<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 240.14a-11(c) or 240.14a-12
HEALTHCARE SERVICES GROUP, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / 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:
___________________________________________________________________________
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley, Pennsylvania 19006
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 18, 1998
---------------------
To the Shareholders of
HEALTHCARE SERVICES GROUP, INC.
NOTICE IS HEREBY GIVEN that an Annual Meeting of shareholders of
Healthcare Services Group, Inc. (the "Company") will be held at the Radisson
Hotel of Bucks County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047,
on May 18, 1998, at 10:00 A.M., for the following purposes:
1. To elect eight directors;
2. To approve and ratify the selection of Grant Thornton LLP as the
independent public accountants of the Company for its current fiscal
year ending December 31, 1998; and
3. To consider and act upon such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on April 10, 1998
will be entitled to vote at the Annual Meeting.
Please sign and promptly mail the enclosed proxy, whether or not you
expect to attend the Meeting, in order that your shares may be voted for you. A
return envelope is provided for your convenience.
By Order of the Board of Directors
DANIEL P. MCCARTNEY
Chairman of the Board and
Chief Executive Officer
Dated: Huntingdon Valley, Pennsylvania
April 10, 1998
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley, Pennsylvania 19006
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 18, 1998
---------------------
This Proxy Statement is furnished to the Shareholders of Healthcare
Services Group, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047, on May 18, 1998
at 10:00 A.M. At the Annual Meeting the shareholders will consider the
following proposals: (1) to elect eight directors; (2) to approve and ratify
the selection of Grant Thornton LLP as the independent public accountants of
the Company for its current fiscal year ending December 31, 1998; and (3) to
consider and act upon such other business as may properly come before the
Annual Meeting.
This Proxy Statement is being mailed to shareholders on or about April 10,
1998.
PROXIES; VOTING SECURITIES
Only holders of Common Stock, $.01 par value of the Company (the "Common
Stock") of record at the close of business on April 10, 1998 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. On the
Record Date, there were issued and outstanding approximately 7,450,963 shares
of Common Stock. Each share of Common Stock entitles the holder thereof to one
vote. The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is required to constitute a quorum at the
meeting. Holders of Common Stock are not entitled to cumulative voting rights.
All shares that are represented by properly executed proxies received
prior to or at the meeting, and not revoked, will be voted in accordance with
the instructions indicated in such proxies. If no instructions are indicated
with respect to any shares for which properly executed proxies are received,
such proxies will be voted FOR each of the proposals. For purposes of
determining the presence of a quorum for transacting business at the Annual
Meeting, abstentions and broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power), if applicable, will be treated as shares that are present but which
have not been voted.
A proxy may be revoked by delivery of a written statement to the Secretary
of the Company stating that the proxy is revoked, by a subsequent proxy
executed by the person executing the prior proxy and presented to the Annual
Meeting, or by voting in person at the Annual Meeting.
All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitation will be made primarily by mail, but
regular employees or representatives of the Company may also solicit proxies by
telephone, telegraph or in person, without additional compensation, except for
reimbursement of out-of-pocket expenses.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors of the Company are to be elected,
each to hold office for a term of one year. Unless authority is specifically
withheld, management proxies will be voted FOR the election of the nominees
named below to serve as directors until the next annual meeting of shareholders
and until their successors have been chosen and qualify. Should any nominee not
be a candidate at the time of the Annual Meeting (a situation which is not now
anticipated), proxies will be voted in favor of the remaining nominees and may
also be voted for substitute nominees. If a quorum is present, the candidate or
candidates receiving the highest number of votes will be elected directors.
Brokers that do not receive instructions are entitled to vote for the election
of directors.
