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SCHEDULE 14A INFORMATION
(Rule 14a)
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 the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or Section 240.14a-12
Roto-Rooter, Inc.
--------------------------------------------------
(Name of Registrant as Specified in its Charter)
Roto-Rooter, Inc.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2004
The Annual Meeting of Stockholders of Roto-Rooter, Inc. will be held at
The Phoenix Club, 812 Race Street, Cincinnati, Ohio, on Monday, May 17, 2004, at
11 a.m. for the following purposes:
(1) To elect directors;
(2) To approve and adopt the Company's 2004 Stock Incentive Plan;
(3) To approve an amendment to the Company's 2002 Executive
Long-Term Incentive Plan;
(4) To approve an amendment to the Company's Certificate of
Incorporation, as amended, increasing the number of authorized
shares of Capital Stock from 15,000,000 to 40,000,000 shares;
(5) To approve an amendment to the Company's Certificate of
Incorporation, as amended, to change the Company's name to
Chemed Corporation; and
(6) To transact such other business as may properly be brought
before the meeting.
Stockholders of record at the close of business on March 19, 2004, are
entitled to notice of, and to vote at, the meeting.
IF YOU DO NOT PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED AT YOUR EARLIEST
CONVENIENCE, OR VOTE BY TELEPHONE OR INTERNET AS INSTRUCTED ON THE PROXY CARD.
NO POSTAGE IS REQUIRED IF IT IS MAILED IN THE UNITED STATES.
Naomi C. Dallob
Secretary
April 5, 2004
LOGO
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Roto-Rooter, Inc. (the "Company" or "Roto-Rooter")
of proxies to be used at the Annual Meeting of Stockholders ("Annual Meeting")
of the Company to be held on May 17, 2004, and any adjournments thereof. The
Company's mailing address is 2600 Chemed Center, 255 East Fifth Street,
Cincinnati, Ohio 45202-4726. The approximate date on which this Proxy Statement
and the enclosed proxy are being sent to stockholders is April 5, 2004. Each
valid proxy received in time will be voted at the meeting and, if a choice is
specified on the proxy, the shares represented thereby will be voted
accordingly. The proxy may be revoked by the stockholder at any time before the
meeting by providing notice to the Secretary.
Only stockholders of record as of the close of business on March 19,
2004, will be entitled to vote at the Annual Meeting or any adjournments
thereof. On such date, the Company had outstanding 12,083,134 shares of
capital stock, par value $1 per share ("Capital Stock"), entitled to one vote
per share.
ELECTION OF DIRECTORS
Twelve directors are to be elected at the Annual Meeting to serve until
the following annual meeting of stockholders and until their successors are duly
elected and qualified. Set forth below are the names of the persons to be
nominated by the Board of Directors, together with a description of each
person's principal occupation during the past five years and other pertinent
information.
Unless authority is withheld or names are stricken, it is intended that
the shares covered by each proxy will be voted for the nominees listed. Votes
that are withheld or stricken will be excluded entirely from the vote and will
have no effect. The Company anticipates that all nominees listed in this Proxy
Statement will be candidates when the election is held. However, if for any
reason any nominee is not a candidate at that time, proxies will be voted for
any substitute nominee designated by the Board of Directors (except where a
proxy withholds authority with respect to the election of directors). The
affirmative vote of a plurality of the votes cast will be necessary to elect
each of the nominees for director.
NOMINEES
EDWARD L. HUTTON Mr. Hutton is Chairman of the Company and
Director since 1970 has held this position since November 1993.
Age: 84 Previously, from 1970 to May 2001, he also
served the Company as Chief Executive
Officer, and from 1970 to November 1993, he
served the Company as President. Mr. Hutton
is also the Chairman of the Board of
Directors of Omnicare, Inc., Covington,
Kentucky (healthcare products and services),
(hereinafter "Omnicare"). Mr. Hutton is a
director of Omnicare. Mr. Hutton is the
father of Thomas C. Hutton, a Vice President
and a director of the Company.
KEVIN J. MCNAMARA Mr. McNamara is President and Chief
Director since 1987 Executive Officer of the Company and has
Age: 50 held these positions since August 1994 and
May 2001, respectively. Previously, he
served as Executive Vice President,
Secretary and General Counsel from November
1993, August 1986 and August 1986,
respectively, to August 1994.
1
DONALD BREEN Mr. Breen is Senior Vice President of John
Nominee Morrell & Co., Cincinnati, Ohio (producer of
Age: 51 fresh foods) and has held this position
since 1992.
CHARLES H. ERHART, JR. Mr. Erhart retired as President of W. R.
Director since 1970 Grace and Co. (hereinafter "Grace"),
Age: 78 Columbia, Maryland (international specialty
chemicals, construction and packaging) in
August 1990, having held that position since
July 1989. Previously, he was Chairman of
the Executive Committee of Grace and held
that position from November 1986 to July
1989. He is a director of Omnicare.
JOEL F. GEMUNDER Mr. Gemunder is President and Chief
Director since 1977 Executive Officer of Omnicare and has held
Age: 64 these positions since May 1981 and May 2001,
respectively. He is also a director of
Omnicare and Ultratech Stepper, Inc.
PATRICK P. GRACE Mr. Grace is President of MLP Capital, Inc.,
Director since 1996 co-managing partner of several real estate
Age: 48 and mining interests in the southeastern
United States and has held that position
since March 1996. From January 2002 to
August 2002, he was also President and Chief
Executive Officer of Kingdom Group, LLC, New
York, New York (a provider of turnkey
compressed natural gas fueling systems)
which filed for bankruptcy in November 2002.
Previously, he was President of Kingdom
Group, LLC, from December 2000 to January
2002 and he was Executive Vice President of
Kingdom Group, LLC from August 1999 to
December 2000. From December 1997 to January
31, 1999, Mr. Grace was also Chief Operating
and Financial Officer of C3 Communications,
Inc., San Francisco, California, a unit of
Level 3 Communications (interactive
marketing).
THOMAS C. HUTTON Mr. Hutton is a Vice President of the
Director since 1985 Company and has held this position since
Age: 53 February 1988. He is a son of Edward L.
Hutton, Chairman and a director of the
Company.
SANDRA E. LANEY Ms. Laney is Chairman and CEO of Cadre
Director since 1986 Computer Resources, Co., Cincinnati, Ohio
Age: 60 (information security) and has held this
position since August 31, 2001. Ms. Laney
retired as an Executive Vice President and
the Chief Administrative Officer of the
Company on March 1, 2003, having held these
positions since May 2001 and May 1991,
respectively. Previously, from November 1993
until May 2001, she held the position of
Senior Vice President of the Company. She is
a director of Omnicare.
TIMOTHY S. O'TOOLE Mr. O'Toole is an Executive Vice President
Director since 1991 of the Company and has held this position
Age: 48 since May 1992. He is also President and
Chief Executive Officer of Vitas Healthcare
Corporation ("Vitas"), a wholly owned
subsidiary of the Company, and has held this
position since February 2004. Previously,
from May 1992 to February 2004, he also
served the Company as Treasurer.
DONALD E. SAUNDERS Mr. Saunders is Markley Visiting Professor
Director from May 1981 to at the Farmer School of Business
May 1982, May 1983 Administration, Miami University, Oxford,
to May 1987 and since May 1998 Ohio, and has held this position since
Age: 60 August 2001. Mr. Saunders retired as
President of DuBois Chemicals, formerly a
wholly owned subsidiary of the Company and
then a division of DiverseyLever, Inc.,
Detroit, Michigan (specialty chemicals), in
October 2000, having held that position
since November 1993.
GEORGE J. WALSH III Mr. Walsh is a partner with the law firm of
Director since 1995 Thompson Hine LLP, New York, New York, and
Age: 58 has held this position since January 1979.
2
FRANK E. WOOD Mr. Wood is President and Chief Executive
Director since Officer of Secret Communications, LLC,
May 2002 Cincinnati, Ohio (owner and operator of
Age: 61 radio stations) and has held this position
since 1994. He is also a co-founder and
principal of The Darwin Group, Cincinnati,
Ohio (venture capital firm specializing in
second-stage investments) and has held this
position since 1998. Since 2000, he has also
served as Chairman of 8e6 Technologies
Corporation, Orange, California (developer
of Internet filtering software).
DIRECTORS EMERITI
In May 1983, the Board of Directors adopted a policy of conferring the
honorary designation of Director Emeritus upon former directors who have made
valuable contributions to the Company and whose continued advice is believed to
be of value to the Board of Directors. Under this policy, each Director Emeritus
is furnished with a copy of all agendas and other materials furnished to members
of the Board of Directors generally and is invited to attend all meetings of the
Board; however, a Director Emeritus is not entitled to vote on any matters
presented to the Board. A Director Emeritus is paid an annual fee of $6,262, and
for each meeting attended, a Director Emeritus is paid $220.
It is anticipated that at the annual meeting of the Board of Directors,
Mr. Walter L. Krebs will again be designated as a Director Emeritus.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee of the
Company is paid an annual fee of $15,000 and a fee of $2,500 for each meeting
attended. Each member of the Nominating Committee of the Board is paid an
additional annual fee of $7,000. Each member of the Audit Committee of the Board
is paid an additional annual fee of $10,000, and each member of the
Compensation/Incentive Committee of the Board (other than its chairman) is paid
an additional annual fee of $3,500. A Committee member, other than Nominating
Committee members who receive no meeting fees, is paid $900 for each meeting of
a Committee he attended unless the Committee met on the same day as the Board of
Directors met, in which event, the Committee member is paid $450 for his
attendance at the Committee meeting. Each member of the Executive Committee who
is not an employee of the Company is paid $800 per meeting.
The chairmen of certain Committees of the Board of Directors are paid
an annual fee in addition to the attendance fees referred to above. The chairman
of the Audit Committee is paid at the rate of $10,000 per annum, and the
chairman of the Compensation/Incentive Committee is paid at the rate of $5,250
per annum. In addition, each member of the Board of Directors and of a Committee
is reimbursed for his reasonable travel expenses incurred in connection with
such meetings.
In addition, in May 2003, each member of the Board of Directors (other
than those serving on the Compensation/Incentive Committee) was granted an
unrestricted stock award covering 200 shares of Capital Stock under the
Company's 1995 and 1999 Stock Incentive Plans. Those directors who are members
of the Compensation/Incentive Committee were paid the cash equivalent of the
200-share stock award or $7,466.
The Company has a deferred compensation plan for nonemployee directors
under which certain directors who are not employees of the Company or of a
subsidiary of the Company participate. Under the plan, which is not a
tax-qualified plan, an account is established for each participant to which
amounts are credited quarterly at the rate of $4,000 per annum. Amounts credited
to these accounts are used to purchase shares of Capital Stock, and all
dividends received on such shares are reinvested in such Capital Stock. Each
participant is entitled to receive the balance in his account within 90 days
following the date he ceases to serve as a director.
Directors may also elect to defer receipt of their directors' fees
under the Company's Excess Benefit Plan.
COMMITTEES AND MEETINGS OF THE BOARD
The Company has the following Committees of the Board of Directors:
Audit Committee, Nominating Committee and Compensation/Incentive Committee.
3
The Audit Committee (a) is directly responsible for the appointment,
compensation, and oversight of a firm of independent accountants to audit the
Company and its consolidated subsidiaries, (b) reviews and reports to the Board
of Directors on the Company's annual financial statements and the independent
accountants' report on such financial statements, (c) meets with the Company's
senior financial officers, internal auditors and independent accountants to
review audit plans and work and other non-audit services regarding the Company's
accounting, financial reporting and internal control systems and (d) confers
quarterly with senior management, internal audit staff, and the independent
accountants to review quarterly financial results. The Audit Committee consists
of Messrs. Erhart, Grace and Saunders. The Board of Directors has determined
that Mr. Saunders qualifies as an "audit committee financial expert" within the
meaning of the applicable SEC regulations. The Audit Committee met on nine
occasions during 2003.
