UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __ )
Filed by the Registrantþ
Filed by a Party other than the Registranto
Check the appropriate box:
|
| o | | Preliminary Proxy Statement |
|
| o | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|
| þ | | Definitive Proxy Statement |
|
| o | | Definitive Additional Materials |
| o | | Soliciting Material Pursuant to §240.14a-12 |
LHC GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| þ | | No fee required. |
| o | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| | (1) | | Title of each class of securities to which transaction applies: |
| |
| | | | |
| | | | |
| |
| | (2) | | Aggregate number of securities to which transaction applies: |
| |
| | | | |
| | | | |
| |
| | (3) | | Per unit 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): |
| |
| | | | |
| | | | |
| |
| | (4) | | Proposed maximum aggregate value of transaction: |
| |
| | | | |
| | | | |
| |
| | (5) | | Total fee paid: |
| |
| | | | |
| | | | |
| o | | Fee paid previously with preliminary materials. |
| |
| o | | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| | (1) | | Amount Previously Paid: |
| |
| | | | |
| | | | |
| |
| | (2) | | Form, Schedule or Registration Statement No.: |
| |
| | | | |
| | | | |
| |
| | (3) | | Filing Party: |
| |
| | | | |
| | | | |
| |
| | (4) | | Date Filed: |
| |
| | | | |
| | | | |
LHC GROUP, INC.
420 West Pinhook Road, Suite A
Lafayette, Louisiana 70503
To Our Stockholders:
You are cordially invited to attend the 20082009 Annual Meeting of the Stockholders of LHC Group, Inc. to be held on Thursday, June 12, 200811, 2009 at 10:00 a.m. local time,(Central time), at theour principal executive offices of LHC Group, Inc.,located 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503.
WhetherRegardless of whether you plan to attend the meeting, or not, I urge you to votesubmit your proxy as soon as possible to assure your representation at the meeting. For your convenience, you can vote your proxy in any one of the following ways:
| | |
| | • | Use the Internet at the web address shown on your proxy card; |
| |
| | • | Use the touch-tone telephone number shown on your proxy card; or |
| |
| | • | Complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided. |
Instructions regarding each method of voting are contained in the accompanying Proxy Statement and on the enclosed proxy card. IfEven if you return a proxy card, if you attend the Annual Meeting, and desire to vote your shares personally rather than by proxy, you may withdraw your proxy at any time before it is exercised.and vote your shares in person.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Keith G. Myers
Chief Executive Officer
April 30, 2009
YOUR VOTE IS IMPORTANT.
PLEASE VOTE YOUR PROXY BY INTERNET, TELEPHONE OR BY COMPLETING,
DATING AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT
PROMPTLY IN THE ENVELOPE PROVIDED.
LHC GROUP, INC.
420 West Pinhook Road, Suite A
Lafayette, Louisiana 70503
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 12, 200811, 2009
To the Stockholders of LHC Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (the “Annual Meeting”) of LHC Group, Inc. (the “Company” or “LHC Group”), will be held at theour principal executive offices of LHC Group,located at 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503, on Thursday, June 12, 200811, 2009 at 10:00 a.m. (Central Time)time) for the following purposes:
1. To elect the three (3) Class IIII directors nominated by the Company’s Board of Directors to serve for a term of three (3) years and until their successors are elected;elected and qualified;
2. To ratify the Stockholder Protection Rights Agreement;
3. To ratify the selection of Ernst & YoungKPMG LLP as the Company’s independent auditors for the Companyregistered public accounting firm for the fiscal year ending December 31, 2008;2009; and
4.3. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 16, 20082009 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. Your attention is directed to the Proxy Statement accompanying this Notice for more complete information regarding the matters to be acted upon at the Annual Meeting.
The Board of Directors of the Company unanimously recommends stockholders vote FOR the director nominees named in the Proxy Statement FOR approval of the Stockholder Protection Rights Plan, and FOR approvalratification of the appointment of Ernst & YoungKPMG LLP as auditorsthe Company’s independent registered public accounting firm for the Company.fiscal 2009.
Stockholders are cordially invited to attend the meeting in person.
By Order of the Board of Directors
Keith G. Myers
Chief Executive Officer
April 30, 2009
April 29,IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 11, 2009. LHC GROUP’S PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
ARE AVAILABLE AT http://investor.lhcgroup.com/annuals.cfm
IMPORTANT
YOUR PROXY IS IMPORTANT. REGARDLESS OF WHETHER OR NOT YOU EXPECTPLAN TO BE PERSONALLY PRESENT ATATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,VOTE YOUR PROXY AS SOON AS POSSIBLE BY INTERNET, TELEPHONE OR BY COMPLETING, SIGNING AND DATEDATING THE ENCLOSED PROXY CARD AND RETURNRETURNING IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
TABLE OF CONTENTS
LHC GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 12, 200811, 2009
Introduction
This Proxy Statement is being furnished in connection with the solicitation of proxies on behalf of the Board of Directors of LHC Group, Inc. (the “Company” or “LHC Group”) from holders of the Company’s Common Stock,common stock, $0.01 par value ( “Common(“Common Stock”). These proxies will be voted for the purposes set forth herein at the 2008 annual meeting2009 Annual Meeting of stockholdersStockholders of the Company (the “Annual Meeting”) to be held at 10:00 a.m. (Central Time)time) on Thursday, June 12, 2008,11, 2009, at the Company’s principal executive offices, of the Company,located at 420 West Pinhook Road., Suite A, Lafayette, Louisiana 70503, and at any adjournments or postponements thereof. The Notice of Annual Meeting, this Proxy Statement, and the proxy card are being first mailed to stockholders on or about May 6, 2009.
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held on June 11, 2009.
This Proxy Statement and LHC Group’s Annual Report onForm 10-K for the fiscal year ended December 31, 2008 are available athttp://investor.lhcgroup.com/annuals.cfm.
At the Annual Meeting, our stockholders will vote on the following matters:
1. The election of the three (3) Class I directors nominated by the Company’s Board of Directors to serve for a term of three (3) years and until their successors are elected; and
2. The ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.
Stockholders will also transact any other business that may properly come before the Annual Meeting. Once the business of the Annual Meeting concludes, members of our management and representatives of KPMG LLP, our independent registered public accounting firm, will be present to respond to appropriate questions from stockholders.
The Company’s Board of Directors recommends stockholders vote FOR the election of the Board of Directors’ three Class I nominees for director, and FOR ratification of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2009.
Proxy Solicitation
You are receiving this Proxy Statement and proxy card because you own shares of Common Stock. This Proxy Statement describes matters we would like you to vote on at the Annual Meeting. It also provides you with information about these matters so that you can make an informed decision.
A proxy is your legal designation of another person, also referred to as a “proxy,” to vote your shares of stock. The written document providing notice of the Annual Meeting and describing the matters to be considered and voted on is called a “proxy statement.” The document used to designate a proxy to vote your shares of stock is called a “proxy card”. Our board of directors has designated two of our officers, Keith G. Myers and John L. Indest, as proxies for the Annual Meeting.
If your shares are held by a bank or brokerage firm, you are considered the “beneficial owner” of shares held in “street name.” If your shares are held in street name, your bank or brokerage firm (the record holder of your shares) forwarded these proxy materials, along with a voting instruction card, to you.
Voting Procedures
Only record holders of record of shares of Common Stock outstanding as of the close of business on April 16, 20082009 (the “Record Date”) are entitled to notice of and to vote on each matter submitted to a vote at the Annual Meeting and any adjournment(s) or postponement(s) thereof. Each share of Common Stock is entitled to one vote on all matters presented at the Annual Meeting. Stockholders do not have the right to cumulate their votes, and proxies cannot be voted for directors.a greater number of persons than the number of nominees named. As of the close of business on the Record Date, the Company had approximately 17,999,99618,435,335 shares of Common Stock outstanding and entitled to vote. The Notice of Annual Meeting, this Proxy Statement, and the proxy are being first mailed to stockholders on or about April 29, 2008.May 6, 2009.
Stockholders may cast their votes in several different ways. When voting for director nominees, they may (1) vote “for”“FOR” all the nominees, (2) “withhold”“WITHHOLD” authority to vote for all nominees, or (3) “withhold”“WITHHOLD” authority to vote for one or more nominees but vote “for”“FOR” the other nominees. With respect to other proposals, stockholders may vote “for”“FOR” or “against”“AGAINST” the proposal, or they may “abstain”“ABSTAIN” from voting on the proposal. If stockholders hold their
Inspectors of election will be appointed to, among other things, determine the number of shares throughof Common Stock outstanding, the shares represented at the Annual Meeting, the existence of a broker or nomineequorum and have not given their broker or nominee instructions about howthe authenticity, validity and effect of proxies, to receive votes of ballots, to hear and determine all challenges and questions in any way arising in connection with the right to vote, on a particular matter for whichto count and tabulate all votes and to determine the broker or nominee does not otherwise have discretionary voting power, their sharesresults. Computershare Trust Company, N.A., our independent transfer agent and registrar, will be considered “broker or nominee non-votes” with respect to that matter.count the votes.
StockholdersVoting in person. You may vote your shares at the Annual Meeting either in person or by proxy. If you are encourageda registered stockholder and you attend the Annual Meeting, you may deliver your completed proxy card in person. Additionally, we will pass out written ballots to registered stockholders who desire to vote in person at the Annual Meeting. Appointing a proxy in response to this solicitation will not affect a stockholder’s right to attend the Annual Meeting and to vote in person. If you are a beneficial owner of shares held in street name, you may not vote your shares in person at the Annual Meeting unless you obtain a power of attorney or proxy form from the record holder of your shares. All holders of shares of Common Stock, or individuals holding their duly appointed proxies, may attend the Annual Meeting. Stockholders must present a form of photo identification to be admitted to the Annual Meeting. If you hold your shares in street name, you are invited to attend the Annual Meeting, but you will also need to bring a copy of your bank or brokerage statement evidencing your ownership as of the Record Date to gain admittance.
Voting by proxy. We urge you to vote by proxy even if you intend to attend the Annual Meeting. If you are a registered stockholder at the close of business on the Record Date, you may vote by proxy through the Internet, telephone or by completing, signing, dating and returning the enclosed proxy card, butnotin time to be received by more than one method.us prior to the Annual Meeting. If you vote by Internet or telephone, you do not need to return your proxy card. You maynot vote by more than one method. If you submit your vote by more than one method, only the last vote that is submitted will be counted and each previous vote will be disregarded. If you do not return your proxy card and do not attend the Annual Meeting, and the shares are registered in your name, your shares will not be voted.
2
If a proxy card is properly executed, returned to us and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth on the proxy card. If a proxy card is signed but no instructions are given with respect to the matters to be acted upon, the shares represented by the proxy will be voted FOR the election of the three Class I directors nominated by the Company’s Board of Directors and FOR the proposal to ratify KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2009. We know of no other business that will be presented at the Annual Meeting. However, if any other matter properly comes before the stockholders for vote at the Annual Meeting, your shares will be voted in accordance with the best judgment of the proxy holders.
Voting through a bank or broker. If your shares are held in “street name” through a broker,, your bank or other holder of record, you will receivebrokerage firm forwarded these proxy materials, as well as voting instructions, fromto you. Please follow the registered holder that you must follow in order forinstructions on the voting instruction card to vote your shares to be voted for you by that record holder.shares. Please refer to the instructions provided with the enclosed proxy card for information on the voting methods available to you.you; your bank or brokerage firm may allow you to vote by telephone or the Internet.
As the beneficial owner of the shares, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to “routine” items, but it will not be permitted to vote your shares with respect to “non-routine” items. In the case of a non-routine item, your shares will be considered “broker non-votes” on that proposal. Proposal 1 — Election of Directors and Proposal 2 — Ratification of Independent Registered Public Accounting Firm are both routine matters; there are no non-routine proposals contained in this Proxy Statement for vote at the Annual Meeting. However, if a non-routine proposal properly comes before the Annual Meeting, broker non-votes will not affect the outcome of the proposal.
Quorum Abstentions and Broker Non-VotesVotes Required
In accordance with Delaware law (under whichA quorum must be present at the Company is organized), and theAnnual Meeting to conduct any business. The Company’s Bylaws require, the presence, in person or by proxy, of the holders of a majority of the voting power of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting is necessary to constitute a quorum. If a quorum which is required before any action can be taken at the Annual Meeting. If less than a majority of the outstanding shares entitled to vote are represented at the Annual Meeting,not present, a majority of the shares so represented may adjourn the Annual Meeting to another date, time or place.
