Lifepoint Hospitals, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o |
|
Preliminary Proxy Statement. |
o |
|
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)). |
þ |
|
Definitive Proxy Statement. |
o |
|
Definitive Additional Materials. |
o |
|
Soliciting Material Pursuant to §240.14a-12. |
LIFEPOINT HOSPITALS, 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):
þ |
|
No fee required. |
o |
|
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: |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Aggregate number of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Per unit 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): |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials. |
|
o |
|
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: |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Form, Schedule or Registration Statement No.: |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Filing Party: |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Date Filed: |
|
|
|
|
|
|
|
|
|
LifePoint Hospitals, Inc.
Notice of 2007
Annual Meeting of Stockholders
and Proxy Statement
103 Powell Court, Suite 200
Brentwood, Tennessee 37027
April 2, 2007
Dear Stockholders:
It is my pleasure to invite you to attend the 2007 Annual Meeting of Stockholders (the Annual
Meeting) of LifePoint Hospitals, Inc. (the Company), which is to be held on Tuesday, May 8, 2007
at 3:00 p.m. local time at 511 Union Street, Suite 2700, Nashville, Tennessee 37219. The following
pages contain the formal notice of the Annual Meeting and the Companys Proxy Statement which
describe the specific business to be considered and voted upon at the Annual Meeting.
The Annual Meeting will be simultaneously broadcast over the Internet. The listen-only webcast
of the Annual Meeting will be available on the Investor Information News Releases section of
the Companys website, www.lifepointhospitals.com, and will be available for replay for 30 days
after the Annual Meeting.
It is important that your shares be represented at the Annual Meeting. Whether or not you
expect to attend in person, the Company would greatly appreciate your efforts to return the proxy
card in the enclosed postage-paid envelope as soon as possible. If you decide to attend the Annual
Meeting, you may withdraw your proxy should you wish to vote in person.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
WILLIAM F. CARPENTER III
President and Chief Executive Officer
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
|
|
|
DATE AND TIME:
|
|
Tuesday, May 8, 2007 at 3:00 p.m. local time |
|
|
|
PLACE:
|
|
511 Union Street, Suite 2700, Nashville, Tennessee 37219 |
|
|
|
WEBCAST:
|
|
You can access the live listen-only webcast of the Annual Meeting on our website at
www.lifepointhospitals.com in the Investor Information News Releases section. |
|
|
|
ITEMS OF BUSINESS:
|
|
Elect two nominees as Class II directors of the Company; |
|
|
|
|
|
Ratify the selection of Ernst & Young LLP as the Companys independent
registered public accounting firm for 2007; |
|
|
|
|
|
Consider a non-binding stockholder proposal regarding declassification of
the Companys Board of Directors, if presented at the Annual Meeting; and |
|
|
|
|
|
Transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof. |
|
|
|
|
|
The enclosed Proxy Statement contains more information regarding
matters to be voted on at the Annual Meeting. Please read the Proxy
Statement carefully. |
|
|
|
WHO MAY VOTE:
|
|
You can vote if you were a stockholder of record at the
close of business on March 16, 2007. Your shares can be
voted at the meeting only if you are present or represented
by a valid proxy. |
|
|
|
PROXY VOTING:
|
|
Your vote is important. Please vote as soon as possible in
one of these ways, even if you plan to attend the meeting: |
|
|
|
|
|
By Internet visit the website on the proxy card or in your
e-mail notice; |
|
|
|
|
|
By Telephone use the toll-free number on the proxy card;
or |
|
|
|
|
|
By Mail mark, sign, date and promptly return the enclosed
proxy card in the postage-paid envelope. |
|
|
|
|
|
You may also submit a ballot at the Annual Meeting on May 8, 2007. |
|
|
|
ADMISSION:
|
|
Stockholders who owned the Companys common stock as of the record date will be admitted to the Annual Meeting with
verification of stock ownership, such as your account statement. |
By Order of the Board of Directors of the Company,
PAUL D. GILBERT
Senior Vice President, General Counsel and Secretary;
Corporate Governance Officer
April 2, 2007
TABLE OF CONTENTS
|
|
|
|
|
QUESTIONS AND ANSWERS ABOUT VOTING AND THE ANNUAL MEETING |
|
|
1 |
|
|
|
|
|
|
GOVERNANCE OF THE COMPANY AND PRACTICES OF THE BOARD OF DIRECTORS |
|
|
6 |
|
Corporate Governance Philosophy |
|
|
6 |
|
Standards of Independence for the Companys Board of Directors |
|
|
6 |
|
Independence of Directors |
|
|
6 |
|
Independence of Committee Members |
|
|
6 |
|
Certain Relationships and Related Transactions |
|
|
7 |
|
Director Nomination Process |
|
|
7 |
|
Director Attendance at Board, Committee and Annual Meetings |
|
|
8 |
|
Executive Sessions of the Board |
|
|
8 |
|
Committees of the Board of Directors |
|
|
8 |
|
Compensation Committee Interlocks and Insider Participation |
|
|
10 |
|
Stockholder Communication with the Board of Directors |
|
|
10 |
|
|
|
|
|
|
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE REPORT |
|
|
11 |
|
|
|
|
|
|
AUDIT AND COMPLIANCE COMMITTEE REPORT |
|
|
13 |
|
|
|
|
|
|
FEES AND SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
|
16 |
|
Fees Paid to the Independent Registered Public Accounting Firm |
|
|
16 |
|
Pre-approval of Services Performed by the Independent Registered Public Accounting Firm |
|
|
16 |
|
|
|
|
|
|
COMPENSATION COMMITTEE REPORT |
|
|
17 |
|
|
|
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS |
|
|
18 |
|
Overview |
|
|
18 |
|
Process |
|
|
20 |
|
Components of Compensation |
|
|
21 |
|
Compensation of the Individual Named Executive Officers |
|
|
24 |
|
Conclusion |
|
|
26 |
|
|
|
|
|
|
COMPENSATION OF EXECUTIVE OFFICERS |
|
|
27 |
|
Executive Officers of the Company |
|
|
27 |
|
Summary Compensation Table |
|
|
28 |
|
Grants of Plan-Based Awards |
|
|
31 |
|
Outstanding Equity Awards at Fiscal Year-End |
|
|
32 |
|
Option Exercises and Stock Vested |
|
|
33 |
|
Potential Payments upon Termination or Change-in-Control |
|
|
33 |
|
|
|
|
|
|
COMPENSATION OF DIRECTORS |
|
|
38 |
|
|
|
|
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
|
|
41 |
|
|
|
|
|
|
PROPOSAL 1: ELECTION OF DIRECTORS |
|
|
44 |
|
|
|
|
|
|
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
|
47 |
|
Required Vote |
|
|
47 |
|
|
|
|
|
|
PROPOSAL 3: NON-BINDING STOCKHOLDER PROPOSAL REGARDING DECLASSIFICATION OF THE COMPANYS BOARD OF DIRECTORS |
|
|
48 |
|
Stockholder Proposal |
|
|
48 |
|
Supporting Statement |
|
|
48 |
|
Statement in Opposition to Non-Binding Stockholder Proposal |
|
|
48 |
|
|
|
|
|
|
GENERAL INFORMATION |
|
|
50 |
|
Section 16(a) Beneficial Ownership Reporting Compliance |
|
|
50 |
|
Stockholder Nominations and Proposals for the 2008 Proxy Statement |
|
|
50 |
|
Other Business for Presentation at the 2008 Annual Meeting |
|
|
50 |
|
Other Available Information |
|
|
50 |
|
i
PROXY STATEMENT
QUESTIONS AND ANSWERS ABOUT VOTING AND THE ANNUAL MEETING
What is the purpose of this Proxy Statement?
This Proxy Statement is furnished to the holders of common stock (Common Stock) of LifePoint
Hospitals, Inc. (the Company) in connection with the solicitation by the Board of Directors of
the Company of proxies to be voted at the Annual Meeting to be held on Tuesday, May 8, 2007 at 3:00
p.m. local time at 511 Union Street, Suite 2700, Nashville, Tennessee 37219, and at any
adjournments or postponements thereof.
This Proxy Statement and the accompanying proxy card are first being mailed to Company
stockholders on or about April 2, 2007.
Who is entitled to vote on the matters discussed in the Proxy Statement?
You are entitled to vote if you were a stockholder of record as of the close of business on
March 16, 2007. On such date, there were 57,369,518 shares of Common Stock outstanding. Your
shares can be voted at the meeting only if you are present or represented by a valid proxy.
What proposals will require my vote?
You are being asked to vote on the following:
|
|
|
the election of two nominees as Class II directors of the Company (Proposal 1); |
|
|
|
|
the ratification of the selection of Ernst & Young LLP as the Companys independent
registered public accounting firm for 2007 (Proposal 2); |
|
|
|
|
a non-binding stockholder proposal regarding declassification of the Companys
Board of Directors (Proposal 3); and |
|
|
|
|
any other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof. |
How does the Board of Directors recommend that I vote?
The Board recommends that you vote:
|
|
|
FOR the election of the two nominees nominated by the Board of Directors
as Class II directors of the Company (Proposal 1); |
|
|
|
|
FOR the ratification of the selection of Ernst & Young LLP as the Companys
independent registered public accounting firm for 2007 (Proposal 2); and |
|
|
|
|
AGAINST the non-binding stockholder proposal regarding declassification of the
Companys Board of Directors (Proposal 3). |
How can I vote?
You can vote prior to the meeting by proxy using the Internet, by telephone or by mail, as
discussed below. You can also vote in person by completing a ballot at the Annual Meeting. Even if
you plan to attend the meeting, we encourage you to vote your shares as soon as possible by proxy.
How do I vote by proxy?
Please follow the instructions on the enclosed proxy card.
Vote by Internet: You can vote your shares using the Internet. With the enclosed proxy card in
hand, go to the website indicated on the proxy card and follow the instructions. Internet voting is
available 24 hours a day, seven days a week until the date set forth on your proxy card. You will
be given the opportunity to confirm that your instructions have been properly recorded. If you vote
on the Internet, you do NOT need to return your proxy card.
Vote by Telephone: You can vote your shares by telephone if you have a touch-tone phone. With
the enclosed proxy card in hand, call the toll-free telephone number shown on the proxy card and
follow the
1
instructions. Telephone voting is available 24 hours a day, seven days a week until the
date set forth on your proxy card. Easy-to-follow voice prompts allow you to vote your shares and
confirm that your instructions have been properly recorded. If you vote by telephone, you do NOT
need to return your proxy card.
Vote by Mail: If you prefer to vote by mail, mark the enclosed proxy card, date and sign it,
and return it in the postage-paid envelope provided. If you sign the proxy card but do not specify
how you want your shares to be voted, your shares will be voted by the proxy designee(s) selected
by the Company in favor of the election of all of the director nominees nominated by the Board of
Directors and in accordance with the directors recommendations on the other proposals listed on
the proxy card. All properly executed proxy cards received before the polls are closed at the
Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance
with the instructions indicated by those proxy cards.
If you are a current or former employee of the Company participating in the LifePoint
Hospitals, Inc. Retirement Plan (the Retirement Plan), please refer to Can I vote the shares I
own under the Retirement Plan? on page 3 for a discussion regarding the voting of such shares.
If you hold your shares of Common Stock in street name (that is, you hold your shares
through a broker, bank or other nominee), your ability to vote by telephone or the Internet depends
on the voting processes of the broker, bank or other nominee. Please carefully follow the
instructions provided by your broker, bank or nominee with or on the voting instruction form or
proxy card.
Can I change my mind after I vote?
If you vote by proxy, you can revoke that proxy at any time before it is voted at the meeting.
You can do this in any of the following ways:
|
|
|
vote again on the Internet or by telephone prior to the meeting using the
instructions on your proxy card; |
|
|
|
|
deliver a written notice of the revocation to the Corporate Secretary of the
Company at 103 Powell Court, Suite 200, Brentwood, Tennessee 37027 prior to the
meeting and submit a valid proxy with a later date; or |
|
|
|
|
attend the meeting in person and vote in person by written ballot. |
If you hold your shares of Common Stock in street name, you must follow the instructions
provided by your broker, bank or nominee to change your vote.
How will a proposal or other matter that was not included in the Proxy Statement be handled for
voting purposes if it comes up at the Annual Meeting?
If any matter that is not described in this Proxy Statement should properly come before the
meeting, the proxy designee(s) selected by the Company (as set forth on the proxy card) will vote
all shares of Common Stock represented by proxy in accordance with their best judgment. At the time
of the printing of this Proxy Statement, we were not aware of any other matters that might be
presented for stockholder action at the Annual Meeting.
What constitutes a quorum for the Annual Meeting?
A majority of the shares of Common Stock entitled to vote, represented in person or by proxy,
is required to constitute a quorum. If a quorum is not present at the time of the Annual Meeting,
the stockholders entitled to vote, present in person or represented by proxy, shall have the power
to adjourn the Annual Meeting until a quorum shall be present or represented by proxy. The Annual
Meeting may be adjourned from time to time, whether or not a quorum is present, by the affirmative
vote of a majority of the votes present and entitled to be cast at the Annual Meeting, by the
officer of the Company presiding over the Annual Meeting or by the Board of Directors.
What vote is required to approve each proposal?
Election of Directors: If a quorum is present, directors are elected by a plurality of the
votes cast by the shares of Common Stock entitled to vote at the Annual Meeting. The Companys
amended and restated certificate of incorporation (the Certificate of Incorporation) does not
provide for cumulative voting and, accordingly, the stockholders do not have cumulative voting
rights with respect to the election of directors. Consequently, each
stockholder may cast one vote per share of Common Stock held of record with respect to each
nominee. Unless a proxy specifies otherwise, the persons named in the proxy will vote the shares
covered thereby FOR the nominees
2
designated by the Board of Directors. Should any nominee become
unavailable for election, an event not now anticipated, shares covered by a proxy will be voted for
a substitute nominee recommended by the Corporate Governance and Nominating Committee and selected
by the current Board of Directors.
Ratification of the Selection of the Independent Registered Public Accounting Firm:
Stockholder ratification of the Audit and Compliance Committees selection of Ernst & Young LLP as
our independent registered public accounting firm is not required by the Second Amended and
Restated By-Laws of the Company (the By-Laws) or otherwise; however, the Board of Directors has
elected to submit the selection of Ernst & Young LLP to the Companys stockholders for
ratification. If a quorum is present, approval of this proposal requires the affirmative vote of a
majority of the shares of Common Stock present, in person or represented by proxy, at the Annual
Meeting and entitled to vote.
Non-Binding Stockholder Proposal Regarding Declassification of the Companys Board of
Directors: If a quorum is present, the By-Laws provide that the affirmative vote of the holders of
a majority of the voting power of the issued and outstanding shares of our Common Stock entitled to
vote, whether present in person, or represented by proxy, shall be required to approve this
proposal.
How will voting on any other business be conducted?
We are not aware of any business to be conducted at the Annual Meeting other than the matters
described in this Proxy Statement. If any other business is properly brought before the meeting,
your signed proxy card gives authority to William F. Carpenter III, our President and Chief
Executive Officer (the CEO), and Paul D. Gilbert, our Senior Vice President, General Counsel and
Secretary, or either of them, with full power of substitution, to vote on such matters at their
discretion. All such other matters properly brought before the meeting shall be approved upon the
affirmative vote of a majority of the shares of Common Stock entitled to vote at the Annual
Meeting.
How many votes per share do I have?
Each share of the Common Stock represented at the Annual Meeting is entitled to one vote on
each matter properly brought before the meeting. All shares entitled to vote and represented by
properly executed proxies received before the polls are closed at the Annual Meeting, and not
revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions
indicated by those proxies.
Can I vote the shares I own under the Retirement Plan?
In accordance with the Retirement Plan, the shares held under that plan are voted at the
direction of our Retirement Plan Committee, which is made up of certain members of our management.
Even though participants in the Retirement Plan receive this Proxy Statement, the Retirement Plan
Committee, and not individual participants, will vote shares held under the Retirement Plan.
What is the difference between a registered stockholder and a beneficial holder of shares?
If your Common Stock is registered directly in your name with our transfer agent, National
City Bank, N.A., you are considered a registered stockholder with respect to those shares. If
this is the case, the proxy materials have been sent or provided directly to you by the Company.
If your Common Stock is held in a stock brokerage account or by a bank or other nominee, you
are considered the beneficial holder of the shares held for you in what is known as street
name. If this is the case, the proxy materials have been forwarded to you by your brokerage firm,
bank or other nominee, or their agent which is considered the stockholder of record with respect to
these shares. As the beneficial holder, you have the right to direct your broker, bank or other
nominee how to vote your shares by using the voting instruction form or proxy card included in the
proxy materials, or by voting via telephone or the Internet. Follow the voting instructions
provided by your brokerage firm, bank or other nominee, or their agent.
How are my shares voted if I am a beneficial holder and I do not return voting instructions?
Your shares may be voted if they are held in the name of a brokerage firm, even if you do not
provide the brokerage firm with voting instructions. Brokerage firms have the authority, under the
rules of the New York Stock Exchange, to vote shares on certain routine matters for which their
customers do not provide voting instructions by the tenth day before the meeting. The election of
directors and the ratification of the selection of Ernst & Young,
LLP as the independent registered public accounting firm of the Company are considered routine
matters, and the non-binding stockholder proposal regarding declassification of the Companys Board
of Directors will not be
3
considered a routine matter. When a proposal is not a routine matter and
the brokerage firm has not received voting instructions from the beneficial holder of the shares
with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This
event is called a broker non-vote. In tabulating voting for the election of directors, which is
determined based on the plurality of the votes cast, shares that are subject to broker non-votes
will not be considered as voted for any nominee or withheld. Because ratification of the selection
of Ernst & Young, LLP as our independent registered public accounting firm and approval of the
non-binding stockholder proposal will be decided by the affirmative vote of a majority of the
shares of Common Stock present at the meeting and entitled to vote, broker non-votes on either of
these proposals will have the effect of a vote against these proposals at the Annual Meeting,
assuming that a quorum is obtained.
What happens if I abstain from voting?
If your shares are represented at the Annual Meeting, in person or by proxy, but you abstain
from voting on a matter, or include instructions in your proxy to abstain from voting on a matter,
your shares will be counted for the purpose of determining if a quorum is present. If you abstain
from voting on the election of directors, your abstention will have no effect on the outcome. If
you abstain from voting on the ratification of Ernst & Young LLP as our independent registered
public accounting firm, your abstention will have the same effect as a vote against the proposal.
If you abstain from voting on the non-binding stockholder proposal, your abstention will have the
same effect as a vote against the proposal.
What do I need to do if I want to attend the Annual Meeting?
You do not need to make a reservation to attend the Annual Meeting. Please note, however, that
you will need to demonstrate that you are a Company stockholder to be admitted to the meeting. If
you plan to attend the Annual Meeting, you must hold your shares of Common Stock in your own name
or bring a copy of a brokerage statement reflecting your ownership of our Common Stock as of the
record date, and you must bring a form of personal photo identification with you in order to be
admitted. We reserve the right to refuse admittance to anyone without proper proof of share
ownership and without proper photo identification.
Stockholders of record can vote in person at the Annual Meeting. If you are not a stockholder
of record, you must obtain a proxy, executed in your favor, from the record holder of your shares
of Common Stock to be able to vote in person at the Annual Meeting.
How can I participate if I am unable to attend the Annual Meeting?
If you are unable to attend the Annual Meeting in person, we invite you to listen to the live
webcast of the Annual Meeting on our website at www.lifepointhospitals.com in the Investor
Information News Releases section. The live broadcast will begin at 3:00 p.m., Central Time, on
May 8, 2007 and a 30-day online replay will be available approximately one hour following the
conclusion of the live broadcast.
What is householding and how does it affect me?
Householding is a program, approved by the Securities and Exchange Commission (the SEC),
that permits companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for
annual reports and proxy statements sent to multiple stockholders of record who have the same
address by delivering a single annual report and proxy statement to that address. Householding is
designed to reduce a companys printing costs and postage fees. Brokers with account holders who
are stockholders of the Company may be householding the Companys proxy materials. If your
household participates in the householding program, you will receive an envelope containing one set
of proxy materials and a separate proxy card for each stockholder account in the household. Please
vote all proxy cards enclosed in the package.
If you are a beneficial holder, you can request information about householding from your
broker, bank or other nominee.
4
What does it mean if I receive more than one package of proxy materials?
If you receive more than one set of stockholder proxy materials, this means that you have
multiple accounts holding the Common Stock with brokers and/or our transfer agent. Please vote all
of your shares by voting the proxy card included in each package. Additionally, to avoid receiving
multiple sets of materials in the future, we
recommend that you contact your broker and/or our transfer agent to consolidate as many
accounts as possible under the same name and address. If you are a beneficial holder, please call
your broker for instructions.
