<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Healthcare Services Group, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(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.
3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 19020
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 30, 2000
---------------------
To the Shareholders of
HEALTHCARE SERVICES GROUP, INC.
NOTICE IS HEREBY GIVEN that the 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 30, 2000, at 10:00 A.M., for the following purposes:
1. To elect eight directors;
2. To approve an amendment to the Company's 1995 Employee Stock Option
Plan to increase the number of shares of Common Stock, $.01 par value
(the "Common Stock") of the Company reserved for issuance thereunder
from a maximum of 500,000 to 1,000,000;
3. To approve and adopt the Company's 1999 Employee Stock Purchase Plan;
4. To approve and adopt the Company's 1999 Deferred Compensation Plan;
5. To approve an amendment to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock by
15,000,000 shares to 30,000,000 shares of Common Stock;
6. To approve and ratify the selection of Grant Thornton LLP as the
independent public accountants of the Company for its current fiscal
year ending December 31, 2000; and
7. To consider and act upon such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on April 17, 2000
will be entitled to notice of and to vote at the Annual Meeting.
Please sign and promptly mail the enclosed proxy, whether or not you
expect to attend the Meeting, in order that your shares may be voted for you. A
return envelope is provided for your convenience.
By Order of the Board of Directors
DANIEL P. MCCARTNEY
Chairman of the Board and
Chief Executive Officer
Dated: Bensalem, Pennsylvania
April 17, 2000
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 19020
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 30, 2000
---------------------
This Proxy Statement is furnished to the Shareholders of Healthcare
Services Group, Inc. (the "Company") in connection with the solicitation by the
Board of Directors of the Company of proxies for the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047, on May 30, 2000
at 10:00 A.M. At the Annual Meeting the shareholders will consider the following
proposals: (1) to elect eight directors; (2) to approve an amendment to the
Company's 1995 Employee Stock Option Plan (the "1995 Employee Plan") to increase
the number of shares of Common Stock, $.01 par value (the "Common Stock")
reserved for issuance from a maximum of 500,000 to 1,000,000; and (3) to approve
and adopt the Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan");
and (4) to approve and adopt the Company's 1999 Deferred Compensation Plan (the
"Deferred Compensation Plan"); and (5) to approve an amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of common
stock by 15,000,000 shares to 30,000,000 shares of Common Stock; and (6) to
approve and ratify the selection of Grant Thornton LLP as the independent public
accountants of the Company for its current fiscal year ending December 31, 2000;
and (7) to consider and act upon such other business as may properly come before
the Annual Meeting.
This Proxy Statement is being mailed to shareholders on or about April 18,
2000.
PROXIES; VOTING SECURITIES
Only holders of Common Stock of record at the close of business on record
of April 17, 2000 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. On the Record Date, there were issued and outstanding
approximately 10,991,557 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, 48, Chief Executive Officer and Chairman of the Board since 1977 .... 1977
W. Thacher Longstreth, 79, elected to and a member of the Philadelphia City Council since
1983; Vice Chairman of Packard Press, a printing firm for more than 5 years; Director of
Tasty Baking Company, Delaware Management Company, Keystone Insurance Company and Micro
League Multimedia, Inc. ................................................................. 1983(1)
Barton D. Weisman, 72, 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, 45, Regional Vice President of the Company for more than five years;
brother of Daniel P. McCartney .......................................................... 1983
Robert L. Frome, Esq., 62, 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, 54, President and Chief Operating Officer of the Company for more than
five years.............................................................................. 1987
Robert J. Moss, Esq., 62, President, Moss Associates, a law firm, for more than five years;
Senior Assistant to United States Senator Arlen Specter for more than five years ........ 1992(2)
John M. Briggs, CPA, 49, Partner of the certified public accounting firm of Briggs,
Bunting & Dougherty, LLP since May 1997; Partner of certified public accounting firm of
Tait, Weller & Baker 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 1999 fiscal year. During 1999, each member
of the Board participated in at least 75% of all Board and applicable committee
meetings held during the period for which he was director.
The Board of Directors has established audit and stock option committees
to devote attention to specific subjects and to assist it in the discharge of
its responsibilities. The functions of those committees, their current members
and the number of meetings held during 1999 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 1999.
STOCK OPTION COMMITTEE. The Stock Option Committee (composed of
non-employee directors) administers the Company's 1995 Employee Plan and
the 1996 Non-Employee Directors' Plan, as amended and restated as of
October 28, 1997, and options which may be granted outside of such Plans.
With respect to the 1995 Employee Plan, the Stock Option Committee has the
power to determine from time to time the individuals to whom options shall
be granted, the number of shares to be covered by each option and the time
or times at which options shall be granted. Mr. John M. Briggs and Mr. W.
Thacher Longstreth comprise the Stock Option Committee. The Stock Option
Committee met once during 1999.
The Company does not have a nominating, executive or compensation
committee. The functions customarily attributable to these committees are
performed by the Board of Directors as a whole.
