------- ----------------- -------
<S> <C> <C> <C> <C>
ShopKo Stores, Inc. (3).... 11,710,000 64.5% -- --
700 Pilgrim Way
Green Bay, Wisconsin 54304
Dale P. Kramer............. 8,150 * 370,000 1.22%
William J. Podany.......... 0 * 113,000 *
Jeffrey C. Girard.......... 1,630 * 4,000 *
Gregory H. Wolf............ 4,890 * 5,000 *
Terry R. Thompson.......... 0 * 0 *
Jeffrey A. Jones........... 1,730 * 76,000 *
Glen C. Laschober.......... 480 * 8,000 *
Peter F. Hoffman........... 100 * 1,200 *
Joseph A. Coffini.......... 3,400 * 555 *
George M. Barlow........... 210(5) * 800 *
All directors and executive
officers as a group
(11 persons).............. 20,790 * 578,480 1.9%
</TABLE>
- --------
*Less than 1%
(1) Except as otherwise noted, the persons named in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes shares which may be acquired within 60 days pursuant to stock
options as follows: Mr. Kramer--280,000 shares; Mr. Podany--88,000 shares;
Mr. Girard--3,000 shares; Mr. Jones--76,000 shares; Mr. Laschober--8,000
shares; Dr. Hoffman--1,200 shares; Mr. Coffini--480 shares; and Mr.
Barlow--800 shares.
(3) Based on Schedule 13G filed on February 14, 2000. According to this
filing, ShopKo Stores, Inc., through its wholly-owned subsidiary ShopKo
Holdings, Inc., has sole voting power and sole dispositive power with
respect to all 11,710,000 shares.
(4) The number of shares shown does not reflect funds from ShopKo's Profit
Sharing and 401(k) Plans invested in ShopKo common stock through the
ShopKo Stock Fund. As of January 29, 2000, the approximate ShopKo Stock
Fund account balances were as follows: Mr. Kramer--$204,877; Mr. Podany--
$63,704; Mr. Jones--$13,237; and Mr. Coffini--$24,414.
(5) Includes 105 shares held by Mr. Barlow's wife.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Based solely upon the Company's review of Forms 3, 4 and 5 received by it
during the last fiscal year pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended, all of such forms were filed on a timely basis by
reporting persons, with the exception of Mr. Jones who reported one transaction
late.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the "Summary Compensation Table") sets forth the
compensation paid by the Company for each of the last two fiscal years to the
Company's Chief Executive Officer and its other four most highly compensated
executive officers:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
----------------------- ---------------------
Name and Principal Securities Underlying All Other
Position Year (1) Salary ($) Bonus ($)(2) Options/SARs(#) Compensation ($)
------------------ -------- ---------- ------------ --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Jeffrey A. Jones........ 1999 360,150 234,098 103,000 79,989(3)
President and Chief 1998 340,000 255,000 0 232,030
Executive
Officer
Glen C. Laschober....... 1999 200,227 91,103 38,850 23,643(4)
Executive Vice
President, Health 1998 192,115 67,240 0 5,284
Benefit Management
Peter F. Hoffman........ 1999 170,926 70,241 24,600 174(6)
Senior Vice President, 1998 163,000 40,750 3,000(5) 38,750
Chief Medical Officer
Joseph A. Coffini....... 1999 161,163 66,346 24,600 11,016(7)
Senior Vice President, 1998 152,696 30,539 0 73,686
Business
Development and
Marketing
George M. Barlow........ 1999 172,385 71,370 24,600 7,634(8)
Senior Vice President, 1998 150,000 30,000 2,000(5) 6,275
Healthcare
Information Technology
</TABLE>
- --------
(1) Refers to fiscal years ended on the following dates: 1998: January 30,
1999; and 1999: January 29, 2000.
(2) Represents bonuses earned with respect to the indicated fiscal year
pursuant to the Company's Executive Incentive Plan although all or a
portion of the bonus may have been paid during the subsequent fiscal year.
