Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e) (2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RehabCare Group, Inc.
(Name of Registant as Specified in Its Charter)
(Names of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / $125 per the Exchange Act Rules 0-11(c)(1)(ii),14a-6(i)(1), 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
pursunat 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>
RehabCare(R)
REHABCARE GROUP, INC.
7733 Forsyth Boulevard
Suite 1700
St. Louis, Missouri 63105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
Dear Stockholder:
The Annual Meeting of Stockholders of RehabCare Group, Inc. ("RehabCare")
will be held at the Pierre Laclede Center, Second Floor, 7733 Forsyth Boulevard,
St. Louis, Missouri on April 30, 1997, at 8:00 a.m., local time, for the
following purposes:
1. To elect seven directors to hold office until the
next Annual Meeting or until their successors shall
have been duly elected and qualified.
2. To transact any and all other business that may
properly come before the Annual Meeting or any
adjournment thereof.
Only stockholders of record of RehabCare at the close of
business on March 14, 1997, are entitled to notice of, and to vote at, the
Annual Meeting or any adjournment thereof.
We cordially invite you to attend the Annual Meeting. Even if
you plan to be present at the meeting, you are requested to date, sign and
return the enclosed Proxy Card in the envelope provided so that your shares will
be represented. The mailing of an executed Proxy Card will not affect your right
to vote in person should you later decide to attend the Annual Meeting.
James M. Usdan
President and Chief Executive Officer
March 28, 1997
<PAGE>
RehabCare(R)
REHABCARE GROUP, INC.
7733 Forsyth Boulevard
Suite 1700
St. Louis, Missouri 63105
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
-----------------
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of
REHABCARE GROUP, INC. ("RehabCare"), in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders to be held at the Pierre
Laclede Center, Second Floor, 7733 Forsyth Boulevard, St. Louis, Missouri, on
Wednesday, April 30, 1997, at 8:00 a.m., local time, and at all adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the preceding
Notice of Annual Meeting of Stockholders.
This Proxy Statement, the Notice of Annual Meeting and the
accompanying Proxy Card were first mailed to the stockholders of RehabCare on or
about March 28, 1997.
The proxy set forth on the accompanying Proxy Card is being
solicited by the Board of Directors of RehabCare. A proxy may be revoked at any
time before it is voted by filing a written notice of revocation or a
later-dated Proxy Card with the Secretary of RehabCare at the principal offices
of RehabCare or by attending the Annual Meeting and voting the shares in person.
Attendance alone at the Annual Meeting will not of itself revoke a proxy. Proxy
Cards that are properly executed, timely received and not revoked will be voted
in the manner indicated thereon at the Annual Meeting and any adjournment
thereof.
RehabCare will bear the entire expense of soliciting proxies.
Proxies will be solicited by mail initially. The directors, executive officers
and employees of RehabCare may also solicit proxies personally or by telephone
or other means but such persons will not be specially compensated for such
services.
Only stockholders of record at the close of business on March
14, 1997, are entitled to notice of, and to vote at, the Annual Meeting. On such
date, there were 3,768,172 shares of RehabCare Common Stock issued and
outstanding.
Each outstanding share of RehabCare Common Stock is entitled
to one vote on each matter to be acted upon at the Annual Meeting. Shares
subject to abstentions will be treated as shares that are present at the Annual
Meeting for purposes of determining the presence of a quorum and as voted for
purposes of determining the base number of shares voting on a particular
proposal. If a broker or other nominee holder indicates on the Proxy Card that
it does not have discretionary authority to vote the shares it holds of record
on a proposal, those shares will not be considered as present for purposes of
determining
<PAGE>
a quorum (unless they are voted on another proposal brought before the meeting)
or as voted for purposes of determining the approval of the stockholders on a
particular proposal. Stockholders do not have the right to cumulate votes in the
election of directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following persons were known to management of RehabCare to
be the beneficial owners of five percent or more of RehabCare Common Stock:
<TABLE>
<CAPTION>
Number of Shares Percent of Outstanding
Name and Address of Beneficial Owner Beneficially Owned Common Stock<F1>
<S> <C> <C>
FMR Corp.<F2> 503,400 13.36%
82 Devonshire Street
Boston, Massachusetts 02109
Connor, Clark & Company Ltd.<F3> 415,225 11.02%
Scotia Plaza,
40 King Street
Suite 5110, Box 125
Toronto, Ontario M5H 3Y2
Cowen & Company <F4> 403,254 10.70%
Financial Square
New York, New York 10005
RH Capital Associates <F5> 308,600 8.19%
55 Harristown Road
Glen Rock, New Jersey 07452
James M. Usdan <F6> 311,564 7.74%
7733 Forsyth Boulevard
Suite 1700
St. Louis, Missouri 63105
Richard C. Stoddard <F7> 304,410 7.65%
7733 Forsyth Boulevard
Suite 1700
St. Louis, Missouri 63105
<FN>
<F1> The percentage calculations are based upon 3,768,172 shares of RehabCare
Common Stock outstanding at March 14, 1997, plus, with respect to Messrs.
