FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-131045
PROSPECTUS SUPPLEMENT NO. 1
(to Prospectus dated April 10, 2006)
HEALTH FITNESS CORPORATION
6,681,000 SHARES OF COMMON STOCK
This Prospectus Supplement No. 1 should be read in conjunction with the
Prospectus dated April 10, 2006 relating to the offer and sale from time to time
by the selling shareholders identified in the Prospectus of up to 6,681,000
shares of the common stock of Health Fitness Corporation. We will not receive
any of the proceeds from the sale of the common stock covered by the Prospectus.
On April 11, 2006, we filed with the U.S. Securities and Exchange
Commission the attached Current Report on Form 8-K and the attached definitive
Proxy Statement on Schedule 14A related to our Annual Meeting of Shareholders.
The information contained herein, including the information attached
hereto, supplements and supersedes, in part, the information contained in the
Prospectus. This Prospectus Supplement No. 1 should be read in conjunction with
the Prospectus, and is qualified by reference to the Prospectus except to the
extent that the information in this Prospectus Supplement No. 1 supersedes the
information contained in the Prospectus.
INVESTING IN OUR COMMON STOCK IS SPECULATIVE AND INVOLVES RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 OF THE PROSPECTUS DATED APRIL 10, 2006.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT NO. 1. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus Supplement No. 1 is April 11, 2006.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 7, 2006
Health Fitness Corporation
(Exact name of Registrant as Specified in its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-25064 41-1580506
(Commission File Number) (IRS Employer
Identification No.)
3600 American Boulevard W., Suite 560
Minneapolis, Minnesota 55431
(Address of Principal Executive Offices and Zip Code)
(952) 831-6830
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
================================================================================
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
(b) On April 7, 2006, Mr. Cary Musech advised the Board of
Directors of Health Fitness Corporation that he will not stand for
re-election as a director at our next annual meeting, scheduled to be
held on May 23, 2006. Mr. Musech will continue to serve as a director,
and member of our Finance Committee, until such time as the next
annual meeting is held. There were no disagreements on any matter
relating to our operations, policies or practices in connection with
Mr. Musech's decision to not stand for re-election.
Mr. Musech joined the Board of Directors in December 2003 in
connection with an investment by Bayview Capital Partners LP. Effective
November 15, 2005, we redeemed all outstanding shares of Series A
Convertible Preferred Stock, all of which was owned by Bayview Capital
Partners, together with substantially all warrants held by Bayview
Capital Partners to acquire common stock. Bayview Capital Partners no
longer currently owns a significant amount of our securities.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 11, 2006
HEALTH FITNESS CORPORATION
By /s/ Wesley W. Winnekins
--------------------------------
Wesley W. Winnekins
Chief Financial Officer
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
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 Section 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------------------------
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
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SEC 1913 (02-02)
HEALTH FITNESS CORPORATION
-------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------------------
The Annual Meeting of Shareholders of Health Fitness Corporation will be
held at 3:30 p.m., Central time, on May 23, 2006, at the Company's corporate
offices, 3600 American Boulevard, West, Bloomington, Minnesota, for the
following purposes:
1. To elect 8 individuals to serve on the Board of Directors for a term
of one year or until their successors are duly elected and
qualified.
2. To approve a 300,000 share increase in the number of shares reserved
for the Company's 1995 Employee Stock Purchase Plan.
3. To approve a 500,000 share increase in the number of shares reserved
for the Company's 2005 Stock Option Plan.
4. To ratify the selection of Grant Thornton LLP as the Company's
independent registered public accounting firm for 2006.
5. To consider and act upon such other matters as may properly come
before the meeting and any adjournments or postponements thereof.
Only shareholders of record at the close of business on April 3, 2006 are
entitled to notice of the meeting and to vote at the meeting or any adjournment
or postponement thereof.
Your vote is important. We ask that you complete, sign, date and return
the enclosed proxy in the envelope provided. The prompt return of proxies will
save the Company the expense of further requests for proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Jerry V. Noyce
President and Chief Executive Officer
Bloomington, Minnesota
April 5, 2006
HEALTH FITNESS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 2006
-------------------------------------
PROXY STATEMENT
-------------------------------------
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Health Fitness
Corporation ("the Company") for the Annual Meeting of Shareholders to be held on
May 23, 2006, at the location and for the purposes set forth in the notice of
meeting, and at any adjournment or postponement 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 or by attending and voting at the meeting. Proxies not revoked will
be voted in accordance with the choice specified by shareholders by means of the
ballot provided on the Proxy for that purpose. Proxies which are signed but
which lack any such specification will, subject to the following, be voted in
favor of the proposals set forth in the Notice of Meeting and in favor of the
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
3600 American Boulevard West, Suite 560, Bloomington, 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 April 17, 2006.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed April 3, 2006 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 3, 2006, 18,930,368 shares
of the Company's Common Stock were issued and outstanding. The Common Stock is
the only outstanding classes 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. No holders of any capital stock of the Company
are entitled to cumulative voting rights.
2
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table sets forth as of April 3, 2006 certain information
regarding beneficial ownership of our common stock by:
- Each person known to us to beneficially own 5% or more of our common
stock;
- Each named executive officer;
- Each of our directors; and
- All of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with Rule 13d-3
under the Securities Exchange Act of 1934. Beneficial ownership generally means
having sole or shared voting or investment power with respect to securities.
Unless otherwise indicated in the footnotes to the table, each person named in
the table has sole voting and investment power with respect to the shares of
common stock set forth opposite the shareholder's name. We have based our
calculation of the percentage of beneficial ownership on 18,930,368 shares of
common stock outstanding on April 3, 2006. Unless otherwise noted below, the
address of each beneficial owner listed on the table is c/o Health Fitness
Corporation, 3600 American Blvd. W., Suite 560, Bloomington, MN 55431.
PERCENT OF
NAME OF BENEFICIAL OWNER NUMBER CLASS (1)
------------------------ ------ ---------
5% BENEFICIAL OWNERS:
Pequot Capital Management, Inc. ........................ 3,898,440(2) 19.7%
500 Nyala Farm Road
Westport, CT 06680
Perkins Capital Management, Inc. ....................... 2,709,267(3) 14.3%
730 East Lake Street
Wayzata, MN 55391
Magnetar Capital Master Fund, Ltd. ..................... 1,624,350(4) 8.4%
c/o Magnetar Financial LLC
1603 Orrington Ave., 13th Floor
Evanston, IL 60201
Gruber & McBaine Capital Management .................... 1,097,890(5) 5.7%
50 Osgood Place - Penthouse
San Francisco, CA 94133
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Jerry V. Noyce ......................................... 535,251(6) 2.8%
Jeanne C. Crawford ..................................... 170,295(7) *
Wesley W. Winnekins .................................... 148,250(8) *
Brian Gagne ............................................ 32,159(9) *
Michael Seethaler ...................................... 23,750(10) *
James A. Bernards ...................................... 176,000(11) *
Mark W. Sheffert ....................................... 141,722(12) *
Cary Musech ............................................ 127,431(13) *
John C. Penn ........................................... 86,000(14) *
Linda Hall Whitman ..................................... 86,000(14) *
Rodney A. Young ....................................... 86,000(14) *
K. James Ehlen, M.D .................................... 78,500(15) *
Robert J. Marzec ....................................... 50,000(16) *
All executive officers and directors as a group (20
persons) ............................................... 2,122,164(17) 10.4%
----------
* Less than one percent.
3
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of April 3, 2006, 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) Shares beneficially owned by Pequot Capital Management, Inc. represent
2,998,800 shares of common stock and 899,640 shares of common stock
issuable pursuant to currently exercisable warrants.
Shares beneficially owned by Pequot Capital Management are held of record
by the following investment funds in the following amounts: Pequot Scout
Fund, L.P., 1,306,110 shares; Pequot Mariner Master Fund, L.P., 676,260
shares; Premium Series PCC Limited - Cell 33, 53,040 shares; Pequot
Diversified Master Fund, Ltd., 86,190 shares; Pequot Navigator Offshore
Fund, Inc., 530,400 shares; Premium Series PCC Limited - Cell 32, 92,820
shares; Pequot Healthcare Fund, L.P., 497,250 shares; Pequot Healthcare
Institutional Fund, L.P., 99,450 shares; and Pequot Healthcare Offshore
Fund, Inc., 556,920 shares.