(3) "All Other Compensation" for Mr. Jones includes the following: ProVantage-
paid portion of individual life insurance policy: $174; 401(k) ProVantage
match: $4,906; ShopKo profit sharing plan contributions: $37,244;
relocation expenses and associated tax adjustments: $24,165; and car
allowance: $13,500.
(4) "All Other Compensation" for Mr. Laschober includes the following:
ProVantage-paid portion of individual life insurance policy: $174; 401(k)
ProVantage match: $5,018; ShopKo profit sharing plan contributions: $6,451;
and car allowance: $12,000.
(5) The securities referenced are options to purchase shares of ShopKo's common
stock.
(6) "All Other Compensation" for Dr. Hoffman consists of ProVantage-paid
portion of individual life insurance policy: $174.
(7) "All Other Compensation" for Mr. Coffini includes the following:
ProVantage-paid portion of individual life insurance policy: $174; and
ShopKo profit sharing plan contributions: $10,842.
(8) "All Other Compensation" for Mr. Barlow includes the following: ProVantage-
paid portion of individual life insurance policy: $174; 401(k) ProVantage
match: $4,569; and relocation expenses and associated tax adjustments:
$2,891.
5
<PAGE>
Option Grants Table
The following table sets forth information about stock option grants during
the fiscal year ended January 29, 2000 to the Company's Chief Executive
Officer and its other four most highly compensated executive officers.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual
Rates of Stock
Price
Appreciation For
Individual Grants(1) Option Term
---------------------------------------------- -------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ------------ ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Jones........ 103,000 21.6 18.00 2009 1,165,970 2,954,799
Glen C. Laschober....... 38,850 8.2 18.00 2009 439,786 1,114,504
Peter F. Hoffman........ 24,600 5.2 18.00 2009 278,475 705,709
Joseph A. Coffini....... 24,600 5.2 18.00 2009 278,475 705,709
George M. Barlow........ 24,600 5.2 18.00 2009 278,475 705,709
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- --------
(1) Forty percent (40%) of these stock options vest and become exercisable on
the second anniversary of the date of grant, with an additional twenty
percent (20%) of the options vesting and becoming exercisable on each
successive anniversary of the date of grant. All stock options vest
immediately upon a "change of control" of the Company, as defined in the
Company's 1999 Stock Incentive Plan.
Option Exercise and Fiscal Year End Value Table
The following table sets forth information with respect to our chief
executive officer and our four other most highly compensated executive
officers concerning stock options that were exercised during the last fiscal
year and the number and value of options outstanding on January 29, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs at Fiscal In-the-Money Options/SARs
Acquired on Year-End (#) at Fiscal Year-End ($)
Exercise Value ------------------------------- -------------------------
Name (#)(1) Realized ($) Exercisable(1) Unexercisable(2) Exercisable Unexercisable
- ---- ----------- ------------ -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Jones........ 0 0 76,000 136,000 213,500 23,625
Glen C. Laschober....... 6,000 134,970 8,000 59,850 4,470 13,410
Peter F. Hoffman........ 0 0 0 27,600 0 0
Joseph A. Coffini....... 10,200 199,974 480 25,320 0 0
George M. Barlow........ 0 0 0 26,600 0 0
</TABLE>
- --------
(1) The securities referenced are shares of ShopKo's common stock.
(2) Includes shares underlying options to purchase ShopKo common stock as
follows: Mr. Jones--33,000; Mr. Laschober--21,000; Dr. Hoffman--3,000; Mr.
Coffini--720; and Mr. Barlow--2,000.
Indemnification of Directors and Officers
The Company's amended and restated bylaws provide for the indemnification,
or reimbursement for losses and expenses incurred in litigation relating to
corporate affairs, of the Company's directors and officers to the full extent
permitted by the Delaware General Corporation Law. The Company has entered
into agreements to indemnify, or reimburse, its directors and certain
officers, in addition to the indemnification provided for in the amended and
restated bylaws. These agreements will, among other things, indemnify the
Company's directors and certain of its officers to the full extent permitted
by Delaware law for any claims, liabilities, damages, judgments, penalties,
fines, settlements, disbursements or expenses, including attorneys' fees,
incurred by such person in any action or proceeding, including any action by
or in the Company's right, on account of services as one of its directors or
officers. The Company believes that these provisions and agreements are
necessary to attract and retain qualified persons as directors and officers.
