1
PRELIMINARY PROXY MATERIALSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Healthcare Services Group, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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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:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
HEALTHCARE SERVICES GROUP, INC.
2643 HUNTINGDON PIKE
HUNTINGDON VALLEY, PENNSYLVANIA 19006
------------------3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 19020
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 23, 1995
------------------30, 2000
---------------------
To the Shareholders of
HEALTHCARE SERVICES GROUP, INC.
NOTICE IS HEREBY GIVEN that anthe Annual Meeting of Shareholders of
Healthcare Services Group, Inc. (the "Company") will be held at the Radisson
Hotel of Bucks County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047,
on May 23, 1995,30, 2000, at 10:00 A.M., for the following purposes:
1. To elect eight directors;
2. To approve and ratify the adoption ofan amendment to the Company's 1995 Incentive
and Non-QualifiedEmployee Stock Option
Plan to increase the number of shares of Common Stock, $.01 par value
(the "Common Stock") of the Company reserved for key employees;issuance thereunder
from a maximum of 500,000 to 1,000,000;
3. To approve and ratify the adoption ofadopt the Company's 1995 Directors'1999 Employee Stock OptionPurchase Plan;
4. To approve and adopt the Company's 1999 Deferred Compensation Plan;
5. To approve an amendment to the Company's Articles of Incorporation
which increasesincreasing the number of authorized shares of common stock,Common Stock by
15,000,000 shares to 30,000,000 shares of the Company from 10,000,000 to 15,000,000;
5.Common Stock;
6. To approve and ratify the selection of Grant Thornton LLP as the
independent public accountants of the Company for its current fiscal
year ending December 31, 1995;2000; and
6.7. To consider and act upon such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on April 19, 199517, 2000
will be entitled to notice of and to vote at the Annual Meeting.
Please sign and promptly mail the enclosed proxy, whether or not you
expect to attend the Meeting, in order that your shares may be voted for you. A
return envelope is provided for your convenience.
By Order of the Board of Directors
DANIEL P. MCCARTNEY
Chairman of the Board and
Chief Executive Officer
Dated: Huntingdon Valley,Bensalem, Pennsylvania
April 21, 199517, 2000
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PRELIMINARY PROXY MATERIAL
--------------------------
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley,3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 1900619020
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 23, 199530, 2000
---------------------
This Proxy Statement is furnished to the Shareholders of Healthcare
Services Group, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047, on May 9, 199530, 2000
at 10:00 A.M. At the Annual Meeting the shareholders will consider the following
proposals: (1) to elect eight directors; (2) to approve and ratify
the adoption ofan amendment to the
Company's 1995 Incentive and Non-QualifiedEmployee Stock Option Plan for key employees (the "1995 Employee Plan"); to increase
the number of shares of Common Stock, $.01 par value (the "Common Stock")
reserved for issuance from a maximum of 500,000 to 1,000,000; and (3) to approve
and ratify the
adoption ofadopt the Company's 1995 Directors'1999 Employee Stock OptionPurchase Plan (the "Directors'"Purchase Plan");
and (4) to approve and adopt the Company's 1999 Deferred Compensation Plan (the
"Deferred Compensation Plan"); and (5) to approve an amendment to the Company's
Articles of Incorporation which increasesincreasing the number of authorized shares of common
stock $.01 par value,by 15,000,000 shares to 30,000,000 shares of the Company from 10,000,000Common Stock; and (6) to
15,000,000; (5) toapprove and ratify and approve the selection of Grant Thornton LLP as the independent public
accountants of the Company for its current fiscal year ending December 31, 1995;2000;
and (6)(7) to consider and act upon such other business as may properly come before
the Annual Meeting.
This Proxy Statement is being mailed to shareholders on or about April 21,
1995.18,
2000.
PROXIES; VOTING SECURITIES
Only holders of Common Stock of the Company (the "Common Stock") of record at the close of business on record
of April 19, 199517, 2000 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. On the Record Date, there were issued and outstanding
approximately 7,953,97410,991,557 shares of the Common Stock. Each share of Common Stock
entitles the holder thereof to one vote. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock is required
to constitute a quorum at the meeting. Holders of Common Stock are not entitled
to cumulative voting rights.
All shares whichthat are represented by properly executed proxies received prior
to or at the meeting, and not revoked, will be voted in accordance with the
instructions indicated in such proxies. If no instructions are indicated with
respect to any shares for which properly executed proxies are received, such
proxies will be voted FOR each of the proposals. For purposes of determining the
presence of a quorum for transacting business at the Annual Meeting, abstentions
and broker "non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power), if applicable, will be
treated as shares that are present but which have not been voted.
A proxy may be revoked by delivery of a written statement to the Secretary
of the Company stating that the proxy is revoked, by a subsequent proxy executed
by the person executing the prior proxy and presented to the Annual Meeting, or
by voting in person at the Annual Meeting.
All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitation will be made primarily by mail, but
regular employees or representatives of the Company may also solicit proxies by
telephone, telegraph or in person, without additional compensation, except for
reimbursement of out-of-pocket expenses.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors of the Company are to be elected,
each to hold office for a term of one year. Unless authority is specifically
withheld, management proxies will be voted FOR the election of the nominees
named below to serve as directors until the next Annual Meetingannual meeting of shareholders
and until their successors have been chosen and qualify. Should any nominee not
be a candidate at the time of the Annual Meeting (a situation which is not now
anticipated), proxies will be voted in favor of the remaining nominees and may
also be voted for substitute nominees. If a quorum is present, the candidate or
candidates receiving the highest number of votes will be elected directors.
Abstentions from voting and broker nonvotes onBrokers that do not receive instructions are entitled to vote for the election
of
directors will have no effect since they will not represent votes cast at the
Annual Meeting for the purpose of electing directors.
The nominees are as follows:
Name, Age, Principal Occupations
for the past five years and Current Director
Public Directorships or Trusteeships Since
------------------------------------ ------ ------------------------------------------------------------------------------------------ -------------------
Daniel P. McCartney, 43,48, Chief Executive Officer and Chairman of the Board since 1977 ............. 1977(1).... 1977
W. Thacher Longstreth, 73,79, elected to and a member of the Philadelphia City Council insince
1983; Vice Chairman of Packard Press, a printing firm since July, 1988;for more than 5 years; Director of
Tasty Baking Company, Delaware Management Company, Keystone Insurance Company and Berean Savings & Loan Association ............. 1983Micro
League Multimedia, Inc. ................................................................. 1983(1)
Barton D. Weisman, 67,72, President and Chief OperatingExecutive Officer of H.B.A. Corporation and
H.B.A. Management, Inc., Florida based companies which own and/or manage nursing homes,
for more than five years ....................................................................................................................................................... 1983(2)
Joseph F. McCartney, 40,45, Regional Vice President of the Company for more than five years ..........years;
brother of Daniel P. McCartney .......................................................... 1983
Robert L. Frome, Esq., 57,62, Member of the law firm of Olshan Grundman Frome Rosenzweig &
RosenzweigWolosky LLP for more than five years; Director of VTX Electronics,NuCo2, Inc.; Secretary of Skybox International Corp. and
Secretary of United Capital Corp. ................................................................ ........................... 1983
Thomas A. Cook, 49, President of the Company since July, 1993; Executive Vice54, President and Chief FinancialOperating Officer of the Company for more than
five years ........................................years.............................................................................. 1987
Robert J. Moss, Esq., 58, John Hancock Mutual Life Insurance Company since July, 1992; Member of
Karr-Barth Associates, Inc., a financial services firm from November 1990 to June 1992; Vice62, President, of Mindy GoldbergMoss Associates, a consulting firm from January 1988 to November 1990;
Member of the law firm, of Dilworth, Paxson, Kalish & Kaufman from February 1985for more than five years;
Senior Assistant to December 1987 .United States Senator Arlen Specter for more than five years ........ 1992(2)
John M. Briggs, CPA, 44,49, Partner of the certified public accounting firm of Briggs,
Bunting & Dougherty, LLP since May 1997; Partner of certified public accounting firm of
Tait, Weller & Baker for more than five years ......................................................................... 1993(2)from January 1980 to May 1997 ...................................... 1993(1)(2)
- - ------------------
(1) Member of Stock Option Committee.
(2) Member of Audit Committee.
The Directors recommend a vote FOR theall nominees.
2
4
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during its fiscal
year to review significant developments affecting the Company and to act on
matters requiring Board approval. It also holds special meetings when an
important matter requires Board action between scheduled meetings. The Board of
Directors met four times during the 19941999 fiscal year. During 1994,1999, each member
of the Board participated in at least 75% of all Board and applicable committee
meetings held during the period for which he was director.
The Board of Directors has established audit and stock option committees
to devote attention to specific subjects and to assist it in the discharge of
its responsibilities. The functions of those committees, their current members
and the number of meetings held during 19941999 are described below:
AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the appointment of the firm selected to be independent public
accountants for the Company and monitors the performance of such firm;
reviews and approves the scope of the annual audit and quarterly reviews
and evaluates problem areas having a potential financial impact on the
Company which may be brought to its attention by management, the
independent public accountants or the Board of Directors; and evaluates all
public financial reporting documents of the Company. Messrs. Robert J.
Moss, Barton D. Weisman and John M. Briggs currently are members of the
Audit Committee. The Audit Committee met two timesonce during 1994.1999.
STOCK OPTION COMMITTEE. AThe Stock Option Committee (composed of
non-employee directors) administers the Company's Incentive Stock Option Plan and will also administer the 1995 Employee Plan and
the 1996 Non-Employee Directors' Plan, if approved byas amended and restated as of
October 28, 1997, and options which may be granted outside of such Plans.
With respect to the stockholders pursuant to
this proxy statement. The1995 Employee Plan, the Stock Option Committee has the
power to determine from time to time the individuals to whom options shall
be granted, the number of shares to be covered by each option and the time
or times at which options shall be granted. Mr. Daniel P. McCartney currently
is the sole member ofJohn M. Briggs and Mr. W.
Thacher Longstreth comprise the Stock Option Committee governing the existing
Incentive Plan.Committee. The Stock Option
Committee met one timeonce during 1994.1999.
The Company does not have a nominating, executive or compensation
committee. The functions customarily attributable to these committees are
performed by the Board of Directors as a whole.
3
5
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of April 19, 1995,17, 2000, regarding
the beneficial ownership of Common Stock of the Company by each person known by the Company to
own 5% or more of the outstanding shares of the Company's
Common Stock, each director of the
Company, the Company's Chief Executive
Officer and President (who comprise the Company's executive officers as defined in Item 402(a)(3) of
Regulation S-K)S-K and the directors and executive officers of the Company as a
group. The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock owned by them, unless otherwise
noted.
Amount and
Nature of Percent
Beneficial of
Name and Beneficial Owner or Group (1) Ownership Class
- - -------------------------------------- --------- ------------------------------------------------------------------------- -------------------- ----------
Lord, Abbett & Co. ............................................... 1,999,036(2) 18.2%
Daniel P. McCartney .................................... 943,106(2) 11.8%
State of Wisconsin Investment Board .................... 755,000(3) 9.5%
The Putnam Investments, Inc ............................ 585,547(4) 7.4%.............................................. 1,429,659(3) 12.7%
Wellington Management Company, LLP ............................... 1,091,900(4) 9.9%
Pequot Capital Management, Inc. .................................. 876,100(5) 8.0%
Dimensional Fund Advisors Inc. ................................... 776,358(6) 7.1%
Rockefeller & Co., Inc. ................................ 473,500(5) 6.0%
First Wisconsin Asset Management, Inc .................. 428,200(6) 5.4%.......................................... 614,877(7) 5.6%
Thomas A. Cook ......................................... 152,000(7) 1.9%................................................... 315,500(8) 2.8%
Barton D. Weisman ................................................ 140,990(9) 1.3%
Joseph F. McCartney .............................................. 91,000(10) (18)
Robert L. Frome .................................................. 64,615(11) (18)
W. Thacher Longstreth ............................................ 55,194(12) (18)
Robert J. Moss ......................................... 32,000(8) (14)
Robert L. Frome ........................................ 51,037(9) (14)
Joseph F. McCartney .................................... 55,750(10) (14)
W. Thacher Longstreth .................................. 41,500(11) (14)
Barton D. Weisman ...................................... 61,500(12) (14)................................................... 32,465(13) (18)
John M. Briggs ......................................... 16,000(13) (14)................................................... 38,830(14) (18)
Brian M. Waters .................................................. 71,000(15) (18)
James L. DiStefano ............................................... 20,750(16) (18)
Directors and Executive Officers as a group (11(10 persons) 1,402,818(15) 16.6%......... 2,255,003(17) 19.1%
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(1) The address of Lord, Abbett & Co. is 90 Hudson Street, Jersey City, NJ
07302. The address of Daniel P. McCartney is 2643 Huntingdon Pike, Huntingdon
Valley,3220 Tillman Drive, Suite
300, Bensalem, PA 19006.19020. The address of Wellington Management Company, LLP
is 75 State of Wisconsin Investment Board is
P.O. Box 7842, Madison, WI 53707.Street, Boston, MA 02109. The address of The Putnam Investments,Pequot Capital
Management, Inc. is One Post Office Square, Boston, MA 02109.500 Nyala Farm Road, Westport, CT 06880. The address
of Dimensional Fund Advisors Inc. ("Dimensional") is 1299 Ocean Avenue,
Santa Monica, CA 90401. The address of Rockefeller & Co., Inc. is 30
Rockefeller Plaza, New York, NY 10112.
