1
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
U.S. Physical Therapy, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
-------------------------------------------------
(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)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
------------------------------------
5) Total fee paid:
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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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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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3
U.S. PHYSICAL THERAPY, INC.
3040 POST OAK BLVD., SUITE 222
HOUSTON, TEXAS 77056
(713) 297-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2001
----------21, 2002
-------------------------
NOTICE IS HEREBY GIVEN that the 20012002 Annual Meeting of Stockholders
(the "Annual Meeting") of U.S. Physical Therapy, Inc. (the "Company") will be
held on Wednesday,Tuesday, May 23, 2001,21, 2002, at 9:00 a.m. (CDT)(EDT), at the Company's officeGrand Hyatt New York
at 3040 Post Oak Boulevard, Suite 222, Houston, Texas,Park Avenue (at Grand Central), New York, New York 10017 for the following
purposes:
(1) To elect nineseven directors; (2) To consider and
vote upon a proposal to amend the Company's 1992
Stock Option Plan to increase by 340,000 the number of shares of Company common
stock reserved for issuance thereunder;
(3) To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to increase the authorized common stock of the Company
to 20,000,000 shares; and
(4)(2) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on April 10, 20018, 2002 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve any one or
more of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company.
By Order of the Board of Directors
/s/ DOROTHY N. FLATO
Dorothy N. Flato
Corporate SecretaryRoy W. Spradlin
Roy W. Spradlin
President and TreasurerChief Executive Officer
Houston, Texas
April 27, 2001
425, 2002
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
5
U.S. PHYSICAL THERAPY, INC.
3040 POST OAK BLVD., SUITE 222
HOUSTON, TEXAS 77056
(713) 297-7000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2001
----------21, 2002
-------------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to stockholders of U.S. Physical
Therapy, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of the Company of proxies to be used at the 20012002 Annual Meeting of
Stockholders (the "Annual Meeting") of the Company, to be held on Wednesday,Tuesday, May
23, 2001,21, 2002, at 9:00 a.m. (CDT)(EDT), at the Company's officeGrand Hyatt New York at 3040 Post Oak
Boulevard, Suite 222, Houston, Texas,Park Avenue (at
Grand Central), New York, New York 10017, and at any adjournments thereof.
The Annual Meeting has been called for the following purposes: (1) to
elect nineseven directors; (2) to consider and vote upon a proposal to amend the
Company's 1992 Stock Option Plan to increase by 340,000 the number of shares of
Company common stock reserved for issuance thereunder; (3) to consider and vote
upon a proposal to amend the Company's Articles of Incorporation to increase the
authorized common stock of the Company to 20,000,000 shares; and (4)(2) to transact such other business as may properly
come before the meeting or any adjournments thereof. If the enclosed form of
proxy is properly executed and returned to the Company in time to be voted at
the Annual Meeting, the shares represented thereby will be voted in accordance
with the instructions marked thereon. Properly executed but unmarked proxies will be voted for the election of the
nine nominees of the Board of Directors as directors, for proposal 2 to increase
the number of shares of Company common stock reserved for issuance under the
1992 Stock Option Plan by 340,000 shares, and for proposal 3 to increase the
number of authorized shares of common stock of the Company to 20,000,000 shares.PROPERLY EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED FOR THE ELECTION OF THE SEVEN NOMINEES OF THE BOARD OF DIRECTORS
AS DIRECTORS. If any other matters are properly brought before the Annual
Meeting, the persons named in the accompanying proxy will vote the shares
represented by the proxies on such matters as determined by a majority of the
Board of Directors. This Proxy Statement is initially being mailed to
stockholders on or about April 27,
2001.25, 2002.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. Stockholders may, however, revoke
a proxy at any time prior to its exercise by delivering to the Company a duly
executed proxy bearing a later date, by attending the Annual Meeting and voting
in person, or by filing a written notice of revocation with Dorothy N. Flato,
Corporate Secretary and Treasurer of the Company, at the Company's principal executive
offices, 3040 Post Oak Boulevard, Suite 222, Houston, Texas 77056. 6
The cost of soliciting proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
Company, through its directors, officers and regular employees, may also solicit
proxies personally or by telephone. The Company will also request persons, firms
and corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so.
The securities which can be voted at the Annual Meeting consist of
shares of common stock of the Company with each share entitling its owner to one
vote on all matters. There is no cumulative voting in the election of directors.
The close of business on April 10, 20018, 2002 has been fixed by the Board of Directors
as the record date for determination of stockholders entitled to vote at the
meeting. The number of shares of the Company's common stock outstanding as of
such date was 6,623,016.11,012,757. The presence, in person or by proxy, of at least a
majority of the total number of outstanding shares of common stock is necessary
to constitute a quorum at the Annual Meeting. Directors of the Company will be
elected by a plurality vote of the votes cast at the Annual Meeting. The
affirmative vote of the holders of at least a majority of the outstanding shares
of the Company's common stock is required for approval of Proposals 2 and 3.
Abstentions
and broker non-votes will be treated as votes present for the purpose of
determining a quorum at the Annual Meeting. Broker non-votes will not be counted
as shares entitled to be voted on any matter.
Abstentions will have
the same effect as a negative vote on Proposals 2 and 3 since the required
affirmative vote is calculated based on the percentage of outstanding shares.
A copy of the Annual Report to Stockholders for the year ended December
31, 20002001 accompanies this Proxy Statement. THE COMPANY HAS FILED AN ANNUAL
REPORT ON FORM 10-K/A10-K FOR THE YEAR ENDED DECEMBER 31, 20002001 (THE "FORM 10-K/A"10-K") WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). STOCKHOLDERS MAY OBTAIN,
FREE OF CHARGE, A COPY OF THE FORM 10-K/A10-K BY WRITING TO U.S. PHYSICAL THERAPY,
INC., 3040 POST OAK BLVD., SUITE 222, HOUSTON, TEXAS 77056, ATT'N:ATTENTION: DOROTHY
FLATO, CORPORATE SECRETARY.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors is currently composed of eight members and one
vacancy. In February 2001, Mr. Richard C.W. Mauran resigned from the Board of
Directors to pursue other interests.members. All
directors hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected and qualified. Prior to
April 2, 2002 the number of Board members was fixed at nine. Effective February
28, 2002, J. Livingston Kosberg resigned as a director of the Company (although
Mr. Kosberg will continue as a consultant to the Company). On April 2, 2002 the
Board reduced the size of the Board to seven effective as of the Annual Meeting
based upon a determination that the Board size was larger than necessary. Mr.
Eddy J. Rogers, Jr., previously a director, decided not to stand for reelection
to the Board. Mr. Rogers voted for the proposal to reduce the size of the Board.
Neither Mr. Kosberg nor Mr. Rogers resigned or determined not to stand for
reelection because of any disagreement with the Company on any matters relating
to the Company's operations, policies or practices. There are no arrangements or
understandings between the Company and any person pursuant to which such person
has been elected as a director.
-2-
7
At the Annual Meeting, nineseven directors will be elected for one-year
terms. Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election
2
as directors of each of the persons named below as nominees of the Board of
Directors. The BoardEach of Directors believes that suchthe nominees willhas consented to stand for election and will
serve, if elected, as directors. However, if any person nominated by the Board
of Directors fails to stand for election or is unable to accept election, the
proxies will be voted for the election of such other person or persons as the
Board of Directors may recommend. THE BOARD RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR.
INFORMATION AS TO NOMINEES
The following table sets forthinformation relates to the names ofseven persons nominated by the
Board of Directors'
nine nominees for election as directors. Each of these personsnominee currently serves as a director of
the Company, except for Mr. Eddy J. Rogers, Jr.Company. Also set forth is certain other information with respect to each
such person's age, the period during which he has served as a director and
positions currently held with the Company.
Position(s)
Director Held With
Nominees: Age (a) Since (b) the Company (c)
- --------- ------- --------- ----------------------- ------------
J. Livingston Kosberg 64 1990Roy W. Spradlin 53 1994 Chairman of the Board,
President and Chief Executive
Officer
Mark J. Brookner 56Brookner(b) 57 1990 Vice Chairman of the Board
Roy W. Spradlin 52 1994 President, Chief Executive
Officer and Director
Daniel C. Arnold 7172 1992 Director
Bruce D. Broussard 3839 1999 Director
James B. Hoover 4647 1993 Director
Marlin W. Johnston 6970 1992 Director
Albert L. Rosen 7778 1992 Director
Eddy J. Rogers, Jr 60 n/a Nominee
- ----------------------
(a) At March 31, 2001.
-3-
82002.
(b) Messrs. Kosberg andMr. Brookner havehas served as directorsa director and an officer of each corporate
predecessor (and subsidiaries thereof) of the Company since the
formation of the original predecessor, National Rehab Associates, Inc.,
in June 1990.
(c) Mr. Brookner served as an officer of all predecessors (and subsidiaries
thereof) of the Company. Mr. Kosberg served as an officer of certain,
but not all, predecessors (and subsidiaries thereof) of the Company.
The principal occupation of each nominee for at least the past five years
is set forth below.
