SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 Rule 14a-11(c) or Rule 14a-12
Renal Care Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class 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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[ ] Fee paid previously with preliminary materials:
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[ ] 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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RENAL CARE GROUP, INC.
2100 WEST END AVENUE, SUITE 800
NASHVILLE, TENNESSEE 37203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JUNE 5, 2002
To the stockholders of Renal Care Group, Inc.:
Renal Care Group, Inc.'s 2002 Annual Meeting of stockholders will be held
at the Loews Vanderbilt Plaza Hotel, 2100 West End Avenue, Nashville, Tennessee,
on Wednesday, June 5, 2002 beginning at 9:00 a.m. (Central Daylight Time) for
the following purposes:
(1) To elect two Class III directors to serve for a term of three (3)
years;
(2) To consider and vote upon a proposal to approve an amendment to
the Renal Care Group, Inc. 1999 Long-Term Incentive Plan (the "Long-Term
Incentive Plan") to increase the number of shares available under the plan;
and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement.
Stockholders of record at the close of business on April 8, 2002 will be
entitled to vote at the Annual Meeting or any adjournment or postponement.
We direct your attention to the Proxy Statement accompanying this Notice
for more complete information regarding the matters to be acted upon at the
Annual Meeting.
By Order of the Board of Directors
DOUGLAS B. CHAPPELL,
Secretary
April 29, 2002
IMPORTANT
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
RENAL CARE GROUP, INC.
2100 WEST END AVENUE
SUITE 800
NASHVILLE, TENNESSEE 37203
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2002
This Proxy Statement is furnished in connection with the solicitation of
proxies by Renal Care Group on behalf of the Board of Directors for the 2002
Annual Meeting. These proxies will be voted at the 2002 Annual Meeting of
stockholders and at any adjournments or postponements. The 2002 Annual Meeting
will be held at 9:00 a.m. (Central Daylight Time) on Wednesday, June 5, 2002, at
the Loews Vanderbilt Plaza Hotel, 2100 West End Avenue, Nashville, Tennessee.
Stockholders of record as of the close of business on April 8, 2002 will be
entitled to vote at the 2002 Annual Meeting and any adjournments. Each share of
common stock is entitled to one vote on all matters presented at the 2002 Annual
Meeting. Stockholders do not have the right to cumulate their votes for
directors. As of April 8, 2002, there were 49,883,532 shares of common stock
outstanding. Renal Care Group is first distributing the Notice of the 2002
Annual Meeting, this Proxy Statement, and the proxy form to stockholders on or
about May 3, 2002.
A majority of the outstanding shares of common stock entitled to vote at
the meeting, represented in person or by proxy, is required to constitute a
quorum for the 2002 Annual Meeting. If a quorum is not present at the 2002
Annual Meeting, or if for any reason Renal Care Group believes that additional
time should be allowed for the solicitation of proxies, then Renal Care Group
may adjourn or postpone the 2002 Annual Meeting with or without a vote of the
stockholders. If the Company proposes adjournment, the persons named in the
enclosed proxy will vote all shares for which they have voting authority in
favor of adjournment.
All shares of common stock represented by properly executed proxies
received prior to or at the 2002 Annual Meeting will be voted in accordance with
the instructions indicated on the proxy card unless the proxy is revoked prior
to or at the 2002 Annual Meeting. If no instructions are given, the proxies will
be voted in favor of the matters listed in the proxy card. The directors must be
elected by a plurality of votes cast (in person or by proxy). The proposed
amendment to the Long-Term Incentive Plan and any other matters will be
determined based upon the vote of the majority of votes cast (in person or by
proxy).
Shares represented by proxies that are marked "withhold authority" or
"abstain" will be counted as shares present for purposes of establishing a
quorum. Shares represented by proxies that include broker nonvotes will also be
counted as shares present for purposes of establishing a quorum. A broker
nonvote occurs when a broker or nominee holding shares for a beneficial owner
votes on one proposal but does not vote on another proposal because the broker
or nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Neither withholding authority to vote
with respect to one or more nominees nor a broker nonvote will affect the
outcome of the election of directors or the amendment of the Long-Term Incentive
Plan.
Renal Care Group will pay all expenses of the 2002 Annual Meeting,
including the cost of soliciting proxies. The Company may reimburse persons
holding shares in their names for others, or holding shares for others who have
the right to give voting instructions, such as brokers, banks, fiduciaries and
nominees, for their reasonable expenses in forwarding the proxy materials to
their principals.
Any stockholder returning a proxy may revoke that proxy at any time prior
to the 2002 Annual Meeting by (a) giving written notice to Renal Care Group of
such revocation, (b) voting in person at the 2002 Annual Meeting, or (c)
executing and delivering to Renal Care Group a proxy bearing a later date.
PROPOSALS FOR STOCKHOLDER ACTION
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
Renal Care Group's Board of Directors is composed of three classes,
designated Class I, Class II, and Class III. The term of the Class III directors
expires at the 2002 Annual Meeting. The current Class III directors are John D.
Bower, M.D., Kenneth E. Johnson, Jr., M.D. and W. Tom Meredith, M.D. Dr. Bower
and Dr. Meredith informed the Company of their decision not to seek reelection
to the Board of Directors, and neither will serve if elected. The Board of
Directors has designated Kenneth E. Johnson, Jr., M.D. as a nominee for election
as a Class III director at the 2002 Annual Meeting. In order to balance the
classes of directors, the Board of Directors has designated Sam A. Brooks as a
nominee for election as a Class III director. Mr. Brooks has been a Class I
director and his term would have expired at the 2003 Annual Meeting. The term of
the Class I directors will expire at the 2003 annual meeting, and the term of
the Class II directors will expire at the 2004 annual meeting. The term of a
director in each class will be three years or until his or her successor is
elected. The continuing Class I directors will be Stephen D. McMurray, M.D. and
William V. Lapham, and the Class II directors are Joseph C. Hutts, Harry R.
Jacobson, M.D. and Thomas A. Lowery, M.D.
The nominees for election at the 2002 Annual Meeting have consented to be
named as candidates in this Proxy Statement and to serve, if elected. Renal Care
Group knows of no reason why either nominee may be unwilling or unable to serve
as a director. If either nominee is unwilling or unable to serve, the shares
represented by all valid proxies will be voted for such other person as the
Board of Directors may recommend.
Directors are elected by a plurality of the votes cast by the shares of
common stock represented in person or by proxy at the 2002 Annual Meeting.
Therefore, the nominees for election as Class III directors who receive the
greatest number of votes cast at the 2002 Annual Meeting will be elected as
Class III directors. Unless the stockholder gives other instructions, the
persons named in the accompanying proxy will vote FOR Sam A. Brooks and Kenneth
E. Johnson, Jr., M.D. as Class III directors.
Information as to each nominee and the directors continuing as Class I
directors and Class II directors follows:
CLASS III DIRECTORS -- NOMINEES FOR ELECTION AT THE 2002 ANNUAL MEETING -- TERM
EXPIRING AT THE 2005
ANNUAL MEETING
SAM A. BROOKS
Age -- 63
Mr. Brooks has been President and Chief Executive Officer of Renal Care
Group since 1995, Chairman since October 1997, and served as Treasurer from June
1995 to November 1995. He also currently serves as President of MedCare
Investments, Inc., a health care investment company, and he has held that
position since 1991.
KENNETH E. JOHNSON, JR., M.D.
Age -- 57
Dr. Johnson has been a director of Renal Care Group since 1996. He is a
board-certified nephrologist trained at the University of Utah. In 1975, Dr.
Johnson was a founding partner of Arizona Nephrology Associates and RenalWest,
L.C. Dr. Johnson joined the Board of Directors when Renal Care Group acquired
RenalWest in September 1996. Dr. Johnson has served as the director of the
critical care units of two hospitals and served as chairman of several
Departments of Medicine in the East Valley area of Mesa, Arizona.
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Dr. Johnson has been a member of the Medical Review Board of the Regional End
Stage Renal Disease Network.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED ABOVE AS CLASS III DIRECTORS.
CURRENT DIRECTORS WHOSE TERMS ARE NOT EXPIRING AT THE 2002 ANNUAL MEETING:
CLASS I DIRECTORS -- TERM EXPIRING AT THE 2003 ANNUAL MEETING
STEPHEN D. MCMURRAY, M.D.
Age -- 54
Dr. McMurray has been a director of Renal Care Group since 1996. He
graduated from Indiana University and Indiana University Medical Center. Dr.
McMurray is a board-certified nephrologist. He has practiced nephrology in Fort
Wayne, Indiana, since 1977. Dr. McMurray is a member of Indiana Medical
Associates, a 46-member multi-specialty physician practice group and currently
serves as Chairman of its board. He is a member of the board of the Renal
Physicians Association, an organization representing nephrologists in the United
States. Dr. McMurray was also a founder of D.M.N. Professional Corporation, one
of the companies included in the formation of the Company in February 1996.