The
address of First Wisconsin Asset Management, Inc. is(2) According to a Schedule 13G filed by Lord, Abbett & Co., dated February 1,
South Pinckney
Street, Madison, WI 53703.
(2)2000, it has sole voting power and dispositive power with respect to the
1,999,036 shares.
(3) Includes incentive stock options to purchase 75,00090,680 shares and
nonqualified stock options to purchase 146,820 shares, all exercisable
within sixty days of April 19, 1995.17, 2000. Also includes an aggregate of 125,000
shares that Mr. McCartney holds as a co-trustee for the benefit of his
children. Mr. McCartney disclaims beneficial ownership of these shares.
Mr. McCartney may be deemed to be a "parent" of and deemed to control the
Company, as such terms are defined for purposes of the Securities Act of
1933, as amended (the "Securities Act"), by virtue of his position as
founder, Director,director, Chief Executive Officer and principal shareholder of
the Company. (3)Daniel P. McCartney is the brother of Joseph F. McCartney.
(4) According to a Schedule 13G filed by State of Wisconsin Investment
Board,Wellington Management Company, LLP,
dated February 13, 1995,9, 2000, it has shared dispositive power with respect to
1,091,900 shares (of which it has shared voting power with respect to
731,900 shares and does not have sole voting or dispositive power with
respect to any shares).
(5) According to a Schedule 13G filed by Pequot Capital Management, Inc. it
has sole voting power and dispositive power with respect to the 755,000876,100
shares.
(4)(6) According to a Schedule 13G filed by The Putnam Investments, Inc.Dimensional, dated February 7, 1995, it has sole voting4, 2000,
Dimensional, a registered investment advisor, may be deemed to have
beneficial ownership of 776,358 shares of the Company's Common Stock as of
December 31, 1999, all of which shares are held in portfolios of DFA
Investment
4
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and dispositive power with respect
to the 585,547DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, for all of which Dimensional serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(5)(7) According to a Schedule 13G filed by Rockefeller & Co., Inc., dated
February 8, 1995,14, 2000, Rockefeller & Co., Inc. made such filing on behalf of
certain clients for which it has sole voting and dispositiveis the investment manager. None of such
clients beneficially owns 5% or more of the outstanding Common Stock. Such
clients have executed agreements granting Rockefeller & Co., Inc. full
power with respect to the 473,500 shares.
(6) According to a Schedule 13G filed by First Wisconsin Asset Management,
Inc. dated February 13, 1992, it has sole voting and dispositive power
with respectall matters relating to the 428,200 shares.
(7)stock of the Company
held by them.
(8) Represents incentive stock options to purchase 125,00084,333 shares and
nonqualified stock options to purchase 27,000231,167 shares, all exercisable
within sixty days of April 19, 1995.
(8) Represents17, 2000.
(9) Includes nonqualified stock options to purchase 32,00050,465 shares, all
exercisable within sixty days of April 19, 1995.
(9) Includes nonqualified17, 2000.
(10) Represents incentive stock options to purchase 41,50040,314 shares and
nonqualified stock options to purchase 50,686 shares, all exercisable
within sixty days of April 19, 1995.
(10)17, 2000.
(11) Includes incentivenonqualified stock options to purchase 13,500 shares and
nonqualified options to purchase 37,00032,465 shares, all
exercisable within sixty days of April 19, 1995.
(11) Represents17, 2000.
(12) Includes nonqualified stock options to purchase 41,50054,965 shares, all
exercisable within sixty days of April 19, 1995.
(12) Includes17, 2000.
(13) Represents nonqualified stock options to purchase 53,50032,465 shares, all
exercisable within sixty days of April 19, 1995. Excludes 5,250 shares held by Mr.
Weisman's wife, as to which shares he disclaims beneficial ownership.
4
6
(13)17, 2000.
(14) Includes nonqualified options to purchase 12,0009,980 shares, all exercisable
within sixty days of April 19, 1995.
(14) Less than 1%17, 2000.
(15) Represents incentive stock options to purchase 69,043 shares and
nonqualified options to purchase 1,957 shares, all exercisable within
sixty days of outstanding shares.
(15)April 17, 2000.
(16) Represents incentive stock options to purchase 20,750 shares, all
exercisable within sixty days of April 17, 2000.
(17) Includes 498,925824,340 shares underlying options granted to said group of
persons. All options are exercisable within sixty days of April 19,
1995.
DIRECTORS' FEES17, 2000.
(18) Less than 1% of the outstanding shares.
Directors' Fees
The Company paid each director who is not an employee of the Company $500
for each regular meeting of the Board of Directors attended. Mr. Frome bills
the Company at his customary rates for time spent on behalf of the Company
(whether as a director or in the performance of legal services for the Company)
and is reimbursed for expenses incurred in attending Directors'directors' meetings. The
Company also granted certain Directors options to non-employee directors to purchase an aggregate
of 35,000 Shares24,950 shares of Common Stock during the year ended December 31, 1994.1999
pursuant to the 1996 Non-Employee Directors' Plan, amended and restated as of
October 28, 1997.
5
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLESummary Compensation Table
The following table sets forth certain information regarding compensation
of more than $100,000 paid or accrued during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and the Company's President
who constitute the onlyfour highest paid executive officers
of the Company who received more
thanwhose total salary and bonus exceeded $100,000 in compensation for the year ended December 31, 1994.1999 (the "Named Executive
Officers").
Long Term Compensation
------------------------------------------------------------------------------
Awards Payouts
------------------------------------------------------- ---------
Annual Compensation Securities
-------------------------------------------------------------------------- Restricted Underlying
Name and Principal Fiscal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Awards SARs (1)(2) Payouts Compensation
- - ---------------------------------------------- -------- --------------------- ------- -------------- ------------ ------------------------- --------- -------------------------
Daniel P. McCartney, 1994 $408,1901999 $531,726 0 $1,668$13,311 0 15,00055,000 0 0
Chairman of the 1993 347,0701998 474,830 0 1,66863,311 0 15,00025,000 0 0
Board and Chief 1992 119,5301997 444,372 0 1,66825,355 0 15,00037,500 0 0
Executive Officer
Thomas A. Cook, 1994 $374,5001999 $531,726 0 $1,320$ 1,791 0 85,000 0 0
President, Chief 1998 474,830 0 68,539 0 25,000 0 0
Operating Officer 1997 444,372 0 83,289 0 37,500 0 0
and Director
Brian M. Waters 1999 $175,750 0 $31,875 0 10,000 0 0
Vice President -- 1998 172,431 0 49,387 0 10,000 0 0
Operations 1997 152,092 0 26,825 0 15,000 0 0
James L. DiStefano 1999 $124,377 0 $ 0 0 6,250 0 0
Chief Financial Officer 1998 118,747 0 6,435 0 4,000 0 0
and Treasurer 1997 106,995 0 0 0 4,500 0 0
Joseph F. McCartney 1999 $108,471 0 $ 8,700 0 20,000 0 0
President, Chief 1993 268,303Divisional Vice 1998 119,431 0 1,32096,185 0 15,0008,000 0 0
Operating Officer 1992 189,967President and Director 1997 94,666 0 1,32090,850 0 37,00012,000 0 and Director0
- - ------------------
(1) Options to acquire shares of Common Stock. The Company has not awarded any
SAR's (Stock Appreciation Rights).
5 as it is not currently authorized to do
so under the 1995 Employee Plan.
(2) Stock option amounts are adjusted to reflect the 3-for-2 stock split paid
in the form of a 50% stock dividend on August 27, 1998.
6
7
OPTION GRANTS DURING 1994 FISCAL YEAROption Grants During 1999 Fiscal Year
The following table provides information related to options to purchase
Common Stock granted to the named executive officersNamed Executive Officers during fiscal 1994.1999.
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (1)
- - ----------------------------------------------------------------------------------------------------------------
Number of-------------------------- -------------------------
% of Total
Securities Options
UnderlyingOptions Granted to Exercise
OptionsGranted Employees in Price
Name (#) (2) Fiscal Year ($/Sh) (2) Expiration Date 5% 10%
- - -------------------- ----------------------------------------- --------- -------------- ------------- --------------- --------- ------------------------- ----------------- ----------- -----------
Daniel P. McCartney.. 15,000 8.6 $12.5125(3)McCartney ......... 55,000 15.70% $7.4250(3) Dec. 5, 1999 $30,078 $ 87,10516, 2009 $341,935 $786,368
Thomas A. Cook ................... 85,000 24.26% 6.7500(4) Dec. 16, 2009 360,828 914,410
Brian M. Waters ............. 10,000 2.85% 6.7500(4) Dec. 16, 2009 42,450 107,578
James L. DiStefano .......... 6,250 1.78% 6.7500(4) Dec. 16, 2009 26,531 67,236
Joseph F. McCartney ......... 20,000 11.5 11.375 (4)5.71% 6.7500(4) Dec. 5, 1999 62,854 138,89116, 2009 84,901 215,155
- - ------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment, nontransferability or differences in vesting periods.
Regardless of the theoretical value of an option, its ultimate value will
depend on the market value of the Common Stock at a future date, and that
value will depend on a variety of factors, including the overall condition
of the stock market and the Company's results of operations and financial
condition. There can be no assurance that the values reflected in this
table will be achieved.
(2) The option exercise price may be paid in shares of Common Stock owned by
the executive, in cash, or a combination of any of the foregoing, as
determined by the Stock Option Committee.
(3) The exercise price was 110% of the fair market value of the Common Stock on
the date of grant.
(4) The exercise price was based on the fair market value (i.e., closing market price) of the
Common Stock on the date of grant.
AGGREGATED OPTION EXERCISES DURING 1994 FISCAL YEAR AND FISCAL YEAR END
OPTION VALUESAggregated Option Exercises During 1999 Fiscal Year and Fiscal Year End Option
Values
The following table provides information related to aggregated stock
options exercised by the named executive officersNamed Executive Officers during the 19941999 fiscal year
and the number and value of options held at fiscal year end. (The Company does
not have any outstanding stock appreciation rights.)
SharesNumber of Securities Value of Unexercised
Acquired Number of SecuritiesShares Underlying Unexercised In-the-Money Options
on Exer-Acquired Value Unexercised Options at FY-End (#) at FY-End ($) (3)(1)
on Exer- Realized ------------------------------- ------------------------------
Name cise (#) Realized -------------------------------- -------------------------------
Name (1) ($) (2)(3) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------------------------------------ ---------- ---------- -------------- ---------------- ------------- ---------------
Daniel P. McCartney 15,000 $60,250 60,000 15,000 $172,999 $14,813......... 0 $ 0 182,500 55,000 $47,325 $ 0
Thomas A. Cook .... -- -- 132,000.............. 0 0 230,500 85,000 75,000 21,250
Brian M. Waters(2) .......... 15,000 23,175 61,000 10,000 30,000 2,500
Joseph F. McCartney ......... 0 0 71,000 20,000 345,626 42,50046,500 5,000
James L. DiStefano .......... 0 0 14,500 6,250 6,000 1,563
- - ------------------
(1) The options exercised by Mr. McCartney during fiscal year 1994 were held
by him for five years.
(2) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise
relates.
(3) The closing price forof the Company's Common Stock as reported by the Nasdaq National
Market System on December 31, 19941999 was $13.50.$7.00. Value is calculated on the
basis of the difference between the option exercise price and $13.50$7.00
multiplied by the number of shares of Common Stock underlying the option.
6(2) The options exercised by Mr. Waters were held by him for five years.
7
8
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative return (assuming
dividends are reinvested) on the Company's Common Stock during the five fiscal years ended
December 31, 19941999 with the cumulative total return on the S&P 500 Index and the
S&P Healthcare Industry -- Miscellaneous Services Group Index.