Stoddard and Usdan, the number of shares subject to options or conversion
privileges exercisable by each such stockholder on or prior to May 13,
1997.
- 2 -
<PAGE>
<F2> Based upon information set forth in Amendment No. 2 to Schedule 13G dated
February 14, 1997, filed by the reporting persons with the Securities and
Exchange Commission. The Schedule 13G is a group filing of FMR Corp., the
holding company of Fidelity Management & Research Company, an investment
advisor registered under the Investment Advisors Act of 1940 and Fidelity
Low-Priced Stock Fund, an investment company registered under the
Investment Company Act of 1940, of which Edward C. Johnson 3d and Abigail
P. Johnson may be deemed to be controlling persons. This group of persons
reported sole voting power with respect to 67,400 shares and sole
investment power with respect to all 503,400 shares. The group reported
that Fidelity Low-Priced Stock Fund reported beneficial ownership of
436,000 shares, or 9.32% of the outstanding shares of RehabCare Common
Stock, at December 31, 1996.
<F3> Based upon information set forth in Amendment No. 6 to Schedule 13G dated
March 6, 1997, filed by the reporting person with the Securities and
Exchange Commission. Connor, Clark & Company Ltd., an investment advisor
registered under the Investor Advisors Act of 1940, reported shared voting
and investment power with respect to all 415,225 shares reported as
beneficially owned. Connor, Clark & Company Ltd. reported that it holds
such shares on behalf of many clients, none of whose interests exceeds five
percent or more of the RehabCare Common Stock, and that it does not have
any economic or pecuniary interest in the securities held.
<F4> Based upon information set forth in Amendment No. 2 to Schedule 13G dated
February 13, 1997, filed by the reporting person with the Securities and
Exchange Commission. The Schedule 13G is a group filing of Cowen & Company,
a broker-dealer registered under the Securities Exchange Act and an
investment advisor registered under the Investment Advisors Act of 1940,
Cowen Incorporated, the general partner of Cowen & Company, and Joseph M.
Cohen, an individual who may be deemed to be a controlling person of Cowen
Incorporated. This group of persons reported shared voting and investment
power with respect to all 403,254 shares reported as beneficially owned.
<F5> Based upon information set forth in a Schedule 13D dated February 5, 1997,
filed by the reporting persons with the Securities and Exchange Commission.
The Schedule 13D is a group filing of RH Capital Associates, a sole
proprietorship and the sole general partner of Glen Rock Partners, L.P. and
RH Capital Associates Number One, L.P., each a Delaware Limited
Partnership, and Robert Horwitz, the owner of RH Capital Associates. This
group of persons reported shared voting and investment power with respect
to all 308,600 shares reported as beneficially owned.
<F6> Total includes 335 shares owned by Mr. Usdan's spouse, as to which shares
Mr. Usdan has no voting or investment power, 4,436 shares held for Mr.
Usdan's account under RehabCare's 401(k) Plan and 36,433 shares held for
Mr. Usdan's account under RehabCare's Executive Deferred Compensation Plan.
<F7> Total includes 4,940 shares held by trusts of which Mr. Stoddard's children
are beneficiaries, as to which shares Mr. Stoddard has no voting or
investment power, 200,470 shares deemed to be beneficially owned by Mr.
Stoddard by virtue of his right to convert into RehabCare Common Stock
RehabCare's Convertible Subordinated Promissory Note and 11,294 shares
deemed to be beneficially owned by trusts of which Mr. Stoddard's children
are beneficiaries by virtue of such trusts' right to convert RehabCare's
Convertible Subordinated Promissory Note into RehabCare Common Stock, as to
which shares Mr. Stoddard has no voting or investment power.
</FN>
</TABLE>
- 3 -
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, the holders of RehabCare Common Stock
will vote on the election of seven directors to serve a term of one year until
the 1998 Annual Meeting or until their successors shall have been duly elected
and qualified. The persons named as proxies on the accompanying Proxy Card
intend to vote all duly executed proxies received by the Board of Directors for
the election of the seven nominees listed below, except as otherwise directed by
the stockholder on the Proxy Card. If for any reason any nominee becomes
unavailable for election, which is not now anticipated, the persons named in the
accompanying Proxy Card will vote for such substitute nominees as designated by
the Board of Directors. The seven nominees receiving the highest number of votes
will be elected as directors of RehabCare. All nominees are currently directors
of RehabCare. The Board of Directors recommends a vote "FOR" the election of
each of the nominees as a director.
In connection with RehabCare's acquisition of Healthcare
Staffing Solutions, Inc. and HCH, Inc. (collectively, "HSSI") on March 1, 1996,
RehabCare agreed in the stock purchase agreement to create as of the closing
date of the acquisition an additional directorship and to appoint Richard C.
Stoddard as a director of RehabCare. RehabCare further agreed to include Mr.