Pequot Capital Management, who is the Investment Manager/Advisor (as
applicable) to the above named funds, exercises sole voting and investment
power for all the shares, except that Pequot Capital Management does not
hold voting power over 53,040 and 92,820 shares held of record by Premium
Series PCC Limited Cell 33 and Cell 32, respectively. Arthur J. Samberg is
the controlling shareholder of Pequot Capital Management, and disclaims
beneficial ownership of the shares except for his pecuniary interest in
the above-named investment funds.
(3) In its most recent Schedule 13G/A filing with the Securities and Exchange
Commission on January 27, 2006, Perkins Capital Management, Inc.
represents that it has sole voting power over 946,000 of the shares, no
voting power over the remaining 1,763,267 shares and sole dispositive
power over all such shares.
(4) Represents 1,249,500 shares of common stock and 374,850 shares issuable
pursuant to currently exercisable warrants. Mr. Alec Litowitz possesses
voting and/or dispositive power over shares held by Magnetar Capital
Master Fund, Ltd. Mr. Litowitz disclaims any beneficial ownership of the
shares beneficially held by Magnetar Capital Master Fund, Ltd.
(5) Includes 601,800 shares of common stock and 180,540 shares issuable
pursuant to currently exercisable warrants. All shares are held in varying
amounts by Lagunitas Partners, LP, Gruber & McBaine International, Jon D.
and Linda W. Gruber Trust and J. Patterson McBaine. Jon D. Gruber and J.
Patterson McBaine, through Gruber & McBaine Capital Management, possess
shared voting and/or investment power over shares held by Lagunitas
Partners LP and Gruber & McBaine International. Messrs. Gruber and
Patterson disclaim any beneficial ownership over the shares held by
Lagunitas Partners LP and Gruber & McBaine International. Jon D. Gruber
possesses sole voting and/or investment power over shares held by Jon D.
and Linda W. Gruber Trust. J. Patterson McBaine possesses sole voting and
investment power over shares held in his name.
(6) Includes 493,500 shares which may be purchased upon exercise of options
that were exercisable by Mr. Noyce as of April 3, 2006, or within 60 days
of such date.
(7) Includes 90,625 shares which may be purchased upon exercise of options by
Ms. Crawford that were exercisable as of April 3, 2006, or within 60 days
of such date. Also includes 39,000 shares held by Ms. Crawford's spouse.
(8) Represents shares which may be purchased upon exercise of options by Mr.
Winnekins that were exercisable as of April 3, 2006, or within 60 days of
such date.
(9) Includes 23,750 shares which may be purchased upon exercise of options by
Mr. Gagne that were exercisable as of April 3, 2006, or within 60 days of
such date.
(10) Represents shares which may be purchased upon exercise of options by Mr.
Seethaler that were exercisable as of April 3, 2006, or within 60 days of
such date.
4
(11) Includes 10,000 shares held by an employee benefit plan over which Mr.
Bernards has voting and investment power, and 80,000 shares which may be
purchased upon exercise of options that were exercisable by Mr. Bernards
as of April 3, 2006, or within 60 days of such date. Also includes 50,000
shares held by Brightstone Capital, LLC ("Brightstone"). As President of
Brightstone, Mr. Bernards may be deemed to share voting and/or investment
power over the shares. Mr. Bernards disclaims any beneficial ownership of
the shares held by Brightstone.
(12) Includes 66,000 shares which may be purchased upon exercise of options by
Mr. Sheffert that were exercisable as of April 3, 2006, or within 60 days
of such date.
(13) Includes 20,000 shares beneficially owned by Bayview Capital Partners LP
("Bayview Partners"), 62,431 shares that may be purchased upon exercise of
warrants that were exercisable as of April 3, 2006, or within 60 days of
such date, and 45,000 shares that may be purchased upon exercise of
options that were exercisable by Mr. Musech as of April 3, 2006, or within
60 days of such date. Mr. Musech is the Chief Executive Officer of Tonka
Bay Equity Partners LLC ("Tonka Bay"), which is the general partner of
Bayview Partners. Mr. Musech serves as one of five members of the Board of
Governors of Tonka Bay, and the Board of Governors makes all investment
decisions on behalf of Bayview Partners, including any decisions regarding
acquisition or disposition of securities of the Company. As a result, Mr.
Musech may be deemed to share voting and/or investment power over the
shares held by Bayview Partners. Mr. Musech disclaims any beneficial
ownership of the shares held by Bayview Partners.
(14) Includes 66,000 shares which may be purchased upon exercise of options by
each of Mr. Penn, Ms. Whitman and Mr. Young that were exercisable as of
April 3, 2006, or within 60 days of such date.
(15) Includes 58,500 shares which may be purchased upon exercise of options by
Mr. Ehlen that were exercisable as of April 3, 2006, or within 60 days of
such date.
(16) Includes 30,000 shares which may be purchased upon exercise of options by
Mr. Marzec that were exercisable as of April 3, 2006, or within 60 days of
such date.
(17) Includes 1,468,556 shares which may be purchased upon exercise of options
and warrants that were exercisable as of April 3, 2006, or within 60 days
of such date. Excludes 553,882 shares held of record by two officers, but
held in escrow at Wells Fargo Bank, National Association, and subject to
forfeiture on or prior to approximately June 30, 2007 in accordance with
the terms of that certain Escrow Agreement dated December 23, 2005 to
which such officers, Wells Fargo and the Company are parties.
5
ELECTION OF DIRECTORS
(PROPOSAL #1)
GENERAL INFORMATION
The Board of Directors has fixed the number of directors for the ensuing
year at eight (8) and the independent directors of the Board recommend that
eight (8) of the current members be nominated and elected at the Annual Meeting.
Under applicable Minnesota law, the election of each nominee requires the
affirmative vote by a plurality of the voting power of the shares present and
entitled to vote on the election of directors at the Annual Meeting at which a
quorum is present.
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 or her 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 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 names and ages of all of the director nominees and the positions held
by each with the Company are as follows:
Name AGE Position
---- --- --------
James A. Bernards 59 Director
K. James Ehlen, M.D. 61 Director
Robert J. Marzec 61 Director
Jerry V. Noyce 61 President, CEO and Director
John C. Penn 66 Chairman
Mark W. Sheffert 58 Director
Linda Hall Whitman 57 Director
Rodney A. Young 51 Director
JAMES A. BERNARDS, a director of the Company since March 1999, serving as
Chairman of the Board from 1999 through 2003. In addition, Mr. Bernards served
as a director of the Company from 1993 to 1998. Mr. Bernards has served as
President of Brightstone Capital, LLC, a venture capital firm, since 1985 and
President of Facilitation Incorporated, a consulting firm since founding it in
July 1993. Prior to that time he was President of Stirtz Bernards & Co., a CPA
firm he founded and with which he had been a partner for more than 12 years. Mr.
Bernards is also a director of three public companies, FSI International, Inc.,
August Technology Corporation and Entegris, Inc., and several private companies.
K. JAMES EHLEN, M.D., a director of the Company since April 2001,
currently serves as Chief Executive Officer of the Halleland Health Consulting
Group, a Minneapolis-based health consulting firm. From February 2001 to
February 2003, Dr. Ehlen served as Chief, Clinical Leadership for Humana Inc., a
national managed care organization. He was Executive Leader of Health Care
Practice for Halleland Health Consulting Group from May 2000 to February 2001
and was a self-employed health care consultant from June 1999 to May 2000. From
October 1988 to June 1999, Dr. Ehlen served as Chief Executive Officer of Allina
Health System, an integrated health care organization. Dr. Ehlen currently
provides medical advisory consulting services to the Company as a representative
of Halleland Health Consulting. See "Certain Transactions" contained within this
Proxy Statement. Dr. Ehlen is also a
6
director of Transoma Medical, Inc., IZEX Technologies, Inc., Cardtronic
Technology, Inc., privately- held companies, and GelStat Corporation, a
publicly-held company.
ROBERT J. MARZEC, a director of the Company since May 2004, retired from
PricewaterhouseCoopers in 2002, where he was an audit partner and a public
accountant for 35 years. Mr. Marzec is also a director of Medtox Scientific,
Inc., and Apogee Enterprises, Inc., both of which are publicly-held companies.
JERRY V. NOYCE has been President and Chief Executive Officer of the
Company since November 2000 and a director since February 2001. From October
1973 to March 1997, he was Chief Executive Officer and Executive Vice President
of Northwest Racquet, Swim & Health Clubs. From March 1997 to November 1999, Mr.
Noyce served as Regional Chief Executive Officer of CSI/Wellbridge Company, the
successor to Northwest Racquet, where he was responsible for all operations at
the Norwest Clubs and the Flagship Athletic Club.
