SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
REHABCARE GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[RehabCare logo]
7733 FORSYTH BOULEVARD
SUITE 2300
ST. LOUIS, MISSOURI 63105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2005
Dear Stockholder:
The annual meeting of stockholders of RehabCare Group, Inc. will be
held at the Pierre Laclede Center, 7733 Forsyth Boulevard, Second Floor, St.
Louis, Missouri 63105, on May 3, 2005, at 8:00 a.m., local time, for the
following purposes:
1. To elect six directors to hold office until the next
annual meeting or until their successors shall have been
duly elected and qualified;
2. To consider and act upon a proposal to approve the
RehabCare Group, Inc. 2005 Equity Incentive Plan;
3. To ratify the appointment of KPMG LLP as RehabCare's
independent registered public accounting firm for the
fiscal year ending December 31, 2005; and
4. To transact any and all other business that may properly
come before the annual meeting or any adjournment thereof.
Only our stockholders of record at the close of business on March
7, 2005, are entitled to notice of, and to vote at, the annual meeting or
any adjournment thereof.
WE CORDIALLY INVITE YOU TO ATTEND THE ANNUAL MEETING. EVEN IF YOU
PLAN TO BE PRESENT IN PERSON AT THE MEETING, YOU ARE REQUESTED TO DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED SO THAT YOUR
SHARES WILL BE REPRESENTED. THE MAILING OF AN EXECUTED PROXY CARD WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE
ANNUAL MEETING.
John H. Short, Ph.D.
President and Chief Executive Officer
March 31, 2005
[RehabCare logo]
7733 FORSYTH BOULEVARD
SUITE 2300
ST. LOUIS, MISSOURI 63105
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2005
-----------------
GENERAL INFORMATION
This proxy statement is furnished to the stockholders of RehabCare
Group, Inc. in connection with our solicitation of proxies for use at the
annual meeting of stockholders to be held at the Pierre Laclede Center, 7733
Forsyth Boulevard, Second Floor, St. Louis, Missouri 63105, on May 3, 2005,
at 8:00 a.m., local time, and at all adjournments thereof, for the purposes
set forth in the preceding notice of annual meeting of stockholders.
This proxy statement, the notice of annual meeting and the
accompanying proxy card were first mailed to our stockholders on or about
March 31, 2005.
The proxy set forth on the accompanying proxy card is being
solicited by our board of directors. All proxies will be voted in accordance
with the instructions contained in the proxy. If no direction is specified
in the proxy, executed proxies will be voted for the election of the six
directors nominated by our board of directors in Proposal I, in favor of the
approval of the RehabCare Group, Inc. 2005 Equity Incentive Plan in Proposal
II and in favor of the ratification of KPMG LLP as our independent
registered public accounting firm in Proposal III. A proxy may be revoked at
any time before it is voted by filing a written notice of revocation or a
later-dated proxy card with our corporate secretary at our principal offices
or by attending the annual meeting and voting the shares in person.
Attendance alone at the annual meeting will not revoke a proxy. Proxy cards
that are properly executed, timely received and not revoked will be voted in
the manner indicated thereon at the annual meeting and any adjournment
thereof.
We will bear the entire expense of soliciting proxies. Proxies
initially will be solicited by mail. Our directors, executive officers and
employees may also solicit proxies personally or by telephone or other
means, but we will not compensate these persons for providing the
solicitation services.
Only our stockholders of record at the close of business on March 7,
2005, are entitled to notice of, and to vote at, the annual meeting. On
this date, there were 16,658,534 shares of our common stock, $0.01 par
value, issued and outstanding.
1
Each outstanding share of our common stock on the record date is
entitled to one vote for each director to be elected at the annual meeting
and one vote on each additional proposal presented at the annual meeting.
Our stockholders do not have the right to cumulate votes in the election of
directors. A majority of the outstanding shares of common stock present in
person or by proxy will constitute a quorum at the annual meeting. A
plurality of the votes cast is required for the election of directors, which
means that the nominees with the six highest vote totals will be elected as
our directors. As a result of the foregoing, a designation on the proxy that
the stockholder is "withholding authority" for a nominee or nominees and
broker "non-votes" do not have an effect on the results of the vote for the
election of directors. A designation on the proxy that the stockholder is
"withholding authority" to vote for a nominee or nominees will be counted,
but broker "non-votes" will not be counted, for the purpose of determining
the number of shares represented at the meeting for purposes of determining
whether a quorum of shares is present. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner.
The approval of the RehabCare Group, Inc. 2005 Equity Incentive
Plan requires the affirmative vote of a majority of votes cast on the
proposal, provided that the total vote cast on the proposal represents over
50 percent of our outstanding shares. Therefore, a broker non-vote will have
the effect of a vote against this proposal to the extent that the total vote
does not exceed 50 percent of our outstanding shares. Shares subject to
abstention will have no effect on this proposal.
The ratification of the appointment of KPMG LLP as our independent
registered public accounting firm requires the affirmative vote of a
majority of the votes cast on the proposal. Therefore, abstentions and
broker "non-votes" will have no effect on the proposal to ratify KPMG LLP as
our auditors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following entities are known to our management to be the
beneficial owners of five percent or more of our common stock as of March 7,
2005:
NUMBER OF SHARES PERCENT OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(1)
------------------------------------ ------------------ ---------------
Snow Capital Management, L.P.(2) 1,114,090 6.69%
2100 Corporate Drive, Suite 300
Pittsburgh, Pennsylvania 15237
Franklin Resources, Inc.(3) 1,109,328 6.66%
One Franklin Parkway
San Mateo, California 94403-1906
Boston Partners Asset Management, LLC(4) 1,075,780 6.46%
28 State Street, 20th Floor
Boston, Massachusetts 02109
State Street Research & Management Company(5) 1,029,440 6.18%
One Financial Center, 31st Floor
Boston, Massachusetts 02111-2690
FMR Corp.(6) 980,000 5.88%
82 Devonshire Street
Boston, Massachusetts 02109
2
<FN>
- --------
(1) The percentage calculations are based upon 16,658,534 shares of our
common stock issued and outstanding on March 7, 2005.
(2) The information provided is based on a Schedule 13G, dated February
14, 2005, filed by Snow Capital Management, L.P., an investment
adviser. Snow Capital Management, L.P. reported sole voting and
dispositive power with respect to all 1,114,090 shares reported as
beneficially owned.
(3) The information provided is based on a Schedule 13G, dated February
14, 2005, filed by Franklin Resources, Inc., a holding company,
Charles B. Johnson, a control person, and Rupert H. Johnson, a control
person. Franklin Resources, Inc., Charles B Johnson and Rupert H.
Johnson reported sole voting and dispositive power with respect to
none of the shares reported as beneficially owned. The reporting
person reported that its subsidiary, Franklin Advisers, Inc., an
investment adviser, had sole voting and dispositive power with respect
to 769,300 of the shares reported as beneficially owned. The reporting
person reported that its subsidiary, Franklin Templeton Portfolio
Advisors, Inc., an investment adviser, had sole voting and dispositive
power with respect to 340,028 of the shares reported as beneficially
owned.
(4) The information provided is based on Amendment No. 3 to Schedule 13G,
dated February 10, 2005, filed by Boston Partners Asset Management,
LLC, an investment adviser. Boston Partners Asset Management, LLC
reported sole voting and dispositive power with respect to all
1,075,780 shares reported as beneficially owned.
(5) The information provided is based on a Schedule 13G, dated January 27,
2005, filed by State Street Research & Management Company, an
investment adviser. State Street Research & Management Company
reported sole voting and dispositive power with respect to all
1,029,440 shares reported as beneficially owned.
(6) The information provided is based on Amendment No. 10 to Schedule 13G,
dated February 14, 2005, filed jointly by FMR Corp., a holding
company, Edward C. Johnson 3rd, a principal stockholder and the
chairman of FMR Corp., and Abigail P. Johnson, a principal stockholder
and member of the board of directors of FMR Corp. Each of FMR Corp.,
Edward C. Johnson 3rd and Abigail P. Johnson reported sole dispositive
power with respect to all 980,000 shares reported as beneficially
owned.
3
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 7, 2005, the beneficial
ownership of our common stock by each director and each executive officer
named in the Summary Compensation Table, individually, and all directors and
executive officers as a group.
NUMBER OF SHARES PERCENT OF OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) COMMON STOCK(3)
- ------------------------ ------------------------ ---------------
William G. Anderson, CPA 198,204 1.18%
Colleen Conway-Welch, Ph.D., R.N. 33,991 (4)
C. Ray Holman, CPA 20,000 (4)
John H. Short, Ph.D. 178,861 1.06%
H. Edwin Trusheim 210,268 1.25%
Theodore M. Wight 79,730 (4)
Tom E. Davis 155,854 (4)
Vincent L. Germanese, CPA 30,000 (4)
Patricia M. Henry 58,690 (4)
Mark A. Bogovich 12,635 (4)
All directors and executive officers as a group (10 persons) 978,233 5.57%
<FN>
- --------
(1) Except as otherwise noted, each individual has sole voting and
investment power with respect to the shares listed beside his or her
name.
(2) Totals include 160,861, 15,000, 207,268, 79,730, 155,854, 30,000,
12,500, 58,000, 33,261, 155,861 and 908,335 shares subject to stock
options owned by Messrs. Anderson, Holman, Trusheim, Wight, Davis,
Germanese, Bogovich, Ms. Henry and Drs. Conway-Welch and Short and all
directors and executive officers as a group, respectively, that are
either presently exercisable or exercisable within 60 days of March 7,
2005. Totals also include 690 shares and 135 shares allocated to Ms.
Henry and Mr. Bogovich, respectively, under our 401(k) plan.
(3) Based upon 16,658,534 shares of our common stock issued and outstanding
as of March 7, 2005, and, for each director or executive officer or the
group, the number of shares subject to options exercisable by such
director or executive officer or the group within 60 days of March 7,
2005.
(4) Less than one percent.
PROPOSAL I.
ELECTION OF DIRECTORS
At the annual meeting, our stockholders will vote on the election
of six directors to serve a term of one year until the 2006 annual meeting
or until their successors shall have been duly elected and qualified.
The persons named as proxies on the accompanying proxy card intend
to vote all duly executed proxies received by our board of directors for the
election of the six directors listed below, except as otherwise directed by
the stockholder on the proxy card. If for any reason any nominee becomes
unavailable for election, which is not now anticipated, the persons named in
the accompanying proxy card will vote for a substitute nominee as designated
by our board of directors. The six nominees receiving the highest number of
votes will be elected as our directors. Each nominee currently serves as one
of our directors. Our board of directors recommends a vote "FOR" the
election of each of the nominees.
4
The name, age, principal occupation or position, business
experience and other directorships for each of the directors or nominees is
set forth below.
H. EDWIN TRUSHEIM, 77, has been our chairman of the board of
directors since 1998 and has served as a director since 1992. Prior to his
retirement, Mr. Trusheim served as chairman of the board of directors and
chief executive officer of General American Life Insurance Company.
WILLIAM G. ANDERSON, CPA, 72, has been a director since 1991. Prior
to his retirement, Mr. Anderson served as vice chairman of Ernst & Young, a
public accounting firm.
COLLEEN CONWAY-WELCH, PH.D., R.N., 60, has been a director since
September 2000. Dr. Conway-Welch serves as the dean and a professor at
Vanderbilt University's School of Nursing, where she has been employed since
1984. Dr. Conway-Welch also serves on the board of directors of Pinnacle
Bank in Nashville, Tennessee, Ardent Health Services and Caremark RX, Inc.
C. RAY HOLMAN, CPA, 62, joined our board of directors in 2003. He
is the retired chairman of the board and chief executive officer of
Mallinckrodt, Inc. Mr. Holman currently serves on the boards of The Laclede
Group, Inc. and InteliStaf Holdings, Inc.
JOHN H. SHORT, PH.D., 60, has been our President and Chief
Executive Officer since May 2004 having served as our Interim President and
Chief Executive Officer since June 2003 and a director of the company since
1991. Prior to joining the company, Dr. Short was the Managing Partner of
Phase 2 Consulting, Inc, a management and economic consulting firm for the
healthcare industry, for in excess of five years. Dr. Short currently serves
on the board of directors of InteliStaf Holdings, Inc.
