<PAGE> 1
SCHEDULE 14A-INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. N/A)
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(c)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 14a-12
________________________________________________________________________________
National Health Enhancement Systems, Inc.
________________________________________________________________________________
(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:
.........................................................................
(4) Date Filed:
.........................................................................
<PAGE> 2
NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
3200 North Central Avenue
Suite 1700
Phoenix, AZ 85012
Notice of Annual Meeting of Stockholders
June 10, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
National Health Enhancement Systems, Inc. (the "Company") will be held on
Tuesday, June 10, 1997, at 4:00 p.m., local time, at the Company's corporate
offices at 3200 North Central Avenue Phoenix, Arizona 85012, for the following
purposes:
1. To elect directors to serve for the ensuing year and/or until
their successors are elected and qualified.
2. To approve the adoption of the Company's 1997 Equity Incentive
Plan.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on April 18,
1997, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, please mark, sign, date,
and return the enclosed proxy card as promptly as possible in the postage-paid
envelope provided for this purpose.
Your attention is directed to the attached Proxy Statement and the
Company's 1997 Annual Report.
By order of the Board of Directors,
JEFFREY T. ZYWICKI
Secretary
Phoenix, Arizona
May 6, 1997
<PAGE> 3
NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
3200 North Central Avenue
Suite 1750
Phoenix, AZ 85012
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors of National
Health Enhancement Systems, Inc. ("the Company") in connection with the Annual
Meeting of Stockholders to be held on June 10, 1997, at 4:00 p.m. local time, at
the Company's corporate offices at 3200 North Central Avenue, Phoenix, Arizona
85012. The proxy materials were mailed on or about May 6, 1997, to stockholders
of record at the close of business on April 18, 1997.
A. SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of the
Company. A person giving the enclosed proxy has the power to revoke it at any
time before it is exercised, by (i) attending the meeting and voting in person;
(ii) duly executing and delivering a proxy bearing a later date; or (iii)
sending a written notice of revocation to the principal officers of the Company.
If the enclosed proxy is properly executed and returned to the Company
in time to be voted at the meeting, it will be voted as specified on the proxy,
unless it is revoked prior thereto. If no specification is made in the proxy,
the shares represented by the proxy will be voted for the election of the
nominees for directors named below, in favor of the proposed 1997 Equity
Incentive Plan and with respect to any other matters which may come before the
meeting, at the discretion of the proxy holders.
The Company will pay the entire cost of soliciting these proxies,
including charges and expenses of brokerage firms and others who forward
solicitation material to beneficial owners of Common Stock. This solicitation
will be by use of the mails and, without additional compensation, directors and
officers of the Company may solicit proxies by further mailing, personal
conversation or telephone.
B. VOTING SECURITIES
As of April 22, 1997, the Company had outstanding 5,493,166 shares of
its Common Stock. Stockholders of record of Common Stock on the record date are
entitled to one vote for each share held of record on each matter of business to
be considered at the annual meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting, who will
determine whether or not a quorum is present. Abstentions will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. As a result, any
abstentions with respect to any such matter will have the effect of a negative
vote. If a broker indicated on the proxy that it does not have
1
<PAGE> 4
discretionary authority as to certain shares to vote on a particular matter
(also called broker non-votes) those shares will be counted for quorum purposes
but will not be considered as present and entitled to vote with respect to that
matter.
With respect to the election of directors, votes may be cast in favor
or withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. When a quorum is present, directors are elected by a
plurality vote, meaning the six persons receiving the most shares voted in their
favor shall be elected as directors. For approval of the proposed 1997 Equity
Incentive Plan and any other matters submitted to stockholders when a quorum is
present, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy at the Annual Meeting is required.
C. STOCKHOLDER PROPOSALS
If any stockholder of the Company wishes to submit a proposal to be
inserted in the proxy material for the Annual Meeting of the stockholders in
1998, such proposal must comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, and must be received by the
Secretary of the Company on or before January 28, 1998. No stockholder proposals
were received by the Company for the June 1997 Annual Meeting of Stockholders.
D. BOARD OF DIRECTORS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each of the persons named below has been nominated for election as a
director of the Company until the 1998 annual Meeting of Stockholders or until
his successor has been duly elected and qualified. Each of the nominees listed
below was elected by the stockholders at the last annual meeting and is
currently a director, except for Mr. McGraw and Mr. Liebner, who were appointed
by the Board subsequent to the last stockholders meeting. All of the nominees
have agreed to serve if elected. The Board knows of no reason why any such
nominee should be unable to serve, but if such should be the case, the shares
represented by duly executed proxies received by the Company will be voted for
the election of a substitute nominee selected by the Board.
The names of the nominees and certain information about them, as of May
6, 1997, are set forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Position Since
- --------------- --- -------- -----
<S> <C> <C> <C>
Gregory J. Petras 47 Chairman and Chief Executive Officer 1983
Gardiner S. Dutton 66 Director 1991
James W. Myers 62 Director 1989
Steven D. Wood, Ph.D. 53 Director 1989
W. Cal McGraw 52 Director 1996
Mark E. Liebner 44 Director 1997
</TABLE>
2
<PAGE> 5
The Board of Directors is responsible for the overall affairs of the
Company. Pursuant to Article III of the Company's Bylaws, the number of
directors comprising the Board of Directors shall be fixed from time to time by
resolution of the Board of Directors. As of the date hereof, the Board of
Directors consists of seven directors, but will be reduced to six directors as a
result of the election at the Annual Meeting. John P. Delmatoff, a director
since 1993, has requested that he not be nominated for re-election to the Board.
During the fiscal year ended January 31, 1997, the Board of Directors
met on six occasions. No director serving during fiscal year 1997 attended fewer
than seventy-five percent (75%) of the aggregate of the total number of meetings
of the Board of Directors during his term, and the total number of meetings held
by all committees of the Board on which the director served. The Board of
Directors has an Audit Committee and a Compensation Committee. It does not have
a nominating committee or a committee performing the functions of a nominating
committee.
The Audit Committee of the Board of Directors, currently consisting of
directors Gardiner S. Dutton and Steven D. Wood, met once during fiscal 1997.
The Audit Committee recommends engagement of the Company's independent auditors,
and is primarily responsible for reviewing the scope of the audit and other
services performed by the Company's independent auditors and for reviewing and
evaluating the Company's accounting principles.
The Compensation Committee of the Board of Directors, currently
consisting of directors Gardiner S. Dutton and James W. Myers, did not formally
meet during fiscal 1997. The Compensation Committee reviews and approves the
Company's executive compensation policy. All options granted during the year
were made by the Board of Directors.
In March 1997, the Board established an Option Committee for purposes
of administering the 1997 Equity Incentive Plan. The Committee is comprised of
Messrs. Myers and Dutton and, to date, has not met.
NAME AND EXPERIENCE
GREGORY J. PETRAS - Mr. Petras has served as the Chairman of the Company since
March 1996 and as the President and a Director of the Company since July 1983
and Chief Executive Officer since January 31, 1986. He had served as the
Company's Treasurer from December 1984 to December 1986. From April 1982 until
December 1985, Mr. Petras was also Executive Vice-President of the Arizona Heart
Institute, Ltd. ("Institute"). In such capacity, Mr. Petras was responsible for
planning, marketing, advertising, program development and general operations at
the Institute. From February 1979 until April 1982, Mr. Petras was the
Administrator responsible for the business operations of the Institute. Prior to
joining the Institute, Mr. Petras was a Manager with the healthcare consulting
division of Arthur Andersen & Co. located in Phoenix, Arizona.
GARDINER S. DUTTON - Mr. Dutton has served as a director of the Company since
November 1991. From December 1990 to November 1995, Mr. Dutton Served as
President and Chief Executive Officer of Bowmar Instrument Corporation based in
Phoenix, Arizona. From November 1980 until December 1990, Mr. Dutton was
Chairman and Chief Executive Officer of Inertia Dynamics of Phoenix, Arizona, a
company engaged in the manufacturing of lawn and garden products.