6
<PAGE>
Change of Control Severance Agreements
The Company has entered into change of control severance agreements with
certain of its officers, including Messrs. Jones, Laschober, Hoffman, Barlow
and Coffini. The severance agreements provide that, if, within two years after
a "change of control," as defined below, the Company terminates the
individual's employment other than for "cause," as defined below, or
disability, or the individual terminates the individual's employment for "good
reason," as defined below, then the individual will be entitled to a lump-sum
cash payment equal to a multiple of one, one and one-half or two times the
individual's annual base salary, plus a multiple of one, one and one-half or
two times the lesser of (A) the individual's average annual bonus for the
three fiscal years immediately preceding the date of termination or (B) the
average of the individual's annual bonus "norm" for the three fiscal years
immediately preceding the date of termination. The multiple referred to in
this paragraph is two for Mr. Jones and one and one-half for Messrs.
Laschober, Hoffman, Barlow and Coffini. Each individual would also receive his
salary through the date of termination and all other amounts owed to the
individual at the date of termination under the Company's benefit plans. In
addition, under such circumstances, the individual will be entitled to
continued health and dental coverage for the individual and the individual's
family for a one, one and one-half or two year period after the date of
termination. The severance agreements provide that if certain amounts to be
paid thereunder constitute "parachute payments," as defined in Section 280(G)
of the Internal Revenue Code, the severance benefits owed to the individual
may be decreased, but only if the result is to give the individual a larger
after-tax benefit than if the payments are not reduced. The individual is
permitted to elect the payments to be reduced.
A "change of control" is defined in the severance agreements as occurring
if:
. the incumbent directors or their permitted successors cease to constitute
at least a majority of the Company's Board of Directors,
. the Company's stockholders approve certain mergers, consolidations,
liquidations, dissolutions or reorganizations of the Company, or
. the Company's stockholders approve a complete liquidation or dissolution
of the Company.
For purposes of the severance agreements, "cause" means:
. personal dishonesty by the individual intended to result in his or her
substantial personal enrichment at the Company's expense,
. repeated, willful violations by the individual of his or her obligation
to devote reasonable time and efforts to carry out his or her
responsibilities to the Company, or
. the conviction of the individual of a felony.
"Good reason" as used in the severance agreements means any materially
adverse reduction of the individual's authority, responsibilities or
compensation, excluding for this purpose specified actions by the Company not
taken in bad faith and which are promptly remedied by the Company upon receipt
of notice, or any required relocation of the individual to a place of business
more than 50 miles from where the individual works at the time of the change
of control.
Other Compensation
The Company provides certain personal benefits and other noncash
compensation to its executive officers. For the fiscal year ended January 29,
2000, the incremental cost of providing such compensation did not exceed the
minimum amounts required to be disclosed under current SEC rules for each
person named in the Summary Compensation Table.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
Prior to the Company's initial public offering, the compensation of the
Company's executive officers was determined by ShopKo's compensation
committee. The compensation committee consists of Messrs. Kramer, Girard and
Wolf. All of these individuals are members of ShopKo's board of directors. Mr.
Kramer is ShopKo's former chairman of the board, president and chief executive
officer. The Company is a party to various agreements with ShopKo.
Additionally, ShopKo was the Company's sole stockholder prior to the Company's
initial public offering, and owns a substantial majority of the Company's
Common Stock. See "Relationship with ShopKo."
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee was established after completion of the
Company's initial public offering in July 1999. The Compensation Committee
consists of Messrs. Kramer (Chairman), Girard and Wolf, none of whom are
employees of the Company. The Compensation Committee is responsible for making
recommendations to the Board concerning the compensation levels of the
executive officers of the Company. The Compensation Committee also administers
the Company's 1999 Stock Incentive Plan and determines awards to be made under
such plan to the Company's executive officers and to other eligible
individuals. It is currently expected that the Compensation Committee will
review compensation programs for executive officers annually, commencing in
2000.
