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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 Registrantregistrant [X]
Filed by a Partyparty other than the Registrantregistrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statementproxy statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statementproxy statement
[ ] Definitive Additional Materialsadditional materials
[ ] Soliciting Material Pursuantmaterial pursuant to Rule 14a-11(c) or Rule 14a-12
Universal Health Services, Inc.UNIVERSAL HEALTH SERVICES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Feefiling fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] FeeFees paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
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UHS LOGO[UHS LOGO]
UNIVERSAL HEALTH SERVICES, INC.
April 21, 19981999
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 20, 1998,19, 1999, at 10:00 a.m., Eastern Daylight Time.
Matters to be acted on atTime, for the meeting include: (a)following
purposes:
(1) the election of one
directortwo directors by the holders of Class A and Class C
Common Stock;
(b)(2) the election of one director by the holders of Class B and Class D
Common Stock; and
(c)(3) the adoption of the Amendment and Restatement of the 1992 Stock Option Plan.Corporate Ownership Program, as Amended.
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 SHARES IN FAVOR OFFOR THE
ELECTION OF DIRECTORS, AND FOR THE ADOPTION OF THE AMENDMENT AND RESTATEMENT OF
THE 1992 STOCK OPTION PLAN.CORPORATE OWNERSHIP
PROGRAM, AS AMENDED.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE 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,
Alan B. Miller
Chairman, President and
Chief Executive Officer
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[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 20, 199819, 1999
Notice is hereby given that the Annual Meeting of Stockholders of Universal
Health Services, Inc. (the "Company") will be held on Wednesday, May 20, 199819, 1999 at
10:00 a.m., at the offices of the Company, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania for the following purposes:
(1) To have the holders of Class A and Class C Common Stock elect onetwo Class
II director,III directors, and to have the holders of Class B and Class D Common
Stock elect one Class IIIII director, bothall directors to serve for a term
of three years until the annual election of directors in the year 20012002
and election and qualification of their respective successors.
(2) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the Amendment and Restatement of the 1992 Stock
Option Plan,Corporate Ownership Program, as Amended,
adopted by the Board of Directors of the Company.
(3) 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 8, 1998,7, 1999, are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person. IN
ANY EVENT, PLEASE MARK YOUR VOTES, THEN DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-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
SIDNEY MILLER, Secretary
King of Prussia, Pennsylvania
April 21, 19981999
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UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
PROXY STATEMENT
GENERAL
This Proxy Statement (first mailed to stockholders on or about April 21,
1998)1999) 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 20, 199819, 1999 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 onetwo Class II directorIII directors of the Company, and to have the holders of
Class B and D Common Stock elect one Class IIIII director of the Company, bothall of
whom will serve for terms of three years until the annual election of directors
in 20012002 and the election and qualification of their respective successors; (2)
to have the holders of Class A, B, C and D Common Stock vote upon the proposal
to adopt the Amendment and Restatement of the 1992 Stock Option Plan,Corporate Ownership Program, As Amended, which was adopted by
the Board of Directors of the Company; and (3) 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, 19971998 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 and
FOR the approval of the Amendment and Restatement of the 1992 Stock Option Plan.Corporate Ownership Program, as Amended. 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 8, 19987, 1999
are entitled to vote at the Annual Meeting. On that date, 2,059,929 shares of
Class A Common Stock, par value $.01 per share, 207,230 shares of Class C Common
Stock, par value $.01 per share, 30,367,19830,016,377 shares of Class B Common Stock, par
value $.01 per share, and 31,32128,062 shares of Class D Common Stock, par value $.01
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
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elected, multiplied by the number of shares of Class A Common Stock, or he may
distribute his votes on the 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 and Restatement of the 1992 Stock Option Plan,Corporate Ownership Program, as Amended, 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 and Restatement of the 1992 Stock Option
Plan,Corporate Ownership Program, as Amended, 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 entitled to vote as is required for
approval of the proposal.
As of April 8, 1998,7, 1999, the shares of Class A and Class C Common Stock
constituted 6.9%7.0% of the aggregate outstanding shares of the Company's Common
Stock, had the right to elect sixfive members of the Board of Directors and
constituted 87.2%87.4% of the general voting power of the Company; and as of that
date the shares of Class B and Class D Common Stock constituted 93.1%93.0% of the
outstanding shares of the Company's Common Stock, had the right to elect two
members of the Board of Directors and constituted 12.8%12.6% of the general voting
power of the Company.
As of February 27, 1998,26, 1999, the Company's current directors and officers as a
group owned of record or beneficially 2,052,4282,050,428 shares of Class A Common Stock,
411,094503,140 shares of Class B Common Stock (excluding shares issuable upon exercise
of options), 205,721 shares of Class C Common Stock and 830630 shares of Class D
Common Stock, representing 99.6%, 1.4%1.7%, 99.3% and 2.6%2.2%, respectively, of the
outstanding shares of each class and constituting 86.8%87% of the general voting
power of the Company on that date.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 27, 1998,26, 1999, 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
CLASS A CLASS B CLASS C CLASS 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)
------------------- -------- -------- -------- -------- ----------
Leatrice Ducat 1,125 (5)(13) (5)
National Disease Research
Interchange
645 N. Michigan Avenue
Ste. 800
Chicago, IL 60611
John H. Herrell 5,4006,650 (5)(13) (5)
Mayo Clinic
200 First Street, SW
Rochester, MN 55905
Robert H. Hotz 13,00014,250 (5)(13) (5)
