<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(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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</TABLE>
<PAGE>
HEALTH RISK MANAGEMENT, INC.
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 22, 2000
------------------------
TO THE SHAREHOLDERS OF HEALTH RISK MANAGEMENT, INC.:
The 2000 Annual Meeting of Shareholders of Health Risk Management, Inc. will
be held at the Company's corporate offices, South Entrance, 10900 Hampshire
Avenue South Bloomington, Minnesota, on Monday, May 22, 2000 at 1:00 p.m.,
Minnesota time, for the following purposes:
1. To elect Class B 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 March 31, 2000, 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: April 12, 2000
Bloomington, Minnesota
<PAGE>
HEALTH RISK MANAGEMENT, INC.
---------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2000
------------------------
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Health Risk
Management, Inc. (the "Company") for use at the 2000 Annual Meeting of
Shareholders to be held on May 22, 2000, 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 10900
Hampshire Avenue South Bloomington, Minnesota 55438. 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 April 12, 2000.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 31, 2000, 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 March 31, 2000, 4,661,801 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
1
<PAGE>
outstanding 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 March 31, 2000.
<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 ..................................... 675,500(2) 14.49%
640 N. LaSalle Street, Suite 300
Chicago, IL 60610
Summit Capital Management, LLC ..................... 397,250(3) 8.52%
601 Union Street Suite 3900
Seattle, WA 98101
Dimensional Fund Advisors, Inc. .................... 288,800(4) 6.20%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Gary T. McIlroy, M.D. .............................. 382,245(5) 8.01%
10900 Hampshire Avenue South
Bloomington, MN 55438
Marlene Travis ..................................... 380,665(6) 8.02%
10900 Hampshire Avenue South
Bloomington, MN 55438
Thomas P. Clark..................................... 124,275(7) 2.63%
Adele M. Kimpell.................................... 17,400(8) *
William M. Smith.................................... 10,275(9) *
Vance Kenneth Travis................................ 11,009(10) *
Robert L. Montgomery................................ 20,380(11) *
Gary L. Damkoehler.................................. 16,701(12) *
Raymond G. Schultze, M.D............................ 6,701(13) *
All Current Executive Officers and Current Directors as
a Group (13 persons).............................. 979,679(14) 19.67%
</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 March 31, 2000, 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) Includes 399,100 (8.56%) shares which Chiplease, Inc. represents are owned
by it and 276,400 (5.93%) shares which Chiplease represents are owned by
the secretary of Chiplease, Inc. and for which the secretary has sole
voting power and which was owned on August 28, 1998, the date of the most
recent Schedule 13D/A received by the Company from such shareholder.
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(3) In its most recent Schedule 13G filing with the Securities and Exchange
Commission on February 14, 2000, Summit Capital Management, LLC represents
it has shared voting and investment power over all such shares.
(4) In its most recent Schedule 13G filing with the Securities and Exchange
Commission on February 11, 2000, Dimensional Fund Advisors, Inc. (DFI),
represents it has sole voting and investment power over all such shares.
DFI disclaims beneficial ownership of the shares.
(5) The number of shares set forth in the above table (i) includes 270,106
shares held by the Gary T. McIlroy Revocable Trust, for which Dr. McIlroy
is grantor and trustee, (ii) includes 108,139 shares which Dr. McIlroy has
the right to acquire upon exercise of options, (iii) includes 4,000 shares
held by a foundation controlled by Dr. McIlroy, (iv) excludes 75 shares
beneficially owned by Dr. McIlroy's and Ms. Travis' adult children and
(v) excludes the shares beneficially owned by Ms. Travis. Dr. McIlroy
disclaims beneficial ownership of such excluded shares.
(6) The number of shares set forth in the above table (i) includes 291,978
shares held by the Marlene O. Travis Revocable Trust, for which Ms. Travis
is grantor and trustee, (ii) includes 84,687 shares which Ms. Travis has
the right to acquire upon exercise of options, (iii) includes 4,000 shares
held by a foundation controlled by Ms. Travis, (iv) excludes 75 shares
beneficially owned by Ms. Travis' and Dr. McIlroy's adult children and
(v) excludes the shares beneficially owned by Dr. McIlroy. Ms. Travis
disclaims beneficial ownership of such excluded shares.
(7) Includes 62,738 shares held by Mr. Clark and 61,537 shares which Mr. Clark
has the right to acquire upon exercise of options.