The Compensation/Incentive Committee makes recommendations to the Board
of Directors concerning (a) salary and incentive compensation payable to
officers and certain other key employees of the Company, (b) establishment of
incentive compensation plans and programs generally, (c) adoption and
administration of certain employee benefit plans and programs and (d) additional
year-end contributions by the Company under the Roto-Rooter Savings and
Retirement Plan ("Retirement Plan"). In addition, the Compensation/Incentive
Committee administers the Company's (a) 2002 Executive Long-Term Incentive Plan,
(b) seven Stock Incentive Plans and the 1999 Long-Term Employee Incentive Plan
and (c) grants of stock options and stock awards to key employees of the
Company. The Compensation/Incentive Committee consists of Messrs. Erhart, Walsh
and Wood. The Compensation/Incentive Committee met on four occasions during
2003. A copy of the Compensation/Incentive Committee Charter is available on the
Company's Web site, www.rotorooterinc.com.
The Nominating Committee (a) recommends to the Board of Directors the
candidates for election to the Board at each Annual Meeting of Stockholders of
the Company, (b) recommends to the Board of Directors candidates for election by
the Board to fill vacancies on the Board, (c) considers candidates submitted by
directors, officers, employees, stockholders and others and (d) performs such
other functions as may be assigned by the Board. The Nominating Committee
consists of Messrs. Erhart, Grace and Walsh. Each member of the Nominating
Committee is independent as defined under the listing standards of the New York
Stock Exchange. The Nominating Committee met once during 2003. In identifying
and evaluating nominees for director, the Nominating Committee considers
candidates with a wide variety of academic backgrounds and professional and
business experiences. After reviewing written statements of the candidates'
backgrounds and qualifications, the Nominating Committee arranges for personal
interviews with those candidates that it believes merit further consideration.
Once it has completed this process, the Nominating Committee makes its final
recommendations to the Board. Mr. Breen, who is the only nominee for director
who is not standing for re-election, was recommended to the Nominating Committee
by Mr. McNamara, the Company's Chief Executive Officer. Stockholders wishing to
submit a candidate for election to the Board should submit the name of such
candidate and a supporting statement to the Company's Secretary at 2600 Chemed
Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726. The Nominating
Committee has a charter and a current copy is available on the Company's Web
site, www.rotorooterinc.com.
During 2003, there were seven meetings of the Board of Directors, and
each director attended at least 75 percent of the aggregate of (a) the total
number of meetings held by the Board of Directors and (b) the total number of
meetings held by all Committees of the Board of Directors on which he or she
served that were held during the period for which he or she was a director or
member of any such Committee. While the Company does not have a formal policy
with regard to Board members' attendance at the Annual Meeting, all members of
the Board are encouraged to attend. Seven members of the Board attended last
year's Annual Meeting held on May 19, 2003.
The Board has determined that six of the Company's directors meet the
independence requirements of the New York Stock Exchange. These directors are
Messrs. Erhart, Gemunder, Grace, Saunders, Walsh and Wood.
Stockholders wishing to communicate with members of the Board should
send such communications to the Company's Secretary at 2600 Chemed Center, 255
East Fifth Street, Cincinnati, Ohio, 45202-4726. The Secretary will forward
these communications to the members of the Board and, if applicable, to
specified individual directors.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION/INCENTIVE COMMITTEE ON EXECUTIVE COMPENSATION
The Company believes that executive compensation must align executive
officers' interests with those of the Company's stockholders and that such
interests are served by having compensation directly and materially linked to
financial and operating performance criteria which, when successfully achieved,
will enhance stockholder value.
4
The Company attempts to achieve this objective with an executive
compensation package for its senior executives which combines base salary,
annual cash incentive compensation, and long-term incentive compensation in the
form of stock options, stock awards and awards under the 2002 Executive
Long-Term Incentive Plan ("LTIP"), along with various benefit plans, including
pension plans, savings plans and medical benefits generally available to the
employees of the Company.
The executive compensation program is administered by the
Compensation/Incentive Committee of the Board of Directors. The membership of
the Compensation/Incentive Committee is comprised of three outside directors
(i.e., nonemployees of the Company). The Compensation/Incentive Committee is
responsible for the review, approval and recommendation to the Board of
Directors of matters concerning base salary and annual cash incentive
compensation for key executives of the Company. The recommendations of the
Compensation/Incentive Committee on such matters must be approved by the full
Board of Directors. The Compensation/Incentive Committee also administers the
Company's stock incentive plans, under which it reviews and approves grants of
stock options and stock awards, and the Company's LTIP.
The Compensation/Incentive Committee may use its discretion to set
executive compensation where, in its judgment, external, internal or individual
circumstances warrant.
Following is a discussion of the components of the executive officer
compensation program.
In determining base salary levels for the Company's executive officers,
the Compensation/Incentive Committee takes into account the magnitude of
responsibility of the position, individual experience and performance and
specific issues particular to the Company. In general, base salaries are set at
levels believed by this Compensation/Incentive Committee to be sufficient to
attract and retain qualified executives when considered along with the other
components of the Company's compensation structure.
The Compensation/Incentive Committee believes that a significant
portion of total cash compensation should be linked to annual performance
criteria. Consequently, the purpose of annual incentive compensation for senior
executives and key managers is to provide a direct financial incentive in the
form of an annual cash bonus to those executives who achieve their business
units' and the Company's annual goals. Operational and financial goals are
established at the beginning of each fiscal year and generally take into account
such measures of performance as sales and earnings growth, profitability, cash
flow and return on investment. Other nonfinancial measures of performance relate
to organizational development, product or service expansion and strategic
positioning of the Company's assets.
Individual performance is also taken into account in determining
individual bonuses. It is the Company's belief that bonuses as a percentage of a
senior executive's salary should be sufficiently high so as to provide a major
incentive for achieving annual performance targets. Bonuses for senior
executives of the Company generally range from 25 percent to 75 percent of base
salary.
The Long-Term Incentive Plan and stock option and stock award programs
form the basis of the Company's incentive plans for executive officers and key
managers. The objective of these plans has been to align executive and
long-term-stockholder interests by creating a strong and direct link between
executive pay and stockholder return.
Stock options have customarily been granted annually and have been
generally regarded as the primary incentive for long-term performance as they
are granted at fair market value and have had vesting restrictions over
four-year periods. The Committee considers each grantee's current option
holdings in making grants. Both the amounts of stock awards and proportion of
stock options have increased as a function of higher salary and position of
responsibility within the Company. In May 2002, the stockholders of the Company
approved the adoption of the LTIP covering officers and key employees of the
Company. The LTIP is administered by the Compensation/Incentive Committee of the
Board of Directors and was adopted to replace the restricted stock program,
which was terminated at the end of 2001. Based on guidelines established by the
Compensation/Incentive Committee in August 2002, the LTIP covers the granting of
compensation awards based on two independent elements: 1) a totally
discretionary award based on operating performance of the Company covering a
period greater than one year and less than four years and 2) an award based on
the attainment of a target stock price of $50 per share during 10 consecutive
trading days prior to the fourth anniversary of the plan.
The Compensation/Incentive Committee has considered, and is continuing
to review, the qualifying compensation regulations issued by the Internal
Revenue Service in December 1993. Generally, the Committee structures
compensation arrangements to achieve deductibility under the tax regulations,
except where the benefit of such deductibility is outweighed by the need for
flexibility or the attainment of other corporate objectives.
5
The base salary of Mr. K. J. McNamara, President and Chief Executive
Officer of the Company, was increased on November 7, 2003, to a base rate of
$417,600. His bonus in respect of 2003 services was $260,575. The
Compensation/Incentive Committee believes that Mr. McNamara's base salary, 2003
bonus and stock options granted are consistent with his performance as measured
by these factors and the other criteria discussed above.
Compensation/Incentive Committee
-------------------------------------
Charles H. Erhart, Jr., Chairman
George J. Walsh III
Frank E. Wood
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid to the Chief Executive
Officer and the four most highly compensated executive officers of the Company
for the past three years for all services rendered in all capacities to the
Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND ROTO-ROOTER ALL OTHER
PRINCIPAL BONUS STOCK COMPENSATION
POSITION YEAR SALARY ($) ($) OPTIONS (#) ($)
------------------ ---- ---------- -------- ----------- ------------
K. J. McNamara 2003 $ 406,975 $260,575 40,000 $ 105,889 (1)
President and 2002 396,829 387,946 30,000 282,154
CEO 2001 372,786 247,946 -0- 150,208
E. L. Hutton 2003 250,000 156,000 -0- 70,592 (2)
Chairman 2002 316,666 200,000 25,000 513,652
2001 466,592 350,000 -0- 254,311
T. S. O'Toole 2003 232,017 92,097 20,000 54,517 (3)
Executive 2002 237,592 195,959 20,000 165,050
Vice President 2001 227,327 85,559 -0- 83,429
S. S. Lee 2003 238,921 109,230 15,000 59,663 (4)
Executive 2002 235,441 98,017 14,000 130,613
Vice President 2001 227,501 110,000 -0- 94,590
A. V. Tucker, Jr. 2003 141,333 54,390 8,000 27,703 (5)
Vice President and 2002 138,783 67,745 6,000 69,972
Controller 2001 134,013 49,689 -0- 42,101
SUMMARY COMPENSATION TABLE (CONTINUED)
(1) Includes the following amounts: $94,616 allocated to Mr. McNamara's
account under the Retirement Plan and Employee Stock Ownership Plans
("ESOP") with respect to 2003; a $3,807 premium payment for term life
insurance; and $7,466 in the form of an unrestricted stock award of 200
shares of Capital Stock.
(2) Includes the following amounts: $59,742 allocated to Mr. Hutton's
account under the Company's Retirement Plan and ESOP with respect to
2003; a $3,384 premium payment for term life insurance; and $7,466 in
the form of an unrestricted stock award of 200 shares of Capital Stock.
(3) Includes the following amounts: $43,194 allocated to Mr. O'Toole's
account under the Retirement Plan and ESOP with respect to 2003; a
$3,857 premium payment for term life insurance; and $7,466 in the form
of an unrestricted stock award of 200 shares of Capital Stock. Does not
include amounts Mr. O'Toole received pursuant to a consulting agreement
with PCI
6
Holding Corp., which purchased the Company's wholly owned Patient Care,
Inc. subsidiary in October 2002. Pursuant to this agreement, Mr.
O'Toole receives compensation at the rate of $3,000 per month during
the term of the agreement.
(4) Includes the following amounts: $57,719 allocated to Mr. Lee's account
under the Retirement Plan, ESOP and Roto-Rooter's Deferred Compensation
Plan and Retirement Plan with respect to 2003 and a $1,944 premium
payment for term life insurance.
(5) Includes the following amounts: $24,319 allocated to Mr. Tucker's
account under the Retirement Plan and ESOP with respect to 2003 and a
$3,384 premium payment for term life insurance.
STOCK OPTIONS
The table below shows information concerning Roto-Rooter stock options
granted in 2003 to the named executives in the Summary Compensation Table.
ROTO-ROOTER STOCK OPTION GRANTS IN 2003
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------- ---------------------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS TO EXERCISE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#) (1) IN 2003 ($/SHARE) DATE 5% ($) 10% ($)
----------------- ---------- ----------------- --------- ---------- -------- ----------
K. J. McNamara 40,000 16.6% $35.85 5/19/2013 $901,835 $2,285,427
E. L. Hutton -0- -0- -0- -0- -0- -0-
T. S. O'Toole 20,000 8.3 35.85 5/19/2013 450,917 1,142,713
S. S. Lee 15,000 6.2 35.85 5/19/2013 338,188 857,035
A. V. Tucker, Jr. 8,000 3.3 35.85 5/19/2013 180,367 457,085
(1) These options which were granted on May 19, 2003, provide for the
purchase price of option shares equal to the fair market value of
Capital Stock on that date; are transferable by will, by the laws of
descent and distribution, pursuant to a qualified domestic relations
order or to certain family members, if permitted under SEC Rule 16b-3
or any successor rule thereto; and become exercisable in four equal
annual installments beginning on November 21, 2003.