SBC Warburg Dillon Read 535 MadisonLLC
299 Park Avenue, 39th Fl.
New York, NY 10022
Martin Meyerson
University of Pennsylvania 23,508 (4)(5)(13) 200(5) (5)
225 Van Pelt Library
Philadelphia, PA 1910310171
Alan B. Miller 1,913,890(6) 2,476,4171,911,890(6) 2,704,124 (4)(6)(13) 191,447 80.8%81.0%
(92.9%) (7.6%(9.0%) (92.4%)
Sidney Miller 121,686 165,508166,758 (4)(5)(7)(13) 12,176 5.1%5.2%
(5.9%) (5.9%)
Anthony Pantaleoni 4,452(5) 17,17016,420 (4)(5)(8) 548(5) 280(5)(8) (5)
Fulbright & Jaworski L.L.P. (13)
666 Fifth Avenue
New York, NY 10103
Paul R. Verkuil 2,500 (5)(13) (5)
Thomas J. Bender 114,149125,638 (5)(13) (5)
Kirk E. Gorman 43,75468,184 (5)(13) (5)
Michael G. Servais 48,10658,674 (5) (5)
Richard C. Wright 12,400(5) 33,697 (4)Steve Filton 70,999 (5) 1,550(5) 350(5)(13) (5)
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PERCENTAGE
CLASS A CLASS B CLASS C CLASS 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)
------------------- -------- -------- -------- -------- ----------
FMR Corp. 3,866,9603,871,280 (9) 1.5%
82 Devonshire Street (12.8%(12.9%)
Boston, MA 02109
Mellon Bank Corporation 1,670,779Capital Research 1,924,900 (10) (5)
One Mellon Bank Center (5.5%and Management Company (6.4%)
Pittsburgh, PA 15258333 South Hope St.
Los Angeles, CA 90071
AMVESCAP PLC 2,885,0002,357,500 (11) (1.1%(1%)
11 Devonshire Square (9.6%(7.9%)
London EC2M 4YR
England
Morgan Stanley, Dean Witter, Discover &
Co. 1,525,539 (12)Firstar Investment Research and
Management Company, LLC 1,566,075 (5)
1585 Broadway (5.0%777 E. Wisconsin Avenue (5.2%)
New York, NY 10036Milwaukee, WI 53202
All directors & executive officers 2,052,428 2,990,4732,050,428 3,276,508 (13) 205,721 830 86.9%630 87.2%
as a group (13(11 persons) (99.6%) (9.2%(10.9%) (99.3%) (2.6%(2.2%)
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(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 49,00047,000 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) These securities are held by FMR Corp., a parent holding company.
Information is based on Amendment No. 89 to Schedule 13G dated February 14,
1998.1,
1999.
(10) These securities are held by Mellon Bank Corporation asCapital Research and Management Company, an
investment advisoradviser for its various direct or indirect subsidiaries.The American Funds Group. Information is based on
Amendment No. 2 to Schedule 13G dated January 23, 1998.February 8, 1999.
(11) These securities are held by AMVESCAP PLC, a parent holding company.
Information is based on Schedule 13G dated February 9, 1998.8, 1999.
(12) These securities are held by Morgan Stanley, Dean Witter, Discover & Co.,Firstar Investment Research and Management
Company, LLC, an investment adviser. Information is based on Amendment No.
4 to Schedule 13G dated February 13, 1998.12, 1999.
(13) Includes 320,400516,625 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 27, 199826, 1999 as follows: Alan B. Miller
(280,000)(430,000); Sidney Miller (1,250); Thomas J. Bender (19,500)(23,250); Kirk E. Gorman
(35,500); Steve Filton (22,250); Anthony Pantaleoni (5,000); Martin
Meyerson (5,000)(1,250); Robert H. Hotz
(5,000)(1,250); John H. Herrell (3,400)(1,250); and Paul
R. Verkuil (2,500)Leatrice Ducat (625).
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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, threetwo in Class I, one in
Class II, and two in Class III.
The persons listed below currently constitute the Company's Board of
Directors.Directors other than Mr. Paul Verkuil, who has decided not to seek re-election
and Dr. John F. Williams, Jr., who has been nominated for election for the first
time. The term of the Class IIIII directors, Mr. Anthony PantaleoniAlan B. Miller, Mr. Sidney Miller
and Mr. Robert H. Hotz,Paul Verkuil, expires at the 19981999 Annual Meeting. Mr. Anthony Pantaleoni hasAlan B. Miller and
Mr. Sidney Miller have been nominated to be elected by the holders of Class A
and Class C Common Stock, and Mr. Robert H. HotzDr. John F. Williams, Jr. 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 eitherany of the nominees will be unavailable for election;
however, if eitherany 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. BothAll 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 SINCE
---- -------- ---------------- --- -------------------- --------
NOMINEES FOR TERMS
EXPIRING IN 1998
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Anthony Pantaleoni.......... II A Common 58 Partner in the law firm of Fulbright 1982
C Common & Jaworski L.L.P., New York, New
York. Director of Faircom Inc., AAON,
Inc. and Westwood Corporation. The
Company utilized during the year
ended December 31, 1997 and currently
utilizes the services of Fulbright &
Jaworski L.L.P. as counsel.
Robert H. Hotz.............. II B Common 53 Managing Director (in the Americas) 1991
D Common for SBC Warburg Dillon Read; Director
of Mikasa, Inc., Formerly Co-Head of
Corporate Finance and Director at
Dillon, Read & Co., Inc.
DIRECTORS WHOSE TERMS
EXPIRE IN 1999
- --------------------------------------
Alan B. Miller.............. III A Common 6061 Chairman of the Board, President and 1978
C Common 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.,
Genesis Health Ventures, and Penn
Mutual Life Insurance Company.