Total Shareholder Returns
$300|------------------------------------------------------------------|
| |
| # # |
| |
| |
$250|------------------------------------------------------------------|
| |
| |
| |
| |
$200|------------------------------------------------------------------|
D | # |
O | # |
L | |
L | # |
A $150|-------------------------------------------------*-----------*----|
R | |
S | * |
| * |
| & & & |
$100|----*&#-----------------------------------------------------------|
| * & |
| & |
| |
| |
$50|------------------------------------------------------------------|
| |
| |
| |
| |
$0|----|----------|---------|-----------|-----------|-----------|----|
Dec89 Dec90 Dec91 Dec92 Dec93 Dec94
*=S&P 500 INDEX &=HEALTHCARE SERVICES GROUP #=HEALTH CARE (MISCELLANEOUS)
Company/Index Dec89 Dec90 Dec91 Dec92 Dec93 Dec94
==============================================================================
S&P 500 INDEX 100 96.90 126.42 136.05 149.76 151.74
- - ------------------------------------------------------------------------------
HEALTHCARE SERVICES
GROUP 100 116.04 109.86 78.47 92.20 105.93
- - ------------------------------------------------------------------------------
HEALTH CARE
(MISCELLANEOUS) 100 162.20 269.14 266.28 194.63 167.60
==============================================================================
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION[GRAPHIC OMITTED]
Report of the Board of Directors on Executive Compensation
The compensation of the Chief Executive Officer of the Company is
determined by the Board of Directors. The Board's determinations regarding such
compensation are based on a number of factors including, in order of importance:
o Consideration of the operating and financial performance of the
Company, primarily its income before income taxes during the preceding
fiscal year, as compared with prior operating periods;
o Attainment of a level of compensation designed to retain a superior
executive in a highly competitive environment; and
o Consideration of the individual's overall contribution to the Company.
Compensation for Company executive officers (referred to in the summary
compensation table) other than the Chief Executive Officer is determined based
upon the recommendation of the Chief Executive Officer, taking into account the
same factors considered by the Board in determining the Chief Executive
Officer's compensation as described above. TheExcept as set forth below, the
Company has not established a policy with regard to Section 162(m) of the
Internal Revenue Code of 1986, as amended ("the Internal Revenue Code"), since
the Company has not and does not currently anticipate paying compensation in
excess of $1 million per annum to any employee. 7Under the 1995 Employee Plan, as
amended, no recipient of options may be granted options to purchase more than
125,000 shares of Common Stock. Therefore, compensation received as a result of
options granted under the 1995 Employee Plan qualify as "performance-based" for
purposes of Section 162(m) of the Internal Revenue Code.
8
9
The Company applies a consistent approach to compensation for all
employees, including senior management. This approach is based on the belief
that the achievements of the Company result from the coordinated efforts of all
employees working toward common objectives.
Mr. Daniel P. McCartney and Mr. Cook each received annual base salaries of
$133,680 and
$100,000 respectively, and an additional 3% of the income from operations before income taxes
of the Company attributable to the fiscal year immediately preceding the year
for which his annual salary is computed.calculated. Their compensation will be similarly
determined with respect to the calendar year ending December 31, 2000 with a
base salary of $227,000.
The Board of Directors
Daniel P. McCartney (Chairman)
W. ThatcherThacher Longstreth
Barton D. Weisman
Joseph F. McCartney
Robert L. Frome
Thomas A. Cook
Robert J. Moss
John M. Briggs
Mr.Messrs. Daniel P. McCartney, Thomas A. Cook and Mr. CookJoseph F. McCartney did not
serve as a directors, executive officers or members of the Compensation Committee
of any other entity during the fiscal year ended December 31, 19941999 and currently
do not serve in such capacities.
INTERLOCKS AND INSIDER PARTICIPATIONInterlocks and Insider Participation and Other Matters
Mr. Barton D. Weisman, a Directordirector of the Company, has an ownership interest
in nineten nursing homes whichthat have entered into service agreements with the Company.
During the year ended December 31, 1994,1999, these agreements resulted in gross
revenues of approximately $3,051,000$3,032,000 to the Company. In 1991,Management believes that
the Company made arrangements with its bank to provide financingterms of $1,000,000 to one of its clients for which the Company agreed to guarantee
payment. In order for the Company to negotiate maximum security for its
guarantee, the Company made the loan directly to the client and
simultaneously sold the promissory note receivable to the bank. The client
paid $50,000 in the first quarter of 1994, $75,000 in each of the second and
third quarter of 1994, and $100,000 in the fourth quarter of 1994 (or an
aggregate of $300,000) as partial payment on such note. In addition, among
the notes sold during 1991, is a promissory note in the amount of $910,000
which was issued in 1990 by an entity related to this client. Such note was
paid in full to the bank on July 15, 1992. On April 22, 1992 Mr. Weisman,
agreed to purchase these promissory notes issued by such client or its
affiliates (for the full principal amount thereof plus accrued interest)
without recourse to the Company, upon a request by the bank that the Company
post substitute collateral. Any such purchase would include the assignment of
the collateral pledged as security. The Company entered into this agreement
(which was approved by the Board of Directors) with Mr. Weisman in order to
protect its interests with respect to these promissory notes.
Mr. Daniel P. McCartney, Director and Chief Executive Officer of the
Company, has a minority ownership interest in a nursing home which has
entered into a service agreementtransactions with the Company. During the year ended
December 31, 1994, this agreement resulted in gross revenues of approximately
$152,800nursing homes described herein
are comparable to the Company.those available to unaffiliated third parties.
Mr. Robert L. Frome, a Directordirector of the Company, is a member of the law firm
of Olshan Grundman Frome Rosenzweig & Rosenzweig,Wolosky LLP, which law firm has been
retained by the Company during the last fiscal year. Fees received from the
Company by such firm during the last fiscal year did not exceed 5% of such
firm's or the Company's revenues.
The Company leases 6,600 square feet of its corporate offices at 2643
Huntingdon Pike, Huntingdon Valley, Pennsylvania from a general partnership
in which Daniel P. McCartney is a general partner. The term of9
PROPOSAL 2
AMENDMENT TO THE 1995 EMPLOYEE PLAN
Proposed Amendment
On July 20, 1999, the lease
commenced on April 1, 1987 and ends on March 31, 2001. Minimum annual rent is
$74,893 payable monthly.
Management believes that the terms of each of the transactions with the
nursing homes described herein are comparable to those available to
unaffiliated third parties. The remaining transactions were deemed fair and
reasonable and approved as being in the best interests of the Company, by the
disinterested directors.
8
10
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF
1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES
The Board of Directors of the Company has unanimously approved for
submission to a vote ofadopted, and proposed that the
shareholders a proposalapprove an amendment to adopt the 1995 Plan.
The purposeEmployee Plan which would increase
the number of shares reserved for issuance under the 1995 Employee Plan isfrom a
maximum of 500,000 to provide additional incentive1,000,000.
Pursuant to the officers1995 Employee Plan, both incentive and non-qualified
options may be granted to key employees of the Company who are primarily responsible foror any subsidiary in
which the management and growthCompany owns more than 50% of the Company. Each option (an "Option") granted
pursuanttotal combined voting power of all
classes of stock. As of the Record Date, options to purchase 639,335 shares of
Common Stock, were outstanding under the 1995 Employee Plan, options to purchase
103,788 shares of Common Stock had been exercised and options to purchase 6,877
shares of Common Stock remain available for grant under the 1995 Employee Plan.
The Board of Directors believes that the proposed increase in the number of
shares available for issuance under the 1995 Employee Plan is necessary to
continue the effectiveness of the 1995 Employee Plan in attracting, motivating
and retaining employees with appropriate experience and ability and to increase
the grantees' alignment of interest with the Company's shareholders.
If the amendment to the 1995 Employee Plan shall be designated atis approved, the timefirst sentence
of grant as either
an "incentive stock option" or as a "non-qualified stock option". A summary
of the significant provisionsSection 4 of the 1995 Employee Plan is set forth below. The full
textwill read as follows:
"Subject to adjustment as provided in Section 7 hereof, a total of one
million (1,000,000) shares of common stock, $.01 par value ("Stock"), of the
Company shall be subject to the Plan."
The 1995 Employee Plan is set forth as Appendix Awill terminate on March 5, 2005, but may be
terminated by the Board of Directors at anytime before that date.
Options Granted to this Proxy Statement.Executive Officers in Fiscal Year 1999
Grants under the 1995 Employee Plan are generally made at the discretion of
the Stock Option Committee (as defined herein). The following descriptiontable sets forth
the total number of options granted under the 1995 Employee Plan during the
fiscal year ended December 31, 1999 and the dollar value of such options as of
the Record Date based on the closing trading price of the Common Stock on such
date.
CURRENT BENEFITS
1995 Plan is qualified in its entirety by
reference to the 1995 Plan itself.
ADMINISTRATIONEMPLOYEE PLAN
Number of Options
Granted in Fiscal
Name and Position 1999 and 2000 Dollar Value($)
- --------------------------------------------- ------------------- ----------------
Daniel P. McCartney 55,000 $ 0
Thomas A. Cook 85,000 0
Brian W. Waters 10,000 0
Joseph F. McCartney 20,000 0
James L. DiStefano 6,250 0
Executive Officers as a Group 184,750 0
Non-Executive Officers Directors as a Group 0 0
Non-Executive Officers as a Group 38,000 0
Administration
The 1995 Employee Plan is administered by a Stock Option Committee,
consisting of one or morenot less than two members of the Board of Directors of the Company.Company
who are "disinterested persons" within the meaning of Rule
10
16b-3 and who are "outside directors" within the meaning of Section 162(C)
of the Internal Revenue Service Code of 1986, as amended (the "Internal Revenue
Code"). The members of the Stock Option Committee are appointed by the Board of
Directors and serve at the pleasure of the Board of Directors. Currently, the
members of the Stock Option Committee are John M. Briggs and W. Thacher
Longstreth. The Stock Option Committee selects the key employees who will be
granted Optionsoptions under the 1995 Employee Plan and, subject to the provisions of
the 1995 Employee Plan, determines the terms and conditions and number of shares
of Common Stock subject to each Option.option. The Stock Option Committee also makes any other
determinationsdetermination necessary or advisable for the administration of the 1995 Employee
Plan. Determinations by the Stock Option Committee are final and conclusive.
Grants of Optionsoptions and other decisions of the Stock Option Committee are not
required to be made on a uniform basis.
It is currently anticipated that Daniel P. McCartney, the
Chief Executive Officer, will be the sole memberDescription of the Committee.
COMMON STOCK SUBJECT TO THE PLAN
The Common Stock issued or to be issued under the 1995 Plan is currently
authorized but unissued Common Stock. The number of shares of Common Stock
available under the 1995 Plan is subject to adjustment by the Stock Option
Committee to prevent dilution in the event of a stock split, combination of
shares, stock dividend or certain other events. Common Stock subject to
unexercised Options that expire or are terminated prior to the end of the
period during which Options may be granted will be restored to the number of
shares of Common Stock available for issuance under the 1995 Plan.
Currently, the Company is authorized under the 1995 Plan to issue Common
Stock pursuant to the exercise of Options with respect to a maximum of
500,000 shares of Common Stock.
ELIGIBILITY
The Stock Option Committee is authorized to grant Options under the 1995
Plan only to key employees of the Company and its subsidiaries. Members of
the Stock Option Committee are eligible for Options under the 1995 Plan.
The aggregate fair market value of shares of Common Stock (determined at
the time the incentive stock option is granted) subject to incentive stock
options granted to a key employee under all stock option plans of the
Company, and of the Company's subsidiaries (if any), and that become
exercisable for the first time by such key employee during any calendar year,
may not exceed $100,000. The term of each Option is fixed by the Stock Option
Committee, but no Option shall be exercisable more than ten years after the
date such Option is granted; provided, however, that in the case of an
optionee who, at the time an incentive Option is granted, owns more than 10%
of the total voting power of all classes of stock of the Company or any
subsidiary, then such Option shall not be exercisable with respect to any of
the shares of Common Stock subject to such Option later than the date which
is five years after the date of grant.
DESCRIPTION OF OPTIONS
Upon the grant of an Optionoption to a key employee, the Stock Option Committee
will fix the number of Sharesshares of Common Stock that the optionee may purchase
upon exercise of the Optionoption and the price at which the shares of Common Stock
may be purchased. The option price for incentive stock options shall not be less than 100%
of the "fair market value" of the shares of Common Stock at the time the Optionoption
is granted; provided, however, that with respect to an incentive stock 9
11
option in
the case of an Optionee,optionee, who, at the time such option is granted, owns more than
10% of the voting stock of the Company or its subsidiaries, the purchase price
per share shall be at least 110% of the fair market value. The option price for non-qualified options shall not be less than 100% of the
fair"Fair market value at the time the Option is granted. "Fair Market Value"value" is
deemed to be the closing sales price of the Common Stock on such date on the Nasdaq
National Market System or, if the Common Stock is not listed on the Nasdaq
National Market or a national securities exchange, the mean between the
closing bid and asked prices of the Common Stock, inSystem, on the principal market in which the Common Stock is
traded.