3
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of April 17, 2000, 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>
Lord, Abbett & Co. ............................................... 1,999,036(2) 18.2%
Daniel P. McCartney .............................................. 1,429,659(3) 12.7%
Wellington Management Company, LLP ............................... 1,091,900(4) 9.9%
Pequot Capital Management, Inc. .................................. 876,100(5) 8.0%
Dimensional Fund Advisors Inc. ................................... 776,358(6) 7.1%
Rockefeller & Co., Inc. .......................................... 614,877(7) 5.6%
Thomas A. Cook ................................................... 315,500(8) 2.8%
Barton D. Weisman ................................................ 140,990(9) 1.3%
Joseph F. McCartney .............................................. 91,000(10) (18)
Robert L. Frome .................................................. 64,615(11) (18)
W. Thacher Longstreth ............................................ 55,194(12) (18)
Robert J. Moss ................................................... 32,465(13) (18)
John M. Briggs ................................................... 38,830(14) (18)
Brian M. Waters .................................................. 71,000(15) (18)
James L. DiStefano ............................................... 20,750(16) (18)
Directors and Executive Officers as a group (10 persons) ......... 2,255,003(17) 19.1%
</TABLE>
- ------------
(1) The address of Lord, Abbett & Co. is 90 Hudson Street, Jersey City, NJ
07302. The address of Daniel P. McCartney is 3220 Tillman Drive, Suite
300, Bensalem, PA 19020. The address of Wellington Management Company, LLP
is 75 State Street, Boston, MA 02109. The address of Pequot Capital
Management, Inc. is 500 Nyala Farm Road, Westport, CT 06880. The address
of Dimensional Fund Advisors Inc. ("Dimensional") is 1299 Ocean Avenue,
Santa Monica, CA 90401. The address of Rockefeller & Co., Inc. is 30
Rockefeller Plaza, New York, NY 10112.
(2) According to a Schedule 13G filed by Lord, Abbett & Co., dated February 1,
2000, it has sole voting power and dispositive power with respect to the
1,999,036 shares.
(3) Includes incentive stock options to purchase 90,680 shares and
nonqualified stock options to purchase 146,820 shares, all exercisable
within sixty days of April 17, 2000. Also includes an aggregate of 125,000
shares that Mr. McCartney holds as a co-trustee for the benefit of his
children. Mr. McCartney disclaims beneficial ownership of these shares.
Mr. McCartney may be deemed to be a "parent" of and deemed to control the
Company, as such terms are defined for purposes of the Securities Act of
1933, as amended (the "Securities Act"), by virtue of his position as
founder, director, Chief Executive Officer and principal shareholder of
the Company. Daniel P. McCartney is the brother of Joseph F. McCartney.
(4) According to a Schedule 13G filed by Wellington Management Company, LLP,
dated February 9, 2000, it has shared dispositive power with respect to
1,091,900 shares (of which it has shared voting power with respect to
731,900 shares and does not have sole voting or dispositive power with
respect to any shares).
(5) According to a Schedule 13G filed by Pequot Capital Management, Inc. it
has sole voting power and dispositive power with respect to the 876,100
shares.
(6) According to a Schedule 13G filed by Dimensional, dated February 4, 2000,
Dimensional, a registered investment advisor, may be deemed to have
beneficial ownership of 776,358 shares of the Company's Common Stock as of
December 31, 1999, all of which shares are held in portfolios of DFA
Investment
4
<PAGE>
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, for all of which Dimensional serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(7) According to a Schedule 13G filed by Rockefeller & Co., Inc., dated
February 14, 2000, Rockefeller & Co., Inc. made such filing on behalf of
certain clients for which it is the investment manager. None of such
clients beneficially owns 5% or more of the outstanding Common Stock. Such
clients have executed agreements granting Rockefeller & Co., Inc. full
power with respect to all matters relating to the stock of the Company
held by them.
(8) Represents incentive stock options to purchase 84,333 shares and
nonqualified stock options to purchase 231,167 shares, all exercisable
within sixty days of April 17, 2000.
(9) Includes nonqualified stock options to purchase 50,465 shares, all
exercisable within sixty days of April 17, 2000.
(10) Represents incentive stock options to purchase 40,314 shares and
nonqualified stock options to purchase 50,686 shares, all exercisable
within sixty days of April 17, 2000.
(11) Includes nonqualified stock options to purchase 32,465 shares, all
exercisable within sixty days of April 17, 2000.
(12) Includes nonqualified stock options to purchase 54,965 shares, all
exercisable within sixty days of April 17, 2000.
(13) Represents nonqualified stock options to purchase 32,465 shares, all
exercisable within sixty days of April 17, 2000.
(14) Includes nonqualified options to purchase 9,980 shares, all exercisable
within sixty days of April 17, 2000.
(15) Represents incentive stock options to purchase 69,043 shares and
nonqualified options to purchase 1,957 shares, all exercisable within
sixty days of April 17, 2000.
(16) Represents incentive stock options to purchase 20,750 shares, all
exercisable within sixty days of April 17, 2000.
(17) Includes 824,340 shares underlying options granted to said group of
persons. All options are exercisable within sixty days of April 17, 2000.
(18) Less than 1% of the outstanding shares.