Stoddard in the slate of nominees to be presented for election to the RehabCare
stockholders at the annual stockholders' meetings in 1996 and 1997. In the event
that Mr. Stoddard's employment with RehabCare has been terminated due to
disability, Mr. Stoddard shall be entitled to designate another individual (with
the approval of RehabCare) for nomination to the stockholders as a director at
such annual meetings. The obligation to nominate Mr. Stoddard or his designee at
such annual meetings shall terminate upon the termination of Mr. Stoddard's
employment with RehabCare for any reason other than Mr. Stoddard's disability.
The name, age, principal occupation or position and other
directorships with respect to the nominees are set forth below. Unless otherwise
indicated, each of the nominees has held the position or another executive
position with the same entity shown or an affiliated entity for in excess of
five years.
William G. Anderson, 64 - Director since 1991; Consultant and
Retired Vice Chairman, Ernst & Young (public accountants).
Richard E. Ragsdale, 53 - Director since 1993; Chairman of
the Board and Director, Community Health Systems, Inc. (hospital ownership
and management); President, CompuCare Auto Diagnostic Center, Inc.
(automobile service); Director, The Minirth Meier New Life Clinics, Inc.
(psychiatric contract units); Chairman and Director, ProMedCo Management
Company (physician practice management).
John H. Short, Ph.D., 52 - Director since 1991; Managing
Partner, Phase II Consulting (health care and economic consulting).
Richard C. Stoddard, 48 - Director since 1996; President of
HSSI, a wholly owned subsidiary of RehabCare (recruitment and placement of
therapists).
H. Edwin Trusheim, 69 - Director since 1992; Retired Chairman
of the Board, General American Life Insurance Company (life and health
insurance); Director, Angelica Corporation, Laclede Gas Company, Reinsurance
Group of America, Incorporated and Venture Stores, Inc.
James M. Usdan, 47 - Director since 1991; President and Chief
Executive Officer of RehabCare; Director, Metro One Telecommunications, Inc.
- 4 -
<PAGE>
Theodore M. Wight, 54 - Director since 1991; a General Partner
of the General Partners of Walden Investors and Pacific Northwest Partners SBIC,
L.P. (venture capital); Director, Eagle Hardware & Garden, Inc. and Interlinq
Software Corp.
BOARD OF DIRECTORS AND COMMITTEES
During the calendar year ended December 31, 1996, the Board of
Directors of RehabCare met seven times. Each director attended not less than 75%
of the meetings of the Board of Directors and committees of which such director
was a member during 1996. The Board of Directors of RehabCare has standing Audit
and Compensation Committees.
The current members of the Audit Committee are Messrs.
Anderson and Short. The Audit Committee met two times during 1996. The duties of
the Audit Committee include selecting the independent auditors of RehabCare and
negotiating the scope and cost of the audit and other services rendered to
RehabCare by such auditors; meeting periodically with RehabCare's independent
public accountants and management to review the work of each and to ensure that
each is properly discharging its responsibilities; and reviewing RehabCare's
accounting policies and internal controls to determine whether such policies and
controls are adequate and are being followed.
The Compensation Committee reviews and recommends to the Board
of Directors the salaries of all executive officers of RehabCare and authorizes
all other forms of executive compensation. The current members of the
Compensation Committee are Messrs. Trusheim, Ragsdale and Wight. The
Compensation Committee met eight times during 1996. The Compensation Committee
is also responsible for the administration of all aspects of RehabCare's
stock-based incentive plans.
DIRECTORS' FEES
Directors who are not also employees of RehabCare receive a
fee of $2,500 for each meeting of the Board of Directors attended in person.
Such directors are also reimbursed for expenses incurred in connection with
their attendance at Board meetings.
Pursuant to the Directors' Stock Option Plan, on January 14 of
each year each non-employee director on such date who has served as a director
for at least ten months during the preceding plan year will be granted an option
to acquire 10,000 shares of RehabCare Common Stock with a per share exercise
price equal to the fair market value of a share of RehabCare Common Stock on the
date of grant. Non-employee directors who do not serve a full ten months will
receive an option for 1,000 shares of RehabCare Common Stock for each full
calendar month of service as a director during the plan year. During the
ten-month period ended December 31, 1996, there were no options to acquire
shares of RehabCare Common Stock granted to non-employee directors.
- 5 -
<PAGE>
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 14, 1997, the
beneficial ownership of RehabCare Common Stock by each director and each
executive officer named in the Summary Compensation Table, individually, and all
directors and executive officers as a group:
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner Beneficially Owned <F1> Percent of Class<F2>
<S> <C>
William G. Anderson 55,000<F3> 1.44%
Richard E. Ragsdale 99,903<F3><F4> 2.62%
John H. Short, Ph.D 50,000<F3> 1.31%
Richard C. Stoddard 304,410<F5><F6> 7.65%
H. Edwin Trusheim 46,000<F3> 1.21%
James M. Usdan 311,564<F6><F7> 7.74%
Theodore M. Wight 32,028<F8> <F9>
Alan C. Henderson 115,120<F6><F10> 2.98%
Keith L. Goding 30,400<F6><F11> <F9>
Hickley M. Waguespack 56,169<F6><F12> 1.47%
All directors and executive officers as a group (10 persons) 1,100,594<F6> 23.82%
<FN>
<F1> Except as otherwise noted, each individual has sole voting and investment
power with respect to the shares listed beside his name.
