<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HEALTH RISK MANAGEMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
HEALTH RISK MANAGEMENT, INC.
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 8, 1998
------------------------
TO THE SHAREHOLDERS OF HEALTH RISK MANAGEMENT, INC.:
The 1998 Annual Meeting of Shareholders of Health Risk Management, Inc. will
be held at the Company's corporate offices, fourth floor, 7900 West 78th Street,
Minneapolis, Minnesota, on Wednesday, July 8, 1998 at 1:00 p.m., Minnesota time,
for the following purposes:
1. To elect Class C directors.
2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
3. To take action upon any other business that may properly come before the
meeting or any adjournment thereof.
Only shareholders of record shown on the books of the Company at the close
of business on June 1, 1998, will be entitled to vote at the meeting or any
adjournment thereof. Each shareholder is entitled to one vote per share on all
matters to be voted on at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please sign, date and return your Proxy in
the return envelope provided as soon as possible. Your cooperation in promptly
signing and returning your Proxy will help avoid further solicitation expense by
the Company.
This Notice, the Proxy Statement and the enclosed Proxy are sent to you by
order of the Board of Directors.
Marlene Travis
PRESIDENT, CHIEF OPERATING OFFICER AND
SECRETARY
Dated: June 5, 1998
Minneapolis, Minnesota
<PAGE>
HEALTH RISK MANAGEMENT, INC.
---------------
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 8, 1998
------------------------
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Health Risk Management,
Inc. (the "Company") for use at the 1998 Annual Meeting of Shareholders to be
held on July 8, 1998, and at any adjournment thereof, for the purposes set forth
in the attached Notice of Annual Meeting.
The cost of soliciting Proxies, including preparing, assembling and mailing
the Proxies and soliciting material, will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit Proxies personally or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its use at
the Annual Meeting by giving written notice of such revocation to the Secretary
or other officer of the Company or by filing a new written Proxy with an officer
of the Company. Personal attendance at the Annual Meeting is not, by itself,
sufficient to revoke a Proxy unless written notice of the revocation or a
subsequent Proxy is delivered to an officer before the revoked or superseded
Proxy is used at the Annual Meeting.
Proxies not revoked will be voted in accordance with the choice specified by
shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the slate of directors proposed by the Board of
Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall be deemed
present at the Meeting for purposes of determining a quorum but shall not be
deemed to be represented at the Meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the Company's principal executive office is 8000 West
78th Street, Minneapolis, Minnesota 55439. The Company expects that this Proxy
Statement and the related Proxy and Notice of Annual Meeting will first be
mailed to shareholders on or about June 5, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed June 1, 1998, as the record
date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on June 1, 1998, 4,581,194 shares
of the Company's Common Stock, par value $.01, were issued and outstanding. Such
$.01 par value Common Stock is the only outstanding class of stock of the
Company. A quorum (a majority of the outstanding
1
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shares) must be represented at the meeting in person or by Proxy to transact
business. Each share of Common Stock is entitled to one vote. Holders of the
Common Stock are not entitled to cumulative voting rights in the election of
directors.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned by each person known to the Company to beneficially own
more than 5% of the Company's Common Stock, by each of the Company's current
directors and nominees for director, by each executive officer named in the
Summary Compensation Table (on page 11), and by all of the Company's current
directors and current executive officers as a group, as of June 1, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF DIRECTOR, EXECUTIVE OFFICER OR IDENTITY OF GROUP BENEFICIALLY OWNED(1) OF CLASS
- ------------------------------------------------------------ --------------------- --------
<S> <C> <C>
Chiplease, Inc. ............................................ 512,300(2) 11.18%
640 N. LaSalle Street, Suite 300
Chicago, IL 60610
Summit Capital Management, LLC ............................. 507,108(3) 11.07%
601 Union Street Suite 3900
Seattle, WA 98101
NOLA, LLC .................................................. 293,565(4) 6.41%
916 Sommerset Street
Watchung, NJ 07060
Dimensional Fund Advisors, Inc. ............................ 237,800(5) 5.19%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Gary T. McIlroy, M.D. ...................................... 302,873(6) 6.48%
8000 West 78th Street
Minneapolis, MN 55439
Marlene Travis ............................................. 350,708(7) 7.53%
8000 West 78th Street
Minneapolis, MN 55439
Thomas P. Clark............................................. 75,337(8) 1.63%
Adele M. Kimpell............................................ 11,500(9) *
John R. Higbee.............................................. 0 *
Vance Kenneth Travis........................................ 11,403(10) *
Ronald R. Hahn.............................................. 11,401(11) *
Robert L. Montgomery........................................ 12,771(12) *
Gary L. Damkoehler.......................................... 10,167(13) *
Raymond G. Schultze, M.D.................................... 3,167(14) *
All Current Executive Officers and Current Directors as a
Group (15 persons)........................................ 804,077(15) 16.63%
</TABLE>
- ------------------------
* Less than one percent.
(1) Except as otherwise noted, each person or group named in the table has sole
voting and investment power with respect to all shares of Common Stock
listed opposite the name of such person or group. Shares not outstanding
but deemed beneficially owned by virtue of the right of a person to acquire
them as of June 1, 1998, or within 60 days of such date are treated as
outstanding only when determining the amount and percent owned by such
person or group named in the table.
2
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(2) Includes 512,300 shares for which Chiplease, Inc. represents it has sole
voting power and which was owned on February 27, 1998, the date of the most
recent Schedule 13D received by the Company from such shareholder.
(3) Includes 507,108 shares for which Summit Capital Management, LLC represents
it has sole voting power and which was owned on March 13, 1998, the date of
the most recent Schedule 13G received by the Company from such
shareholders.