Directors' Fees
The Company paid each director who is not an employee of the Company $500
for each regular meeting of the Board of Directors attended. Mr. Frome bills
the Company at his customary rates for time spent on behalf of the Company
(whether as a director or in the performance of legal services for the Company)
and is reimbursed for expenses incurred in attending directors' 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, 1999
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 1999 (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, 1999 $531,726 0 $13,311 0 55,000 0 0
Chairman of the 1998 474,830 0 63,311 0 25,000 0 0
Board and Chief 1997 444,372 0 25,355 0 37,500 0 0
Executive Officer
Thomas A. Cook, 1999 $531,726 0 $ 1,791 0 85,000 0 0
President, Chief 1998 474,830 0 68,539 0 25,000 0 0
Operating Officer 1997 444,372 0 83,289 0 37,500 0 0
and Director
Brian M. Waters 1999 $175,750 0 $31,875 0 10,000 0 0
Vice President -- 1998 172,431 0 49,387 0 10,000 0 0
Operations 1997 152,092 0 26,825 0 15,000 0 0
James L. DiStefano 1999 $124,377 0 $ 0 0 6,250 0 0
Chief Financial Officer 1998 118,747 0 6,435 0 4,000 0 0
and Treasurer 1997 106,995 0 0 0 4,500 0 0
Joseph F. McCartney 1999 $108,471 0 $ 8,700 0 20,000 0 0
Divisional Vice 1998 119,431 0 96,185 0 8,000 0 0
President and Director 1997 94,666 0 90,850 0 12,000 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 1995 Employee Plan.
(2) Stock option amounts are adjusted to reflect the 3-for-2 stock split paid
in the form of a 50% stock dividend on August 27, 1998.
6
<PAGE>
Option Grants During 1999 Fiscal Year
The following table provides information related to options to purchase
Common Stock granted to the Named Executive Officers during fiscal 1999.
<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 ......... 55,000 15.70% $7.4250(3) Dec. 16, 2009 $341,935 $786,368
Thomas A. Cook .............. 85,000 24.26% 6.7500(4) Dec. 16, 2009 360,828 914,410
Brian M. Waters ............. 10,000 2.85% 6.7500(4) Dec. 16, 2009 42,450 107,578
James L. DiStefano .......... 6,250 1.78% 6.7500(4) Dec. 16, 2009 26,531 67,236
Joseph F. McCartney ......... 20,000 5.71% 6.7500(4) Dec. 16, 2009 84,901 215,155
</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 1999 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 1999 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 ......... 0 $ 0 182,500 55,000 $47,325 $ 0
Thomas A. Cook .............. 0 0 230,500 85,000 75,000 21,250
Brian M. Waters(2) .......... 15,000 23,175 61,000 10,000 30,000 2,500
Joseph F. McCartney ......... 0 0 71,000 20,000 46,500 5,000
James L. DiStefano .......... 0 0 14,500 6,250 6,000 1,563
</TABLE>
- ------------
(1) The closing price of the Common Stock as reported by the Nasdaq National
Market System on December 31, 1999 was $7.00. Value is calculated on the
basis of the difference between the option exercise price and $7.00
multiplied by the number of shares of Common Stock underlying the option.
(2) The options exercised by Mr. Waters 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, 1999 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 Plan, as
amended, no recipient of options may be granted options to purchase more than
125,000 shares of Common Stock. Therefore, compensation received as a result of
options granted under the 1995 Employee Plan qualify as "performance-based" for
purposes of Section 162(m) of the Internal Revenue Code.
8
<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, 2000 with a
base salary of $227,000.
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, 1999 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, 1999, these agreements resulted in gross
revenues of approximately $3,032,000 to the Company. 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.
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 2
AMENDMENT TO THE 1995 EMPLOYEE PLAN
Proposed Amendment
On July 20, 1999, the Board of Directors adopted, and proposed that the
shareholders approve an amendment to the 1995 Employee Plan which would increase
the number of shares reserved for issuance under the 1995 Employee Plan from a
maximum of 500,000 to 1,000,000.
Pursuant to the 1995 Employee Plan, both incentive and non-qualified
options may be granted to key employees of the Company or any subsidiary in
which the Company owns more than 50% of the total combined voting power of all
classes of stock. As of the Record Date, options to purchase 639,335 shares of
Common Stock, were outstanding under the 1995 Employee Plan, options to purchase
103,788 shares of Common Stock had been exercised and options to purchase 6,877
shares of Common Stock remain available for grant under the 1995 Employee Plan.
The Board of Directors believes that the proposed increase in the number of
shares available for issuance under the 1995 Employee Plan is necessary to
continue the effectiveness of the 1995 Employee Plan in attracting, motivating
and retaining employees with appropriate experience and ability and to increase
the grantees' alignment of interest with the Company's shareholders.
If the amendment to the 1995 Employee Plan is approved, the first sentence
of Section 4 of the 1995 Employee Plan will read as follows:
"Subject to adjustment as provided in Section 7 hereof, a total of one
million (1,000,000) shares of common stock, $.01 par value ("Stock"), of the
Company shall be subject to the Plan."
The 1995 Employee Plan will terminate on March 5, 2005, but may be
terminated by the Board of Directors at anytime before that date.
Options Granted to Executive Officers in Fiscal Year 1999
Grants under the 1995 Employee Plan are generally made at the discretion of
the Stock Option Committee (as defined herein). The following table sets forth
the total number of options granted under the 1995 Employee Plan during the
fiscal year ended December 31, 1999 and the dollar value of such options as of
the Record Date based on the closing trading price of the Common Stock on such
date.
