<PAGE> 1
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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
HEALTH POWER, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
HEALTH POWER, INC. LOGO
HEALTH POWER, INC.
NOTICE OF ANNUAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
To the Stockholders of
HEALTH POWER, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Health
Power, Inc. (the "Company") will be held at the offices of the Company's
subsidiary, CompManagement, Inc., located at 6377 Emerald Parkway, Dublin, Ohio
43016, on Thursday, June 3, 1999, at 3:00 p.m., local time, for the following
purposes:
1. To elect two Class I directors, each to hold office for a
three-year term and until a successor is elected and qualified.
2. To elect two Class III directors, each to hold office for a
two-year term and until a successor is elected and qualified.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April 12, 1999, has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting and any adjournment thereof.
In order that your shares may be represented at this meeting and to assure
a quorum, please sign and return the enclosed proxy promptly. A return addressed
envelope, which requires no postage, is enclosed. In the event you are able to
attend and wish to vote in person, at your request we will cancel your proxy.
By Order of the Board of Directors
DR. ELLIOTT P. FELDMAN
Secretary
Dated: April 30, 1999
<PAGE> 3
HEALTH POWER, INC.
PROXY STATEMENT
GENERAL
This Proxy Statement is being furnished to the holders of shares of common
stock, $0.01 par value (the "Shares"), of Health Power, Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board") to be used at the Company's
Annual Meeting of Stockholders (the "Annual Meeting"). The Annual Meeting will
be held at the offices of the Company's subsidiary, CompManagement, Inc.,
located at 6377 Emerald Parkway, Dublin, Ohio 43016, on Thursday, June 3, 1999,
at 3:00 p.m., local time, for the purposes set forth on the accompanying Notice
of Annual Meeting. The mailing address of the Company's principal executive
offices is 1209 Orange Street, Wilmington, Delaware 19801.
The approximate date on which this Proxy Statement and the form of proxy
will be first sent to stockholders is April 30, 1999.
PROXIES AND VOTING
The close of business on April 12, 1999, has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. On the record date, 3,834,829 Shares
were outstanding and entitled to vote. Each Share is entitled to one vote.
All Shares represented by properly executed proxies will be voted at the
Annual Meeting in accordance with the choices indicated on the proxy. If a proxy
does not indicate a choice, the Shares represented by that proxy will be voted
in favor of the proposals set forth on the accompanying Notice of Annual
Meeting. A stockholder may revoke a proxy at any time prior to its exercise by
delivering to the Company a subsequently dated proxy or by giving notice of
revocation to the Company in writing or in open meeting. A stockholder's
presence at the Annual Meeting does not by itself revoke the proxy.
In the election of directors, the nominees who receive the highest number
of votes for the available directorships in each class will be elected, and thus
abstentions and broker non-votes have no effect on the election of directors (a
broker non-vote occurs when a broker who holds Shares in street name for a
customer has not received voting instructions from the customer and does not
have discretion to vote on the matter). Stockholders do not have the right to
cumulate their votes in electing directors.
ELECTION OF DIRECTORS
The number of directors is currently fixed at nine. The Board is divided
into three classes, Class I, Class II, and Class III. Class I has two directors;
Class II has four directors; and Class III has three directors. The term of
office of the Class I directors and the Class III directors expires concurrently
with the holding of the Annual Meeting.
Directors in each class are normally elected to three-year terms, with the
terms of office of one class of directors expiring each year at the annual
meeting of stockholders and at such time as their successors are duly elected
and qualified. The individuals elected as Class I directors will be elected to a
three-year term expiring in 2002. In addition, individuals will be elected as
Class III directors at the Annual Meeting, and these individuals will be elected
to a two-year term. This departure from the normal three-year term is necessary
because the Company did not hold an annual meeting in 1998, when the directors
in Class III would have
1
<PAGE> 4
been elected to a three-year term scheduled to expire in 2001. A two-year term
of office is therefore necessary for the Class III directors elected at the
Annual Meeting so that their term of office will expire in 2001 as originally
scheduled.