JOHN C. PENN, a director of the Company since April 2001 and Chairman of
the Board since January 2004, currently serves as Chairman of Intek Plastics,
Inc., a custom extruder of plastic products for the window and door industries.
From 1999 to 2003, he served as Vice Chairman and Chief Executive Officer of
Satellite Companies, a family-owned group of three companies engaged in the
manufacture and international sales of portable restroom equipment, distribution
and rental of relocateable buildings, and sales and maintenance of private
aircraft. He served for 21 years as an outside board member of those companies
before joining them as an employee in 1999. For 25 years prior to joining
Satellite Companies, Mr. Penn served as chief executive officer of several
companies in the manufacturing and medical industries, including Center for
Diagnostic Imaging, Benson Optical and Arctic Enterprises. Mr. Penn is also a
director of Angeion Corporation, a publicly-held company.
MARK W. SHEFFERT, a director of the Company since January 2001, has served
as Chairman and Chief Executive Officer of Manchester Companies, Inc., an
investment banking and business advisory firm, since December 1989. Prior to
that, he was President of First Bank System, Inc. (now U.S. Bank) a $28 billion
bank holding company headquartered in Minneapolis, Minnesota. He also served as
Chairman and CEO for First Trust, a $20 billion trust company based in St. Paul,
Minnesota. For 10 years prior to First Bank, Mr. Sheffert served as President
and Chief Operating Officer of North Central Insurance Company. Mr. Sheffert has
served on the Board of Directors for over thirty companies, including NYSE,
NASDAQ and private companies, and he currently serves on the Board of BNCCORP,
Inc, a publicly-held company.
LINDA HALL WHITMAN, a director of the Company since April 2001, was Chief
Executive Officer of MinuteClinic, a healthcare services company, from 2002 to
2005, and is currently serving as a consultant to MinuteClinic. Prior to that,
she was President of Ceridian Performance Partners (an employee benefits
provider), Ceridian Corporation from 1996 through 2000 and Vice President,
Business Integration at Ceridian from 1995 to 1996. From 1980 to 1995 she served
in various management and executive positions with Honeywell, Inc., including
Vice President, Consumer Business Group from 1993 to 1995. Ms. Whitman has been
a director of MTS Systems Incorporation since 1985 and August Technology
Corporation from 2001 to 2006. She served on the Ninth District Federal Reserve
Bank Board as a Class C Director from 1999 to 2005, and served as its Chair from
2004 to 2005.
RODNEY A. YOUNG, a director of the Company since April 2001, has served as
President, Chief Executive Officer and director of Angeion Corporation, a
medical company, since November 2004, joining Angeion as its Executive Vice
President in July 2004. Mr. Young was Chief Executive Officer and President of
LecTec Corporation, a developer, manufacturer and marketer of healthcare
consumer and over-the-counter pharmaceutical products, from August 1996 to July
2003, also serving as the Chairman of the Board of LecTec from November 1996 to
July 2003. Prior to that, Mr. Young served Baxter International, Inc. for five
years in various management roles, most recently as Vice President and
7
General Manager of the Specialized Distribution Division. Mr. Young also serves
as a director of Possis Medical, Inc., a publicly-held company, and Delta Dental
Plan of Minnesota.
Pursuant to the terms of a stock purchase agreement, Bayview Capital
Partners LP ("Bayview Partners") had the right to designate an individual for
one directorship on the Company's Board of Directors. Mr. Musech was designated
as the Bayview Partners nominee and was elected as a director of the Company
effective as of December 8, 2003. Effective May 23, 2005, Mr. Musech will resign
his position as director of the Company as Bayview Partners is no longer an
investor in the Company. There are no other 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.
CORPORATE GOVERNANCE
INDEPENDENCE
The Board of Directors has determined that Messrs. James A. Bernards, John
C. Penn, Robert J. Marzec, Mark W. Sheffert, Rodney A. Young and Ms. Linda Hall
Whitman, constituting a majority the Board of Directors, are independent
directors since none of them are believed to have any relationships that, in the
opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director and
since such directors otherwise satisfy the requirements of NASD Rule
4200(a)(15). (Although the Company is not subject to the rules of the NASD, the
Board of Directors believes that NASD Rule 4200(a)(15) is helpful in determining
the Company's independent directors.)
Jerry Noyce is precluded from being considered independent since he
currently serves as an executive officer of the Company. K. James Ehlen is
precluded by the Board from being independent since he has received material
compensation as a consultant to the Company. The Company expects that Dr. Ehlen
will qualify as an independent director under Nasdaq Rule 4200(a)(15) on
February 1, 2008.
CODE OF CONDUCT
The Board has approved an Ethics and Code of Conduct policy that applies
to all employees, directors and officers, including the principal executive
officer, principal financial officer, principal accounting officer and
controller. The Ethics and Code of Conduct policy addresses such topics as
protection and proper use of our assets, compliance with applicable laws and
regulations, accuracy and preservation of records, accounting and financial
reporting, conflicts of interest and insider trading. The Ethics and Code of
Conduct policy is available on the Company's website at www.hfit.com. Health
Fitness Corporation intends to include on its website any amendment to, or
waiver from, a provision of its code of ethics that applies to the principal
executive officer, principal financial officer, principal accounting officer and
controller that relates to any element of the code of ethics definition
enumerated in Item 406(b) of Regulation S-K under the Securities Act of 1933.
SHAREHOLDER COMMUNICATION WITH BOARD
Shareholders may communicate directly with the Board of Directors. All
communications should be directed to the Company's Secretary at the address
below and should prominently indicate on the outside of the envelope that it is
intended for the Board of Directors or for non-management directors. If no
director is specified, the communication will be forwarded to the entire Board.
Shareholder communications to the Board should be sent to:
Health Fitness Corporation Board of Directors
Attention: Secretary
3600 American Boulevard West, Suite 560
Bloomington, Minnesota 55431
8
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
Directors' attendance at Annual Meetings can provide shareholders with an
opportunity to communicate with directors about issues affecting the Company.
The Company does not have a policy regarding director attendance, but all
directors are encouraged to attend the Annual Meeting of Shareholders. The 2005
Annual Meeting of Shareholders was attended by six directors.
COMMITTEE AND BOARD MEETINGS
During fiscal 2005, the Board held 7 formal meetings. The directors often
communicate informally to discuss the affairs of the Company and, when
appropriate, take formal action by written consent of a majority of all
directors, in accordance with the Company's charter and bylaws and Minnesota
law.
The Company's Board of Directors has four standing committees, the Audit
Committee, the Compensation and Human Capital Committee, the Finance Committee
and the Nominating / Governance Committee. Members of such committees met
formally and informally from time to time throughout fiscal 2005 on committee
matters.
Each director attended 75% or more of the total number of meetings of the
Board and of committees of which he or she was a member.
Audit Committee
The Audit Committee is comprised of directors Robert J. Marzec (Chair),
Mark W. Sheffert and John C. Penn. Messrs. Marzec, Sheffert and Penn are, in the
judgment of the Board of Directors, "independent" directors. The Board also
believes that each member of the Nominating Committee satisfies the independence
requirements of Nasdaq Rule 4200(a)(15) (though not required to comply with such
provision) and the criteria of Section 10A(m)(3) of the Securities Exchange Act
of 1934. The Audit Committee is responsible for the oversight relating to the
Company's systems of internal and disclosure controls and its financial
accounting and reporting matters. The Committee is also responsible for
appointment, compensation, retention and oversight of the work of any publicly
registered accounting firm, including the Company's independent public
accountants. The Charter for the Audit Committee is attached as Exhibit A to the
Proxy Statement for the 2004 Annual Meeting of Shareholders. The Audit Committee
met 7 times during fiscal 2005.
Audit Committee Financial Expert
The Board has determined that Robert J. Marzec is the "audit committee
financial expert" as defined by Item 401(h)(2) of Regulation S-K under the
Securities Act of 1933. The designation of Mr. Marzec as the audit committee
financial expert does not impose on Mr. Marzec any duties, obligations or
liability that are greater than the duties, obligations and liability imposed on
Mr. Marzec as a member of the Audit Committee and the Board of Directors in the
absence of such designation or identification.
