SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
HEALTH FITNESS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
1) Title of each class of securities to which transaction applies:
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:
HEALTH FITNESS CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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The Annual Meeting of Shareholders of Health Fitness Corporation will be
held on June 3, 1998, at 3:00 p.m. (Minneapolis time), at the Radisson South
Hotel, 7800 Normandale Boulevard, Bloomington, Minnesota, for the following
purposes:
1. To elect four directors for the ensuing year.
2. To approve the selection of Deloitte & Touche LLP as independent
auditors for the current fiscal year.
3. To consider and act upon such other matters as may properly come
before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on April 15, 1998, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
Your vote is important. We ask that you complete, sign, date and return the
enclosed proxy in the envelope provided for your convenience. The prompt return
of proxies will save the Company the expense of further requests for proxies.
BY ORDER OF THE BOARD OF DIRECTORS
CHARLES E. BIDWELL
SECRETARY
BLOOMINGTON, MINNESOTA
MAY 11, 1998
HEALTH FITNESS CORPORATION
Annual Meeting of Shareholders
June 3, 1998
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PROXY STATEMENT
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INTRODUCTION
Your Proxy is solicited by the Board of Directors of Health Fitness
Corporation ("the Company") for use at the Annual Meeting of Shareholders to be
held on June 3, 1998, at the location and for the purposes set forth in the
notice of meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of the Company's Common Stock,
will be borne by the Company. Directors, officers and regular employees of the
Company may, without compensation other than their regular remuneration, solicit
proxies personally or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its use
at the meeting by giving written notice of such revocation to the Secretary of
the Company. 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 number and 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 instructions 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 proxy 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 principal executive office of the Company is
3500 West 80th Street, Suite 130, Minneapolis, Minnesota 55431. The Company
expects that this Proxy Statement, the related proxy and notice of meeting will
first be mailed to shareholders on or about May 11, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed April 15, 1998, as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on April 15, 1998, 11,786,116
shares of the Company's Common Stock were issued and outstanding. The Common
Stock is the only outstanding class of capital stock of the Company entitled to
vote at the meeting. Each share of Common Stock is entitled to one vote on each
matter to be voted upon at the meeting. Holders of Common Stock are not entitled
to cumulative voting rights.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of April 15, 1998, by persons known to the Company to be
beneficial owners of more than 5% of the Company's Common Stock, by each
executive officer of the Company named in the Summary Compensation table, by
each current director and nominee for director of the Company and by all
directors and executive officers (including the named individuals) as a group.
Unless otherwise indicated, the shareholders listed in the table have sole
voting and investment powers with respect to the shares indicated.
- ---------------------------------------------- ----------------------------------- ------------------------------------
Name and Address of Number of Shares Percent of Class
Beneficial Owner Beneficially Owned (1)
- ---------------------------------------------- ----------------------------------- ------------------------------------
Loren S. Brink 880,566 (2) 7.4%
3500 W. 80th Street
Minneapolis, MN 55431
- ---------------------------------------------- ----------------------------------- ------------------------------------
George E. Kline 864,760 (3) 7.2%
4750 IDS Center
Minneapolis, MN 55402
- ---------------------------------------------- ----------------------------------- ------------------------------------
James A. Bernards 764,760 (3) 6.4%
7200 Metro Boulevard
Edina, MN 55439
- ---------------------------------------------- ----------------------------------- ------------------------------------
Charles E. Bidwell 462,596 (4) 3.9%
- ---------------------------------------------- ----------------------------------- ------------------------------------
William T. Simonet, M.D. 99,250 (5) *
- ---------------------------------------------- ----------------------------------- ------------------------------------
Robert K. Spinner 86,500 (6) *
- ---------------------------------------------- ----------------------------------- ------------------------------------
Thomas H. Coplin 104,320 (7) *
- ---------------------------------------------- ----------------------------------- ------------------------------------
Charles J. Pappas 42,539 (8) *
- ---------------------------------------------- ----------------------------------- ------------------------------------
All directors and executive officers as a 2,666,806 (9) 21.4%
group (11 persons)
- ---------------------------------------------- ----------------------------------- ------------------------------------
* Less than 1%
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person to acquire them as of April 15, 1998, or within sixty days of
such date are treated as outstanding only when determining the percent
owned by such individual and when determining the percent owned by a group.