WILLIAM V. LAPHAM
Age -- 63
Mr. Lapham has been a director of Renal Care Group since 1999. He served as
acting Chief Financial Officer of Uptons, a division of American Retail Group,
from January 1999 to June 1999. From 1962 until his retirement in 1998, Mr.
Lapham was associated with Ernst & Young LLP and its predecessors, serving as a
partner for the last 26 years of his tenure. He was a member of Ernst & Young's
International Council for eight years ending in December 1997. Mr. Lapham is a
director of LifePoint Hospitals, Inc., an operator of general, acute care
hospitals in non-urban areas, and Avado Brands, Inc., a full-service, casual
dining restaurant company.
CLASS II DIRECTORS -- TERM EXPIRING AT THE 2004 ANNUAL MEETING
JOSEPH C. HUTTS
Age -- 60
Mr. Hutts has been a director of Renal Care Group since 1995. He currently
serves as President and Chief Executive Officer of Surgis, Inc., a company that
develops and operates outpatient surgery centers. He was Chairman of the Board,
President and Chief Executive Officer of PhyCor, Inc., an operator of multi-
specialty medical clinics, from 1988 until his resignation in June of 2000. Mr.
Hutts remains a director of PhyCor, Inc. Mr. Hutts was formerly with Hospital
Corporation of America in various positions, the last of which was President,
HCA Health Plans. From 1986 to 1988, Mr. Hutts was Vice Chairman and Chief
Operating Officer of Equitable HCA Corporation, which did business as Equicor.
HARRY R. JACOBSON, M.D.
Age -- 54
Dr. Jacobson has been a director of Renal Care Group since 1995 and was
Chairman of the Board of Directors of the Company from 1995 to 1997. He
currently serves as Vice Chancellor for Health Affairs at Vanderbilt University,
a position he has held since 1997. He also currently serves as Professor of
Medicine at Vanderbilt University Medical Center, a position he has held since
1985. Dr. Jacobson received a B.S. degree from the University of Illinois and
his M.D. from the University of Illinois Abraham Lincoln School of Medicine. He
completed his internal medicine training at Johns Hopkins Hospital and his
nephrology training at Southwestern Medical School in Dallas, Texas.
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THOMAS A. LOWERY, M.D.
Age -- 55
Dr. Lowery has been a director of Renal Care Group since 1996. He is a
board-certified nephrologist trained at Baylor College of Medicine and the
University of Alabama, Birmingham. He has served on the Executive Committee of
Southwest Organ Bank and has been the Director of the Renal Transplant Program
of East Texas Medical Center in Tyler, Texas. In addition, he has practiced as a
partner of Tyler Nephrology Associates, P.A. and its predecessors since 1979.
Dr. Lowery was a founder of one of the companies included in the formation of
the Company in February 1996.
BOARD COMMITTEES, ATTENDANCE, AND COMPENSATION OF DIRECTORS
COMMITTEES
The Board of Directors has established two Committees, the Audit and
Compliance Committee and the Compensation Committee, each of which is briefly
described below.
Renal Care Group's Audit and Compliance Committee is composed solely of
non-employee directors. It recommends the annual appointment of Renal Care
Group's independent auditors and, in conjunction with the Company's auditors,
reviews the scope of audit and other assignments and related fees. The Audit and
Compliance Committee also reviews the accounting principles used by Renal Care
Group in financial reporting, Renal Care Group's internal auditing procedures
and the adequacy of Renal Care Group's internal control procedures, all in
conjunction with Renal Care Group's independent auditors. The Audit and
Compliance Committee also oversees the activities of Renal Care Group's internal
compliance committee and receives reports from that committee and Renal Care
Group's Compliance Officer. The Audit and Compliance Committee is chaired by Mr.
Lapham and also includes Mr. Hutts, Dr. Johnson and Dr. Lowery.
Renal Care Group's Compensation Committee is composed solely of
non-employee directors. It is responsible for establishing salaries, bonuses,
and other compensation for the Company's executive officers. The Stock Option
Subcommittee of the Compensation Committee is responsible for administering
Renal Care Group's stock option plans. The Compensation Committee is currently
chaired by Dr. McMurray and also includes Mr. Hutts, Mr. Lapham and Dr.
Meredith. After the 2002 Annual Meeting the Compensation Committee will be
chaired by Dr. McMurray and will include Mr. Hutts and Mr. Lapham. The Stock
Option Subcommittee is currently chaired by Mr. Hutts and is composed of Mr.
Lapham and Mr. Hutts.
MEETINGS
During 2001, the Board of Directors of the Company held four regularly
scheduled meetings. In addition, the Compensation Committee met once; and the
Audit and Compliance Committee met four times during 2001. Each director
attended at least 75% of the total number of meetings held by the Board of
Directors and its committees on which he served.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are employees of Renal Care Group or
medical directors of Renal Care Group dialysis facilities do not receive any
compensation for serving on the Board of Directors. In 2001, each non-employee,
non-medical director member of the Board of Directors received a fee of $2,000
for each meeting of the Board of Directors he attended and a fee of $1,000 for
each committee meeting he attended that was not on the same day as a meeting of
the Board of Directors. All directors, including members who are employees or
medical directors, receive reimbursement of out-of-pocket expenses incurred in
connection with attending meetings of the Board of Directors or its committees.
Renal Care Group maintains the Renal Care Group, Inc. 1996 Stock Option
Plan for Outside Directors (the "Outside Director Plan") to provide for grants
of options to its non-employee directors. The Outside Director Plan provides for
automatic grants to Directors of Renal Care Group who are (1) not employees of
the Company, (2) not the Chairman or Vice Chairman of the Board of Directors of
the Company, and (3) not a party to, and whose medical practices are not a party
to, a medical director agreement with Renal
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Care Group that is in force. The Outside Director Plan provides for an initial
grant to each eligible director of 11,250 shares on the date such person first
becomes a director and subsequent annual grants of options to purchase 5,625
shares of common stock following each annual meeting. The annual grants are made
on the day following each annual meeting of stockholders. The Option Price for
each option granted under the Outside Director Plan is the "Fair Market Value,"
as that term is defined in the Outside Director Plan, of the shares of common
stock subject to the option on the date the option is granted. These options are
immediately exercisable subject to securities law restrictions and have a term
of ten years. Accordingly, on the day after the 2002 Annual Meeting, the Company
will grant to each eligible director an option to purchase 5,625 shares of
common stock with an exercise price of the Fair Market Value on such date.
PROPOSAL 2
APPROVAL OF PROPOSED AMENDMENT TO THE
LONG-TERM INCENTIVE PLAN
The Board of Directors adopted the Renal Care Group, Inc. 1999 Long-Term
Incentive Plan in April 1999, and the stockholders approved it at the 1999
annual meeting. In February 2000 the Board of Directors approved an amendment to
the Long-Term Incentive Plan, which became effective upon approval by the
stockholders at the 2000 annual meeting. In March 2001 the Board of Directors
approved an amendment to the Long-Term Incentive Plan, which became effective
upon approval by the stockholders at the 2001 annual meeting. Under the
Long-Term Incentive Plan, Renal Care Group has reserved a total of 3,500,000
shares of common stock for issuance upon the grant or exercise of awards. The
Board of Directors has adopted resolutions approving and recommending to the
stockholders for their approval an amendment to the Long-Term Incentive Plan
that would increase the number of shares reserved for issuance under the
Long-Term Incentive Plan from 3,500,000 to 5,500,000 shares. If approved by the
stockholders, the proposed Amendment will be effective on the date of the 2002
Annual Meeting.
In addition to the amendment to increase the number of shares reserved for
issuance under the Long-Term Incentive Plan, the Board of Directors adopted two
additional amendments to the Long-Term Incentive Plan. The first amendment
limits the number of shares that may be issued in any year as restricted stock
awards to ten percent of the number of shares available for grant. The second
amendment prohibits the repricing of any option or other award.
A summary of the Long-Term Incentive Plan is set forth below. The summary
is qualified in its entirety by reference to the full text of the Long-Term
Incentive Plan. Renal Care Group will provide, free of charge, a copy of the
Long-Term Incentive Plan to any stockholder upon written request to the
Secretary, Renal Care Group, 2100 West End Avenue, Suite 800, Nashville,
Tennessee 37203.
GENERAL
The purpose of the Long-Term Incentive Plan is to promote the success and
enhance the value of Renal Care Group by linking the personal interests of
employees, officers, consultants, and directors to the interests of the
stockholders, and by giving these employees, officers, consultants and directors
an incentive for outstanding performance. As of March 31, 2002, there were
approximately 300 persons eligible to participate in the Long-Term Incentive
Plan.
