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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
Chemed Corporation
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(Name of Registrant as Specified in its Charter)
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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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:_________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-ll (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________________
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LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2006
The Annual Meeting of Stockholders of Chemed Corporation will be held at
The Queen City Club, 331 East Fourth Street, Cincinnati, Ohio, on Monday, May
15, 2006, at 11 a.m. for the following purposes:
(1) To elect directors;
(2) To approve and adopt the Company's 2006 Stock Incentive Plan;
(3) To approve an amendment to the Company's Certificate of
Incorporation, as amended, increasing the number of authorized
shares of Capital Stock from 40,000,000 to 80,000,000 shares;
(4) To ratify the selection of independent accountants by the Audit
Committee of the Board of Directors; and
(5) To transact such other business as may properly be brought before
the meeting.
Stockholders of record at the close of business on March 31, 2006, 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 11, 2006
LOGO
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Chemed Corporation (the "Company" or "Chemed") of
proxies to be used at the Annual Meeting of Stockholders ("Annual Meeting") of
the Company to be held on May 15, 2006, 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 11, 2006. 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 31, 2006,
will be entitled to vote at the Annual Meeting or any adjournments thereof. On
such date, the Company had outstanding 26,282,201 shares of capital stock, par
value $1 per share ("Capital Stock"), entitled to one vote per share.
ELECTION OF DIRECTORS
Thirteen 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 Board of the Company and has held this position since
Director since 1970 May 2004. In May 2004, the Company amended its By-Laws to create the non-executive
Age: 86 position of Chairman of the Board. Prior to May 2004, Mr. Hutton served in an
executive position as Chairman of the Company from November 1993. 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 Executive Officer of the Company and has held
Director since 1987 these positions since August 1994 and May 2001, respectively. Previously, he served
Age: 52 as Executive Vice President, Secretary and General Counsel from November 1993,
August 1986 and August 1986, respectively, to August 1994.
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DONALD BREEN, JR. Mr. Breen is President of Castle Hill Ventures, LLC., Cincinnati, Ohio (management
Director since May 2004 consulting and investments) and has held this position since September 2005.
Age: 53 Previously he was Senior Vice President of John Morrell & Co., Cincinnati, Ohio
(producer of fresh foods) from 1992 until September 2005.
CHARLES H. ERHART, JR. Mr. Erhart retired as President of W. R. Grace and Co. (hereinafter "Grace"),
Director since 1970 Columbia, Maryland (international specialty chemicals, construction and packaging)
Age: 80 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 Executive Officer of Omnicare and has held these
Director since 1977 positions since May 1981 and May 2001, respectively. He is also a director of
Age: 66 Omnicare and Ultratech Stepper, Inc.
PATRICK P. GRACE Mr. Grace is President of MLP Capital, Inc., an investment holding company which
Director since 1996 has held several real estate and mining interests in the southeastern United
Age: 50 States. He 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
("Kingdom"), 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, from December 2000 to January 2002, and he was Executive
Vice President of Kingdom 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 Company and has held this position since
Director since 1985 February 1988. He is a son of Edward L. Hutton, Chairman of the Board and a director
Age: 55 of the Company.
WALTER L. KREBS Mr. Krebs retired as Senior Vice President-Finance, Chief Financial Officer and
Director from May 1989 Treasurer of Service America Systems, Inc., a former wholly-owned subsidiary of the
to April 1991, Company ("Service America"), in July 1999, having held the position since October
May 1995 to May 2003 1997. Previously, he was a Director - Financial Services of DiverseyLever, Inc.
and since May 2005 (formerly known as Diversey Corporation), Detroit, Michigan (specialty chemicals)
Age: 73 ("Diversey") from April 1991 to April 1996. Previously, from January 1990 to April
1991, he was a Senior Vice President and the Chief Financial Officer of the
Company's then-wholly-owned subsidiary, DuBois Chemicals, Inc. ("DuBois").
SANDRA E. LANEY Ms. Laney is Chairman and CEO of Cadre Computer Resources Co., Cincinnati, Ohio
Director since 1986 (information security) and has held this position since August 31, 2001. Ms. Laney
Age: 62 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 of the Company and has held this position
Director since 1991 since May 1992. He is Chief Executive Officer of Vitas Healthcare Corporation
Age: 50 ("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 at the Farmer School of Business
Director from May 1981 to Administration, Miami University, Oxford, Ohio, and has held this position since
May 1982, May 1983 to August 2001. Mr. Saunders retired as President of DuBois, then a division of
May 1987 and since May 1998 DiverseyLever, Inc., Detroit, Michigan (specialty chemicals), in October 2000,
Age: 62 having held that position since November 1993.
