1
SCHEDULE 14A
(RULE 14A-101)14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL HEALTH SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fees paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
2
[UHS LOGO]UHS LOGO
UNIVERSAL HEALTH SERVICES, INC.
April 19, 200020, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Universal Health Services, Inc. to be held at the offices of the Company,
Universal Corporate Center, 367 South Gulph Road, King of Prussia,
Pennsylvania, on May 17, 2000,23, 2001, at 10:00 a.m., Eastern Daylight Time, for the
following purposes:
(1) the election of two directors by the holders of Class A and Class C
Common Stock;
(2) the election of a director by the holders of Class B and (2)Class D
Common Stock;
(3) the adoption of the Amendment to the Company's Restated Certificate
of Incorporation to increase the number of authorized shares of
Class B Common Stock;
(4) the adoption of the Amendment to the Amended and Restated 1992
Stock Option Plan, and
(5) the adoption of the 2001 Employees' Restricted Stock Purchase Plan.
Detailed information concerning these matters is set forth in the attached
Notice of Annual Meeting of Stockholders and Proxy Statement.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR SHARESYour Board of Directors recommends that you vote your shares FOR THE
ELECTION OF DIRECTORS, ANDthe
election of directors, FOR THE ADOPTION OF THE AMENDMENT TO THEthe adoption of the Amendment to the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Class B Common Stock, FOR the adoption of the Amendment to the
Amended and Restated 1992 STOCK
OPTION PLAN.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE EITHER VOTE BY
TELEPHONE, OR PROMPTLY SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE.Stock Option Plan, and FOR the adoption of the 2001
Employees' Restricted Stock Purchase Plan.
Whether or not you plan to attend the meeting, please either vote by
telephone, internet, or promptly sign and return your proxy card in the
enclosed envelope. If you then attend and wish to vote your shares in person,
you still may do so. In addition to the matters noted above, we will discuss
the business of the Company and be available for Stockholders' comments and
discussion relating to the Company.
I look forward to seeing you at the meeting.
Sincerely,
/s/ Alan B. Miller
Alan B. Miller
Chairman, President and
Chief Executive Officer
3
[UHS Logo]UHS LOGO
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000May 23, 2001
Notice is hereby given that the Annual Meeting of Stockholders of Universal
Health Services, Inc. (the "Company") will be held on Wednesday, May 17, 200023, 2001
at 10:00 a.m., at the offices of the Company, Universal Corporate Center, 367
South Gulph Road,Road. King of Prussia, Pennsylvania for the following purposes:
(1) To have the holders of Class A and Class C Common Stock elect two Class
III directors, all directors to serve for a term of three years until
the annual election of directors in the year 20032004 and election and
qualification of their respective successors.
(2) To have the holders of Class B and Class D Common Stock elect one Class
II direcor, to serve for a term of three years until the annual
election of directors in the year 2004 and the election and
qualification of his successor.
(3) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the Amendment to the Company's Restated Certificate
of Incorporation to increase the number of authorized shares of Class B
Common Stock.
(4) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the Amendment to the Amended and Restated 1992 Stock
Option Plan, adopted by the Board of Directors of the Company.
(3)(5) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the 2001 Employees' Restricted Stock Purchase Plan.
(6) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on April 5, 2000,12, 2001, are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person. IN
ANY EVENT, PLEASE EITHER VOTE BY TELEPHONE, INTERNET OR MARK YOUR VOTES, THEN DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-
PAIDPOSTAGE-PAID ENVELOPE WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. YOU MAY REVOKE YOUR PROXY IF YOU DECIDE TO ATTEND THE ANNUAL MEETING
AND WISH TO VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Steve G. Filton
STEVE G. FILTON, Secretary
King of Prussia, Pennsylvania
April 19, 200020, 2001
4
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTERUniversal Corporate Center
367 SOUTH GULPH ROAD
KING OF PRUSSIA,South Gulph Road
King of Prussia, PA 19406
PROXY STATEMENT
GENERAL
This Proxy Statement (first mailed to stockholders on or about April 19,
2000)20,
2001) is furnished in connection with the solicitation by the Board of
Directors of Universal Health Services, Inc. (the "Company") of proxies for
use at the Annual Meeting of Stockholders, or at any adjournment thereof. The
meeting will be held on Wednesday, May 17, 200023, 2001 at 10:00 a.m., at the offices
of the Company, Universal Corporate Center, 367 South Gulph Road, King of
Prussia, Pennsylvania. The Annual Meeting is being held (1) to have the
holders of Class A and C Common Stock elect two Class III directors of the
Company, all of whom will serve for terms of three years until the annual
election of directors in 20032004 and the election and qualification of their
respective successors; (2) to have the holders of Class B and D Common Stock
elect one Class II director, to serve for a term of three years until the
annual election of directors in 2004 and the election and qualification of his
successor; (3) to have the holders of Class A, B, C and D Common Stock vote
upon the proposal to adopt the Amendment to the Company's Restated Certificate
of Incorporation to increase the number of authorized shares of Class B Common
Stock; (4) to have the holders of Class A, B, C and D Common Stock vote upon
the proposal to adopt the Amendment to the Amended and Restated 1992 Stock
Option Plan, which was adopted by the Board of Directors of the Company; (5)
to have the holders of Class A, B, C and (3)D Common Stock vote upon the proposal
to adopt the 2001 Employees' Restricted Stock Purchase Plan, and (6) to
transact such other business as may properly be brought before the meeting or
any adjournment thereof.
A copy of the Company's Annual Report to Stockholders, including financial
statements for the year ended December 31, 19992000 is enclosed herewith.
A separate form of Proxy applies to the Company's Class A and Class C Common
Stock and a separate form of Proxy applies to the Company's Class B and Class
D Common Stock. Enclosed is a Proxy for the shares of stock held by you on the
record date. Unless otherwise indicated on the Proxy, shares represented by
any Proxy will, if the Proxy is properly executed and received by the Company
prior to the Annual Meeting, be voted FOR each of the nominees for directors,
FOR the approval of the adoption of the Amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Class B Common Stock, and FOR the approval of the Amendment to the Amended and
Restated 1992 Stock Option Plan and FOR the approval of the adoption of the
2001 Employees' Restricted Stock Purchase Plan. Any Proxy executed and
returned to the Company is revocable by delivering a later signed and dated
Proxy or other written notice to the Secretary of the Company at any time
prior to its exercise. A Proxy is also subject to revocation if the person
executing the Proxy is present at the meeting and chooses to vote in person.
VOTING
Only stockholders of record as of the close of business on April 5, 200012, 2001
are entitled to vote at the Annual Meeting. On that date, 2,030,5661,924,443 shares of
Class A Common Stock, par value $.01$.0l per share, 204,593193,924 shares of
Class C Common Stock, par value $.01$.0l per share, 28,425,24727,832,060 shares of Class B
Common Stock, par value $.01$.0l per share, and 23,91320,930 shares of Class D Common
Stock, par value $.01$.0l per share, were outstanding.
The Company's Restated Certificate of Incorporation provides that, with
respect to the election of directors, holders of Class A Common Stock vote as
a class with the holders of Class C Common Stock, and holders of Class B
Common Stock vote as a class with holders of Class D Common Stock, with
holders of all classes of Common Stock entitled to one vote per share. Each
holder of Class A Common Stock may cumulate his votes for directors giving one
candidate a number of votes equal to the number of directors to be elected,
multiplied by the number of shares of Class A Common Stock, or he may
distribute his votes on the 5
same principle among as many candidates as he
shall see fit. For a holder of Class A Common Stock to exercise his cumulative
voting rights, the stockholder must give notice at the meeting of his
intention to cumulate his votes.
As to matters other than the election of directors, including the approval
of the Amendment to the Restated Certificate of Incorporation, Amendment to
the Amended and Restated 1992 Stock Option Plan, the Adoption of the 2001
Employees' Restricted Stock Purchase Plan, the Company's Restated Certificate
of Incorporation provides that holders of Class A, Class B, Class C and Class
D Common Stock all vote together as a single class, except as otherwise
provided by law. Each share of Class A Common Stock entitles the holder
thereof to one vote; each share of Class B Common Stock entitles the holder
thereof to one-tenth of a vote; each share of Class C Common Stock entitles
the holder thereof to 100 votes (provided the holder of Class C Common Stock
holds a number of shares of Class A Common Stock equal to ten times the number
of shares of Class C Common Stock that holder holds); and each share of Class
D Common Stock entitles the holder thereof to ten votes (provided the holder
of Class D Common Stock holds a number of shares of Class B Common Stock equal
to ten times the number of shares of Class D Common Stock that holder holds).
In the event a holder of Class C or Class D Common Stock holds a number of
shares of Class A or Class B Common Stock, respectively, less than ten times
the number of shares of Class C or Class D Common Stock that holder holds,
then that holder will be entitled to only one vote for every share of Class C,
or one-tenth of a vote for every share of Class D Common Stock, which that
holder holds in excess of one-tenth the number of shares of Class A or Class B
Common Stock, respectively, held by that holder. The Board of Directors, in
their discretion, may require beneficial owners to provide satisfactory
evidence that such owner holds ten times as many shares of Class A or Class B
Common Stock as Class C or Class D Common Stock, respectively, if such facts
are not apparent from the stock records of the Company.
Stockholders entitled to vote for the election of directors can withhold the
authority to vote for any one or more nominees. Nominees receiving a plurality
of the votes cast will be elected. Abstention from the vote to consider the
adoption of the Amendment to the Restated Certificate of Incorporation,
Amendment to the Amended and Restated 1992 Stock Option Plan, the Adoption of
the 2001 Employees' Restricted Stock Purchase Plan, or the approval of such
other matters as may properly come before the meeting, or any adjournment
thereof, are treated as votes against the proposal. Broker non-votes are
treated as shares as to which the beneficial owners have withheld voting
authority and therefore as shares not entitled to vote on the matter, thereby
making it easier to obtain the approval of holders of a majority of the
aggregate voting power of the shares present entitled to vote as is required
for approval of the proposal. A majority of holders of the outstanding common
stock votes and of the outstanding Class B Common Stock is required to approve
the Amendment to the Restated Certificate of Incorporation. Therefore,
abstentions or broker non-votes have the effect of a vote against the
proposal, making it more difficult to obtain the required vote.
2
As of April 5, 2000,12, 2001, the shares of Class A and Class C Common Stock
constituted 7.3%7.1% of the aggregate outstanding shares of the Company's Common
Stock, had the right to elect six members of the Board of Directors and
constituted 87.9%87.7% of the general voting power of the Company; and as of that
date the shares of Class B and Class D Common Stock constituted 92.7%92.9% of the
outstanding shares of the Company's Common Stock, had the right to elect two
members of the Board of Directors and constituted 12.1%12.3% of the general voting
power of the Company.
As of February 29, 2000,28, 2001, the Company's current directors and officers as a
group owned of record or beneficially 2,023,0651,920,743 shares of Class A Common
Stock, 674,226627,116 shares of Class B Common Stock (excluding shares issuable upon
exercise of options), 203,084193,544 shares of Class C Common Stock and 630 shares of
Class D Common Stock, representing 99.6%99.8%, 2.4%2.3%, 99.3%99.8% and 2.6%2.9% respectively,
of the outstanding shares of each class and constituting 87.6%87.8% of the general
voting power of the Company on that date.
23
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 29, 2000,28, 2001, the number of shares
of equity securities of the Company and the percentage of each class owned
beneficially, within the meaning of Securities and Exchange Commission Rule
13d-3, and the percentage of the general voting power of the Company currently
held, by (i) all stockholders known by the Company to own more than 5% of any
class of the Company's equity securities, (ii) all directors of the Company
who are stockholders, (iii) the executive officers named in the Summary
Compensation Table and (iv) all directors and executive officers as a group.
Except as otherwise specified, the named beneficial owner has sole voting and
investment power.
PERCENTAGE
CLASSPercentage
Class A CLASSClass B CLASSClass C CLASSClass D OF GENERAL
NAME AND ADDRESS OF COMMON COMMON COMMON COMMON VOTING
BENEFICIAL OWNER(1) STOCK(2) STOCK(2) STOCK(2) STOCK(2) POWER(3)of General
Name and Address of Common Common Common Common Voting
Beneficial Owner(1) Stock(2) Stock(2) Stock(2) Stock(2) Power(3)
------------------- -------- ----------------- ------------- -------- -------- ----------
Leatrice Ducat 1,750 (5)(14)3,625(5)(12) (5)
National Disease
Research Interchange
645 N. Michigan Avenue
Ste. 800
Chicago, IL 60611
John H. Herrell 7,900 (5)(14)9,400(5)(12) (5)
Mayo Clinic
200 First Street, SW
Rochester, MN 55905
Robert H. Hotz 22,50020,000(5)(12) (5)(14) (5)
UBS Warburg Dillon Read LLC
299 Park Avenue, 39th
Fl.
