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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. )
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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 Rule 14a-11(c) or Rule 14a-12
Healthstream, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[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:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
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HEALTHSTREAM, INC.
209 10TH AVENUE, SUITE 450
NASHVILLE, TENNESSEE 37203
(615) 301-3100
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2001
-------------------
Dear Shareholder:
On Thursday, May 31, 2001, HealthStream, Inc. will hold its 2001 annual
meeting of shareholders at 209 10th Avenue, Suite 450, Nashville, Tennessee
37203. The meeting will begin at 2:00 p.m., Central Daylight Time.
Only shareholders that own our common stock at the close of business on
April 9, 2001 can vote at this meeting. A list of our shareholders will be
available at our principal executive offices at 209 10th Avenue, Suite 450,
Nashville, Tennessee, during ordinary business hours beginning two days after
this notice of the annual meeting is first sent to shareholders. At the meeting,
we will consider the following proposals:
1. to elect three (3) Class I directors to hold office for a
term of three (3) years and until their respective successors have been
duly elected and qualified and one (1) Class II director to hold office
for a term of one (1) year and until her successor has been duly
elected and qualified;
2. to ratify the appointment of Ernst & Young LLP as our
independent auditors; and
3. to transact such other business as may properly come
before the meeting or any postponement or adjournment of the meeting.
Our 2000 Annual Report to Shareholders is being mailed to shareholders
with this proxy statement. The annual report is not part of the proxy
solicitation materials.
Cameras and recording devices are not permitted at the meeting. "Street
name" holders will need to bring a copy of a brokerage statement reflecting
stock ownership as of the record date.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN AS PROMPTLY AS POSSIBLE THE ENCLOSED PROXY IN THE ACCOMPANYING
REPLY ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND
VOTE IN PERSON.
By Order of the Board of Directors,
Robert A. Frist, Jr.
Chief Executive Officer
Nashville, Tennessee
April 30, 2001
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HEALTHSTREAM, INC.
209 10TH AVENUE, SUITE 450
NASHVILLE, TENNESSEE 37203
-------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2001
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TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS............................................................................................ 1
STOCK OWNERSHIP.................................................................................................. 5
ITEM ONE - ELECTION OF DIRECTORS................................................................................. 6
ITEM TWO - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS...................... 11
ITEM THREE - OTHER MATTERS....................................................................................... 11
EXECUTIVE COMPENSATION........................................................................................... 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR 2000................................................. 18
AUDIT COMMITTEE REPORT FOR 2000.................................................................................. 20
GENERAL INFORMATION.............................................................................................. 21
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QUESTIONS AND ANSWERS
1. Q: WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
A: At HealthStream's annual meeting, shareholders will act upon the
matters outlined in the notice of meeting on the cover page of this
proxy statement, including the election of three Class I directors and
one Class II director and ratification of our independent auditors. In
addition, our management will respond to questions from shareholders.
2. Q: WHEN WAS THIS PROXY STATEMENT MAILED TO SHAREHOLDERS?
A: This proxy statement was first mailed to shareholders on or about
April 30, 2001.
3. Q: WHO IS SOLICITING MY VOTE?
A: This proxy solicitation is being made and paid for by HealthStream. In
addition, we have retained Corporate Communications, Inc. to assist in
the solicitation. We will pay Corporate Communications, Inc.
approximately $5,000 plus out-of-pocket expenses for their assistance.
Our directors, officers and other employees not specially employed for
this purpose, may also solicit proxies by personal interview, mail,
telephone or facsimile. They will not be paid additional remuneration
for their efforts. We will also request brokers and other fiduciaries
to forward proxy solicitation material to the beneficial owners of
shares of the common stock that the brokers and fiduciaries hold of
record. We will reimburse them for their reasonable out-of-pocket
expenses.
4. Q: WHAT MAY I VOTE ON?
A:
- The election of three (3) Class I directors and one (1) Class II
director to our board of directors; and
- The proposal to ratify the appointment of Ernst & Young LLP as
our independent auditors.
5. Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The board recommends that you vote:
- FOR each of the director nominees; and
- FOR the proposal to ratify the appointment of Ernst & Young LLP
as our independent auditors.
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6. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: We do not know of any business to be considered at the 2001 annual
meeting other than the proposals described in this proxy statement. If
any other business is presented at the annual meeting, your signed
proxy card gives authority to Robert A. Frist, Jr., our Chief
Executive Officer, and Robert H. Laird, Jr., our Vice President,
Secretary and General Counsel, or either of them, to vote on such
matters at their discretion.
7. Q: WHO IS ENTITLED TO VOTE?
A: Only shareholders of record at the close of business on April 9, 2001
(the record date) may vote at this meeting. As of the record date,
there were approximately 20,366,058 shares of our voting common stock
outstanding. The shares were held by approximately 228 holders of
record. Every shareholder is entitled to one vote for each share of
common stock the shareholder held of record on the record date.
8. Q: HOW DO I VOTE?
A: You may vote by signing and dating the proxy card you receive and
returning it in the enclosed prepaid envelope. If you return your
signed proxy card but do not mark the boxes showing how you wish to
vote, your shares will be voted FOR the two proposals. You have the
right to revoke your proxy at any time before the meeting by:
- notifying our Corporate Secretary, Robert H. Laird, Jr., at 209
10th Avenue, Suite 450, Nashville, TN 37203;
- voting in person; or
- submitting a later-dated proxy card.
9. Q: CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
A: If you are a registered shareholder you may vote by telephone, or
electronically through the Internet, by following the instructions
included with your proxy card.
If your shares are held by your broker, often referred to as in
"street name," please check your proxy card or contact your broker or
nominee to determine whether you will be able to vote by telephone or
electronically.