CURRENT BENEFITS
1995 EMPLOYEE PLAN
<TABLE>
<CAPTION>
Number of Options
Granted in Fiscal
Name and Position 1999 and 2000 Dollar Value($)
- --------------------------------------------- ------------------- ----------------
<S> <C> <C>
Daniel P. McCartney 55,000 $ 0
Thomas A. Cook 85,000 0
Brian W. Waters 10,000 0
Joseph F. McCartney 20,000 0
James L. DiStefano 6,250 0
Executive Officers as a Group 184,750 0
Non-Executive Officers Directors as a Group 0 0
Non-Executive Officers as a Group 38,000 0
</TABLE>
Administration
The 1995 Employee Plan is administered by a Stock Option Committee,
consisting of not less than two members of the Board of Directors of the Company
who are "disinterested persons" within the meaning of Rule
10
<PAGE>
16b-3 and who are "outside directors" within the meaning of Section 162(C)
of the Internal Revenue Service Code of 1986, as amended (the "Internal Revenue
Code"). The members of the Stock Option Committee are appointed by the Board of
Directors and serve at the pleasure of the Board of Directors. Currently, the
members of the Stock Option Committee are John M. Briggs and W. Thacher
Longstreth. The Stock Option Committee selects the key employees who will be
granted options under the 1995 Employee Plan and, subject to the provisions of
the 1995 Employee Plan, determines the terms and conditions and number of shares
subject to each option. The Stock Option Committee also makes any other
determination necessary or advisable for the administration of the 1995 Employee
Plan. Determinations by the Stock Option Committee are final and conclusive.
Grants of options and other decisions of the Stock Option Committee are not
required to be made on a uniform basis.
Description of Options
Upon the grant of an option to a key employee, the Stock Option Committee
will fix the number of shares of Common Stock that the optionee may purchase
upon exercise of the option and the price at which the shares of Common Stock
may be purchased. The option price for stock options shall not be less than 100%
of the "fair market value" of the shares of Common Stock at the time the option
is granted; provided, however, that with respect to an incentive stock option in
the case of an optionee, who, at the time such option is granted, owns more than
10% of the voting stock of the Company or its subsidiaries, the purchase price
per shall be at least 110% of the fair market value. "Fair market value" is
deemed to be the closing sales price of Common Stock on such date on the Nasdaq
National Market System or, if the Common Stock is not listed on the Nasdaq
National Market System, on the principal market in which the Common Stock is
traded.
Registration of Shares
The Company has filed a registration statement under the Securities Act,
with respect to 500,000 shares of Common Stock issuable pursuant to the 1995
Employee Plan. The Company intends to file an additional registration statement
under the Securities Act with respect to the additional 500,000 shares of Common
Stock issuable pursuant to the amendment subsequent to the amendment's approval
by the Company's shareholders.
Vote Required
The approval of the amendment to the 1995 Employee Plan requires the
affirmative vote of a majority of the votes cast by all shareholders voting on
the proposal and entitled to vote thereon. An abstention or withholding of
authority to vote or broker non-vote will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to the 1995 Employee Plan.
11
<PAGE>
PROPOSAL 3
APPROVAL OF 1999 EMPLOYEE STOCK PURCHASE PLAN
On July 20, 1999, the Board of Directors adopted, and proposed that the
shareholders approve the Purchase Plan. The following description of the
Purchase Plan is a summary and does not purport to be fully descriptive.
Purpose of the Proposal
The purpose of the Purchase Plan is to provide employees of the Company
with an opportunity to purchase shares of the Company's Common Stock at a
discount through payroll deductions. The Purchase Plan does not create in any
employee or class of employees any right with respect to continuation of
employment by the Company, and shall not be deemed to interfere in any way with
the Company's right to terminate, or otherwise modify, an employee's employment
at any time.
The Board of Directors believes that this proposal will increase
shareholder value by further aligning the interests of key individuals with the
interest of shareholders by providing them with an opportunity to benefit from
stock price appreciation that may accompany improved financial performance.
Administration
The Purchase Plan is administered by a committee of the Board of Directors
consisting of not less than three (3) members of the Board of Directors not
eligible to participate in the Purchase Plan (the "Purchase Plan Committee").
Eligibility
Any person who has completed two (2) years continuous employment with the
Company, is customarily employed on a full-time or part-time basis by the
Company and is regularly employed at least 20 hours per week (or any of its
subsidiaries) is eligible to participate in the Purchase Plan (unless or until
such time as he would own 5% or more of the total combined voting power or value
of all classes of stock of the Company or of its subsidiaries (including stock
issuable upon exercise of options held by him) or he would have the right to
purchase more than $25,000 worth of stock (determined at the time such option to
purchase is granted) pursuant to the Purchase Plan for each calendar year in
which the option to purchase is outstanding). As of April 1, 2000, approximately
6,400 employees were eligible to purchase Common Stock under the Purchase Plan,
Offering Dates
The Purchase Plan is implemented by four annual offerings (for the years
2000 through 2003). Offering periods for the next four years commence on January
1 and end on December 31 of each fiscal year. The Purchase Plan will terminate
on December 31, 2003, unless terminated sooner in accordance with the provisions
thereof.
Participation in the Purchase Plan
Eligible employees become participants in the Purchase Plan by delivering
to the Company's Human Resources Department an Employee Stock Purchase Plan
Enrollment Form (the "Enrollment Form") authorizing payroll deductions on or
prior to the beginning of the offering period or such other date as may be
specified by the Purchase Plan Committee. Such payroll deductions continue
during the offering period unless the employee withdraws from participation in
the Purchase Plan. See "Withdrawal."
