<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number: 0-23220
HEALTH POWER, INC.
(Exact name of Registrant as specified in its charter)
Delaware 31-1145640
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1209 Orange Street
Wilmington, Delaware 19801
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (302) 636-7593
Securities registered pursuant to Section 12(b) of the Act:
None
----------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
-----------------------------
(Title of Class)
<PAGE> 2
HEALTH POWER, INC.
FORM 10-K/A*
(Amendment No. 1)
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the executive officers of Health Power, Inc., a
Delaware corporation (the "Company"), may be found under the caption "Executive
Officers of the Registrant" immediately following Item 4 in Part I of the Form
10-K, and is also incorporated by reference into this Item 10.
The following sets forth certain information regarding the directors of
the Company:
<TABLE>
<CAPTION>
Name Age Positions with the Company
---- --- --------------------------
<S> <C> <C>
Dr. Bernard F. Master 56 Chairman of the Board, President,
Chief Executive Officer, and Director
Robert J. Bossart 46 Director
Dr. Elliott P. Feldman 59 Secretary and Director
Robert S. Garek 59 Director
Crystal A. Kuykendall, Ph.D., J.D. 48 Director
Frank R. Nutis 76 Director
Dr. Burt E. Schear 75 Director
Dr. Peter Somani 50 Director
</TABLE>
Dr. Master has been Chairman of the Board, Chief Executive Officer, and
a director of the Company since its formation in 1985, and President of the
Company since January 1998. Dr. Master is the sole stockholder of a corporation
which operated medical clinics which were providers for Health Power HMO, Inc.,
an Ohio corporation ("Health Power HMO"), which is a wholly owned subsidiary of
the Company. See Item 13. Certain Relationships and Related Transactions.
Mr. Bossart has been a director of the Company since 1995. Mr. Bossart
has been Chief Executive Officer of CompManagement, Inc., an Ohio corporation
("CompManagement"), which is a wholly owned subsidiary of the Company, since
September 1996, and prior to that, the President of CompManagement since its
formation in 1984. CompManagement offers claims management, risk
- ------------------
* Items omitted from this Form 10-K/A (Amendment No. 1) are included in Health
Power, Inc.'s Annual Report on Form 10-K for its fiscal year ended December 31,
1997, as filed with the Securities and Exchange Commission on March 31, 1998
(the "Form 10-K").
2
<PAGE> 3
management, and medical cost containment services to employees with respect to
workers' compensation and unemployment compensation claims. Mr. Bossart is also
Chief Executive Officer of CompManagement Health Systems, Inc., an Ohio
corporation ("CompManagement Health Systems"), which is a wholly owned
subsidiary of the Company, since it initiated operations in September 1996.
CompManagement Health Systems is certified as a state-wide managed care
organization under Ohio's Health Partnership Program, a managed care workers'
compensation program.
Dr. Feldman has been the Secretary and a director of the Company since
its formation in 1985. Since 1965, Dr. Feldman has been a practicing physician
in Columbus, Ohio. Dr. Feldman is the sole stockholder of two corporations which
each operate a medical clinic which are providers for Health Power HMO. See Item
13. Certain Relationships and Related Transactions.
Mr. Garek has been a director of the Company since 1986. Mr. Garek has
been a principal of R.S. Garek & Associates, a real estate development firm,
since 1997, and prior to that, a partner in Feibel-Garek Realtors, a real estate
development firm, since 1965.
Dr. Kuykendall has been a director of the Company since 1995. Dr.
Kuykendall has been the president of Kreative & Innovative Resources for Kids,
Inc., a company which provides products and services to advance the technical
development of youths, since 1990.
Mr. Nutis has been a director of the Company since 1986. Mr. Nutis has
been the president of Nutis Press, Inc., a printing and lithograph company,
since 1949.
Dr. Schear has been a director of the Company since 1991. Dr. Schear is
a retired physician. Dr. Schear is a 50% stockholder and president of Burt E.
Schear, M.D. & Associates, Inc., a professional corporation which operates three
medical clinics which are providers for Health Power HMO. See Item 13. Certain
Relationships and Related Transactions.
