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SCHEDULE 14A INFORMATION
(Rule 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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[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)
Chemed Corporation
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LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2005
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
16, 2005, at 11 a.m. for the following purposes:
(1) To elect directors;
(2) To ratify the selection of independent accountants by the Audit
Committee of the Board of Directors; and
(3) To transact such other business as may properly be brought before
the meeting.
Stockholders of record at the close of business on March 31, 2005, 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, 2005
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 16, 2005, 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, 2005. 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, 2005,
will be entitled to vote at the Annual Meeting or any adjournments thereof. On
such date, the Company had outstanding 12,702,737 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
Director since 1970 held this position since May 2004. Prior to May 2004, Mr.
Age: 85 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
Director since 1987 the Company and has held these positions since August 1994
Age: 51 and May 2001, respectively. Previously, he served as
Executive Vice President, Secretary and General Counsel
from November 1993, August 1986 and August 1986,
respectively, to August 1994.
1
DONALD BREEN, JR. Mr. Breen is Senior Vice President of John Morrell
Director since May 2004 & Co., Cincinnati, Ohio (producer of fresh foods)
Age: 52 and has held this position since 1992.
CHARLES H. ERHART, JR. Mr. Erhart retired as President of W. R. Grace and
Director since 1970 Co. (hereinafter "Grace"), Columbia, Maryland
Age: 79 (international specialty chemicals, construction
and packaging) in August 1990, having held that
position since July 1989. Previously, he was
Chairman of the Executive Committee of Grace and
held that position from November 1986 to July 1989.
He is a director of Omnicare.
JOEL F. GEMUNDER Mr. Gemunder is President and Chief Executive
Director since 1977 Officer of Omnicare and has held these positions
Age: 65 since May 1981 and May 2001, respectively. He is
also a director of Omnicare and Ultratech Stepper,
Inc.
PATRICK P. GRACE Mr. Grace is President of MLP Capital, Inc.,
Director since 1996 co-managing partner of several real estate and
Age: 49 mining interests in the southeastern United States
and has held that position since March 1996. From
January 2002 to August 2002, he was also President
and Chief Executive Officer of Kingdom Group, LLC
("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
Director since 1985 has held this position since February 1988. He is a
Age: 54 son of Edward L. Hutton, Chairman of the Board and
a director of the Company.
WALTER L. KREBS Mr. Krebs retired as Senior Vice President-Finance,
Director from May 1989 Chief Financial Officer and Treasurer of Service
to April 1991, and America Systems, Inc., a wholly owned subsidiary of
May 1995 to May 2003 the Company ("Service America"), in July 1999,
Age: 72 having held the position since October 1997.
Previously, he was a Director - Financial Services
of DiverseyLever, Inc. (formerly known as Diversey
Corporation), Detroit, Michigan (specialty
chemicals) ("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
Director since 1986 Resources Co., Cincinnati, Ohio (information
Age: 61 security) and has held this position since August
31, 2001. Ms. Laney retired as an Executive Vice
President and the Chief Administrative Officer of
the Company on March 1, 2003, having held these
positions since May 2001 and May 1991,
respectively. Previously, from November 1993 until
May 2001, she held the position of Senior Vice
President of the Company. She is a director of
Omnicare.
TIMOTHY S. O'TOOLE Mr. O'Toole is an Executive Vice President of the
Director since 1991 Company and has held this position since May 1992.
Age: 49 He is Chief Executive Officer of Vitas Healthcare
Corporation ("Vitas"), a wholly owned subsidiary of
the Company, and has held this position since
February 2004. Previously, from May 1992 to
February 2004, he also served the Company as
Treasurer.
DONALD E. SAUNDERS Mr. Saunders is Markley Visiting Professor at the
Director from May 1981 to Farmer School of Business Administration, Miami
May 1982, May 1983 to University, Oxford, Ohio, and has held this
May 1987 and since May 1998 position since August 2001. Mr. Saunders retired as
Age: 61 President of DuBois Chemicals, formerly a wholly
owned subsidiary of the Company and then a division
of DiverseyLever, Inc., Detroit, Michigan
(specialty chemicals), in October 2000, having held
that position since November 1993.