Purchase Price and Number of Shares
The Company has reserved 800,000 shares of Common Stock for issuance under
the Purchase Plan. The purchase price per share at which Shares will be sold in
an offering under the Purchase Plan (the "Per Share Price") is the lower of (i)
85% of the fair market value of a share of Common Stock on the offering
commencement date (or the nearest prior business date) or (ii) 85% of the fair
market value of a share of Common Stock
12
<PAGE>
on the offering termination date (or the nearest prior business date). The fair
market value of a share of Common Stock on a given date is the closing sale
price of the Company's Common Stock in the principal U.S. securities market for
the Common Stock, currently the Nasdaq National Market. On the commencement date
of each offering, a Participant shall be deemed to have been granted an option
to purchase a maximum number of shares of Common Stock equal to the aggregate
amount contributed to the Purchase Plan divided by the Per Share Price.
Payment of Purchase Price
Funds for the total purchase price of the Shares are accumulated by payroll
deductions over the offering period. Participants are permitted to withdraw
their contributions at any time during an offering period and in such event no
further deductions will be made from his or her pay during the offering period.
Withdrawal
An employee's participation in the Purchase Plan may be terminated by
signing and delivering to the Company's Human Resources Department a notice of
withdrawal from the Purchase Plan. Any withdrawal from a given offering period
automatically terminates the employee's interest in that offering. A participant
withdrawing from an offering may resume participation in the Purchase Plan by
executing an Enrollment Form for subsequent annual offerings.
Termination of Employment
Termination of a participant's employment will generally cancel the
participant's participation in the Purchase Plan immediately.
Capital Changes
In the event of certain changes in the capitalization of the Company (such
as a stock split) appropriate adjustments will be made by the Company in the
number and price of shares of Common Stock subject to purchase. No adjustment
shall be made for stock dividends. Any distribution of shares to shareholders in
an amount aggregating 20% or more of the outstanding shares shall be deemed a
stock split; distribution of shares aggregating less than 20% shall be deemed a
stock dividend.
Effect of Liquidation, Dissolution, Sale of Assets or Merger
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each option then outstanding under the
Purchase Plan will thereafter be entitled to receive at the next offering
termination date, upon the exercise of such option for each share as to which
such option shall be exercised, as nearly as reasonably may be determined, the
cash, securities and/or property which a holder of one share of Common Stock was
entitled to receive upon, and at the time of, such transaction.
Transferability
No rights or accumulated payroll deductions of an employee under the
Purchase Plan may be pledged, assigned or transferred for any reason, other than
by will or the laws of descent and distribution. Any such attempt shall be
without effect except that the Company may treat the attempt as an election to
withdraw from participation in the Purchase Plan.
Amendment and Termination of Plan
The Board of Directors shall have complete power and authority to terminate
or amend the Purchase Plan; provided, however, that the Board of Directors shall
not, without the approval of the shareholders of the Company (i) increase the
maximum number of shares which may be issued under any offering; (ii) amend the
13
<PAGE>
requirements as to the class of employees eligible to purchase stock under the
Purchase Plan or (iii) permit the members of the Purchase Plan Committee to
purchase stock under the Purchase Plan. No termination, modification, or
amendment of the Purchase Plan may, without the consent of an employee then
having an option under the Purchase Plan to purchase stock, adversely affect the
rights of such employee under such option.
New Plan Benefits
Because participation in the Purchase Plan is entirely within the
discretion of the eligible employees of the Company, the Company cannot forecast
the extent of future participation. Therefore the Company has omitted the
tabular disclosure of the benefits or amounts allocated under the Purchase Plan
to executive officers. As of the Record Date, no acquisitions of Common Stock
have been made by executive officers pursuant to the Purchase Plan.
Tax Information
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Internal Revenue Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares of Common
Stock if the requirements imposed by Section 423 are met.
If the shares of Common Stock are sold or disposed of (within the meaning
of Section 424 of the Internal Revenue Code) at least two years after the date
of the beginning of the offering period (herein referred to as the "Date of
Option Grant") and at least one year after the date of the end of the offering
period (herein referred to as the "Exercise Date"), or in the event of the death
of the holder, the consequences to the participants are as follows: the
participants will recognize ordinary income equal to the lesser of (a) the
excess of the fair market value of the shares of Common Stock at the time of
such disposition (or death) over the amount paid for the shares subject to the
option or (b) the excess of the fair market value of the shares of Common Stock
at the time the option was granted over an amount equal to the option price as
computed as of the date of option grant. Any further gain upon such disposition
will be treated as long- term capital gain. If the shares of Common Stock are
sold and the sales price is less than the price paid for the shares of Common
Stock, there is no ordinary income and the participant has a capital loss for
the difference. The Company is not entitled to a compensation deduction when the
aforementioned holding periods have been satisfied.
If the shares of Common Stock are sold or disposed of before the expiration
of the two-year and one-year holding periods described above (a "disqualifying
disposition"), the excess of the fair market value of the shares of Common Stock
on the Exercise Date over the amount paid for the shares of Common Stock will be
treated as ordinary compensation income, even if, for example, no gain is
realized on the sale. The balance of any gain will be treated as capital gain.
Even if the shares of Common Stock are sold for less than their fair market
value on the Exercise Date, the same amount of ordinary compensation income will
be attributed to a participant and a capital loss will be recognized equal to
the difference between the sales price and the value of the shares on such
Exercise Date. In the case of a disqualifying disposition, the Company is
entitled to a compensation deduction in the amount of the compensation income
recognized by the participant.
The foregoing discussion is only a general summary of the federal income
tax consequences of a purchase of Common Stock under the Purchase Plan and the
subsequent disposition of shares received pursuant to such purchases.
Registration of Shares
The Company has filed a registration statement under the Securities Act
with respect to 800,000 shares of Common Stock issuable pursuant to the Purchase
Plan.