7
The table below shows information concerning Roto-Rooter stock options
exercised during 2003 and the year-end number and value of unexercised
Roto-Rooter stock options held by the executive officers named in the Summary
Compensation Table.
AGGREGATED ROTO-ROOTER STOCK OPTION EXERCISES IN
2003 AND YEAR-END STOCK OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/03 (#) AT 12/31/03 ($)
-------------------------- --------------------------
NUMBER OF
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- ------------ -------- ----------- ------------- ----------- -------------
K. J. McNamara 9,000 $129,840 122,000 45,000 $ 1,373,510 $ 474,750
E. L. Hutton 28,323 214,122 135,577 12,500 1,425,276 123,125
T. S. O'Toole -0- -0- 96,000 25,000 1,113,005 262,000
S. S. Lee 8,000 57,200 43,750 18,250 508,073 191,575
A. V. Tucker, Jr. 3,500 61,670 54,500 9,000 624,290 94,950
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs.
McNamara, Lee, O'Toole and Tucker. Mr. McNamara's employment agreement provides
for his continued employment as President and Chief Executive Officer of the
Company through May 3, 2007, subject to earlier termination under certain
circumstances, at a base salary of $404,850 per annum or such higher amount as
the Board of Directors may determine, as well as participation in incentive
compensation plans, stock incentive plans and other benefit plans. In the event
of termination without cause, the agreement provides that for the balance of the
term of the agreement, Mr. McNamara will receive severance payments equal to 150
percent of his then-current base salary, the amount of incentive compensation
most recently paid or approved in respect of the previous year, and the fair
market value of all stock awards which would have vested during the 12 months
prior to termination notwithstanding that such shares vested on an accelerated
basis effective January 1, 2002. In addition, such severance payments will be
reduced by the amount of any earned income received by Mr. McNamara from any
other source for any period such severance payments are payable. Messrs. Lee,
O'Toole and Tucker have employment agreements which provide for their continued
employment as senior executives of the Company through May 21, 2006, May 3,
2007, and May 3, 2006, respectively, and are identical in all material respects
to that of Mr. McNamara, except their respective agreements provide for a base
salary of $238,921, $240,800 and $140,600 per annum or such higher amounts as
the Board of Directors may determine.
EXECUTIVE STOCK OWNERSHIP PLAN
Pursuant to the Company's Executive Stock Ownership Plan, during 2003,
Messrs. McNamara and E. L. Hutton had the following aggregate amounts of
indebtedness outstanding (principal and interest), respectively: Mr. McNamara -
$493,093; Mr. E. L. Hutton - $404,182. As of February 15, 2004, the aggregate
amounts of indebtedness outstanding for Mr. McNamara and Mr. E. L. Hutton were
$482,458 and $377,443, respectively.
CERTAIN TRANSACTIONS
In connection with the August 2001 sale of the assets of the Company's
former subsidiary, Cadre Computer Resources, Inc. ("Cadre"), to a corporation,
Cadre Computer Resources Co. ("Cadre Computer"), owned by certain officers and
the current employees of Cadre in August 2001, the Company loaned Cadre Computer
$518,000. At December 31, 2003, the aggregate amount of indebtedness outstanding
was $422,000. Messrs. McNamara and E. L. Hutton and Ms. Laney are directors of
Cadre Computer. Ms. Laney, who is Chairman and CEO of Cadre Computer, also has a
40% ownership interest in Cadre Computer.
Mr. Walsh is a partner with the law firm of Thompson Hine LLP, which
provided legal services to the Company in 2003.
8
COMPARATIVE STOCK PERFORMANCE
The graph below compares the yearly percentage change in the Company's
cumulative total stockholder return on Capital Stock (as measured by dividing
(i) the sum of (A) the cumulative amount of dividends for the period December
31, 1998, to December 31, 2003, assuming dividend reinvestment, and (B) the
difference between the Company's share price at December 31, 1998, and December
31, 2003; by (ii) the share price at December 31, 1998) with the cumulative
total return, assuming reinvestment of dividends, of the (1) S&P 500 Stock Index
and (2) Dow Jones Industrial Diversified Index.
9
ROTO-ROOTER INC.
CUMULATIVE TOTAL STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING DECEMBER 31, 2003
Dollars
[LINE GRAPH]
DECEMBER 31 ... 1998 1999 2000 2001 2002 2003
Roto-Rooter Inc. 100.00 91.79 109.21 111.60 117.83 155.68
S&P 500 100.00 121.04 110.02 96.95 75.52 97.18
Dow Jones Industrial
Diversified 100.00 135.47 136.45 122.67 79.65 107.76
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2003,
with respect to the only person who is known to be the beneficial owner of more
than 5 percent of Capital Stock:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP CLASS (3)
------------------------- -------------------- ---------
Mario J. Gabelli, 1,549,463 shares (2) 14.3%
Marc J. Gabelli, and
various related entities.
One Corporate Center
Rye, NY 10580
(1) The table above does not include Fidelity Management & Resources Corp.,
("FMR") 82 Devonshire Street, MA 02109, which held 884,000 shares of
Capital Stock as of December 31, 2003. As of January 31, 2004, FMR
ceased to be beneficial owner of more than five percent of the Capital
Stock and held 367,700 shares of Capital Stock as of that date.
(2) Sole voting power, 1,549,463 shares; sole dispositive power, 1,549,463
shares.
(3) For purposes of calculating Percent of Class, all shares subject to
stock options which were exercisable within 60 days of December 31,
2003, were assumed to have been issued.
The following table sets forth information as of December 31, 2003,
with respect to Capital Stock beneficially owned by all nominees and directors
of the Company, the executive officers named in the Summary Compensation Table
and the Company's directors and executive officers as a group:
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
--------------------- ------------------------ ----------
Edward L. Hutton 41,397 Direct
135,577 Option 1.3%
7,332 Trustee
Kevin J. McNamara 45,791 Direct
122,000 Option 1.1%
Trustee (3)
Donald Breen 100 Direct (5)
Charles H. Erhart, Jr. 10,000 Direct
Joel F. Gemunder 8,814 Direct
Patrick P. Grace 700 Direct
11
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
----------------------- ------------------------ ----------
Thomas C. Hutton 41,194 Direct
30,500 Option
7,832 Trustee (3)
Sandra E. Laney 54,430 Direct
51,100 Option
7,332 Trustee (3)
Spencer S. Lee 8,932 Direct
51,100 Option
Timothy S. O'Toole 13,784 Direct
96,000 Option
Donald E. Saunders 2,031 Direct
Arthur V. Tucker, Jr. 10,483 Direct
54,500 Option
George J. Walsh III 2,525 Direct
Frank E. Wood 200 Direct
Directors and Executive 240,281 Direct 2.2%
Officers as a Group 533,427 Option 4.9%
(14 persons) 68,570 Trustee (4)
FOOTNOTES TO STOCK OWNERSHIP TABLE
(1) Includes securities beneficially owned (a) by the named persons or
group members, their spouses and their minor children (including shares
of Capital Stock allocated as of December 31, 2003, to the account of
each named person or member of the group under the Company's Retirement
Plan and under the Company's ESOP or, with respect to Mr. Gemunder,
allocated to his account as of December 31, 2003, under the Omnicare
Employees Savings and Investment Plan), (b) by trusts and
custodianships for their benefit and (c) by trusts and other entities
as to which the named person or group has or shares the power to direct
voting or investment of securities. "Direct" refers to securities in
categories (a) and (b) and "Trustee" to securities in category (c).
Where securities would fall into both "Direct" and "Trustee"
classifications, they are included under "Trustee" only. "Option"
refers to shares which the named person or group has a right to acquire
within 60 days from December 31, 2003. For purposes of determining the
Percent of Class, all shares subject to stock options which were
exercisable within 60 days from December 31, 2003, were assumed to have
been issued.
(2) Percent of Class under 1.0 percent is not shown.
(3) Messrs. T. Hutton and McNamara and Ms. Laney are trustees of the Chemed
Foundation which holds 60,738 shares of Capital Stock over which the
trustees share both voting and investment power. This number is
included in the total number of "Trustee" shares held by the Directors
and Executive Officers as a Group but is not reflected in the
respective holdings of the individual trustees.
(4) Shares over which more than one individual holds beneficial ownership
have been counted only once in calculating the aggregate number of
shares owned by Directors and Executive Officers as a Group.
(5) Shares acquired in March of 2004.
12
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
the regulations thereunder, the Company's executive officers and directors and
persons who own more than 10 percent of Capital Stock are required to file
reports with respect to their ownership and changes in ownership of Capital
Stock with the Securities and Exchange Commission ("SEC"). In addition, such
persons are required to forward copies of such reports to the Company. Based on
a review of the copies of such reports furnished to the Company and on the
written representation of such non-reporting persons that, with respect to 2003,
no reports on Form 5 were required to be filed with the SEC, the Company
believes that, during the period January 1, 2003 through December 31, 2003,
except for Mr. E. L. Hutton and Mr. Lee, the Company's executive officers and
directors and greater-than-10-percent stockholders have complied with all
Section 16(a) reporting requirements. Mr. E. L. Hutton filed a Form 4 late
involving the sale of stock by his wife and Mr. Lee filed a Form 4 to reflect
additional shares.
PROPOSAL TO APPROVE AND ADOPT THE
2004 STOCK INCENTIVE PLAN
In view of the few remaining shares available for the grant of
additional stock awards or stock options under the previously adopted stock
incentive plans, the Board of Directors has approved, subject to stockholder
approval, the adoption of the 2004 Stock Incentive Plan (the "Stock Incentive
Plan") pursuant to which 700,000 shares of Capital Stock may be issued or
transferred to key employees as stock incentives. The full text of the proposed
Stock Incentive Plan is set forth as Exhibit A to this Proxy Statement and the
following discussion is qualified in its entirety by reference to such text.
THE STOCK INCENTIVE PLAN
The Stock Incentive Plan will become effective as of the date it is
adopted by the stockholders of the Company, i.e., May 17, 2004. If it is not
adopted by the stockholders, the Stock Incentive Plan will be of no force and
effect. If it is adopted, no stock options may be granted under the Stock
Incentive Plan after May 17, 2014. The Board of Directors may terminate the
Stock Incentive Plan at any earlier time, but outstanding options will continue
to be exercisable until they expire in accordance with their terms. The market
value of the Capital Stock as of March 19, 2004 was $52.30 per share.
The Stock Incentive Plan authorizes the issuance or transfer of a
maximum of 700,000 shares of Capital Stock pursuant to stock incentives granted
to key employees of the Company and its subsidiaries under the Stock Incentive
Plan. For purposes of the Stock Incentive Plan, a "subsidiary" is a corporation
or other form of business association of which shares (or other ownership
interests) having 50 percent or more of the voting power are owned or
controlled, directly or indirectly, by the Company and "key employees" are
employees of the Company or a subsidiary, including officers and directors
thereof, who, in the opinion of the Compensation/Incentive Committee (as defined
below), are deemed to have the capacity to contribute significantly to the
growth and successful operations of the Company or a subsidiary.
Stock incentives granted under the Stock Incentive Plan may be in the
form of options to purchase Capital Stock ("stock options") or in the form of
awards of Capital Stock in payment of incentive compensation ("stock awards"),
or a combination of stock awards and stock options. However, no more than
300,000 shares of Capital Stock may be issued or transferred pursuant to stock
incentives granted under this Plan in the form of stock awards.
The Stock Incentive Plan shall be administered by a Committee (the
"Compensation/Incentive Committee") consisting of no fewer than three persons
designated by, and serving at the pleasure of, the Board of Directors of the
Company.
The Compensation/Incentive Committee designates the key employees of
the Company and its subsidiaries who might participate in the Stock Incentive
Plan and as to the form and terms of the number of shares covered by each stock
incentive granted thereunder. In making such designation, the Committee may
consider an employee's present or potential contribution to the success of the
Company or any subsidiary and other factors which it may deem relevant.
Under the Stock Incentive Plan, a stock incentive in the form of a
stock award will consist of shares of Capital Stock issued as incentive
compensation earned or to be earned by the employee. Shares subject to a stock
award may be issued when the award is granted or at a later date, with or
without dividend equivalent rights. A stock award shall be subject to such
terms, conditions and restrictions (including restrictions on the transfer of
the shares issued pursuant to the award) as the Compensation/Incentive Committee
shall designate.