<F2> Based upon 3,768,172 shares of RehabCare Common Stock issued and
outstanding as of March 14, 1997 and, for each director or executive
officer or the group, the number of shares subject to options or conversion
rights exercisable by such director or executive officer or the group on or
prior to May 13, 1997.
<F3> Includes 45,000 shares subject to presently exercisable stock options.
<F4> Includes 54,903 shares of RehabCare Common Stock held by The Ragsdale
Family Foundation, of which Mr. Ragsdale is a trustee, and as to which
shares Mr. Ragsdale has shared voting and investment power.
<F5> Includes 4,940 shares held by trusts of which Mr. Stoddard's children are
beneficiaries, as to which shares Mr. Stoddard has no voting or investment
power, 200,470 shares deemed to be beneficially owned by Mr. Stoddard by
virtue of his right to convert into RehabCare Common Stock RehabCare's
Convertible Subordinated Promissory Note and 11,294 shares deemed to be
beneficially owned by trusts of which Mr. Stoddard's children are
beneficiaries by virtue of such trusts' right to convert RehabCare's
Convertible Subordinated Promissory Note into RehabCare Common Stock, as to
which shares Mr. Stoddard has no voting or investment power.
<F6> Totals include 211,764, 256,250, 92,500, 30,000, 51,875 and 852,389 shares
subject to stock options or conversion rights held by Messrs. Stoddard,
Usdan, Henderson, Goding and Waguespack, and all directors and executive
officers as a group, respectively, that are either presently exercisable or
which are exercisable on or prior to May 13, 1997.
- 6 -
<PAGE>
<F7> Includes 335 shares owned by Mr. Usdan's spouse, as to which shares Mr.
Usdan has no voting or investment power, 4,436 shares held for Mr. Usdan's
account under RehabCare's 401(k) Plan and 36,433 shares held for Mr.
Usdan's account under RehabCare's Executive Deferred Compensation Plan.
<F8> Includes 30,000 shares subject to presently exercisable stock options.
<F9> Less than one percent.
<F10>Includes 300 shares owned by Mr. Henderson's spouse as custodian for Mr.
Mr.Henderson's children, as to which shares Mr. Henderson has no voting or
investment power, 3,807 shares held for Mr. Henderson's account under
RehabCare's 401(k) Plan and 10,313 shares held for Mr. Henderson's account
under RehabCare's Executive Deferred Compensation Plan.
<F11>Includes 400 shares owned by a trust of which Mr. Goding is the trustee and
the beneficiary.
<F12>Includes 2,084 shares held for Mr. Waguespack under RehabCare's Executive
Deferred Compensation Plan.
</FN>
</TABLE>
REPORT OF COMPENSATION COMMITTEE
REGARDING EXECUTIVE COMPENSATION
General
RehabCare's executive compensation program is administered by
the Compensation Committee of the Board of Directors. During the ten-month
period ended December 31, 1996, the Committee was composed of three non-employee
directors, Messrs. Trusheim (Chairman), Ragsdale and Wight.
RehabCare's executive compensation policy is designed and
administered to provide a competitive compensation program that will enable
RehabCare to attract, motivate, reward and retain executives who have the
skills, education, experience and capabilities required to discharge their
duties in a competent and efficient manner. The compensation policy is based on
the principle that the financial rewards to the executive are aligned with the
financial interests of the stockholders of RehabCare. In this manner, RehabCare
will meet its ultimate responsibility to its stockholders by striving to give a
suitable long-term return on their investment through earnings from operations
and prudent management of RehabCare's business and operations.
RehabCare's executive compensation strategy has three separate
elements consisting of base salary, annual incentive compensation and long-term
incentive compensation. The following is a summary of the policies underlying
each element.
Base Salary
The Committee has determined the salary ranges for each of the
executive officer positions of RehabCare based upon the level and scope of the
responsibilities of the office, the pay levels of similarly positioned executive
officers among companies competing for the services of such executives and a
consideration of the level of experience and performance profile of the
particular executive officer. In considering the competitors in the market,
RehabCare emphasizes publicly traded rehabilitation services companies with
similar service and revenue profiles to RehabCare. RehabCare also looks at a
combination of for-profit general hospitals and certain outpatient service
providers to define the lower end of the
- 7 -
<PAGE>
compensation market and the larger publicly traded rehabilitation services
companies (i.e. companies with annual revenues of $500 million or more) to
define the upper limits of such market.
The Committee's recent practice has been to establish a range
of base salaries for particular executive officers within the range offered by
the comparison group of companies so as to be able to attract and retain high
quality people. The data utilized in determining such ranges is compiled from
publicly available information regarding the comparison group of companies and
from various salary surveys that are made available to the public by trade and
industry associations, accounting firms, compensation consultants and
professional groups.