J. LIVINGSTON KOSBERG3
ROY W. SPRADLIN has served as Chairman of the Board of the Company
since April 1992May 2001 and as President of the Company since May 1994. From May 1994 to
August 1995, Mr. Spradlin served as the Company's Chief Operating Officer.
Effective August 1995, Mr. Spradlin was named the Company's Chief Executive
Officer from April
1992 to August 1995.Officer.
MARK J. BROOKNER has served as Vice Chairman of the Board of the
Company since August 1998. Mr. Brookner served as Chief Financial Officer of the
Company from April 1992 to August 1998 and also served as Secretary and
Treasurer during portions of that time.
ROY W. SPRADLIN has served as President of the Company since May 1994.
From May 1994 to August 1995, Mr. Spradlin served as the Company's Chief
Operating Officer. Effective August 1995, Mr. Spradlin was named the Company's
Chief Executive Officer.
DANIEL C. ARNOLD is a private investor engaged primarily in managing
his family's
personal investments. He serves as a directorDuring the past five years, he had served on the Board
of Directors of both Parkway Properties, Inc., a real estate investment trust, whose holdings are predominately office buildings,
and Belco Oil & Gas Corp., an oil and gas exploration and production company. Mr. ArnoldHe
has also servesserved as Chairman of the Board of Trustees of Baylor College of
Medicine.
BRUCE D. BROUSSARD has been the Chief Financial Officer of US Oncology
since August 2000. US Oncology is a network of over 800 community-based cancer
physicians caring for a larger number of cancer patients than any other single
medical organization. From December 1997 to August 2000, Mr. Broussard was the
Chief Executive Officer of HarborDental Properties, a dental development company
specializing in free-standing upscale dedicated dental buildings. From January
1996 to October 1997,Properties. Mr. Broussard was Executive Vice President and Chief
Financial Officer of Regency Health Services, Inc., a national chain of nursing
homes and provider of long-term health services. For the period from 1993 to
1996, Mr. Broussard wasserved as the
Chief Financial Officer for Regency Health Services, Inc. from 1996 to 1997 and
a Director offor Sun Health Care Group a health care provider.
-4-
9from 1993 to 1996.
JAMES B. HOOVER is the founding managing member of Dauphin Capital
Partners, a health care venture capital firm established in 1998. ForDuring the
previousprior six years, he was a general partner of Welsh, Carson, Anderson & Stowe, a
management buyout firm focused on the acquisition of health care and information
services companies. Prior thereto, Mr. Hoover was a general partner
with the investment banking firm of Robertson, Stephens & Company, serving
initially as a senior medical industry research analyst and subsequently as
manager of the firm's health care corporate finance group. Mr. Hoover presently serves on the Board of Directors of
XCare.net,Quovadx, Inc., an e-commerce services provider to the health care industry, and
several privately owned health care and
internet companies.
MARLIN W. JOHNSTON has been a management consultant with Tonn &
Associates, a management consulting firm, since September 1993. During 1992 and
1993, Mr. Johnston served as a management consultant to the Texas Department of
Health and the Texas Department of Protective and Regulatory Services.
ALBERT L. ROSEN manages his personal investments and retired as
President and General Manager of the San Francisco Giants, a major league
baseball team, in December 1992.
He had served in
such position since September 1985.
EDDY J. ROGERS, JR. is a partner at the Houston-based law firm of
Mayor, Day, Caldwell & Keeton, L.L.P., where he practices corporate law. Mr.
Rogers, until 1997, was a director of Living Centers of America, Inc., a New
York Stock Exchange listed nursing home company.4
CORPORATE GOVERNANCE AND OTHER MATTERS
AUDIT COMMITTEE DISCLOSURE
The Board of Directors has appointed an Audit Committee whose members
currently consist of Messrs. Johnston (chairman), BrooknerBroussard and Broussard. Mr.
BrooknerRogers. The
Board has adopted a written Audit Committee Charter requiring the Audit
Committee to consist of at least three members of the Board and each member of
the Audit Committee is not an "independent director" as that term is defined by
Nasdaq Stock Market Rule 4200(a)(14) because he is an employee of the Company. The
Nasdaq rule requiring three independent directors on the Audit Committee is
effective June 2001, by which time the Audit Committee will be reconstituted to
fully meet the requirements.Committee. The Audit Committee is
responsible for, among other things: (i) engaging the Company's independent
auditors, (ii) reviewing with the auditors the plan, scope and timing of the
audit and any other services the auditors are asked to perform as well as the
auditors' report on the Company's financial statements following completion of
the audit, (iii) audit fees and (iv) the Company's policies and procedures with
respect to internal accounting and financial controls. The Audit Committee met
threefive times during 2000.
-5-
10
The Board of Directors has adopted a written Charter of the Audit
Committee, a copy of which is attached hereto as Appendix A.2001.
INDEPENDENT AUDITORS' FEES
Audit Fees. Aggregate fees for professional services rendered by KPMG
LLP in connection with the audits of the Company's financial statements and
reports for the fiscal year ended December 31, 20002001 were $75,000.$78,815.
Financial Information Systems Design and Implementation Fees. During
the fiscal year ended December 31, 2000,2001, KPMG LLP rendered no professional
services in connection with the design and implementation of financial
information systems.
All Other Fees. In addition to the fees described above, aggregate fees
of $64,000$10,400 were paid to KPMG LLP during the fiscal year ended December 31, 20002001
related to researchemployee compensation consulting and assistance with filing of
registration statements on various accounting pronouncements and a one-time
information technology consulting project.Form S-8.
The Audit Committee has discussed the non-audit services provided by
KPMG LLP and the related fees and has considered whether those services and fees
are compatible with maintaining auditor independence.
REPORT OF THE AUDIT COMMITTEE
In connection with the December 31, 20002001 financial statements, the
Audit Committee (1) reviewed and discussed the audited financial statements with
management; (2) discussed with KPMG LLP the matters required by Statement on
Auditing Standards No. 61; and (3) received and discussed with the auditors the
matters required by Independence Standards Board Statement No. 1 and considered
5
the compatibility of non-audit services with the auditor's independence. Based
upon these reviews and discussions, the Audit Committee has recommended to the
Board of Directors, and the Board of Directors has approved, that the Company's
audited financial statements be included in the Securities and Exchange
Commission Annual Report on Form 10-K for the fiscal year ended December 31,
2000.2001.
Respectively submitted,
The Audit Committee
Marlin W. Johnston, Chairman
Mark J. Brookner
Bruce D. Broussard
-6-
11Eddy J. Rogers, Jr.
OTHER COMMITTEES
The Board has a Compensation Committee, the current members of which
are Messrs. Arnold (chairman), Hoover and Rosen. Until his resignation in
February 2002, Mr. Kosberg was a member of the Compensation Committee. The
Compensation Committee reviews matters concerning compensation of employees of
the Company. During 2000,2001, the Compensation Committee held one meeting.two meetings.
The Board has a Stock Option Committee, the current members of which
are Messrs. Arnold (chairman), Hoover and Rosen. Until his resignation in
February 2002, Mr. Kosberg was a member of the Stock Option Committee. The Stock
Option Committee reviews matters concerning the Company's stock option plans.
During 2000,2001, the Stock Option Committee held two meetings.
The Board of Directors has a Corporate Compliance Committee, the
current members of which are Messrs. Johnston (chairman), Brookner, Broussard
and Broussard.Rogers. The Corporate Compliance Committee reviews and assesses the
activities and findings of internal audits, the Audit Committee relative to the
compliance program and reports of material noncompliance within the Company and
approves resolutions and corrective actions proposed by management. During 2000,2001,
the Corporate Compliance Committee held four meetings.
In November 1994, the Board of Directors established the Executive
Committee whose members are Messrs. Kosberg,Spradlin (chairman), Arnold and Hoover.
Until his resignation in February 2002, Mr. Kosberg was a member and chairman of
the Executive Committee. The Executive Committee assists management by providing
advice and recommendations when needed and performs such other services as
delegated by the Board of Directors. During 2000,2001, the Executive Committee did
not hold any meetings.
6
There is no separate Nominating Committee of the Board of Directors.
OTHER CORPORATE GOVERNANCE MATTERS
During 2000,2001, the Company's Board of Directors held fiveeight meetings. No
incumbent directorAll
directors attended fewer thanat least 75% of the total number of meetings of the Board of
Directors of the Company and of all committees of the Board of Directors during
their tenure during 2001. Average attendance by directors at the aggregate
number of the Company onBoard and committee meetings for which he served.they were scheduled to attend
was 93%.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not compensated
separately for serving on the Board. Each of the Company's directors who are not
employees of the Company receives $3,500 for attendance at each regular meeting
of the Board of Directors. Directors are also reimbursed for their out-of-pocket
travel and related expenses incurred in attending all Board and committee
meetings. In May 2000,June 2001, upon the first anniversary of his initial election to the Board of Directors of the
-7-
12
Company, Bruce Broussard,Eddy J. Rogers, Jr., one of the Company's current non-employee
directors, received a ten-year non-qualified option to purchase 20,00045,000 shares of
the Company's common stock.stock, becoming exercisable over a five-year period. The
exercise price of the option, which was granted under the Company's 1992 Stock
Option Plan, is $4.50$15.40 per share. In September
2000,August 2001, the then six non-employee
directors, Daniel C. Arnold, Bruce D. Broussard, James B. Hoover, Marlin W.