Options granted under the 1995 Plan are exercisable at such time or times
and subject to such terms or conditions as determined by the Stock Option
Committee, provided, however, that unless a shorter or longer vesting period
is otherwise determined by the Stock Option Committee at grant, Options are
exercisable as follows: 50%Registration of the aggregate shares of Common Stock
purchasable thereunder commencing one year after the date of grant and an
additional 50% exercisable commencing two years after the date of grant. The
Stock Option Committee may waive such installment exercise provision at any
time in whole or in part based on performance and/or such other factors as
the Stock Option Committee may determine in its sole discretion, however no
Options shall be exercisable until after six months from the date of grant.
Options may be exercised in whole or in part at any time during the option
period, by written notice to the Company specifying the number of shares to
be purchased, accompanied by payment in full of the purchase price, in cash,
by check or such other instrument as may be acceptable to the Stock Option
Committee. As determined by the Stock Option Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made in
the form of shares of Common Stock owned by the optionee for at least six
months (based on the Fair Market Value of the Stock on the trading day before
the Option is exercised).
TRANSFERABILITY; TERMINATION OF EMPLOYMENT
All Options granted under the 1995 Plan are non-transferable and
non-assignable except by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the optionee only by the optionee.
Incentive stock options expire no later than three months after the
optionee's termination of employment for any reason other than death and no
later than twelve months after the optionee's termination of employment on
account of death. Unless authorized by the Stock Option Committee, the
optionee or the personal representative of his estate, may exercise an
incentive stock option only with respect to those shares which could have
been purchased by the optionee at the date of the optionee's termination of
employment or death. In no event is any incentive stock option exercisable
after expiration of the term thereof.
Non-qualified stock options are subject to the same termination provisions
as described above for incentive stock options, unless the Stock Option
Committee specifically provides otherwise either in the option agreement
pursuant to which the non-qualified stock option is granted or by decision of
the Stock Option Committee.
TERMINATION AND AMENDMENT
The 1995 Plan will terminate on March 8, 2005, but may be terminated by
the Board of Directors at any time before such date. The 1995 Plan may be
amended at any time by the Board of Directors. However, without the approval
of the stockholders of the Company, no such amendment may (i) materially
increase the number of shares which may be issued under the 1995 Plan; (ii)
materially increase the benefits accruing to Optionees under the 1995 Plan;
(iii) materially modify the requirements as to eligibility for participation
in the 1995 Plan; or (iv) decrease the option exercise price to less than
100% of the Fair Market Value on the date of grant thereof. Any termination
or amendment of the 1995 Plan will not impair the rights of optionees under
outstanding Options without the consent of the affected optionees.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Incentive stock options granted under the 1995
Plan are intended to be "incentive stock options" as defined by Section 422
of the Internal Revenue Code of 1986, as amended. Under present law, the
grantee of an incentive stock option will not realize taxable income upon the
grant or the exercise of the incentive stock option and the Company will not
receive an income tax deduction at either such time. If the grantee does not
sell the Common Stock acquired upon exercise of an incentive stock option
10
12
within either (i) two years after the grant of the incentive stock option or
(ii) one year after the date of exercise of the incentive stock option, the gain
upon a subsequent sale of the Common Stock will be taxed as long-term capital
gain. If the grantee, within either of the above periods, disposes of the Common
Stock acquired upon exercise of the incentive stock option, the grantee will
recognize as ordinary income an amount equal to the lesser of (i) the gain
realized by the grantee upon such disposition or (ii) the difference between the
exercise price and the fair market value of the shares on the date of exercise.
In such event, the Company would be entitled to a corresponding income tax
deduction equal to the amount recognized as ordinary income by the grantee. The
gain in excess of such amount recognized by the grantee as ordinary income would
be taxed as a long-term capital gain or short-term capital gain (subject to the
holding period requirements for long-term or short-term capital gain treatment).
The exercise of the incentive stock option will result in the excess of
the stock's fair market value on the date of exercise over the exercise price
being included in the optionee's alternative minimum taxable income (AMTI).
Liability for the alternative minimum tax is complex and depends upon an
individual's overall tax situation. Before exercising an incentive stock
option, a grantee should discuss the possible application of the alternative
minimum tax with his tax advisor in order to determine the tax's impact.
Non-Qualified Stock Options. Upon exercise of a non-qualified stock option
granted under the 1995 Plan, or upon the exercise of an incentive stock
option that does not qualify for the tax treatment described above under
"Incentive Stock Options," the grantee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock
received over the exercise price of such Common Stock. That amount increases
the grantee's basis in the Common Stock acquired pursuant to the exercise of
the non-qualified stock option. Upon exercise of a non-qualified stock option
granted under the 1995 Plan, the Company would have a federal tax withholding
obligation. Upon a subsequent sale of the Common Stock, the grantee will
incur short-term or long-term capital gain or loss depending upon his holding
period for the Common Stock and upon the Common Stock's subsequent
appreciation or depreciation. The Company will be allowed a federal income
tax deduction for the amount recognized as ordinary income by the grantee
upon the grantee's exercise of the option.
Summary of Tax Consequences. The foregoing outline is no more than a
summary of the federal income tax provisions relating to the grant and
exercise of options and the sale of Common Stock acquired under the 1995
Plan. Individual circumstances may vary these results. The federal income tax
laws and regulations are constantly being amended, and each participant
should rely upon his own tax counsel for advice concerning the federal income
tax provisions applicable to the 1995 Plan.
REGISTRATION OF SHARESShares
The Company has filed a registration statement under the Securities Act,
with respect to 500,000 shares of 1933 as amended ("Common Stock issuable pursuant to the 1995
Employee Plan. The Company intends to file an additional registration statement
under the Securities Act")Act with respect to the additional 500,000 shares of Common
Stock underlying Options grantedissuable pursuant to the 1995 Plan.
VOTE REQUIREDamendment subsequent to the amendment's approval
by the Company's shareholders.
Vote Required
The approval of the amendment to the 1995 Employee Plan requires the
affirmative vote of a majority of the votes cast by all shareholders representedvoting on
the proposal and entitled to vote thereon. An abstention or withholding of
authority to vote or broker non-vote
therefore, will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to the 1995 Employee Plan.
11
13
PROPOSAL NO. 3
RATIFICATION AND
APPROVAL OF 19951999 EMPLOYEE STOCK OPTIONPURCHASE PLAN
FOR DIRECTORSOn July 20, 1999, the Board of Directors adopted, and proposed that the
shareholders approve the Purchase Plan. The following description of the
Purchase Plan is a summary and does not purport to be fully descriptive.
Purpose of the Proposal
The purpose of the Purchase Plan is to provide employees of the Company
with an opportunity to purchase shares of the Company's Common Stock at a
discount through payroll deductions. The Purchase Plan does not create in any
employee or class of employees any right with respect to continuation of
employment by the Company, and shall not be deemed to interfere in any way with
the Company's right to terminate, or otherwise modify, an employee's employment
at any time.
The Board of Directors believes that this proposal will increase
shareholder value by further aligning the interests of key individuals with the
Company has unanimously approved the
Directors' Plan for submissioninterest of shareholders by providing them with an opportunity to shareholders as set forth in Appendix B to
this proxy statement. This discussion is qualified in its entirety by
reference to Appendix B.benefit from
stock price appreciation that may accompany improved financial performance.
Administration
The 1995 Directors'Purchase Plan is intended to assist the
Company in securing and retaining Directors by allowing them to participate
in the ownership and growth of the Company through the grant of stock options
("Directors' Options"). The 1995 Directors' Plan provides a means whereby
such Directors may purchase Common Stock pursuant to Directors' Options
granted in accordance with such plan.
ADMINISTRATION AND GRANTS
The Directors' Plan will be administered by a committee of two or morethe Board of Directors
consisting of not less than three (3) members of the Board of Directors not
eligible to participate in the Purchase Plan (the "Committee""Purchase Plan Committee"),.
Eligibility
Any person who has completed two (2) years continuous employment with the
Company, is customarily employed on a full-time or part-time basis by the
Company and is regularly employed at least 20 hours per week (or any of its
subsidiaries) is eligible to participate in the Purchase Plan (unless or until
such time as he would own 5% or more of the total combined voting power or value
of all classes of stock of the Company or of its subsidiaries (including stock
issuable upon exercise of options held by him) or he would have the right to
purchase more than $25,000 worth of stock (determined at the time such option to
purchase is granted) pursuant to the Purchase Plan for each calendar year in
which the option to purchase is outstanding). As of April 1, 2000, approximately
6,400 employees were eligible to purchase Common Stock under the Purchase Plan,
Offering Dates
The Purchase Plan is implemented by four annual offerings (for the years
2000 through 2003). Offering periods for the next four years commence on January
1 and end on December 31 of each fiscal year. The Purchase Plan will terminate
on December 31, 2003, unless terminated sooner in accordance with the express provisions
thereof.
Participation in the Purchase Plan
Eligible employees become participants in the Purchase Plan by delivering
to the Company's Human Resources Department an Employee Stock Purchase Plan
Enrollment Form (the "Enrollment Form") authorizing payroll deductions on or
prior to the beginning of the Directors' Plan. The Committee has full and
complete authority to adopt such rules and regulations and to make alloffering period or such other determinations not inconsistent with the Directors' Plandate as may be
necessaryspecified by the Purchase Plan Committee. Such payroll deductions continue
during the offering period unless the employee withdraws from participation in
the Purchase Plan. See "Withdrawal."
Purchase Price and Number of Shares
The Company has reserved 800,000 shares of Common Stock for issuance under
the administrationPurchase Plan. The purchase price per share at which Shares will be sold in
an offering under the Purchase Plan (the "Per Share Price") is the lower of such plan. It is anticipated that the
Committee will initially be comprised of Daniel P. McCartney and W. Thacher
Longstreth.
Subject to the express provisions(i)
85% of the Directors' Plan, the Committee
shall have the authority, in its discretion, to determine the Directors to
whom the options shall be granted, the numberfair market value of shares which shall be
subject to each option, the purchase price of eacha share of Common Stock which shall be subject to each option,on the period(s) during which such
options shall be exercisable (whether in wholeoffering
commencement date (or the nearest prior business date) or in part), and the other
terms and provisions thereof. In determining the Directors to whom options
shall be granted and the number of shares for which options shall be granted,
the Committee shall consider the length of service(ii) 85% of the Director and the
amountfair
market value of earnings of the Company.
SHARES SUBJECT TO THE DIRECTORS' PLAN
The Company is authorized under the Directors' Plan to issue sharesa share of Common Stock
pursuant to12
on the exerciseoffering termination date (or the nearest prior business date). The fair
market value of Directors' Options with respect to a maximum of 150,000 shares of Common Stock. The sharesshare of Common Stock issued
oron a given date is the closing sale
price of the Company's Common Stock in the principal U.S. securities market for
the Common Stock, currently the Nasdaq National Market. On the commencement date
of each offering, a Participant shall be deemed to be issued under the Directors' Plan are currently authorized but
unissued shares of Common Stock. Thehave been granted an option
to purchase a maximum number of shares of Common Stock available underequal to the Directors'aggregate
amount contributed to the Purchase Plan divided by the Per Share Price.
Payment of Purchase Price
Funds for the total purchase price of the Shares are accumulated by payroll
deductions over the offering period. Participants are permitted to withdraw
their contributions at any time during an offering period and in such event no
further deductions will be subjectmade from his or her pay during the offering period.
Withdrawal
An employee's participation in the Purchase Plan may be terminated by
signing and delivering to adjustment to prevent
dilutionthe Company's Human Resources Department a notice of
withdrawal from the Purchase Plan. Any withdrawal from a given offering period
automatically terminates the employee's interest in that offering. A participant
withdrawing from an offering may resume participation in the Purchase Plan by
executing an Enrollment Form for subsequent annual offerings.
Termination of Employment
Termination of a participant's employment will generally cancel the
participant's participation in the Purchase Plan immediately.
Capital Changes
In the event of certain changes in the capitalization of the Company (such
as a stock split, combination of shares, stock dividend
or certain other events. Shares subject to unexercised Directors' Options
that expire or are terminated prior to the end of the period during which
Directors' Options may be grantedsplit) appropriate adjustments will be restored tomade by the Company in the
number and price of shares of Common Stock availablesubject to purchase. No adjustment
shall be made for issuancestock dividends. Any distribution of shares to shareholders in
an amount aggregating 20% or more of the outstanding shares shall be deemed a
stock split; distribution of shares aggregating less than 20% shall be deemed a
stock dividend.
Effect of Liquidation, Dissolution, Sale of Assets or Merger
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each option then outstanding under the
Directors' Plan.