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GEORGE J. WALSH III Mr. Walsh is a partner with the law firm of Thompson Hine LLP, New York, New York,
Director since 1995 and has held this position since January 1979.
Age: 60
FRANK E. WOOD Mr. Wood is President and Chief Executive Officer of Secret Communications, LLC,
Director since Cincinnati, Ohio (owner and operator of radio stations) and has held this position
May 2002 since 1994. He is also a co-founder and principal of The Darwin Group, Cincinnati,
Age: 63 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 $18,000,
and for each meeting attended, a Director Emeritus is paid $500.
Mr. John M. Mount, who served as a Director of the Company from 1986 -
1991 and from 1994 - 2003, was designated Director Emeritus in May 2005. It is
anticipated that at the annual meeting of the Board of Directors, Mr. Mount will
again be designated as a Director Emeritus.
COMPENSATION OF DIRECTORS
Effective May 16, 2005, each member of the Board of Directors who is not
an employee of the Company is paid an annual fee of $18,000 and a fee of $3,000
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 $1,000 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 $500 for his
attendance at the Committee meeting. Mr. Edward Hutton, who served in the
non-executive position of Chairman of the Board during 2005, received $325,000
in salary, a $56,000 premium payment under a split dollar insurance policy,
$88,162 allocated to his account under the Company's Retirement Plan and ESOP, a
$3,384 premium payment for term life insurance, and $16,228 in the form of an
unrestricted stock award of 400 shares of Capital Stock. Mr. Hutton does not
receive any additional amounts in his capacity as a director of the Company.
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 2005, each member of the Board of Directors (other
than those serving on the Compensation/Incentive Committee) was granted an
unrestricted stock award covering 400 shares of Capital Stock under the
Company's 2004 Stock Incentive Plan. Those directors who are members of the
Compensation/Incentive Committee were paid the cash equivalent of the 400-share
stock award or $16,298.
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 participate
in the Company's health insurance plans by paying rates offered to former
employees under COBRA.
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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.
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, Krebs 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
eight occasions during 2005.
The Compensation/Incentive Committee ("CIC") 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 Chemed/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) eight 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, Breen
and Wood. The Compensation/Incentive Committee met on six occasions during 2005.
A copy of the Compensation/Incentive Committee Charter is available on the
Company's Web site, www.chemed.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, Gemunder and Grace. 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 2005. 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. 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.chemed.com.
The Board of Directors has five scheduled meetings a year, at which it
reviews and discusses reports by management on the performance of the Company
and its operating subsidiaries, its plans and properties, as well as immediate
issues facing the Company. The Board meets during each of its meetings in
executive session, without employees or management directors present. Such
sessions are presided over by various independent directors.
During 2005, there were five meetings of the Board of Directors, and each
director attended 100 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. Thirteen members of the Board attended last year's Annual
Meeting held on May 16, 2005.
The Board and the Nominating Committee of the Board undertook an annual
review of director independence. During this review, the Board and the
Nominating Committee considered transactions and relationships between each
director or any member of his or her immediate family and the Company and its
subsidiaries and affiliates, including those reported under the caption "Certain
Relationships and Related Transactions" below. The Board and the Nominating
Committee also examined transactions and relationships between directors or
their affiliates and members of the Company's senior management or their
affiliates. The
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purpose of this review was to determine whether any such relationships or
transactions were inconsistent with a determination that the director is
independent under the New York Stock Exchange corporate governance standards.
As a result of this review, the Board and the Nominating Committee have
affirmatively determined that, under the New York Stock Exchange listing
standards, the following directors and nominees for director, constituting a
majority of the individuals nominated for election as directors at the Annual
Meeting, are independent of the Company and its management: Messrs. Breen,
Erhart, Gemunder, Grace, Krebs, Saunders, Walsh and Wood.
The Board of Directors has adopted Corporate Governance Principles and
Policies on Business Ethics which along with the charters of the Audit,
Compensation/Incentive and Nominating Committees are available on the Company's
Web site under Corporate Governance - Governance Documents (www.chemed.com) and
a printed copy may be obtained from the Company's Secretary at 2600 Chemed
Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726.
