<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):
/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:
___________________________________________________________________________
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley, Pennsylvania 19006
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 18, 1999
---------------------
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, 1999, 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, 1999; 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 5, 1999 will
be entitled to notice of and to vote at the Annual Meeting.
Please sign and promptly mail the enclosed proxy, whether or not you
expect to attend the Meeting, in order that your shares may be voted for you. A
return envelope is provided for your convenience.
By Order of the Board of Directors
DANIEL P. MCCARTNEY
Chairman of the Board and
Chief Executive Officer
Dated: Huntingdon Valley, Pennsylvania
April 5, 1999
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley, Pennsylvania 19006
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 18, 1999
---------------------
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, 1999
at 10:00 A.M. At the Annual Meetings 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, 1999; 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 5,
1999.
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 record of April 5, 1999 (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 11,057,957
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, 47, Chief Executive Officer and Chairman of the Board since 1977 .... 1977
W. Thacher Longstreth, 78, elected to the Philadelphia City Council in 1983; Vice
Chairman of
Packard Press, a printing firm for more than 5 years; Director of Tasty Baking Company,
Dela-
ware Management Company, Keystone Insurance Company and Micro League Multimedia, Inc..... 1983(1)
Barton D. Weisman, 71, President and Chief Executive 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, 44, Regional Vice President of the Company for more than five years;
brother
of Daniel P. McCartney .................................................................. 1983
Robert L. Frome, Esq., 61, Member of the law firm of Olshan Grundman Frome Rosenzweig &
Wolosky LLP for more than five years; Director of NuCo2, Inc. ........................... 1983
Thomas A. Cook, 53, President and Chief Operating Officer of the Company for more than 1987
five years
Robert J. Moss, Esq., 61, Executive Director of Alzheimer's Association of South Central
Pennsyl-
vania since December 1998; American Express Company October 1997 to December 1998; Mem-
ber of the law firm Moss Associates March 1996 to October 1997; John Hancock Mutual Life
Insurance Company July 1992 to March 1996 ............................................... 1992(2)
John M. Briggs, CPA, 48, Partner of the certified public accounting firm of Briggs,
Bunting &
Dougherty, LLP since May 1997; Partner of certified public accounting firm of Tait,
Weller &
Baker from January 1980 to May 1997 ..................................................... 1993(1)(2)
</TABLE>
- ------------
(1) Member of Stock Option Committee.
(2) Member of Audit Committee.
The Directors recommend a vote FOR all 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 1998 fiscal year. During 1998, 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 1998 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 1998.
STOCK OPTION COMMITTEE. The Stock Option Committee (composed of
non-employee directors) administers the Company's 1995 Employee Stock
Option Plan the 1996 Non-Employee Directors' Plan, as 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 once during 1998.
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 5, 1999, 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 .............................................. 1,538,659(2) 13.7%
Lord, Abbett & Co. ............................................... 1,297,411(3) 11.7%
Dawson-Samberg Capital Management, Inc. .......................... 823,500(4) 7.5%
Wellington Management Company, LLP ............................... 808,300(5) 7.3%
State of Wisconsin Investment Board .............................. 772,500(6) 7.0%
Dimensional Fund Advisors Inc. ................................... 749,108(7) 6.8%
Franklin Resources, Inc. ......................................... 709,125(8) 6.4%
Rockefeller & Co., Inc. .......................................... 625,890(9) 5.7%
Thomas A. Cook ................................................... 290,500(10) 2.6%
Barton D. Weisman ................................................ 136,000(11) 1.2%
Joseph F. McCartney .............................................. 83,000(12) (20)
W. Thacher Longstreth ............................................ 57,475(13) (20)
Robert L. Frome .................................................. 35,025(14) (20)
Robert J. Moss ................................................... 30,475(15) (20)
John M. Briggs ................................................... 28,840(16) (20)
Brian M. Waters .................................................. 76,000(17) (20)
James L. DiStefano ............................................... 16,750(18) (20)
Directors and Executive Officers as a group (10 persons) ......... 2,292,724(19) 19.3%
</TABLE>
- ------------
(1) The address of Daniel P. McCartney is 2643 Huntingdon Pike, Huntingdon
Valley, PA 19006. The address of Lord Abbett & Co. is 767 Fifth Avenue,
New York, NY 10153. The address of Dawson-Samberg Capital Management, Inc.
is 354 Pequot Avenue, Southport, CT 06490. The address of Wellington
Management Company, LLP is 75 State Street, Boston, MA 02109. The address
of State of Wisconsin Investment Board is P.O. Box 7842, Madison, WI
53707. 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 Rockefeller & Co., Inc. is 30 Rockefeller Plaza, New York, NY
10112.