No notice of the time and place of the adjourned meeting will be given if the adjournment is for less than 30 days and no new record date is fixed for the adjourned meeting. Abstentions, and shares represented by proxies reflecting abstentions, will be treated as shares present for quorum purposes and entitled to vote at the Annual Meeting, and they will have the same practical effect as votes against a proposal. Broker or nomineebroker non-votes will be treated as shares present for quorum purposes but not entitled to vote at the Annual Meeting, and they will not be included in the vote totals and, therefore, will not count as votes “for” or “against” any proposals. Votes withheld, and shares represented by proxies marked to withhold authority, with respect to one or more nominees, will be treated as shares present for quorum purposes, and they will not be included in the vote totals and therefore will not count as votes “for” or “against” any nominee. Computershare Trust Company, N.A., our independent transfer agent and registrar, will count the votes.purposes.
If a quorum is present at the Annual Meeting, the following stockholder votes will be required for approval of the proposals to be submitted at the Annual Meeting:
| | |
| | • | Proposal 1 — Election of Directors.The nominees for director shall be elected by a plurality of the votes of the shares present, in person or by proxy,cast at the Annual Meeting. Abstentions,Meeting, meaning that the three nominees for director receiving the greatest number of votes withheld, and brokerwill be elected. If you vote “WITHHOLD” with respect to one or nominee non-votes, andmore nominees, your shares represented by proxies reflecting abstentions, votes withheld,will not be voted with respect to the person or persons indicated. If you hold your shares in street name, your failure to indicate voting instructions to your bank or broker or nominee non-votes, will not affect the outcome of director elections.Proposal 1, as the election of directors is a routine matter on which banks and brokers may vote even in the absence of specific voting instructions from you. |
| |
| | • | Other proposalsProposal 2 — Ratification of Independent Registered Public Accounting Firm. The ratification of KPMG LLP shall be approved by a majority of the voting power of the outstanding shares of Common Stock present, in person or by proxy, and entitled to vote aton the Annual Meeting. Abstentions and votes withheld, and shares represented by proxies reflecting abstentions or votes withheld,matter. If you indicate “ABSTAIN” on your proxy card, if will have the same effect as a negative vote butagainst Proposal 2. If you hold your shares in street name, your failure to indicate voting instructions to your bank or broker or nominee non-votes, and shares represented by proxies reflecting broker or nominee non-votes, will not haveaffect the effectoutcome of Proposal 2, as the ratification of an independent registered public accounting firm is a routine matter on which banks and brokers may vote against any other proposal.even in the absence of specific voting instructions from you. |
3
Expenses
The Company will bear the cost of solicitation, including the preparation, assembly, printing and mailing of the proxy materials. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation materialfor forwarding to suchthe beneficial owners. In addition,owners, of the shares. The Company may reimburse such persons for their costs in forwarding the solicitation materials to such beneficial owners. The original solicitation of proxies by mail may be supplemented by a solicitationsolicitations in person by telephone, telegramfacsimile or other means by directors, officers or employees of the Company. No additional compensation will be paid to these individuals for any such services. Except as described above, the Company does not presently intend to solicit proxies other than by mail.
Revocability
Any registered stockholder returning the accompanying proxy card may revoke that proxy at any time prior to its exercise by (a) giving written notice to the Company of such revocation, prior to or at the Annual Meeting, to the Company, Attention: Secretary, 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503, (b) voting in person at the meeting,Annual Meeting, or (c) executing and delivering to the Company, prior to or at the Annual Meeting, a proxy card bearing a later date. Your presence at the Annual Meeting will not in itself revoke your proxy; you must obtain a ballot and vote at the Annual Meeting to revoke your proxy. Unless properly revoked, the shares represented by proxies received by the Board of Directors will be voted at the Annual Meeting.
PROPOSALS FOR STOCKHOLDER ACTION
PROPOSAL #11
ELECTION OF DIRECTORS
The Company’s Board of Directors (the “Board”) is composed of three classes, designated Class I, Class II and Class III.III, with one class of directors elected each year for a three-year term. The term of the three Class IIII directors expires at the 20082009 Annual Meeting. The current Class IIII directors are Keith G. Myers, Ted W. Hoyt,Monica F. Azare, John B. Breaux and George A. Lewis.Dan S. Wilford. The Board is currently composed of nine directors, seven of whom are outside, non-employee directors and two of whom are employee directors. The Nominating and Corporate
2
Governance Committee conducted an evaluation of each person listed below under the caption “Class III Nominees”Class I nominee to evaluate thehis or her performance of each existing director prior to recommending to the Board his or her nomination for an additional term as a director. Upon the recommendation of the Nominating and Corporate Governance Committee, which consists entirely of independent directors, the Board nominated Ms. Azare and Messrs. Myers, HoytBreaux and LewisWilford for election as Class IIII directors to serve until the Annual Meeting of Stockholders in 2011 or2012 and until their successors have been elected and qualified.
The term of the Class III directors will expire at the 20092010 annual meeting of the stockholders of the Company and the term of the Class IIIII directors will expire at the 20102011 annual meeting of the stockholders of the Company. Each succeeding term of a director in Class I, Class II, or Class III shall be for three (3) years and until his or her successor is elected.elected and qualified. The current Class III Directors are Monica F. Azare, John B. Breaux, and Dan S. Wilford and the current Class II directors are John L. Indest, Ronald T. Nixon and W.J. “Billy” Tauzin.Tauzin and the current Class III directors are Keith G. Myers, Ted W. Hoyt and George A. Lewis.
The Certificate of Incorporation of the Company (the “Certificate of Incorporation”) presently provides that the number of directors shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the Board. At each annual meeting of stockholders, or special meeting in lieu thereof, after the initial classification of the board of directors, the successors to directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election, or special meeting held in lieu thereof. The number of directors may be changed only by resolution of the Board. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one thirdone-third of the directors. The Company’s Bylaws further provide that newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement,
4
disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board, be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office until their successor is elected and qualified.
Each nominee for election at the Annual Meeting has consented to be a candidate and to be so named in this Proxy Statement and to serve, if elected. The Company does not know of any reason why any nominee would be unable or, if elected, will decline to serve as a director. If any nominee becomes unable or unwilling to serve, although not anticipated,the Board may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the persons named as proxies will vote your shares for the substitute nominees, unless you have voted “WITHHOLD” with respect to the discretionary authority to vote for a substitute. original nominee.
Directors will beare elected by a plurality of the votes cast by the shares of Common Stock represented in person or by proxy at the Annual Meeting. Therefore, the three nominees for election as Class IIII directors who receive the greatest number of votes cast at the Annual Meeting will be elected to the Board as Class IIII directors. Shares may not be voted cumulatively, and proxies cannot be voted for a greater number of persons than the number of nominees named. Unless otherwise specified, the accompanying proxy will be voted FOR Keith G. Myers, Ted W. Hoyt,Monica F. Azare, John B. Breaux and George A. LewisDan S. Wilford as Class IIII directors.
Information Regarding Nominees for Class IIII Director:
Nominees for Election of Class IIII Directors for a Three-Year Term
Expiring at the Annual Meeting of Stockholders to be held in Fiscal 2012
| | | | | | |
Nominee | | Age | | Position |
|
| Monica F. Azare | | | 42 | | | Director and Nominee |
| John B. Breaux | | | 65 | | | Director and Nominee |
| Dan S. Wilford | | | 68 | | | Director and Nominee |
Monica F. Azarewas appointed as a director in November 2007. Ms. Azare currently serves as Senior Vice President of Corporate Communications for Verizon Communications. Prior to this position, Ms. Azare served as Senior Vice President-Public Policy and Government Affairs for Verizon Communications and before that she served as Executive Director and Senior Counsel of Federal Affairs for Verizon Wireless. Ms. Azare’s distinguished career also includes service as Vice President, Federal Affairs for Insight Communication in New York and Chief Counsel to House Energy and Commerce Chairman Billy Tauzin. Ms. Azare is a member of the Federal Communications Bar Association, Louisiana State Bar Association and the Corporate Counsel of Women of Color, and she was selected as a2006-2007 David Rockefeller Fellow. She currently serves on several boards of directors, including the Business Council of New York State, the New York City Partnership and the Louisiana State University College Advisory Board. A Louisiana native, Ms. Azare received a Bachelor of Arts degree from Louisiana State University and a Juris Doctorate from the Southern University Law Center.
Senator John B. Breauxwas appointed as a director in February 2007. Senator Breaux has served in both the United States Senate and the United States House of Representatives. Most recently and until his retirement from public service in 2005, Senator Breaux represented the State of Louisiana in the United States Senate for three consecutive terms, beginning in 1987. Prior to his tenure as Senator, he served as a member of the United States House of Representatives from 1972 to 1987. Senator Breaux began his career in 1972 with his election as a Democrat to the Ninety-second Congress in a special election. At the age of 28, he was then the youngest member of the United States House of Representatives. Senator Breaux was re-elected to the seven succeeding Congresses and served until January 3, 1987, when he won election as a Democrat to the United States Senate. Senator Breaux was re-elected in both the 1992 and 1998 elections. As a member of the Senate, Senator Breaux was Chair and ranking minority member of the Senate Committee on Aging, a member of the Senate Finance Committee and a member of the Senate Commerce Committee where he was recognized as a non-partisan consensus builder. Senator Breaux is a Director of CSX Corporation and a former Senior Managing Director of the Clinton Group, an investment advisory firm. Senator Breaux is also a partner
5
in The Breaux-Lott Leadership Group, a partnership that offers strategic advice, consulting and lobbying services, which he co-founded in 2008.
Dan S. Wilfordwas appointed as a director in November 2005. He served from 1984 through 2002 as the President and Chief Executive Officer of Memorial Hermann Healthcare System headquartered in Houston, Texas. Mr. Wilford also served as Chief Executive Officer of a community-based, not-for-profit, multi-hospital system in the greater Houston area. Prior to that, he was associated for ten years with Hillcrest Medical Center in Tulsa, Oklahoma and was President of North Mississippi Health Services in Tupelo, Mississippi. He currently serves on the board of directors for one other publicly traded company, Healthcare Realty Trust, and twelve not-for-profit organizations, most of which are related to the healthcare industry. In March 2009, Mr. Wilford was inducted into ModernHealthcare’s Hall of Fame.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF MONICA F. AZARE, JOHN B. BREAUX AND DAN S. WILFORD AS CLASS I DIRECTORS.
Information Regarding Directors Continuing in Office:
Class II Directors Continuing in Office Whose Terms
Expire at the Annual Meeting of Stockholders to be held in Fiscal 2010
| | | | | | |
Nominee | | Age | | Position |
|
| John L. Indest | | | 57 | | | Director, President, Chief Operating Officer and Secretary |
| Ronald T. Nixon | | | 53 | | | Director |
| W.J. “Billy” Tauzin | | | 65 | | | Director |
John L. Indestcurrently serves as our President and Chief Operating Officer. He previously served as an Executive Vice President and as our Senior Vice President and Chief Operating Officer of Home-Based Services, beginning in May 2001. Mr. Indest has also served as a director since June 2000 and as Secretary since August 2004. From November 1998 to May 2001, Mr. Indest served as our Vice President. Prior to joining us in November 1998, Mr. Indest served as President, Chief Executive Officer and co-owner of Homebound Care, Inc., a regional home health provider. Mr. Indest has testified before the United States House of Representatives’ Ways and Means Subcommittee on healthcare issues and was co-chairman of the Louisiana Task Force on Ethics, overseeing compliance issues applicable to home health and hospice in the state of Louisiana. He formerly served on the Board of Directors of the National Association of Home and Hospice Care. Mr. Indest is a registered nurse with a Masters of Science in Health Services Administration from the University of St. Francis.
Ronald T. Nixonhas served as a director since July 2001. Mr. Nixon is a founding principal of The Catalyst Group, formed in 1990, which manages two small business investment companies, or SBICs, one participating preferred SBIC and three private equity investment funds. Prior to joining The Catalyst Group, Mr. Nixon operated companies in the manufacturing, distribution and service sectors. Mr. Nixon serves on the board of directors of numerous private companies. Mr. Nixon holds a Bachelor of Science degree in Mechanical Engineering from the University of Texas at Austin and is a registered Professional Engineer in the State of Texas.