New York, NY 10171
Alan B. Miller 1,910,890(6) 2,778,283 (4)1,903,891(6) 2,729,201(4)(6)(14) 191,447 (82.4%(12) 191,446 86.6%
(98.9%) (94.1%(9.8%) (9.7%) (93.5%)
Sidney Miller 95,323 139,008 (4)(5)(7)(14) 9,539 (4.1%)
(4.6%) (4.6%(98.7%)
Anthony Pantaleoni 4,452(5) 17,670 (4)19,948(4)(5)(8)(7)(12) 548(5) 280(5)(8) (5)
Fulbright & Jaworski
L.L.P.
(14)
666 Fifth Avenue
New York, NY 10103
-
Debra K. Osteen 34,999(5) (5)
Joseph T. Sebastianelli 625(5)(12)
onehealthbank.com
379 Princeton-Hightstown
Road
Building 2
Cranbury, NJ 08512
John F. Williams, Jr., M.D. 150150(5) (5)
(5)M.D.
George Washington
University
2300 EveEye Street, N.W.
Suite 713E
Washington, DC 20037
Thomas J. Bender 147,987 (5)(14) (5)
Kirk E. Gorman 88,071 (5)(14) (5)
Steve G. Filton 87,444 (5)(14) (5)
34
7
PERCENTAGE
CLASSPercentage
Class A CLASSClass B CLASSClass C CLASSClass D OF GENERAL
NAME AND ADDRESS OF COMMON COMMON COMMON COMMON VOTING
BENEFICIAL OWNER(1) STOCK(2) STOCK(2) STOCK(2) STOCK(2) POWER(3)of General
Name and Address of Common Common Common Common Voting
Beneficial Owner(1) Stock(2) Stock(2) Stock(2) Stock(2) Power(3)
------------------- -------- ----------------- --------- -------- -------- ----------
Kirk E. Gorman 50,542(5)(12) (5)
Steve G. Filton 67,926(5)(12) (5)
Richard C. Wright 12,400(5) 58,078 24,992(4)(5)(14)(12) 1,550(5) 350(5) (5)
Debra K. Osteen 45,164 (5) (5)
FMR Corp. 1,505,100 (9)1,640,097(8) (5)
82 Devonshire Street (5.8%(5.92%)
Boston, MA 02109
Capital Research 2,474,900 (10)2,000,000(9) (5)
and Management Company (9.6%(7.2%)
333 South Hope St.
Los Angeles, CA 90071
The Growth Fund of America,
Inc. 1,450,000 (11)Morgan Stanley Dean 1,796,844(10) (5)
333 South Hope Street (5.6%Witter & Co.
1585 Broadway (6.45%)
Los Angeles, CA 90071New York, NY 10036
Westport Asset 1,368,690(11) (5)
Management, Inc. 1,798,724 (12) (5)
253 Riverside Avenue (7%(5.9%)
Westport, CT 06880
Private Capital Management,
Inc. 5,806,077 (13) 2.2%
3003 Tamiami Trail, N. (22.7%)
Naples, FL 33940
All directors & 1,920,743 2,961,408(4)(12) 193,544 630 87.8%
executive officers
as a group 2,023,065 3,394,005 (14) 203,084 630 87.6%
(12(11 persons) (94.1%(99.8%) (11%(10.6%) (99.2%(99.8%) (2.5%(2.9%)
- -------------------------
(1) Unless otherwise shown, the address of each beneficial owner is c/o
Universal Health Services, Inc., Universal Corporate Center, 367 South
Gulph Road, King of Prussia, PA 19406.
(2) Each share of Class A, Class C and Class D Common Stock is convertible
at any time into one share of Class B Common Stock.
(3) As to matters other than the election of directors, holders of Class A,
Class B, Class C and Class D Common Stock vote together as a single
class. Each share of Class A Common Stock entitles the holder thereof to
one vote; each share of Class B Common Stock entitles the holder thereof
to one-tenth of a vote; each share of Class C Common Stock entitles the
holder thereof to 100 votes (provided the holder of Class C Common Stock
holds a number of shares of Class A Common Stock equal to ten times the
number of shares of Class C Common Stock that holder holds); and each
share of Class D Common Stock entitles the holder thereof to ten votes
(provided the holder of Class D Common Stock holds a number of shares of
Class B Common Stock equal to ten times the number of shares of Class D
Common Stock that holder holds).
(4) Includes shares issuable upon the conversion of Classes A, C and/or D
Common Stock.
(5) Less than 1%.
(6) Includes 46,000 shares of Class A Common Stock which are beneficially owned
by The Alan B. Miller Family Foundation, Alan B. Miller, as Trustee; and
100,000 shares of Class A Common Stock which are beneficially
owned by Mr. Miller and are held by Mr. Miller in trust for the benefit
of his spouse.
(7) Includes 30,000 shares of Class B Common Stock which are beneficially owned
by Mr. Miller's spouse.
(8) Includes 2,890 shares of Class B Common Stock and 280 shares of Class D
Common Stock which are beneficially owned by Mr. Pantaleoni and are held
by Mr. Pantaleoni in trust for the benefit of certain members of his
family.
(9)(8) These securities are held by FMR Corp., a parent holding company.
Information is based on Amendment No. 11II to Schedule 13Gl3G dated February
14, 2000.
(10)2001.
(9) These securities are held by Capital Research and Management Company.
Information is based on Schedule 13Gl3G dated February 10, 2000.
(11)12, 2001.
(10) These securities are held by The Growth Fund of America, Inc.Morgan Stanley Dean Witter & Co., which is
advised by Capital Research and Management Company, a
registered investment advisor. Information is based on Schedule 13G
dated February 10, 2000.
(12)12, 2001.
(11) These securities are held by Westport Asset Management, Inc., a
registered investment advisor. Information is based on Schedule 13G
dated February 16,
2000.
4
8
(13) These securities are held by Private Capital Management, Inc. and SPS
Partners, L.P., registered investment advisors. Bruce S. Sherman is
Chairman of Private Capital Management, Inc. and Managing General Partner
of SPS Partners, L.P., and exercises shared dispositive power with respect
to the shares beneficially owned by those entities. Information is based on
Schedule 13G dated February 14, 2000.
(14)2001.
(12) Includes 493,000219,375 shares issuable pursuant to stock options to purchase
Class B Common Stock held by directors and officers of the Company and
exercisable within 60 days of February 29, 200028, 2001 as follows: Leatrice
Ducat (1,250)(3,125); John H. Herrell (2,500)(5,000); Robert H. Hotz (2,500)(5,000); Alan B.
Miller (363,750); Sidney Miller (2,500)(177,500); Anthony Pantaleoni (2,500)(5,000); Thomas J.
Bender (33,250)Joseph T. Sebastianelli
(625); Kirk E. Gorman (39,000)(7,500); Steve G. Filton (28,750)(9,375); Richard C.
Wright (11,250)(3,750) and Debra K. Osteen (5,750)(2,500).
5
9
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a Board of
Directors of not fewer than three members nor more than nine members. The
Board of Directors is currently fixed at eightseven members, and is divided into
three classes, with members of each class serving for a three-year term. At
each Annual Meeting of Stockholders, directors are chosen to succeed those in
the class whose term expires at such Annual Meeting. Under the Company's
Restated Certificate of Incorporation, holders of shares of the Company's
outstanding Class B and Class D Common Stock are entitled to elect 20% (but
not less than one) of the directors, currently two directors, one in each of
Class II and Class III, and the holders of Class A and Class C Common Stock
are entitled to elect the remaining directors, currently sixfive directors, two
in Class I, two in Class II, and twoone in Class III.
The persons listed below currently constitute the Company's Board of
Directors. The term of the Class III directors, Mr. JohnAnthony Pantaleoni, Mr.
Robert H. HerrellHotz and Ms.
Leatrice Ducat,Mr. Joseph T. Sebastianelli, expires at the 20002001 Annual
Meeting. Mr. JohnAnthony Pantaleoni, and Mr. Robert H. Herrell and Ms.
Leatrice DucatHotz have been nominated to
be elected by the holders of Class A and Class C Common Stock and Mr. Joseph
T. Sebastianelli has been nominated to be elected by the holders of Class B
and Class D Common Stock. The Company has no reason to believe that any of the
nominees will be unavailable for election; however, if any nominee becomes
unavailable for any reason, the shares represented by the Proxy will be voted
for the person, if any, who is designated by the Board of Directors to replace
the nominee. All nominees have consented to be named and have indicated their
intent to serve if elected.
The following information is furnished with respect to each of the nominees
for election as a director and each member of the Board of Directors whose
term of office will continue after the meeting.
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCEClass of Principal Occupation
Class of Stockholders During the Last Director
Name Director Entitled to Vote Age Five Years Since
---- -------- ---------------- --- -------------------- --------
NOMINEES FOR TERMS
EXPIRING IN 2000
- ----------------------------
John H. Herrell............. I A Common 59 Vice President and Chief Administrative 1993
C Common Officer of Mayo Foundation since 1993.
Prior thereto, Chief Financial Officer
of Mayo Foundation since 1984 and
various other capacities since 1968.
Leatrice Ducat.............. I A Common 67 President and Founder, National Disease 1997
C Common Research Interchange since 1980;
President and Founder, Human Biological
Data Interchange since 1988; Founder,
Juvenile Diabetes Foundation, National
and International Organization of the
Juvenile Diabetes Foundation; Past
Chairman and Founder, National Diabetes
Research Coalition.
DIRECTORS WHOSE TERMS
EXPIRE IN 2001
- ------------------------------------------------
Anthony Pantaleoni..........Pantaleoni...... II A Common 60 Partner in61 Of Counsel to the law firm of Fulbright & 1982
C Common Fulbright & Jaworski L.L.P., New
York, New York. Director of AAON,
Inc. and Westwood Corporation.
The Company utilized during the
year ended December 31, 19992000 and
currently utilizes the services
of Fulbright & Jaworski L.L.P. as
counsel.
6
10
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCE
---- -------- ---------------- --- -------------------- --------
Robert H. Hotz..............Hotz.......... II B Common 5556 Managing Director and Co-Head of 1991
D Common Corporate Finance in the Americas
for USB Warburg Dillon Read; Director of
Mikasa, Inc., Formerly Co-Head of
Corporate Finance and Director at
Dillon, Read & Co., Inc.LLC.
Joseph T. Sebastianelli..... II A Common 5354 Currently, Chairman, Chief 2000
Sebastianelli.......... C Common Executive Officer and President
of onehealthbank.com, a
technology company in Cranbury,
New Jersey since May 2000.
Formerly Executive Vice President
of 2000
C Common Scripps Health, a multi-hospital system
in San Diego, California.Health. Formerly,
President of Aetna, Inc. and
prior to its merger with Aetna in
1996, Co-President and Principal
Medical Administrative Officer of
U.S. Healthcare, Inc.
6
Class of Principal Occupation
Class of Stockholders During the Last Director
Name Director Entitled to Vote Age Five Years Since
---- -------- ---------------- --- -------------------- --------
DIRECTORS WHOSE TERMS
EXPIRE IN 2002
- -------------------------------------------------
Alan B. Miller..............Miller.......... III A Common 6263 Chairman of the Board, President and 1978
C Common and Chief Executive Officer of
the Company since 1978. Prior
thereto, President, Chairman of
the Board and Chief Executive
Officer of American Medicorp,
Inc. Trustee of Universal Health
Realty Income Trust. Director of
CDI Corp. and
Penn Mutual Life Insurance
Company.
Sidney Miller............... III A Common 73 Secretary of the Company, from 1990 to 1978
C Common 1999. Assistant to the President during
1993CDI (NYSE) Corp. and
1994. Prior thereto, Executive
Vice President of the Company since
1983, Senior Vice President of the
Company since 1982 and Vice President
of the Company since 1978.Broadlane, Inc.
John F. Williams, Jr., M.D.,
Ed.D. .................... III B Common 5152 Vice President for Health Affairs and 1999
M.D., Ed.D............. D Common Executiveand Dean of George Washington
University since 1997; Prior
thereto, Medical Director of The
George Washington University
Hospital, and Associate Vice
President for Graduate Medical
Education at the School of
Medicine and Health Sciences;
Member of the American Public
Health Association, the American
Medical Association, the New York
Academy of Sciences, the American
Society of Anesthesiologists and
the Society of Critical Care
Medicine.
DIRECTORS WHOSE TERMS
EXPIRING IN 2003
- ---------------------
John H. Herrell......... I A Common 60 Vice President and Chief 1993
C Common Administrative Officer of Mayo
Foundation since 1997;1993. Prior
thereto, Medical DirectorChief Financial Officer
of The George
Washington University Hospital,Mayo Foundation since 1984 and
Associate Vicevarious other capacities since
1968.