5
9
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCE
---- -------- ---------------- --- -------------------- --------
Sidney Miller............... III.. A Common 7172 Secretary of the Company since 1990. 1978
C Common Assistant to the President during 1993
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.
5
9
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCE
---- -------- ---------------- --- -------------------- --------
Paul R. Verkuil ............John F. Williams, Jr., M.D.,
Ed.D. .................... III B Common 58 Dean, Cardozo Law School, Yeshiva 199650 Vice President for Health Affairs and 1999
D Common University; President Emeritus,
CollegeExecutive Dean of William and Mary.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 CEO,Health Sciences; Member of
the American Automobile Association; Dean, Tulane
Law School.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
EXPIRE IN 2000
- --------------------------------------
Martin Meyerson............. I A Common 75 President Emeritus and Emeritus 1985
C Common Professor, University of Pennsylvania;
President, the Foundation for the
International Exchange of Scientific
and Cultural Information by
Telecommunications (Switzerland/U.S.);
Chairman, Marconi Foundation;
Director, Avatar Holdings, Inc. and
First Fidelity Atlantic.
John H. Herrell............. I A Common 5758 Vice President and Chief Administrative 1993
C Common Administrative 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 6566 President and Founder, National Disease 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
Juvenile Diabetes Foundation; Past
Chairman and Founder, National Diabetes
Research Coalition.
DIRECTORS WHOSE TERMS
EXPIRE IN 2001
- --------------------------------------
Anthony Pantaleoni.......... II A Common 59 Partner in the law firm of Fulbright & 1982
C Common Jaworski L.L.P., New York, New York.
Director of AAON, Inc. and Westwood
Corporation. The Company utilized
during the year ended December 31, 1998
and currently utilizes the services of
Fulbright & Jaworski L.L.P. as counsel.
Robert H. Hotz.............. II B Common 54 Managing Director and Co-Head of 1991
D Common Corporate Finance in the Americas for
Warburg Dillon Read; Director of
Mikasa, Inc., Formerly Co-Head of
Corporate Finance and Director at
Dillon, Read & Co., Inc.
SECTION 16(a) BENEFICIAL 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. Michael G. Servais madeBased on reports filed with the Company, the Company
believes all required reports of executive officers and directors were filed in
a late filing on Form 4.timely manner.
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10
PROPOSAL NO. 2
ADOPTION OF THE AMENDMENT AND RESTATEMENT OF
THE 1992 STOCK OPTION PLANCORPORATE OWNERSHIP PROGRAM, AS AMENDED
On January 21, 1998,March 17, 1999, the Board of Directors of the Company adopted an
Amendmentamendment to, and Restatement (the "Amendment and Restatement")restatement of the 1992 Stock
Option Plan (the "1992 Plan"Corporate Ownership Program, as
Amended ("Amended Program"), subject to stockholder approval. The AmendmentAmended
Program will (i) increase the aggregate number of shares of Class B Common Stock
as to which purchase rights may be granted from time to time under the Amended
Program from 200,000 to 400,000 shares; and Restatement (i) removes(ii) extend the restriction on the grant of options to
non-employee directors, (ii) provides that the Board of Directors shall
administer the 1992 Plan and (iii) removes provisions requiring the affirmative
voteterm of the Company's stockholdersProgram
to amendallow for the 1992 Plan, which is no longer
required under applicable securities laws.purchase of shares for a period ending March 17, 2009 and make
certain other changes to the program. The Amendment and RestatementAmended Program 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 Amendment and
RestatementAmended Program are summarized below.
PURPOSE
The full textProgram is intended to provide a method whereby employees of the
AmendmentCompany, upon whose involvement, initiative and Restatementefforts the Company is largely
dependent for the successful conduct of its business, can purchase Class B
Common Stock in a manner which will provide (a) an increased incentive for such
employees to exert their best efforts on behalf of the 1992 Stock Option Plan is set forth in Exhibit ACompany, (b) strengthen
the ability of the Company to this Proxy Statement,recruit and retain those persons possessing
outstanding competence and the following discussion is qualified in its entirety by reference thereto.
The primary purpose of Amendment and Restatement isability to conformcontribute significantly to the
1992
Plan to certain changesCompany's success, (c) reward those employees who have made in the rules and regulations promulgated under
Section 16(b) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). In January and March of 1998, 30,000 options and 10,000
options, respectively, were granted subject to stockholder approval of the
Amendment and Restatement. The Company believes that the Amendment and
Restatement offers more flexibilitysignificant
contributions to the Company in the grantingpast, and (d) further identify the interests
of options,
and that adoptionsuch employees with those of the AmendmentCompany and Restatement is necessaryits stockholders by increasing
the desire of such employees to aidmaximize the value of the Company.
PURCHASE OF SHARES
Under the Program, the Company will be authorized to sell from time to time
up to 400,000 shares of Common Stock in attracting and retaining officers, directors and employees who are in
a position to contribute materially to the successful conductaggregate (less than 1% of the
Company's
business and affairs.outstanding shares as of March 17, 1999) to eligible, participating employees.
As of March 17, 1999, only 5,052 shares remained available for purchase
thereunder. The Amendment and Restatement is intended to furnish
additional incentives whereby present and future officers, directors and
employees may be encouraged to acquire, or to increase their holdingsCompensation Committee of the Company's Class B Common Stock.
