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 the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SECTION 240.14a-11(c) or
SECTION 240.14a-12
U.S. Physical Therapy, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s)Filing Proxy Statement if other
than 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)(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 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>
U.S. PHYSICAL THERAPY, INC.
3040 Post Oak Blvd., Suite 222
Houston, Texas 77056
(713) 297-7000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 1998
_________________________
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders
(the "Special Meeting") of U.S. Physical Therapy, Inc. (the
"Company") will be held on Wednesday, September 9, 1998, at 10:00
a.m. (CDT), at the Company's office at 3040 Post Oak Boulevard,
Suite 222, Houston, Texas for the following purposes:
(1) To consider and vote upon a proposal to amend the
Company's 1992 Stock Option Plan to (i) increase by 350,000 the
number of shares of Company common stock reserved for issuance
under the 1992 Stock Option Plan and (ii) increase the number of
stock options that may be granted to any one eligible individual in
any one calendar year from 50,000 to 100,000; and
(2) To transact such other business as may properly come
before the Special Meeting or any adjournments thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the
close of business on August 3, 1998 as the record date for the
determination of stockholders entitled to notice of and to vote at
the Special Meeting. Only holders of common stock of record at the
close of business on that date will be entitled to notice of and to
vote at the Special Meeting or any adjournments thereof.
In the event that there are not sufficient votes to approve
any one or more of the foregoing proposals at the time of the
Special Meeting, the Special Meeting may be adjourned in order to
permit further solicitation of proxies by the Company.
By Order of the Board of Directors
/s/ Dorothy Nagle Flato
Dorothy Nagle Flato
Corporate Secretary and Treasurer
Houston, Texas
August 12, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
U.S. PHYSICAL THERAPY, INC.
3040 Post Oak Blvd., Suite 222
Houston, Texas 77056
(713) 297-7000
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 9, 1998
_________________________
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to stockholders of U.S.
Physical Therapy, Inc. (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies to
be used at a Special Meeting of Stockholders (the "Special
Meeting") of the Company, to be held on Wednesday, September 9,
1998, at 10:00 a.m. (CDT), at the Company's office at 3040 Post Oak
Boulevard, Suite 222, Houston, Texas, and at any adjournments
thereof.
The Special Meeting has been called for the following
purposes: (1) to consider and vote upon a proposal to amend the
Company's 1992 Stock Option Plan to (i) increase by 350,000 the
number of shares of Company common stock reserved for issuance
under the 1992 Stock Option Plan and (ii)increase the number of
stock options that may be granted to any one eligible individual in
any one calendar year from 50,000 to 100,000 and (2) to transact
such other business as may properly come before the meeting or any
adjournments thereof. If the enclosed form of proxy is properly
executed and returned to the Company in time to be voted at the
Special Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. Properly executed
but unmarked proxies will be voted FOR the proposed amendments to
the 1992 Stock Option Plan. If any other matters are properly
brought before the Special Meeting, the persons named in the
accompanying proxy will vote the shares represented by the proxies
on such matters as determined by a majority of the Board of
Directors. This Proxy Statement is initially being mailed to
stockholders on or about August 12, 1998.
The presence of a stockholder at the Special Meeting will not
automatically revoke such stockholder's proxy. Stockholders may,
however, revoke a proxy at any time prior to its exercise by
delivering to the Company a duly executed proxy bearing a later
date, by attending the Special Meeting and voting in person, or by
filing a written notice of revocation with Dorothy Nagle Flato,
Corporate Secretary and Treasurer of the Company, at 3040 Post Oak
Blvd., Suite 222, Houston, Texas 77056.
The cost of soliciting proxies in the form enclosed herewith
will be borne by the Company. In addition to the solicitation of
proxies by mail, the Company, through its directors, officers and
regular employees, may also solicit proxies personally or by
telephone. The Company will also request persons, firms and
corporations holding shares in their names or in the name of their
nominees, which are beneficially owned by others, to send proxy
material to and obtain proxies from such beneficial owners and will
reimburse such holders for their reasonable expenses in doing so.
The securities which can be voted at the Special Meeting
consist of shares of common stock of the Company with each share
entitling its owner to one vote on all matters. The close of
business on August 3, 1998 has been fixed by the Board of Directors
as the record date for determination of stockholders entitled to
vote at the meeting. The number of shares of the Company's common
stock outstanding as of such date was 3,610,734. The presence, in
person or by proxy, of at least a majority of the total number of
outstanding shares of common stock is necessary to constitute a
quorum at the Special Meeting. The affirmative vote of the holders
of at least a majority of the outstanding shares of the Company's
common stock is required for approval of the proposed amendments to
the 1992 Stock Option Plan. Abstentions and broker non-votes will
be treated as votes present for the purpose of determining a quorum
at the Special Meeting. Abstentions and broker non-votes will have
the same effect as a negative vote on the proposed amendments to
the 1992 Stock Option Plan since the required affirmative vote is
calculated based on the percentage of outstanding shares.