Leatrice Ducat.......... I A Common 68 President for Graduate
Medical Education at the School of
Medicine and Health Sciences; MemberFounder, National 1997
C Common Disease Research Interchange
since 1980; President and
Founder, Human Biological Data
Interchange since 1988; Founder,
Juvenile Diabetes Foundation,
National and International
Organization of the American Public Health Association,
the American Medical Association, the
New York Academy of Sciences, the
American Society of AnesthesiologistsJuvenile
Diabetes Foundation; Past
Chairman and the Society of Critical Care
Medicine.Founder, National
Diabetes Research Coalition.
SECTIONSection 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Mr. Robert H. Hotz failed to file a Form 4, StatementBased on reports filed with the
Company, the Company believes all required reports of Changes of Beneficial Ownership, in a timely mannerexecutive officers and
John F. Williams,
Jr., M.D. failed to file a Form 3, Initial Statement of Beneficial Ownership,directors were filed in a timely manner.
7
11
PROPOSAL NO. 2
ADOPTION OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK
The Board of Directors has unanimously adopted and submits to stockholders
for their approval an amendment to Article Fourth of the Company's Restated
Certificate of Incorporation which would increase the number of shares of
Class B Common Stock that the Company is authorized to issue from 75,000,000
shares to 150,000,000 shares. The full text of the proposed amendment to
Article Fourth is set forth in Exhibit A hereto and the foregoing discussion
is qualified by reference thereto.
As of March 21, 2001, 1,924,443 shares of Class A Common Stock, 27,807,575
shares of Class B Common Stock, 193,924 shares of Class C Common Stock and
21,766 shares of Class D Common Stock were issued and outstanding. In
addition, as of March 21, 2001, a total of 5,683,319 shares of Class B Common
Stock were reserved for issuance under the various employee benefit plans of
the Company, and a total of 3,750,000 shares of Class B Common Stock were
reserved for issuance upon conversion of outstanding convertible securities,
leaving 28,325,787 shares of Class B Common Stock unreserved and available for
issuance.
The Board of Directors has proposed this increase in the authorized number
of shares of Class B Common Stock and recommends its adoption in order to
provide the Company with greater flexibility to issue Class B Common Stock for
appropriate corporate purposes. Among the purposes for which such additional
authorized stock could be issued include funding its capital needs and
corporate growth, for the acquisition of desirable business, for stock options
to attract and retain employees and for stock splits and stock dividends. The
Board of Directors has declared, subject to approval of this Proposal, a 2 for
1 stock split in the form of a 100% stock dividend on all classes of its
Common Stock payable on June 1, 2001 to stockholders of record on May 16,
2001. If the Proposal is not adopted, the stock split will not be effected.
The Board of Directors has no current plans or intentions with respect to the
issuance of additional shares of Class B Common Stock other than for use in
connection with possible stock splits and for use in connection with the
Company's employee benefit plans.
Approval of the proposed amendment to the Restated Certificate of
Incorporation will allow the Board to effect the stock split described above
and move promptly to issue additional shares, if appropriate opportunities
should arise, without the delay and expense of calling a special stockholders'
meeting. The Board of Directors will determine whether, when and on what terms
the issuance of shares of Class B Common Stock may be warranted. Like the
presently authorized but unissued shares of Class B Common Stock, the
additional shares will be available without further action by the stockholders
unless such action is required by applicable law or regulations or stock
exchange rules. Stockholders do not presently have preemptive rights with
respect to the current authorized Class B Common Stock. Except in certain
cases such as a stock dividend, the issuance of additional shares of Class B
Common Stock would have the effect of diluting the voting powers of existing
stockholders.
8
Vote Required
The affirmative vote of the holders of a majority of the shares of Class B
Common Stock and a majority of the Common Stock votes of the Company
outstanding is required for the adoption of the proposal set forth above.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 2--THE ADOPTION OF THE AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF CLASS B COMMON STOCK" TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
9
PROPOSAL NO. 3
ADOPTION OF THE AMENDMENT TO THE
AMENDED AND RESTATED UNIVERSAL HEALTH SERVICES, INC.
1992 STOCK OPTION PLAN
On September 28, 1999,January 17, 2001, the Board of Directors of the Company adopted an
amendment to the Amended and Restated 1992 Stock Option Plan (the "1992
Plan"), subject to stockholder approval. The Amendment to the 1992 Plan will
increase the aggregate number of shares of Class B Common Stock as to which purchase rights may be
granted from timeissued pursuant to timethe exercise of options under the Plan from 3,000,0004,000,000 to
5,500,000 shares, will increase the number of options any individual may
receive during any calendar year from 200,000 to 4,000,000 shares.500,000 and will extend the
expiration date of the 1992 Plan from July 15, 2002 to July 15, 2005 (the
"Amendment"). The 1992 Plan will become effective only if approved by
stockholders representing a majority of the aggregate voting power of the
shares of outstanding Common Stock present and entitled to vote at the
meeting. The essential features of the 1992 Plan (including the Amendment) are
summarized below. The full text of the Amended and Restated 1992 Stock Option
Plan is set forth in Exhibit AB to this Proxy Statement, and the following
discussion is qualified in its entirety by reference thereto.
The 1992 Plan is intended to aid the Company in attracting and retaining
officers, directors and employees who are in a position to contribute
materially to the successful conduct of the Company's business and affairs.
The amendmentAmendment is intended to furnish additional incentives whereby present and
future officers, directors and employees may be encouraged to acquire, or to
increase their holdings of, the Company's Class B Common Stock. AThe Company
had utilized virtually all options available for grant under the Plan and
therefore adopted the Amendment and Restatement to the 1992 Plan in January
2001.
On January 17, 2001, a total of 574,500965,850 options have beenwere granted under the 1992
Plan, as
amended, subject to stockholder approval.approval of the Amendment to the 1992 Plan.
Options for approximately 1,170,000 shares will remain available for grant if
the proposal is adopted. The table below indicates options which have been
granted, subject to stockholder approval, to the named persons and to the
indicated groups of persons. Other awards under the 1992 Plan, as amended, are
not yet determinable. The closing price of the Company's Class B Common Stock
on the New York Stock Exchange on April 5, 200012, 2001 was $50.0625.$90.41. The dollar value
listed below is the excess of the closing price of the Company's Class B
Common Stock on April 5, 200012, 2001 over the exercise price of the total options
granted under the 1992 Plan. In September and NovemberFor a description of 1999, 305,000
options and 25,000 options, respectively, were granted subjectin the last
fiscal year to stockholder
approvalcertain executives of the Amendment to the 1992 Plan. An additional 244,500 options were
granted on January 19, 2000, subject to stockholder approval of the Amendment to
the 1992 Plan.Company, see "Executive
Compensation--Option Grants in Last Fiscal Year."
10
PLAN BENEFITS GRANTED TO DATE
1992 STOCK OPTION PLAN, AS AMENDED
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) OPTIONS(2)Dollar Number of
Name and Position Value(1) Options(2)
- ----------------- ---------- ----------
Alan B. Miller.............................................. $5,390,625 240,000Miller............................................ $2,798,750 500,000
Kirk E. Gorman.............................................. $ 637,500 40,000Gorman............................................ $335,850 60,000
Thomas J. Bender............................................ $ 400,125 31,000
Steve G. Filton............................................. $ 358,875 23,500
8
12
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) OPTIONS(2)
- ----------------- ---------- ----------
Bender(3)....................................... $335,850 60,000
Debra K. Osteen........................................... $223,900 40,000
Richard C. Wright........................................... $ 68,750 12,500Wright......................................... $223,900 40,000
All current executives as a Group........................... $ 213,250 16,000Group......................... $223,900 40,000
Non-Executive Directors as a Group.......................... $ 421,563 27,500Group........................ $167,925 30,000
Non-Executive Officers, Employees as a Group................ $2,306,250 184,000Group.............. $1,096,270 195,850
- -------------------------
(1) Based on the difference between the exercise price and the closing sale
price of the Class B Common Stock on the New York Stock Exchange on April
5, 200012, 2001 of $50.0625$90.41 per share.
(2) The table shown above contains the options granted in 2001 pursuant to the
1992 Stock Option Plan, as amended,Amended, which are subject to stockholder approval.approval of the
Amendment to the 1992 Plan. For options granted to the five named
executives shown above during the last fiscal year, pursuant to the 1992
Plan, including options granted both
before and after giving effectprior to the amendment, see "Executive
Compensation -- OptionCompensation--Option Grants in Last Fiscal Year."
DESCRIPTION OF THE AMENDED AND RESTATED(3) Mr. Bender's employment with the Company was terminated during the first
quarter of 2001. The options granted, shown on the table above, were
cancelled upon his termination.
Description of the Amended and Restated 1992 STOCK OPTION PLANStock Option Plan
The 1992 Plan permits the granting of options to purchase an aggregate of
4,000,0005,500,000 shares of the Company's Class B Common Stock (prior to the
Amendment, the limit was 4,000,000 shares) to certain key employees, directors
of and consultants to the Company or any of its subsidiaries. Directors are
eligible to receive options under the Plan, regardless of whether they are
otherwise employed by the Company. The number of shares which may be
issued underApproximately 300 persons are eligible to
participate in the 1992 Plan will not qualify as incentive stock plans under the
federal income tax law.Plan.
The 1992 Plan will be administered by the Board of Directors; however, the
Board of Directors may appoint a committee (the "Committee") of the Board
whose members shall satisfy the requirements of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the requirements of Rule
16b-3(a)(3)(i) under the Securities and Exchange Act of 1934, as amended (or
any further successor laws or regulations), to grant options to executive
officers of the Company. The Board of Directors currently administers the 1992
Plan.
11
Subject to the provisions of the 1992 Plan, the Board of Directors has the
authority to determine the individuals to whom stock options will be granted,
the number of shares to be covered by each option, the option price, the type of option, the terms
for the payment of the option price and other terms and conditions. In the
case of options granted by the Committee, the exercise price shall not be less
than the fair market value of the Class B Common Stock. Payment for shares
acquired upon exercise of an option may be made (as determined by the Board of Directors) in cash, by promissory note or
by shares of Class B Common Stock. The Company provides a three-year loan for
participants in the 1992 Plan, to cover the tax liability incurred by
optionees upon exercise of the option ("Option Loan"). Payment of interest is deferred
during the term of the loan. The loan and all interest thereon will be
forgiven on the maturity date if the optionee is employed by the Company on
that date. No person may receive grants of options to purchase more than
200,000500,000 shares in any one calendar year.year (prior to the Amendment, the limit was
200,000 shares).
All options must expire no later than ten years from the date of grant. In
general, except as otherwise provided by the Board of Directors or the
Committee, no option may be exercised after the termination of the optionee's
service
9
13 with the Company and subsidiaries. However, the option exercise is
extended to twelve months after termination if the optionee's service is
terminated by reason of disability or death.
Options may be transferred to members of the immediate family of an optionee
or to trusts for the benefit of immediate family members unless otherwise
prohibited. The Board of Directors may amend or terminate the 1992 Plan, at
any time, without the consent of the Company's stockholders. In any event, no
options may be granted under the 1992 Plan after July 15, 2002.
FEDERAL INCOME TAX CONSEQUENCES2005 (prior to the
Amendment the expiration date was July 15, 2002).
Federal Income Tax Consequences
The following is a summary of the salient federal income tax consequences
associated with awards made under the 1992 Plan.
The grant of an option under the 1992 Plan is not a taxable event. In
general, if and when thea non-qualified option is exercised, the optionee will
recognize ordinary income equal to the excess of the value of the Common Stock
acquired upon the exercise over the exercise price (i.e., the option spread),
and the Company will generally be entitled to a corresponding deduction. If
shares of Common Stock acquired upon the exercise of an option are subject to
the six-month sale restriction under Section 16(b) of the Securities Exchange
Act of 1934, then the optionee will recognize ordinary income attributable to
the exercise on the date the restriction lapses unless an early income
recognition election is made. Upon a later sale of the shares, the optionee
will realize capital gain or loss equal to the difference between the selling
price and the value of the shares at the time ordinary income is recognized.
VOTE REQUIREDThe Company has not, and does not intend to, grant incentive stock options
under the 1992 Plan.
Vote Required
The affirmative vote of the holders of a majority of the shares of the
Common Stock votes of the Company present and entitled to vote at the 20002001
Annual Meeting of Stockholders is required for the adoption of the proposal
set forth above.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 2 -- ADOPTION3--ADOPTION OF THE AMENDMENT TO
THE AMENDED AND RESTATED 1992 STOCK OPTION PLAN," TO BE IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF.