THEODORE M. WIGHT, 62, has been a director since 1991. Prior to his
retirement, Mr. Wight served as a general partner of the general partners of
Walden Investors, a venture capital business, and Pacific Northwest Partners
SBIC, L.P., a venture capital business. In June 2004, Pacific Northwest
Partners SBIC, L.P. entered into a consent judgment whereby the United
States Small Business Administration was appointed as receiver for Pacific
Northwest Partners SBIC, L.P. for the purpose of marshaling and liquidating
all of its assets with the goal of maximizing recovery and satisfying the
claims of creditors.
BOARD OF DIRECTORS AND COMMITTEES
BOARD STRUCTURE AND MEETINGS
During the year ended December 31, 2004, our board of directors met
eleven times, four of which were telephonic meetings. Each director attended
not less than 75% of the meetings of our board of directors and committees
of which such director was a member during 2004. It is our policy to
strongly encourage the members of our board of directors to attend the
annual meeting of stockholders. At the last annual meeting, all but one of
the then current directors were in attendance.
Our board of directors has standing Audit, Compensation and
Nominating/Corporate Governance, and Compliance Committees. Each of the
committees of our board of directors is comprised of independent directors.
Our board of directors has adopted a written charter for each of these
committees. The full text of each charter and our corporate governance
guidelines are available on our website located at www.rehabcare.com under
the "For Our Investors" section and are available in print to any
shareholder who requests them. In compliance with the New York Stock
Exchange Corporate Governance Standards, our board of directors holds
regularly scheduled executive sessions without
5
management. Our independent non-employee chairman, H. Edwin Trusheim,
presides at all executive sessions of the board of directors.
DIRECTOR INDEPENDENCE
It is critical that the board reflect a substantial degree of
independence from management, both in fact and in appearance. Accordingly,
while the board will determine, from time to time, the number of employee
directors that will be permitted, a substantial majority of the board will
remain independent directors. Under no circumstances will the proportion of
employee directors exceed one-third of the entire board membership. In
addition, the board operates under the direction of an independent,
non-executive chairman of the board. For a director to be considered
independent, the board must determine that the director does not have any
direct or indirect material relationship with the company. The board has
established corporate governance guidelines, to assist it in determining
director independence, which conform to the independence requirements in the
New York Stock Exchange listing rules. The portion of the guidelines that
relates to director independence is set forth below. The board has
determined that Messrs. Trusheim, Anderson, Holman and Wight and Dr.
Conway-Welch, satisfy the New York Stock Exchange's independence
requirements and our independence guidelines. In making the independence
determinations, the board of directors reviewed all of our directors'
relationships with the company based primarily on a review of the responses
of the directors to questions regarding employment, business, familial,
compensation and other relationships with the company and its management.
In addition to applying the company's corporate governance
guidelines, the board will consider all relevant facts and circumstances in
making an independence determination, and not merely from the standpoint of
the director, but also from that of persons or organizations with which the
director has an affiliation. Independence depends not only on the personal,
employment and business relationships of each director, but also upon the
board's overall relationship with, and attitude towards, management.
Providing objective, independent judgment is at the core of the board's
oversight responsibilities. The board and each outside director will reflect
this independence.
Under the guidelines, an independent director is a member of the
board of directors of the company who:
o Is not receiving, and has not received, for the three years
prior to the date of determination, more than $100,000 per
year in direct compensation from the company, other than
director and committee fees and receipt of fixed amounts of
compensation under a retirement plan (including deferred
compensation) for prior service to the company (provided that
such compensation is not contingent in any way on continued
service) and has no immediate family member who is receiving
or has received such compensation either currently or during
such three-year period;
o Is not, and has not been, for the three years prior to the
date of determination, an employee of the company and has no
immediate family member who is or has been, for the three
years prior to the date of determination, an executive
officer of the company;
o Is not, and has not been, affiliated with or employed by the
present or a former internal or external auditor of the
company, and has no immediate family member who is, or has
been, affiliated with or employed in a professional capacity
by the present or a former internal or external auditor of
the company, unless, in each case, it has been more than
three years since the affiliation, employment or the auditing
relationship ended;
6
o Is not, and has not been (and has no immediate family member
who is or has been), for the three years prior to the date of
determination, part of an interlocking directorship in which
an executive officer of the company serves on the
compensation committee of the company that concurrently
employed the director (or immediate family member) as an
executive officer;
o Is not an executive officer or an employee (and has no
immediate family member who is an executive officer) of
another company that presently, or at any time within the
three years prior to the date of determination, makes
payments to, or receives payments from, the company for
property or services in an amount which, in any single fiscal
year, exceeds the greater of $1 million, or 2% of such other
company's consolidated gross revenues; and
o The board of directors has affirmatively determined it has no
other material commercial, industrial, banking, consulting,
legal, accounting, charitable or familial relationship with
the company, either individually or as a partner, stockholder
or officer of an organization or entity having such a
relationship with the company, which relationship would
adversely impact the director's independence in connection
with the company.
For the purpose of determining independence under the foregoing
principles, "immediate family member" means a director's spouse, parents,
children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law,
brothers- and sisters-in-law and anyone who shares the director's home. The
committee may conclude that director is independent if the disqualifying
issue relates to an immediate family member who is no longer an immediate
family member as a result of legal separation or divorce or if the relevant
immediate family member has died or become incapacitated. References to any
company include any parent or subsidiary in a consolidated group with the
company.
It is a responsibility of the board to regularly assess each
director's independence and to take appropriate actions in any instance in
which the requisite independence has been compromised.
AUDIT COMMITTEE
Messrs. Anderson (chairman) and Holman and Dr. Conway-Welch
comprise the Audit Committee. The Audit Committee met eleven times during
2004, four of which were telephonic meetings. The duties of the Audit
Committee include:
o recommending to the board of directors a public accounting
firm to be placed in nomination for stockholder ratification
as our independent auditors and compensating and terminating
the independent auditors as deemed necessary;
o meeting periodically with our independent auditors and
financial management to review the scope of the duties of the
proposed auditor for the then-current year, the proposed
audit fees and the audit procedures to be utilized, reviewing
the audit and eliciting the judgment of the independent
auditors regarding the quality of the accounting principles
applied to our financial statements; and
o evaluating on an annual basis the qualifications, performance
and independence of the independent auditors, based on the
committee's review of the independent auditor's report and
the performance of the independent auditors throughout the
year.
7
Each member of the Audit Committee meets the independence
requirements of the New York Stock Exchange. Each member of our Audit
Committee is financially literate, knowledgeable and qualified to review
financial statements. The "audit committee financial expert" designated by
our board of directors is William G. Anderson.
COMPENSATION AND NOMINATING/CORPORATE GOVERNANCE COMMITTEE
The members of the Compensation and Nominating/Corporate Governance
Committee are Messrs. Trusheim and Wight. Mr. Trusheim serves as the
chairman of the committee. In addition to Messrs. Trusheim and Wight, Joseph
R. Swedish served on the Compensation and Nominating/Corporate Governance
Committee from his election to the board of directors in June 2004 until his
resignation from the board in February 2005. Each member of the Compensation
and Nominating/Corporate Governance Committee meets the independence
requirements of the New York Stock Exchange. The Compensation and
Nominating/Corporate Governance Committee met five times during 2004. The
duties of the Compensation and Nominating/Corporate Governance Committee
include:
o reviewing and recommending to our board of directors the
salaries of all our executive officers and authorizing all
other forms of executive compensation;
o reviewing our incentive compensation and equity-based plans
and recommending to our board of directors changes to such
plans as needed;
o overseeing the search for individuals including considering
nominees for directors recommended by our stockholders to
become members of our board of directors and recommending to
our board of directors for approval director nominees to be
presented for election at our annual meeting of stockholders;
o reviewing our corporate governance guidelines at least
annually and recommending changes to our board of directors
as necessary.
The Compensation and Nominating/Corporate Governance Committee of
our board of directors is responsible under its charter for identifying and
selecting qualified candidates for election to the board of directors prior
to each annual meeting of the stockholders. In addition, stockholders who
wish to recommend a candidate for election to the board of directors may
submit such recommendation to the chairman of the committee. Any
recommendation must include the name, contact information, background,
experience and other pertinent information on the proposed candidate and
must be received by us within the time limits set forth herein under the
title "Proposals of Stockholders" for consideration by the committee. In
accordance with the committee's charter and our corporate governance
guidelines, we are willing to consider candidates recommended by
stockholders. In identifying and evaluating nominees for director, the
committee considers each candidate's qualities, experience, background and
skills, as well as other factors which the candidate may bring to the board
of directors.
COMPLIANCE COMMITTEE
The Compliance Committee members are Messrs. Holman (chairman) and
Anderson and Dr. Conway-Welch. The Compliance Committee oversees the
implementation and operation of our ongoing regulatory compliance program,
including the enforcement of appropriate disciplinary mechanisms to ensure
that all reasonable steps are taken to respond to a regulatory offense and
to prevent future offenses of a similar kind. The Compliance Committee met
four times during 2004.
8
DIRECTORS' FEES
Directors who are not also our employees were paid $5,000 for each
meeting of our board of directors that he or she attended in person and also
received a one-time payment of $5,000 for all telephonic meetings of our
board of directors during 2004. Each director who is not also an employee
also received a one-time payment of $5,000 in recognition of the additional
time and effort involved during the selection of our new Chief Executive
Officer and during our acquisition of the assets of Phase 2 Consulting. We
also reimburse our directors for expenses incurred in connection with their
attendance at board meetings.
Each of the non-employee directors also receives annual stock
option grants under our Second Amended and Restated 1996 Long-Term
Performance Plan. In January 2004, we granted options to acquire 7,500
shares of our common stock at an exercise price of $24.80 per share, the
fair market value of our common stock on the date of grant, to each of
Messrs. Anderson, Holman, Trusheim and Wight and Dr. Conway-Welch. In
addition, in March 2004, we granted options to acquire 4,000 shares of our
common stock at an exercise price of $21.73 per share, the fair market value
of our common stock on the date of grant, to Mr. Trusheim for his services
as chairman of the board. In June 2004, we granted options to acquire 7,500
shares of our common stock at an exercise price of $24.40 per share, the
fair market value of our common stock on the date of grant, to Mr. Swedish
at his election to the board.
MISCELLANEOUS
We have adopted a Code of Ethics for Senior Executive and Financial
Officers and a Code of Business Conduct and Organizational Ethics for all
directors and employees. These codes of ethics are posted on our website,
www.rehabcare.com, under the "For Our Investors" section and are available
in print to any shareholder who requests them.
We have established procedures for stockholders or other interested
parties to communicate directly with our board of directors. Such parties
can contact our board of directors by mail at: RehabCare Group, Inc.,
Attention: H. Edwin Trusheim, Chairman of the Board, 7733 Forsyth Boulevard,
Suite 2300, St. Louis, Missouri 63105. All communications made by this means
will be received by the Chairman of the Board.
REPORT OF THE COMPENSATION AND NOMINATING/CORPORATE GOVERNANCE
COMMITTEE REGARDING EXECUTIVE COMPENSATION
GENERAL
The Compensation and Nominating/Corporate Governance Committee of
our board of directors administers our executive compensation program. At
the end of the fiscal year ended December 31, 2004, the committee was
composed of three non-employee directors, Messrs. Trusheim (chairman), Wight
and Swedish. Messrs. Trusheim and Wight served on the committee for the
entire fiscal year. Mr. Swedish joined the committee in June of 2004 and
resigned from the board of directors in February 2005.
Our executive compensation policy is designed and administered to
provide a competitive compensation program that enables us to attract,
motivate, reward and retain executives who have the skills, education,
experience and capabilities required to discharge their duties in a
competent and efficient manner to help enable the company to achieve its
goals. We base our compensation policy on the principle that the financial
rewards to the executive are aligned with the financial interests of our
stockholders. We believe that through this principle we will meet our
ultimate responsibility to our
9
stockholders by striving to give a suitable long-term return on their
investment through earnings from operations and prudent management of our
business and operations. The committee has reconsidered the extent of the
use of time-vested non-qualified stock options and has decided to reduce the
number of options granted and the number of employees receiving such grants
over a several year period of time.
Our executive compensation strategy consists of three separate
elements, including base salary, annual incentive compensation and long-term
incentive compensation. The following is a summary of the policies
underlying each element.