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.
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 also has retained the services of compensation
consultants, Compensation Strategies, Inc.
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.
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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 in 2005 ranged from 25 to 165 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. 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. In August 2002, the Compensation/Incentive Committee
established guidelines which covered 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
$25 per share during 10 consecutive trading days prior to the fourth anniversary
of the plan. In June 2004, the Compensation/Incentive Committee established new
guidelines covering LTIP awards. These guidelines are disclosed under the
caption "Long Term Incentive Plan." Based on this criteria during 2005 the
Compensation/Incentive Committee approved a payout under the LTIP in the
aggregate amount of $4,813,000.
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.
During 2005, the base salary of Mr. K. J. McNamara, President and Chief
Executive Officer of the Company, was $600,000. His bonus in respect of 2005
services was $990,000 and a restricted stock award of 8,000 shares, vesting in
full on February 8, 2010. Factors considered in establishing the compensation
levels in 2005 for Mr. McNamara were the 55.2% increase in net income, excluding
special items, the 48% increase in the price of Capital Stock, and an increase
of over 50% in earnings per share, excluding special items. The
Compensation/Incentive Committee believes that Mr. McNamara's base salary, LTIP
awards, 2005 bonus and stock options granted are consistent with his performance
as measured by these factors and the other criteria discussed above.
Compensation/Incentive Committee
Charles H. Erhart, Jr., Chairman
Donald Breen, Jr.
Frank E. Wood
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid to the Chief Executive
Officer and the four most highly compensated executive officers of the Company
for the past three years for all services rendered in all capacities to the
Company and its subsidiaries:
6
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- -----------------------------------
AWARDS (2) PAYOUTS
------------------------ ----------
SECURITIES
RESTRICTED UNDERLYING
NAME AND STOCK CHEMED LTIP ALL OTHER
PRINCIPAL SALARY BONUS AWARDS (#) STOCK PAYOUTS COMPENSATION
POSITION YEAR ($) ($) (1) OPTIONS (#) ($) ($)
- ----------------- ---- -------- -------- ---------- ------------ ---------- ------------
K. J. McNamara 2005 $600,000 $990,000 8,000 70,000 $1,016,547 $ 576,284 (3)
President and 2004 417,600 500,000 8,000 100,000 3,097,609 538,936
CEO 2003 406,975 260,575 -0- 80,000 -0- 105,889
T. S. O'Toole 2005 430,000 300,000 3,250 20,000 589,337 387,164 (4)
Executive 2004 360,516 225,000 -0- 90,000 1,189,024 240,140
Vice President 2003 232,017 92,097 -0- 40,000 -0- 54,517
S. S. Lee 2005 255,802 200,000 -0- 17,000 317,893 176,726 (5)
Executive 2004 247,507 145,000 -0- 34,000 381,802 123,858
Vice President 2003 238,921 109,230 -0- 30,000 -0- 59,663
D. P. Williams 2005 280,000 250,000 3,250 25,000 479,965 239,369 (6)
Vice President 2004 217,025 155,000 -0- 50,000 548,411 111,721
and CFO 2003 175,430 62,000 -0- 20,000 -0- 39,721
A. V. Tucker, Jr. 2005 162,000 102,000 1,500 15,000 288,236 134,244 (7)
Vice President 2004 145,000 70,000 -0- 30,000 315,199 66,170
and Controller 2003 141,333 54,390 -0- 16,000 -0- 27,703
SUMMARY COMPENSATION TABLE (CONTINUED)
- --------
(1) The number and value of the aggregate restricted shares of Capital Stock
held by the named executives at December 31, 2005 were as follows: K.J.
McNamara - 18,400 shares, $914,112; T.S. O'Toole - 6,000 shares, $298,080;
S.S. Lee - 4,000 shares, $198,720; D.P. Williams - 5,000 shares, $248,400;
and A.V. Tucker, Jr. - 3,000 shares, $149,040. Except for Mr. McNamara,
the restricted shares reflect a one time grant in 2004 under the LTIP and
vest in full on December 31, 2007. Recipients receive dividends on the
awarded shares and are entitled to vote them, whether or not vested. The
number of restricted shares for Mr. McNamara also reflects a grant of
8,000 shares which vest in full on February 18, 2009.