Johnston, Richard C.W. Mauran and Albert L. Rosen and Eddy J. Rogers, Jr., each received ten-year
non-qualified options to purchase 6,6685,000 shares of the Company's common stock.
The exercise price of these options, which were granted under the Company's 1992
Stock Option Plan, is $6.2188$16.34 per share. Stock options to directors become
exercisable ratably over three years, subject to acceleration upon a change of
control (as described in footnote (a) to "Option Grants in 2001 Fiscal Year").
All options issued under the 1992 Stock Option Plan expire thirty days after the
termination of the recipient's position with the Company, thus Mr. Rogers'
options will expire when he ceases to be a director on May 21, 2002.
J. Livingston Kosberg received $33,000$12,500 and Mark J. Brookner received
$75,000$75,070 for serving as Chairman of the Board through May 2001 and Vice Chairman
of the Board respectively, in 2000.2001, respectively. Additionally, Mr. Kosberg is compensated by
the Company as a consultant as stated in the section of "Employment and
Consulting Agreements." These compensation arrangements currently remain in
effect.
EXECUTIVE OFFICERS
Certain informationInformation about Mr. Spradlin, the Company's Chief Executive Officer,
and Mark J. Brookner, the Company's Vice Chairman and an employee, is included
under
7
"Information as to Nominees." Certain information about the Company's other
three executive officers is set forth below. The respective agesage of thesethe named executive officers
areis as of March 31, 2001.
MICHAEL LANG, age 41, joined the Company in 1994 and was elected Senior
Vice President of Development. Prior to joining the Company, Mr. Lang was Vice
President and Corporate Trust Officer for Chase Manhattan Bank, where he was
responsible for tax reporting for all asset-backed securities.2002.
J. MICHAEL MULLIN, age 49,50, joined the Company in 1998 and was elected
Chief Financial Officer. From May 1993 through May 1998, Mr. Mullin was
President of Imperial Health Resources, Inc., a management company specializing
in management of subacute units in acute care hospitals.
STEPHEN ROSENBLOOM,J. LIVINGSTON KOSBERG, age 49, has65, served as Senior Vice PresidentChairman of Marketingthe Board of the
Company since 1992. Prior thereto, Mr. Rosenbloom was employed
by Continental Airlines as Senior Director of Marketing Services.from April 1992 until May 23, 2001 and is currently a consultant for the
Company.
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company and its
subsidiaries during 2001, 2000 and 1999 to Messrs. Spradlin, Mullin, Brookner
and 1998 to the Company's Chief Executive Officer
and the Company's other three executive officersKosberg (the "Named Executive Officers").
-8-
13
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- --------------------------------------------------- --------------
Other Securities
Name and Fiscal Annual Underlying
Principal Position(s) Year Salary Bonus Compensation Options(#)(a)
- --------------------- ------ -------- -------------- ----- ------------ ----------------------------
Roy W. Spradlin 2000 $220,000 $100,0002001 $250,000 $125,000 $ 0 50,000112,500
Chairman, President 2000 220,000 100,000 0 75,000
and Chief Executive 1999 200,000 50,000 0 0
Executive Officer
1998 180,000 35,000 0 200,000J. Michael Lang(b) 2000 $127,575Mullin 2001 $150,000 $ 40,000 $ 0 0
Senior Vice President 1999 121,500 18,000 0 0
of Development
J. Michael Mullin(c) 2000 $132,000 $ 30,000 $ 0 50,00060,000
Chief Financial Officer 2000 132,000 30,000 0 75,000
1999 120,000 20,000 0 50,000
1998 69,000 5,000 0 30,000
Stephen Rosenbloom(b) 2000 $149,10075,000
Mark J. Brookner 2001 $ 35,00075,000 $ 0 50,000
Senior Vice President 1999 142,000 30,000$ 0 0
of MarketingVice Chairman 2000 75,000 0 0 0
and employee 1999 75,000 0 0 0
J. Livingston Kosberg(b) 2001 $ 95,000 $ 0 $ 0 0
Chairman and 2000 35,000 0 0 0
consultant 1999 35,000 0 0 0
8
- --------------------------
(a) Reflects shares of the Company's common stock underlying options
granted, as adjusted for stock splits, under the Company's 1992 Stock
Option Plan, as amended,amended.
(b) Mr. Kosberg served as adjusted to reflect the two-for-one common stock split effected in the
form of a 100% stock dividend distributed on January 5, 2001 to record
holders of sharesChairman of the Company's common stock as of December 27,
2000.
(b) Mr. Lang and Mr. Rosenbloom became executive officers effective
February 17, 1999.
(c) Mr. Mullin joined the Company onBoard until May 26, 1998 and was elected Chief
Financial Officer effective August 3, 1998.
-9-
1423, 2001.
OPTION GRANTS
The following table contains information with respect to grants of
stock options to the Named Executive Officers during the year ended December 31,
2000.2001.
OPTION GRANTS IN 20002001 FISCAL YEAR
Individual Grants Potential
Realizable Value
Number of % of Total at Assumed Annual
Securities Options Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees of Base for Option Term
(b)
Granted in Fiscal Price Expiration ----------------------------------------------
Name (#)(a) Year ($/Sh) Date 5%($) 10%($)
- ---- ------------- ---------- ---------- ------- ------------ -------- -----------------
Roy W. Spradlin 50,000 21% $ 4.50 05/23/10 $141,501 $358,592
Michael Lang 0 0% $ 0 -- $ 0 $ 0112,500 39% $15.40 06/12/11 $1,089,560 $2,761,159
J. Michael Mullin 50,00060,000 21% $15.40 06/12/11 $ 4.50 05/23/10 $141,501 $358,592
Stephen Rosenbloom 50,000 21% $ 4.50 05/23/10 $141,501 $358,592581,099 $1,472,618
- ----------------------------
(a) The non-qualified stock options, which expire in ten years, were
granted under the 1992 Option Plan and vest one-fourthone-fifth on each of the
first, second, third, fourth and fifth anniversaries of the date of
grant. Vestinggrant, subject to accelerated vesting upon a change in control.
Specifically, vesting will be accelerated in the event of a "change in
control" of the Company (defined generally as the acquisition of 50% or
more of the Company's outstanding voting stock, a change in a majority
of the Board of Directors or a merger, consolidation or acquisition of
all or substantially all of the assets of the Company), subject to
certain limitations if vesting would result in adverse tax consequences
to the optionee. The per share option exercise price equals the fair
market value of a share of the Company's common stock on the date of
grant, as determined in accordance with the 1992 Option Plan, as
adjusted for the two-for-one stock split effectedsplits, including two splits in the form of a 100%
stock dividend distributed on January 5, 2001 to record holders of
shares of the Company's common stock as of December 27, 2000.
(b) The options granted to Messrs. Spradlin, Mullin and Rosenbloom are
non-qualified stock options which expire ten years from the date of
grant.2001.
OPTION EXERCISES AND HOLDINGS
The following table sets forth the option exercises during fiscal year
20002001 and the year-end value of all unexercised in-the-money options held by the
Named Executive Officers.
-10-9
15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Shares Value of Securities
Acquired Value Number of Securities Underlying Unexercised
on Realized Underlying Unexercised In-the-Money Options at
Name Exercise (#) ($) Options at FY-End (#)(a) FY-End ($)(a)(b)
- ---- ------------ -------- ----------------------------- ----------------------------------------------------- -------------------------
Un- Un-
Exercisable Unexercisableexercisable Exercisable Unexercisableexercisable
----------- ------------- ----------- ------------------------ -----------
Roy W. Spradlin 155,000 $2,178,831 463,750 348,750 $5,802,052 $3,122,206
J. Michael Mullin 41,250 $ 526,547 0 213,750 $ 0 $2,062,149
Mark J. Brookner 0 $ 0 347,500 222,500 $2,412,375 $1,531,250
Michael Lang 15,600180,000 0 $2,270,050 $ 103,894 51,900 72,500 $ 362,418 $ 495,378
J. Michael Mullin 0 $ 0 7,500 122,500 $ 46,639 $ 891,479
Stephen Rosenbloom 40,000 $ 320,000 117,500 122,500 $ 762,672 $ 864,141
- -----------------------------
(a) Reflects the number of shares of the Company's common stock underlying
options granted under the Executive Option Plan and the 1992 Option
Plan and the exercise or base price of such options, as adjusted for
the two-for-one stock split
effected in the form of a 100% stock dividend distributed on January 5,
2001 to record holders of shares of the Company's common stock as of
December 27, 2000.splits.
(b) Market value of underlying securities at year-end of $11.88$16.16 per share
minus the exercise or base price of in-the-money options at year-end.