Can I view the Proxy Statement and Annual Report over the Internet instead of receiving them in the
mail?
The Notice of Annual Meeting and Proxy Statement are available on our website at
www.lifepointhospitals.com in the Investor Information SEC Filings section. The 2006 Annual
Report is available on our website in the Investor Information Financial Reports section.
Instead of receiving copies of our Proxy Statement and Annual Report materials by mail for annual
meetings of stockholders held after 2007, stockholders will be able to receive proxy materials
online under new SEC rules. Opting to receive your proxy materials online will save us the cost of
producing and mailing documents to your home or business and also will give you an electronic link
to the proxy voting site.
Stockholders of Record: If you vote on the Internet at the website indicated on the proxy
card, simply follow the prompts for enrolling in the electronic proxy delivery service.
Beneficial Owners: If you hold your shares in a brokerage account, you also may have the
opportunity to receive copies of these documents electronically. Please check the information
provided in the proxy materials mailed to you by your broker, bank or other holder of record
regarding the availability of this service.
Who will tabulate and certify the vote?
Representatives of Corporate Election Services will serve as the independent inspector of
elections and will tabulate and certify the vote.
Who pays the expenses of the Annual Meeting?
The Company will pay all expenses of the Annual Meeting, including any cost for the
solicitation of proxies. Our directors, officers and employees may also solicit proxies by personal
interview, mail, e-mail, telephone, facsimile or other electronic means. They will not be paid
additional remuneration for their efforts. 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 such persons reasonable
expenses in forwarding the proxy materials to their principals.
5
GOVERNANCE OF THE COMPANY AND PRACTICES OF THE BOARD OF DIRECTORS
Corporate Governance Philosophy
The Companys Code of Conduct provides guidance to all employees and assists in carrying out
the Companys daily activities with appropriate ethical and legal standards. The Code of Conduct
governs all of the Companys employees, including the Companys CEO and senior officers. The
Company has taken a number of additional steps to promote and protect the interests of
stockholders. In response to the requirement of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley)
that each public company disclose whether it has adopted a code of ethics for senior financial
officers, the Companys Board of Directors adopted the Code of Ethics for Senior Financial Officers
and the Chief Executive Officer (the Code of Ethics). The Companys Code of Ethics specifically
addresses the specific role of these officers in corporate governance. The Code of Ethics
incorporates principles to which these officers are expected to adhere and which they are expected
to advocate. Many of the topics covered in the Code of Ethics are also addressed in the Companys
Code of Conduct, and each of the officers subject to the Code of Ethics is subject to, and has
agreed to abide by, the Code of Conduct.
The Company takes its corporate governance responsibilities very seriously and has adopted
Corporate Governance Standards for the Company and appointed a Corporate Governance Officer. The
Company has published the Corporate Governance Standards in the Corporate Governance section of
the Companys website at www.lifepointhospitals.com. In addition, the Company has published its
Code of Conduct, Code of Ethics and Board committee charters on the Corporate Governance section
of its website.
The Companys Corporate Governance and Nominating Committee regularly reviews corporate
governance developments and adopts appropriate practices as warranted. During 2006, the role of
Chairman and CEO was split into two positions, and changes were implemented in the Companys
governance documents to reflect this change.
Standards of Independence for the Companys Board of Directors
The Companys Corporate Governance Standards establish that a substantial majority of the
Board shall be composed of independent directors. No director will be deemed independent unless the
Board affirmatively determines that the director has no material relationship with the Company,
directly or as an officer, stockholder or partner of an organization that has a material
relationship with the Company, and meets the independence standards established by the securities
exchange on which the Companys shares are listed (currently, The NASDAQ Stock Market, LLC), and
all other applicable laws, rules and regulations regarding director independence in effect from
time to time. In addition to the foregoing, the Board shall consider all relevant facts and
circumstances in making independence determinations.
Independence of Directors
Historically, the Board of Directors has been comprised entirely of outside, independent
directors, except for the CEO. Currently, only one director, Mr. Carpenter, is a part of management
and is not independent.
Independence of Committee Members
The Company requires that all members of the Audit and Compliance Committee, the Compensation
Committee and the Corporate Governance and Nominating Committee meet the independence standards
established by The NASDAQ Stock Market, LLC and all applicable laws, rules and regulations
regarding director independence in effect from time to time.
In addition, each member of the Audit and Compliance Committee must meet the criteria for
independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended
(the Exchange Act), (subject to the exemptions provided in Rule 10A-3(c)) and must not have
participated in the preparation of the financial statements of the Company at any time during the
past three years.
Each member of the Companys Audit and Compliance Committee must be an independent director
and be free from any relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Audit and Compliance Committee. A
member of the Audit and Compliance Committee may not, other than in his or her capacity as a member
of the Audit and Compliance Committee, the Board or another committee of the Board, accept any
consulting, advisory or other compensatory fee
from the Company or be an affiliated person of the Company or any subsidiary of the Company.
In addition, the
6
independence of an Audit and Compliance Committee member is determined according
to the Marketplace Rules of The NASDAQ Stock Market, LLC.
Certain Relationships and Related Transactions
In accordance with Companys Corporate Governance Standards and the Code of Ethics, directors
and officers of the Company shall avoid conflicts of interest with the Company. If an actual or
potential conflict of interest arises for a director, the director shall promptly inform the
Chairman of the Board of Directors. If an actual or potential conflict of interest arises for the
Chairman of the Board of Directors, the Chairman shall promptly inform the Chair of the Corporate
Governance and Nominating Committee. If a significant conflict exists and cannot be resolved, the
director shall resign. All directors will recuse themselves from any discussion or decision
affecting their personal, business or professional interests. The Board shall resolve any conflict
of interest issue involving a director or the CEO, and the CEO shall resolve any conflict of
interest issue involving any other officer of the Company.
Pursuant to policies provided in its charter, the Audit and Compliance Committee of the Board
of Directors reviews all related party transactions for potential conflicts of interest, which must
be approved by the Audit and Compliance Committee or another independent body of the Board. The
Audit and Compliance Committee also discusses with management, prior to the filing of the Companys
annual and quarterly reports with the SEC, any disclosure required concerning related party
transactions of any type and amount and potential conflicts of interest. In addition, the Board
annually assesses the outside affiliations of each director to determine if any of these
affiliations could cause a potential conflict of interest or could interfere with the independence
of the director based on the standards of independence set forth above. During 2006, there were no
reportable related party transactions for the Company, and no related party had any reportable
indebtedness to the Company or any of its subsidiaries.
Director Nomination Process
The Certificate of Incorporation provides that the Board of Directors is to be divided into
three classes of as nearly equal size as possible. Approximately one-third of the directors are
elected each year. In evaluating and determining whether to nominate a candidate who is recommended
for a position on the Board of Directors, the Corporate Governance and Nominating Committee
considers the criteria outlined in the Companys Corporate Governance Standards, which include the
highest professional ethics, integrity and values and a commitment to representing the long-term
interests of the stockholders of the Company. Nominees must also have an inquisitive and objective
perspective, practical wisdom and mature judgment. Further, nominees should know how to read and
understand financial statements and understand the use of financial ratios and information in
evaluating the financial performance of the Company. A nominee who also serves as a senior officer
of a company or in an equivalent position should not serve on more than two boards of public
companies in addition to the Company, and other nominees should not serve on more than four other
boards of public companies in addition to the Company. Nominees must be willing to devote
sufficient time to carrying out their duties and responsibilities effectively and should be
committed to serve on the Board of Directors for an extended period of time. The Board of Directors
believes that its membership should reflect a diversity of experience, gender, race, ethnicity and
age.
The Corporate Governance and Nominating Committee regularly assesses the size of the Board of
Directors, whether any vacancies are expected because of retirement or otherwise, and the need for
particular expertise on the Board of Directors. Candidates may come to the attention of the
Corporate Governance and Nominating Committee from current Board members, stockholders,
professional search firms (upon request), management or other sources. The Corporate Governance and
Nominating Committee reviews all candidates in the same manner regardless of the source of the
recommendation. This assessment includes a review of the nominees judgment, experience,
independence, understanding of the Companys business or related industries, and such other factors
as the Corporate Governance and Nominating Committee concludes are pertinent in light of the
current needs of the Board of Directors. The Corporate Governance and Nominating Committee selects
qualified nominees and proposes its recommendations to the Board of Directors.
The By-Laws provide that nominations of persons for election as directors (other than persons
nominated by or at the direction of the Board of Directors) at an annual meeting of stockholders
may be made by any stockholder of record who is entitled to vote and who provides proper notice. In
order for any such nomination to be proper, the notice must contain certain information concerning
the nominating stockholder and the nominee and must be delivered to the Secretary of the Company at
the Companys principal executive offices not less than 90
days prior to the first anniversary of the preceding years annual meeting of stockholders.
If, however, the date of
7
the annual meeting is advanced more than 30 days prior to or delayed more
than 60 days after such anniversary date, notice by the stockholder to be timely must be delivered
not later than the close of business on the later of the 90th day prior to such annual meeting or
the tenth day following the day on which the public announcement of the date of such meeting is
first made.
The Corporate Governance and Nominating Committee will consider nominations by any Company
stockholder of record who is entitled to vote at the applicable meeting and who has complied with
the notice procedures set forth in the By-Laws. A copy of the By-Laws is available in the
Corporate Governance section of the Companys website, www.lifepointhospitals.com, or may be
obtained by writing to the Corporate Secretary, LifePoint Hospitals, Inc., Suite 200, Brentwood,
Tennessee 37027. The Corporate Governance and Nominating Committee will evaluate any director
candidate nominated by stockholders according to the criteria discussed above and, based on the
results of that evaluation, will determine whether to include the candidate in its recommended
slate of director nominees in the proxy statement.
In the event that the number of directors to be elected to the Board of Directors is
increased, and there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Company at least 100 days prior
to the first anniversary of the preceding years annual meeting, a stockholders notice, with
respect to nominees for any new positions created by such increase, shall be considered timely if
it is delivered not later than the close of business on the tenth day following the day on which
such public announcement is first made by the Company.
Nominations by stockholders of persons for election to the Board of Directors may be made at a
special meeting of stockholders if the stockholders notice required by the By-Laws is delivered
not later than the close of business on the later of 90 days prior to such special meeting or the
tenth day following the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.
Director Attendance at Board, Committee and Annual Meetings
The Board of Directors held 11 meetings (including regularly scheduled and special meetings)
during 2006. Directors are expected to attend all meetings of the Board of Directors, the annual
meeting of stockholders and all meetings of the committees on which they serve, with the
understanding that on occasion a director may be unable to attend a meeting. During 2006, all
directors attended the annual meeting of stockholders and each director attended at least 75% of
the aggregate of the total number of meetings of the Board of Directors and the total number of
meetings held by all committees on which the director served.
Executive Sessions of the Board
Routinely, the Board of Directors meets in executive sessions in which William F. Carpenter
III, the sole management director, and other members of management do not participate. The
Companys Chairman of the Board presides over the executive sessions of the Board of Directors. In
2006, the Board of Directors met in executive session at each of its regular meetings.
Committees of the Board of Directors
The Board of Directors has three standing committees that assist the Board in carrying out its
duties an Audit and Compliance Committee, a Compensation Committee and a Corporate Governance and
Nominating Committee. The current charter of each of these committees is available in the
Corporate Governance section of the Companys website at www.lifepointhospitals.com and may be
obtained without charge by writing to the Corporate Secretary at the Companys principal offices
LifePoint Hospitals, Inc., 103 Powell Court, Suite 200, Brentwood, Tennessee 37027, Attention:
Corporate Secretary.
8
The following table shows the current membership of each committee:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Governance |
Director |
|
Audit and Compliance |
|
Compensation |
|
and Nominating |
William F. Carpenter III |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Richard H. Evans |
|
|
X |
|
|
Chair |
|
|
X |
|
DeWitt Ezell, Jr. |
|
|
X |
|
|
|
X |
|
|
|
X |
|
Michael P. Haley |
|
|
X |
|
|
|
X |
|
|
|
X |
|
Ricki Tigert Helfer |
|
|
X |
|
|
|
X |
|
|
Chair |
William V. Lapham |
|
Chair |
|
|
X |
|
|
|
X |
|
John E. Maupin, Jr., D.D.S. |
|
|
X |
|
|
|
X |
|
|
|
X |
|
Owen G. Shell, Jr. |
|
|
X |
|
|
|
X |
|
|
|
X |
|
Audit and Compliance Committee
Pursuant to its Charter, the Audit and Compliance Committee selects the Companys independent
registered public accounting firm and oversees the arrangements for, and approves the scope of, the
audits to be performed by the independent registered public accounting firm. The Audit and
Compliance Committee has adopted a procedure to pre-approve all services to be performed by the
independent registered public accounting firm. For more information on this procedure, please refer
to the section entitled Fees and Services of the Independent Registered Public Accounting Firm in
this Proxy Statement. The Audit and Compliance Committee monitors the Companys systems of internal
controls regarding finance, accounting, legal and corporate compliance, monitors compliance with
the Companys Code of Conduct and the Code of Ethics, monitors adherence to the Companys
regulatory compliance program, reviews and approves the Companys internal audit activities,
reviews the Companys accounting procedures and controls and reviews the Companys annual
consolidated financial statements. During 2006, the Audit and Compliance Committee held eight
meetings, including quarterly meetings held to review the Companys quarterly financial results and
its release of earnings, in each case prior to public release. The Board has determined that
William V. Lapham, Chair of the Audit and Compliance Committee, is an audit committee financial
expert, as defined by rules adopted by the SEC, and is independent in accordance with the
standards established by the securities exchange on which the Companys shares are listed. The
report of the Audit and Compliance Committee begins on page 13.
Compensation Committee
The Compensation Committee is responsible for, among other things, approving compensation
arrangements for executive management of the Company, including the CEO, reviewing compensation
plans relating to officers, making recommendations to the Board with respect to payments under the
Companys Annual Executive Cash Bonus Plan (the Bonus Plan) and the Executive Performance
Incentive Plan (the EPIP), administering the Companys Amended and Restated 1998 Long-Term
Incentive Plan (the LTIP), Management Stock Purchase Plan (the MSPP) and Employee Stock
Purchase Plan (the ESPP), making recommendations to the Board with respect to compensation paid
by the Company to any director, reviewing the Companys health benefit plans with respect to the
Companys employees and reviewing the Companys employee compensation policy. The Compensation
Committee also reviews and discusses with management the Compensation Discussion and Analysis
required by SEC Regulation S-K, Item 402(b).
During the year, the Compensation Committee works with Watson Wyatt & Company, a consultant
retained by management, and McDaniel & Associates, Inc., a consultant retained by the Compensation
Committee, both of which provide market data regarding executive compensation and advise the
Compensation Committee regarding compensation programs and amounts. The Compensation Committee
obtains specific data and reports from the consultants on an annual basis and at other times upon
request. The Compensation Committee invites representatives of the consultants to attend meetings
of the Compensation Committee from time to time. The Compensation Committee also meets with the CEO
to consider recommendations for the compensation arrangements for executives other than the CEO.
For more information on these meetings, please refer to the section entitled Compensation
Discussion and Analysis in this Proxy Statement. During 2006, the Compensation Committee held five
meetings. The report of the Compensation Committee begins on page 17.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, among other things, identifies persons
qualified to become members of the Board of Directors and recommends to the Board of Directors
proposed nominees for Board membership; recommends to the Board of Directors the directors to serve
on each standing committee of the Board
9
of Directors; ensures that a succession plan is in place for the position of CEO and other
senior management positions; leads the Board of Directors in its annual review of the performance
of the Board, its committees and the directors; regularly reviews evolving governance issues and
makes recommendations to the Board of Directors, as appropriate to amend the Companys corporate
governance standards; and identifies a person qualified to be the Companys Corporate Governance
Officer and recommends to the Board of Directors the election of such person as an officer of the
Company. The Corporate Governance and Nominating Committee will consider all nominees recommended
by stockholders who comply with the procedures set forth in the By-Laws, which are summarized in
the section entitled General Information Stockholder Nominations and Proposals for the 2008
Proxy Statement in this Proxy Statement. During 2006, there were no material changes to the
procedures by which a stockholder may recommend nominees to the Board of Directors. During 2006,
the Corporate Governance and Nominating Committee held four meetings. The report of the Corporate
Governance and Nominating Committee begins on page 11.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors during 2006 consisted of Ms. Helfer, Dr.
Maupin and Messrs. Evans, Ezell, Haley, Lapham and Shell. None of the members of the Compensation
Committee have at any time been an officer or employee of the Company nor have any of the members
had any relationship requiring disclosure by the Company. None of the Companys executive officers
serves, or in the past year served, as a member of the board of directors or compensation committee
of any entity that has or had one or more of its executive officers serving on the Companys Board
of Directors or Compensation Committee.
Stockholder Communication with the Board of Directors
Stockholders who wish to communicate with the Board of Directors (or specified individual
directors), including the non-management directors as a group, may do so by addressing their
correspondence to the appropriate member(s) of the Board of Directors, c/o the Corporate Secretary,
LifePoint Hospitals, Inc., 103 Powell Court, Suite 200, Brentwood, Tennessee 37027. All written
communications received in such manner from stockholders of the Company will be forwarded to the
members of the Board of Directors to whom the communication is directed or, if the communication is
not directed to any particular member(s) of the Board of Directors, the communication will be
forwarded to all members of the Board of Directors.
10
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE REPORT
The Corporate Governance and Nominating Committee of the Board of Directors consists entirely
of directors who are independent as determined by the Board of Directors and who meet the
independence and experience requirements of The NASDAQ Stock Market, LLC. The Corporate Governance
and Nominating Committee reviews and reassesses the adequacy of its charter on an annual basis. On
September 19, 2006, the Corporate Governance and Nominating Committee adopted, and the Board of
Directors approved, amendments to the Corporate Governance and Nominating Committee Charter which
outline the practices followed by the Corporate Governance and Nominating Committee. The current
Charter of the Corporate Governance and Nominating Committee is available on the Corporate
Governance section of the Companys website, www.lifepointhospitals.com. Paul D. Gilbert, the
Companys Senior Vice President and General Counsel, serves as the Companys Corporate Governance
Officer.
The Company has been committed to building long-term stockholder value since its formation in
1999 and believes that sound corporate governance practices contribute to stockholder value. The
Companys directors have been, and continue to be, interested in establishing and maintaining a
culture of proper governance. For example, Mr. Carpenter is the only inside director, and each of
the committees of the Board of Directors is composed exclusively of independent directors.
The Companys Corporate Governance and Nominating Committee is charged with, among other
things:
|
|
|
Identifying persons qualified to become members of the Board of Directors
and recommending to the Board of Directors proposed nominees for Board membership; |
|
|
|
|
Reviewing any candidates recommended by stockholders in accordance with the
By-Laws and providing a process for receipt and consideration of any such
recommendations; |
|
|
|
|
Evaluating the performance of existing directors before recommending to the
Board of Directors nominations for additional terms as directors; |
|
|
|
|
Recommending to the Board of Directors the directors to serve on each
standing committee of the Board of Directors and periodically reviewing the structure
and respective functions of the committees; |
|
|
|
|
Annually reviewing the composition of the Board of Directors to ensure that
a majority of the members are independent in accordance with the Marketplace Rules of
The NASDAQ Stock Market, LLC; |
|
|
|
|
Ensuring that a succession plan is in place for the position of CEO and
other senior management positions; |
|
|
|
|
Developing and recommending to the Board of Directors an annual evaluation
process for each committee and member of the Board; |
|
|
|
|
Annually reviewing and assessing the Companys Corporate Governance
Standards, Certificate of Incorporation and By-Laws; |
|
|
|
|
Identifying a person qualified to be the Companys Corporate Governance
Officer and recommending to the Board of Directors the appointment of such person as an
officer of the Company; |
|
|
|
|
Annually reviewing the composition of the Board of Directors to ensure that
a majority of the members are independent in accordance with the securities exchange
on which the Companys shares are listed and other considerations relating to the
composition of the Board and its committees, including, among other things, the size of
the Board and its committees and the criteria for membership of the Board; and |
|
|
|
|
Overseeing the annual evaluation of the Board, the standing committees of
the Board and individual members of the Board. |
Pursuant to the authority granted in its Charter, the Corporate Governance and Nominating
Committee regularly monitors the corporate governance best practices of public companies and those
that develop in the Companys industry. Certain of these best practices, together with the strong
standards already established by the Company, were adopted by the Corporate Governance and
Nominating Committee as the Companys Corporate Governance Standards. The Corporate Governance and
Nominating Committee, as well as the Board of Directors,
reviews these standards at least annually. On February 23, 2006 and September 19, 2006, the
Corporate Governance
11
and Nominating Committee adopted, and the Board of Directors approved,
amendments to the Corporate Governance Standards which outline the guidelines for the Company. The
Companys Corporate Governance Standards, as amended, are available on the Corporate Governance
section of the Companys website, www.lifepointhospitals.com.