EXECUTIVE COMPENSATION
Compensation
The following table shows the compensation paid by the Company
and its subsidiaries during 1997, 1996 and 1995 to the Company's
Chief Executive Officer and the Company's other executive officer
(the "named executive officers").
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
Securities
Name and Fiscal Underlying
Principal Position(s) Year Salary Bonus Options(#)
Roy W. Spradlin (a) 1997 $165,000 $ 35,000 15,000
President and Chief 1996 150,000 30,000 15,000
Executive Officer 1995 125,000 25,000 50,000
Mark J. Brookner (b) 1997 $130,000 $20,000 --
Chief Financial 1996 125,000 20,000 10,000
Officer 1995 110,000 15,000 15,000
(a) Mr. Spradlin became President and Chief Operating Officer in
May 1994. In August 1995, he was named Chief Executive
Officer.
(b) Mr. Brookner was named Vice Chairman of the Board effective
August 3, 1998 and resigned as Chief Financial Officer of the
Company as of that date.
J. Michael Mullin was appointed as the Company's new Chief
Financial Officer effective August 3, 1998. His salary for 1998 is
$115,000.
Option Grants
The following table contains information with respect to
grants of stock options to each of the named executive officers
during the year ended December 31, 1997.
Option Grants in 1997 Fiscal Year
Individual Grants
Potential
Number of % of Total Realizable Value
Securities Options at Assumed Annual
Underlying Granted to Exercise Rates of Stock
Options Employees of Base Price Appreciation
Granted in Fiscal Price Expiration for Option Term(b)
Name (#)(a) Year ($/Sh) Date 5%($) 10%($)
Roy
Spradlin 15,000 20% $9.125 8/20/97 $86,094 $218,179
(a) The options vest one-fourth on each of the second, third,
fourth and fifth anniversaries of the date of grant. Vesting
will be accelerated in the event of a "change in control" of
the Company (defined generally as the acquisition of 50% or
more of the Company's outstanding voting stock, a change in a
majority of the Board of Directors or a merger, consolidation
or acquisition of all or substantially all of the assets of
the Company), subject to certain limitations if vesting would
result in adverse tax consequences to the optionee. The per
share option exercise price equaled the fair market value of
a share of the Company's common stock on the date of grant, as
determined in accordance with the Company's 1992 Stock Option
Plan.
(b) The options granted to Mr. Spradlin are non-incentive stock
options which expire ten years from the date of grant.
Option Exercises and Holdings
The following table sets forth the 1997 year-end value of all
unexercised in-the-money options held by the named executive
officers. No options were exercised by either of the named
executive officers during 1997.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Value of Securities
Underlying Unexercised
Number of Securities In-the-Money Options
Underlying Unexercised at FY-End ($)(a)
Options At FY-End (#) Exercisable/
Name Exercisable/Unexercisable Unexercisable
Roy W. Spradlin 47,500/112,500 $147,625/$269,750
Mark J. Brookner 31,250/28,750 40,275/54,025
(a) Market value of underlying securities at year-end of $11.75
per share minus the exercise or base price of in-the-money
options at year-end.
Employment Agreements
Mr. Spradlin has entered into an amended and restated
employment agreement with the Company dated as of February 24,
1998, which supersedes his amended and restated employment
agreement with the Company dated as of February 21, 1997. Under
his new employment agreement, Mr. Spradlin is employed as President
and Chief Executive Officer for a five-year term ending on February
21, 2002. Pursuant to the terms of his new employment agreement,
Mr. Spradlin's base salary is $165,000, subject to review at least
annually with increases based on performance. Additionally, Mr.
Spradlin is eligible to receive cash bonuses payable at the
discretion of the Board of Directors and, subject to conditions of
eligibility, is entitled to participate in any employee benefit
plans adopted by the Company. Mr. Spradlin's new employment
agreement may be terminated by the Company prior to the expiration
of its five-year term in the event (i) he becomes disabled for 90
consecutive days or (ii) his employment is terminated for "cause"
(as defined in the agreement). In the event that (i) Mr. Spradlin's
employment is terminated without "cause," (ii) the Company sells all
or substantially all of its assets, (iii) more than 50% of the
Company's outstanding common stock is transferred or sold by the
Company's stockholders, (iv) the Company completes a merger or
consolidation in which the stockholders of the Company immediately
prior to the merger or consolidation own less than 50% of the
surviving company or (v) the Company is dissolved in a voluntary or
involuntary dissolution, Mr. Spradlin would be entitled to receive
a lump sum termination/severance benefit equal to one and one-half
times his annual salary plus bonus for the then most recent 12-
month period. Under his new employment agreement, in the event of
his death, Mr. Spradlin's heirs or beneficiaries would become
entitled to receive a payment equal to one year's annual salary.
Mr. Spradlin's new employment agreement further contains a covenant
not to compete during its five-year term and for a one year period
following the termination of his employment.