13
Under the Stock Incentive Plan, a stock incentive in the form of a
stock option will provide for the purchase of shares of Capital Stock in the
future at an option price per share which will not be less than 100 percent of
the fair market value of the shares covered thereby on the date the stock option
is granted. Each option shall be exercisable in full or in part six months after
the date the option is granted, or may become exercisable in one or more
installments and at such time or times, as the Compensation/Incentive Committee
shall determine, or upon various circumstances which may result in a change of
control. Unless otherwise provided in the option, an option, to the extent it is
or becomes exercisable, may be exercised at any time in whole or in part until
the expiration or termination of the option. Any term or provision in any
outstanding option specifying when the option may be exercisable or that it be
exercisable in installments may be modified at any time during the life of the
option by the Compensation/Incentive Committee, provided, however, no such
modification of an outstanding option shall, without the consent of the
optionee, adversely affect any option theretofore granted to him.
Upon the exercise of an option, the purchase price shall be paid in
cash or, if so provided in the option, in shares of Capital Stock or in a
combination of cash and such shares. The Company may cancel all or a portion of
an option subject to exercise and pay the holder cash or shares equal in value
to the excess of the fair market value of the shares subject to the portion of
the option so canceled over the option price of such shares. Options shall be
granted for such lawful consideration as the Compensation/Incentive Committee
shall determine.
All stock options granted under the Stock Incentive Plan will expire
within ten years from the date of grant. No more than 50,000 options may be
granted to an individual employee in any calendar year. A stock option is not
transferable or assignable by an optionee other than by will, by the laws of
descent and distribution, pursuant to a qualified domestic relations order or to
certain family members, if permitted under SEC Rule 16b-3 or any successor rule
thereto, and each option is exercisable, during his lifetime, only by him or a
permitted transferee or assignee. Unexercised options terminate upon termination
of employment, except that if termination arises from a resignation with the
consent of the Compensation/Incentive Committee, the options terminate three
months after such termination of employment, and except further that if an
optionee ceases to be an employee by reason of his death while employed,
retirement or disability, or if he should die within three months following his
resignation with the consent of the Compensation/Incentive Committee, the
options terminate fifteen months after an optionee's termination of employment
but may be exercised only to the extent that they could have been exercised by
the optionee, had he lived, three months after he ceased to be an employee. A
leave of absence for military or governmental service or for other purposes, if
approved by the Compensation/Incentive Committee, does not constitute a
termination of employment, but no options are exercisable during any such leave
of absence.
Exercise of a stock option will be conditioned on an optionee's payment
in full of the purchase price for the shares, in cash or by the transfer to the
Company of shares of Capital Stock at fair market value on the date of transfer.
An optionee shall not be considered a holder of the shares subject to a stock
option until actual delivery of a certificate representing such shares is made
by the Company.
None of the stock options granted under the Stock Incentive Plan will
be "restricted," "qualified" or "incentive" stock options or options granted
pursuant to an "employee stock purchase plan" as the quoted terms are defined in
Sections 422 through 424 of the Internal Revenue Code of 1986, as amended.
With respect to stock awards in shares of Capital Stock that are either
transferable or not subject to a substantial risk of forfeiture, the employee
must recognize ordinary income equal to the cash or the fair market value of the
shares of Capital Stock and the Company will be entitled to a deduction for the
same amount. With respect to stock awards that are settled in shares of Capital
Stock that are restricted as to transferability and subject to substantial risk
of forfeiture, the employee must recognize ordinary income equal to the fair
market value of the shares of Capital Stock at the first time such shares become
transferable or not subject to a substantial risk of forfeiture, whichever
occurs earlier, and the Company will be entitled to a deduction for the same
amount.
An optionee realizes no taxable income by reason of the grant of a
nonstatutory option. Subject to insider trading restrictions, upon exercise of
the option an optionee realizes compensation taxable as ordinary income in the
amount of the excess of the fair market value of the shares of Capital Stock
over the option price on the date of exercise. Upon the sale of shares of
Capital Stock acquired pursuant to the exercise of an option, an optionee
realizes either a capital gain or a capital loss based upon the difference
between his selling price and the fair market value of such shares on the date
of exercise. Such capital gain or loss, as the case may be, will be either
short-term or long-term depending on the period elapsed between the date of
exercise and the date of sale. In those instances where the employee receives
compensation taxable as ordinary income, the Company or a subsidiary (except for
certain foreign subsidiaries) will generally be entitled to a Federal income tax
deduction in the amount of such compensation. An employee will not recognize a
gain on previously owned shares of Capital Stock if he exercises an option and
transfers such shares to the Company in payment of the option price. Taxes
payable by an optionee or awardee on exercise of an option or
14
removal of restrictions on an award may be paid in cash, by surrender of shares,
or by withholding of shares of Capital Stock as the Compensation/Incentive
Committee shall determine.
The Board of Directors, upon the recommendation of the
Compensation/Incentive Committee, may amend the Stock Incentive Plan subject, in
the case of specified amendments, to stockholder approval. The Stock Incentive
Plan may be discontinued at any time by the Board of Directors. No amendment or
discontinuance of the Stock Incentive Plan shall, without the consent of the
employee, adversely affect any stock incentive held by him under the Stock
Incentive Plan.
Subject to stockholder approval, a grant of 139,727 options under the
proposed Stock Incentive Plan to purchase shares valued in a total of $7,967,235
of the Company's Capital Stock and a grant of 79,672 shares of restricted stock
awards in the aggregate fair market value of $4,542,917 of the Company's Capital
Stock have been approved for twenty-two Vitas management employees and a group
of general managers. No determination has been made with respect to any
prospective grant of a stock incentive under the Stock Incentive Plan for any of
the Company's executive officers or directors. It is, therefore, not possible at
the present time to indicate specifically the names of the executive officers or
directors to whom stock incentives may be granted or to whom stock incentives
would have been granted had this Plan been in effect during 2003 or the number
of shares to be subject to stock incentives or any other information concerning
the operation of the Stock Incentive Plan as it may affect these specific
individuals. The proceeds of sale of shares of Capital Stock under the Stock
Incentive Plan will be used by the Company for general corporate purposes.
As of December 31, 2003, the number of stock options outstanding under
the Company's equity compensation plans, the weighted average exercise price of
outstanding options, and the number of securities remaining available for
issuance were as follows:
EQUITY COMPENSATION PLAN INFORMATION
Plan Category Number of Securities to be Weighted-average exercise Number of securities remaining
issued upon exercise of price of outstanding available for future issuance
outstanding warrants and options, warrants and under equity compensation plans
rights rights [excluding securities reflected
in column a]
(a) (b) (c)
-------------------------- -------------------------- ------------------------- --------------------------------
Equity Compensation plans
approved by stockholders 1,032,527 $36.08 139,219
--------- ------ -------
Equity Compensation plans
not approved by
stockholders (1) 140,338 34.79 3,092
--------- ------ -------
TOTAL 1,172,865 35.92 142,311
========= ===== =======
(1) In May 1999 the Board of Directors adopted the 1999 Long-Term
Employee Incentive Plan without stockholder approval. This plan permits the
Company to grant up to 250,000 shares of non-qualified options and stock awards
to a broad base of salaried and hourly employees (excluding officers and
directors) of the Company. Except for the exclusion of officers and directors,
this plan has the same general terms and provisions of the proposed 2004 Stock
Incentive Plan. In addition, pursuant, to this plan no individual may be granted
more than 25,000 stock options in a calendar year, the aggregate number of the
shares of Capital Stock which may be issued pursuant to stock incentives in the
form of Stock Awards shall not be more than 135,000, and no stock incentives
shall be granted under the plan after May 17, 2009.
In order to effect the approval and adoption of the Stock Incentive
Plan, the following resolution will be presented to the Annual Meeting:
"RESOLVED, THAT THE 2004 STOCK INCENTIVE PLAN SET FORTH AS
EXHIBIT A TO THE PROXY STATEMENT ACCOMPANYING THE NOTICE OF
THE ANNUAL MEETING OF THE STOCKHOLDERS OF ROTO-ROOTER, INC. TO
BE HELD MAY 17, 2004, BE AND THE SAME HEREBY IS APPROVED AND
ADOPTED."
The affirmative vote of the majority of the shares represented at the
meeting and entitled to vote will be necessary for the adoption of the foregoing
resolution, with abstentions having the effect of negative votes and broker
non-votes having no effect because they are not considered entitled to vote on
this matter. The approval and adoption of the Stock Incentive Plan is not a
matter which is required to be submitted to a vote of the stockholders of the
Company. The reason for submitting such proposal to a vote of the stockholders
is to meet a condition of Section 162(m) of the Internal Revenue Code of 1986,
as amended, which
15
provides for the deduction of certain executive compensation in excess of
$1,000,000, and to meet the requirements of the New York Stock Exchange. The
Stock Incentive Plan will become effective upon adoption by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION
OF THE STOCK INCENTIVE PLAN.
PROPOSAL TO AMEND THE COMPANY'S
2002 EXECUTIVE LONG-TERM INCENTIVE PLAN
The Board of Directors has approved, subject to stockholder approval,
an amendment of the Corporation's 2002 Executive Long-Term Incentive Plan (the
"Plan") to permit awards thereunder to be payable in shares of Capital Stock as
well as in cash.
THE PLAN
The Plan, adopted in May 2002 following stockholder approval, permits
the awarding of incentive compensation upon the achievement of certain
performance-related goals over periods longer than one year.
The purpose of the Plan is to provide the Company with the means to
attract and retain officers and other key employees and to motivate those
individuals to improve the long-term performance of the Company.
The Plan is administered by a Committee of the Board of Directors,
consisting solely of two or more "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. The Committee
has the power to interpret the Plan and to prescribe, amend, and rescind rules
and regulations relating to the administration of the Plan, including treatment
upon terminations of employment and in connection with a change in control of
the Company. The Committee's determinations with respect to the Plan are
conclusive and binding.
All officers and other key employees of the Company and its
Subsidiaries, as determined by the Committee for each Plan Period, are eligible
to participate in the Plan.
At the commencement of each Plan Period, the Committee shall determine
the length of the Plan Period, select which eligible employees shall participate
in the Plan for that Plan Period, and determine the Performance Goals for each
Participant and the payment schedule detailing the amount which may be available
for payment to each Participant based on the level of achievement of the
Performance Goals. Upon completion of the Plan Period, the Committee shall
certify the extent to which the Performance Goals were satisfied and determine
the amount available for each Participant's Award pursuant to the payment
schedule. Prior to authorizing payment, the Committee may increase or decrease
the amount of an Award based on any factors the Committee determines to be
appropriate; provided, however, that the Committee may not increase the amount
of an Award with respect to a Participant who the Committee determines in its
discretion is or may be a "covered employee" under Section 162(m). A new Plan
Period shall not commence until any preceding Plan Period has been completed,
and the Maximum Amount of an Award with respect to a Participant for a
particular Plan Period cannot exceed the product of $2,000,000 and the number of
full or partial fiscal years in a Plan Period.
The Committee can select the Performance Measures upon which the
Performance Goals are based, from the following list:
(i) Cash flow;
(ii) Cash flow from operations;
(iii) Total earnings;
(iv) Earnings per share, diluted or basic;
(v) Earnings per share from continuing operations, diluted or basic;
(vi) Earnings before interest and taxes;
(vii) Earnings before interest, taxes, depreciation, and amortization;
(viii) Earnings from continuing operations;
(ix) Net asset turnover;
(x) Inventory turnover;
(xi) Net earnings or net income;
(xii) Operating earnings;
(xiii) Operating margin;
(xiv) Return on equity;
(xv) Return on net assets;
16
(xvi) Return on total assets;
(xvii) Return on capital;
(xviii) Return on investment;
(xix) Return on sales;
(xx) Sales;
(xxi) Revenues;
(xxii) Market share;
(xxiii) Economic value added;
(xxiv) Expense reduction levels;
(xxv) Stock price; and
(xxvi) Total stockholder return.