A totalBoard of 40,000 optionsDirectors shall
administer the Program and have been granted underfull and exclusive power to interpret the
1992 Plan, as
amended, subject to stockholder approvalProgram. All officers, Managing Directors, Corporate Directors, Administrators,
Directors of Nursing and Controllers of the Amendment and Restatement.Company or any of its subsidiaries
shall be eligible to participate in the Program ("Key Employees") after one year
of employment with the Company or any one of its subsidiaries.
The table below indicates options which have been granted, subject to stockholder
approval, topurchase price for the named persons and toshares will be 100% of 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 Stockshares on the New York Stock Exchange on April 7, 1998 was $56.875. The dollar value listed belowthe date that the loan is closed
("Purchase Date"). Contemporaneously with the excesssale of the closingshares, the Company
will loan the Key Employee an amount equal to 90% of the purchase price of the
Company's Class B Common Stock on April 7, 1998 over the
exercise priceshares. The Company will not make any loan in excess of 90% of the total options grantedKey
Employee's current base annual salary or any loan if the aggregate principal
amount of all of the loans extended under this Program would exceed 180% of the
Key Employee's current base annual salary.
RESTRICTIONS ON STOCK; FORFEITURE OF STOCK
Each Key Employee who purchases stock under the 1992 Plan.Program will be entitled,
except as stated herein or in the Program, to all rights of a stockholder,
including the right to vote. However, all of the stock will be restricted from
sale or transfer for a one-year period and one-half of such stock will be
restricted for a period of
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PLAN BENEFITS GRANTED TO DATE
1992 STOCK OPTION PLAN, AS AMENDED
DOLLAR NUMBER OF
NAME AND POSITION VALUE OPTIONS
- ----------------- -------- ---------
Alan B. Miller.............................................. -- --
Kirk E. Gorman.............................................. -- --
Michael G. Servais.......................................... -- --
Thomas J. Bender............................................ -- --
Richard C. Wright........................................... -- --
All current executives as a group........................... -- --
Non-Executive Directors as a Group.......................... $271,875 30,000
Non-Executive Officers, Employees as a Group................ $ 5,125 10,000
Note:two years, from the Purchase Date. The table shown above containsstock certificates representing such
restricted shares will bear restrictive legends referring to these contractual
restrictions.
LOANS
Each loan ("Loan") for a stock purchase will be secured by the options granted pursuantpledge of
that stock, and the Company will have recourse against the personal assets of
the Key Employee to the 1992
Stock Option Plan, as amended, which is subject to stockholder approval.
For options granted to the five named executives shown above during the
last fiscal year, pursuant to the 1992 Plan prior to amendment, see
"Executive Compensation -- Option Grants in Last Fiscal Year."
DESCRIPTION OF THE 1992 PLAN
The 1992 Plan, as amended and restated, permits the grantingextent of options to
purchase an aggregate of 3,000,000 shares26% of the Company's Class B Common Stock
to employees and directors of and consultants to the Company or any of its
subsidiaries. As of December 31, 1997, approximately 17,800 employees were
eligible to participate in the 1992 Plan. As of April 7, 1998, the closing price
of the Class B Common Stock as quoted on the New York Stock Exchange was
$56.875. Directors are eligible to receive options under the 1992 Plan,
regardless of whether they are otherwise employed by the Company. This will
replace the Company's pre-existing Non-Employee Director Plan. The number of
shares which may be issued under the 1992 Plan is subject to anti-dilution
adjustments. Options granted under the 1992 Plan will not qualify as incentive
stock plans under the federal income tax law.
The 1992 Plan as amended and restated 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. 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 program for participants in the 1992 Option Plan to cover the
tax liability incurred by optionees upon exercise of the option. Payment of
interest is deferred during the termoriginal principal amount of the
loan. The loan and allwill bear interest thereonat the applicable federal rate, rounded up to
the nearest tenth of one percent. The loan will be forgivengenerally mature on the maturityfifth
anniversary of the Purchase Date, but may mature on a later date ifas the
optionee is employed byCommittee may select. The principal and interest on the Loan will not be due
until the fifth anniversary of the Purchase Date, unless the Key Employee's
employment with the Company on
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that date. No person may receive grants of options to purchase more than 200,000
sharesis terminated, in any one calendar year.
All options must expire no later than ten yearswhich case the Loan will become
due 90 days from the date of grant. In
general, except as otherwise provided by the Board of Directors, no option maytermination. The Loan can be exercised after the termination of the optionee's service 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
Planprepaid at any time
without penalty, except that the consentrestriction on the transfer or sale of the
Company's stockholders. In any
event, no options may be grantedshares acquired under the 1992 Plan after July 15, 2002.Program shall remain in effect. One of the amendments
will provide that all payments under the loan will be applied first to the
non-recourse portion of the loan instead of the recourse portion. Thus employees
will be subject to personal liability until the loan is fully repaid.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the salientFor federal income tax consequences
associated with awards madepurposes, the Company intends to treat the issuance
of Common Stock to a participating employee under the 1992 Plan.Program as a
non-compensatory sale of shares to the employee. As such, the employee would not
realize income upon the purchase of shares, and would realize capital gain or
loss upon a subsequent sale of the shares. Interest paid on the Loan would be
deductible by the employee, subject to the limitations on deductibility of
investment interest, and would be taxable as ordinary income to the Company. The
Internal Revenue Service could assert that, in view of the stock transfer
restrictions and the relatively large amount of nonrecourse purchase money
financing, a stock purchase transaction under the Program should be treated as
the grant of an option underto purchase shares for federal income tax purposes. Under
this approach, a participating employee could realize ordinary income at the
1992 Plantime the Loan is not a taxable event. In
general, if and when the option is exercised, the optionee will recognize
ordinary incomerepaid equal to the excess ofdifference between the then value of the
Common Stock acquired
uponshares and the exercise over the exercisepurchase price, (i.e., the option spread), and the Company willwould be entitled to a
corresponding deduction. If shares of Common Stock
acquired uponThe Company has received no assurance that the exercise ofService
would not view a stock purchase transaction under the Program as an option are subject toand,
if so, that 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.Service would not be sustained.