The Corporate Governance and Nominating Committee regularly reviews evolving governance issues
and makes recommendations to the Board of Directors, as appropriate. In addition, all of the
members of the Board of Directors regularly attend director education programs that encourage
improved corporate governance practices. Since the 2006 annual meeting of stockholders, the
Corporate Governance and Nominating Committee has reviewed, with the Corporate Governance Officer
and outside counsel, many governance issues including the following: director independence; the
size of the Board; the practice of all independent directors serving on all committees; the
Companys classified Board terms; succession issues; Board and management stock ownership
guidelines; the Companys stockholder rights plan; majority voting for the election of directors;
director nomination process; and potential Board liability issues. After thorough consideration and
the adoption of certain amendments, the Corporate Governance and Nominating Committee determined
generally that, at this time, the Companys Corporate Governance Standards and the Charter of the
Corporate Governance and Nominating Committee are sufficient to protect and enhance stockholder
value.
CORPORATE GOVERNANCE AND NOMINATING
COMMITTEE
Ricki Tigert Helfer, Chair
Richard H. Evans
DeWitt Ezell, Jr.
Michael P. Haley
William V. Lapham
John E. Maupin, Jr., D.D.S.
Owen G. Shell, Jr.
Dated: March 15, 2007
12
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee of the Board of Directors was established, in accordance
with Section 3(a)(58)(A) of the Exchange Act and consists entirely of directors who are independent
as determined by the Board of Directors and who meet the independence and experience requirements
of The NASDAQ Stock Market, LLC. The Board has determined that Mr. Lapham, Chair of the Audit and
Compliance Committee, is an audit committee financial expert, as defined by rules adopted by the
SEC. The Audit and Compliance Committee reviews and reassesses the adequacy of its Charter on an
annual basis. On September 19, 2006, the Audit and Compliance Committee adopted, and the Board of
Directors approved, amendments to the Audit and Compliance Committee Charter which outline the
practices followed by the Audit and Compliance Committee. The current Charter of the Audit and
Compliance Committee is available on the Corporate Governance section of the Companys website,
www.lifepointhospitals.com.
The Audit and Compliance Committee has adopted a policy on the reporting of concerns regarding
accounting or auditing matters. Any person, whether or not an employee, who has a concern about the
conduct of the Company or any of the Companys personnel, including with respect to the Companys
accounting, internal accounting controls or auditing matters, may, in a confidential and anonymous
manner, communicate that concern via an external compliance hotline, (877) 508-5433. The hotline
services are available 24 hours a day, seven days a week. All calls to the compliance hotline will
be handled on an expedited basis and, under certain circumstances, will be communicated directly to
the Chair of the Audit and Compliance Committee.
In performing its functions, the Audit and Compliance Committee acts primarily in an oversight
capacity. The Audit and Compliance Committee relies on the work and assurances of the Companys
management, which has the primary responsibility for preparing financial statements and reports and
implementing internal controls over financial reporting, and the work and assurances of the
Companys independent registered public accounting firm, which reviews the Companys quarterly and
annual financial statements. In addition, the Audit and Compliance Committee relies on the
Companys independent registered public accounting firm, which expresses an opinion on the
conformity of the Companys annual financial statements to generally accepted accounting
principles, an opinion on managements assessment of internal control over financial reporting and
an opinion on the effectiveness of internal control over financial reporting.
The Audit and Compliance Committee selected Ernst & Young LLP as the Companys independent
registered public accounting firm for 2006. This selection was subsequently approved by the Board
of Directors and was ratified by the Companys stockholders at the annual meeting of stockholders
held on May 8, 2006.
At each of its meetings during 2006, the Audit and Compliance Committee met with the senior
members of the Companys financial management team, the General Counsel, and the Senior Vice
President, Audit and Compliance. In addition, the Audit and Compliance Committee met with
representatives of the Companys independent registered public accounting firm at each of its
meetings during 2006 to discuss the Companys financial statements prior to the Companys release
of earnings and at three of its four other regularly scheduled meetings. The Audit and Compliance
Committee had six private sessions with the Companys Senior Vice President, Audit and Compliance,
two private sessions with the Companys Chief Financial Officer (the CFO), one private session
with the Companys Chief Accounting Officer, one private session with certain members of management
and six private sessions with representatives of the Companys independent registered public
accounting firm. At these private sessions, candid discussions regarding financial management,
accounting and internal controls took place. In addition, the Audit and Compliance Committee took
the following actions:
|
|
|
Reviewed and discussed with management the Companys audited financial
statements for the year ended December 31, 2006, including a discussion of the quality
(rather than just the acceptability) of the accounting principles and policies, the
reasonableness of significant judgments and the clarity of disclosures in the financial
statements. Regarding managements accounting judgments, members of the Audit and
Compliance Committee asked for managements representations that the audited financial
statements of the Company have been prepared in conformity with generally accepted
accounting principles and that the financial statements present fairly the Companys
financial position and results of operations and have expressed to both management and
Ernst & Young LLP their general preference for conservative judgments. |
|
|
|
|
Reviewed and discussed with management the quarterly financial results of
the Company and discussed any significant changes to the Companys accounting
principles. |
13
|
|
|
Discussed with Ernst & Young LLP the matters required to be communicated to
the Audit and Compliance Committee under Statement on Auditing Standards No. 61, as
amended, as adopted by the Public Company Accounting Oversight Board (the PCAOB), and
such other matters relating to the conduct of the audit, including their judgments as
to the quality (rather than just the acceptability) of the Companys accounting
principles and policies. |
|
|
|
|
Received the written disclosures and the letter from Ernst & Young LLP
regarding the independence of Ernst & Young LLP as required by Independence Standards
Board Standard No. 1, as adopted by the PCAOB, and discussed with Ernst & Young LLP its
independence from the Company and management. |
|
|
|
|
When evaluating the independence of Ernst & Young LLP, the Audit and
Compliance Committee considered carefully, among other things, the former relationship
between Ernst & Young LLP and each of Michael J. Culotta, the Companys CFO, and
William V. Lapham, the Chair of the Audit and Compliance Committee and a director of
the Company. After significant and detailed discussion regarding these and other
factors, including steps taken to preserve the ongoing independence of Ernst & Young
LLP, and based upon the Audit and Compliance Committees understanding of the relevant
facts and circumstances, the Audit and Compliance Committee concluded that Ernst &
Young LLP is qualified to serve as the Companys independent registered public
accounting firm. |
|
|
|
|
Considered the competence, quality of controls and the national reputation
of Ernst & Young LLP in addition to the competence of the individual auditors
performing the Companys audit on behalf of Ernst & Young LLP. |
|
|
|
|
Pre-approved specific audit, audit-related, tax and other services to be
provided by Ernst & Young LLP. |
|
|
|
|
Reviewed and approved the Companys annual internal audit and compliance
plans. |
|
|
|
|
Reviewed and discussed with management Ernst & Young LLPs opinion
including reports on managements assessment of internal controls over the financial
reporting processes. |
|
|
|
|
Ensured that procedures are in place for the receipt, retention and
treatment of complaints received by the Company regarding accounting, financial
reporting, internal controls, auditing, legal or compliance matters. |
|
|
|
|
Reviewed regularly all related party transactions for potential conflicts
of interest and discussed with management, prior to the filing of the Companys annual
and quarterly reports with the SEC, any disclosure relating to directors and officers
related party transactions and potential conflicts of interest. |
|
|
|
|
Monitored the Companys compliance with the provisions of Sarbanes-Oxley
during the testing of internal controls. |
|
|
|
|
Reviewed and discussed with management on a regular basis certain
identified risk areas, including enterprise risk management. |
|
|
|
|
Reviewed and discussed with management on a regular basis any errors,
irregularities, fraud or illegal acts that may have a material or non-material impact
on the Companys financial statements, policies or reporting requirements. |
|
|
|
|
Reviewed the PCAOB report with respect to Ernst & Young LLP. |
|
|
|
|
Performed an annual review of the Audit and Compliance Committees Charter
and the Companys Code of Ethics. |
In reliance on these reviews and discussions, and the report of Ernst & Young LLP, the Audit
and Compliance Committee recommended to the Board of Directors, and the Board of Directors
determined, that the audited financial statements be included for filing with the SEC in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006.
14
The Audit and Compliance Committee also oversees the Companys internal compliance activities
and is responsible for the review of matters related to the Companys ethics and compliance
program, Corporate Integrity Agreement, Code of Conduct, Code of Ethics and compliance with federal
healthcare program requirements.
In performing its compliance-related functions during 2006, the Audit and Compliance Committee
also met privately with the Companys Senior Vice President, Audit and Compliance, and reviewed and
assessed the efforts of management to monitor the Companys compliance with requirements of law.
AUDIT AND COMPLIANCE COMMITTEE
William V. Lapham, Chair
Richard H. Evans
DeWitt Ezell, Jr.
Michael P. Haley
Ricki Tigert Helfer
John E. Maupin, Jr., D.D.S.
Owen G. Shell, Jr.
Dated: March 15, 2007
15
FEES AND SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Fees Paid to the Independent Registered Public Accounting Firm
The table below provides information concerning fees for services rendered by Ernst & Young
LLP during the last two fiscal years (including an estimate of fees for 2006, some of which have
not yet been billed). The nature of the services provided in each such category is described
following the table.
|
|
|
|
|
|
|
|
|
|
|
Amount of Fees |
|
Description of Fees |
|
2006 |
|
|
2005 |
|
Audit Fees |
|
$ |
1,716,624 |
|
|
$ |
1,887,640 |
|
Audit-Related Fees |
|
|
7,500 |
|
|
|
76,054 |
|
Tax Fees |
|
|
193,564 |
|
|
|
379,305 |
|
All Other Fees |
|
|
77,025 |
|
|
|
47,600 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,994,713 |
|
|
$ |
2,390,599 |
|
|
|
|
|
|
|
|
Audit Fees These fees were primarily for professional services rendered by Ernst &
Young LLP in connection with the audit of the Companys consolidated annual financial statements,
audit of internal controls over financial reporting (pursuant to Section 404 of Sarbanes-Oxley),
reviews of the interim condensed consolidated financial statements included in the Companys
quarterly reports on Form 10-Q for the first three fiscal quarters of the fiscal years ended
December 31, 2005 and 2006 and the audit of the Retirement Plan for the year ended December 31,
2004. The fees also include separate opinion audits of certain subsidiaries, as well as comfort
letters and consents related to SEC filings, including fees for SEC filings associated with the
business combination with Province Healthcare Company (Province).
Audit-Related Fees These fees were primarily for services rendered by Ernst & Young LLP for
matters such as consultation on accounting and reporting standards, transaction due diligence
services, audit of the employee health and welfare benefit plan and audit of the Province 401(k)
benefit plan for the year ended December 31, 2004.
Tax Fees These fees were for services rendered by Ernst & Young LLP for assistance with tax
compliance regarding tax filings and also for other tax advice and consulting services.
All Other Fees Other fees paid to Ernst & Young LLP were primarily consulting fees relating
to independent review organization billing and compliance services and Medicare cost reporting
software.
The Audit and Compliance Committee has reviewed the fees detailed above and considers the
provision of the described services to be compatible with maintaining the independence of Ernst &
Young LLP. None of these services are of a type that was prohibited under the independent
registered public accounting firm independence standards of the SEC.
Pre-approval of Services Performed by the Independent Registered Public Accounting Firm
The Audit and Compliance Committee has implemented procedures to ensure the pre-approval of
all audit, audit-related, tax and other services performed by the Companys independent registered
public accounting firm. These procedures require that the Audit and Compliance Committee approve
all services prior to the commencement of work. Unless the specific service has been pre-approved
with respect to that year, the Audit and Compliance Committee must approve the permitted service
before the independent registered public accounting firm is engaged to perform it. The Audit and
Compliance Committee has delegated to Mr. Lapham, the Chair of the Audit and Compliance Committee,
pre-approval authority with respect to audit or permitted non-audit services (in an amount not to
exceed $20,000 in each instance) to be provided by Ernst & Young LLP, subject to ratification of
such pre-approval by the Audit and Compliance Committee at its next scheduled meeting. On a
quarterly basis, the Audit and Compliance Committee reviews a summary listing of all service fees,
along with a reasonably detailed description of the nature of the engagement of Ernst & Young LLP.
The Audit and Compliance Committee pre-approved in accordance with the regulations of the SEC all
audit, audit-related, tax and other services performed by Ernst & Young LLP during 2006. The Audit
and Compliance Committee considered and determined that the provision of non-audit services by
Ernst & Young LLP during 2006 was compatible with maintaining auditor independence.
16
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation
Discussion and Analysis required by SEC Regulation S-K, Item 402(b) beginning on page 18
of this Proxy Statement. Based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in
this Proxy Statement and incorporated by reference in the Companys Annual Report on Form 10-K for
the year ended December 31, 2006.
COMPENSATION COMMITTEE
Richard H. Evans, Chair
DeWitt Ezell, Jr.
Michael P. Haley
Ricki Tigert Helfer
William V. Lapham
John E. Maupin, Jr., D.D.S.
Owen G. Shell, Jr.
Dated: March 15, 2007
17
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The Compensation Committee reviews and administers the process and substance of the Companys
executive compensation program, including compensation of the Named Executive Officers (i.e., those
executive officers who appear in the Summary Compensation Table on page 28) . The
Compensation Committee is composed entirely of directors who are independent, as defined by the
Marketplace Rules of The NASDAQ Stock Market, LLC, and all seven of the Companys independent
directors serve on the Compensation Committee. On September 19, 2006, the Compensation Committee
adopted and the Board of Directors approved amendments to the Compensation Committee charter, which
outline the practices followed by the Compensation Committee. These amendments arose during the
Compensation Committees annual review of its charter. The current Charter of the Compensation
Committee is available in the Corporate Governance section of the Companys website,
www.lifepointhospitals.com.
The Companys executive compensation program is guided by the core principles of
Competitiveness, Internal Equity, Simplicity, Financial Performance and Values Focus (the Core
Principles). These Core Principles, and the Compensation Committees compensation philosophy and
strategy, were memorialized by the Compensation Committee in written form in 2004, and the
Compensation Committee applied these concepts in the manner described in this Compensation
Discussion and Analysis.
The Compensation Committee believes that the Companys executive compensation program should:
|
|
|
allow the Company to attract, motivate, retain and be responsive to the needs of a
highly qualified executive leadership team (Competitiveness); |
|
|
|
|
be consistent with the Companys overall compensation structure for all employees
(Internal Equity); |
|
|
|
|
be straightforward and easy to understand and administer (Simplicity); |
|
|
|
|
appropriately promote attention to the Companys financial performance (Financial
Performance); and |
|
|
|
|
advance the interests of the Companys various constituents, including patients,
physicians and employees, through compliance with legal, governance and operational
guidelines (Values Focus). |
The Core Principles are best understood in the context of the discussion of the process for
determining compensation, described below under the heading Process. While the discussion herein
relates specifically to the Named Executive Officers, the Overview, Process and Components of
Compensation sections are generally applicable to all of the Companys most senior officers.
Competitiveness
The Compensation Committee, together with the CEO, focus on attracting, retaining and
motivating a highly qualified group of Named Executive Officers. They believe that doing so is in
the best interests of the Company, its stockholders and other constituencies. In these efforts, the
Compensation Committee also considers the market for executive talent when setting compensation. To
assist in these efforts, since 2003, management has engaged Watson Wyatt & Company (the Management
Consultant), and since 2004, the Compensation Committee has engaged McDaniel & Associates, Inc.
(the Committee Consultant and collectively with the Management Consultant, the Compensation
Consultants). The Management Consultant collects and analyzes information on market practices and
works with management in developing proposed compensation levels for the Named Executive Officers
and other Company employees. The Committee Consultant provides services only to the Compensation
Committee and renders independent advice and counsel to the Compensation Committee regarding the
compensation recommendations. In this regard, the Committee Consultant assists the Compensation
Committee in its review of relevant information including reports prepared by the Management
Consultant. The Compensation Committee meets periodically with each of the Compensation Consultants
in executive session.
Prior to setting compensation for 2006, the Compensation Committee received written reports
from the Management Consultant regarding comparative market data including comprehensive analyses
of compensation and compensation components (the Management Consultant Reports). The Compensation
Committee understands that the Management Consultant Reports were based on public information and
survey data collected by the
18
Management Consultant from other publicly-traded healthcare service companies comparable to
the Company in terms of revenue, market capitalization and/or other relevant indicators (the
Comparator Companies).1
The Compensation Committee determined that the Comparator Companies constituted a sufficiently
large and relevant group for purposes of comparing compensation data. The Management Consultant
Reports provided detailed information, regarding base salary, cash bonus and long-term equity
incentive compensation for individuals deemed to be comparable to the Named Executive Officers at
the Comparator Companies (the Comparable Executives). For the Companys CEO, former Executive
Vice President (EVP), CFO and Chief Operating Officer (COO), the Compensation Committee also
reviewed and considered, to the extent the Compensation Committee deemed appropriate, market
compensation information from public information for other publicly-traded hospital companies with
revenue and market capitalization larger than that of the Company.2 For Named Executive
Officers other than the CEO, EVP, CFO and COO, where specific Comparable Executive data was not
publicly available, the Compensation Committee considered third party survey data obtained by the
Management Consultant with respect to compensation paid to executives at other companies believed
to have similar responsibilities to those of the Named Executive Officers. On behalf of the
Compensation Committee, the Committee Consultant reviewed and commented upon the Management
Consultant Reports and provided further background and context to the Compensation Committee.
Internal Equity
The Compensation Committee utilizes an internal compensation structure designed by management
that is generally used to set the compensation of all corporate employees, including the Named
Executive Officers. The Compensation Committee seeks to achieve a relative equality between the
compensation of similarly-situated Company employees and provide for steady, gradual increases in
compensation as an employees experience, responsibility and performance increases. Employees
promoted within the Company may receive larger increases in compensation at the time they are
promoted. The Core Principle of Internal Equity allows for an individual employees compensation to
be influenced not only by compensation of individuals at Comparator Companies, but also by the
compensation of other employees within the Company. As with each of the Core Principles, Internal
Equity and the internal compensation structure are not rigid but are considered in the
determination of compensation of Named Executive Officers.
Simplicity
The basic components of compensation applicable to the Named Executive Officers include base
salary, potential annual cash bonus and long-term equity incentive awards. The Named Executive
Officers also receive employee benefits consistent with those offered to other employees of the
Company. All Named Executive Officers are covered by the Companys Change in Control Severance
Plan. The Compensation Committee believes the Company is well served by a compensation structure
that is relatively easy to monitor, implement and describe to its officers, employees and
stockholders.
Financial Performance
The Compensation Committee believes that the Companys compensation program should encourage
and reward outstanding financial performance. The financial measures used by the Company in its
annual cash bonus plan are based upon the Companys achievement of specific performance goals
determined by the Compensation Committee early in the Companys fiscal year. For 2006, the
Compensation Committee set performance goals tied to the Companys net revenue and earnings before
interest, taxes, depreciation and amortization (EBITDA), because the Compensation Committee feels
that these measures reflect the short-term financial performance of the Company. Further, net
revenue and EBITDA are measures recognized in the healthcare services industry as key indicators of
performance. The Compensation Committee also believes that the Named Executive Officers should
receive a large portion of their compensation in the form of equity, thereby putting this portion
of their compensation at risk and even further aligning their long-term interests with those of the
Companys stockholders. The Companys compensation program is designed to maintain a close
correlation between the rewards to the Companys executives and the tactical and strategic success
of the Company.
|
|
|
1 |
|
The Comparator Companies for 2006 were Apria
Healthcare Group Inc.; Beverly Enterprises Inc.; Community Health Systems,
Inc.; DaVita Inc.; Genesis Healthcare Corporation; Health Management
Associates, Inc.; Kindred Healthcare, Inc.; Lincare Holdings Inc.; Manor Care,
Inc.; Renal Care Group, Inc.; Sunrise Senior Living, Inc.; Triad Hospitals,
Inc.; and Universal Health Services, Inc. |
|
2 |
|
These companies were HCA Inc. and Tenet
Healthcare Corporation. |
19
Values Focus
The Compensation Committee believes that the compensation of the Named Executive Officers
should also be closely tied to qualitative, non-financial, operational goals. The healthcare
industry is highly regulated and is monitored closely by enforcement agencies. The Companys
compliance with applicable laws and standards is central to its performance. Further, the quality
of care provided is becoming a significant component of the basis upon which hospitals compete and
are compensated. Beyond these recent developments, it is important that the highest possible level
of care is provided at the hospitals owned by the Company. For these reasons, the Compensation
Committee has decided to use compensation to incentivize compliance with applicable law and
standards and to encourage ongoing efforts to improve the level of care provided at Company
hospitals.