The Performance Measures may be expressed with respect to the Company
or one or more operating units or Subsidiaries. The Performance Measures may be
determined on an absolute basis, relative to internal goals, relative to levels
attained in prior years, or related to indices or other companies. They may also
be expressed as ratios expressing a relationship between two or more Performance
Measures. The Committee may adjust any Performance Measure to prevent dilution
or enlargement of any Award as a result of extraordinary events or circumstances
or to exclude the effects of extraordinary, unusual, or non-recurring items;
changes in law, regulations, or accounting principles; currency fluctuations;
discontinued operations; non-cash items; certain recapitalizations,
restructurings, or other corporate transactions; stock dividends; or stock
splits or combinations. However, no such adjustments will be made to the extent
that amounts paid to a "covered employee" under the Plan would fail to qualify
as "qualified performance-based compensation" under Section 162(m).
Awards under the Plan were previously payable in a lump sum in cash or
to a deferred compensation plan, as may be established for this purpose. The
Company also may deduct from an Award any amounts required to be withheld under
federal, state, or local tax laws. The proposed amendment allows the Committee
sole discretion to denominate such Awards in either cash or in shares of Capital
Stock. Such shares of Capital Stock shall be issued from authorized reserves of
stock incentive plans approved by the stockholders.
Nothing in the Plan shall give any person any right to continued
employment, constitute a contract or agreement of employment, or interfere with
the Company's right to terminate or change the conditions of employment. Any
rights of a Participant under the Plan are not assignable, and cash awards shall
be made from the general funds of the Company.
Except with respect to terminations of employment or in connection with
a change in control of the Company, Awards under the Plan are intended to
qualify as "qualified performance-based compensation" satisfying the
requirements of Section 162(m). To the extent that any provision of the Plan or
an Award does not comply or is inconsistent with these requirements, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
The Board of Directors may alter, amend, suspend, or terminate the
Plan; provided, however, that no amendment that requires stockholder approval in
order for the Plan to continue to comply with Section 162(m) shall be effective
unless such stockholder approval is obtained. No amendment or termination of the
Plan may, without the consent of a Participant for whom an Award has been
determined for a completed Plan Period but not yet paid, adversely affect the
Participant's rights under such an Award.
The Plan if amended will be so effective on May 17, 2004.
No determination has been made with respect to the selection of
Participants or the payment of Awards under the Plan as amended. It is,
therefore, not possible at the present time to indicate specifically the names
and positions of Participants to whom Awards may be made or any other
information concerning the operation of the amended Plan as it may affect
specific individuals.
In order to effect the approval of the amendment to the Plan, the
following resolution will be presented at the Annual Meeting:
"RESOLVED, THAT THE 2002 EXECUTIVE LONG-TERM INCENTIVE PLAN BE
AMENDED TO PERMIT AWARDS THEREUNDER TO BE MADE IN SHARES OF
CAPITAL STOCK AS WELL AS IN CASH, SUCH AMENDMENT BE AND THE
SAME HEREBY IS ADOPTED."
The affirmative vote of the majority of the shares represented at the
meeting and entitled to vote will be necessary for the adoption of the foregoing
resolution, with abstentions having the effect of negative votes and broker
non-votes having no effect because they are not considered entitled to vote on
this matter. The approval of the amendment of the Plan is not a matter which is
required to be submitted to a vote of the stockholders of the Company. The
reason for submitting such proposal to a vote of the
17
stockholders is to meet a condition of Section 162(m) of the Internal Revenue
Code of 1986, as amended, which provides for the deduction of certain executive
compensation in excess of $1,000,000, and to meet the requirements of the New
York Stock Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION
OF THE AMENDMENT TO THE PLAN.
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION, AS AMENDED,
TO INCREASE THE AUTHORIZED SHARES OF
CAPITAL STOCK
The Board of Directors proposes that stockholders approve an amendment
to the Company's Certificate of Incorporation, as amended ("Certificate"), to
increase the Company's authorized shares of Capital Stock. The amendment would
increase the authorized shares of Capital Stock from 15,000,000 shares to
40,000,000 shares.
After the Company's merger with Vitas on February 24, 2004, 12,160,961
shares of the Company's 15,000,000 shares of Capital Stock were issued and
outstanding. In addition, 1,128,455 shares of Capital Stock were reserved for
employee stock option plans and 381,169 shares were reserved for conversion of
the Company's Capital Trust Convertible Trust Preferred Securities. Therefore,
as of February 24, 2004 the Company had approximately 1,329,415 shares of
unissued and unreserved Capital Stock available for further issuance.
After the Company's acquisition of Vitas, the Board of Directors
believes that the number of authorized shares of Capital Stock available for
issuance is not sufficient to enable the Company to respond to potential
business opportunities and to pursue objectives designed to enhance stockholder
value. The additional authorized shares of Capital Stock will provide the
Company with greater flexibility to use the Company's Capital Stock, without
further stockholder approval except to the extent such approval may be required
by law or by applicable New York Stock Exchange listing standards, for various
purposes including, without limitation, raising equity capital in order to
reduce the Company's level of debt or for other general corporate purposes;
making future acquisitions, entering into strategic relationships, providing
equity incentives to employees, officers, or directors and effecting stock
dividends (including stock splits in the form of stock dividends). The Company
does not currently have any specific agreements or plans that would involve the
issuance of the proposed additional authorized shares of Capital Stock.
The additional shares of Capital Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control of
management. For example, without further stockholder approval, the Board of
Directors could adopt a "poison pill" that would under certain circumstances
related to an acquisition of the Company shares of Capital Stock not approved by
the Board, give certain holders the right to acquire additional shares of the
Company's Capital Stock at a low price, or the Board could strategically sell
shares of Capital Stock in a private transaction to purchasers who oppose a
takeover or favor the current Board.
Although the proposal to increase the authorized shares of Capital
Stock has been prompted by business and financial considerations and not by the
threat of any hostile takeover attempt (nor is the Board aware of any such
attempt), stockholders should be aware that the approval of this proposal could
facilitate future efforts by the Board to deter or prevent changes in control,
including transactions in which the stockholders might otherwise receive a
premium over the current market prices.
In order to amend the Company's Certificate of Incorporation, as
amended, the following resolution will be presented at the Annual Meeting:
RESOLVED, THAT THE CERTIFICATE OF INCORPORATION, AS AMENDED,
OF THE CORPORATION BE FURTHER AMENDED BY STRIKING ARTICLE IV
THEREOF IN ITS ENTIRETY AND SUBSTITUTING IN LIEU THEREOF THE
FOLLOWING NEW ARTICLE IV:
"ARTICLE IV. THE TOTAL NUMBER OF SHARES OF STOCK WHICH THE
CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS FORTY MILLION
(40,000,000), OF WHICH FORTY MILLION (40,000,000) SHARES SHALL
BE CAPITAL STOCK WITH A PAR VALUE OF ONE DOLLAR ($1.00) PER
SHARE AMOUNTING IN THE AGGREGATE TO FORTY MILLION DOLLARS
($40,000,000).
The affirmative vote of the holders of a majority of the Company's
shares outstanding on the record date will be necessary for the adoption of the
foregoing resolution. Abstentions and broker nonvotes will have the effect of
votes against the resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INCREASE IN AUTHORIZED
SHARES OF CAPITAL STOCK.
18
AMENDING THE COMPANY'S AMENDED CERTIFICATE OF INCORPORATION
CHANGING THE NAME OF THE COMPANY TO CHEMED CORPORATION
The Company seeks stockholder approval to amend the Amended Certificate
of Incorporation to change the Company's name from Roto-Rooter, Inc. back to
Chemed Corporation. Twelve months ago, the Company changed its name from Chemed
Corporation to Roto-Rooter, Inc. The rationale at that time was that the
Roto-Rooter subsidiary was to be the main focus of activity. In late 2003, the
Company was presented with the opportunity to make a major investment in the
hospice field, which we completed on February 24, 2004. Accordingly, it is
appropriate now to signal, with this name change, that our focus has broadened
and the management has made a significant commitment to the hospice field.
Approval of the amendment to the Company's Amended Certificate of
Incorporation to change the Company's name requires the affirmative vote of a
majority of all votes entitled to be cast by holders of record of Capital Stock.
Abstentions and broker shares that are not voted on the matter will have the
effect of votes against the resolution.
A copy of the proposed amendment to the Amended Certificate of
Incorporation is attached as Exhibit C to this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee is in the process of selecting an independent
accountant for the current year. PricewaterhouseCoopers LLP acted as the
Company's independent accountants for 2003 and has acted as independent
accountants for the Company and its consolidated subsidiaries since 1970. Ernst
& Young LLP has acted as independent accountants for the Company's recently
acquired subsidiary, Vitas Healthcare Corporation for more than ten years. Given
the size of Vitas, which had revenues of approximately $420,000,000 for the
fiscal year ending September 30, 2003, the Audit Committee is in the process of
determining whether to select PricewaterhouseCoopers LLP or Ernst & Young LLP as
the Company's independent accountants for 2004. It is expected that a
representative of PricewaterhouseCoopers LLP will be present at the Company's
Annual Meeting. Such representative shall have the opportunity to make a
statement if he so desires and shall be available to respond to appropriate
questions raised at the meeting.
AUDIT COMMITTEE REPORT
The Audit Committee is appointed by the Board of Directors of the
Company to assist the Board in monitoring:
- The integrity of the Company's financial statements.
- Compliance by the Company with legal and regulatory requirements.
- The independence and performance of the Company's internal and external
auditors.
During 2000, the Audit Committee developed a charter for the Committee,
which was approved by the full Board of Directors on May 15, 2000. The charter
was amended on March 5, 2004. A copy of the charter, as amended, is attached
hereto as Exhibit B and a copy is available on the Company's Web site,
www.rotorooterinc.com.
The Company's management has primary responsibility for preparing the
Company's financial statements and for the Company's financial reporting
process. The Company's independent accountants, PricewaterhouseCoopers LLP, are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements to generally accepted accounting principles.
20
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited
financial statements with the Company's management.
2. The Audit Committee has discussed with the independent
accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standard, AU 380).
3. The Audit Committee has received the written disclosures and
the letter from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with
Audit Committees) and has discussed with the independent
accountants the independent accountants' independence.
4. Based on the review and discussion referred to in paragraphs
(1) through (3) above, the Audit Committee recommended to the
Board of Directors of the Company that the audited financial
statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003, for filing
with the SEC.
Each of the members of the Audit Committee is independent as defined
under the listing standards of the New York Stock Exchange.
The undersigned members of the Audit Committee have submitted this
Report.
Donald E. Saunders, Chairman
Charles H. Erhart, Jr.
Patrick P. Grace
FEES PAID TO INDEPENDENT ACCOUNTANTS
AUDIT FEES
PricewaterhouseCoopers LLP billed the Company $536,600 and $613,500,
respectively, in aggregate fees and expenses for professional services rendered
for the audit of the Company's annual financial statements for the years 2002
and 2003 and for the reviews of the financial statements included in the
Company's Forms 10-Q for those years.
AUDIT-RELATED FEES
PricewaterhouseCoopers LLP billed the Company $50,200 and $122,400,
respectively, in aggregate fees and expenses for audit-related services
rendered, primarily for the audit of the Company's employee benefit plans for
the 2002 and 2003 financial statements and for implementation assistance with
internal control provisions of the Sarbanes-Oxley Act of 2002.
TAX FEES
The Company paid PricewaterhouseCoopers LLP $17,950 in fees and
expenses for tax services rendered during 2002. No such services were rendered
during 2003.
ALL OTHER FEES
PricewaterhouseCoopers LLP billed the Company $2,152 and $2,172,
respectively, in aggregate fees for services rendered by PricewaterhouseCoopers
LLP, other than the services described above, for the years 2002 and 2003.
The Audit Committee has adopted a policy which requires the Committee's
pre-approval of audit and non-audit services performed by the independent
auditor to assure that the provision of such services does not impair the
auditor's independence. The Audit Committee pre-approved all of the audit and
non-audit services rendered by PricewaterhouseCoopers LLP as listed above.