Compensation and Human Capital Committee
The Compensation and Human Capital Committee consists of Linda Hall
Whitman (Chair), James A. Bernards and Rodney A. Young. Though not required to
comply with such provision, the Board believes that each of the foregoing
members of the Compensation and Human Capital Committee satisfies the
independence requirements of Nasdaq Rule 4200(a)(15). The Compensation and Human
Capital Committee is charged with oversight responsibility for management's
performance and the
9
adequacy and effectiveness of compensation and benefit plans. In addition, the
Compensation and Human Capital Committee makes recommendations to the Board of
Directors regarding remuneration arrangements for senior management, and
adoption of employee compensation and benefit plans. Though not required to
comply with such provision, the Board believes that each member of the
Compensation and Human Capital Committee satisfies the independence criteria of
Nasdaq Rule 4200(a)(15). The Compensation and Human Capital Committee met 3
times during fiscal 2005.
Effective March 1, 2006, K. James Ehlen, M.D. was appointed to the
Compensation and Human Capital Committee as a non-voting member. Mr. Ehlen's
appointment as a non-voting member is subject to the continuing condition that
he not receive more than $30,000 in consulting fees from the Company in any
12-month period. Dr. Ehlen does not satisfy the independence requirements of
Nasdaq Rule 4200(a)(15) since he received more than $60,000 in annual
consideration from the Company within the past three years for serving as a
consultant to the Company. Dr. Ehlen will not be present or otherwise
participate in any matters related to fixing the compensation of the Company's
Chief Executive Officer so long as he is a consultant to the Company. Dr. Ehlen
will be entitled to participate in all other discussions and matters before the
Compensation and Human Capital Committee. The Company believes that Dr. Ehlen
will be particularly valuable in discussions regarding the performance and
adequacy of the Company's personnel, including its executive officers, and in
all other personnel policy matters. The Company expects that Dr. Ehlen will
qualify as an independent director under Nasdaq Rule 4200(a)(15) on February 1,
2008.
Finance Committee
The Finance Committee, which consists of Mark W. Sheffert (Chair), James
A. Bernards, and Cary Musech, is charged with exploring strategic opportunities
and the methods that might be available for financing such opportunities. The
Finance Committee met 17 times during fiscal 2005.
Nominating/Governance Committee
The Company's Nominating/Governance Committee consists of the Chairman of
the Board (John C. Penn), the Chairman of the Audit Committee (Robert J.
Marzec), the Chairman of the Compensation and Human Capital Committee (Linda
Hall Whitman), and the Chairman of the Finance Committee (Mark W. Sheffert).
Though not required to comply with such provision, the Board believes that each
member of the Nominating/Governance Committee satisfies the independence
requirements of Nasdaq Rule 4200(a)(15). The nominees for election to the Board
at the annual meeting of shareholders were recommended by the
Nominating/Governance Committee. The Nominating/Governance Committee met once
during fiscal 2005.
The Nominating/Governance Committee has not adopted a charter. The Company
has not yet adopted a nominating policy regarding director nominee proposals by
shareholders and does not believe such a policy is needed because shareholders
are free at any time to recommend a nominee to be considered by the Board by
submitting a written proposal to the Chairman of the Board of Directors, at
Health Fitness Corporation, 3600 American Boulevard West, Suite 560,
Bloomington, Minnesota 55431. A consent signed by the proposed nominee agreeing
to be considered as a director should accompany the written proposal. The
proposal should include the name and address of the nominee, in addition to the
qualifications and experience of said nominee.
10
The independent directors will consider the attributes of the candidates
and the needs of the Board and will review all candidates in the same manner,
regardless of the source of the recommendation. In evaluating director nominees,
a candidate should have certain minimum qualifications, including being able to
read and understand basic financial statements, be familiar with our business
and industry, have high moral character and mature judgment, and be able to work
collegially with others. In addition, factors such as the following shall be
considered:
- appropriate size and diversity of the Board;
- needs of the Board with respect to particular talent and experience;
- knowledge, skills and experience of nominee;
- familiarity with domestic and international business affairs;
- legal and regulatory requirements;
- appreciation of the relationship of our business to the changing
needs of society; and
- desire to balance the benefit of continuity with the periodic
injection of the fresh perspective provided by a new member.
DIRECTORS FEES
Under a compensation plan for outside directors, directors who are not
employees of the Company receive the following compensation:
1. Each director receives an annual cash retainer of $12,000 payable
quarterly at a rate of $3,000 in advance of each quarter.
2. The chairperson of the board receives an additional annual cash
retainer of $6,000 payable quarterly at a rate of $1,500 in advance of
each quarter.
3. The chairperson of the audit committee receives an additional
annual cash retainer of $5,000 payable quarterly at a rate of $1,250 in
advance of each quarter.
4. The chairperson of the Compensation and Human Capital Committee
receives an additional annual cash retainer of $2,500 payable quarterly at
a rate of $625 in advance of each quarter.
5. The chairperson of the finance and nominating/governance
committees receives a $250 committee meeting fee (in addition to fees paid
to all committee members for their attendance at such committee meetings).
6. Each director receives a cash payment of $1,000 for attending
each regular and special board meeting. Telephonic board meetings, or a
director's telephonic attendance at a board meeting, are compensated at
75% of the full payment.
7. Committee members receive a cash payment of $500 for attending
each regular and special committee meeting up to the following annual
limit: Compensation and Human Capital Committee - eight meetings; and
Audit Committee - eight meetings. The Finance Committee and
Nominating/Governance Committee do not have an annual limit on the number
of meetings. Telephonic committee meetings, or the director's telephonic
attendance at a committee meeting, will be compensated at 75% of the full
payment.
8. Upon the initial election to the Board of Directors, a director
receives a grant of 20,000 shares of common stock.
9. Upon the initial election to the Board of Directors and annually
thereafter, a director will receive a six-year fully vested option to
purchase 15,000 shares of common stock. The option will have an exercise
price equal to the fair market value of the common stock on the date of
grant.
11
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors,
as amended, (set forth in Exhibit A to the 2004 proxy statement), the Audit
Committee assists the Board of Directors with fulfilling its oversight
responsibility regarding the quality and integrity of the accounting, auditing
and financial reporting practices of the Company. In discharging its oversight
responsibilities regarding the audit process, the Audit Committee:
(1) reviewed and discussed the audited financial statements with
management;
(2) discussed with the independent auditors the material required to be
discussed by Statement on Auditing Standards No. 61; and
(3) reviewed the written disclosures and the letter from the independent
auditors required by the Independence Standards Board's Standard No.
1, and discussed with the independent auditors any relationships
that may impact their objectivity and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, as filed with the Securities and Exchange
Commission.
MEMBERS OF THE AUDIT COMMITTEE:
Robert J. Marzec (Chair)
Mark W. Sheffert
John C. Penn
CERTAIN TRANSACTIONS
On December 1, 2003, the Company entered into a Professional Services
Agreement with K. James Ehlen, M.D., representing Halleland Health Consulting.
The scope of services provided by Dr. Ehlen primarily included serving as the
Company's Medical Advisor, representing the Company as its lead clinical
representative with clients, and supporting the Company's enhancement of its
corporate health and wellness services strategy. The agreement stated that Dr.
Ehlen would receive a monthly retainer of $10,000 and expire after 120 days. On
April 1, 2004, the Company renewed the agreement with Dr. Ehlen. The new
agreement stated that Dr. Ehlen would receive a monthly retainer of $7,500 and
expired on December 31, 2004. Currently, Dr. Ehlen continues to provide
substantially the same services to the Company on a month-to-month basis. For
fiscal year 2005, the Company paid Dr. Ehlen $66,336 for his services.
Pursuant to an investment by Bayview Capital Partners LP ("Bayview
Partners") on December 8, 2003, a $2,000,000 term note (the "Term Note") was
issued to Bayview Partners, along with 1,000,000 shares of Series A Convertible
Preferred Stock (the "Preferred Stock") and a ten-year warrant to purchase
1,210,320 shares of Common Stock of the Company at $0.50 per share (the
"Warrants"). The Preferred Stock has a stated dividend rate of 6% per year,
computed on a simple interest basis, paid in kind in the form of additional
shares of Preferred Stock using a price of $1.00 per share ("PIK Dividends").
Between December 31, 2003 and November 14, 2005, an aggregate of 111,105 shares
of Preferred Stock were issued to Bayview Partners in payment of the dividends.
At the option of Bayview Partners, the Preferred Stock, including any PIK
Dividends, may be converted into the Company's common stock at a price of $0.50
per share. On December 29, 2004, the Company repaid the Term Note to Bayview
Partners. On November 15, 2005, the Company redeemed all of the outstanding
shares of the Preferred Stock, which were convertible into 2,222,210 shares of
common stock, and also redeemed warrants to purchase 1,213,032 shares of common
stock if exercised for cash, or 916,458 shares of common stock if exercised on a
"cash-less" basis. Currently, Bayview Partners has warrants to purchase an
additional 62,431 shares
12
of common stock, which were obtained in connection with anti-dilution rights,
with exercise prices ranging from $2.24 to $2.70 per share. Cary Musech, a
director of the Company since December 2003, is the Chief Executive Officer of
Tonka Bay Equity Partners LLC, which is the general partner of Bayview Partners.