10. Q: WHAT IS THE VOTE REQUIRED TO APPROVE EACH PROPOSAL?
A: Each of the director nominees must receive affirmative votes from a
plurality of the shares voting to be elected. The other proposal must
receive affirmative votes from a majority of the shares represented in
person or by proxy and entitled to vote.
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11. Q: WHAT IS A "QUORUM"?
A: A "quorum" is a majority of the outstanding shares. They may be
present at the meeting or represented by proxy. There must be a quorum
for business to be conducted at the meeting. Proxies received but
marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the
meeting.
12. Q: WHAT IF I ABSTAIN FROM VOTING?
A: If you attend the meeting or send in your signed proxy card but
abstain from voting on any proposal, you will be counted for purposes
of determining whether a quorum exists. If you abstain from voting on
the election of directors, your abstention will have no effect on the
outcome. If you abstain from voting on the ratification of Ernst &
Young LLP as our independent auditors, your abstention will have the
same effect as a vote against the proposal.
13. Q: HOW DO I VOTE MY SHARES IF THEY ARE HELD IN THE NAME OF MY
BROKER (STREET NAME)?
A: If your shares are held by your broker, often referred to as in
"street name," you will receive a form from your broker seeking
instruction as to how your shares should be voted. If you do not issue
instructions to your broker, your broker will vote your shares at its
discretion on your behalf. The Nasdaq National Market rules provide
that brokers and nominees may not exercise their voting discretion on
certain non-routine matters without receiving instructions from the
beneficial owner of the shares. A broker non-vote occurs when a broker
holding shares registered in street name is not permitted to vote
without instructions on non-routine matters, and the broker returns a
proxy card with no vote (the "non-vote") on the non-routine matter.
14. Q: WHAT IS THE EFFECT OF A BROKER NON-VOTE?
A: A broker non-vote will have no effect on the election of directors. A
broker non-vote will have the effect of a vote against the proposal to
ratify the appointment of Ernst & Young LLP as our independent
auditors. Broker non-votes will be counted as present for purposes of
determining whether there is a quorum.
15. Q: WHO WILL COUNT THE VOTES?
A: A representative of our transfer agent, SunTrust Bank, Atlanta, will
count the votes and act as inspector of election.
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16. Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: Shareholders of record on April 9, 2001 may attend the meeting.
"Street name" holders will need to bring a copy of a brokerage
statement reflecting their ownership of our common stock as of the
record date. Cameras and recording devices are not permitted at the
meeting.
17. Q: WHEN ARE SHAREHOLDER PROPOSALS DUE IN ORDER TO BE INCLUDED
IN OUR PROXY STATEMENT FOR THE 2002 ANNUAL MEETING?
A: Any shareholder proposals to be considered for inclusion in next
year's proxy statement must be submitted in writing to Robert H.
Laird, Jr., Corporate Secretary, HealthStream, Inc., 209 10th Avenue,
Suite 450, Nashville, Tennessee 37203, prior to the close of business
on December 31, 2001.
18. Q: WHEN ARE OTHER SHAREHOLDER PROPOSALS DUE?
A: Our Bylaws contain an advance notice provision that requires that a
shareholder's notice of a proposal to be brought before an annual
meeting must be timely. In order to be timely, the notice must be
addressed to our Corporate Secretary and delivered or mailed and
received at our principal executive offices not less than 120 days
prior to the first anniversary of the date this notice of annual
meeting was provided to shareholders.
19. Q: HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT THE COMPANY?
A: We will provide a copy of our Annual Report on Form 10-K for the year
ended December 31, 2000 excluding certain of its exhibits, without
charge to any shareholder who makes a written request to Investor
Relations Department, HealthStream, Inc., 209 10th Avenue, Suite 450,
Nashville, Tennessee 37203 or an oral request by calling (615)
301-3114. The Company's Annual Report on Form 10-K and various other
filings also may be accessed on the World Wide Web at www.sec.gov.
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STOCK OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2001 (unless otherwise noted),
for:
- each person who is known by us to beneficially own more than
5% of the outstanding shares of our common stock;
- each of our directors and nominees;
- each of our executive officers named in the Summary
Compensation Table; and
- all of our directors and executive officers as a group.
The percentages of shares outstanding provided in the table are based
on 20,312,452 shares outstanding as of March 31, 2001. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Unless otherwise indicated, each person or entity named in the table
has sole voting and investment power, or shares voting and investment power with
his or her spouse, with respect to all shares of stock listed as owned by that
person. The number of shares shown does not include the interest of certain
persons in shares held by family members in their own right. Shares issuable
upon exercise of options that are exercisable within 60 days of March 31, 2001
are considered outstanding for the purpose of calculating the percentage of
outstanding shares of our common stock held by the individual, but not for the
purpose of calculating the percentage of outstanding shares held by any other
individual. The address of each of our directors and executive officers listed
below is c/o HealthStream, Inc., 209 10th Avenue, Suite 450, Nashville,
Tennessee 37203.
NUMBER OF
NAME SHARES PERCENT
--------------------------------------------------------------------------- --------- -------
Robert A. Frist, Jr 5,216,691(1) 25.7
T. Rowe Price Associates, Inc. 2,500,000(2) 12.3
100 E. Pratt Street
Baltimore, Maryland 21202
Morgan Stanley & Co. Incorporated 1,138,940(3) 5.6
1221 Avenue of the Americas
New York, New York 10020
M. Fazle Husain 1,168,740(4) 5.8
Charles N. Martin, Jr 405,902 2.0
Jeffrey L. McLaren 395,324 2.0
John H. Dayani 118,920 *
Michael Pote 112,086(5) *
James F. Daniell 68,448 *
Thompson S. Dent 62,894 *
Stephen Clemens 48,446 *
Robert H. Laird, Jr 36,468 *
Arthur E. Newman 32,912 *
William W. Stead 33,500 *
Linda Rebrovick 5,000 *
All directors and executive officers as a group (16 persons) 8,237,609 40.6
------------
* Less than one percent.