(4) Includes 293,565 shares for which NOLA, LLC represents it has sole voting
power and which was owned on May 1, 1997, the date of the most recent
Schedule 13D received by the Company from such shareholder.
(5) In its most recent Schedule 13G filing with the Securities and Exchange
Commission, Dimensional Fund Advisors, Inc. represents it has sole voting
power as to 158,700 of such shares and sole dispositive power over all such
shares.
(6) The number of shares set forth in the above table (i) includes 207,970
shares held by the Gary T. McIlroy Revocable Trust, for which Dr. McIlroy
is grantor and trustee, (ii) includes 94,903 shares which Dr. McIlroy has
the right to acquire upon exercise of options, (iii) excludes 75 shares
beneficially owned by Dr. McIlroy's and Ms. Travis' adult children, and
(iv) excludes the shares beneficially owned by Ms. Travis. Dr. McIlroy
disclaims beneficial ownership of such excluded shares.
(7) The number of shares set forth in the above table (i) includes 274,948
shares held by the Marlene O. Travis Revocable Trust, for which Ms. Travis
is grantor and trustee, (ii) includes 75,760 shares which Ms. Travis has
the right to acquire upon exercise of options, (iii) excludes 75 shares
beneficially owned by Ms. Travis' and Dr. McIlroy's adult children, and
(iv) excludes the shares beneficially owned by Dr. McIlroy. Ms. Travis
disclaims beneficial ownership of such excluded shares.
(8) Includes 47,568 shares held by Mr. Clark and 27,769 shares which Mr. Clark
has the right to acquire upon exercise of options.
(9) Includes 11,500 shares which Ms. Kimpell has the right to acquire upon
exercise of options.
(10) Includes 3,802 shares held by Mr. Travis and 7,601 shares which Mr. Travis
has the right to acquire upon exercise of options.
(11) Includes 7,600 shares held by Mr. Hahn and 3,801 shares which Mr. Hahn has
the right to acquire upon exercise of options.
(12) Includes 6,163 shares held by Mr. Montgomery and 6,608 shares which Mr.
Montgomery has the right to acquire upon exercise of options.
(13) Includes 7,000 shares held by Mr. Damkoehler and 3,167 shares which Mr.
Damkoehler has the right to acquire upon exercise of options.
(14) Includes 3,167 shares which Mr. Schultze has the right to acquire upon
exercise of options.
(15) Includes 560,701 shares held by the current officers and directors, and
253,709 shares that current executive officers and directors as a group
have the right to acquire as of June 1, 1998, or within 60 days of such
date, upon exercise of options.
ELECTION OF DIRECTORS
(PROPOSAL #1)
The Bylaws of the Company provide that the number of directors shall be
determined by the Board of Directors. The Board of Directors has set such number
at seven. The Company's Articles of Incorporation provide for the election of
three classes of directors with terms staggered so as to require the election of
only one class of directors each year. Only directors who are members of Class C
will be elected at the
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Annual Meeting. The Class C directors will be elected to a three-year term and,
therefore, will hold office until the Company's 2001 Annual Meeting of
Shareholders and until their successors have been duly elected and qualified.
The terms of Classes A and B continue until 1999 and 2000, respectively.
The Board of Directors nominates Gary T. McIlroy, M.D., Ronald R. Hahn, and
Robert L. Montgomery for election as the Class C directors. Each Proxy will be
voted for each of such nominees unless the Proxy withholds a vote for one or
more of the nominees. If any of the nominees should be unable to serve as a
director by reason of death, incapacity or other unexpected occurrence, the
Proxies solicited by the Board of Directors shall be voted by the proxy
representatives for such substitute nominee as is selected by the Board, or, in
the absence of such selection, for such fewer number of directors as results
from such death, incapacity or other unexpected occurrence. The election of each
Class C nominee requires the affirmative vote of the holders of the greater of
(i) a majority of the voting power of the shares represented in person or by
proxy at the Annual Meeting with authority to vote on such matter or (ii) a
majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Annual Meeting.
The following table provides certain information with respect to all
directors of the Company:
<TABLE>
<CAPTION>
CURRENT POSITION(S) PRINCIPAL OCCUPATION(S) DIRECTOR
NAME OF DIRECTOR (CLASS) AGE WITH COMPANY DURING PAST FIVE YEARS SINCE
- ------------------------------- --- -------------------- ------------------------------------------------ -----------
<S> <C> <C> <C> <C>
Gary T. McIlroy, M.D. 57 Chairman of the Chairman and Chief Executive Officer of the 1977
(Class C) Board, Chief Company since 1977. Dr. McIlroy is married to
Executive Officer Marlene Travis.
and Director
Nominee
Marlene Travis 58 President, Chief President of the Company since 1987 and Chief 1977
(Class B) Operating Officer, Operating Officer of the Company from 1987 to
Secretary and 1992 and since June 1993; and Chief
Director Administrative Officer from 1992 to June 1993;
Ms. Travis is married to Gary T. McIlroy, M.D.
Vance Kenneth Travis 72 Director Chairman of the Board of Triad International, 1984
(Class B) Inc., a plant engineering and project
management operation for petro-chemical and
refinery process plants located in Calgary,
Alberta, Canada. Mr. Travis is Marlene Travis'
uncle.