(2) Number of shares reflects 2-for-1 stock split in the form of a 100% stock
dividend paid on May 11, 2005.
(3) Includes the following amounts: $529,893 allocated to Mr. McNamara's
account under the Retirement Plan and Employee Stock Ownership Plans
("ESOP") with respect to 2005; a $3,807 premium payment for term
insurance; a $26,356 accrual in the Company's Supplemental Pension and
Life Insurance Plan; and $16,228 in the form of an unrestricted stock
award of 400 shares of Capital Stock.
(4) Includes the following amounts: $307,861 allocated to Mr. O'Toole's
account under the Retirement Plan and ESOP with respect to 2005; a $3,857
premium payment for term insurance; a $23,218 accrual in the Company's
Supplemental Pension and Life Insurance Plan; $16,228 in the form of an
unrestricted stock award of 400 shares of Capital Stock; and $36,000 for a
housing allowance.
(5) Includes the following amounts: $155,787 allocated to Mr. Lee's account
under the Retirement Plan, ESOP and Roto-Rooter's Deferred Compensation
Plan and Retirement Plan with respect to 2005; a $1,944 premium payment
for term insurance; a $3,515 premium payment for supplemental life
insurance; and a $15,480 accrual in the Company's Supplemental Pension and
Life Insurance Plan.
(6) Includes the following amounts: $224,026 allocated to Mr. Williams'
account under the Retirement Plan and ESOP with respect to 2005; a $3,158
premium payment for term insurance; and a $12,185 accrual in the Company's
Supplemental
7
Pension and Life Insurance Plan.
(7) Includes the following amounts: $123,524 allocated to Mr. Tucker's account
under the Retirement Plan and ESOP with respect to 2005; a $2,217 premium
payment for term insurance; a $750 premium payment for supplemental life
insurance; and a $7,753 accrual in the Company's Supplemental Pension and
Life Insurance Plan.
STOCK OPTIONS
The table below shows information concerning Chemed stock options granted
in 2005 to the named executives in the Summary Compensation Table.
CHEMED STOCK OPTION GRANTS IN 2005
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------- -----------------------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS TO EXERCISE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#) (1) (2) IN 2005 ($/SHARE) DATE 5% ($) 10% ($)
- ----------------- ----------- --------- --------- ----------- ---------- -----------
K. J. McNamara 70,000 20.2% $ 38.13 3/11/2015 $1,678,583 $ 4,253,858
T. S. O'Toole 20,000 5.8 38.13 3/11/2015 479,595 1,215,388
S. S. Lee 17,000 4.9 38.13 3/11/2015 407,656 1,033,080
D. P. Williams 25,000 7.2 38.13 3/11/2015 599,494 1,519,235
A. V. Tucker, Jr. 15,000 4.3 38.13 3/11/2015 359,696 911,541
- --------
(1) These options which were granted on March 11, 2005, 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 became exercisable in full on June 11, 2005.
(2) Number of shares underlying options granted reflect the 2-for-1 stock
split in the form of a 100% stock dividend paid on May 11, 2005.
The table below shows information concerning Chemed stock options
exercised during 2005 and the year-end number and value of unexercised Chemed
stock options held by the executive officers named in the Summary Compensation
Table.
AGGREGATED CHEMED STOCK OPTION EXERCISES IN
2005 AND YEAR-END STOCK OPTION VALUES
------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/05 (#) AT 12/31/05 ($)
-------------------------- -------------------------------
NUMBER OF
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ------------ ---------- ----------- ------------- ----------- ------------------
K. J. McNamara 117,000 $3,149,850 283,400 -0- $ 7,178,236 -0-
T. S. O'Toole 173,000 4,061,850 110,000 -0- 2,737,600 -0-
S. S. Lee 12,000 219,120 163,000 -0- 4,718,970 -0-
D. P. Williams 45,000 1,016,080 113,000 -0- 2,876,370 -0-
A. V. Tucker, Jr. 48,000 1,260,624 115,000 -0- 3,250,190 -0-
8
LONG TERM INCENTIVE PLAN
The table below shows information concerning LTIP awards granted to the
named executives in the Summary Compensation Table during 2005. All the awards
granted in 2005 were in the form of unrestricted shares of Capital Stock.