Mr. Musech is not standing for reelection at the Annual Meeting.
EXECUTIVE COMPENSATION
COMPENSATION AND HUMAN CAPITAL COMMITTEE REPORT
COMPENSATION AND HUMAN CAPITAL COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION. The Compensation and Human Capital Committee of the Board of
Directors is composed of outside directors Linda Hall Whitman, James A. Bernards
and Rodney A. Young. Effective March 1, 2006, Dr. Ehlen was appointed as a
non-voting member of the Compensation and Human Capital Committee. Dr. Ehlen
will not participate in any matters related to the fixing of compensation for
the Chief Executive Officer so long as he is serving as a consultant to the
Company. None of such members of the Committee is or ever has been an employee
or officer of the Company and none of such persons are affiliated with any
entity other than the Company with which an executive officer of the Company is
affiliated.
OVERVIEW AND PHILOSOPHY. In accordance with the Compensation and Human
Capital Committee Charter, the Compensation and Human Capital Committee (i)
develops procedures and policies for compensating directors; (ii) reviews the
Company's procedures, processes and policies used to compensate the Company's
CEO and principal executives (Chief Financial Officer, National Vice Presidents
of Account Services, Vice President of Human Resources, Vice President of
Marketing, Vice President of Program Services, Vice President of Health
Management Consulting, National Vice President of Business Development, Chief
Information Officer and Chief Science Officer); (iii) reviews the performance
evaluation procedures for the CEO and principal executives; (iv) recommends
compensation plans for the CEO to the Board and approves compensation plans for
the principal executives. The Compensation and Human Capital Committee has
developed executive compensation programs designed to attract and retain
qualified executives and to motivate them to maximize shareholder investment by
achieving Company goals. There are three basic components to the Company's
executive compensation program: base pay, annual incentive bonus, and long-term,
equity-based incentive compensation in the form of stock options. Each component
is established in light of individual and Company performance, comparable
compensation programs in the Minneapolis/Saint Paul metropolitan area, equity
among employees and cost effectiveness.
BASE PAY. Base pay is designed to be competitive, although conservative,
as compared to salary levels for equivalent positions at comparable companies in
the Minneapolis/Saint Paul metropolitan area. The executive's actual salary
within this competitive framework depends on the individual's performance,
responsibilities, experience, leadership and potential future contribution. The
base pay of the CEO and CFO are currently set by their employment agreements
(See "Employment Agreements" below), with increases for the CEO determined by
the Board upon recommendation of the Compensation and Human Capital Committee
and increases for the CFO determined by the CEO and the Compensation and Human
Capital Committee.
ANNUAL INCENTIVE BONUS. In addition to base pay, the CEO and other
principal executives may be eligible to receive an annual cash bonus based on
criteria determined by the Board of Directors for the CEO, and for other
principal executives by the CEO and Compensation and Human Capital Committee.
Bonus eligibility may range from 15% to 50% of base pay.
LONG-TERM, EQUITY-BASED INCENTIVE COMPENSATION. The long-term,
equity-based compensation program is tied directly to shareholder return. Under
the current program, long-term incentive compensation consists of stock options
that generally do not fully vest until after four years. Stock options are
awarded with an exercise price equal to the fair market value of the Company's
common
13
shares on the date of grant. Accordingly, the executive is rewarded only if the
shareholders receive the benefit of appreciation in the price of the Common
Stock.
Because long-term options vest over time, the Company periodically
(generally once each year) grants new options to provide continuing incentives
for future performance. The size of the previous grants and the number of
options held are considered by the Compensation and Human Capital Committee, but
are not entirely determinative of future grants. Each executive's annual grants
are based upon the individual's performance, responsibilities, experience,
leadership and potential future contribution and any other factors deemed
relevant by the Committee. Stock option grants for the CEO and CFO are made by
the Board of Directors upon recommendation of the Compensation and Human Capital
Committee. Stock option grants for other principal executives are made by the
CEO and Compensation and Human Capital Committee, including grants from a stock
option pool subject to the discretion of the CEO within certain parameters.
Stock options are designed to align the interests of the Company's
executives with those of shareholders by encouraging executives to enhance the
value of the Company and, hence, the price of the Common Stock and the
shareholders' investment. In addition, through deferred vesting, this component
of the compensation system is designed to create an incentive for the executive
to remain with the Company.
BENEFITS. The Company also provides medical and insurance benefits to its
executive officers, which are generally available to all Company employees. The
Company has a 401(k) plan in which all qualified employees, including the
executive officers, are eligible to participate. During 2005, the Company made
aggregate matching contributions of approximately $261,000 to plans qualified
under IRC Section 401(k).
ANNUAL REVIEWS. Each year the Compensation and Human Capital Committee
reviews its executive compensation polices and programs and determines what
changes, if any, are appropriate for the following year. In addition, the
Committee and Board of Directors review the individual performance of the CEO.
Chief Executive Officer Compensation in 2005. Mr. Noyce serves as the
Company's Chief Executive Officer. For 2005, the Board of Directors approved the
recommendation of the Compensation and Human Capital Committee to increase Mr.
Noyce's annual base salary by 2% to $250,096, and to grant Mr. Noyce options to
purchase 40,000 shares of the Company's common stock, vesting over four years,
with an exercise price equal to fair market value as of the date of grant. In
December 2004, the Board of Directors, upon the recommendation of the
Compensation and Human Capital Committee, approved a bonus program for Mr. Noyce
for fiscal year 2005 pursuant to which Mr. Noyce had the opportunity to earn a
bonus of up to 27% of his base pay upon achievement of certain revenue targets
and a bonus of up to 18% of base pay based upon achievement of certain EBITDA
targets. The Company paid Mr. Noyce a cash bonus of $73,558 in fiscal year 2005
for bonus objectives he met for fiscal year 2004.
MEMBERS OF THE COMPENSATION AND HUMAN CAPITAL COMMITTEE:
Linda Hall Whitman (Chair)
James A. Bernards
Rodney A. Young
K. James Ehlen, M.D.
14
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 Chief Executive
Officer and to the Company's other four most highly compensated executive
officers who received compensation in excess of $100,000 during fiscal 2005
(such individuals referred to as the "named executive officers").
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
----------------------------------- ---------------------- -------
Restricted Securities LTIP All Other
Name and Principal Fiscal Stock Underlying Payouts Compensation
Position Year Salary ($) Bonus ($) Other ($) Awards ($) Options ($) ($)
-------- ---- ---------- --------- --------- ---------- ------- --- ---
Jerry V. Noyce.................. 2005 249,134 73,558 8,400(2) -- 40,000 -- --
President and 2004 243,269 -- 8,400 -- 80,000 -- --
Chief Executive Officer 2003 238,050 10,000 8,400 -- 102,000 -- --
Wesley W. Winnekins,............ 2005 159,193 33,000 -- -- 10,000 -- --
Chief Financial 2004 143,780 -- -- -- 17,000 -- --
Officer 2003 131,159 15,000 -- -- 27,000 -- --
Jeanne C. Crawford,............. 2005 135,115 24,747 -- -- 7,500 -- --
Vice President - Human 2004 128,895 8,766 -- -- 35,000 -- --
Resources 2003 123,311 20,230 -- -- 25,000 -- --
Brian Gagne..................... 2005 130,437 21,456 -- -- 15,000 -- --
Vice President - 2004 125,221 8,658 27,489(3) -- -- -- --
Program Services (1)
Michael Seethaler,.............. 2005 123,146 29,260 -- -- 15,000 -- --
National Vice President - 2004 120,101 10,000 -- -- -- -- --
Business Development (1)
----------
(1) Such persons first became executive officers during fiscal 2004.
(2) Amount represents payments for a car allowance and country club
membership. See "Employment Agreements - Jerry V. Noyce."
(3) Amount represents payments for relocation expenses.
EMPLOYMENT AGREEMENTS
JERRY V. NOYCE. In November 2000, the Company entered into an employment
agreement with Jerry Noyce, the Company's President and Chief Executive Officer.