1012
PROPOSAL NO. 4
ADOPTION OF THE 2001 EMPLOYEES' RESTRICTED STOCK
PURCHASE PLAN
On March 7, 2001, the Board of Directors adopted the 2001 Employees'
Restricted Stock Purchase Plan (the "Restricted Stock Plan"), subject to
stockholder approval. The Restricted Stock Plan provides for the purchase by
certain employees of, and consultants to, the Company of shares of Class B
Common Stock of the Company at a price equal to the par value of such shares
at the time of such sale. The Restricted Stock Plan is administered by a
committee (the "Committee") which consists of not less than two "non-employee
directors", as that term is defined in Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. Currently, the Stock Option and Compensation
Committee has been appointed as the Committee under the Plan. The Committee
has full authority under the Restricted Stock Plan to select the employees to
whom shares shall be sold, to determine the number of shares to be sold, the
times at which shares shall be sold, the time at which the restrictions on the
shares shall lapse and the terms and conditions of the Restricted Stock
Purchase Agreement (the "Agreement") pursuant to which the shares are sold.
The Company may grant restricted shares to a person in lieu of other
compensation earned under incentive plans of the Company. The Agreement gives
the Company the right to repurchase all of the shares sold to an employee, for
an amount equal to the price paid by the employee, in the event his employment
terminates for any reason during the periods set forth in the Agreement.
The Restricted Stock Plan authorizes the issuance of up to 300,000 shares of
the Company's Class B Common Stock prior to its expiration on March 7, 2010.
The closing price of the Company's Class B Common Stock on the New York Stock
Exchange on April 12, 2001 was $90.41. The Restricted Stock Plan was adopted
for the purposes of encouraging key employees and consultants, who are
expected to make continued substantial contributions to the development of the
Company, to increase their personal and proprietary interest in the Company's
growth and success. A person granted shares under the Restricted Stock Plan
will realize ordinary income when the shares granted become transferable or
are no longer subject to the risk of forfeiture in an amount equal to the
excess of the fair market value of the shares at that time over the purchase
price. The Company will be able to claim a business expense deduction in an
equal amount. The Board of Directors may amend or terminate the Restricted
Stock Plan at any time, provided that, no amendment which would increase the
number of shares which may be issued under the Plan without approval of the
Company's stockholders if and to the extent such approval is necessary or
desirable to comply with applicable law or exchange requirements. In addition,
no amendment or termination shall affect the rights of any employee with
respect to shares previously sold under the Restricted Stock Plan.
The full text of the Restricted Stock Plan is set forth in Exhibit C, and
this summary is qualified in its entirety by reference thereto.
In lieu of a portion of the cash bonus earned by Mr. Alan B. Miller under
the Executive Incentive Plan, on March 7, 2001, the Committee granted Mr.
Miller 5,800 shares of Restricted Stock which are subject to the approval of
the Restricted Stock Plan at the next meeting of the stockholders. The rights
to these shares will vest in one year from the date of grant, provided Mr.
Miller remains employed by the Company on such date. Under the terms of the
grant, Alan B. Miller paid cash in an amount equal to the aggregate par value
of the shares granted. The market price on the date of the grant to Alan B.
Miller was $86.45. Other awards under the Restricted Stock Plan are not yet
determinable.
13
PLAN BENEFITS GRANTED TO DATE
RESTRICTED STOCK PLAN
Dollar Number of
Name and Position Value(1) Shares
- ----------------- -------- ---------
Alan B. Miller............................................... $501,410 5,800
Kirk E. Gorman............................................... 0 0
Thomas J. Bender(2).......................................... 0 0
Debra K. Osteen.............................................. 0 0
Richard C. Wright............................................ 0 0
All current executives as a Group............................ 0 0
Non-Executive Directors as a Group........................... 0 0
Non-Executive Officers, Employees as a Group................. 0 0
- ----------
(1) Based on the closing sale price of the Class B Common Stock on the New
York Stock Exchange on March 7, 2001 of $86.45 per share.
(2) Mr. Bender's employment with the Company was terminated during the first
quarter of 2001.
Approximately 300 employees are eligible to participate in the Plan.
Vote Required
The affirmative vote of a majority of the shares of the Common Stock votes
of the Company present and entitled to vote at the 2001 Annual Meeting of
Stockholders is required for the adoption of the proposal set forth above.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 4--ADOPTION OF THE 2001 EMPLOYEES'
RESTRICTED STOCK PURCHASE PLAN," TO BE IN THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
14
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid by
the Company as well as certain other compensation paid or accrued, during the
fiscal years indicated, to the Chairman of the Board, President, and Chief
Executive Officer and the four highest paid executive officers of the Company
for such period in all capacities in which they served.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
----------------------------------------- RESTRICTED
OTHER STOCK SECURITIES ALL OTHER
ANNUAL AWARDS UNDERLYING COMPEN-
FISCAL COMPENSATIONLong-term
Annual compensation compensation awards All
---------------------------------- --------------------- other
Restricted Securities compen-
Other Annual stock Underlying sation
Name and principal Fiscal Bonus Compensation ($) awards ($) OPTIONS SATION
NAME AND PRINCIPAL POSITION YEAR SALARYOptions ($)
BONUSposition Year Salary ($) (a) (b) (#) (c)($)
---------------------------
------------------ ------ ---------- ----------------- -------- ---------------- ---------- ---------- ----------------
Alan B. Miller, Chairman
of the Board,
President, and Chief
Executive Officer............Officer...... 2000 $947,600 $507,590 $ 819,548 $1,004,667 45,000 $12,972
1999 $920,000 $920,000 0 $1,996,327 $1,996,327 24,342 220,000 $11,17211,172
1998 884,000 593,406 4,556 196,930 150,000 12,772
1997 850,000 357,000 4,556 128,529 40,000 12,772
Kirk E. Gorman, Senior
Vice President,
Treasurer and Chief
Financial Officer......Officer.... . 2000 $293,906 $209,000 $ 325,186 $ 111,616 20,000 $ 3,400
1999 $282,719 $282,719 0 $ 160,025 $ 5,684 30,000 $ 1,600
1998 267,975 118,981 0 40,873 22,000 3,200
1997 250,800 84,280 4,906 30,225 22,000 3,200
Thomas J. Bender, Senior
Vice President....................President(d)...... 2000 $275,000 $190,000 $ 0 $ 5,208 20,000 $ 3,400
1999 $225,750 $148,148 $225,750 148,148 248,694 $ 6,096 33,500 $ 1,600
1998 207,500 127,364 0 43,023 15,000 3,200
1997 198,000 118,510 0 34,568 15,000 3,200
Steve G. Filton,Debra K. Osteen, Vice
President Controller and
Secretary................................. 2000 $222,000 $206,000 $ 96,975 $ 3,205 17,000 $ 3,400
1999 $213,450 $ 0 $ 133,670 $ 3,542 21,000 $186,000 195,300 100,516 2,760 6,000 1,600
1998 196,650 69,850 0 24,417 15,000 3,200
1997 183,500 53,960 4,163 19,052 15,000174,000 57,420 15,786 20,187 5,000 3,200
Richard C. Wright, Vice
President....................President ............. 2000 $210,125 $195,000 $ 160,228 $ 2,564 12,500 $ 3,400
1999 $203,333 $203,333 15,000 $ 104,233 $ 8,526 15,000 $ 1,600
1998 193,333 30,022 0 22,640 15,000 3,200
1997 183,333 133,500 0 42,490 15,000 3,200
- -------------------------
(a) Other annual compensation for Mr. Alan B. Miller includes: (i) $814,992 in
2000 and $1,991,771 in 1999 which represents forgiveness of principal
under Option Loans, and; (ii) $4,556 in 1999,2000, $4,556 in 19981999 and $4,556 in
19971998 for other compensation. Other annual compensation for Messrs. Gorman,
Bender, FiltonWright and WrightMs. Osteen in 19972000, 1999 and 19991998 represents
forgiveness of principal under Option Loans.
15
(b) Restricted stock awards represent (i) the value of Class B Common Shares
received by those executives in lieu of cash payments pursuant to the
Company's 1992 Stock Bonus Plan ("Bonus Shares") for 1997 and 1998 only; (ii) the
portion of additional restricted shares ("Premium Shares") equal to 20% of
the 11
15
Bonus Shares issued in prior years which vested in 2000, 1999 and;and
1998; and (iii) the value of the Class B Common Shares issued in
connection with the 1990 Employees' Restricted Stock Purchase Plan (the
"1990 Plan") and the 2001 Employees' Restricted Stock Purchase Plan (the
"2001 Plan"). Restrictions on one-half of the Bonus Shares and the Premium
Shares lapse after one year from date of grant and restrictions on the
remaining Bonus Shares and Premium Shares lapse two years after the date
of grant.
Restricted stock awards for Mr. Alan B. Miller include: (i) $148,352 in
1998 and $89,250 in 1997only, representing the value of the Bonus Shares, and; (ii) $20,632 in
2000, $24,342 in 1999 and $48,578 in 1998 representing the value of the
vested portion of the Premium Shares. In May of 2000, Mr. Alan B. Miller
was granted an award of 9,000 shares of the Company's Class B Common Stock
(market value of $482,625 on the date of grant), under the 1990 Plan, on
which restrictions will lapse on May 17, 2002. Additionally, in March of
2001, Mr. Alan B. Miller was granted an award of 5,800 shares of the
Company's Class B Common Stock (market value of $501,410 on the date of
grant), under the 2001 Plan, on which restrictions will lapse on March 7,
2002. The shares granted to Mr. Alan B. Miller in 2001 pursuant to the
terms of the 2001 Plan, were granted subject to shareholder approval, as
mentioned above.
Restricted stock awards for Mr. Kirk E. Gorman include: (i) $29,745 in 1998
only, representing the value of the Bonus Shares, and; (ii) $4,366 in 2000,
$5,684 in 1999 and $39,279$11,128 in 19971998 representing the value of the vested
portion of the Premium Shares. In May of 2000, Mr. Kirk E. Gorman was
granted an award of 2,000 shares of the Company's Class B Common Stock
(market value of $107,250 on the date of grant), under the 1990 Plan, on
which restrictions will lapse on May 17, 2002. Restricted stock awards for
Mr. Thomas J. Bender include: (i) $31,841 in 1998 only, representing the
value of the Bonus Shares, and; (ii) $5,208 in 2000, $6,096 in 1999 and
$11,182 in 1998 representing the value of the vested portion of the Premium
Shares. Restricted stock awards for Mr. Kirk E. GormanMs. Debra K. Osteen include: (i)
$29,745$14,355 in 1998 and $21,070 in 1997only, representing the value of the Bonus Shares, and; (ii)
$5,684$3,205 in 2000, $2,760 in 1999 $11,128and $5,832 in 1998 and $9,155 in 1997 representing the value of
the vested portion of the Premium Shares. Restricted stock awards for Mr.
Thomas J. Bender include: (i) $31,841 in 1998 and $29,628 in 1997
representing the value of the Bonus Shares, and; (ii) $6,096 in 1999,
$11,182 in 1998 and $4,940 in 1997 representing the value of the vested
portion of the Premium Shares. Restricted stock awards for Mr. Steve G.
Filton include: (i) $17,462 in 1998 and $13,490 in 1997 representing the
value of the Bonus Shares, and; (ii) $3,542 in 1999, $6,955 in 1998 and
$5,562 in 1997 representing the value of
the vested portion of the Premium Shares. Restricted stock awards for Mr.
Richard C. Wright include: (i) $3,755 in 1998 and $29,625 in 1997only, representing the value
of the Bonus Shares, and; (ii) 8,526$2,564 in 2000, $8,526 in 1999 and $18,885
in 1998 and $12,865 in 1997 representing the value of the vested portion of the Premium Shares.
There were no Bonus Shares issued in 2000 or 1999.
At December 31, 1999,2000, Messrs. Miller, Gorman, Bender, FiltonWright and WrightMs. Osteen
held 5,179 1,073, 1,228, 6432,088, 418, 447, 53, and 438201 shares, respectively, of restricted Bonus
Shares and Premium Shares, with a value based on the closing price of the
shares on that date of $186,444, $38,628, $44,208, $23,148$233,334, $46,712, $49,952, $5,923, and $15,768,$22,462,
respectively.
(c) All other compensation includes the Company's match of officers'
contributions to the Company's 401(k) plan, and, for Mr. Alan B. Miller,
the total includes $9,572 in each year related to term life insurance
premiums paid for by the Company.
LOANS TO CHIEF EXECUTIVE OFFICER
Option Loans have been advanced(d) Mr. Thomas J. Bender's employment with the Company was terminated during
the first quarter of 2001.
As part of the Company's Executive Incentive Plan, target levels of net
income and return on assets for the Company as a whole are recommended on
an annual basis by senior management of the Company and approved by the
Company to Mr. Alan B. Miller in
connection with the Amended and Restated 1992 Stock Option Plan as well as a
loan advanced pursuant to the termsCommittee of the 1992 Corporate Ownership Program, As
Amended. Additionally, duringBoard of Directors which administers the second quarter of 2000, the Company loaned Mr.