Ronald R. Hahn 53 Director Nominee Chairman and President, ESE Partners, LLC, a 1992
(Class C) venture capital management company, since 1996
and President of Stroben & Hahn, Inc., a
venture capital management company, since
1981. Consultant regarding the U.S. healthcare
industry to Union d'Etudes et
d'Investissements ("UI"), the merchant banking
subsidiary of Credit Agricole, principally
from 1992 to 1995. Mr. Hahn currently also
serves on the Board of Directors of Protein
Databases, Inc., a publicly traded computer
software
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CURRENT POSITION(S) PRINCIPAL OCCUPATION(S) DIRECTOR
NAME OF DIRECTOR (CLASS) AGE WITH COMPANY DURING PAST FIVE YEARS SINCE
- ------------------------------- --- -------------------- ------------------------------------------------ -----------
company, and JAMS/Endispute, a provider of
dispute resolution services.
<S> <C> <C> <C> <C>
Robert L. Montgomery 61 Director Nominee President, Western Division of Sutter Health 1993
(Class C) since 1996. Prior to this, he was President
and Chief Executive Officer of Alta Bates
Health System of Emeryville, California, a
vertically integrated full service healthcare
system, from 1989 to 1996, and from 1979 to
March 1983.
Gary L. Damkoehler 58 Director Chairman, Chief Executive Officer and President 1996
(Class A) since 1988 of JSA Healthcare Corporation of
St. Petersburg, Florida, a direct provider of
healthcare services.
Raymond G. Schultze, M.D. 64 Director Professor of Medicine at the UCLA School of 1996
(Class A) Medicine from 1978 to 1997. Dr. Schultze
served as Director of the UCLA Medical Center
from 1980 to 1995, and Administrative Vice
Chancellor for UCLA from 1986 to 1992. Dr.
Schultze currently is providing consulting
services to the County of Los Angeles for the
re-engineering of their healthcare system.
</TABLE>
DIRECTOR FEES AND OPTIONS
ANNUAL RETAINER AND MEETING FEES. All directors of the Company are
reimbursed for expenses incurred by them in connection with attending meetings
of the Board and performing duties as a director. Each nonemployee director
receives an annual retainer of $12,500 and meeting fees as follows: $750 for
each Board meeting attended; $500 ($650 for committee chairs) for each committee
meeting attended unless the committee meeting is held in conjunction with a
Board meeting; $500 for each meeting of the board of directors of a subsidiary
of the Company that is attended; $500 for each Board meeting in which the
nonemployee director participates by telephone; and $250 for each committee
meeting in which the nonemployee director participates by telephone. A director
of the Company may elect to receive the payment of his or her annual retainer,
meeting fees and committee fees on a monthly basis or in one lump sum at the end
of the fiscal year.
DEFERRED COMPENSATION PLAN FOR DIRECTORS. The Board of Directors of the
Company adopted the Deferred Compensation Plan for Directors, effective for
fiscal 1994, and for all fiscal years thereafter until the Plan is terminated.
Under the Deferred Compensation Plan, members of the Company's Board of
Directors and members of the Board of any subsidiary may elect, prior to July 1
of any fiscal year, to defer the receipt of all or any portion of any annual
retainer and meeting fees that may be payable to the director during the fiscal
year for which the election is effective. The Deferred Compensation Plan is
administered by the Compensation Committee. All amounts deferred by the director
are credited to an account established for the director for accounting purposes
only, and the amounts credited to such account generally accrue interest,
compounded quarterly, at a rate equal to two percentage points above the Prime
Rate. The Deferred Compensation Plan is and will remain unfunded, and the
director will stand in the position of a general unsecured creditor of the
Company with respect to all payments made pursuant to the Deferred Compensation
Plan.
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<PAGE>
DIRECTOR OPTIONS. Under the Amended and Restated 1992 Long-Term Incentive
Plan, directors who are not employees of the Company are eligible for
nonqualified stock options. As specified in the Plan, an option for 3,800 shares
of the Company's Common Stock was granted to each nonemployee director who was
serving on the Board on September 14, 1992, the date the Board originally
adopted the Plan, and is granted to each new nonemployee director on the date
that such new director is first elected to the Board. All nonemployee directors
will also receive an option for 1,900 shares of the Company's Common Stock at
the end of each fiscal year during which such director continues to serve on the
Board. The Board may, in its discretion, grant additional nonqualified stock
options to nonemployee directors, subject to such terms and conditions as the
Board may deem appropriate.
In addition, a nonemployee director may elect in writing to receive a
nonqualified stock option in lieu of all or any portion of the annual retainer
and meeting fees to which such director may be entitled and which would
otherwise be payable to such director during the fiscal year for which the
election has been made. The number of shares subject to such option is
determined by dividing the total dollar amount specified in the election by 25%
of the fair market value of the Company's Common Stock as of the date the option
is granted, which shall be the last day of the fiscal year for which the
election has been made. Any election by the nonemployee director to receive a
nonqualified stock option in lieu of annual retainer and meeting fees must be
made prior to the date the option is granted.
Except for options granted in lieu of retainer or meeting fees, the option
price per share for all nonqualified stock options granted to nonemployee
directors is generally the fair market value of a share of the Company's Common
Stock as of the date such option is granted. The exercise price per share for
all nonqualified stock options granted to nonemployee directors in lieu of
retainer or meeting fees pursuant to the election described above equals 75% of
the fair market value of a share of the Company's Common Stock as of the date
such option is granted. All nonqualified stock options granted to the
nonemployee directors ordinarily expire five years after the date they are
granted, and become exercisable as to one-third of the shares subject to the
option on each of the succeeding three anniversaries of the option grant.
COMMITTEE AND BOARD MEETINGS
The Company's Board of Directors has an Audit Committee which reviews with
the Company's independent auditors the annual financial statements and the
results of the annual audit. The Audit Committee also is used to review
potential conflict of interest situations involving related party transactions.