The nominees are as follows:
<TABLE>
<CAPTION>
Name, Age, Principal Occupations
for the past five years and Current Director
Public Directorships or Trusteeships Since
------------------------------------- ------
<S> <C>
Daniel P. McCartney, 46, Chief Executive Officer and Chairman of the Board since 1977 ......... 1977
W. Thacher Longstreth, 77, elected to the Philadelphia City Council in 1983; Vice Chairman of
Packard Press, a printing firm since July 1988; Director of Tasty Baking Company, Delaware
Management Company, Keystone Insurance Company and Micro League Multimedia, Inc. ............ 1983(1)
Barton D. Weisman, 70, President and Chief Operating Officer of H.B.A. Corporation and H.B.A.
Management, Inc., Florida based companies which own and/or manage nursing homes, for more
than five years ............................................................................. 1983(2)
Joseph F. McCartney, 43, Regional Vice President of the Company for more than five years; brother
of Daniel P. McCartney ...................................................................... 1983
Robert L. Frome, Esq., 60, Member of the law firm of Olshan Grundman Frome & Rosenzweig LLP
for more than five years; Director of NuCo2, Inc. ........................................... 1983
Thomas A. Cook, 52, President and Chief Operating Officer of the Company since July 1993;
Executive Vice President and Chief Financial Officer of the Company for more than five years. 1987
Robert J. Moss, Esq., 60, American Express Company since 1996; John Hancock Mutual Life Insur-
ance Company since July 1992; and Member of Karr-Barth Associates, Inc., a financial services
firm from November 1990 to June 1992 ........................................................ 1992(2)
John M. Briggs, CPA, 47, Partner of the certified public accounting firm of Briggs, Bunting &
Dougherty, LLP .............................................................................. 1993(1)(2)
</TABLE>
- ------------
(1) Member of Stock Option Committee.
(2) Member of Audit Committee.
The Directors recommend a vote FOR the nominees.
2
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during its fiscal
year to review significant developments affecting the Company and to act on
matters requiring Board approval. It also holds special meetings when an
important matter requires Board action between scheduled meetings. The Board of
Directors met four times during the 1997 fiscal year. During 1997, each member
of the Board participated in at least 75% of all Board and applicable committee
meetings held during the period for which he was director.
The Board of Directors has established audit and stock option committees
to devote attention to specific subjects and to assist it in the discharge of
its responsibilities. The functions of those committees, their current members
and the number of meetings held during 1997 are described below:
AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the appointment of the firm selected to be independent public
accountants for the Company and monitors the performance of such firm;
reviews and approves the scope of the annual audit and quarterly reviews
and evaluates problem areas having a potential financial impact on the
Company which may be brought to its attention by management, the
independent public accountants or the Board of Directors; and evaluates all
public financial reporting documents of the Company. Messrs. Robert J.
Moss, Barton D. Weisman and John M. Briggs currently are members of the
Audit Committee. The Audit Committee met once during 1997.
STOCK OPTION COMMITTEE. The Stock Option Committee (composed of
non-employee directors) administers the Company's Employee Plans, the 1996
Non-Employee Directors' Plan, amended and restated as of October 28, 1997,
and a 1995 Directors' Plan which was terminated. With respect to the
Employee Plans, the Stock Option Committee has the power to determine from
time to time the individuals to whom options shall be granted, the number
of shares to be covered by each option and the time or times at which
options shall be granted. Mr. John M. Briggs and Mr. W. Thacher Longstreth
comprise the Stock Option Committee. The Stock Option Committee met three
times during 1997.
The Company does not have a nominating, executive or compensation
committee. The functions customarily attributable to these committees are
performed by the Board of Directors as a whole.