With respect to 1999, virtually all of the compensation decisions for
executive officers, including base salary and bonus levels and stock option
awards for Mr. Jones, were made by ShopKo's compensation committee prior to
the completion of the Company's initial public offering.
Described below are the different forms of compensation, both short and
long-term, that the Compensation Committee may consider in making future
recommendations to the Board.
Base Salary. The Compensation Committee intends to set (and periodically
adjust) the base salaries of the Company's executive officers at levels
designed to attract and retain highly qualified individuals. The Compensation
Committee expects to review information on the compensation levels of
comparable public companies and to consider that information together with the
executives' and the Company's performance in determining salary levels.
Bonus Compensation. Historically, the Company's executive officers have had
an opportunity for annual bonuses. The Compensation Committee intends to set
target performance levels for the Company's executive officers which would
result in eligible executive officers receiving bonus payouts based on a
percentage of base salary if the performance goals set by the Compensation
Committee are met for that year.
Equity Based Compensation. The Company adopted the 1999 Stock Incentive
Plan in connection with the Company's initial public offering. The
Compensation Committee expects that stock option grants will be the primary
form of long-term incentive compensation for the Company's executive officers.
The Compensation Committee believes stock options are an effective means of
incenting senior management to increase the long-term value of the Company's
Common Stock.
In making compensation decisions, it is the Compensation Committee's
current intention to recommend plans and awards which will meet the
requirements for deductibility for tax purposes under Section 162(m) of the
Internal Revenue Code of 1986, as amended.
The Compensation Committee:
Dale P. Kramer, Chairman Jeffrey C. Girard Gregory H. Wolf
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's Common Stock for the period beginning on
July 14, 1999 (the first day of trading of the Common Stock on the New York
Stock Exchange) and ending on January 29, 2000 (the Company's fiscal year
end), with the cumulative total return for the Russell 2000 Index and the
cumulative total return for the Nasdaq Health Services Index, which has been
selected as the Company's peer group. The comparison assumes $100 was invested
on July 14, 1999 in the Company's Common Stock and in each of the comparison
indexes, and assumes reinvestment of dividends.
7-14-99 1-29-00
------- -------
Provantage Health Services, Inc. $100 $50
Russell 2000 $100 $91
Nasdaq Health Services $100 $74
10
<PAGE>
RELATIONSHIP WITH SHOPKO
The Company entered into a number of agreements with ShopKo in connection
with the initial public offering of the Company's Common Stock. These
agreements were entered into while the Company was a wholly-owned subsidiary
of ShopKo, and, therefore, such agreements were not the result of arm's-length
negotiations. As a result, there can be no assurance that each of these
agreements, or the transactions provided for in these agreements, has been or
will be effected on terms at least as favorable to the Company as could have
been obtained from parties other than ShopKo.
These agreements may be modified and additional agreements, arrangements
and transactions may be entered into between the Company and ShopKo. Any such
future modifications, agreements, arrangements and transactions will be
determined through negotiation between the Company and ShopKo. With respect to
additional material transactions between the Company and ShopKo, the Company's
board of directors has established a policy that all such transactions will be
submitted for review, approval and authorization to the Company's directors
who are not affiliated with ShopKo.
The following is a summary of the material features of certain agreements,
arrangements and transactions between the Company and ShopKo. The summaries of
each of the following agreements are qualified in their entirety by reference
to the full text of such agreement, a copy of which has been filed with the
SEC.
Credit Agreement. The Company has entered into a credit agreement with
ShopKo to provide the Company with a revolving line of credit which expires on
January 31, 2001. Pursuant to the credit agreement, ShopKo has agreed, subject
to certain conditions, to make advances to the Company on a revolving basis in
an aggregate amount not to exceed $25.0 million. Borrowings under the credit
agreement will bear interest at various market rates at the time of borrowing.
The credit agreement provides for an annual commitment fee of 1/5 of one
percent of the total commitment amount. The credit agreement is unsecured, and
the Company may terminate the credit agreement at any time without penalty.