Congressman W.J. “Billy” Tauzinwas appointed as our Lead Director in January 2005. In December 2004, Congressman Tauzin was named President and Chief Executive Officer of the Pharmaceutical Research and Manufacturers of America, a trade group that serves as one of the pharmaceutical industry’s top lobbying groups. He served 12 terms in the U.S. House of Representatives, representing Louisiana’s 3rd Congressional District since being first sworn in 1980. From January 2001 through December 2004, Congressman Tauzin served as Chairman of the House Committee on Energy and Commerce. He also served as a senior member of the House Resources Committee and Deputy Majority Whip. Prior to being a member of Congress, Congressman Tauzin was a member of the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief Administration Floor Leader. He currently serves on the Board
6
of Directors of Entergy Corporation. Congressman Tauzin received a Bachelor of Arts Degree from Nicholls State University and a Juris Doctorate from Louisiana State University.
Class III Directors Continuing in Office Whose Terms
Expire at the Annual Meeting of Stockholders to be held in Fiscal 2011
| | | | | | | |
Nominee | | Age | | Position |
| |
| Keith G. Myers | | | 4849 | | | Director, Chairman and NomineeChief Executive Officer |
| Ted W. Hoyt | | | 5354 | | | Director and Nominee |
| George A. Lewis | | | 7172 | | | Director and Nominee |
Keith G. Myersis our co-founder and has served as Chairman of the Board and Chief Executive Officer (or similar positions in our predecessors) since 1994. Mr. Myers wasserved as President of the Company from 1994 to 2007. Prior to joining us, Mr. Myers founded, co-owned and operated Louisiana Premium Seafoods, Inc., an international food processing, procurement and distribution company. Mr. Myers received credentials inIn 1999, from the National Association for Home Care with regard to the home/hospice care sector. Mr. Myers was named Business Executive of the Year in 1999 by the Louisiana Rural Health Association. Mr. Myers received credentials from the National Association for Home Care and Hospice in 1999 and was granted credentials by the Healthcare Financial Management Association in 2005. Mr. Myers has been an active participant in the Home Health Top 100 since 2002 and has participated in the preparation of numerous white papers and presentations to members of both the United States Senate and House of Representatives, specifically related to health care reimbursement methodologies. In June 2003, Mr. Myers received the Regional Entrepreneur of the Year for outstanding performance in the healthcare category by Ernst & Young LLP with respect tofield of Healthcare Services and was officially inducted as a lifetime member of The National Entrepreneur of the Texas, Louisiana and Mississippi Region.Year Hall of Fame in November 2003.
3
Ted W. Hoythas served as a director since August 2004. Mr. Hoyt has practiced corporate and tax law since 1977, counseling both private and public corporations. Since January 1999, Mr. Hoyt has served as the Managing General ManagerPartner of the law firm of Hoyt & Stanford, LLC. Mr. Hoyt was the co-founder of Omni Geophysical Corporation, which later became Omni Energy Services, a publicly traded company, for which he served as a director and officer from 1986 to 1996. Mr. Hoyt has also served as a tax attorney with the National Office of the Internal Revenue Service. Mr. Hoyt holds a Bachelor of Science degree in Business Administration degree from the University of Louisiana at Lafayette, a Juris Doctorate from Louisiana State University and a Masters in Tax Law degree from Georgetown University. Mr. Hoyt is admitted to the Bar in Louisiana, New York and the District of Columbia.
George A. Lewishas served as a director since August 2004. Mr. Lewis commenced his auditing career with Arthur Andersen & Co. in 1958. In 1963, Mr. Lewis joined the firm of Broussard, Poche, Lewis & Breaux, L.L.P., Certified Public Accountants, where he served as an audit partner until his retirement in 1996. Since 1996, Mr. Lewis has primarily served as an expert audit and accounting defense witness with respect to litigation involving various nationally recognized accounting firms. Mr. Lewis has served on various committees of the American Institute of Certified Public Accountants, including as a member of the Auditing Standards Board from 1990 through 1994, and as a member of the Society of Louisiana Certified Public Accountants. Mr. Lewis has authored an education course to train CPAs to deal with issues of the elderly. Mr. Lewis holds CPA certificates in Louisiana and Texas and is a member of the American Institute of Certified Public Accountants and the Society of Louisiana Certified Public Accountants. Mr. Lewis received a Bachelor of Science from Louisiana State University. Mr. Lewis serves as the financial expert on our Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT A VOTE “FOR” THE ELECTION OF KEITH G. MYERS, TED W. HOYT AND GEORGE A. LEWIS AS CLASS III DIRECTORS.
Information Regarding Directors Continuing in Office:
Class I Directors Continuing in Office Whose Terms
Expire at the Annual Meeting of Stockholders to be held in Fiscal 2009
| | | | | | |
Nominee
| | Age | | Position
|
|
Monica F. Azare | | | 41 | | | Director |
John B. Breaux | | | 64 | | | Director |
Dan S. Wilford | | | 67 | | | Director |
Monica F. Azarewas appointed as a director in November 2007. Ms. Azare currently serves as Senior Vice President — Public Policy and Government Affairs for Verizon Communications, with responsibility for leading Verizon’s public policy, regulatory and legislative activity in New York and Connecticut. Prior to this position , Ms. Azare served as Executive Director and Senior Counsel of Federal Affairs for Verizon Wireless, where she was responsible for advancing the company’s position on wireless issues before members of the U.S. House of Representatives. Ms. Azare’s distinguished career also includes serving as Vice President, Federal Affairs for Insight Communications in New York, Chief Counsel to House Energy and Commerce Chairman Billy Tauzin, and Chair of the House Telecommunications, Trade and Consumer Protection Subcommittee. Ms. Azare also currently serves on the Board of NYC Investment Fund’s Civic Capital Corp. A Louisiana native, Ms. Azare received a Bachelor of Arts degree from Louisiana State University and a Juris Doctorate from the Southern University Law Center. She is a member of the Federal Communications Bar Association, Louisiana State Bar Association, the Corporate Counsel of Women of Color, and Jack and Jill of America, a national organization that encourages leadership and service by young people in their communities. Ms. Azare was recently selected as a2007-2008 David Rockefeller Fellow.
Senator John B. Breauxwas appointed as a director in February 2007. Senator Breaux has served in both the United States Senate and the United States House of Representatives. Most recently and until his retirement from public service in 2005, Senator Breaux represented the State of Louisiana in the United States Senate for three consecutive terms, beginning in 1987. Prior to his tenure as Senator, he served as a member
4
of the United States House of Representatives from 1972 to 1987. Senator Breaux began his career in 1972 with his election as a Democrat to the Ninety-second Congress in a special election. At the age of 28, he was then the youngest member of the United States House of Representatives. Senator Breaux was re-elected to the seven succeeding Congresses and served until January 3, 1987, when he won election as a Democrat to the United States Senate. Senator Breaux was re-elected in both the 1992 and 1998 elections. As a member of the Senate, Senator Breaux was ranking minority member of the Senate Committee on Aging, a member of the Senate Finance Committee and a member of the Senate Commerce Committee where he was recognized as a non-partisan consensus builder. Since his retirement from the United States Senate, Senator Breaux has been actively involved in Patton Boggs LLP, a Washington D.C. law firm, as a Director of CSX Corporation, and as a former Senior Managing Director of the Clinton Group, an investment advisory firm. Senator Breaux is also a partner in The Breaux-Lott Leadership Group, a partnership that offers strategic advice, consulting and lobbying services, which he co-founded in 2008.
Dan S. Wilfordwas appointed as a director in November 2005. He served from 1984 through 2002 as the President and Chief Executive Officer of Memorial Hermann Healthcare System headquartered in Houston, Texas. Mr. Wilford also served as Chief Executive Officer of a community-based, not-for-profit, multi-hospital system in the greater Houston area. Prior to that, he was associated for ten years with Hillcrest Medical Center in Tulsa, Oklahoma and was President of North Mississippi Health Services in Tupelo, Mississippi. He currently serves on the board of directors for one other publicly traded company, Healthcare Realty Trust, and twelve not-for-profit organizations, most of which are related to the healthcare industry.
Class II Directors Continuing in Office Whose Terms
Expire at the Annual Meeting of Stockholders to be held in Fiscal 2010
| | | | | | |
Nominee
| | Age | | Position
|
|
John L. Indest | | | 56 | | | Director and Secretary |
Ronald T. Nixon | | | 52 | | | Director |
W.J. “Billy” Tauzin | | | 64 | | | Director |
John L. Indestcurrently serves as our President and Chief Operating Officer. He previously served as an Executive Vice President and as our Senior Vice President and Chief Operating Officer of Home-Based Services, beginning in May 2001. Mr. Indest has also served as a director since June 2000 and as Secretary since August 2004. From November 1998 to May 2001, Mr. Indest served as our Vice President. Prior to joining us in November 1998, Mr. Indest served as President, Chief Executive Officer and co-owner of Homebound Care, Inc., a regional home health provider. Mr. Indest has testified before the United States House of Representatives’ Ways and Means Subcommittee on healthcare issues and was co-chairman of the Louisiana Task Force on Ethics, overseeing compliance issues applicable to home health and hospice in the state of Louisiana. He currently serves on the Board of Directors of the National Association of Home and Hospice Care. Mr. Indest is a registered nurse with a Masters of Science in Health Services Administration from the University of St. Francis.
Ronald T. Nixonhas served as a director since July 2001. Mr. Nixon is a founding principal of The Catalyst Group, formed in 1990, which manages two small business investment companies, or SBICs, one participating preferred SBIC and three private equity investment funds. Prior to joining The Catalyst Group, Mr. Nixon operated companies in the manufacturing, distribution and service sectors. Mr. Nixon serves on the board of directors of numerous private companies. Mr. Nixon holds a Bachelor of Science degree in Mechanical Engineering that he received from the University of Texas at Austin and is a registered Professional Engineer in the State of Texas.
Congressman W.J. “Billy” Tauzinwas appointed as our lead independent director in January 2005. In December 2004, Congressman Tauzin was named President and Chief Executive Officer of the Pharmaceutical Research and Manufacturers of America, a trade group that serves as one of the pharmaceutical industry’s top lobbying groups. He served 12 terms in the U.S. House of Representatives, representing Louisiana’s 3rd Congressional District since being first sworn in 1980. From January 2001 through December 2004, Congressman Tauzin served as Chairman of the House Committee on Energy and Commerce. He also served
5
as a senior member of the House Resources Committee and Deputy Majority Whip. Prior to being a member of Congress, Congressman Tauzin was a member of the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief Administration Floor Leader. He currently serves on the Board of Directors of Entergy Corporation. Congressman Tauzin received a Bachelor of Arts Degree from Nicholls State University and a Juris Doctorate from Louisiana State University.
PROPOSAL #2
RATIFICATION OF THE ADOPTION OF THE
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
At the Annual Meeting, the Company’s stockholders will be asked to ratify the Stockholder Protection Rights Agreement entered into between LHC Group, Inc. and Computershare Trust Company, N.A. as Rights Agent, on March 10, 2008 (the “Rights Agreement”). None of the Company’s Certificate of Incorporation, Bylaws or applicable law require stockholder approval of a Rights Agreement or any similar arrangement. However, the Board has determined to request stockholder ratification of the Rights Agreement as a matter of good corporate governance. The terms of the Rights Agreement have been designed to substantially conform to the published requirements of the Corporate Governance Policies and Guidelines issued by Institutional Shareholder Services, a proxy advisory firm for many institutional investors.
Reasons for a Stockholder Protection Rights Plan
A stockholder protection rights plan is used to protect stockholders in the event of certain unsolicited attempts to acquire control of a company, including a partial or two-tier tender offer that fails to treat all stockholders equally; a “creeping acquisition” by the purchase of stock on the open market; and other acquisition tactics that the Board believes are unfair to and not in the best interests of stockholders.
Stockholder protection rights plans help to prevent an acquiror from taking advantage of the onset of adverse market conditions, short-term declines in share prices, or anticipated improvements in operating results before such improvements are fully reflected in a company’s share price — allowing a hostile acquiror to take control at a price that does not reflect a company’s intrinsic value or long term prospects.