3
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of April 10, 1998, regarding
the beneficial ownership of Common Stock by each person known by the Company to
own 5% or more of the outstanding shares of Common Stock, each director of the
Company, the Company's executive officers as defined in Item 402(a)(3) of
Regulation S-K) and the directors and executive officers of the Company as a
group. The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock owned by them, unless otherwise
noted.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name and Beneficial Owner or Group (1) Ownership Class
- -------------------------------------- --------- -----
<S> <C> <C>
Daniel P. McCartney .............................................. 1,023,106(2) 13.5%
State of Wisconsin Investment Board .............................. 700,000(3) 9.4%
Wellington Management Company, LLP ............................... 688,500(4) 9.3%
Rockefeller & Co., Inc. .......................................... 552,632(5) 7.4%
Dimensional Fund Advisors Inc. ................................... 509,172(6) 6.8%
Franklin Resources, Inc. ......................................... 478,050(7) 6.4%
Lord, Abbett & Co. ............................................... 420,900(8) 5.7%
Thomas A. Cook ................................................... 192,000(9) 2.5%
Robert J. Moss ................................................... 16,990(10) (19)
Robert L. Frome .................................................. 60,740(11) (19)
Joseph F. McCartney .............................................. 60,000(12) (19)
W. Thacher Longstreth ............................................ 42,143(13) (19)
Barton D. Weisman ................................................ 80,090(14) (19)
John M. Briggs ................................................... 26,990(15) (19)
Brian M. Waters .................................................. 51,000(16) (19)
James L. DiStefano ............................................... 9,500(17) (19)
Directors and Executive Officers as a group (10 persons) ......... 1,562,559(18) 19.4%
</TABLE>
- ------------
(1) The address of Daniel P. McCartney is 2643 Huntingdon Pike, Huntingdon
Valley, PA 19006. The address of State of Wisconsin Investment Board is
P.O. Box 7842, Madison, WI 53707. The address of Wellington Management
Company, LLP is 75 State Street, Boston, MA 02109. The address of
Rockefeller & Co., Inc. is 30 Rockefeller Plaza, New York, NY 10112. The
address of Dimensional Fund Advisors Inc. ("Dimensional") is 1299 Ocean
Avenue, Santa Monica, CA 90401. The address of Franklin Resources, Inc. is
777 Mariners Island Blvd., San Mateo, CA 94403. The address of Lord Abbett
& Co. is 767 Fifth Avenue, New York, NY 10153.
(2) Includes incentive stock options to purchase 54,983 shares and
nonqualified stock options to purchase 85,017 shares, all currently
exercisable. Mr. McCartney may be deemed to be a "parent" of and deemed to
control the Company, as such terms are defined for purposes of the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of
his position as founder, director, Chief Executive Officer and principal
shareholder of the Company. Daniel P. McCartney is the brother of Joseph
F. McCartney.
(3) According to a Schedule 13G filed by State of Wisconsin Investment Board,
dated January 20, 1998, it has sole voting power and dispositive power
with respect to the 700,000 shares.
(4) According to a Schedule 13G filed by Wellington Management Company, LLP,
dated January 24, 1998, it has shared dispositive power with respect to
688,500 shares (of which it has sole voting power with respect to 182,000
shares and shared voting power with respect to 506,500 shares).
(5) According to a Schedule 13G filed by Rockefeller & Co., Inc., dated
February 12, 1998, it has sole voting and dispositive power with respect
to the 552,632 shares.
(6) According to a Schedule 13G filed by Dimensional, dated February 9, 1998,
Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 509,172 shares of the
Company's Common Stock as of December 31, 1997, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(7) According to a Schedule 13G filed by Franklin Resources, Inc., dated
February 12, 1997, it has sole voting power and dispositive power with
respect to the 478,050 shares.
4
<PAGE>
(8) According to a Schedule 13G filed by Lord Abbett & Co., dated February 13,
1998, it has sole voting power and dispositive power with respect to the
420,900 shares.
(9) Represents incentive stock options to purchase 69,850 shares and
nonqualified stock options to purchase 122,150 shares, all currently
exercisable.
(10) Represents nonqualified stock options to purchase 16,990 shares, all
currently exercisable.
(11) Includes nonqualified stock options to purchase 26,990 shares, all
currently exercisable.
(12) Represents incentive stock options to purchase 23,000 shares and
nonqualified options to purchase 37,000 shares, all currently exercisable.
(13) Includes nonqualified stock options to purchase 41,990 shares, all
currently exercisable.