Dr. Crystal A. Kuykendall, an incumbent director in Class I, and Jonathan
R. Wagner have has been nominated for election as Class I directors. Drs.
Elliott P. Feldman and Bernard F. Master, the incumbent directors in Class III,
have been nominated for election as Class III directors. In the event that any
nominee named below as a Class I or Class III director is unable to serve (which
is not anticipated), the persons named in the proxy may vote the proxy for
another nominee of their choice.
The number of nominees for election in Class III is less than the number of
director positions available in Class III because the Company believes it is
desirable to have a vacancy available that could be filled by the Board without
the time and expense involved in holding a special meeting of stockholders,
should a person who could make a valuable contribution as a director of the
Company become available. No decision has been made to fill the vacancy, nor has
any candidate been considered or approved by the Board.
With respect to Class III directors, proxies cannot be voted at the Annual
Meeting for a greater number of persons than the two nominees named in this
Proxy Statement.
CLASS I DIRECTORS
(NOMINEES FOR ELECTION)
<TABLE>
<CAPTION>
NAME OF
NOMINEE/DIRECTOR SHARES
AND POSITION PRINCIPAL OCCUPATION(S) DIRECTOR OF THE BENEFICIALLY PERCENT
WITH THE COMPANY AGE DURING THE PAST FIVE YEARS COMPANY SINCE OWNED(1) OF CLASS
---------------- --- -------------------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Crystal A. Kuykendall, 49 President of Kreative & 1995 6,406 *
Ph.D., J.D., Director Innovative Resources for
Kids, Inc., a company that
provides products and
serves to advance the
technical development of
youths, since 1990.
Jonathan R. Wagner, 41 President of -- 304,136 7.9%
Director Nominee CompManagement, Inc., a
wholly owned subsidiary of
the Company
("CompManagement"), since
September 1996, and prior
to that, Vice President of
CompManagement since its
formation in 1984.
</TABLE>
2
<PAGE> 5
CLASS III DIRECTORS
(NOMINEES FOR ELECTION)
<TABLE>
<CAPTION>
NAME OF
NOMINEE/DIRECTOR SHARES
AND POSITION PRINCIPAL OCCUPATION(S) DIRECTOR OF THE BENEFICIALLY PERCENT
WITH THE COMPANY AGE DURING THE PAST FIVE YEARS COMPANY SINCE OWNED(1) OF CLASS
---------------- --- -------------------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Dr. Elliott P. Feldman, 60 Secretary of the Company 1985 93,017 2.4%
Secretary and Director since its formation in
March 1985. Practicing
physician since 1965.
Dr. Bernard F. Master, 57 Chairman of the Board and 1985 1,218,892(2) 31.6%
Chairman of the Board Chief Executive Officer of
President, Chief Executive the Company since its
Officer and Director formation in March 1985.
President of the Company
since January 1998.
</TABLE>
Set forth below is information relating to Class II directors, whose terms
of office will continue after the Annual Meeting.
CLASS II DIRECTORS
(TERMS EXPIRING IN 2000)
<TABLE>
<CAPTION>
NAME OF DIRECTOR SHARES
AND POSITION PRINCIPAL OCCUPATION(S) DIRECTOR OF THE BENEFICIALLY PERCENT
WITH THE COMPANY AGE DURING THE PAST FIVE YEARS COMPANY SINCE OWNED(1) OF CLASS
---------------- --- -------------------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Robert J. Bossart, 47 Chief Executive Officer of 1995 304,470 7.9%
Director CompManagement since
September 1996, and prior
to that, President of
CompManagement since its
formation in 1984. Chief
Executive Officer of
CompManagement Health
Systems, Inc., a wholly
owned subsidiary of
CompManagement
("CompManagement Health
Systems"), since it
initiated operations in
September 1996.