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 19981999
Annual Meeting of Stockholders is required for the adoption of the proposal set
forth above.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 2 -- ADOPTION OF THE AMENDMENT
AND RESTATEMENT OF THE 1992
STOCK OPTION PLAN,CORPORATE OWNERSHIP PROGRAM, AS AMENDED," TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
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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
ALL OTHER
OTHER STOCK SECURITIES COMPEN-ALL OTHER
ANNUAL AWARDS UNDERLYING SATIONCOMPEN-
FISCAL COMPENSATION ($) ($) OPTIONS ($)SATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (a) (b) (#) (c)
--------------------------- ------ ---------- --------- ---------------- ---------- ---------- ---------
Alan B. Miller, Chairman of the
Board, President, and Chief
Executive Officer..... 1997 $850,000 $357,000Officer............ 1998 $884,000 $593,406 $ 4,556 $$196,930 150,000 $12,772
1997 850,000 357,000 4,556 128,529 40,000 $12,77212,772
1996 825,000 561,040 4,562 160,156 0 11,072
1995 800,000 480,000 178,954 2,787,324 300,000 11,072
Kirk E. Gorman, Senior Vice
President, Treasurer and
Chief Financial Officer.....Officer...... 1998 $267,975 $118,981 $ 0 $ 40,873 22,000 $ 3,200
1997 $250,800 $250,800 84,280 $ 4,906 $ 30,225 22,000 $ 3,200
1996 237,750 129,360 0 37,051 0 1,500
1995 228,248 109,600 6,012 31,370 40,000 1,500
Michael G. Servais,
Senior Vice President.......President........ 1998 $272,708 $ 87,200 $50,684 $ 34,319 22,000 $ 3,200
1997 $245,625 $168,015 $245,625 168,015 0 $ 48,680 22,000 $ 3,200
1996 223,208 164,240 0 43,210 0 1,500
1995 197,625 109,040 0 31,352 40,000 1,500
Thomas J. Bender,
Vice President.............. 1997 $198,000 $118,510President............... 1998 $207,500 $127,364 $ 0 $ 43,023 15,000 $ 3,200
1997 198,000 118,510 0 34,568 15,000 $ 3,200
1996 189,938 122,400 11,353 31,350 4,000 1,500
1995 181,561 114,480 20,297 34,119 30,000 1,500
Richard C. Wright,Steve G. Filton,
Vice President.............. 1997 $183,333 $133,500President and
Controller................... 1998 $196,650 $ 69,850 $ 0 $ 42,49024,417 15,000 $ 3,200
1997 183,500 53,960 4,163 19,052 15,000 3,200
1996 175,000 230,000 2,428 54,400171,000 81,360 0 1,500
1995 172,499 230,000 2,312 54,987 30,00022,740 0 1,500
- ---------------
(a) Other annual compensation for Mr. Alan B. Miller includes: (i) $174,375$4,556 in
1995 related to forgiveness of principal under Option Loans, and; (ii)1998, $4,556 in 1997 and $4,562 in 1996 and $4,579 in 1995 for other compensation.miscellaneous compensation
items. Other annual compensation for Messrs. Gorman, Servais, Bender and
WrightFilton in 1995,
1996, 1997 and 19971998 represents forgiveness of principal under
Option Loans.
(b) Restricted stock awards represent: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"); (ii) the vested portion of
additional restricted shares ("Premium Shares") equal to 20% of the Bonus
Shares, and; (iii) the value of the Class B Common Shares issued in
connection with the 1990 Employee'sEmployees'
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Restricted Stock Purchase Plan (the "1990 Plan"). Restrictions on one-half
of the Bonus Shares and the 10
14
Premium Shares lapse after one year from date of
grant and restrictions on the remaining bonus shares and premium shares
lapse two years after two years. Duringthe date of grant.
Restricted stock awards for Mr. Alan B. Miller include: (i) $148,352 in
1998, $89,250 in 1997 and $140,260 in 1996 representing the value of the
Bonus Shares, and; (ii) $48,578 in 1998, $39,279 in 1997 and $19,896 in 1996
representing the value of the vested portion of the Premium Shares.