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(1) 35,307 of these shares are owned by Frist Family Internet Partners. Mr.
Frist disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in those shares.
(2) Based on a Schedule 13G filed by T. Rowe Price Associates, Inc. on
February 14, 2001, these shares are held by various individual and
institutional investors that T. Rowe Price Associates, Inc. serves as
investment advisor with power to direct investments and/or sole power
to vote the shares. T. Rowe Price Associates, Inc. disclaims
beneficial ownership of these shares except to the extent of its
pecuniary interest in those shares.
(3) Based on a Schedule 13G filed by Morgan Stanley & Co. Incorporated on
January 26, 2001, 999,284 of these shares are held by Morgan Stanley
Venture Partners III, L.P., 95,947 are held by Morgan Stanley Venture
Investors, L.P. and 43,709 shares are held by The Morgan Stanley
Venture Partners Entrepreneur Fund, L.P.
(4) 1,138,940 of these shares are owned by entities associated with Morgan
Stanley & Co. Incorporated. Mr. Husain is a managing member of the
general partner of Morgan Stanley & Co. Incorporated. Mr. Husain
disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest in those shares.
(5) 48,510 of these shares are owned by Borneo Partners. Mr. Pote disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest in those shares.
ITEM ONE - ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (Class I, Class II
and Class III). At each annual meeting of shareholders, directors constituting
one class are elected for a three-year term. Directors who were elected to fill
a vacancy in a class whose term expires in a later year are elected for a term
equal to the remaining term for their respective class. The Fourth Amended and
Restated Charter of the Company provides that each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The current Board of Directors is
comprised of nine members. Three members of the Board of Directors will be
elected as Class I directors and one member will be elected as a Class II
director at the Annual Meeting.
The Board of Directors has nominated and recommends to the
shareholders, Thompson Dent, James Daniell and William Stead for election as
Class I directors to serve until the annual meeting of shareholders in 2004 and
until such time as their respective successors are duly elected and qualified.
Messrs. Dent, Daniell and Stead are currently Class I directors of the Company
having been previously elected by the shareholders. The Board of Directors has
nominated and recommends to the shareholders, Linda Rebrovick for election as a
Class II director to serve until the annual meeting of shareholders in 2002 and
until such time as her successor is duly elected and qualified. Ms. Rebrovick
was previously elected by the Board of Directors in April 2000 to fill a vacancy
created by the increase of the size of the Board of Directors from eight to nine
members.
If any of the nominees should become unable to accept election, the
persons named in the proxy may vote for such other person or persons as may be
designated by the Board of Directors. Management has no reason to believe that
any of the nominees named above will be unable to serve. Certain information
with respect to directors who are nominees for election at the Annual Meeting
and with respect to directors who are not nominees for election at the Annual
Meeting is set forth on the following pages.
The directors shall be elected by a plurality of the votes cast in the
election by the holders of the common stock represented and entitled to vote at
the Annual Meeting.
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DIRECTOR
NAME AGE PRINCIPAL OCCUPATION/DIRECTORSHIPS SINCE
-------------------------- ------- -------------------------------------------------------------------- --------
DIRECTOR NOMINEES
Class I Directors
(Term Expires 2004)
Thompson Dent 49 Mr. Dent is a founder of PhyCor, Inc. He currently serves as its 1995
chief executive officer and president, and served as its chief
operating officer from October 1997 to October 1998. Mr. Dent served
as executive vice president, corporate services, from the inception
of PhyCor until October 1997 and served as secretary of PhyCor from
1991 to October 1998. Mr. Dent is also a director of PhyCor. He
holds a Masters in Healthcare Administration from George Washington
University.
James Daniell 58 Dr. Daniell has maintained a private medical practice at Centennial 1995
Medical Center in Nashville since 1984. A founding member of the
Society for Reproductive Surgeons, he served as past president of
the International Society of Gynecologic Endoscopy and the Nashville
OB/GYN Society. He holds a Bachelor of Science from David Lipscomb
University and an M.D. from the University of Tennessee.
William Stead 52 Dr. Stead has served as associate vice chancellor for health affairs 1998
of Vanderbilt University Medical Center since 1991. Dr. Stead is
also the chief technology officer of EBM Solutions, a healthcare
information company, and chief science officer of IntelliTx
Technologies, Inc., a healthcare information technology company. He
is the editor-in-chief of the Journal of American Medical
Informatics Association, a founding fellow of the American College
of Medical Informatics and the American Institute for Engineering in
Biology and Medicine and a member of the Institute of Medicine of
the National Academy of Sciences. He is past president of the
American Association for Medical Systems and Informatics, and of the
American College of Medical Informatics. Dr. Stead earned a Bachelor
of Arts in chemistry and an M.D. from Duke University.
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DIRECTOR
NAME AGE PRINCIPAL OCCUPATION/DIRECTORSHIPS SINCE
-------------------------- ------- ---------------------------------------------------------------------- ----------------
Class II Director
(Term Expires 2002)
Linda Rebrovick 45 Ms. Rebrovick is Executive Vice President of KPMG Consulting, Inc. 2001
and has served on the Executive Committee of KPMG Consulting since
January 1997. During the past three years, she held the position of
National Leader, Health Care Consulting, one of KPMG Consulting's
six industries. Ms. Rebrovick was elected to the KPMG LLP 20-member
Board of Directors in August 1997 and has served as the Chair of the
Board Process and Evaluation Committee. Prior to joining KPMG LLP,
Ms. Rebrovick spent 16 years in various sales, management, and
executive positions at IBM Corporation. Ms. Rebrovick received a
bachelor's degree in marketing from Auburn University.