Robert S. Garek, 60 Principal of R.S. Garek & 1986 21,316 *
Director Associates, a real estate
development firm, since
1997, and prior to that,
partner in Feibel-Garek
Realtors, a real estate
development firm, since
1965.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF DIRECTOR SHARES
AND POSITION PRINCIPAL OCCUPATION(S) DIRECTOR OF THE BENEFICIALLY PERCENT
WITH THE COMPANY AGE DURING THE PAST FIVE YEARS COMPANY SINCE OWNED(1) OF CLASS
---------------- --- -------------------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Frank R. Nutis, 77 President of Nutis Press, 1986 31,851(3) *
Director Inc., a printing and
lithograph company, since
1949.
Dr. Burt E. Schear, 76 Retired physician. 1991 76,336 2.0%
Director
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership as of April 12, 1999. Except as otherwise indicated in
the notes to this table, the persons named in the table and their spouses
have sole voting and investment power with respect to all Shares owned by
them. For each of the directors or director nominees, this table includes
the following number of Shares which may be acquired upon the exercise of
options that are currently exercisable or exercisable within 60 days of
April 12, 1999: Mr. Bossart--10,352 Shares; Dr. Feldman--17,614 Shares; Mr.
Garek--13,880 Shares; Dr. Kuykendall--3,000 Shares; Dr. Master--23,556
Shares; Mr. Nutis--15,325 Shares; Dr. Shear--9,663 Shares; and Mr.
Wagner--10,018 Shares.
(2) Includes 1,400 Shares owned by a trust of which Dr. Master is the trustee.
(3) Includes 5,000 Shares owned by a trust of which Mr. Nutis is the trustee.
In addition to the Shares beneficially owned by Dr. Master and Messrs.
Bossart and Wagner, as set forth above, Richard T. Kurth, the other named
executive officer in the Summary Compensation Table set forth below,
beneficially owned 68,804 Shares (1.8% of Class) as of April 12, 1999, including
6,013 Shares which may be acquired upon the exercise of options that are
currently exercisable or exercisable within 60 days of April 12, 1999. Mr. Kurth
has sole voting and investment power with respect to all of these Shares.
As of April 12, 1999, all directors and executive officers of the Company,
as a group (11 persons), beneficially owned 2,128,519 Shares (53.9% of Class),
including 112,546 Shares which may be acquired upon the exercise of options
which are currently exercisable or exercisable within 60 days of April 12, 1999.
4
<PAGE> 7
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 only other
executive officers whose annual compensation exceeded $100,000 during 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) GRANTED(2) COMPENSATION(3)
- --------------------------- ---- --------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Bernard F. Master, 1998 $303,692 $50,000 -0- 20,000 $2,137
Chairman, President and 1997 $192,000 -0- -0- 3,472 $ 638
Chief Executive Officer of 1996 $184,250 -0- -0- 11,452 $1,382
the Company
Robert J. Bossart, 1998 $178,031 -0- $379,379 3,506 $2,500
Chief Executive Officer of 1997 $178,031 -0- $815,968 2,031 $2,250
CompManagement and 1996 $163,455 -0- $ 96,581 4,642 $1,687
CompManagement Health Systems
Jonathan R. Wagner, 1998 $165,309 -0- $464,012 3,367 $2,500
President of 1997 $165,309 -0- $828,688 1,875 $2,589
CompManagement 1996 $151,775 -0- $154,331 4,286 $1,781
Richard T. Kurth, 1998 $133,380 -0- $447,468 2,455 $2,500
Executive Vice President of 1997 $133,380 -0- $860,620 1,406 $2,688
CompManagement 1996 $122,460 -0- $ 54,056 3,214 $1,714
</TABLE>
- ---------------
(1) Includes amounts contributed by the named executive officer to 401(K)
retirement plans.
(2) Other annual compensation represents sales commissions paid to Messrs.