The Long-Term Incentive Plan authorizes Renal Care Group to grant awards to
employees, officers, consultants and directors of Renal Care Group or its
subsidiaries in the following forms: (i) options to purchase shares of common
stock which may be incentive stock options or nonqualified stock options; (ii)
stock appreciation rights ("SARs"); (iii) performance units; (iv) restricted
stock; (v) dividend equivalents; (vi) other stock-based awards; or (vii) any
other right or interest relating to common stock or cash. The maximum number of
shares of common stock with respect to one or more options and/or SARs that may
be granted during any one calendar year under the Long-Term Incentive Plan to
any one participant is 300,000, and the maximum aggregate number of shares of
common stock that may be issued as restricted stock awards in any year is ten
percent of the number of shares available for grant.
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Pursuant to Section 162(m) of the Code, Renal Care Group generally may not
deduct compensation in excess of $1 million paid to the President and the four
next most highly compensated executive officers of the Company. The Long-Term
Incentive Plan is designed to comply with Code Section 162(m) so that the grant
of options and SARs under the Long-Term Incentive Plan, and other awards, such
as performance units, that are conditioned on the performance goals described in
Section 13.13 of the Long-Term Incentive Plan, will be excluded from the
calculation of annual compensation for purposes of Code Section 162(m) and will
be fully deductible.
ADMINISTRATION
The Long-Term Incentive Plan is administered by the Stock Option
Subcommittee of the Compensation Committee of the Board of Directors of the
Company, or at the discretion of the Board from time to time, by the Board or
another committee. The committee or subcommittee administering the Long-Term
Incentive Plan (the "Committee") has the power, authority and discretion to:
- designate participants;
- determine the type or types of awards to be granted to each participant
and the number, terms and conditions thereof;
- establish, adopt or revise any rules and regulations as it deems
necessary or advisable to administer the Long-Term Incentive Plan; and
- make all other decisions and determinations that may be required under,
or as it deems necessary or advisable to administer, the Long-Term
Incentive Plan.
AWARDS
Stock Options. The Committee is authorized to grant options to
participants. The options may be incentive stock options or nonqualified stock
options. All options must be evidenced by a written award agreement between the
Company and the participant, which will include such provisions as may be
specified by the Committee. The exercise price of an option will be established
by the Committee, provided that the exercise price shall not be less than the
fair market value of the underlying common stock as of the date of the grant.
The terms of any incentive stock option must meet the requirements of Section
422 of the Code, including stockholder approval requirements.
Stock Appreciation Rights. The Committee may grant SARs to participants.
Upon the exercise of a SAR, the participant has the right to receive the excess,
if any, of: the fair market value of one share of common stock on the date of
exercise, over the grant price of the SAR as determined by the Committee. The
grant price of the SAR will not be less than the fair market value of one share
of common stock on the date of grant. All awards of SARs must be evidenced by an
award agreement, reflecting the terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of the SAR, as determined by the Committee at the time of grant.
Performance Units. The Committee may grant performance units to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
performance units granted to each participant and to set performance goals and
other terms or conditions to payment of the performance units in its discretion
which, depending on the extent to which they are met, will determine the number
and value of performance units that will be paid to the participant.
Restricted Stock Awards. The Committee may make awards of restricted stock
to participants, which will be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote restricted stock or the right to
receive dividends, if any, on the restricted stock). In 2002 the Board of
Directors amended the plan to limit the number of shares that may be issued as
restricted stock awards. From and after the year ending December 31, 2002, the
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Company may not make restricted stock awards in any year in excess of ten
percent of the number of shares available for grant.
Dividend Equivalents. The Committee is authorized to grant dividend
equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of common stock subject to an option award or SAR award, as
determined by the Committee. The Committee may provide that dividend equivalents
will be paid or distributed when accrued or be deemed to have been reinvested in
additional shares of common stock or otherwise reinvested.
Other Stock-Based Awards. The Committee may, subject to limitations under
applicable law, grant to participants such other awards that are payable in,
valued in whole or in part by reference to, or otherwise based on or related to
shares of common stock as deemed by the Committee to be consistent with the
purposes of the Long-Term Incentive Plan, including without limitation shares
common stock awarded purely as a bonus and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of common stock and awards valued by
reference to book value of shares of common stock or the value of securities of
or the performance of specified parents or subsidiaries of Renal Care Group. The
Committee will determine the terms and conditions of any such awards.
Performance Goals. The Committee may determine that any award will be
determined solely on the basis of (a) the achievement by Renal Care Group or a
parent or subsidiary company of a specified target return, or target growth in
return, on equity or assets, (b) Renal Care Group's, parent's or subsidiary's
stock price, (c) the Company's total shareholder return (stock price
appreciation plus reinvested dividends) relative to a defined comparison group
or target over a specific performance period, (d) the achievement by a business
unit of Renal Care Group, parent or subsidiary of a specified target, or target
growth in, net income or earnings per share, or (e) any combination of the goals
set forth in (a) through (d) above. If an award is made on such basis, the
Committee will establish goals prior to the beginning of the period for which
such performance goal relates (or such later date as may be permitted under Code
Section 162(m) or the regulations thereunder), and the Committee may reduce (but
not increase) the award, notwithstanding the achievement of a specified goal.
Any payment of an award granted with performance goals will be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied.
Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an incentive stock option, pursuant to a
qualified domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not result in accelerated taxation, (ii) does not cause
any option intended to be an incentive stock option to fail to be described in
Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking
into account any factors deemed relevant, including without limitation, state or
federal tax or securities laws applicable to transferable awards. A participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the participant and to receive any distribution with
respect to any award upon the participant's death.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding options, SARs, and other awards in the nature of
rights that may be exercised will become fully exercisable and all restrictions
on outstanding awards will lapse. Any options or SARs will thereafter continue
or lapse in accordance with the other provisions of the Long-Term Incentive Plan
and the award agreement. Unless otherwise provided in an Award Agreement
approved by the Committee, if a Change in Control (as defined in the Long-Term
Incentive Plan) occurs and is followed by a participant's termination of
employment (other than by reason of participant's death, disability, resignation
without good reason or termination for cause) within twelve months after the
Change in Control, then all of such participant's unexercised Awards (whether
vested or not vested) shall automatically vest and become unforfeitable and
shall be cashed out at the greater of (a) the highest closing price per share
paid for the purchase of common stock in a national securities market during the
90 day period ending on the date of the Change in Control (the "Change in
Control Price") or (b) the fair market value of the common stock on the date of
such termination. Upon a Change in Control
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that results directly or indirectly in the common stock (or the stock of any
successor received in exchange therefor) ceasing to be publicly traded in a
national securities market, all unexercised Awards (whether vested or not
vested) shall automatically vest and become unforfeitable and shall be cashed
out at the Change in Control Price. Upon a Change in Control, no action may be
taken that would adversely affect the rights of any participant or the operation
of the Long-Term Incentive Plan with respect to any Award to which a participant
may be entitled on or prior to the date, or as a result, of the Change in
Control. Under certain conditions, the Board of Directors may determine that
events otherwise constituting a Change in Control will not be considered a
Change in Control. Under certain conditions, the Board of Directors may
determine that events that do not otherwise constitute a Change in Control, but
which the Board of Directors deems to be, or to be reasonably likely to lead to,
an effective change in control, the Committee may in its discretion declare that
all unvested Awards will vest and become unforfeitable. In addition, the
Committee has the discretion at any time to accelerate vesting of a
participant's Awards.
TERMINATION AND AMENDMENT
The Board of Directors or the Committee may, at any time and from time to
time, terminate, amend or modify the Long-Term Incentive Plan without
stockholder approval. The Board of Directors or the Committee may, however,
condition any amendment on the approval of Renal Care Group's stockholders if
approval is necessary or advisable with respect to tax, securities or other
applicable laws, policies or regulations. No termination, amendment or
modification of the Long-Term Incentive Plan may adversely affect any award
previously granted under the Long-Term Incentive Plan, without the written
consent of the participant. In 2002, the Board of Directors amended the plan to
provide that the exercise price of any option or other Award granted under the
Long-Term Incentive Plan may not be reduced, and that the original term of any
option or other Award may not be extended.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either Renal Care Group or
the participant when the Company grants a nonqualified stock option with an
exercise price equal to at least the Fair Market Value on the date of grant.
However, the participant will realize ordinary income on the exercise of the
nonqualified stock option in an amount equal to the excess of the fair market
value of the common stock acquired upon the exercise of such option over the
exercise price, and Renal Care Group will receive a corresponding deduction
(subject to Code Section 162(m) limitations). The gain, if any, realized upon
the subsequent disposition by the participant of the common stock will
constitute short-term or long-term capital gain, depending on the participant's
holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either Renal Care Group or
the participant when the Company grants an incentive stock option or when the
participant exercises an incentive stock option, except that upon exercise of an
incentive stock option, the participant may be subject to alternative minimum
tax on certain items of tax preference. If the participant holds the shares of
common stock acquired upon exercise of an incentive stock option for the greater
of two years after the date the option was granted or one year after the
acquisition of such shares of common stock, the difference between the aggregate
option price and the amount realized upon disposition of the shares of common
stock will constitute long-term capital gain or loss, and Renal Care Group will
not be entitled to a federal income tax deduction. If the shares of common stock
are disposed of in a sale, exchange or other "disqualifying disposition" during
the required holding period, the participant will realize taxable ordinary
income in an amount equal to the excess of the fair market value of the common
stock purchased at the time of exercise over the aggregate option price, and
Renal Care Group will be entitled to a federal income tax deduction in that
amount (subject to Code Section 162(m) limitations).