(8) Includes 1,000 shares held by Ms. Kimpell and 16,400 shares which
Ms. Kimpell has the right to acquire upon exercise of options.
(9) Includes 3,275 shares held by Mr. Smith and 7,000 shares which Mr. Smith
has the right to acquire upon exercise of options.
(10) Includes 5,308 shares held by Mr. Travis and 5,701 shares which
Mr. Travis has the right to acquire upon exercise of options.
(11) Includes 9,462 shares held by Mr. Montgomery and 10,918 shares which
Mr. Montgomery has the right to acquire upon exercise of options.
(12) Includes 11,000 shares held by Mr. Damkoehler and 5,701 shares which
Mr. Damkoehler has the right to acquire upon exercise of options.
(13) Includes 1,000 shares held by Dr. Schultze and 5,701 shares which
Dr. Schultze has the right to acquire upon exercise of options.
(14) Includes 661,961 shares held by the current officers and directors, and
317,718 shares that current executive officers and directors as a group
have the right to acquire as of March 31, 2000, 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 six. 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 B will be elected at the 2000 Annual Meeting. The Class B directors will
be elected to a three-year term and, therefore, will hold office until the
Company's 2003 Annual Meeting of Shareholders and until their successors have
been duly elected and qualified. The terms of Classes C and A continue until
2001 and 2002, respectively.
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The Board of Directors nominates Marlene Travis and Vance Kenneth Travis for
election as the Class B 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 B nominee requires the
affirmative vote of a majority of the shares represented at the Annual Meeting
with authority to vote on such matter but not less than the affirmative vote of
1,165,451 shares.
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. 59 Chairman of the Chairman and Chief Executive Officer of 1977
(Class C) Board, Chief the Company since 1977. Dr. McIlroy
Executive Officer is married to Marlene Travis.
and Director
Marlene Travis 60 President, Chief President of the Company since 1987 and 1977
(Class B) Operating Chief Operating Officer of the
Officer, Company from 1987 to 1992 and since
Secretary and June 1993; and Chief Administrative
Director Nominee Officer from 1992 to June 1993;
Ms. Travis is married to Gary T.
McIlroy, M.D.
Vance Kenneth Travis 73 Director Chairman of the Board of Triad 1984
(Class B) Nominee International, 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.
Robert L. Montgomery 63 Director Consultant regarding Health System 1993
(Class C) Management to Sutter Health since
1999. Prior to this he was
President,Western Division of Sutter
Health from 1996 to 1999. Mr.
Montgomery served as 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 60 Director Chairman, Chief Executive Officer and 1996
(Class A) President since 1988 of JSA
Healthcare Corporation of St.
Petersburg, Florida, a direct
provider of healthcare services.
</TABLE>
4
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<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>
Raymond G. Schultze, M.D. 66 Director Chief Executive Officer and Medical 1996
(Class A) Director since 1997 of Toiyabe
Dialysis Unit. Consultant regarding
healthcare management consulting
(self-employed) since 1997. Prior to
this he was Professor of Medicine at
the UCLA School of Medicine form 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 is currently
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 the
beginning 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.
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.
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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 reviews potential conflict
of interest situations involving related party transactions. The Audit
Committee's current members are Mr. Damkoehler, Mr. Montgomery and Mr. Travis.
The Audit Committee met three times during fiscal 1999 which ended June 30,
1999, and once during the six month transition period ended December 31, 1999.
The Company changed its fiscal year from June 30 to December 31 effective
December 31, 1999.
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. Travis, Dr.. Schultze and Mr. Montgomery are the
current members of such Committee. During fiscal 1999 and during the six months
ended December 31, 1999, the Compensation Committee did not meet, but the Board
recommended no change in base compensation.
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 eighty nor more than one hundred 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 shareholders; 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 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 1999
and held five (5) meetings during the six months ended December 31, 1999. 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.
6
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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 provisions.
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 1999 and the six months ended December 31, 1999, base
salaries for the chief executive and certain other executives were the same as
fiscal 1998, which were generally toward the mid-point of base salary levels for
comparable health care organizations in fiscal 1997. In fiscal 1999 and the six
months ended December 31, 1999, the chief executive's base salary and certain
other executives' base salaries were the same as fiscal 1998 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.
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.
7
<PAGE>
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
a payment percentage that corresponds to such goals to the employee's salary at
the beginning of the applicable fiscal year. The Committee may also use common
stock or stock options if it believes that common stock or stock options will
provide executive officers with appropriate incentives. For fiscal 1999 and the
six months ended December 31, 1999, no incentives under this Plan were common
stock or options and no cash bonuses were paid under this Plan.