Bossart, Wagner, and Kurth under their respective employment agreements.
Sales commissions paid are based upon a percentage of revenues of
CompManagement and CompManagement Health Systems which are attributable to
new business generated by such person.
(3) Represents matching contributions to 401(K) retirement plans.
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all grants of stock options during 1998 to
the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
------------------------------------------------------------------ APPRECIATION FOR OPTION
NUMBER OF SHARES % OF TOTAL OPTIONS EXERCISE TERM(2)
UNDERLYING GRANTED TO EMPLOYEES PRICE PER EXPIRATION ------------------------
NAME OPTIONS GRANTED IN FISCAL YEAR SHARE(1) DATE 5% 10%
- ---- ---------------- -------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dr. Bernard F. Master 20,000 32.7% $4.50 02/12/08 $56,000 $143,437
Robert J. Bossart 3,506 5.7% $4.38 04/13/08 $ 9,657 $ 24,474
Jonathan R. Wagner 3,367 5.5% $4.38 04/13/08 $ 9,274 $ 23,503
Richard T. Kurth 2,455 4.0% $4.38 04/13/08 $ 6,762 $ 17,138
</TABLE>
- ---------------
(1) The exercise price per share is equal to the fair market value of the Shares
on the date of grant.
(2) The dollar amounts under the 5% and 10% columns are the result of
calculations required by the rules of the Securities and Exchange
Commission. Although permitted by these rules, the Company did not use an
alternate formula for a grant date valuation because the Company is not
aware of a formula that would determine with reasonable accuracy a present
value based on future unknown factors.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following tables sets forth stock option exercises during 1998 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, 1998:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
12/31/98 OPTIONS AT 12/31/98
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
- ---- --------------- ------------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Dr. Bernard F. Master -0- -0- 13,556/51,250 $0/$0
Robert J. Bossart -0- -0- 8,321/9,858 $0/$0
Jonathan R. Wagner -0- -0- 8,143/9,385 $0/$0
Richard T. Kurth -0- -0- 4,607/6,468 $0/$0
</TABLE>
- ---------------
(1) Aggregate market value of the Shares 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 Shares as of December 31, 1998.
6
<PAGE> 9
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total return on the Company's Shares to the yearly percentage change in the
cumulative total return of the Nasdaq Stock Market (U.S.) and the Dow Jones
Health Care Providers Index. The graph and the amounts in the graph assume that
$100 was invested on March 3, 1994 (when the Company's Shares were first
available to the public) and that all dividends were reinvested.
COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET DOW JONES HEALTH CARE
HEALTH POWER, INC. (U.S.) INDEX
------------------ ------------------- ---------------------
<S> <C> <C> <C>
3/03/94 100 100 100
12/94 129 97 94
12/95 68 137 121
12/96 22 168 136
12/97 41 207 130
12/98 21 290 109
</TABLE>
The foregoing graph is not -- nor is it intended to be -- any indication of
the future performance of the Company's Shares.
EMPLOYMENT AGREEMENTS
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. Dr. Master's current employment
agreement as Chairman provides for an annual base salary of $295,000 plus an
annual cash bonus of up to 35% of his annual base salary. The amount of the
annual cash bonus is based upon Dr. Master's achievement of performance criteria
or goals established by the Company's Compensation Committee. If Dr. Master's
employment as Chairman is terminated due to or after a change in control of the
Company, then Dr. Master will receive severance payments equal to one year's
annual base salary and fringe benefits for one year from his termination date.
Under this employment agreement, Dr. Master receives Formula Vesting Options
under the Health Power, Inc. 1994 Executive Performance Stock Option Plan, as
amended (the "Executive Plan"), equal to the aggregate amount of Formula Vesting
Options and Discretionary Vesting Options received by the Chief Executive
Officer of CompManagement. Since January 1998, Dr. Master has also had an
additional one-year employment agreement pursuant to which he serves as
President of Health Power Management Corporation ("HPMC"), a wholly owned
subsidiary of the Company which manages the operations of Health Power HMO, Inc.