The Audit Committee's current members are Mr. Damkoehler, Mr. Hahn, Mr.
Montgomery and Mr. Travis. The Audit Committee met once during fiscal 1997.
The Board also has a Compensation Committee which reviews and recommends the
compensation to be paid to the Company's senior officers under the Company's
management incentive plans. Mr. Hahn, Mr. Travis, Mr. Schultze and Mr.
Montgomery are the current members of such Committee. During fiscal 1997, the
Compensation Committee met one (1) time.
The Company does not have a nominating committee. The functions which would
be performed by a nominating committee are performed by the entire Board. Any
shareholder who intends to make a nomination at an annual meeting must deliver,
not less than fifty nor more than seventy-five days prior to the particular
annual meeting, a notice to the Company's Corporate Secretary setting forth: the
name and address of the shareholder who intends to make the nomination; the
class and number of shares of stock of the Company which are beneficially owned
by the shareholder; the name, age, business address and residence address of
each nominee being proposed by the shareholder; the principal occupation or
employment of each nominee; the class and number of shares of stock of the
Company which are beneficially owned by each nominee; such other information
concerning each nominee that would be required, under the rules of the
Securities and Exchange Commission, in a proxy statement soliciting proxies for
the election of such nominee; and a signed consent of each nominee to serve as a
director of the Company if so elected. The Company may require any proposed
nominee to furnish such other
6
<PAGE>
information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as a director of the Company.
The Company's Board of Directors held eight (8) meetings during fiscal 1997.
Each director attended seventy-five percent or more of the total number of
meetings of the Board of Directors and of committee(s) of which he or she was a
member.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE'S RESPONSIBILITY
The Compensation Committee's (the "Committee") principal responsibility with
respect to executive level compensation is to ensure the Company's executive
compensation plans are aligned with and support the Company's business
objectives. The Committee evaluates the overall design and administration of the
plans in order to fulfill its responsibility. In addition, to enhance the
objectivity and independence of the Committee, it is comprised entirely of
outside directors.
COMPENSATION PHILOSOPHY
The primary elements of the executive officers' total compensation program
are based on salary, annual incentives, and long-term incentives. The elements
are designed to:
(i) motivate executive officers to achieve strategic objectives which
promote the future success of the Company and increase shareholder value;
(ii) reward outstanding performance at the corporate, department, and
individual levels;
(iii) aid the Company in attracting and retaining executives capable of
assuring the future success of the Company; and
(iv) promote a pay-for-performance philosophy by placing a significant
portion of the total compensation "at risk" while providing compensation
opportunities which are comparable to market levels.
Under current tax law, a deduction for compensation paid by a company to
each of the company's named executives may be disallowed if the officer's
compensation exceeds $1 million. Special rules apply for "performance-based"
compensation, including compensation resulting from stock options. The Company
intends to take such steps as are necessary to comply with the deduction limits
imposed by tax law.
BASE SALARY
Base salaries for certain executive officers are reviewed by the Committee
on an annual basis. Each year the Committee assesses the executive employee's
level of responsibility, experience, individual performance, accountabilities
relative to other Company executives, and external market practices. Each year
the Committee also reviews Company performance and recommends to the full Board
the salary levels for the coming year, and the base salaries are adjusted
accordingly. In fiscal 1997, base salaries for the chief executive and certain
other executives were the same as fiscal 1996, which were generally toward the
mid-point of base salary levels for comparable health care organizations. In
fiscal 1997, the chief executive's base salary and certain other executives'
base salaries were the same as fiscal 1996 because of a pay-for-performance
philosophy for base compensation which places a significant portion of the total
compensation "at risk" while providing compensation opportunities which are
comparable to market levels. Other executives' salaries are reviewed annually
and changed based on their performance and responsibilities.
7
<PAGE>
ANNUAL INCENTIVES
EXECUTIVE INCENTIVE PLAN. The Company's Board of Directors has an Executive
Incentive Plan which provides for the payment of annual incentive bonuses to
certain executive employees. The Executive Incentive Plan is administered by the
Compensation Committee, whose members are not eligible to participate in the
Executive Incentive Plan.
Generally, an executive employee does not earn a bonus under the Executive
Incentive Plan unless specified revenue, net profit or other performance goals
are met by the Company. The Compensation Committee sets a range of bonus levels
based on the performance goals set for the year. The Committee determines the
amount of such cash bonus that may be paid to an executive employee by applying
to the employee's salary at the beginning of the applicable fiscal year a
payment percentage that corresponds to such goals. The Committee may also use
stock options if it believes that stock options will provide executive officers
with appropriate incentives. Fiscal 1997 incentives under this Plan were stock
options and no cash bonuses were paid. These options became fully exercisable
November 23, 1997.
For fiscal 1997, the chief executive officer received options for 15,000
shares as an annual incentive and did not receive any cash bonus under the Plan.
LONG-TERM INCENTIVES
The Company may grant some executive level employees long-term awards,
including stock options, performance awards, and restricted stock pursuant to
the Long-Term Incentive Plan. The purpose of these awards are to:
(i) focus executives on the achievement of performance objectives which
enhance shareholder value;
(ii) emphasize the importance of balancing present business needs and
long-term goals critical to the future success of the Company; and
(iii) attract and retain executives of superior ability.