BASE SALARY
The Compensation and Nominating/Corporate Governance Committee
determined the salary ranges for each of our executive officer positions
based upon the level and scope of the responsibilities of the office, the
pay levels of similarly positioned executive officers among companies
competing for the services of these types of executives and a consideration
of the level of experience and performance profile of the particular
executive officer. In considering the competitors in the market, we
emphasize privately-held and publicly-traded healthcare outsourcing
companies with similar revenue, earnings and market capitalization profiles
to us.
The committee's recent practice has been to establish a range of
base salaries for particular executive officers within the range offered by
the comparison group of companies so as to be able to attract and retain
high quality people. The data utilized in determining such ranges is
compiled from publicly available information for the comparison group of
companies and from various salary surveys that are made available to the
public by trade and industry associations, accounting firms, compensation
consultants and professional groups.
Salary increases for each of the executive officers are considered
annually by the committee and are based upon individual performance
evaluations conducted by the committee. In the case of all executive
officers other than Dr. Short, the committee also receives and considers the
recommendations of the Chief Executive Officer.
On the basis of the committee's review of the performance of our
executive officers during 2004, the committee increased the salaries of Dr.
Short, Messrs. Germanese, Davis and Bogovich, and Ms. Henry for 2005 by
between 4% and 18%, effective March 1, 2005.
ANNUAL INCENTIVE COMPENSATION
The committee has established a short-term incentive plan pursuant
to which the Chief Executive Officer, the named executive officers and other
key employees can earn annual cash bonuses primarily based upon the
performance of the company against performance objectives established by the
committee at the beginning of the plan year. In this manner, a substantial
portion of the executive officer's annual compensation is tied to the
financial performance of the company for that year. A much smaller portion
of the executive officer's bonus opportunity is tied to the achievement of
pre-established individual performance measures which are not directly tied
to financial performance but which are believed to benefit the company's
operations and results.
For services rendered during the year ended December 31, 2004,
certain of our executive officers received performance-based cash bonuses
based upon the achievement of certain increases in year-to-year growth in
revenue and earnings per share of the company. These performance-based cash
bonuses are based upon a formula approved by the committee annually. For
services performed in 2004, the committee approved the award of
performance-based cash bonuses to each of Dr. Short, Messrs.
10
Germanese, Davis and Bogovich, and Ms. Henry in the amounts set forth on the
summary compensation table.
The committee has established operating revenue and earnings per
share targets for computing annual bonuses to be paid for 2005. Up to 80% of
an executive officer's bonus opportunity will be paid for the achievement of
operating revenue and earnings per share levels above established minimum
levels. Upon achievement in excess of the minimum operating revenue and
earnings per share levels established by the committee, cash bonuses will be
computed and paid on a sliding scale up to a maximum amount established for
the executive officer. The named executive officer can earn an annual bonus
of between 4.5% (in the case of the achievement of minimum operating revenue
and earnings per share levels) to 81% (in the case of the achievement of
maximum operating revenue and earnings per share levels) of the officer's
2005 base salary. If the minimum operating revenue and earnings per share
levels are not met, none of this portion of the annual bonus will be paid to
the executive officers.
Each of the named executive officers has also been given individual
objectives as part of the annual bonus plan allowing such officer to earn up
to 20% of the officer's bonus opportunity. The decision as to whether this
portion of the bonus has been earned will be based upon a performance
evaluation by the Chief Executive Officer, or his designee, of the executive
officer's performance against his or her individual objectives.
LONG-TERM INCENTIVE COMPENSATION
The committee believes that long-term incentive compensation is the
most direct way of tying executive compensation to increases in stockholder
value. Our long-term incentive programs in the past have been primarily in
the form of grants of time-vested stock options. The committee has
reconsidered the extent of the use of time-vested stock options and has
decided to reduce the number of options granted and the number of employees
receiving such grants over a several year period of time. During 2004 and
2005, certain executive officers were granted time-vested stock options with
respect to the 2004-2006 performance period, but beginning with stock
options granted as part of the 2005-2007 performance period the long-term
incentive awards are performance-based.
The committee periodically evaluates the level of long-term
incentives provided to each of our executive officers. Based on such
evaluation, for the three-year performance period starting in 2004 and
ending in 2006, the committee set long-term performance awards consisting of
a cash payout and the grant of time-vested options to certain executive
officers. For the three-year performance period starting in 2005 and ending
in 2007, the committee established long-term performance awards consisting
of a cash payout and the grant of performance-based options to certain
executive officers.
The following time-vested option awards were granted as part of the
2004-2006 performance award: Mr. Davis, 17,038; Mr. Germanese, 17,626; Ms.
Henry, 14,373; and Mr. Bogovich, 6,269. These options become exercisable
with respect to 25%, 50%, 75% and 100% of the total number of shares subject
to the options on each of the first, second, third and fourth anniversaries,
respectively, of the date of award.
For the 2005-2007 performance period, the committee has established
operating revenue and earnings per share growth targets for computing the
long-term performance awards to be paid for the period. Upon achievement in
excess of the minimum operating revenue and earnings per share levels
established by the committee, cash awards will be paid and stock options
that were granted at the time the committee set the performance standards
will vest on a sliding scale to a maximum amount established for the
executive officer. The named executive officer can earn a long-term
performance award valued at between 10% (in the case of the achievement of
minimum operating revenue and earnings per share
11
levels) and 175% (in the case of the achievement of maximum operating
revenue and earnings per share levels) of the officer's base salary. If
minimum operating revenue and earnings per share levels are not met for the
performance period, the executive officer will not be entitled to any
long-term performance award. In such case, all or any portion of the options
granted with respect to the performance award will be forfeited to the
company and will be available for future grants.
The following performance-based option awards were granted as part
of the 2005-2007 performance award: Mr. Davis, 26,250 shares; Mr. Germanese,
27,155 shares; Ms. Henry, 22,142 shares; and Mr. Bogovich, 9,910 shares.
These options will vest after the end of the performance period if the
maximum performance targets for the 2005-2007 performance period are met. If
less than the maximum performance targets are achieved, only a portion of
these options will vest. Options granted to Dr. Short are described below.
Our board of directors, upon the recommendation of the committee,
has given the chief executive officer the authority to grant newly hired
employees options to purchase up to 10,000 shares of our common stock. Each
option has an exercise price equal to the fair market value of common stock
on the date of grant and has a term of 10 years.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Dr. Short became our President and Chief Executive Officer on May
3, 2004. From June of 2003 until May 3, 2004, Dr. Short served as the
company's Interim President and Chief Executive Officer pursuant to a
consulting agreement with Phase 2 Consulting, a consulting firm in which Dr.
Short was the managing partner. Pursuant to the consulting agreement, Phase
2 Consulting provided various management, consulting and advisory services
to us, including having Dr. Short serve as our Interim President and Chief
Executive Officer. Accordingly, all compensation for Dr. Short's services up
to May 3, 2004 was made pursuant to the consulting agreement. Simultaneously
with Dr. Short's election as President and Chief Executive Officer, the
company acquired Phase 2 Consulting.
Dr. Short serves as the company's President and Chief Executive
Officer pursuant to a termination compensation agreement entered into on May
3, 2004. The termination compensation agreement governs the compensation
paid to Dr. Short for his service to the company. Pursuant to the
termination compensation agreement Dr. Short was paid a base salary at an
annual rate of $515,000 during 2004. Dr. Short was also eligible to
participate in all incentive, savings, retirement and welfare benefit plans
on the same basis as the company's other executive officers. As an
inducement to employment, Dr. Short was awarded an option to purchase
250,000 shares of the company's common stock at market price on the date of
grant. Dr. Short will not be eligible for any other stock option grants
until 2008. Additional terms of Dr. Short's termination compensation
agreement are described under "Employment, Termination of Employment and
Change of Control Arrangements."
In connection with the committee's review and adjustment of the
salaries of all executive officers for 2005, Dr. Short's base salary was
increased 8% to $556,200, effective as of March 1, 2005. The committee
determined Dr. Short's compensation based upon the company's overall
performance, its change in strategy, the achievement of its goals, the
alteration of roles of his management team and its performance, the
compensation paid by competing companies and the company's prospects, among
other objective and subjective factors.
Consistent with the performance criteria applicable to the other
named executive officers and previously discussed under the caption "Annual
Incentive Compensation" in this committee report, Dr. Short is eligible for
an annual bonus based upon the same performance criteria and targets and
individual performance goals described above. If the minimum performance
levels are achieved,
12
Dr. Short could earn between 5.5% (in the case of the achievement of the
minimum performance levels) to 99% (in the case of the achievement of the
maximum performance levels) of his base salary. Dr. Short will not be paid
that portion of his annual bonus that is based solely on financial
performance criteria if the minimum performance levels for the financial
criteria are not met.
Likewise, Dr. Short is eligible to participate in the long-term
performance plan under similar terms and conditions as the other named
executive officers as previously discussed under the caption "Long-Term
Incentive Compensation" in this committee report. Dr. Short will participate
in the long-term incentive plan for the 2005-2007 period only to the extent
of a cash award. Dr. Short will be eligible to earn up to 43.75% of his
annual salary as a cash award if the maximum performance targets for the
period are met.
In accordance with the compensation philosophy described above, the
committee believes that Dr. Short's compensation is competitive with the
compensation paid by other companies in its industry to their chief
executive officers.
Although the foregoing describes the committee's current
compensation policies applicable to the executive officers, the committee
reserves the right to change these policies at such time in the future and
in such a manner as the committee deems necessary or appropriate.
COMPENSATION AND NOMINATING/CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
H. EDWIN TRUSHEIM THEODORE M. WIGHT
13
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
For the years ended December 31, 2004, 2003 and 2002, the following
table presents summary information concerning compensation awarded, paid to
or earned by our chief executive officer and each of our other most highly
compensated executive officers for services rendered to us.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#)(1) COMPENSATION ($)(2)
- --------------------------- ---- ---------- --------- ------------ ------------- -------------------
John H. Short, Ph.D. 2004 321,875 224,434 120,000(4) 250,000 532,479(5)
President and Chief 2003 -- -- -- -- 391,600(6)
Executive Officer (3)
Tom E. Davis 2004 299,183 160,406 -- 17,038 4,110
Executive Vice President and 2003 281,667 24,959 -- 20,000 4,000
Chief Development Officer 2002 238,958 54,251 -- 20,000 4,000
Patricia M. Henry 2004 251,400 153,368 -- 14,373 3,900
Executive Vice President 2003 235,000 15,000 -- 20,000 4,000
2002 207,917 107,008 -- 60,000 4,000
Vincent L. Germanese 2004 309,500 176,569 -- 17,626 4,110
Senior Vice President, 2003 300,000 15,000 -- 20,000 250
Chief Financial Officer 2002 25,000 5,774 -- 50,000 --
and Secretary (7)
Mark A. Bogovich 2004 158,758 90,571 -- 6,269 3,496
Vice President and Chief 2003 130,241 15,000 -- 5,000 2,604
Accounting Officer 2002 114,618 45,750 -- -- 3,062
<FN>
- --------
(1) Totals included the following option awards granted to the named
executive officers as part of the 2004-2006 performance award: Mr.
Davis, 17,038; Mr. Germanese, 17,626; Ms. Henry, 14,373; and Mr.
Bogovich, 6,269.
(2) Except as otherwise indicated, totals include amounts contributed by us
pursuant to the matching portion of our 401(k) plan.
(3) John Short, Ph.D. became our President and Chief Executive Officer in
May 2004. He served as our Interim President and Chief Executive
Officer from June 2003 until May 2004. Dr. Short's services to us as
Interim President and Chief Executive Officer were provided pursuant to
the terms of a consulting agreement with Phase 2 Consulting, a
consulting firm in which Dr. Short was the managing partner. Dr. Short
was not separately compensated by us for his services until his
election as President and Chief Executive Officer in May 2004. For a
discussion of this arrangement, see "Compensation of Chief Executive
Officer" in the "Report of the Compensation and Nominating/Corporate
Governance Committee Regarding Executive Compensation" included in this
proxy statement.
(4) Amount represents $120,000 provided to Dr. Short to compensate him for
the cost of relocating to St. Louis.