2
GEORGE J. WALSH III Mr. Walsh is a partner with the law firm of
Director since 1995 Thompson Hine LLP, New York, New York, and has held
Age: 59 this position since January 1979.
FRANK E. WOOD Mr. Wood is President and Chief Executive Officer
Director since of Secret Communications, LLC, Cincinnati, Ohio
May 2002 (owner and operator of radio stations) and has held
Age: 62 this position since 1994. He is also a co-founder
and principal of The Darwin Group, Cincinnati, Ohio
(venture capital firm specializing in second-stage
investments) and has held this position since 1998.
Since 2000, he has also served as Chairman of 8e6
Technologies Corporation, Orange, California
(developer of Internet filtering software).
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee of the
Company is paid an annual fee of $15,000 and a fee of $2,750 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. Each member of the Executive Committee who
is not an employee of the Company is paid $900 per meeting.
The chairmen of certain Committees of the Board of Directors are paid an
annual fee in addition to the attendance fees referred to above. The chairman of
the Audit Committee is paid at the rate of $10,000 per annum, and the chairman
of the Compensation/Incentive Committee is paid at the rate of $5,250 per annum.
In addition, each member of the Board of Directors and of a Committee is
reimbursed for his reasonable travel expenses incurred in connection with such
meetings.
In addition, in May 2004, each member of the Board of Directors (other
than those serving on the Compensation/Incentive Committee) was granted an
unrestricted stock award covering 200 shares of Capital Stock under the
Company's 1995 and 1999 Stock Incentive Plans. Those directors who are members
of the Compensation/Incentive Committee were paid the cash equivalent of the
200-share stock award or $8,994.
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.
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 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 twelve
occasions during 2004.
3
The Compensation/Incentive Committee makes recommendations to the Board of
Directors concerning (a) salary and incentive compensation payable to officers
and certain other key employees of the Company, (b) establishment of incentive
compensation plans and programs generally, (c) adoption and administration of
certain employee benefit plans and programs and (d) additional year-end
contributions by the Company under the 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 2004. 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 2004. In identifying
and evaluating nominees for director, the Nominating Committee considers
candidates with a wide variety of academic backgrounds and professional and
business experiences. After reviewing written statements of the candidates'
backgrounds and qualifications, the Nominating Committee arranges for personal
interviews with those candidates that it believes merit further consideration.
Once it has completed this process, the Nominating Committee makes its final
recommendations to the Board. Mr. Krebs, who is the only nominee for director
who is not standing for re-election, was recommended to the Nominating Committee
by Mr. McNamara, the Company's Chief Executive Officer. Stockholders wishing to
submit a candidate for election to the Board should submit the name of such
candidate and a supporting statement to the Company's Secretary at 2600 Chemed
Center, 255 East Fifth Street, Cincinnati, Ohio 45202-4726. The Nominating
Committee has a charter and a current copy is available on the Company's Web
site, www.chemed.com.
During 2004, there were six meetings of the Board of Directors, and each
director attended at least 75 percent of the aggregate of (a) the total number
of meetings held by the Board of Directors and (b) the total number of meetings
held by all Committees of the Board of Directors on which he or she served that
were held during the period for which he or she was a director or member of any
such Committee. While the Company does not have a formal policy with regard to
Board members' attendance at the Annual Meeting, all members of the Board are
encouraged to attend. Eleven members of the Board attended last year's Annual
Meeting held on May 17, 2004.
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 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. The Board and the Nominating Committee similarly reviewed the
independence of Mr. Krebs, who is the only nominee for director who is not
standing for re-election.
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.
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.
4
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 comprises 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.
Individual performance is also taken into account in determining
individual bonuses. It is the Company's belief that bonuses as a percentage of a
senior executive's salary should be sufficiently high so as to provide a major
incentive for achieving annual performance targets. Bonuses for senior
executives of the Company generally range from 25 percent to 83 percent of base
salary.
The Long-Term Incentive Plan and stock option and stock award programs
form the basis of the Company's incentive plans for executive officers and key
managers. The objective of these plans has been to align executive and
long-term-stockholder interests by creating a strong and direct link between
executive pay and stockholder return.