SARs. Under present federal income tax regulations, a participant
receiving a SAR will not recognize income, and Renal Care Group will not be
allowed a tax deduction, at the time the award is granted. When a participant
exercises a SAR, the amount of cash and the fair market value of any shares of
common stock
8
received will be ordinary income to the participant, and Renal Care Group will
be allowed a deduction in that amount for federal income tax purposes (subject
to Code Section 162(m) limitations).
Performance Units. Under present federal income tax regulations, a
participant receiving performance units will not recognize income, and Renal
Care Group will not be allowed a tax deduction, at the time the award is
granted. When a participant receives payment of performance units, the amount of
cash and the fair market value of any shares of common stock received will be
ordinary income to the participant, and Renal Care Group will be allowed a
deduction in that amount for federal income tax purposes (subject to Code
Section 162(m) limitations).
Restricted Stock. Under present federal income tax regulations, and unless
the participant makes an election to accelerate recognition of the income to the
date of grant, a participant receiving a restricted stock award will not
recognize income, and Renal Care Group will not be allowed a tax deduction, at
the time the award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the common stock,
and Renal Care Group will be entitled to a tax deduction in that amount (subject
to Code Section 162(m) limitations).
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
The table below reflects awards granted during the fiscal year ended
December 31, 2001 to the persons and groups shown in the table below. Any future
awards under the Long-Term Incentive Plan will be made at the discretion of the
Committee or the Board, as the case may be. Consequently, Renal Care Group
cannot determine, with respect to (1) the executive officers of the Company, (2)
all current executive officers as a group, (3) all non-executive directors, as a
group, or (4) all eligible participants, including all current officers who are
not executive officers, as a group, either the benefits or amounts that will be
received in the future by such persons or groups pursuant to the Long-Term
Incentive Plan.
1999 LONG-TERM INCENTIVE PLAN
STOCK OPTION GRANTS(1) RESTRICTED STOCK AWARDS(3)
------------------------ --------------------------
DOLLAR VALUE NUMBER OF DOLLAR VALUE NUMBER OF
NAME AND POSITION OF OPTIONS OPTIONS OF AWARDS SHARES
----------------- ------------ --------- ------------- ----------
Sam A. Brooks........................... (2) 105,000 $560,200 20,000
Chairman of the Board, Chief Executive
Officer and President
Gary Brukardt........................... (2) 62,500 0 0
Executive Vice President and Chief
Operating Officer
Raymond Hakim, M.D., Ph.D. ............. (2) 62,500 0 0
Executive Vice President, Chief
Medical Officer
R. Dirk Allison......................... (2) 62,500 0 0
Executive Vice President, Chief
Financial Officer and Treasurer
All Executive Officers as a Group....... (2) 292,500 560,200 20,000
All Non-Executive Directors as a
Group................................. (2) 0 0 0
All Non-Executive Officer Employees as a
Group................................. (2) 747,625 0 0
---------------
(1) The options granted Mr. Brooks vest as to 33 1/3% of the shares as of the
grant date and an additional 33 1/3% of the shares will vest on each
successive anniversary date. The options granted to Messrs. Brukardt, Hakim
and Allison will vest as to 25% of the shares one year after the date of
grant and
9
an additional 25% on each successive anniversary date. The exercise price
per share for options granted to executive officers of the Company during
2001 was $28.02 per share.
(2) The dollar value of the above options is dependent on the difference between
the exercise price and the fair market value of the underlying shares on the
date of exercise. As of April 26, 2002 fair market value of the shares was
$34.58 based on the closing price of the Company's common stock on that day.
(3) The restrictions on the restricted stock granted Mr. Brooks lapse on August
2, 2006. The restricted stock was granted on August 2, 2001, and the closing
price for the common stock on that day was $28.01 per share.
REASONS FOR AMENDMENT OF THE LONG-TERM INCENTIVE PLAN
Renal Care Group believes that granting awards under the Long-Term
Incentive Plan is necessary to attract, retain, and motivate qualified employees
and consultants, including but not limited to individuals who are or will be
employed by Renal Care Group. Renal Care Group also grants awards to new
employees joining the Company whether through recruiting efforts or
acquisitions. Management believes that grants to new employees are an important
tool, enhancing Renal Care Group's ability to recruit new employees and to
acquire companies and to pursue its growth strategy, by aligning the interests
of these new employees with those of Renal Care Group's stockholders. In the
past, Renal Care Group has also granted options to physicians serving as medical
directors of some of its facilities. Of the approximately 6,436,000 options
currently outstanding under the Long-Term Incentive Plan and other plans,
medical directors hold approximately 850,000 options.
There are currently fewer than 240,000 shares available for grant under
Renal Care Group's Long-Term Incentive Plan and the 1996 Stock Option Plan,
which are the only plans under which Renal Care Group will make grants to
current officers, employees and consultants. Renal Care Group has determined not
to make future grants under option plans of acquired companies.
Renal Care Group believes it is important to make annual grants to current
officers and employees, so that they have a continuing incentive to improve
Renal Care Group's performance that vests over a period of time and mirrors the
results for the Renal Care Group's stockholders. To be able to continue to use
stock-based incentives to attract new employees, to incent and retain existing
employees, and to align the incentives of employees of acquired companies with
those of Renal Care Group's stockholders, the Board of Directors has recommended
an amendment to increase the number shares of common stock reserved for issuance
under the Long-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE LONG-TERM INCENTIVE PLAN.
SECURITY OWNERSHIP OF DIRECTORS,
OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of common stock held
beneficially, directly or indirectly, as of the Record Date by (a) each director
of Renal Care Group, (b) Renal Care Group's Chief Executive Officer and Renal
Care Group's three most highly compensated executive officers other than the
Chief Executive Officer (collectively, the "Named Executive Officers"), and (c)
all directors and executive officers of Renal Care Group as a group, together
with the percentage of the outstanding shares of common stock which such
ownership represents. As of the date of this Proxy Statement, to the knowledge
of the Company, there is no person or entity that owns more than five percent of
the outstanding common stock.
10
COMMON STOCK
BENEFICIAL OWNERSHIP(1)
------------------------
NAME NUMBER PERCENT
---- ----------- ---------
Sam A. Brooks(2)............................................ 988,684 2.0
Gary A. Brukardt(3)......................................... 399,826 *
Raymond Hakim, M.D., Ph.D.(4)............................... 366,686 *
R. Dirk Allison(5).......................................... 66,687 *
John D. Bower(6)............................................ 434,554 *
Joseph C. Hutts(7).......................................... 36,000 *
Harry R. Jacobson, M.D.(8).................................. 398,931 *
Kenneth E. Johnson, Jr., M.D.(9)............................ 257,350 *
William V. Lapham(10)....................................... 23,100 *
Thomas A. Lowery, M.D.(11).................................. 150,348 *
Stephen D. McMurray, M.D.(12)............................... 76,602 *
W. Tom Meredith, M.D.(13)................................... 140,939 *
All executive officers and directors as a group (12
persons)(14).............................................. 3,319,707 6.7
---------------
* Less than 1% of the outstanding common stock.
(1) Information relating to the beneficial ownership of common stock by the
above individuals is based upon information furnished by each such
individual using "beneficial ownership" concepts set forth in rules
promulgated by the Securities and Exchange Commission (the "Commission")
under Section 13(d) of the Exchange Act. Beneficial ownership includes
shares as to which such person or group, directly or indirectly, through
any contract, management, understanding, relationship, or otherwise has or
shares voting power and/or investment power as those terms are defined in
Rule 13d-3(a) of the Exchange Act. Except as indicated in other footnotes
to this table, each individual listed above possesses sole voting and
investment power with respect to all shares set forth by his or its name,
except to the extent such power is shared by a spouse under applicable law.
Any security that any person named above has the right to acquire within 60
days is deemed to be outstanding for purposes of calculating the ownership
percentage by the particular person or group, but are not deemed
outstanding for any other purpose.
(2) Includes 36,550 shares of restricted stock and 760,516 shares of common
stock that may be acquired upon exercise of options. Does not include
236,984 shares of common stock that may be acquired upon exercise of
options that are not exercisable within 60 days.
(3) Includes 390,250 shares of common stock that may be acquired upon exercise
of options and 6,525 shares of restricted stock. Does not include 212,250
shares of common stock that may be acquired upon exercise of options that
are not exercisable within 60 days.