ELIGIBILITY TERM
The Committee is authorizedPurchase Plan will thereafter be entitled to grant Directors' Options underreceive at the Directors' Plan to any or all Directors. The termnext offering
termination date, upon the exercise of a Directors' Option may
be up to five (5) years from the grant date of each Directors' Option,
subject to earlier termination in accordance with the Directors' Plan.
EXERCISE PRICE AND PAYMENT
The exercise pricesuch option for each share subjectas to a Directors' Option is the
fair market value thereof. The fair market value per share is the closing
sale price of a sharewhich
such option shall be exercised, as reported by the Nasdaq National Market on the grant
date.
Directors' Optionsnearly as reasonably may be exercised in whole determined, the
cash, securities and/or in part at any time during
the option period, by written noticeproperty which a holder of exercise and payment of the full
purchase price as follows: in cash or by check, bank draft or money order
payable to the Company; by deliveryone share of Common Stock already owned bywas
entitled to receive upon, and at the time of, such transaction.
Transferability
No rights or accumulated payroll deductions of an eligible Director for at least six months (based on the fair market value of
the Common Stock on the date of exercise); or through the written election of
the Director to have Common Stock withheld from the shares otherwise to be
received (based on the fair market value of the shares on the date of
exercise).
12
14
TRANSFERABILITY; TERMINATION OF TRUSTEESHIP
All Directors' Options grantedemployee under the
Directors'Purchase Plan are
non-transferable and non-assignable exceptmay be pledged, assigned or transferred for any reason, other than
by will or by the laws of descent and distributiondistribution. Any such attempt shall be
without effect except that the Company may treat the attempt as an election to
withdraw from participation in the Purchase Plan.
Amendment and Termination of Plan
The Board of Directors shall have complete power and authority to terminate
or pursuant to a qualified domestic relations order, and may
be exercised duringamend the lifetime of the optionee only by the optionee, his
guardian or legal representative. If a Director no longer serves onPurchase Plan; provided, however, that the Board of Directors his or her Directors' Optionsshall
not, without the approval of the shareholders of the Company (i) increase the
maximum number of shares which may be exercised upissued under any offering; (ii) amend the
13
requirements as to the class of employees eligible to purchase stock under the
Purchase Plan or (iii) permit the members of the Purchase Plan Committee to
purchase stock under the Purchase Plan. No termination, modification, or
amendment of the Purchase Plan may, without the consent of an employee then
having an option under the Purchase Plan to purchase stock, adversely affect the
rights of such employee under such option.
New Plan Benefits
Because participation in the Purchase Plan is entirely within the
discretion of the eligible employees of the Company, the Company cannot forecast
the extent of future participation. Therefore the Company has omitted the
tabular disclosure of the benefits or amounts allocated under the Purchase Plan
to executive officers. As of the Record Date, no acquisitions of Common Stock
have been made by executive officers pursuant to the Purchase Plan.
Tax Information
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Internal Revenue Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares of Common
Stock if the requirements imposed by Section 423 are met.
If the shares of Common Stock are sold or disposed of (within the meaning
of Section 424 of the Internal Revenue Code) at least two years after the date
of the beginning of the offering period (herein referred to as the "Date of
Option Grant") and at least one year after the date of such termination.
TERMINATION AND AMENDMENT
The Directors' Plan will terminate on March 8, 2005, but may be terminated
by the Board of Directors at any time before such date. The Directors' Plan
may be amended at any time by the Board of Directors. Any termination or
amendmentend of the Directors' Plan will not impairoffering
period (herein referred to as the rights of optionees
under outstanding Directors' Options without"Exercise Date"), or in the consentevent of the affected
optionees.
FEDERAL INCOME TAX CONSEQUENCES
Upon exercisedeath
of a Directors' Option granted under the Directors' Plan,holder, the granteeconsequences to the participants are as follows: the
participants will recognize ordinary income in an amount equal to the lesser of (a) the
excess of the fair market value of the shares of Common Stock receivedat the time of
such disposition (or death) over the exercise price
of such Common Stock. That amount increasespaid for the grantee's basis in the Common
Stock acquired pursuantshares subject to the
exerciseoption or (b) the excess of the option. Upon a subsequent sale
of the Common Stock, the grantee will incur short term or long term gain or
loss depending upon his holding period for the Common Stock and upon the
subsequent appreciation or depreciation in thefair market value of the shares of Common Stock.Stock
at the time the option was granted over an amount equal to the option price as
computed as of the date of option grant. Any further gain upon such disposition
will be treated as long- term capital gain. If the shares of Common Stock are
sold and the sales price is less than the price paid for the shares of Common
Stock, there is no ordinary income and the participant has a capital loss for
the difference. The Company is not entitled to a compensation deduction when the
aforementioned holding periods have been satisfied.
If the shares of Common Stock are sold or disposed of before the expiration
of the two-year and one-year holding periods described above (a "disqualifying
disposition"), the excess of the fair market value of the shares of Common Stock
on the Exercise Date over the amount paid for the shares of Common Stock will be
allowedtreated as ordinary compensation income, even if, for example, no gain is
realized on the sale. The balance of any gain will be treated as capital gain.
Even if the shares of Common Stock are sold for less than their fair market
value on the Exercise Date, the same amount of ordinary compensation income will
be attributed to a federal income taxparticipant and a capital loss will be recognized equal to
the difference between the sales price and the value of the shares on such
Exercise Date. In the case of a disqualifying disposition, the Company is
entitled to a compensation deduction forin the amount of the compensation income
recognized as ordinary income by the grantee upon the grantee's
exercise of the option.participant.
The foregoing outlinediscussion is no more thanonly a general summary of the federal income
tax provisions relating to the grant and exerciseconsequences of optionsa purchase of Common Stock under the Directors'Purchase Plan and the
salesubsequent disposition of Common Stock acquired under the Directors' Plan.
Individual circumstances may vary these results. The federal income tax laws
and regulations are constantly being amended, and each participant should
rely upon his own tax counsel for advice concerning the federal income tax
provisions applicableshares received pursuant to the Directors' Plan.
REGISTRATION OF SHARESsuch purchases.
Registration of Shares
The Company has filed a registration statement under the Securities Act
with respect to the800,000 shares of Common Stock underlying Directors' Options
grantedissuable pursuant to the Directors'Purchase
Plan.
VOTE REQUIREDVote Required
The Board of Directors seeks shareholder approval because such approval is
required under the Internal Revenue Code as a condition to favorable tax
treatment for participants under the Purchase Plan. The approval
14
of Directors'the Purchase Plan requires the affirmative vote of a majority of the votes
cast by all shareholders representedvoting on the proposal and entitled to vote thereon.
An abstention or withholding of authority to vote or broker non-
vote, therefore,non-vote will not
have the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the Directors'Purchase Plan.
1315
15
PROPOSAL 4
APPROVAL OF 1999 DEFERRED COMPENSATION PLAN
On July 20, 1999, the Board of Directors adopted, and proposed that the
shareholders approve the 1999 Deferred Compensation Plan. The Deferred
Compensation Plan became effective on January 1, 2000 (the "Effective Date").
The following description of the Deferred Compensation Plan is a summary and
does not purport to be fully descriptive.
Purpose of the Proposal
The purpose of the Deferred Compensation Plan is to secure and retain the
services of a select group of management or highly compensated employees and to
provide additional retirement benefits to certain key employees who have devoted
extraordinary energies to the Company.
General
The Deferred Compensation Plan is an unfunded, unsecured plan for which the
obligations are paid to plan participants (individually a "Participant" and
collectively the "Participants") out of the Company's general assets, which are
subject to claims of the Company's creditors. An unfunded plan is merely an
unsecured promise by the Company to pay deferred compensation at a later date. A
Participant may rely only on the credit of the Company and has no right to the
Company's assets other than as a general unsecured creditor. The Company intends
to establish a trust (the "Trust") as a source of funds to assist it in meeting
its obligations under the Deferred Compensation Plan. The Company will also be
required to issue approximately 75,000 shares of Common Stock to Participants in
the Deferred Compensation Plan.
Eligibility
Certain key employees of the Company are eligible to participate in the
Deferred Compensation Plan if they are (i) selected for participation in the
Deferred Compensation Plan by the Deferred Compensation Plan Administrator (as
hereinafter defined) and (ii) employed in any of the following executive or
management capacities:
o Corporate executive and management personnel (including the five highest
paid executive officers);
o Divisional and Regional Managers; and
o District Managers
Deferrals of Compensation
Each year, every Participant in the Deferred Compensation Plan may
irrevocably elect to defer the receipt of up to 15% of his or her compensation
for any calendar year during the term of his or her employment with the Company.
The Company shall contribute and allocate to each Participant's account, as of
the last day of each calendar year, the number of full shares of Common Stock,
obtained by dividing an amount equal to twenty-five (25%) percent of the amount
of compensation deferred by the Participant for such calendar year, as embodied
in the Salary Deferral Election form completed by the Participant prior to the
beginning of such calendar year, by the Market Price (as hereinafter defined) of
the shares of Common Stock on the last date of the calendar year. Market Price
is defined in the Deferred Compensation Plan as the closing price of the shares
of Common Stock on the last day of the calendar year or if there was no trading
of the Company's Common Stock on such date, the closing price on the nearest
prior business date on which trading occurred on a recognized securities
exchange. To be eligible to receive an allocation of Common Stock, a Participant
must be employed by the Company on the last date of the calendar year for which
the allocation is to be made. Key employees eligible to participate in the
Deferred Compensation Plan on the Effective Date become fully vested in the
stock allocated to their respective accounts if employed by the Company on
December 31, 2002. Other vesting rules apply to persons who become eligible to
participate after the Effective Date, as described below.
16
Deferred Compensation Plan Administration
The Company's Board of Directors shall appoint a committee of three (3) or
more individuals to administer the Deferred Compensation Plan (the "Deferred
Compensation Plan Administrator"), subject to the supervision and review of the
Board. Committee members may be participants and may be members of the Board.
PNC Bank, N.A. (the "Trustee") has been appointed the Trustee of the Deferred
Compensation Plan. The Trust will (i) receive contributions from the Company and
(ii) retain such contributions (and the proceeds thereon from investments,
including the proceeds of any life insurance policies owned by the trust, if
any). The Deferred Compensation Plan Administrator shall provide written reports
to the Board, no less frequently than annually, concerning the operations of the
Deferred Compensation Plan and the Trust.
Company Matching
The Company shall contribute to the Trust all amounts deferred and
contributed under the Deferred Compensation Plan within ten (10) business days
of the date such amounts would otherwise have been paid to the Participant
pursuant to the Company's standard payroll practices. All amounts contributed to
the Trust and the earnings thereon shall be held by the Trustee and invested in
accordance with the terms of the Trust Agreement between the Company and the
Trustee.
Common Stock allocated to each Participant's account shall become fully
vested and be a nonforfeitable interest only if (a) the Participant was employed
and elected to participate in the Deferred Compensation Plan as of its Effective
Date and is still employed by the Company on December 31, 2002, or (b) the
Participant became eligible and elected to participate in the Deferred
Compensation Plan after its Effective Date and is still employed by the Company
on the last day of the calendar year which commenced on or after the third
anniversary of the later of (i) the date on which such individual became a
eligible to participate in the Deferred Compensation Plan, or (ii) the first day
of the calendar year in which Participant elected to contribute to the Deferred
Compensation Plan. In the event a Participant's employment is terminated for any
reason other than death, disability or retirement prior to the Common Stock
becoming fully vested, all Common Stock previously allocated to such
Participant's account shall be forfeited and held by the Trustee to be available
for allocation in subsequent years. Special provisions apply in the event of a
"Change in Control" of the Company.
Change in Control
Upon the occurrence of a Change in Control, as defined in the Deferred
Compensation Plan, the Deferred Compensation Plan shall automatically terminate
and the accounts of all Participants shall be paid in a single lump sum as soon
as practicable.
Amendment and Termination
The Company reserves the right to amend or terminate the Deferred
Compensation Plan for any reason at any time, provided, that no amendment or
termination may adversely affect benefits accrued under the Deferred
Compensation Plan prior to the effective date of such amendment or termination.
New Plan Benefits
Because participation in the Deferred Compensation Plan is entirely within
the discretion of the eligible employees of the Company, the Company cannot
forecast the extent of future participation. Therefore the Company has omitted
the tabular disclosure of the benefits or amounts allocated under the Deferred
Compensation Plan to executive officers. As of the Record Date, no acquisitions
of Common Stock have been made by executive officers pursuant to the Deferred
Compensation Plan.
Income Tax Consequences
The Deferred Compensation Plan is not qualified under Sections 401(a) and
403(a) of the Internal Revenue Code. Compensation that is deferred pursuant to
the Deferred Compensation Plan will not be subject to Federal
17
income taxation until distributions are made. When distributions are made,
however, they will be subject to Federal income taxes, at ordinary tax rates,
effective for the year(s) in which received and will be subject to Federal
income tax withholding. The Company generally receives a compensation deduction
for such amounts, although there may be circumstances when such a deduction may
not be available. No distribution is eligible for a tax deferred "roll over" to
an I.R.A. or for transfer to any other Company or another employer's qualified
retirement plan.