STOCK OPTIONS. Stock options allow the executives to purchase shares of the
Company's common stock at an exercise price equal to the fair market value at
the date of grant over a period of five years. Generally, one-third to
one-fourth of the executive's option becomes exercisable within the first six to
twelve months after grant with the remainder over a period ranging up to three
or four years following the date of grant. During fiscal 1997, in addition to
the options for 15,000 shares discussed above under Annual Incentives, the
Company issued the chief executive officer options for 40,000 shares at an
exercise price of $13.25 per share under the Amended and Restated 1992 Long-Term
Incentive Plan on June 30, 1997.
PERFORMANCE UNITS. The Compensation Committee authorized awards of
performance units ("Units") in fiscal 1993 and fiscal 1994 that generally would
have provided executive recipients with the opportunity to receive cash awards
if the Company's financial goals and other business objectives were achieved
over a three-year period.
In fiscal 1995, the Committee determined that only annual cash incentives
and stock options should be granted to executives to simplify their compensation
program, cancelled the Units previously awarded and decided that no additional
Units should be granted under the Amended and Restated 1992 Long-Term Incentive
Plan for the foreseeable future.
Ronald R. Hahn, CHAIRPERSON
V. Kenneth Travis
Robert L. Montgomery
Raymond G. Schultze, M.D.
8
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has an Employment Agreement, dated June 20, 1996, with Gary T.
McIlroy, M.D. whereby Dr. McIlroy will continue to serve as Chief Executive
Officer with the term continuing indefinitely unless terminated under the terms
of the Agreement. Dr. McIlroy received a base salary for fiscal 1997 of $278,000
(subject to increase upon annual review by the Compensation Committee of the
Board) and is eligible to receive an annual incentive bonus under the Executive
Incentive Plan. The Employment Agreement is terminable by the Company for cause,
in which case the Company is obligated to pay only Dr. McIlroy's accrued base
salary and a portion of any annual incentive bonus for the fiscal year in which
his termination occurs. The Agreement is also terminable by the Company upon
thirty (30) days written notice, without cause, in which case the Company is
obligated to (i) pay the then-current annualized base salary and provide health,
dental, life and other benefits for a twenty-four (24) month period; (ii) pay
out-placement services; (iii) pay a portion of any annual incentive bonus for
the fiscal year in which his termination occurs; and (iv) transfer all cash
value and life insurance policies owned by the Company to Dr. McIlroy. In the
event Dr. McIlroy resigns for "good reason" or within twelve (12) months after a
"change of control" of the Company, the Company is obligated to make all of the
payments and provide all of the benefits described in the preceding sentence,
and shall accelerate the vesting of all stock options which shall then remain
exercisable until the options expire. The Agreement also addresses the benefits
payable and the treatment of the life insurance policies owned by the Company
upon termination for death or disability and, in the event of disability,
provides for supplemental disability payments and health, dental and life
benefits for a twelve (12) month period.
The Company also has a Split Dollar Agreement, dated June 5, 1991, which
requires the Company to pay the premiums on a life insurance policy owned by Dr.
McIlroy (or his assignee) and which requires repayment to the Company of either
the premiums paid or the policy's accumulated cash surrender value, whichever is
greater, upon Dr. McIlroy's death or termination of employment. Under the
Employment Agreement, if Dr. McIlroy's employment is terminated without cause or
within twelve (12) months after a "change of control" of the Company, or if Dr.
McIlroy resigns for "good reason," the repayment obligations under the Split
Dollar Agreement cease and the Company must release any collateral assignment in
the life insurance policy.
The Company has an Employment Agreement, dated June 21, 1996, with Marlene
Travis whereby Ms. Travis will continue to serve as President and Chief
Operating Officer with the term continuing indefinitely unless and until
terminated under the terms of the Agreement. Ms. Travis received a base salary
for fiscal 1997 of $250,000 (subject to increase upon annual review by the Chief
Executive Officer) and is eligible to receive an annual incentive bonus under
the Executive Incentive Plan. The Employment Agreement is terminable by the
Company for cause, in which case the Company is obligated to pay only Ms.
Travis' accrued base salary and a portion of any annual incentive bonus for the
fiscal year in which her termination occurs. The Agreement is also terminable by
the Company upon thirty (30) days written notice, without cause, in which case
the Company is obligated to (i) pay the then-current annualized base salary and
provide health, dental, life and other benefits for a twenty-four (24) month
period; (ii) pay out-placement services; (iii) pay a portion of any annual
incentive bonus for the fiscal year in which her termination occurs; and (iv)
transfer all cash value and life insurance policies owned by the Company to Ms.
Travis. In the event Ms. Travis resigns for "good reason" or within twelve (12)
months after a "change of control" of the Company, the Company is obligated to
make all of the payments and provide all of the benefits described in the
preceding sentence and shall accelerate the vesting of all stock options which
shall then remain exercisable until the options expire. The Agreement also
addresses the benefits payable and the treatment of the life insurance policies
owned by the Company upon termination for death or disability and, in the event
of disability, provides for supplemental disability payments and health, dental
and life benefits for a twelve (12) month period.
The Company also has a Split Dollar Agreement, dated June 5, 1991, which
requires the Company to pay the premiums on a life insurance policy owned by Ms.
Travis (or her assignee) and which requires
9
<PAGE>
repayment to the Company of either the premiums paid or the policy's accumulated
cash surrender value, whichever is greater, upon Ms. Travis' death or
termination of employment. Under the Employment Agreement, if Ms. Travis'
employment is terminated without cause or within twelve (12) months after a
"change of control" of the Company, or if Ms. Travis resigns for "good reason,"
the repayment obligations under the Split Dollar Agreement cease and the Company
must release any collateral assignment in the life insurance policy.
The Company has an Employment Agreement dated June 21, 1996, with Thomas P.