A major purpose of a stockholder protection rights plan is to give the board of directors a greater period of time to evaluate the adequacy of an acquisition offer, investigate alternatives, solicit competitive proposals and take other steps necessary to maximize stockholder value.
Stockholder protection rights plans are also intended to induce potential acquirors to negotiate with the board, and thereby strengthen a board’s bargaining position for the benefit of all stockholders. A company’s board of directors is in a position to evaluate a potential combination in light of the company’s business plan and other strategic alternatives. A stockholder protection rights plan enables a board, as elected representatives of a company’s stockholders, to better respond to an unsolicited acquisition proposal. The board also has a fiduciary obligation to act in the best interests of all of the company’s stockholders.
The Rights Agreement does not prevent an offer to acquire the Company. In responding to an acquisition proposal, the Company’s Board, a majority of which is comprised of outside, independent directors, recognize the obligation to fulfill its fiduciary duties to the Company and the Company’s stockholders.
Background of the LHC Group Rights Agreement
The Company adopted the initial Rights Agreement on March 10, 2008. Neither the adoption, nor any renewal or amendment, were connected with an acquisition proposal, hostile or otherwise. The Rights Agreement adopted by the Board contains certain features intended to be favorable to the interests of the Company’s stockholders.
6
Summary of Rights Agreement
The following is a summary of the Rights Agreement, which is qualified in its entirety by the Rights Agreement attached hereto as Appendix A.
Issuance. One (1) right to buy 1/10,000 of one (1) share of Series A Junior Participating Preferred Stock, par value $0.01 per share, was issued as a dividend on each share of the Company’s Common Stock outstanding on March 10, 2008. Until the rights become exercisable, one (1) right will attach to each share of Common Stock issued by the Company and each share issuable upon the exercise of outstanding options and warrants.
Term. The rights expire three (3) years from the adoption of the Rights Agreement on March 10, 2011, unless exercised, redeemed or terminated earlier.
Independent Director Review. A committee of independent members of the Company’s Board will review the continuing appropriateness of the Rights Agreement annually.
Exercise Price. Each right will entitle the registered holder to purchase from the Company 1/10,000 of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share at a purchase price of $60.00, subject to adjustment.
acquiring person. Subject to specified exceptions, an acquiring person is any person who, together with affiliates and associates, is or becomes the beneficial owner of twenty percent (20%) or more of the aggregate of all shares of the Company’s Common Stock then outstanding.
Authority of the Board. When evaluating decisions surrounding redemption or termination of the Rights Agreement, the Company’s Boards will not be subject to restrictions such as those commonly known as “dead-hand,” “slow-hand,” “no-hand,” or similar provisions.
Rights Detach and Become Exercisable. Immediately upon the first to occur of (i) ten (10) business days following the public announcement that a person or group has acquired beneficial ownership of twenty percent (20%) or more of the Company’s Common Stock, or (ii) ten (10) business days (or a later date chosen by the Board so long as the twenty percent (20%) threshold has not been crossed) after a person or group commences or announces its intention to commence a tender or exchange offer, the consummation of which would result in beneficial ownership by such person or group of twenty percent (20%) or more of the Company’s Common Stock, the rights would detach from shares of the Company’s Common Stock and become exercisable and transferable apart from shares of the Company’s Common Stock. This date is referred to as the “distribution date.” Prior to such time, the rights are not exercisable and are not transferable apart from the Company’s Common Stock.
Flip-In. If a person or group acquires twenty percent (20%) or more of the Company’s Common Stock, then each right would “flip in” and become a right to receive upon payment of the exercise price that number of shares of Common Stock having a market value of two (2) times the exercise price of the right. Therefore, as a result of the “flip-in”, each right would entitle its holder to purchase shares of Common Stock having a market value of $120 at a purchase price of $60. The acquiring person that caused the rights to become exercisable would be excluded from the “flip-in.” If LHC Group did not have sufficient shares of authorized Common Stock available for the complete exercise of the “flip-in” rights, LHC Group could satisfy its obligations to rights holders by issuing preferred stock, cash, debt or equity securities, property or a combination thereof.
Flip-Over. If, after the rights have detached and become exercisable, an acquiring person were to merge or otherwise combine with the Company, or the Company were to sell fifty percent (50%) or more of its assets or earning power, each right then outstanding would “flip-over” and become a right to receive upon payment of the exercise price that number of shares of Common Stock of the acquiring person having a market value of two (2) times the exercise price of the right. Thus, as a result of the “flip-over”, each right would entitle its holder to purchase shares of the acquiring person’s Common Stock having a market value of $120 at an exercise price of $60. The “flip-over” provisions do not apply to a merger or other combination pursuant to a qualified offer meeting certain criteria describe in the Rights Agreement.
7
Exchange. At any time after a person or group becomes an acquiring person, other than pursuant to a qualified offer, the Board may cause the exchange of the rights, in whole or in part, for shares of the Company’s Common Stock at an exchange ratio of one (1) share of the Company’s Common Stock for each right (or, if insufficient shares are available, the Company may issue preferred stock, cash, debt or equity securities, property or a combination thereof in exchange for the rights). Rights owned by the acquiring person would be void and not subject to such an exchange.
Redemption. The rights would be redeemable by the Board at a price of $0.01 per right, at any time prior to the earlier of the “distribution date” or March 10, 2011.
Qualified Offer. A qualified offer is an offer determined by the Board of Directors of the Company to be a fully financed offer for any or all outstanding shares of the Company’s Common Stock made by an Offerer who owns no more than ten percent (10%) of the outstanding Common Stock, at a per share offer price greater than the highest reported market price for the Common Stock, in the immediately preceding twenty-four (24) months that the Board of the Company, upon the advice of a nationally recognized investment banking firm, does not deem to be either unfair or inadequate. A qualified offer is conditioned upon a minimum of at least two-thirds of the outstanding shares of the Company’s Common Stock being tendered and not withdrawn, with a commitment to acquire all the Company’s Common Stock not tendered for the same consideration. If the qualified offer includes Common Stock of the person or group making the offer, it must be freely tradeable Common Stock of a publicly traded company, and the board and its representatives must be given access to conduct a due diligence review of the offeror to determine whether the consideration is fair and adequate. A qualified offer must also remain open for one hundred twenty (120) business days following commencement. If a qualified offer has been made, the record holders of ten percent (10%) of the outstanding shares of the Company’s Common Stock may direct the Board to call a special meeting of stockholders to consider a resolution authorizing a redemption of all rights. If at the special meeting the holders of a majority of the shares of the Company’s Common Stock outstanding vote in favor of the redemption of the rights, then the Board will redeem the rights and take such other action as may be necessary to prevent the rights from interfering with the consummation of the qualified offer.
Voting. The rights do not entitle holders of such rights to voting rights.
Amendment. The Rights Agreement can be amended or supplemented by the Board at any time without the approval of the holders of any Rights, so long as no one has become an acquiring person. Thereafter the Rights Agreement may be amended only in a manner that does not adversely affect the holders of the rights (excluding any acquiring person or its affiliates and associates). Business combinations approved by the Board generally involve the redemption of the rights or an amendment of the Rights Agreement to make them inapplicable to the particular acquisition.
Federal Income Tax Consequences
The federal income tax consequences of a stockholder protection rights plan have not been definitively established by Congress or the courts, and the only revenue ruling issued by the Internal Revenue Service to date addresses the adoption of a stockholder protection rights plan, but not any later tax consequences. The following discussion of probable tax consequences is subject to changes in the law, as well as clarification and interpretation of existing law that may have retroactive as well as prospective effect.
Under Revenue Ruling90-11, the adoption of the Rights Agreement and the subsequent distribution of the rights to stockholders would not be a taxable event for the Company or its stockholders under federal income tax laws. Although not addressed in the revenue ruling, the physical distribution of rights certificates upon the rights becoming exercisable should not result in any tax.
After such physical distribution, the rights would probably be treated for tax purposes as capital assets in the hands of most stockholders and each right would probably have a basis of zero and a holding period which relates back to the holding period of the stock with respect to which such rights were issued. Upon the rights becoming rights to purchase an acquirer Common Stock, holders of rights probably would be taxed even if the rights were not exercised. Upon the rights being redeemed for cash or the rights being exchanged for stock of
8
the Company, holders of the rights would probably have a taxable event. Upon the rights becoming rights to purchase the Company’s Common Stock, holders of rights would probably not have a taxable event. The rights may have an impact on tax-free reorganizations involving the Company. Several types of tax-free transactions can still be structured, although the rights may be treated as taxable “boot.”
Accounting Treatment
The initial issuance of the rights has no accounting or financial reporting impact. Since the rights were “out of the money” when issued, they did not dilute earnings per share. Since the redemption date of the rights is neither fixed nor determinable, the accounting guidelines do not require the redemption amount to be accounted for as a long-term obligation of the Company.
Other Protections Afforded Stockholders
The Board is not seeking ratification in response to, or in anticipation of, any pending or threatened takeover bid or offer for the Common Stock of the Company. The Board does not have any current intention of implementing any other proposal having an anti-takeover effect, although certain provisions of the Company’s Certificate of Incorporation and Bylaws may have that effect, as might certain applicable provisions of Delaware law. We believe these provisions, along with the Rights Agreement, protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors, and by providing our Board of Directors with more time to assess any acquisition proposal. The provisions are not intended to make our Company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our Company and our stockholders.
We are subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits “business combinations” between a publicly-held Delaware corporation and an “interested stockholder,” which is generally defined as a shareowner who becomes a beneficial owner of fifteen percent (15%) or more of a Delaware corporation’s voting stock during the three-year period following the date that such stockholder became an interested shareowner. Section 203 could have the effect of delaying, deferring or preventing a change in control of the Company that our shareholders might consider to be in their best interests.
Vote Required
Ratification of the Rights Agreement will require the affirmative vote of a majority of the shares present and voting at the Annual Meeting in person or by Proxy.
Effect of Proposal
If the stockholders do not ratify the Rights Agreement, the Board intends to terminate the Rights Agreement. Despite termination, the Board would retain the right to enact a new Rights Agreement if, in the exercise of their fiduciary duties, the directors determined it was appropriate. The Board would only implement a new Rights Agreement in the instance where the Board believes that there is an imminent need to defend the rights of the stockholders to fairly and equally participate in a change of control transaction. If that occurs and the Board is unable to seek stockholder approval prior to enactment due to time constraints, the Board will submit that new plan to the stockholders for ratification within twelve (12) months.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
STOCKHOLDER PROTECTION RIGHTS AGREEMENT .
9
PROPOSAL #32
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORSREGISTERED PUBLIC ACCOUNTING FIRM
The independent accounting firm of Ernst & YoungAudit Committee appointed KPMG LLP (“E&Y”KPMG”) has served as the Company’s independent auditors since June 11, 2001.registered public accounting firm on August 20, 2008. The Company’s Audit Committee has also selected E&YKPMG to conduct the annual audit of the financial statements of the Company for its fiscal year ending December 31, 2008. E&Y2009. KPMG has no financial interest, direct or indirect, in the Company and does not have any connection with the Company except in its professional capacity as an independent auditor.
The ratification by the stockholders of the selection of E&YKPMG as independent auditors is not required by law or by the Bylaws of the Company. The Board, consistent with the practice of many publicly held corporations, is nevertheless submitting this selection to its stockholders. If thisour stockholders do not ratify the selection is not ratifiedof KPMG at the Annual Meeting, the Audit Committee intends to reconsider its selection of independent auditorsKPMG for the fiscal year ending December 31, 2008.2009. Even if the selection of KPMG is ratified, the Audit Committee, in its sole discretion, may direct the appointment ofappoint a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the best interestinterests of the Company and itsour stockholders.
Representatives of E&YKPMG will be present at the Annual Meeting and will have an opportunity to make a statement, if they so desire, and to respond to appropriate questions.
The ratification of KPMG requires the approval of a majority of the voting power of the outstanding shares of Common Stock present, in person or by proxy, and entitled to vote on the matter. Abstentions will have the same effect as a vote against the ratification of KPMG as the Company’s independent registered public accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF E&YKPMG AS THE COMPANY’S INDEPENDENT AUDITORS.