(2) Includes 116,666 shares which may be purchased upon exercise of options
which are exercisable as of April 15, 1998 or within 60 days of such date.
(3) Includes (i) 120,000 shares held by Brightstone Capital, Ltd., an
investment firm controlled by Mr. Bernards and Mr. Kline; and (ii) 85,782
shares and a currently exercisable warrant to purchase 50,000 shares held
by Brightside Fund, 318,182 shares and a currently exercisable warrant to
purchase 79,546 shares held by Brightstone Fund VIII, a currently
exercisable warrant to purchase 20,000 shares held by Brightbridge Fund,
and 31,250 shares held by Brightstone Fund V, all of which are investment
funds managed by Messrs. Bernards and Kline. Includes 50,000 shares which
may be purchased upon exercise of options which are exercisable as of April
15, 1998 or within 60 days of such date.
(4) Includes 80,000 shares which may be purchased upon exercise of options and
warrants that are exercisable as of April 15, 1998 or within 60 days of
such date. Does not include 10,000 shares which may be purchased upon
exercise of an option which will become exercisable if such person is
elected a director at the Annual Meeting.
(5) Includes 42,250 shares which may be purchased upon exercise of options and
warrants that are exercisable as of April 15, 1998 or within 60 days of
such date. Does not include 10,000 shares which may be purchased upon
exercise of an option which will become exercisable if such person is
elected a director at the Annual Meeting.
(6) Includes 67,500 shares which may be purchased upon exercise of options and
warrants that are exercisable as of April 15, 1998 or within 60 days of
such date. Does not include 10,000 shares which may be purchased upon
exercise of an option which will become exercisable if such person is
elected a director at the Annual Meeting.
(7) Includes 11,750 shares which may be purchased upon exercise of warrants
that are exercisable as of April 15, 1998 or within 60 days of such date.
Does not include 70,431 shares which may be purchased upon exercise of
options held by Practice Management Consultants, Inc. ("PMC") which will
become exercisable upon delivery of certain information systems
deliverables. See "Certain Transactions."
(8) Includes 40,000 shares which may be purchased upon exercise of options that
are exercisable as of April 15, 1998 or within 60 days of such date.
(9) Includes 669,916 shares which may be purchased upon exercise of options and
warrants that are exercisable as of April 15, 1998 or within 60 days of
such date. Does not include 30,000 shares which may be purchased upon
exercise of options which will become exercisable if Messrs. Bidwell,
Spinner and Simonet are elected directors at the Annual Meeting.
ELECTION OF DIRECTORS
(Proposal #1)
General Information
The Board of Directors has fixed the number of directors to be elected at
the Annual Meeting at four. The Board has nominated as management's slate all
current members of the Board, except Mr. Bernards and Mr. Kline, who have
declined to stand for re-election. See "Directors Fees" below. The Company is in
the process of identifying qualified candidates who would be willing to serve as
Board members, but none have been identified as of the date of this Proxy
Statement. If such candidate(s) are identified after the Annual Meeting, the
Board has the authority to increase the size of the Board and fill such newly
created vacancies without shareholder approval. Under applicable Minnesota law,
the election of each nominee requires the affirmative vote of the holders of the
greater of (1) a majority of the voting power of the shares represented in
person or by proxy at the Annual Meeting with authority to vote on such matter
or (2) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Annual Meeting.
In the absence of other instructions, each proxy will be voted for each of
the nominees listed below. If elected, each nominee will serve until the next
annual meeting of shareholders and until his successor shall be elected and
qualified. If, prior to the meeting, it should become known that any of the
nominees will be unable to serve as a director after the meeting by reason of
death, incapacity or other unexpected occurrence, the proxies will be voted for
such substitute nominee as is selected by the Board of Directors or,
alternatively, not voted for any nominee. The Board of Directors has no reason
to believe that any nominee will be unable to serve.