During the ten-month period ended December 31, 1996, Messrs.
Usdan and Henderson each had separate employment contracts with RehabCare that
were entered into prior to such period. These employment contracts established
an initial base salary for the respective executive officer, which base salary
rate is to be reviewed for adjustment in May of each subsequent year. The
Committee met in April 1996 to consider base salary increases for Messrs.
Goding, Henderson and Waguespack based upon the performance evaluation and
recommendation of the Chief Executive Officer. Base salary increases for Mr.
Usdan, as the Chief Executive Officer, are based upon the performance evaluation
conducted by the Committee and/or the Board of Directors.
In connection with the Committee's annual evaluation of the
base salaries of the executive officers of RehabCare, in April 1996 the
Committee increased the respective annual base salary of Messrs. Usdan, Goding,
Henderson and Waguespack by between 14% and 18% of such executive officer's
previous annual base salary.
Annual Incentive Compensation
For services rendered during the ten-month period ended
December 31, 1996, each of RehabCare's executive officers will receive cash
bonuses awarded on performance-based criteria upon the completion of such
period. Messrs. Usdan and Henderson have a performance-based annual cash bonus
compensation component set forth in their respective employment contracts with
RehabCare. Under the contractual provisions, the cash bonuses of Messrs. Usdan
and Henderson are based upon the achievement of certain targets for the annual
growth in RehabCare's fully diluted pretax earnings per share, excluding
extraordinary items and after deduction of accrued bonuses (hereinafter referred
to as "EPS"). The cash bonuses for each such officer will range from 4% of such
officer's base compensation during the applicable fiscal year for a 10% annual
growth rate in EPS up to 100% of such officer's then current base salary for a
31% annual growth rate in EPS. For the bonus payable with respect to the
ten-month period ended December 31, 1996, earnings per share for the twelve
months ended February 28, 1997 was compared to the comparable period ended
February 29, 1996. For calendar 1997, the cash bonus calculation will be based
upon annualized growth in earnings per share during the ten-month period
commencing on March 1, 1997, and ending on December 31, 1997, as compared with
calendar year 1996. Thereafter, cash bonuses will be based upon growth in
earnings per share during the then-current calendar year as compared with the
immediately prior calendar year to be consistent with RehabCare's newly
established December 31 fiscal year end. For the ten-month period ended December
31, 1996, Messrs. Usdan and Henderson will receive cash bonuses under their
contracts of $149,305 and $113,183, respectively. Messrs. Goding and Waguespack
also will receive performance-based cash bonuses of $122,917 and $95,844 for the
period.
- 8 -
<PAGE>
Long-Term Incentive Compensation
The Committee believes that long-term incentive compensation
is the most direct way of tying the executive compensation to increases in
stockholder value. RehabCare's long-term incentive programs are both cash- and
stock-based thereby providing a means through which executive officers will be
incentivized to continue high quality performance with RehabCare over a long
period of time while allowing such executive officers to build a meaningful
investment in RehabCare Common Stock.
Stock options were awarded to all executive officers as well
as other key employees who were employed by RehabCare on the date of the initial
public offering of its Common Stock in June 1991, with the number of shares
subject to such options based upon the level of responsibility of the recipient.
Executive officers and other eligible employees who joined RehabCare after the
initial public offering date were also granted options to purchase shares of
RehabCare Common Stock shortly after their dates of employment based upon their
respective level of duties. The Board of Directors, upon the recommendation of
the Committee, has given the Chief Executive Officer the authority to grant
newly hired employees of RehabCare options to purchase up to 10,000 shares of
RehabCare Common Stock. Each option has an exercise price equal to the fair
market value of RehabCare Common Stock on the date of grant and has a term of
ten years.
In addition, the Committee from time to time has evaluated the
level of long-term incentives provided to each of the executive officers of
RehabCare and each officer's relative contributions to corporate performance.
Based upon such evaluation, the Committee has approved grants of additional
options to certain executive officers of RehabCare. During the ten months ended
December 31, 1996, the Committee granted options for the purchase of 7,000,
50,000 and 6,000 shares of RehabCare Common Stock to Messrs. Goding, Henderson
and Waguespack, respectively, at an exercise price of $16.00 per share, the fair
market value of RehabCare Common Stock on the date of grant.
In October 1992, the Board of Directors, upon the
recommendation of the Committee, entered into supplemental cash bonus agreements
with certain of the executive officers who had served RehabCare continually
since before the initial public offering. The purpose of the agreements was to
reward these executive officers for their outstanding past performances through
the date of the agreements as well as to establish incentives to continue in the
service of RehabCare for the long-term future. The Committee viewed this bonus
program as a one-time grant to long-time executives in recognition of their
efforts in establishing RehabCare as a publicly traded company. See
"Compensation of Executive Officers - Employment Arrangements."
The Committee believes that the combination of the two
long-term incentive programs gives the participating officers a balance between
cash incentives for continuation of service over a period of years and equity
appreciation incentives from the stock-based grants.