EMPLOYMENT AND CONSULTING AGREEMENTS
Mr. Spradlin has entered into an amended and restated employment
agreement with the Company dated as of February 24, 1998, which supersedes hisa second amended and restated employment
agreement with the Company dated as of February 21, 1997.2001, which superseded his
prior employment agreement with the Company dated as of February 24, 1998. Under
his new employment agreement, Mr. Spradlin is employed as President and Chief
Executive Officer for a five-yearthree-year term ending on February 21, 2002.2004, which term
may be extended through February 21, 2006. Pursuant to the terms of his new
employment agreement, Mr. Spradlin's base salary was $165,000 initially and has been subsequently increased tois $250,000 for fiscal year 2001 based on performance.per year.
Additionally, Mr. Spradlin is eligible to receive cash bonuses payable at the
discretion of the Board of Directors and, subject to conditions of eligibility,
is entitled to participate in any employee benefit plans adopted by the Company.
Mr. Spradlin's new employment agreement may be terminated by the Company prior
to the expiration of its five-year term in the event (i) he becomes disabled for 90
consecutive days or (ii) his employment is terminated for "cause" (as defined in
the agreement). In the event that (i) Mr. Spradlin's employmentthere is terminated without "cause,"
(ii)a "change in control"(as defined in
the Company sells all or substantially all of its assets, (iii) more than
50%agreement) of the Company's outstanding common stock is transferred or sold
-11-
16
by the Company's stockholders, (iv) the Company, completes a merger or
consolidation in which the stockholders of the Company immediately prior to the
merger or consolidation own less than 50% of the surviving company or (v) the
Company is dissolved in a voluntary or involuntary dissolution, Mr. Spradlin would be entitled to receive a lump
sum equal to $500,000 and the term of his employment agreement shall be modified
to end one year from the change in control. In the event Mr. Spradlin's
employment is terminated without "cause", or Mr. Spradlin resigns "for good
cause" (as defined in the agreement), Mr. Spradlin would be entitled to receive
a lump
10
sum termination/severance benefit equal to one and one-half times his annual salary plus bonusMr. Spradlin's (i) base compensation
for the then most recent
12-month period.remainder of the term of the new employment agreement, (ii) the greater
of (a) Mr. Spradlin's bonus paid the last fiscal year prior to termination or
resignation or (b) the average of the bonuses paid over the three fiscal years
prior to termination or resignation and (iii) Mr. Spradlin's accrued but unused
vacation days. Under his new employment agreement, in the event of his death,
Mr. Spradlin's heirs or beneficiaries would become entitled to receive a payment
equal to one year's annual salary. Mr. Spradlin's new employment agreement
further contains a covenant not to compete or solicit during its five-year term and for a
one-yeartwo-year period following the termination of his employment.
CERTAIN TRANSACTIONS
In May 1994,Mr. Kosberg is party to a consulting agreement with the Company completed the issuance and sale of $3,000,000
aggregate principal amount of 8% Convertible Subordinated Notes, Series C due
June 30, 2004 (the "Series C Notes"). The Series C Notes were issued at par in a
private placement to Sloan Financial Corporation ("Sloan Financial"), a company
which is controlled by one of the Company's former directors,dated
March 1, 2001. Under this consulting agreement Mr. Richard C. W.
Mauran. The Series C Notes are convertible, at the option of the holder, into
the number of whole shares of common stock of the Company determined by dividing
the principal amount converted by $5.00, subject to adjustment upon the
occurrence of certain events. Interest on the Series C Notes is payable at a
rate of 8% per annum, payable quarterly. Holders of Series C Notes also have
certain registration rights with respect to the underlying common shares. Sloan
Financial also owned $2,000,000 aggregate principal amount of the Company's 8%
Convertible Subordinated Notes due June 30, 2003 (the "Initial Series Notes"),
which were issuedKosberg has been retained by
the Company at parto provide consulting services for a five-year term ending May 31,
2006. Pursuant to the terms of his consulting agreement, Mr. Kosberg is paid a
consulting fee equal to $95,000 per year. In addition to the consulting fee, the
Company will provide health insurance coverage for Mr. Kosberg and his spouse.
Mr. Kosberg's consulting agreement may be terminated by the Company prior to the
expiration of its five-year term in the event (i) he becomes disabled for 90
consecutive days or (ii) a material default of the consulting agreement that is
uncured for 30 days.
Management intends to propose certain changes to the compensation
arrangements of Messrs. Spradlin, Kosberg and Brookner beginning in June 1993. In January 2001,2002
subject to the Company exercised its right under the Initial Series Notes to require conversion
at $5.00 per share into 400,000 whole shares of common stockapproval of the Company.
During 2000Compensation Committee and through the dateBoard of
notice of the required conversion, interest
on the Initial Series Notes accruedDirectors. Mr. Kosberg's compensation is proposed to be reduced from $95,000 to
$80,000, and was payable quarterlya provision is to be added that Mr. Kosberg and his wife will be
provided primary coverage health insurance until Mr. Kosberg becomes 75 (Mr.
Kosberg is presently 65). Mr. Spradlin's employment agreement is proposed to be
amended by adding a provision that he and his family will be provided primary
coverage health insurance until he becomes 75 (Mr. Spradlin is presently 53).
Mr. Brookner, presently an at-will part-time employee being paid at an annual
rate of 8%$75,000 per year, is proposed to become subject to a three year
part-time employment agreement calling for compensation at an annual rate of
$50,000 per year, with a provision that he and his wife will be provided primary
coverage health insurance until he becomes 75 (Mr. Brookner is presently 57). See "Principal HoldersNo
assurance can be given that such proposals will be accepted by the Compensation
Committee or Board of Voting Securities."Directors.
CERTAIN TRANSACTIONS
Eddy J. Rogers, Jr., a nominee for directorship, is a partner in the law firm of Mayor, Day, CaldwellAndrews & Keeton,Kurth,
L.L.P., Houston, Texas, which provided certain legal services to the Company
during 2000.2001. The dollar amount of fees that the Company paid to that firm during
20002001 did not exceed 5% of that firm's gross revenues for its last full fiscal
year.
11
STOCK PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder return of the Company's common stock to The Nasdaq Stock Market
United States -12-
17
Index and The Nasdaq Stock Market Healthcare Index for the period
from December 31, 19951996 through December 31, 2000.2001. The graph assumes that $100
was invested in each of the Company's common stock and the companies listed on
The Nasdaq Stock Market United States Index and The Nasdaq Stock Market
Healthcare Index on December 31, 19951996 and that any dividends were reinvested.
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN FOR THE YEAR ENDED
DECEMBER 31, 2000*
[GRAPHIC OMITTED]2001*
[GRAPH]
12/95
12/96 12/97 12/98 12/99 12/00 12/01
----- ----- ----- ----- ----- -----
U.S. Physical Therapy, Inc. 100 121 86 85 102 73 72 203240 495
The Nasdaq Stock Market United States Index 100 123 151 212 395 238122 173 321 193 153
The Nasdaq Stock Market Healthcare Index 100 98 102103 87 70 96 104
12
*Cumulative total return assumes an initial investment of $100 on December
31,199531,1996 and the reinvestment of dividends. There were no dividends paid by the
Company during the period presented.
-13-
18
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors and its Compensation and Stock Option Committees
have prepared the following report on the Company's policies with respect to the
compensation of executive officers for 2000.2001. The Board of Directors makes all
decisions on compensation of the Company's executive officers (other than stock
options), based upon recommendations of the Compensation Committee. Decisions as
to the grant of stock options are made by the Stock Option Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation policies of the Company are designed to enable the
Company to attract, motivate and retain experienced and qualified executives.
The Company seeks to provide competitive compensation. The Company's policy has
been to provide a significant component of an executive officer's compensation
through the grant of stock options. The Company believes that grants of stock
options to executives, as well as to employees generally, help align the
interests of such persons with the interests of Company stockholders.
The following describes in more specific terms the elements of
compensation of executive officers for 2000.2001.
BASE SALARIES
BaseOther than the base salary for the Company's Chief Executive Officer,
which is set by an employment agreement (see "Employment and Consulting
Agreements"), base salaries of executives are initially determined by evaluating
the responsibilities of the position, the experience and knowledge of the
individual and the competitive marketplace for executive talent. Base salaries
for executive officers are reviewed annually by the Compensation Committee and
the Board of Directors based on, among other things, individual performance and
responsibilities.
INCENTIVE COMPENSATION
Based on performance, incentive opportunities are available to a wide
range of Company employees. Incentive compensation is effective in reinforcing
both the overall values of the Company and the specific operating goals of the
various business units.
13
Incentive compensation programs are designed to focus employees'
attention on the key performance goals of the Company, to identify the expected
levels of performance and to reward individuals who meet or exceed such
expectations. The aggregate amounts available for incentive awards are
determined by the overall financial performance of the Company. The actual
awards paid to individual recipients are formulated by management and approved
by the Compensation Committee at its discretion.
-14-
19
STOCK OPTION AWARDS
The Company's 1992 Stock Option Plan, as amended (the "1992 Option
Plan") and the Executive Stock Option Plan (the "Executive Option Plan") were
approved by the Board of Directors and the stockholders of the Company to align
employee and outside directors' interests with stockholders' interests, to
provide incentives to key employees of the Company by encouraging their
ownership of common stock and to aid the Company in attracting and retaining
such key employees, upon whose efforts the Company's success and future growth
depends. While certain options are outstanding under the Executive Option Plan,
no options were granted under such plan during 2001 or will be granted under
such plan in the future.