3
<PAGE> 6
JAMES W. MYERS - Mr. Myers has served as a director of the Company since March
1989. Mr. Myers is principal of Myers Management & Capital Group, a Phoenix,
Arizona consulting firm founded in January, 1996. From May 1989 to December
1995, Mr. Myers was President and Chief Executive Officer of Myers Craig Vallone
Francois, Inc., a Phoenix, Arizona consulting and investment banking firm
founded in May, 1986. Mr. Myers is a current director of Royal Grip, Inc. and
ILX, Inc.
STEVEN D. WOOD, PH.D. - Dr. Wood has served as a director of the Company since
March 1989. Dr. Wood served as Associate Dean for Graduate Programs at Arizona
State University from July 1983 to June 1988, and is currently a Professor of
Decision and Information Systems at Arizona State University's College of
Business. Dr. Wood has co-authored three books and published over seventy-five
articles in professional journals and texts. Dr. Wood has been involved with the
development and packaging of services and products for health care providers and
is a principal with Health Services Marketing, Ltd., which licenses health care
programs to hospitals and major medical vendors.
W. CAL MCGRAW - Mr. McGraw is Founder and President of McGraw & Associates, a
consulting, management and investment services firm, specializing in software,
technology and health companies in the United States, Europe, Asia and South
America. Mr. McGraw also has extensive merger and acquisition experience. He was
formerly Chairman of Expert Systems Inc. and Senior Vice President of Business
Development with Beech Street Corporation, a national preferred provider
organization (PPO). Mr. McGraw was national sales manager for fifteen years at
Burroughs Corporation. He also serves on the Board of both The College of
Business and the School of Technology at East Tennessee State University.
MARK E. LIEBNER - Mr. Liebner is Senior Vice President-Chief Financial Officer
of Rural/Metro Corp., a leading provider of emergency transportation and fire
protection services, a position he has held since 1991. Prior to joining
Rural/Metro, Mr. Liebner worked for Van Kampen Merritt, a Xerox financial
services company, where he focused on assisting middle market and quickly
growing companies with key financial advice and debt restructuring. Mr. Liebner
also has extensive knowledge and expertise in the commercial banking industry,
having worked for six years as vice president of corporate finance for Lloyds
International Corporation and as an international loan syndication officer for
Manufacturers Hanover Trust Company. In addition, Mr. Liebner has gained
significant international finance experience through his time at Chrysler
Corporation, where he served as a financial assistant for that company's
European financial staff based in Paris, as well as an auditor in its
international department.
JOHN P. DELMATOFF - Mr. Delmatoff has served as a director since April 1993. He
was one of two shareholders of First Strategic Group, Ltd. ("FSG"), which merged
into a subsidiary of the Company, and served as its President. FSG is a
consulting firm which specializes in the development of healthcare marketing and
advertising strategies. Prior to his ownership and management of FSG, Mr.
Delmatoff was a principal of Delmatoff Gerow Morris Langhans, Inc., an
advertising agency. Mr. Delmatoff's term as a Director expires on June 10, 1997,
and he has decided not to stand for re-election.
4
<PAGE> 7
Director Compensation
Each director who is not employed by the Company or an affiliate
company is paid an annual fee of $9,000. Employee directors or directors
employed by an affiliate company serve without additional compensation for their
services as a director, except for Messrs. Myers and McGraw who are paid a
monthly retainer of $3,000 and $4,000, respectively, for services provided in
connection with various strategic projects. In addition, directors may be
awarded options under the Company's 1988 Stock Option Plan, or proposed 1997
Equity Incentive Plan.
Messrs. McGraw, Wood and Dutton received options to purchase 10,000,
1,400 and 1,400 shares of Common Stock at an exercise price of $7.50, $8.00 and
$8.00 respectively, per share on August 27, 1996 and March 12, 1996. All options
were granted pursuant to the terms and conditions of the 1988 Stock Option Plan,
and the exercise price of each option was equal to the fair market value of the
Common Stock on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINATED DIRECTORS
E. PROPOSED ADOPTION OF THE 1997 EQUITY INCENTIVE PLAN
PROPOSAL NO.2
At the Annual Meeting there will be submitted to stockholders a
proposal to ratify the Board of Directors' decision and recommendation to adopt
the 1997 Equity Incentive Plan (the "Incentive Plan"), in light of the fact that
the existing 1988 Stock Option Plan ("Stock Option Plan") will expire in 1998.
The proposed Incentive Plan is a flexible plan which provides a menu of
different types of awards, including incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock, performance units
and stock bonuses. A summary of the Incentive Plan is included below and on the
ensuing pages of this proxy. A copy of the Incentive Plan is included in this
Proxy as Exhibit A attached hereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
PRINCIPAL FEATURES OF THE 1997 EQUITY INCENTIVE PLAN
The 1997 Equity Incentive Plan ("Incentive Plan") was adopted by the
Board of Directors on March 6, 1997, subject to approval by the stockholders.
The Incentive Plan authorizes awards of incentive stock options to employees and
non-qualified stock options, stock appreciation rights, performance units,
restricted stock and other Common Stock-based awards (collectively "Awards") to
officers, directors, employees, consultants, independent contractors,
distributors, and advisors of the Company and its subsidiaries.
5
<PAGE> 8
The aggregate number of shares of stock reserved and available for
Incentive Stock Options shall initially be 250,000 shares. The aggregate number
of shares of Stock reserved and available for Awards other than Incentive Stock
Options or which may be used to provide a basis of measurement or valuation of
an Award (such as a SAR or Performance Unit Award) shall initially be 150,000
shares, automatically to increase annually, effective as of the first day of
each fiscal year, commencing with the fiscal year which begins in calendar 1998
(i.e. February 1, 1998), by a number of Shares equal to two percent ( 2%) of the
number of outstanding Shares as of the last day of the preceding fiscal year.
The Company is required to reserve and keep available at all times a sufficient
number of shares of its Common Stock to satisfy the requirements of Awards
granted under the Plan (which shares may be authorized but unissued or treasury
shares). Proceeds from the sale of shares pursuant to the Plan will be used for
general corporate purposes of the Company. The market value of the Common Stock,
as of April 22, 1997, was $7.50 per share.
The Incentive Plan is administered by a committee (the "Committee")
appointed by the Board consisting of at least two non-employee directors. The
committee has the exclusive authority to administer and interpret the Incentive
Plan, including the power and discretion to designate participants, determine
the basis of their participation, the types of awards to be granted and the
price, timing, terms and duration of awards. At May 6, 1997, the Company had
approximately 225 employees eligible to participate in the plan.
Awards under the Incentive Plan may consist of Incentive Stock Options,
Non-Qualified Options, Stock Appreciation Rights, Performance Units, Restricted
Stock Awards and other Stock-Reference Awards. A stock option is the right to
purchase shares of the Company's Common Stock at a set price specified in the
award agreement. An Incentive Stock Option ("ISO") is an option that is intended
to satisfy the requirements specified in Section 422 of the Internal Revenue
Code. Under the Code, ISOs may only be granted to employees. A Non-Qualified
Option is any stock option other than an Incentive Stock Options. A Stock
Appreciation Right is a right granted to a person to receive the appreciation in
the value of a share of Common Stock over a certain period of time. Under the
Incentive Plan, the Company may pay that amount in cash, or in Common Stock, or
in a combination of both. A Performance Unit is a right which may be granted to
a participant to receive cash, Common Stock, awards and/or other property, or
any combination thereof, pursuant to the Incentive Plan. Under the Incentive
Plan, the Committee may award Performance Units that become payable to or
exercisable by a participant upon the achievement of specific performance goals
and other terms or conditions established by the Committee at the date of grant.
An award of Restricted Stock is a grant of Common Stock or an offer to sell
shares of Common Stock to a participant subject to restrictions on sale of the
shares of Common Stock or other transfer by the participant as may be determined
by the Committee. The Incentive Plan permits the Committee to grant or sell
Restricted Stock to participants with certain vesting restrictions or a rise of
forfeiture for a period to be determined by the Committee as of the date of the
award. A Stock-Reference Award is an award payable in valued in whole or in part
by reference to, or otherwise based on or related to shares of Common Stock of
the Company.