Stock options have customarily been granted annually and have been
generally regarded as the primary incentive for long-term performance as they
are granted at fair market value and have had vesting restrictions over
four-year periods, except for those granted in May 2004 which vested in full on
November 17, 2004. 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
5
granting of compensation awards based on two independent elements: 1) a totally
discretionary award based on operating performance of the Company covering a
period greater than one year and less than four years and 2) an award based on
the attainment of a target stock price of $50 per share during 10 consecutive
trading days prior to the fourth anniversary of the plan. Based on this
criteria, in February 2004, the Compensation/Incentive Committee approved a
payout under the LTIP in the aggregate amount of $7.8 million. In June, the
Compensation/Incentive Committee established new guidelines covering LTIP
awards. These guidelines are disclosed under the caption "Long Term Incentive
Plan."
The Compensation/Incentive Committee has considered, and is continuing to
review, the qualifying compensation regulations issued by the Internal Revenue
Service in December 1993. Generally, the Committee structures compensation
arrangements to achieve deductibility under the tax regulations, except where
the benefit of such deductibility is outweighed by the need for flexibility or
the attainment of other corporate objectives.
The base salary of Mr. K. J. McNamara, President and Chief Executive
Officer of the Company, was increased on February 18, 2005, to a base rate of
$600,000. His bonus in respect of 2004 services was $500,000 and a restricted
stock award of 4,000 shares, vesting in full on February 18, 2009. The
Compensation/Incentive Committee believes that Mr. McNamara's base salary, LTIP
awards, 2004 bonus and stock options granted are consistent with his performance
as measured by the criteria discussed above.
Compensation/Incentive Committee
Charles H. Erhart, Jr., Chairman
Donald Breen, Jr.
Frank E. Wood
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid to the Chief Executive
Officer and the four most highly compensated executive officers of the Company
for the past three years for all services rendered in all capacities to the
Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------
AWARDS (1) PAYOUTS
------------------------
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------- UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS CHEMED STOCK PAYOUTS COMPENSATION
POSITION YEAR ($) ($) OPTIONS (#) ($) ($)
----------------- ---- -------- -------- ------------ ---------- ------------
K. J. McNamara 2004 $417,600 $500,000 50,000 $3,097,609 $525,758 (2)
President and 2003 406,975 260,575 40,000 -0- 105,889
CEO 2002 396,829 387,946 30,000 -0- 282,154
E. L. Hutton (3) 2004 293,750 56,000 -0- 948,122 222,639 (4)
Chairman of the 2003 250,000 156,000 -0- -0- 70,592
Board 2002 316,666 200,000 25,000 -0- 513,692
T. S. O'Toole 2004 360,516 225,000 45,000 1,189,024 228,531 (5)
Executive 2003 232,017 92,097 20,000 -0- 54,517
Vice President 2002 237,592 195,959 20,000 -0- 165,050
S. S. Lee 2004 247,507 145,000 17,000 381,802 114,361 (6)
Executive 2003 238,921 109,230 15,000 -0- 59,663
Vice President 2002 235,441 98,017 14,000 -0- 130,613
D. P. Williams 2004 217,025 155,000 25,000 548,411 105,628 (7)
Vice President 2003 175,430 62,000 10,000 -0- 39,721
and CFO 2002 167,893 62,000 9,000 -0- 53,943
6
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, 2004 were as follows: K.J.
McNamara - 5,200 shares; E.L. Hutton - 0 shares; T.S. O'Toole - 3,000
shares; S.S. Lee - 2,000 shares; and D.P. Williams - 2,500 shares. The
restricted shares reflect a one time grant in 2004 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. These restricted shares
were awarded under the LTIP.
(2) Includes the following amounts: $513,007 allocated to Mr. McNamara's
account under the Retirement Plan and Employee Stock Ownership Plans
("ESOP") with respect to 2004; a $3,807 premium payment for term life
insurance; and $8,944 in the form of an unrestricted stock award of 200
shares of Capital Stock.
(3) Prior to May 2004, Mr. Hutton served as Chairman of the Company and was
considered an executive officer of the Company. Since May 2004, Mr. Hutton
has served as Chairman of the Board and is no longer an executive officer
of the Company.