The names and ages of all of the director nominees and the positions held
by each with the Company are as follows:
- ------------------------------- ----------------- ------------------------------------------------------
Name Age Position
- ------------------------------- ----------------- ------------------------------------------------------
Loren S. Brink 42 President, Chief Executive Officer and Chairman
of the Board of Directors
- ------------------------------- ----------------- ------------------------------------------------------
Charles E. Bidwell 53 Chief Financial Officer, Secretary, Treasurer
and Director
- ------------------------------- ----------------- ------------------------------------------------------
William T. Simonet, M.D. 44 Director
- ------------------------------- ----------------- ------------------------------------------------------
Robert K. Spinner 55 Director
- ------------------------------- ----------------- ------------------------------------------------------
Loren S. Brink has been President, Chief Executive Officer and Chairman of
the Company since its inception in 1981. He holds a Masters Degree in Cardiac
Rehabilitation and Adult Fitness from the University of Wisconsin. He has an
extensive clinical background, has published numerous articles regarding
corporate fitness and speaks frequently at national conferences.
Charles E. Bidwell has served as the Company's Chief Financial Officer,
Secretary and Treasurer since July 1997 pursuant to a consulting arrangement.
Mr. Bidwell has been a Director of the Company since 1988. Mr. Bidwell is a
venture capital investor who was Chief Financial Officer of Red Owl Stores,
Inc., a Minneapolis-based food retailer, from 1981 until April 1994. He has a
25-year history of starting and managing new businesses, as well as significant
corporate experience with Tonka, Inc. and Red Owl Stores, Inc. He holds an MBA
in Marketing and Finance from Carnegie-Mellon University in Pittsburgh,
Pennsylvania.
William T. Simonet, M.D., a Director of the Company since March 1993, is an
independent practicing orthopedic surgeon. From 1985 until August 1994, Dr.
Simonet practiced with Orthopedic Consultants, P.A. Dr. Simonet received his
Medical degree in 1980 from the University of Minnesota medical school. He also
received a Master of Science degree in orthopedic surgery from the Mayo Graduate
School of Medicine in 1985.
Robert K. Spinner, a Director of the Company since May 1995, was President
of Abbott Northwestern Hospital in Minneapolis, Minnesota from 1988 to 1997 and
a member of the administrative staff at Abbott Northwestern from 1968 to 1997.
In 1997, Allina Health Systems named Mr. Spinner President of Allina Hospitals.
Mr. Spinner graduated from St. John's University in Collegeville, Minnesota with
a Bachelor's degree in Economics and Accounting in 1964; he was awarded a
Masters degree in Hospital and Healthcare Administration from the University of
Minnesota in 1969. Mr. Spinner is a member of the Board of Directors of St.
John's University, the Newt C. Little Hospice, the Minnesota Hospital
Association, and MedVision, Inc., a developer of medical practice management
software.
There are no arrangements or understandings between any of the directors or
any other person (other than arrangements or understandings with directors
acting as such) pursuant to which any person was selected as a director or
nominee of the Company. There are no family relationships among the Company's
directors.
Committee and Board Meetings
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee, consisting of
Messrs. Bernards, Spinner and Bidwell, is charged with responsibility for
reviewing the Company's external and internal auditing system, monitoring
accounting and financial reporting practices, determining the adequacy of
administrative and internal accounting controls, monitoring compliance with the
Company's prescribed procedures and reviewing publicly disseminated financial
information. The Audit Committee functions include supervision of the
independent auditors, including recommendation of the engagement or discharge of
such auditors, and review with the independent auditors of the audit plan and
results of the auditing engagement. The Audit Committee met two times during
fiscal 1997. Following the Annual Meeting, the Board expects to appoint Mr.
Simonet or a new "outside" director to replace Mr. Bernards on the Audit
Committee.
The Compensation Committee, which consists of Messrs. Bernards, Kline,
Simonet and Spinner, is charged with oversight responsibility for management's
performance and the adequacy and effectiveness of compensation and benefit
plans. In addition, the Compensation Committee makes recommendations to the
Board of Directors regarding remuneration arrangements for senior management,
and adoption of employee compensation and benefit plans. Members of both of such
Committees meet informally from time to time throughout the year on Committee
matters.