The Incentive Plan grants the Committee discretion to determine when
options or other awards will become exercisable and the vesting period of
options and awards. Vesting of options and other exercisable rights granted
under the Incentive Plan shall be accelerated, and restrictions on outstanding
awards shall lapse, upon a change in control of the company as defined in the
Incentive Plan.
6
<PAGE> 9
No right or interest of a participant in any award made under the
Incentive Plan may be sold, assigned or otherwise transferred other than by will
or the laws of descent and distribution, with limited exceptions as provided by
applicable law.
In the event that the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company, or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization or reclassification, or in the event of
a stock split, combination of shares or dividends payable in capital stock,
automatic adjustments shall be maintained as before the occurrence of such
event.
With the approval of the Board, the Committee may terminate, amend or
modify the Incentive Plan. However, without approval of the stockholders of the
Company (if required in accordance with the Code, the Securities Exchange Act of
1934, the rules and regulations thereunder or other applicable law and rules),
no such termination, amendment or modification may materially increase the total
number of shares of Common Stock that may be issued under the Incentive Plan,
materially modify the eligibility requirements for participation in the
Incentive Plan or materially increase the total number of shares of Common Stock
that may be issued under the Incentive Plan, materially modify the eligibility
requirements for participation in the Incentive Plan or materially increase the
benefits accruing to participant under the Incentive Plan. Unless terminated
sooner, the Incentive Plan shall expire on March 6, 2007.
Awards granted under the Incentive Plan have varying federal income tax
consequences, summarized below:
Incentive Stock Options. An employee is not taxed for regular
income tax purposes either at the time of the award or at the time of exercise
of the option. The difference between the exercise price and the fair market
value of the stock at the time of exercise, however, generally constitutes
income for alternative minimum tax purposes. Generally, the Company is not
entitled to a deduction with respect to the grant or exercise of an ISO. If an
employee holds the stock acquired upon exercise of an ISO for at least two years
from the date of the grant and at least one year following the date of exercise,
the difference between the amount paid for the stock and the subsequent sales
price is treated as long-term capital gain or loss. If these holding period
requirements are not satisfied, the employee is generally taxed, at ordinary
income tax rates, on the difference between the exercise price and the fair
market value of the stock as of the date of exercise and the Company is then
entitled to a corresponding deduction.
Non-Qualified Stock Options. The grant of a Non-Qualified
Stock Option typically does not produce any taxable income for the participant,
and the Company is not entitled to a deduction at that time. Upon exercise of a
Non-Qualified Stock Option, the optionee normally will recognize taxable
ordinary income equal to the excess of the stock's fair market value on the date
of exercise over the option exercise price. Subject to the requirements of
reasonableness, and the satisfaction of any reporting obligations, the Company
will generally be entitled to a business expense deduction equal to the taxable
ordinary income recognized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term or short-term depending on whether the stock was held for more
than one year.
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<PAGE> 10
Stock Appreciation Rights. If a participant receives the
appreciation inherent in a Stock Appreciation Right award in cash, the cash is
compensation income, taxable to the participant. If the participant receives the
appreciation in the form of Common Stock, the stock received is taxable to the
participant to the extent of its fair market value. The Company generally
receives a deduction in the amount equal to the amount taxable to the
participant in the year in which the participant recognizes taxable income.
Performance Units. A participant who has been awarded
Performance Units does not recognize taxable income until payment is received.
When paid, the participant will recognize income equal to the amount of cash and
the fair market value of any Common Stock issued to the participant. The Company
will generally have a corresponding deduction.
Restricted Stock. A participant receiving a Restricted Stock
Award will not realize any federal tax consequences at the time the award is
granted. However, a participant who is granted Restricted Stock may make an
election under Section 83(b) of the Code, within thirty (30) days of the grant,
to have the grant taxed as compensation income at the date of grant, with the
result that any future appreciation or depreciation in the value of the shares
of Common Stock granted will be taxed as a capital gain or loss upon a
subsequent sale of the Common Stock. If a Section 83 (b) election is made and
the Common Stock is subsequently forfeited pursuant to the terms of the award, a
loss is not allowed. If a participant does not make a Section 83(b) election,
then the grant will be taxed as compensation income at the fair market value on
the date the restrictions lapse. The Company generally will be entitled to a
corresponding deduction in the same year the participant recognizes income for
federal income tax purposes.
Stock Reference Awards. No taxable income is recognized by a
participant upon the grant of a Stock Reference Award. If payments on Stock
Reference Awards are made in cash, the participant will have ordinary income at
the time of payment in the amount of the cash paid. If payments are made in
shares of Common Stock, the participant will recognize as ordinary income the
fair market value of the shares of Common Stock received. The Company generally
will be intitled to a corresponding deduction equal to the compensation income
of the participant.
Issuances of Options Under the 1988 Stock Option Plan
The following table sets forth certain information regarding options
received under the 1988 Stock Option Plan from its inception through January 31,
1997 by (i) the Company's executive officers named in the summary compensation
table below; (ii) all current executive officers as a group; (iii) all current
directors who are not executive officers as a group; (iv) each nominee for
election as a director; (v) each associate of any of such directors, executive
officers or nominees; (vi) each other person who has received 5% or more of such
options; and (vii) all employees as a group.
8
<PAGE> 11
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Name of Individual Aggregate Shares of Common Stock
or Group Subject to Options Granted
Through January 31, 1997
- --------------------------------------------------------------------------------------
<S> <C>
Gregory J. Petras 183,300
- --------------------------------------------------------------------------------------
John P. Delmatoff -
- --------------------------------------------------------------------------------------
Terri S. Langhans -
- --------------------------------------------------------------------------------------
A. Neal Westermeyer 184,000
- --------------------------------------------------------------------------------------
Ian R. Lazarus 82,500
- --------------------------------------------------------------------------------------
Gardiner S. Dutton 25,400
- --------------------------------------------------------------------------------------
James W. Myers 29,000
- --------------------------------------------------------------------------------------
Steve D. Wood, Ph.D. 47,400
- --------------------------------------------------------------------------------------
W. Cal McGraw 10,000
- --------------------------------------------------------------------------------------
Mark E. Liebner -
- --------------------------------------------------------------------------------------
All Current Directors who are not Executive Officers 111,800
as a Group
- --------------------------------------------------------------------------------------
All Employees as a Group 1,281,850
- --------------------------------------------------------------------------------------
</TABLE>
The amounts that would be receivable by the individuals or groups named in the
table above under the 1997 Equity Incentive Plan as proposed are not
determinable at this time, since no Awards under such plan have been made.
F. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information, as of April 22, 1997,
concerning the equity securities of the Company owned by each director of the
Company, the executive officers of the Company named in the summary compensation
tables below, all directors and executive officers as a group, and by each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding equity securities of the Company:
A. BENEFICIAL OWNERS HOLDING MORE THAN 5% OF THE COMPANY'S STOCK
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AMOUNT & NATURE PERCENT
NAME OF BENEFICIAL OWNER CLASS OF BENEFICIAL OWNERSHIP(3) OF
CLASS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Edward B. Diethrich, M.D. and Common 1,112,766 16.3%
Gloria D. Diethrich(4)
- --------------------------------------------------------------------------------------------------------------------
Gregory J. Petras(2),(5) Common 789,514 11.6%
- --------------------------------------------------------------------------------------------------------------------
Bisgrove Financial Management LP(1) Common 500,000 7.3%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AMOUNT & NATURE PERCENT
NAME OF BENEFICIAL OWNER CLASS OF BENEFICIAL OWNERSHIP(3) OF
CLASS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rural/Metro Corporation(10) Common 370,370 5.4%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
B. BENEFICIAL OWNERS WHO ARE EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT & NATURE PERCENT
NAME OF BENEFICIAL OWNER(2) POSITION CLASS OF BENEFICIAL OWNERSHIP(3) OF
CLASS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gregory J. Petras(5) Chairman/CEO Common 789,514 11.6%
- --------------------------------------------------------------------------------------------------------------------------
John P. Delmatoff CEO-FSG/ Common 195,184 2.9%
Director
- --------------------------------------------------------------------------------------------------------------------------
Terri S. Langhans COO-FSG Common 195,184 2.9%
- --------------------------------------------------------------------------------------------------------------------------
W. Cal McGraw(11) Director Common 184,508 2.7%
- --------------------------------------------------------------------------------------------------------------------------
A. Neal Westermeyer(12) COO Common 181,000 2.6%
- --------------------------------------------------------------------------------------------------------------------------
Ian R. Lazarus(13) President-Call Common 97,500 1.4%
Center
- --------------------------------------------------------------------------------------------------------------------------
Gardiner S. Dutton(6) Director Common 81,000 1.2%
- --------------------------------------------------------------------------------------------------------------------------
James W. Myers(7) Director Common 29,000 .4%
- --------------------------------------------------------------------------------------------------------------------------
Steve D. Wood, Ph.D(8) Director Common 57,000 0.8%
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS AND DIRECTORS AS A GROUP(9) 1,809,890 26.5%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The address for Bisgrove Financial Management Limited Partnership
is US West Building, 5090 N. 40th Street, Phoenix, Arizona.