(4) Includes the following amounts: $210,311 allocated to Mr. Hutton's account
under the Company's Retirement Plan and ESOP with respect to 2004; a
$3,384 premium payment for term life insurance; and $8,944 in the form of
an unrestricted stock award of 200 shares of Capital Stock.
(5) Includes the following amounts: $215,730 allocated to Mr. O'Toole's
account under the Retirement Plan and ESOP with respect to 2004; a $3,857
premium payment for term life insurance; and $8,944 in the form of an
unrestricted stock award of 200 shares of Capital Stock. Does not include
amounts Mr. O'Toole received pursuant to a consulting agreement with PCI
Holding Corp., which purchased the Company's wholly owned Patient Care,
Inc. subsidiary in October 2002. Pursuant to this agreement, which PCI
Holding terminated on August 19, 2004, Mr. O'Toole received compensation
at the rate of $3,000 per month during the term of the agreement. Also
does not include $830,000 which Mr. O'Toole received when his 40,000
options in Vitas common stock were cashed out in connection with the
Company's acquisition of Vitas in February 2004.
(6) Includes the following amounts: $112,417 allocated to Mr. Lee's account
under the Retirement Plan, ESOP and Roto-Rooter's Deferred Compensation
Plan and Retirement Plan with respect to 2004 and a $1,944 premium payment
for term life insurance.
(7) Includes the following amounts: $104,073 allocated to Mr. Williams'
account under the Retirement Plan, ESOP and Roto-Rooter Retirement Plan
with respect to 2004 and a $1,555 premium payment for term life insurance.
STOCK OPTIONS
The table below shows information concerning Chemed stock options granted
in 2004 to the named executives in the Summary Compensation Table.
7
CHEMED STOCK OPTION GRANTS IN 2004
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
% OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED PRICE APPRECIATION
OPTIONS TO EXERCISE FOR OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION ----------------------
NAME (#) (1) IN 2004 ($/SHARE) DATE 5% ($) 10% ($)
-------------- ---------- ----------------- --------- ---------- ---------- ----------
K. J. McNamara 50,000 12.5% $43.55 5/17/2014 $1,369,418 $3,470,374
E. L. Hutton -0- -0- -0- -0- -0- -0-
T. S. O'Toole 45,000 11.2 43.55 5/17/2014 1,232,476 3,123,337
S. S. Lee 17,000 4.2 43.55 5/17/2014 465,602 1,179,927
D. P. Williams 25,000 6.2 43.55 5/17/2014 684,709 1,735,187
(1) These options which were granted on May 17, 2004, provide for the purchase
price of option shares equal to the fair market value of Capital Stock on
that date; are transferable by will, by the laws of descent and
distribution, pursuant to a qualified domestic relations order or to
certain family members, if permitted under SEC Rule 16b-3 or any successor
rule thereto; and become exercisable in full on November 17, 2004.
The table below shows information concerning Chemed stock options
exercised during 2004 and the year-end number and value of unexercised Chemed
stock options held by the executive officers named in the Summary Compensation
Table.
AGGREGATED CHEMED STOCK OPTION EXERCISES IN
2004 AND YEAR-END STOCK OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT 12/31/04 (#) AT 12/31/04 ($)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- ------------ -------- ----------- ------------- ----------- -------------
K. J. McNamara 5,000 $132,400 151,500 27,500 $4,439,930 $859,200
E. L. Hutton 44,077 979,680 97,750 6,250 2,894,780 190,500
T. S. O'Toole 34,500 772,780 116,500 15,000 3,273,350 467,700
S. S. Lee -0- -0- 68,000 11,000 2,040,675 343,155
D. P. Williams -0- -0- 59,250 7,250 1,695,975 226,230
8
LONG TERM INCENTIVE PLAN
The table below shows information concerning LTIP awards granted to the
named executives in the Summary Compensation Table during 2004.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
NUMBER OF
SHARES OF NUMBER OF
CAPITAL CASH RESTRICTED SHARES OF
STOCK AWARDS CAPITAL STOCK
(#) (1) ($) (1) (#) (2)
---------- ---------- --------------------
K.J. McNamara 32,346 $1,000,000 5,200
E.L. Hutton 10,782 333,333 -0-
T.S. O'Toole 11,860 366,667 3,000
S.S. Lee 3,234 100,000 2,000
D.P. Williams 4,852 150,000 2,500
(1) Awarded in February 2004.