Vote Required
The Board of Directors seeks shareholder approval because such approval is
required under the Internal Revenue Code as a condition to favorable tax
treatment for participants under the Purchase Plan. The approval
14
<PAGE>
of the Purchase Plan requires the affirmative vote of a majority of the votes
cast by all shareholders voting on the proposal and entitled to vote thereon.
An abstention or withholding of authority to vote or broker non-vote will not
have the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the Purchase Plan.
15
<PAGE>
PROPOSAL 4
APPROVAL OF 1999 DEFERRED COMPENSATION PLAN
On July 20, 1999, the Board of Directors adopted, and proposed that the
shareholders approve the 1999 Deferred Compensation Plan. The Deferred
Compensation Plan became effective on January 1, 2000 (the "Effective Date").
The following description of the Deferred Compensation Plan is a summary and
does not purport to be fully descriptive.
Purpose of the Proposal
The purpose of the Deferred Compensation Plan is to secure and retain the
services of a select group of management or highly compensated employees and to
provide additional retirement benefits to certain key employees who have devoted
extraordinary energies to the Company.
General
The Deferred Compensation Plan is an unfunded, unsecured plan for which the
obligations are paid to plan participants (individually a "Participant" and
collectively the "Participants") out of the Company's general assets, which are
subject to claims of the Company's creditors. An unfunded plan is merely an
unsecured promise by the Company to pay deferred compensation at a later date. A
Participant may rely only on the credit of the Company and has no right to the
Company's assets other than as a general unsecured creditor. The Company intends
to establish a trust (the "Trust") as a source of funds to assist it in meeting
its obligations under the Deferred Compensation Plan. The Company will also be
required to issue approximately 75,000 shares of Common Stock to Participants in
the Deferred Compensation Plan.
Eligibility
Certain key employees of the Company are eligible to participate in the
Deferred Compensation Plan if they are (i) selected for participation in the
Deferred Compensation Plan by the Deferred Compensation Plan Administrator (as
hereinafter defined) and (ii) employed in any of the following executive or
management capacities:
o Corporate executive and management personnel (including the five highest
paid executive officers);
o Divisional and Regional Managers; and
o District Managers
Deferrals of Compensation
Each year, every Participant in the Deferred Compensation Plan may
irrevocably elect to defer the receipt of up to 15% of his or her compensation
for any calendar year during the term of his or her employment with the Company.
The Company shall contribute and allocate to each Participant's account, as of
the last day of each calendar year, the number of full shares of Common Stock,
obtained by dividing an amount equal to twenty-five (25%) percent of the amount
of compensation deferred by the Participant for such calendar year, as embodied
in the Salary Deferral Election form completed by the Participant prior to the
beginning of such calendar year, by the Market Price (as hereinafter defined) of
the shares of Common Stock on the last date of the calendar year. Market Price
is defined in the Deferred Compensation Plan as the closing price of the shares
of Common Stock on the last day of the calendar year or if there was no trading
of the Company's Common Stock on such date, the closing price on the nearest
prior business date on which trading occurred on a recognized securities
exchange. To be eligible to receive an allocation of Common Stock, a Participant
must be employed by the Company on the last date of the calendar year for which
the allocation is to be made. Key employees eligible to participate in the
Deferred Compensation Plan on the Effective Date become fully vested in the
stock allocated to their respective accounts if employed by the Company on
December 31, 2002. Other vesting rules apply to persons who become eligible to
participate after the Effective Date, as described below.
16
<PAGE>
Deferred Compensation Plan Administration
The Company's Board of Directors shall appoint a committee of three (3) or
more individuals to administer the Deferred Compensation Plan (the "Deferred
Compensation Plan Administrator"), subject to the supervision and review of the
Board. Committee members may be participants and may be members of the Board.
PNC Bank, N.A. (the "Trustee") has been appointed the Trustee of the Deferred
Compensation Plan. The Trust will (i) receive contributions from the Company and
(ii) retain such contributions (and the proceeds thereon from investments,
including the proceeds of any life insurance policies owned by the trust, if
any). The Deferred Compensation Plan Administrator shall provide written reports
to the Board, no less frequently than annually, concerning the operations of the
Deferred Compensation Plan and the Trust.
Company Matching
The Company shall contribute to the Trust all amounts deferred and
contributed under the Deferred Compensation Plan within ten (10) business days
of the date such amounts would otherwise have been paid to the Participant
pursuant to the Company's standard payroll practices. All amounts contributed to
the Trust and the earnings thereon shall be held by the Trustee and invested in
accordance with the terms of the Trust Agreement between the Company and the
Trustee.
Common Stock allocated to each Participant's account shall become fully
vested and be a nonforfeitable interest only if (a) the Participant was employed
and elected to participate in the Deferred Compensation Plan as of its Effective
Date and is still employed by the Company on December 31, 2002, or (b) the
Participant became eligible and elected to participate in the Deferred
Compensation Plan after its Effective Date and is still employed by the Company
on the last day of the calendar year which commenced on or after the third
anniversary of the later of (i) the date on which such individual became a
eligible to participate in the Deferred Compensation Plan, or (ii) the first day
of the calendar year in which Participant elected to contribute to the Deferred
Compensation Plan. In the event a Participant's employment is terminated for any
reason other than death, disability or retirement prior to the Common Stock
becoming fully vested, all Common Stock previously allocated to such
Participant's account shall be forfeited and held by the Trustee to be available
for allocation in subsequent years. Special provisions apply in the event of a
"Change in Control" of the Company.