Options are granted at the discretion of the Stock Option Committee.
Individual grant sizes are determined based on organizational and individual
performance. At the discretion of the Stock Option Committee, and based on the
recommendation of management, options may also be used as an incentive for
candidates recruited to fill key positions.
During 2000,2001, the Company granted options covering a total of 294,758363,825
shares of Company common stock to 5666 directors, officers and employees. This
includes options granted under the 1999 Employee Stock Option Plan and options
granted to individuals to induce employment. No options have been granted to the
Named Executive Officers or directors under the 1999 Employee Stock Option Plan
or as inducements of employment. The per share exercise price of all options
granted in 20002001 equaled the fair market value of a share of Company common stock
on the date of grant.
Stock option grants made to executive officers in 20002001 reflect
significant individual performance and contributions relating to the Company's
operations and an incentive to an executive officer to join the Company.
OTHER
The Company has a 401(k) profit sharing plan covering all employees
with three months of service. The Company may make discretionary contributions
of up to 50% of employee contributions. The Company did not make any
contributions during 2000.2001.
14
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Pursuant to employment agreements with the Company (see "Employment and
Consulting Agreements"), Mr. Spradlin received a salary of $250,000, $220,000
and $200,000 in 2001, 2000 and $180,000 in
2000, 1999, and 1998, respectively. He also received bonuses
totaling $125,000, $100,000 and $50,000 in 2001, 2000 and $35,000 in 2000, 1999, and 1998, respectively.
Although Mr. Spradlin participated in the Company's 401(k) Plan from 19981999
through 2000,2001, the Company did not make any matching contributions to such plan
during these years. In addition to cash compensation, Mr. Spradlin was granted
50,000112,500 and 200,00075,000 options to purchase shares of Company common stock under the
1992 Option Plan during 20002001 and 1998,2000, respectively.
In determining the appropriate compensation (other than base salary,
which is fixed by an employment agreement with Mr. Spradlin), the Compensation
Committee evaluates the overall performance of the Company under Mr. Spradlin's
leadership, as well as his -15-
20
individual contributions to key strategic, financial
and development objectives. The Compensation Committee does not utilize any
specific quantitative factors or formulas in reviewing his performance or
compensation.
COMPENSATION DEDUCTIBILITY POLICY
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the"Code") and applicable Treasury regulations, no deduction is allowed for
annual compensation in excess of $1 million paid by a publicly traded
corporation to its chief executive officer and the four other most highly
compensated officers. Under those provisions, however, there is no limitation on
the deductibility of "qualified performance-based compensation."
In general, the Company's policy is to maximize the extent of tax
deductibility of executive compensation under the provisions of Section 162(m)
so long as doing so is compatible with its determinations as to the most
appropriate methods and approaches for the design and delivery of compensation
to the Company's executive officers.
Respectfully submitted,
The Board of Directors Compensation Committee
J. Livingston KosbergRoy W. Spradlin Daniel C. Arnold
Mark J. Brookner James B. Hoover
Roy W. SpradlinDaniel C. Arnold Albert L. Rosen
Bruce D. Broussard
James B. Hoover Stock Option Committee
Marlin W. Johnston Daniel C. Arnold
Bruce D. Broussard Stock Option CommitteeAlbert L. Rosen James B. Hoover
Daniel C. Arnold
Marlin W. Johnston James B. HooverEddy J. Rogers, Jr. Albert L. Rosen
Albert L. Rosen15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers to file with the SEC initial reports of
ownership of the Company's equity securities and to file subsequent reports when
there are changes in such ownership. The Company believes that during 20002001 all
Section 16(a) filing requirements applicable to the Company's directors and
officers were complied with on a timely basis, except for one late filing of
Form 4,3, Initial Statement of Changes in Beneficial Ownership of Securities, by Mr. HooverRogers
relating to a total of two transactions.
-16-
21
APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN
(PROPOSAL 2)
The Company maintains three stock option plans: the 1992 Stock Option
Plan, as amended (the "1992 Option Plan"), the Executive Stock Option Plan (the
"Executive Option Plan") and the 1999 Employee Stock Option Plan (the "1999
Option Plan"). A total of 1,990,000 shares of common stock (subject to
adjustment for changes in capitalization) are currently reserved for issuance
upon the exercise of stock options granted under the 1992 Option Plan to key
employees, officers and directors of the Company or any of its affiliates. To
date, a total of 1,592,291 options have been granted and are outstanding,
311,967 options have been granted and exercised and 85,742 options remain
available for future issuance under the 1992 Option Plan. A total of 210,000
shares of Company common stock (subject to adjustment for changes in
capitalization) are currently reserved for issuance upon the exercise of stock
options granted under the Executive Option Plan to officers of the Company or
any of its affiliates. To date, 170,000 options have been granted and are
outstanding, no options have been exercised and 40,000 options remain available
for future issuance under the Executive Option Plan. A total of 200,000 shares
of common stock (subject to adjustment for changes in capitalization) are
currently reserved for issuance upon the exercise of stock options granted under
the 1999 Option Plan to employees of the Company or any of its affiliates. To
date, 62,500 options have been granted and are outstanding, no options have been
exercised and 137,500 options remain available for future grant under the 1999
Option Plan. The purposes of the 1992 Option Plan, Executive Option Plan and
1999 Option Plan are to provide an incentive for eligible individuals to remain
in the employ or service of the Company or its affiliates, to extend to them the
opportunity to acquire a proprietary interest in the Company so that they will
apply their best efforts for the benefit of the Company and to aid the Company
in attracting able persons to serve the Company and its affiliates.
PROPOSED AMENDMENT TO 1992 OPTION PLAN
The Board of Directors has voted, subject to stockholder approval at
the Annual Meeting, to amend the 1992 Option Plan to increase by 340,000 (from
1,990,000 to 2,330,000) the number of shares of Company common stock reserved
for issuance upon exercise of options granted under the 1992 Option Plan. The
340,000 share increase in the shares reserved for issuance under the 1992 Option
Plan includes 40,000 shares remaining available for grant under the Executive
Option Plan. Because the per share exercise price of options granted under the
Executive Option Plan may be no less than 175% of the fair market value of a
share of Company common stock on the date of grant (as opposed to not less than
fair market value for incentive options and not less than par value for
non-qualified options granted under the 1992 Option Plan), the Board of
Directors believes that officers of the Company and its affiliates who are
eligible to receive option grants under the Executive Option Plan are not
provided with an appropriate incentive to expend maximum effort on behalf of the
Company. During
-17-
22
1997, the Company's stockholders approved an increase in shares reserved for
issuance under the 1992 Option Plan which represented the number of remaining
available shares under the Executive Option Plan upon the premise that no
further grants under the Executive Option Plan would be made. Since 1997, there
has been a 40,000 share increase in remaining available shares under the
Executive Option Plan due to unexercised options being canceled by a former
employee. Accordingly, the Board has voted to amend the 1992 Option Plan to
increase the shares reserved thereunder by 340,000 shares, 40,000 of which
represent the number of shares remaining available for grant under the Executive
Option Plan, subject to stockholder approval of such increase at the Annual
Meeting. The proposed 340,000 share increase in the number of shares reserved
for issuance under the 1992 Option Plan will assure that a meaningful number of
shares will be available for future grant to key employees, officers and
directors of the Company and its affiliates under the 1992 Option Plan.
At March 31, 2001, a total of 85,742 shares of Company common stock
remained available for future grant under the 1992 Option Plan. At March 31,
2001, a total of approximately 73 key employees, officers and directors of the
Company and its affiliates were eligible to participate in the 1992 Option Plan.
Based on the closing bid price of the Company's common stock on March 30, 2001
of $11.188, the aggregate market value of the 340,000 additional shares to be
reserved under the 1992 Option Plan is $3,804,000.
REQUIRED VOTE
The approval by the affirmative vote of a majority of the outstanding
shares is required to approve the proposed amendment to the 1992 Option Plan to
increase by 340,000 (from 1,990,000 to 2,330,000) the number of shares of
Company common stock reserved for issuance upon exercise of options granted
under the 1992 Option Plan. THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF SUCH
AMENDMENT.
DESCRIPTION OF THE 1992 OPTION PLAN
The principal provisions of the 1992 Option Plan are summarized below.
Such summary does not, however, purport to be complete and is qualified in its
entirety by the terms of the 1992 Option Plan. Stockholders may obtain, free of
charge, a copy of the 1992 Option Plan by writing Dorothy Nagle Flato, Corporate
Secretary and Treasurer, U.S. Physical Therapy, Inc., 3040 Post Oak Blvd., Suite
222, Houston, Texas 77056.
The 1992 Option Plan provides for the grant of options that are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") as well as non-qualified
options. The 1992 Option Plan is administered by the Stock Option Committee
("Option Committee"), which is appointed by the Board of Directors. The Option
Committee selects the key employees,
-18-
23
officers and directors of the Company and its affiliates to whom options are
granted. The current members of the Option Committee are Messrs. Daniel C.