For 2006, the Compensation Committee used specific predetermined targets to encourage the
Named Executive Officers to work toward (1) the delivery of high quality patient care in accordance
with applicable law and standards and guidelines recognized within the healthcare industry, and (2)
the satisfaction of the patients, employees and physicians at the hospital level. The Compensation
Committee believes that it is important to incentivize compliance in a heavily-regulated industry
such as the provision of healthcare services.
Process
The process for establishing 2006 compensation began in December 2005, when the Compensation
Committee first reviewed the Management Consultant Reports on competitive market data. From
December 2005 through the first quarter of 2006, the Senior Vice President of Human Resources and
Administration (the SVP of HR) worked with the Management Consultant, Messrs. Carpenter, Culotta
and Gracey and Mr. Donahey, our former Chairman, President and Chief Executive Officer, to develop
recommendations regarding base salaries, annual bonus opportunities (Potential Bonus) and
corresponding performance criteria (Bonus Performance Goals) and equity grant recommendations for
the Companys 13 most highly compensated employees, including the Named Executive Officers. These
recommendations were then discussed with and reviewed in detail by the Compensation Committee Chair
and the Committee Consultant before being presented to the entire Compensation Committee. A number
of adjustments were made to the management recommendations as a result of this review by the Chair
of the Compensation Committee and the Committee Consultant. Base salaries, Potential Bonus and
Bonus Performance Goals, equity grants and vesting conditions for each of the Named Executive
Officers were subsequently considered and discussed in detail by the entire Compensation Committee
at its regularly scheduled meeting in February 2006. Following the Compensation Committee
deliberations on the recommendations, the Compensation Committee set the fixed components of the
Named Executive Officers compensation for 2006.
The Compensation Committee also discussed at its February 2006 meeting the eligible
participants in the EPIP for the 2006 fiscal year, based on projected total compensation and
management responsibilities. In this regard, the Compensation Committee determined that Messrs.
Donahey, Carpenter, Culotta and Gracey (the EPIP Executives) should be participants in the EPIP.
The Compensation Committee also established the Bonus Performance Goals and performance-based
equity awards, which are subject to vesting upon achievement of specified performance goals. The
two other Named Executive Officers, Ms. Koford and Mr. Weiss (the NEO Division Presidents), are
eligible for a Potential Bonus upon the achievement of Bonus Performance Goals, pursuant to the
Bonus Plan. The Management Consultant created comprehensive compensation tally sheets for the EPIP
Executives and the Compensation Committee reviewed and approved the compensation amounts and
targets after discussion with all relevant parties, including the Compensation Consultants.
During 2006, the Compensation Committee requested that the Management Consultant prepare a
report describing general trends and specific Comparator Company practices in the area of
broad-based and executive retirement benefits. The report was presented at the Compensation
Committees meeting during May 2006 and discussed with the Committee Consultant. Although the
report showed that many Comparator Companies, particularly other hospital management companies,
provide executives with a higher level of retirement benefits as compared to the Company, the
Compensation Committee determined that no changes to executive retirement benefits would be
considered during 2006. The Committee will continue to monitor this area as part of its regular
review of the Companys employee benefits programs during the second quarter of each year.
Following the appointment of Mr. Carpenter as CEO, the Compensation Committee, in consultation
with the Compensation Consultants, began discussions regarding the compensation of Mr. Carpenter as
the new CEO of the Company. The Compensation Committee met in the third quarter of 2006 to finalize
the compensation of Mr. Carpenter and to approve, in consultation with independent outside counsel,
a proposed Executive Severance and
20
Restrictive Covenant Agreement to offer to Mr. Carpenter (the Carpenter Severance
Agreement). At this meeting, the Compensation Committee also reviewed the Companys interim
performance against the Bonus Performance Goals set in the first quarter of the year.
During the fourth quarter of 2006, the Compensation Committee began the process of planning
for the 2007 compensation of the Named Executive Officers, including review of the Management
Consultant Reports containing comparative market data obtained during 2006. In connection with
their review of the Management Consultant Reports, the Compensation Committee approved a revised
list of Comparator Companies for 2007.3
Components of Compensation
Based on advice from the Compensation Consultants, managements recommendation, the Core
Principles and the judgment of the committee members, the Compensation Committee allocates
compensation to individuals both as to specific components (for example, base salary, Potential
Bonus and equity awards) and as a whole (Total Direct Compensation). Each of the components of
compensation is discussed in more detail below. While considering each component of compensation,
the Compensation Committee is relatively more focused on each Named Executive Officers Total
Direct Compensation, rather than the individual components that make up an individual officers
Total Direct Compensation. The Compensation Committee seeks to target Total Direct Compensation
opportunities for the Named Executive Officers within the range of Total Direct Compensation for
Comparable Executives, reflecting the Core Principle of Competitiveness. Because the Compensation
Committee has determined that a significant portion of each executives compensation should be at
risk, the actual compensation realized by the Named Executive Officers depends on the level of
performance achieved over both the short-term and long-term. This focus on Total Direct
Compensation has the effect of more heavily weighting long-term incentives and at-risk
compensation. The Compensation Committee believes that the component mix of compensation is broadly
reflective of the Core Principles.
Base Salary
The base salary for each of the Named Executive Officers is largely driven by notions of
Competitiveness, Internal Equity and long-term individual performance. The salaries of the Named
Executive Officers are evaluated annually as described above under the section entitled Process.
The Compensation Committee believes that base salaries should be targeted within the range of base
salaries for Comparable Executives, while reflecting other relevant factors, such as unique roles
and responsibilities and/or individual long-term performance and experience. Accordingly, the base
salary of any particular individual may be above or below the median of the applicable range of
base salaries paid by Comparator Companies.
Potential Bonus
Named Executive Officers may earn the Potential Bonus if the Bonus Performance Goals set in
advance by the Compensation Committee are achieved. The Companys commitment to the Core Principles
of Financial Performance and Values Focus are, as a result, advanced. The Compensation Committee
establishes the Potential Bonus as a percentage of base salary for each of the Named Executive
Officers. The Named Executive Officers may receive a bonus payment if the Bonus Performance Goals
are met and have the potential to earn annual bonuses above the Potential Bonus if Bonus
Performance Goals for net revenues and EBITDA are exceeded.
Any bonus paid to EPIP Executives is made pursuant to the EPIP. The EPIP is a
performance-based plan designed to qualify under the provisions of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code). The Bonus Performance Goals and weightings used to
determine actual awards do not vary among the EPIP Executives. The Compensation Committee may
reduce the final bonus payment to the EPIP Executives in its sole and absolute discretion,
regardless of the achievement of the Bonus Performance Goals. In March 2007, the Compensation
Committee exercised its discretion to reduce the bonus amounts paid for 2006 performance to the
EPIP Executives, based upon its judgment and the Companys performance measured against the Bonus
Performance Goals.
The NEO Division Presidents may receive a bonus payment pursuant to the Bonus Plan. The Bonus
Performance Goals and weightings used to determine actual awards do not vary among the NEO Division
Presidents. Under the Bonus Plan, the Compensation Committee may use its discretion to increase
bonus awards.
|
|
|
3 |
|
Beverly Enterprises, Inc. and Renal Care
Group, Inc. were dropped from the list of Comparator Companies because they
were no longer publicly traded and HealthSouth Corporation was added as a
Comparator Company. |
21
For 2006, the Potential Bonus for each Named Executive Officer was tied to the Companys
performance measured against the following goals set in advance by the Compensation Committee:
|
|
|
Twenty percent (20%) of the Potential Bonus was payable only if the Company achieved
net revenues from continuing operations of at least $2,337,900,000 (excluding 2006
hospital acquisitions). For 2006, the Company obtained net revenue from continuing
operations of $2,348,600,000 (excluding 2006 hospital acquisitions). Because the
Company exceeded the goal, 24.8% of the Potential Bonus was awarded; |
|
|
|
|
Twenty percent (20%) of the Potential Bonus was payable only if the Company achieved
adjusted EBITDA from continuing operations of at least $440,400,000 (excluding 2006
hospital acquisitions).4 For 2006, the Company achieved adjusted EBITDA from
continuing operations of $439,800,000 (excluding 2006 hospital acquisitions) and 19.7%
of the Potential Bonus was awarded. The Companys adjusted EBITDA from continuing
operations is calculated as follows: |
|
|
|
|
|
Revenues |
|
$ |
2,439,700,000 |
|
Salaries and benefits |
|
|
(960,600,000 |
) |
Supplies |
|
|
(340,100,000 |
) |
Other operating expenses |
|
|
(421,600,000 |
) |
Provision for doubtful accounts |
|
|
(266,700,000 |
) |
|
|
|
|
|
|
|
450,700,000 |
|
|
|
|
|
|
2006 hospital acquisitions
adjusted EBITDA |
|
|
(10,900,000 |
) |
|
|
|
|
|
|
$ |
439,800,000 |
|
|
|
|
|
|
|
|
Eighteen percent (18%) of the Potential Bonus was tied to the cultural and
procedural integration of hospitals acquired in 2005. Such measure required the
consistent implementation in the acquired hospitals of the Companys policies and
procedures and communication by the EPIP Executives of the Companys high standards of
ethical and legal compliance, and the full 18% was awarded; |
|
|
|
|
Twelve percent (12%) of the Potential Bonus was tied to constituency satisfaction,
one element of the Values Focus, as measured by surveys conducted by third parties.
Three percent (3%) of this criteria was tied to exceeding either the prior Company
average or the national average in each of the following areas: (1) outpatient
satisfaction; (2) inpatient satisfaction; (3) physician satisfaction; and (4) employee
satisfaction. Inpatient satisfaction was achieved for 2006 and 3% of the Potential
Bonus was awarded; |
|
|
|
|
Twelve percent (12%) of the Potential Bonus was tied to accreditation of the
Companys hospitals by The Joint Commission. Based on the percentage of the Companys
hospitals that achieved accreditation by The Joint Commission, the entire 12%, or a
portion thereof, could be earned. As of December 31, 2006, all of the Companys acute
care hospitals were accredited by The Joint Commission, and the full 12% was awarded; |
|
|
|
|
Twelve percent (12%) of the Potential Bonus was tied to physician recruitment and
retention, consistent with the Values Focus and Financial Performance Core Principles,
because physician recruitment and retention are key drivers of the Companys business.
The Named Executive Officers earned 6% of the Potential Bonus if during 2006 the
Company recruited 164 new physicians and an additional 6% if the Companys retention
rate was equal to or greater than the national average. During 2006, the Company
recruited 182 new physicians and had a retention rate of 95.4%, compared to a national
average rate of 88%, and the full 12% was awarded; and |
|
|
|
|
Six percent (6%) of the Potential Bonus was tied to development and acquisition
activity of the Company. For 2006, the goal was the successful resolution of a proposed
acquisition of hospitals from HCA Inc. This goal was achieved and the full 6% was
awarded. |
|
|
|
4 |
|
For NEO Division Presidents, 10% of the
Potential Bonus was based on the EBITDA of the division of the Company over
which they are President. The other 10% of the Potential Bonus for this
criteria was based on the adjusted EBITDA of the Company as described herein.
Each of the divisions of the NEO Division Presidents exceeded this goal.
Therefore, Ms. Koford was awarded 29.9% and Mr. Weiss was awarded 22.8% of the
Potential Bonus for this criteria. |
22
While the Bonus Performance Goals are the same for each of the Named Executive Officers,
except as noted for the NEO Division Presidents, the actual Bonus Payment may vary materially
depending on the Named Executive Officers position. Before setting each Bonus Performance Goal,
and also before making any actual Bonus Payment, the Compensation Committee, in consultation with
the Compensation Consultants, calculated each Named Executive Officers Potential Bonus award plus
his or her base salary to determine the Total Cash Compensation amount and evaluated the Total
Cash Compensation against that of Comparable Executives. The actual Bonus Payment made to each
individual Named Executive Officer is shown in the Summary Compensation Table.
Long-Term Incentives
Consistent with the Core Principles of Competitiveness and Financial Performance, the
Compensation Committee granted the Named Executive Officers long-term incentives in 2006. As in
recent years, these long-term incentives were exclusively in the form of equity awards of (1)
non-qualified options to purchase shares of the Companys Common Stock (Options) and (2)
restricted shares of Common Stock (Restricted Shares and collectively with Options, the Equity
Compensation).
The Compensation Committee granted two Options for each Restricted Share to each of the Named
Executive Officers in 2006. This award reflected the Compensation Committees desire to deliver
reasonably balanced expected values through each type of equity award and the Companys estimated
fair values for each type of grant. The Company has granted a combination of Options and Restricted
Shares since 2004, with the primary objectives of enhancing key employee retention and using shares
more efficiently.
For 2006, Total Cash Compensation combined with Equity Compensation generally resulted in
Total Direct Compensation for the Named Executive Officers between the median and the
75th percentile of Total Direct Compensation for Comparable Executives, depending on
individual performance.
In discharging its responsibility for administering the Companys stock-based compensation
programs, the Compensation Committee regularly monitors and evaluates the total cost of such
programs. Each year, the Management Consultant prepares an analysis of the Companys programs in
the areas of total share utilization, annual grant rates and operating expense as compared to the
Comparator Companies. The analysis results are used by the Compensation Committee in evaluating
managements annual equity grant recommendations for all program participants, including the Named
Executive Officers. Overall, the Companys total stock compensation costs historically have been
between the median and the 75th percentile of Comparator Company levels. In evaluating
the Companys total cost from stock compensation programs, the Compensation Committee takes into
consideration that compared to the practices of the Comparator Companies, the Companys retirement
benefit programs are relatively conservative, particularly for the Named Executive Officers.
Option Awards
In 2006, all Options grants to the Named Executive Officers were made by the Compensation
Committee at its regularly scheduled February meeting, except for additional Options granted to Mr.
Carpenter at the regular meeting held in September, following his appointment as CEO. The regular
meetings of the Compensation Committee do not typically coincide with earnings releases or other
periodic filings of the Company likely to have a material effect on the stock price of the Company
and are scheduled in advance without regard to such events. Pursuant to the provisions of the LTIP,
the exercise price of an Option is set as the closing price of the Companys stock on the most
recent trading date prior to the grant date. The Compensation Committee does not grant options with
reload features and has a policy against re-pricing stock options. Consistent with the Core
Principles, all Options granted in 2006 to Named Executive Officers vest in three equal
installments on the first, second and third anniversaries following the grant date.
Restricted Share Awards
In 2006, the Compensation Committee granted Restricted Shares to the Named Executive Officers.
As with Options, all Restricted Shares granted to the Named Executive Officers were made by the
Compensation Committee at its regularly scheduled February meeting, except for additional
Restricted Shares granted to Mr. Carpenter at the regular meeting held in September, following his
appointment as CEO. The Restricted Shares granted to the NEO Division Presidents vest upon the
third anniversary of the grant date. The EPIP and Section 162(m) of the Code require that
Restricted Shares granted to the EPIP Executives vest based upon the satisfaction of both continued
employment and achievement of performance criteria. As a result, Restricted Shares granted to each
EPIP Executive
23
vest upon the third anniversary of the grant date, but only if the EPIP Executive continues to be
employed by the Company through December 31, 2008 and if the Company achieves specified performance
goals (the Vesting Goals). For the 2006 grant of Restricted Shares to the EPIP Executives, the
Compensation Committee set the Vesting Goals as achievement by the Company of either (1) net
revenue of $2,250,000,000 or (2) adjusted EBITDA of $450,000,000, in any of fiscal years 2006, 2007
or 2008. These Vesting Goals were met by the Company in 2006.
Employee Benefits
Consistent with the Core Principles of Internal Equity and Simplicity, Named Executive
Officers are generally entitled only to benefits consistent with those offered to other employees
of the Company, except to the extent such benefits are integrally and directly related to the
performance of the Named Executive Officers duties. The Company offers group life, disability,
medical, dental and vision insurance, an employee stock ownership program and other comparable
benefits to all employees. The Company offers the MSPP, available to certain management level
employees of the Company, including the Named Executive Officers, which allows participants to
reduce their base salary, up to a maximum percentage, and purchase Common Stock at an amount equal
to 75% of the average market value, which is consistent with the Financial Performance Core
Principle. Shares purchased under the MSPP vest only if the participant remains an employee of the
Company on the three year anniversary of the date such shares were purchased.
The Company maintains a Retirement Plan, which allows eligible employees, including the Named
Executive Officers, to elect to contribute a portion of their compensation to the Retirement Plan
and for which the Company provides matching contributions of up to 3% of a participants base
salary, which contribution is made in shares of the Companys common stock from the Companys
Employee Stock Ownership Plan. Shares contributed by the ESOP vest on a pro-rata basis based upon
the number of years the participant remains employed by the Company. The retirement benefit is
based solely on the contributions to each employees account and the investment of those
contributions in the Retirement Plan.
While the Company maintains an aircraft, the Named Executive Officers are not generally
entitled to use the aircraft for personal travel. On rare occasions, Named Executive Officers have
taken immediate family members with them when traveling on the Company aircraft for business
purposes at no incremental cost to the Company.
Change in Control
The Company maintains a Change in Control Severance Plan (the Change in Control Plan), which
may provide certain payments and benefits to eligible employees, including the Named Executive
Officers, upon a change in control. The Change in Control Plan provides severance benefits to
participants whose employment is terminated or otherwise adversely impacted within 18 months of a
change in control of the Company. The Board adopted the Change in Control Plan to increase the
likelihood that key management personnel are retained during any period of potential or actual
corporate transactions involving a change in control of the Company. The Compensation Committee
believes that the provisions of the Change in Control Plan are consistent with those offered by the
Comparator Companies and other organizations of similar size in general industry.
During 2005, the Committee amended the LTIP so that full vesting of outstanding equity awards
following a change in control of the Company also requires a second trigger either termination
of employment within 18 months or a determination by the acquiring entity to not issue substitute
or replacement awards upon the closing of the transaction. By taking this action, the Compensation
Committee ensured that the Named Executive Officers will only receive additional benefits from a
change in control of the Company if such an event also has an adverse economic impact on them
individually. For more information about the Change in Control Plan, please refer to the section
below entitled COMPENSATION OF EXECUTIVE OFFICERS Potential Payments upon Termination or
Change-in-Control Change in Control Arrangements.
Compensation of the Individual Named Executive Officers
Mr. Donahey
Mr. Donaheys base salary, Potential Bonus and Equity Compensation were established by the
Compensation Committee in February 2006, after consultation with the Compensation Consultants. The
Compensation Committee increased Mr. Donaheys base salary for 2006 by 3.2% from 2005. As the
Companys Chairman of the Board of Directors and CEO, Mr. Donaheys Total Direct Compensation was
established at approximately the 50th percentile of the Comparator Companies.
24
Pursuant to the EPIP, Mr. Donaheys Potential Bonus was established at 100% of his base
salary. In February 2006, the Compensation Committee awarded Equity Compensation to Mr. Donahey in
amounts comparable to awards granted for the prior year, absent a special 2005 grant of Equity
Compensation related to the business combination with Province.
In June 2006, the Board of Directors negotiated, and Mr. Donahey executed, a Separation
Agreement which provided for an aggregate payment to Mr. Donahey of $3.5 million in two equal
installments and the indemnification of Mr. Donahey for any excise taxes which may be imposed in
connection with such payments. The Company does not expect that any such excise taxes will be
imposed.
Messrs. Carpenter, Culotta and Gracey
While Mr. Donahey was CEO, he expressed a desire to create and maintain an executive team
management policy whereby each of the EVP, CFO and COO would be compensated at the same level of
Total Direct Compensation. This approach was reflected in the 2006 compensation recommendation for
the EPIP Executives. Notwithstanding this executive team approach, the Management Consultant
attempted to benchmark each of those executives against Comparable Executives at the Comparator
Companies and the Compensation Committee considered the results in evaluating the compensation
recommendations for the EPIP Executives. Because of the unique roles of each of the EPIP
Executives, Comparable Executives were not all readily identifiable and the Compensation Committee
determined that the most useful benchmark for each of the EVP, CFO and COO was an average of the
second, third and fourth highest paid executives at the Comparator Companies. Using these
benchmarks, each of the EVP, CFO and COO was compensated at a rate between the median and the
75th percentile for Total Direct Compensation, which is a result of Internal Equity and
the Compensation Committees analysis of the long-term performance and experience of each of these
individuals. The Potential Bonus for each of the EVP, COO and CFO was 75% of base salary.
Following Mr. Carpenters appointment as CEO in June 2006, after consultation with the
Compensation Consultants, Mr. Carpenters base salary was reevaluated and adjusted by the
Compensation Committee in September 2006, effective as of the date of his appointment. The
Compensation Committee also granted Mr. Carpenter additional Equity Compensation and raised his
Potential Bonus to 100% of his base salary. Because Mr. Carpenter was new to the role of CEO, was
promoted internally and did not also hold the office of Chairman of the Board, his Total Direct
Compensation was set at the low end of the range of the Comparable Executives and at a lower level
than that of Mr. Donahey.