Compensation of Directors
Directors who are also employees of the Company are not
compensated separately for serving on the Board. Each of the
Company's directors who are not employees of the Company received
$3,500 for attendance at each regular meeting of the Board of
Directors. Directors are also reimbursed for their out-of-pocket
travel and related expenses incurred in attending all Board and
committee meetings. In December 1997, five of the Company's
current non-employee directors, Daniel C. Arnold, James B. Hoover,
Marlin W. Johnston, Richard C.W. Mauran and Albert L. Rosen, each
received ten-year non-qualified options to purchase 6,000 shares of
the Company's common stock. The exercise price of these options,
which were granted under the Company's 1992 Stock Option Plan, is
$11.50 per share. J. Livingston Kosberg received $75,000 for
serving as Chairman of the Board in 1997. Mark J. Brookner was
named Vice Chairman of the Board effective August 3, 1998 and will
receive $75,000 for serving in this capacity in 1998.
Stock Performance Graph
The following performance graph compares the cumulative total
stockholder return of the Company's Common Stock to The Nasdaq
Stock Market United States Index and The Nasdaq Stock Market
Healthcare Index for the period from December 31, 1992 through
December 31, 1997. The graph assumes that $100 was invested in
each of the Company's Common Stock and the companies listed on The
Nasdaq Stock Market United States Index and The Nasdaq Stock Market
Healthcare Index on December 31, 1992 and that any dividends were
reinvested.
Comparison of Five Years Cumulative Total Return for the Year
Ended December 31, 1997*
The Nasdaq
Measurement Period Stock Market The Nasdaq Stock
(Fiscal Year U.S. Physical United States Market
Covered) Therapy, Inc. Index Healthcare Index
12/31/92 $100 $100 $100
12/31/93 154 115 115
12/31/94 176 112 124
12/31/95 184 159 157
12/31/96 156 195 157
12/31/97 188 239 160
______________________
*Cumulative total return assumes an initial investment of $100 on
December 31, 1992 and the reinvestment of dividends. There were no
dividends paid by the Company during the period presented.
Report on Executive Compensation
The Board of Directors and its Compensation and Stock Option
Committees have prepared the following report on the Company's
policies with respect to the compensation of executive officers for
1997. The Board of Directors makes all decisions on compensation
of the Company's executive officers (other than stock options),
based upon recommendations of the Compensation Committee.
Decisions as to the grant of stock options are made by the Stock
Option Committee.
Compensation of Executive Officers
The compensation policies of the Company are designed to enable
the Company to attract, motivate and retain experienced and
qualified executives. The Company seeks to provide competitive
compensation. The Company's policy has been to provide a
significant component of an executive officer's compensation
through the grant of stock options. The Company believes that
grants of stock options to executives, as well as to employees
generally, help align the interests of such persons with the
interests of Company stockholders.
The following describes in more specific terms the elements of
compensation of executive officers for 1997.
Base Salaries
Base salaries of executives are initially determined by
evaluating the responsibilities of the position, the experience and
knowledge of the individual and the competitive marketplace for
executive talent. Base salaries for executive officers are
reviewed annually by the Compensation Committee and the Board
based on, among other things, individual performance and
responsibilities.
Incentive Compensation
Based on performance, incentive opportunities are available to a
wide range of Company employees. Incentive compensation is
effective in reinforcing both the overall values of the Company and
the specific operating goals of the various business units.
Incentive compensation programs are designed to focus employees'
attention on the key performance goals of the Company, to identify
the expected levels of performance and to reward individuals who
meet or exceed such expectations. The aggregate amounts available
for incentive awards are determined by the overall financial
performance of the Company. The actual awards paid to individual
recipients are formulated by management and approved by the
Compensation Committee in its discretion.
Stock Option Awards
The Company's 1992 Stock Option Plan, as amended, (the "1992
Option Plan") and the Executive Option Plan (the "Executive Plan")
were approved by the Board of Directors and the stockholders of the
Company to align employee and outside directors' interests with
stockholders' interests, to provide incentives to key employees of
the Company by encouraging their ownership of Common Stock and the
aid the Company in attracting and retaining such key employees,
upon whose efforts the Company's success and future growth depends.
Options are granted at the discretion of the Stock Option
Committee. Individual grant sizes are determined based on
organizational and individual performance. At the discretion of
the Stock Option Committee, and based on the recommendation of
management, options may also be used as an incentive for candidates
recruited to fill key positions.
During 1997, the Company granted options covering a total of
106,750 shares of Company common stock to 34 directors, officers
and employees, including an option for 15,000 shares granted to Mr.
Spradlin. The per share exercise price of all options granted in
1997 equaled the fair market value of a share of Company common
stock on the date of grant. At December 31, 1997, 40,625 shares
were available for future grant under the 1992 Option Plan and no
shares were available for future grant under the Executive Plan.
Stock option grants made to executive officers in 1997 reflect
significant individual performance and contributions relating to
the Company's operations, including implementation of the Company's
development program.
Other
The Company has a 401(k) profit sharing plan covering all
employees with three months of service. The Company may make
discretionary contributions of up to 50% of employee contributions.
The Company did not make any contributions during 1997.