For fiscal 1999 and the six months ended December 31, 1999, the chief
executive officer did not receive options or common stock 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 1999 and for the six
months ended December 31, 1999, where no options for shares were issued above
under Annual Incentives, the Company issued the chief executive officer options
for 10,000 shares at an exercise price of $10.00 per share under the Amended and
Restated 1992 Long-Term Incentive Plan on February 17, 1999.
PERFORMANCE UNITS. The Committee has determined that only cash incentives
and stock options should be granted to executives to simplify the Company's
compensation program, and decided that no Performance Units should be granted
under the Amended and Restated 1992 Long-Term Incentive Plan for the foreseeable
future.
V. Kenneth Travis
Robert L. Montgomery
Raymond G. Schultze, M.D.
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 1999 and for the
six months ended December 31, 1999 of $278,000 per year (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
8
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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 1999 and for the six months ended December 31, 1999 of $250,000 per
year (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 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. As announced, Mr. Clark will be assuming the position of
Executive Vice President, Acquisitions and Business Development and a new Chief
Financial
9
<PAGE>
Officer will be hired. Mr. Clark's responsibilities under his Employment
Agreement will be adjusted accordingly. Mr. Clark received an annual base salary
for fiscal 1999 and for the six months ended December 31, 1999 of $200,000 per
year (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 the six
month transition period ended December 31, 1999, and for each of the previous
three fiscal years paid to the Company's Chief Executive Officer and the four
other highest paid executive officers of the Company whose salary and bonus for
fiscal year ended June 30, 1999 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS
OTHER -----------------------
ANNUAL COMPENSATION ANNUAL RESTRICTED SECURITIES
------------------------------ COMPEN- STOCK UNDERLYING LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS SATION(1) AWARDS OPTIONS PAYOUTS COMPENSATION
- ----------------- -------- -------- -------- --------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary T. McIlroy, M.D. ....... 1999* $139,000 $ 0 $ 4,930(10) 0 0 $0 $10,332(6)
Chairman & CEO 1999 278,000 0 9,859(10) 0 10,000(4) 0 23,986(6)
1998 278,000 0(2) 9,837(10) 0 40,000(2) 0 23,484(6)
1997 278,000 0(2) 9,395(10) 0 15,000(2) 0 23,150(6)
40,000(4)
Marlene Travis .............. 1999* $125,000 $ 0 $ 4,930(10) 0 0 $0 $ 9,211(7)
President & COO 1999 250,000 0 9,859(10) 0 10,000(4) 0 21,009(7)
1998 250,000 0(2) 9,337(10) 0 30,000(2) 0 20,336(7)
1997 250,000 0(2) 9,395(10) 0 12,500(2) 0 20,150(7)
33,333(4)
Thomas P. Clark ............. 1999* $100,000 $ 0 $ 5,451(10) 0 0 $0 $ 5,186(8)
CFO 1999 200,000 0 10,902(10) 15,000(11) 0 0 35,752(8)
1998 200,000 0(2) 10,460(10) 0 30,000(2) 0 9,555(8)
1997 200,000 0(2) 10,460(10) 0 10,000(2) 0 9,150(8)
26,667(4)
Adele M. Kimpell ............ 1999* $ 85,800 $25,000(3) 0 0 0 $0 $ 2,782(5)
Executive V.P. 1999 171,420 0 0 0 0 0 4,290(5)
1998 156,420 0(2) 0 0 3,600(2) 0 3,361(5)
1997 153,542 0(2) 0 0 4,000(2) 0 2,663(5)
9,000(4)
William M. Smith ............ 1999* $103,129 0 0 0 0 $0 $11,481(9)
Former Vice President 1999 237,506 0 0 0 1,500(4) 0 61,086(9)
Managed Care Sales 1998 128,181 $15,000(12) 0 0 6,000(4) 0 11,074(9)
</TABLE>
- ------------------------
* Six month transition period ended December 31, 1999.
(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) Additional compensation in connection with off-site services provided for
an extended period of time.
(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 $3,150, $3,484, $3,986 and $332 as Company
matching contributions under its 401(k) Salary Savings Plan or other
retirement payments for fiscal 1997, 1998, 1999 and the six months ended
December 31,1999, respectively, and $20,000 per year (10,000 per half year)
for the total premiums paid by the Company on the life insurance policy
covered by the Split-Dollar Agreement referred to below in "Employment
Agreements" for fiscal 1997, 1998, 1999 and the six months ended
December 31, 1999, respectively.