The directors often communicate informally to discuss the affairs of the
Company and, when appropriate, take formal Board action by written consent of a
majority of all directors, in accordance with the Company's Articles of
Incorporation and Minnesota law, rather than hold formal meetings. During fiscal
1997, the Board of Directors held 13 formal meetings and took action two times
by written action in lieu of a meeting. Each incumbent director attended 75% or
more of the total number of meetings (held during the period(s) for which he has
been a director or served on committee(s)) of the Board and of committee(s) of
which he was a member.
Directors Fees
Directors are not paid fees for attending Board or Committee meetings, but
are reimbursed for their out-of-pocket expenses incurred on the Company's
behalf. On April 8, 1997, the Company adopted a stock option program for
nonemployee directors whereby each nonemployee director (Messrs. Bernards,
Bidwell, Kline, Simonet and Spinner) was granted a nonqualified stock option
under the Company's 1995 Stock Option Plan (the "Plan") to purchase 50,000
shares of Company Common Stock at $3.00 per share. Such options expire April 8,
2007. In recognition of the directors' past service as directors without
compensation, such options were made immediately exercisable ("vested") to the
extent of 10,000 shares. Such options will vest to the extent of an additional
10,000 shares upon each re-election of such respective director to the Company's
Board of Directors, commencing with the May 1997 Annual Meeting of Shareholders.
If an optionee ceases to be a director, such options shall remain exercisable
but only to the extent vested at the date of termination, unless such optionee
ceases to be a director for cause, in which event the option shall immediately
terminate.
In March 1998, James A. Bernards and George E. Kline, each a Director of
the Company since 1993, informed the Company that they had decided not to stand
for re-election to the Board. Mr. Bernards and Mr. Kline indicated that their
reason for leaving the Board was to focus their energies and attention on
younger start-up companies in need of venture capital. Mr. Bernards is President
of Brightstone Capital, Ltd., a venture capital firm and has been President of
Facilitation Incorporated, a strategic planning firm he founded in July 1993.
Mr. Kline is an executive officer of Brightstone Capital, Ltd., a venture
capital firm and has been President of Venture Management, a firm engaged in
investing and providing financial consulting services to corporations, since
1968. Mr. Kline is also a director of Applied Biometrics, Inc., CyberOptics
Corporation, Rimage Corporation, Fieldworks, Inc. and Nutrition Medical, Inc. In
consideration of Mr. Bernards' and Mr. Kline's long service on the Company's
Board of Directors and their extraordinary efforts expended over the past year
in connection with the Company's recent debt and equity financing, in April 1998
the Board resolved to "vest" immediately the remaining 30,000 share portion of
Mr. Bernards' and Mr. Kline's director options described above.
CERTAIN TRANSACTIONS
Bridge Loan. On August 26, 1997, the Company borrowed $500,000 from
Brightbridge Fund I, L.P. ("Brightbridge"), a limited partnership of which
Brightstone Capital Limited LLC ("Brightstone") is the general partner and a 20%
limited partner. Brightstone is owned 50% by James Bernards and 50% by George
Kline, each currently a director of the Company. The loan, which was repaid in
February 1998, bore interest at 12% per annum. Brightbridge received five-year
warrants to purchase 20,000 shares of Company common stock at an exercise price
of $3.00 per share and, because the loan was not repaid when due, became
entitled to receive an additional 5,000 warrants exercisable at $3.00 per share.
The number of warrant shares and exercise price are subject to adjustment, and
the parties have appointed a third party to make a binding determination with
respect thereto.
Consulting. Mr. Bidwell has served as a consultant to the Company in the
area of capital raising, and has also served as the Company's Chief Financial
Officer, Secretary and Treasurer since July 1997. Mr. Bidwell received $189,750
of contingent consulting compensation in February 1998 upon completion of the
Company's debt and equity offerings, and also was reimbursed $21,677 of
out-of-pocket expenses incurred, which amounts were expensed by the Company in
1997. Mr. Bidwell and the Board's Compensation Committee are negotiating the
terms of a Consulting Agreement pursuant to which Mr. Bidwell will continue to
serve as a consultant to the Company in the capacities described above and in
the areas of acquisitions, strategic planning, and selection and training of the
Company's financial and accounting personnel.