No Social Security or Medicare Tax will be withheld on distributions of
deferred compensation inasmuch as such taxes were withheld at the time of
deferral or vesting, as the case may be. State and local income taxes (and
withholding) may also be due with respect to distributions from the Deferred
Compensation Plan.
Registration of Shares
The Company has filed a registration statement under the Securities Act
with respect to 200,000 shares of Common Stock issuable pursuant to the Deferred
Compensation Plan.
Vote Required
The Deferred Compensation Plan is being submitted to the Company's
shareholders for approval to comply with Nasdaq Stock Market requirements for
the listing of the shares of Common Stock that may be issued under the Deferred
Compensation Plan. The approval of the Deferred Compensation Plan requires the
affirmative vote of a majority of the votes cast by all shareholders voting on
the proposal and entitled to vote thereon. An abstention or withholding of
authority to vote or broker non-vote will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the Deferred Compensation Plan.
18
PROPOSAL 5
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY 5,000,00015,000,000 SHARES
Under the Company's Articles of Incorporation, as amended, the Company is
authorized to issue up to 10,000,00015,000,000 shares of Common Stock. In April 1995,On March 31, 2000,
the Board of Directors approved and authorized an Amendment to the Company's
Articles of Incorporation that increases this maximum number of authorized
shares of Common Stock by 5,000,00015,000,000 shares to a total of 15,000,00030,000,000 shares,
subject to approval by the shareholders of the Company. If the shareholders do
not approve the Amendment, then the number of authorized shares of the Company's
Common Stock will remain at 10,000,000.15,000,000.
The purpose of the proposed Amendment is to provide sufficient shares for
future acquisitions, benefit plans, recapitalizations and other corporate
purposes, althoughpurposes. Except as set forth in this Proxy Statement (i.e., see Proposals 2, 3
and 4), no such use currently is planned. Once authorized, the additional shares
of Common Stock may be issued by the Board of Directors without further action
by the shareholders, unless such action is required by law or applicable stock
exchange requirements. Accordingly, this solicitation may be the only
opportunity for the shareholders to take action in connection with such
acquisitions, benefit plans, recapitalizations and other corporate actions. As
of April 19, 1995, 7,953,974the Record Date, 10,991,557 shares of Common Stock were issued and
outstanding, and approximately 893,0003,045,916 shares were reserved for issuance under
the Company's stock option plans or other employee benefit plans (including the
shares of common stock which may be issued if Proposals 2, 3 and 4 are approved)
or, pursuant to shares issuable upon the exercise of certain non-qualified
options. IfAccordingly, assuming the shareholders approveapproval of Proposals 2, 3 and 4, (and the
1995 Plan and the Directors' Plan, then an additional 500,000 and 150,000continued reservation of shares respectively will be issued or reserved for issuance under such plans.
Thus,thereunder) of the 10,000,00015,000,000 shares of Common
Stock currently authorized, approximately only 503,026962,527 shares will beremain unissued and
unreserved.
The resolution to be considered by the shareholders at the meeting reads
as follows;
"RESOLVED, that Article 4 of the Articles of Incorporation of Healthcare
Services Group, Inc. should, as amended, shall be amended and restated to read in
full as follows:
4. The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 15,000,00030,000,000 shares of common stock with a
par value of $.01 per share.
FURTHER RESOLVED, that the proper officers of Healthcare Services Group,
Inc. are hereby authorized and directed, after shareholder approval of the
proposed amendment, to execute, under its corporate seal, Articles of
Amendment to the Articles of Incorporation, as amended, and to file such
Articles of Amendment with the Pennsylvania Department of State.
FURTHER RESOLVED, that the Board of Directors of Healthcare Services Group,
Inc. may, notwithstanding approval by the shareholders of Healthcare
Services Group, Inc., at any time prior to the filing of the Articles of
Amendment with the Pennsylvania Department of State, terminate the proposed
amendment and all transactions contemplated by or incident thereto."
Vote Required
Shareholder approval of this proposal is required under Pennsylvania law.
Unless authority has been withheld the proxy agents intend to vote FOR approval
of the amendment. Approval of the amendment to the Company's Articles of
Incorporation, as amended, increasing the number of authorized shares of Common
Stock by 5,000,00015,000,000 shares, requires the affirmative vote of the holders of a
majority of the votes cast by all shareholders entitled to vote thereon.present and voting. An
abstention, withholding of authority to vote or broker non-vote, therefore,
will not have the same legal effect as an "against" vote and will not be
counted in determining whether the proposal has received the required
shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to the Company's Articles of Incorporation.
14Incorporation, as amended.
19
16
PROPOSAL NO. 56
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Grant Thornton LLP was selected by the Audit
Committee of the Board of Directors as the independent public accountants of the
Company for the year endingended December 31, 1994.2000. Said firm has no other
relationship to the Company. The Board of Directors recommends the ratification
of the selection of the firm of Grant Thornton LLP to serve as the independent
public accountants of the Company for the current year ending December 31, 1995.2000. A
representative of Grant Thornton LLP, which has served as the Company's
independent public accountants since December 1992, will be present at the
forthcoming shareholders' meeting with the opportunity to make a statement if he
so desires and such representative will be available to respond to appropriate
questions. The approval of the proposal to ratify the appointment of Grant
Thornton LLP requires the affirmative vote of a majority of the votes cast by
all shareholders represented and entitled to vote thereon. An abstention,
withholding of authority to vote or broker non-vote, therefore, will not have
the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
However, brokers that do not receive instructions on this proposal are entitled
to vote for the selection of the independent public accountants.
OTHER MATTERS
So far as is now known, there is no business other than that described
above to be presented for action by the shareholders at the meeting, but it is
intended that the proxies will be exercised upon any other matters and proposals
that may legally come before the meeting, or any adjournment thereof, in
accordance with the discretion of the persons named therein.
DEADLINE FOR SHAREHOLDER PROPOSALS
To the extent permitted by law, any shareholder proposal intended for
presentation at next year's annual shareholders' meeting must be received in
proper form at the Company's principal office no later than December 30, 1995.2000.
If the Company is not notified of a shareholder proposal by December 30,
2000, such proposal will not be included in the proxy statement for the next
year's annual shareholders' meeting and the Company will be permitted to use its
discretionary authority in respect thereof in accordance with Rule 14a-4(c)(1)
of the Securities Exchange Act of 1934, as amended.
ANNUAL REPORT
The 19941999 Annual Report to Shareholders, including financial statements, is
being mailed herewith. If you do not receive your copy please advise the Company
and another will be sent to you.
By Order of the Board of Directors,
DANIEL P. MCCARTNEY
CHAIRMAN AND
CHIEF EXECUTIVE OFFICERChairman and
Chief Executive Officer
Dated: Huntingdon Valley,Bensalem, Pennsylvania
April 21, 199517, 2000
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994,1999, as filed with the Securities and Exchange Commission,
may be obtained without charge by any shareholder of record on the Record Daterecord date
upon written request addressed to: Secretary, Healthcare Services Group, Inc.,
2643 Huntingdon Pike, Huntingdon Valley, Pennsylvania
19006.
153220 Tillman Drive, Suite 300, Bensalem, PA 19020.
20
17
APPENDIX A
1995 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
FOR KEY EMPLOYEES OF
HEALTHCARE SERVICES GROUP, INC.
1. Purpose of the Plan
This 1995 Incentive and Nonqualified Stock Option Plan (the "Plan") is
intended as an incentive, to retain in the employ of Healthcare Services
Group, Inc. (the "Company") and any Subsidiary of the Company (within the
meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), persons of training, experience and ability, to attract new
employees whose services are considered valuable, to encourage the sense of
proprietorship and to stimulate the active interest of such persons in the
development and financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the Plan
shall constitute incentive stock options within the meaning of Section 422 of
the Code ("Incentive Options") while certain other options granted pursuant
to the Plan shall be nonqualified stock options ("Nonqualified Options").
Incentive Options and the Nonqualified Options are hereinafter referred to
collectively as "Options".
2. Administration of the Plan
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee")
consisting of one or more Directors of the Company. The member(s) of the
Committee, shall serve at the pleasure of the Board.
The Committee, subject to Section 3 hereof, shall have full power and
authority to designate recipients of Options, to determine the terms and
conditions of respective Option agreements (which need not be identical) and
to interpret the provisions and supervise the administration of the Plan.
Subject to Section 7 hereof, the Committee shall have the authority, without
limitation, to designate which Options granted under the Plan shall be
Incentive Options and which shall be Nonqualified Options. To the extent any
Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option. Notwithstanding any provision in the Plan to
the contrary, Options may be granted under the Plan to any member of the
Committee during the term of his membership on the Committee, subject to
approval of the Board of Directors or the Audit Committee thereof.
Subject to the provisions of the Plan, the Committee shall interpret the
Plan and all Options granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all
other determinations necessary or advisable for the administration of the
Plan and shall correct any defects or supply any omission or reconcile any
inconsistency in the Plan or in any Options granted under the Plan in the
manner and to the extent that the Committee deems desirable to carry the Plan
or any Options into effect. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee and
any decision reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority at a
meeting duly held. Subject to the provisions of the Plan, any action taken or
determination made by the Committee pursuant to this and the other paragraphs
of the Plan shall be conclusive on all parties.
3. Designation of Optionees.
The persons eligible for participation in the Plan as recipients of
Options ("Optionees") shall include only full-time key employees of the
Company or any Subsidiary. In selecting Optionees, and in determining the
number of shares to be covered by each Option granted to Optionees, the
Committee may consider the office or position held by the Optionee, the
Optionee's degree of responsibility for and contribution to the growth and
success of the Company or any Subsidiary, the Optionee's length of service,
age, promotions, potential and any other factors which the Committee may
consider relevant. An employee who has been granted an Option hereunder may
be granted an additional Option or Options, if the Committee shall so
determine.
A-1
18
4. Stock Reserved for the Plan.
Subject to adjustment as provided in Section 7 hereof, a total of five
hundred thousand (500,000) shares of common stock, $.01 par value ("Stock"),
of the Company shall be subject to the Plan. The shares of Stock subject to
the Plan shall consist of unissued shares or previously issued shares
reacquired and held by the Company or any Subsidiary of the Company, and such
amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock which may remain unsold and which are not subject
to outstanding Options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until termination of the Plan the
Company shall at all times reserve a sufficient number of shares of Stock to
meet the requirements of the Plan. Should any Option expire or be cancelled
prior to its exercise in full or should the number of shares of Stock to be
delivered upon the exercise in full of an Option be reduced for any reason,
the shares of Stock theretofore subject to such Option may again be subject
to an Option under the Plan.
5. Terms and Conditions of Options.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable:
(a) Option Price. The purchase price of each share of Stock purchasable
under an Option shall be determined by the Committee at the time of grant but
shall not be less than 100% of the fair market value of such share of Stock
on the date the Option is granted in the case of an Incentive Option and not
less than 100% of the fair market value of such share of Stock on the date
the Option is granted in the case of a Non-Qualified Option; provided,
however, that with respect to an Incentive Option, in the case of an Optionee
who, at the time such Option is granted, owns (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or of any Subsidiary, then the purchase price
per share of Stock shall be at least 110% of the Fair Market Value (as
defined below) per share of Stock at the time of grant. The exercise price
for each incentive stock option shall be subject to adjustment as provided in
Section 7 below. The fair market value ("Fair Market Value") means the
closing price of publicly traded shares of Stock on the national securities
exchange on which shares of Stock are listed, (if the shares of Stock are so
listed) or on the NASDAQ Stock Market System (if the shares of Stock are
regularly quoted on the NASDAQ Stock Market System), or, if not so listed or
regularly quoted, the mean between the closing bid and asked prices of
publicly traded shares of Stock in the over-the-counter market, or, if such
bid and asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code.
(b) Option Term. The term of each Option shall be fixed by the Committee,
but no Option shall be exercisable more than ten years after the date such
Option is granted; provided, however, that in the case of an Optionee who, at
the time such Option is granted, owns more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary, then
such Option shall not be exercisable with respect to any of the shares
subject to such Option later than the date which is five years after the date
of grant.
(c) Exercisability. Subject to paragraph (j) of this Section 5, Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at grant, provided,
however, that except as provided in paragraphs (f) and (g) of this Section 5,
unless a shorter or longer vesting period is otherwise determined by the
Committee at grant, Options shall be exercisable as follows: up to one-half
(1/2) of the aggregate shares of Stock purchasable under an Option shall be
exercisable commencing one year after the date of grant and an additional
one-half (1/2) of the aggregate initial shares of Stock purchasable under an
Option shall be exercisable commencing two years after the date of grant. The
Committee may waive such installment exercise provision at any time in whole
or in part based on performance and/or such other factors as the Committee
may determine in its sole discretion, provided, however, no Option shall be
exercisable until more than six months have elapsed from the date of grant of
such Option.