Dr. Somani has been a director of the Company since 1997. Since 1997,
Dr. Somani has served as a consultant to the health care industry and a lecturer
on health care related issues. From 1992 to 1997, Dr. Somani served as the
director of the Ohio Department of Health, a state agency with concurrent
regulatory authority over, among other things, health insuring corporations, and
from 1991 to 1992, he served as an assistant director of that Department. Dr.
Somani has also served as a professor of medicine and pharmacology at the
Medical College of Ohio, Toledo, Ohio (1980 to 1990), and the University of
Miami School of Medicine, Miami, Florida (1974 to 1980).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons owning more than 10% 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.
Officers, directors, and greater than 10% stockholders are required by the
Securities and Exchange Commission's regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Company, the Company believes that during
1997 all Section 16(a) filing requirements applicable to its officers,
directors, and greater than 10% stockholders were complied with by such persons,
except as follows: Dr. Master failed to timely report a gift of 4,000 shares of
Common Stock made to a charitable organization in July 1996; and each of Messrs.
Bossart, Wagner, and Kurth failed to timely report their receipt of 4,642,
4,286, and 3,214 options, respectively, granted to each of them under the
Company's Executive Performance Stock Option Plan in July 1996.
3
<PAGE> 4
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Set forth below is summary information regarding the annual and
long-term compensation of the Company's chief executive officer and its four
most highly compensated executive officers, other than the chief executive
officer, at the end of 1997:
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation Shares
---------------------------------- Underlying
Name and Principal Other Annual Options All Other
Position Year Salary(1) Bonus Compensation(2) Granted Compensation(3)
- ------------------ ---- --------- ----- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Bernard F. Master 1997 $192,000 $ -0- $ -0- 3,472 $ 638
Chairman of the Board, 1996 $184,250 $ -0- $ -0- 11,452 $1,382
President and Chief 1995 $161,829 $ -0- $ -0- 10,274 $1,357
Executive Officer of the
Company
Robert J. Bossart 1997 $178,031 $ -0- $815,968 2,031 $2,250
Chief Executive Officer 1996 $163,455 $ -0- $ 96,581 4,642 $1,687
of CompManagement 1995 $154,001 $ -0- $ 57,707 8,000 $2,250
and CompManagement
Health Systems
Jonathan R. Wagner 1997 $165,309 $ -0- $828,691 1,875 $2,589
President of 1996 $151,775 $ -0- $154,331 4,286 $1,781
CompManagement 1995 $142,986 $ -0- $116,301 8,000 $2,250
Richard T. Kurth 1997 $133,380 $ -0- $860,620 1,406 $2,688
Executive Vice President 1996 $122,460 $ -0- $ 54,056 3,214 $1,714
of CompManagement 1995 $115,915 $ -0- $ 39,174 4,000 $2,250
Thomas E. Beaty, Jr.(4) 1997 $160,000 $ -0- $ -0- 15,624 $1,561
President and Chief 1996 $172,854 $ -0- $ -0- 16,894 $1,223
Operating Officer of the 1995 $137,847 $ -0- $ -0- 6,764 $1,500
Company
</TABLE>
- ---------------------
(1) Includes amounts contributed by the named executive officer to 401(k)
retirement plans.
(2) Other compensation represents sales commissions paid to Messrs.
Bossart, Wagner, and Kurth under their respective employment
agreements. Sales commissions are based upon a percentage of revenues
of CompManagement and CompManagement Health Systems which are
attributable to new business generated by such person. CompManagement
Health Systems generated $11.3 million in revenues during 1997, its
first year of operations, all of which constituted new business.
(3) Represents amounts contributed as matching contributions to 401(k)
retirement plans.
(4) Mr. Beaty resigned as an officer and director of the Company on
February 6, 1998.