Additionally, during 1995, Mr. Alan B. Miller was granted an award of up to
160,000 shares (after giving effect to a two-for-one stock split declared in
the form of a 100% stock dividend which was paid in May, 1996) of the
Company's Class B Common Stock, under the 1990 Plan, on which the
restrictions
lapsed as follows: (a) restrictions on 40,000 shares lapsed in April, 1996
(market value of $1,029,800 on vesting date); (b) restrictions on 30,000
shares lapsed in March, 1997 (market value of $993,750$993,450 on vesting date)
pursuant to a formula based upon the financial performance of the Company
during 1996; (c) restrictions on 30,000 shares lapsed in March, 1998 (market
price of $1,683,750 on vesting date) pursuant to a formula based upon the
financial performance of the Company during 1997, and; (d) restrictions on
60,000 shares lapsed in March, 1998 (market price of $3,367,500 on vesting
date) pursuant to a formula based upon the financial performance of the
Company for the two years ended December 31, 1997. 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 Committee of the Board of
Directors which administers the Plan. Restricted stock awards for Mr. Alan B. Miller include: (i) $89,250 in 1997,
$140,260 in 1996 and $120,000 in 1995 representing the value of the Bonus
Shares; (ii) $39,279 in 1997, $19,896 in 1996 and $17,324 in 1995
representing the value of the vested portion of the Premium Shares, and;
(iii) (a) $662,500 in 1995 representing the value of 40,000 shares of the
Company's Class B Common Stock, and; (b) $1,987,500 in 1995 representing the
value of 120,000 shares of the Company's Class B Common Stock, based upon
the closing market price of the shares on the date of grant, issued in
connection with the 1990 Plan. As mentioned above, Mr. Alan B. Miller was
granted an award of up to 160,000 of the Company's Class B Common Stock,
issued in connection with the 1990 Plan, of which: (i) 40,000 of the shares
issued during 1995 became fully vested in April, 1996 (market value of
$1,029,800 on vesting date); (ii) 30,000 shares became fully vested in
March, 1997 (market value of $993,750 on the vesting date); (iii) 30,000
shares became fully vested in March, 1998 (market value of $1,683,750 on
vesting date), and; (iv) 60,000 shares became fully vested in March, 1998
(market value of $3,367,500 on vesting date). Restricted stock awards for
Mr. Kirk
E. Gorman include: (i) $29,745 in 1998, $21,070 in 1997 and $32,340 in 1996 and $27,400
in 1995
representing the value of the Bonus Shares, and; (ii) $11,128 in 1998,
$9,155 in 1997 and $4,711 in 1996 and $3,970 in 1995 representing the value of the vested
portion of the Premium Shares. Restricted stock awards for Mr. Michael G.
Servais include: (i) $21,800 in 1998, $42,004 in 1997 and $41,060 in 1996 and $27,260 in 1995
representing the value of the Bonus Shares, and; (ii) $12,519 in 1998,
$6,676 in 1997 and $2,150 in 1996 and $4,092 in 1995 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, $29,628 in 1997 and $30,600 in 1996 and $28,620 in 1995
representing the value of the Bonus Shares, and; (ii) $11,182 in 1998,
$4,940 in 1997 and $750 in 1996 and $5,499 in 1995 representing the value of the vested portion
of the Premium Shares. Restricted stock awards for Mr. Richard WrightSteve G. Filton
include: (i) $29,625$17,462 in 1998, $13,490 in 1997 $50,000and $20,340 in 1996 and $50,000 in 1995
representing the value of the Bonus Shares, and; (ii) $12,865$6,955 in 1998, $5,562
in 1997 $4,400and $2,400 in 1996 and $4,987 in 1995 representing the value of the vested portion of
the Premium Shares.
At December 31, 1997,1998, Messrs. Miller, Gorman, Wright,Servais, Bender and ServaisFilton
held 7,989, 1,836, 3,023, 1,8034,547, 1,060, 1,687, 1,220 and 2,147671 shares, respectively, of restricted
Bonus Shares and Premium Shares, with a value based on the closing price of
the shares on that date of $402,446, $92,489, $152,284,
$90,826$235,876, $54,988, $87,513, $63,288 and $108,155,$34,808,
respectively.
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(c) All other compensation includes the Company's match of officers'
contributioncontributions to the Company's 401(k) plan, and, for Mr. Alan B. Miller, the
total includes $9,572 in each year related to term life insurance premiums
paid for by the Company.
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OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENTAGE OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS EXERCISE STOCK PRICE
OPTIONS GRANTED TO PER APPRECIATION FOR
GRANTED EMPLOYEES SHARE OPTION TERM
(#) IN FISCAL PRICE EXPIRATION --------------------------------------------
NAME (A)(a) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- ------------------ ----------
Alan B. Miller................................. 40,000 16% $41.25 10/15/02 $455,862 $1,007,342Miller............................... 100,000 22% $51.625 07/30/03 $1,426,296 $3,151,758
50,000 11% $52.000 11/18/03 $ 718,328 $1,587,326
Kirk E. Gorman.................................Gorman............................... 22,000 9% $41.25 10/15/02 $250,7245% $52.000 11/18/03 $ 554,038316,064 $ 698,423
Michael G. Servais.............................Servais........................... 22,000 9% $41.25 10/15/02 $250,7245% $52.000 11/18/03 $ 554,038316,064 $ 698,423
Thomas J. Bender...............................Bender............................. 15,000 6% $41.25 10/15/02 $170,9483% $52.000 11/18/03 $ 377,753
Richard C. Wright..............................215,498 $ 476,198
Steve G. Filton.............................. 15,000 6% $41.25 10/15/02 $170,9483% $52.000 11/18/03 $ 377,753215,498 $ 476,198
- ---------------
(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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
Alan B. Miller......................... 50,000 $1,884,375 280,0000 $ 0 430,000 255,000 $10,174,375 $7,998,125$15,997,813 $2,992,188
Kirk E. Gorman......................... 30,000 $1,153,125 35,500 48,500 $ 751,875 30,000 62,0001,226,563 $ 1,123,125 $1,662,000528,438
Michael G. Servais..................... 26,00030,500 $1,048,625 12,500 48,500 $ 589,469 12,500 57,000509,375 $ 490,625 $1,469,031528,438
Thomas J. Bender....................... 0 0 19,500 44,000 $ 712,469 $1,157,188
Richard C. Wright...................... 23,500868,469 23,250 35,750 $ 370,469 23,500 46,000781,563 $ 881,594 $1,272,062441,625
Steve G. Filton........................ 20,000 $ 812,250 22,250 33,750 $ 752,938 $ 384,375
- ---------------
(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, 19971998 of $50.375$51.875 per share.