Clark whereby Mr. Clark will continue to serve as Chief Financial Officer, with
the term continuing indefinitely unless and until terminated under the terms of
the Agreement. Mr. Clark received an annual base salary for fiscal 1997 of
$200,000 (subject to increase upon annual review by the Chief Executive Officer)
and is eligible to receive an annual incentive bonus under the Executive
Incentive Plan. The Employment Agreement is terminable by the Company for cause,
in which case the Company is obligated to pay only Mr. Clark's accrued base
salary and a portion of any annual incentive bonus for the fiscal year in which
his termination occurs. The Agreement is also terminable by the Company upon
thirty (30) days written notice, without cause, in which case the Company is
obligated to (i) pay the then-current annualized base salary and provide health,
dental, life and other benefits for a twenty-four (24) month period; (ii) pay
out-placement services; (iii) pay a portion of any annual incentive bonus for
the fiscal year in which his termination occurs; and (iv) transfer all cash
value and life insurance policies paid by the Company to Mr. Clark. In the event
Mr. Clark resigns for "good reason" or within twelve (12) months after a "change
of control" of the Company, the Company is obligated to make all of the payments
and provide all of the benefits described in the preceding sentence and shall
accelerate the vesting of all stock options which shall then remain exercisable
until the options expire. The Agreement also addresses the benefits payable and
the treatment of the life insurance policies owned by the Company upon
termination for death or disability and, in the event of disability, provides
for supplemental disability payments and health, dental and life benefits for a
twelve (12) month period.
The Company also has a Split Dollar Agreement, dated September 19, 1991,
which requires the Company to pay the premiums on a life insurance policy owned
by Mr. Clark (or his assignee) and which requires repayment to the Company of
either the premiums paid or the policy's accumulated cash surrender value,
whichever is greater, upon Mr. Clark's death or termination of employment. Under
the Employment Agreement, if Mr. Clark's employment is terminated without cause
or within twelve (12) months after a "change of control" of the Company, or if
Mr. Clark resigns for "good reason," the repayment obligations under the Split
Dollar Agreement cease and the Company must release any collateral assignment in
the life insurance policy.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years of the Company's Chief Executive Officer and the
four other highest paid executive officers of the Company whose salary and bonus
for fiscal 1997 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION(1) ------------------------
---------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
- ----------------------------------- ---- -------- ------- ------------ ----------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary T. McIlroy, M.D. ............. 1997 $278,000 $ 0(2) $ 9,395(10) 0 15,000(2) $0 $23,150(6)
Chairman & CEO 1996 $278,000 13,510 9,395(10) 0 40,000(4) 0 22,655(6)
1995 278,000 0(2) 9,395(10) 0 33,138(3) 0 23,127(6)
4,000(2)
16,000(4)
30,000(9)
Marlene Travis .................... 1997 250,000 0(2) 9,395(10) 0 12,500(2) 0 20,150(7)
President & COO 1996 222,000 13,510 9,395(10) 0 33,333(4) 0 19,655(7)
1995 222,000 0(2) 9,395(10) 0 23,298(3) 0 19,943(7)
3,500(2)
12,000(4)
25,000(9)
Thomas P. Clark ................... 1997 200,000 0(2) 10,460(10) 0 10,000(2) 0 9,150(8)
CFO 1996 167,500 11,580 10,460(10) 0 26,667(4) 0 8,655(8)
1995 167,500 0(2) 10,460(10) 0 17,759(3) 0 8,388(8)
3,000(2)
12,000(4)
20,000(9)
Adele M. Kimpell .................. 1997 153,542 0(2) 0 0 4,000(2) 0 2,663(5)
Sr. V.P., Health 1996 128,169 6,000 0 0 9,000(4) 0 1,882(5)
Plan Operations 1995 106,795 6,000 0 0 5,000(3) 0 1,796(5)
2,000(2)
John R. Higbee .................... 1997 128,544 0(2) 0 0 1,500(2) 0 2,671(5)
CIO 1996 122,400 10,000 0 0 1,500(4) 0 1,101(5)
1995 107,840 10,000 0 0 0 0 0(5)
4,500(2)
</TABLE>
- ------------------------------
(1) Does not include the payment of professional and monthly club dues, group
term life insurance, and other personal benefits, the aggregate amount of
which was less than 10% of the individual's listed compensation.
(2) Stock options were issued under the Amended and Restated 1992 Long-Term
Incentive Plan or the 1990 Stock Option Plan in lieu of cash bonus under
the annual Executive Incentive Plan and are fully exercisable.
(3) Stock options were issued under the 1990 Stock Option Plan, and become
exercisable in annual increments of one-fourth per year.
(4) Stock options were issued under the Amended and Restated 1992 Long-Term
Incentive Plan and become exercisable in annual increments of one-third per
year.
(5) The Company matching contribution under its 401(k) Salary Savings Plan.
(6) The amount reflected includes $3,127, $2,655, and $3,150 as Company
matching contributions under its 401(k) Salary Savings Plan or other
retirement payments for fiscal 1995, 1996, and 1997 respectively, and
$20,000 per year for the total premiums paid by the Company on the life
insurance policy covered by the Split-Dollar Agreement referred to above in
"Employment Agreements" for fiscal 1995, 1996, and 1997, respectively.
11
<PAGE>
(7) The amount reflected includes $2,943, $2,655 and $3,150 as Company matching
contributions under its 401(k) Salary Savings Plan or other retirement
payments for fiscal 1995, 1996, and 1997, respectively, and $17,000 per
year for the total premiums paid by the Company on the life insurance
policy covered by the Split-Dollar Agreement referred to above in
"Employment Agreements" for fiscal 1995, 1996 and 1997, respectively.