11
<PAGE>
(7) The amount reflected includes $3,150, $3,336, $4,009 and $711 as Company
matching contributions under its 401(k) Salary Savings Plan or other
retirement payments for fiscal 1997, 1998, 1999 and the six months ended
December 31, 1999 respectively, and $17,000 per year ($8,500 per half year)
for a total premiums paid by the Company on the life insurance policy
covered by the Split-Dollar Agreement referred to below in "Employment
Agreements" for fiscal 1997, 1998, 1999 and the six months ended
December 31, 1999 respectively.
(8) The amount reflected includes $3,150, $3,555, $4,435 and $2,186 as Company
matching contributions under its 401(k) Salary Savings Plan or other
retirement payments for fiscal 1997, 1998, 1999 and the six months ended
December 31, 1999 respectively, and $6,000 per year ($3,000 per half year)
for the total premiums paid by the Company on the life insurance policy
covered by the Split-Dollar Agreement referred to below in "Employment
Agreements" for fiscal 1997, 1998, 1999 and the six months ended
December 31, 1999 respectively.
(9) The amount reflected includes $2,492, $4,800 and $1,801 for fiscal 1998,
1999 and the six months ended December 31, 1999 as Company matching
contributions under its 401(k) Salary Savings Plan and a moving allowance
of $8,582, $56,286, and $9,680 for fiscal 1998, 1999 and the six months
ended December 31, 1999.
(10) Includes auto allowance and medical coverage.
(11) Issuance of 15,000 common shares as a special bonus in connection with
certain business acquisition activities.
(12) Special bonus related to acceptance of employment.
The following two stock option tables summarize option grants and exercises
during fiscal 1999 for the Chief Executive Officer and other named executive
officers, and the values of options granted during fiscal 1999 and held by such
persons at June 30, 1999. No options were granted or exercised during the six
month period ended December 31, 1999.
STOCK OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
------------------------------------------------- OF STOCK PRICE APPRECIATION
FOR OPTION TERM
NUMBER OF % OF TOTAL -----------------------------------------
SECURITIES OPTIONS 5%(3) 10%(3)
UNDERLYING GRANTED TO EXERCISE ------------------- -------------------
OPTIONS EMPLOYEES IN OR BASE EXPIRATION STOCK STOCK
NAME GRANTED FISCAL YEAR PRICE DATE PRICE GAIN PRICE GAIN
- ---- ---------- ------------ -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary McIlroy, M.D.......... 10,000(1) 12.9% $ 10.00 06/30/03 $12.76 $27,600 $16.11 $61,100
Marlene Travis............. 10,000(1) 12.9% $ 10.00 06/30/03 $12.76 $27,600 $16.11 $61,100
Thomas P. Clark............ 0 0.0% $ 0 -- $ 0.00 $ 0 $ 0.00 $ 0
Adele M. Kimpell........... 0 0.0% $ 0 -- $ 0.00 $ 0 $ 0.00 $ 0
William M. Smith........... 1,500(1) 1.9% $ 10.00 06/30/03 $12.76 $ 4,140 $16.11 $ 9,165
</TABLE>
- ------------------------
(1) One-third of the stock options granted as a long-term incentive to the
individuals become exercisable on February 17, 1999, the date of grant, and
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.
(2) 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 1999 AND DECEMBER 31, 1999 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
DECEMBER 31, 1999 IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE EXERCISABLE/ AT DECEMBER 31, 1999(1)
ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------- --------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
Gary T. McIlroy, M.D...... 0 -- 91,473/96,665 $0/$0
Marlene Travis............ 0 -- 71,354/73,277 $0/$0
Thomas P. Clark........... 15,000 $142,035 51,537/32,889 $0/$0
Adele M. Kimpell.......... 2,000 $11,626 15,200/5,400 $0/$0
William M. Smith.......... -- -- 6,500/1,000 $0/$0
</TABLE>
- ------------------------
(1) Market value of underlying securities at December 31, 1999 ($6.125), the
closing price of the Common Stock, minus the exercise price. No options
were exercised during the six months ended December 31, 1999.
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, 1994, through
February 29, 2000, 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.