4
<PAGE> 5
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all grants of stock options to the
executive officers named in the Summary Compensation Table during 1997:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation
Options Employees in Exercise or for Option Term(2)
Name Granted Fiscal Base Price Expiration -----------------
---- (#) Year ($/Sh)(1) Date 5% ($) 10% ($)
------- ---- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Dr. Bernard F. Master 3,472 4.9% $4.00 04/15/07 $ 8,734 $22,134
Robert J. Bossart 2,031 2.9% $4.00 04/15/07 $ 5,109 $12,948
Jonathan R. Wagner 1,875 2.6% $4.00 04/15/07 $ 4,717 $11,953
Richard T. Kurth 1,406 2.0% $4.00 04/15/07 $ 3,537 $ 8,963
Thomas E. Beaty, Jr. 15,624 22.1% $4.00 04/15/07 $39,303 $99,602
</TABLE>
- -------------------
(1) The per share exercise price is equal to the fair market value of the
shares of Common Stock on the date of grant.
(2) The dollar amounts under the 5% and 10% columns in the table are the
result of calculations required by the rules of the Securities and
Exchange Commission.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION
VALUES
The following table sets forth stock option exercises during 1997 by
the executive officers named in the Summary Compensation Table and the value of
in-the-money stock options held by those individuals as of December 31, 1997:
<TABLE>
<CAPTION>
Number of Shares
Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
Value at 12/31/97 (#) -- 12/31/97 ($) --
Shares Acquired Realized Exercisable / Exercisable /
Name on Exercise (#) ($)(1) Unexercisable Unexercisable(2)
---- --------------- ------ ------------- ----------------
<S> <C> <C> <C> <C>
Dr. Bernard F. Master -0- -0- 13,556/31,250 $0/$3,472
Robert J. Bossart -0- -0- 2,000/12,673 $0/$2,031
Jonathan R. Wagner -0- -0- 2,000/12,161 $0/$1,875
Richard T. Kurth -0- -0- 1,000/ 7,620 $0/$1,406
Thomas E. Beaty, Jr. -0- -0- 18,209/40,681 $0/$15,624
</TABLE>
- -----------------------
(1) Aggregate market value of the shares of Common Stock covered by the
option less the aggregate price paid by the executive officer.
(2) The value of in-the-money options was determined by subtracting the
exercise price from the closing price of the Common Stock as of
December 31, 1997.
5
<PAGE> 6
EMPLOYMENT AGREEMENTS; TERMINATION OF EMPLOYMENT
Dr. Bernard F. Master, the Company's Chairman, President, and Chief
Executive Officer, has had successive one-year employment agreements since 1991
pursuant to which he serves as chairman. The term of his current agreement as
chairman expires in May 1999. Dr. Master's annual base salary under this
employment agreement is $192,000. This employment agreement provides him with
disability insurance benefits in addition to those benefits provided to all of
the Company's personnel and a discretionary cash bonus in an amount determined
by the Company's Compensation Committee. Under his employment agreement, Dr.
Master receives "Formula Vesting Options" under the Health Power, Inc. 1994
Executive Performance Stock Option Plan, as amended (the "Executive Plan"),
exercisable for a number of shares of Common Stock determined to be appropriate
by the Company's Compensation Committee, which shares vest in accordance with
the formula calculations set forth in the Executive Plan. Since January 1998,
Dr. Master has also had an additional one-year employment agreement pursuant to
which he serves as president. This employment agreement, which expires in
January 1999, provides for an annual base salary of $120,000. In connection with
such employment agreement, Dr. Master also received "Discretionary Vesting
Options" under the Executive Plan exercisable for 20,000 shares of Common Stock.
Such options vest in accordance with the provisions of the Executive Plan.
Robert J. Bossart, the Chief Executive Officer of CompManagement and
CompManagement Health Systems, has an employment agreement which expires in
December 1999. Mr. Bossart's employment agreement provides for the payment of an
annual salary of $156,168 (subject to periodic increases) plus sales
commissions. Mr. Bossart has also agreed to abide by certain noncompetition and
confidentiality provisions. If Mr. Bossart's employment is terminated for any
reason other than just cause, or is terminated at the end of the five-year term
of the agreement, then Mr. Bossart will receive one of the following amounts:
(a) if prior to such termination there has been a change in control of the
Company, an amount equal to two times his base salary plus two times the
commissions earned by him for the last full performance year of his employment;
or (b) in any other event, an amount equal to two times his base salary plus the
commissions earned by him during the one-year period immediately prior to such
termination. Severance benefits also include the receipt of fringe benefits
otherwise receivable under the agreement until the earlier of two years after
the date of termination or the date any such benefit is provided by another
employer. Mr. Bossart also receives Formula Vesting Options and Discretionary
Vesting Options under the Executive Plan pursuant to his employment agreement.