Previously, from January 1, 1996 to March 31, 1997, Mr. Bidwell served as a
consultant to the Company in the areas of strategic planning and exploration and
negotiation of joint ventures and acquisitions. Pursuant to this previous
arrangement, in 1996 Mr. Bidwell earned $74,000 and received options to purchase
35,000 shares of the Company's Common Stock, immediately exercisable at $3.00
per share through March 2000 (with respect to 10,000 shares) and October 15,
2000 (with respect to 25,000 shares).
Loan. The Company's President and Chief Executive Officer, Loren Brink, has
received loans and advances from the Company from time to time over the last two
years. As of December 31, 1997, the total of all such loans, including interest
was $67,229.
Guarantee. Loren Brink gave a limited personal guarantee securing the
Company's Credit Facility. Mr. Brink and the Board's Compensation Committee are
currently negotiating reasonable compensation to Mr. Brink for giving such
guarantee.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and two other most highly compensated executive officers who
received compensation in excess of $100,000 during fiscal 1997 (such individuals
referred to as the "named executive officers").
Long Term Compensation
- ------------------------ -------- ------------------------------------- -------------------------- ---------- --------------
Annual Compensation Awards Payouts
- ------------------------ -------- ------------------------------------- -------------------------- ---------- --------------
Restricted LTIP All Other
Name and Principal Fiscal Stock Payouts Compensation
Position Year Salary ($) Bonus ($) Other Awards ($) Options ($) ($)(1)
($)
- ------------------------ -------- ----------- ------------ ------------ ------------ ------------- ---------- --------------
Loren S. Brink 1997 160,000 -- 17,339(2) -- 100,000 -- 11,740
1996 137,700 35,000 22,436(2) -- 100,000 -- 3,935
1995 111,800 -- 15,054(2) -- -- -- 3,422
- ------------------------ -------- ----------- ------------ ------------ ------------ ------------- ---------- --------------
Charles E. Bidwell 1997 189,750(3) -- 21,677(3) -- 50,000 -- --
1996 74,000(3) -- 1,496(3) -- 35,000 -- --
1995 -- -- -- -- -- -- --
- ------------------------ -------- ----------- ------------ ------------ ------------ ------------- ---------- --------------
Thomas H. Coplin 1997 129,027(4) -- * -- -- -- --
1996 116,449 -- * -- -- -- --
1995 -- -- -- -- -- -- --
- ------------------------ -------- ----------- ------------ ------------ ------------ ------------- ---------- --------------
Charles J. Pappas 1997 86,554 27,500 * -- 100,000 -- --
1996 -- -- -- -- -- -- --
1995 -- -- -- -- -- -- --
- ------------------------ -------- ----------- ------------ ------------ ------------ ------------- ---------- --------------
* Does not exceed lesser of $50,000 or 10% of such individual's salary and
bonus.
(1) Amount reflects life insurance premiums not available to employees
generally.
(2) Amount reflects automobile allowance and entertainment expense allowance.
(3) Amount reflects contingent consulting compensation and direct out-of-pocket
expense reimbursement. Mr. Bidwell is responsible for his own overhead and
other indirect expenses, and is not eligible for and does not receive any
employee benefits. See "Certain Transactions" above.
(4) Amount includes amounts paid to Practice Management Consultants with
respect to Mr. Coplin for periods prior to July 1, 1997. See "Employment
Agreements" below.