CONTINUING DIRECTORS
Class II Directors
(Term Expires 2002)
Jeffrey L. McLaren 34 Jeffrey L. McLaren, one of our co-founders, served as our president 1990
and as one of our directors from 1990 through November 2000 and as
our chief product officer from 1999 through November 2000. Mr.
McLaren currently serves as our vice chairman. He graduated from
Trinity University with a Bachelor of Arts in both business and
philosophy.
John H. Dayani 54 Dr. Dayani currently serves as president and chief executive officer 1998
of Cardiovascular Services of America. Dr. Dayani served as president
and chief executive officer of Network Health Services, Inc. from its
inception in May 1996 until 1999. He served as its executive chairman
from 1999 until May 2000. Dr. Dayani was the founder, president and
chief executive officer of Medifax, Inc. from 1993 to 1995 and served
as its consultant from 1995 to June 1998. He also founded American
Nursing Resources, Inc., American Nursing Resources Home Health Agency,
Inc., American Nursing Resources Home Infusion, Inc., Nurse America and
Quality Managed Care. Dr. Dayani earned a Bachelor of Science and Ph.D.
in engineering from Vanderbilt University.
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DIRECTOR
NAME AGE PRINCIPAL OCCUPATION/DIRECTORSHIPS SINCE
-------------------------- ------- ---------------------------------------------------------------------- ----------------
Class III Directors
(Term Expires 2003)
Robert A Frist, Jr. 34 Robert A. Frist, Jr., one of our co-founders, has served as our 1990
chief executive officer and chairman of the board of directors since
1990. Mr. Frist serves on the board of directors of Passport Health
Communications, an online health insurance verification provider and
HealthLeaders, Inc., a healthcare publisher. He graduated with a
Bachelor of Science in business with concentrations in finance,
economics and marketing from Trinity University. Mr. Frist is the
brother-in-law of Scott Portis, our vice president of technology.
M. Fazle Husain 36 Mr. Husain is a principal of Morgan Stanley & Co. Incorporated and 1999
Morgan Stanley Dean Witter Venture Partners. Mr. Husain joined
Morgan Stanley & Co. Incorporated in 1987 in its corporate finance
department, and joined Morgan Stanley Venture Partners in 1988. He
received a ScB. degree in chemical engineering from Brown University
in 1987 and a Masters of Business Administration from Harvard in
1991. Mr. Husain serves as a director of AllScripts, Inc., a
provider of point-of-care physician solutions, Cardiac Pathways
Corp., a manufacturer of cardiology and electrophysiology systems
and The Medicines Company, a biopharmaceuticals company. Mr. Husain
serves on the compensation committee of AllScripts, Inc.
Charles N. Martin, Jr. 59 Mr. Martin currently serves as chairman of the board of directors, 1999
president and chief executive officer of Vanguard Health Systems, a
healthcare company. From January 1992 to January 1997, Mr. Martin
served as chairman of the board of directors, president and chief
executive officer of OrNda HealthCorp, an investor-owned hospital
company, except during the period from April 1994 to August 1995
when Mr. Martin served as chairman and chief executive officer. He
holds a Bachelor of Science degree from Southern University in
Collegedale, Tennessee.
The Board of Directors holds regular quarterly meetings and meets on
other occasions when required by special circumstances. Some of the directors
also devote their time and attention to the Board's principal standing
committees. The Board of Directors does not have a nominating committee. The
committees, their primary functions and memberships are as follows:
Audit Committee. This committee makes recommendations to the Board of
Directors with respect to the Company's financial statements and the
appointment of independent auditors, reviews significant audit and
accounting policies and practices, meets with the Company's independent
auditors concerning, among other things, the scope of audits and
reports, and reviews the performance of the overall accounting and
financial controls of the Company. Members of the audit committee
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are M. Fazle Husain, John H. Dayani and James Daniell. See "Audit
Committee Report."
Compensation Committee. This committee has the responsibility for
reviewing and approving the salaries, bonuses and other compensation
and benefits of executive officers, reviewing and advising management
regarding benefits and other terms and conditions of compensation of
management and administering the Company's 2000 Stock Incentive Plan
(the "2000 Stock Plan"). Members of the compensation committee are
Thompson Dent, Charles N. Martin, Jr. and John H. Dayani. See
"Compensation Committee Report on Executive Compensation."
CORPORATE GOVERNANCE
Our business is managed under the direction of the board of directors.
Our board delegates the conduct of the business to our senior management team.
During 2000, our board of directors held ten meetings, the audit
committee held three meetings, and the compensation committee held seven
meetings. Except for Thompson Dent, John Dayani and Charles N. Martin, all
incumbent directors attended at least seventy-five percent of the board
meetings, and all incumbent directors attended all of the meetings of the
committees of the board on which the director served. Our Chairman usually
proposes the agenda for the meetings. Directors receive the agenda and
supporting information in advance of the meetings. Directors may raise other
matters to be included in the agenda or at the meetings. Our Chief Executive
Officer and other members of senior management make presentations to the board
at the meetings and a substantial portion of the meeting time is devoted to the
board's discussion of these presentations.
Directors have regular access to senior management. They may also seek
independent, outside advice. The board considers all major decisions. The board
has established two standing committees so that certain areas can be addressed
in more depth than may be possible at a full board meeting.