(5) Amount includes aggregate monthly fees of $220,000 and aggregate
incentive fees of $312,050 paid to Phase 2 Consulting pursuant to our
consulting agreement with Phase 2 Consulting, which terminated
effective May 3, 2004 upon the acquisition of Phase 2 Consulting
by our company.
(6) Amount represents aggregate monthly fees of $385,000 and aggregate
incentive fees of $6,600 paid to Phase 2 Consulting pursuant to our
consulting agreement with Phase 2 Consulting.
(7) Mr. Germanese became an executive officer in November 2002 upon his
employment by the company.
14
EMPLOYMENT, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
In connection with his election as President and Chief Executive
Officer in May 2004, the company and Dr. Short entered into a termination
compensation agreement. This agreement generally provides Dr. Short with
benefits upon termination of his employment without cause prior to a change
in control transaction equal to his then-current salary and bonus for the 12
months following termination. If his employment is terminated within two
years after a change in control transaction without cause or by Dr. Short
for any reason or no reason, he will be entitled to a lump-sum cash payment
equal to 2.99 times his annual compensation, including a bonus based upon
his five-year average bonus percentage, and a prorated bonus amount for the
portion of the year in which his employment ends. In each case, he will also
be entitled to the continuation of his health and welfare benefits for up to
one year after the date of termination and the vesting of all stock-based
awards that would have become exercisable within six months of the
termination date.
We currently have separate termination compensation agreements with
each of Mr. Davis and Ms. Henry. Each of these agreements generally provides
the named executive with benefits upon termination of his or her employment
without cause prior to a change in control transaction equal to his or her
then-current salary and bonus for the 12 months following termination. If
the executive officer's employment is terminated within three years after a
change in control transaction without cause or for good reason, he or she
will be entitled to a lump-sum cash payment equal to 1.5 times his or her
annual compensation, including a bonus based upon his or her five-year
average bonus percentage. In each case, the terminated officer will also be
entitled to the continuation of his or her health and welfare benefits for
up to one year after the date of termination and the vesting of all
stock-based awards that would have become exercisable within six months of
the termination date.
If the value of the cash payments and the continuation or
acceleration of benefits upon termination under any of the termination
compensation agreements would subject the executive officer to the payment
of a federal excise tax as "excess parachute payments," we will be required
to make an additional "gross-up" payment to cover the additional taxes owed
by the officer.
A change in control transaction is generally:
o an acquisition by any one person or group of 25% or more of
our outstanding common stock (20% or more with respect to Dr.
Short);
o the replacement of the majority of our directors;
o stockholder approval of a reorganization, merger or
consolidation that changes the stock ownership of the board;
or
o approval by the stockholders of a complete liquidation or
dissolution of us or the sale of substantially all of our
assets.
"Cause" generally means the executive officer's failure to
substantially perform his or her assigned duties or willful misconduct
materially injurious to us. "Good reason" generally means the assignment of
the executive officer to lesser duties, a reduction in or cancellation of
his or her salary, bonus, compensation or other benefit plans, his or her
relocation to a new metropolitan area, or any breach of the agreement by us.
15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the
exercise of stock options by the executive officers named in the Summary
Compensation Table during the year ended December 31, 2004, and the number
of exercisable and unexercisable stock options at December 31, 2004, as well
as the value of such stock options having an exercise price lower than the
closing price on December 31, 2004 ("in-the-money" options) held by the
executive officers named in the Summary Compensation Table.
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR-END (#) YEAR-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ --------------------- -----------------
John H. Short, Ph.D. -- $ -- 129,819 / 213,542 $ 1,547,134 / 1,368,804
Tom E. Davis -- -- 155,854 / 30,020 2,483,447 / 207,948
Patricia M. Henry -- -- 43,000 / 49,230 202,450 / 306,477
Vincent L. Germanese -- -- 30,000 / 45,190 191,150 / 299,881
Mark A. Bogovich -- -- 12,500 / 7,840 128,319 / 57,379
<FN>
- --------
(1) Based on a price per share of $27.99, the closing price of our common
stock on December 31, 2004.
16
OPTION GRANTS IN LAST YEAR
The following table sets forth information concerning stock option
grants made in the year ended December 31, 2004, to the executive officers
named in the Summary Compensation Table.
INDIVIDUAL GRANT
-----------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE OR ---------------------------
GRANTED FISCAL BASE PRICE EXPIRATION
NAME (#)(1)(2) YEAR (%) ($/SH) DATE(3) 5% ($) 10% ($)
---- --------- -------- ------ ------- ------ -------
John H. Short, Ph.D. 250,000 65.38 21.58 5/3/2014 8,787,886 13,993,240
Tom E. Davis 5,020 1.31 23.09 10/26/2014 188,808 300,645
Patricia M. Henry 4,230 1.11 23.09 10/26/2014 159,095 253,332
Vincent L. Germanese 5,190 1.36 23.09 10/26/2014 195,202 310,826
Mark A. Bogovich 2,840 0.74 23.09 10/26/2014 106,815 170,086
<FN>
- --------
(1) The options become exercisable with respect to 25%, 50%, 75% and 100%
of the total number of shares subject to the options on each of the
first, second, third and fourth anniversaries, respectively, of the
date of award, except for Dr. Short who had 12.5% of his options vest
on November 3, 2004 and 2.1% of his options vest each month thereafter.
(2) The table does not include options that were granted in 2005 pursuant
to the company's long-term performance plan, including the following
options granted in February 2005 as part of the award for the 2004-2006
performance period: Mr. Davis, 12,018; Mr. Germanese, 12,436; Ms.
Henry, 10,143; and Mr. Bogovich, 3,429.
(3) The options terminate on the earlier of ten years after grant; three
months after termination of employment, except in the case of
retirement, death or total disability; or 24 months after termination
of employment in the case of retirement, death or total disability.
(4) The indicated 5% and 10% rates of appreciation are provided to comply
with Securities and Exchange Commission regulations and do not
necessarily reflect our views as to the likely trend in our common
stock price. Actual gains, if any, on stock option exercises and common
stock holdings will be dependent on, among other things, the future
performance of our common stock and overall market conditions. There
can be no assurance that the amounts reflected above will be achieved.
Additionally, these values do not take into consideration the
provisions of the options providing for nontransferability or delayed
exercisability.
PROPOSAL II.
APPROVAL OF THE REHABCARE GROUP, INC.
2005 EQUITY INCENTIVE PLAN
In March, 2005, our board of directors approved, subject to
stockholder approval, the RehabCare Group, Inc. 2005 Equity Incentive Plan.
The purposes of the 2005 Equity Incentive Plan are to provide employees an
incentive for continuation of their efforts for the success of the company
and for continuity of employment, to induce directors of the company to
remain directors of the company over the long term, to align directors'
interests in the company's financial performance more directly with those of
the stockholders and to aid the company in competing with other enterprises
for the services of new directors. The 2005 Equity Incentive Plan will
provide benefits similar to those provided under the RehabCare Group, Inc.
Second Amended and Restated 1996 Long-Term Performance Plan. By its terms,
new awards may not be granted under the Second Amended and Restated 1996
Long-Term Performance Plan after April 23, 2006. The company intends to
terminate the Second Amended and Restated 1996
17
Long-Term Performance Plan and cancel the authority to grant new awards
under the plan upon the approval and effectiveness of the 2005 Equity
Incentive Plan. There are currently approximately 800,000 shares which are
authorized for issuance and not subject to outstanding awards under the
Second Amended and Restated 1996 Long-Term Performance Plan which will no
longer be authorized for issuance upon the termination of the Second Amended
and Restated 1996 Long-Term Performance Plan.
An aggregate of 2,000,000 shares will be available for future
grants of stock options and stock-based incentives to our key employees and
our directors under the 2005 Equity Incentive Plan. Not more than Four
Hundred Thousand (400,000) shares under the Plan shall be reserved for
issuance as stock appreciation rights, restricted stock, performance awards,
stock units or other equity awards. We are requesting that the stockholders
approve the number of shares described above for issuance under the plan.
The 2005 Equity Incentive Plan is intended to replace the RehabCare Group,
Inc. Second Amended and Restated 1996 Long-Term Performance Plan because the
company will not be able to make further awards under the Second Amended and
Restated 1996 Long-Term Performance Plan, after April 23, 2006. Accordingly,
the board of directors believes that the approval of the plan is necessary
and appropriate to maintain flexibility and uninterrupted availability of
authorized shares for our key employees and our non-employee directors'
compensation program.
The 2005 Equity Incentive Plan will be administered by the
Compensation and Nominating/Corporate Governance Committee of our board of
directors. The members of this committee are all independent directors. The
committee, by majority action thereof, is authorized in its sole discretion
to determine the individuals to whom benefits will be granted, the type and
amount of such benefits and the terms of the benefit grants, as well as to
interpret the plan, to prescribe, amend and rescind rules and regulations
relating to the plan, to provide for conditions and assurances deemed
necessary or advisable to protect our interests, and to make all other
determinations necessary or advisable for the administration of the plan to
the extent not contrary to the express provisions of the plan. Because
awards are granted under the plan at the discretion of the committee, the
amount of awards to be granted is not determinable.
Notwithstanding the above, the maximum number of shares of our
stock subject to stock options that may be awarded to any individual shall
not exceed 100,000 shares in any calendar year, except for the chief
executive officer for whom the annual maximum shall be 250,000 (each as
adjusted in accordance with the plan).
Currently, approximately 130 employees, officers and directors are
eligible to participate in the 2005 Equity Incentive Plan. The complete text
of the plan is set forth in Appendix A to this proxy statement. The
following summary of the plan is qualified by reference to the complete text
of the plan.
DESCRIPTION OF PLAN
Under the terms of the plan, our officers, directors and key
employees or our officers, directors and key employees of any designated
subsidiary will be eligible to receive (a) stock appreciation rights; (b)
restricted stock; (c) performance awards; (d) stock units, (e) incentive
stock options; (f) nonqualified stock options; and (g) any other type of
equity based award.
STOCK APPRECIATION RIGHTS. The committee may grant stock
appreciation rights giving the holder thereof a right to receive, at the
time of surrender, a payment equal to the difference between the fair market
value of such stock on the date of surrender of the stock appreciation
rights and the "Base Price" established by the committee at the time of
grant, subject to any limitation imposed by the committee on appreciation.
The "Base Price" shall not be less than the fair market value of our common
stock on the date of grant of the stock appreciation rights. In the
committee's discretion, the value of a
18
stock appreciation right may be paid in cash or our common stock, or a
combination thereof. A stock appreciation right may be granted either
independent of, or in conjunction with, any stock option. If granted in
conjunction with a stock option, at the discretion of the committee, a stock
appreciation right may either be surrendered (a) in lieu of the exercise of
such stock option, (b) in conjunction with the exercise of such stock
option, or (c) upon expiration of such stock option. The term of any stock
appreciation right shall be established by the committee, but in no event
shall a stock appreciation right be exercisable earlier than six months nor
later than ten years from the date of grant.
RESTRICTED STOCK. The committee may issue shares of our common
stock either as a stock bonus or at a purchase price of less than fair
market value, subject to the restrictions or conditions specified by the
committee at the time of grant. In the case of any restricted stock, the
purchase price, if any, will be determined by the committee. The restricted
stock may be subject to (i) restrictions on the sale or other disposition
thereof; (ii) rights of us to reacquire the restricted stock at the purchase
price, if any, originally paid therefor upon termination of the employee's
employment or upon termination of the director's services as a member of our
board of directors within specified periods; and (iii) such other
restrictions, conditions and terms as the committee deems appropriate.
During the period of restriction, holders of restricted stock shall be
entitled to receive all dividends and other distributions made in respect of
such stock and to vote such stock without limitation.
PERFORMANCE AWARDS. The committee may grant performance awards
consisting of shares of our common stock, monetary units payable in cash or
a combination thereof. These grants would result in the issuance, without
payment therefor, of our common stock or the payment of cash upon the
achievement of certain pre-established performance criteria (such as return
on average total capital employed, earnings per share or increases in share
price) during a specified performance period. The participating employee
will have no right to receive dividends on or to vote any shares subject to
a performance award until the award is actually earned and the shares are
issued. In the event that a person who is required to file reports under
Section 16 of the Securities Exchange Act of 1934 receives a performance
award that includes shares of our common stock, such shares received may not
be disposed of by such person until six months following the date of
issuance (except in the case of a change of control).