Miller $1 million pursuant to the terms of a promissory note which is payable on
demand and provides for interest at an annual rate of 8%.
12Plan.
16
16
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENTAGE OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS EXERCISE STOCK PRICE
OPTIONS GRANTED TO PER APPRECIATION FOR
GRANTED EMPLOYEES SHARE OPTION TERMIndividual Grants
--------------------------------------------
Potential
Realizable
Value at Assumed
Number of Percentage of Annual Rates of
Securities Total Exercise Stock Price
Underlying Options Price Appreciation for
Options Granted to Per Option Term
Granted Employees in Share Expiration -------------------
Name (#) IN FISCAL PRICE EXPIRATION -----------------------
NAME (a) YEARFiscal Year ($/SH) DATEDate 5%($) 10%($)
---- ---------- ------------- -------- ---------- ------------------ ----------
Alan B. Miller................................. 25,000 3.9% $41.6250 04/01/04 $ 287,504 $ 635,312
195,000 30.4% $23.6875 09/28/04 $1,276,162 $2,819,984Miller........ 45,000 17.4% $44.5625 1/19/05 $554,028 $1,224,263
Kirk E. Gorman................................. 10,000 1.6% $41.6250 04/01/04Gorman........ 20,000 7.8% $44.5625 1/19/05 $246,235 $ 115,002 $ 254,125
20,000 3.1% $23.6875 09/28/04 $ 130,888 $ 289,229544,117
Thomas J. Bender...............................Bender (b).. 20,000 3.1% $41.6250 04/01/047.8% $44.5625 1/19/05 $246,235 $ 230,003544,117
Debra K. Osteen....... 10,000 3.9% $44.5625 1/19/05 $123,117 $ 508,250
2,500 0.4% $51.1250 05/272,059
7,000 2.7% $67.4375 7/19/0405 $130,421 $ 35,312 $ 78,031
11,000 1.7% $23.6875 09/28/04 $ 71,988 $ 159,076
Steve G. Filton................................ 10,000 1.6% $41.6250 04/01/04 $ 115,002 $ 254,125
11,000 1.7% $23.6875 09/28/04 $ 71,988 $ 159,076288,199
Richard C. Wright.............................. 15,000 2.3% $41.6250 04/01/04Wright..... 12,500 4.8% $44.5625 1/19/05 $153,897 $ 172,502 $ 381,187340,073
- -------------------------
(a) Options are exercisable as follows: 25% one year after date of grant and
an additional 25% in each of the second, third and fourth years after date
of grant. The options expire five years after the date of grant.
(b) Mr. Bender's employment with the Company was terminated during the first
quarter of 2001. The options granted, shown on the above table, were
cancelled upon his termination.
AGGREGATED OPTIONOPTIONS EXERCISED IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($Number of
Securities Underlying Value of Unexercised
Unexercised Options at in-the-Money Options at
Shares Value Fiscal Year-End (#) Fiscal Year-End ($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#)Acquired on Realized ------------------------- -------------------------
Name Exercise (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLEExercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ---------- ----------- ------------- ----------- -------------
Alan B. Miller......................... 195,000 $4,570,313 357,500 352,500 $5,831,250 $2,400,938Miller.......... 300,000 $17,125,000 160,000 295,000 $11,346,328 $22,422,422
Kirk E. Gorman......................... 20,000Gorman.......... 55,000 $ 467,500 36,500 57,500 $ 388,750 $ 246,250
Thomas J. Bender....................... 11,000 $ 257,125 28,250 53,250 $ 317,063 $ 148,188
Steve G. Filton........................ 11,000 $ 257,125 26,250 39,750 $ 291,563 $ 135,438
Richard C. Wright...................... 23,500 $ 779,500 7,500 33,7502,412,094 0 59,000 $ 0 $ 4,235,625
Thomas J. Bender (3).... 45,125 $ 1,932,625 0 56,375 $ 0 $ 3,948,313
Debra K. Osteen......... 7,500 $ 319,313 2,250 24,250 $ 161,313 $ 1,545,344
Richard C. Wright....... 18,750 $ 640,781 0 35,000 $ 0 $ 2,341,250
- -------------------------
(1) Based on the difference between the exercise price and the closing sale
price of the Class B Common Stock on the New York Stock Exchange on the
date of exercise.
(2) Based on the difference between the exercise price and the closing sale
price of the Class B Common Stock on the New York Stock Exchange on
December 31, 199929, 2000 of $36.00$111.75 per share.
13(3) Mr. Bender's employment with the Company was terminated during the first
quarter of 2001 and his outstanding options with vesting dates after April
1, 2001 were cancelled.
17
17
EMPLOYMENT CONTRACT
The Company and Alan B. Miller have entered into an employment contract
pursuant to which Mr. Miller will act as President and Chief Executive Officer
of the Company until December 31, 2002. In addition, the Agreement provides
for a five-year consulting arrangement commencing upon termination of Mr.
Miller's active employment, during which period he will be paid an annual fee
equal to one-half of his base salary at the date of expiration of the term of
active employment. During the period of his active employment, Mr. Miller was
entitled to a salary of $675,000 for the year ended December 31, 1992, to be
increased in each year thereafter by an amount equal to not less than the
percentage increase in the consumer price index over the previous year. Mr.
Miller is also entitled to an annual bonus of at least $100,000 (which he elected to waive for 1999) and payment of
insurance premiums, including income tax reimbursements, of $13,674 per annum,
as well as such other compensation as the Board of Directors may determine in
its discretion. Mr. Miller may be discharged only for cause or permanent
disability.
EXECUTIVE RETIREMENT INCOME PLANExecutive Retirement Income Plan
In October, 1993, the Board of Directors adopted the Executive Retirement
Income Plan pursuant to which certain management or other highly compensated
employees designated by the Board of Directors who have completed at least 10
years of active employment with the Company may receive retirement income
benefits. The monthly benefit is payable to a participant who retires after he
or she reaches age 62 and is equal to 3% of the employee's average monthly
base salary over the three years preceding retirement multiplied by the number
of full years (not to exceed 10) of the participant's active employment with
the Company. Payment of the benefit will be made in 60 monthly installments
following the participant's retirement date. Under certain circumstances, the
participant may be entitled to elect to receive the present value of the
payments in one lump sum or receive payments over a period of 10 years. The
estimated annual benefits payable (for the 60 months in which the participant
receives benefits) upon retirement at age 65 for each of Alan B. Miller, Kirk
E. Gorman, Thomas J. Bender, Steve G. Filton and Richard C. Wright and Ms. Debra K. Osteen
assuming their annual compensation increases by 4% annually, would be
$287,000$296,000, $147,000, $127,000, $146,000$149,000, $94,000 and $94,000,$167,000 respectively. If an
employee ceases employment with the Company prior to age 62, no retirement
income will be payable to the participant unless the Board of Directors
determines otherwise.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONStock Option and Compensation Committee Interlocks and Insider Participation
The Committee of the Board of Directors was comprised during 19992000 of four
non-employee directors, Anthony Pantaleoni, Robert H. Hotz, John H. Herrell
and Leatrice Ducat. Anthony Pantaleoni is a partner inOf Counsel to Fulbright & Jaworski
L.L.P., which serves as the Company's principal outside counsel. Robert H.
Hotz serves as Managing Director and Co-Head of Corporate Finance in the
Americas at UBS Warburg Dillon Read LLC, which provided consulting services and brokerage
services for the Company's share buy-back program.program and acted as one of the
Company's principal underwriters for the discounted Convertible Debentures
that were issued by the Company during 2000.
18
COMMITTEE REPORT TO SHAREHOLDERS
The report of the Stock Option and Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of
1933, as amended, or under the Securities Exchange Act of 1934, as amended,
except to the 14
18
extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION PHILOSOPHYCompensation Philosophy
The Committee regularly reviews and, with any changes it believes
appropriate, approves the Company's compensation program. The Company believes
that executive compensation should be closely related to the value delivered
to stockholders. This belief has been adhered to by developing incentive pay
programs which provide competitive compensation and reflect Company
performance. Both short-term and long-term incentive compensation are based on
Company performance and the value received by stockholders.
In designing its compensation programs, the Company follows its belief that
compensation should reflect the value created for stockholders while
supporting the Company's strategic business goals. In doing so, the
compensation programs reflect the following themes:
-. Compensation should encourage increased stockholder value.
-. Compensation programs should support the short-term and long-term
strategic business goals and objectives of the Company.
-. Compensation programs should reflect and promote the Company's values,
and reward individuals for outstanding contributions toward business
goals.
-. Compensation programs should enable the Company to attract and retain
highly qualified professionals.
PAY MIX AND MEASUREMENTPay Mix and Measurement
The Company's executive compensation is based on three components, each of
which is intended to serve the overall compensation philosophy.
BASE SALARYBase Salary
The Company's salary levels are intended to be consistent with competitive
pay practices and level of responsibility, with salary increases reflecting
competitive trends, the overall financial performance of the Company, the
performance of the individual executive and general economic conditions.
SHORT-TERM INCENTIVESShort-Term Incentives
On May 18, 1994, the Company's stockholders approved the adoption of the
Company's Executive Incentive Plan. Pursuant to that Plan, at the start of
each fiscal year, target levels of net income and return on assets for the
Company as a whole ("Company Targets") and target levels of net income for
each of the Company's individual divisions and facilities ("Division Targets")
are recommended by senior management of the Company and approved by the
Committee of the Board of Directors which administers the Plan. In accordance
with the Plan, a subcommittee consisting of Mr. Herrell and Ms. Ducat
established salary and bonus targets in March 19992000 for the 19992000 calendar year.
Similarly, a subcommittee will establish salary and bonus targets for future
years in accordance with tax law
19
requirements. The Committee expects to continue
15
19 the basic policies outlined
below. All senior executives of the Company, including heads of divisions and
facilities, have the opportunity to earn as a bonus for a fiscal year an
amount equal to a portion of their base salary for that fiscal year, depending
on whether and to what extent the Company Targets and/or the Division Targets
are achieved. For fiscal 1999, Thomas J. Bender,2000, (i) Alan B. Miller, the Company's Chairman and
President, was entitled to a bonus of 106% of his base salary based on the
achievement of Company Targets, (one-half of the bonus was paid in cash and
one-half was awarded with a grant of 5,800 shares of restricted stock issued
pursuant to the terms of the 2001 Employee's Restricted Stock Purchase Plan),
(ii) Kirk E. Gorman, a Senior Vice President of the Company, was entitled to a
bonus of 66%71% of his base salary based on the achievement of Company Targets,
(iii) Thomas J. Bender, a Senior Vice President of the Company (his employment
with the Company was terminated during the first quarter of 2001) was entitled
to a bonus of 69% of his base salary based on the achievement of Company
Targets and the Division Targets.Targets, (iv) Debra K. Osteen, Vice President of the
Company, was entitled to a bonus of 93% of her base salary based on the
achievement of Company Targets and the Division Targets, and; (v) Richard C.
Wright, Vice President of the Company, was entitled to a bonus of 64% of his
base salary based on the achievement of Company Targets, plus $60,000 related
to completed hospital acquisitions. Seventy-five percent (75%) of the
respective bonuses of Mr. Bender's bonus wasBender and Ms. Osteen were determined based on the
achievement of the Division Targets and the remaining 25% of such bonus wasbonuses were
determined based on the achievement of the Company Targets, which were not met during fiscal 1999. Messrs. Miller, Gorman and
Filton were not entitled to bonuses for fiscal 1999, pursuant to the Plan, since
the Company Targets were not achieved.Targets. Depending upon the
actual performance of the Company and the Divisions compared to Company
Targets and/or the Division Targets, the senior executives can receive bonuses
up to 150% of their base salaries.
LONG-TERM INCENTIVESLong-Term Incentives
Stock options are granted from time to time to reward key employees'
contributions. The grant of options is based primarily on a key employee's
potential contribution to the Company's growth and profitability. Options are
granted at the prevailing market value of the Company's Common Stock and will
only have value if the Company's stock price increases. Generally, grants of
options vest in equal amounts over four years and executives must be employed
by the Company for such options to vest.
1999 COMPENSATION2000 Compensation
The base salary for the Chairman and President was increased during 19992000 to
$920,000.$947,600. This represents a 4%3% increase over 1998.1999.
The Stock Option and Compensation Committee believes that linking executive
compensation to corporate performance results in a better alignment of
compensation with corporate business goals and stockholder value. As
performance goals are met or exceeded, resulting in increased value to
stockholders, executives are rewarded commensurately. The Stock Option and
Compensation Committee believes that compensation levels during 19992000
adequately reflect the Company's compensation goals and policies.
The Committee intends that compensation awarded to individuals will be to
the extent practicable eligible for deduction under Section 162(m) of the
Internal Revenue Code but will in certain circumstances award compensation not
eligible for such deductions.