STOCKHOLDER PROPOSALS
Any proposals by stockholders intended to be included in the proxy
materials for presentation at the 2005 Annual Meeting of Stockholders must be in
writing and received by the Secretary of the Company no later than December 6,
2004. Any proposals by
21
stockholders intended to be presented at the 2004 Annual Meeting of Stockholders
outside of the Company's proxy solicitation process shall be considered untimely
if notice of such a proposal was not given to the Secretary of the Company by
February 16, 2004. In the case of timely notice, persons named in the proxies
solicited by the Company for that meeting (or their substitutes) will be allowed
to use their discretionary voting authority when the proposal is raised at the
meeting without any discussion of the proposal in the Company's proxy statement
for that meeting.
ADDITIONAL COPIES OF
ANNUAL REPORT AND PROXY STATEMENT
If you are a stockholder of record and share an address with another
stockholder and have received only one annual report or proxy statement, you may
write or call the Company to request a separate copy of these materials at no
cost to you. You may write to the Company at 2600 Chemed Center, Cincinnati,
Ohio 45202-4726, Attn: Investor Relations, or call 1-800-224-3633 or
513-762-6463.
OTHER MATTERS
As of the date of this Proxy Statement, the management has not been
notified of any stockholder proposals intended to be raised at the 2004 Annual
Meeting outside of the Company's proxy solicitation process nor does management
know of any other matters which will be presented for consideration at the
Annual Meeting. However, if any other stockholder proposals or other business
should come before the meeting, the persons named in the enclosed proxy (or
their substitutes) will have discretionary authority to take such action as
shall be in accordance with their best judgment.
EXPENSES OF SOLICITATION
The expense of soliciting proxies in the accompanying form will be
borne by the Company. The Company will request banks, brokers and other persons
holding shares beneficially owned by others to send proxy materials to the
beneficial owners and to secure their voting instructions, if any. The Company
will reimburse such persons or institutions for their expenses in so doing. In
addition to solicitation by mail, officers and regular employees of the Company
may, without extra remuneration, solicit proxies personally, by telephone or by
telegram from some stockholders if such proxies are not promptly received. The
Company has also retained D. F. King & Co., Inc., a proxy soliciting firm, to
assist in the solicitation of such proxies at a cost which is not expected to
exceed $7,500 plus reasonable expenses. This Proxy Statement and the
accompanying Notice of Meeting are sent by order of the Board of Directors.
Naomi C. Dallob
Secretary
April 5, 2004
22
EXHIBIT A
ROTO-ROOTER, INC.
2004 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this plan are (a) to secure for the
Corporation the benefits of incentives inherent in ownership of Capital Stock by
Key Employees, (b) to encourage Key Employees to increase their interest in the
future growth and prosperity of the Corporation and to stimulate and sustain
constructive and imaginative thinking by Key Employees, (c) to further the
identification of interest of those who hold positions of major responsibility
in the Corporation and its Subsidiaries with the interests of the Corporation's
stockholders, (d) to induce the employment or continued employment of Key
Employees and (e) to enable the Corporation to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
competent executives.
2. DEFINITIONS: Unless otherwise required by the context, the following
terms when used in this Plan shall have the meanings set forth in this Section
2.
BOARD OF DIRECTORS: The Board of Directors of the Corporation.
CAPITAL STOCK: The Capital Stock of the Corporation, par value $1.00
per share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of Section 8.
CORPORATION: Roto-Rooter, Inc., a Delaware corporation.
FAIR MARKET VALUE: As applied to any date, the mean between the high
and low sales prices of a share of Capital Stock on the principal stock exchange
on which the Corporation is listed, or, if it is not so listed, the mean between
the bid and the ask prices of a share of Capital Stock in the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System on such date or, if no such sales or prices were made or quoted
on such date, on the next preceding date on which there were sales or quotes of
Capital Stock on such exchange or market, as the case may be; provided, however,
that, if the Capital Stock is not so listed or quoted, Fair Market Value shall
be determined in accordance with the method approved by the
Compensation/Incentive Committee, and, provided further, if any of the foregoing
methods of determining Fair Market Value shall not be consistent with the
regulations of the Secretary of the Treasury or his delegate at the time
applicable to a Stock Incentive of the type involved, Fair Market Value in the
case of such Stock Incentive shall be determined in accordance with such
regulations and shall mean the value as so determined.
COMPENSATION/INCENTIVE COMMITTEE: The Compensation/Incentive Committee
designated to administer this Plan pursuant to the provisions of Section 10.
INCENTIVE COMPENSATION: Bonuses, extra and other compensation payable
in addition to a salary or other base amount, whether contingent or
discretionary or required to be paid pursuant to an agreement, resolution or
arrangement, and whether payable currently or on a deferred basis, in cash,
Capital Stock or other property, awarded by the Corporation or a Subsidiary
prior or subsequent to the date of the approval and adoption of this Plan by the
stockholders of the Corporation.
KEY EMPLOYEE: An employee of the Corporation or of a Subsidiary who in
the opinion of the Compensation/Incentive Committee can contribute significantly
to the growth and successful operations of the Corporation or a Subsidiary. The
grant of a Stock Incentive to an employee by the Compensation/Incentive
Committee shall be deemed a determination by the Compensation/Incentive
Committee that such employee is a Key Employee. For the purposes of this Plan, a
director or officer of the Corporation or of a Subsidiary shall be deemed an
employee regardless of whether such director or officer is on the payroll of, or
otherwise paid for services by, the Corporation or a Subsidiary.
A-1
OPTION: An option to purchase shares of Capital Stock.
PERFORMANCE UNIT: A unit representing a share of Capital Stock, subject
to a Stock Award, the issuance, transfer or retention of which is contingent, in
whole or in part, upon attainment of a specified performance objective or
objectives, including, without limitation, objectives determined by reference to
or changes in (a) the Fair Market Value, book value or earnings per share of
Capital Stock, or (b) sales and revenues, income, profits and losses, return on
capital employed, or net worth of the Corporation (on a consolidated or
unconsolidated basis) or of any one or more of its groups, divisions,
Subsidiaries or departments, or (c) a combination of two or more of the
foregoing factors.
PLAN: The 2004 Stock Incentive Plan herein set forth as the same may
from time to time be amended.
STOCK AWARD: An issuance or transfer of shares of Capital Stock at the
time the Stock Incentive is granted or as soon thereafter as practicable, or an
undertaking to issue or transfer such shares in the future, including, without
limitation, such an issuance, transfer or undertaking with respect to
Performance Units.
STOCK INCENTIVE: A stock incentive granted under this Plan in one of
the forms provided for in Section 3.
SUBSIDIARY: A corporation or other form of business association of
which shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Corporation.
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the
Compensation/Incentive Committee may at any time, or from time to time,
grant Stock Incentives under this Plan to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) and (d) of this
Section 4 and of Section 8, the aggregate number of shares of Capital
Stock which may be issued or transferred pursuant to Stock Incentives
granted under this Plan shall not exceed 700,000 shares; provided,
however, that the maximum aggregate number of shares of Capital Stock
which may be issued or transferred pursuant to Stock Incentives in the
form of Stock Awards, shall not exceed 300,000 shares.
(b) The maximum aggregate number of shares of Capital Stock
which may be issued or transferred under the Plan to directors of the
Corporation or of a Subsidiary shall not exceed 250,000 shares.
(c) Authorized but unissued shares of Capital Stock and shares
of Capital Stock held in the treasury, whether acquired by the
Corporation specifically for use under this Plan or otherwise, may be
used, as the Compensation/Incentive Committee may from time to time
determine, for purposes of this Plan, provided, however, that any
shares acquired or held by the Corporation for the purposes of this
Plan shall, unless and until transferred to a Key Employee in
accordance with the terms and conditions of a Stock Incentive, be and
at all times remain treasury shares of the Corporation, irrespective of
whether such shares are entered in a special account for purposes of
this Plan, and shall be available for any corporate purpose.
(d) If any shares of Capital Stock subject to a Stock
Incentive shall not be issued or transferred and shall cease to be
issuable or transferable because of the termination, in whole or in
part, of such Stock Incentive or for any other reason, or if any such
shares shall, after issuance or transfer, be reacquired by the
Corporation or a Subsidiary because of an employee's failure to comply
with the terms and conditions of a Stock Incentive, the shares not so
issued or transferred, or the shares so reacquired by the Corporation
or a Subsidiary shall no longer be charged against any of the
limitations provided for in paragraphs (a) or (b) of this Section 4 and
may again be made subject to Stock Incentives.
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5. STOCK AWARDS: Stock Incentives in the form of Stock Awards shall be
subject to the following provisions:
(a) A Stock Award shall be granted only in payment of
Incentive Compensation that has been earned or as Incentive
Compensation to be earned, including, without limitation, Incentive
Compensation awarded concurrently with or prior to the grant of the
Stock Award.
(b) For the purposes of this Plan, in determining the value of
a Stock Award, all shares of Capital Stock subject to such Stock Award
shall be valued at not less than 100 percent of the Fair Market Value
of such shares on the date such Stock Award is granted, regardless of
whether or when such shares are issued or transferred to the Key
Employee and whether such shares are subject to restrictions which
affect their value.
(c) Shares of Capital Stock subject to a Stock Award may be
issued or transferred to the Key Employee at the time the Stock Award
is granted, or at any time subsequent thereto, or in installments from
time to time, as the Compensation/Incentive Committee shall determine.
In the event that any such issuance or transfer shall not be made to
the Key Employee at the time the Stock Award is granted, the
Compensation/Incentive Committee may provide for payment to such Key
Employee, either in cash or in shares of Capital Stock from time to
time or at the time or times such shares shall be issued or transferred
to such Key Employee, of amounts not exceeding the dividends which
would have been payable to such Key Employee in respect of such shares
(as adjusted under Section 8) if they had been issued or transferred to
such Key Employee at the time such Stock Award was granted. Any amount
payable in shares of Capital Stock under the terms of a Stock Award
may, at the discretion of the Corporation, be paid in cash, on each
date on which delivery of shares would otherwise have been made, in an
amount equal to the Fair Market Value on such date of the shares which
would otherwise have been delivered.
(d) A Stock Award shall be subject to such terms and
conditions, including, without limitation, restrictions on sale or
other disposition of the Stock Award or of the shares issued or
transferred pursuant to such Stock Award, as the Compensation/Incentive
Committee may determine; provided, however, that upon the issuance or
transfer of shares pursuant to a Stock Award, the recipient shall, with
respect to such shares, be and become a stockholder of the Corporation
fully entitled to receive dividends, to vote and to exercise all other
rights of a stockholder except to the extent otherwise provided in the
Stock Award. Each Stock Award shall be evidenced by a written
instrument in such form as the Compensation/Incentive Committee shall
determine, provided the Stock Award is consistent with this Plan and
incorporates it by reference.
6. OPTIONS: Stock Incentives in the form of Options shall be subject to
the following provisions:
(a) The maximum aggregate number of Stock Incentives in the
form of Options which may be granted to an individual employee of the
Corporation or a Subsidiary in any calendar year shall not exceed
50,000 Options.
(b) Upon the exercise of an Option, the purchase price shall
be paid in cash or, if so provided in the Option or in a resolution
adopted by the Compensation/Incentive Committee (and subject to such
terms and conditions as are specified in the Option or by the
Compensation/Incentive Committee), in shares of Capital Stock or in a
combination of cash and such shares. Shares of Capital Stock thus
delivered shall be valued at their Fair Market Value on the date of
exercise. Subject to the provisions of Section 8, the purchase price
per share shall be not less than 100 percent of the Fair Market Value
of a share of Capital Stock on the date the Option is granted.