Employment Agreements
Loren Brink. On May 22, 1997 the Company entered into a three-year
Employment Agreement with Mr. Brink, effective January 1, 1997 (the
"Agreement"), which will automatically extend for additional three-year terms,
unless either party gives written notice of termination. Pursuant to the
Agreement, Mr. Brink will continue to serve as the Company's President and Chief
Executive Officer at a minimum base salary of $160,000, $170,000 and $180,000
for the calendar years 1997, 1998 and 1999, respectively. Mr. Brink is eligible
to earn an annual year-end cash bonus ranging from 25% of base salary (if the
Company's actual pre-tax profits are at least 80% of the budgeted amount
therefor) to 75% of his base salary (if the Company's actual pre-tax profits are
120% or more of budget). The Company granted Mr. Brink incentive stock options
to purchase up to 100,000 shares of Company Common Stock at an exercise price of
$3.00 per share. Such options vest 25% immediately and 25% on each of the first
three anniversaries of the effective date. Mr. Brink receives normal and
customary employee benefits and fringe benefits, including a $750 per month car
allowance, county club membership and $2,500 per year for professional,
financial, legal and tax planning counsel. The Company may terminate the
Agreement on 60 days' notice for cause or upon twelve-months' notice without
cause. The Agreement terminates upon Mr. Brink's death or permanent disability.
If Mr. Brink is terminated for "cause," he will continue to receive his base
salary for up to 60 days, and be entitled to participate in certain benefit
programs at his expense for up to eighteen months. If Mr. Brink is terminated
without "cause," he will continue to receive his base salary for a period of up
to 24 months following such termination. If the Agreement is terminated due to
Mr. Brink's death or disability, Mr. Brink's base salary will continue to be
paid for a period of 18 months. If Mr. Brink's employment is terminated by
reason of his death, disability, without cause or in connection with a change of
control of the Company, he will receive a pro rated portion of any bonuses or
incentive payment, and the immediate vesting and acceleration of any unexpired
and unvested stock options previously granted. The Agreement gives Mr. Brink the
option to terminate the Agreement upon a change of control or business
combination, including the sale or merger of the Company. In such event, Mr.
Brink can elect to receive his base salary for the longer of the unexpired three
year term of the Agreement or 24 months, or in lieu thereof, a cash payment
equal to 2.99 times Mr. Brink's base salary, subject to reduction to prevent
such payment (together with any other payments considered contingent upon a
change of control) from constituting an excess parachute payment under
applicable provisions of the Internal Revenue Code.
Thomas Coplin. The Company is negotiating the terms of an employment
agreement with Thomas Coplin, the President of the Company's rehabilitative
health care business. Since July 1, 1997, Mr. Coplin has served an employee of
the Company at a salary of $10,000 per month, plus reimbursement of travel and
apartment expenses. Prior to such date, Mr. Coplin was an employee of Practice
Management Consultants ("PMC"), a company one-half owned by Mr. Coplin, pursuant
to which PMC designed and implemented information systems for the Company's
rehabilitative health care business. The Company reimbursed PMC's expenses on a
monthly basis through June 1997, and issued PMC a warrant to purchase 70,431
shares of the Company's common stock at $4.00 per share, exercisable upon
delivery of certain system deliverables. Effective July 1, 1997, Mr. Coplin and
the other PMC employees performing such systems design and implementation
services became employees of the Company.
The Company also has an arrangement with PMC and its principals pursuant to
which PMC and its principals establish criteria for potential physical therapy
clinic acquisitions, conduct due diligence and evaluate potential acquisitions
against such criteria, and negotiate the acquisition agreements for such
acquisitions. The Company reimbursed PMC's expenses in connection therewith
through June 1997, and since such date the Company has incurred such expenses
directly. In addition, the Company pays one of the principals of PMC a three
percent fee upon closing of such acquisitions. Finally, the Company's
arrangement with PMC provides that Mr. Coplin and the other principal of PMC
will each receive stock options and/or warrants to purchase Company common
stock, the amount and/or value of which may be linked to the earnings of the
Company's rehabilitative health care business or a portion thereof, but the
amount of which have not been finally determined.
Option/SAR Grants During 1997 Fiscal Year
The following table sets forth information regarding stock options granted
to the named executive officers during the fiscal year ended December 31, 1997.