Compensation of Chief Executive Officer
Mr. Spradlin received a salary of $165,000, $150,000 and $125,000
in 1997, 1996 and 1995, respectively. He also received bonuses
totaling $35,000, $30,000 and $25,000 in 1997, 1996 and 1995,
respectively. Although Mr. Spradlin participated in the Company's
401(k) Plan for 1995 through 1997, the Company did not make any
matching contributions to such plan during these years. In
addition to cash compensation, Mr. Spradlin was granted 15,000,
15,000 and 50,000 options to purchase shares of Common Stock under
the Option Plan during 1997, 1996 and 1995, respectively.
Compensation Deductibility Policy
Under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") and applicable Treasury regulations, no
deduction is allowed for annual compensation in excess of $1
million paid by a publicly traded corporation to its chief
executive officer and the four other most highly compensated
officers. Under those provisions, however, there is no limitation
on the deductibility of "qualified performance-based compensation."
In general, the Company's policy is to maximize the extent of tax
deductibility of executive compensation under the provisions of
Section 162(m) so long as doing so is compatible with its
determinations as to the most appropriate methods and approaches
for the design and delivery of compensation to the Company's
executive officers.
Respectfully submitted,
The Board of Directors Compensation Committee
J. Livingston Kosberg Daniel C. Arnold
Roy W. Spradlin James B. Hoover
Mark J. Brookner Albert L. Rosen
George H. Hargrave
Daniel C. Arnold
James B. Hoover Stock Option Committee
Marlin W. Johnston J. Livingston Kosberg
Albert L. Rosen George H. Hargrave
Richard C.W. Mauran
APPROVAL OF AMENDMENTS TO 1992 STOCK OPTION PLAN
A total of 645,000 shares of common stock (subject to
adjustment for changes in capitalization) are currently reserved
for issuance upon the exercise of stock options granted under the
1992 Option Plan to key employees, officers and directors of the
Company or any of its affiliates. The purpose of the 1992 Option
Plan is to provide an incentive for eligible individuals to remain
in the employ or service of the Company or its affiliates, to
extend to them the opportunity to acquire a proprietary interest in
the Company so that they will apply their best efforts for the
benefit of the Company and to aid the Company in attracting able
persons to serve the Company and its affiliates.
Proposed Amendments to 1992 Option Plan
The Board of Directors has voted, subject to stockholder
approval at the Special Meeting, to amend the 1992 Option Plan to
(i) increase by 350,000 (from 645,000 to 995,000) the number of
shares of common stock reserved for issuance upon exercise of
options granted under the 1992 Stock Option Plan and (ii) increase
the number of stock options that may be granted to any one eligible
individual in any one calendar year from 50,000 to 100,000 (in each
case, subject to adjustments for stock dividends, stock splits and
the like as provided in the 1992 Stock Option Plan). The proposed
350,000 share increase in the number of shares reserved for
issuance under the 1992 Option Plan will assure that a meaningful
number of shares will be available for future grant to key
employees, officers and directors of the Company and its affiliates
under the 1992 Option Plan.
The limitation on the maximum number of shares of common stock
that may be granted to any employee in a calendar year is a
consequence of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") effective for fiscal years from 1994 forward
under which no deduction is allowed for annual compensation in
excess of $1 million paid by a publicly traded corporation to its
chief executive officer and the four other most highly compensated
officers. Under Section 162(m), there is no limitation on the
deductibility of "qualified performance-based compensation." To
satisfy this definition: (i) the compensation must be paid solely
on account of the attainment of one or more pre-established,
objective performance goals; (ii) the performance goals under which
compensation is paid must be established by a compensation
committee comprised solely of two or more directors who qualify as
"outside directors" for purposes of the exception; (iii) the
material terms under which the compensation is to be paid must be
disclosed to and subsequently approved by shareholders of the
corporation before payment is made in a separate vote; and (iv) the
compensation committee must certify in writing before payment of
the compensation that the performance goals and any other material
terms were in fact satisfied. Under Treasury regulations, in the
case of compensation attributable to stock options, the performance
goal requirement (summarized in (i) above) is deemed satisfied, and
the certification requirement (summarized in (iv) above) is
inapplicable, if: (i) the grant or award is made by a compensation
committee satisfying the above requirements; (ii) the plan under
which the option is granted states the maximum number of shares
with respect to which options may be granted during a specified
time period to an employee; and (iii) under the terms of the
option, the amount of compensation is based solely on an increase
in the value of the stock after the date of grant. The proposed
increase in the limitation on the number of options that may be
granted to any one eligible individual in any one calendar year
from 50,000 to 100,000 is intended to provide the Company with
greater flexibility in making grants under the 1992 Option Plan.
At July 15, 1998, a total of 40,625 shares of common stock
remained available for future grant under the 1992 Option Plan. At
July 15, a total of approximately 54 key employees, officers and
directors of the Company and its affiliates were eligible to
participate in the 1992 Option Plan. Based on the closing bid
price of the Company's common stock on July 15, 1998 of $14.00, the
aggregate market value of the 350,000 additional shares to be
reserved under the 1992 Option Plan is $4,900,000.