(2) Awarded June 22, 2004.
During January 2004, the price of the Company's stock exceeded $50
per share for more than 10 consecutive trading days, fulfilling one of the
performance targets of the 2002 Executive Long-Term Incentive Plan. In February
the Compensation/Incentive Committee ("CIC") approved a payout under the LTIP in
the aggregate amount of $7.8 million ($2.8 million in cash and 84,633 shares of
Capital Stock).
During June 2004, the CIC approved guidelines covering the
establishment of a pool of 125,000 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:
- 44,000 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.
- 44,000 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:
- 11,000 shares for a stock price of $70.00
- an additional 16,500 shares for a stock price of $77.50
- an additional 16,500 shares for a stock price of $85.00
- 22,000 shares represent a retention element, subject to a
four-year, time based vesting.
- 15,000 shares may be awarded at the discretion of the CIC.
On June 22, 2004, the CIC awarded 22,000 restricted shares of
Capital Stock to key employees of management under the retention component of
the 2004 LTIP Pool. These shares vest on December 31, 2007 for all participants
still employed by the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. McNamara,
O'Toole, Lee and Williams. 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
9
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
and Williams have employment agreements which provide for their continued
employment as senior executives of the Company through May 3, 2007, 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 and $171,990 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 2004,
Messrs. McNamara and E. L. Hutton had the following aggregate amounts of
indebtedness outstanding (principal and interest), respectively: Mr. McNamara -
$489,759; Mr. E. L. Hutton - $390,319. Mr. Hutton repaid his loan in full on
March 9, 2004. As of February 15, 2005, the aggregate amount of indebtedness
outstanding for Mr. McNamara was $483,333.
CERTAIN TRANSACTIONS AND RELATED 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, 2004, the aggregate amount of indebtedness outstanding
was $322,993. Messrs. McNamara and E. L. Hutton and Ms. Laney are directors of
Cadre Computer. Ms. Laney, who is Chairman and CEO of Cadre Computer, also has a
45% 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 2004, Vitas made purchases of $344,000 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 is a director of the Company and
Omnicare.
Mr. Walsh is a partner in the New York office of the law firm of Thompson
Hine LLP. During 2004 the Dayton, Ohio office of Thompson Hine LLP provided
legal services to the Company for which the Company paid $37,119.
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, 1999, to December 31, 2004, assuming dividend reinvestment, and (B) the
difference between the Company's share price at December 31, 1999, and December
31, 2004; by (ii) the share price at December 31, 1999) 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, 2002
[PERFORMANCE GRAPH]
DECEMBER 31... 1999 2000 2001 2002 2003 2004
-------------------------------- ------ ------ ------ ------ ------ ------
Chemed Corporation 100.00 118.99 121.59 128.38 169.62 249.10
S&P 500 100.00 90.90 80.09 62.39 80.29 89.03
Dow Jones Industrial Diversified 100.00 100.72 90.55 58.80 79.54 94.79
11
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2004, with
respect to the only persons who are 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 BENEFICIAL OWNERSHIP CLASS (3)
------------------------- -------------------- ----------
Mario J. Gabelli, 1,549,463 shares (1) 11.3%
Marc J. Gabelli, and
various related entities.
One Corporate Center
Rye, NY 10580
Perry Corp. 1,200,000 shares (2) 8.6%
599 Lexington Avenue
New York, NY 10022
(1) Sole voting power, 1,549,463 shares; sole dispositive power, 1,549,463
shares.
(2) Sole voting power, 1,200,000 shares; sole dispositive power, 1,200,000
shares.
(3) For purposes of calculating Percent of Class, all shares subject to stock
options which were exercisable within 60 days of December 31, 2004, were
assumed to have been issued.