(the "HMO"). This employment agreement, which terminates upon the completion of
the windup of the HMO, provides for a base salary of $12,500 per month.
7
<PAGE> 10
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 ($178,031 for 1998) 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 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 HPMC and (b) the number of such Options previously granted to Mr.
Bossart which received accelerated vesting treatment from prior years. The
Shares 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 ($165,309 for 1998) 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 Discretionary Vesting Options
under the Executive Plan pursuant to his employment agreement. The number of
Shares 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 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 ($133,380 for 1998) 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 subject to Formula Vesting Options and Discretionary
Vesting Options granted each year is based upon (a) a percentage of the maximum
8
<PAGE> 11
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 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.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board has established an Executive Committee, a Compensation Committee,
an Audit and Finance Committee, a 1994 Stock Option Plan Committee, and a 1994
Executive Performance Stock Option Plan Committee. The Board has no standing
nominating committee or other committee performing similar functions.
The Executive Committee, whose current members are Drs. Master and Feldman
and Messrs. Bossart, Garek, and Nutis, has the same authority, subject to
certain limitations, as the Board during intervals between meetings of the
Board. The Executive Committee did not meet during 1998.
The Compensation Committee, whose current members are Dr. Kuykendall and
Messrs. Garek and Nutis, is responsible for evaluating the compensation, fringe
benefits, and perquisites provided to the Company's officers and adopting
compensation policies applicable to the Company's executive officers, including
the specific relationship, if any, of corporate performance to executive
compensation and the factors and criteria upon which the compensation of the
Company's chief executive officer should be based. In 1998, the Compensation
Committee held two meeting.
The Audit and Finance Committee, whose current members are Drs. Master and
Feldman and Mr. Garek, is responsible for recommending the appointment of the
Company's auditors to the Board, reviewing with such auditors the scope and
results of their audit, reviewing the Company's accounting functions,
operations, and management, and considering the adequacy and effectiveness of
the internal auditing controls and internal auditing methods and procedures of
the Company. In 1998, the Audit and Finance Committee held one meeting.
The 1994 Stock Option Plan Committee, whose current members are Dr.
Kuykendall and Messrs. Garek and Nutis, is responsible for administering the
1994 Stock Option Plan. The 1994 Stock Option Plan Committee held one meeting in
1998.
The Compensation Committee has been designated to act as the 1994 Executive
Performance Stock Option Committee and is responsible for administering the
Executive Plan. The Compensation Committee held two meetings and took action
twice by written consent during 1998 with respect to matters pertaining to the
Executive Plan.
The Board held nine meetings and took action one time by written consent in
1998. Each incumbent director attended at least 75% of the meetings held by the
Board and the committees on which he or she served during 1998.
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 cash
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 a number of Shares equal in value to $3,000 (determined as of
the end of the year for which the award is to be made). In addition, under this
plan, outside directors receive 50% of their cash annual retainer fee and 50% of
their quarterly meeting fees in the form of Shares, and they have the option to
receive all or a greater percentage of such fees in the form of Shares. Outside
directors can also elect to receive all or a specified percentage of their other
fees (such as fees for attending special Board meetings or committee meetings)
in the form of Shares. The number of Shares awarded is determined by dividing
the dollar amount of the fees to be received in the form Shares by the last
9
<PAGE> 12
reported sale price of the Shares 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 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.
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 who own 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% shareholders 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 1998 all Section 16(a) filing
requirements applicable to its officers and directors were complied with by such
persons, except as follows: Dr. Master filed a Form 4 eight days late to report
the purchase of 1,000 Shares; and Mr. Garek filed a Form 4 eight days late to
report the purchase of 500 Shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert S. Garek, Crystal A. Kuykendall, Ph.D., J.D., and Frank R. Nutis
serve as members of the Compensation Committee. No executive officer of the
Company served during 1998 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the report of the Company's Compensation Committee, whose
members are identified below, with respect to compensation reported for 1998 as
reflected in the Summary Compensation Table set forth above.