The Company expects to make under the 1992 Option Plan (i) an
option grant to purchase 100,000 shares of Company common stock to
Mr. Spradlin and (ii) grants totaling 85,000 shares to three other
individuals (an option for 15,000 shares to Mr. Mullin and an
option for 35,000 shares each to two other officers of the
Company), on the date of stockholder approval of the proposed
amendments to the 1992 Option Plan. All such options would be non-
qualified options, and would vest one-fourth on each of the second,
third, fourth and fifth anniversaries of the date of grant.
Vesting will be accelerated in the event of a "change in control"
of the Company (defined generally as the acquisition of 50% or more
of the Company's outstanding voting stock, a change in a majority
of the Board of Directors or a merger, consolidation or acquisition
of all or substantially all of the assets of the Company), subject
to certain limitations if vesting would result in adverse tax
consequences to the optionee. The per share option exercise price
of the options will equal the fair market value of a share of the
Company's common stock on the date of grant, determined in
accordance with the 1992 Option Plan.
Required Vote
The approval by the affirmative vote of a majority of the
outstanding shares is required to approve the proposed amendments
to the 1992 Option Plan to (i) increase by 350,000 (from 645,000 to
995,000) the number of shares of common stock reserved for issuance
upon exercise of options granted under the 1992 Option Plan and
(ii) increase the number of options to purchase shares of Company
common stock that may be granted to any one eligible individual in
any one calendar year from 50,000 to 100,000. The Board recommends
a vote FOR approval of such amendments.
Description of the 1992 Option Plan
The principal provisions of the 1992 Option Plan are
summarized below under the caption "Description of the 1992 Option
Plan." Such summary does not, however, purport to be complete and
is qualified in its entirety by the terms of the 1992 Option Plan.
Shareholders may obtain, free of charge, a copy of the 1992 Option
Plan by writing Dorothy Nagle Flato, Corporate Secretary and
Treasurer, U.S. Physical Therapy, Inc., 3040 Post Oak Blvd., Suite
222, Houston, Texas 77056.
The 1992 Option Plan provides for the grant of options that
are intended to qualify as "incentive stock options" under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code")
as well as non-qualified options. The 1992 Option Plan is
administered by the Stock Option Committee ("Option Committee"),
which is appointed by the Board of Directors. The Option Committee
selects the key employees, officers and directors of the Company
and its affiliates to whom options are granted. Effective August
3, 1998, the Company reconstituted the members of the Stock Option
Committee for the purpose of satisfying certain requirements of
Section 162(m) of the Code (discussed below). The current members
of the Option Committee are Messrs. Daniel C. Arnold (Chairman),
Albert L. Rosen and James B. Hoover.
Incentive stock options (those intended to qualify for special
tax treatment under the Code) granted under the 1992 Option Plan
may be granted only to employees of the Company or a corporate
subsidiary and at a per share exercise price of not less than the
fair market value of a share of common stock on the date of grant.
The exercise prices of non-qualified options granted under the 1992
Option Plan are determined by the Option Committee upon each grant
(but may not be less than the par value of a share of the Company's
common stock). The Option Committee determines which eligible
individuals receive options and how many are issued. Currently,
options covering no more than 50,000 shares of common stock of the
Company may be granted under the 1992 Option Plan to any officer or
other employee during any calendar year. The maximum option term
for an incentive option is 10 years from the date of grant. No
incentive option may be granted more than 10 years after the
effective date of the 1992 Option Plan. No person may be granted
an incentive option if, at the time of the grant, such person owns,
directly or indirectly, more than 10% of the total combined voting
power of the Company or of any affiliate unless the option price is
at least 110% of the fair market value of the common stock on the
date of grant of the option and the exercise period of such
incentive option is by its terms limited to five years. Payment
for shares purchased under the 1992 Option Plan may be made either
in cash or cash equivalents or by exchanging shares of common stock
of the Company with a fair market value equal to or less than the
total option price plus cash for any difference, as determined in
the discretion of the Option Committee.
If an employee's employment with the Company or an affiliate
terminates by reason of death or disability, his or her options, to
the extent then exercisable, may be exercised within one year after
such death or disability. If the optionee's employment terminates
for any reason other than death or disability, options held by such
optionee terminate 30 days after the date of such termination
unless otherwise provided in the option agreement. The Option
Committee may extend the period during which the options may be
exercised.
Options granted under the 1992 Option Plan are exercisable
during an optionee's lifetime only by the optionee or the
optionee's guardian or legal representative. Options are not
transferable other than by will or the laws of descent and
distribution. Further, shares of common stock issued upon exercise
of an option may not be transferred until after six months from the
date the option is granted.
Subject to the terms and conditions of and within the
limitations of the 1992 Option Plan, the Option Committee may
modify, extend or renew outstanding options granted under the 1992
Option Plan, or accept the surrender of options and authorize the
granting of new options under the 1992 Option Plan in substitution
therefor.