The board of directors will consider nominees for the board of
directors recommended by shareholders, if shareholders comply with the advance
notice provisions contained in our bylaws. Directors are selected based on their
demonstrated knowledge, experience and ability in their chosen endeavors and,
most importantly, based on their ability to represent the interests of all the
shareholders. Shareholder recommendations for nominees must include biographical
information and the proposed nominee's written consent to nomination. The
recommendations must be addressed to our Corporate Secretary and delivered or
mailed and received at our principal executive offices not less than 120 days
prior to the first anniversary of the date this notice of annual meeting was
provided to shareholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that during the 2000 fiscal year, all SEC filings of
directors, officers and ten-percent shareholders complied with the requirements
of Section 16 of the Securities Exchange Act. This belief is based on our review
of forms filed or written notice that no forms were required.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
DIRECTOR NOMINEES.
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ITEM TWO - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
OUR INDEPENDENT AUDITORS
The audit committee has recommended, and the board of directors has
appointed, Ernst & Young LLP as our independent auditors. The independent
auditors will audit our consolidated financial statements for 2001. This
appointment is subject to your ratification. If you do not ratify their
appointment, the board of directors and the audit committee will reconsider
their appointment. Ernst & Young LLP has served as our independent auditors
since 1998. Representatives of Ernst & Young LLP will attend our annual meeting.
They will have an opportunity to speak and respond to your questions.
FEES BILLED TO HEALTHSTREAM BY ERNST & YOUNG LLP DURING 2000
Audit Fees. The aggregate audit fees billed to us by Ernst & Young LLP
during 2000 for professional services rendered for the audit of our annual
financial statements and for the reviews of the financial statements included in
our quarterly reports on Form 10-Q totaled $124,785.
Financial Information Systems Design and Implementation Fees. Ernst &
Young LLP did not perform any professional services regarding financial
information systems design and implementation.
All Other Fees. The aggregate fees billed to us by Ernst & Young LLP
during 2000 for all services rendered to us, excluding those discussed under
"Audit Fees," totaled $593,738, including audit related fees for professional
services rendered for our filing on Form S-1 and related acquisition audits of
$540,113, and professional services rendered for tax and other services of
$53,625.
The audit committee has considered whether the independent auditors
provision of non-audit services to the Company is compatible with the auditor's
independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS.
ITEM THREE - OTHER MATTERS
We do not know of any matter other than those discussed in the
foregoing materials contemplated for action at the annual meeting. The persons
named in the proxies will vote in accordance with the recommendation of the
board of directors on any other matter properly brought before the annual
meeting. Discretionary authority for them to do so is contained in the proxy.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for 2000, regarding the
compensation earned by the Chief Executive Officer and the five most highly
compensated executive officers based on salary and bonus earned during 2000
(named executive officers).
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARD
-------------------------------------------- -------------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND FISCAL SALARY BONUS COMPENSA- OPTIONS
PRINCIPAL POSITION YEAR ($) ($) TION ($)(1) (#)
--------------------------------------- ------- ----------- --------- --------------- ---------------
Robert A Frist, Jr., President and CEO 2000 85,000 10,000 -- --
1999 79,167 9,665 -- 83,250
1998 66,027 2,296 -- 47,915
Arthur E. Newman, 2000 125,827 10,000 40,056 157,500
Senior Vice President and CFO 1999 -- -- -- --
1998 -- -- -- --
Michael Pote, Senior Vice President 2000 121,667 10,000 -- 28,000
1999 107,561 14,692 -- 83,250
1998 98,058 7,296 -- 47,915
Jeffrey L. McLaren, 2000 120,000 10,000 -- --
Vice Chairman 1999 85,000 11,083 -- 83,250
1998 71,176 2,296 -- 47,915
Robert H. Laird, Jr., 2000 91,667 10,000 -- 20,000
Vice President, General Counsel & 1999 73,125 6,815 -- 85,978
Secretary 1998 52,589 1,531 -- 23,957
Stephen Clemens, Vice President of 2000 91,667 10,000 -- 20,000
Product Development 1999 76,911 9,472 -- 85,978
1998 60,052 1,531 -- 23,957
(1) Includes reimbursed expenses that are not deductible for income tax
purposes.
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OPTIONS GRANTED DURING 2000
The following table provides information related to options granted to
the named executive officers during the 2000 fiscal year and the potential
realizable value of each grant of options assuming that the market price of the
underlying security appreciates in value from the date of the grant to the end
of the option term. We have not issued stock appreciation rights or warrants to
our executive officers.
INDIVIDUAL GRANTS
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NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE ASSUMED ANNUAL RATE OF STOCK
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION FOR OPTION
NAME GRANTED (#) FISCAL YEAR(1) SHARE($) DATE TERMS ($)
5% 10%
------------------------------------------------------------------------------------------------------------------
Robert A Frist, Jr.,
President and CEO -- -- -- -- -- --
Arthur E. Newman,
Senior Vice President
and CFO 129,500 6.2% 6.49 1/20/08 401,595 961,988
28,000 1.3% 2.13 10/16/08 28,455 68,235
Michael Pote,
Senior Vice President 28,000 1.3% 2.13 10/16/08 28,455 68,235
Jeffrey L. McLaren,
Vice Chairman -- -- -- -- -- --
Robert H. Laird, Jr.,
Vice President,
General Counsel &
Secretary 20,000 1.0% 2.13 10/16/08 20,325 48,740
Stephen Clemens,
Vice President of
Product Development 20,000 1.0% 2.13 10/16/08 20,325 48,740
----------
(1) The Company granted a total of 2,097,316 options to employees during
2000.