(2) The address for all executive officers and directors is c/o
National Health Enhancement Systems, Inc., Suite 1700, 3200 North Central
Avenue, Phoenix, Arizona 85012.
(3) Includes shares under options exercisable on May 6, 1996, and
options which will become exercisable within 60 days thereafter.
10
<PAGE> 13
(4) The shares beneficially held by Dr. and Mrs. Diethrich are held under
a Revocable Trust Agreement dated May 8, 1974, the trustees of which are Dr. and
Mrs. Diethrich. This trust has sole voting and investment power and also holds
all of Dr. Diethrich's stock in The Arizona Heart Institute. The address for Dr.
and Mrs. Diethrich is Edward B. Diethrich, M.D. and Gloria B. Diethrich, P.O.
Box 10000, Phoenix, Arizona 85064. On October 31, 1996, Dr. and Mrs. Diethrich
transferred 140,000 shares to the Diethrich 1996 Charitable Remainder Unitrust.
(5) The shares listed include 173,300 of Common Stock which Mr. Petras
has the right to acquire under options exercisable within 60 days.
(6) The shares listed include 25,400 shares of Common Stock which Mr.
Dutton has the right to acquire under options exercisable within 60 days.
(7) The shares listed include 29,000 shares of Common Stock which Mr.
Myers has the right to acquire under options exercisable within 60 days.
(8) The shares listed include 46,000 shares of Common Stock which Dr.
Wood has the right to acquire under options exercisable within 60 days.
(9) This group includes the seven (7) directors of the Company and three
(3) executive officers who are not also directors, a group totaling ten (10)
persons.
(10) The address for Rural/Metro Corporation is 8401 East Indian School
Road, Scottsdale, Arizona 85251.
(11) The shares listed include 10,000 shares of common stock which Mr.
McGraw has the right to acquire under options exercisable within 60 days.
(12) The shares listed include 184,000 shares of common stock which Mr.
Westermeyer has the right to acquire under options exercisable within 60 days.
(13) The shares listed include 77,500 shares of common stock which Mr.
Lazarus has the right to acquire under options exercisable within 60 days.
F. EXECUTIVE OFFICERS
Officers are elected annually by the Board of Directors and serve until
removed by the Board of Directors (with or without cause), resignation,
disqualification or until their successors are elected and qualify.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and any exchange on which the
shares trade. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1997,
all filings required by its officers, directors and greater than ten-percent
beneficial owners were timely filed, except for Form 3 for Earl Bray, which was
subsequently filed on April 17, 1997.
11
<PAGE> 14
1. Identification and Experience
Information regarding the names, ages, terms, and positions with the
Company and business experience of the current executive officers and
significant employees is set forth as follows:
NAME AGE POSITION
- ---- --- --------
Earl E. Bray 37 Chief Financial Officer
Richard W. Hill 52 Senior Vice President -
Information Systems
Ian R. Lazarus 37 President of the Medical Call
Center Division
Terri S. Langhans 41 President and Chief
Executive Officer of First
Strategic Group (a subsidiary
of the Company)
Gregory J. Petras 47 Chairman, President and Chief
Executive Officer
A. Neal Westermeyer 53 Executive Vice President and
Chief Operating Officer
Jeffrey T. Zywicki 40 Senior Vice President,
Treasurer and Secretary
Earl E. Bray. Mr. Bray, a certified public accountant, commenced
employment with the Company in January 1997 and serves as the Company's Chief
Financial Officer. Before joining the Company, Mr. Bray was Chief Financial
Officer of a wholly-owned for profit subsidiary of Blue Cross Blue Shield of
Arizona. From October 1993 through January 1996, he was Assistant Director of
the Arizona Health Care Cost Containment System. Prior to October 1993, Mr. Bray
was Senior manager with Ernst & Young LLP, where he served for over 10 years.
Richard W. Hill. Mr. Hill commenced employment with the Company in June
1989 as Senior Vice President of Information Systems. Prior to his employment
with the Company, Mr. Hill was a Senior Manager in the management consulting
division of Arthur Andersen & Co., a position he had held since 1983, where he
was responsible for project management of both large and small software
application systems. Prior to that date, Mr. Hill held various positions since
1973 with Arthur Andersen & Co. as manager, staff consultant, and programmer.
Ian R. Lazarus. Mr. Lazarus joined the Company in November 1989 as vice
president and product manager for the Company's various health management
systems, and he was recently promoted to lead the Company's national Medical
Call Center for personal health management services. Before coming to National
Health, Mr. Lazarus completed a six-year career with Voluntary Hospitals of
America, Inc., (VHA). Mr. Lazarus holds a Master of Health Services
Administration degree from the University of Michigan and is a Diplomat of the
American College of Healthcare Executives.
12
<PAGE> 15
Terri S. Langhans. Ms. Langhans joined the Company as President and
Chief Operating Officer of First Strategic Group, Ltd., a Company subsidiary, on
April 30, 1993. On July 1, 1996, she was named Chief Executive Officer. Prior to
the FSG merger with the Company, Ms. Langhans served as Senior Vice President
and was half-owner of FSG, managing account teams in developing marketing and
advertising strategies. Prior to joining FSG, Ms. Langhans served as
Vice-President, Client Services, and was a principal, of Delmatoff, Gerow,
Morris, Langhans, Inc for four years. Prior to that, Ms. Langhans directed the
marketing and public relations activities of a 350-bed regional hospital and
managed a variety of product-line strategies.
Gregory J. Petras. Mr. Petras has served as the Chairman of the Company
since March 1996 and also served as President and a Director of the Company
since July 1983 and Chief Executive Officer since January 31, 1986. He served as
the Company's Treasurer from December 1984 to December 1986. From April 1982
until December 1985, Mr. Petras was also Executive Vice-President of The Arizona
Heart Institute, Ltd. In such capacity, Mr. Petras was responsible for planning,
marketing, advertising, program development and general operations at the
Institute. Prior to joining the Arizona Heart Institute, Ltd., Mr. Petras was a
manager in the healthcare consulting division of Arthur Andersen & Co., located
in Phoenix, Arizona.
A. Neal Westermeyer. Mr. Westermeyer commenced employment with the
Company in June 1993 and serves as the Company's Chief Operating Officer. Prior
to his employment with the Company, from January 1992 until June 1993, Mr.
Westermeyer served as Senior Vice President of Sales and Marketing for
Integrated Health Services, Inc., a subacute care company which owned, leased or
managed long term care facilities. Prior to joining Integrated Health Services,
Mr. Westermeyer spent six years as Vice President of Marketing at Humana, Inc.,
a publicly held integrated healthcare company.