Salary increases under the agreement are determined by the Compensation and
Human Capital Committee and the Board. Mr. Noyce's current annual base salary
under the agreement is $275,000. Mr. Noyce is also eligible to earn an annual
bonus based on criteria set by the Board. Mr. Noyce also receives normal and
customary employee benefits and fringe benefits, including a $500 per month car
allowance and up to $200 per month for a country club membership. The agreement
may be terminated by either party upon written notice to the other party. If Mr.
Noyce is terminated without "cause," he will continue to receive his base salary
for a period of 12 months following such termination. If the agreement is
terminated by the Company because of a change of control, Mr. Noyce will receive
his base salary for a period of 24 months following termination. If Mr. Noyce
resigns as a result of a change of control because he will not be named chief
executive officer of the new controlling entity, he will receive his base salary
for a period of 12 months following termination.
WESLEY W. WINNEKINS. The Company has an employment agreement with Wes
Winnekins, the Company's Chief Financial Officer, which agreement was effective
as of February 9, 2001 and continues for an indefinite term until terminated in
accordance with the agreement. Mr. Winnekins' current annual base salary under
his employment agreement is $180,000. Mr. Winnekins is also eligible to earn an
annual bonus based on criteria set by the Company's CEO and approved by the
Compensation and Human Capital Committee. The agreement may be terminated by
either party upon written notice to the other party. If Mr. Winnekins is
terminated without "cause," he will continue to receive his base salary for a
period of three months following such termination.
15
JEANNE C. CRAWFORD. The Company has an employment agreement with Jeanne
Crawford, Vice President - Human Resources, which agreement was effective as of
March 1, 2003 and continues for an indefinite term until terminated in
accordance with its terms. Ms. Crawford's current annual base salary under the
agreement is $145,000. Ms. Crawford is also eligible to earn an annual bonus
based on criteria set by the Company's CEO and approved by the Compensation and
Human Capital Committee. The agreement may be terminated by either party upon
written notice to the other party. If Ms. Crawford is terminated without
"cause," she will continue to receive her base salary for a period of three
months following such termination.
BRIAN GAGNE. The Company has an employment agreement with Brian Gagne,
Vice President - Program Services, which agreement was effective as of December
8, 2003 and continues for an indefinite term until terminated in accordance with
its terms. Mr. Gagne's current annual base salary under the agreement is
$142,000. Mr. Gagne is also eligible to earn an annual bonus based on criteria
set by the Company's CEO and approved by the Compensation and Human Capital
Committee. The agreement may be terminated by either party upon written notice
to the other party. If Mr. Gagne is terminated without "cause," he will continue
to receive his base salary for a period of three months following such
termination.
MICHAEL SEETHALER. The Company has an employment agreement with Michael
Seethaler, National Vice President - Business Development, which agreement was
effective as of December 22, 2003 and continues for an indefinite term until
terminated in accordance with its terms. Mr. Seethaler's current annual base
salary under his employment agreement is $140,000. Mr. Seethaler is also
eligible to earn an annual bonus based on criteria set by the Company's CEO and
approved by the Compensation and Human Capital Committee. The agreement may be
terminated by either party upon written notice to the other party. If Mr.
Seethaler is terminated without "cause," he will continue to receive his base
salary for a period of three months following such termination.
16
STOCK OPTIONS GRANTED IN FISCAL 2005
The following table sets forth information regarding stock options granted
to the named executive officers during the fiscal year ended December 31, 2005.
We have not granted stock appreciation rights.
Amounts in the following table represent potential realizable gains that
could be achieved for the options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
calculated based on the requirements of the Securities and Exchange Commission
and do not represent an estimate or projection of our future common stock
prices. These amounts represent certain assumed rates of appreciation in the
value of our common stock from the fair market value on the date of grant.
Actual gains, if any, on stock option exercises depend on the future performance
of the common stock and overall stock market conditions. The amounts reflected
in the following table may not necessarily be achieved.
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER OPTION TERM
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------------------------
NAME GRANTED (#) (1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --------------- ----------- ------ ---- ----- ------
Jerry V. Noyce 40,000(1) 16% $2.62 2/24/11 35,642 80,860
Wesley W. Winnekins 10,000(1) 4% $2.62 2/24/11 8,911 20,215
Jeanne C. Crawford 7,500(1) 3% $2.62 2/24/11 6,683 15,161
Brian Gagne 7,500(1) 3% $2.81 2/4/11 7,168 16,261
7,500(1) 3% $2.62 2/24/11 6,683 15,161
Michael Seethaler 7,500(1) 3% $2.81 2/4/11 7,168 16,261
7,500(1) 3% $2.62 2/24/11 6,683 15,161
----------
(1) Exercisable in four annual increments, each in the amount of 25% of the
number of shares granted, commencing on the first anniversary of the date
of grant.
AGGREGATED OPTION EXERCISES IN 2005 AND YEAR END OPTION 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.
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON EXERCISE VALUE OPTIONS AT 12/31/05 12/31/05(1)
NAME (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --- -------- ------------------------- -------------------------
Jerry V. Noyce -- -- 422,500/161,500 $897,155/$170,120
Wesley W. Winnekins -- -- 117,000/51,500 $222,080/$66,540
Jeanne C. Crawford -- -- 77,500/45,000 $147,600/$36,675
Brian Gagne -- -- 20,000/35,000 $27,600/$27,675
Michael Seethaler -- -- 20,000/35,000 $28,800/$28,875
----------
(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 30, 2005 on the OTC
Bulletin Board was $2.63.
17
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock from December 31, 2000 through December 31,
2005, with the cumulative total return of the S&P 500 Index and the S&P 500
Consumer Discretionary Index. The comparison assumes $100 was invested on
December 31, 2000 in the Company's Common Stock and in each of the foregoing
indices, and assumes reinvestment of dividends.
(PERFORMANCE GRAPH)
Base Indexed Returns
Period Years Ending
------ --------------------------------------
Company/Index Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05
------------- ------ ------ ------ ------ ------ ------
HEALTH FITNESS CORPORATION $100 157.58 151.52 372.73 878.79 796.97
S&P 500 INDEX $100 88.11 68.64 88.33 97.94 102.75
S&P 500 CONSUMER DISCRETIONARY $100 102.79 78.31 107.60 121.85 114.10
18
INCREASE IN SHARES RESERVED FOR
1995 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL #2)
GENERAL
The Company has in effect a 1995 Employee Stock Purchase Plan (the "Stock
Purchase Plan"). The Board of Directors has recommended an increase in the
number of shares of the Company's Common Stock reserved for issuance under the
Stock Purchase Plan from 700,000 to 1,000,000 shares. A general description of
the basic features of the Stock Purchase Plan is presented below, but such
description is qualified in its entirety by reference to the full text of the
Stock Purchase Plan, a copy of which may be obtained without charge upon written
request to the Company's Chief Financial Officer.
DESCRIPTION OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
PURPOSE. The purpose of the Stock Purchase Plan is to encourage stock
ownership by employees of the Company and its subsidiaries and in so doing to
provide an incentive to remain in the Company's employ, to improve operations,
to increase profits and to contribute more significantly to the Company's
success.
ELIGIBILITY. The Stock Purchase Plan permits employees to purchase stock
of the Company at a favorable price and possibly with favorable tax consequences
to the employees. Generally speaking, all full-time and part-time employees
(including officers) of the Company (or those subsidiaries authorized by the
Board from time to time (a "designated subsidiary")) who (i) are regularly
scheduled to work 20 or more hours per week, (ii) who have been employed by the
Company or designated subsidiary for at least 30 days prior to the commencement
date of a phase, and (iii) who are not classified as an on-call or temporary
employee in the Company's payroll system are eligible to participate in any of
the phases of the Stock Purchase Plan. However, any employee who would own (as
determined under the Internal Revenue Code), immediately after the grant of an
option, stock possessing 5% or more of the total combined voting power or value
of all classes of the stock of the Company cannot purchase stock through the
Stock Purchase Plan. As of March 15, 2006, the Company had 926 full-time and
part-time employees eligible to participate.
ADMINISTRATION; TERM. The Stock Purchase Plan is administered by the Board
of Directors or a Committee appointed by the Board. The Stock Purchase Plan
gives broad powers to the Board or Committee to administer and interpret the
Stock Purchase Plan. The Stock Purchase Plan will terminate on a date to be
determined by the Board.
OPTIONS. The Stock Purchase Plan is carried out in phases of six months
each, commencing on January 1 and July 1 of each year. Before the commencement
date of the phase, each participating employee must elect to have a certain
percentage of his or her compensation deducted during each pay period in such
phase; provided, however, that the payroll deductions during a phase may not
exceed 10% of the participant's compensation or such other maximum percentage
established by the Board or Committee. An employee may not increase or decrease
his or her payroll deduction percentage during a phase. An employee may request
a withdrawal of all accumulated payroll deductions at any time during the phase.