The Company has not granted stock appreciation rights:
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Loren S. Brink 100,000 13.1% $3.00 5/22/02
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Charles E. Bidwell 50,000 6.6% $3.00 4/08/07
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Thomas H. Coplin -- -- -- --
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Charles J. Pappas 100,000 13.1% $3.00 3/18/02
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Aggregated Option/SAR Exercises During 1997 Fiscal Year and Fiscal Year End
Option/SAR Values
The following table provides information related to the number of options
exercised during the last fiscal year and the number and value of options held
at fiscal year end by the named executive officers:
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
Number of Unexercised
Securities Underlying Value of Unexercised In
Shares Acquired Options at 12/31/97 the-Money Options at
Name on Exercise (#) Value exercisable/ 12/31/97(1)
Realized unexercisable exercisable/unexercisable
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
Loren S. Brink 200,000 $370,500 58,333/141,667 $0
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
Charles E. Bidwell -- -- 55,000/30,000 $0
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
Thomas H. Coplin -- -- -- --
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
Charles J. Pappas -- -- 40,000/60,000 $0
- ----------------------- ---------------------- --------------- ------------------------ ----------------------------
- ------------------------
(1) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the market price of the Common Stock at fiscal year end and
the option exercise price per share multiplied by the number of shares subject
to options. The closing price as of December 31, 1997 on the Nasdaq SmallCap
Market was $1.56.
APPROVAL OF SELECTION OF AUDITORS
(Proposal #2)
The Board of Directors of the Company has selected Deloitte & Touche LLP as
independent auditors of the Company for the current fiscal year ending December
31, 1998. Deloitte & Touche LLP has acted as the Company's independent auditors
since 1992. The Board of Directors desires that the selection of such auditors
for the current 1998 fiscal year be submitted to the shareholders for approval.
If the selection is not approved, the Board of Directors will reconsider its
decision.
A representative of Deloitte & Touche LLP is expected to be present at the
meeting, will be given an opportunity to make a statement regarding financial
and accounting matters of the Company and will be available at the meeting to
respond to appropriate questions from the Company's shareholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders ("Insiders") are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to Insiders were complied with
except the following:
o Michael Wise failed to timely file a Form 3;
o George Kline failed to timely file three forms reporting three
transactions;
o Thomas Coplin failed to timely file two forms reporting two
transactions; and
o James Bernards failed to timely file one form reporting one
transaction.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If any
other matter properly comes before the meeting, the appointees named in the
proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1999 annual meeting of shareholders must be
received by the Company by January 11, 1999, to be includable in the Company's
proxy statement and related proxy for the 1999 annual meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, accompanies this notice of meeting and Proxy Statement.
No part of the Annual Report is incorporated herein and no part thereof is to be
considered proxy soliciting material.
FORM 10-KSB
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL
FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE
FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE
COMPANY'S FURNISHING SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH REPORT AND/OR
EXHIBITS(S) SHOULD BE DIRECTED TO MR. CHARLES E. BIDWELL, CHIEF FINANCIAL
OFFICER, AT THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
Charles E. Bidwell
SECRETARY
Dated: May 11, 1998
Minneapolis, Minnesota
HEALTH FITNESS CORPORATION
PROXY FOR ANNUAL MEETING
Of Shareholders To Be Held
June 3, 1998
The undersigned hereby appoints LOREN S. BRINK and CHARLES E. BIDWELL, and
each of them, with full power of substitution, as Proxies to represent and vote,
as designated below, all shares of Common Stock of Health Fitness Corporation
registered in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held at the Radisson South Hotel, 7800 Normandale
Boulevard, Bloomington, Minnesota, at 3:00 p.m. (Minneapolis time) on June 3,
1998, and at any adjournment thereof, and the undersigned hereby revokes all
proxies previously given with respect to the meeting.
The Board of Directors recommends that you vote FOR each proposal below.
1. Elect four directors: [Nominees: Loren S. Brink, Charles E. Bidwell,
William T. Simonet, M.D., and Robert K. Spinner]
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote
(except those whose names have for all nominees listed
above been written in below)
To withhold authority to vote for any individual nominee write that
nominee's name on the line below
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2. Approve selection of Deloitte & Touche LLP as independent auditors for
current fiscal year:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER MATTERS. In their discretion, the Proxies are . . .
[ ] AUTHORIZED [ ] NOT AUTHORIZED . . .
to vote upon such other business as may properly come before the
Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL,
AND WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL NUMBER 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: _____________, 1998 ---------------------------------------------
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PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
appropriate, official position or
representative capacity. For stock held in
joint tenancy, each joint owner should sign.