STOCK OPTION AND COMPENSATION COMMITTEE
John H. Herrell Robert H. Hotz
Leatrice Ducat Anthony Pantaleoni
1620
20
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(THE COMPANY,(The Company, S&P 500, PEER GROUP)
UNIVERSAL HEALTH SERVICES -
CL B S & P 500 INDEX PEER GROUP
--------------------------- --------------- ----------
1994 100 100 100
1995 181.13 137.58 140.32
1996 233.67 169.17 167.29
1997 411.22 225.6 153.91
1998 423.47 290.08 132.06
1999 293.88 351.12 135.83
Peer Group and Old Peer Group)
[GRAPH]
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------ -------
Universal Health Services-
CLB $100.00 $129.01 $227.04 $233.80 $162.25 $503.65
S & P 500 Index $100.00 $122.96 $163.98 $210.85 $255.21 $231.98
Peer Group $100.00 $118.53 $110.06 $94.23 $94.02 $155.66
Old Peer Group $100.00 $119.22 $109.68 $94.11 $96.80 $156.49
The total cumulative return on investment (change in the year end stock price
plus reinvested dividends) for each of the periods for the Company, the peer
group, the old peer group and the S&P 500 Composite is based on the stock price
or composite index at the end of fiscal 1994.1995.
The above graph compares the performance of the Company with that of the S&P
500 Composite, a group of peer companies, and a group of old peer companies
where performance has been weighted based on market capitalization. Companies
in the peer group, which consist of companies in the S&P Health Care Hospital
Management Index (in which the Company is also included), are as follows: Columbia/HCATenet
Healthcare Corporation,
21
HCA-Healthcare Corporation, Health Management Associates, Province Healthcare
Company, and Quorum Health Group. Companies in the old peer group are as
follows: HCA-Healthcare Corporation, Community Health Systems, Inc.,
Transitional Hospitals Corporation (acquired by Vencor, Inc. in 1997), Health
Management Associates, Inc., OrNda HealthCorp. (acquired by Tenet Healthcare
Corporation in 1997), Quorum Health Group, Inc., Ramsay Health Care,Youth Services, Inc.
and Tenet Healthcare Corporation.
17
21 During 1996, Community Health Systems, Inc.
became a privately held company and is no longer publicly traded. Stock price
information is included for Community Health Systems, Inc. through the period
ended July 1996. OrNda HealthCorp. merged with Tenet Healthcare Corporation on
January 31, 1997. Transitional Hospitals Corporation was acquired by Vencor,
Inc. on September 15, 1997.
COMPENSATION OF DIRECTORS
The non-employee directors are compensated for their service on the Board of
Directors and Committees of the Board on an annual basis at $20,000 each.
During 1998, the Company adopted the Deferred Compensation Plan for UHS Board
of Directors (the "Plan"). The Plan allows the Company's Board of Directors to
elect: (i) the amount of their compensation to be deferred; (ii) the future
date when the deferred amounts should be paid; (iii) the method of
distribution to be used when the deferred amounts are paid, and; (iv) the
investment measure to be used for crediting earnings on deferred amounts
during the period held pursuant to hethe Plan. As of December 31, 1999,2000, three
members of the Company's Board of Directors are participating in this Plan.
On November 18, 1997, Ms. Leatrice Ducat, upon being appointed to the Board
of Directors, received an option to purchase 2,500 shares of the Class B Common
Stock of the Company at an exercise price of $44.5625 per share.
On January 21, 1998, pursuant to the Amendment and Restatement of the 1992
Stock Option Plan, all non-employee directors of the Company who have served
for more than eighteen months received an option to purchase 5,000 shares of
the Company's Class B Common Stock at an exercise price of $47.8125 per share.
On November 11, 1999 all non-employee directors of the Company received an
option to purchase 5,000 shares of the Company's Class B Common Stock at an
exercise price of $33.75 per share. On January 19, 2000, Mr. Joseph T.
Sebastianelli received an option to purchase 2,500 shares of the Class B
Common Stock of the Company at an exercise price of $44.56 per share. On
January 17, 2001, all non-employee directors of the Company received an option
to purchase 5,000 shares of the Company's Class B Common Stock at an exercise
price of $84.8125 per share. All the above options are exercisable as follows:
25% one year after date of grant and an additional 25% in each of the second,
third and fourth years after date of grant. The options expire five years
after the date of grant.
BOARD OF DIRECTORS
Meetings of the Board. Regular meetings of the Board are generally held
every other month, while special meetings are called when necessary. Before
each Board or Committee meeting, directors are furnished with an agenda and
background materials relating to matters to be discussed. During 1999,2000, there
were seveneight Board meetings. All current directors attended more than 75% of the
meetings of the Board and of committees of the Board on which they served.
The Executive Committee, the Stock Option and Compensation Committee, the
Audit Committee, and the Finance Committee are the standing committees of the
Board of Directors, and may meet concurrently with the Board of Directors'
meetings.
22
Executive Committee. The Executive Committee has the responsibility, between
meetings of the Board of Directors of the Company, to advise and aid the
officers of the Company in all matters concerning the management of the
business and, while the Board is not in session, has the power and authority
of the Board to the fullest extent permitted under law. The Executive
Committee met oncetwice in 1999.2000. Members of the Committee are Alan B. Miller,
Sidney Miller,Robert H. Hotz, and Anthony Pantaleoni.
Stock Option and Compensation Committee. The Stock Option and Compensation
Committee has responsibility for reviewing and recommending to the Board of
Directors the compensation levels of officers and directors of the Company and
its subsidiaries and the administration of the 1990 Employees' Restricted
Stock Purchase Plan, the 1992 Corporate Ownership Program, As Amended, the
Amended and Restated 18
22
1992 Stock Bonus Plan, the Stock Purchase Plan, the
Amended and Restated 1992 Stock Option Plan, and
the Stock Compensation Plan and,
if approved, the 2001 Employees' Restricted Stock Purchase Plan. This
Committee either met or took action through unanimous written consent sixthree
times in 1999.2000. The members of this Committee are Anthony Pantaleoni, Robert H.
Hotz, John H. Herrell and Leatrice Ducat. A subcommittee of the Stock Option
and Compensation Committee, comprised of Mr. Herrell and Ms. Ducat, will
administer the 1994 Executive Incentive Plan and the various stock plans.
Audit Committee. The Audit Committee is responsible for providing assistance
to the Board of Directors in fulfilling its responsibilities relating to
corporate accounting and reporting practices and to maintain a direct line of
communication between the directors and the independent accountants. It
recommends the firm to be appointed independent auditor, reviews the scope and
results of the audit with the independent auditors and considers the adequacy
of the internal accounting and control procedures of the Company. The Audit
Committee met twice in 1999.2000. Members of this Committee are John H. Herrell,
Sidney Miller,Joseph T. Sebastianelli, Leatrice Ducat and John F. Williams, Jr., M.D.
Finance Committee. The Finance Committee is responsible for reviewing the
Company's cash flow and capital commitments and is charged with overseeing its
long-term financial planning. The Finance Committee met twiceonce in 1999.2000. Members
of this Committee are Alan B. Miller, Sidney MillerJoseph T. Sebastianelli and Robert H.
Hotz.
AUDIT COMMITTEE REPORT
The Board of Directors of the Company is committed to the accuracy and
integrity of its financial reporting. The Audit Committee takes an involved
and active role in delivering on this commitment.
The Audit Committee provides independent, objective oversight of the
Company's accounting functions and internal controls. The Committee is
composed solely of independent directors who are qualified for service under
the New York Stock Exchange listing standards. It acts under a written charter
first adopted and approved by the Board of Directors in 2000, which is
attached to this Proxy Statement as Appendix D.
The Audit Committee evaluates and recommends to the Board an accounting firm
to be engaged as the Company's independent auditors. Additionally, and as
appropriate, the Committee reviews and evaluates, and discusses and consults
with the Company's management, internal audit personnel and the independent
auditors about the following:
. the plan for, and the independent auditors' report on, each audit of the
Company's financial statements;
23
. the Company's financial disclosure documents, including all financial
statements and reports filed with the SEC or sent to shareholders;
. changes in the Company's accounting practices, principles, controls or
methodologies, or in the Company's financial statements;
. significant developments in accounting rules;
. the adequacy of the Company's internal accounting controls, and
accounting, financial and auditing personnel; and
. the establishment and maintenance of an environment at the Company that
promotes ethical behavior.
The Audit Committee recommends to the Board that the Company's financial
statements be included in the Company's annual report. The Committee took a
number of steps in making this recommendation for 2000:
. First, the Committee discussed with the Company's independent auditors
the overall scope and plans for their audits.
. Second, the Committee met with the independent auditors, without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls and the overall quality
of the Company's financial reporting.
. Third, the Committee reviewed the audited financial statements in the
Annual Report with management including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness
of significant judgments, and the clarity of disclosures in the
financial statements.
. Fourth, the Committee reviewed with the independent auditors their
judgments as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are required
to be discussed with the Committee under auditing standards generally
accepted in the United States.
. Finally, the Committee discussed with the independent auditors the
auditors' independence from management and the Company, including the
matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of non-audit services
with the auditors' independence.
Based on the discussions with Arthur Andersen LLP concerning the audit, the
independence discussions, and the financial statement review, and such other
matters deemed relevant and appropriate by the Audit Committee, the Audit
Committee recommended to the Board that the financial statements be included
in the Company's 2000 Annual Report on Form 10-K.
Audit Committee
John H. Herrell
Joseph T. Sebastianelli
Leatrice Ducat
John F. Williams, Jr., M.D.
24
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has been retained by the Board of Directors, on the
recommendation of the Audit Committee, to perform all accounting and audit
services during the 20002001 fiscal year. It is anticipated that representatives
of Arthur Andersen LLP will be present at the Annual Meeting and will have an
opportunity to make a statement, if they desire to do so, and to respond to
any appropriate inquiries of the stockholders or their representatives.
During 2000, the Company retained Arthur Andersen LLP, to provide services
in the following categories and amounts:
Audit fees $ 529,000
All other fees 643,000
----------
$1,172,000
The Audit Committee has considered whether the provision of non-audit
services by the Company's principal auditor is compatible with maintaining
auditor independence.
EXPENSES FOR PROXY SOLICITATION
The principal solicitation of proxies is being made by mail; however,
certain officers, directors and employees of the Company, none of whom will
receive additional compensation therefor, may solicit proxies by telegram,
telephone or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling and will
reimburse the reasonable expenses of brokerage firms and others for forwarding
material to beneficial owners of shares.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
FOR PRESENTATION AT THE 20012002 ANNUAL MEETING
Any proposal that a stockholder wishes to present for consideration at the
20012002 Annual Meeting must be received by the Company no later than December 21,
2000.2001. This date provides sufficient time for inclusion of the proposal in the
20012002 proxy materials.
1925
23
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action at the Annual Meeting. As for any
business that may properly come before the Annual Meeting, the Proxies confer
discretionary authority in the persons named therein. Those persons will vote
or act in accordance with their best judgment with respect thereto.
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE YOUR PROXY BY TELEPHONE OR INTERNET AT
YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE
ANNUAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Steve G. Filton
STEVE G. FILTON, Secretary
King of Prussia, Pennsylvania
April 19, 200020, 2001
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: INVESTOR RELATIONS,
UNIVERSAL HEALTH SERVICES, INC., UNIVERSAL CORPORATE CENTER, 367 SOUTH GULPH
ROAD, P.O. BOX 61558, KING OF PRUSSIA, PENNSYLVANIA 19406-0958.
2026
24
EXHIBIT A
The Restated Certificate of Incorporation of the Company is to be amended by
replacing the present first sentence of Article FOURTH with a new first
sentence to read as follows:
FOURTH: The total number of shares of all classes of common stock which the
Company shall have authority to issue is 168,200,000 shares, consisting of
12,000,000 shares of Class A Common Stock, par value of $.01 per share (the
"Class A Common Stock"), 150,000,000 shares of Class B Common Stock, par value
of $.01 per share (the "Class B Common Stock"), 1,200,000 shares of Class C
Common Stock, par value of $.01 per share (the "Class C Common Stock") and
5,000,000 shares of Class D Common Stock, par value of $.01 per share (the
"Class D Common Stock").
A-1
EXHIBIT B
UNIVERSAL HEALTH SERVICES, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
1. Purpose. The purpose of the Universal Health Services, Inc. 1992 Stock
Option Plan (the "Plan") is to enable Universal Health Services, Inc. (the
"Company") and its stockholders to secure the benefits of common stock
ownership by personnel of the Company and its subsidiaries. The Board of
Directors of the Company (the "Board") believes that the granting of options
under the Plan will foster the Company's ability to attract, retain and
motivate those individuals who will be largely responsible for the continued
profitability and long-term future growth of the Company.