(d) Method of Exercise. Options may be exercised in whole or in part at
any time during the option period, by giving written notice to the Company
specifying the number of shares to be purchased, accompanied by payment in
full of the purchase price, in cash, by check or such other instrument as may
be acceptable to the Committee. As determined by the Committee, in its sole
A-2
19
discretion, at or after grant, payment in full or in part may also be made in
the form of Stock owned by the Optionee for at least six months (based on the
Fair Market Value of the Stock on the trading day before the Option is
exercised); provided, however, that if such Stock was issued pursuant to the
exercise of an Incentive Option under the Plan, the holding requirements for
such Stock under the Code shall first have been satisfied. An Optionee shall
have the rights to dividends or other rights of a stockholder with respect to
shares subject to the Option after (i) the Optionee has given written notice of
exercise and has paid in full for such shares and (ii) becomes a stockholder of
record.
(e) Non-transferability of Options. Options are not transferable and may
be exercised solely by the Optionee during his lifetime, or after his death
by the person or persons entitled thereto under his will or the laws of
descent and distribution. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of, or to subject to execution, attachment
or similar process, any Option contrary to the provisions hereof shall be
void and ineffective and shall give no right to the purported transferee.
(f) Termination by Death. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with the Company or any Subsidiary
terminates by reason of death, the Option may thereafter be immediately
exercised, to the extent then exercisable (or on such accelerated basis as
the Committee shall determine at or after grant), by the legal representative
of the estate or by the legatee of the Optionee under the will of the
Optionee, for a period of one year from the date of such death or until the
expiration of the stated term of such Option as provided under the Plan,
whichever period is shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with the Company or any
Subsidiary terminates by reason of total and permanent disability as
determined under the Company's long term disability policy ("Disability"),
any Option held by such Optionee may thereafter be exercised, to the extent
it was exercisable at the time of termination due to Disability (or on such
accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after three months from the date of such termination of
employment or the expiration of the stated term of such Option, whichever
period is shorter.
(h) Termination by Reason of Retirement. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with the Company or any
Subsidiary terminates by reason of Normal or Early Retirement (as such terms
are defined below), any Option held by such Optionee may thereafter be
exercised to the extent it was exercisable at the time of such Retirement (as
defined below) (or on such accelerated basis as the Committee shall determine
at or after grant), but may not be exercised after three months from the date
of such termination of employment or the expiration of the stated term of
such Option, whichever period is shorter.
For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on or
after the normal retirement date specified in the applicable Company or
Subsidiary pension plan or if no such pension plan, age 65. Early Retirement
shall mean retirement from active employment with the Company or any
Subsidiary pursuant to the early retirement provisions of the applicable
Company or Subsidiary pension plan or if no such pension plan, age 55.
Retirement shall mean Normal or Early Retirement.
(i) Other Termination. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with the Company or any Subsidiary
terminates for any reason other than death, Disability or Retirement, the
Option shall thereupon terminate, except that the exercisable portion of any
Option which was exercisable on the date of such termination of employment
may be exercised for the lesser of three months from the date of termination
or the balance of such Option's term if the Optionee's employment with the
Company or any Subsidiary is involuntarily terminated by the Optionee's
employer without Cause. Cause shall mean a felony conviction or the failure
of an Optionee to contest prosecution for a felony or an Optionee's willful
misconduct or dishonesty, any of which is deemed by the Committee or the
Board of Directors to be harmful to the business or reputation of the Company
or any Subsidiary. The transfer of an Optionee from the employ of the Company
to a Subsidiary, or vice versa, or from one Subsidiary to another, shall not
be deemed to constitute a termination of employment for purposes of the Plan.
(j) Limit on Value of Incentive Option. The aggregate Fair Market Value,
determined as of the date the Option is granted, of the Stock for which
Incentive Options are exercisable for the first time by any Optionee during
any calendar year under the Plan (and/or any other stock option plans of the
Company or any Subsidiary) shall not exceed $100,000.
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(k) Transfer of Incentive Option Shares. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide that
if the Optionee makes a disposition, within the meaning of Section 424(c) of
the Code and regulations promulgated thereunder, of any share or shares of
Stock issued to him pursuant to his exercise of an Incentive Option granted
under the Plan within the two-year period commencing on the day after the
date of the grant of such Incentive Option or within a one-year period
commencing on the day after the date of transfer of the share or shares to
him pursuant to the exercise of such Incentive Option, he shall, within ten
days of such disposition, notify the Company thereof and immediately deliver
to the Company any amount of federal income tax withholding required by law.
6. Term of Plan.
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the date the Plan is approved by the Board, but Options
granted may extend beyond that date.
7. Capital Change of the Company.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the
Plan and in the number and option price of shares subject to outstanding
Options granted under the Plan, to the end that after such event each
Optionee's proportionate interest shall be maintained as immediately before
the occurrence of such event. Notwithstanding the foregoing, there shall be
no adjustment for the issuance of Shares on conversion of notes, preferred
stock or exercise of warrants or Shares issued by the Board for such
consideration as the Board deems appropriate.
8. Purchase for Investment.
Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended, or the Company has determined
that such registration is unnecessary, each person exercising an Option under
the Plan may be required by the Company to give a representation in writing
that he is acquiring the shares for his own account for investment and not
with a view to, or for sale in connection with, the distribution of any part
thereof.
9. Taxes.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under
the Plan with respect to the withholding of any taxes or any other tax
matters.
10. Effective Date of Plan.
The Plan shall be effective on the date it is approved by the Board,
provided however that the Plan shall be subject to subsequent approval by
majority vote of the Company's stockholders within one (1) year from the date
approved by the Board. Options may be granted, but not exercised, before such
stockholder approval is obtained. If the stockholders fail to approve the
Plan within the required time period, any Options granted under this Plan
shall be void and no additional Options may thereafter be granted hereunder.
11. Amendment and Termination.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made which would impair the right of any Optionee under
any Option theretofore granted without his consent, and except that no
amendment shall be made which, without the approval of the stockholders
would:
(a) materially increase the number of shares which may be issued under
the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the Optionees under
the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the Option exercise price to less than 100% of the Fair
Market Value on the date of grant thereof; or
(e) extend the Option term provided for in Section 5(b).
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The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of any Optionee without his consent. The Committee may also substitute new
Options for previously granted Options, including options granted under other
plans applicable to the participant and previously granted Options having
higher option prices, upon such terms as the Committee may deem appropriate.
12. Reorganization etc.
Notwithstanding any other provisions in Section 5 hereof, upon the
dissolution or liquidation of the Company, or upon a reorganization, merger
or consolidation of the Company with one or more corporations as a result of
which the Company is not the surviving corporation, or upon a sale of
substantially all of the property or more than 80% of the then outstanding
shares of Common Stock of the Company to another corporation, the Company
shall give to each Optionee at the time of adoption of the plan or agreement
for liquidation, dissolution, merger or sale either (1) a reasonable time
thereafter within which to exercise the Option prior to the effective date of
such liquidation or dissolution, merger or sale, or (2) the right to exercise
the Option in its entirety as to an equivalent number of shares of Common
Stock of the corporation succeeding the Company or acquiring its business by
reason of such liquidation, dissolution, merger, consolidation or
reorganization.
13. Government Regulations.
The Plan, and the granting and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as
may be required.
14. General Provisions.
(a) Certificates. All certificates for shares of Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange or
trading system upon which the Stock is then listed, and any applicable
Federal or state securities law, and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference
to such restrictions.
(b) Employment Matters. The adoption of the Plan shall not confer upon any
Optionee of the Company or any Subsidiary, any right to continued employment
(or, in case the Optionee is also a director, continued retention as a
director) with the Company or a Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees at any time.
(c) Limitation of Liability. No member of the Board or the Committee, or
any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) Registration of Options. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act of 1933 and
applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration. The Company shall not be under any
obligation to register under applicable federal or state securities laws any
Stock to be issued upon the exercise of an Option granted hereunder, or to
comply with an appropriate exemption from registration under such laws in
order to permit the exercise of an Option and the issuance and sale of the
Stock subject to such Option; however, the Company may in its sole discretion
register such Stock at such time as the Company shall determine. If the
Company chooses to comply with such an exemption from registration, the Stock
issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the
Stock represented thereby, and the Committee may also give appropriate
stop-transfer instructions to the transfer agent to the Company.
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APPENDIX B
HEALTHCARE SERVICES GROUP, INC.
1995 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Healthcare Services Group, Inc. 1995 Directors' Stock
Option Plan (the "Plan") is to secure for Healthcare Services Group, Inc. and
its stockholders the benefits arising from stock ownership by its Directors.
The Plan will provide a means whereby such Directors may purchase shares of
the common stock, $.01 par value, of Healthcare Services Group, Inc. pursuant
to options granted in accordance with the Plan.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 "Committee" shall mean the Stock Option Committee of the Board of
Directors of the Corporation, Healthcare Services Group, Inc., which shall
consist of one or more members of the Board of Directors of the Board of
Directors of the Corporation.
2.2 "Chairman" shall mean the duly appointed Chairman of any standing
Committee of the Board.
2.3 "Company" shall mean Healthcare Services Group, Inc. and any of its
subsidiaries.
2.4 "Director" shall mean any person who is a member of the Board of
Directors of the Company.
2.5 "Eligible Director" shall be any Director of the Company.
2.6 "Exercise Price" shall mean the price per Share at which an Option may
be exercised.
2.7 "Fair Market Value" shall mean the closing price of publicly traded
Shares on the national securities exchange on which Shares are listed (if the
Shares are so listed) or on the Nasdaq Stock Market System (if the Shares are
regularly quoted on the Nasdaq Stock Market System), or, if not so listed or
regularly quoted, the mean between the closing bid and asked prices of
publicly traded Shares in the over-the-counter market Electronic Bulletin
Board, or, if such bid and asked prices shall not be available, as reported
by any nationally recognized quotation service selected by the Company.
2.8 "Option" shall mean an Option to purchase Shares granted pursuant to
the Plan.
2.9 "Option Agreement" shall mean the written agreement described in
Article VI herein.
2.10 "Permanent Disability" shall mean the condition of an Eligible
Director who is unable to participate as a member of the Board by reason of
any medically determined physical or mental impairment which can be expected
to result in death or which can be expected to last for a continuous period
of not less than twelve (12) months.
2.11 "Purchase Price" shall be the Exercise Price multiplied by the number
of whole Shares with respect to which an Option may be exercised.
2.12 "Shares" shall mean shares of common stock, $.01 par value, of the
Company.
ARTICLE III
ADMINISTRATION
3.1 General. This Plan shall be administered by the Committee in
accordance with the express provisions of this Plan.
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3.2 Powers of the Board. The Committee shall have full and complete
authority to adopt such rules and regulations and to make all such other
determinations not inconsistent with the Plan as may be necessary for the
administration of the Plan.
ARTICLE IV
SHARES SUBJECT TO PLAN
Subject to adjustment in accordance with Article IX, an aggregate of
150,000 Shares are reserved for issuance under this Plan. Shares sold under
this Plan may be either authorized, but unissued Shares or reacquired Shares.
If an Option, or any portion thereof, shall expire or terminate for any
reason without having been exercised in full, the unpurchased Shares covered
by such Option shall be available for future grants of Options.
ARTICLE V
GRANTS
5.1 Grants of Options. Subject to the express provisions of the Plan, the
Committee shall have the authority, in its discretion, to determine the
Eligible Directors to whom the Options shall be granted, the number of Shares
which shall be subject to each Option, the purchase price of each Share which
shall be subject to each Option, the period(s) during which such Options
shall be exercisable (whether in whole or in part), and the other terms and
provisions thereof. In determining the Eligible Directors to whom Options
shall be granted and the number of Shares for which Options shall be granted,
the Committee shall consider the length of service of the Eligible Director
and the amount of earnings of the Company.
5.2 Determination Final. The determination of the Committee on matters
referred to this Article V shall be final.
ARTICLE VI
TERMS OF OPTION
Each Option shall be evidenced by a written Option Agreement executed by
the Company and the Eligible Director which shall specify the Grant Date, the
number of Shares subject to the Option, the Exercise Price and shall also
include or incorporate by reference the substance of all of the following
provisions and such other provisions consistent with this Plan as the Board
may determine.
6.1 Term. The term of the Option shall be five (5) years from the Grant
Date of each Option, subject to earlier termination in accordance with
Articles VI and X.