The Compensation Committee regularly reviews executive compensation
policies and levels and evaluates the performance of management in the context
of the Company's performance. The Compensation Committee is composed entirely of
independent outside directors. The Compensation Committee believes that
executive compensation for senior management must reward management for
successful performance, provide management with incentives to accomplish the
Company's goals and objectives, encourage correlation between management's
performance and enhancement of stockholder value, and be sufficiently
competitive to attract and retain key management personnel.
Chairman and Chief Executive Officer. Dr. Bernard F. Master is the founder
of the Company, its largest stockholder, and has been employed by the Company
since its inception. Since 1991, Dr. Master has served as Chairman of the Board
and Chief Executive Officer of the Company pursuant to successive one-year
employment agreements. In February 1998, Dr. Master assumed the additional
duties as President of HPMC after the resignation of his predecessor. In
connection with the assumption of the duties of President of the HPMC, Dr.
Master entered into an employment agreement with HPMC. See "-- Employment
Agreements."
The 1998 compensation package for Dr. Master consisted of four components,
an annual base salary for his services as Chairman (which was reflected in an
employment agreement), an annual base salary for his services as President of
HPMC (which was reflected in a separate employment agreement), a discretionary
cash bonus, and stock options. Dr. Master's 1998 employment agreement as
Chairman provided for an annual base salary of $192,000, the same as in 1997. In
connection with Dr. Master's assumption of the duties of President of the HPMC,
he entered into an employment agreement providing for an annual base salary of
$120,000. At that time, he was also awarded a Discretionary Vesting Option to
purchase 20,000 Shares at a
10
<PAGE> 13
price of $4.50 per share (the then current market price of the Shares) pursuant
to the Executive Plan. In April 1999, the Compensation Committee met and
reviewed the achievement of Dr. Master's 1998 performance goals and, based upon
the achievement of such goals, accelerated the vesting of such options to
February 2000.
At its April 1999 meeting, the Compensation Committee reviewed the various
accomplishments of Dr. Master during 1998 on behalf of the Company, including
reducing the HMO's administrative expenses by $2.0 million over 1997 levels,
reducing the HMO's Medicaid loss ratio below .84, negotiating a contract for the
sale of the HMO's Franklin County Medicaid membership (the transaction was
denied by the Ohio Department of Human Services for reasons beyond the control
of the HMO), providing valuable guidance in CompManagement's acquisition of M&N
Risk Management, Inc. in December 1998, exploring discussions with numerous
potential buyers and others regarding the sale or charitable donation of the
HMO, and providing leadership during extremely difficult times for the HMO. The
Committee assessed the value of these accomplishments to the Company, as well as
Dr. Master's dedication and hard work on behalf of the Company in 1998. With the
goal of providing Dr. Master with a short-term reward for his efforts, as well
as a long-term incentive to encourage this effort in the future, the
Compensation Committee awarded Dr. Master a cash bonus in the amount of $50,000
and granted him an option to purchase 10,000 Shares at a price of $3.00 per
share (the then current market price of the Shares).
Also at its April 1999 meeting, the Compensation Committee established the
1999 compensation package for Dr. Master. This compensation package again
consists of four components -- an annual base salary for his services as
Chairman (which was reflected in an employment agreement), an annual base salary
for his services as President of HPMC (which was reflected in a separate
employment agreement), a cash bonus based upon achievement of performance
criteria or goals established by the Compensation Committee, and stock options.
Dr. Master's 1999 employment agreement as Chairman provides for an annual base
salary of $295,000 plus an annual cash bonus of up to 35% of his annual base
salary. The amount of the annual cash bonus will be based upon Dr. Master's
achievement of performance criteria or goals established by the Company's
Compensation Committee. If Dr. Master's employment as chairman is terminated due
to or after a change in control of the Company, then Dr. Master will receive
severance payments equal to one year's annual base salary and fringe benefits
for one year from his termination date. Under this employment agreement, Dr.