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AGGREGATE OPTION EXERCISES DURING 2000 AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised
by the named executive officers during the 2000 fiscal year and the number and
value of options held at fiscal year end. We have not issued stock appreciation
rights or warrants to our executive officers.
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON VALUE OPTIONS AT FISCAL YEAR AT FISCAL YEAR-END
EXERCISE REALIZED END(#) ($)
NAME (#) ($) ----------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- ------------- ----------------- ----------- ------------- ----------- -------------
Robert A Frist, Jr 314,500 627,011(1) 44,769 86,393 -- --
President and CEO
Arthur E. Newman, -- -- 16,881 140,619 -- --
Senior Vice President and
CFO
Michael Pote, Senior Vice 27,658 191,562(2) 44,769 90,436 -- --
President
Jeffrey L. McLaren, 148,714 1,247,710(2) 44,679 86,393 -- --
Vice Chairman
Robert H. Laird, Jr., 23,957 160,512(2) 18,500 87,478 -- --
Vice President, General
Counsel & Secretary
Stephen Clemens, Vice 11,979 80,259(2) 36,467 81,489 -- --
President of Product
Development
--------------
(1) Based on the difference between the fair market value on the date of
exercise and the price paid upon exercise.
(2) Based on the difference between the initial public offering price of
$9.00 and the price paid upon exercise.
DIRECTORS' COMPENSATION
We do not currently pay cash fees to directors for attendance at
meetings. We do reimburse our directors for out-of-pocket expenses related to
attending meetings of the board of directors. Non-employee directors are
eligible to receive stock option grants under the 2000 Stock Plan. Each year,
immediately following the date of our annual meeting, assuming enough shares are
available under the 2000 Stock Plan, each non-employee director will
automatically be granted options to purchase
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5,000 shares of our common stock. The exercise price will be equal to the fair
market value on the date of grant, and these options will vest immediately upon
grant. During 2000, upon the effectiveness of our initial public offering, each
of our non-employee directors were granted options to purchase 10,000 shares of
our common stock at the initial public offering price. These options vested
immediately upon grant. Upon the election of Ms. Rebrovick to the Board of
Directors, she was granted an option to purchase 15,000 shares of common stock
at the fair market value at the date of grant. These options will vest in five
equal annual installments beginning on the first anniversary of the date of
grant.
Employee directors are not eligible for any additional compensation for
service on the board or its committees.
EMPLOYMENT AGREEMENT
Under an employment agreement dated April 21, 1999, Robert A. Frist,
Jr. is employed as our chief executive officer for a two-year period at an
initial base salary of $85,000. The employment term is automatically extended
for successive one year periods unless on or before a date that is 90 days prior
to the expiration of the employment term either the Company or Mr. Frist shall
have given written notice to the other of its or his intention not to further
extend the employment term, in which case the employment agreement shall expire
and terminate at the end of the initial or extended employment term. Mr. Frist
is also entitled to participate in the 2000 Stock Plan. Under this employment
agreement, Mr. Frist has agreed not to compete with us and not to solicit our
customers or employees for one year after his employment is terminated, with
limited exceptions. Mr. Frist is entitled to severance benefits if we terminate
him without cause. He is also entitled to severance benefits if he resigns for
good reason after a change in control, if he resigns upon the occurrence of a
material change in the terms of his employment or if he resigns upon the
occurrence of a material breach of the agreement by the Company. If termination
occurs during the initial two year employment term, the severance benefit shall
be the sum of $290,000, less the cumulative amount of base salary actually paid
to Mr. Frist during the two year period through the effective date of
termination, and $145,000. If termination occurs during any extended one year
term of the agreement, the severance benefit shall be the sum of $145,000, less
the cumulative amount of base salary actually paid to Mr. Frist during the one
year period through the effective date of termination, and $145,000. In
addition, if Mr. Frist terminates his employment for good reason after the
occurrence of a change in control, all options, shares and other benefits will
fully vest immediately.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee are responsible for
determining executive compensation and stock option grants to executive
officers. During 2000, the following directors served on the compensation
committee: Thompson Dent, Charles N. Martin, Jr. and John H. Dayani. Robert A.
Frist, Jr., our Chairman, submitted recommendations to the compensation
committee concerning executive officer compensation for 2000, but did not
participate in deliberations regarding the compensation of such officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We had a promissory note in the principal amount of $1,293,000 payable
to Robert A. Frist, Jr., our president, chief executive officer and chairman,
which was converted to 553,711 shares of common stock upon consummation of our
initial public offering.
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In August 2000, we issued 49,743 shares of our common stock upon the
exercise of options at $0.54 per share to Scott M. Portis, our vice-president of
technology. Also in August 2000, we issued 55,500 shares of our common stock
upon the exercise of options at $0.61 per share to Mr. Portis.
In March 2001, Jeffrey L. McLaren, our vice-chairman, executed a
secured promissory note in the principal amount of $215,000. This note is
secured by 300,000 shares of our common stock and has a term of five years.
We believe that all of these transactions were made on terms as
favorable to us as we would have received from unaffiliated third parties. Any
future transactions between us and our officers, directors and principal
shareholders and their affiliates will be approved by a majority of the board of
directors, including a majority of the independent and non-interested directors.
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COMPANY STOCK PERFORMANCE
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that we specifically incorporate this
information by reference, and shall not otherwise be deemed filed under such
acts.
The graph below compares the cumulative total shareholder return on our
common stock for the past nine months, with the cumulative total return of
companies on the Nasdaq Composite Index and the J.P. Morgan H & Q Information
Services Index over the same period (assuming the investment of $100 in our
common stock, the Nasdaq Composite Index and the J.P. Morgan H & Q Information
Services Index on April 10, 2000 and reinvestment of all dividends).