A-3
(c) Each Option shall be exercisable, in full or in part, six
months after the date the Option is granted, or may become exercisable
in one or more installments and at such time or times, as the
Compensation/Incentive Committee shall determine. Unless otherwise
provided in the Option, an Option, to the extent it is or becomes
exercisable, may be exercised at any time, in whole or in part, until
the expiration or termination of the Option. Any term or provision in
any outstanding Option specifying when the Option is exercisable or
that it be exercisable in installments may be modified at any time
during the life of the Option by the Compensation/Incentive Committee,
provided, however, no such modification of an outstanding Option shall,
without the consent of the optionee, adversely affect any Option
theretofore granted to him. An Option will become immediately
exercisable in full if at any time during the term of the Option the
Corporation obtains actual knowledge that any of the following events
has occurred, irrespective of the applicability of any limitation on
the number of shares then exercisable under the Option: (1) any person
within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), other than the Corporation or
any of its subsidiaries, has become the beneficial owner, within the
meaning of Rule 13d-3 under the 1934 Act, of 30 percent or more of the
combined voting power of the Corporation's then outstanding voting
securities; (2) the expiration of a tender offer or exchange offer,
other than an offer by the Corporation, pursuant to which 20 percent or
more of the shares of the Corporation's Capital Stock have been
purchased; (3) the stockholders of the Corporation have approved (i) an
agreement to merge or consolidate with or into another corporation and
the Corporation is not the surviving corporation or (ii) an agreement
to sell or otherwise dispose of all or substantially all of the assets
of the Corporation (including a plan of liquidation); or (4) during any
period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors cease for any reason to
constitute at least a majority thereof, unless the nomination for the
election by the Corporation's stockholders of each new director was
approved by a vote of at least one-half of the persons who were
directors at the beginning of the two-year period.
(d) Each Option shall be exercisable during the life of the
optionee only by him or a transferee or assignee permitted by paragraph
(g) of this Section 6 and, after his death, only by his estate or by a
person who acquired the right to exercise the Option pursuant to one of
the provisions of paragraph (g) of this Section 6. An Option, to the
extent that it shall not have been exercised, shall terminate when the
optionee ceases to be an employee of the Corporation or a Subsidiary,
unless he ceases to be an employee because of his resignation with the
consent of the Compensation/Incentive Committee (which consent may be
given before or after resignation), or by reason of his death,
incapacity or retirement under a retirement plan of the Corporation or
a Subsidiary. Except as provided in the next sentence, if the optionee
ceases to be an employee by reason of such resignation, the Option
shall terminate three months after he ceases to be an employee. If the
optionee ceases to be an employee by reason of such death, incapacity
or retirement, or if he should die during the three-month period
referred to in the preceding sentence, the Option shall terminate
fifteen months after he ceases to be an employee. Where an Option is
exercised more than three months after the optionee ceased to be an
employee, the Option may be exercised only to the extent it could have
been exercised three months after he ceased to be an employee. A leave
of absence for military or governmental service or for other purposes
shall not, if approved by the Compensation/Incentive Committee, be
deemed a termination of employment within the meaning of this paragraph
(d); provided, however, that an Option may not be exercised during any
such leave of absence. Notwithstanding the foregoing provisions of this
paragraph (d) or any other provision of this Plan, no Option shall be
exercisable after expiration of the term for which the Option was
granted, which shall in no event exceed ten years. Where an Option is
granted for a term of less than ten years, the Compensation/Incentive
Committee, may, at any time prior to the expiration of the Option,
extend its term for a period ending not later than ten years from the
date the Option was granted.
(e) Options shall be granted for such lawful consideration as
the Compensation/Incentive Committee shall determine.
(f) Neither the Corporation nor any Subsidiary may directly or
indirectly lend any money to any person for the purpose of assisting
him to purchase or carry shares of Capital Stock issued or transferred
upon the exercise of an Option.
(g) No Option nor any right thereunder may be assigned or
transferred by the optionee except:
(i) by will or the laws of descent and distribution;
(ii) pursuant to a qualified domestic relations order
as defined by the Internal Revenue Code of 1986, as amended,
or by the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder;
(iii) by an optionee who, at the time of the
transfer, is not subject to the provisions of Section 16 of
the 1934 Act, provided such transfer is to, or for the benefit
of (including but not limited to trusts for the benefit of),
the optionee's spouse or lineal descendants of the optionee's
parents; or
(iv) by an optionee who, at the time of the transfer,
is subject to the provisions of Section 16 of the 1934 Act, to
the extent, if any, such transfer would be permitted under
Securities and Exchange Commission Rule 16b-3 or any successor
rule thereto, as such rule or any successor rule thereto may
be in effect at the time of the transfer.
A-4
If so provided in the Option or if so authorized by the
Compensation/Incentive Committee and subject to such terms and
conditions as are specified in the Option or by the
Compensation/Incentive Committee, the Corporation may, upon or without
the request of the holder of the Option and at any time or from time to
time, cancel all or a portion of the Option then subject to exercise
and either (i) pay the holder an amount of money equal to the excess,
if any, of the Fair Market Value, at such time or times, of the shares
subject to the portion of the Option so canceled over the aggregate
purchase price of such shares, or (ii) issue or transfer shares of
Capital Stock to the holder with a Fair Market Value, at such time or
times, equal to such excess.
(h) Each Option shall be evidenced by a written instrument,
which shall contain such terms and conditions, and shall be in such
form, as the Compensation/Incentive Committee may determine, provided
the Option is consistent with this Plan and incorporates it by
reference. Notwithstanding the preceding sentence, an Option, if so
granted by the Compensation/Incentive Committee, may include
restrictions and limitations in addition to those provided for in this
Plan.
(i) Any federal, state or local withholding taxes payable by
an optionee or awardee upon the exercise of an Option or upon the
removal of restrictions of a Stock Award shall be paid in cash or in
such other form as the Compensation/Incentive Committee may authorize
from time to time, including the surrender of shares of Capital Stock
or the withholding of shares of Capital Stock to be issued to the
optionee or awardee. All such shares so surrendered or withheld shall
be valued at Fair Market Value on the date such are surrendered to the
Corporation or authorized to be withheld.
7. COMBINATIONS OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (b) (iii) of Section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of
Stock Award with any form of Option; provided, however, that the terms
and conditions of such Stock Incentive pertaining to a Stock Award are
consistent with Section 5 and the terms and conditions of such Stock
Incentive pertaining to an Option are consistent with Section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as the Compensation/Incentive Committee may
determine, including, without limitation, a provision terminating in
whole or in part a portion thereof upon the exercise in whole or in
part of another portion thereof. Such combination Stock Incentive shall
be evidenced by a written instrument in such form as the
Compensation/Incentive Committee shall determine, provided it is
consistent with this Plan and incorporates it by reference.
8. ADJUSTMENT PROVISIONS: In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Capital Stock shall be
effected, or the outstanding shares of Capital Stock are, in connection with a
merger or consolidation of the Corporation or a sale by the Corporation of all
or a part of its assets, exchanged for a different number or class of shares of
stock or other securities of the Corporation or for shares of the stock or other
securities of any other corporation, or a record date for determination of
holders of Capital Stock entitled to receive a dividend payable in Capital Stock
shall occur (a) the number and class of shares or other securities that may be
issued or transferred pursuant to Stock Incentives, (b) the number and class of
shares or other securities which have not been issued or transferred under
outstanding Stock Incentives, (c) the purchase price to be paid per share or
other security under outstanding Options, and (d) the price to be paid per share
or other security by the Corporation or a Subsidiary for shares or other
securities issued or transferred pursuant to Stock Incentives which are subject
to a right of the Corporation or a Subsidiary to reacquire such shares or other
securities, shall in each case be equitably adjusted.
9. TERM: This Plan shall be deemed adopted and shall become effective
on the date it is approved and adopted by the stockholders of the Corporation.
No Stock Incentives shall be granted under this Plan after May 17, 2014.
10. ADMINISTRATION:
(a) The Plan shall be administered by the
Compensation/Incentive Committee, which shall consist
of no fewer than three persons designated by the
Board of Directors. Grants of Stock Incentive may be
granted by the Compensation/Incentive Committee
either in or without consultation with employees,
but, anything in this plan to the contrary
notwithstanding, the Compensation/Incentive Committee
shall have full authority to act in the matter of
selection of all Key Employees and in determining the
number of Stock Incentives to be granted to them.
(b) The Compensation/Incentive Committee may establish
such rules and regulations, not inconsistent with the
provisions of this Plan, as it deems necessary to
determine eligibility to participate in this Plan and
for the proper administration of this Plan, and may
amend or revoke any rule or regulation so
established. The
A-5
Compensation/Incentive Committee may make such
determinations and interpretations under or in
connection with this Plan as it deems necessary or
advisable. All such rules, regulations,
determinations and interpretations shall be binding
and conclusive upon the Corporation, its
Subsidiaries, its stockholders and all employees, and
upon their respective legal representatives,
beneficiaries, successors and assigns upon all other
persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the
Compensation/Incentive Committee acting under this
Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no
liability except for gross negligence or willful
misconduct in the performance of their duties.
11. GENERAL PROVISIONS:
(a) Nothing in this Plan nor in any instrument executed
pursuant hereto shall confer upon any employee any
right to continue in the employ of the Corporation or
a Subsidiary, or shall affect the right of the
Corporation or of a Subsidiary to terminate the
employment of any employee with or without cause.
(b) No shares of Capital Stock shall be issued or
transferred pursuant to a Stock Incentive unless and
until all legal requirements applicable to the
issuance or transfer of such shares, in the opinion
of counsel to the Corporation, have been complied
with. In connection with any such issuance or
transfer, the person acquiring the shares shall, if
requested by the Corporation, give assurances,
satisfactory to counsel to the Corporation, that the
shares are being acquired for investment and not with
a view to resale or distribution thereof and
assurances in respect of such other matters as the
Corporation or a Subsidiary may deem desirable to
assure compliance with all applicable legal
requirements.
(c) No employee (individually or as a member of a group),
and no beneficiary or other persons claiming under or
through him, shall have any right, title or interest
in or to any shares of Capital Stock allocated or
reserved for the purposes of this Plan or subject to
any Stock Incentive except as to such shares of
Capital Stock, if any, as shall have been issued or
transferred to him.
(d) The Corporation or a Subsidiary may, with the
approval of the Compensation/Incentive Committee,
enter into an agreement or other commitment to grant
a Stock Incentive in the future to a person who is or
will be a Key Employee at the time of grant, and,
notwithstanding any other provision of this Plan, any
such agreement or commitment shall not be deemed the
grant of a Stock Incentive until the date on which
the Company takes action to implement such agreement
or commitment.
(e) In the case of a grant of a Stock Incentive to an
employee of a Subsidiary, such grant may, if the
Compensation/Incentive Committee so directs, be
implemented by the Corporation issuing or
transferring the shares, if any, covered by the Stock
Incentive to the Subsidiary, for such lawful
consideration as the Compensation/Incentive Committee
may specify, upon the condition or understanding that
the Subsidiary will transfer the shares to the
employee in the accordance with the terms of the
Stock Incentive specified by the
Compensation/Incentive Committee pursuant to the
provisions of this Plan. Notwithstanding any other
provisions hereof, such Stock Incentive may be issued
by and in the name of the Subsidiary and shall be
deemed granted on the date it is approved by the
Compensation/Incentive Committee, on the date it is
delivered by the Subsidiary or on such other date
between said two dates, as the Compensation/Incentive
Committee shall specify.
(f) The Corporation or a Subsidiary may make such
provisions as it may deem appropriate for the
withholding of any taxes which the Corporation or a
Subsidiary determines it is required to withhold in
connection with any Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute
for, or shall preclude or limit the establishment or
continuation of, any other Plan, practice or
arrangement for the payment of compensation or fringe
benefits to employees generally, or to any class or
group of employees, which the Corporation or any
Subsidiary or other affiliate now has or may
hereafter lawfully put into effect, including,
without limitation, any retirement, pension, group
insurance, stock purchase, stock bonus or stock
option plan.