If the outstanding shares of the Company's common stock are
increased or decreased by reason of a stock dividend or split,
combination, exchange of shares, or other recapitalization, merger
or otherwise, in which the Company is the surviving corporation, or
by reason of a spin-off of a part of the Company into a separate
entity, or assumptions and conversions of outstanding grants due to
the acquisition by the Company of a separate entity, an appropriate
and proportionate adjustment will be made in the aggregate number
and class of the reserved shares, in the number and class of shares
subject to each outstanding option, and the per share exercise
price of each outstanding option shall be automatically adjusted to
equitably reflect the effect of such change.
Adjustments to account for changes in capitalization will be
made by the Board, whose determination in that respect will be
conclusive. No fractional shares of common stock will be issued
under the 1992 Option Plan on account of any such adjustment, and
any fractions resulting from any such adjustment will be rounded
downward to the nearest whole share.
Except as otherwise provided in the option agreement, upon any
dissolution or liquidation of the Company, or upon a merger or
consolidation in which the Company is not the surviving
corporation, or upon any transaction by a third party which results
in any person owning 50% or more of the total combined voting power
of all classes of stock of the Company, the 1992 Option Plan and
the options issued thereunder will terminate, unless provision is
made in connection with such transaction for the continuation of
the Plan and/or the assumption of the options or for the
substitution for such options of new options covering the stock of
a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and
the per share exercise price. In the event of such termination,
all outstanding options shall be exercisable in full during such
period immediately prior to the occurrence of such termination as
the Board of Directors in its discretion shall determine.
The Board of Directors of the Company at any time may amend
the 1992 Option Plan as to shares of common stock as to which
options have not been granted. However, the approval of the
Company's stockholders is required for any amendment that would
(1) increase the aggregate number of shares of common stock as to
which options may be granted (other than adjustments upon changes
in capitalization); (2) increase the maximum period during which
options may be exercised; or (3) extend the effective period of the
1992 Option Plan. The Board at any time may terminate or suspend
the 1992 Option Plan. No termination, suspension or amendment of
the Plan may, without the consent of the optionee to whom an option
has been granted, alter or impair any of the rights of the holder
of the option.
Federal Income Tax Consequences of the 1992 Option Plan
The grant of an option will not be a taxable event for the
optionee or the Company.
Incentive Options. An optionee will not recognize taxable
income upon exercise of an incentive option, and any gain realized
upon a disposition of shares of stock received pursuant to the
exercise of an incentive option will be taxed as long-term capital
gain if the optionee holds the shares for at least two years after
the date of grant and for one year after the date of exercise.
However, the excess of the fair market value of stock subject to an
incentive option on the exercise date over the option exercise
price will be included in the optionee's alternative minimum
taxable income in the year of exercise (or, if the optionee is
subject to certain securities law restrictions, in the year in
which such restrictions expire, unless the optionee elects within
30 days following exercise to have income determined without regard
to such restrictions) for purposes of the alternative minimum tax.
An optionee may be entitled to a credit against regular tax
liability in future years for minimum taxes paid with respect to
the exercise of incentive options. The Company will not be
entitled to any business expense deduction with respect to the
grant or exercise of an incentive option, except as discussed
below.
For the exercise of an option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the
Company or a corporate subsidiary from the date the option is
granted through a date within three months before the date of
exercise of the option. In the case of an optionee who is
disabled, the three-month period for exercise following termination
of employment is extended to one year. In the case of an employee
who dies, the time for exercising incentive stock options after
termination of employment and the holding period for stock received
pursuant to the exercise of the option are waived.
If all of the foregoing requirements are met except for the
one-year or two-year holding period mentioned above, the optionee
will recognize ordinary income upon the disposition of the stock in
an amount equal to the excess of the fair market value of the stock
at the time the option was exercised over the option exercise
price. The balance of the realized gain, if any, will be capital
gain. The employer corporation will be allowed a business expense
deduction to the extent the optionee recognizes ordinary income,
except that no deduction will be allowed for compensation in any
one year paid to the chief executive officer and the four other
most highly compensated executive officers of the Company to the
extent such compensation does not satisfy the requirements of
Section 162(m) of the Code.
If an optionee exercises an incentive option by tendering
shares of common stock with a fair market value equal to part or
all of the option exercise price, the exchange of shares will be
treated as a nontaxable exchange (except that this treatment would
not apply if the optionee had acquired the shares being transferred
pursuant to the exercise of an incentive option and had not
satisfied the special holding period requirements summarized
above). If the exercise is treated as a tax free exchange, the
optionee would have no taxable income from the exchange and
exercise (other than minimum taxable income as discussed above) and
the tax basis of the shares exchanged would be treated as the
substituted basis for the shares received. If the optionee used
shares received pursuant to the exercise of an incentive option (or
another statutory option) as to which the optionee had not
satisfied the applicable holding period requirement, the exchange
would be treated as a taxable disqualifying disposition of the
exchanged shares.