J.P. MORGAN H & Q
HEALTHCARE INFORMATION
HEALTHSTREAM, INC. NASDAQ STOCK MARKET SERVICES
------------------ ------------------- ----------------------
4/11/00 100 100 100
12/31/00 12 61 52
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR 2000
The compensation of HealthStream's executive officers is reviewed and
approved annually by the compensation committee of the Board of Directors,
currently comprised of three non-employee directors. In addition to reviewing
and approving executives' salary and bonus arrangements, the compensation
committee establishes policies and guidelines for other benefits and administers
the awards of stock and stock options pursuant to the Company's 2000 Stock Plan.
The compensation committee is assisted in making compensation decisions by the
Company's Chief Executive Officer (referred to in this report as the "CEO").
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The objectives of the Company's executive compensation program are to:
- attract, motivate, and retain the executives responsible for
the success of the company;
- reward key executives based upon corporate and individual
performance; and
- provide incentives designed to maximize shareholder value.
The compensation committee reviews the Company's executive officer compensation
program annually to ensure that the compensation paid to the Company's executive
officers is consistent with the Company's business strategy, corporate culture
and operating performance. The compensation committee also reviews the
compensation policies of similarly situated companies to ensure that the
Company's compensation policies are competitive with other companies in the
industry. The three primary components of the Company's executive officer
compensation program are a base salary, the potential for a performance-based
annual bonus, and periodic grants of stock options.
BASE SALARIES. Base salaries for the Company's executive officers, as
well as changes in such salaries, are based upon a number of factors, including:
- recommendations by the CEO;
- the nature of the executive officer's position;
- the committee's subjective determination of the executive
officer's contribution to the performance of the Company;
- the experience of the officer; and
- the term of the officer's employment with the Company.
The CEO reviews all salary recommendations with the compensation committee,
which then approves or disapproves such recommendations.
In October 1999, the compensation committee reviewed the base salaries
for the Company's executive officers. Based upon discussions with the CEO, the
committee determined that the base compensation levels for the Company's
executive officers were competitive with the average base compensation levels of
executive officers with similar responsibilities at comparable companies.
ANNUAL BONUSES. Annual bonuses were accrued on behalf of the executive
officers of the Company for fiscal 2000. The compensation committee has approved
an officers' compensation plan for 2001 that provides for the payment of bonuses
based upon the attainment of certain 2001 earnings targets.
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STOCK OPTIONS. In order to align the long-term interests of the
executive officers with those of shareholders, the compensation committee from
time to time awards stock options to the Company's executive officers. The terms
of these options, including the sizes of the grants, are determined by the
compensation committee based upon the recommendations of the CEO and the
committee's subjective discretion. Awards of stock options to executive officers
have been historically at then-current market prices and with periodic vesting
over four years.
In 2000, the compensation committee granted stock options to purchase
an aggregate of 385,105 shares to the Company's executive officers. The options
vest over a four-year period and are exercisable at the market price of the
common stock on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
In establishing the compensation of Robert A. Frist, Jr. the Company's
CEO, the compensation committee utilized the same compensation policies
applicable to executive officers in general. Mr. Frist did not receive an
increase in his base salary for fiscal year 2000 or 1999. Mr. Frist received a
$10,000 bonus in 2000.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code (the "Code") generally
disallows a corporate deduction for compensation over $1.0 million paid to the
Company's CEO and any of the other most highly compensated officers. The $1.0
million limitation applies to all types of compensation, including restricted
stock awards and amounts realized on the exercise of stock options and stock
appreciation rights, unless the awards and plan under which the awards are made
qualify as "performance based" under the terms of the Code and related
regulations. Under the regulations, executive compensation pursuant to the 2000
Stock Plan should qualify as "performance based" compensation and therefore be
excluded from the $1.0 million limit. Other forms of compensation provided by
the Company are not excluded from the $1.0 million limit. The Company currently
anticipates that the compensation of its executive officers will be deductible
under Section 162(m) because executive officer compensation is presently below
the $1.0 million limit and because the Company intends to continue to utilize
performance based compensation in future periods.
Thompson Dent
Charles N. Martin, Jr.
John H. Dayani.
The foregoing report of the compensation committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this information by reference, and shall not otherwise be deemed
filed under such acts.
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AUDIT COMMITTEE REPORT FOR 2000
The audit committee of the Board of Directors is comprised of three
directors who are independent directors as defined under the applicable rules of
the National Association of Securities Dealers. During 2000, the members of the
audit committee were Messrs. Daniell, Dayani and Husain.
In accordance with its written charter adopted by the board of
directors, a copy of which is attached to this proxy as Exhibit A, the audit
committee reviews HealthStream's financial reporting process on behalf of the
board of directors. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal controls.
The Company's independent auditors are responsible for expressing an opinion on
the conformity of our audited financial statements to generally accepted
accounting principles. The Committee held three meetings during fiscal year 2000
which were attended by all members.
In this context, the audit committee has reviewed and discussed with
management and the independent auditors the interim financial statements for
each quarter and the audited financial statements. The audit committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees). In
addition, the audit committee has received from the independent auditors the
written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and discussed with them
their independence from the Company and its management. The audit committee has
considered whether the independent auditors provision of non-audit services to
the company is compatible with the auditor's independence.
In reliance on the reviews and discussions referred to above, the audit
committee recommended to the board of directors, and the board has approved,
that the audited financial statements be included in our Annual Report on Form
10-K for the year ended December 31, 2000, for filing with the Securities and
Exchange Commission. The audit committee and the Board of Directors have also
recommended, subject to shareholder approval, the selection of the Company's
independent auditors.