A-6
12. AMENDMENTS AND DISCONTINUANCE:
(a) This Plan may be amended by the Board of Directors
upon the recommendation of the Compensation/Incentive
Committee, provided that, without the approval of the
stockholders of the Corporation, no amendment shall
be made which (i) increases the aggregate number of
shares of Capital Stock that may be issued or
transferred pursuant to Stock Incentives as provided
in paragraph (a) of Section 4, (ii) increases the
maximum aggregate number of shares of Capital Stock
that may be issued or transferred under the Plan to
directors of the Corporation or of a Subsidiary as
provided in paragraph (b) of Section 4, (iii)
increases the maximum aggregate number of Stock
Incentives, in the form of Options, which may be
granted to an individual employee as provided in
paragraph (a) of Section 6, (iv) withdrawals the
administration of this Plan from the
Compensation/Incentive Committee, (v) permits any
person who is not at the time a Key Employee of the
Corporation or of a Subsidiary to be granted a Stock
Incentive, (vi) permits any option to be exercised
more than ten years after the date it is granted,
(vii) amends Section 9 to extend the date set forth
therein or (viii) amends this Section 12.
(b) Notwithstanding paragraph (a) of this Section 12, the
Board of Directors may amend the Plan to take into
account changes in applicable securities laws,
federal income tax laws and other applicable laws.
Should the provisions of Rule 16b-3, or any successor
rule, under the Securities Exchange Act of 1934 be
amended, the Board of Directors may amend the Plan in
accordance therewith.
(c) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue
this Plan.
(d) No amendment or discontinuance of this Plan by the
Board of Directors or the Stockholders of the
Corporation shall, without the consent of the
employee, adversely affect any Stock Incentive
theretofore granted to him.
A-7
EXHIBIT B
ROTO-ROOTER, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements, and (3) the
independence and performance of the Company's internal and external auditors.
The members of the Audit Committee shall be appointed by the Board and
shall consist of at least three members of the Board who meet the independence
and experience requirements of the New York Stock Exchange. Accordingly, all of
the members will be directors:
1. Who have no relationship to the Company that may interfere
with the exercise of their independence from management and
the Company,
2. Who receive no compensation from the Company other than
directors' fees, and
3. Who are financially literate or who become financially
literate within a reasonable period of time after appointment
to the Audit Committee. In addition, at least one member of
the Audit Committee will have accounting or related financial
management expertise.
The Audit Committee shall meet, whether in person or telephonically, at
least four times each year. The Audit Committee shall make regular reports to
the Board.
The Audit Committee shall:
1. Review and assess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management
and the independent auditor prior to the filing by the Company
of its annual report on Form 10-K, including significant
financial reporting matters related thereto.
3. Review with management and the independent auditor the
Company's quarterly financial statements prior to the filing
by the Company of its reports on Form 10-Q, or where
practicable, prior to the first public release of quarterly
earnings.
4. Assist Board oversight of the integrity of the Company's
financial statements.
5. Discuss earnings press releases, as well as financial
information and earnings guidance provided by the Company to
analysts and ratings agencies.
6. Review with management the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures.
7. Review significant issues with respect to the Company's
accounting principles and practices as suggested by the
independent auditor, internal auditors or management.
B-1
8. Review with the independent auditor any audit problems or
difficulties and management's response to them.
9. Set clear hiring policies for employees or former employees of
the independent auditor
10. Exercise sole authority in the appointment, oversight and
retention of the independent auditor, which firm is ultimately
accountable to the Audit Committee and the Board.
11. Exercise sole authority to approve the fees to be paid to the
independent auditor.
12. Approve any significant non-audit relationship with the
independent auditor.
13. Receive periodic reports no less frequently than annually from
the independent auditor regarding all relationships between
the independent auditor and the Company, and the auditor's
independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board
take appropriate action to satisfy itself to the independence
of the auditor.
14. Obtain and review, at least annually, a report by the
independent auditor describing: its internal quality control
procedures; any material issues raised by (i) the most recent
quality control review, (ii) peer review of the firm, or (iii)
any inquiry or investigation by governmental or professional
authorities within the preceding five years concerning any
independent audits by the firm, and any steps taken to address
such issues; and all relationships between the independent
auditor and the Company.
15. Evaluate together with the Board the performance and
independence of the independent auditor and, if so determined
in the Audit Committee's sole authority, replace the
independent auditor.
16. Meet with the independent auditor prior to the annual audit to
review the planning and scope of the audit. Exercise sole
authority to approve the terms of the audit engagement.
17. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61, as
amended, relating to the conduct of the annual audit and
quarterly reviews.
18. Assist Board oversight of the internal audit department
responsibilities, performance, and the adequacy of its
resources to carry out its responsibilities.
19. Review the appointment and replacement of the internal
auditor.
20. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual
proxy statement.
21. Assist Board oversight of, and review with the Company's
counsel, legal matters that may have a material impact on the
financial statements and any material reports or inquiries
received from regulators or governmental agencies.
B-2
22. Meet with management, the internal auditor, and the
independent auditor in separate executive sessions to discuss
any matters that the Audit Committee or those persons believe
should be discussed.
23. Review and approve the expense reports of the Company's
principal executive officer.
24. Obtain advice, as it deems appropriate, from outside legal,
accounting and other advisors.
25. Establish procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters; and for the
confidential, anonymous submission by employees of such
concerns.
The foregoing shall be the common recurring activities of the Audit
Committee in carrying out its functions. These functions are set forth as a
guide with the understanding that the Audit Committee may diverge from this
guide as appropriate given the circumstances.
The Committee shall annually conduct an evaluation of its performance.
The Company shall provide appropriate funding, as determined by the
Committee, for payment to any registered public accounting firm performing
audit, review, or attest services; to outside advisors retained by the
Committee; and of ordinary administrative expenses of the Committee.
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor.
Consequently, in carrying out its responsibilities, the Audit Committee
is not providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditor's
work.
B-3
EXHIBIT C
PROPOSED AMENDMENT TO THE AMENDED CERTIFICATE OF INCORPORATION
OF ROTO-ROOTER, INC.
Article I of the Amended Certificate of Incorporation of Roto-Rooter,
Inc. is deleted and is replaced by the following:
"ARTICLE I
The name of the Corporation is Chemed Corporation."
C-1
ROTO-ROOTER, INC. LOGO
STOCKHOLDER'S PROXY AND
CONFIDENTIAL ESOP AND SAVINGS & RETIREMENT PLAN VOTING INSTRUCTION CARD
ANNUAL MEETING OF STOCKHOLDERS, MAY 17, 2004
The undersigned hereby appoints E. L. Hutton, K. J. McNamara and N. C. Dallob as
Proxies, each with the power to appoint a substitute, and hereby authorizes them
to represent and to vote, as designated on the reverse side, all the shares of
capital stock of Roto-Rooter, Inc., held of record by the undersigned on March
19, 2004, at the Annual Meeting of Stockholders to be held on May 17, 2004, or
at any adjournment thereof.
This proxy also provides confidential voting instructions for shares of
Roto-Rooter, Inc., Capital Stock held by The Fifth Third Bank, Trustee of the
Roto-Rooter, Inc., Employee Stock Ownership Plan I (ESOP), for the benefit of
the undersigned and directs such Trustee to vote as designated on the reverse
side of this card. The Trustee will vote all unallocated shares in the same
proportion the allocated shares have been voted and will vote allocated shares
for which no voting instructions have been received in the same proportion as
total voted allocated shares.
This proxy also provides confidential voting instructions for shares of
Roto-Rooter, Inc., Capital Stock held by Merrill Lynch Trust Company, Trustee of
the Roto-Rooter Savings & Retirement Plan (Plan), for the benefit of the
undersigned and directs such Trustee to vote as designated on the reverse side
of this card. The Trustee will vote all non-vested shares in the same proportion
the vested shares have been voted. Additionally, any vested shares for which no
voting instructions have been received will be voted in the same proportion as
total voted vested shares.
This proxy/confidential ESOP and Plan voting instruction card is solicited
jointly by the Board of Directors of Roto-Rooter, Inc., and the Trustees of the
ESOP and Plan, pursuant to a separate Notice of Annual Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
The Company's proxy tabulator, Wells Fargo Bank, N. A., will report separately
to the Company and to each Trustee as to proxies received and voting
instructions provided. Individual ESOP and Plan voting instructions will be kept
confidential by the proxy tabulator and not provided to the Company.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING
THE ENCLOSED ENVELOPE, OR VOTE BY TELEPHONE OR INTERNET.
(continued and to be signed on reverse side)
COMPANY #
THERE ARE THREE WAYS TO VOTE:
VOTE BY PHONE-- TOLL FREE-- 1-800-560-1965
o Use any touch-tone telephone to vote 24 hours a day, 7 days a week, until
11:59 p.m., Eastern Daylight Time, on Wednesday, May 12, 2004.
o Have your proxy/confidential ESOP and Plan voting instruction card and the
last 4 digits of the U.S. Social Security Number (SSN) or Taxpayer
Identifying Number (TIN) for this account. Follow the simple instructions the
voice prompts provide you.
VOTE BY INTERNET-- http://www.eproxy.com/rrr/
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
11:59 p.m., Eastern Daylight Time, on Wednesday, May 12, 2004.
o Have your proxy/confidential ESOP and Plan voting instruction card and the
last 4 digits of the U.S. Social Security Number (SSN) or Taxpayer
Identifying Number (TIN) for this account. Follow the simple instructions to
obtain your records and create an electronic ballot.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES, ESOP TRUSTEE
AND/OR PLAN TRUSTEE TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED,
SIGNED AND RETURNED YOUR PROXY/CONFIDENTIAL ESOP AND PLAN VOTING INSTRUCTION
CARD.
VOTE BY MAIL
Mark, sign and date your proxy/confidential ESOP and Plan voting instruction
card and return it in the postage-paid envelope provided or return it to Wells
Fargo Bank, N. A., c/o Shareowner Services , P. O. Box 64873, St. Paul, MN
55164-0873.
NOTICE TO ESOP AND PLAN PARTICIPANTS: YOUR VOTING INSTRUCTIONS MUST BE RECEIVED
BY WELLS FARGO BANK BY 11:59 P.M., EASTERN DAYLIGHT TIME, WEDNESDAY, MAY 12,
2004, IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR CARD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. Election of Directors (mark only one box):
01 Edward L. Hutton 05 Joel F. Gemunder 09 Timothy S. O'Toole [ ] FOR all nominees [ ] WITHHOLD ALL
02 Kevin J. McNamara 06 Patrick P. Grace 10 Donald E. Saunders listed unless VOTING AUTHORITY
03 Donald Breen 07 Thomas C. Hutton 11 George J. Walsh III indicated below. for directors.
04 Charles H. Erhart, Jr. 08 Sandra E. Laney 12 Frank E. Wood
--------------------------------------------------------------------------
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED AT THE RIGHT.
PLEASE FOLD HERE
------------------------------------------------------------------------------
2. To approve and adopt the Company's 2004 Stock Incentive Plan. [ ] For [ ] Against [ ] Abstain
3. To approve an amendment to the Company's 2002 Executive Long-Term
Incentive Plan. [ ] For [ ] Against [ ] Abstain
4. To approve an amendment to the Company's Certificate of Incorporation, as
amended, increasing the number of authorized shares of Capital Stock from
15,000,000 shares to 40,000,000 shares. [ ] For [ ] Against [ ] Abstain
5. To approve an amendment to the Company's Certificate of Incorporation, as
amended, changing the Company's name to Chemed Corporation. [ ] For [ ] Against [ ] Abstain
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
IF NO CHOICE IS SPECIFIED, THIS PROXY/CONFIDENTIAL ESOP AND PLAN VOTING
INSTRUCTION CARD WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5, EXCEPT THAT ESOP
SHARES WILL BE VOTED IN THE SAME PROPORTION AS TOTAL VOTED ALLOCATED ESOP SHARES
AND PLAN SHARES WILL BE VOTED IN THE SAME PROPORTION AS TOTAL VOTED VESTED PLAN
SHARES.
Address Change? Mark Box [ ] Indicate changes below: Dated _________, 2004
---------------------------------------
Signature(s) in Box
NOTE: Please sign as name appears.
Joint owners should each sign. When
signed on behalf of a corporation,
partnership, estate, trust or other
stockholder, state how you are
authorized to sign.