The number of shares of Common Stock subject to Formula Vesting Options and
Discretionary Vesting Options granted each year is based upon (a) a percentage
of maximum cash bonus established for that year for the president of Health
Power Management Corporation, an Ohio corporation ("HPMC"), and (b) the number
of such Options previously granted to Mr. Bossart which received accelerated
vesting treatment from prior years. The shares of Common Stock subject to the
Formula Vesting Options and the Discretionary Vesting Options vest in the manner
set forth in the Executive Plan. Mr. Bossart is also entitled to participate in
cash bonus arrangements generally made available to all of the Company's
personnel.
Jonathan R. Wagner, the President of CompManagement, has an employment
agreement which expires in December 1999. Mr. Wagner's employment agreement
provides for the payment of an annual salary of $145,008 (subject to periodic
increases) plus sales commissions. Mr. Wagner has also agreed to abide by
certain noncompetition and confidentiality provisions. If Mr. Wagner's
employment is terminated for any reason other than just cause, or is terminated
at the end of the term of the agreement, then Mr. Wagner is to receive one of
the following amounts: (a) if prior to such termination there has been a change
in control of the Company, an amount equal to two times his base salary plus two
times the commissions earned by him for the last full performance year of his
employment; or (b) in any other event, an amount equal to two times his base
salary plus the commissions earned by him during the one-year period immediately
prior to such termination. Severance benefits also include the receipt of fringe
benefits otherwise receivable under the agreement until the earlier of two years
after the date of termination or the date any such benefit is provided by
another employer. Mr. Wagner also receives Formula Vesting Options and
6
<PAGE> 7
Discretionary Vesting Options under the Executive Plan pursuant to his
employment agreement. The number of shares of Common Stock subject to Formula
Vesting Options and Discretionary Vesting Options granted each year is based
upon (a) a percentage of the maximum cash bonus established for that year for
the president of HPMC and (b) the number of such Options previously granted to
Mr. Wagner which received accelerated vesting treatment from prior years. The
shares of Common Stock subject to the Formula Vesting Options and the
Discretionary Vesting Options vest in the manner set forth in the Executive
Plan. Mr. Wagner also is entitled to participate in cash bonus arrangements
generally made available to all of the Company's employees.
Richard T. Kurth, the Executive Vice President of CompManagement, has
an employment agreement which expires in December 1999. Mr. Kurth's employment
agreement provides for the payment of an annual salary of $117,000 (subject to
periodic increases) plus sales commissions. Mr. Kurth has also agreed to abide
by certain noncompetition and confidentiality provisions. If Mr. Kurth's
employment is terminated for any reason other than just cause, or is terminated
at the end of the five-year term of the agreement, then Mr. Kurth is to receive
one of the following amounts: (a) if prior to such termination there has been a
change in control of the Company, an amount equal to two times his base salary
plus two times the commissions earned by him for the last full performance year
of his employment; or (b) in any other event, an amount equal to two times his
base salary plus the commissions earned by him during the one-year period
immediately prior to such termination. Severance benefits also include the
receipt of fringe benefits otherwise receivable under the agreement until the
earlier of two years after the date of termination or the date any such benefit
is provided by another employer. Mr. Kurth also receives Formula Vesting Options
and Discretionary Vesting Options under the Executive Plan pursuant to his
employment agreement. The number of shares of Common Stock subject to Formula
Vesting Options and Discretionary Vesting Options granted each year is based
upon (a) a percentage of the maximum cash bonus established for that year for
the president of HPMC and (b) the number of such Options previously granted to
Mr. Kurth which received accelerated vesting treatment from prior years. The
shares of Common Stock subject to the Formula Vesting Options and the
Discretionary Vesting Options vest in the manner set forth in the Executive
Plan. Mr. Kurth also is entitled to participate in cash bonus arrangements
generally made available to all of the Company's employees.
Thomas E. Beaty, Jr. served as President and Chief Operating Officer of
the Company pursuant to a one-year employment agreement ending April 30, 1998.