The Company may at any time replace the credit agreement with borrowings from
banks or other financial institutions or in the private or public markets. The
credit agreement restricts the Company from borrowing funds from parties other
than ShopKo without ShopKo's consent, and prohibits the Company from selling
Common Stock unless ShopKo meets certain financial tests, pledging certain of
the Company's assets and entering into agreements which restrict the Company's
ability to pay dividends.
Indemnification and Hold Harmless Agreement. The Company has entered into
an indemnification and hold harmless agreement with ShopKo with respect to the
allocation of responsibility for certain liabilities. In general, the
indemnification agreement provides that the Company and ShopKo will each
indemnify the other party and that party's directors, officers, employees and
agents against certain liabilities arising from or based upon the operation of
their own respective businesses prior to and following the Company's initial
public offering, including, but not limited to, liabilities arising under
securities, environmental and contract law.
Tax Matters Agreement. The Company has entered into a tax matters agreement
with ShopKo which provides that ShopKo will prepare all returns and,
generally, have liability for all income taxes attributable to all tax periods
ending on or before the Company's initial public offering. The Company has
entered into an administrative services agreement, described below, pursuant
to which ShopKo will continue to prepare tax returns for the Company, however,
the Company has liability for all taxes for tax periods beginning after the
Company's initial public offering. For tax periods which began before the
Company's initial public offering but ended after the offering, ShopKo has
liability for income taxes attributable to income allocable to the period
ending with the offering and the Company has liability for the remainder.
ShopKo determined the method for allocating income in the tax year in which
the offering occurred. By law, the Company is liable for the entire federal
income tax of ShopKo and other companies included in the consolidated return
for all periods in which the Company is included in the consolidated group. In
the tax matters agreement, however, ShopKo agrees to indemnify the Company
against this liability except to the extent it relates to the Company and its
subsidiaries,
11
<PAGE>
if any, after the offering. If the Company's employees exercise ShopKo stock
options or otherwise receive compensation from ShopKo nonqualified plans after
the offering, the tax matters agreement provides that the Company will
reimburse ShopKo for the tax benefit, if any, that the Company receives from
deducting compensation attributable thereto and the employer's share of any
employment taxes arising in connection with such compensation which is paid by
ShopKo.
Administrative Services Agreement. The Company has entered into an
administrative services agreement with ShopKo pursuant to which ShopKo will
make available and provide certain administrative, support and consultation
services to the Company, including employee benefits, payroll processing,
insurance, tax compliance, treasury, and accounts payable processing. The
administrative services agreement has an initial term which expires January
31, 2001, subject to automatic renewal for successive one-year terms. At any
time during the term of the administrative services agreement, either party
may terminate existing categories of services upon 120 days' prior written
notice. ShopKo is obligated to provide the Company transition assistance, at
the Company's request and expense, upon the termination of any service
provided pursuant to the agreement.
I.T. Support Agreement. Certain components of the Company's computer
systems are located in ShopKo's corporate headquarters. The Company has
entered into an I.T. support agreement with ShopKo pursuant to which ShopKo
has agreed to provide the Company with:
. access to ShopKo's computer facilities,
. certain support services to be performed by ShopKo's systems personnel,
and
. the shared use of ancillary computer hardware and operating software.
The I.T. support agreement has a term which expires on January 31, 2001. At
any time during the term of the I.T. support agreement, either party may
terminate existing categories of services upon 120 days' prior written notice.
In addition, ShopKo has agreed to provide transition assistance to the Company
if any services are terminated as a result of expiration or termination of the
agreement or otherwise. The I.T. support agreement also contains
confidentiality provisions relating to the Company's patient data and
proprietary software.
Lease Agreement. The Company has entered into a lease agreement whereby the
Company leases its corporate headquarters from ShopKo. The lease agreement has
a term of 15 years with four options to renew for five years each. The annual
rental payments are $200,000. The Company has the option to purchase the
building at fair market value or to increase the rental payments to fair
market rates at such time as ShopKo ceases to beneficially own at least 51% of
the Company's outstanding Common Stock.