Arnold (chairman), James B. Hoover and Albert L. Rosen.
Incentive stock options (those intended to qualify for special tax
treatment under the Code) granted under the 1992 Option Plan may be granted only
to employees of the Company or a corporate subsidiary and at a per share
exercise price of not less than the fair market value of a share of Company
common stock on the date of grant. The exercise prices of non-qualified options
granted under the 1992 Option Plan are determined by the Option Committee upon
each grant (but may not be less than the par value of a share of the Company's
common stock). The Option Committee determines which eligible individuals
receive options and how many are issued. Currently, options covering no more
than 200,000 shares of common stock of the Company may be granted under the 1992
Option Plan to any officer or other employee during any calendar year. The
maximum option term for an incentive option is 10 years from the date of grant.
No incentive option may be granted more than 10 years after the effective date
of the 1992 Option Plan. No person may be granted an incentive option if, at the
time of the grant, such person owns, directly or indirectly, more than 10% of
the total combined voting power of the Company or of any affiliate unless the
option price is at least 110% of the fair market value of the common stock on
the date of grant of the option and the exercise period of such incentive option
is by its terms limited to five years. Payment for shares purchased under the
1992 Option Plan may be made either in cash or cash equivalents or by exchanging
shares of common stock of the Company with a fair market value equal to or less
than the total option price plus cash for any difference, as determined in the
discretion of the Option Committee.
If an employee's employment with the Company or an affiliate terminates
by reason of death or disability, his or her options, to the extent then
exercisable, may be exercised within one year after such death or disability. If
the optionee's employment terminates for any reason other than death or
disability, options held by such optionee terminate 30 days after the date of
such termination unless otherwise provided in the option agreement. The Option
Committee may extend the period during which the options may be exercised.
Options granted under the 1992 Option Plan are exercisable during an
optionee's lifetime only by the optionee or the optionee's guardian or legal
representative. Options are not transferable other than by will or the laws of
descent and distribution. Further, shares of Company common stock issued upon
exercise of an option may not be transferred until after six months from the
date the option is granted.
Subject to the terms and conditions of and within the limitations of
the 1992 Option Plan, the Option Committee may modify, extend or renew
outstanding options
-19-
24
granted under the 1992 Option Plan, or accept the surrender of options and
authorize the granting of new options under the 1992 Option Plan in substitution
therefor.
If the outstanding shares of the Company's common stock are increased
or decreased by reason of a stock dividend or split, combination, exchange of
shares, or other recapitalization, merger or otherwise, in which the Company is
the surviving corporation, or by reason of a spin-off of a part of the Company
into a separate entity, or assumptions and conversions of outstanding grants due
to the acquisition by the Company of a separate entity, an appropriate and
proportionate adjustment will be made in the aggregate number and class of the
reserved shares, in the number and class of shares subject to each outstanding
option, and the per share exercise price of each outstanding option shall be
automatically adjusted to equitably reflect the effect of such change.
Adjustments to account for changes in capitalization will be made by
the Board, whose determination in that respect will be conclusive. No fractional
shares of common stock will be issued under the 1992 Option Plan on account of
any such adjustment, and any fractions resulting from any such adjustment will
be rounded downward to the nearest whole share.
Except as otherwise provided in the option agreement, upon any
dissolution or liquidation of the Company, or upon a merger or consolidation in
which the Company is not the surviving corporation, or upon any transaction by a
third party which results in any person owning 50% or more of the total combined
voting power of all classes of stock of the Company, the 1992 Option Plan and
the options issued thereunder will terminate, unless provision is made in
connection with such transaction for the continuation of the 1992 Option Plan
and/or the assumption of the options or for the substitution for such options of
new options covering the stock of a successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and the per share exercise price. In the event of such termination, all
outstanding options shall be exercisable in full during such period immediately
prior to the occurrence of such termination as the Board of Directors in its
discretion shall determine.
The Board of Directors of the Company at any time may amend the 1992
Option Plan as to shares of common stock as to which options have not been
granted. However, the approval of the Company's stockholders is required for any
amendment that would (1) increase the aggregate number of shares of common stock
as to which options may be granted (other than adjustments upon changes in
capitalization); (2) increase the maximum period during which options may be
exercised; or (3) extend the effective period of the 1992 Option Plan. The Board
at any time may terminate or suspend the 1992 Option Plan. No termination,
suspension or amendment of the 1992 Option Plan may, without the consent of the
optionee to whom an option has been granted, alter or impair any of the rights
of the holder of the option.
-20-
25
FEDERAL INCOME TAX CONSEQUENCES OF THE 1992 OPTION PLAN
The grant of an option will not be a taxable event for the optionee or
the Company.
Incentive Options. An optionee will not recognize taxable income upon
exercise of an incentive option, and any gain realized upon a disposition of
shares of stock received pursuant to the exercise of an incentive option will be
taxed as long-term capital gain if the optionee holds the shares for at least
two years after the date of grant and for one year after the date of exercise.
However, the excess of the fair market value of stock subject to an incentive
option on the exercise date over the option exercise price will be included in
the optionee's alternative minimum taxable income in the year of exercise for
purposes of the alternative minimum tax. An optionee may be entitled to a credit
against regular tax liability in future years for minimum taxes paid with
respect to the exercise of incentive options. The Company will not be entitled
to any compensation expense deduction with respect to the grant or exercise of
an incentive option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Company or a
corporate subsidiary from the date the option is granted through a date within
one month before the date of exercise of the option. In the case of an optionee
who is disabled or who dies, the one-month period for exercise following
termination of employment is extended to one year. In the case of an employee
who dies, the holding period for stock received pursuant to the exercise of the
option is waived.
If all of the foregoing requirements are met except for the one-year or
two-year holding period mentioned above, the optionee will recognize ordinary
income upon the disposition of the stock in an amount equal to the excess of the
fair market value of the stock at the time the option was exercised over the
option exercise price. The balance of the realized gain, if any, will be capital
gain. The Company will be allowed a compensation expense deduction to the extent
the optionee recognizes ordinary income.
Non-qualified Options. Upon exercising a non-qualified option, an
optionee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the stock on the date of
exercise (or, if the optionee is subject to certain restrictions imposed by the
securities laws, upon the lapse of those restrictions, unless the optionee makes
a special tax election within 30 days after exercise to have income determined
without regard to the restrictions). If the Company complies with applicable
reporting requirements, it will be entitled to a compensation expense deduction
in the same amount and generally in the same year as the optionee recognizes
ordinary income. Upon a subsequent sale or exchange of shares acquired pursuant
to the exercise of a non-qualified option, the optionee will have taxable gain
or loss, measured by the difference between the amount realized on
-21-
26
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION
(PROPOSAL 3)
Under the Articles of Incorporation, filed with the Nevada Secretary of
State on April 1, 1992 and not amended subsequent to such date, the Company is
currently authorized to issue 10,500,000 shares of capital stock, consisting of
(i) 500,000 shares of preferred stock, par value $0.01 per share, and (ii)
10,000,000 shares of common stock, par value $0.01 per share. In December 2000,
the Board of Directors declared a two-for-one stock split effected as a dividend
of one share of Company common stock for each outstanding share of Company
common stock, as well as appropriate adjustments in the number of shares of
Company common stock reserved for future issuance, all of which resulted in
fewer than 700,000 shares of Company common stock being available for issuance
by the Company out of the 10,000,000 shares authorized.
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board of Directors has voted, subject to stockholder approval at
the Annual Meeting, to amend the Articles of Incorporation to increase the
authorized common stock of the Company to 20,000,000 shares.
REQUIRED VOTE
The approval by the affirmative vote of a majority of the outstanding
shares is required to approve the proposed amendment to the Articles of
Incorporation to increase the authorized common stock of the Company to
20,000,000 shares. THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF SUCH AMENDMENT.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company appointed KPMG LLP as the
Company's independent auditors effectivebeginning September 27, 1999. KPMG LLP replaced
Ernst & Young LLP, which served as the Company's independent auditors since
1992. Ernst & Young LLP was dismissed effective September 27, 1999.
The report issued by Ernst & Young LLP on the Company's financial
statements for fiscal 1998 did not contain any adverse opinion orFor a disclaimerdescription
of opinion, or any qualification or modification as to uncertainty, audit scope,
or accounting principles.
The decision to change the Company's independent auditors to KPMG LLP
was recommended by the Audit Committee of the Board of Directors of the Company
and -22-
27
then ratified by the full Board of Directors.
During the Company's two most recent fiscal years, including the
interim period preceding the dismissal of Ernst & Young LLP, there were no
disagreements with Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Ernst & Young LLP, would have
caused it to make reference to the subject matter of the disagreement in
connection with its reports.non-audit fees, see "Corporate Governance and Other Matters -
Independent Auditors' Fees."
Representatives of KPMG LLP are expected to be present at the Annual
Meeting. TheySuch representatives will be given an opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of April 10, 20018, 2002 with
respect to the shares of the Company's common stock beneficially owned by each
director of the Company, each nominee for election as a director of the Company,
the Company's Chief Executive Officer and the Named Executive Officers and by
all directors and executive officers as a group.