(14) Includes nonqualified stock options to purchase 38,990 shares, all
currently exercisable. Excludes 7,250 shares held by Mr. Weisman's wife,
as to which shares he disclaims beneficial ownership, includes 8,000
shares held as tenants by the entirety with Mr. Weisman's wife.
(15) Includes nonqualified stock options to purchase 14,990 shares, all
currently exercisable.
(16) Represents incentive stock options to purchase 49,695 shares, and
nonqualified options to purchase 1,305 shares, all currently exercisable.
(17) Represents incentive stock options to purchase 9,500 shares, all currently
exercisable.
(18) Includes 592,450 shares underlying options granted to said group of
persons. All options are currently exercisable.
(19) Less than 1% of the outstanding shares.
Directors' Fees
The Company paid each director who is not an employee of the Company $500
for each regular meeting of the Board of Directors attended. Mr. Frome bills
the Company at his customary rates for time spent on behalf of the Company
(whether as a director or in the performance of legal services for the Company)
and is reimbursed for expenses incurred in attending directors' meetings. The
Company also granted options to non-employee directors to purchase an aggregate
of 24,950 shares of Common Stock during the year ended December 31, 1997
pursuant to the 1996 Non-Employee Directors' Plan, amended and restated as of
October 28, 1997.
5
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid or accrued during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and the four highest paid executive officers
whose total salary and bonus exceeded $100,000 in 1997 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Awards Payouts
------------------------- ---------
Annual Compensation Securities
------------------------------------ Restricted Underlying
Name and Principal Fiscal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Awards SARs (1) Payouts Compensation
- -------------------------- -------- ----------- ------- -------------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney, 1997 $444,372 0 $25,355 0 25,000 0 0
Chairman of the 1996 411,687 0 13,311 0 25,000 0 0
Board and Chief 1995 426,083 0 13,956 0 40,000 0 0
Executive Officer
Thomas A. Cook, 1997 $444,372 0 $83,289 0 25,000 0 0
President, Chief 1996 411,687 0 1,500 0 50,000 0 0
Operating Officer 1995 426,083 0 27,258 0 0 0 0
and Director
Brian M. Waters 1997 $152,092 0 $26,825 0 10,000 0 0
Vice President -- 1996 139,186 0 8,700 0 20,000 0 0
Operations 1995 130,391 0 8,700 0 0 0 0
Joseph F. McCartney 1997 $ 94,666 0 $90,850 0 8,000 0 0
Regional Vice 1996 98,889 0 11,100 0 16,000 0 0
President and 1995 106,879 0 14,913 0 0 0 0
Director
James L. DiStefano 1997 $106,995 0 0 0 3,000 0 0
Chief Financial Officer 1996 103,393 0 0 0 2,000 0 0
and Treasurer 1995 99,890 0 0 0 2,000 0 0
</TABLE>
- ------------
(1) Options to acquire shares of Common Stock. The Company has not awarded any
SAR's (Stock Appreciation Rights) as it is not currently authorized to do
so under the Employee Plans.
6
<PAGE>
Option Grants During 1997 Fiscal Year
The following table provides information related to options to purchase
Common Stock granted to the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (1)
- -----------------------------------------------------------------------------------------------------------------------------
% of Total
Options
Options Granted to Exercise
Granted Employees in Price
Name (#) (2) Fiscal Year ($/Sh) (2) Expiration Date 5% 10%
- ----------------------------- --------- -------------- ---------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney ......... 25,000 15.31% $12.650(3) Aug. 21, 2007 $152,057 $429,451
Thomas A. Cook .............. 25,000 15.31% $11.500(4) Aug. 21, 2007 $180,807 $458,201
Brian M. Waters ............. 10,000 6.12% $11.500(4) Aug. 21, 2007 $ 72,323 $183,280
Joseph F. McCartney ......... 8,000 4.9% $11.500(4) Aug. 21, 2007 $ 57,858 $146,624
James L. DiStefano .......... 3,000 1.84% $11.500(4) Aug. 21, 2007 $ 21,697 $ 54,984
</TABLE>
- ------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment, nontransferability or differences in vesting periods.