Non-qualified Options. Upon exercising a non-qualified
option, an optionee will recognize ordinary income in an amount
equal to the difference between the exercise price and the fair
market value of the stock on the date of exercise (or, if the
optionee is subject to certain restrictions imposed by the
securities laws, upon the lapse of those restrictions, unless the
optionee makes a special tax election within 30 days after exercise
to have income determined without regard to the restrictions). If
the employer corporation complies with applicable reporting
requirements, it will be entitled to a business expense deduction
in the same amount and generally in the same year as the optionee
recognizes ordinary income. Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a non-qualified option,
the optionee will have taxable gain or loss, measured by the
difference between the amount realized on the disposition and the
tax basis of the shares (generally, the amount paid for the shares
plus the amount treated as ordinary income at the time the option
was exercised), except that no deduction will be allowed for
compensation in any one year paid to the chief executive officer
and the four other most highly compensated executive officers of
the Company to the extent such compensation does not satisfy the
requirements of Section 162(m) of the Code.
If the optionee surrenders shares of common stock in payment
of part or all of the exercise price for non-qualified options, no
gain or loss will be recognized with respect to the shares
surrendered (regardless of whether the shares were acquired
pursuant to the exercise of an incentive option) and the optionee
will be treated as receiving an equivalent number of shares
pursuant to the exercise of the option in an nontaxable exchange.
The basis of the shares surrendered will be treated as the
substituted tax basis for an equivalent number of option shares
received and the new shares will be treated as having been held for
the same holding period as had expired with respect to the
transferred shares. The difference between the aggregate option
exercise price and the aggregate fair market value of the shares
received pursuant to the exercise of the option will be taxed as
ordinary income. The employer corporation will be entitled to a
deduction as described above. The optionee's basis in the
additional shares will be equal to the amount included in the
optionee's income.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of August 3,
1998 with respect to the shares of the Company's common stock
beneficially owned by each director of the Company, each of the
named executive officers and by all directors and executive
officers as a group.
Amount and Percent of
Name and Address Nature of Common Stock
of Beneficial Owner Beneficial Ownership(a) Outstanding
Daniel C. Arnold 173,500 (b) 4.73%
Director
Mark J. Brookner 120,000 3.28
Vice Chairman of the Board
George H. Hargrave 167,000 4.63
Director
James B. Hoover 75,000 (c) 2.05
Director
Marlin W. Johnston 47,000 1.29
Director
J. Livingston Kosberg 498,330 (d) 13.80
Chairman of the Board
Richard C.W. Mauran 532,000 (d) 12.84
Director
Albert L. Rosen 85,000 2.33
Director
Roy W. Spradlin 70,000 1.90
President, Chief Executive
Officer and Director
J. Michael Mullin 0 0
Chief Financial Officer
All directors and 1,767,830 39.86
executive officers as
a group (10 persons)
(a) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934 (the "1934 Act"), a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of the Company's
common stock if he has or shares voting power or investment power
with respect to such security, or has the right to acquire
beneficial ownership at any time within 60 days from August 3,
1998. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. All persons shown in
the table above have sole voting and investment power, unless
otherwise indicated. This table includes 307,000 shares of common
stock subject to outstanding options which are exercisable within
60 days from August 3, 1998. Of such shares, Messrs. Arnold,
Brookner, Hoover, Johnston, Spradlin, Mauran and Rosen, hold
options to purchase 45,000, 45,000, 45,000, 35,000, 70,000, 32,000
and 35,000 shares, respectively. This table also includes 217,500
shares that can be acquired upon conversion of $2,175,000 aggregate
principal amount of the Company's outstanding 8% Convertible
Subordinated Notes due June 30, 2003 and 300,000 shares that can be
acquired upon conversion of $3,000,000 aggregate principal amount
of the Company's outstanding 8% Convertible Subordinated Notes,
Series C due June 30, 2004.
(b) Includes 50,000 shares owned by the Arnold Family Limited
Partnership; 16,000 shares owned by the Bintliff 1990 Limited
Partnership; 50,000 shares owned by Arnold 1997 Limited
Partnership; and 12,500 shares that can be acquired upon
conversion of $125,000 aggregate principal amount of the
Company's outstanding 8% Subordinated Notes due June 30, 2003
held by the Arnold Family Limited Partnership. Mr. Arnold is
the managing general partner of the Arnold Family Limited
partnership and the Arnold 1997 Limited Partnership and a
general partner of the Bintliff 1990 Limited Partnership. As
such, he has shared voting and dispositive power over the
shares held by the three partnerships. Mr. Arnold disclaims
beneficial ownership of these securities except to the extent
of his pecuniary interest therein.
(c) Includes 5,000 shares that can be acquired upon conversion of
$50,000 aggregate principal amount of the Company's
outstanding 8% Convertible Subordinated Notes due June 30,
2003 owned by Mr. Hoover.
(d) See "Principal Holders of Voting Securities".
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of August 3,
1998 with respect to the ownership of shares of common stock by the
persons known to management to be the beneficial owners of more
than 5% of the Company's outstanding common stock. The information
is based on the most recent statements on Schedule 13D or 13G filed
on behalf of such persons or on other information available to the
Company.