LONG-TERM INCENTIVE PLAN
- AWARDS IN LAST FISCAL YEAR
- -----------------------------------
NUMBER OF
SHARES OF
CAPITAL STOCK (#)
-----------------
K.J. McNamara 22,400
T.S. O'Toole 12,950
S.S. Lee 7,050
D.P. Williams 10,575
A.V. Tucker, Jr. 6,350
During June 2004, the CIC approved guidelines covering the
establishment of a pool of 250,000 capital shares ("2004 LTIP Pool") to be
distributed to eligible members of management upon attainment of the following
hurdles during the period January 1, 2004 through December 31, 2007. The number
of shares and the stock price information discussed below reflect a 2-for-1
stock split in the form of a 100% stock dividend paid on May 11, 2005.
- 88,000 shares will be awarded if Chemed's cumulative pro forma
adjusted EBITDA (including the results of Vitas beginning on
January 1, 2004) reaches $365 million within the four-year
period.
- 88,000 shares will be awarded if Chemed's stock price reaches
the following hurdles during any 30 trading days out of any 60
trading day period during the four-year period:
- 22,000 shares for a stock price of $35.00
- an additional 33,000 shares for a stock price of $38.75
- an additional 33,000 shares for a stock price of $42.50
- 44,000 shares represent a retention element, subject to a
four-year, time based vesting.
- 30,000 shares may be awarded at the discretion of the CIC.
During 2005, the Company's stock price reached the following three stock
price hurdles: $70.00 ($35.00 post-stock split); $77.50 ($38.75 post-stock
split) and $85.00 ($42.50 post-stock split). On March 11, 2005, July 11, 2005
and December 2, 2005, the Compensation/Incentive Committee awarded 25,000
shares, 37,500 shares and 43,500 shares, respectively, to key employees of
management.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. McNamara,
O'Toole, Lee, Williams and Tucker. Mr. McNamara's employment agreement provides
for his continued employment as President and Chief Executive Officer of the
Company through May 3, 2008, subject to earlier termination under certain
circumstances, at a base salary of $417,600 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.
O'Toole, Lee, Williams and Tucker have employment agreements which provide for
their continued employment as senior executives of
9
the Company through May 3, 2007, May 21, 2006, May 21, 2006 and May 21, 2006,
respectively, and are identical in all material respects to that of Mr.
McNamara, except their respective agreements provide for a base salary of
$240,800, $238,921, $171,990 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 2005, Mr.
McNamara had the following aggregate amount of indebtedness outstanding
(principal and interest) - $494,589. As of February 22, 2006, the aggregate
amount of indebtedness outstanding for Mr. McNamara was $0.
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, 2005, the aggregate amount of indebtedness outstanding
was $220,606. Messrs. McNamara and E. L. Hutton and Ms. Laney are unpaid
directors of Cadre Computer. Ms. Laney, who is Chairman and CEO of Cadre
Computer, also has a 51% ownership interest in Cadre Computer.
In October 2004, Vitas entered into a pharmacy services agreement
("Agreement") with Omnicare whereby Omnicare will provide specified pharmacy
services for Vitas and its hospice patients in geographical areas served by both
Vitas and Omnicare. The Agreement has an initial term of three years that renews
automatically thereafter for one-year terms. Either party may cancel the
Agreement at the end of any term by giving written notice at least 90 days prior
to the end of said term. During 2005, Vitas made purchases of $16.2 million from
Omnicare under the Agreement.
Mr. E. L. Hutton is non-executive Chairman and a director of the Company
and Omnicare. Mr. Gemunder is a director of the Company and President and Chief
Executive Officer of Omnicare and Ms. Laney and Mr. Erhart are directors of the
Company and Omnicare.
Mr. Walsh is a partner in the New York office of the law firm of Thompson
Hine LLP. During 2005, the Dayton, Ohio office of Thompson Hine LLP provided
legal services to the Company for which the Company paid $35,716.
Mr. O'Toole's brother-in-law, Thad Jaracz, is employed by Vitas as a
Senior Director - Corporate Services. During 2005 Mr. Jaracz received $111,636
in salary and $25,000 as a bonus for services rendered in 2005. He also received
1,200 shares of restricted Capital Stock. Mr. Jaracz also participates in the
Vitas employee benefit plans. Mr. O'Toole's brother-in-law, Robert Meyrose was
hired as Manager IT Field Service Performance of Vitas on January 17, 2006. His
annual rate of pay is $85,000. Mr. Meyrose also participates in the Vitas
employee benefit plans.