Jeffrey T. Zywicki. Mr. Zywicki commenced employment with the Company
in November 1986 and serves as the Company's, Senior Vice President of Corporate
Development, Treasurer and Secretary. Prior to his employment with the Company,
Mr. Zywicki, a certified public accountant, served as the Controller of Tri-City
Properties, Inc., a position he had held since October 1985, and as Assistant
Controller for Del E. Webb Hotels, a position he had held since July 1984. Both
organizations were affiliated with Del E. Webb Corporation, a real estate and
construction company headquartered in Phoenix, Arizona. Prior to July 1984, Mr.
Zywicki was employed by the public accounting firm of Ernst Young, LLP (formerly
Arthur Young & Company).
a. The Summary Compensation Table
The following table describes all annual compensation paid during the
most recent fiscal year to the Chief Executive Officer and four other most
highly compensated executive officers of the Company including any long term
compensation awarded or paid out to such individuals during that period.
13
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
-----------------------------------------------------------------------------------------
Name and principal position Year Awards Payouts
Other ---------------------------------- All other
Salary ($) Bonus ($) Annual Securities LTIP compen-
Compen- Underlying payouts sation
sation($) Options/SARs ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregory J. Petras 1997 $208,770 - - 10,000 - -
Chairman & CEO 1996 $170,000 - - 30,000 - -
1995 $169,676 - - 15,000 - -
A. Neal Westermeyer 1997 $174,935 - - 10,000 - -
Chief Operating 1996 $162,825 - - 25,000 - -
Officer 1995 $154,462 - - 20,000 - -
Ian R. Lazarus 1997 $131,102 - - 5,000 - -
President - 1996 $120,679 - - 20,000 - -
Call Center 1995 $96,308 - - 15,000 - -
John P. Delmatoff(1) 1997 $137,762 - - - - -
Chief Executive 1996 $143,359 - - - - -
Officer Of FSG 1995 $126,538 $6,655 - - - -
Terri S. Langhans 1997 $144,200 - - - - -
President And 1996 $148,130 - - - - -
Chief Operating 1995 $126,538 $6,655 - - - -
Officer of FSG
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As of April 11, 1997, Mr. Delmatoff resigned and became a consultant to the
Company and Ms. Langhans was named Chief Executive Officer of FSG.
b. The Options/SAR Grants Table
The following table describes the terms of all grants of stock options to the
executive officers named above during the last fiscal year.
14
<PAGE> 17
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Underlying total options/ Exercise or Expiration
Name Options/SARs SARs base price date
Granted (1) granted to ($/Sh)
employees in
fiscal year
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gregory J. Petras 10,000 6% $8.80 3/12/06
A. Neal Westermeyer 10,000 6% $8.00 3/12/06
Ian R. Lazarus 5,000 3% $8.00 3/12/06
John P. Delmatoff(2) - - - -
Terri S. Langhans(2) - - - -
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) One Hundred percent (100%) of the options granted vest on 1/31/98
provided that the individual is employed by the Company on that date.
(2) As of April 11, 1997, Mr. Delmatoff resigned and became a consultant to
the Company and Ms. Langhans was named Chief Executive Officer of FSG.
c. Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value Table
The following table describes (1) any exercises of options by
the chief executive officer and chief operating officer during the last fiscal
year and (2) the value of outstanding options held by such individuals at
January 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Number of unexercised Value of unexercised
options/SARs at in-the-money options/SARs at
Shares fiscal year-end (#) fiscal year-end ($)
Name acquired on Value ---------------------- --------------------------
exercise (#) Realized ($) Exercisable/ Exercisable/
unexercisable unexercisable
(d) (e)
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gregory J. Petras N/A N/A 173,300/ $1,953,605/
10,000 $ 32,000
A. Neal Westermeyer 11,000 $89,750 174,000/ $ 1,863,531/
10,000 $ 40,000
Ian R. Lazarus N/A N/A 77,500/ $ 861,797/
5,000 $ 20,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
3. Employment Contracts
The Company entered into an Employment Agreement and a Key Executive
Employment and Severance Agreement with Gregory J. Petras on October 15, 1992
(the "Employment Agreement"). Under the terms of the Employment Agreement, Mr.
Petras is to be paid a salary of $150,000 per year, to be reviewed by the Board
of Directors no less than annually, and is entitled to participate in
performance-based bonus plans as and when provided to the Company management
team. Under the terms of the Employment Agreement, Mr. Petras is entitled to
Termination Payments, as defined in the Employment Agreements, if his employment
with the Company is terminated after a change of control of the Company. The
maximum liability of the Company under these Employment Agreements in the event
of a change of control would be the sum of all accrued benefits of Mr. Petras,
continued insurance coverage, out-placement services, relocation expenses,
waiver of rights to repurchase unvested stock options and an amount equal to two
(2) times his annual salary at the time of such termination, be paid in
accordance with the Company's usual payroll schedule over a two year period.
The Employment Agreement also provides for: (1) certain registration
rights of shares of common stock of the Company owned by Mr. Petras upon the
Company's registration of any of its shares of common stock other than a
registration statement filed solely with respect to shares of common stock sold
to employees under any employee stock or stock option plan, and (2) use and
disclosure obligations relating to confidential information of the Company.
The Employment Agreement includes a covenant not to compete by Mr.
Petras. Mr. Petras agrees that upon any termination of his employment with the
Company, he will not act in a similar capacity for any business which competes
to a substantial degree with the Company in the United States, or engage in any
activity involving direct, material competition in the United States with the
Company's then existing products or services, or those planned for release by
the Company within the following twelve (12) months, for a one (1) year period,
or such longer period during which Mr. Petras accepts severance payments from
the Company. Any violation of this covenant not to compete by Mr. Petras shall
automatically terminate the Company's obligations to make any severance payments
to Mr. Petras.
H. INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Auditors") was the principal public accounting
firm utilized by the Company for the fiscal year ended January 31, 1997. It is
anticipated that a representative of the Auditors will attend the Annual Meeting
for the purpose of responding to appropriate questions. At the meeting, a
representative of the Auditors will be afforded an opportunity to make a
statement if the Auditors so desire. The Company intends to engage the Auditors
for the current fiscal year.
16
<PAGE> 19
I. OTHER MATTERS
As of the date of this Proxy Statement, management of the Company knows
of no business that will be presented for consideration at the meeting other
than that which has been referred to above. As to other business, if any, that
may properly come before the meeting, it is intended that proxies in the
enclosed form will be voted in respect thereof, in accordance with the judgment
of the persons voting the proxies.
Board of Directors
Phoenix, Arizona
May 6, 1996
17
<PAGE> 20
EXHIBIT A
NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
1997 EQUITY INCENTIVE PLAN
ARTICLE 1: PURPOSE
1.1 General. The purpose of the National Health Enhancement Systems,
Inc. 1997 Equity Incentive Plan (the "Plan") is to promote the interests of
National Health Enhancement Systems, Inc. (the "Company"), by enabling the
Company to motivate, attract, and retain the services of persons upon whose
judgment, efforts, and contributions the success of the Company's business
depends. The plan is further intended to align the personal interests of such
persons with the interests of shareholders of the Company through equity
participation in the Company's growth and success. Capitalized terms not
otherwise defined in the text are defined in Article 16.
ARTICLE 2: EFFECTIVE DATE; TERM
2.1 Effective Date. The Plan shall become effective on March 6, 1997
(the "Effective Date").
2.2 Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval at the first annual meeting of
shareholders of the Company held after the Effective Date. Any Awards granted
under the Plan prior to shareholder approval are effective when made (unless the
Committee specifies otherwise at the time of grant), but no Award may be
exercised or settled and no restrictions relating to any Award may lapse before
shareholder approval. If the shareholders fail to approve the Plan, any Award
previously made shall be automatically canceled without any further act.
2.3 Term. This Plan shall terminate on the tenth (10th) anniversary of
the Effective Date, subject to Article 14.
ARTICLE 3: SHARES SUBJECT TO THE PLAN
3.1 Number of Incentive Stock Options; Number of Shares. The aggregate
number of shares of Stock reserved and available for Incentive Stock Options
(but no other purpose) shall initially be 250,000 shares.