(8) The amount reflected includes $2,388, $2,655 and $3,150 as Company matching
contributions under its 401(k) Salary Savings Plan or other retirement
payments for fiscal 1995, 1996 and 1997, respectively, and $6,000 per year
for the total premiums paid by the Company on the life insurance policy
covered by the Split-Dollar Agreement referred to above in "Employment
Agreements" for fiscal 1995, 1996 and 1997, respectively.
(9) Stock options were issued to Dr. McIlroy, Ms. Travis and Mr. Clark, for
30,000, 25,000 and 20,000 shares, respectively, in lieu of performance unit
awards for fiscal 1995, cancellation of performance unit awards for fiscal
1994 and fiscal 1993 issued under the 1992 Long-Term Incentive Plan, and
cancellation of stock options issued in fiscal 1993 of 27,643, 19,588 and
15,827 respectively, which were originally issued in lieu of a cash bonus.
One-half of these stock options became exercisable on August 1, 1995, and
one-half became exercisable on August 1, 1996.
(10) Includes auto allowance and medical coverage.
The following two stock option tables summarize option grants and exercises
during fiscal 1997 for the Chief Executive Officer and other named executive
officers, and the values of options granted during fiscal 1997 and held by such
persons at June 30, 1997.
STOCK OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------- -------------------------------
NUMBER OF
SECURITIES % OF TOTAL 5%(3) 10%(3)
UNDERLYING OPTIONS GRANTED -------------------- ---------
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION STOCK STOCK
NAME GRANTED FISCAL YEAR BASE PRICE DATE PRICE GAIN PRICE
- ----------------------------------- ------------- --------------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary T. McIlroy, M.D............... 15,000(1) 5.7% $ 11.00 06/30/02 $ 14.04 $ 45,600 $ 17.72
40,000(2) 15.1% $ 13.25 06/30/02 $ 16.91 146,400 $ 21.34
Marlene Travis..................... 12,500(1) 4.7% $ 11.00 06/30/02 $ 14.04 $ 38,000 $ 17.72
33,333(2) 12.6% $ 13.25 06/30/02 $ 16.91 121,999 $ 21.34
Thomas P. Clark.................... 10,000(1) 3.8% $ 11.00 06/30/02 $ 14.04 $ 30,400 $ 17.72
26,667(2) 10.1% $ 13.25 06/30/02 $ 16.91 $ 97,601 $ 21.34
Adele M. Kimpell................... 4,000(1) 1.5% $ 11.00 06/30/02 $ 14.04 $ 12,160 $ 17.72
9,000(2) 3.4% $ 13.25 06/30/02 $ 16.91 $ 32,940 $ 21.34
John R. Higbee..................... 1,500(1) 0.6% $ 11.00 06/30/02 $ 14.04 $ 4,560 $ 17.72
1,500(2) 0.6% $ 13.25 06/30/02 $ 16.91 $ 5,490 $ 21.34
<CAPTION>
NAME GAIN
- ----------------------------------- ---------
<S> <C>
Gary T. McIlroy, M.D............... $ 100,800
$ 323,600
Marlene Travis..................... $ 84,000
$ 269,664
Thomas P. Clark.................... $ 67,200
$ 215,736
Adele M. Kimpell................... $ 26,880
$ 72,810
John R. Higbee..................... $ 10,080
$ 12,135
</TABLE>
- ------------------------------
(1) The stock options granted as fiscal 1997 incentives to the individuals
became exercisable six months after May 23, 1997, the date of the grant.
Under the terms of the Plan, the Board may provide for the protection of all
optionees to whom options have been granted in the event of a merger,
liquidation, reorganization or similar transaction.
(2) One-third of the stock options granted as a long-term incentive to the
individuals became exercisable one year after June 30, 1997, the date of
grant,and on the next two anniversaries of the date of grant. Under the
terms of the Plan, the Board may provide for the protection of all optionees
to whom options have been granted in the event of a merger, liquidation,
reorganization or similar transaction.
(3) The stock price is calculated using a 5% and 10% rate of appreciation
(solely for illustrative purposes) for the term of the option, compounded
annually. The gain is the difference between the resulting illustrative
compounded stock price and the exercise price times the number of options
granted.
12
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISES REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------- ------------- ---------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
Gary T. McIlroy, M.D............... 16,862 $ 82,211 81,235/76,903 $170,446/$133,301
Marlene Travis..................... 11,202 $ 54,615 63,149/61,482 $128,013/$101,435
Thomas P. Clark.................... 42,241 $ 302,550 19,880/49,546 $107,617/$82,298
Adele M. Kimpell................... -- -- 7,000/15,500 $5,875/$9,375
John R. Higbee..................... -- -- 4,500/3,000 $29,875/$4,125
</TABLE>
- ------------------------
(1) Market value of underlying securities at June 30, 1997 ($13.50), the closing
price of the Common Stock, minus the exercise price.
13
<PAGE>
PERFORMANCE GRAPH
Set forth below are line graphs comparing the Company's cumulative total
shareholder return on the Company's Common Stock, from June 30, 1993, through
May 30, 1998, with the cumulative total return of The NASDAQ Market Index (U.S.
Companies) and of the selected peer group (the "SIC Peer Group Index"). The SIC
Peer Group Index includes all NASDAQ companies which are in the same three-digit
SIC ("Standard Industrial Classification") labeled 632 Accident and Health
Insurance and Medical Service Plans.