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, 2000, to December 31, 2005, assuming dividend reinvestment, and (B) the
difference between the Company's share price at December 31, 2000, and December
31, 2005; by (ii) the share price at December 31, 2000) with the cumulative
total return, assuming reinvestment of dividends, of the (1) S&P 500 Stock Index
and (2) Dow Jones Industrial Diversified Index.
10
CHEMED CORPORATION
CUMULATIVE TOTAL STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDING DECEMBER 31, 2005
[LINE GRAPH]
DECEMBER 31 2000 2001 2002 2003 2004 2005
- -------------------------------- ------ ------ ------ ------ ------ ------
Chemed Corporation 100.00 102.19 107.89 142.55 209.35 311.74
S&P 500 100.00 88.11 68.64 88.33 97.94 102.75
Dow Jones Industrial Diversified 100.00 89.90 58.38 78.97 94.12 91.66
11
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2005, 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 (2)
- ------------------------- --------------------- ----------
Mario J. Gabelli, 1,831,603 shares (1) 6.6%
Marc J. Gabelli, and
various related entities.
One Corporate Center
Rye, NY 10580
- --------
(1) Sole voting power, 1,682,003 shares; sole dispositive power, 1,831,603
shares.
(2) For purposes of calculating Percent of Class, all shares subject to stock
options which were exercisable within 60 days of December 31, 2005, were
assumed to have been issued.
The following table sets forth information as of December 31, 2005, 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 81,910 Direct
97,000 Option
22,162 Trustee
Kevin J. McNamara 186,386 Direct
283,400 Option 1%
Trustee (3)
Donald Breen 4,000 Direct
Charles H. Erhart, Jr. 20,000 Direct
Joel F. Gemunder 11,476 Direct
Patrick P. Grace 2,600 Direct
12
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
- ----------------------- ------------------------ ----------
Thomas C. Hutton 85,484 Direct
47,000 Option
22,662 Trustee (3)
Walter L. Krebs 11,748 Direct
Sandra E. Laney 120,279 Direct
86,000 Option
22,162 Trustee (3)
Spencer S. Lee 24,743 Direct
163,000 Option
Timothy S. O'Toole 49,993 Direct
110,000 Option
Donald E. Saunders 4,928 Direct
Arthur V. Tucker, Jr. 31,678 Direct
101,000 Option
George J. Walsh III 7,450 Direct
David P. Williams 52,177 Direct
113,000 Option
Frank E. Wood 400 Direct
Directors and Executive 695,252 Direct 2.5%
Officers as a Group 1,000,400 Option 3.6%
(16 persons) 144,138 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, 2005, 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, 2005, 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, 2005. For purposes
of determining the Percent of Class, all shares subject to stock options
which were exercisable within 60 days from December 31, 2005, 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 121,476 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.
13
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 2005,
no reports on Form 5 were required to be filed with the SEC, the Company
believes that, during the period January 1, 2005 through December 31, 2005, the
Company's executive officers and directors and greater-than-10-percent
stockholders have complied with all Section 16(a) reporting requirements.
PROPOSAL TO APPROVE AND ADOPT THE
2006 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 2006 Stock Incentive Plan (the "Stock Incentive Plan") pursuant
to which 3,000,000 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 15, 2006. 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 15, 2016. 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 31, 2006 was $59.13 per share.
The Stock Incentive Plan authorizes the issuance or transfer of a maximum
of 3,000,000 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 900,000
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 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.
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
14
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 200,000 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 incapacity, 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 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.
15
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.