Registration Rights Agreement. The Company has entered into a registration
rights agreement with ShopKo Holdings, Inc., a wholly-owned subsidiary of
ShopKo, pursuant to which the Company has granted demand and "piggyback"
registration rights to ShopKo Holdings and its affiliates, including ShopKo,
with respect to shares of Common Stock owned by ShopKo Holdings and its
affiliates, including ShopKo. Pursuant to the registration rights agreement,
ShopKo Holdings has the right to require the Company to file up to three
registration statements under the Securities Act, which may be increased by an
unlimited number of registration statements if effected on Form S-3, covering
ShopKo Holdings' shares. ShopKo Holdings also has the right, if the Company
files a registration statement, to require the Company to include its shares
in such registration statement. The Company's obligations under the
registration rights agreement are subject to certain limitations relating to
the minimum amount of Common Stock to be included in a registration statement,
the timing of the exercise of registration rights and other similar matters.
The Company has agreed to pay all costs and expenses relating to the exercise
of ShopKo Holdings' registration rights, except for underwriting commissions
and filing fees relating to the shares sold by ShopKo Holdings, any special or
extraordinary auditing expenses, ShopKo Holdings' legal expenses and, in the
case of demand registration rights, printing fees. The Company and ShopKo
Holdings will each indemnify the other party for certain liabilities,
including liabilities under the Securities Act, in connection with any
registration under the registration rights agreement. The registration rights
agreement will terminate when ShopKo Holdings or its affiliates owns less than
5% of the Company's outstanding Common Stock.
12
<PAGE>
Prior to July 19, 1999, general administrative and other expenses were
allocated to the Company from ShopKo for the types of services described in
the administrative services agreement and the information technology services
agreement. The allocation for the last fiscal year was $0.5 million.
In addition to the agreements described above, the Company has entered into
various transactions with ShopKo in the ordinary course of business. The
payments for these activities for the last fiscal year are as follows:
<TABLE>
<CAPTION>
Fiscal Year
1999
-------------
(in millions)
<S> <C>
Company payment to ShopKo for prescription costs........... $52.1
Company purchase of pharmaceutical inventory from ShopKo... 0.3
Company payment to ShopKo for administrative, audit and
technology services after July 19, 1999................... 0.6
Company payment to ShopKo for rent expense................. 0.1
ShopKo payment to Company for claims processing............ 2.6
ShopKo payment to Company under indemnification agreement.. 1.5
ShopKo payment to Company for data warehouse product....... 0.35
ShopKo payment to Company for portion of warrant sale
proceeds.................................................. 0.6
</TABLE>
The Company receives a benefit in the form of lower prices when purchasing
various goods and services when such purchases are made through or in
conjunction with ShopKo. Such benefits may not be available in all cases in
the future.
The Company used approximately $73,744,000 of the proceeds received in
connection with the initial public offering of its Common Stock to repay a
portion of a $115 million 5% demand promissory note issued to ShopKo. The
demand promissory note was issued to ShopKo in connection with a
reorganization of the Company's corporate structure. The unpaid balance of the
demand promissory note was contributed to the Company by ShopKo as a capital
contribution.
Messrs. Kramer, Podany, Girard and Wolf are members of ShopKo's board of
directors. Mr. Podany is also ShopKo's chairman of the board, president and
chief executive officer.
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed Deloitte & Touche LLP to audit the financial statements of the
Company and its subsidiaries for the fiscal year ending February 3, 2001 and
is seeking the ratification of their appointment by the stockholders. Shares
represented by the accompanying proxy will be voted for ratification unless
the proxy indicates to the contrary.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
Vote Required to Ratify Selection; Board's Recommendation
Ratification of Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending February 3, 2001 requires the affirmative vote of a
majority of shares present in person or represented by proxy at the meeting.
The Board recommends a vote FOR such ratification. Proxies solicited by the
Board will, unless otherwise directed, be voted in favor of such ratification.