The following table sets forth information as of December 31, 2004, 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 32,154 Direct
97,750 Option
11,081 Trustee
Kevin J. McNamara 73,796 Direct
151,500 Option 1.1%
Trustee (3)
Donald Breen, Jr. 2,000 Direct
Charles H. Erhart, Jr. 10,000 Direct
Joel F. Gemunder 5,538 Direct
3,476 Trustee
Patrick P. Grace 1,100 Direct
12
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
----------------------- ------------------------ ----------
Thomas C. Hutton 40,276 Direct
39,000 Option
11,581 Trustee (3)
Walter L. Krebs 5,022 Direct
Sandra E. Laney 53,624 Direct
56,100 Option
11,081 Trustee (3)
Spencer S. Lee 12,832 Direct
68,000 Option
Timothy S. O'Toole 26,147 Direct
116,500 Option
Donald E. Saunders 2,251 Direct
George J. Walsh III 2,525 Direct
David P. Williams 20,829 Direct
59,250 Option
Frank E. Wood 200 Direct
Directors and Executive 298,620 Direct 2.2%
Officers as a Group 656,600 Option 4.7%
(16 persons) 75,795 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, 2004, 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, 2004, 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, 2004. For purposes
of determining the Percent of Class, all shares subject to stock options
which were exercisable within 60 days from December 31, 2004, were assumed
to have been issued.
(2) Percent of Class under 1.0 percent is not shown.
(3) Messrs. T. C. Hutton and McNamara and Ms. Laney are trustees of the Chemed
Foundation which holds 60,738 shares of Capital Stock over which the
trustees share both voting and investment power. This number is included
in the total number of "Trustee" shares held by the Directors and
Executive Officers as a Group but is not reflected in the respective
holdings of the individual trustees.
(4) Shares over which more than one individual holds beneficial ownership have
been counted only once in calculating the aggregate number of shares owned
by Directors and Executive Officers as a Group.
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 2004,
no reports on Form 5 were required to be filed with the SEC, the Company
believes that, during the period January 1, 2004, through December 31, 2004,
except for Mr. O'Toole, Mr. Williams, and Mr. E. L. Hutton the Company's
executive officers and directors and greater-than-10-percent stockholders have
complied with all Section 16(a) reporting requirements. Mr. O'Toole and Mr. E.
L. Hutton filed Form 4s to correct the information on previous Form 4s and Mr.
Williams filed Form 4s to correct calculation errors on previously filed Form
4s.
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 2005. 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 2005. 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, as amended, is attached
hereto as Exhibit A and a copy 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 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.
14
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, 2004, for filing with the SEC.
Each of the members of the Audit Committee is independent as defined under
the listing standards of the New York Stock Exchange.
The undersigned members of the Audit Committee have submitted this Report.
Donald E. Saunders, Chairman
Charles H. Erhart, Jr.
Patrick P. Grace
FEES PAID TO INDEPENDENT ACCOUNTANTS
AUDIT FEES
PricewaterhouseCoopers LLP billed the company $614,000 and $1,189,000 in
2003 and 2004, respectively. 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 $122,400 and $1,446,000 in
2003 and 2004, respectively for audit-related services. In 2003, these fees
related primarily to the audit of the Company's employee benefit plans. 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.
TAX FEES
No such services were rendered during 2003 or 2004.
ALL OTHER FEES
PricewaterhouseCoopers LLP billed the Company $2,200 and $2,300,
respectively, in aggregate fees for services rendered other than the services
described above, for the years 2003 and 2004.
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 2006 Annual Meeting of Stockholders must be in
writing and received by the Secretary of the Company no later than December 11,
2005. Any proposals by stockholders intended to be presented at the 2005 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, 2005. 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 STATMENT
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.
15
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 2005 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 $7,500 plus reasonable expenses. This Proxy Statement and the
accompanying Notice of Meeting are sent by order of the Board of Directors.
Naomi C. Dallob
Secretary
April 11, 2005
16
EXHIBIT A
CHEMED CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2)
the compliance by the Company with legal and regulatory requirements, and (3)
the independence and performance of the Company's internal and external
auditors.