3.2 Number of Shares. The aggregate number of shares of Stock reserved
and available for Awards other than Incentive Stock Options or which may be used
to provide a basis of measurement or valuation of an Award (such as an SAR or
Performance Unit Award) shall initially be 150,000 shares. Such number of Shares
shall increase annually, effective as of the first day of each fiscal year,
commencing with the fiscal year which begins in calendar 1998 (i.e.
18
<PAGE> 21
February 1, 1998), by a number of Shares equal to two percent (2%) of the number
of outstanding Shares as of the last day of the preceding fiscal year.
3.3 Lapsed Awards. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan, in each case to the full extent available pursuant to the applicable
rules and interpretations of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
3.4 Payments in Stock. Any shares of Stock tendered to or withheld by
the Company in connection with payment for Stock purchased pursuant to the Plan
or withholding taxes thereon shall be added back to the aggregate number of
shares reserved and available for Awards under Section 3.1 or 3.2 of the Plan,
being the same Section from which the Stock so tendered or withheld was
originally authorized, provided, that such Awards shall be available only
pursuant to the applicable rules and interpretations of the Exchange Act.
3.5 Stock Distributed. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock,
or Stock purchased on the open market.
ARTICLE 4: ELIGIBILITY
4.1 General. Awards may be granted only to an individual who is an
officer, director or other employee (including employees who also are directors
or officers), consultant, independent contractor, distributor or adviser of the
Company or a Subsidiary, as determined by the Committee.
ARTICLE 5: ADMINISTRATION
5.1 Committee. The Plan shall be administered by a Committee of the
Board that is appointed by, and shall serve at the discretion of, the Board. The
Committee shall consist of two or more individuals each of whom is a member of
the Board who is a "Non-Employee Director," as such term is defined in Rule
16b-3(b)(3) promulgated under Section 16 of the Exchange Act or any successor
provision, except as may be otherwise permitted under Section 16 of the Exchange
Act and the regulations and rules promulgated thereunder.
5.2 Authority of Committee. The Committee has the exclusive power,
authority, and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
19
<PAGE> 22
(c) Determine the number of Awards to be granted and the
number of shares of Stock subject to an Award;
(d) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(e) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award and accelerations or waivers thereof,
and any modification or amendment of any Award previously granted,
based in each case on such considerations as the Committee in its sole
discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(g) Decide all other matters that must be determined in
connection with an Award;
(h) Establish, adopt, or revise any rules and regulations as
it may deem necessary or advisable to administer the Plan;
(i) Interpret the Plan, any Award, and any Award Agreement in
its discretion; and
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan.
5.3 Decisions Binding. All decisions, interpretations, and
determinations by the Committee with respect to the Plan, any Award, and any
Award Agreement are final, binding, and conclusive on all parties.
ARTICLE 6: STOCK OPTIONS
6.1 General. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
under an Option shall be determined by the Committee, provided that
such exercise price shall not be less than one hundred percent (100%)
of such Fair Market Value in the case of an Incentive Stock Option.
20
<PAGE> 23
(b) Payment. Payment for Stock issued upon exercise of an
Option shall be made in accordance with Article 11 of the Plan.
(c) Time and Conditions of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the expiration
date of each Option and the performance or other conditions, if any,
that must be satisfied before all or part of an Option may be
exercised.
(d) Evidence of Option. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions as may be specified by
the Committee.
6.2 Incentive Stock Options. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) Employees Only. Incentive Stock Options may only be
granted to employees (including officers and directors who are also
employees) of the Company or a Subsidiary.
(b) Exercise Price. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option may not be less than the Fair Market Value as of
the date of the grant.
(c) Exercise. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(d) Individual Dollar Limitation. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) Ten Percent Owners. An Incentive Stock Option may be
granted to a Ten Percent Owner, provided that at the time such option
is granted the exercise price per share of Stock shall not be less than
110% of the Fair Market Value and such option by its terms is not
exercisable after the expiration of five (5) years from the date of its
grant.
(f) Expiration of Incentive Stock Options. No Award of an
Incentive Stock Option may be made pursuant to this Plan after the
expiration of ten (10) years from the Effective Date.
(g) Right to Exercise. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant.
21
<PAGE> 24
6.3 Termination of Participant. Notwithstanding the exercise periods
set forth in any Award Agreement, Options shall be subject to the following:
(a) An Option shall lapse ten (10) years after it is granted,
unless an earlier time is set in the Award Agreement.
(b) If a Participant's employment is terminated due to (i)
Disability, (ii) Retirement, or (iii) for any other reason other than
for Cause, such Participant may exercise his or her Incentive Stock
Options only to the extent that such Incentive Stock Options would have
been exercisable on the Termination Date; provided, that such exercise
is made prior to the earlier of (i) the expiration of three (3) months
(six (6) months in the case of Disability) after the Termination Date
or (ii) the expiration date of the Option set forth in the Award
Agreement. If a Participant's employment is terminated due to Cause,
the Participant's Incentive Stock Options shall automatically lapse and
not be exercisable by the Participant, whether or not such Options were
vested.
(c) If a Participant's employment, contractual or other
relationship with the Company is terminated due to (i) Disability, (ii)
Retirement, or (iii) for any other reason other than for Cause, such
Participant may exercise his or her Non-Qualified Stock Options, only
to the extent that such Options would have been exercisable on the
Termination Date; provided, that such exercise is made within the later
of six (6) months after the Termination Date or the applicable time
period, if any, for exercise set forth in the Award Agreement for such
a termination. If a Participant's employment, contractual or other
relationship is terminated due to Cause, the Participant's
Non-Qualified Stock Options shall automatically lapse and not be
exercisable by the Participant, whether or not such Options were
vested.
(d) If a Participant dies before his or her Options lapse
pursuant to this Section , then the Participant's Options may be
exercised, only to the extent that such Options would have been
exercisable on the date of the Participant's death; provided that such
exercise is made prior to the earlier of (i) the first anniversary of
such Participant's death or (ii) the expiration date of the Option set
forth in the Award Agreement. Upon the Participant's death, any
exercisable Options may be exercised by the Participant's legal
representative or representatives.
ARTICLE 7: STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) Right to Payment. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
22
<PAGE> 25
(1) The Fair Market Value of one share of Stock on
the date of exercise; over
(2) The grant price of the SAR as determined by the
Committee, which shall not be less than the Fair Market Value
of one share of Stock on the date of grant in the case of any
SAR related to any Incentive Stock Option.
(b) Other Terms. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 8: PERFORMANCE UNITS
8.1 Grant of Performance Units. The Committee is authorized to grant
Performance Units to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Units granted to each Participant. All
Awards of Performance Units shall be evidenced by an Award Agreement.
8.2 Right Under Performance Units. A grant of Performance Units gives
the Participant rights, valued as determined by the Committee, and payable to,
or exercisable by, the Participant to whom the Performance Units are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Units in its discretion which, depending on the extent to
which they are met, will determine the amount and value of cash, Stock, Awards,
and/or other property that will be paid to the Participant.
8.3 Other Terms. Performance Units may be payable in cash, Stock, or
other Awards or property, or any combination thereof, and have such other terms
and conditions as determined by the Committee and reflected in the Award
Agreement.
ARTICLE 9: RESTRICTED STOCK AWARDS
9.1 Restricted Stock Awards. The Committee is authorized to make Awards
of Restricted Stock to Participants either in the form of a grant of Stock or an
offer to sell Stock to a Participant, in such amounts and subject to such terms,
conditions and restrictions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by an Award Agreement.
9.2 Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, including without
limitation "vesting" or forfeiture
23
<PAGE> 26
restrictions, as the Committee may impose. These restrictions may lapse
separately or in combination at such times, under such circumstances, in such
installments, or otherwise, as the Committee determines at the time of the grant
of the Award or thereafter.
9.3 Forfeiture. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the Company;
provided, however, that the Committee may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in specified circumstances, and the Committee may in
other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock.