13
<PAGE>
PROPOSALS OF STOCKHOLDERS FOR 2001 ANNUAL MEETING
Nominations, other than by or at the direction of the Board of Directors,
of candidates for election as directors at the 2001 Annual Meeting and any
other stockholder proposed business to be brought before the 2001 Annual
Meeting must be submitted to the Company not later than January 23, 2001. Such
stockholder proposed nominations and other stockholder proposed business must
be made in accordance with the Company's Amended and Restated By-Laws which
provide, among other things, that stockholder proposed nominations and
stockholder proposed business must be accompanied by certain information
concerning the proposal and the stockholder submitting the proposal. To be
considered for inclusion in the proxy statement solicited by the Board of
Directors, stockholder proposals for consideration at the 2001 Annual Meeting
of Stockholders of the Company must be received by the Company at its
principal executive offices, N19 W24130 Riverwood Drive, Waukesha, Wisconsin
53188 on or before December 20, 2000. Proposals should be directed to Ms.
Patricia A. Nussle, Vice President and Secretary. To avoid disputes as to the
date of receipt, it is suggested that any stockholder proposal be submitted by
certified mail, return receipt requested.
OTHER MATTERS
Other Proposed Action. The Board of Directors of the Company knows of no
other matters which may come before the meeting. However, if any matter other
than those referred to above should properly come before the meeting, it is
the intention of the persons named in the enclosed proxy to vote such proxy in
accordance with their discretion.
Cost of Solicitation. The cost of soliciting proxies will be borne by the
Company. Arrangements will be made with brokerage houses, custodians, nominees
and other fiduciaries to send proxy materials to their principals, and the
Company will reimburse them for their expenses. In addition to solicitation by
mail, certain officers and directors of the Company, who will receive no
compensation for their services other than their regular salaries, may solicit
proxies by telephone, telecopy and personally.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia A. Nussle
Secretary
Dated: April 19, 2000
14
<PAGE>
- --------------------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for Proposals 1 and 2.
Please mark your votes as indicated in this example [X]
/\ Fold and detach here /\
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- -- --
- -- --
<S> <C>
1. Election of directors: 01 Jeffrey A. Jones 02 Terry R. Thompson [_] FOR all [_] WITHHELD from
nominees all nominees
__________________________________
(Instruction: To withhold authority to vote for any individual nominee, |________________________________|
write that nominee's name in the space provided to the right.) [_] For [_] Against [_] Abstain
2. Ratification of Deloitte & Touche LLP to audit the financial statements of
the Company for the fiscal year ending February 3, 2001.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. Dated: ____________________________, 2000
_____________________________________
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CHOICE IS |_____________________________________|
SPECIFIED, PROXIES WILL BE VOTED FOR ALL ITEMS. Signature(s)
Address Change? Mark Box [_] [_] PLEASE CHECK THE BOX IF YOU ARE Please sign, date, and return the proxy
Indicate changes below: ATTENDING THE ANNUAL MEETING IN card promptly using the enclosed
PERSON. NUMBER OF envelope.
SHAREHOLDERS ATTENDING:
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PROVANTAGE
HEALTH SERVICES, INC.
Annual Meeting
of
ProVantage Health Services, Inc.
Stockholders
Tuesday, May 23, 2000
10:00 a.m.
Radisson Inn--Green Bay
2040 Airport Drive
Green Bay, Wisconsin 54313
---------------------------------------
Agenda
. Elect two directors to serve until
2003.
. Ratify the appointment of Deloitte &
Touche LLP to audit the financial
statements of the Company for the
fiscal year ending February 3, 2001.
. Transact such other business as may
properly come before the meeting.
---------------------------------------
\/ Fold and detach here \/
- --------------------------------------------------------------------------------
PROVANTAGE HEALTH SERVICES, INC. proxy
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Jeffrey A. Jones and Patricia A. Nussle
proxies, each with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of stock of ProVantage Health Services, Inc.
standing in the name of the undersigned with all powers which the undersigned
would possess if present at the Annual Meeting of Stockholders of the Company
to be held May 23, 2000 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