STOCK UNITS. The committee may grant awards consisting of stock
units under the plan. A stock unit represents the right to receive a share
of stock from the company at a designated time in the future. These awards
may be subject to restrictions, terms and conditions established by the
committee. The participating employee will generally not have the rights of
a shareholder until the stock subject to the award is issued. In the
discretion of the committee, a participating employee may receive payments
in cash, or adjustment in the number of stock units, equivalent to the
dividends the participating employee would have received if he or she had
been the owner of shares of stock rather than stock units.
INCENTIVE STOCK OPTIONS. Incentive stock options may be granted
only to participants who are employees of the company at the time of grant.
The committee may grant incentive stock options to purchase shares of our
common stock at a price not less than 100% of the fair market value of the
shares on the date the option is granted. Incentive stock options will be
exercisable not earlier than six months and not later than ten years after
the date they are granted and will terminate not later than three months
after termination of employment for any reason other than death or
disability, and during such three month period shall be exercisable only as
to those shares with respect to which it had become exercisable on the date
of termination of employment. In the event of termination of employment as a
result of death or disability, such option, to the extent exercisable on the
date of termination as a result of death or disability, will be exercisable
for twelve months after such termination. However, in no event shall any
incentive stock option be exercised more than ten years after its grant. The
aggregate fair
19
market value (determined as of the time an option is granted) of the stock
with respect to which incentive stock options are exercisable for the first
time by an optionee during any calendar year (under all option plans of us
and our subsidiaries) shall not exceed $100,000.
NONQUALIFIED STOCK OPTIONS. The committee may grant nonqualified
stock options to purchase shares of our common stock at purchase prices not
less than 100% of the fair market value of the shares on the date the option
is granted. Nonqualified stock options will be exercisable not earlier than
six months and not later than ten years after the date they are granted.
Nonqualified stock options may terminate earlier following termination of
employment or termination of a director's services as a board member, as
provided in the option agreement under which the option is granted. The
committee shall have the right to determine at the time the option is
granted whether shares issued upon exercise of a nonqualified stock option
shall be subject to restrictions, and if so, the nature of the restrictions.
OTHER EQUITY AWARDS. The committee may grant other types of
equity-based awards not otherwise described in the plan in such amounts and
subject to such terms as the committee may determine.
The board of directors may terminate, amend or modify the plan;
provided, however, that no such action of the board of directors may,
without the approval of our stockholders: (a) increase the total number of
shares of our common stock which may be issued under the plan or increase
the amount or type of benefits that may be granted; (b) change the minimum
purchase price, if any, of shares of our common stock which may be subject
to benefits; or (c) modify the requirements as to eligibility for benefits
under the plan. The company will not adjust or amend the exercise price of
any stock options previously awarded under the plan, whether through
amendment, cancellation, replacement grants or any other means, without the
approval of the company's stockholders.
TRANSFERABILITY OF AWARDS
With the exception of nonqualified stock options, lifetime
transfers of awards granted under the plan are generally not permitted. A
participant is allowed to transfer awards granted under the plan upon his or
her death by will or through the laws of descent and distribution. In
addition to the foregoing methods, nonqualified stock options may be
transferred by a participant to (i) the participant's spouse, children or
grandchildren; (ii) a trust for the benefit of the participant or the
participant's spouse, children or grandchildren; or (iii) a company with
respect to which eighty percent or more of the equity interests in the
company are owned by the participant or the participant's spouse, children
or grandchildren. No other transfers of awards under the plan are permitted.
FEDERAL INCOME TAX CONSEQUENCES
No income will be realized by a participating officer, director or
employee on the grant of an incentive stock option or a nonqualified stock
option, the grant of a stock appreciation right or upon the award of
restricted stock, and we will not be entitled to a deduction at such time.
If a holder exercises an incentive stock option and does not dispose of the
shares acquired within two years from the date of the grant, or within one
year from the date of exercise of the option, no income will be realized by
the holder at the time of exercise. We will not be entitled to a deduction
by reason of the exercise.
If a holder disposes of the shares acquired pursuant to an
incentive stock option within two years from the date of grant of the option
or within one year from the date of exercise of the option, the holder will
realize ordinary income at the time of disposition which will equal the
excess, if any, of the lesser of (a) the amount realized on the disposition,
or (b) the fair market value of the shares on the
20
date of exercise, over the holder's basis in the shares. We generally will
be entitled to a deduction in the year of the disqualifying disposition.
Upon the exercise of a nonqualified stock option or the surrender
of a stock appreciation right, the excess, if any, of the fair market value
of the stock on the date of exercise over the purchase price or Base Price,
as the case may be, is ordinary income to the holder as of the date of
exercise. We generally will be entitled to a deduction equal to such excess
amount in the year of exercise.
Subject to a voluntary election by the holder under Section 83(b)
of the Internal Revenue Code of 1986, as amended, a holder will realize
income as a result of the award of restricted stock at the time the
restrictions expire on such shares. An election pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended would have the effect of
causing the holder to realize income in the year in which such award was
granted. The amount of income realized will be the difference between the
fair market value of the shares on the date such restrictions expire (or on
the date of issuance of the shares, in the event of a Section 83(b)
election) over the purchase price, if any, of such shares. We generally will
be entitled to a deduction equal to the income realized in the year in which
the holder is required to report such income.
An officer, director or employee will realize income as a result of
a performance award or stock unit at the time the award is issued or paid.
The amount of income realized by the participant will be equal to the fair
market value of the shares on the date of issuance or the amount of the cash
compensation paid. We will be entitled to a corresponding deduction equal to
the income realized in the year of such issuance or payment.
EQUITY COMPENSATION PLAN BENEFIT INFORMATION
The following table provides information as of December 31, 2004
with respect to the shares of our common stock that may be issued under our
existing equity compensation plans.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------------------ ----------------------- -------------------- -----------------------
Equity compensation plans approved by
stockholders 2,394,805 $18.90 1,109,128
Equity compensation plans not
approved by stockholders - - -
========= ====== =========
Total 2,394,805 $18.90 1,109,128
The vote required to approve the 2005 Equity Incentive Plan is a
majority of the shares of our common stock voting, in person or by proxy, at
the annual meeting, provided that the total vote cast on the proposal
represents over 50 percent of our outstanding shares. Our board of directors
recommends a vote "FOR" the approval of the RehabCare Group, Inc. 2005
Equity Incentive Plan.
21
PROPOSAL III.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee has appointed KPMG LLP as our independent
registered public accounting firm (independent auditors) for the fiscal year
ended December 31, 2005 and the board of directors is asking for
ratification of this appointment. Although advisory only because the Audit
Committee is required under the Sarbanes-Oxley Act of 2002 and the related
rules and regulations of the Securities and Exchange Commission to have
responsibility for the appointment of our independent auditors, this
proposal is put before you in order to seek your views on this important
corporate matter. If you do not ratify the appointment, the Audit Committee
will take the matter under advisement. We anticipate that representatives of
KPMG LLP will attend the annual meeting. Such representatives will have an
opportunity to make a statement if they wish, and will be available to
respond to appropriate questions.
The following table presents fees for professional audit services
rendered by KPMG LLP for the audit of our annual financial statements, and
fees billed for other services rendered by KPMG LLP for the fiscal years
shown.
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- -----------------
Audit Fees (1)................. $ 630,695 $341,575
Audit-Related Fees (2)......... 285,171 304,150
Tax Fees (3)................... 260,960 275,600
All Other Fees (4)............. 0 0
========== ========
Total....................... $1,176,826 $921,325
<FN>
- --------
(1) Audit Fees consist of fees rendered for professional services rendered
for the audit of our financial statements included in our Form 10-K
during the years ended December 31, 2004 and 2003, review of our 10-Q's
and services that are normally provided by KPMG LLP in connection with
statutory and regulatory filings or engagement. The increase in audit
fees for the year ended December 31, 2004 as compared to the year ended
December 31, 2003, was primarily related to auditing management's
assessment of and the effectiveness of our internal control over
financial reporting and audit work performed on our unconsolidated
affiliate, InteliStaf Holdings, Inc.
(2) Audit Related Fees consist of fees rendered for assurance and related
services that are reasonably related to the performance of the audit or
review of our financial statements and are not reported under "Audit
Fees." This category includes fees related primarily to an audit of the
employee benefit plan for 2004 and 2003, due diligence procedures
related to acquisitions, due diligence procedures related to the sale
of our staffing division in 2003 and documentation assistance in 2004
and 2003 under Section 404 of the Sarbanes-Oxley Act of 2002.
(3) Tax Fees consist of fees rendered for professional services rendered
for tax compliance and tax advice. These services include assistance
regarding federal and state tax compliance and tax and compliance work
in connection with acquisitions. Such fees can be further categorized
as tax compliance and preparation services and tax consulting and
advisory services. For 2004 we paid ($219,000) for tax compliance and
preparation services and ($41,960) for tax consulting and advisory
22
services. For 2003 we paid ($164,100) for tax compliance planning and
preparation services and ($111,500) for tax consulting and advisory
services.
(4) All Other Fees consist of fees for products and services other than the
services reported above.
Our Audit Committee has established a policy requiring the approval
of all audit engagement fees and terms and the pre-approval of all non-audit
services provided to us by KPMG LLP. The policy prohibits the Audit
Committee from delegating to management the committee's responsibility to
pre-approve permitted services of our independent auditor.
During 2004 and 2003, the Audit Committee pre-approved non-audit
services related to tax compliance, assistance with documenting controls
under Sarbanes-Oxley Section 404 and due diligence assistance on potential
acquisitions. The Audit Committee pre-approved 100% of the fees for services
covered under the captions "Audit Related Fees," "Tax Fees," and "All Other
Fees" for fiscal years 2004 and 2003.
Prior to retaining KPMG LLP to provide any non-audit services, the
Audit Committee considered whether KPMG LLP's provision of all these
services was compatible with maintaining the independence of KPMG LLP and
determined that the provision of these services would not interfere with
KPMG LLP's independence.
The affirmative vote of a majority of the shares of our common
stock voting in person or by proxy at the annual meeting is required to
ratify the appointment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ended December 31, 2005. Our board of
directors recommends a vote "FOR" ratification of the appointment of KPMG
LLP as our independent registered public accounting firm for the fiscal year
ended December 31, 2005.
REPORT OF THE AUDIT COMMITTEE
DUTIES AND RESPONSIBILITIES
The primary function of the audit committee is oversight of our
financial reporting process on behalf of our board of directors. The
company's management is responsible for the preparation, presentation and
integrity of the company's financial statements as well as the maintenance
of appropriate accounting and financial reporting practices and policies and
internal controls and procedures designed to provide reasonable assurances
that the company is in compliance with applicable accounting standards, laws
and regulations. The company's independent auditors, KPMG LLP, are
responsible for planning and performing a proper audit of the company's
annual financial statements and performing reviews of the company's
quarterly financial statements prior to the filing of each of these reports
with the Securities and Exchange Commission.
The officers and employees of the company who are responsible for
the financial management of the company and the independent auditors have
more time, knowledge and detailed information regarding the company and its
financial information than do the committee members. Consequently, in
carrying out our responsibilities, the committee is not providing any expert
or special assurances as to the company's financial statements or any
professional certification as to the independent auditors' work. Each member
of the committee is entitled to rely on (i) the integrity of those persons
and organizations within and outside the company from which he or she
receives information and (ii) the accuracy of the financial and other
information provided to the committee by such persons and organizations,
absent actual knowledge to the contrary (which shall be promptly reported to
the board of directors).
23
In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements and management's report on the
effectiveness of our internal control over financial reporting in our Annual
Report on Form 10-K with management. In connection with its review of the
financial statements, the committee discussed with management the quality,
not just the acceptability, of the accounting principles, the reasonableness
of significant judgments and the clarity of disclosures in the financial
statements. Our independent auditors are responsible for expressing an
opinion on the conformity of our audited financial statements to generally
accepted accounting principles and on management's report on the
effectiveness of our internal control over financial reporting. The audit
committee has the sole authority and responsibility to select, appoint,
evaluate and, where appropriate, replace the independent auditors. The audit
committee also oversees the performance of the company's internal audit
function.
DISCLOSURE POLICY
We adopted a Corporate Disclosure Policy on October 25, 2004. This
policy covers all employees and board members of the company as to
completeness and accuracy of disclosures made in public filings and as
required under Regulation Fair Disclosure.