Master receives Formula Vesting Options equal to the aggregate amount of Formula
Vesting Options and Discretionary Vesting Options received by the Chief
Executive Officer of CompManagement. Dr. Master's 1999 employment agreement as
President of the HPMC terminates upon the completion of the windup of the HMO
and provides for a base salary of $12,500 per month.
Other Executive Officers. The Compensation Committee believes the chief
executive officer should establish the compensation of senior management
personnel, including the other named executive officers, to ensure that these
individuals are responsive to the programs and directives of the chief executive
officer and chief operating officer. The employment agreements with Robert J.
Bossart, Jonathan R. Wagner, and Richard T. Kurth, the named executive officers
other than Dr. Master, were negotiated and entered into in connection with the
Company's acquisition of CompManagement in 1995. See "-- Employment Agreements."
Robert S. Garek
Crystal A. Kuykendall, Ph.D., J.D.
Frank R. Nutis
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 and prior to May 1, 1999, the HMO had provider agreements with
a number of physician groups affiliated with certain of the Company's officers
and directors and affiliated with certain of the HMO's directors. These provider
agreements were on the same terms and conditions as the HMO's provider
agreements with unaffiliated physicians or physician groups. Such affiliated
physician groups were as follows: Affiliated Medical Practices, Inc., of which
Dr. Bernard F. Master is the sole stockholder; Parsons Avenue Medical Clinic,
Inc. and Westland Family Practice, Inc., both of which Dr. Elliott P. Feldman is
the sole stockholder; Burt E. Schear & Associates, Inc., of which Dr. Burt E.
Schear and Dr. Martin J. Schear, a director of the HMO, are the sole
stockholders; and Child Care Consultants, Inc., of which Dr. James E. Foy, a
director of the HMO, is a 50% stockholder. For the fiscal year ended December
31, 1998, payments under provider agreements to affiliated physician groups
amounted to $564,123. 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, $135,572; Dr. Elliott P.
Feldman, $93,272; Dr. Burt E. Schear and Dr. Martin J. Schear, $168,842; and Dr.
James E. Foy, $166,436.
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 $53,674
for 1998.
The Company has entered into a broker's agreement with R.S. Garek and
Associates (the "Broker") for the sale of the Company's real estate located at
556-560 East Town Street, Columbus, Ohio. Robert S. Garek, a director of the
Company, is a principal of the Broker. Under this agreement, the Broker has the
exclusive right to offer the real estate for sale until June 10, 1999. If the
real estate is sold during that period, the Broker will be entitled to a
commission equal to 6% of the total selling price. Management of the Company
believes that this broker's agreement, including the sales commission, is no
less favorable to the Company than it could receive from an unaffiliated real
estate broker.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information with respect to the only
persons known by the Company to own beneficially 5% or more of the Shares:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF OWNERSHIP
- ------------------- -------------------- --------------------
<S> <C> <C>
Dr. Bernard F. Master 1,218,892(2) 31.6%
560 East Town Street
Columbus, Ohio 43215
Heartland Advisors, Inc. 776,300 20.2%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Robert J. Bossart 304,470 7.9%
6377 Emerald Parkway
Dublin, Ohio 43016
Jonathan R. Wagner 304,136 7.9%
6377 Emerald Parkway
Dublin, Ohio 43016
</TABLE>
- ---------------
(1) Beneficial ownership as of April 12, 1999, except in the case of Heartland
Advisors, Inc., which is as of December 31, 1998. Except as otherwise
indicated in the notes to this table, the persons named in the table and
their spouses have sole voting and investment power with respect to all
Shares owned by them. For the following persons, this table includes the
following number of Shares which may be acquired
12
<PAGE> 15
upon the exercise of options that are currently exercisable or exercisable
within 60 days of April 12, 1999: Mr. Bossart--10,352 Shares; Dr.