- 9 -
<PAGE>
Compensation of Chief Executive Officer
Mr. Usdan's base salary, annual incentive compensation and
long-term incentive compensation are determined by the Committee in the same
manner as is used by the Committee for executive officers generally as well as
by reference to Mr. Usdan's employment contract with RehabCare. The total
compensation package of Mr. Usdan is designed to be competitive within the
industry while creating awards for short- and long-term performance in line with
the financial interests of the stockholders. A substantial portion of Mr.
Usdan's cash compensation for the year is incentive-based and is therefore at
risk to the extent that RehabCare does not meet or exceed the pre-established
EPS growth objectives included in his employment contract.
COMPENSATION COMMITTEE
H. EDWIN TRUSHEIM RICHARD E. RAGSDALE THEODORE M. WIGHT
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of each
executive officer of RehabCare for each of the last three fiscal periods:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus($)<F2> Options/SARs(#) Compensation($)<F3>
- --------------------------- ---- ---------- ----------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
James M. Usdan, President 1996<F1> $214,167 $325,138 --/-- $3,150
and Chief Executive Officer 1996 220,833 281,584 --/-- 4,739
1995 195,000 272,590 --/-- 3,785
Alan C. Henderson, 1996<F1> 162,500 183,183 50,000/-- 3,240
Executive Vice President 1996 172,958 150,995 --/-- 4,627
and Chief Financial Officer 1995 161,458 157,223 10,000/-- 3,730
Keith L. Goding, Executive 1996<F1> 137,500 122,917 7,000/-- 3,317
Vice President and Chief 1996 145,000 105,194 --/-- 483
Development Officer<F4> 1995 12,083 -- 60,000/-- --
Hickley M. Waguespack, 1996<F1> 137,500 113,344 6,000/-- 3,329
Executive Vice President 1996 145,000 83,387 60,000/-- 3,070
and Chief Operating Officer 1995 100,580 56,459 2,500/-- 2,234
<FN>
<F1> Effective December 31, 1996, RehabCare converted its fiscal year end from
the last day of February to December 31. For purposes of the compensation
table, the first row designated 1996 sets forth the compensation of each
executive officer of RehabCare for the ten-month period ended December 31,
1996. The second and third rows, designated 1996 and 1995, respectively,
set forth the compensation
- 10 -
<PAGE>
for each executive officer of RehabCare for fiscal year 1996, which ended
February 29, 1996, and fiscal year 1995, which ended February 28, 1995.
<F2> Totals for the ten-month period ended December 31, 1996 include $175,833,
$70,000 and $17,500 payable to Messrs. Usdan, Henderson and Waguespack,
respectively, pursuant to supplemental cash bonus agreements between
RehabCare and the named executive officer.
<F3> Totals for the ten-month period ended December 31, 1996 in respect of
Messrs. Usdan, Henderson, Goding and Waguespack include amounts contributed
by RehabCare pursuant to the matching portion of RehabCare's 401(k) Plan.
<F4> Mr. Goding was appointed Executive Vice President and Chief Development
Officer effective February 10, 1995. Prior thereto, Mr. Goding was
employed by a company unaffiliated with RehabCare and, thus, no disclosure
with regard to executive compensation of Mr. Goding is provided for any
period prior to his employment with RehabCare.
</FN>
</TABLE>
Employment Arrangements
RehabCare currently has separate employment agreements with
each of James M. Usdan, President and Chief Executive Officer, and Alan C.
Henderson, Executive Vice President and Chief Financial Officer, with terms
through April 30, 1997, and automatically renewable thereafter for successive
one-year terms unless terminated by either party. The agreements provide for
minimum annual base salaries of $150,000 for Mr. Usdan and $135,000 for Mr.
Henderson and annual cash bonuses based upon the achievement of certain targets
for the annual growth in RehabCare's fully diluted pretax earnings per share,
excluding extraordinary items and after deduction of accrued bonuses. The cash
bonuses will range from 4% of the officer's base compensation for a 10% annual
growth rate up to 100% of base compensation for a 31% annual growth rate. Each
agreement provides for severance pay upon termination by RehabCare equal to one
year's base salary plus the officer's pro rata bonus for the year of
termination, and for a one-year covenant not to compete on the part of the
officer. In addition, upon a change in control of RehabCare (as defined in the
agreements), all unvested options held by the officer will immediately vest.
Each of Messrs. Usdan, Henderson and Waguespack has a separate
termination agreement with RehabCare under which such executive officer will be
paid severance benefits in the event that his employment with RehabCare is
"terminated" by RehabCare within three years of a "change in control" of
RehabCare but prior to such executive officer reaching the age of 65. Each
agreement is for a term of three years and, unless there is a prior "change in
control," each agreement will be subject to an automatic extension each year for
an additional year, except if RehabCare gives a 60-day written notice to the
executive officer that the term will not be so extended.