Mr. Beaty resigned these offices, as well as his position as director of the
Company, on February 6, 1998. Under his severance agreement, Mr. Beaty received
the following: (i) payment of his base salary through July 31, 1998; (ii)
payment of $20,000 for executive out-placement services; (iii) health insurance
coverage up to October 31, 1999; (iv) payment of his unused vacation time; (v)
payment of the 1998 premiums for a $400,000 face amount term life insurance
policy covering his life; and (vi) accelerated vesting of options for 15,624
shares of Common Stock issued to him in 1997 under the Executive Plan (the
options have an exercise price of $4.00 per share). Under the terms of the
employment agreement in place at the time of his resignation, Mr. Beaty's annual
base salary was $160,000. Mr. Beaty's employment agreement also provided for
cash and stock option incentive bonuses. Mr. Beaty relinquished his right to any
such bonuses under the terms of the severance arrangement.
COMPENSATION OF DIRECTORS
Directors who are employees receive no separate compensation for their
services as a director. Outside directors of the Company (persons who are not
employees of the Company or any of its subsidiaries) receive an annual retainer
fee of $3,000, $500 for each Board or committee meeting attended, and the
reimbursement of travel expenses. In accordance with the Company's 1996
Directors Stock Award and Purchase Plan, outside directors also receive an
annual award of Common Stock equal in value to $3,000 (determined as of the end
of the year for which the award is to be made). Under this plan, outside
directors receive 50% of their cash annual retainer fee and 50% of their
quarterly
7
<PAGE> 8
meeting fees in the form of Common Stock, and they have the option to receive a
greater percentage of such fees in the form of Common Stock. Outside directors
can also elect to receive all or a specified percentage of their other fees
(such as special board or committee meeting fees) in the form of Common Stock.
The number of shares awarded is determined by dividing the dollar amount of the
fees to be received in the form shares of Common Stock by the last reported sale
price of the Common Stock on the Nasdaq National Market system as of the last
trading day prior to the date on which the applicable Board meeting is held. In
addition, outside directors receive stock options under the Company's 1993
Directors' Stock Option Plan. Under this plan, promptly following each annual
meeting of stockholders of the Company, each eligible director is granted an
option to purchase 1,000 shares of Common Stock at the fair market value of such
shares on the last trading day prior to the annual meeting preceding the date of
grant. Options are immediately exercisable in whole or in part and must be
exercised within ten years of the grant date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert S. Garek, Crystal A. Kuykendall, and Frank R. Nutis serve as
members of the Compensation Committee. No executive officer of the Company
served during 1997 as a member of a compensation committee or as a director of
any entity of which any of the Company's directors served as an executive
officer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) each stockholder known
by the Company to be the beneficial owner of 5% or more of the Common Stock,
(ii) each director and each executive officer named in the Summary Compensation
Table (see Item 11), and (iii) all executive officers and directors as a group:
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
- ------------------- ----------------------- ----------------
Dr. Bernard F. Master 1,203,892(2) 31.3%
560 East Town Street
Columbus, Ohio 43215
Heartland Advisors, Inc. 646,900(3) 16.9%
790 North Milwaukee St.
Milwaukee, Wisconsin 53202
Robert J. Bossart 295,581(4) 7.7%
6377 Emerald Parkway
Dublin, Ohio 43016
Jonathan R. Wagner 295,581 7.7%
6377 Emerald Parkway
Dublin, Ohio 43016
Richard T. Kurth 59,716 1.6%
Thomas E. Beaty, Jr. 103,824(4) 2.7%
Dr. Elliott P. Feldman 91,830 2.4%
8
<PAGE> 9
Robert S. Garek 21,836 *
Crystal A. Kuykendall, Ph.D., J.D. 6,200 *
Frank R. Nutis 31,013 *
Dr. Burt E. Schear 75,460 2.0%
Dr. Peter Somani 2,018 *
All executive officers and 2,156,733 55.1%
directors as a group (12 persons)
- ----------------
*Less than 1%
(1) Beneficial ownership was determined as of July 15, 1998, except as
otherwise indicated in the notes to this table. The persons named in
this table and/or their spouses have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned
by the named person, except as otherwise indicated in the notes to this
table. This table does not include options for Common Stock which were
not exercisable as of the date beneficial ownership was determined or
were not exercisable within 60 days of such date. For the following
persons, this table includes the following number of shares of Common
Stock which could be acquired upon the exercise of options which were
exercisable as of the date beneficial ownership was determined or were
exercisable within 60 days of such date: Dr. Master -- 13,556 shares;
Mr. Bossart -- 4,000 shares; Mr. Wagner -- 4,000 shares; Mr. Kurth --
2,000 shares; Dr. Feldman -- 17,614 shares; Mr. Garek -- 13,880 shares;
Dr. Kuykendall -- 3,000 shares; Mr. Nutis -- 15,325 shares; Dr. Schear
-- 9,663 shares; and Dr. Somani -- 1,000 shares.