AMOUNT AND PERCENT OF
NAME OF NATURE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OUTSTANDING
- ---------------- ----------------------- -----------------------
Daniel C. Arnold 283,668(b) 4.21%
DirectorRoy W. Spradlin 388,750 3.4%
Chairman of the Board, President
and Chief Executive Officer
Mark J. Brookner 397,500(d) 5.90173,750 1.6
Vice Chairman of the Board
Daniel C. Arnold 103,002 *
Director
16
Bruce D. Broussard 42,1682 *
Director
James B. Hoover 188,668 2.80212,752 1.9
Director
Marlin W. Johnston 102,668 1.5321,000 *
Director
J. Livingston Kosberg 954,160(d) 14.41
Chairman of the Board791,240(c) 7.2
Director
Albert L. Rosen 183,668(c) 2.74122,800(b) 1.1
Director
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Eddy J. Rogers, Jr.Jr
Director Nominee 0 N/A
Roy W. Spradlin 351,500(d) 5.04
President, Chief Executive
Officer and Director
Michael Lang 52,900 *
Senior Vice President
of Development
J. Michael Mullin 7,50018,750 *
Chief Financial Officer
Stephen Rosenbloom 117,500 1.74
Senior Vice President of Marketing
All directors and 2,681,900 34.831,832,046 15.5
executive officers as
a group (12(10 persons)
- ----------------------
* Less than 1%.
(a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "1934 Act"), a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of the Company's common stock if
he has or shares voting power or investment power with respect to such
security, or has the right to acquire beneficial ownership at any time
within 60 days from April 10, 2001.8, 2002. As used herein, "voting power" is
the power to vote or direct the voting of shares and "investment power"
is the power to dispose or direct the disposition of shares. All
persons shown in the table above have sole voting and investment power,
unless otherwise indicated. This table includes 1,076,240773,806 shares of
common stock subject to outstanding options which are exercisable
within 60 days from April 10, 2001.8, 2002. Of such shares, Messrs. Spradlin,
Brookner, Arnold,
Brookner, Broussard, Hoover, Johnston, Rosen Spradlin, Lang,and Mullin
and Rosenbloom hold options to
purchase 108,668, 115,000, 42,168,
108,668, 88,668, 88,668, 347,500, 51,900, 7,500388,750, 75,000, 103,002, 2, 133,002, 55,300 and 117,50018,750
shares, respectively.
17
(b) Includes 125,00067,500 shares owned by the Arnold Family Limited Partnership
and 50,000 shares owned by the Arnold 1997 Limited Partnership. Mr.
Arnold is the managing general partner of the Arnold Family Limited
Partnership and the Arnold 1997 Limited Partnership. As such, he has
shared voting and dispositive power over the shares held by the two
partnerships. Mr. Arnold disclaims beneficial ownership of these
securities except to the extent of his pecuniary
-24-
29
interest therein.
(c) Includes 95,000 of Company common stock held by the Rosen Family
Trust. Mr. Rosen serves as a trustee for the Rosen Family Trust.
(d)(c) See "Principal Holders of Voting Securities."
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 10, 20018, 2002 with
respect to the ownership of shares of Company common stock by the persons known
to management to be the beneficial owners of more than 5% of the Company's
outstanding common stock. The information is based on the most recent statements
on Schedule 13D or 13G filed on behalf of such persons or on other information
available to the Company.
AMOUNT AND PERCENT OF
NAME AND ADDRESS NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
- ------------------- -------------------- ------------
Mark J. Brookner 397,500(a) 5.90%Livingston Kosberg 791,240(a) 7.2%
3040 Post Oak Blvd., Suite 222700
Houston, Texas 77056
J. Livingston Kosberg 954,160(b) 14.41
3040 Post Oak Blvd., Suite 222
Houston, Texas 77056
Roy W. Spradlin 351,500(c) 5.04
3040 Post Oak Blvd., Suite 222
Houston, Texas 77056
J. Carlo Cannell d/b/a 717,200(d) 10.83
Cannell Capital, Management
600 CaliforniaLLC 874,850(b) 7.9
2500 18 Street Floor 14
San Francisco, California 94108
Clarence E. Mayer 675,000(e) 10.19
109 North Post Oak Lane, Suite 300
Houston, Texas 77024
-25-
30
Richard C.W. Mauran 850,000(f) 11.77
Sloan Financial Corporation
31 Burton Ct
Franklins Row
London, SW 3, England94110
George D. Bjurman & Associates 676,185(c) 6.1
10100 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90067
407,800(g) 6.16Sloan Financial Corporation 900,000(d) 7.6
Richard C.W. Mauran
31 Burton Ct.
Franklins Row
London, SW 3, England
RS Investments Management Co., LLC 908,500(e) 8.2
388 Market Street, Suite 200
San Francisco, California 94111
FMR Corp. 1,443,650(f) 13.1
82 Devonshire Street
Boston, Massachusetts 02109
18
- ---------------------------
(a) Includes 150,000 shares of Company common stock held individually in
Mr. Brookner's name, 115,000 stock options held by Mr. Brookner,
112,500 shares held by the Dolores Wilkenfeld Trust, 6,668 shares held
by the Robin Kosberg Elkin Trust, 6,666 shares held by the Lori Kosberg
Trust and 6,666 shares held by the Wendy Kosberg Starr Trust. Mr.
Brookner serves as trustee for the Dolores Wilkenfeld Trust, the Robin
Kosberg Elkin Trust, the Lori Kosberg Trust and the Wendy Kosberg Starr
Trust.
(b) The reported share amount includes 834,160651,240 shares held by the
Livingston Kosberg Trust, 40,00060,000 shares held by the Kosberg Foundation
Charitable Trust, 60,00050,000 shares held by the Lewis Wilkenfeld Trust and
20,00030,000 shares held individually in Mr. Kosberg's name. Mr. Kosberg is
the trustee and the income beneficiary of the Livingston Kosberg Trust
and the trustee of the Kosberg Foundation Charitable Trust and the
Lewis Wilkenfeld Trust. The reported share amount excludes 2,340 shares
held by Mr. Kosberg's wife for which Mr. Kosberg disclaims beneficial
ownership.
(c) Includes 4,000 shares of Company common stock held individually in Mr.
Spradlin's name and 347,500 stock options held by Mr. Spradlin.
(d)(b) The Schedule 13G of J. Carlo Cannell d/b/a Cannell Capital, ManagementLLC dated November 17, 1998February 14, 2002 states
that Cannell Capital, ManagementLLC has shared voting and shared dispositive
power over the entire number of such shares; J. Carlo Cannell has
shared voting and shared dispositive power over the entire number of
such shares; The Anegada Fund Limited has shared voting and dispositive
power over 118,950 shares; Tonga Partners, L.P. has sole voting and
sole dispositive power over 362,200347,100 shares; Pleiades Investment
Partners, L.P. has soleshared voting and soleshared dispositive power over
53,00035,700 shares; The Cuttyhunk Fund Limited has soleshared voting and soleshared
dispositive power over 225,000262,950 shares; Canal, Ltd.GS Cannell Portfolio, LLC has
soleshared voting and soleshared dispositive power over 59,200100,650 shares; Goldman Sachs Performance Partners (Offshore), L.P.George
S. Sarlo 1995 Charitable Remainder Trust has soleshared voting and soleshared
dispositive power over 6,000 shares and Goldman
Sachs Performance Partners, L.P. has sole voting and sole dispositive
power over 11,8009,500 shares. Mr. Cannell is a general partnerthe managing member
of Tonga
Partners, L.P.Cannell Capital, LLC and is the investment advisor of each of the
other named entities.
-26-
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(e) The Schedule 13G of Mr. Mayer dated February 8, 2001 states that he has
sole voting and sole dispositive power over the entire number of such
shares.
(f) Includes 167,332 shares of Company common stock owned by Sloan
Financial Corporation ("Sloan Financial"), of which Mr. Mauran is the
controlling stockholder, 600,000 shares of Company common stock that
may be acquired by Sloan Financial upon conversion of $3,000,000
aggregate principal amount of the Company's outstanding 8% Convertible
Subordinated Notes, Series C, due June 30, 2004 owned by Sloan
Financial and 82,668 shares held individually in Mr. Mauran's name.
Sloan Financial and Mr. Mauran possess shared voting and shared
dispositive power over the entire number of such shares.
(g)(c) The Schedule 13G of George D. Bjurman & Associates dated March 31, 2001
states that George D. Bjurman & Associates has sole voting and
dispositive power over the entire number of shares.
(d) Consists of 900,000 shares of Company common stock that may be acquired
by Sloan Financial Corporation ("Sloan Financial") upon conversion of
$3,000,000 aggregate principal amount of the Company's outstanding 8%
Convertible Subordinated Notes, Series C, due June 30, 2004 owned by
Sloan Financial. Sloan Financial and Mr. Mauran possess shared voting
and shared dispositive power over the entire number of such shares.