Regardless of the theoretical value of an option, its ultimate value will
depend on the market value of the Common Stock at a future date, and that
value will depend on a variety of factors, including the overall condition
of the stock market and the Company's results of operations and financial
condition. There can be no assurance that the values reflected in this
table will be achieved.
(2) The option exercise price may be paid in shares of Common Stock owned by
the executive, in cash, or a combination of any of the foregoing, as
determined by the Stock Option Committee.
(3) The exercise price was 110% of the fair market value of the Common Stock on
the date of grant.
(4) The exercise price was the market value (i.e., closing market price) of the
Common Stock on the date of grant.
<PAGE>
Aggregated Option Exercises During 1997 Fiscal Year and Fiscal Year End Option
Values
The following table provides information related to aggregated options
exercised by the Named Executive Officers during the 1997 fiscal year and the
number and value of options held at fiscal year end. (The Company does not have
any outstanding stock appreciation rights.)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at FY-End (#) at FY-End ($) (1)
on Exer- Realized ------------------------------- ------------------------------
Name cise (#) ($) (3) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney(2) ......... 15,000 $34,894 140,000 0 $240,875 $0
Thomas A. Cook(3) .............. 25,000 81,250 192,000 0 373,250 0
Brian M. Waters(4) ............. 5,000 18,125 51,000 0 126,875 0
Joseph F. McCartney(5) ......... 13,000 42,250 60,000 0 175,125 0
James L. DiStefano ............. -- -- 9,500 0 24,125 0
</TABLE>
- ------------
(1) The closing price of the Common Stock as reported by the Nasdaq National
Market System on December 31, 1997 was $12.625. Value is calculated on the
basis of the difference between the option exercise price and $12.625
multiplied by the number of shares of Common Stock underlying the option.
(2) The options exercised by Mr. Daniel McCartney were held by him for five
years.
(3) The options exercised by Mr. Cook were held by him for five years.
(4) The options exercised by Mr. Waters were held by him for five years.
(5) The options exercised by Mr. Joseph McCartney were held by him for five
years.
7
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative return (assuming
dividends are reinvested) on the Common Stock during the five fiscal years
ended December 31, 1997 with the cumulative total return on the S&P 500 Index
and the S&P Healthcare Industry -- Miscellaneous Services Group Index.
Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index Dec93 Dec94 Dec95 Dec96 Dec97
===============================================================================
HEALTHCARE SERVICES GROUP 17.50 14.89 -30.56 6.67 26.25
HEALTH CARE (SPEC SVC)-500 -38.97 -35.71 37.49 4.54 25.66
S&P 500 INDEX 10.08 1.32 37.58 22.96 33.36
INDEX RETURNS
Base Years Ending
Period
Company / Index Dec92 Dec93 Dec94 Dec95 Dec96 Dec97
===============================================================================
HEALTHCARE SERVICES GROUP 100 117.50 135.00 93.75 100.00 126.25
HEALTH CARE (SPEC SVC)-500 100 61.03 39.24 53.95 56.40 70.87
S&P 500 INDEX 100 110.08 111.53 153.45 188.68 251.63
TOTAL SHAREHOLDER RETURNS
275--------------------------------------------------------------------------
250-------------------------------------------------------------------------$
225--------------------------------------------------------------------------
200--------------------------------------------------------------------------
D $
o 175--------------------------------------------------------------------------
l
l
a 150-----------------------------------------$--------------------------------
r
s # #
125--------------------------------------------------------------------------
#
$ $
100#*$----------------------------------------------------#------------------
#
75--------------------------------------------------------------------------
*
* *
50------------------------------------------*-------------------------------
*
25--------------------------------------------------------------------------
0--------------------------------------------------------------------------
Dec92 Dec93 Dec94 Dec95 Dec96 Dec97
Years Ending
# = HEALTHCARE SERVICES GROUP * = HEALTH CARE (SPEC SVC)-500 $ = S&P 500 INDEX
Report of the Board of Directors on Executive Compensation
The compensation of the Chief Executive Officer of the Company is
determined by the Board of Directors. The Board's determinations regarding such
compensation are based on a number of factors including, in order of
importance:
o Consideration of the operating and financial performance of the
Company, primarily its income before income taxes during the preceding
fiscal year, as compared with prior operating periods;
o Attainment of a level of compensation designed to retain a superior
executive in a highly competitive environment; and
o Consideration of the individual's overall contribution to the Company.