Change in Control
Upon the occurrence of a Change in Control, as defined in the Deferred
Compensation Plan, the Deferred Compensation Plan shall automatically terminate
and the accounts of all Participants shall be paid in a single lump sum as soon
as practicable.
Amendment and Termination
The Company reserves the right to amend or terminate the Deferred
Compensation Plan for any reason at any time, provided, that no amendment or
termination may adversely affect benefits accrued under the Deferred
Compensation Plan prior to the effective date of such amendment or termination.
New Plan Benefits
Because participation in the Deferred Compensation Plan is entirely within
the discretion of the eligible employees of the Company, the Company cannot
forecast the extent of future participation. Therefore the Company has omitted
the tabular disclosure of the benefits or amounts allocated under the Deferred
Compensation Plan to executive officers. As of the Record Date, no acquisitions
of Common Stock have been made by executive officers pursuant to the Deferred
Compensation Plan.
Income Tax Consequences
The Deferred Compensation Plan is not qualified under Sections 401(a) and
403(a) of the Internal Revenue Code. Compensation that is deferred pursuant to
the Deferred Compensation Plan will not be subject to Federal
17
<PAGE>
income taxation until distributions are made. When distributions are made,
however, they will be subject to Federal income taxes, at ordinary tax rates,
effective for the year(s) in which received and will be subject to Federal
income tax withholding. The Company generally receives a compensation deduction
for such amounts, although there may be circumstances when such a deduction may
not be available. No distribution is eligible for a tax deferred "roll over" to
an I.R.A. or for transfer to any other Company or another employer's qualified
retirement plan.
No Social Security or Medicare Tax will be withheld on distributions of
deferred compensation inasmuch as such taxes were withheld at the time of
deferral or vesting, as the case may be. State and local income taxes (and
withholding) may also be due with respect to distributions from the Deferred
Compensation Plan.
Registration of Shares
The Company has filed a registration statement under the Securities Act
with respect to 200,000 shares of Common Stock issuable pursuant to the Deferred
Compensation Plan.
Vote Required
The Deferred Compensation Plan is being submitted to the Company's
shareholders for approval to comply with Nasdaq Stock Market requirements for
the listing of the shares of Common Stock that may be issued under the Deferred
Compensation Plan. The approval of the Deferred Compensation Plan requires the
affirmative vote of a majority of the votes cast by all shareholders voting on
the proposal and entitled to vote thereon. An abstention or withholding of
authority to vote or broker non-vote will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the Deferred Compensation Plan.
18
<PAGE>
PROPOSAL 5
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY 15,000,000 SHARES
Under the Company's Articles of Incorporation, as amended, the Company is
authorized to issue up to 15,000,000 shares of Common Stock. On March 31, 2000,
the Board of Directors approved and authorized an Amendment to the Company's
Articles of Incorporation that increases this maximum number of authorized
shares of Common Stock by 15,000,000 shares to a total of 30,000,000 shares,
subject to approval by the shareholders of the Company. If the shareholders do
not approve the Amendment, then the number of authorized shares of the Company's
Common Stock will remain at 15,000,000.
The purpose of the proposed Amendment is to provide sufficient shares for
future acquisitions, benefit plans, recapitalizations and other corporate
purposes. Except as set forth in this Proxy Statement (i.e., see Proposals 2, 3
and 4), no such use currently is planned. Once authorized, the additional shares
of Common Stock may be issued by the Board of Directors without further action
by the shareholders, unless such action is required by law or applicable stock
exchange requirements. Accordingly, this solicitation may be the only
opportunity for the shareholders to take action in connection with such
acquisitions, benefit plans, recapitalizations and other corporate actions. As
of the Record Date, 10,991,557 shares of Common Stock were issued and
outstanding, and approximately 3,045,916 shares were reserved for issuance under
the Company's stock option plans or other employee benefit plans (including the
shares of common stock which may be issued if Proposals 2, 3 and 4 are approved)
or, pursuant to shares issuable upon the exercise of certain non-qualified
options. Accordingly, assuming the approval of Proposals 2, 3 and 4, (and the
continued reservation of shares thereunder) of the 15,000,000 shares of Common
Stock currently authorized, only 962,527 shares will remain unissued and
unreserved.
The resolution to be considered by the shareholders at the meeting reads
as follows;
"RESOLVED, that Article 4 of the Articles of Incorporation of Healthcare
Services Group, Inc., as amended, shall be amended and restated to read in
full as follows:
4. The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 30,000,000 shares of common stock with a
par value of $.01 per share.
FURTHER RESOLVED, that the proper officers of Healthcare Services Group,
Inc. are hereby authorized and directed, after shareholder approval of the
proposed amendment, to execute, under its corporate seal, Articles of
Amendment to the Articles of Incorporation, as amended, and to file such
Articles of Amendment with the Pennsylvania Department of State.
FURTHER RESOLVED, that the Board of Directors of Healthcare Services Group,
Inc. may, notwithstanding approval by the shareholders of Healthcare
Services Group, Inc., at any time prior to the filing of the Articles of
Amendment with the Pennsylvania Department of State, terminate the proposed
amendment and all transactions contemplated by or incident thereto."
Vote Required
Shareholder approval of this proposal is required under Pennsylvania law.