(2) Includes incentive stock options to purchase 89,200 shares and
nonqualified stock options to purchase 123,300 shares, all exercisable
within sixty days of April 5, 1999. Also includes an aggregate of 210,000
shares that Mr. McCartney holds as a co-trustee for the benefit of his
children. Mr. McCartney disclaims beneficial ownership of these shares.
Mr. McCartney may be deemed to be a "parent" of and deemed to control the
Company, as such terms are defined for purposes of the Securities Act of
1933, as amended (the "Securities Act"), by virtue of his position as
founder, director, Chief Executive Officer and principal shareholder of
the Company. Daniel P. McCartney is the brother of Joseph F. McCartney and
Bryan D. McCartney.
(3) According to a Schedule 13G filed by Lord, Abbett & Co., dated February
12, 1999, it has sole voting power and dispositive power with respect to
the 1,297,411 shares.
(4) According to a Schedule 13G filed by Dawson-Samberg Capital Management,
Inc., dated February 10, 1999, it has sole voting power and dispositive
power with respect to the 823,500 shares.
(5) According to a Schedule 13G filed by Wellington Management Company, LLP,
dated December 31, 1998, it has shared dispositive power with respect to
808,300 shares (of which it has shared voting power with respect to
562,400 shares and does not have sole voting power with respect to any
shares).
(6) According to a Schedule 13G filed by State of Wisconsin Investment Board,
dated January 16, 1999, it has sole voting power and dispositive power
with respect to the 772,500 shares.
4
<PAGE>
(7) According to a Schedule 13G filed by Dimensional, dated February 11, 1999,
Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 749,108 shares of the
Company's Common Stock as of December 31, 1998, 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.
(8) According to a Schedule 13G filed by Franklin Resources, Inc., dated
January 27, 1999, it has sole voting power and dispositive power with
respect to the 709,125 shares.
(9) According to a Schedule 13G filed by Rockefeller & Co., Inc., dated
February 12, 1999, it has sole voting and dispositive power with respect
to the 625,890 shares.
(10) Represents incentive stock options to purchase 105,215 shares and
nonqualified stock options to purchase 185,285 shares, all exercisable
within sixty days of April 5, 1999.
(11) Includes nonqualified stock options to purchase 45,475 shares, all
exercisable within sixty days of April 5, 1999.
(12) Represents incentive stock options to purchase 38,000 shares and
nonqualified stock options to purchase 45,000 shares, all exercisable
within sixty days of April 5, 1999.
(13) Represents nonqualified stock options to purchase 57,475 shares, all
exercisable within sixty days of April 5, 1999.
(14) Includes nonqualified stock options to purchase 34,975 shares, all
exercisable within sixty days of April 5, 1999.
(15) Represents nonqualified stock options to purchase 30,475 shares, all
exercisable within sixty days of April 5, 1999.
(16) Includes nonqualified options to purchase 4,990 shares, all exercisable
within sixty days of April 5, 1999.
(17) Represents incentive stock options to purchase 72,234 shares and
nonqualified options to purchase 3,766 shares, all exercisable within
sixty days of April 5, 1999.
(18) Represents incentive stock options to purchase 16,750 shares, all
exercisable within sixty days of April 5, 1999.
(19) Includes 852,140 shares underlying options granted to said group of
persons. All options are exercisable within sixty days of April 5, 1999.
(20) 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, 1998
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 1998 (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)(2) Payouts Compensation
- -------------------------- -------- ----------- ------- -------------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney, 1998 $474,830 0 $63,311 0 25,000 0 0
Chairman of the 1997 444,372 0 25,355 0 37,500 0 0
Board and Chief 1996 411,687 0 13,311 0 37,500 0 0
Executive Officer
Thomas A. Cook, 1998 $474,830 0 $68,539 0 25,000 0 0
President, Chief 1997 444,372 0 83,289 0 37,500 0 0
Operating Officer 1996 411,687 0 1,500 0 75,000 0 0
and Director
Brian M. Waters 1998 $172,431 0 $49,387 0 10,000 0 0
Vice President -- 1997 152,092 0 26,825 0 15,000 0 0
Operations 1996 139,186 0 8,700 0 30,000 0 0
Joseph F. McCartney 1998 $119,431 0 $96,185 0 8,000 0 0
Divisional Vice 1997 94,666 0 90,850 0 12,000 0 0
President and Director 1996 98,889 0 11,100 0 24,000 0 0
James L. DiStefano 1998 $118,747 0 $ 6,435 0 4,000 0 0
Chief Financial Officer 1997 106,995 0 0 0 4,500 0 0
and Treasurer 1996 103,393 0 0 0 3,000 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.
(2) Stock option amounts are adjusted to reflect the 3-for-2 stock split paid
in the form of a 50% stock dividend on August 27, 1998.