Compensation for Company executive officers (referred to in the summary
compensation table) other than the Chief Executive Officer is determined based
upon the recommendation of the Chief Executive Officer, taking into account the
same factors considered by the Board in determining the Chief Executive
Officer's compensation as described above. Except as set forth below, the
Company has not established a policy with regard to Section 162(m) of the
Internal Revenue Code of 1986, as amended ("the Internal Revenue Code"), since
the Company has not and does not currently anticipate paying compensation in
excess of $1 million per annum to any employee. Under the 1995 Incentive and
Non-Qualified Stock Option Plan, as amended, no recipient of options may be
granted options to purchase more than 125,000 shares of Common Stock.
Therefore, compensation received as a result of options granted under the 1995
Incentive and Non-Qualified Stock Option Plan qualify as "performance-based"
for purposes of Section 162(m) of the Internal Revenue Code.
8
<PAGE>
The Company applies a consistent approach to compensation for all
employees, including senior management. This approach is based on the belief
that the achievements of the Company result from the coordinated efforts of all
employees working toward common objectives.
Mr. Daniel P. McCartney and Mr. Cook each received annual base salaries of
$100,000 and an additional 3% of the income from operations before income taxes
of the Company attributable to the fiscal year immediately preceding the year
for which his annual salary is calculated.
The Board of Directors
Daniel P. McCartney (Chairman)
W. Thacher Longstreth
Barton D. Weisman
Joseph F. McCartney
Robert L. Frome
Thomas A. Cook
Robert J. Moss
John M. Briggs
Messrs. Daniel P. McCartney, Thomas A. Cook and Joseph F. McCartney did
not serve as directors, executive officers or members of the Compensation
Committee of any other entity during the fiscal year ended December 31, 1997
and currently do not serve in such capacities.
Interlocks and Insider Participation and Other Matters
Mr. Barton D. Weisman, a director of the Company, has an ownership
interest in ten nursing homes that have entered into service agreements with
the Company. During the year ended December 31, 1997, these agreements resulted
in gross revenues of approximately $2,957,000 to the Company.
The Company leases 6,600 square feet of its corporate offices at 2643
Huntingdon Pike, Huntingdon Valley, Pennsylvania from a general partnership in
which Daniel P. McCartney is a general partner. The term of the lease commenced
on April 1, 1987 and ends on March 31, 2001. Minimum annual rent is $88,620
payable monthly.
Management believes that the terms of each of the transactions with the
nursing homes described herein are comparable to those available to
unaffiliated third parties. The remaining transaction was deemed fair and
reasonable and approved as being in the best interests of the Company, by the
disinterested directors.
Mr. Robert L. Frome, a director of the Company, is a member of the law
firm of Olshan Grundman Frome & Rosenzweig LLP, which law firm has been
retained by the Company during the last fiscal year. Fees received from the
Company by such firm during the last fiscal year did not exceed 5% of such
firm's or the Company's revenues.