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 2005 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, 2005, 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
Number of securities
remaining available for
Number of Securities to be future rights issuance
issued upon exercise of Weighted-average exercise under equity compensation
outstanding warrants and price of outstanding options, plans [excluding securities
rights warrants and rights reflected in column a]
Plan Category (a) (b) (c)
- ----------------------------- -------------------------- ----------------------------- ---------------------------
Equity Compensation plans
approved by stockholders 1,671,462 $23.70 137,035
Equity Compensation plans not
approved by stockholders (1) 70,371 20.61 1,588
--------- ------ -------
TOTAL 1,741,833 23.57 138,623
--------- ------ -------
- -----------
(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 500,000 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 2006 Stock Incentive Plan. In addition, pursuant, to this plan no
individual may be granted more than 50,000 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 270,000, 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 2006 STOCK INCENTIVE PLAN SET FORTH AS EXHIBIT A
TO THE PROXY STATEMENT ACCOMPANYING THE NOTICE OF THE ANNUAL MEETING
OF THE STOCKHOLDERS OF CHEMED CORPORATION TO BE HELD MAY 15, 2006,
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 required
to be submitted to a vote of the stockholders of the Company by the New York
Stock Exchange Listed Company Manual, which sets as a condition of continued
listing on the Exchange such submission of equity compensation plans. We are
also submitting such proposal to a vote of stockholders 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.
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.
16
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 40,000,000 shares to
80,000,000 shares.
On March 31, 2005, the Board of Directors of the Company approved a
2-for-1 stock split in the form of a 100% stock dividend to stockholders of
record at the close of business on April 22, 2005. This stock split was paid May
11, 2005. As of December 31, 2005, 25,979,600 shares of the Company's Capital
Stock were issued and outstanding. In addition, 1,880,456 shares of Capital
Stock were reserved for employee stock incentive plans. Therefore, as of
December 31, 2005, the Company Stock had approximately 12,139,944 shares of
unissued and unreserved Capital Stock available for further issuance.
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. The issuance of any additional shares of Capital
Stock would dilute both the equity interests and earnings or losses per share
of existing holders. Such dilution may be substantial, depending on the number
of shares issued.
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 EIGHTY MILLION
(80,000,000), OF WHICH EIGHTY MILLION (80,000,000) SHARES SHALL BE
CAPITAL STOCK WITH A PAR VALUE OF ONE DOLLAR ($1.00) PER SHARE
AMOUNTING IN THE AGGREGATE TO EIGHTY MILLION DOLLARS ($80,000,000).
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.
17
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected the firm of PricewaterhouseCoopers LLP as
independent accountants for the Company and its consolidated subsidiaries for
the year 2006. This firm has acted as independent accountants for the Company
and its consolidated subsidiaries since 1970. Although the submission of this
matter to the stockholders is not required by law or by the By-Laws of the
Company, the selection of PricewaterhouseCoopers LLP will be submitted for
ratification at the Annual Meeting.
The affirmative vote of the majority of the shares represented at the meeting,
with abstentions having the effect of negative votes, will be necessary to
ratify the selection of PricewaterhouseCoopers LLP as independent accountants
for the Company and its consolidated subsidiaries for the year 2006. If the
selection is not ratified at the meeting, the Audit Committee will reconsider
its selection of independent accountants.
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 11, 2005. A copy of the charter is available on the
Company's Web site, www.chemed.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.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements and management's report on internal control over financial
reporting 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, 2005, 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
Walter L. Krebs
18
FEES PAID TO INDEPENDENT ACCOUNTANTS
AUDIT FEES
PricewaterhouseCoopers LLP billed the company $1,989,000 in 2004 and
$1,485,000 in 2005. These fees were for professional services rendered for the
integrated audit of the Company's annual financial statements and of its
internal control over financial reporting, review of the financial statements
included in the Company's Forms 10-Q and review of documents filed with the SEC.
AUDIT-RELATED FEES
PricewaterhouseCoopers LLP billed the company $1,446,000 and $189,000 in
2004 and 2005, respectively, for audit-related services. In 2004, $1,115,000 of
these fees related to audits of significant subsidiaries of the Company for
years 2001, 2002, and 2003 financial statements for the purpose of registering
the Company's floating rate notes, $205,000 for review of the Private Placement
Memorandum related to the acquisition of Vitas, $59,000 for consultation
concerning financial accounting and reporting standards and the remaining
$67,000 was related primarily to the audit of the Company's employee benefit
plans. In 2005, $75,000 was related to the audit of the employee benefit plans
and $114,000 was related to audits of Vitas' Florida subsidiaries.
TAX FEES
No such services were rendered during 2004 or 2005.
ALL OTHER FEES
PricewaterhouseCoopers LLP billed the Company $2,300 and $2,400,
respectively, in aggregate fees for services rendered other than the services
described above, for the years 2004 and 2005.