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
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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
11
15
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 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 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, Michael G. Servais, Thomas J. Bender and Richard C. Wright,Steve G. Filton, assuming their
annual compensation increases by 4% annually, would be $287,000, $141,000,
$118,000, $120,000$145,000,
$126,000, $121,000 and $92,000,$140,000, 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 PARTICIPATION
The Committee of the Board of Directors was comprised during 19971998 of four
non-employee directors, Anthony Pantaleoni, Martin Meyerson, Robert H. Hotz, and
John H. Herrell.Herrell and
Martin Meyerson, who retired in July 1998. Anthony Pantaleoni is a partner in
Fulbright & Jaworski L.L.P., which serves as the Company's principal outside
counsel. Robert H. Hotz serves as a Managing Director at SBC Warburg Dillon Read LLC,
which served as Managing
Underwriterprovided consulting services and brokerage services for the Company's
offering of $135,000,000 of Senior Notes in August
1995.share buy-back program.
COMMITTEE REPORT TO SHAREHOLDERS
The report of the Compensation and Stock Option 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 extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
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17
COMPENSATION 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
12
16
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 MEASUREMENT
The Company's executive compensation is based on three components, each of
which is intended to serve the overall compensation philosophy.
BASE 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 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 Messrs. Herrell and Meyerson established salary and
bonus targets in March 19971998 for the 19971998 calendar year. Similarly, a
subcommittee will establish salary and bonus targets for future years in
accordance with tax law requirements. The Committee expects to continue
14
18 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 1997,1998, (i) Alan B. Miller, the
Company's Chairman and President, was entitled to a bonus of 53%84% of his base
salary based on the achievement of Company Targets, (ii) Kirk E. Gorman, a
Senior Vice President of the Company, was entitled to a bonus of 42%56% of his base
salary based on the achievement of Company Targets, (iii) Michael G. Servais, a
Senior Vice President of the Company, was
13
17
entitled to a bonus of 86%40% of his base salary based on the achievement of
Company Targets and the Division Targets, (iv) Thomas J. Bender, Vice President
of the Company, was entitled to a bonus of 75%77% of his base salary based on the
achievement of Company Targets and the Division Targets, and (v) Richard C. Wright,Steve G.
Filton, Vice President of the Company, was entitled to a bonus of 26%44% of his
base salary based on the achievement of Company Targets, plus $115,000 related to completed hospital acquisitions.Targets. Seventy-five percent
(75%) of the respective bonuses of Messrs. Servais and Bender was determined
based on the achievement of the Division Targets, and the remaining 25% of such
bonuses was determined based on the achievement of the Company 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 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.
19971998 COMPENSATION
The base salary for the Chairman and President was increased during 19971998 to
$850,000.$884,000. This represents a 3%4% increase over 1996.1998. Further, the bonus of the
Chairman and President for 1997,1998, determined as set forth above, was $446,250$741,758
(including $89,250$148,352 in restricted stock), reflecting 53%84% of his base salary.
During 1995, Mr. Alan B. Miller was granted an award of up to 160,000
shares (after giving effect to a two-for-one stock split declared in the form of
a 100% stock dividend which was paid in May 1996) of the Company's Class B
Common Stock, under the 1990 Plan, on which the restrictions lapse as follows:
(a) restrictions on 40,000 shares lapsed in April, 1996 (market value of
$1,029,800 on vesting date); (b) restrictions on an additional 30,000 shares
lapsed in March, 1997 (market value of $993,750 on vesting date) pursuant to a
formula based upon the financial performance of the Company during 1996; (c)
restrictions on 30,000 shares lapsed in March, 1998 (market price of $1,683,750
on vesting date) pursuant to a formula based upon the financial performance of
the Company during 1997, and; (d) restrictions on 60,000 shares lapsed March,
1998 (market price of $3,367,500 on vesting date) pursuant to a formula based
upon the financial performance of the Company for the two years ended December
31, 1997.
The 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 15
19
performance goals are met or
exceeded, resulting in increased value to stockholders, executives are rewarded
14
18
commensurately. The Compensation Committee believes that compensation levels
during 19971998 adequately reflect the Company's compensation goals and policies.
COMPENSATION AND STOCK OPTION COMMITTEE
John H. Herrell Robert H. Hotz
Martin MeyersonLeatrice Ducat Anthony Pantaleoni
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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, S&P 500, PEER GROUP)
[LINE GRAPH]
MEASUREMENT PERIOD UNIVERSAL HEALTH
(FISCAL YEAR COVERED) SERVICES,
INC. S & P 500 PEER GROUP
-------------------------- --------- ----------
1992'1993' 100.00 100.00 100.00
1993 143.37 110.08 135.25
1994 173.46 111.53 146.84
1995 314.17 153.45 206.04
1996 405.34 188.68 245.65
1997 713.32 251.63 225.99'1994' 120.99 101.32 108.57
'1995' 219.14 139.40 152.35
'1996' 282.72 171.40 181.63
'1997' 497.53 228.59 167.10
'1998' 512.35 293.91 143.38
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 and the S&P 500 Composite is based on the stock price or composite
index at the end of fiscal 1992.1993.
The above graph compares the performance of the Company with that of the
S&P 500 Composite, and a group of peer companies where performance has been
weighted based on market capitalization. Companies in the peer group are as
follows: Columbia/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, Inc. and
Tenet Healthcare Corporation.
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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 1997,1998, 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 the Plan. As of December 31, 1997, four1998, three members of the Company's Board of
Directors are participating in this Plan.