PRINCIPAL ACCOUNTING FEES AND SERVICES
E&Y billed LHC GroupThe following table shows the following fees forrelated to the audit and other services provided by Ernst & Young LLP (“Ernst & Young”) for the fiscal years ended December 31, 2007 and 2006 fiscal year:2008, preceding the replacement of Ernst & Young as the Company’s registered public accounting firm in August 2008:
| | | | | | | | | | | | | | | | | |
Fee Category | | 2007 | | 2006 | | | 2008 | | 2007 | |
| |
| Audit Fees | | $ | 1,216,481 | | | $ | 1,179,157 | | | $ | 145,958 | | | $ | 1,226,482 | |
| Audit-Related Fees | | | — | | | | — | | | | — | | | | — | |
| Tax Fees | | | — | | | | — | | | | 209,030 | | | | — | |
| Other Fees | | | 3,500 | | | | 3,500 | | | | 3,500 | | | | 3,500 | |
| | | | | | | | | | | |
| Total | | $ | 1,219,981 | | | $ | 1,182,657 | | | $ | 358,488 | | | $ | 1,229,982 | |
The following table shows the fees related to the audit and other services provided by KPMG for the fiscal year ended December 31, 2008:
| | | | | |
Fee Category | | 2008 | |
| |
| Audit Fees | | $ | 1,172,000 | |
| Audit-Related Fees | | | — | |
| Tax Fees | | | — | |
| Other Fees | | | 1,500 | |
| | | | | |
| Total | | $ | 1,173,500 | |
| | |
| | • | Audit Feesincludes the aggregate fees billed for professional services rendered for the audit of LHC Group’s fiscal years 2007 and 2006the Company’s annual financial statements for fiscal years 2008 and 2007 and internal control over |
8
| | |
| | financial reporting, review of LHC Group’sthe Company’sForm 10-K andForm 10-Qs for the same periods, and quarterly reviews. |
| | |
| | • | Audit-Related Feesincludes the aggregate fees billed for assurance and related services rendered during fiscal years 20072008 and 20062007 that were reasonably related to the performance of the audit or review of LHC Group’sthe Company’s financial statements and that are not reported in Audit Fees. |
| |
| | • | Tax Feesincludes the aggregate fees billed for tax compliance, tax advice, and tax planning services rendered during fiscal years 20072008 and 2006.2007. |
| |
| | • | Other Feesfor Ernst & Young includes the aggregate fees billed for the EY Online accounting and research tool used by LHC Groupthe Company during fiscal years 20072008 and 2006.2007. Other fees for KPMG include the Accounting Research Online tool used by the Company during fiscal 2008. |
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Company’s Audit Committee approves all fees to be paid for audit and audit related services, tax and all other fees of the Company’s independent auditor prior to engagement for those services.
The Audit Committee is responsible for the appointment, compensation and oversight of the work performed by ourthe Company’s independent registered public accounting firm. The Audit Committee has adopted a pre-approval policy requiring it to pre-approve all audit (including audit related)and audit-related services and permitted non-audit
10
services provided by the independent registered public accounting firm in order to assure that the provision of such services does not impair the firm’sauditor’s independence. The Audit Committee pre-approved all fiscal year 20072008 services by Ernst & Young LLP.and KPMG.
The Audit Committee pre-approval policy sets forth specified audit, audit-related, tax and other permissible non-audit services, if any, for which pre-approval is provided up to a maximum fee amount set annually by the Audit Committee. Pre-approval is generally provided for up to one year, and any proposed services exceeding these fee levels must be specifically pre-approved by the Audit Committee. Any services not specifically identified in the policy must receive specific pre-approval. The Company’s independent registered public accounting firm and management periodically report periodically to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval.pre-approval policy. The Audit Committee may also pre-approve particular services on acase-by-case basis and may delegate specific pre-approval authority to one or more members pursuant to a resolution adopted by the unanimous approval of the Audit Committee, provided that the member reports any pre-approved services at the next regularly scheduled Audit Committee meeting.
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
CommitteesIndependence of Directors
The Board has reviewed the independence of each of the Company’s directors in light of the definition of “independent director” as that term is defined in the NASDAQ Marketplace Rules. As a result of this review, the Board affirmatively determined that all of the directors are independent, with the exception of Keith G. Myers and John L. Indest, each of whom is employed by the Company.
In finding all of its non-employee directors independent, the Board evaluated two relationships that did not constitute related party transactions and therefore do not require disclosure pursuant toRegulation S-K Item 404(a). In considering whether Dan S. Wilford qualifies as an independent director, the Board reviewed the Company’s employment agreement with Ned B. Wilford, the brother of Dan Wilford. The Board concluded that the employment agreement did not disqualify Dan Wilford as an independent director. Secondly, in considering whether Senator John B. Breaux qualifies as an independent director, the Board reviewed the Company’s relationship with The Breaux-Lott Leadership Group, which provides consulting services to the Company, and of which Senator Breaux is a partner. The Board concluded that the relationship did not disqualify Senator Breaux as an independent director.
9
The Board has also established a Lead Director Position, to be held by an independent, non-employee director. W.J. “Billy” Tauzin was appointed the Lead Director of the Company in January 2005. The Lead Director’s duties include meeting with the Chairman of the Board to review financials, preparing and reviewing agendas and minutes of committee meetings and pertinent Board issues, presiding as Chair of the Nominating and Corporate Governance Committee, and presiding at regularly scheduled executive sessions of the Board and other meetings of the independent, non-employee directors.
Committees and Meetings of the Board of Directors
During the Company’s fiscal year ended December 31, 2008, the Board held six meetings and took additional action, from time to time, by unanimous written consent. Additionally, each director attended at least 75% of the aggregate number of meetings held in fiscal 2008 by the Board and its committees on which he or she served. The Board has established a policy encouraging all members of the Board to attend each annual meeting of the stockholders of the Company, particularly with respect to those directors who are up for election at any such annual meeting. Four members of the Board attended the 2008 Annual Meeting of Stockholders.
The Board has adopted a policy relating to non-management executive sessions. Under this policy, periodically, and no less frequently than semi-annually, the Board meets in executive sessions in which management directors and other members of management do not participate. The non-management members of the Board held three executive sessions during fiscal 2008.
The Board has established three committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee, each of which is briefly described below. All committee members are non-employee, independent directorsThe following table shows the current membership of the Company (as independence is defined in Rule 4200(a)(15) of the National Association of Securities Dealers listing standards).these committees.
| | | | | | | | | | | | |
| | | | | | | | Nominating and
| |
| | | | | | | | Corporate
| |
Name | | Audit | | | Compensation | | | Governance | |
|
| George A. Lewis | | | X | * | | | X | | | | | |
| Ted W. Hoyt | | | X | | | | X | | | | | |
| Ronald T. Nixon | | | X | | | | | | | | X | |
| Dan S. Wilford | | | | | | | X | | | | X | |
| Monica F. Azare | | | | | | | X | * | | | | |
| W.J. Tauzin | | | | | | | | | | | X | * |
| John B. Breaux | | | | | | | | | | | X | |
The Board has also established a Lead Director Position, to be held by an independent, non-employee director. W.J. “Billy” Tauzin was appointed the Lead Director of LHC Group in January 2005. The Lead Director’s duties include meeting with the Chairman to review financials, agenda/minutes of committee meetings and pertinent Board issues; presiding as Chair of the Nominating and Corporate Governance Committee and presiding at regularly scheduled executive sessions of the Board and other meetings of the independent, non-employee directors.
Audit Committee
During fiscal 2008, the Audit Committee held eleven meetings and took additional action by unanimous written consent. The members of the Audit Committee are Messrs. Lewis, Hoyt and Nixon, with Mr. Lewis serving as chair. The Board has determined that each member of the Audit Committee is “independent” as defined inRule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) and the NASDAQ Marketplace Rules, including rules specifically governing audit committee members. The Board has also determined that Mr. Lewis is an “audit committee financial expert,” as defined by rules adopted by the Securities and Exchange Commission, or SEC.Item 407(d)(5) ofRegulation S-K. A description of Mr. Lewis’ qualifications with regard to his status as an audit committee financial expert can be found in the biographical information set forth under Proposal #1 in this Proxy Statement.
The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act and the charter of the Audit Committee is available on the Company’s website atwww.LHCGroup.com.. The Board of Directors has determined that each member of the Audit Committee is “independent” under the heightened standards required for members of the Audit Committee by the Nasdaq listing standards, the rules of the Securities and Exchange Commission and the Audit Committee Charter.
The Audit Committee performs the following functions, among others:
| | |
| | • | ReviewsAnnually reviews and implements the Audit Committee charter which is posted onand reports to the Company’s website atwww.LHCGroup.com.Board; |
10
| | |
| | • | Selects the Company’s independent audit firm (whose duty it is to audit the financial statements of the Company and its subsidiaries for the fiscal year in which it is appointed) and has the sole authority and responsibility to approve all audit and engagement fees and terms, as well as all significant permitted non-audit services by the Company’s independent auditors.auditors; |
| |
| | • | Meets with the auditors and management of the Company to review and discuss the scope of the audit and all significant matters related to the audit.audit; |
11
| | |
| | • | Reviews the adequacy and effectiveness of the Company’s internal controls regarding accounting and financial matters.matters; |
| |
| | • | Reviews the Company’s financial statements and discusses them with management and the independent auditors.auditors; |
| |
| | • | Reviews and discusses with management the Company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.agencies; |
| |
| | • | Reviews and discusses with management the Company’s quarterly reports onForm 10Q10-Q and annual reports onForm 10K.10-K; and |
| |
| | • | Reviews and approves any proposed transaction with any affiliate, in accordance with the Company’s written policy. |
Additional information regarding the Audit Committee and its processes and procedures for the consideration and approval of related party transactions can be found under the heading “Certain Relationships and Related Transactions” later in this proxy statement.Proxy Statement.
Compensation Committee
During fiscal 2008, the Compensation Committee met four times and took additional action by unanimous written consent. The members of the Compensation Committee are Ms. Azare and Messrs. Hoyt, Lewis and Wilford andWilford. Effective August 8, 2008, Ms. Azare withwas unanimously elected the chair of the committee. Prior to August 8, 2008, Mr. Hoyt servingserved as chair. The charter of the Compensation Committee is available on the Company’s website atwww.LHCGroup.com.Committee’s chair. The Board of Directors has determined that each of the members of the Compensation Committee is an “independent director” as defined in the charter and under the Nasdaq listing standards,NASDAQ Marketplace Rules, is a “non-employee director” as defined in the charter and inRule 16b-3 under the Exchange Act, and is an “outside director” as defined under Section 162(m) of the Internal Revenue Code and related regulations.
The Compensation Committee charter is available on the Company’s website atwww.LHCGroup.com.The Compensation Committee performs the following functions, among others:
| | |
| | • | Annually reviews and approves corporatethe Company’s goals and objectives relevant to the compensation of the Company’s chief executive officers,officer, and evaluates the performance of the Company’s chief executive officers in light of thoseofficer with respect to these goals and objectives.objectives; |
| |
| | • | DeterminesAnnually determines and approves the compensation of the Company’s executive officers.officers; |
| |
| | • | Makes recommendations to the Board regarding the Company’s equity-based and incentive compensation programs.programs; and |
| |
| | • | ReviewsAnnually reviews and implements the Compensation Committee charter and reports to the Board. |
The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee deems appropriate. Additional information regarding the Compensation Committee and its processes and procedures for the consideration and determination of the executive compensation can be found inunder the CompensationHeading “Compensation Discussion and AnalysisAnalysis” later in this proxy statement.Proxy Statement.
Nominating and Corporate Governance Committee
During fiscal 2008, the Nominating and Corporate Governance Committee held two meetings and took additional action by unanimous written consent. The members of the Nominating and Corporate Governance
11
Committee are Messrs. Tauzin, Breaux, Nixon and Wilford, with Mr. Tauzin serving as chair. The Board has determined that the members of the Nominating and Corporate Governance Committee are independent directors under NASDAQ Marketplace Rule.
The charter of the Nominating and Corporate Governance Committee is available on the Company’s website atwww.LHCGroup.com.. The members of the Nominating and Corporate Governance Committee are independent directors under Nasdaq Marketplace Rule 4200(a)(15).