2. Stock Subject to the Plan. The Company may issue and sell a total of
4,000,0005,500,000 shares of its Class B Common Stock, $.01$.0l par value (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and
unissued or held by the Company in its treasury. New options may be granted
under the Plan with respect to shares of Common Stock which are covered by the
unexercised portion of an option which has terminated or expired by its terms,
by cancellation or otherwise.
3. Administration. The Plan will be administered by the Board. Subject to
the provisions of the Plan, the Board, acting in its sole and absolute
discretion, will have full power and authority to grant options under the
Plan,Plan. to interpret the provisions of the Plan and option agreements made under
the Plan, to supervise the administration of the Plan, and to take such other
action as may be necessary or desirable in order to carry out the provisions
of the Plan. The Board may act by the vote of a majority of its members
present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Board as to any disputed question, including
questions of construction, interpretation and administration, will be final
and conclusive on all persons. The Board will keep a record of its proceedings
and acts and will keep or caused to be kept such books and records as may be
necessary in connection with the proper administration of the Plan.
Notwithstanding the foregoing, the Board shall have the authority to appoint a
committee (the "Committee") of the Board whose members shall satisfy the
requirements of Section 162(m) of the Internal Revenue Code of 1986 (the
"Code"), and the requirements of Rule 16b-3(b)(3)(i) under the Securities
Exchange Act of 1934, as amended (or any successor laws or regulations), to
grant options to executive officers of the Company and, all references to "the
Board" hereunder with respect to the grant of such options shall be deemed to
refer to such Committee.
4. Eligibility. Options may be granted under the Plan to present or future
employees of the Company or a subsidiary of the Company (a "Subsidiary")
within the meaning of Section 424(f) of the Code, consultants to the Company
or a Subsidiary who are not employees, and to directors of the Company or a
Subsidiary whether or not they are employees of or consultants to the Company
and/or a Subsidiary. Subject to the provisions of the Plan, the Board may from
time to time select the persons to whom options will be granted, and will fix
the number of shares covered by each such option and establish the terms and
conditions thereof (including, without limitation, exercise price, which in
the case of grants by the Committee shall not be less than fair market value
of the Common Stock on the date of grant, and restrictions on exercisability
of the option or on the shares of Common Stock issued upon exercise thereof).
Notwithstanding anything to the A-1
25
contrary contained herein no person may
receive grants of options to purchase more than 200,000500,000 shares in any one
calendar year.
B-1
5. Terms and Conditions of Options. Each option granted under the Plan will
be evidenced by a written agreement in a form approved by the Board. Each such
option will be subject to the terms and conditions set forth in this paragraph
and such additional terms and conditions not inconsistent with the Plan as the
Board deems appropriate.
(a) Option Period. The period during which an option may be exercised
will be fixed by the Board and will not exceed 10 years from the date the
option is granted.
(b) Exercise of Options. An option may be exercised by transmitting to
the Company (1) a written notice specifying the number of shares to be
purchased, and (2) payment of the exercise price (or, if applicable,
delivery of a secured obligation therefor), together with the amount, if
any, deemed necessary by the Company to enable it to satisfy its income tax
withholding obligations with respect to such exercise (unless other
arrangements acceptable to the Company are made with respect to the
satisfaction of such withholding obligations).
(c) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan
may be paid in cash and/or such other form of payment as may be permitted
under the option agreement, including, without limitation, previously-owned
shares of Common Stock. The Board may permit the payment of all or a
portion of the purchase price in installments (together with interest) over
a period of not more than 5 years. The Board may permit the Company to lend
money to employees for purposes of exercising options and paying any income
tax due upon exercise. The Board may, in its sole discretion, forgive any
amounts due under the loans made hereunder under such conditions as it
deems appropriate.
(d) Rights as a Stockholder. No shares of Common Stock will be issued in
respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a portion
of the purchase price is being paid in installments). The holder of an
option will have no rights as a stockholder with respect to any shares
covered by an option until the date a stock certificate for such shares is
issued to him or her. Except as otherwise provided herein, no adjustments
shall be made for dividends or distributions of other rights for which the
record date is prior to the date such stock certificate is issued.
(e) Nontransferability of Options. Options granted under the Plan may be
assigned or transferred to members of the immediate family of optionee or
trusts for the benefit of immediate family members, unless otherwise
prohibited by the Option Agreement, by will or by the applicable laws of
descent and distribution or dissemination.
(f) Termination of Employment or Other Service. Unless otherwise provided
by the Board in its sole discretion, if an optionee ceases to be employed
by or to perform services for the Company and any Subsidiary for any reason
other than death or disability (defined below), then each outstanding
option granted to him or her under the Plan will terminate on the date of
termination of employment or service (or, if earlier, the date specified in
the option agreement). Unless otherwise provided by the Board in its sole
discretion, if an optionee's employment or service is terminated by reason
of the optionee's death or A-2
26
disability (or if the optionee's employment or
service is terminated by reason of his or her disability and the optionee
dies within one year after such termination of employment or service), then
each outstanding option granted to the optionee under the Plan will
terminate on the date one year after the date of such
B-2
termination of employment or service (or one year after the later death of
a disabled optionee) or, if earlier, the date specified in the option
agreement. For purposes hereof, the term "disability" means the inability
of an optionee to perform the customary duties of his or her employment or
other service for the Company or a Subsidiary by reason of a physical or
mental incapacity which is expected to result in death or be of indefinite
duration.
(g) Other Provisions. The Board may impose such other conditions with
respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws,
as it may deem necessary or advisable.
6. Capital Changes, Reorganization, Sale.
(a) Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares for which options may be granted under the Plan, the
maximum number of shares for which options may be granted to any person in
any one calendar year, the number and class of shares covered by each
outstanding option and the exercise price per share shall all be adjusted
proportionately for any increase or decrease in the number of issued shares
of Common Stock resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.
(b) Cash, Stock or Other Property for Stock. Except as provided in
subparagraph (c) below, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger have
the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the Stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares
of Common Stock, any option granted hereunder shall terminate, but the
optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation to exercise his or her option in whole or in part to the
extent permitted by the option agreement, and, if the Board in its sole
discretion shall determine, at the time of grant or otherwise, may exercise
the option whether or not the vesting requirements set forth in the option
agreement have been satisfied.
(c) Conversion of Options on Stock for Stock Exchange. If the
Stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or
stock, separation or reorganization (other than a mere reincorporation or
the creation of a holding company), all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock unless the
Company and the corporation issuing the Exchange Stock, in their sole
discretion, determine that any or all such options granted hereunder shall
not be converted into options to purchase shares of Exchange Stock but
instead shall terminate in accordance with the provisions of subparagraph
A-3
27
(b) above. The amount and price of converted options shall be determined by
adjusting the amount and price of the options granted hereunder in the same
proportion as used for determining the number of shares of Exchange Stock
the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock,
B-3
separation or reorganization. The Board shall determine in its sole
discretion if the converted options shall be fully vested whether or not
the vesting requirements set forth in the option agreement have been
satisfied.
(d) Fractional Shares. In the event of any adjustment in the number of
shares covered by any option pursuant to the provisions hereof, any
fractional shares resulting from such adjustment will be disregarded and
each such option will cover only the number of full shares resulting from
the adjustment.
(e) Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.
7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan at any time. No amendment or termination may affect adversely any
outstanding option without the written consent of the optionee.
8. No Rights Conferred. Nothing contained herein will be deemed to give any
individual any right to receive an option under the Plan or to be retained in
the employ or service of the Company or any Subsidiary.
9. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of Delaware.
10. Stockholder Approval; Term of the Plan. The Plan was adopted by the
Board on July 15, 1992 and amended on September 29, 1999,January 17, 2001, subject to the
approval of the Amendment by the Stockholders of the Company at the next
Annual Meeting of Stockholders. The Plan will terminate on July 15, 2002,2005,
unless sooner terminated by the Board. The rights of optionees under options
outstanding at the time of the termination of the Plan shall not be affected
solely by reason of the termination and shall continue in accordance with the
terms of the option (as then in effect or thereafter amended).
A-4B-4
28EXHIBIT C
2001 EMPLOYEES' RESTRICTED STOCK PURCHASE PLAN
1. Purpose. The purpose of this 2001 Employees' Restricted Stock Purchase
Plan (the "Plan"), is to secure for Universal Health Services, Inc. (the
"Company") the benefits of the additional incentive resulting from the
ownership of its Shares of Class B Common Stock, par value $.01 per share (the
"Shares"), by selected employees of, and consultants to, the Company or its
subsidiaries (for convenience such persons are hereinafter collectively
referred to as "employees") who are important to the success and the growth of
the business of the Company and its subsidiaries, and to help the Company and
its subsidiaries secure and retain the services of such persons.
2. Restricted Stock Committee. The Plan shall be administered by the entire
Board of Directors or if established by the Board, a committee of the Board of
Directors which shall consist of not less than two "non-employee directors",
as defined in Rule 16b-3, under the Securities Exchange Act of 1934, as
amended (the "Committee"). The Committee shall have full authority in its
discretion from time to time, and at any time, to select the employees to whom
Shares shall be sold, to determine the number of Shares to be sold, the times
at which Shares shall be sold, the times at which the restrictions on the
Shares shall lapse and the terms and conditions of the Restricted Stock
Purchase Agreement. The Committee may issue shares in lieu of cash bonuses for
which an employee may be eligible under any other employee incentive plan of
the Company.
The Board of Directors may at any time appoint or remove members of the
Committee and may fill vacancies, however caused, in the Committee. The
Committee shall select one of its members as its Chairman, and shall hold its
meetings at such time and place as it shall deem advisable. A majority of its
members shall constitute a quorum. All actions of the Committee shall be taken
by a majority of its members, and can be taken by written consent in lieu of a
meeting. The Committee shall make such rules and regulations for the conduct
of its business as it shall deem advisable.
The interpretation, construction or determination of any provisions of the
Plan by the Committee shall be final and conclusive.
3. Shares Subject to Plan. Subject to the adjustment provisions of paragraph
9, the number of shares of Class B Common Stock which may be issued or sold
under the Plan shall not exceed 300,000.
Shares sold under the Plan may be Shares of the Company's authorized and
unissued Shares of Class B Common Stock, Shares of the Company's issued Shares
of Class B Common Stock held in the Company's treasury, or both. Should any
Shares sold pursuant to the Plan be repurchased by the Company, such Shares
shall again become available for sale hereunder.
4. Employees Eligible. Shares may be sold pursuant to the Plan to employees
and consultants of the Company and its subsidiaries (including officers of the
Company or any of its subsidiaries whether or not they are also directors of
the Company or any of its subsidiaries). For purposes of the Plan,
"subsidiary" shall mean a "subsidiary corporation" as defined in Section 424
of the Internal Revenue Code of 1986, as amended or any other affiliate of the
Company. In making determinations as to whom Shares should be sold, the
Committee shall take into consideration an employee's present and potential
contribution to the success of the Company and its subsidiaries and such other
factors as the Committee may deem proper and relevant.
C-1
5. Purchase of Shares, Price and Delivery of Payment. Subsequent to a
determination by the Committee that Shares shall be sold pursuant to the Plan,
the Company or a subsidiary shall deliver to the employee a letter advising
him of such determination. Within 30 days of the date of such letter, the
employee must complete the Restricted Stock Purchase Agreement enclosed
therewith and return it to the Company along with payment in full by cash or
check. The price of each Share sold pursuant to the Plan shall be the par
value thereof at the time of sale. Prior delivery by an employee to the
Company of a completed Restricted Stock Purchase Agreement and payment in full
for the Shares, the Committee may, at its discretion, revoke its decision to
sell Shares to an employee.
6. Restrictions. All Shares sold pursuant to the Plan shall be sold subject
to a Restricted Stock Purchase Agreement which gives the Company the right to
repurchase all or a portion of such Shares, for an amount equal to the price
paid by the employee, in the event that his employment terminates for any
reason during the period set forth in such Restricted Stock Purchase
Agreement. Each employee shall also be required to agree that all Shares
purchased by him pursuant to the Plan are purchased for investment purposes
and not for the purpose of resale or other distribution thereof.
Notwithstanding the foregoing, in the event that an employee of the Company
or one of its subsidiaries who has purchased Shares under the plan terminates
his employment with such employer and immediately commences employment with
the Company or a different subsidiary thereof, such event shall not be treated
as a termination of employment under the Plan, and the Company's repurchase
rights with respect to such Shares shall not be affected. Upon the termination
of employment in such cases, the Restricted Stock Purchase Agreement entered
into between such employee and his employer shall be cancelled and, upon the
commencement of employment with his new employer, the employee and his new
employer shall enter into a new Restricted Stock Purchase Agreement.
7. Transferability. No Shares subject to repurchase by the Company may be
sold, assigned, transferred, disposed of, pledged or otherwise hypothecated,
by the purchase of such Shares. Any attempt to do any of the foregoing shall
cause the immediate forfeiture of such Shares.