Master--23,556 Shares; and Mr. Wagner--10,018 Shares.
(2) Includes 1,400 Shares owned by a trust of which Dr. Master is the trustee.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP has been selected by the Board of Directors to
be the Company's independent public accountants for the fiscal year ending
December 31, 1999.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting and to have an opportunity to make a statement if desired and
to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 annual
meeting of stockholders must be received by the Company for inclusion in the
proxy statement and form of proxy on or prior to 120 days in advance of the
first anniversary of the date of this Proxy Statement. If a stockholder intends
to present a proposal at the 2000 annual meeting of stockholders, but does not
seek to include such proposal in the Company's Proxy Statement and form of
proxy, such proposal must be received by the Company on or prior to 45 days in
advance of the first anniversary date of this Proxy Statement or the persons
named in the form of proxy for the 2000 annual meeting will be entitled to use
their discretionary voting authority should such proposal then be raised at such
meeting, without any discussion of the matter in the Company's Proxy Statement
or form of proxy.
OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, the persons named in the accompanying form of proxy intend to vote the
proxy in accordance with their judgment on such matters.
The Company will bear the cost of soliciting proxies. In addition to the
use of the mails, proxies may be solicited by officers, directors, and regular
employees, personally or by telephone or telegraph. The Company will reimburse
banks, brokers, and nominees for any out-of-pocket expenses incurred by them in
sending proxy materials to the beneficial owners of the Shares held by any
banks, brokers or nominees. If follow-up requests for proxies are necessary, the
Company may employ other persons to make these requests.
DR. ELLIOTT P. FELDMAN
Secretary
13
<PAGE> 16
HEALTH POWER, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. Bernard F. Master and Robert J.
Bossart, and each of them, with full power of substitution, proxies to
vote and act with respect to all shares of common stock, $0.01 par value
(the "Shares"), of Health Power, Inc., a Delaware corporation (the
"Company"), which the undersigned is entitled to vote at the Company's
Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
offices of the Company's subsidiary, CompManagement, Inc., located at
6377 Emerald Parkway, Dublin, Ohio 43016, on Thursday, June 3, 1999, at
3:00 p.m., local time, and at any and all adjournments thereof, with all
the powers the undersigned would possess if present in person, on the
following proposals and any other matters that may properly come before
the Annual Meeting.
1. WITH [ ] OR WITHOUT [ ] AUTHORITY TO ELECT ALL NOMINEES LISTED BELOW
AS CLASS I DIRECTORS (EXCEPT AS MARKED TO THE CONTRARY BELOW):
Crystal A. Kuykendall, Ph.D., J.D. Jonathan R. Wagner
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH HIS OR HER NAME.
2. WITH [ ] OR WITHOUT [ ] AUTHORITY TO ELECT ALL NOMINEES LISTED BELOW
AS CLASS III DIRECTORS (EXCEPT AS MARKED TO THE CONTRARY BELOW):
Dr. Elliott P. Feldman Dr. Bernard F. Master
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH HIS OR HER NAME.
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED UPON THE PROPOSALS
LISTED ABOVE IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BY THE
UNDERSIGNED, BUT IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED
TO ELECT ALL OF THE NOMINEES FOR DIRECTORS AS SET FORTH IN ITEMS 1 AND 2,
ABOVE, AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTER WHICH
PROPERLY COMES BEFORE THE ANNUAL MEETING.
Dated: , 1999
-----------------
-----------------------------
(Signature of Stockholder)
-----------------------------
(Signature of Stockholder)
(Please sign legibly exactly
as the name is printed on the
left.)
If the registration is as
attorney, executor,
administrator, trustee or
guardian, please sign full
title as such.
PLEASE DATE, SIGN AND MAIL PROXY PROMPTLY