(4) Includes 347,750 shares of common stock that may be acquired upon exercise
of options and 6,525 shares of restricted stock. Does not include 212,250
shares of common stock that may be acquired upon exercise of options that
are not exercisable within 60 days.
(5) Includes 66,250 shares of common stock that may be acquired upon exercise
of options. Does not include 226,250 shares of common stock that may be
acquired upon exercise of options that are not exercisable within 60 days.
(6) Includes 84,375 shares of common stock that may be acquired upon exercise
of options.
(7) Includes 36,000 shares of common stock that may be acquired upon exercise
of options.
(8) Includes 27,050 shares of restricted stock and 85,625 shares of common
stock that may be acquired upon exercise of options.
11
(9) Includes 234,907 shares of common stock owned by EVIG Konsten, L.P., an
Arizona limited partnership and 21,775 shares of common stock owned by The
Kenneth E. and Becky H. Johnson Foundation.
(10) Includes 22,500 shares of common stock that may be acquired upon exercise
of options.
(11) Includes 45,000 shares of common stock that may be acquired upon exercise
of options and 5,250 shares of restricted stock.
(12) Includes 18,300 shares of restricted stock. Does not include 27,000 shares
of common stock that may be acquired upon exercise of options that are held
by his spouse.
(13) Includes 5,625 shares of common stock that may be acquired upon exercise of
options.
(14) Includes 1,843,891 shares of common stock that may be acquired upon
exercise of options and 80,200 shares of restricted stock.
12
MANAGEMENT
The Named Executive Officers are listed in the table below. Biographical
information concerning Sam A. Brooks, who is also a director, is included under
Proposal 1 in this Proxy Statement. Biographical information concerning the
other Named Executive Officers is set forth below.
NAME AGE POSITION
---- --- --------
Sam A. Brooks......................... 63 Chairman of the Board, President,
Chief Executive Officer and Director
Gary A. Brukardt...................... 56 Executive Vice President, Chief
Operating Officer
Raymond Hakim, M.D., Ph.D. ........... 57 Executive Vice President and Chief
Medical Officer
R. Dirk Allison....................... 46 Executive Vice President, Chief
Financial Officer and Treasurer
Mr. Brukardt has been Executive Vice President and Chief Operating Officer
of Renal Care Group since 1996. From 1991 to 1996, Mr. Brukardt served as
Executive Vice President of Baptist Health Care Affiliates in Nashville,
Tennessee, where he was responsible for the development and operation of
physician practice management organizations and the management of four hospitals
and 22 outpatient facilities. In addition, from 1991 to 1996, Mr. Brukardt
served as Chairman and President of HealthNet Management, Inc., a managed care
company.
Dr. Hakim has been Executive Vice President and Chief Medical Officer of
Renal Care Group since 1995. He has published extensively on the adequacy of
dialysis and the clinical aspects of biocompatibility. From 1992 to 1995, Dr.
Hakim served as Medical Director for the Vanderbilt Dialysis Program. He served
as a member of the Medical Board of Vanderbilt University Medical Center in
1992, as Chairman of the Ambulatory Services Committee of Vanderbilt University
Medical Center in 1990 and 1991, and as Director, Clinical Nephrology of
Vanderbilt University Medical Center from 1987 to 1991. He received his M.S.
from Rensselaer Polytechnic Institute, his Ph.D. from Massachusetts Institute of
Technology and his M.D. from McGill University. Dr. Hakim performed his
residency at Royal Victoria Hospital and his renal fellowship at Brigham and
Women's Hospital.
Mr. Allison has been Executive Vice President and Chief Financial Officer
of Renal Care Group since 1999. From 1997 until 1999, Mr. Allison was President
and Chief Executive Officer of MedSynergies, Inc. a physician practice
management company specializing in eye care based in Dallas, Texas. From 1995
until 1997, Mr. Allison was President and Chief Executive Officer of Capstone
Pharmacy Services, Inc., a public institutional pharmacy company with more than
40 pharmacies. From 1993 until 1995, Mr. Allison was President and Chief
Executive Officer of PremierPharmacy, Inc. an institutional pharmacy company
that was sold to Capstone Pharmacy Services, Inc. From 1987 until 1993, Mr.
Allison was President and Chief Executive Officer of Allied Pharmacy Management,
Inc., a hospital pharmacy management company. In 1987, Mr. Allison was Director
of Internal Auditing for Wal-Mart Stores, Inc. Mr. Allison is a certified public
accountant and holds an MBA from the University of Dallas and a BBA from
Northeast Louisiana University.
EMPLOYMENT AGREEMENTS
Renal Care Group has entered into employment agreements with Messrs.
Brooks, Allison and Brukardt and Dr. Hakim, as well as some other key
associates. The terms of the employment agreements for Messrs. Brooks and
Brukardt and Dr. Hakim commenced on July 13, 2000, and the term of Mr. Allison's
commenced on October 15, 1999. Each of these employment agreements has a term of
three years and successive one-year renewal terms thereafter. Each of these
employment agreements contains restrictive covenants prohibiting the officer
from competing with Renal Care Group for a period of one year after the end of
the employment term, unless the employment agreement is terminated following a
change in control.
The annual salaries of the executive officers as set forth in the
employment agreements are $600,000, $250,000, $375,000, and $330,000 for Messrs.
Brooks, Allison and Brukardt and Dr. Hakim, respectively.
13
These salaries are subject to adjustment by the Compensation Committee, and
their annual salaries during 2001 were $600,000, $286,539, $380,000, and
$330,000 for Messrs. Brooks, Allison and Brukardt and Dr. Hakim, respectively.
Each executive officer is eligible under his employment agreement for bonuses at
the sole discretion of Renal Care Group.
The employment agreements of Messrs. Brooks, Allison and Brukardt and Dr.
Hakim, also provide for severance of (i) his salary (plus target bonus in the
case of Mr. Brooks) for 12 months if such officer is terminated without cause,
(ii) his salary for one month if the officer is terminated for cause, (iii) his
salary (plus target bonus) for 36 months if the officer is terminated within 12
months of a change in control of Renal Care Group either (A) without cause, or
(B) by resignation of the officer as a result of declining to accept
reassignment to a job that is not the equivalent of his then current position,
or (iv) his salary (plus target bonus) for 24 months if the officer resigns 12
months after a change in control of Renal Care Group. If any of the executive
officers receives severance that would result in the imposition of excise tax
under Section 4999 of the Code, he will be entitled to the amount described
above plus a gross-up payment, if necessary, to reimburse him for any such
excise tax plus all federal, state and local income and excise taxes imposed on
such gross-up payment. In addition, following a change in control of Renal Care
Group, if any of the above officers resigns for any reason or is terminated
without cause, the non-competition covenants set forth in his employment
agreement will become null and void.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual salaries paid to the Named
Executive Officers for the fiscal years ended December 31, 1999, 2000 and 2001.
LONG-TERM
COMPENSATION
-----------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
------------------- STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) SARS COMPENSATION
--------------------------- ---- -------- -------- ---------- ---------- ------------
Sam A. Brooks................ 2001 $600,000 $352,500 $560,200 105,000 $20,968(2)
Chairman of the Board and 2000 558,274 417,187 -- 225,000 20,968(2)
President 1999 445,016 323,750 113,096 230,000 --
Gary A. Brukardt............. 2001 380,000 142,500 -- 62,500 9,174(2)
Executive Vice President, 2000 366,543 206,250 -- 125,000 18,273(2)
Chief Operating Officer 1999 330,018 142,506 -- 140,000 --
Raymond Hakim, M.D., Ph.D. .. 2001 330,000 148,750 -- 62,500 --
Executive Vice President 2000 319,232 181,250 -- 125,000 3,074(2)
and Chief Medical Officer 1999 290,004 135,000 -- 140,000 --
R. Dirk Allison.............. 2001 286,539 93,750 -- 62,500 1,574(2)
Executive Vice President, 2000 250,000 31,678 -- 125,000 1,574(2)
Chief Financial Officer, 1999 48,077 -- -- 105,000 58,037(3)
and Treasurer
---------------
(1) Mr. Brooks was granted a restricted stock award of 20,000 shares on August
2, 2001. The value in the above table is based on a closing price of $28.01
on that date. The award contains restrictions that lapse on August 2, 2006.
Mr. Brooks was also granted a restricted stock award of 3,500 shares on
January 25, 1999. The value in the above table is based on a closing price
of $32.313 on that date. The award contains restrictions that lapse on
January 25, 2004. Mr. Brooks holds an aggregate of 36,550 shares of
restricted stock with an aggregate value of $900,584 as of their respective
dates of grant. Mr. Brukardt holds an aggregate of 6,525 shares of
restricted stock with an aggregate value of $113,644 as of the date of
grant. Dr. Hakim holds an aggregate of 6,525 shares of restricted stock with
an aggregate of $113,644 as of the date of grant. If dividends are declared
and paid on the Company's common stock, then dividends will be paid to the
holders of restricted stock.