The Carpenter Severance Agreement imposes certain obligations on the Company upon the
termination of Mr. Carpenters employment, including, if he is terminated without cause, the
continuation of certain benefits for a period of 24 months and the payment of severance (in
addition to his salary and any earned but unpaid bonus through the date of termination). Any such
severance received by Mr. Carpenter would be conditioned upon Mr. Carpenters release of all claims
against the Company and be paid in an amount equal to his then current base salary for a period of
24 months following the date of termination of his employment plus an amount equal to two times Mr.
Carpenters bonus earned for the prior fiscal year, which bonus amount would be paid in equal
amounts, ratably, over the 24-month period following the date of termination of his employment.
Cause is defined as (a) a material breach of the terms of the agreement or repeated failure to
perform his duties in a manner reasonably consistent with the criteria established or directions
given by the Board of Directors, (b) any action constituting fraud, self-dealing, embezzlement, or
dishonesty, or (c) conviction of a crime involving moral turpitude or any felony. In the event of
a breach by Mr. Carpenter of any of the restrictive covenants contained in the Carpenter Severance
Agreement, Mr. Carpenter would forfeit additional severance payments from the date of the breach.
The Carpenter Agreement does not alter the payments and benefits due to Mr. Carpenter in the event
of his termination following a change in control of the Company, which are governed by the Change
in Control Plan.
Ms. Koford and Mr. Weiss
The Compensation Committee set compensation for the NEO Division Presidents consistent with
its evaluation of Internal Equity and Competitiveness. The NEO Division Presidents were compensated
near the median of Comparable Executives for 2006 with regard to base salary and Total Cash
Compensation was at the 50th percentile for Comparable Executives based on Total Direct
Compensation. The NEO Division Presidents Potential Bonus was set at 50% of their respective base
salaries. The Compensation Committee also reviewed the compensation of other Division Presidents
within the Company and other senior executives in the same salary grade
25
and Internal Equity dictated that those lateral senior executives be compensated similarly to the
NEO Division Presidents.
Conclusion
The Compensation Committee believes that its decisions with respect to compensation paid to
the Named Executive Officers for 2006 are consistent with the Core Principles.
26
COMPENSATION OF EXECUTIVE OFFICERS
Executive Officers of the Company
The following list identifies the name, age and position(s) of the executive officers of the
Company:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
William F. Carpenter III
|
|
|
52 |
|
|
President and Chief Executive Officer |
Michael J. Culotta
|
|
|
52 |
|
|
Chief Financial Officer |
William M. Gracey
|
|
|
53 |
|
|
Chief Operating Officer |
Paul D. Gilbert
|
|
|
40 |
|
|
Senior Vice President, General Counsel and Secretary;
Corporate Governance Officer |
Jess N. Judy
|
|
|
57 |
|
|
Division President |
Robert N. Klein
|
|
|
46 |
|
|
Division President |
Joné Law Koford
|
|
|
50 |
|
|
Division President |
Thomas M. Weiss
|
|
|
52 |
|
|
Division President |
Michael A. Wiechart
|
|
|
41 |
|
|
Division President |
R. Scott Raplee
|
|
|
41 |
|
|
Senior Vice President, Operations Chief Financial Officer |
Gary D. Willis
|
|
|
42 |
|
|
Senior Vice President and Chief Accounting Officer |
The term of each executive officer runs until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal. The following is a
biographical summary of the experience of the executive officers of the Company who are not members
of the Companys Board of Directors:
Michael J. Culotta has served as CFO of the Company since November 2001. Prior to joining the
Company, Mr. Culotta served as a partner and healthcare area industry leader for the southeast area
at Ernst & Young LLP. Mr. Culotta was affiliated with Ernst & Young LLP for over 24 years. Mr.
Culotta is a director of Evolved Digital Systems, Inc., a provider of IT services to clients in the
healthcare industry, and serves as lead director and as the chair of its audit committee.
William M. Gracey has been Chief Operating Officer of the Company since February 2004. From
May 11, 1999 until February 2004, Mr. Gracey was a Division President of the Company. From July
1998 until May 11, 1999, Mr. Gracey served as a division president of the America Group of HCA.
Prior to that time, Mr. Gracey served in various operations positions with HCA. Mr. Gracey is the
immediate past chairman of the Tennessee Hospital Association. Mr. Gracey is a member of the board
of directors of BlueCross BlueShield of Tennessee and serves as the hospital representative for the
State of Tennessee.
Paul D. Gilbert has been the Senior Vice President and General Counsel, Corporate Secretary
and Corporate Governance Officer of the Company since August 8, 2006. Prior to such time, Mr.
Gilbert was a partner of the law firm of Waller Lansden Dortch & Davis, LLP from January 1, 1999 to
August 6, 2006, where he advised investor owned and not-for-profit hospitals and health systems,
psychiatric and behavioral health facilities and other healthcare facilities on a broad range of
transactional, corporate governance and financing matters.
Jess N. Judy has been a Division President of the Company since February 2006. From October
2003 to January 2006, Mr. Judy served as the president and chief executive officer of Austin
Surgical Hospital in Austin, Texas. For seven years prior to that time, Mr. Judy served as senior
vice president, Operations for Aveta Health, Inc. Prior to that time, Mr. Judy served in various
operations positions with Heritage Health Systems, Inc., Community Cardiac Services, Inc. and HCA.
Robert N. Klein has been a Division President of the Company since November 2005. From
November 1997 to October 2005, Mr. Klein served as the chief executive officer for HCAs Skyline
Medical Center in Nashville, Tennessee and HCAs Hendersonville Medical Center in Hendersonville,
Tennessee. Prior to that time, Mr. Klein served in various other hospital executive positions with
HCA and Baptist Medical Centers in Birmingham, Alabama.
Joné Law Koford has been a Division President of the Company since September 2001. From May
2001 until August 2001, Ms. Koford served as Vice President of Development for the Company. Prior
to that, Ms. Koford served in various operations positions with Altius Health Plans, Strategic
Health Initiatives, Arcon Healthcare, Inc., HCA and HealthTrust, Inc. The Hospital Company.
27
Thomas M. Weiss has been a Division President of the Company since September 2003. From August
2001 to August 2003, Mr. Weiss served as the chief executive officer of the Companys Lake
Cumberland Regional Hospital in Somerset, Kentucky. For 10 years prior to that time, Mr. Weiss
served as the chief executive officer of Crestwood Medical Center in Huntsville, Alabama.
Michael A. Wiechart has been a Division President of the Company since March 2004. From May
1999 until February 2004, Mr. Wiechart served as a Division Chief Financial Officer of the Company.
From 1998 to 1999, Mr. Wiechart served as vice president/operations controller of Province. Prior
to that time, Mr. Wiechart served in various financial positions with HCA.
R. Scott Raplee has been Senior Vice President, Operations Chief Financial Officer of the
Company since March 2004. From May 1999 until February 2004, Mr. Raplee served as a Division Chief
Financial Officer of the Company. Prior to that time, Mr. Raplee served in various financial
positions with HCA.
Gary D. Willis has served as Senior Vice President and Chief Accounting Officer of the Company
since February 2006. From December 2002 to February 2006, Mr. Willis served as Vice President and
Controller of the Company. From April 2002 to December 2002, Mr. Willis served as chief accounting
officer of Central Parking Corporation, a company that owns, leases and manages parking facilities.
From 1995 to March 2002, Mr. Willis held various positions, including chief accounting officer,
with Gaylord Entertainment Company.
Summary Compensation Table
Decisions on compensation for the Companys executive officers are made by the Compensation
Committee of the Board of Directors. No member of the Compensation Committee is a current or former
employee or officer of the Company or any of its affiliates. The Compensation Committee is
responsible for approving compensation arrangements for executive management of the Company,
including the CEO, reviewing compensation plans relating to officers, approving equity-based
compensation grants, reviewing other benefits under the Companys employee benefit plans and
reviewing generally the Companys employee compensation policy.
The table below sets forth the compensation of the CEO, the CFO, the three other most highly
compensated executive officers and Mr. Donahey, our former Chairman, President and Chief Executive
Officer who resigned on June 25, 2006. These individuals may be referred to in this Proxy Statement
as the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Compen- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Compen- |
|
sation |
|
All Other |
|
|
Name and Principal Position |
|
Year(1) |
|
Salary |
|
Bonus(2) |
|
Awards(3) |
|
Awards(4) |
|
sation(5) |
|
Earnings |
|
Compensation(6) |
|
Total |
William F. Carpenter III |
|
|
2006 |
|
|
$ |
598,558 |
|
|
$ |
|
|
|
$ |
834,603 |
|
|
$ |
498,036 |
|
|
$ |
525,250 |
|
|
$ |
|
|
|
$ |
7,065 |
|
|
$ |
2,463,512 |
|
President and Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Culotta |
|
|
2006 |
|
|
|
490,385 |
|
|
|
|
|
|
|
783,539 |
|
|
|
455,427 |
|
|
|
358,125 |
|
|
|
|
|
|
|
8,785 |
|
|
|
2,096,261 |
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William M. Gracey |
|
|
2006 |
|
|
|
490,385 |
|
|
|
|
|
|
|
773,440 |
|
|
|
455,427 |
|
|
|
358,125 |
|
|
|
|
|
|
|
13,665 |
|
|
|
2,091,042 |
|
Chief Operating Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joné Law Koford |
|
|
2006 |
|
|
|
363,077 |
|
|
|
|
|
|
|
413,802 |
|
|
|
202,412 |
|
|
|
192,903 |
|
|
|
|
|
|
|
4,938 |
|
|
|
1,169,378 |
|
Division President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas M. Weiss |
|
|
2006 |
|
|
|
358,077 |
|
|
|
|
|
|
|
414,202 |
|
|
|
202,412 |
|
|
|
177,480 |
|
|
|
|
|
|
|
11,511 |
|
|
|
1,155,528 |
|
Division President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth C. Donahey |
|
|
2006 |
|
|
|
410,577 |
|
|
|
|
|
|
|
(864,307 |
) |
|
|
200,919 |
|
|
|
|
|
|
|
|
|
|
|
1,914,247 |
(7) |
|
|
1,661,436 |
|
Former Chairman,
President and Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In accordance with SEC transition rules, this table reflects compensation to the Named
Executive Officers only for the most recently completed fiscal year. Information for years
prior to the most recently completed fiscal year presented |
28
|
|
|
|
|
under previous SEC rules is available in the Companys previous filings, which can be obtained
from the SECs website at www.sec.gov. |
|
(2) |
|
Reflects discretionary bonuses granted under the EPIP and the Bonus Plan. No such bonuses
were paid in 2006. |
|
(3) |
|
Reflects the fair value for restricted stock awards granted under the LTIP and the fair value
relating to the incremental value of restricted Common Stock acquired pursuant to the MSPP
received on the share purchase date, in accordance with FAS 123R, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Common |
|
|
|
|
Restricted Stock Awards |
|
Stock Acquired under |
|
|
Name |
|
Granted under the LTIP |
|
the MSPP |
|
Total Stock Awards |
William F. Carpenter III |
|
$ |
834,603 |
|
|
$ |
|
|
|
$ |
834,603 |
|
Michael J. Culotta |
|
|
773,029 |
|
|
|
10,510 |
|
|
|
783,539 |
|
William M. Gracey |
|
|
773,029 |
|
|
|
411 |
|
|
|
773,440 |
|
Joné L. Koford |
|
|
406,048 |
|
|
|
7,754 |
|
|
|
413,802 |
|
Thomas M. Weiss |
|
|
406,048 |
|
|
|
8,154 |
|
|
|
414,202 |
|
Kenneth C. Donahey |
|
|
(864,307 |
) |
|
|
|
|
|
|
(864,307 |
) |
|
|
|
|
|
The assumptions used in calculating the accrued values are set forth in Note 7 to the
Companys financial statements included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2006. |
|
(4) |
|
Reflects the fair value for stock option awards granted under the LTIP in accordance with FAS
123R. The assumptions used in calculating the accrued values are set forth in Note 7 to the
Companys financial statements included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2006. |
|
(5) |
|
Reflects cash awards earned during 2006 under the EPIP and the Bonus Plan. |
|
(6) |
|
Details of the amounts reported as All Other Compensation are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life |
|
Long-term |
|
Opting out |
|
Retirement |
|
Personal Use |
|
Total All |
|
|
Insurance |
|
Disability |
|
of the |
|
Plan |
|
of Company |
|
Other |
Name |
|
Premiums |
|
Insurance |
|
Dental Plan |
|
Contribution |
|
Aircraft* |
|
Compensation |
William F. Carpenter III |
|
$ |
951 |
|
|
$ |
2,060 |
|
|
$ |
|
|
|
$ |
4,054 |
|
|
$ |
|
|
|
$ |
7,065 |
|
Michael J. Culotta |
|
|
951 |
|
|
|
|
|
|
|
|
|
|
|
7,834 |
|
|
|
|
|
|
|
8,785 |
|
William M. Gracey |
|
|
951 |
|
|
|
2,060 |
|
|
|
|
|
|
|
10,654 |
|
|
|
|
|
|
|
13,665 |
|
Joné L. Koford |
|
|
751 |
|
|
|
2,060 |
|
|
|
|
|
|
|
2,127 |
|
|
|
|
|
|
|
4,938 |
|
Thomas M. Weiss |
|
|
738 |
|
|
|
2,060 |
|
|
|
|
|
|
|
8,713 |
|
|
|
|
|
|
|
11,511 |
|
Kenneth C. Donahey |
|
|
820 |
|
|
|
1,030 |
|
|
|
28 |
|
|
|
10,755 |
|
|
|
3,922 |
|
|
|
16,555 |
|
|
|
|
* |
|
The Company reports use of the corporate aircraft by the Named Executive Officers
as a perquisite or other personal benefit only if it is not integrally and directly
related to the performance of the executives duties. While the Company maintains an
aircraft, the Named Executive Officers are not generally entitled to use the aircraft
for personal travel. SEC rules require the Company to report any such use as
compensation in an amount equal to the Companys aggregate incremental cost. On certain
occasions, immediate family members accompanied Named Executive Officers on the Company
aircraft for trips that were integrally and directly related to the performance of the
executives duties. Because these immediate family members used unoccupied space on
flights that were already scheduled for business purposes, the Company did not recognize
any incremental cost in connection with such use and, therefore, does not report any
compensation related to the flights. The amount reported for Mr. Donahey relates to a
one-way flight involving Mr. Donahey and an immediate family member, which includes a
portion of a subsequent flight with no passengers, that was not integrally and directly
related to Mr. Donaheys duties. The incremental cost of this use of the corporate
aircraft is calculated by multiplying the aircrafts hourly variable operating cost for
the Company in 2006 times the trips flight time. Variable operating costs include the
following: aircraft fuel and oil; repairs and maintenance; parking and landing fees;
hangar rental costs; permit fees; insurance; crew expenses; supplies; and depreciation
of the aircraft. |
|
|
|
|
(7) |
|
Includes $1,750,000 that was paid during 2006 pursuant to a Separation Agreement and $147,692
with respect to accrued paid time off in connection with Mr. Donaheys termination of
employment. |
As discussed in the section entitled COMPENSATION DISCUSSION AND ANALYSIS, the
Compensation Committee allocates compensation to the Named Executive Officers both as to specific
components (for example, base salary, bonus and equity awards) and as to total compensation. While
considering each component of compensation, the Compensation Committee is relatively more focused
on each Named Executive Officers total compensation, rather than the individual components that
make up an executives total compensation.
29
Executive Severance and Restrictive Covenant Agreement with Mr. Carpenter
On December 11, 2006, LifePoint CSGP, LLC, a wholly-owned subsidiary of the Company, entered
into the Carpenter Severance Agreement with William F. Carpenter III, the Companys CEO. In the
event that Mr. Carpenter is terminated by LifePoint CSGP (other than pursuant to a change in
control as discussed below), the Carpenter Severance Agreement specifies the respective rights and
obligations of LifePoint CSGP and Mr. Carpenter.
Pursuant to the Carpenter Severance Agreement, Mr. Carpenter continues to be employed at will
and receives compensation in an amount determined by the Board of Directors or a committee thereof.
The Carpenter Severance Agreement includes provisions that prohibit Mr. Carpenter from competing
with or soliciting employees or consultants of the Company and its affiliates during his employment
period and for a period of 24 months thereafter or disclosing confidential information of the
Company and its affiliates. The Carpenter Severance Agreement imposes certain obligations on the
Company upon the termination of Mr. Carpenters employment, including, if he is terminated without
cause, the continuation of certain benefits for a period of 24 months and the payment of severance
(in addition to his salary and any earned but unpaid bonus through the date of termination). Any
such severance received by Mr. Carpenter would be conditioned upon Mr. Carpenters release of all
claims against the Company and be paid in an amount equal to his then current base salary for a
period of 24 months following the date of termination of his employment plus an amount equal to two
times Mr. Carpenters bonus earned for the prior fiscal year, which bonus amount would be paid in
equal amounts, ratably, over the 24-month period following the date of termination of his
employment. Cause is defined as (a) a material breach of the terms of the agreement or repeated
failure to perform his duties in a manner reasonably consistent with the criteria established or
directions given by the Board of Directors, (b) any action constituting fraud, self-dealing,
embezzlement, or dishonesty, or (c) conviction of a crime involving moral turpitude or any felony.
In the event of a breach by Mr. Carpenter of any of the restrictive covenants contained in the
Carpenter Severance Agreement, Mr. Carpenter would forfeit additional severance payments from the
date of the breach. The Carpenter Agreement does not alter the payments and benefits due to Mr.
Carpenter in the event of his termination following a change in control of the Company, which are
governed by the Change in Control Plan.
Separation Agreement with Kenneth C. Donahey
Effective June 25, 2006, the Company entered into a separation agreement with Kenneth C.
Donahey, who had served as the Companys Chairman, President and Chief Executive Officer (the
Separation Agreement). The Separation Agreement terminated the employment agreement between the
Company and Mr. Donahey, effective June 25, 2001, as amended and restated effective as of December
31, 2004 (the Donahey Employment Agreement). Mr. Donahey is entitled to receive $3.5 million in
two equal installments, one of which was paid December 27, 2006 and the second of which is due June
26, 2007. The Company also agreed to indemnify Mr. Donahey for any excise taxes which may be
imposed in connection with such payments. The Company does not expect that any such excise taxes
will be imposed. The confidentiality provisions of the Donahey Employment Agreement remain in
effect for 36 months. During that period, Mr. Donahey may exercise his vested stock options. For a
period of two years, he will receive insurance benefits comparable to those available to Company
executives. The Separation Agreement also provided for a mutual release of claims, except for any
indemnity claims to which Mr. Donahey may be entitled and for breaches of the Separation Agreement.
Mr. Donahey agreed not to compete with the Company for a period of one year in non-urban hospitals,
diagnostic/imaging or surgery centers, and the physician recruitment business, subject to certain
limitations, and he agreed not to induce or encourage the departure of Company employees for a
period of one year.