6.2 Restriction on Exercise. Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Board at grant, provided, however, that except in the case of the Eligible
Director's death or Permanent Disability, upon which events the Option will
become immediately exercisable, unless a longer vesting period is otherwise
determined by the Committee at grant, Options shall be exercisable as
follows: one-half of the aggregate Shares purchasable under an Option shall
be exercisable commencing one year after the Grant Date and an additional
one-half of the Shares purchasable under an Option shall be exercisable
commencing two years after the Grant Date. The Board may waive such
installment exercise provision at any time in whole or in part based on
performance and/or such other factors as the Board may determine in its sole
discretion, provided, however, that no Option shall be exercisable until more
than six months have elapsed from the Grant Date.
6.3 Exercise Price. The Exercise Price for each Share subject to an Option
shall be the Fair Market Value of the Share as determined in Section 2.7
herein.
6.4 Manner of Exercise. An Option shall be exercised in accordance with
its terms, by delivery of a written notice of exercise to the Company and
payment of the full purchase price of the Shares being purchased. An Eligible
Director may exercise an Option with respect to all or less than all of the
Shares for which the Option may then be exercised, but an Eligible Director
must exercise the Option in full Shares.
B-2
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6.5 Payment. The Purchase Price of Shares purchased pursuant to an Option
or portion thereof, may be paid:
(a) in United States Dollars, in cash or by check, bank draft or money
order payable to the Company; or
(b) by delivery of Shares already owned by an Eligible Director (for a
period of at least six months) with an aggregate Fair Market Value on the
date of exercise equal to the Purchase Price.
6.6 Transferability. No Option shall be transferable, otherwise than by
will or the laws of descent and distribution, and an Option shall be
exercisable during the Eligible Director's lifetime only by the Eligible
Director, his guardian or legal representative or to immediate family members
of the Eligible Director or pursuant to a qualified domestic relations order.
6.7 Termination of Membership on the Board. If an Eligible Director's
membership on the Board terminates for any reason, an Option vested on the
date of termination may be exercised in whole or in part at any time within
one (1) year after the date of such termination (but in no event after the
term of the Option expires) and shall thereafter terminate.
ARTICLE VII
GOVERNMENT AND OTHER REGULATIONS
7.1 Delivery of Shares. The obligation of the Company to issue or transfer
and deliver Shares for exercised Options under the Plan shall be subject to
all applicable laws, regulations, rules, orders and approvals which shall
then be in effect.
7.2 Holding of Stock After Exercise of Option. The Option Agreement shall
provide that the Eligible Director, by accepting such Option, represents and
agrees, for the Eligible Director and his permitted transferees hereunder
that none of the Shares purchased upon exercise of the Option shall be
acquired with a view to any sale, transfer or distribution of the Shares in
violation of the Securities Act of 1933, as amended (the "Act") and the
person exercising an Option shall furnish evidence satisfactory to that
Company to that effect, including an indemnification of the Company in the
event of any violation of the Act by such person. Notwithstanding the
foregoing, the Company in its sole discretion may register under the Act the
Shares issuable upon exercise of the Options under the Plan.
ARTICLE VIII
WITHHOLDING TAX
The Company may in its discretion, require an Eligible Director to pay to
the Company, at the time of exercise of an Option an amount that the Company
deems necessary to satisfy its obligations to withhold federal, state or
local income or other taxes (which for purposes of this Article includes an
Eligible Director's FICA obligation) incurred by reason of such exercise.
When the exercise of an Option does not give rise to the obligation to
withhold federal income taxes on the date of exercise, the Company may, in
its discretion, require an Eligible Director to place Shares purchased under
the Option in escrow for the benefit of the Company until such time as
federal income tax withholding is required on amounts included in the
Eligible Director's gross income as a result of the exercise of an Option. At
such time, the Company, in its discretion, may require an Eligible Director
to pay to the Company an amount that the Company deems necessary to satisfy
its obligation to withhold federal, state or local taxes incurred by reason
of the exercise of the Option, in which case the Shares will be released from
escrow upon such payment by an Eligible Director.
ARTICLE IX
ADJUSTMENTS
9.1 Proportionate Adjustments. If the outstanding Shares are increased,
decreased, changed into or exchanged into a different number or kind of
Shares or securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
B-3
25
similar transaction, an appropriate and proportionate adjustment shall be made
by the Committee or the Board of Directors to the maximum number and kind of
Shares as to which Options may be granted under this Plan. A corresponding
adjustment changing the number or kind of Shares allocated to unexercised
Options or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment in the outstanding Options
shall be made without change in the Purchase Price applicable to the unexercised
portion of the Option with a corresponding adjustment in the Exercise Price of
the Shares covered by the Option. Notwithstanding the foregoing, there shall be
no adjustment for the issuance of Shares on conversion of notes, preferred stock
or exercise of warrants or Shares issued by the Board for such consideration as
the Board deems appropriate.
9.2 Reorganization, etc. Notwithstanding any other provision in Article VI
hereof, upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all of the property or more than
80% of the then outstanding Shares of the Company to another corporation, the
Company shall give to each Eligible Director at the time of adoption of the
plan or agreement for liquidation, dissolution, merger or sale either (1) a
reasonable time thereafter within which to exercise the Option in its
entirety prior to the effective date of such liquidation or dissolution,
merger or sale, or (2) the right to exercise the Option as to an equivalent
number of Shares of stock of the corporation succeeding the Company or
acquiring its business by reason of such liquidation, dissolution, merger,
consolidation or reorganization.
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 Amendments. The Board may at any time amend or revise the terms of
the Plan, provided no such amendment or revision shall, unless appropriate
stockholder approval of such amendment or revision is obtained:
(a) increase the maximum number of Shares which may be sold pursuant to
Options granted under the Plan, except as permitted under the provisions
of Article IX;
(b) change the minimum Exercise Price set forth in Article VI; or
(c) permit the granting of Options to any one other than as provided in
Article V.
10.2 Termination. The Board at any time may suspend or terminate this
Plan. This Plan, unless sooner terminated, shall terminate on the tenth
anniversary of its adoption by the Board. No Option may be granted under this
Plan while this Plan is suspended or after it is terminated.
10.3 Consent of Holder. No amendment, suspension or termination of the
Plan shall, without the consent of the holder of Options, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Privilege of Stock Ownership. No Eligible Director entitled to
exercise any Option granted under the Plan shall have any of the rights or
privileges of a stockholder of the Company with respect to any Shares
issuable upon exercise of an Option until certificates representing the
Shares shall have been issued and delivered.
11.2 Plan Expenses. Any expenses incurred in the administration of the
Plan shall be borne by the Company.
11.3 Use of Proceeds. Payments received from an Eligible Director upon the
exercise of Options shall be used for general corporate purposes of the
Company.
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11.4 Governing Law. The Plan has been adopted under the laws of the
Commonwealth of Pennsylvania. The Plan and all Options which may be granted
hereunder and all matters related thereto, shall be governed by and construed
and enforceable in accordance with the laws of the Commonwealth of
Pennsylvania as it then exists.
ARTICLE XII
STOCKHOLDER APPROVAL
This Plan is subject to approval, at a duly held stockholders' meeting
within twelve (12) months after the date the Board approves this Plan, by the
affirmative vote of holders of a majority of the voting Shares of the Company
represented in person or by proxy and entitled to vote at the meeting.
Options may be granted, but not exercised, before such stockholder approval
is obtained. If the stockholders fail to approve the Plan within the required
time period, any Options granted under this Plan shall be void, and no
additional Options may thereafter be granted hereunder.
B-5
27
/X/ Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Daniel P. McCartney; W.
1. Election of Thacher Longstreth; Barton D.
Directors / / / / Weisman; Joseph F. McCartney; Robert
L. Frome Thomas A. Cook; Robert J.
FOR all nominees listed on the Moss; and John M. Briggs; and in
right (except as marked to the accordance with proxy Statement
contrary on the right) (Instruction: To withhold authority to vote
for any individual nominee, print that
nominee's name on the space provided at left.)
- - ------------------------------ at left.)
FOR AGAINST ABSTAIN
2. To approve and ratify the adoption of
the Company's 1995 Incentive and non-
qualified Stock Option Plan for key
employees. / / / / / /
3. To approve and ratify the adoption of the
Company's 1995 Directors' Stock Option
Plan. / / / / / /
4. To approve an amendment to the
Company's Articles of Incorporation which
increases the number of authorized
shares of common stock of the
Company from 10,000,000 to
15,000,000. / / / / / /
5. To approve and ratify the selection of
Grant Thornton LLP as independent
Accountants of the Company as
described in Proxy Statement. / / / / / /
SIGNATURE(S) DATE
------------------------------- ---------------------------
NOTE: Please sign exactly as your name or names appear hereon. When signing
as Executor, Administrator, Trustee, Corporate Officer Attorney, Agent
or Guardian, etc; please add your full title to your signature. No
postage is required if this proxy is returned in the enclosed envelope
and mailed in the United States. Please date, sign and return this
proxy in the enclosed envelope.
28
HEALTHCARE SERVICES GROUP, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders to be held at The Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, PA, 19047 on May 23, 199530, 2000 at 10:00
A.M.
The undersigned, revoking all previous proxies, hereby appoints Daniel P.
McCartney and Thomas A. Cook, or either of them, attorneys and proxies with full
power of substitution and with all the powers the undersigned would possess if
personally present, to vote all shares of Common Stock of HEALTHCARE SERVICES
GROUP, INC. owned by the undersigned at the Annual Meeting of Shareholders of
said Corporation to be held at the time and place set forth above, and at any
adjournment thereof, in the transaction of such business as may properly come
before the meeting or any adjournment thereof, all as more fully described in
the Proxy Statement, and particularly to vote as designated below.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT
IF NO DIRECTION IS MADE THEY WILL BE VOTED FOR THE ELECTION OF THE NOMINATED
DIRECTORS, THE APPROVAL OF THEthe approval of the amendment to the company's 1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN FOR
KEY EMPLOYEES, THE 1995 DIRECTORS' STOCK OPTION PLANemployee stock
option plan, the approval of each of the company's 1999 employee stock purchase
plan and 1999 deferred compensation plan and the approval of the amendment to
the company's articles of incorporation AND THE AMENDMENT TO THE
COMPANY'S ARTICLESRATIFICATION OF INCORPORATION AND THE INDEPENDENT
PUBLIC ACCOUNTANTS, ALL AS RECOMMENDED IN THE PROXY STATEMENT, FOR THE RATIFICATION (AS SET OUT ON
THE REVERSE SIDE OF THIS PROXY CARD) AND IN ACCORDANCE
WITH THE DISCRETION OF THE PROXIES OR PROXY ORON ANY OTHER BUSINESS TRANSACTED AT
THE ANNUAL MEETING.
(To be Signed on Reverse Side)
A [X] Please mark your
votes as in this
example using
dark ink only.
FOR WITHHELD
1. TO ELECT EIGHT [ ] [ ] Nominees: Daniel P. McCartney; W.
DIRECTORS; Thacher Longstreth; Barton
D. Weisman; Joseph F.
FOR all nominees listed on the McCartney; Robert L.
right (except as marked to the Frome; Thomas A. Cook;
contrary below) Robert J. Moss; and John M.
Briggs; and in accordance
with proxy Statement
(Instruction: To withhold authority to vote
for any individual nominee, print that
nominee's name on the space provided at
left.)
_____________________________________
FOR AGAINST ABSTAIN
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 [ ] [ ] [ ]
EMPLOYEE STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE FROM A
MAXIMUM OF 500,000 TO 1,000,000; AND
(3) TO APPROVE AND ADOPT THE COMPANY'S 1999 [ ] [ ] [ ]
EMPLOYEE STOCK PURCHASE PLAN; AND
(4) TO APPROVE AND ADOPT THE COMPANY'S 1999 DEFERRED [ ] [ ] [ ]
COMPENSATION PLAN; AND
(5) TO APPROVE AN AMENDMENT TO THE COMPANY'S [ ] [ ] [ ]
ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY
15,000,000 SHARES TO 30,000,000 SHARES; AND
(6) TO APPROVE AND RATIFY THE SELECTION OF GRANT [ ] [ ] [ ]
THORNTON LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR ITS CURRENT FISCAL
YEAR ENDING DECEMBER 31, 2000; AND
(7) TO CONSIDER AND ACT UPON SUCH OTHER BUSINESS AS [ ] [ ] [ ]
MAY PROPERLY COME BEFORE THE MEETING.
_______________________________________Date _____________ 2000
Signature
_______________________________________Date _____________ 2000
Signature if held jointly
Please sign exactly as name appears on tne certificate or certificates
representing shares to be voted by this proxy, as shown on the label above. When
signing as executor, administrator, attorney, trustee, or guardian, please give
full title as such. If a corporation, please sign full corporation name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person(s).