Based on the amount of accumulated payroll deductions made at the end of the
phase, shares will be purchased for each employee at the termination date of
such phase (generally six months after the commencement date). The purchase
price to be paid by the employees will be 95% of the fair market value on the
termination date of the phase. The closing price of one share of the Company's
Common Stock on March 15, 2006, was $2.25 per share. As required by tax law, an
employee may not, during any calendar year, receive options under the Stock
Purchase Plan for shares which have a total fair market value in excess of
$25,000 determined at the time such options are granted. Any amount not used to
purchase shares will be carried forward to the next option period. No interest
is paid by the Company on funds withheld and used to purchase shares, and such
funds are used by the Company for general
19
operating purposes. If the employee dies or terminates employment for any reason
before the end of the phase, the employee's payroll deductions will be refunded,
without interest, as soon as practicable after such termination.
AMENDMENT. The Board of Directors may, from time to time, revise or amend
the Stock Purchase Plan as the Board may deem proper and in the best interest of
the Company or as may be necessary to comply with Section 423 of the Internal
Revenue Code (the "Code"); provided, that no such revision or amendment may (i)
increase the total number of shares available for issuance under the Stock
Purchase Plan except as provided in the case of stock splits, consolidations,
stock dividends or similar events, (ii) modify requirements as to eligibility
for participation in the Stock Purchase Plan, or (iii) materially increase the
benefits accruing to participants under the Stock Purchase Plan, without prior
approval of the Company's shareholders if that approval is required for
compliance with Code Section 423 or other applicable laws and regulations.
FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK PURCHASE PLAN. Options
granted under the Stock Purchase Plan are intended to qualify for favorable tax
treatment to the employees under Code Sections 421 and 423. Employee
contributions are made on an after-tax basis. Under current federal income tax
provisions, no income is taxable to the optionee upon the grant or exercise of
an option. For tax purposes, the date of grant of the option is the commencement
date of the applicable phase. In addition, certain favorable tax consequences
may be available to the employee if shares purchased pursuant to the Stock
Purchase Plan are not disposed of by the employee within two years after the
date the option was granted nor within one year after the date of transfer of
purchased shares to the employee. The Company generally will not receive an
income tax deduction upon either the grant or exercise of the option unless the
employee disposes of the shares before the end of the two-year/one-year holding
periods described above.
PLAN BENEFITS. The table below shows the total number of shares that have
been purchased by the following individuals and groups under the Stock Purchase
Plan as of April 3, 2006:
TOTAL NUMBER OF SHARES
NAME AND POSITION / GROUP RECEIVED (1)
------------------------- ------------
Jerry V. Noyce, President and CEO 41,751
Wesley W. Winnekins, CFO 0
Jeanne C. Crawford, Vice President, Human Resources 0
Brian Gagne, Vice President - Program Services 8,409
Michael Seethaler, National Vice President - 0
Business Development
Current Executive Officer Group 56,950
Current Non-executive Officer Director Group 0
Current Non-executive Officer Employee Group 501,477
----------
(1) Because participation in the Stock Purchase Plan is voluntary, the future
benefits that may be received by participating individuals or groups under
the Stock Purchase Plan cannot be determined at this time.
VOTE REQUIRED
Because of the employees' positive response to the 1995 Employee Stock
Purchase Plan, the Board of Directors recommends that the shareholders approve
the 300,000 share increase in the number of shares reserved for the Plan.
Approval of the increase requires the affirmative vote of the greater of (i) a
majority of the voting power of the shares represented in person or by proxy at
the meeting with authority to vote on such matter or (ii) 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.
20
INCREASE IN SHARES RESERVED FOR
2005 STOCK OPTION PLAN
(PROPOSAL #3)
GENERAL
The Company has in effect a 2005 Stock Option Plan (the "Stock Option
Plan"). The Board of Directors has recommended an increase in the number of
shares of the Company's Common Stock reserved for issuance under the Stock
Option Plan from 3,500,000 to 4,000,000 shares. A general description of the
basic features of the Stock Option Plan is presented below, but such description
is qualified in its entirety by reference to the full text of the Stock Option
Plan, a copy of which may be obtained without charge upon written request to the
Company's Chief Financial Officer.
DESCRIPTION OF THE 2005 STOCK OPTION PLAN
PURPOSE. The purpose of the Stock Option Plan is to advance the interests
of the Company and its shareholders by enabling the Company to attract and
retain persons of ability as employees, directors and consultants, by providing
an incentive to such individuals through equity participation in the Company.
TERM. Options may be granted under the Stock Option Plan until December
14, 2014, or until such earlier date as the Stock Option Plan is discontinued or
terminated by the Board.
ADMINISTRATION. The Stock Option Plan is administered by the Board of
Directors or by a Committee of the Board of Directors (the "Administrator"). The
Stock Option Plan gives broad powers to the Administrator to administer and
interpret the Stock Option Plan, including the authority to select the
individuals to be granted options and to prescribe the particular form and
conditions of each option granted.
ELIGIBILITY. All salaried employees of the Company or any subsidiary are
eligible to receive incentive stock options pursuant to the Stock Option Plan.
All salaried employees, non-employee directors and officers of, and consultants
to, the Company or any subsidiary are eligible to receive nonqualified stock
options. As of March 15, 2006, the Company had approximately 572 eligible
employees (of which twelve are executive officers) and eight are directors who
are not employees.
OPTIONS. When an option is granted under the Stock Option Plan, the
Administrator, at its discretion, specifies the option price, the type of option
(either "incentive" or "nonqualified") to be granted, and the number of shares
of Common Stock which may be purchased upon exercise of the option. The exercise
price of an incentive stock option may not be less than 100% of the fair market
value of the Company's Common Stock and the option price of a nonqualified
option may not be less than 85% of the fair market value of the Company's Common
Stock on the date of grant. The fair market value of the Company's Common Stock
(i.e., the closing sale price) on March 15, 2006 was $2.25 per share. The term
during which the option may be exercised and whether the option will be
exercisable immediately, in stages or otherwise, are set by the Administrator,
but the term of an incentive stock option may not exceed ten years from the date
of grant. Optionees may pay for shares upon exercise of options with cash,
certified check or Common Stock of the Company valued at the stock's then fair
market value. Each stock option granted under the Stock Option Plan is
nontransferable during the lifetime of the optionee. Each outstanding option
under the Stock Option Plan may terminate earlier than its stated expiration
date in the event of the optionee's termination of employment, directorship or
other relationship with the Company.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the Stock Option Plan or revise or amend it in any respect;
provided, the Stock Option Plan may not, without the approval of the
shareholders, be amended in any manner that will (a) materially increase the
number of shares subject to the Stock Option Plan except as provided in the case
of stock splits, consolidations,
21
stock dividends or similar events; (b) materially modify the requirements for
eligibility for participation in the Stock Option Plan; (c) materially increase
the benefits accruing to optionees under the Stock Option Plan or (d) cause
incentive stock options to fail to meet the requirements of the Internal Revenue
Code.
FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK OPTION PLAN. Under present
law, an optionee will not realize any taxable income on the date a nonqualified
option is granted pursuant to the Stock Option Plan. Upon exercise of the
option, however, the optionee must recognize, in the year of exercise, ordinary
income equal to the difference between the option price and the fair market
value of the Company's Common Stock on the date of exercise. Upon the sale of
the shares, any resulting gain or loss will be treated as capital gain or loss.
The Company will receive an income tax deduction in its fiscal year in which
options are exercised, equal to the amount of ordinary income recognized by
those optionees exercising options, and must withhold income and other
employment-related taxes on such ordinary income.
Incentive stock options granted under the Stock Option Plan are intended
to qualify for favorable tax treatment under Code Section 422. Under Section
422, an optionee recognizes no taxable income when the option is granted.
Further, the optionee generally will not recognize any taxable income when the
option is exercised if he or she has at all times from the date of the option's
grant until three months before the date of exercise been an employee of the
Company. The Company ordinarily is not entitled to any income tax deductions
upon the grant or exercise of an incentive stock option. Certain other favorable
tax consequences may be available to the optionee if he or she does not dispose
of the shares acquired upon the exercise of an incentive stock option for a
period of two years from the granting of the option and one year from the
receipt of the shares.