The members of the Audit Committee shall be appointed by the Board and
shall consist of at least three members of the Board who meet the independence
and experience requirements of the New York Stock Exchange. Accordingly, all of
the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company,
2. Who receive no compensation from the Company other than directors'
fees, and
3. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Audit
Committee. In addition, at least one member of the Audit Committee
will have accounting or related financial management expertise.
The Audit Committee shall meet, whether in person or telephonically, at
least four times each year. The Audit Committee shall make regular reports to
the Board.
The Audit Committee shall:
1. Review and assess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management and
the independent auditor prior to the filing by the Company of its
annual report on Form 10-K, including significant financial
reporting matters related thereto.
3. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing by the Company of
its reports on Form 10-Q, or where practicable, prior to the first
public release of quarterly earnings.
4. Assist Board oversight of the integrity of the Company's financial
statements.
5. Discuss earnings press releases, as well as financial information
and earnings guidance provided by the Company to analysts and
ratings agencies.
6. Review with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures.
7. Review significant issues with respect to the Company's accounting
principles and practices as
A-1
suggested by the independent auditor, internal auditors or
management.
8. Review with the independent auditor any audit problems or
difficulties and management's response to them.
9. Set clear hiring policies for employees or former employees of the
independent auditor.
10. Exercise sole authority in the appointment, oversight and retention
of the independent auditor, which firm is ultimately accountable to
the Audit Committee and the Board.
11. Exercise sole authority to approve the fees to be paid to the
independent auditor.
12. Approve any significant non-audit relationship with the independent
auditor.
13. Receive periodic reports no less frequently than annually from the
independent auditor regarding all relationships between the
independent auditor and the Company, and the auditor's independence,
discuss such reports with the auditor, and if so determined by the
Audit Committee, recommend that the Board take appropriate action to
satisfy itself to the independence of the auditor.
14. Obtain and review, at least annually, a report by the independent
auditor describing: its internal quality control procedures; any
material issues raised by (i) the most recent quality control
review, (ii) peer review of the firm, or (iii) any inquiry or
investigation by governmental or professional authorities within the
preceding five years concerning any independent audits by the firm,
and any steps taken to address such issues; and all relationships
between the independent auditor and the Company.
15. Evaluate and discuss with the Board the performance and independence
of the independent auditor and, if so determined in the Audit
Committee's sole authority, replace the independent auditor.
16. Meet with the independent auditor prior to the annual audit to
review the planning and scope of the audit. Exercise sole authority
to approve the terms of the audit engagement.
17. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended,
relating to the conduct of the annual audit and quarterly reviews.
18. Assist Board oversight of the internal audit department
responsibilities, performance, and the adequacy of its resources to
carry out its responsibilities.
19. Review the appointment and replacement of the internal auditor.
20. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
21. Assist Board oversight of, and review with the Company's counsel,
legal matters that may have a material impact on the financial
statements and any material reports or inquiries received from
A-2
regulators or governmental agencies.
22. Meet with management, the internal auditor, and the independent
auditor in separate executive sessions to discuss any matters that
the Audit Committee or those persons believe should be discussed.
23. Review and approve the expense reports of the Company's principal
executive officer.
24. Obtain advice, as it deems appropriate, from outside legal,
accounting and other advisors.
25. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and for the confidential,
anonymous submission by employees of such concerns.
The foregoing shall be the common recurring activities of the Audit
Committee in carrying out its functions. These functions are set forth as a
guide with the understanding that the Audit Committee may diverge from this
guide as appropriate given the circumstances.
The Committee shall annually conduct an evaluation of its performance.
The Company shall provide appropriate funding, as determined by the
Committee, for payment to any registered public accounting firm performing
audit, review, or attest services; to outside advisors retained by the
Committee; and of ordinary administrative expenses of the Committee.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor.
Consequently, in carrying out its responsibilities, the Audit Committee is
not providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditor's
work.
A-3
(CHEMED LOGO)
--------------------------------------------------------------------------------
CHEMED CORPORATION
STOCKHOLDER'S PROXY AND
CONFIDENTIAL ESOP AND SAVINGS & RETIREMENT PLAN VOTING INSTRUCTION CARD
ANNUAL MEETING OF STOCKHOLDERS, MAY 16, 2005
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, 2005, at the Annual Meeting of Stockholders to be held on May 16, 2005, or
at any adjournment thereof.