The Nominating and Corporate Governance Committee performs the following functions, among others:
| | |
| | • | Recommends to the Board for its approval proposed nominees for Board membership after evaluating the proposed nominee and making a determination as to the proposed nominee’s qualifications to be a Board member.member; and |
| |
| | • | Evaluates the performance of each existing director before recommending to the Board his or her nomination for an additional term as a director. |
Director Nominee Evaluation Process
The Nominating and Corporate Governance Committee of the Board of Directors is also responsible for seeking individuals qualified to become Board members, conducting appropriate inquiries into the backgrounds and qualifications of possible Board nominees and proposing nominees for Board membership to the Board for its approval. The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members and other Board members, as well as by management and stockholders.
The Nominating and Corporate Governance Committee will evaluate prospective nominees considering certain factors, including:
| | |
| • | the commitment of the prospective nominee to represent the long-term interests of the stockholders of the Company; |
|
| • | the prospective nominee’s standards of character and integrity; |
|
| • | the prospective nominee’s financial literacy; |
|
| • | the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s service on other public company boards; |
|
| • | the prospective nominee’s independence and absence of any conflicts of interest that would interfere with his or her performance as a director; and |
|
| • | the extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate for the Board. |
The Nominating and Corporate Governance Committee believes it is appropriate for at least one member of the Board to meet the criteria for an “audit committee financial expert” as defined by Item 407(d)(5) ofRegulation S-K, and that a majority of the members of the Board meet the definition of “independent director” under the NASDAQ Marketplace Rules. The Nominating and Corporate Governance Committee also believes it appropriate for certain members of the Company’s management to participate as members of the Board. Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it deems are in the best interests of the Company and its stockholders, such as the current composition of the Board, the balance of management and independent directors and the need for specialized expertise.
The Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining new Board members. If any member of the Board does not wish to continue in service, or if the Nominating and Corporate Governance Committee or the Board decides not to re-nominate a current Board
12
member for re-election, the Nominating and Corporate Governance Committee will identify the desired skills and experience for a new nominee in light of the criteria for Board members described below. The criteria employed by the Nominating and Corporate Governance Committee in evaluating potential nominees will not differ based on whether the candidate is recommended by a stockholder of the Company.
A stockholder who wishes to recommend a prospective nominee for the Board to the Nominating and Corporate Governance Committee should submit a written notice by mail to the Nominating and Corporate Governance Committee,c/o the Secretary, LHC Group, Inc., 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503. Such a written recommendation must be received not less than 120 calendar days nor more than 150 calendar days before the first anniversary of the date of the Company’s notice of annual meeting sent to stockholders in connection with the previous year’s annual meeting.
Stockholder recommendations to the Nominating and Corporate Governance Committee should include, at a minimum:
| | |
| • | the candidate’s name, age, business addresses, and other contact information; |
|
| • | a complete description of the candidate’s qualifications, experience, background and affiliations, as would be required to be disclosed in the proxy statement pursuant to Regulation 14A of the Exchange Act; |
|
| • | a sworn or certified statement by the candidate in which he or she consents to being named in the proxy statement as a nominee and to serve as a director if elected; and |
|
| • | the name and address of the stockholder(s) of record making such a recommendation. |
Stockholders may also continue to make their own direct nominations to the Board, for election at an annual or special meeting of the stockholders, in accordance with the procedures set forth in the Company’s Bylaws relating to stockholder nominations. For additional information about direct nominations by stockholders, see the section entitled “Stockholder Proposals” under the heading Board of Directors and Corporate Governance. There have been no changes to the procedures by which stockholders may recommend nominees to our Board of Directors since the Company’s last disclosure of such procedures, which appeared in the definitive proxy statement for our 2008 Annual Meeting of Stockholders.
Stockholder Proposals
For nominations or other business to be properly brought before an annual meeting by a stockholder, (1) the stockholder must have given timely notice thereof in writing to the Secretary of the Company, (2) such business must be a proper matter for stockholder action under the Delaware General Corporation Law, (3) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Company with a solicitation notice, such stockholder or beneficial owner must, in the case of a proposal, have delivered prior to the meeting a proxy statement and form of proxy to holders of at least the percentage of the Company’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered prior to the meeting a proxy statement and form of proxy to holders of a percentage of the Company’s voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the solicitation notice, and (4) if no solicitation notice relating thereto has been timely provided pursuant to this section,policy, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a solicitation notice.
To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Company not less than sixty (60) or more than ninety (90) days prior to the first anniversary (the “Anniversary”) of the date on which the Company first mailed its proxy materials for the preceding year’s annual meeting of stockholders;stockholders (the “Anniversary”); provided, however, that if no proxy materials were mailed by the Company in connection with the preceding year’s annual meeting, or if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual
13
meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (a) the 90th day prior to such annual meeting or (b) the 10th day following the day on which public announcement of the date of such meeting is first made.
Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), and such person’s written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company’s voting shares to elect such nominee or nominees.
TheNeither the Secretary nor the Nominating and Corporate Governance Committee has nothave received any nominee recommendationsnominations or other proposals from any of the Company’s stockholders in connection with the 20082009 Annual Meeting. The Board is nominating Messrs. Myers, Hoyt, and Lewis for re-election as Class III directors based upon the recommendation of the Nominating and Governance Committee.
Stockholder Communications with the Board of Directors
The Board accepts communications sent to the Board (or to specified individual directors) by stockholders of the Company. Stockholders may communicate with the Board (or with specified individual directors) by writing to them LHC Group, Inc.,c/o Secretary, LHC Group, Inc., 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503. Communications should be sent by overnight or certified mail, return receipt requested. All written communications received in such manner from stockholders of the Company shallwill be forwarded promptly to the member(s) of the Board to whom the communication is directed or, if the communication is
13
not directed to any particular member(s) of the Board, the communication shallwill be forwarded to all members of the Board.
MeetingsCompensation Committee Interlocks And Insider Participation
During the Company’s fiscal year ended December 31, 2007 (“Fiscal 2007”), the Board held five meetingsMs. Azare and took additional action, from time to time, by unanimous written consent. The Compensation Committee met twiceMessrs. Hoyt, Lewis, and took additional action by unanimous written consent. The Audit Committee held eight meetings and the Nominating and Governance Committee held two meetings, and both took additional action by unanimous written consent. During fiscal 2007, each incumbent director attended 57% or more of the aggregate number of meetings held by the Board and its committees on which he or she served. The Board has established a policy encouraging allWilford served as members of the Board to attend each annual meetingCompensation Committee of the stockholdersBoard during fiscal 2008. None of the Company, particularly with respect to those directors who are up for election at any such annual meeting. Seven members of the Board attended the 2007 Annual Meeting of Stockholders.
Non-Management Executive Sessions
The Board has adopted a policy relating to non-management executive sessions. Under this policy, periodically, and no less frequently than semi-annually, the Board will meet in executive sessions in which management directors and other members of management do not participate. The non-management membersCompensation Committee during fiscal 2008 was, during fiscal 2008 or formerly, an officer or employee of the Company. During fiscal 2008, none of the Company’s executive officers served as a member of a board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board held three executive sessions during fiscal 2007.or Compensation Committee.
Code of Business Conduct and Ethics
In compliance with requirements of both the SECSecurities and Nasdaq Global Market, or Nasdaq,Exchange Commission (“SEC”) and NASDAQ Marketplace Rules, the Company has a Code of Business Conduct and Ethics applicable to all of its directors, officers and employees. The Code of Business Conduct and Ethics can be found on the Company’s website atwww.LHCGroup.com.www.LHCGroup.com.
Independence of Directors
The Board has reviewed the independence of each of the Company’s directors in light of the definition of “independent director” as that term is defined in the Nasdaq listing standards. As a result of this review, the Board affirmatively determined that all of the directors are independent of the Company and its management under the applicable Nasdaq standards with the exception of Keith G. Myers and John L. Indest, each of whom is employed by the Company.
In finding all of its non-employee directors independent, the Board evaluated two relationships that did not constitute related party transactions and therefore do not require disclosure pursuant toRegulation S-K Item 404(a) (§ 229.404(a)). In considering whether Dan S. Wilford qualifies as an independent director, the Board reviewed the Company’s employment agreement with Ned B. Wilford, the brother of Dan Wilford, The Board concluded that the employment agreement did not disqualify Dan Wilford as an independent director. Secondly, in considering whether Senator John B. Breaux qualifies as an independent director, the Board reviewed the Company’s relationship with The Breaux-Lott Leadership Group, which provides consulting services to the Company, and of which Senator Breaux is a partner. The Board concluded that the relationship did not disqualify Senator Breaux as an independent director.
Director Nominee Evaluation Process
The Nominating and Corporate Governance Committee of the Board of Directors is responsible for seeking individuals qualified to become Board members, conducting appropriate inquiries into the backgrounds and qualifications of possible Board nominees and proposing nominees for Board membership to the Board for its approval. The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members and other Board members, as well as by management and stockholders.
A stockholder who wishes to recommend a prospective nominee for the Board to the Nominating and Corporate Governance Committee should submit a written notice by mail to the Nominating and Corporate
14
c/o the2008 DIRECTOR COMPENSATION Company’s Secretary, LHC Group, Inc., 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503. Such a written recommendation must be received not less than 120 calendar days nor more than 150 calendar days before
The following table sets forth the first anniversarycash and equity compensation that we paid to our non-employee directors during 2008.
| | | | | | | | | | | | | | | | | |
| | | Fees Earned
| | | | | | | | | | |
| | | or Paid in
| | | Stock
| | | Option
| | | | |
| | | Cash(1)
| | | Awards
| | | Awards
| | | Total
| |
Name | | ($) | | | ($)(2) | | | ($)(3) | | | ($) | |
| |
| W.J. Tauzin | | | 53,750 | | | | 39,165 | | | | — | | | | 92,915 | |
| Ted W. Hoyt | | | 50,000 | | | | 39,165 | | | | — | | | | 89,165 | |
| George A. Lewis | | | 55,000 | | | | 39,165 | | | | — | | | | 94,165 | |
| John B. Breaux | | | 41,000 | | | | 71,677 | | | | — | | | | 112,677 | |
| Ronald T. Nixon | | | 47,000 | | | | 39,165 | | | | — | | | | 86,165 | |
| Dan S. Wilford | | | 47,000 | | | | 39,165 | | | | — | | | | 86,165 | |
| Monica F. Azare | | | 42,000 | | | | 61,587 | | | | — | | | | 103,587 | |
| | |
| (1) | | Amounts reflect the total cash compensation earned by or paid to each director in fiscal year 2008 in connection with Board and committee retainers. |
|
| (2) | | Reflects the proportionate amount of the grant date fair value of stock awards recognized by the Company as an expense in 2008 for financial statement reporting purposes, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The fair values of these awards and the amounts expensed in 2008 were determined in accordance with FAS 123R. The total number of restricted shares held by each of the directors as of December 31, 2008 was as follows: Tauzin, 2,300; Hoyt, 2,300; Lewis, 2,300; Breaux, 3,467; Nixon, 2,300; Wilford, 2,300; and Azare, 3,467. |
|
| (3) | | There were no option grants in 2008. The total number of stock options held by each of the directors as of December 31, 2008 was as follows: Tauzin, 7,000; Hoyt, 0; Lewis, 4,000; Breaux, 0; Nixon, 4,000; Wilford, 4,000; and Azare, 0. |
The total number of restricted shares granted to each director during 2008 and the grant date fair value of such awards was as follows:
| | | | | | | | | |
| | | | | | Grant Date
| |
| | | Number of
| | | Fair Value
| |
Name | | Shares | | | ($) | |
| |
| W.J. Tauzin | | | 2,300 | | | | 38,000 | |
| Ted W. Hoyt | | | 2,300 | | | | 38,000 | |
| George A. Lewis | | | 2,300 | | | | 38,000 | |
| John B. Breaux | | | 2,300 | | | | 38,000 | |
| Ronald T. Nixon | | | 2,300 | | | | 38,000 | |
| Dan S. Wilford | | | 2,300 | | | | 38,000 | |
| Monica F. Azare | | | 2,300 | | | | 38,000 | |
Director Compensation Plan. Our Amended and Restated 2005 Non-Employees Director Compensation Plan, which we refer to as the “Director Compensation Plan,” provides for both cash and equity compensation for our non-employee directors. Employees of the date of the Company’s notice of annual meeting sent to stockholders in connection with the previous year’s annual meeting. Stockholders may continue to make their own direct nominations to the Board,Company do not receive any compensation for election at an annual or special meeting of the stockholders, in accordance with the procedures set forth in the Company’s Bylaws relating to stockholder nominations. See the section entitled “Stockholder Proposals” under the heading Corporate Governance for additional information about direct nominations by stockholders. There have been no changes to the procedures by which stockholders may recommend nominees toserving on our Board of Directors since the Company’s last disclosure of such procedures, which appeared in the definitive proxy statement for our 2007 Annual Meeting of Stockholders.Board.