(e) The Schedule 13G of RS Investments Management Co., LLC dated February
14, 2002 states that RS Investments Management Co., LLC has shared
voting and dispositive power over the entire number of shares. RS
Investment Management, L.P., has shared voting and dispositive power
over 589,200 shares.
(f) The Schedule 13G of FMR Corp. dated February 14, 2002 states that FMR
Corp. has shared voting and sole dispositive power over the entire
number of shares.
19
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS TO BE
PRESENTED AT THE 20022003 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented by any stockholder for action at
the 20022003 Annual Meeting of Stockholders of the Company must be received by the
Company on or before December 28, 200131, 2002 in order for the proposal to be
considered for inclusion in the proxy statement and form of proxy relating to
the 20022003 Annual Meeting. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and form of proxy relating to the
20022003 Annual Meeting any stockholder proposal which does not meet all of the
requirements for inclusion established by the SEC in effect at the time such
proposal is received. In such cases, the Board may exercise any discretion
authority granted by the proxies to be solicited on behalf of the Board in
connection with the 2003 Annual Meeting of stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be presented for action by the
stockholders at the 20012002 Annual Meeting. If, however, any other matters not now
known are properly brought before the meeting, the persons named in the
accompanying proxy will vote such proxy in accordance with the determination of
a majority of the Board of Directors.
By Order of the Board of Directors
/s/ DOROTHY N. FLATO
Dorothy N. Flato
Corporate SecretaryRoy W. Spradlin
Roy W. Spradlin
President and TreasurerChief Executive Officer
Houston, Texas
April 27, 2001
-27-25, 2002
32
APPENDIX A
AUDIT COMMITTEE CHARTER
U.S. PHYSICAL THERAPY, INC.
PURPOSE
The audit committee of the board of directors shall assist the board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
Company's compliance with legal and regulatory requirements and (3) the
independence and performance of the Company's internal and external auditors.
COMPOSITION
Effective no later than June 14, 2001, the membership of the audit committee
shall consist of at least three members of the board of directors, who shall
serve at the pleasure of the board of directors and be appointed by the full
board of directors, and who shall meet the following criteria:
1. Each member of the audit committee must be an "independent
director" within the meaning of the applicable rules of The
Nasdaq Stock Market, Inc. as in effect on June 14, 2001.
2. Each member of the audit committee must be able to read and
understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow
statement, or become able to do so within a reasonable period
of time after his or her appointment to the audit committee.
3. At least one member of the audit committee shall have past
employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable
experience or background which results in the individual's
financial sophistication, including being or having been a
chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities.
4. Notwithstanding paragraph 1, one director who is not
independent as defined in the applicable rules of The Nasdaq
Stock Market, Inc., and is not a current employee or an
immediate family member of such employee, may serve on the
audit committee, if the full board, under exceptional and
limited circumstances, determines that (i) the membership on
the committee by the individual is required by the best
interests of the Company and its stockholders, and (ii) the
circumstances that cause the director not to meet the
independence requirements would not interfere with the
director's exercise of independent judgment, and the board
discloses, in the next annual
33
proxy statement subsequent to such determination, the nature
of the relationship and the reasons for that determination.
Prior to June 14, 2001, the membership of the audit committee shall consist of
at least two members of the board of directors, who shall serve at the pleasure
of the board of directors and be designated by the full board of directors, and
who shall be "independent directors" within the meaning of the applicable rules
of The Nasdaq Stock Market, Inc. as in effect prior to that date. These rules
define an "independent director" as a person other than an officer or employee
of the Company or its subsidiaries or any other individual having a relationship
which, in the opinion of the Company's board of directors, would interfere with
the exercise of independent judgment in carrying out responsibilities.
RESPONSIBILITIES
In meeting its responsibilities, the audit committee is expected to:
1. Make regular reports to the board.
2. Review and reassess the adequacy of the committee's charter
annually and recommend any proposed changes to the board of
directors for approval.
3. Review the annual audited financial statements with
management, including major issues regarding accounting and
auditing principles and practices as well as the Company's
system of internal controls.
4. Determine whether to recommend to the board of directors that
the annual audited financial statements be included in the
Company's annual report on Form 10-K.
5. Review with management and the Company's independent auditors
any significant financial reporting issues raised by
management or the auditors in connection with the preparation
of the Company's annual audited financial statements.
6. Review proposed major changes to the Company's auditing and
accounting principles and practices that are brought to the
attention of the audit committee by independent auditors,
internal auditors or management.
7. Recommend to the board of directors the independent auditors
to be engaged.
-2-
34
8. Obtain from the independent auditors a formal written
statement delineating all relationships between the
independent auditors and the Company, consistent with
Independence Standards Board Standard 1.
9. Actively engage in a dialogue with the independent auditors
with respect to any disclosed relationships or services that
may impact the objectivity and independence of the independent
auditors.
10. Take, or recommend that the full board of directors take,
appropriate action to oversee the independence of the
independent auditors.
11. Review the performance of the independent auditors and, if so
determined by the audit committee, recommend that the board
replace the independent auditors.
12. Review the appointment and replacement of the senior internal
auditing executive, if any.
13. Review any significant reports to management prepared by the
internal auditing department, if any, and management's
responses.
14. Meet with the independent auditors prior to the audit to
review the planning and staffing of the audit.
15. Discuss with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit.
16. Review with the independent auditors any management letter
provided or to be provided by the auditors and management's
response to that letter.
17. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual
proxy statement.
18. Review with the board as necessary in the audit committee's
judgment the Company's policies and procedures regarding
compliance with applicable laws and regulations and with the
Company's code of conduct, if any.
19. Review with counsel legal matters that are brought to the
audit committee's attention and that may have a material
impact on the financial statements, the Company's compliance
policies and material reports or inquiries received from
regulatory bodies.
-3-
35
20. Meet at least annually with the chief financial officer, the
senior internal auditing executive, if any, and the
independent auditor in separate executive sessions.
POWERS
The audit committee shall have the power to conduct or authorize investigations
into any matters within the committee's scope of responsibilities. The committee
shall be empowered to retain independent counsel, accountants, or others to
assist it in the conduct of any investigation. The committee may ask members of
management or others to attend its meeting and provide pertinent information as
necessary.
RELATIONSHIP WITH AUDITORS AND BOARD OF DIRECTORS
The Company's independent auditors are ultimately accountable to the board of
directors of the Company and to the audit committee, as representatives of the
stockholders of the Company. The board of directors and the audit committee have
ultimate authority and responsibility to select, evaluate, and, where
appropriate, replace the independent auditors. 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 independent auditors. Nor is it the duty of the audit committee
to conduct investigations, to resolve disagreements, if any, between management
and independent auditors or to assure compliance with laws and regulations and
the Company's code of conduct, if any.
-4-
36
U.S. PHYSICAL THERAPY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- MAY 23, 200121, 2002
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of U.S. Physical Therapy, Inc. (the "Company")
hereby appoints Roy W. Spradlin and J. Livingston Kosberg and Dorothy N. Flato,Michael Mullin, and each of them, with
full power of substitution in each, as proxies to cast all votes, as designated
below, which the undersigned stockholder is entitled to cast at the 20012002 Annual
Meeting of Stockholders of the Company to be held on Wednesday,Tuesday, May 23, 2001,21, 2002, at
9:00 a.m. (CDT)(EDT), at the Company's officeGrand Hyatt New York at 3040 Post Oak
Boulevard, Suite 222, Houston, Texas,Park Avenue (at Grand Central),
New York, New York 10017, and at any adjournments thereof, upon the following
matters.
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3 AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE
BOARD OF DIRECTORS AS TO OTHER MATTERS.
The undersigned stockholder hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement, and hereby revokes any proxy or proxies
heretofore given. This proxy may be revoked at any time before its exercise.
(continued and to be signed and dated on reverse side)
37
(1) Election of nineseven directors for one-year terms. Nominees: J. Livingston
Kosberg,Roy W. Spradlin,
Mark J. Brookner, Roy W. Spradlin, Daniel C. Arnold, Bruce D. Broussard, James B. Hoover,
Marlin W. Johnston and Albert L. Rosen and
Eddy J. Rogers, Jr.
FOR all nominees listed WITHHOLD AUTHORITY
above (except as marked to vote for all nominees
to the contrary below). listed.
[ ]Rosen.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed.
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
-------------------------------------------- --------------------------------------------------------------------------------
(2) Approval under the Company's 1992 Stock Option Plan to increase by
340,000 the number of shares of Company common stock reserved for
issuance under the 1992 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) Approval to amend the Articles of Incorporation to increase the
authorized common stock of the Company to 20,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(4) As determined by a majority of the Company's Board of Directors, the
proxies are authorized to vote upon such other business as may properly
come before the meeting, or any adjournments thereof.
Please date and sign exactly as
name appears hereon and return in
the enclosed envelope.
Date:
-------------------------
------------------------------
Please date and sign exactly as name
appears hereon and return in the enclosed
envelope
Date: ------------------------------------
-----------------------------------------
Signature of Stockholder or Authorized
Representative (Only one signature is
required in the case of stock ownership in
the name of two or more persons.)