The termination compensation agreements of Messrs. Usdan and
Henderson would require a lump-sum cash payment in an amount equal to 2.99 times
the executive officer's average annual compensation for the five full fiscal
years preceding the fiscal year in which the termination occurs. The agreement
of Mr. Waguespack would require a lump-sum cash payment in an amount equal to
such executive officer's then-current annual rate of compensation. In the case
of Messrs. Usdan and Henderson, if payment of the foregoing amounts and any
other benefits received or receivable upon termination after a "change in
control" would subject such executive officer to the payment of a federal excise
tax, the total amount payable by RehabCare to such executive officer shall be
increased by an amount sufficient to provide such executive officer (after
satisfaction of all excise taxes and federal and state income taxes
- 11 -
<PAGE>
attributable to such increased payment) with a net amount equal to the federal
excise tax owed by the executive officer.
"Change in control" is generally defined as (i) the
acquisition by any person of beneficial ownership of 20% or more of the
outstanding shares of RehabCare Common Stock or of the combined voting power in
the election of directors; (ii) the replacement of the majority of the existing
directors or persons nominated for election as directors by the incumbent Board
of Directors; (iii) approval by the stockholders of RehabCare of a
reorganization, merger or consolidation unless following such transaction
control of the surviving company does not change through changes in the
beneficial ownership of the securities or membership on the Board of the
surviving corporation; or (iv) approval by the stockholders of RehabCare of a
complete liquidation or dissolution of RehabCare or the sale of substantially
all of the assets of RehabCare. "Termination" generally includes any event which
ends the executive officer's employment relationship with RehabCare, other than
a termination due to the death, disability or retirement of the executive
officer, a termination by RehabCare for "cause" or a termination by the
executive officer for other than "good reason." "Cause" is generally defined as
(i) the willful and continued failure (after demand by RehabCare) to
substantially perform the duties of the office other than due to physical or
mental incapacity of the executive officer or (ii) the willful engagement in
misconduct by the executive officer that is materially injurious to RehabCare.
"Good reason" is generally defined as (i) the assignment of duties inconsistent
with the executive officer's position, duties, responsibilities and status
immediately prior to a "change in control"; (ii) a reduction in the executive
officer's current base salary; (iii) failure to continue the executive officer's
then-current participation level in RehabCare's bonus, compensation or other
benefit plans; (iv) the geographic relocation of the executive officer; or (v)
any breach of the agreement.
In addition to the termination compensation agreements
described above, Messrs. Goding and Waguespack have been granted additional
severance benefits pursuant an arrangement whereby if the executive officer is
terminated by RehabCare without cause or if a take-over of RehabCare occurs that
involves an involuntary change in the job responsibilities or job location of
the executive officer, the executive officer will receive from RehabCare a
severance payment equal to the executive officer's then-current base salary and
benefits for one year thereafter and any earned but unpaid bonus due and owing
to the executive officer.
In October 1992, the Board of Directors, upon the
recommendation of RehabCare's Compensation Committee, entered into supplemental
cash bonus agreements with each of Messrs. Usdan, Henderson and Waguespack in
the individual amounts of $700,000, $280,000 and $70,000, respectively, and
$1,050,000 in the aggregate. The purpose of the agreements was to reward these
individual executive officers for their efforts in establishing RehabCare as a
publicly traded company as well as to establish incentives for them to continue
in the service of RehabCare for the long-term future. The individual agreements
assign a cash bonus amount to the eligible executive officer based upon level of
responsibility. The bonuses vested on a monthly basis beginning in March 1993
and continued through February 1997. The vested portion of the executive
officer's bonus becomes payable within 30 days of the earlier of the termination
of the executive officer's employment with RehabCare or October 15, 2002. In
1996, the Board of Directors amended the terms of the supplemental cash bonus
agreements to provide that up to 50% of an executive officer's vested bonus may
be contributed to the executive officer's account under RehabCare's Executive
Deferred Compensation Plan and invested exclusively in RehabCare Common Stock.
- 12 -
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning stock
option grants made in the ten-month period ended December 31, 1996, to the
individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rate of
Stock Price
Appreciation
Individual Grants Value For Option Term
----------------------------------------------------- -----------------------
Number of Percent of
Securities Total
Underlying Options
Options Granted Exercise or
Granted Employees in Base Price Expiration
Name (#)<F1> Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---- ---------- ------------- --------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
James M. Usdan.............. -- -- -- -- -- --
Alan C. Henderson........... 50,000 16.43% 16.00 6/26/06 $ 503,116 $ 1,274,994
Keith L. Goding............. 7,000 2.30% 16.00 6/26/06 70,436 178,499
Hickley M. Waguespack....... 6,000 1.97% 16.00 6/26/06 60,374 152,999
<FN>
<F1> Options become exercisable with respect to 25% of the total number of
shares subject to the option on the first anniversary date o the date of
grant and will become exercisable with respect to an additional 25% of the
total number of shares on each of such anniversary date in the following
three years. The options terminate on the earlier of: ten years after
grant; three months after termination of employment except in the case of
death or total disability; or twelve months after termination for death or
total disability. Upon a change in control of RehabCare, as described under
"Employment Arrangements" herein, such options become fully exercisable.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Period and Fiscal Period-End
Option/SAR Values
The following table sets forth information concerning the
number of exercisable and unexercisable stock options at December 31, 1996, as
well as the value of such stock options having an exercise price lower than the
last reported trading price on December 31, 1996 ("in-the-money" options) held
by the executive officers named in the Summary Compensation Table. No options
were exercised by any of the named executive officers during the ten-month
period ended December 31, 1996.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at Fiscal
Shares Fiscal Period-End(#) Period-End($)<F1>
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ --------------------- -------------
<S> <C> <C> <C> <C>
James M. Usdan.............. -- -- 256,250/18,750 1,797,656/124,219
Alan C. Henderson........... -- -- 92,500/57,500 662,500/265,625
Keith L. Goding............. -- -- 15,000/52,000 103,125/338,250
Hickley M. Waguespack....... -- -- 36,250/52,250 268,906/387,406
<FN>
<F1> Based on a price per share of $20.125, the last reported transaction price of RehabCare Common Stock on December 31,
1996.