This proxy also provides confidential voting instructions for shares of Chemed
Corporation Capital Stock held by The Fifth Third Bank, Trustee of the Chemed
Corporation Employee Stock Ownership Plan I (ESOP), for the benefit of the
undersigned and directs such Trustee to vote as designated on the reverse side
of this card. The Trustee will vote all unallocated shares in the same
proportion the allocated shares have been voted and will vote allocated shares
for which no voting instructions have been received in the same proportion as
total voted allocated shares.
This proxy also provides confidential voting instructions for shares of Chemed
Corporation Capital Stock held by Merrill Lynch Trust Company, Trustee of the
Chemed/Roto-Rooter Savings & Retirement Plan (Plan), for the benefit of the
undersigned and directs such Trustee to vote as designated on the reverse side
of this card. The Trustee will vote all non-vested shares in the same proportion
the vested shares have been voted. Additionally, any vested shares for which no
voting instructions have been received will be voted in the same proportion as
total voted vested shares.
This proxy/confidential ESOP and Plan voting instruction card is solicited
jointly by the Board of Directors of Chemed Corporation and the Trustees of the
ESOP and Plan, pursuant to a separate Notice of Annual Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
The Company's proxy tabulator, Wells Fargo Bank, N. A., will report separately
to the Company and to each Trustee as to proxies received and voting
instructions provided. Individual ESOP and Plan voting instructions will be kept
confidential by the proxy tabulator and not provided to the Company.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY
USING THE ENCLOSED ENVELOPE, OR VOTE BY TELEPHONE OR INTERNET.
(continued and to be signed on reverse side)
COMPANY #
THERE ARE THREE WAYS TO VOTE:
VOTE BY PHONE -- TOLL FREE -- 1-800-560-1965
- 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 11, 2005.
- Have your proxy/confidential ESOP and Plan voting instruction card and the
last 4 digits of the U. S. Social Security Number (SSN) or Taxpayer
Identifying Number (TIN) for this account. Follow the simple instructions
the voice prompts provide you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/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 11, 2005.
- Have your proxy/confidential ESOP and Plan voting instruction card and the
last 4 digits of the U. S. Social Security Number (SSN) or Taxpayer
Identifying Number (TIN) for this account. Follow the simple instructions
to obtain your records and create an electronic ballot.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES, ESOP TRUSTEE
AND/OR PLAN TRUSTEE TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED,
SIGNED AND RETURNED YOUR PROXY/CONFIDENTIAL ESOP AND PLAN VOTING INSTRUCTION
CARD.
VOTE BY MAIL
Mark, sign and date your proxy/confidential ESOP and Plan voting instruction
card and return it in the postage-paid envelope provided or return it to
Shareowner Services(SM), P. O. Box 64873, St. Paul, MN 55164-0873.
NOTICE TO ESOP AND PLAN PARTICIPANTS: YOUR VOTING INSTRUCTIONS MUST BE RECEIVED
BY WELLS FARGO BANK BY 11:59 P.M., EASTERN DAYLIGHT TIME, WEDNESDAY, MAY 11,
2005, IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR CARD.
- Please detach here -
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1.Election of Directors (mark ONLY ONE box):
01 Edward L. Hutton 05 Joel F. Gemunder 09 Sandra E. Laney
02 Kevin J. McNamara 06 Patrick P. Grace 10 Timothy S. O'Toole
03 Donald Breen, Jr. 07 Thomas C. Hutton 11 Donald E. Saunders
04 Charles H. Erhart, Jr. 08 Walter L. Krebs 12 George J. Walsh III
13 Frank E. Wood [ ] FOR all [ ] WITHHOLD ALL
nominees VOTING
listed unless AUTHORITY for
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 AT RIGHT.
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2. 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 ESOP AND PLAN VOTING
INSTRUCTION CARD WILL BE VOTED FOR PROPOSALS 1 AND 2.
Address Change? Mark Box [ ] Indicate changes below:
Dated _____________________________, 2005
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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.