Amount and Percent of
Name and Address Nature of Common Stock
of Beneficial Owner Beneficial Ownership Outstanding
J. Livingston Kosberg 498,330 (a) 13.80%
3040 Post Oak Blvd., Suite 222
Houston, Texas 77056
Clarence E. Mayer 337,500 (b) 9.35
5847 San Felipe, Suite 1700
Houston, Texas 77057
Richard C.W. Mauran 532,000 (c) 12.84
Sloan Financial Corporation
31 Burton Ct.
Franklins Row
London, SW 3, England
J. Carlo Cannell d/b/a 187,200 (d) 5.18
Cannell Capital Management
750 Battery Street
San Francisco, California 94111
(a) The Schedule 13G of Mr. Kosberg dated February 16, 1993 states
that such amount includes 56,250 shares held by the Dolores
Wilkenfeld Trust and 442,080 shares held by the Livingston
Kosberg Trust. Mr. Kosberg is the trustee of both trusts and
the income beneficiary of the Livingston Kosberg Trust. Mr.
Kosberg does not hold any shares individually in his own name.
The reported share amount excludes 1,170 shares held by Mr.
Kosberg's wife and 48,000 shares held by Mr. Kosberg's three
children and their spouses. Mr. Kosberg disclaims beneficial
ownership of such shares.
(b) The Schedule 13D of Mr. Mayer dated February 16, 1993 states
that he has sole voting and dispositive power over the entire
number of such shares.
(c) Includes 200,000 shares of Company common stock that may be
acquired by Sloan Financial Corporation ("Sloan Financial"),
of which Mr. Mauran is the controlling stockholder, upon
conversion of $2,000,000 aggregate principal amount of the
Company's outstanding 8% Convertible Subordinated Notes due
June 30, 2003 owned by Sloan Financial and 300,000 shares of
Company common stock that may be acquired by Sloan Financial
upon conversion of $3,000,000 aggregate principal amount of
the Company's outstanding 8% Convertible Subordinated Notes,
Series C, due June 30, 2004 owned by Sloan Financial. The
Schedule 13D of Sloan Financial and Mr. Mauran states that
they possess shared voting and shared dispositive power over
the entire number of such shares. Also includes 32,000
director options held by Mr. Mauran.
(d) The Schedule 13D of J. Carlo Cannell d/b/a Cannell Capital
Management ("Cannell") dated July 23, 1997 states that Cannell
has sole voting and dispositive power over the entire number
of such shares.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
TO BE PRESENTED AT 1999 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented by any stockholder for
action at the 1999 Annual Meeting of Stockholders of the Company
must be received by the Company on or before December 24, 1998 in
order for the proposal to be considered for inclusion in the proxy
statement and form of proxy relating to the 1999 Annual Meeting.
Nothing in this paragraph shall be deemed to require the Company to
include in its proxy statement and form of proxy relating to the
1999 Annual Meeting any stockholder proposal which does not meet
all of the requirements for inclusion established by the SEC in
effect at the time such proposal is received.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
of the Company does not know of any other matters to be presented
for action by the stockholders at the Special Meeting. If, however,
any other matters not now known are properly brought before the
meeting, the persons named in the accompanying proxy will vote such
proxy in accordance with the determination of a majority of the
Board of Directors.
By Order of the Board of Directors
/s/ Dorothy Nagle Flato
Dorothy Nagle Flato
Corporate Secretary and Treasurer
Houston, Texas
August 12, 1998
<PAGE>
U.S. PHYSICAL THERAPY, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -- September 9, 1998
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of U.S. Physical Therapy, Inc. (the
"Company") hereby appoints J. Livingston Kosberg and Mark J.
Brookner, and each of them, with full power of substitution in each,
as proxies to cast all votes, as designated below, which the
undersigned stockholder is entitled to cast at the Special Meeting
of Stockholders of the Company to be held on Wednesday, September
9, 1998 at 10:00 a.m. (CDT), at the Company's office at 3040 Post
Oak Boulevard, Suite 222, Houston, Texas and at any adjournments
thereof, upon the following matters.
This proxy will be voted as directed by the undersigned
stockholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DETERMINATION OF
A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER MATTERS.
The undersigned stockholder hereby acknowledges receipt of the
Notice of Special Meeting and Proxy Statement, and hereby revokes
any proxy or proxies heretofore given. This proxy may be revoked
at any time before its exercise.
(continued and to be signed and dated on reverse side)
(1) Approval under the Company's 1992 Stock Option Plan to (i)
increase by 350,000 the number of shares of Company common
stock reserved for issuance under the 1992 Stock Option Plan
and (ii) increase the number of stock options that may be
granted to any one eligible individual in any one calendar
year from 50,000 to 100,000.
FOR AGAINST ABSTAIN
(2) As determined by a majority of the Company's Board of
Directors, the proxies are authorized to vote upon such other
business as may properly come before the meeting, or any
adjournments thereof.
Please date and sign exactly as name appears
hereon and return in
the enclosed envelope.
Date:
Signature of Stockholder or
Authorized Representative
(Only one signature is required
in the case of stock ownership
in the name of two or more
persons.
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