(2) Includes 1,400 shares owned by a trust of which Dr. Master is the
trustee.
(3) Beneficial ownership was determined as of December 31, 1997, and is
based upon a Schedule 13G filed by Heartland Advisors, Inc. with the
Securities and Exchange Commission. Heartland Advisors, Inc. is an
investment adviser registered under Section 203 of the Investment
Advisors Act of 1940.
(4) Beneficial ownership was determined as of February 6, 1998, the date
Mr. Beaty resigned as an officer and director of the Company. Mr.
Beaty's shares include 100 shares of Common Stock held by Mr. Beaty as
custodian for his grandchild and 33,833 shares which could be acquired
upon the exercise of options which were exercisable as of February 6,
1998 or were exercisable within 60 days of such date.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Health Power HMO has entered into provider agreements with a number of
physician groups affiliated with the Company's medical director and certain of
its officers and directors. These provider agreements are on the same terms and
conditions as Health Power HMO's provider agreements with unaffiliated
physicians or physician groups. Affiliation with these providers by members of
management of the Company may result in certain conflicts of interest between
the Company and such individuals, such as with respect to the annual adjustment
of provider fees. Such affiliated physician groups are Parsons Avenue Medical
Clinic, Inc. and Westland Family Practice, Inc., both of which Dr. Elliott P.
Feldman is the sole stockholder; Burt E. Schear, M.D. & Associates, Inc., of
which Dr. Burt E. Schear is a 50% stockholder; and Child Care Consultants, Inc.,
of which Dr. James E. Foy, the medical director of
9
<PAGE> 10
Health Power HMO, is a 50% stockholder. In addition, prior to April 1998,
Affiliated Medical Practices, Inc., a corporation in which Dr. Bernard F. Master
is the sole stockholder, owned Over-The-Rhine Family Practice and Fairmont
Family Practice, and prior to April 1997, this corporation owned Master Family
Practice and Main Street MedCenter, all of which were providers for Health Power
HMO. For the fiscal year ended December 31, 1997, payments under provider
agreements to affiliated physician groups amounted to $1,757,061. During such
period, physician groups affiliated with the following members of management of
the Company received the following amounts under their provider agreements: Dr.
Bernard F. Master, $1,100,512; Dr. Elliott P. Feldman, $168,944; Dr. Burt E.
Schear, $242,477; and Dr. James E. Foy, $245,128.
Under its provider agreement with Health Power HMO, Affiliated Medical
Practices, Inc., a corporation in which Dr. Bernard F. Master is the sole
stockholder, agreed to provide medical services exclusively to members of Health
Power HMO. In exchange for this exclusivity arrangement, Affiliated Medical
Practices, Inc. received additional capitation payments from Health Power HMO.
During the fiscal year ended December 31, 1997, such additional capitation
payments amounted to $135,005. This exclusivity arrangement is offered to all of
Health Power HMO's other primary care physicians or physician groups.
The Company has entered into contracts to provide health care services
to the employees and their dependents of physician groups affiliated with the
Company's medical director and certain of its officers and directors. These
contracts are substantially on the same terms as contracts with other employer
groups. The commercial premiums from such physician groups amounted to $83,467
for 1997.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HEALTH POWER, INC.
Date: August 20, 1998 By /s/ Dr. Bernard F. Master
---------------------------------------------
Dr. Bernard F. Master, Chairman of the Board,
Chief Executive Officer, and President
11