In January 1994, under the Amended and Restated Non-Employee Director Stock
Option Plan, each non-employee director of the Company received an option to
purchase 5,000 shares of the Class B Common Stock of the Company at an exercise
price of $9.8125 per share. On January 24, 1996, Mr. Paul Verkuil, upon being
appointed to the Board of Directors, received an option to purchase 5,000 shares
of the Class B Common Stock of the Company at an exercise price of $22.9375 per
share. 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, and subject to stockholder approval on May 20, 1998, 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. 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 1997,1998, 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 Compensation and Stock Option 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.
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 once in
1997.1998. Members of the Committee are Alan B. Miller, Sidney Miller, and Anthony
Pantaleoni.
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Compensation and Stock Option Committee. The Compensation and Stock Option
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 1992 Stock
Bonus Plan, the Stock Purchase Plan, and the Stock Compensation Plan. This
Committee either met or took action through unanimous written consent fourfive times
in 1997.1998. The members of this Committee are Anthony Pantaleoni, Martin Meyerson, Robert H. Hotz,
and John H. Herrell.Herrell and Leatrice Ducat. A subcommittee of the Compensation and Stock
Option Committee, comprised of Messrs.Mr. Herrell and Meyerson,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 1997.1998. Members of this Committee are John H. Herrell,
Sidney Miller, Martin Meyerson, and Paul Verkuil. Ms. Leatrice Ducat was
appointed to this Committee as of January 1998.Ducat.
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 once in 1997.1998. Members of
this Committee are Alan B. Miller, Sidney Miller and Robert H. Hotz.
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 19981999 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.
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 1999THE 2000 ANNUAL MEETING
Any proposal that a stockholder wishes to present for consideration at the
19992000 Annual Meeting must be received by the Company no later than December 22,
1998.1999. This date provides sufficient time for inclusion of the proposal in the
19992000 proxy materials.
1918
2322
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 AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
SIDNEY MILLER, Secretary
King of Prussia, Pennsylvania
April 21, 19981999
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.
2019
24
EXHIBIT A
UNIVERSAL HEALTH SERVICES, INC.
1992 STOCK OPTION PLAN, AS AMENDED
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
3,000,000 shares of its Class B Common Stock, $.01 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,
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 200,000 shares in any one calendar year.
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
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26
sole discretion, if an optionee's employment or service is terminated by
reason of the optionee's death or 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 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
A-3
27
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subparagraph (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,
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. Term of the Plan. The Plan shall be effective as of July 15, 1992, the
date on which it was adopted by the Board, subject to the approval of the
stockholders of the Company at the next Annual Meeting of Stockholders. The Plan
will terminate on July 15, 2002, 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-4
2823
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 20, 199819, 1999
Alan B. Miller and Sidney Miller 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 8, 19987, 1999 at the Annual Meeting of Stockholders to be
held at 10:00 a.m. on Wednesday, May 20, 1998,19, 1999, 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.
2924
PLEASE MARK YOUR CHOICE LIKE THIS [X]M IN BLUE OR BLACK INK
[ ]
------------------------ ------------------------ ------------------------
ACCOUNT NUMBER CLASS A COMMON CLASS C COMMON
- --------------------------------------------------------------------------------
1. The Election of a Director. Nominee is: Anthony 3. Discretionary authority is hereby granted with
Pantaleoni respect to such other matters as may properly come
before the meeting.Directors. Nominees are: Alan B. Miller
and Sidney Miller
[ ] For the Nomineeboth Nominees [ ] Withheld
from both Nominees
[ ] ---------------------------------------
For, except vote withheld from the Nominee
-----------------------------------------------------above nominee:
- ------------------------------------------------------------------------
2. Adoption of the Amendment and Restatement of the 1992 Stock Option Plan.Corporate Ownership Program, As Amended.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ]- ----------------------
3. Discretionary authority is hereby granted with respect to such other
matters as may properly come before the meeting.
- ------------------------------------------------------------------------
DATED:
------------------------
SIGNATURE:
--------------------
SIGNATURE:
--------------------
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, 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, AND FOR ADOPTION OF THE 1992 CORPORATE OWNERSHIP PROGRAM, AS AMENDED.
- --------------------------------------------------------------------------------
25
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 19, 1999
Alan B. Miller and Sidney Miller 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 7, 1999, at the
Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 19,
1999 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.
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
UNIVERSAL HEALTH SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 19 1999, 10:00 A.M.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA.
26
Please mark
your votes as
indicated in [X]
this example
1. The election of a Director. Nominee: John F. Williams, Jr., M.D.
FOR the nominee WITHHOLD
listed to the right AUTHORITY
to vote for the nominee
listed to the right
[ ] [ ]
2. Adoption of the 1992 Corporate Ownership Program, as amended.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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
ELECTION OF THE NOMINEE FOR DIRECTOR AND FOR ADOPTION OF THE AMENDMENT1992
CORPORATE OWNERSHIP PROGRAM, AS AMENDED.
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.
- --------------------------------------------------------------------------------
-FOLD AND RESTATEMENTDETACH HERE-
ANNUAL MEETING
OF
THE 1992 STOCK
OPTION PLAN.
- --------------------------------------------------------------------------------UNIVERSAL HEALTH SERVICES, INC. STOCKHOLDERS
WEDNESDAY, MAY 19, 1999
10:00 A.M.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA
================================================================================
AGENDA
(*) Election of Directors
(*) Adoption of the Corporate Ownership Program, as amended
(*) Discussion on matters of current interest
================================================================================