Stockholder recommendations toCash Compensation. Our non-employee directors currently receive the Nominating and Corporate Governance Committee should include, at a minimum:following fees, as applicable for their services on our Board;
| | |
| | • | $30,000 annual cash retainer, payable on a quarterly basis, for service on the candidate’s name, age, business addresses, and other contact information;Board; |
| |
| | • | $20,000 annual cash retainer, payable on a complete description ofquarterly basis, for service as the candidate’s qualifications, experience, background and affiliations, as would be required to be disclosed in the proxy statement pursuant to Regulation 14A of the Exchange Act;Lead Director; |
| |
| | • | $14,000 annual cash retainer, payable on a sworn or certified statement by the candidate in which he or she consents to being named in the proxy statementquarterly basis, for service as a nominee and to serve as a director if elected; and |
|
| • | the name and addressChairman of the shareholder(s) of record making such a recommendation.Audit Committee; |
15
The Nominating and Corporate Governance Committee will evaluate prospective nominees considering certain factors, including:
| | |
| | • | the commitment$10,000 annual cash retainer, payable on a quarterly basis, for service as a Chair of the prospective nominee to represent the long-term interests of the stockholders of the Company;Compensation Committee; |
| |
| | • | the prospective nominee’s standards of character and integrity; |
|
| • | the prospective nominee’s financial literacy; |
|
| • | the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s$6,000 annual cash retainer, payable on a quarterly basis, for service on other public company boards; |
|
| • | the prospective nominee’s independence and absence of any conflicts of interest that would interfere with his or her performance as a director;member (other than Chair) on a Committee; and |
| |
| | • | the extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate$1,250 cash fee payable for the Board.each regularly scheduled quarterly Board meeting |
OtherEquity Compensation. New directors, other than the foregoing, there are no stated minimum criteria for director nominees, althoughLead Director, receive an initial grant of 3,500 shares of restricted stock. The Lead Director receives an initial grant of 7,000 shares of restricted stock. These initial grants of restricted stock vest one-third on the Nominatingdate of grant and Corporate Governance Committee may also consider such other factors as it deems are in the best interestone-third on each of the Company and its stockholders, such as the current compositionfirst two anniversaries of the Board,grant date. Additionally, the balancedirector compensation plan provides for annual grants of management and independent directors andrestricted stock to non-employee directors. Annually, on March 1st, each non-employee director serving on that date shall be granted an award of restricted stock having an aggregate value equal to $38,000, based on the need for specialized expertise.price of our Common Stock on such date. The Nominating and Corporate Governance Committee, however, does believe it is appropriate for at least one memberannual restricted stock grant vests on the first anniversary of the Board to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of the Board meet the definition of “independent director” under the Nasdaq listing standards. The Nominating and Corporate Governance Committee also believes it appropriate for certain members of the Company’s management to participate as members of the Board.grant date.
The NominatingBenefits. We reimburse each non-employee director for expenses associated with attending board and Corporate Governance Committee will identify nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skillscommittee meetings and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board
15
with that of obtaining new Board members. If any member of the Board doesother board-related activities. Non-employee directors do not wish to continue in service or if the Nominating and Corporate Governance Committee or the Board decides not to re-nominate a current Board member for re-election, the Nominating and Corporate Governance Committee will identify the desired skills and experience for a new nominee in light of the criteria above. The criteria employed by the Nominating and Corporate Governance Committee in evaluating potential nominees will not differ based on whether the candidate is recommended by a stockholder ofreceive other benefits from the Company.
MANAGEMENT
The following table provides information regarding the executive officers of the Company are listed in the table below. Biographical information concerning those executive officers currently serving as directors or nominees is set forth under Proposal #1 in this Proxy Statement. Biographical information concerning all other executive officers of the Company is set forth below.Company:
| | | | | | | |
Name | | Age | | | Position(s) |
| |
| Keith G. Myers | | | 4849 | | | Chief Executive Officer and Chairman of the Board |
| John L. Indest | | | 5657 | | | President, Chief Operating Officer, Secretary, Director |
| Peter J. Roman | | | 5758 | | | Senior Vice President, Chief Financial Officer, and Treasurer |
| Daryl J. Doise | | | 5051 | | | Senior Vice President, Corporate Development |
| Donald D. Stelly | | | 3940 | | | Senior Vice President, Operations |
| Richard A. MacMillan | | | 5556 | | | Senior Vice President, Senior Counsel, Director of Corporate Compliance and Director of Regulatory and Governmental Affairs |
| Peter C. November | | | 39 | | | Senior Vice President, General Counsel Compliance Officerand Director of Mergers & Acquisitions |
Keith G. Myershas served as Chief Executive Officer and Chairman of the Board (or similar positions in our predecessors) since 1994. Please refer to the biography of Mr. Myers provided under the heading“Proposal 1-Election of Directors — Information Regarding Directors Continuing in Office,” above.
John L. Indesthas served as our President and Chief Operating Officer since 2001 and as Secretary since August 2004. Please refer to the biography of Mr. Indest provided under the heading “Proposal 1 — Election of Directors — Information Regarding Directors Continuing in Office,” above.
Peter J. Romanserveshas served as our Senior Vice President, Chief Financial Officer and Treasurer.Treasurer since September 2007. Mr. Roman joined the companyCompany in April of 2005 and has served as the Vice President/Controller and was named Chief Financial Officer in 2007. Prior to LHC Group,joining us, Mr. Roman served as the Chief Financial Officer for VLP Corporate Services. From 1997 to 2004, he served as the Chief Financial Officer for Unifab International, Inc., a publicly-traded oilfield fabrication services company located in Southwest Louisiana. Mr. Roman also served as a Certified Public Accountant for 13 years with Ernst & Young in their New Orleans location. He is a member of the Society of Louisiana Certified Public Accountants and received a Bachelor’s Degree in Accountingaccounting from Louisiana State University.
Daryl J. Doiseserveshas served as our Senior Vice President of Corporate Development a position he has held since 2005. He previously served as our Chief Operating Officer of Facility-Based Services, beginning in May 2002. Prior to joining LHC Group,the Company, Mr. Doise was employed for the previous four years by Quorum Health Services where he served as President and Chief Executive Officer of Opelousas General Hospital, a 200-bed hospital with
16
over 800 employees. Mr. Doise has also served as an officer and member of the Board of Directors of the Louisiana Hospital Association. Mr. Doise received a Bachelor of Science degree from Louisiana State University, with a major in accounting, and earned a Masters of Business Administration from Tulane University.
Donald D. Stellyserveshas served as our Senior Vice President of Operations. Mr. Stelly joined the company in April 2005 after most recently serving as the Chief Executive Officer at Doctor’s Hospital, a subsidiary of LifePoint Hospitals, Inc. which is based in Brentwood, Tennessee. Prior to attaining that position, Mr. Stelly served as Chief Operating Officer and Chief Nursing Officer of Doctor’s Hospital which was nationally recognized for attaining superior operating results through Service Excellence. Additionally, Mr. Stelly has enjoyed a career of providing direct patient care as a Registered Nurse in a variety of settings within the healthcare continuum. He earned a Bachelor’s Degree in Nursingnursing from the University of Southwestern Louisiana in 1991.
Richard A. MacMillanserveshas served as our Senior Vice President, Senior Counsel, Director of Corporate Compliance and General CounselDirector of Regulatory and Compliance Officer.Governmental Affairs. Mr. MacMillan joined the companyCompany in April 2007. He is a Past-President of the Louisiana Rural Health Association and is a member of the National Rural Health Association. Mr. MacMillan serves on the Board of Directors of the Louisiana Association for Ambulatory Healthcare. In addition, he is a member of the American Health Lawyers Association, the Health Law Sections of the Louisiana State Bar Association and The Mississippi Bar, and the Healthcare Financial ManagementHealth Care Compliance Association. Mr. MacMillan served as General Counsel to the HomeCare Association of Louisiana from 1994 to 2007. He is admitted to the Louisiana Bar
16
and the Mississippi Bar. He is also licensed as a Registered Nurse in Mississippi and Louisiana. Mr. MacMillan received his Juris DoctorDoctorate from Louisiana State University, and a B.S.Bachelor of Science in Nursing degreenursing from the University of Southern Mississippi.
Peter C. Novemberhas served as our Senior Vice President, General Counsel and Director of Mergers & Acquisitions. Mr. November joined the Company in August 2008. Prior to joining us, Mr. November was a partner with the law firm Alston & Bird LLP in Atlanta, Georgia, where his practice focused on representing publicly traded high growth healthcare companies. Mr. November is a member of several professional organizations, including the American Bar Association’s Public Company Acquisition Task Force and the Corporate Governance Task Force for the American Health Lawyers Association, as well as various civic and community organizations. He is admitted to the Georgia Bar. Mr. November received a Bachelor of Science degree in accounting from the University of Kentucky and graduatedmagna cum laudefrom the University of Kentucky College of Law in 1996.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
In the paragraphs that follow, we will give an overview and analysis of our compensation program and policies, the material compensation decisions we have made under those programs and policies with respect to our top executive officers, and the material factors that we considered in making those decisions. Later in this proxy statement you will find a series of tables containing specific information about the compensation earned or paid in 20072008 to the following individuals, whom we refer to as our named executive officers:
| | |
| | • | Keith G. Myers, our chief executive officer and chairman of the board, |
| |
| | • | John L. Indest, our president, chief operating officer and secretary, |
|
| • | Peter J. Roman, our senior vice president, chief financial officer and treasurer, |
|
| • | Barry E. Stewart, our former executive vice president, chief financial officer and treasurer, |
|
| • | John L. Indest, our president, chief operating officer and secretary, |
| |
| | • | Daryl J. Doise, our senior vice president of corporate development, and |
| |
| | • | Donald D. Stelly, our senior vice president of operations. |
The discussion below is intended to help you understand the detailed information provided in those tables and put that information into context within our overall compensation program.
17
Objectives of Our Compensation Program
We believe that each executive officer has the potential to affect both the short-term and long-term profitability of the Company. Therefore, we place considerable importance on creating and implementing our executive compensation program to properly compensate and incentivize our executive officers. Our executive compensation program emphasizes the creation of stockholder value by focusing on the overall performance of the Company and recognizing and rewarding each executive officer’s contributions to the success of the Company.
Our compensation philosophy is to integrate our compensation program with corporate performance by linking a substantial portion of executive officer compensation to the achievement of financial goals that are critical to the success of the Company. Our objective is to have a compensation program that will allow us to attract, motivate, and retain qualified executives, and align the interests of our executive officers with the interests of stockholders. In order to further this objective, our compensation program is structured to incorporate certain key principles, which are reflected in various elements of our compensation program, as summarized below:
| | | |
| | | Element of Compensation Program
|
Compensation Principle | | that Reflects Principle |
| |
| Our executives should be provided with total compensation opportunities at levels that are competitive for comparable positions at firms with whom we compete for talent. | | Based on review of competitive market data, total pay opportunities for our executives approximates the median level of compensation relative to our peer group. |
| A significant portion of executive compensation should be linked to the Company’s achievement of performance goals in a way that proportionally rewards higher performance levels. | | Annual bonus awards and restricted stock awards that are earned based on company performance. |
Our executive’s interests should be closely aligned with those of our shareholdersstockholders by making stock-based incentives a core element of our compensation program. | | We grant annual equity awards to our executives in the form of restricted stock. |
17
Role of the Compensation Committee
Our Compensation Committee assists our Board of Directors in dischargingdelegating its responsibilities relating to compensation of our executive officers. The Compensation Committee reviews and approves all compensation that is payable to our executive officers. Each of the four members of our Compensation Committee is independent as that term is defined under the listing standards of the NasdaqNASDAQ Exchange and the director independence standards adopted by our Board. We believe that their independence from management allows the Compensation Committee members to provide objective consideration of various elements that could be included in an executive compensation program and apply independent judgment about which elements and designs best achieve our compensation objectives.