30
Grants of Plan-Based Awards
Certain information concerning each grant of an award made to a Named Executive Officer during
2006 is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
Exercise |
|
Date Fair |
|
|
|
|
|
|
Possible Future Payouts Under |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
or Base |
|
Value of |
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
Estimated Future Payouts Under |
|
Shares of |
|
Securities |
|
Price of |
|
Stock and |
|
|
|
|
|
|
Awards(1) |
|
Equity Incentive Plan Awards(2) |
|
Stock or |
|
Underlying |
|
Option |
|
Option |
Name |
|
Grant Date |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
Units(3) |
|
Options |
|
Awards(4) |
|
Awards(5) |
William F. Carpenter III |
|
|
02/22/2006 |
|
|
$ |
16,500 |
|
|
$ |
550,000 |
|
|
$ |
749,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
President and Chief |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734,175 |
|
Executive Officer |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
33.02 |
|
|
|
557,577 |
|
|
|
|
09/18/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631,340 |
|
|
|
|
09/18/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
36.22 |
|
|
|
451,210 |
|
Michael J. Culotta |
|
|
02/22/2006 |
|
|
|
11,250 |
|
|
|
375,000 |
|
|
|
510,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734,175 |
|
|
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
33.02 |
|
|
|
557,577 |
|
|
|
|
07/01/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,190 |
|
|
|
|
|
|
|
|
|
|
|
48,388 |
|
William M. Gracey |
|
|
02/22/2006 |
|
|
|
11,250 |
|
|
|
375,000 |
|
|
|
510,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Operating Officer |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734,175 |
|
|
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
33.02 |
|
|
|
557,577 |
|
|
|
|
07/01/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
9,671 |
|
Joné Law Koford |
|
|
02/22/2006 |
|
|
|
2,738 |
|
|
|
182,500 |
|
|
|
249,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Division President |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
326,300 |
|
|
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
33.02 |
|
|
|
247,812 |
|
|
|
|
07/01/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
24,258 |
|
Thomas M. Weiss |
|
|
02/22/2006 |
|
|
|
2,700 |
|
|
|
180,000 |
|
|
|
246,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Division President |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
326,300 |
|
|
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
33.02 |
|
|
|
247,812 |
|
|
|
|
07/01/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,116 |
|
|
|
|
|
|
|
|
|
|
|
35,857 |
|
Kenneth C. Donahey |
|
|
02/22/2006 |
|
|
|
24,000 |
|
|
|
800,000 |
|
|
|
1,090,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chairman, |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,631,500 |
|
President and Chief |
|
|
02/22/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
33.02 |
|
|
|
1,239,060 |
|
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects cash bonus awards granted under the EPIP or the Bonus Plan, as applicable, where
receipt is contingent upon the achievement of certain performance goals. Threshold amount is
equal to 3.0% of target amount for Messrs. Carpenter, Culotta, Gracey and Donahey and 1.5% of
target amount for Ms. Koford and Mr. Weiss. Maximum amount is equal to 136.25% of target
amount for Messrs. Carpenter, Culotta, Gracey and Donahey and 136.875% of target amount for
Ms. Koford and Mr. Weiss. For more information about the cash bonus awards and performance
goals for the Named Executive Officers, please refer to the section above entitled
COMPENSATION DISCUSSION AND ANALYSIS. |
|
(2) |
|
Reflects restricted stock awards granted under the EPIP where vesting is contingent upon the
achievement of certain performance goals. For more information about the vesting criteria,
please refer to the section above entitled COMPENSATION DISCUSSION AND ANALYSIS. |
|
(3) |
|
Reflects restricted stock awards granted under the LTIP and shares acquired under the MSPP,
except for Mr. Culotta, whose total also reflects 684 shares acquired under the ESPP, which
had no grant date fair value. The amounts paid for shares acquired under the MSPP were as
follows: |
|
|
|
|
|
Name |
|
Amount Paid |
William F. Carpenter III |
|
$ |
|
|
Michael J. Culotta |
|
|
36,064 |
|
William M. Gracey |
|
|
7,208 |
|
Joné L. Koford |
|
|
18,080 |
|
Thomas M. Weiss |
|
|
26,725 |
|
Kenneth C. Donahey |
|
|
|
|
|
|
|
(4) |
|
Reflects the fair market value of a share of Common Stock, as set forth in the LTIP, as the
closing sales price of the Common Stock on the trading day immediately preceding the date of
grant. |
|
(5) |
|
Reflects the aggregate FAS 123R value of all awards made in 2006. Such amounts are not
apportioned over the service or vesting period, as opposed to the presentation in the Summary
Compensation Table. |
31
Outstanding Equity Awards at Fiscal Year-End
Certain information concerning unexercised options, stock that has not vested and equity
incentive plan awards for each Named Executive Officer outstanding as of the end of the 2006 fiscal
year is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Market or |
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Payout Value |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
Unearned |
|
of Unearned |
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Shares or |
|
Market Value |
|
Shares, Units |
|
Shares, Units |
|
|
Number of |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Units of |
|
of Shares or |
|
or Other |
|
or Other |
|
|
Securities Underlying |
|
Unexercised |
|
Option |
|
Option |
|
|
Stock That |
|
Units of Stock |
|
Rights That |
|
Rights That |
|
|
Unexercised Options |
|
Unearned |
|
Exercise |
|
Expiration |
|
|
Have Not |
|
That Have |
|
Have Not |
|
Have Not |
Name |
|
Exercisable |
|
Unexercisable |
|
Options |
|
Price |
|
Date |
|
|
Vested |
|
Not Vested |
|
Vested |
|
Vested |
William F. Carpenter III |
|
|
18,750 |
|
|
|
|
|
|
|
|
|
|
$ |
9.75 |
|
|
|
05/21/2009 |
|
|
|
|
18,000 |
(4) |
|
$ |
606,600 |
|
|
|
|
|
|
$ |
|
|
President and Chief |
|
|
36,250 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
06/01/2009 |
|
|
|
|
36,000 |
(5) |
|
|
1,213,200 |
|
|
|
|
|
|
|
|
|
Executive Officer |
|
|
227,756 |
|
|
|
|
|
|
|
|
|
|
|
10.81 |
|
|
|
06/07/2009 |
|
|
|
|
22,500 |
(6) |
|
|
758,250 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
37.13 |
|
|
|
02/09/2011 |
|
|
|
|
18,000 |
(6) |
|
|
606,600 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
02/24/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
30,000 |
(1) |
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
(2) |
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
(3) |
|
|
|
|
|
|
36.22 |
|
|
|
09/28/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Culotta |
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
31.44 |
|
|
|
12/12/2011 |
|
|
|
|
18,000 |
(4) |
|
|
606,600 |
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
36,000 |
(5) |
|
|
1,213,200 |
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
02/24/2013 |
|
|
|
|
22,500 |
(6) |
|
|
758,250 |
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
02/20/2014 |
|
|
|
|
1,044 |
(7) |
|
|
35,183 |
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
30,000 |
(1) |
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
1,050 |
(8) |
|
|
35,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
(2) |
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
1,506 |
(9) |
|
|
50,752 |
|
|
|
|
|
|
|
|
|
William M. Gracey |
|
|
18,750 |
|
|
|
|
|
|
|
|
|
|
|
9.75 |
|
|
|
05/21/2009 |
|
|
|
|
18,000 |
(4) |
|
|
606,600 |
|
|
|
|
|
|
|
|
|
Chief Operating Officer |
|
|
18,750 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
06/01/2009 |
|
|
|
|
36,000 |
(5) |
|
|
1,213,200 |
|
|
|
|
|
|
|
|
|
|
|
87,378 |
|
|
|
|
|
|
|
|
|
|
|
10.81 |
|
|
|
06/07/2009 |
|
|
|
|
22,500 |
(6) |
|
|
758,250 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
37.13 |
|
|
|
02/09/2011 |
|
|
|
|
301 |
(9) |
|
|
10,144 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
02/24/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
02/20/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
30,000 |
(1) |
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
(2) |
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joné Law Koford |
|
|
70,000 |
|
|
|
|
|
|
|
|
|
|
|
46.19 |
|
|
|
08/28/2011 |
|
|
|
|
10,000 |
(4) |
|
|
337,000 |
|
|
|
|
|
|
|
|
|
Division President |
|
|
6,667 |
|
|
|
13,333 |
(1) |
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
20,000 |
(6) |
|
|
674,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
(2) |
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
10,000 |
(6) |
|
|
337,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
832 |
(7) |
|
|
28,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
828 |
(8) |
|
|
27,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
755 |
(9) |
|
|
25,444 |
|
|
|
|
|
|
|
|
|
Thomas M. Weiss |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
46.19 |
|
|
|
08/28/2011 |
|
|
|
|
10,000 |
(4) |
|
|
337,000 |
|
|
|
|
|
|
|
|
|
Division President |
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
20,000 |
(5) |
|
|
674,000 |
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
02/24/2013 |
|
|
|
|
10,000 |
(6) |
|
|
337,000 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
27.46 |
|
|
|
08/25/2013 |
|
|
|
|
821 |
(7) |
|
|
27,668 |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
02/20/2014 |
|
|
|
|
816 |
(8) |
|
|
27,499 |
|
|
|
|
|
|
|
|
|
|
|
|
6,667 |
|
|
|
13,333 |
(1) |
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
1,116 |
(9) |
|
|
37,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
(2) |
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth C. Donahey |
|
|
37,500 |
|
|
|
|
|
|
|
|
|
|
|
9.75 |
|
|
|
05/21/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chairman, |
|
|
37,500 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
06/01/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief |
|
|
134,756 |
|
|
|
|
|
|
|
|
|
|
|
10.81 |
|
|
|
06/07/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer |
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
|
37.13 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
46.19 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,334 |
|
|
|
|
|
|
|
|
|
|
|
42.60 |
|
|
|
06/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These options become exercisable in three equal installments on April 22, 2006, April 22,
2007 and April 22, 2008. |
32
|
|
|
(2) |
|
These options become exercisable in three equal installments on February 22, 2007, February
22, 2008 and February 22, 2009. |
|
(3) |
|
These options become exercisable in three equal installments on September 28, 2007, September
28, 2008 and September 28, 2009. |
|
(4) |
|
These annual restricted stock award shares are subject to forfeiture in their entirety unless
the executive continues to be employed by the Company on April 22, 2008, at which time the
shares will become fully vested. |
|
(5) |
|
This one-time, special grant of restricted stock awards vests in three equal installments on
April 22, 2008, April 22, 2009 and April 22, 2010. With respect to the special restricted
stock awarded to Messrs. Culotta, Carpenter and Gracey, the vesting of the restricted shares
also required the realization of certain predetermined performance criteria which were met in
2005. |
|
(6) |
|
The vesting of the restricted stock awards granted to the executives was subject to the
achievement of certain predetermined performance criteria, in addition to the requirement of
continued service as an employee through December 31, 2008, which were met in 2006. |
|
(7) |
|
These shares of restricted stock purchased pursuant to the MSPP become unrestricted on July
1, 2008. |
|
(8) |
|
These shares of restricted stock purchased pursuant to the MSPP become unrestricted on
January 1, 2009. |
|
(9) |
|
These shares of restricted stock purchased pursuant to the MSPP become unrestricted on July
1, 2009. |
Option Exercises and Stock Vested
Certain information concerning each exercise of stock options and each vesting of stock,
including restricted stock, during 2006 for each Named Executive Officer on an aggregated basis is
set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
Acquired |
|
Value Realized |
|
Acquired |
|
Value Realized |
Name |
|
on Exercise |
|
on Exercise |
|
on Vesting |
|
on Vesting |
William F. Carpenter III |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Culotta |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William M. Gracey |
|
|
735 |
|
|
|
23,306 |
(1) |
|
|
|
|
|
|
|
|
Chief Operating Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joné Law Koford |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Division President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas M. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Division President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth C. Donahey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chairman, President and Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On January 25, 2006, Mr. Gracey exercised options to purchase 394 shares of Common Stock and
held such shares. Based on the closing price of $30.48 on that date, the intrinsic value
realized by Mr. Gracey was $12,009. On December 15, 2006, Mr. Gracey exercised options to
purchase 289 shares of Common Stock and held such shares, and Mr. Graceys wife exercised
options to purchase 52 shares of Common Stock and held such shares. Based on the closing price
of $33.13 on that date, the intrinsic value realized by Mr. Gracey was $9,575 and the
intrinsic value realized by Mr. Graceys wife was $1,722. Mr. Gracey disclaims beneficial
ownership of the shares of Common Stock held by his wife. |
Potential Payments upon Termination or Change-in-Control
The Company has entered into certain agreements and maintains certain plans that will require
the Company to provide compensation to Named Executive Officers in the event of a termination of
employment or a change in control of the Company. The amount of compensation payable to each Named
Executive Officer if each situation occurred on December 31, 2006 is listed in the tables below.
33
Mr. Carpenter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
525,250 |
(1) |
|
$ |
2,438,624 |
(2) |
|
$ |
|
|
|
$ |
4,350,000 |
(3) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380,934 |
(4) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,173,674 |
(5) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
26,466 |
(6) |
|
|
|
|
|
|
13,233 |
(7) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,196,856 |
(8) |
|
|
|
|
|
|
|
(1) |
|
Reflects the earned but unpaid target cash bonus amount payable upon any voluntary separation
of employment by Mr. Carpenter, in accordance with the Carpenter Severance Agreement. |
|
(2) |
|
Reflects a severance payment of Mr. Carpenters base salary as of December 31, 2006 for 24
months after termination plus an amount equal to two times the last bonus payment made to Mr.
Carpenter the prior fiscal year in accordance with the Carpenter Severance Agreement. The
severance payment to Mr. Carpenter is payable in several installments. |
|
(3) |
|
Reflects a severance payment of three times the sum of (a) the rate of Mr. Carpenters normal
annual compensation, which rate shall not be less than the highest rate in effect during the
six-month period immediately prior to the change in control, plus (b) Mr. Carpenters target
cash bonus amount, in accordance with the Change in Control Plan. |
|
(4) |
|
Reflects the intrinsic value of the shares of Common Stock underlying outstanding,
unexercised stock options, which become exercisable in accordance with the LTIP in the event
either (a) a surviving or acquiring entity does not assume such stock options or substitute
similar awards for such stock options or (b) a surviving or acquiring entity assumes such
stock options or substitutes such stock options with similar awards but Mr. Carpenters
employment is terminated without cause or for good reason, as set forth in the LTIP. |
|
(5) |
|
Reflects the intrinsic value of the outstanding, unvested restricted shares of Common Stock,
which become vested in accordance with the LTIP in the event either (a) a surviving or
acquiring entity does not assume such restricted shares or substitute similar awards for such
restricted shares or (b) a surviving or acquiring entity assumes such restricted shares or
substitutes such restricted shares with similar awards but Mr. Carpenters employment is
terminated without cause or for good reason, as set forth in the LTIP. |
|
(6) |
|
Reflects the premiums for medical, dental and life insurance benefits for a 24-month period
in accordance with the Carpenter Severance Agreement. |
|
(7) |
|
Reflects the premiums for medical, dental and life insurance benefits for a 12-month period
in accordance with the Change in Control Plan. |
|
(8) |
|
Reflects a payment of all excise taxes imposed under Section 4999 of the Code and any income
and excise taxes that are payable as a result of any reimbursements for Section 4999 excise
taxes in accordance with the Carpenter Severance Agreement. This calculation assumes maximum
federal and state income and Medicare tax rates and is based on a five-year average of
earnings reported on Form W-2 for the tax years 2001 through 2005. The Company does not
expect that any such excise taxes will be imposed. |
Mr. Culotta
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,625,000 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,800 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
934,463 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,172 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,311,167 |
(5) |
|
|
|
|
34
Mr. Gracey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,625,000 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,800 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894,845 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,233 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,166,997 |
(5) |
|
|
|
|
Ms. Koford
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,642,500 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,647 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
492,197 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,011 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
766,256 |
(5) |
|
|
|
|
Mr. Weiss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,620,000 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,647 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497,290 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,996 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
758,118 |
(5) |
|
|
|
|
|
|
|
(1) |
|
Reflects a severance payment of three times the sum of (a) the rate of the executives normal
annual compensation, which rate shall not be less than the highest rate in effect during the
six-month period immediately prior to the change in control, plus (b) the executives target
cash bonus amount, in accordance with the Change in Control Plan. |
|
(2) |
|
Reflects the intrinsic value of the shares of Common Stock underlying outstanding,
unexercised stock options, which become exercisable in accordance with the LTIP in the event
either (a) a surviving or acquiring entity does not assume such stock options or substitute
similar awards for such stock options or (b) a surviving or acquiring entity assumes such
stock options or substitutes such stock options with similar awards but the executives
employment is terminated without cause or for good reason, as set forth in the LTIP. |
|
(3) |
|
Reflects the intrinsic value of the outstanding, unvested restricted shares of Common Stock,
which become vested in accordance with the (i) LTIP in the event either (a) a surviving or
acquiring entity does not assume such restricted shares or substitute similar awards for such
restricted shares or (b) a surviving or acquiring entity assumes such restricted shares or
substitutes such restricted shares with similar awards but the executives employment is
terminated without cause or for good reason, as set forth in the LTIP, and (ii) MSPP. |
|
(4) |
|
Reflects the premiums for medical, dental and life insurance benefits for a 12-month period
in accordance with the Change in Control Plan. |
|
(5) |
|
Reflects a payment of all excise taxes imposed under Section 4999 of the Code and any income
and excise taxes that are payable as a result of any reimbursements for Section 4999 excise
taxes in accordance with the Change in Control Plan. This calculation assumes maximum federal
and state income and Medicare tax rates and is based on a five-year average of earnings
reported on Form W-2 for the tax years 2001 through 2005. The Company does not expect that
any such excise taxes will be imposed. |
35
Mr. Donahey(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and Payments upon |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Effective June 25, 2006, the Company entered into the Separation Agreement with Mr. Donahey,
pursuant to which he has and will receive certain severance payments and benefits. He was not
an employee of the Company as of December 31, 2006 and, therefore, was not eligible to receive
any additional payments or benefits. |
Retirement and Termination Arrangements
The Company maintains certain compensatory arrangements that are intended to provide payments
to the Named Executive Officers upon their resignation or retirement. These include the Retirement
Plan, which is a defined contribution retirement plan that is intended to be qualified under
section 401(a) of the Code. Eligible employees may elect to contribute a portion of their
compensation to the Retirement Plan and the Company provides certain matching and other
contributions. The retirement benefit is based solely on the contributions to each employees
account and the investment of those contributions in the Retirement Plan.
Under the EPIP, upon the retirement of an EPIP Executive during a period when performance
goals of an award are achieved, the award may be paid in full or may be prorated based on the
number of full months which lapsed in the performance period as of the date of the retirement, at
the sole and absolute discretion of the Compensation Committee. Upon the death or disability of an
EPIP Executive, if the Company achieves the performance goals specified in an award, the EPIP
Executive will be eligible to receive payments under the award. Such award may be paid in full or
may be prorated based on the number of full months that have elapsed in the performance period as
of the date of the death or disability, at the sole and absolute discretion of the Compensation
Committee. If , however, the Company fails to achieve the performance goals, the Compensation
Committee may in its discretion pay all or a portion of the award.
Under the MSPP, if a Named Executive Officers employment is terminated either for cause by
the Company or for any reason by the executive, the executive shall forfeit all right with respect
to any restricted shares of Common Stock purchased under the MSPP, which shall automatically be
considered to be cancelled, and shall only have an unfunded right to receive from the Companys
general assets a cash payment equal to the lesser of (1) the fair market value of such shares on
the executives last day of employment or (2) the aggregate base salary foregone by the executive
as a condition of receiving such shares. If a Named Executive Officers employment is terminated
without cause, the executive shall have a funded right to receive the lesser of such cash
payments, with the Compensation Committee to have the sole discretion as to which of such amounts
shall be payable. Under the MSPP, upon retirement of a Named Executive Officer, the Compensation
Committee shall determine, in its discretion, whether all outstanding restrictions with respect to
shares of Common Stock purchased under the MSPP shall expire or whether the executive shall instead
be treated as though the executives employment had been terminated by the Company without cause.
Under the MSPP, cause generally means (1) the conviction of the executive of a felony under the
laws of the United States or any state, whether or not appeal is taken, (2) the conviction of the
executive for a violation of criminal law involving the Company and its business, (3) the willful
misconduct of the executive, or the willful or continued failure by the executive (except on
account of death or disability) to substantially perform his or her employment duties, which in
either case has a material adverse effect on the Company, (4) the willful fraud or material
dishonesty of the executive in connection with his performance of his employment duties, (5) the
use of alcohol in a manner which in the opinion of the Company materially impairs the ability of
the executive to effectively perform his employment duties, or the use, possession, or sale of, or
impaired performance because, controlled substances or (6) sexual or other illegal harassment of a
Company employee by the executive.
The Carpenter Severance Agreement provides that if Mr. Carpenter is involuntarily terminated,
except for cause or in certain other circumstances, he is entitled to receive a severance payment
in the amount of his base salary for 24 months after termination plus an amount equal to two times
his earned but unpaid target cash bonus amount
36
awarded under the EPIP, which bonus amount would be paid in equal amounts, ratably, over the
24-month period following the date of termination of his employment. For more information about the
Carpenter Severance Agreement, please refer to the section above entitled EXECUTIVE COMPENSATION
Summary Compensation Table Executive Severance and Restrictive Covenant Agreement with Mr.
Carpenter.
Change in Control Arrangements
The Company maintains the Change in Control Plan for certain corporate employees, including
the Named Executive Officers. The Change in Control Plan provides benefits to eligible corporate
employees of the Company if (i) whose employment is terminated within 18 months of a change in
control (a) the employee is terminated by the successor entity for any reason other than for
cause, or (b) the employee terminates employment because the position offered by the successor is
modified so that it is not substantially equivalent to the one held with the Company immediately
prior to the change in control or (ii) the employee is not offered such a substantially
equivalent position. Termination for cause means the employment was involuntarily terminated
because the participant (1) is convicted of a crime of moral turpitude that adversely affects the
reasonable business interests of the Company, (2) committed an act of fraud, embezzlement or
material dishonesty against the Company or any of its affiliates, or (3) intentionally neglected
the responsibilities of his or her employment and such neglect remains uncorrected for more than 30
days following written notice from the Company detailing the acts of neglect. In general, a
substantially equivalent position is the same or better than the position to which it is being
compared. Under these circumstances, the Named Executive Officers are entitled to receive a lump
sum severance payment of three times the sum of the executives normal annual compensation, which
rate shall not be less than the highest rate in effect during the six-month period immediately
prior to the change in control, plus the target cash bonus amount which the executive would be
eligible to receive in the year in which the change in control occurs, assuming all performance
conditions were achieved. The Company will also provide each Named Executive Officer with
participation in medical, life, disability and similar benefit plans that are offered to similarly
situation employees of the Company, provided that the level of benefits will be substantially
equivalent to the benefits provided immediately prior to the change in control. If these benefits
are provided pursuant to continuation rights pursuant to Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, the Company will waive all premiums that would otherwise be
due by the executive at the time of severance for 12 months. In addition, each participant is
indemnified against excise taxes that are imposed on change in control payments under Section 4999
of the Code. Benefits under this plan are offset by any other payments that the participant is
entitled to receive under any other agreement, plan or arrangement upon a change in control of the
Company.