Fazle Husain, Audit Committee Chairman
Dr. James Daniell, Audit Committee Member
John Dayani, Audit Committee Member
The foregoing report of the audit committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this information by reference, and shall not otherwise be deemed
filed under such acts.
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GENERAL INFORMATION
ANNUAL REPORT
Our 2000 Annual Report to Shareholders is being mailed to shareholders
with this proxy statement. The Annual Report is not part of the proxy
solicitation materials.
ADDITIONAL INFORMATION
A copy of our Annual Report on Form 10-K for the year ended December
31, 2000, excluding certain of the exhibits thereto, may be obtained without
charge by writing to HealthStream, Inc., Investor Relations Department, 209 10th
Avenue, Suite 450, Nashville, Tennessee 37203 or an oral request by calling
(615) 301-3114.
By Order of the Board of Directors,
Robert A. Frist, Jr.
Chief Executive Officer
Nashville, Tennessee
April 30, 2001
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EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
The Audit Committee (the "Committee") is appointed by the Board of
Directors (the "Board") to assist the Board in monitoring on a periodic basis
the processes used by the Company to produce financial statements, the Company's
systems of internal accounting and financial controls, and the independence of
the Company's outside auditors.
In discharging its responsibilities, the Committee is empowered to
investigate any matter with full access to all books, records, facilities and
personnel of the Company and the power to retain outside counsel, auditors or
other experts or consultants for this purpose. The Committee shall make regular
reports to the Board.
The Committee shall review and reassess the adequacy of this Charter on
an annual basis and submit it annually to the Board for approval.
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition and experience will meet the applicable
listing standards of the NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere
with the exercise of their independent judgment in carrying out the
responsibilities of a director (unless as to one non-independent member the
Board under exceptional and limited circumstances determines that membership is
required by the best interests of the Company and its shareholders); and
2. Who are financially literate (as defined in the NASD listing
standard) or who become financially literate within a reasonable period of time
after appointment to the Committee. In addition, at least one member of the
Committee will have sufficient experience or background which results in
financial sophistication (as defined in the NASD listing standard).
The Committee's monitoring responsibility recognizes that the Company's
management is responsible for preparing the Company's financial statements in
accordance with generally accepted accounting principles and that the outside
auditors are responsible for auditing those financial statements. Additionally,
the Committee recognizes that the Company's financial management, as well as its
outside auditors, have more time, knowledge and more detailed information on the
Company and its financial reports than do Committee members; consequently, in
carrying out its responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements and is not conducting
an audit or investigation of the financial statements or determining that the
Company's financial statements are true and complete or are in accordance with
generally accepted accounting principles.
The following functions shall be the common recurring activities of the
Committee in carrying out its monitoring responsibilities. These functions are
set forth as a guide with the understanding that the Committee may diverge from
this guide as it deems appropriate given the circumstances.
- The Committee shall review with management and the outside auditors the
annual audited financial statements to be included in the Company's
Annual Report on Form 10-K (or the
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- Annual Report to Shareholders if distributed prior to the filing of
Form 10-K) and review and consider with the outside auditors the
matters required to be discussed by Statements of Auditing Standards
("SAS") No. 61 and No. 90.
- As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to be
included in the Company's quarterly reports to be filed with Securities
and Exchange Commission on Form 10-Q and the matters required to be
discussed by SAS No. 61 and No. 90; this review will occur prior to the
Company's filing of the Form 10-Q.
- The Committee shall discuss with management and the outside auditors
the quality and adequacy of the Company's internal controls that could
significantly affect the Company's financial statements.
- The Committee shall:
- request from the outside auditors annually a formal
written statement delineating all relationships between the
outside auditors and the Company that may impact the
objectivity and independence of the outside auditors,
consistent with Independence Standards Board Standard Number
1;
- discuss with the outside auditors in an active
dialogue any such disclosed relationships and their impact on
the outside auditors' independence; and
- if determined appropriate by the Committee, recommend
that the Board take appropriate action in response to the
outside auditor's report to ensure the outside auditor's
independence.
- The Committee, subject to any action that may be taken by the Board,
shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate,
replace the outside auditors, and the outside auditors are ultimately
accountable to the Board and the Committee.
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THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF HEALTHSTREAM, INC.
The undersigned shareholder(s) of HealthStream, Inc., a Tennessee
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 30, 2001, and hereby appoints
Robert A. Frist, Jr. and Robert H. Laird, Jr. and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2001 Annual Meeting
of Shareholders of HealthStream, Inc. to be held on Thursday, May 31, 2001 at
2:00 p.m. Central Daylight Time, at 209 10(th) Avenue, Suite 450, Nashville,
Tennessee 37203, and at any adjournment or adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below:
1. To elect Thompson Dent, James Daniell and William Stead to serve as Class I
directors to the Board of Directors until the 2004 Annual Meeting of
Shareholders and to elect Linda Rebrovick to serve as a Class II director to
the Board of Directors to serve until the 2002 Annual Meeting of
Shareholders and until their respective successors are elected and
qualified.
[ ] FOR all nominees listed below (except as [ ] WITHHOLD AUTHORITY to vote for all
indicated to the contrary below) nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW.)
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2. To ratify the appointment of Ernst & Young LLP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To vote in accordance with their best judgment with respect to any other
matters which may properly come before the meeting or any adjournment or
adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED FOR THE PROPOSALS SET FORTH HEREIN AND AS THE PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
(This Proxy should be marked, dated, and signed by the shareholder(s)
exactly as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)
Dated: , 2001
--------------------------
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Signature
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Signature if held jointly