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 2007 Annual Meeting of Stockholders must be in
writing and received by the Secretary of the Company no later than December 11,
2006. Any proposals by stockholders intended to be presented at the 2006 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, 2006. 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 1-800-2CHEMED or
1-800-224-3633.
19
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 2006 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
email 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 $9,500 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 11, 2006
20
EXHIBIT A
================================================================================
CHEMED CORPORATION
2006 STOCK INCENTIVE PLAN
================================================================================
A-1
CHEMED CORPORATION
2006 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: Chemed Corporation, 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.
OPTION: An option to purchase shares of Capital Stock.
A-2
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 2006 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 3,000,000 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 900,000 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 1,200,000 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.
A-3
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 200,000 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-4
(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-5
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 15, 2016.
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.
A-6
(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 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 on 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.
(d) Any awards under the Plan made to members of the Committee
shall be approved by the Board. With respect to awards to such
directors, all rights, powers and authorities vested in the
Committee under the Plan shall instead be exercised by the
Board, and all provisions of the Plan relating to the
Committee shall be interpreted in a manner consistent with the
foregoing by treating any such reference as a reference to the
Board for such purpose.
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
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.
A-7
(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.
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) withdraws 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-8
CHEMED
CHEMED CORPORATION
- Please detach here -
- --------------------------------------------------------------------------------
CHEMED CORPORATION
STOCKHOLDER'S PROXY AND
CONFIDENTIAL SAVINGS AND RETIREMENT VOTING INSTRUCTION CARD
ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 2006
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 Chemed Corporation held of record by the undersigned on March
31, 2006, at the Annual Meeting of Stockholders to be held on May 15, 2006, or
at any adjournment thereof.
This proxy also provides confidential voting instructions for shares of Chemed
Corporation Capital Stock held by Merrill Lynch Trust Company, Trustee of
Chemed/Roto-Rooter Savings and 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 Plan voting instruction card is solicited jointly by the
Board of Directors of Chemed Corporation and the Trustees of the 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 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.
(continued and to be signed on reverse side)
COMPANY #
CONTROL #
THERE ARE THREE WAYS TO VOTE:
VOTE BY PHONE -- TOLL FREE -- 1-800-560-1965
- 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 10, 2006.
- Have your proxy/confidential 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/CHE/
- 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 10, 2006.
- Have your proxy/confidential 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 AND/OR PLAN TRUSTEE
TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED
YOUR PROXY/CONFIDENTIAL PLAN VOTING INSTRUCTION CARD.
VOTE BY MAIL
Mark, sign and date your proxy/confidential 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 ServicesSM, P. O. Box 64873, St. Paul, MN
55164-0873.
NOTICE TO PLAN PARTICIPANTS: YOUR VOTING INSTRUCTIONS MUST BE RECEIVED BY WELLS
FARGO BANK BY 11:59 P.M., EASTERN DAYLIGHT TIME, WEDNESDAY, MAY 10, 2006, IN
ORDER TO ENSURE THAT YOUR VOTE IS COUNTED.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR CARD.
9 Please detach here 9
.................................................................................
(continued from other side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ACTIONS OR PROPOSALS:
1.Election of Directors (mark ONLY ONE box):
01 Edward L. Hutton 05 Joel F. Gemunder 09 Sandra E. Laney 13 Frank E. Wood [ ] FOR all [ ] WITHHOLD ALL
02 Kevin J. McNamara 06 Patrick P. Grace 10 Timothy S. O'Toole nominees VOTING
03 Donald Breen, Jr. 07 Thomas C. Hutton 11 Donald E. Saunders listed unless AUTHORITY for
04 Charles H. Erhart, Jr. 08 Walter L. Krebs 12 George J. Walsh III indicated below. directors.
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.
2. To approve and adopt the Company's 2006 Stock Incentive Plan. [ ] For [ ] Against [ ] Abstain
3. To approve an amendment to the Company's Certificate of Incorporation, [ ] For [ ] Against [ ] Abstain
as amended, increasing the number of authorized shares of Capital Stock
from 40,000,000 to 80,000,000 shares.
4. To ratify the selection of independent accountants by the Audit Committee
of the Board of Directors. [ ] 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 PLAN VOTING INSTRUCTION CARD
WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
Address Change? Mark Box [ ] Indicate changes below:Dated
_____________________________, 2006
--------------------------------------------------------
--------------------------------------------------------
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.