The LTIP provides for full vesting of outstanding awards granted to employees, including those
granted to Named Executive Officers, following a change in control to the extent the rights under
such awards have not been previously forfeited. Full vesting will only occur if (1) the successor
entity does not assume the awards or provide similar awards to replace the awards issued under the
LTIP, or (2) employment is terminated within 18 months after the change in control by the successor
entity without cause or by the employee because the position offered by the successor is not
substantially equivalent to the one held with the Company immediately prior to the change in
control.
Under the EPIP, if a change in control occurs during a period when performance goals of an
award are not achieved, the Compensation Committee, in its discretion, may authorize payment to an
EPIP Executive of the target bonus amount, or a portion of such amount, that would be payable under
an award. The payment of the awards will be made, at the discretion of the Compensation Committee,
after the end of the performance period or the change in control.
Under the MSPP, upon a change in control, restricted shares of Common Stock purchased under
the MSPP become unrestricted.
37
COMPENSATION OF DIRECTORS
Certain information concerning the compensation of directors for 2006 is set forth in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified |
|
|
|
|
|
|
Fees Earned or |
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Deferred |
|
|
|
|
|
|
Paid in |
|
Stock |
|
Option |
|
Incentive Plan |
|
Compensation |
|
All Other |
|
|
Name(1) |
|
Cash(2) |
|
Awards(3) |
|
Awards |
|
Compensation |
|
Earnings |
|
Compensation(4) |
|
Total |
Richard H. Evans |
|
$ |
78,750 |
|
|
$ |
133,548 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
212,298 |
|
DeWitt Ezell, Jr. |
|
|
74,000 |
|
|
|
133,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,548 |
|
Michael P. Haley |
|
|
72,500 |
|
|
|
232,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,948 |
|
Ricki Tigert Helfer |
|
|
77,250 |
|
|
|
133,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,298 |
|
William V. Lapham |
|
|
82,750 |
|
|
|
133,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,298 |
|
John E. Maupin, Jr. |
|
|
70,500 |
|
|
|
133,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,048 |
|
Owen G. Shell, Jr. |
|
|
194,000 |
(5) |
|
|
133,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,548 |
|
|
|
|
(1) |
|
Mr. Carpenter, the Companys CEO, does not and Mr. Donahey, the Companys former Chairman,
President and Chief Executive Officer, did not receive compensation for serving as a member of
the Board of Directors. |
|
(2) |
|
Includes deferred stock units granted under the Directors Plan in the following amounts: Mr.
Ezell, $65,000; Ms. Helfer, $65,000; Mr. Maupin, $18,438; and Mr. Shell, $32,500. Under the
Directors Plan, non-employee directors may elect to defer payment of all or any part of their
directors fees. For each term of the Board of Directors (beginning on the date of an annual
meeting of stockholders and ending on the date immediately preceding the next annual meeting
of stockholders), a non-employee director may elect to receive, in lieu of all or any portion
(in multiples of 25%) of his annual retainer payable for such term, a deferred stock unit
award pursuant to the Directors Plan. Such an election shall be for the number of deferred
stock units determined by dividing (a) the additional annual retainer amount that would have
been payable to the non-employee director in cash in the absence of his stock election, by (b)
the fair market value of a share of Common Stock on the date of grant. |
|
(3) |
|
Reflects the fair value for restricted stock awards granted under the Directors Plan, in
accordance with FAS 123R. The assumptions used in calculating the accrued values are set forth
in Note 7 to the Companys financial statements included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2006. On July 1, 2005 and May 8, 2006, all directors
received an annual grant of 3,500 shares of restricted stock. On April 22, 2005, Mr. Haley
also received 7,000 shares of restricted stock granted under the Directors Plan upon his
commencement of service as a director. The grant date fair value of these restricted stock
awards, computed in accordance with FAS 123R and based on the Common Stock closing prices of
$42.38 on April 22, 2005, $50.54 on July 1, 2005 and $33.03 on May 8, 2006, was as follows: |
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
Grant Date Fair |
Name |
|
Restricted Stock |
|
Value |
Richard H. Evans |
|
|
7,000 |
|
|
$ |
292,495 |
|
DeWitt Ezell, Jr. |
|
|
7,000 |
|
|
|
292,495 |
|
Michael P. Haley |
|
|
14,000 |
|
|
|
589,155 |
|
Ricki Tigert Helfer |
|
|
7,000 |
|
|
|
292,495 |
|
William V. Lapham |
|
|
7,000 |
|
|
|
292,495 |
|
John E. Maupin, Jr. |
|
|
7,000 |
|
|
|
292,495 |
|
Owen G. Shell, Jr. |
|
|
7,000 |
|
|
|
292,495 |
|
|
|
|
(4) |
|
The Company reports use of the corporate aircraft by the directors as a perquisite or other
personal benefit only if it is not integrally and directly related to the performance of the
directors duties. While the Company maintains an aircraft, the directors are not generally
entitled to use the aircraft for personal travel. SEC rules require the Company to report any
such use as compensation in an amount equal to the Companys aggregate incremental cost. On
three occasions, a directors spouse accompanied the director on the Company aircraft for
trips that were integrally and directly related to the performance of the directors duties.
Because these immediate family members used unoccupied space on flights that were already
scheduled for business purposes, the Company did not recognize any incremental cost in
connection with such use and, therefore, does not report any compensation related to the
flights. |
38
|
|
|
(5) |
|
During 2006, Mr. Shell received a one-time payment of $50,000 in consideration of his
contributions during the transition period between CEOs. Effective June 26, 2006, Mr. Shell
receives $125,000 annually for serving as the non-executive Chairman of the Board of Directors
in addition to the annual cash retainer of $75,000 for serving as a director. |
On an annual basis, following the Annual Meeting, the Board of Directors, upon
recommendation of the Compensation Committee, determines the compensation payable to non-employee
members of the Board of Directors for the term beginning on the date of the prior years annual
meeting of stockholders, and ending on the date immediately preceding the next annual meeting of
stockholders. The Compensation Consultants provided the Compensation Committee with information on
peer comparisons, including a methodology overview, total board compensation, board-only
compensation and equity grants, committee service compensation and initial equity grants. The
Consultants also reported on current trends in Board compensation, recent changes adopted at peer
group companies and the assumptions used by the Consultants in determining the annual retainer
amount.
On May 9, 2006, the Board of Directors, upon recommendation of the Compensation Committee,
approved a change in compensation payable to non-employee members of the Board of Directors for the
term beginning on the date of the 2006 annual meeting of stockholders, and ending on the date
immediately preceding the Annual Meeting. In making its recommendation, the Compensation Committee
considered peer group information, trends in director compensation and the total number of meetings
attended and also received the advice of the Consultants. This approach acknowledges that the role
of a director is one of ongoing oversight and is not limited to activity during meetings.
Prior to the May 9, 2006 action, the non-employee members of the Board of Directors had
received compensation as approved by the Board of Directors on July 1, 2005. The Board of Directors
had approved an annual retainer of $35,000 for outside directors who were neither officers nor
employees of the Company. In addition, the outside directors received $1,500 for each Board meeting
attended. Committee members received a fee of $1,000 for attendance at each committee meeting that
was not held on the same day as a meeting of the Board of Directors; provided that the maximum
amount payable to a committee member for attending committee meetings on any single day was $1,000
without regard to the number of committee meetings held on that day. The chair of each committee
received an annual retainer in recognition of the additional duties involved in serving as the
chair, with the Chair of the Audit and Compliance Committee receiving $5,000, the Chair of the
Compensation Committee receiving $4,000 and the Chair of the Corporate Governance and Nominating
Committee receiving $4,000.
The compensation arrangements that the Board adopted during 2006 are as follows:
|
|
|
the annual cash retainer payable to non-employee directors will be $75,000 per year; |
|
|
|
|
an additional annual cash retainer of $30,000 per year will be payable to a
Lead Director, if one is appointed; |
|
|
|
|
an additional annual cash retainer of $125,000 per year will be payable to
the non-executive Chairman of the Board of Directors, if one is appointed; |
|
|
|
|
an additional annual cash retainer of $10,000 per year will be payable to
the Chair of the Audit and Compliance Committee; |
|
|
|
|
an additional annual cash retainer of $5,000 per year payable to each of
the Chairs of the Compensation Committee and the Corporate Governance and Nominating
Committee; and |
|
|
|
|
directors will not receive any fees for attending meetings of the Board of
Directors or committees. |
Each of the foregoing annual fees is paid in four quarterly pro-rata installments. Directors
are also reimbursed for expenses incurred relating to attendance at meetings.
39
Also, on May 9, 2006, pursuant to the Directors Plan, the Board of Directors, upon
recommendation of the Compensation Committee, approved the grant of 3,500 deferred restricted stock
awards to each of the members of the Board of Directors who are not employees of the Company or any
of its subsidiaries. This award will be fully vested and no longer subject to forfeiture upon the
earliest of any of the following conditions to occur: (1) the date that is immediately prior to the
date of the Annual Meeting; (2) the death or disability of the non-employee director; or (3) a
change in control (as defined in the Directors Plan) of the Company. Generally, such shares will
not be forfeited in their entirety if the individual continues to serve as a director of the
Company on the day prior to the Annual Meeting. The non-employee directors receipt of shares of
Common Stock pursuant to the restricted stock award is deferred until the first business day
following the earliest to occur of (1) the third anniversary of the date of grant, or (2) the date
the non-employee director ceases to be a member of the Board of Directors. The Company granted
these restricted stock awards pursuant to LifePoint Hospitals, Inc. Deferred Restricted Stock Award
Agreements.
40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The tables below set forth certain information as of December 31, 2006 (unless otherwise
indicated) regarding beneficial ownership of Common Stock by (1) each director, nominee for
director and Named Executive Officers of the Company who owns Common Stock, (2) all directors and
executive officers as a group, and (3) each person known by the Company to be the beneficial owner
of more than 5% of the outstanding Common Stock of the Company. As of December 31, 2006, there were
57,365,018 shares of Common Stock outstanding. Except as otherwise indicated, the beneficial owners
listed below have sole voting and investment power with respect to all shares owned by them, except
to the extent such power is shared by a spouse under applicable law.
Security Ownership of Certain Beneficial Owners as of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
Name and Address of Beneficial Owner |
|
Beneficial Ownership |
|
Percent of Class |
FMR Corp. |
|
|
4,780,139 |
(1) |
|
|
8.33 |
% |
82 Devonshire Street
Boston, MA 02109 |
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc. |
|
|
3,791,972 |
(2) |
|
|
6.50 |
|
100 E. Pratt Street
Baltimore, MD 21202 |
|
|
|
|
|
|
|
|
Shapiro Capital Management LLC |
|
|
3,713,382 |
(3) |
|
|
6.47 |
|
3060 Peachtree Road N.W., Suite 1555
Atlanta, GA 30305 |
|
|
|
|
|
|
|
|
Wellington Management Company, LLP |
|
|
2,927,160 |
(4) |
|
|
5.10 |
|
75 State Street
Boston, MA 02109 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As reported in the Schedule 13G filed on February 14, 2007 with the SEC, the beneficial owner
claims to have sole voting power with respect to 194,399 shares of Common Stock and sole
dispositive power with respect to 4,780,139 shares of Common Stock. |
|
(2) |
|
As reported in the Schedule 13G filed on February 13, 2007 with the SEC, the beneficial owner
claims to have sole voting power with respect to 543,255 shares of Common Stock and sole
dispositive power with respect to 3,791,972 shares of Common Stock. |
|
(3) |
|
As reported in the Schedule 13G filed on February 6, 2007 with the SEC, the beneficial owner
claims to have sole voting power with respect to 3,390,755 shares of Common Stock, shared
voting power with respect to 322,627 shares of Common Stock and sole dispositive power with
respect to 3,713,382 shares of Common Stock. |
|
(4) |
|
As reported in the Schedule 13G filed on February 14, 2007 with the SEC, the beneficial owner
claims to have shared voting power with respect to 2,526,790 shares of Common Stock and shared
dispositive power with respect to 2,890,360 shares of Common Stock. |
Security Ownership of Management and Directors as of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
Name of Beneficial Owner |
|
Beneficial Ownership(1) |
|
Percent of Class |
Kenneth C. Donahey |
|
|
927,500 |
(2) |
|
|
1.61 |
% |
William F. Carpenter III |
|
|
680,182 |
(2) |
|
|
1.19 |
|
William M. Gracey |
|
|
466,178 |
(2),(3) |
|
|
* |
|
Michael J. Culotta |
|
|
445,463 |
(2) |
|
|
* |
|
Thomas M. Weiss |
|
|
206,367 |
(2) |
|
|
* |
|
Joné Law Koford |
|
|
126,479 |
(2) |
|
|
* |
|
DeWitt Ezell, Jr. |
|
|
45,633 |
(4) |
|
|
* |
|
William V. Lapham |
|
|
42,055 |
(4),(5) |
|
|
* |
|
John E. Maupin, Jr., D.D.S. |
|
|
35,552 |
(4) |
|
|
* |
|
Ricki Tigert Helfer |
|
|
30,630 |
(4) |
|
|
* |
|
Owen G. Shell, Jr. |
|
|
23,381 |
(4) |
|
|
* |
|
Richard H. Evans |
|
|
23,080 |
(4) |
|
|
* |
|
Michael P. Haley |
|
|
14,583 |
(4),(6) |
|
|
* |
|
Directors and executive officers as a group (19 persons) |
|
|
3,467,490 |
|
|
|
6.04 |
% |
41
|
|
|
(1) |
|
In computing the number of shares beneficially owned by an individual and the percentage
ownership of that individual, shares of Common Stock underlying options held by that
individual that are currently exercisable, or will become exercisable within 60 days from
December 31, 2006, are deemed outstanding. The total number of shares of Common Stock
underlying options, pursuant to which such individuals have rights to acquire beneficial
ownership of Common Stock within 60 days, is as follows: |
|
|
|
|
|
|
|
Shares Underlying |
Name |
|
Options |
Kenneth C. Donahey |
|
|
738,090 |
|
William F. Carpenter III |
|
|
482,756 |
|
William M. Gracey |
|
|
334,878 |
|
Michael J. Culotta |
|
|
330,000 |
|
Thomas M. Weiss |
|
|
154,334 |
|
Joné Law Koford |
|
|
83,334 |
|
DeWitt Ezell, Jr. |
|
|
24,640 |
|
William V. Lapham |
|
|
24,640 |
|
John E. Maupin, Jr., D.D.S. |
|
|
24,640 |
|
Ricki Tigert Helfer |
|
|
12,835 |
|
Richard H. Evans |
|
|
11,500 |
|
Owen G. Shell, Jr. |
|
|
11,000 |
|
|
|
|
(2) |
|
The ownership given for each individual includes shares of Common Stock indirectly owned
through the Retirement Plan as set forth in the table below. Share amounts are estimates based
on unit accounting and based upon a December 31, 2006 value of $33.70 per share. |
|
|
|
|
|
|
|
Shares Owned |
|
|
Through |
Name |
|
Retirement Plan |
William F. Carpenter III |
|
|
1,378 |
|
Michael J. Culotta |
|
|
3,112 |
|
Kenneth C. Donahey |
|
|
3,500 |
|
William M. Gracey |
|
|
2,762 |
|
Joné Law Koford |
|
|
730 |
|
Thomas M. Weiss |
|
|
1,607 |
|
The ownership for each individual also includes restricted stock awards granted in 2005 under
the LTIP as set forth in the table below. Generally, these shares of restricted stock become
unrestricted on April 22, 2008.
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
William F. Carpenter III |
|
|
18,000 |
|
Michael J. Culotta |
|
|
18,000 |
|
Kenneth C. Donahey |
|
|
|
|
William M. Gracey |
|
|
18,000 |
|
Joné Law Koford |
|
|
10,000 |
|
Thomas M. Weiss |
|
|
10,000 |
|
Further, the ownership for each individual includes restricted stock awards granted in 2005
under the LTIP as set forth in the table below. Generally, these shares of restricted stock
become unrestricted in three equal installments on April 22, 2008, April 22, 2009 and April
22, 2010 and, with respect to Messrs. Carpenter, Culotta and Gracey, upon realization of
certain predetermined performance criteria.
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
William F. Carpenter III |
|
|
36,000 |
|
Michael J. Culotta |
|
|
36,000 |
|
Kenneth C. Donahey |
|
|
|
|
William M. Gracey |
|
|
36,000 |
|
Joné Law Koford |
|
|
20,000 |
|
Thomas M. Weiss |
|
|
20,000 |
|
In addition, the ownership for each individual includes restricted stock awards granted in
2006 under the LTIP as set forth in the table below. Generally, these shares of restricted
stock become unrestricted on February 22, 2009. With respect to
42
Messrs. Donahey, Culotta, Carpenter and Gracey, vesting is conditioned upon the individuals
continued employment with the Company on December 31, 2008 and upon realization of certain
predetermined performance criteria.
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
William F. Carpenter III |
|
|
22,500 |
|
Michael J. Culotta |
|
|
22,500 |
|
Kenneth C. Donahey |
|
|
|
|
William M. Gracey |
|
|
22,500 |
|
Joné Law Koford |
|
|
10,000 |
|
Thomas M. Weiss |
|
|
10,000 |
|
|
|
|
(3) |
|
The ownership for Mr. Gracey includes 111 shares of Common Stock owned by Mr. Graceys wife,
as to which he disclaims beneficial ownership. |
|
(4) |
|
The ownership for each individual includes 3,500 restricted stock awards, granted under the
Outside Directors Plan, payable in shares of Common Stock. Generally, these shares become
unrestricted on July 1, 2008 and will be forfeited in their entirety unless the individual
continues to serve as a director on such date. |
|
|
|
The ownership for each individual also includes 3,500 restricted stock awards, granted under
the Outside Directors Plan, payable in shares of Common Stock. Generally, these shares become
unrestricted on May 7, 2007 with a deferred settlement date on the May 9, 2009. Generally,
such shares will be forfeited in their entirety unless the individual continues to serve as a
director on the day immediately prior to the 2007 Annual Meeting of Stockholders. |
|
|
|
Further, the ownership for each individual includes deferred stock units, granted under the
Outside Directors Plan, payable in shares of Common Stock as follows: |
|
|
|
|
|
|
|
Deferred Stock |
Name |
|
Units |
Richard H. Evans |
|
|
1,080 |
|
DeWitt Ezell, Jr. |
|
|
2,970 |
|
Ricki Tigert Helfer |
|
|
7,295 |
|
John E. Maupin, Jr., D.D.S. |
|
|
3,398 |
|
Owen G. Shell, Jr. |
|
|
1,881 |
|
|
|
|
(5) |
|
The ownership for Mr. Lapham includes 2,410 shares held by Mr. Laphams wife and 705 shares
held by Mr. Laphams daughter, as to which he disclaims beneficial ownership. |
|
(6) |
|
The ownership for Mr. Haley includes 7,000 shares of restricted stock granted under the
Outside Directors Plan. Generally, these shares will be forfeited in their entirety unless Mr.
Haley continues to serve as a director of the company on April 22, 2008. |
43
MATTERS TO BE VOTED ON
PROPOSAL 1: ELECTION OF DIRECTORS
The Companys Board of Directors consists of eight members, seven of whom are independent
directors. The Certificate of Incorporation provides that the Board of Directors shall be divided
into three classes of as nearly equal size as possible. Approximately one-third of the directors
are elected each year. The Corporate Governance and Nominating Committee conducts an annual
evaluation of the Board, its committees and the directors in order to evaluate their performance
prior to recommending any nominees to the Board for additional terms as directors.
Upon the recommendation of the Corporate Governance and Nominating Committee, which consists
entirely of independent directors, the Board of Directors has nominated the two individuals named
below under the caption Nominees for Election for election as directors to serve until the annual
meeting of stockholders in 2010 or until their successors have been elected and qualified.
Nominees for Election
CLASS II DIRECTORS TERM WILL EXPIRE IN 2010
DeWitt Ezell, Jr.