9.4 Payment and Certificates for Restricted Stock. If a Restricted
Stock Award provides for the purchase of Stock by a Participant, payment shall
be made pursuant to Article 11 of the Plan. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
ARTICLE 10: STOCK-REFERENCE AWARDS
10.1 Grant of Stock-Reference Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, other rights convertible or exchangeable into shares of Stock, and
awards valued by reference to book value of shares of Stock or the value of
securities of or the performance of specified divisions or Subsidiaries of the
Company. The Committee shall determine the terms and conditions of such Awards.
ARTICLE 11: PAYMENT FOR STOCK PURCHASES;
WITHHOLDING TAXES; RELOAD OPTIONS
11.1 Payment. Payment for Stock purchased pursuant to the Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Committee in an Award Agreement or otherwise in writing and where permitted by
law:
(a) by cancellation of indebtedness of the Company to the
Participant;
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(b) by surrender of Stock that either: (1) has been paid for
within the meaning of Rule 144 promulgated under the Securities Act; or
(2) was obtained by the Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee, secured by the Stock
purchased, and bearing interest at a rate sufficient to avoid
imputation of income under Sections 482 and 1274 of the Code; provided,
however, that Participants who are not employees of the Company shall
not be entitled to purchase Stock with a promissory note unless the
note is adequately secured by collateral other than the Stock;
provided, further, that the portion of the Purchase Price equal to the
par value of the Stock, if any, must be paid in cash;
(d) by waiver of compensation due or accrued to Participant
for services rendered;
(e) by tender of property acceptable to the Committee;
(f) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock then exists:
(1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (a "NASD Dealer")
whereby Participant irrevocably elects to exercise the Option
and to sell a portion of the Stock so purchased to pay for the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Stock to forward the Exercise
Price directly to the Company;
(2) through a "margin" commitment from Participant
and a NASD Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Stock so purchased to
the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of
such Stock to forward the exercise price directly to the
Company; or
(3) through any other "cashless exercise" procedure
approved by the Committee; or
(g) by any combination of the foregoing.
11.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under the Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
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11.3 Tax Withholding. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan. Whenever,
under the Plan, payments in satisfaction of Awards are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements. With respect to withholding required upon
any taxable event relating to the issuance of Stock under the Plan, Participants
may elect, subject to the Committee's approval and any rules or policies adopted
by the Committee from time to time, to satisfy the withholding requirement, in
whole or in part, by having the Company or any Subsidiary withhold shares of
Stock having a Fair Market Value on the date of withholding equal to the amount
to be withheld for tax purposes. The Committee may, at the time any Award is
granted, require that any and all applicable tax withholding requirements be
satisfied by the withholding of shares of Stock as set forth above.
11.4 Reload Options. Award Agreements may contain a provision pursuant
to which a Participant who pays all or a portion of the exercise price of an
Option or the tax required to be withheld pursuant to an exercise of an Option
by surrendering shares of Stock pursuant to Sections 11.1 or 11.3, respectively,
shall be automatically granted an Option for the purchase of Stock equal to the
number of shares surrendered (a "Reload Option"). The grant of the Reload Option
shall be effective on the date the Participant surrenders the shares of Stock in
respect of which the Reload Option is granted (the "Reload Date"). The Reload
Option shall have an exercise price equal to the Fair Market Value of the Stock
on the Reload Date, and shall have a term which is no longer, and which shall
lapse no later, than the original term of the underlying option. If stock
otherwise available under an Incentive Stock Option is withheld pursuant to
Section 11.3, any Reload Option granted in connection with the withholding shall
be treated as a new Incentive Stock Option, subject to the rules set forth in
Section 6.2.
ARTICLE 12: PROVISIONS APPLICABLE TO AWARDS
12.1 Stand-Alone, Tandem, and Substitute Awards. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. Awards granted in addition to or in tandem with other Awards may
be granted either at the same time as or at a different time from the grant of
such other Awards.
12.2 Exchange Provisions. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
12.3 Term of Award. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock
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Appreciation Right granted in tandem with the Incentive Stock Option exceed a
period of ten years from the date of its grant.
12.4 Form of Payment for Awards. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, other Awards, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
12.5 Limits on Transfer. No Incentive Stock Option shall be assignable
or transferable by a Participant other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
Section 414(p)(1)(A) of the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. For an Award other than an Award that
includes an Incentive Stock Option, Participants may assign or otherwise
transfer all or a portion of the rights represented by the Award to one or more
persons, corporations, partnerships or other entities, subject to such
restrictions, limitations, or conditions as the Committee deems to be
appropriate.
12.6 Stock Certificates. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules, and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
12.7 Market Standoff. In connection with any registration of the
Company's securities (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), upon request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, Participants shall not sell, make any short sale of, loan, grant any
option for the purchase of, pledge, hypothecate, or otherwise dispose of any
Stock without the prior written consent of the Company or such underwriters, as
the case may be, for such period of time (not to exceed one hundred eighty (180)
days from the date of the final prospectus used in such registration) as may be
requested by the Company or such managing underwriters. The certificates for the
Stock delivered under the Plan shall contain a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER INCLUDING A MARKET STANDOFF AGREEMENT BETWEEN
THE COMPANY AND THE ORIGINAL SHAREHOLDER THAT PROHIBITS SALE OR
TRANSFER OF SUCH SHARES FOR A PERIOD OF UP TO 180 DAYS FOLLOWING THE
DATE OF THE FINAL PROSPECTUS FOR A PUBLIC OFFERING OF THE
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ISSUER'S COMMON STOCK. A COPY OF THE AGREEMENT IS ON FILE WITH THE
SECRETARY OF THE ISSUER.
ARTICLE 13: CHANGES IN CAPITAL STRUCTURE
13.1 General. In the event a stock dividend is declared after the
Effective Date upon the Stock, the shares of Stock then subject to each Award
(and the number of shares subject thereto) shall be increased proportionately
without any change in the aggregate purchase price therefor. In the event that
after the Effective Date the Stock shall be changed into or exchanged for a
different number or class of shares of Stock, without receipt of material
consideration, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger, or consolidation, there shall be substituted for
each such share of Stock then subject to each Award the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.
13.2 Acceleration Upon a Change of Control. Simultaneously with the
effectiveness of a Change of Control, all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully exercisable and all restrictions on outstanding
Awards shall lapse. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Article 6, the excess
Options shall be deemed to be Non-Qualified Stock Options.
ARTICLE 14: AMENDMENT, MODIFICATION, AND TERMINATION
14.1 Amendment, Modification, and Termination. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend, or
modify the Plan. However, without approval of the shareholders of the Company
(if required in accordance with the Code, the Exchange Act, the rules and
regulations thereunder or other applicable law and rules), no such termination,
amendment, or modification may:
(a) Materially increase the total number of shares of Stock
that may be issued under the Plan, except as provided in Section 13.1;
(b) Materially modify the eligibility requirements for
participation in the Plan; or
(c) Materially increase the benefits accruing to Participants
under the Plan.
Any such termination, amendment, or modification shall comply with such other
requirements as may be required by the Code, by the rules under Section 16 of
the Exchange Act, by any national
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securities exchange or system on which the Stock is listed or reported, or by a
regulatory body having jurisdiction.
14.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 15: GENERAL PROVISIONS
15.1 No Rights to Awards. No Participant or employee shall have any
claim to be granted any Award under the Plan, and neither the Company nor the
Committee is obligated to treat Participants and employees uniformly.
15.2 No Stockholders Rights. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award. 15.3 No Right to
Employment. Nothing in the Plan or any Award Agreement shall interfere with or
limit in any way the right of the Company or any Subsidiary to terminate any
Participant's employment or other relationship with the Company at any time, nor
confer upon any Participant any right to continue in the employment or any other
relationship of the Company or any Subsidiary.
15.3 No Right to Employment. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment or other relationship
with the Company at any time, nor confer upon any Participant any right to
continue in the employment or any other relationship of the Company or any
Subsidiary.
15.4 Unfunded Status of Awards. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Subsidiary.
15.5 Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
15.6 Expenses. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
15.7 Titles and Headings. The titles and headings of the Articles and
Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
control.