Unless authority has been withheld the proxy agents intend to vote FOR approval
of the amendment. Approval of the amendment to the Company's Articles of
Incorporation, as amended, increasing the number of authorized shares of Common
Stock by 15,000,000 shares, requires the affirmative vote of the holders of a
majority of the votes cast by all shareholders present and voting. An
abstention, withholding of authority to vote or broker non-vote, therefore,
will not have the same legal effect as an "against" vote and will not be
counted in determining whether the proposal has received the required
shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to the Company's Articles of Incorporation, as amended.
19
<PAGE>
PROPOSAL NO. 6
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, 2000. Said firm has no other
relationship to the Company. The Board of Directors recommends the ratification
of the selection of the firm of Grant Thornton LLP to serve as the independent
public accountants of the Company for the year ending December 31, 2000. A
representative of Grant Thornton LLP, which has served as the Company's
independent public accountants since December 1992, will be present at the
forthcoming shareholders' meeting with the opportunity to make a statement if he
so desires and such representative will be available to respond to appropriate
questions. The approval of the proposal to ratify the appointment of Grant
Thornton LLP requires the affirmative vote of a majority of the votes cast by
all shareholders represented and entitled to vote thereon. An abstention,
withholding of authority to vote or broker non-vote, therefore, will not have
the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
However, brokers that do not receive instructions on this proposal are entitled
to vote for the selection of the independent public accountants.
OTHER MATTERS
So far as is now known, there is no business other than that described
above to be presented for action by the shareholders at the meeting, but it is
intended that the proxies will be exercised upon any other matters and proposals
that may legally come before the meeting, or any adjournment thereof, in
accordance with the discretion of the persons named therein.
DEADLINE FOR SHAREHOLDER PROPOSALS
To the extent permitted by law, any shareholder proposal intended for
presentation at next year's annual shareholders' meeting must be received in
proper form at the Company's principal office no later than December 30, 2000.
If the Company is not notified of a shareholder proposal by December 30,
2000, such proposal will not be included in the proxy statement for the next
year's annual shareholders' meeting and the Company will be permitted to use its
discretionary authority in respect thereof in accordance with Rule 14a-4(c)(1)
of the Securities Exchange Act of 1934, as amended.
ANNUAL REPORT
The 1999 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: Bensalem, Pennsylvania
April 17, 2000
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, 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.,
3220 Tillman Drive, Suite 300, Bensalem, PA 19020.
20
<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 30, 2000 at 10:00
A.M.
The undersigned, revoking all previous proxies, hereby appoints Daniel P.
McCartney and Thomas A. Cook, or either of them, attorneys and proxies with full
power of substitution and with all the powers the undersigned would possess if
personally present, to vote all shares of Common Stock of HEALTHCARE SERVICES
GROUP, INC. owned by the undersigned at the Annual Meeting of Shareholders of
said Corporation to be held at the time and place set forth above, and at any
adjournment thereof, in the transaction of such business as may properly come
before the meeting or any adjournment thereof, all as more fully described in
the Proxy Statement, and particularly to vote as designated below.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT
IF NO DIRECTION IS MADE THEY WILL BE VOTED FOR THE ELECTION OF THE NOMINATED
DIRECTORS, the approval of the amendment to the company's 1995 employee stock
option plan, the approval of each of the company's 1999 employee stock purchase
plan and 1999 deferred compensation plan and the approval of the amendment to
the company's articles of incorporation AND THE 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>
A [X] Please mark your
votes as in this
example using
dark ink only.
FOR WITHHELD
1. TO ELECT EIGHT [ ] [ ] Nominees: Daniel P. McCartney; W.
DIRECTORS; Thacher Longstreth; Barton
D. Weisman; Joseph F.
FOR all nominees listed on the McCartney; Robert L.
right (except as marked to the Frome; Thomas A. Cook;
contrary below) Robert J. Moss; and John M.
Briggs; and in accordance
with proxy Statement
(Instruction: To withhold authority to vote
for any individual nominee, print that
nominee's name on the space provided at
left.)
_____________________________________
FOR AGAINST ABSTAIN
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 [ ] [ ] [ ]
EMPLOYEE STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE FROM A
MAXIMUM OF 500,000 TO 1,000,000; AND
(3) TO APPROVE AND ADOPT THE COMPANY'S 1999 [ ] [ ] [ ]
EMPLOYEE STOCK PURCHASE PLAN; AND
(4) TO APPROVE AND ADOPT THE COMPANY'S 1999 DEFERRED [ ] [ ] [ ]
COMPENSATION PLAN; AND
(5) TO APPROVE AN AMENDMENT TO THE COMPANY'S [ ] [ ] [ ]
ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY
15,000,000 SHARES TO 30,000,000 SHARES; AND
(6) TO APPROVE AND RATIFY THE SELECTION OF GRANT [ ] [ ] [ ]
THORNTON LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR ITS CURRENT FISCAL
YEAR ENDING DECEMBER 31, 2000; AND
(7) TO CONSIDER AND ACT UPON SUCH OTHER BUSINESS AS [ ] [ ] [ ]
MAY PROPERLY COME BEFORE THE MEETING.
_______________________________________Date _____________ 2000
Signature
_______________________________________Date _____________ 2000
Signature if held jointly
Please sign exactly as name appears on tne certificate or certificates
representing shares to be voted by this proxy, as shown on the label above. When
signing as executor, administrator, attorney, trustee, or guardian, please give
full title as such. If a corporation, please sign full corporation name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person(s).