Age 68
Director since May 1999
DeWitt Ezell, Jr. served as state president of Tennessee for BellSouth Corporation, a
communications services company, from January 1990 until his retirement on April 30, 1999. Prior to
that time, Mr. Ezell served in various engineering, regulatory and public relations positions
during his 37-year tenure with The Company Corporation. Mr. Ezell is the chairman of the board of
BlueCross BlueShield of Tennessee, a non-profit health insurance company.
William V. Lapham
Age 68
Director since May 1999
William V. Lapham currently serves as Chair of the Companys Audit and Compliance Committee.
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, and as a member of Ernst &
Youngs International Council for eight years ending in December 1997. Mr. Lapham was a director of
Renal Care Group, Inc., a publicly-traded kidney dialysis services company and was the chair of its
audit and compliance committee until its acquisition by Fresenius Medical Care AG & Co. KGaA on
March 31, 2006. Mr. Lapham is also a past director of Avado Brands, Inc., a proprietary brand
management company, prior to its going private in May 2005 and was chair of its audit committee.
Continuing Directors
The persons named below will continue to serve as directors until the annual meeting of
stockholders in the year indicated or until their successors are elected and take office.
Stockholders are not voting at this Annual Meeting on the election of Class III and Class I
directors. The biographies below include the name, age and principal occupations of each continuing
director and the year in which each was first elected to the Board of Directors.
CLASS III DIRECTORS TERM WILL EXPIRE IN 2008
William F. Carpenter III
Age 52
Director since June 2006
William F. Carpenter III has served as CEO of the Company since his appointment on June 26,
2006. Prior to June 26, 2006, Mr. Carpenter served as Executive Vice President of the Company from
February 2004 until his appointment as CEO. In addition, Mr. Carpenter served as General Counsel
and Secretary of the Company since May 11, 1999 and Corporate Governance Officer since February
2003. From May 11, 1999 to February 2004, Mr. Carpenter served as Senior Vice President of the
Company. From November 23, 1998 until May 11, 1999, Mr. Carpenter served as general counsel of the
America Group of HCA. Mr. Carpenter was a member of the law firm of
44
Waller Lansden Dortch & Davis, LLP through December 31, 1998. Mr. Carpenter is a director of
Psychiatric Solutions, Inc., a behavioral health services company and is chair of its corporate
governance committee.
Richard H. Evans
Age 62
Director since June 2000
Richard H. Evans currently serves as the Chair of the Companys Compensation Committee. Mr.
Evans has been the chairman of Evans Holdings, LLC, a real estate investment and real estate
services company, since April 1999. Prior to that time, Mr. Evans served as chief executive officer
of Huizenga Sports, Entertainment Group, Madison Square Garden Corporation and Radio City Music
Hall Productions, chief operating officer of Gaylord Entertainment Company and chief operating
officer and corporate director of Florida Panther Holdings. Mr. Evans previously served as a member
of the board of governors of the National Basketball Association, the National Hockey League, Major
League Baseball and the National Football League.
Michael P. Haley
Age 56
Director since April 2005
Michael P. Haley has been a director of the Company since April 2005. Mr. Haley was a director
of Province from February 2004 until the closing of the business combination with Province in April
2005. From January 1, 2005 to June 1, 2005, Mr. Haley served as chairman of MW Manufacturers, Inc.,
a producer and distributor of window and door products for the residential construction industry,
and as senior vice president of sales and marketing for Ply Gem Industries, Inc., a manufacturer of
residential exterior building products. From 2001 to January 1, 2005, Mr. Haley served as president
and chief executive officer of MW Manufacturers, Inc. Prior to that time, Mr. Haley served in
various management capacities with American of Martinsville, Inc, a manufacturer of commercial
contract furniture and subsidiary of La-Z-Boy Incorporated, and with Loewenstein Furniture Group.
Mr. Haley is a director of Ply Gem Industries, Inc., American National Bankshares, Inc., a
publicly-traded bank holding company, and Stanley Furniture Company, a publicly-traded furniture
manufacturer.
CLASS I DIRECTORS TERM WILL EXPIRE IN 2009
Ricki Tigert Helfer
Age 62
Director since May 1999
Ricki Tigert Helfer currently serves as Chair of the Companys Corporate Governance and
Nominating Committee. Since June 1997, Ms. Helfer has been an independent consultant on financial
regulatory issues and banking system reform in emerging market countries with Financial Regulation
and Reform International. Prior to that time, Ms. Helfer held several positions including governor
of the Philadelphia Stock Exchange and chairman of its audit committee, chairman of the board of
directors and chief executive officer of the Federal Deposit Insurance Corporation, and partner in
the law firm of Gibson, Dunn & Crutcher LLP. Ms. Helfer is a member of the board of directors of
American Express Bank, a wholly owned subsidiary of the American Express Company. Ms. Helfer also
serves as a member of the board of directors for the Citizens Committee for Children of New York
City.
John E. Maupin, Jr., D.D.S.
Age 60
Director since May 1999
John E. Maupin, Jr., D.D.S. has served as the president of Morehouse School of Medicine since
July 1, 2006. From July 1994 until June 2006, Dr. Maupin served as president of Meharry Medical
College. Dr. Maupin currently serves on the National Committee on Foreign Medical Education
Accreditation of the U.S. Department of Education. He also has served on the National Advisory
Research Resources Council of the National Center for Research Resources, National Institutes of
Health; National Advisory Dental Research Council of the National Institute of Dental and
Craniofacial Research, National Institutes of Health; and the Board of Scientific Counselors of the
National Center for Infectious Diseases, Centers for Disease Control and Prevention. Dr. Maupin is
a director of HealthSouth Corporation, a publicly-traded provider of healthcare services, and
serves as a director/trustee for the VALIC family of funds, a fund complex.
45
Owen G. Shell, Jr.
Age 70
Director since December 2002
Owen G. Shell, Jr. currently serves as the Companys non-executive Chairman of the Board of
Directors. Mr. Shell has over 40 years of executive management experience in the banking industry.
He served as president of the Asset Management Group of Bank of America Corporation from November
1996 until his retirement in June 2001. From 1986 through 1996, Mr. Shell served as the president
of Bank of America for the Tennessee region. Prior to that, Mr. Shell held several positions,
including chairman, president and chief executive officer of First American National Bank in
Nashville, Tennessee. Mr. Shell is a director of Central Parking Corporation, a publicly-traded
company that owns, leases and manages parking facilities.
Your Board of Directors Recommends a Vote FOR Proposal 1
46
PROPOSAL 2: RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Companys Audit and Compliance Committee has selected Ernst & Young LLP as the Companys
independent registered public accounting firm for 2007. Ernst & Young LLP has audited the Companys
financial statements since 1999 and is considered by management to be well qualified.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have
an opportunity to make any statement they consider appropriate and to respond to any appropriate
stockholders questions at that time.
Required Vote
Stockholder ratification of the Audit and Compliance Committees selection of Ernst & Young
LLP as the Companys independent registered public accounting firm is not required by the By-Laws
or otherwise; however, the Board of Directors has elected to submit the selection of Ernst & Young
LLP to the Companys stockholders for ratification. The Company is seeking an affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, and entitled to vote at the
Annual Meeting, if a quorum is present, in order to ratify the selection of the independent
registered public accounting firm. If the appointment of Ernst & Young LLP is not ratified by the
stockholders, the selection of an independent registered public accounting firm will be determined
by the Audit and Compliance Committee after careful consideration of any information submitted by
the stockholders.
Your Board of Directors Recommends a Vote FOR Proposal 2
47
PROPOSAL 3: NON-BINDING STOCKHOLDER PROPOSAL REGARDING
DECLASSIFICATION OF THE COMPANYS BOARD OF DIRECTORS
The following non-binding stockholder proposal has been submitted on behalf of Accipiter Life
Sciences Fund, LP whose address is 399 Park Avenue, 38th Floor, New York, New York
10022. The proponent has informed us that, as of December 6, 2006, it beneficially owned 53,198
shares of Common Stock. If the proponent, or a representative of the proponent who is qualified
under Delaware law to present this proposal, is present and submits the proposal for a vote at the
Annual Meeting, the proposal will be voted on by stockholders. Pursuant to federal securities
regulations, the proposal and supporting statement are set forth exactly as submitted by the
proponent. We are not responsible for the content of any of the material provided by the proponent.
To ensure readers can easily distinguish between material provided by the proponent and material
provided by the Company, the proponents proposal is contained in the box set forth below.
Stockholder Proposal
RESOLVED, that the stockholders of Lifepoint Hospitals, Inc. request that the Board of
Directors take the necessary steps to declassify the Board of Directors and to require that all
directors stand for election annually.
Supporting Statement
We believe the election of directors is the most powerful way that stockholders influence the
strategic direction of a public company. Currently, the Board of Directors of LifePoint Hospitals,
Inc. (Lifepoint) is divided into three classes serving staggered three-year terms. It is our
belief that the classification of the Board of Directors is not in the best interests of LifePoint
and its stockholders because it reduces accountability and is an unnecessary anti-takeover device.
The elimination of the staggered board would require each director to stand for election annually.
We believe that such annual accountability would serve to keep directors closely focused on the
performance of top executives and on maximizing stockholder value. Concerns that the annual
election of directors would have a destabilizing impact by leaving our company without experienced
board members in the event that all incumbents are voted out are unfounded. In the unlikely event
the owners should choose to replace the entire board, it would be obvious that the incumbent
directors contributions were not valued.
A classified board of directors protects the incumbency of the board of directors and current
management, which in turn limits accountability to stockholders. It is our belief that Lifepoints
corporate governance procedures and practices, and the level of management accountability they
impose, are related to the financial performance of the company. We believe sound corporate
governance practices, such as the annual election of directors, will impose the level of management
accountability necessary to help insure that a good performance record continues over the long
term.
Increasingly, classified boards like Lifepoints have become unpopular in recent years.
Institutional investors are calling for the end of this system. Californias Public Employees
Retirement System, New York City pension funds, New York State pension funds and many others
including the Council of Institutional Investors, and Institutional Shareholder Services, one of
the most influential proxy evaluation services, support this position.
During the past few years a majority of stockholders supported proposals asking their boards
to repeal classified board structures at a number of respected companies.
For a greater voice in the governance of Lifepoint and annual Board of Directors
accountability we ask stockholders to vote YES on this proposal.
Statement in Opposition to Non-Binding Stockholder Proposal
The Board of Directors is committed to the highest quality corporate governance and annually
examines our corporate governance practices, including the structure and functioning of the Board
of Directors and its committees, in light of the changing environment. The Board of Directors and
its Corporate Governance and Nominating Committee, in consultation with outside counsel, have
carefully considered this proposal and the arguments for and against a classified board. The Board
of Directors recommends a vote AGAINST the proposal based on the following reasons:
48
Stability, Continuity and Experience
The Companys current structure is intended to provide and promote greater stability,
continuity and knowledge of the Companys business affairs and financial strategies. The classified
board structure ensures that at any given time a majority of the directors have prior experience as
directors of the Company and are familiar with the Companys business strategies and operations.
Experienced directors are a valuable resource and, with their knowledge about the Companys
business and affairs, are better positioned to make decisions that are in the best interests of the
Company and its stockholders. The Board believes that a declassified Board, which would allow all
directors to be replaced in a given year, could risk the loss of core knowledge of the Company, its
business and its operations that has been gained by the members of the Board of Directors during
their service to the Company and its stockholders. In addition, we believe that a classified board
properly balances the dynamics of recruiting new directors with the need for continuity through
experience on the board. The Board believes that longer terms will help attract more qualified
candidates who are willing to commit the time and dedication necessary to understand the Company,
its operations and its competitive environment.
Independence/Long-Term Focus
The Board of Directors believes that the three-year terms afforded by a classified board
enhance the Boards ability to implement the Companys long-term strategy and to focus on the
Companys long-term performance. Electing directors to three-year terms enhances the independence
of non-management directors by providing them with a longer assured term of office, thereby better
insulating them against potential pressure from management, other board members or special interest
groups who may have an agenda contrary to the long-term interests of all stockholders. The freedom
to focus on the long-term interests of the Company instead of on the renomination process leads to
greater independence and better governance.
Accountability to Stockholders
The current classified board structure does not compromise the directors accountability to
our stockholders. Every director is required to uphold his or her fiduciary duties to the Company
and our stockholders, regardless of whether the director serves a term of one year or three years.
In addition, because approximately one-third of the Companys directors must stand for election
each year, the stockholders have an annual opportunity to express any dissatisfaction they may have
with the Board of Directors by withholding votes from any director standing for election that year.
Protection Against Unfair and Abusive Takeover Tactics
A classified board is intended to safeguard a company and its stockholders against the efforts
of a third party intent on quickly taking control of, and not paying fair value for, the companys
business and assets. A classified board structure does not prevent unsolicited acquisition
proposals or prevent a company from being acquired. The classified board structure reduces the
threat of imminent removal and provides the Board with time and leverage to evaluate the adequacy
and fairness of takeover proposals, to negotiate the best result for all stockholders and to weigh
alternative methods of maximizing overall stockholder value.
Effect of Proposal
Stockholders should be aware that approval of this proposal at the Annual Meeting is not
binding and would not eliminate the Companys classified board structure. Approval of this proposal
will only advise our Board that a majority of our stockholders voting at the meeting favor a change
and prefer that the Board take the necessary steps to declassify the Board of Directors. Under the
laws of the state of Delaware, the change contemplated by the proposal would require an amendment
to the Certificate of Incorporation which must first be approved by the Board of Directors, acting
in accordance with its fiduciary duties, and then submitted to a vote of the stockholders at a
subsequent meeting. Any such amendment would require the affirmative vote at a subsequent meeting
of the holders of not less than eighty percent (80%) of the voting power of all shares of Common
Stock entitled to vote generally in the election of directors.
Your Board of Directors Recommends a Vote AGAINST Proposal 3
49
GENERAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys executive officers, directors and
persons who beneficially own more than ten percent (10%) of the Common Stock to file reports of
ownership and changes in ownership with the SEC. Such executive officers, directors and beneficial
owners are also required to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on a review of (1) the applicable filings, and any amendments thereto, made with the
SEC and posted on its website and (2) written representations from the Companys executive officers
and directors, the Company believes that all reports were filed in a timely manner during 2006.
All Section 16(a) reports are posted on the Investor Information SEC Filings section of
the Companys website, www.lifepointhospitals.com, by the end of the business day after filing and
remain accessible for at least 12 months.
Stockholder Nominations and Proposals for the 2008 Proxy Statement
Stockholders who would like to recommend director nominees for consideration at the 2008
annual meeting of stockholders should notify the Corporate Secretary at LifePoint Hospitals, Inc.,
103 Powell Court, Suite 200, Brentwood, Tennessee 37027. This notification must be received by the
Company on or before the close of business on February 8, 2008 and must provide information about
the nominees qualifications for Board membership and other information required by the By-Laws. If
the stockholder desires for the Company to consider the director nominees for inclusion in the
proxy statement for the 2008 annual meeting, however, the notification must be received by the
Company by December 4, 2007.
Any stockholder satisfying the SEC requirements and wishing to have a proposal considered for
inclusion in the Companys proxy materials for the 2008 annual meeting of stockholders should
submit the proposal, along with proof of ownership of the Common Stock in accordance with Rule
14a-8(b)(2) promulgated under the Exchange Act, in writing and mailed to the Company at 103 Powell
Court, Suite 200, Brentwood, Tennessee 37027, Attention: Corporate Secretary. The proposal must be
received by December 4, 2007 for the Company to consider it for inclusion in the proxy statement
for the 2008 annual meeting.
Other Business for Presentation at the 2008 Annual Meeting
Any stockholder who wishes to present other business for the 2008 annual meeting of
stockholders must notify the Corporate Secretary in writing of his or her intent. Under the
By-Laws, proposals of business to be transacted by the stockholders (other than proposals submitted
by or at the direction of the Board of Directors) at an annual meeting of stockholders may be made
by any stockholder of record who is entitled to vote and who provides proper notice. In order for
any such submission to be proper, the notice must contain certain information concerning the
proposal as required by the By-Laws and must be delivered to the Company at 103 Powell Court, Suite
200, Brentwood, Tennessee 37027, Attention: Corporate Secretary, by February 8, 2008.
Other Available Information
A copy of the Companys 2006 Annual Report to Stockholders is enclosed. Upon the written
request of any stockholder entitled to vote at the Annual Meeting, the Company will furnish,
without charge, a copy of the Companys Annual Report on Form 10-K for the year ended December 31,
2006 filed with the SEC. Such requests should be directed to LifePoint Hospitals, Inc., 103 Powell
Court, Suite 200, Brentwood, Tennessee 37027, Attention: Investor Relations, (615) 372-8500. The
Companys 2006 Annual Report to Stockholders and Form 10-K for the year ended December 31, 2006 are
also available on the Investor Information SEC Filings section of the Companys website at
www.lifepointhospitals.com.The Companys Annual Report to Stockholders and Form 10-K are not proxy
soliciting materials.
50
In addition, the Company files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or other information
filed with the SEC at the SECs public reference room at 100 F Street, N.E., Washington, D.C
20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
The SEC filings are also available to the public from commercial document retrieval services and at
the Internet website maintained by the SEC at www.sec.gov. If you are a stockholder of the Company
and would like to request any of the documents the Company has filed with the SEC, please request
them in writing at 103 Powell Court, Suite 200, Brentwood, Tennessee 37027, Attention: Investor
Relations. You can also obtain copies of these documents on the Investor Information SEC
Filings section of the Companys website at
www.lifepointhospitals.com.
By Order of the Board of Directors,
PAUL D. GILBERT
Senior Vice President, General Counsel and Secretary;
Corporate Governance Officer
Brentwood, Tennessee
Dated: April 2, 2007
51
LIFEPOINT HOSPITALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 8, 2007
The undersigned hereby authorizes and appoints William F. Carpenter III and Paul D. Gilbert,
or either of them, with power of substitution, as proxies to vote all shares of Common Stock of
LifePoint Hospitals, Inc. (the Company) owned by the undersigned at the Annual Meeting of
Stockholders to be held at 511 Union Street, Suite 2700, Nashville, Tennessee 37219, at 3:00 p.m.
local time on May 8, 2007, and any adjournment thereof, as indicated on the reverse side of this
proxy card.
This Proxy is solicited on behalf of the Companys Board of Directors.
This Proxy, when properly executed, will be voted in the manner directed herein by the
undersigned stockholder. A vote against any of the proposals will not count as a vote for
adjournment of the Annual Meeting.
|
|
|
|
|
Dated: ,2007 |
|
|
|
|
|
Signature of stockholder |
|
|
|
|
|
Signature if held jointly |
|
|
|
|
|
Please sign exactly as your name appears on this
Proxy Card. 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. |
YOUR VOTE IS IMPORTANT!
If you do not vote by telephone or Internet, please sign and date this proxy
card and return it promptly in the enclosed postage-paid envelope so that your shares may be represented at the Annual Meeting.
|
|
|
|
|
|
LIFEPOINT HOSPITALS, INC.
|
|
PROXY |
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned
stockholder. A vote against any of the proposals will not count as a vote for adjournment of the
Annual Meeting. If no direction is made, this proxy will be voted FOR the election of directors,
FOR ratification of the selection of the independent registered public accounting firm and AGAINST
the non-binding stockholder proposal.
The Board of Directors recommends a vote FOR:
1. |
|
Election of the two nominees listed as Class II directors of the Company: DeWitt Ezell, Jr. and
William V. Lapham |
|
|
|
|
|
|
|
|
|
|
|
|
|
o
|
|
FOR all nominees
(except as marked to the contrary below)
|
|
o
|
|
WITHHOLD AUTHORITY
to vote for all nominees listed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTION: To withhold authority to vote for an individual nominee, write his
name in the space provided below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. |
|
Ratification of the selection of Ernst & Young LLP as the independent registered public
accounting firm of the Company for 2007. |
|
|
|
|
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
The Board of Directors recommends a vote AGAINST:
3. |
|
The non-binding stockholder proposal regarding declassification of the Companys Board of
Directors. |
|
|
|
|
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
In their discretion, the proxies named on the reverse side of this proxy card may vote upon
such other matters as may properly come before the Annual Meeting or any adjournment thereof.
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
VOTE 24 HOURS A DAY, 7 DAYS A WEEK
Your telephone or Internet vote must be received by 5:00 a.m. Central Time on May 8, 2007 to be counted.
|
|
|
|
|
Vote by Telephone 1-888-693-8683
Use any
touch-tone phone to
vote your proxy. Have
your proxy card in
hand when you call.
|
|
Vote by Internet www.cesvote.com
Use the Internet
to vote your proxy.
Have your proxy card
in hand when you call.
|
|
Vote by Mail
Mark, sign and
date your proxy card
and return it in the
enclosed postage-paid
envelope.
|
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned your proxy card.
If you vote by telephone or Internet, please do not send your proxy by mail.