14
(2) The amounts represent premiums paid by the Company in respect of life
insurance policies for the benefit of each Named Executive Officer.
(3) Relocation expenses.
OPTION GRANTS IN 2001
The following table is a summary of all stock options granted to the Named
Executive Officers during the year ended December 31, 2001. Individual grants
are listed separately for each Named Executive Officer. In addition, this table
shows the potential gain that could be realized if the fair market value of the
common stock were to appreciate at an annual rate of either 5% or 10% over the
option term.
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(3)
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------------------
NAME GRANTED YEAR ($/SHARE) DATE 5% 10%
---- ---------- ---------- ----------- ---------- ------------ ------------
Sam A. Brooks(1)............. 105,000 10.1% $28.02 8/2/11 $1,850,271 $4,688,950
Gary A. Brukardt(2).......... 62,500 6.0 $28.02 8/2/11 1,101,352 2,791,041
Raymond Hakim, M.D.,
Ph.D.(2)................... 62,500 6.0 $28.02 8/2/11 1,101,352 2,791,041
R. Dirk Allison(2)........... 62,500 6.0 $28.02 8/2/11 1,101,352 2,791,041
---------------
(1) Options vest as to 33 1/3% of the shares as of the grant date and an
additional 33 1/3% of the shares will vest on each successive anniversary
date.
(2) Options vest as to 25% of the shares one year after the date of grant and an
additional 25% on each successive anniversary date.
(3) The potential realizable value through the expiration date of the options
has been determined on the basis of the market price per share at the time
of grant compounded annually over the term of the option, net of the
exercise price. These values have been determined based upon assumed rates
of appreciation mandated by the Securities and Exchange Commission and are
not intended to forecast the possible future appreciation, if any, of the
price or value of the common stock.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END VALUES
Set forth below is information with respect to exercises of options by the
Named Executive Officers during 2001 pursuant to Renal Care Group's stock
incentive plans, and information with respect to unexercised options held by the
Named Executive Officers as of December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES HELD AT DECEMBER 31, 2001 AT DECEMBER 31, 2001(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Sam A. Brooks............. 500,000 $12,708,636 700,516 296,984 $9,482,983 $3,377,788
Gary A. Brukardt.......... 70,000 1,202,466 352,750 249,750 4,825,549 2,924,538
Raymond Hakim, M.D.,
Ph.D. .................. 80,000 2,190,786 325,250 234,750 6,029,467 2,773,038
R. Dirk Allison........... 0 0 66,250 226,250 1,046,688 2,853,438
---------------
(1) These amounts represent the market value of the underlying common stock on
the date of exercise, less the applicable exercise price.
(2) The market value of the common stock on the New York Stock Exchange was
$32.10 per share as of December 31, 2001.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
This report is submitted by Renal Care Group's Compensation Committee at
the direction of the Board of Directors. It provides information regarding the
compensation and benefits provided to Renal Care Group's Chief Executive Officer
and other executive officers. The Compensation Committee is responsible for all
decisions regarding compensation for Renal Care Group's executive officers. The
Compensation Committee is composed of four non-employee directors. Because the
Compensation Committee believes that each executive officer has the potential to
affect the short-term and long-term profitability of Renal Care Group, the
Committee places considerable importance on the task of creating and
implementing Renal Care Group's executive compensation program. During 1999 the
Board of Directors created the Stock Option Subcommittee of the Compensation
Committee. This subcommittee administers Renal Care Group's stock option and
incentive plans.
Renal Care Group's executive compensation program is focused on stockholder
value, the overall performance of Renal Care Group, the effect of the
executive's performance on the success of Renal Care Group and the individual
performance of the particular executive.
COMPENSATION PHILOSOPHY
The Compensation Committee's philosophy is to integrate the compensation of
Renal Care Group's executive officers with corporate performance. The
Compensation Committee's objectives are to measure executive performance against
short-term and long-term goals, reward performance, and recognize individual
initiative and achievements. The Compensation Committee is also focused on
assisting Renal Care Group in attracting, motivating, and retaining qualified
executives, and aligning the incentives of management with the interests of
stockholders. In administering the compensation policies and programs used by
the Compensation Committee and endorsed by the Board of Directors, the
Compensation Committee:
- recommends total compensation of executive officers in relation to Renal
Care Group's performance;
- aligns compensation amounts with comparable levels paid to executive
officers of companies comparable in size and performance to Renal Care
Group; and
- provides cash bonuses based upon a percentage of annual salary to
motivate and retain high quality executive officers.
The Stock Option Subcommittee considers and approves all grants of stock
options and restricted stock. Renal Care Group's compensation program currently
consists of base salary and annual incentive compensation in the form of cash
bonuses and options. In 2001, the Compensation Committee reviewed Renal Care
Group's executive compensation relative to executive compensation of peer
groups. Because Renal Care Group's compensation plan involves incentives that
are contingent upon Renal Care Group's performance and individual performance,
an executive officer's actual compensation level in any particular year may be
above or below that of similarly situated officers of competitors. The
Compensation Committee reviews each element of executive compensation annually.
The key components of Renal Care Group's executive compensation program are
described below.
BASE SALARY
The Compensation Committee reviews and approves an annual salary plan for
Renal Care Group's executive officers. The salary plan is developed by Renal
Care Group's Chief Executive Officer, who reviews it with the Compensation
Committee. The Compensation Committee reviews many subjective factors in
determining these salary plans, such as the executive officer's
responsibilities, the scope of the position, length of service, corporate and
individual performance, and salaries paid by other health care services
companies to officers in similar positions. While these subjective factors are
then integrated with objective factors, including Renal Care Group's net income,
earnings per share, return on equity and growth, the overall assessment is
16
primarily a subjective one that is intended to reflect the level of
responsibility and individual performance of the particular executive officer.
BONUSES
The Compensation Committee believes that a significant portion of the total
cash compensation for executive officers should be based on Renal Care Group's
achievement of specific performance criteria, including earnings per share,
clinical performance and individual performance. Executive officers of Renal
Care Group receive a cash bonus based on a percentage of annual base salary, if
Renal Care Group and the executive officer meet annual performance targets. The
performance targets are established and communicated at the beginning of each
year. The Compensation Committee includes clinical performance targets and
individual performance targets with earnings-based targets to determine bonuses
to the executive officers. The Compensation Committee believes Renal Care
Group's long-term success depends not only on earnings per share performance but
also on keeping Renal Care Group's patients healthy and on having the executive
officers take responsibility for meeting their personal goals, both of which may
not translate directly into improved annual financial performance. Bonuses for
executive officers can be as much as 112.5% of base salary in the case of the
CEO and 75% for Executive Vice Presidents. This means that a significant part of
each executive's cash compensation package is at risk.
LONG-TERM COMPONENT -- STOCK INCENTIVE PLANS
To date, Renal Care Group has relied primarily upon stock option and
restricted stock awards to provide long-term incentives for executives and to
align executives' incentives more closely with the interests of stockholders.
The Stock Option Subcommittee of the Compensation Committee continues to believe
that stock options and restricted stock awards have been and remain an excellent
vehicle for providing financial incentives for management. Renal Care Group's
stock incentive plans permit Renal Care Group to issue stock options and
restricted stock awards to officers, key employees, and consultants of Renal
Care Group. Subject to general limits prescribed by the stock incentive plans,
the Stock Option Subcommittee has the authority to determine the individuals to
whom stock options and restricted stock awards will be granted, the terms of the
options and restricted stock awards, and the number of shares subject to each
option or restricted stock award. The size of any particular stock option or
restricted stock award is based upon position and the executive's individual
performance during the related evaluation period. With respect to stock options,
because the exercise price of the options is the market price of stock on the
date of grant and the options generally vest over a period of time and carry a
ten-year life, employees benefit only if the value of Renal Care Group's common
stock increases. Thus, employees with stock options are rewarded for their
efforts to improve long-term stock market performance. In this way, the Stock
Option Subcommittee works to align the financial interests of management with
those of stockholders. For this reason, Renal Care Group uses stock options as
it's principal long-term incentive program.
Executive officers of Renal Care Group may also participate in Renal Care
Group's Employee Stock Purchase Plan (the "Stock Purchase Plan"). Executive
officers participate in the Stock Purchase Plan on the same terms as
non-executive employees who meet the applicable eligibility criteria, subject to
any legal limitations on the amounts that may be contributed or the benefits
that may be payable under the Stock Purchase Plan. All contributions to the
Stock Purchase Plan are made or invested in Renal Care Group's common stock.