CHARTER
The audit committee operates pursuant to a charter, which was
approved and adopted by the board of directors first on May 10, 2000, and
which was amended on August 27, 2003 and July 27, 2004. The charter and our
performance under the charter are reassessed annually by the audit
committee. The audit committee charter can be found on our website at
www.rehabcare.com under the "For Our Investors" section and is available in
print to any shareholder who requests it.
INDEPENDENCE AND QUALIFICATION OF MEMBERS
Our board of directors has determined that each of the members of
the audit committee is independent within the meaning of the listing
standards of the New York Stock Exchange and the Securities Exchange Act of
1934, as amended, and that each of the committee members possesses the
financial qualifications required of audit committee members under the
Exchange Act. Our board has determined William G. Anderson meets the
Securities and Exchange Commission's requirements for, and has designated
him as, the company's audit committee financial expert.
INDEPENDENCE OF AUDITORS FROM MANAGEMENT
The committee meets with the independent auditors, with and without
management present, to discuss the scope and plans for the audit, results of
their examinations, their evaluations of our internal controls and the
overall quality of our financial reporting. The committee reviewed with the
independent auditors the acceptability of our accounting principles and such
other matters as are required to be discussed with the committee under
generally accepted auditing standards, including, but not limited to, those
matters required to be discussed under SAS 61 (Codification of Statements on
Auditing Standards). The committee has received from the independent
auditors the written disclosure and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). In connection with this disclosure, the committee has discussed
with the independent auditors the auditors' independence from management and
us.
We discussed with KPMG LLP their independence from the company and
management and considered the auditor's independence for all audit and
non-audit services performed. We meet
24
privately with the independent auditors, have the sole authority to retain
and dismiss the independent auditors and periodically review their
performance and independence from management. The independent auditors have
unrestricted access and report directly to the committee. The audit
committee has sole authority to approve all audit engagement fees and terms
and pre-approve all non-audit services.
We have the authority to conduct any investigation we deem
appropriate in fulfilling our responsibilities and have the ability to
retain, at the company's expense, any legal, accounting or other consultants
we deem necessary in the performance of our duties without the prior
approval of the full board of directors.
In reliance on the reviews and discussions referred to above, the
audit committee recommended to our board of directors that the audited
financial statements be included in the Annual Report on Form 10-K for the
year ended December 31, 2004, for filing with the Securities and Exchange
Commission.
ANNUAL EVALUATION OF MEMBERS
We annually evaluate the performance of the committee and its
members and report our conclusions to the board of directors. No audit
committee member serves on the audit committee of more than two other audit
committees of public companies.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
WILLIAM G. ANDERSON, CPA COLLEEN CONWAY-WELCH, PH.D., R.N. C. RAY HOLMAN, CPA
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Beginning in the third quarter of 2003, we retained a software
vendor for various computer related activities. John H. Short, Ph.D., our
President and Chief Executive Officer and a director, and Theodore M. Wight,
a director, are also directors of the software company. Messrs. Wight and
Short and their affiliated entities own 27.3% and 5.5% of the fully diluted
capitalization of the software company, respectively. We paid the software
vendor approximately $330,000 and $245,000 in 2004 and 2003, respectively.
We continue to utilize the software vendor for website hosting services at
an approximate annual cost of $73,000. This contract is cancelable upon 60
days notice.
Prior to our acquisition of Phase 2 Consulting on May 3, 2004,
described below, Phase 2 entered into a joint marketing arrangement with the
aforementioned software vendor. This agreement remains in force.
In May 2004, we acquired Phase 2 and hired Dr. Short as our
permanent President and Chief Executive Officer. Prior to its acquisition,
Dr. Short was the managing director and majority owner of Phase 2. We paid
$5,000,000 in cash for certain of the assets of Phase 2.
During 2003, we entered into an agreement with Phase 2. Per the
terms of the agreement, Phase 2 provided us with management, consulting and
advisory services, including having John H. Short, Ph.D., the managing
director of Phase 2 and a member of our board of directors, serve as Interim
President and Chief Executive Officer. A monthly consulting fee of $55,000
was paid by us to Phase 2 during the term of the agreement plus
reimbursement of business expenses. In addition, Phase 2 was
25
entitled to an incentive fee based on predetermined performance standards.
On May 3, 2004, we acquired Phase 2 and elected Dr. Short as our President
and Chief Executive Officer. The advisory services agreement with Phase 2
was terminated at that time. We incurred approximately $505,000 and $680,000
of expense related to this agreement in 2004 and 2003, respectively.
Prior to our acquisition of Phase 2 on May 3, 2004, we engaged
Phase 2 for several consulting projects for services ranging from long-term
information technology strategy, staffing analysis and acquisition target
analysis, separate from the agreement described above. The total cost of
these projects, which were paid in full, was approximately $75,000.
As a result of Dr. Short's relationship to Phase 2, the terms and
conditions of the acquisition agreement between us and Phase 2 were
negotiated on our behalf by the independent members of our board of
directors. The independent board members retained an independent financial
advisor to assist them during this process.
During the period from May 3, 2004 to December 31, 2004, we
purchased air transportation services from 55JS Limited, Co. in the amount
of approximately $190,000. 55JS Limited, Co. is owned by Dr. Short, our
President and Chief Executive Officer. The air transportation services are
billed to us, at cost, for hourly usage of 55JS's plane for company
business.
During the third quarter of 2004, the management of Phase 2 had a
senior management retreat at the Diamond D Ranch. The Diamond D Ranch is 25%
owned by Dr. Short, our President and Chief Executive Officer. The total
cost of the retreat was approximately $40,000. This entire amount was
pre-funded by Phase 2 prior to our acquisition of Phase 2 on May 3, 2004.
The pre-funded balance was reported as a current asset on the closing
balance sheet of Phase 2.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders and nominations for directors intended to
be presented at the 2006 annual meeting of stockholders must be received by
our corporate secretary, 7733 Forsyth Boulevard, Suite 2300, St. Louis,
Missouri 63105, by not later than November 30, 2005, for consideration for
inclusion in the proxy statement and proxy card for that meeting. Upon
receipt of any such proposal, we will determine whether or not to include
such proposal in the proxy statement and proxy card in accordance with
regulations governing the solicitation of proxies. Stockholder proposals and
nominations for directors that do not appear in the proxy statement may be
considered at the 2006 annual meeting of stockholders only if written notice
of the proposal is received by us by not earlier than February 1, 2006 and
not later than March 3, 2006.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that our executive officers and directors, and persons who own more
than 10% of our outstanding stock, file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Based solely on a
review of the reports furnished to us and written representations from our
directors and executive officers, we believe that our directors and
executive officers, except for Drs. Short and Conway-Welch, complied with
all applicable Section 16(a) filing requirements during the year ended
December 31, 2004. Dr. Short filed one late report in 2004 and Dr.
Conway-Welch filed one late report for 2003.
26
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative stockholder returns,
assuming the reinvestment of dividends, of our common stock on an indexed
basis with the New York Stock Exchange ("NYSE") Market Index and the Dow
Jones Industry Group - Index of Health Care Providers ("HEA Index") for the
period beginning January 1, 2000 and ending December 31, 2004:
[PERFORMANCE GRAPH]
- ---------------------------------------------------------------------------------------------------------------
Fiscal Year Ending
Company/ Index/ ----------------------------------------------------------------------------------
Market 12/31/1999 12/29/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
- ---------------------------------------------------------------------------------------------------------------
RehabCare Group $100 $483.53 $278.59 $179.58 $200.09 $263.44
- ---------------------------------------------------------------------------------------------------------------
NYSE Market Index $100 $102.38 $93.26 $76.18 $98.69 $111.45
- ---------------------------------------------------------------------------------------------------------------
Health Care Provider $100 $169.38 $162.38 $147.88 $199.14 $260.59
- ---------------------------------------------------------------------------------------------------------------
27
ANNUAL REPORT
We simultaneously mailed our annual report for the year ended
December 31, 2004, to our stockholders. A copy of our Annual Report on Form
10-K for the year ended December 31, 2004, as filed with the Securities and
Exchange Commission (excluding exhibits), may be obtained by any
stockholder, without charge, upon making a written or telephone request to
Betty Cammarata, Investor Relations, 7733 Forsyth Boulevard, Suite 2300, St.
Louis, Missouri 63105, telephone 800-677-1238, or by accessing our Internet
site at www.rehabcare.com and clicking on the "For Our Investors" section.
HOUSEHOLDING OF MATERIALS
In some instances, only one copy of this proxy is being delivered
to multiple stockholders sharing an address, unless we have received
instructions from one or more of the stockholders to continue to deliver
multiple copies. We will deliver promptly upon oral or written request a
separate copy of the proxy statement to any stockholder at your address. If
you wish to receive a separate copy of the proxy statement, you may call us
at 800-677-1238, or send a written request to Betty Cammarata, Investor
Relations, RehabCare Group, Inc., 7733 Forsyth Boulevard, Suite 2300, St.
Louis, Missouri 63105. If you have received only one copy of the proxy
statement and wish to receive a separate copy for each stockholder in the
future, you may call us at the telephone number or write us at the address
listed above. Alternatively, stockholders sharing an address who now receive
multiple copies of the proxy statement may request delivery of a single
copy, also by calling us at the number or writing to us at the address
listed above.
OTHER MATTERS
As of the date of this proxy statement, our board of directors does
not intend to present, nor has it been informed that other persons intend to
present, any matters for action at the annual meeting other than those
specifically referred to herein. If, however, any other matters should
properly come before the annual meeting, it is the intention of the persons
named as proxies to vote the shares represented by proxy cards granting such
proxies discretionary authority to vote on such other matters in accordance
with their judgment as to our best interest on such matters.
Vincent L. Germanese
Senior Vice President, Chief Financial
Officer and Secretary
March 31, 2005
28
APPENDIX A
REHABCARE GROUP, INC.
2005 EQUITY INCENTIVE PLAN
1. PURPOSES. The purposes of this 2005 Equity Incentive Plan (the
"Plan") are (i) to encourage certain employees of RehabCare Group, Inc. (the
"Corporation"), and of such subsidiaries of the Corporation as the Committee
administering the Plan designates, to acquire Common Stock of the
Corporation or to receive monetary payments based on the value of such stock
or based upon achieving certain goals on a basis mutually advantageous to
such employees and the Corporation and thus provide an incentive for
continuation of the efforts of employees for the success of the Corporation
and for continuity of employment; and (ii) to induce Directors of the
Corporation to remain Directors of the Corporation over the long term, to
align the Directors' interests in the Corporation's financial performance
more directly with those of the stockholders and to aid the Corporation in
competing with other enterprises for the services of new Directors.
2. ADMINISTRATION. The Plan will be administered by the
Compensation and Nominating/Corporate Governance Committee (the "Committee")
of the Board of Directors of the Corporation consisting of two or more
Directors as the Board may designate from time to time. The determinations
of the Committee shall be made in accordance with their judgment as to the
best interests of the Corporation and its stockholders and in accordance
with the purpose of the Plan. Determinations, interpretations or other
actions made or taken by the Committee pursuant to the provisions of the
Plan shall be final and binding and conclusive for all purposes and upon all
persons whomsoever. Subject to the express provisions of the Plan, the
Committee shall have plenary authority to construe and interpret the Plan,
to make, amend and rescind rules and regulations regarding the Plan and its
administration, to determine the terms and provisions of the respective
award agreements (which need not be identical), and to take whatever action
is necessary to carry out the purposes of the Plan. A majority of members of
the Committee shall constitute a quorum, and all determinations of the
Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee, by a writing signed by a majority of the Committee members.
3. SHARES RESERVED UNDER THE PLAN. Subject to adjustment as
provided in Section 14, there is hereby reserved for issuance under the Plan
an aggregate of Two Million (2,000,000) shares of Common Stock of the
Corporation, which may be authorized but unissued or treasury shares. Not
more than Four Hundred Thousand (400,000) shares under the Plan shall be
reserved for issuance as stock appreciation rights, restricted stock,
performance awards, stock units or other equity awards. As used in this
Section 3, the term "Plan Maximum" shall refer to the number of shares of
Common Stock of the Corporation that are available for grant of awards
pursuant to the Plan. Stock underlying outstanding options, stock
appreciation rights, performance awards, stock units or other equity awards
will reduce the Plan Maximum while such options, stock appreciation rights,
performance awards, stock units or other equity awards are outstanding.