6
<PAGE>
Option Grants During 1998 Fiscal Year
The following table provides information related to options to purchase
Common Stock granted to the Named Executive Officers during fiscal 1998.
<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 11.30% $ 9.2125(3) Dec. 04, 2008 $110,737 $312,752
Thomas A. Cook .............. 25,000 11.30% 8.3750 (4) Dec. 04, 2008 131,675 333,690
Brian M. Waters ............. 10,000 4.52% 8.3750 (4) Dec. 04, 2008 52,670 133,476
Joseph F. McCartney ......... 8,000 3.61% 8.3750 (4) Dec. 04, 2008 42,136 106,781
James L. DiStefano .......... 4,000 1.81% 8.3750 (4) Dec. 04, 2008 21,068 53,390
</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.
Aggregated Option Exercises During 1998 Fiscal Year and Fiscal Year End Option
Values
The following table provides information related to aggregated stock
options exercised by the Named Executive Officers during the 1998 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>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options
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) ......... 22,500 $75,000 187,500 25,000 $304,125 $ 0
Thomas A. Cook(3) .............. 22,500 66,500 265,500 25,000 468,773 18,750
Brian M. Waters(4) ............. 10,500 40,687 66,000 10,000 139,500 7,500
Joseph F. McCartney(5) ......... 15,000 87,485 75,000 8,000 181,875 6,000
James L. DiStefano(6) .......... 1,500 6,435 12,750 4,000 28,774 3,000
</TABLE>
- ------------
(1) The closing price of the Common Stock as reported by the Nasdaq National
Market System on December 31, 1998 was $9.125. Value is calculated on the
basis of the difference between the option exercise price and $9.125
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.
(6) The options exercised by Mr. James DiStefano 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, 1998 with the cumulative total return on the S&P 500 Index
and the S&P Healthcare Industry -- Miscellaneous Services Group Index.
[GRAPHIC OMITTED]
Report of the Board of Directors on Executive Compensation
The compensation of the Chief Executive Officer of the Company is
determined by the Board of Directors. The Board's determinations regarding such
compensation are based on a number of factors including, in order of
importance:
o Consideration of the operating and financial performance of the
Company, primarily its income before income taxes during the preceding
fiscal year, as compared with prior operating periods;
o Attainment of a level of compensation designed to retain a superior
executive in a highly competitive environment; and
o Consideration of the individual's overall contribution to the Company.
Compensation for Company executive officers (referred to in the summary
compensation table) other than the Chief Executive Officer is determined based
upon the recommendation of the Chief Executive Officer, taking into account the
same factors considered by the Board in determining the Chief Executive
Officer's compensation as described above. 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 Employee
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. Their compensation will be similarly
determined with respect to the calendar year ending December 31, 1999.
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, 1998
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, 1998, these agreements resulted
in gross revenues of approximately $2,931,000 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 & Wolosky LLP, which law firm has been
retained by the Company during the last fiscal year. Fees received from the
Company by such firm during the last fiscal year did not exceed 5% of such
firm's or the Company's revenues.
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, 1999. 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, 1999. 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, 1999.
If the Company is not notified of a shareholder proposal by December 30,
1999, such proposal will not be included in the proxy statement for the next
year's annual shareholders' meeting and the Company will be permitted to use
its discretionary authority in respect thereof in accordance with Rule
14a-4(c)(1) of the Securities Exchange Act of 1934, as amended.
ANNUAL REPORT
The 1998 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 5, 1999
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, 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>
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, 1999 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)
<PAGE>
- ----- Please mark your
X votes as in this
- ----- example.
FOR WITHHELD Nominees: Daniel P. McCartney; W.
------ ------ Thacher Longstreth; Barton
1. Election of | | | | D. Weisman; Joseph F.
Directors | | | | McCartney; Robert L. Frome
------ ------ Thomas A. Cook; Robert J. Moss;
and John M. Briggs; and in
accordance with proxy Statement
(Instruction: To withhold authority to
vote for any individual nominee, print
that nominee's name on the space provided
at left.)
FOR all nominees listed on the right
(except as marked to the contrary below)
- ----------------------------------------
FOR AGAINST ABSTAIN
2. To approve and ratify the selection of ------ ------ ------
Grant Thornton LLP as independent | | | | | |
accountants of the Company as | | | | | |
described in Proxy Statement. ------ ------ ------
SIGNATURE(S) DATE
------------------------------------- -------------
NOTE: Please sign exactly as your name or names appear hereon. When signing as
Executor, Administrator, Trustee, Corporate Officer Attorney, Agent or
Guardian, etc; please add your full title to your signature. No postage
is required if this proxy is returned in the enclosed envelope and mailed
in the United States. Please date, sign and return this proxy in the
enclosed envelope.