These features are intended to align further the employees' and stockholders'
long-term financial interests.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's basis for compensation of Mr. Brooks, Renal
Care Group's Chief Executive Officer, is based on the compensation philosophy
discussed above. Mr. Brooks participates in the same executive compensation
plans available to the other executive officers. In 2001, the Compensation
Committee set Mr. Brooks' base salary at $600,000, which was the same as his
base salary in 2000. The Compensation Committee kept Mr. Brooks' base salary
flat in light of the Company's performance in 2000. The Stock Option
Subcommittee approved a grant of options to purchase 105,000 shares of common
stock
17
and a restricted stock award of 20,000 shares of common stock. The compensation
levels established for Mr. Brooks were in response to the Board's, the
Committee's and the Subcommittee's assessments of Renal Care Group's performance
and accomplishments in 2000 and 2001, as well as Mr. Brooks' position in Renal
Care Group and the nature of his responsibilities and contributions. The
Committee considered Mr. Brooks' performance in terms of Renal Care Group's
success in meeting its performance targets, from both an operational and a
financial standpoint, and in developing and executing its strategic plan. In
evaluating Mr. Brooks' compensation, the Committee also considered Renal Care
Group's performance relative to its peers and competitors in the health care
services industry.
FEDERAL INCOME TAX DEDUCTIBILITY LIMITATIONS
The Compensation Committee and the Stock Option Subcommittee intend to work
to structure future compensation so that executive compensation paid by Renal
Care Group is fully deductible in accordance with Section 162(m) of the Internal
Revenue Code. Section 162(m) generally disallows a tax deduction to public
companies for compensation over $1 million paid to certain executive officers
unless certain conditions are met. However, the Compensation Committee may, in a
particular case, decide to approve compensation that may prove not to be
deductible.
SUMMARY
The Compensation Committee believes that this mix of base salaries,
variable cash incentives and the potential for equity ownership in Renal Care
Group represents a balance that will motivate the management team to produce
strong returns for Renal Care Group's stockholders over the long term. The
Compensation Committee also believes this program strikes an appropriate balance
between the interests and needs of Renal Care Group in operating its business
and appropriate rewards based on stockholder value.
Submitted by the Compensation
Committee
Stephen D. McMurray, M.D., Chairman
Joseph C. Hutts
William V. Lapham
W. Tom Meredith, M.D.
18
STOCKHOLDER RETURN
PERFORMANCE GRAPH
The following is a comparative performance graph that compares the
percentage change of cumulative total stockholder return on Renal Care Group's
common stock with (a) the performance of a broad equity market indicator and (b)
the performance of a published industry index or peer group. The following graph
compares the percentage change of cumulative total stockholder return on Renal
Care Group's common stock with (1) the Standard & Poor's 500 Composite Index
(the "Broad Index") and (2) the Nasdaq Health Services Stocks, SIC Codes
8000-8099 (the "Industry Index"). The graph begins on January 1, 1997. For
purposes of preparing the graph, Renal Care Group assumed that an investment of
$100 was made on January 1, 1997 in each of Renal Care Group's common stock, the
Broad Index and the Industry Index and that all dividends, if any, were
reinvested at the time they were paid.
The comparison in the graph below is based on historical data and is not
intended to forecast the possible future performance of the common stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR RENAL CARE GROUP, INC.
PRODUCED ON 04/01/2002 INCLUDING DATA TO 12/31/2001
(PERFORMANCE GRAPH)
-----------------------------------------------------------------------------------------------------------
CRSP TOTAL RETURNS INDEX FOR: 12/1996 12/1997 12/1998 12/1999 12/2000 12/2001
-----------------------------------------------------------------------------------------------------------
Renal Care Group, Inc. 100.0 151.8 205.0 166.3 195.1 228.4
S&P 500 Stocks 100.0 133.5 172.2 208.5 190.0 167.6
Nasdaq Health Services
Stocks
SIC 8000 -- 8099 US &
Foreign 100.0 102.6 87.0 70.0 96.0 103.8
---------------
Source: Center for Research in Security Prices
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/1996.
19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of Renal Care Group's Compensation Committee are Joseph C.
Hutts, Stephen D. McMurray, M.D., W. Tom Meredith, M.D. and William V. Lapham.
Dr. McMurray is a member of Indiana Dialysis Management, a division of
Indiana Medical Associates, a 46-member multi-specialty practice group. Renal
Care Group entered into a Medical Director Agreement dated February 12, 1996
with the predecessor of that practice group. The Medical Director Agreement has
a term of seven years with successive renewal terms of three years each and
provides for medical director fees of $326,000 subject to agreed adjustments. In
2001, Renal Care Group paid Indiana Dialysis Management $500,000 under this
agreement.
Renal Care Group entered into an Independent Contractor Agreement with Dr.
McMurray, dated November 20, 1997, pursuant to which Dr. McMurray receives
$12,000 per month in connection with services provided to the Company. Dr.
McMurray received $144,000 under this agreement during 2001.
Barbara McMurray, Dr. McMurray's spouse, is an employee of Renal Care
Group. In 2001 Ms. McMurray received a base salary of $139,500.14 plus bonuses
of $22,281.75. Ms. McMurray serves as Vice President Operations Development.
During 2001, Renal Care Group and Indiana Dialysis Management formed two
joint ventures, each of which will own and operate one dialysis center. During
2001, neither center conducted operations. Indiana Dialysis Management owns a
40% interest in one of the joint ventures and 30% in the other. The agreements
for these joint ventures require all members to contribute in cash their share
of all capital (including working capital) to operate the business and provide
for distributions out of net cash flow strictly in accordance with the members'
interests. During 2001, Indiana Dialysis Management contributed $380,000 to the
capital of one of these two joint ventures and is obligated to contribute
$351,493 to the capital of the other. During 2001, the members of these joint
ventures received no distributions. The formation of these joint ventures was
reviewed by the Audit and Compliance Committee and was approved by the full
Board of Directors, with Dr. McMurray not taking part in the deliberations.
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee of the Board of Directors oversees Renal
Care Group's financial reporting process on behalf of the Board of Directors.
The Audit and Compliance committee operates under a written charter adopted by
the Board of Directors in 1999 and updated on November 7, 2000. This report
reviews the actions taken by the Audit and Compliance Committee with regard to
Renal Care Group's financial reporting process during 2001 and particularly with
regard to the Company's audited consolidated financial statements as of December
31, 2000 and 2001 and for the three years in the period ended December 31, 2001.
All members of the Audit and Compliance Committee are independent, as that
term is defined by Section 303.01(B)(2)(a) and (3) of the listing standards of
the New York Stock Exchange. None of the committee members is or has been an
officer or employee of Renal Care Group or any of its subsidiaries or has
engaged in any business transaction or has any business or family relationship
with Renal Care Group or any of its subsidiaries or affiliates that would cause
that member not to be considered independent.
Renal Care Group's management has the primary responsibility for the
company's financial statements and reporting process, including the systems of
internal controls. Ernst & Young LLP, Renal Care Group's independent auditors,
is responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States and issuing a report thereon. The Audit and Compliance
Committee monitors and oversees these processes and recommends annually to the
Board of Directors the accountants to serve as Renal Care Group's independent
auditors for the coming year.
The Audit and Compliance Committee has implemented procedures to guide its
activities during the course of each fiscal year. These procedures are designed
to allow the Committee to devote the attention that
20
it deems necessary or appropriate to fulfill its oversight responsibilities
under the Audit and Compliance Committee's charter. To carry out its
responsibilities, the Audit and Compliance Committee met four times during 2001.
In fulfilling its oversight responsibilities, the Audit and Compliance
Committee reviewed with management the audited financial statements to be
included in Renal Care Group's annual report on Form 10-K for 2001, including a
discussion of the quality (rather than just the acceptability) of the accounting
principles, the reasonableness of significant judgments, the identification and
application of significant accounting policies and the clarity of disclosures in
the financial statements. The Audit and Compliance Committee also reviewed with
Renal Care Group's independent auditors, Ernst & Young LLP, their judgments as
to the quality (rather than just the acceptability) of Renal Care Group's
accounting principles, the identification and application of significant
accounting policies and such other matters as are required to be discussed with
the Audit and Compliance Committee under Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended.
The Audit and Compliance Committee obtained from the independent auditors a
formal written statement describing all relationships between the auditors and
Renal Care Group that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees. The Audit and Compliance Committee discussed with the auditors any
relationships that may have an impact on the auditors' objectivity and
independence, and the Audit and Compliance Committee determined that the
auditors are independent. The Audit and Compliance Committee also considered
whether the provision of information technology services and other non-audit
services by Ernst & Young LLP is compatible with maintaining Ernst & Young's
independence.
Additionally, the Audit and Compliance Committee discussed with Renal Care
Group's internal and independent auditors the overall scope and plan for their
respective audits. The committee met with the internal and independent auditors,
with and without management present, to discuss the results of their
examinations, their evaluations of Renal Care Group's internal controls and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit and
Compliance Committee recommended to the Board of Directors that the audited
financial statements be included in Renal Care Group's annual report on Form
10-K for 2001 for filing with the Securities and Exchange Commission. The Audit
and Compliance Committee also recommended to the Board of Directors that the
Company retain Ernst & Young LLP as Renal Care Group's independent auditors for
2002.