15.8 Fractional Shares. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
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15.9 Securities Law Compliance. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or any Award Agreement or any action by the Committee
fails to so comply, it shall be void to the extent permitted by law and voidable
as deemed advisable by the Committee.
15.10 Government and Other Regulations. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act, any of the shares of Stock paid under the
Plan. If the shares of Stock paid under the Plan may in certain circumstances be
exempt from registration under the Securities Act, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
15.11 Governing Law. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Delaware.
15.12 Foreign Jurisdictions. The following additional provisions shall
apply to Awards and administration of the Plan in jurisdictions other than the
United States:
(a) The Committee shall have full power and authority to
establish a set of rules ("sub-plan rules") applicable to options granted in any
particular jurisdiction for the purpose of permitting options granted pursuant
to such sub-plan rules in that jurisdiction to qualify for favorable local tax
treatment. Such sub-plan rules, which may be more restrictive than the
provisions of the Plan which would otherwise apply, shall be applicable only
with respect to options granted to optionees in the jurisdiction covered by any
such sub-plan rules. Without limiting the generality of the foregoing, such
sub-plan rules may specify more restrictive eligibility requirements than
otherwise specified in the Plan, may prescribe a specific vesting schedule, may
prescribe a shorter option term than otherwise permitted under the Plan, or may
specify a higher minimum option price than otherwise set forth in the Plan.
Shares issued pursuant to such options shall nonetheless be counted against the
maximum number of shares specified in the Plan and such options and shares shall
otherwise be governed by the provisions of this Plan and the instrument
evidencing such option, except as amended pursuant to the relevant sub-plan
rules.
(b) The Committee may adopt rules or procedures relating to
the operation and administration of the Plan in non-United States jurisdictions
to accommodate the specific requirements of local laws and procedures. Without
limiting the generality of the foregoing, the Committee is specifically
authorized to adopt rules and procedures regarding conversion of local currency,
withholding procedures and handling of stock certificates which vary with local
requirements.
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ARTICLE 16: DEFINITIONS
16.1 Definitions. The following words and phrases shall have the
following meanings for purposes of this Plan:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, or Other Stock-Based
Award, or any other right or interest relating to Stock, cash or
property, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) conviction of any crime involving fraud
or gross misconduct, (ii) noncompliance with reasonable directives of
the Board or its designees, or (iii) violation of Company rules,
policies or procedures or of the Plan or any applicable Award
Agreement.
(e) "Change of Control" means and includes each of the
following:
(1) Any transaction or series of transactions,
whereby any person (as that term is used in Section 13 and
14(d)(2) of the Exchange Act), excluding affiliates of the
Company as of the Effective Date, is or becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange
Act) directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the
Company's then outstanding securities;
(2) Any merger, consolidation, or liquidation of the
Company in which the Company is not the continuing or
surviving corporation or pursuant to which Stock would be
converted into cash, securities, or other property, other than
a merger or consolidation with a wholly owned Subsidiary, a
reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in
the shareholders of the Company and all then outstanding
Awards are assumed by the successor corporation, which
assumption shall be binding on all Participants.
(3) The sale, transfer, or other disposition of all
or substantially all of the assets of the Company.
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(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee of the Board described in
Article 5.
(h) "Disability" means the following: A Participant shall be
disabled if he or she is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which can be
expected to last for a continuous period of not less than 12 months.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant's
conditions.
(i) "Fair Market Value" means with respect to Stock or any
other property, the fair market value of such Stock or other property
determined by such methods or procedures as may be established from
time to time by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Stock as of any date shall be the
mean between the bid and asked quotations for the Stock on that date as
reported by the National Association of Securities Dealers Automated
Quotation System (NASDAQ) or, if there are no bid or asked quotations
on such date, the mean between the bid and asked quotations on the next
preceding date for which quotations are available. If the Stock is
subsequently listed and traded upon a recognized securities exchange or
shall be quoted on a recognized national market system, the Fair Market
Value shall be the closing price on such date or, if no closing price
is so reported for that date, the closing price on the next preceding
date for which a closing price was reported.
(j) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(k) "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
(l) "Option" means a right granted to a Participant under
Article 6 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(m) "Participant" means a person who, as an officer, employee,
consultant, independent contractor, or adviser of the Company or any
Subsidiary, has been granted an Award under the Plan.
(n) "Performance Unit" means a right granted to a Participant
under Article 8 to receive cash, Stock, or other Awards.
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(o) "Plan" means the National Health Enhancement Systems, Inc.
1997 Equity Incentive Plan, as amended from time to time.
(p) "Restricted Stock Award" means Stock granted to a
Participant or offered for sale to a Participant under Article 9.
(q) "Retirement" means a Participant's termination of
employment with the Company after attaining any normal or early
retirement age specified in any pension, profit sharing, or other
retirement program sponsored by the Company, if any.
(r) "Securities Act" means the Securities Act of 1933, as
amended.
(s) "Stock" means the common stock of the Company and such
other securities of the Company that may be substituted for Stock
pursuant to Article 13.
(t) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 7 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 7.
(u) "Stock-Reference Award" means a right, granted to a
Participant under Article 10.
(v) "Subsidiary" means any corporation of which a majority of
the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
(w) "Ten Percent Owner" means any individual who, at the date
of grant of an Incentive Stock Option, owns stock possessing more than
ten percent of the total combined voting power of all classes of Stock
of the Company or a Subsidiary. For purposes of determining such
percentage, the following rules shall apply:
(1) the individual with respect to whom such
percentage is being determined shall be considered as owning
the Stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood),
spouse, ancestors, and lineal descendants; and
(2) Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries.
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(x) "Termination Date" means the date on which the employment
(or other service or relationship in the case of a Participant who is
not an employee of the Company) of a Participant terminates for any
reason or no reason.
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
STOCK WITHHOLDING POLICY
The following policy is adopted pursuant to the National Health
Enhancement Systems, Inc. 1997 Equity Incentive Plan and is subject to change,
modification or repeal at any time by the Committee thereunder.
Capitalized terms have the same respective meanings specified in the Plan.
The Committee may allow the Participant to satisfy the Participant's
withholding tax obligations by electing to have the Company withhold from the
Stock to be issued that number of shares of Stock having a Fair Market Value
equal to the minimum amount required to be withheld, determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date"). All
elections by a Participant to have shares of Stock withheld for this purpose
shall be made in writing in a form acceptable to the Committee and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, then except as provided below, the election
shall be irrevocable as to the particular Stock as to which the
election is made; and
(c) all elections shall be subject to the consent or
disapproval of the Committee.
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
3200 NORTH CENTRAL AVENUE, SUITE 1750
PHOENIX, ARIZONA 85012
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL STOCKHOLDERS MEETING
JUNE 10,1997.
The undersigned hereby appoints Earl E. Bray and Jeffrey T. Zywicki,
jointly and severally (the "Proxy Holders"), proxies with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all shares of Common Stock of National Health Enhancement Systems, Inc.
held on record by the undersigned on April 18, 1997, at the Annual Meeting of
Stockholders to be Held June 10, 1997.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
<PAGE> 39
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
VOTE FOR ALL nominees VOTE WITHHELD
listed except as marked to for all
the contrary below nominees listed
1. ELECTION OF
DIRECTORS TO [ ] [ ]
THE BOARD OF
DIRECTORS
Nominees: Gregory J. Petras, Gardiner S. Dutton, James W. Myers, Steven D.
Woods, PH.D., W. Cal McGraw, Mark E. Liebner
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
The Board of Directors recommends a VOTE FOR the following matters:
FOR AGAINST ABSTAIN
2. Adoption of the 1997 Equity Incentive Plan. [ ] [ ] [ ]
3. In their discretion, the Proxy Holders are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES IN PROPOSAL 1 AND FOR PROPOSAL 2.
I plan to attend the Annual Meeting on June 10, 1997. [ ]
SIGNATURE(S) ________________________________________________ DATED _____ , 1997
Please sign exactly as the name appears. 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.