8. Right to Terminate Employment or Service. Nothing in the Plan or in any
Restricted Stock Purchase Agreement shall confer upon any employee the right
to continue in the employment of the Company or affect the right of the
Company to terminate the employee's employment at any time, subject, however,
to the provisions of any agreement of employment between the Company and the
employee.
9. Adjustment Upon Changes in Capitalization, etc. In the event of one or
more stock splits, stock dividends, reclassifications, recapitalizations or
any other change in the character or amount of the Company's Shares, the
number, kind and purchase price of shares which may thereafter be sold under
the Plan shall be adjusted to give effect thereto, and all new, substituted or
additional securities to which any employee may become entitled by reason of
his ownership of Shares previously purchased pursuant to the Plan shall be
subject to the terms of the Plan and the Restricted Stock Purchase Agreement
under which such Shares were purchased.
10. Amendment or Termination of Plan. The Board of Directors shall have the
authority to amend or terminate the Plan at any time; provided, however, that
no such amendment or termination shall adversely affect the rights of any
employee with respect to Shares previously sold hereunder. Notwithstanding the
above, no
C-2
amendment to the Plan will become effective without the approval of the
company's stockholders which would increase the number of shares which may be
issued under the Plan if and to the extent such approval is necessary or
desirable to comply with applicable law or exchange requirements.
11. Expiration of the Plan. Unless sooner terminated by the Board of
Directors, shares may be sold under the Plan at any time and from time to
time, prior to March 7, 2010 on which date the Plan shall expire. Any Shares
sold under the Plan that remain outstanding on or after such expiration date
shall remain subject to the terms of the Plan until any restrictions thereon
have lapsed or they have been repurchased by the Company.
12. Effective Date of Plan. The Plan shall become effective on March 7,
2001, subject, nevertheless, to (1) approval by the Stockholders representing
at least a majority of the Common Stock votes of the Company present or
represented at the 2001 Annual Meeting of Stockholders.
C-3
EXHIBIT D
UNIVERSAL HEALTH SERVICES, INC.
AUDIT COMMITTEE CHARTER
MAY 17, 2000
The Audit Committee (the "Committee") of Universal Health Services, Inc.
(the "Corporation") is established, pursuant to Section 11 of the By-laws of
the Corporation, to assist the Board of Directors in fulfilling its oversight
responsibility by monitoring and reviewing the effectiveness of the
Corporation's: (1) financial reporting process; (2) system of internal
controls over financial operations; and (3) audit process.
In carrying out its responsibilities, the Committee shall report directly to
the Board of Directors, and shall provide an open avenue of communication
between and among the internal auditors, the independent accountants, and the
Board of Directors. Some specific activities consistent with the Committee's
role as stated above include:
1. Recommending to the Board of Directors the nomination of a firm of
independent accountants to audit the accounts of the Corporation, and
reviewing and approving the discharge of the independent accountants, if
necessary.
2. Meeting with the independent accountants without management present and
also, if necessary, with management present and monitoring the external
financial audit coverage including reviewing the:
.scope and fee of the engagement
.auditor's proposed audit approach
.results of the audit
.Corporation's annual financial statements and related footnotes
.auditor's opinions, reports, management letters and management's reply
.appropriateness of any corrective actions recommended
.independence of the auditors, including review of proposed and current
non-audit services provided and their related fees
.coordination of the audit effort to assure completeness of coverage,
reduction of redundant efforts, and the effective use of audit
resources
3. Monitoring the effectiveness of the Corporation's internal controls,
including considering and reviewing with the independent accountants and
the director of internal auditing:
(a) the Corporation's accounting policies and procedures;
(b) the Corporation's policies and procedures for assuring compliance
with laws and regulations that could have a material effect on the
Corporation's financial statements; and
D-1
(c) related party transactions
4. Reviewing with outside counsel, as the Committee deems appropriate,
legal matters that could have a material impact on the Corporation's
financial statements.
5. Inquiring of management, the director of internal auditing, and the
independent accountants about significant risks or exposures and
assessing the steps management has taken to minimize such risk to the
Corporation.
6. Offering advice and guidance on the handling of unusual or significant
findings related to the financial operations of the Corporation;
instituting special reviews of allegations of questionable conduct in
any aspect of the Corporation's activities, operations or finance,
including regulatory matters; making recommendations to the Board of
Directors for any special studies of significant matters coming to the
Committee's attention within the scope of its duties, with emphasis on
measures which might be needed to strengthen the Corporation's financial
operations. The Committee shall have the authority to select and retain
its own counsel, consultants, accountants and other experts to assist in
conducting special reviews.
7. Reviewing the findings of all examinations, inspections and reports of
regulatory agencies and management responses.
8. Reviewing this charter annually and proposing any recommended changes.
9. At the request of the Board of Directors, the Committee will be
available to offer advice and guidance on the handling of items that
might be considered sensitive in nature.
COMMITTEE POLICIES AND PROCEDURES
Membership
The Committee shall consist of three (3) members. The Board of Directors
shall select each member and designate the Committee's chairperson. The
Committee shall be composed solely of the Board of Directors independent of
management and free from any relationship that, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment as a
Committee member. Directors who are affiliates of the Corporation or officers
or employees of the Corporation or its subsidiaries would not be qualified for
Committee membership.
Committee Meetings
The Committee shall meet at least quarterly and at the discretion of the
chairperson. The Committee shall establish an agenda and a record of each
meeting.
Meetings with the Board of Directors
The Committee shall meet with the Board of Directors at each regularly
scheduled Board meeting, or such additional times as the Committee deems
appropriate, to discuss the status of its work. The Committee will provide the
Board of Directors with a report of its activities.
D-2
Access to the Corporation
The Committee shall have access to all corporate personnel and records needed
to perform its responsibilities, including meetings with the outside
accountants, the director of internal auditing and any other personnel deemed
necessary. The Committee will be provided the resources necessary to discharge
its responsibilities.
D-3
PROXY CLASS A
COMMON STOCK
CLASS C
COMMON STOCK
UNIVERSAL HEALTH SERVICES, INC.
THIS PROXY SOLICITED BY THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 17, 2000This Proxy Solicited By The Board Of
Directors For The Annual Meeting Of
Stockholders To Be Held On May 23, 2001
Alan B. Miller and Steve FiltonFitton and each of them, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated
below, all shares of Class A Common Stock and Class C Common Stock of Universal
Health Services, Inc. held of record by the undersigned on April 5, 200012, 2001 at
the Annual Meeting of Stockholders to be held ata 10:00 a.m. on Wednesday, May
17,
2000,23, 2001, at the offices of the Company, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof. Any
and all proxies heretofore given are hereby revoked.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.PR0MPTLY.
29
PLEASE MARK YOUR CHOICE LIKE THIS M IN BLUE OR BLACK INK
[ ]
------------------------ ------------------------ ------------------------[_]_______________ ______________ ______________
ACCOUNT NUMBER CLASS A COMMON CLASS C COMMON
- --------------------------------------------------------------------------------
1. The Election of Directors. Nominees are: John H. Herrell 3. Discretionary authority is hereby granted with
and Leatrice Ducat respect to such other matters as may properly come
before the meeting.
[ ] For both Nominees [ ] Withheld
from both Nominees
[ ]
- ---------------------------------------------------------
For, except vote withheld from the above nominee:
------------------------------------------------
I. The Election of Directors. Nominees 5. Discretionary authority is hereby
are: Anthony Pantaleoni and Joseph granted with respect to such
T. Sebastianello other matters as may properly
[_] For both Nominees come before the meeting.
[_] Withheld from both Nominees
[_] _________________________________
For, except vote withheld from the above nominee:
DATED: ____________________________
- ------------------------------------------------------------------------
2. Adoption of the Amendment to the 1992 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] N N
-----------------------------------------
2. Adoption of the Amendment to the SIGNATURE: ________________________
Company's Restated Certificate of
Incorporation to increase the SIGNATURE: ________________________
number of authorized shares of
Class B Common Stock IMPORTANT: Please sign exactly as
FOR AGAINST ABSTAIN name appears at the left. Each
[_] [_] [_] joint owner shall sign. Executors,
- ------------------------------------------------------------------------
DATED:
SIGNATURE:
SIGNATURE:----------------------------------------- administrators, trustees, etc.
3. Adoption of the Amendment to the should give full title.
Amended and Restated 1992 Stock
Option Plan. The above-signed acknowledges
FOR AGAINST ABSTAIN receipt of the Notice of Annual
[_] [_] [_] Meeting of Stockholders and the
- ----------------------------------------- Proxy Statement furnished
4. Adoption of the 2001 Employees' therewith.
Restricted Stock Purchase Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
- -----------------------------------------
- --------------------------------------------------------------------------------
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE ABOVE, IF
NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR ELECTION OF THE NOMINEES
FOR DIRECTORS, THE ADOPTION OF THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
CLASS B COMMON STOCK, THE ADOPTION OF THE AMENDMENT TO THE AMENDED AND RESTATED
1992 STOCK OPTION PLAN AND THE ADOPTION OF THE 2001 EMPLOYEES' RESTRICTED STOCK
PURCHASE PLAN.
- --------------------------------------------------------------------------------
Please mark
your votes as
indicated in
this example [X]
FOR AGAINST ABSTAIN
1. Election of Robert H. Hotz as a Director. [_] [_] [_]
2. Adoption of the Amendment to the Company's
Restated Certificate of Incorporation to
increase the number of authorized
shares of Class B Common Stock. [_] [_] [_]
3. Adoption of the Amendment to the Amended and
Restated 1992 Stock Option Plan. [_] [_] [_]
4. Adoption of the 2001 Employees' Restricted
Stock Purchase Plan. [_] [_] [_]
5. Discretionary authority is hereby granted
with respect to such other matters as may
properly come before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED
AS DESIGNATED BY THE ABOVE. IF NO CHOICE IS SPECIFIED,
THE PROXY WILL BE VOTED FOR THE ELECTION OF
ROBERT H. HOTZ, THE ADOPTION OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF CLASS B COMMON STOCK, THE ADOPTION OF THE
AMENDMENT TO THE AMENDED AND RESTATED 1992 STOCK
OPTION PLAN AND THE ADOPTION OF THE 2001 EMPLOYEES'
RESTRICTED STOCK PURCHASE PLAN.
Signature____________________Signature____________________Date______________
IMPORTANT: Please sign exactly as name appears at the left. Each joint owner
shall sign. Executors, administrators, trustees, etc. should give full title.
The above-signed acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement furnished therewith.
- --------------------------------------------------------------------------------
WHEN PROPERLY EXECUTED,/\ FOLD AND DETACH HERE /\
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
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.
Internet Telephone
http://www.proxyvoting.com/UHS 1-800-840-1208 Mail
OR OR
Use the Internet to vote your / Use any touch-tone telephone / Mark, sign and
proxy. Have your proxy card in / to vote your proxy. Have your / date your
hand when you access the web / proxy card in hand when you / proxy card and
site. You will be prompted to / call. You will be prompted to / return it in
enter your control number, / enter your control number, / the enclosed
located in the box below, to / located in the box below, / postage-paid
create and submit an / and then follow the / envelope.
electronic ballot. / directions given. /
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
- --------------------------------------------------------------------------------
PROXY CLASS B
COMMON STOCK
CLASS D
COMMON STOCK
UNIVERSAL HEALTH SERVICES, INC.
This Proxy Solicited By The Board Of
Directors For The Annual Meeting Of
Stockholders To Be Held On May 23, 2001
Alan B. Miller and Steve Filton and each of them, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated
below, all shares of Class B Common Stock and Class D Common Stock of Universal
Health Services, Inc. held of record by the undersigned on April 12, 2001, at
the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May
23, 2001 at the offices of the Company, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof. Any
and all proxies heretofore given are hereby revoked.
THIS PROXY WILL BE VOTED AS DESIGNATEDIS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY,
OR VOTE BY TELEPHONE USING THE ABOVE. IF
NO CHOICE IS SPECIFIED,INSTRUCTIONS ON THE PROXY WILL BE VOTED FOR ELECTION OF THE NOMINEES FOR
DIRECTORS, AND FOR ADOPTION OF THE AMENDMENT TO THE 1992 STOCK OPTION PLAN.REVERSE SIDE.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Annual Meeting
of
Universal Health Services, Inc. Stockholders
Wednesday, May 23, 2001
10:00 a.m.
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA.
Agenda
* Election of two Directors by the holders of Class A and Class C Common Stock
* Election of a Director by the holders of Class B and Class D Common Stock
* Adoption of the Amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Class B Common
Stock
* Adoption of the Amendment to the Amended and Restated 1992 Stock Option Plan
* Adoption of the 2001 Employees' Restricted Stock Purchase Plan
* Discussion on matters of current interest