</FN>
</TABLE>
- 13 -
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative stockholder
returns, including the reinvestment of dividends, of RehabCare Common Stock on
an indexed basis with the NASDAQ Market Index and the Dow Jones Industry Group
Index of Health-Care Providers ("HEA") for the period beginning January 1, 1992,
and ending December 31, 1996:
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS<F1> AMONG REHABCARE GROUP, INC.,
NASDAQ MARKET INDEX AND DOW JONES INDUSTRIAL GROUP HEA INDEX
[GRAPH]
ASSUMES $100 INVESTED ON JANUARY 1, 1992 IN REHABCARE GROUP, INC. COMMON STOCK,
NASDAQ MARKET INDEX & DOW JONES GROUP HEA INDEX
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
RehabCare Group, Inc. 100 122.37 118.42 136.84 202.63 211.84
NASDAQ Market Index 100 100.98 121.13 127.17 164.96 204.98
Dow Jones Industry Group HEA Index 100 113.31 137.52 150.17 194.03 189.13
<FN>
<F1> Total return assumes reinvestment of dividends
</FN>
</TABLE>
- 14 -
<PAGE>
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
RehabCare's directors and executive officers ("Reporting Persons") to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of RehabCare Common Stock. To the knowledge of
management, based solely on its review of the copies of such reports furnished
to RehabCare, during the ten-month period ended December 31, 1996, all Section
16(a) filing requirements were met.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP served as RehabCare's independent public
accountants for the ten-month period ended December 31, 1996. Representatives of
KPMG Peat Marwick LLP are expected to be present at the Annual Meeting to
respond to appropriate questions from stockholders and such representatives will
have the opportunity to make statements if they so desire.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be present at the 1998
Annual Meeting of Stockholders must be received by the Secretary of RehabCare by
not later than November 27, 1997 for consideration of inclusion in the Proxy
Statement and Proxy Card for that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
of RehabCare does not intend to present, nor has it been informed that other
persons intend to present, any matters for action at the Annual Meeting, other
than those specifically referred to herein. If, however, any other matters
should properly come before the Annual Meeting, it is the intention of the
persons named as proxies to vote the shares represented by Proxy Cards granting
such proxies discretionary authority to vote on such other matters in accordance
with their judgment as to the best interest of RehabCare on such matters.
James M. Usdan
President and Chief Executive Officer
March 28, 1997
- 15 -
<PAGE>
REHABCARE GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1997
The undersigned hereby appoints JAMES M. USDAN and ALAN C. HENDERSON, and
each of them, with or without the other, proxies, with full power of
substitution to vote as designated below, all shares of stock of RehabCare
Group, Inc. (the "Corporation") that the undersigned signatory hereof is
entitled to vote at the Annual Meeting of Stockholders of the Corporation to be
held at the Pierre Laclede Center, Second Floor, 7733 Forsyth Boulevard, St.
Louis, Missouri, on Wednesday, April 30, 1997, at 8:00 a.m., local time, and all
adjournments thereof, all in accordance with and as more fully described in the
Notice and accompanying Proxy Statement for such meeting, receipt of which is
hereby acknowledged.
1. Election of Directors
Election of seven directors to hold office until the next Annual
Meeting of Stockholders or until their successors shall have been duly
elected and qualified.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as written to the for all nominees listed below.
contrary below)
William G. Anderson, Richard E. Ragsdale, John H. Short, Richard C. Stoddard,
H. Edwin Trusheim, James M. Usdan and Theodore M. Wight
(INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write that nominee's name in the space provided below)
2. In their discretion, upon any other business which may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES LISTED IN THE ELECTION OF
DIRECTORS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SIGN
HERE
(Please sign exactly as name appears
hereon)
SIGN
HERE
Executors, administrators, trustees,
etc. should so indicate when signing
Dated
<PAGE>
Appendix
Page 14 of the printed Proxy contains the Stockholder Return Performance
Graph. The information contained in the graph is depicted in the table that
follows the graph.