COMPARISON OF THE PERIOD 06/30/94 TO 02/29/00
CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEALTH RISK MANAGEMENT, INC. SIC CODE INDEX NASDAQ MARKET INDEX
<S> <C> <C> <C>
6/30/94 100 100 100
6/30/95 161.54 101.41 117.28
6/30/96 161.54 131.5 147.64
6/30/97 207.69 171.23 177.85
6/30/98 234.62 180.82 235.75
6/30/99 151.92 175.19 330.37
12/31/99 94.22 141.21 495.88
2/29/00 118.27 108.31 569.2
</TABLE>
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, Inc.; American Medical SEC, Inc.; AON Corp.; Citizens
Financial Corp.; Conseco, Inc.; Everest Re Group Ltd.; Foundation Health System;
Healthaxis, Inc.; Humana, Inc.; Lifepoint Hospitals; Maxicare Health Plans;
Medical Control, Inc; Mid-Atlantic Medical Services; MIIX Group, Inc.; Morrison
Management Specialists; Oxford Health Plans, Inc.; Pacificare Health System B
New; Penncorp Financial Group; Rightchoice Managed Care; Sierra Health Services;
Torchamrk Corp; Triad Hospitals, Inc.; Trigon Healthcare, Inc.; United
Healthcare Corp.; United Wisconsin Services; Unum Provident Corp.; Wellpoint
Health Network.
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 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.
14
<PAGE>
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, 1999
through December 31, 1999, all Section 16(a) filing requirements applicable to
its current and former officers and directors were complied with.
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 current fiscal year ending December 31, 2000. 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 2000 Annual Meeting. If
selection is not ratified, the Board will reconsider its selection.
A representative of Ernst & Young LLP is expected to be present at the 2000
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 2000
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 2001 annual meeting of shareholders must
received by the company by December 12, 2000 to be considered for inclusion in
the Company's proxy statement and related proxy for the 2001 annual meeting of
shareholders. In addition, as provided in the Company's Bylaws, no shareholder
proposals received by the Company less than 80 days prior to the date of the
2001 annual meeting can be considered at the meeting.
TRANSITION REPORT
A copy of the Company's Transition Report on Form 10-K including
consolidated financial statements, together with a letter to shareholders for
the six month transition period ended December 31, 1999, 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 TRANSITION REPORT ON
FORM 10-K FOR THE TRANSITION PERIOD ENDED DECEMBER 31, 1999, TO ANY SHAREHOLDER
OF THE COMPANY UPON WRITTEN REQUEST. REQUESTS SHOULD BE SENT TO CHIEF FINANCIAL
OFFICER, HEALTH RISK MANAGEMENT, INC., 10900 HAMPSHIRE AVENUE SOUTH,
BLOOMINGTON, MINNESOTA 55438. SUCH REQUESTS SHOULD INCLUDE A REPRESENTATION THAT
THE SHAREHOLDER WAS THE BENEFICIAL OWNER OF SHARES OF COMMON STOCK ON MARCH 31,
2000, THE RECORD DATE FOR THE 2000 ANNUAL MEETING OF SHAREHOLDERS.
Dated: April 12, 2000
Bloomington, Minnesota
15
<PAGE>
-- PLEASE DETACH HERE --
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Class B directors: 01 Marlene Travis / / FOR ALL nominees / / WITHHOLD AUTHORITY to
02 Vance Kenneth Travis listed at left (except vote for all nominees listed
those whose names at left.
have been written in
the box below).
--------------------------------------------------------
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
WRITE THAT NOMINEE'S NAME IN THE BOX PROVIDED TO THE RIGHT.) --------------------------------------------------------
2. INDEPENDENT AUDITORS. Ratification of selection of For Against Abstain
Ernst & Young LLP as the Company's independent auditors / / / / / /
for the 2000 fiscal year.
</TABLE>
In their discretion, the appointed Proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR IF NO
DIRECTION IS GIVEN FOR EITHER OF PROPOSALS #1 AND #2, WILL BE VOTED FOR SUCH
PROPOSAL.
Address Change? Mark Box / /
Indicate changes below:
Dated: , 2000
-----------------------
---------------------------------------
---------------------------------------
(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).
<PAGE>
HEALTH RISK MANAGEMENT, INC.
FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2000 PROXY
- ------------------------------------------------------------------------------
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
2000 Annual Meeting of Shareholders and at any adjournment thereof, and the
undersigned hereby revokes all proxies previously given with respect to the
Annual Meeting.
SEE REVERSE FOR VOTING INSTRUCTIONS.