This report of the audit committee does not constitute "soliciting
material" and should not be deemed to be "filed" with the Securities and
Exchange Commission or incorporated by reference into any other filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates this report by
reference in any of those filings.
Submitted by the Audit and Compliance
Committee:
William V. Lapham, Chairman
Joseph C. Hutts
Kenneth E. Johnson, Jr., M.D.
Thomas A. Lowery, M.D.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MEDICAL DIRECTOR ARRANGEMENTS
Dr. Lowery is a member of Tyler Nephrology Associates, P.A., a practice
group currently consisting of six nephrologists. Renal Care Group entered into a
Medical Director Agreement with that practice group dated February 12, 1996. The
Medical Director Agreement has a term of seven years with successive renewal
terms of three years each and provides for medical director fees of $392,000
subject to agreed adjustments. During 2001, Renal Care Group paid Tyler
Nephrology Associates, P.A. $428,000 under this agreement.
Dr. Johnson is a member of Arizona Nephrology Associates, PLC, a practice
group consisting of 16 nephrologists. Renal Care Group entered into a Medical
Director Services Agreement with several additional nephrologists dated
September 30, 1996. The Medical Director Services Agreement has a term of seven
years with successive renewal terms of three years each and currently provides
for medical director fees of $840,000 per year. During 2001, Renal Care Group
paid Arizona Nephrology Associates $1,000,000 in the aggregate under this
Agreement.
Renal Care Group believes that each of the foregoing agreements was
obtained on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. The terms of each such Medical Director Agreement
were determined by arm's-length negotiations between Renal Care Group and the
practices generally before the practice became affiliated with Renal Care Group
and before the director became a director. See "Compensation Committee
Interlocks and Insider Participation" for a discussion of the terms of Medical
Director Agreement between the Company and Dr. McMurray's practice group.
LEASES OF REAL PROPERTY
Pursuant to a lease agreement dated February 12, 1996, Renal Care Group
leases from an affiliate of Dr. Bower approximately 30,000 square feet of
administrative and other space used by the Company for the operation of centers
in Mississippi. The lease is a triple net lease at a rate of approximately $8.50
per square foot per year, or a gross payment of approximately $21,300 per month.
The lease contains an initial term of ten years and two five-year renewal
options. During 2001, Renal Care Group paid the affiliate of Dr. Bower
approximately $256,000 under this lease.
Dr. Lowery owns a 37% interest in real property and improvements used in
the operation of two of Renal Care Group's dialysis centers. Pursuant to lease
agreements dated February 12, 1996, Renal Care Group leases centers located in
Carthage and Tyler, Texas. Each lease is a triple net lease with rent payable at
$12.00 per square foot per year. The Tyler lease requires a gross payment of
$20,092 per month, and the Carthage lease requires a gross payment of $2,479 per
month. Each lease has an initial term of ten years with two additional five-year
renewal options. The amount of rent is subject to a consumer price index
adjustment after the initial five-year period. In addition, Renal Care Group has
subleased back to Tyler Nephrology Associates, Inc. a portion of the Tyler
center on terms substantially similar to those contained in the lease of such
center to the Company. During 2001, Renal Care Group paid approximately $259,000
in rent under these leases net of amounts attributable to the sublease.
Renal Care Group believes that each of the foregoing Leases was obtained on
terms no less favorable to Renal Care Group than could be obtained from
unaffiliated third parties.
RELATIONSHIP WITH VANDERBILT UNIVERSITY
Dr. Jacobson currently serves as Vice Chancellor of Health Affairs at
Vanderbilt University and as Professor of Medicine in the Division of
Nephrology, Department of Medicine, Vanderbilt University. Renal Care Group is a
party to a Dialysis Center Management Agreement with Vanderbilt University
Medical Center pursuant to which Renal Care Group manages the outpatient
dialysis center of Vanderbilt University Medical Center. Renal Care Group
received approximately $519,000 pursuant to this agreement for the year ended
December 31, 2001. This agreement has a one-year term that is automatically
renewed each year unless either party cancels the agreement at least 90 days
prior to the end of the current term.
22
COMPANY POLICY
Renal Care Group's policy is that transactions with affiliates (other than
those entered into in connection with its formation) must be reviewed by the
Audit and Compliance Committee and approved by a majority of the disinterested
members of the Board of Directors and will be made on terms no less favorable to
Renal Care Group than could be obtained from unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Exchange Act, Renal Care Group's directors,
executive officers and any person holding more than ten percent of the common
stock are required to report their ownership of the common stock and any changes
in that ownership to the SEC and the Nasdaq Stock Market's National Market.
These persons are also required by SEC regulations to furnish copies of these
reports to Renal Care Group. Specific due dates for these reports have been
established, and Renal Care Group must report any failure to make required
filings in 2001 in this Proxy Statement. Based solely on a review of the reports
furnished to Renal Care Group or written representations from the Company's
directors, officers, and ten percent beneficial owners, all reporting
requirements were satisfied, with the exception of a Form 4 that was filed late
by Raymond M. Hakim in connection with his exercise of options in May 2001.
AUDITORS
Ernst & Young LLP has served as Renal Care Group's independent public
accountants since its inception and is expected to be selected to serve in that
capacity for the fiscal year ended December 31, 2002. A representative of Ernst
& Young LLP will attend the 2002 Annual Meeting to respond to questions from
stockholders and to make a statement if necessary.
AUDIT FEES
The aggregate fees billed by Ernst & Young LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2001, and the reviews of the financial statements
included in the Company's quarterly reports on Form 10-Q for that fiscal year
were $177,500. Audit-related fees were $67,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Ernst & Young LLP for financial information
systems design and implementation services during the fiscal year ended December
31, 2001.
ALL OTHER FEES
The aggregate fees billed by Ernst & Young LLP for professional services
rendered during the fiscal year ended December 31, 2001, other than as stated
above under the captions Audit Fees and Financial Information Systems Design and
Implementation Fees, were $908,941. These fees primarily consist of tax
compliance services, assistance with an IRS examination and state and local tax
planning.
AUDIT COMMITTEE REVIEW
Renal Care Group's Audit and Compliance Committee has reviewed the services
rendered and the fees billed by Ernst & Young LLP for the fiscal year ended
December 31, 2001. The Audit and Compliance Committee determined that the
services rendered and the fees billed last year that were not related to the
audit of Renal Care Group's financial statements are compatible with the
independence of Ernst & Young LLP as the Company's independent accountants.
23
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Stockholders wishing to submit a proposal for action at Renal Care Group's
2003 annual meeting of stockholders and to have the proposal included in Renal
Care Group's proxy materials relating to that meeting, must deliver their
proposals to Renal Care Group at its principal offices not later than December
31, 2002. Additional legal requirements apply to any inclusion of stockholder
proposals in proxy materials of Renal Care Group.
ANNUAL REPORTS
Renal Care Group's 2001 Annual Report to stockholders is being mailed to
stockholders with this Proxy Statement. The Annual Report is not part of the
proxy soliciting material.
A copy of Renal Care Group's annual report on Form 10-K for the fiscal year
ended December 31, 2001, as filed with the Securities and Exchange Commission,
may be obtained by any stockholder, free of charge, upon written request to the
Secretary, Renal Care Group, Inc., 2100 West End Avenue, Suite 800, Nashville,
Tennessee 37203.
OTHER MATTERS
Management knows of no other matters to be presented and acted upon at the
Annual Meeting other than those set forth in the accompanying notice. However,
if any other matters requiring a vote of the stockholders should properly come
before the 2002 Annual Meeting or any adjournment thereof, each proxy will be
voted with respect thereto in accordance with the best judgment of the proxy
holder.
24
RENAL CARE GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sam A. Brooks, Jr. and R. Dirk Allison as
Proxies, each with power to appoint his substitute, and hereby authorizes either
one or both of them to represent and to vote, as designated below, all the
shares of common stock of Renal Care Group, Inc. held of record by the
undersigned on April 8, 2002, at the 2002 Annual Meeting of Stockholders to be
held on June 5, 2002.
The Board of Directors recommends a vote "FOR" all of the following
proposals:
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for the nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
--------------------------------------------------------------------------------
(Sam A. Brooks, Jr. and Kenneth E. Johnson, Jr., M.D. as Class III Directors)
2. PROPOSAL TO: approve an amendment to the Renal Care Group, Inc. 1999
Long-Term Incentive Plan that would increase the number of shares available
for issuance from 3,500,000 to 5,500,000; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be dated and signed on reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES FOR DIRECTOR LISTED ABOVE AND FOR PROPOSAL 2 ABOVE.
Please sign exactly as name
appears below. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated: , 2002
------------------------------
--------------------------------------
Signature
--------------------------------------
Signature if held jointly