Shares underlying expired, canceled or forfeited options, stock appreciation
rights, performance awards, stock units or other equity awards shall be
added back to the Plan Maximum. If a stock appreciation right is exercised
for cash or a performance award or other equity award is paid in cash the
Plan Maximum shall be increased by the number of shares with respect to
which such payment is applicable. Restricted Stock issued pursuant to the
Plan will reduce the Plan Maximum while outstanding even while subject to
restrictions. Shares of Restricted Stock shall be added back to the Plan
Maximum if such Restricted Stock is forfeited.
Notwithstanding the above, the maximum number of shares of Common
Stock subject to stock options and stock appreciation rights that may be
awarded to any individual shall not exceed 100,000
B-1
shares in any calendar year, except for the chief executive officer for whom
the annual maximum shall be 250,000 (each as adjusted in accordance with
Section 14).
4. PARTICIPANTS. Participants will consist of such officers,
Directors, and key employees of the Corporation or any designated subsidiary
as the Committee in its sole discretion determines have a major impact on
the success and future growth and profitability of the Corporation.
Designation of a participant in any year shall not require the Committee to
designate such person to receive a benefit in any other year or to receive
the same type or amount of benefit as granted to the participant in any
other year or as granted to any other participant in any year. The Committee
shall consider such factors as it deems pertinent in selecting participants
and in determining the type and amount of their respective benefits.
5. TYPES OF BENEFITS. The following benefits may be granted under
the Plan: (a) stock appreciation rights ("SARs"); (b) restricted stock
("Restricted Stock"); (c) performance awards ("Performance Awards"); (d)
stock units ("Stock Units"); (e) incentive stock options ("ISOs"); (f)
nonqualified stock options ("NQSOs"); and any other type of equity-based
award ("Other Equity Awards"), all as described below.
6. AWARD OF BENEFITS. The Committee may, in its sole discretion,
grant benefits in accordance with the Plan, and establish the timing,
pricing, amount, and other terms and conditions of such grants, which need
not be uniform with respect to the various participants or with respect to
different grants to the same participant. All benefits granted under the
Plan shall be granted as of an award date which shall be designated in the
particular award agreement. If no award date is so specified, the award date
shall be the date that the Committee action granting the award is effective.
Promptly after each award date, the Corporation shall notify the participant
of the grant of the benefit, and shall deliver to the participant an
agreement awarding the benefit, duly executed by and on behalf of the
Corporation.
7. STOCK APPRECIATION RIGHTS. A SAR is the right to receive all or
a portion of the difference between the fair market value of a share of
Common Stock and the exercise price of the SAR established by the Committee,
subject to such terms and conditions set forth in a SAR Agreement as may be
established by the Committee in its sole discretion. At the discretion of
the Committee, SARs may be exercised (a) in lieu of exercise of an option,
(b) in conjunction with the exercise of an option, (c) upon lapse of an
option, (d) independent of an option or (e) each of the above in connection
with a previously awarded option under the Plan. At the time of grant, the
Committee may establish, in its sole discretion, a maximum amount per share
which will be payable upon exercise of a SAR. At the discretion of the
Committee, payment for SARs may be made in cash or shares of Common Stock of
the Corporation, or in a combination thereof. SARs will be exercisable not
earlier than six months and not later than ten years after the date they are
granted and will expire in accordance with the terms established by the
Committee.
8. RESTRICTED STOCK. Restricted Stock shall consist of Common Stock
of the Corporation issued or transferred under the Plan (other than upon
exercise of SARs, stock options or as Performance Awards or Stock Units) at
any purchase price less than the fair market value thereof on the date of
issuance or transfer, or as a bonus. In the case of any Restricted Stock:
(a) The purchase price, if any, will be determined by the
Committee.
(b) Restricted Stock may be subject to (i) restrictions on the sale
or other disposition thereof; (ii) rights of the Corporation to reacquire
such Restricted Stock at the purchase price, if any, originally paid
therefor upon termination of the employee's employment or upon termination
of the Director's services as a member of the Board within specified
periods; and (iii) such other restrictions, conditions and terms as the
Committee deems appropriate.
B-2
(c) The participant shall be entitled to all dividends paid with
respect to Restricted Stock during the period of restriction and shall not
be required to return any such dividends to the Corporation in the event of
the forfeiture of the Restricted Stock.
(d) The participant shall be entitled to vote the Restricted Stock
during the period of restriction.
(e) The Committee shall determine whether Restricted Stock is to be
delivered to the participant with an appropriate legend imprinted on the
certificate or if the certificate will be deposited in escrow pending
removal of the restrictions.
9. PERFORMANCE AWARDS. Performance Awards shall consist of Common
Stock of the Corporation, monetary units or some combination thereof, to be
issued without any payment therefor, in the event that certain performance
goals established by the Committee are achieved over a period of time
designated by the Committee. The goals established by the Committee may
include return on average total capital employed, earnings per share,
increases in share price or such other goals as may be established by the
Committee. In the event the minimum goal is not achieved at the conclusion
of the period, no payment shall be made to the participant. Actual payment
of the award earned shall be in cash or in Common Stock of the Corporation
or in a combination of both, as the Committee in its sole discretion
determines. If Common Stock of the Corporation is used, the participant
shall not have the right to vote and receive dividends until the actual
shares are issued.
10. STOCK UNITS. A Stock Unit represents the right to receive a
share of Common Stock from the Corporation at a designated time in the
future, subject to such restrictions, terms and conditions set forth in a
Stock Unit Agreement as may be established by the Committee in its sole
discretion. The participant generally does not have the rights of a
shareholder until receipt of the Common Stock. A Stock Unit agreement may,
in the discretion of the Committee, provide for payments in cash, or
adjustment in the number of Stock Units, equivalent to the dividends the
participant would have received if the participant had been the owner of
shares of Common Stock rather than Stock Units.
11. INCENTIVE STOCK OPTIONS. ISOs shall consist of stock options to
purchase shares of Common Stock at purchase prices not less than 100% of the
fair market value of the shares on the date the option is granted. The
purchase price may be paid (i) by check or, in the discretion of the
Committee, either (ii) by the delivery of shares of Common Stock of the
Corporation then owned by the participant or (iii) by a combination of cash
and Common Stock of the Corporation, in the manner provided in the option
agreement. ISOs will be exercisable not earlier than six months and not
later than ten years after the date they are granted and will terminate not
later than three months after termination of employment for any reason other
than death or disability. In the event termination of employment occurs as a
result of death or disability, such an option will be exercisable for twelve
months after such termination to the extent provided in the ISO agreement.
In no event shall any ISO be exercised more than ten years after its grant.
Leaves of absence granted by the Corporation for military service, illness,
and transfers of employment between the Corporation and any subsidiary
thereof shall not constitute termination of employment. The aggregate fair
market value (determined as of the time an option is granted) of the stock
with respect to which ISOs are exercisable for the first time by an optionee
during any calendar year (under all option plans of the Corporation and its
subsidiary corporations) shall not exceed $100,000. ISOs shall be granted
only to employees of the Corporation or a subsidiary.
B-3
12. NONQUALIFIED STOCK OPTIONS. NQSOs shall consist of nonqualified
stock options to purchase shares of Common Stock at purchase prices not less
than 100% of the fair market value of the shares on the date the option is
granted. The purchase price may be paid (i) by check or, in the discretion
of the Committee, either (ii) by the delivery of shares of Common Stock of
the Corporation then owned by the participant or (iii) by a combination of
cash and Common Stock of the Corporation, in the manner provided in the
option agreement. NQSOs will be exercisable not earlier than six months and
not later than ten years after the date they are granted. In no event shall
any option be exercised more than ten years after its grant, and an option
may terminate earlier following termination of employment or termination of
a Director's services as a Board Member, as provided in the option
agreement. Leaves of absence granted by the Corporation for military
service, illness, and transfers of employment between the Corporation and
any subsidiary thereof shall not constitute termination of employment.
13. OTHER EQUITY AWARDS. The Committee may grant other types of
equity-based awards not otherwise described in the Plan in such amounts and
subject to such terms as the Committee shall determine.
14. ADJUSTMENT PROVISIONS.
(a) If the Corporation shall at any time change the number of
issued shares of Common Stock without new consideration to the Corporation
(such as by stock dividends or stock splits), the total number of shares
reserved for issuance under this Plan, the maximum number of shares
available to a particular participant, and the number of shares covered by
each outstanding benefit shall be adjusted so that the aggregate
consideration payable to the Corporation, if any, and the value of each such
benefit shall not be changed. Benefits may also contain provisions for their
continuation or for other equitable adjustments after changes in the Common
Stock resulting from reorganization, sale, merger, consolidation, issuance
of stock rights or warrants, or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares reserved or available hereunder, the Board of
Directors may authorize the issuance or assumption of benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
15. NONTRANSFERABILITY. Each benefit granted under the Plan to a
participant shall not be transferable, other than an NQSO to a Permissible
Transferee, except by will or the laws of descent and distribution, and
shall be exercisable, during the participant's lifetime, only by the
participant or, in the case of an NQSO, a Permissible Transferee. In the
event of the death of a participant, exercise or payment shall be made only:
(a) By or to a Permissible Transferee, the executor or
administrator of the estate of the deceased participant or the person or
persons to whom the deceased participant's rights under the benefit shall
pass by will or the laws of descent and distribution; and
(b) To the extent that the deceased participant was entitled
thereto at the date of his or her death.
For purposes of this Section 15, "Permitted Transferee" shall include (i)
one or more members of the participant's family, (ii) one or more trusts for
the benefit of the participant and/or one or more members of the
participant's family, or (iii) one or more partnerships (general or
limited), corporations, limited liability companies or other entities in
which the aggregate interests of the participant and members of the
participant's family exceed 80% of all interests. For this purpose, the
participant's family shall include only the participant's spouse, children
and grandchildren.
B-4
16. TAXES. The Corporation shall be entitled to withhold the amount
of any tax attributable to any amounts payable or shares deliverable under
the Plan after giving the person entitled to receive such payment or
delivery notice as far in advance as practicable, and the Corporation may
defer making payment or delivery as to any benefit if any such tax is
payable until indemnified to its satisfaction. With respect to withholding
required upon the exercise of options or SARs, upon the lapse of
restrictions on Restricted Stock or Stock Units, or upon the achievement of
performance goals related to Performance Awards and Other Equity Awards,
participants may elect, subject to approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Corporation
withhold shares having a fair market value on the date the tax is to be
determined equal to the required withholding. All such elections shall be
subject to such restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
17. BENEFICIARY. A participant may designate one or more persons
(concurrently, contingently or successively) to whom Restricted Stock,
Performance Awards, Stock Units or Other Equity Awards will be distributed
and by whom stock options and SARs will be exercisable if the participant
dies before receiving complete payment of such amounts. Any such designation
must be made on a form acceptable to the Corporation for this purpose, will
be effective on the date received by the Corporation and may be revoked by
the participant by a subsequent written designation delivered to the
Corporation while the participant is alive. If the participant fails to
designate a beneficiary or if no designated beneficiary survives the
participant, then any such benefit shall be transferred to the participant's
estate.
18. TENURE. A participant's right, if any, to continue to serve the
Corporation and its subsidiaries as an officer, employee, Director or
otherwise, shall not be enlarged or otherwise affected by his or her
designation as a participant under the Plan.
19. DURATION, INTERPRETATION, AMENDMENT AND TERMINATION. No benefit
shall be granted more than ten years after the date of initial adoption of
this Plan; provided, however, that the terms and conditions applicable to
any benefit granted within such period may thereafter be amended or modified
by mutual agreement between the Corporation and the participant or such
other person as may then have an interest therein. Without the prior
approval of the Corporation's stockholders, the Corporation will not effect
a "repricing" (as such term is defined in Section 303A.08 of the New York
Stock Exchange Rules) of any stock option or other benefit granted under the
terms of this Plan. To the extent that any stock options or other benefits
which may be granted within the terms of the Plan would qualify under
present or future laws for tax treatment that is beneficial to a recipient,
then any such beneficial treatment shall be considered within the intent,
purpose and operational purview of the Plan and the discretion of the
Committee, and to the extent that any such stock options or other benefits
would so qualify within the terms of the Plan, the Committee shall have full
and complete authority to grant stock options or other benefits that so
qualify (including the authority to grant, simultaneously or otherwise,
stock options or other benefits which do not so qualify) and to prescribe
the terms and conditions (which need not be identical as among recipients)
in respect to the grant or exercise of any such stock option or other
benefits under the Plan.