9
<PAGE>
PROPOSAL NO. 2
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Grant Thornton LLP was selected by the Audit
Committee of the Board of Directors as the independent public accountants of
the Company for the year ended December 31, 1998. Said firm has no other
relationship to the Company. The Board of Directors recommends the ratification
of the selection of the firm of Grant Thornton LLP to serve as the independent
public accountants of the Company for the year ending December 31, 1998. A
representative of Grant Thornton LLP, which has served as the Company's
independent public accountants since December 1992, will be present at the
forthcoming shareholders' meeting with the opportunity to make a statement if
he so desires and such representative will be available to respond to
appropriate questions. The approval of the proposal to ratify the appointment
of Grant Thornton LLP requires the affirmative vote of a majority of the votes
cast by all shareholders represented and entitled to vote thereon. An
abstention, withholding of authority to vote or broker non-vote, therefore,
will not have the same legal effect as an "against" vote and will not be
counted in determining whether the proposal has received the required
shareholder vote. However, brokers that do not receive instructions on this
proposal are entitled to vote for the selection of the independent public
accountants.
OTHER MATTERS
So far as is now known, there is no business other than that described
above to be presented for action by the shareholders at the meeting, but it is
intended that the proxies will be exercised upon any other matters and
proposals that may legally come before the meeting, or any adjournment thereof,
in accordance with the discretion of the persons named therein.
DEADLINE FOR SHAREHOLDER PROPOSALS
To the extent permitted by law, any shareholder proposal intended for
presentation at next year's annual shareholders' meeting must be received in
proper form at the Company's principal office no later than December 30, 1998.
ANNUAL REPORT
The 1997 Annual Report to Shareholders, including financial statements, is
being mailed herewith. If you do not receive your copy please advise the
Company and another will be sent to you.
By Order of the Board of Directors,
DANIEL P. MCCARTNEY
Chairman and
Chief Executive Officer
Dated: Huntingdon Valley, Pennsylvania
April 10, 1998
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as filed with the Securities and Exchange Commission,
may be obtained without charge by any shareholder of record on the record date
upon written request addressed to: Secretary, Healthcare Services Group, Inc.,
2643 Huntingdon Pike, Huntingdon Valley, Pennsylvania 19006.
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
/X/ Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Daniel P. McCartney; W. FOR AGAINST ABSTAIN
1. Election of / / / / Thacher Longstreth; Barton 2. To approve and ratify the / / / / / /
Directors D. Weisman; Joseph F. selection of Grant Thornton
McCartney; Robert L. Frome LLP as independent accountants
Thomas A. Cook; Robert J. Moss; of the Company as
and John M. Briggs; and in described in Proxy Statement.
accordance with proxy Statement
FOR all nominees listed on (Instruction: To withhold authority to vote for
the right (except as any individual nominee, print that nominee's
marked to the contrary name on the space provided at left.)
below)
- -------------------------
SIGNATURE(S) DATE
---------------------------------------------- ----------------
NOTE: Please sign exactly as your name or names appear hereon. When signing as
Executor, Administrator, Trustee, Corporate Officer Attorney, Agent or
Guardian, etc; please add your full title to your signature. No postage is
required if this proxy is returned in the enclosed envelope and mailed in
the United States. Please date, sign and return this proxy in the enclosed
envelope.
</TABLE>
<PAGE>
HEALTHCARE SERVICES GROUP, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders to be held at The Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, PA, 19047 on May 18, 1998 at 10:00
A.M.
The undersigned, revoking all previous proxies, hereby appoints Daniel P.
McCartney and Thomas A. Cook, or either of them, attorneys and proxies with
full power of substitution and with all the powers the undersigned would
possess if personally present, to vote all shares of Common Stock of HEALTHCARE
SERVICES GROUP, INC. owned by the undersigned at the Annual Meeting of
Shareholders of said Corporation to be held at the time and place set forth
above, and at any adjournment thereof, in the transaction of such business as
may properly come before the meeting or any adjournment thereof, all as more
fully described in the Proxy Statement, and particularly to vote as designated
below.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT
IF NO DIRECTION IS MADE THEY WILL BE VOTED FOR THE ELECTION OF THE NOMINATED
DIRECTORS AND THE RATIFICATION OF THE INDEPENDENT PUBLIC ACCOUNTANTS, ALL AS
RECOMMENDED IN THE PROXY STATEMENT, AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXIES OR PROXY ON ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL MEETING.
(To be Signed on Reverse Side)