STOCK OPTION PLAN BENEFITS. The table below shows the total number of
stock options that previously have been granted to the following individuals and
groups under the 2005 Stock Option Plan as of April 3, 2006:
TOTAL NUMBER OF
NAME AND POSITION / GROUP OPTIONS RECEIVED (1)
------------------------- --------------------
Jerry V. Noyce, President and CEO 684,000
Wesley W. Winnekins, CFO 208,500
Jeanne C. Crawford, Vice President, Human Resources 152,500
Brian Gagne, Vice President - Programs and Partnerships 75,000
Michael Seethaler, National Vice President - Business Development 75,000
Current Executive Officers as a Group (12 persons) 1,578,750
Current Directors who are not Executive Officers as a Group (8 persons) 477,500
Current Employees who are not Executive Officers as a Group (21 persons) 230,425
----------
(1) This table reflects the total number of options granted under the Stock
Option Plan as of April 3. Because future grants of stock options under
the Stock Option Plan are subject to the discretion of the Committee, the
future benefits that may be received by these individuals and groups under
the Stock Option Plan cannot be determined at this time.
VOTE REQUIRED
The Board of Directors recommends that the shareholders approve the
500,000 share increase in the number of shares reserved for the Stock Option
Plan. Under applicable Minnesota law, approval of the increase in the number of
shares offered under the Stock Option Plan requires the affirmative vote of the
holders of a majority of the voting power of the shares represented in person or
by proxy at the meeting with authority to vote on such matter, provided that
such majority must be greater than 25% of the Company's outstanding shares.
22
The following table provides information as of December 31, 2005 about the
Company's equity compensation plans:
NUMBER OF SECURITIES TO BE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF WEIGHTED AVERAGE EXERCISE AVAILABLE FOR FUTURE ISSUANCE UNDER
OUTSTANDING OPTIONS, WARRANTS PRICE OF OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS (EXCLUDING
AND RIGHTS WARRANTS AND RIGHTS SECURITIES REFLECTED IN COLUMN (a))
(a) (b) (c)
----------------------------- ----------------------------- ------------------------------------
Equity compensation plans 2,157,425 $1.34 1,342,734 (1)
approved by security holders
Equity compensation plans not 1,694,431 (2) $2.38 --
approved by security holders
TOTAL 3,851,856 $1.80 1,342,734
----------
(1) Includes 182,134 shares of common stock available for issuance under the
Company's Employee Stock Purchase Plan.
(2) Represents outstanding warrants to selling agents and investors issued in
connection with financing transactions.
23
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL #4)
Grant Thornton LLP acted as the Company's independent registered public
accounting firm for the fiscal year ended December 31, 2005, and has been
selected by the Audit Committee to act as the Company's auditors for fiscal
2006. Although it is not required to do so, the Board wishes to submit the
selection of Grant Thornton LLP to the shareholders for ratification. The
Company's selection of Grant Thornton LLP will be deemed ratified by the
shareholders if holders of a majority of the voting power of the shares
represented in person or by proxy at the meeting with authority to vote on such
matter provided that such majority must be greater than 25% of the Company's
outstanding shares. The Board, and in particular the Audit Committee, retains
discretion at all times to select the Company's independent registered public
accounting firm, notwithstanding ratification by the Company's shareholders. In
the event the shareholders do not approve such selection, the Audit Committee
will reconsider its selection. A representative of Grant Thornton LLP is
expected to be present at the Annual Meeting of Shareholders. Such
representative will have an opportunity to make a statement if he or she desires
to do so and will be available to respond to appropriate questions.
The ratification of Grant Thornton LLP as the independent registered
public accounting firm for the Company requires the affirmative vote of a
majority of the shares represented in person or by proxy at the Annual Meeting.
AUDIT FEES
The following fees were paid to Grant Thornton LLP in fiscal years 2004
and 2005:
FY 2004 FY 2005
------- -------
Audit Fees $117,753 $ 84,837
Audit-Related Fees 7,104 8,840
Tax Fees 28,472 82,607
All Other Fees 23,793 569
-------- --------
$177,122 $176,853
Audit fees are for professional services rendered and expenses incurred
for the audit of the Company's annual financial statements and review of
financial statements included in our Forms 10-K and 10-Q or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements.
Audit-related fees are primarily for services rendered and expenses
incurred for the audit of the Company's 401K Employee Benefit Plan.
Tax fees include fees for services provided and expenses incurred in
connection with the preparation of federal and state tax returns, tax advice and
tax planning.
All other fees include fees for services provided and expenses incurred
for non-audit related accounting services. The other fees paid in 2005 relate
primarily to consultative services on Sarbanes-Oxley.
Pursuant to its written charter, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the Company's
independent auditors in order to assure that the provision of such services does
not impair the auditor's independence. Unless a particular service has received
general pre-approval by the Audit Committee, each service provided must be
specifically pre-approved. Any proposed services exceeding pre-approved costs
levels will require specific pre-approval by the Audit Committee. As such, the
Audit Committee adopted a policy in February 2003 that states the Audit
24
Committee is required to approve all audit and non-audit accounting-related
services. The Audit Committee has pre-approved services to be requested from
time to time by the Company's Chief Executive Officer and Chief Financial
Officer only on accounting matters that do not exceed $5,000 on any one occasion
or $25,000 per year; provided that the Company's Chief Financial Officer must
report to the Audit Committee on the provision of such services at the Audit
Committee meeting held immediately thereafter.
The Company's Audit Committee has considered whether provision of the
above non-audit services is compatible with maintaining Grant Thornton LLP's
independence and has determined that such services have not adversely affected
Grant Thornton LLP's independence.
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, 2005,
all Section 16(a) filing requirements applicable to Insiders were complied with.
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 2007 Annual Meeting must be received by the
Company no later than January 22, 2007 to be includable in the Company's proxy
statement and related proxy for the 2007 Annual Meeting.
Also, if a shareholder proposal intended to be presented at the 2007
Annual Meeting but not included in the Company's proxy statement and proxy is
received by the Company after April 8, 2007, then management named in the
Company's proxy form for the 2007 Annual Meeting will have discretionary
authority to vote the shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's materials.
25
FORM 10-K
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2005 (WITHOUT EXHIBITS), 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. THE COMPANY WILL FURNISH
WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING SOLICITED, UPON WRITTEN
REQUEST OF ANY SUCH PERSON, ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE
FORM 10-K, UPON THE PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE
COMPANY'S FURNISHING SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH EXHIBIT(S)
SHOULD BE DIRECTED TO WESLEY W. WINNEKINS, CHIEF FINANCIAL OFFICER, AT THE
COMPANY'S PRINCIPAL ADDRESS.
Dated: April 5, 2006
Bloomington, Minnesota
26
HEALTH FITNESS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 23, 2006
3:30 p.m. (Central time)
3600 American Boulevard West
Bloomington, Minnesota 55431
HEALTH FITNESS CORPORATION
3600 AMERICAN BOULEVARD WEST
BLOOMINGTON, MN 55431 PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 23, 2006.
The shares of stock you hold in your account will be voted as you specify on the
reverse side.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2, 3 AND 4.
The undersigned hereby appoints JOHN C. PENN, JAMES A. BERNARDS and MARK W.
SHEFFERT, and each of them, individually, with full power of substitution, as
Proxies to represent and vote, as designated below, all shares of capital 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 Company's
corporate offices, 3600 American Boulevard West, Bloomington, Minnesota, at 3:30
p.m. (Minneapolis time) on May 23, 2006, and at any adjournment thereof, and the
undersigned hereby revokes all proxies previously given with respect to the
meeting.
See reverse for voting instructions.
** Please detach here **
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
1. Elect directors: 1 - James A. Bernards 5 - Mark W. Sheffert [ ] Vote FOR [ ] Vote WITHHELD
2 - K. James Ehlen, M.D. 6 - Linda Hall Whitman all nominees from all nominees
3 - Jerry V. Noyce 7 - Rodney A. Young (except as marked)
4 - John C. Penn 8 - Robert J. Marzec
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED
NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED
TO THE RIGHT.)
-----------------------------------------
-----------------------------------------
2. Approve the increase in the shares reserved for the 1995 Employee Stock [ ] FOR [ ] AGAINST [ ] ABSTAIN
Purchase Plan.
3. Approve the increase in the shares reserved for the 2005 Stock Option Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratify selection of Grant Thornton LLP as independent registered public [ ] FOR [ ] AGAINST [ ] ABSTAIN
accounting firm.
5. In their discretion, upon such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ] Indicate changes below:
Date
-------------------------------------
-----------------------------------------
-----------------------------------------
Signature(s) in Box
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 tenant
should sign.