The Board of Directors may amend the Plan from time to time, or
terminate the Plan at any time. However, no action authorized by this
Section shall reduce the amount of any existing award or change the terms
and conditions thereof without the participant's consent. No amendment of
the Plan shall, without approval of the stockholders of the Corporation, (a)
increase the total number of shares which may be issued under the Plan or
increase the amount or type of benefits that may be granted under the
B-5
Plan; (b) change the minimum purchase price, if any, of shares of Common
Stock which may be made subject to benefits under the Plan; or (c) modify
the requirements as to eligibility for benefits under the Plan.
20. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of
Directors March 22, 2005, to be effective on approval of the Plan by the
stockholders of the Corporation.
B-6
REHABCARE GROUP, INC.
[ ] Mark this box with an X if you have made
changes to your name or address details
above.
- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD ESPP
- --------------------------------------------------------------------------------
A ELECTION OF DIRECTORS (FOR TERM EXPIRING IN 2006)
1. The Board of Directors has proposed and recommends a vote "FOR" the
following:
FOR WITHHOLD FOR WITHHOLD
01 - William G. Anderson, CPA [ ] [ ] 04 - John H. Short, Ph.D. [ ] [ ]
02 - Colleen Conway-Welch, Ph.D. [ ] [ ] 05 - H. Edwin Trusheim [ ] [ ]
03 - C. Ray Holman, CPA [ ] [ ] 06 - Theodore M. Wight [ ] [ ]
B APPROVAL OF THE 2005 EQUITY INCENTIVE PLAN
The Board of Directors has proposed and recommends a vote "FOR" the following:
FOR AGAINST ABSTAIN Please mark this box with an X if you plan to attend the
2. Approval of the RehabCare Group, Inc. 2005 [ ] [ ] [ ] Annual Meeting in person. [ ]
Equity Incentive Plan.
C RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The proxies are authorized to vote upon such other
matters as may properly come before the meeting or any
adjournment thereof in such manner as said proxies shall
The Board of Directors has proposed and recommends a vote "FOR" the determine in their sole discretion.
following:
3. Ratification of the appointment of KPMG LLP as FOR AGAINST ABSTAIN
RehabCare's independent registered public accounting [ ] [ ] [ ]
firm for the fiscal year ending December 31, 2005.
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
D AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please sign this proxy card exactly as your shares are registered. When
signing as attorney, executor, administrator, trustee or guardian, please
give your full title. If more than one person holds the power to vote the
same shares, any one of them may sign this proxy card. If the shareholder is
a corporation, this proxy card must be signed by a duly authorized officer
of the shareholder.
Signature 1 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Signature 2 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Date (mm/dd/yyyy)
- ------------------------------------------------------------------------
[ ] [ ] / [ ] [ ] / [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROXY - REHABCARE GROUP, INC.
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints John H. Short,
Ph.D. and Vincent L. Germanese (or such other person as is designated by the
Board of Directors of RehabCare Group, Inc. ("RehabCare")) (the "Proxies"),
or either of them, with full power to act alone, true and lawful
attorney(s), with full power of substitution, for the undersigned and in the
name, place and stead of the undersigned to vote as designated on the
reverse side all of the shares of common stock, $0.01 par value, of
RehabCare entitled to be voted by the undersigned at the Annual Meeting of
Stockholders to be held on May 3, 2005 and at any adjournments or
postponements thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL THE NAMED NOMINEES FOR DIRECTOR, "FOR" APPROVAL OF
THE 2005 EQUITY INCENTIVE PLAN AND "FOR" THE RATIFICATION OF THE APPOINTMENT
OF KPMG, LLP AS REHABCARE'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.
The undersigned acknowledges receipt of the 2004 Annual Report to
Stockholders and the Notice of Annual Meeting and the Proxy Statement.
Please mark, sign, date and return the Proxy Card promptly using the
enclosed envelope.
(SEE REVERSE SIDE TO VOTE)
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
YOU CAN VOTE BY TELEPHONE OR INTERNET! AVAILABLE 24 HOURS A DAY 7 DAYS A
WEEK!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
[phone] TO VOTE USING THE TELEPHONE (WITHIN U.S. AND CANADA)
o Call toll free 1-800-841-0806 in the United States or Canada any time on a
touch tone telephone. There is NO CHARGE to you for the call.
o Follow the simple instructions provided by the recorded message.
C0123456789
----------------
[mouse] TO VOTE USING THE INTERNET
o Go to the following web site:
WWW.COMPUTERSHARE.COM/US/PROXY
o Enter the information requested on your computer screen and follow the
simple instructions.
-----------
12345
-----------
IF YOU VOTE BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL BACK THIS PROXY
CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 5:30
P.M., CENTRAL DAYLIGHT TIME ON MAY 2, 2005.
THANK YOU FOR VOTING
REHABCARE GROUP, INC.
[ ] Mark this box with an X if you have made
changes to your name or address details
above.
- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- --------------------------------------------------------------------------------
A ELECTION OF DIRECTORS (FOR TERM EXPIRING IN 2006)
1. The Board of Directors has proposed and recommends a vote "FOR" the
following:
FOR WITHHOLD FOR WITHHOLD
01 - William G. Anderson, CPA [ ] [ ] 04 - John H. Short, Ph.D. [ ] [ ]
02 - Colleen Conway-Welch, Ph.D. [ ] [ ] 05 - H. Edwin Trusheim [ ] [ ]
03 - C. Ray Holman, CPA [ ] [ ] 06 - Theodore M. Wight [ ] [ ]
B APPROVAL OF THE 2005 EQUITY INCENTIVE PLAN
The Board of Directors has proposed and recommends a vote "FOR" the following:
FOR AGAINST ABSTAIN Please mark this box with an X if you plan to attend the
2. Approval of the RehabCare Group, Inc. 2005 [ ] [ ] [ ] Annual Meeting in person. [ ]
Equity Incentive Plan.
C RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The proxies are authorized to vote upon such other
matters as may properly come before the meeting or any
adjournment thereof in such manner as said proxies shall
The Board of Directors has proposed and recommends a vote "FOR" the determine in their sole discretion.
following:
3. Ratification of the appointment of KPMG LLP as FOR AGAINST ABSTAIN
RehabCare's independent registered public accounting [ ] [ ] [ ]
firm for the fiscal year ending December 31, 2005.
D AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please sign this proxy card exactly as your shares are registered. When
signing as attorney, executor, administrator, trustee or guardian, please
give your full title. If more than one person holds the power to vote the
same shares, any one of them may sign this proxy card. If the shareholder is
a corporation, this proxy card must be signed by a duly authorized officer
of the shareholder.
Signature 1 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Signature 2 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Date (mm/dd/yyyy)
- ------------------------------------------------------------------------
[ ] [ ] / [ ] [ ] / [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROXY - REHABCARE GROUP, INC.
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints John H. Short,
Ph.D. and Vincent L. Germanese (or such other person as is designated by the
Board of Directors of RehabCare Group, Inc. ("RehabCare")) (the "Proxies"),
or either of them, with full power to act alone, true and lawful
attorney(s), with full power of substitution, for the undersigned and in the
name, place and stead of the undersigned to vote as designated on the
reverse side all of the shares of common stock, $0.01 par value, of
RehabCare entitled to be voted by the undersigned at the Annual Meeting of
Stockholders to be held on May 3, 2005 and at any adjournments or
postponements thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL THE NAMED NOMINEES FOR DIRECTOR, "FOR" APPROVAL OF
THE 2005 EQUITY INCENTIVE PLAN AND "FOR" THE RATIFICATION OF THE APPOINTMENT
OF KPMG, LLP AS REHABCARE'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.
The undersigned acknowledges receipt of the 2004 Annual Report to
Stockholders and the Notice of Annual Meeting and the Proxy Statement.
Please mark, sign, date and return the Proxy Card promptly using the
enclosed envelope.
(SEE REVERSE SIDE TO VOTE)
REHABCARE GROUP, INC.
[ ] Mark this box with an X if you have made
changes to your name or address details
above.
- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- --------------------------------------------------------------------------------
A ELECTION OF DIRECTORS (FOR TERM EXPIRING IN 2006)
1. The Board of Directors has proposed and recommends a vote "FOR" the
following:
FOR WITHHOLD FOR WITHHOLD
01 - William G. Anderson, CPA [ ] [ ] 04 - John H. Short, Ph.D. [ ] [ ]
02 - Colleen Conway-Welch, Ph.D. [ ] [ ] 05 - H. Edwin Trusheim [ ] [ ]
03 - C. Ray Holman, CPA [ ] [ ] 06 - Theodore M. Wight [ ] [ ]
B APPROVAL OF THE 2005 EQUITY INCENTIVE PLAN
The Board of Directors has proposed and recommends a vote "FOR" the following:
FOR AGAINST ABSTAIN Please mark this box with an X if you plan to attend the
2. Approval of the RehabCare Group, Inc. 2005 [ ] [ ] [ ] Annual Meeting in person. [ ]
Equity Incentive Plan.
C RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The proxies are authorized to vote upon such other
matters as may properly come before the meeting or any
adjournment thereof in such manner as said proxies shall
The Board of Directors has proposed and recommends a vote "FOR" the determine in their sole discretion.
following:
3. Ratification of the appointment of KPMG LLP as FOR AGAINST ABSTAIN
RehabCare's independent registered public accounting [ ] [ ] [ ]
firm for the fiscal year ending December 31, 2005.
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
D AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please sign this proxy card exactly as your shares are registered. When
signing as attorney, executor, administrator, trustee or guardian, please
give your full title. If more than one person holds the power to vote the
same shares, any one of them may sign this proxy card. If the shareholder is
a corporation, this proxy card must be signed by a duly authorized officer
of the shareholder.
Signature 1 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Signature 2 - Please keep signature within the box
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Date (mm/dd/yyyy)
- ------------------------------------------------------------------------
[ ] [ ] / [ ] [ ] / [ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROXY - REHABCARE GROUP, INC.
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints John H. Short,
Ph.D. and Vincent L. Germanese (or such other person as is designated by the
Board of Directors of RehabCare Group, Inc. ("RehabCare")) (the "Proxies"),
or either of them, with full power to act alone, true and lawful
attorney(s), with full power of substitution, for the undersigned and in the
name, place and stead of the undersigned to vote as designated on the
reverse side all of the shares of common stock, $0.01 par value, of
RehabCare entitled to be voted by the undersigned at the Annual Meeting of
Stockholders to be held on May 3, 2005 and at any adjournments or
postponements thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL THE NAMED NOMINEES FOR DIRECTOR, "FOR" APPROVAL OF
THE 2005 EQUITY INCENTIVE PLAN AND "FOR" THE RATIFICATION OF THE APPOINTMENT
OF KPMG, LLP AS REHABCARE'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.
The undersigned acknowledges receipt of the 2004 Annual Report to
Stockholders and the Notice of Annual Meeting and the Proxy Statement.
Please mark, sign, date and return the Proxy Card promptly using the
enclosed envelope.
(SEE REVERSE SIDE TO VOTE)
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
YOU CAN VOTE BY TELEPHONE OR INTERNET! AVAILABLE 24 HOURS A DAY 7 DAYS A
WEEK!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
[phone] TO VOTE USING THE TELEPHONE (WITHIN U.S. AND CANADA)
o Call toll free 1-800-306-0477 in the United States or Canada any time on a
touch tone telephone. There is NO CHARGE to you for the call.
o Follow the simple instructions provided by the recorded message.
C0123456789
----------------
[mouse] TO VOTE USING THE INTERNET
o Go to the following web site:
WWW.COMPUTERSHARE.COM/US/PROXY
o Enter the information requested on your computer screen and follow the
simple instructions.
-----------
12345
-----------
IF YOU VOTE BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL BACK THIS PROXY
CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 5:30
P.M., CENTRAL DAYLIGHT TIME ON MAY 2, 2005.
THANK YOU FOR VOTING
APPENDIX
Page 27 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.