[GRAPH]
The NASDAQ Market Index and SIC Peer Group Index is provided by Media
General Financial Services. The Peer Group includes the following companies:
Aetna, Inc.; AFLAC Incorporated; Chartwell RE Corp.; Citizens Financial Corp.;
Compdent Corporation; Conseco, Inc.; Everest Reinsurance Hld.; First
Commonwealth Inc.; Health Power, Inc.; Inc.; Humana, Inc.; Maxicare Health
Plans; Medical Control Inc.; Mid Atlantic Medical Services, Inc.; Oxford Health
Plans, Inc.; Pacificare Health System B New, Inc.; Pacificare Health System Cl
A; Penncorp Financial Group; Provident American Corp.; RightChoice Managed Care;
Safeguard Health Enterprises; Sierra Health Services, Inc.; Torchmark
Corporation; Transamerica Corporation; Trigon Healthcare, Inc.; Union American
Holding; United Dental Care, Inc.; United Healthcare Corporation; United
Wisconsin Services; Unum Corporation; Washington National CP; and Westbridge
Capital Corp.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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 Securities and Exchange Commission
(the "SEC"). Such forms include: Form 3, due within 10 days after becoming an
officer, director or greater than
14
<PAGE>
ten-percent holder; Form 4, due within 10 days after any calendar month during
which a reportable transaction occurred; and Form 5 due within 45 days after the
end of the fiscal year. 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 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 the period from July 1, 1996
through June 30, 1997, all Section 16(a) filing requirements applicable to its
current and former officers, directors, and greater than ten-percent beneficial
owners were complied with except that one Form 5 was filed late by Adele M.
Kimpell, and one Form 5 was filed late by Michael T. McKim.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL #2)
The Company's Board of Directors, upon recommendation of its Audit
Committee, has selected Ernst & Young LLP as independent auditors of the Company
for the fiscal year ending June 30, 1998. Ernst & Young LLP has acted as the
Company's independent auditors since fiscal 1985. Although it is not required to
do so, the Board wishes to submit the selection of Ernst & Young LLP for
shareholders' ratification at the 1998 Annual Meeting. If the selection is not
ratified, the Board will reconsider its selection.
A representative of Ernst & Young LLP is expected to be present at the 1998
Annual Meeting and will be given an opportunity to make a statement if so
desired. Such representative is also expected to be available to respond to
appropriate questions at the Meeting.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the 1998
Annual Meeting. If any other matter does properly come before the Meeting, the
appointees named in the Proxies will vote the Proxies in accordance with their
best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1999 Annual Meeting of Shareholders must be
received by the Company by February 4, 1999, to be includable in the Company's
proxy statement and related proxy for the 1999 Annual Meeting of Shareholders.
ANNUAL REPORT
A copy of the Company's Annual Report, which contains its Form 10-K and
consolidated financial statements as well as a letter to shareholders for the
fiscal year ended June 30, 1997, accompanies, or has been furnished prior to,
this Notice of Annual Meeting and Proxy Statement. No part of such Report is
incorporated herein or is to be considered proxy soliciting material.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1997, TO ANY SHAREHOLDER OF THE COMPANY
UPON WRITTEN REQUEST. REQUESTS SHOULD BE SENT TO CHIEF FINANCIAL OFFICER, HEALTH
RISK MANAGEMENT, INC., 8000 WEST 78TH STREET, MINNEAPOLIS, MINNESOTA 55439. SUCH
REQUESTS SHOULD INCLUDE A REPRESENTATION THAT THE SHAREHOLDER WAS THE BENEFICIAL
OWNER OF SHARES OF COMMON STOCK ON JUNE 1, 1998, THE RECORD DATE FOR THE 1998
ANNUAL MEETING OF SHAREHOLDERS.
Dated: June 5, 1998
Minneapolis, Minnesota
15
<PAGE>
HEALTH RISK MANAGEMENT, INC.
PROXY
FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 8, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints GARY T. McILROY, M.D. and THOMAS P. CLARK,
and each of them, with full power of substitution, his or her proxies to
represent and vote, as designated below, all shares of Health Risk Management,
Inc. registered in the name of the undersigned, at the Company's 1998 Annual
Meeting of Shareholders and at any adjournment thereof, and the undersigned
hereby revokes all proxies previously given with respect to the Annual Meeting.
1. ELECTION OF CLASS C DIRECTORS. Nominees: Gary T. McIlroy, M.D., Ronald R.
Hahn and Robert L. Montgomery
<TABLE>
<S> <C>
/ / FOR ALL nominees listed above / / WITHHOLD AUTHORITY
(except those whose names have been written on the to vote for all nominees listed above.
line below).
</TABLE>
(To WITHHOLD authority to vote for any individual nominee write that
nominee's name on the line below.)
________________________________________________________________________________
2. INDEPENDENT AUDITORS. Ratification of selection of Ernst & Young LLP as the
Company's independent auditors for the 1998 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE.)
<PAGE>
3. OTHER MATTERS. In their discretion, the appointed Proxies are...
/ / AUTHORIZED / / NOT AUTHORIZED
to vote upon such other business as may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL
AND, IN THE CASE OF PROPOSAL #3 WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL
#3.
DATED: _________________________________, 1998
______________________________________________
______________________________________________
(PLEASE DATE AND SIGN NAME(S) EXACTLY AS SHOWN
ON YOUR STOCK CERTIFICATE. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS, ETC.,
SHOULD INDICATE CAPACITY WHEN SIGNING. FOR
STOCK HELD IN JOINT TENANCY, EACH JOINT OWNER
SHOULD SIGN.)