How We Determine and Assess Executive Compensation
We believe that the total compensation package available to our executives should be fair and competitive, should provide enhanced levels of financial reward based on higher levels of performance, and should be designed to recognize and reward both short and long term performance.
As described below, the Compensation Committee determines appropriate elements and levels of compensation for our named executive officers based upon input from our chief executive officer, market data provided by ana third-party compensation consultant, analysis of market data and trends, and an analysis of internal pay-equity. In general, we emphasize annual performance incentives and long-term equity incentives over fixed compensation such as base salary. We do not use a specific formula or weighting with respect to the allocation of the various pay elements within our executive compensation program.
Role of Independent Compensation Consultants. To assist in evaluating our compensation practices, the Compensation Committee has from time to time retained an independent compensation consultant to provide advice and ongoing recommendations regarding executive compensation practices that are consistent with our
18
business goals and pay philosophy. In 2006, the Compensation Committee retained the executive compensation consulting services of Longnecker and Associates, whom we refer to as Longnecker. Specifically, we instructed Longnecker to (i) review the total compensation package (base salary, annual cash incentives and long-term equity incentives) we pay to our named executive officers, (ii) assess the competitiveness and reasonableness of our compensation program as compared to a peer group of companies within the health care industry with similar revenue levels and market capitalization, and (iii) provide conclusions and recommendations for the current and future total compensation packages for our named executive officers. We believe that this input and advice produces more informed decision-making and assures that an objective perspective is considered in this important governance process. The results of the 2006 study were used to establish our 2007 executive compensation which was maintained through 2008.
Market Data and Peer Group. The Compensation Committee reviews and analyzes market data to ensure that our executive officer compensation is competitive with the marketplace. We consider the compensation levels, programs and practices of other companies within our industry and of comparable size in terms of revenue and market capitalization to assist us in setting our executive compensation so that it is market competitive. In 2007, weWe used the following peer group for these purposes: Amedisys, Inc., Almost Family, Inc., Genesis HealthCare Corporation; Gentiva Health Services; Odyssey HealthCare, Inc.; and VistaCare, Inc.
The above peer group is the oneIn 2007, we used for targeting and evaluatingadjusted the compensation levels of our named executive officers for 2007.executives after comparing to the above peer group. As our strategy changes and we leverage our capabilities into other markets, we intend to review the peer groups annually to assure that we have the appropriate marketplace focus. In 2008 we maintained the compensation levels adjusted in 2007.
Internal Pay Equity. Our management philosophy emphasizes a team approach among our top executive officers. Our compensation program reflects this team approach by the fact that survey data provided by Longnecker indicates that weour chief executive officer and president have a higher level ofmore comparable compensation pay equity amongcompared to our top threeother executives than manyofficers of our peer companies. To achieve this pay equity, we generally strive to set the compensation level of our chief executive officer at slightly below the median for our peer group, and to set the compensation levels of our chief operating officer and chief financial officer at slightly above the median level, in an effort to minimize pay disparities among this group while still recognizing differences in job title and responsibilities.
18
Specifically, we seek to keep the total value of the compensation package of our chief executive officer at a level that is no more than 10% greater than the compensation package of our chief operating officer. In general, we achieve this result by first setting the compensation of our executive officers other than our chief executive officer and president at competitive levels based on market data, and then determining the compensation of our chief executive officer by making adjustments based on these principals of internal pay equity.and president. Typically, this results in our chief executive officer and president being paid below the median for our peer group.
Role of Executive Officers. Our chief executive officer, with input from our chief operating officer,president recommends to the Compensation Committee base salary, target bonus levels and long-term incentive awards for our executive officers. Our chief executive officer bases these recommendations on data and analysis regarding our peer group, information provided by our compensation consultant, and qualitative judgments regarding individual performance. Our chief executive officer is not present when the Compensation Committee discusses or determines any aspect of his pay.
Elements of Our Compensation Program
Our executive compensation program consists primarily of the following components: base salary, annual cash incentive awards, paid quarterly, and long-term equity incentive awards. In addition, we provide certain other benefits, such as perquisites, retirement benefits and severance benefits.
Base Salary
We provide base salaries to our executive officers as compensation for day-to-day responsibilities and sustained performance. Base salary provides our executive officers with an element of compensation that is not “at-risk.” We consider a combination of objective and subjective factors in determining the appropriate base salaries for our executive officers. Objective factors include salaries paid by competitive companies in our peer group to officers in similar positions, base compensation paid to other Company executives, and factors relating to the performance of the Company, including net income, earnings per share, return on equity, and growth. Subjective factors relate to the performance of the individual executive officer, and include the following:
| | |
| | • | the executive officer’s responsibilities, |
| |
| | • | the scope of the position, |
19
| | |
| | • | experience and length of the executive officer’s service with the Company, |
| |
| | • | individual efforts and performance within the Company, the industry and the community, |
| |
| | • | team building skills consistent with the Company’s best interests, and |
| |
| | • | observance of the Company’s ethics and compliance program. |
While these subjective factors are integrated with the objective factors mentioned above, the overall assessment is primarily a subjective one, intended to reflect the level of responsibility and individual performance of the particular executive officer. With these objective and subjective factors in mind, Mr. Myers conducts an annual merit review of the executive officers, and based on this review, recommends base salaries to the Compensation Committee with respect to the named executive officers other than himself. The Compensation Committee determines the appropriate base salary for Mr. Myers after an annual performance review based on the same factors used to evaluate the other named executive officers.
Based onDue to the factors and analysis described above,changing reimbursement environment in the home health industry in 2008, the Compensation Committee approveddecided to maintain base salaries for 2008 at the 2007 levels for our named executive officersMessrs. Myers, Indest and Doise. Messrs. Roman and Stelly’s base salaries were increased by 31% and 20%, respectively in amounts that represented an increase of approximately 3%2008 over 2006 levels. The amounts of these increases were below median salary increases relative to our peer group, but commensurate with the rate of increase given to most of our employees. Upon Mr. Roman’s promotion to chief financial officer in September 2007 his base salary was increasedlevels to make itthem competitive with compensation opportunities available to other chief financial officerssimilar positions within our peer group.
19
Annual Cash Incentive Awards
The Compensation Committee believes that a significant portion of the total cash compensation for executive officers should be based on the Company’s achievement of specific performance criteria, and that a significant part of the cash compensation package should be “at-risk.” For 2007,2008, the Compensation Committee approved an annual cash incentive bonus program pursuant to which the named executive officers were awarded an opportunity to earn target cash bonuses equal to 80% of their base salary, (60% in the case of Mr. Stelly), based on achievement of company and individual performance targets, as further described below.
Messrs. Myers Stewart and Indest,
and 50% of base salary in the case of Messrs. Myers, StewartRoman, Doise and Indest’s 2007 annual cash incentive target was 80% of their base salaries, respectively. Their bonuses were determinedStelly, based on achievement of the followingcompany performance goals,targets listed below, each of which we believe areis critical to our long-term success:long term success.
| | |
| • | Company’s achievement of EPS for 2007 of at least $1.42 (weighted 25%); |
|
| • | 10% improvement in Medicare Home Health Compare scores (25% weighting); and |
|
| • | Successful development of a long-term strategic plan (25% weighting). |
In addition, a portion of the bonus was determined based on Compensation Committee discretion (25% weighting).
In 2007, the Company did not achieve its EPS target, but the other two performance goals were met, and the Compensation Committee determined that Messrs. Myers and Indest earned their full 25% discretionary bonus, based on a subjective assessment of their individual performance during the past fiscal year, as well as the potential for contribution to our long-term strategic objectives. As a result, Messrs. Myers and Indest earned 75% of their target annual bonus (approximately 60% of their base salaries), in the following amounts: Mr. Myers, $203,940; and Mr. Indest, $185,400 Myers and Mr. Indest each selected to forego and to not receive one-half of the discretionary portion of the bonus resulting in a reduction of the amount of bonus actually paid to Mr. Myers and Mr. Indest of $33,990 and $30,900, respectively. Mr. Stewart did not receive an annual bonus due to his resignation in August 2007.
Mr. Doise
Mr. Doise’s 2007 annual cash incentive target was 80% of his base salary and such award was determined based the following components:
| | |
| • | $2,500 for each new acquisition, joint venture or de novo location opened in 2007. Mr. Doise earned $90,000 under this component of his bonus plan. |
|
| • | An amount equal to 0.1% of the last 12 months of Medicare revenue of such new acquisitions, joint ventures or de novo locations. Mr. Doise earned $31,902 under this component of his bonus plan. |
|
| • | An amount equal to the 0.5% of the first year projected Medicare revenue of each new acquisition or joint venture that had a projected internal rate of return equal to or greater than 30%. Mr. Doise earned $33,169 under this component of his bonus plan. |
In the aggregate, Mr. Doise earned in 84% of his 2007 target annual bonus, equal to $155,071, which represents approximately 67% of his base salary.
Mr. Stelly
Mr. Stelly’s 2007 annual cash incentive target was 60% of his base salary, with a maximum of $30,000 per quarter, and such award was determined based on the following components:
| | |
| • | An amount equal to 0.1% of the revenue for all facilities operating within budget with regard to revenue and direct cost for the first four quarters of operation of each new acquisition, joint venture or de novo location. Mr. Stelly earned $31,684 under this component of his bonus plan. |
20
The performance targets and the weight of each within the targeted bonus for each named executive officer are as follows:
| | |
| • | An amount equal to 0.5% of the amount by which revenue exceeds budgeted expectations. Mr. Stelly earned $52,314 under this component of his bonus plan. |
|
| • | $12,500 per quarter for achievement of budgeted EPS targets, as follows: 1st quarter; $0.29; 2nd quarter; $0.34; 3rd quarter; $0.38; 4th quarter; $0.41. Mr. Stelly earned $12,500 under this component of his bonus plan. |
| | | | | | | | | | | | | | | | | | | | | |
| | | Mr. Myers
| | | Mr. Indest
| | | Mr. Roman
| | | Mr. Doise
| | | Mr. Stelly
| |
Performance Target | | (% Weight) | | | (% Weight) | | | (% Weight) | | | (% Weight) | | | (% Weight) | |
| |
| 1. Company’s achievement of Net Service Revenue for 2008 being greater than the Company’s Board approved budget for 2008 ($332 million) | | | 10 | | | | 10 | | | | 10 | | | | 40 | | | | 20 | |
| 2. Company’s achievement of EPS for 2008 being greater than the Company’s Board approved budget for 2008 ($1.27) | | | 10 | | | | 10 | | | | 20 | | | | 20 | | | | 20 | |
| 3. Company’s organic growth for 2008 being greater than the industry average as reported by Reuters | | | 10 | | | | 10 | | | | 5 | | | | 2 | | | | 20 | |
| 4. Company’s quality scores improvement in 2008 being greater than the Company’s improvement in 2007 as reported by Outcome Concepts Systems (OCS) | | | 10 | | | | 10 | | | | 5 | | | | 2 | | | | 20 | |
| 5. Company’s patient satisfaction scores for 2008 being greater than the industry average as reported by Press Ganey | | | 10 | | | | 10 | | | | 5 | | | | 2 | | | | 2 | |
| 6. Company’s employee satisfaction scores for 2008 being greater than the industry average as reported by Morehead & Associates | | | 10 | | | | 10 | | | | 20 | | | | 2 | | | | 10 | |
| 7. Company’s employee turnover for 2008 being less than the industry average as reported by Morehead & Associates | | | 10 | | | | 10 | | | | 5 | | | | 2 | | | | 2 | |
| 8. Company’s return on assets (ROA) for 2008 being greater than the industry average as reported by Reuters | | | 10 | | | | 10 | | | | 10 | | | | 10 | | | | 2 | |
| 9. Company’s return on capital (ROC) for 2008 being greater than the industry average as reported by Reuters | | | 10 | | | | 10 | | | | 10 | | | | 10 | | | | 2 | |
| 10. Company’s return on equity (ROE) for 2008 being greater than the industry average as reported by Reuters | | | 10 | | | | 10 | | | | 10 | | | | 10 | | | | 2 | |
In 2008, the aggregate,Company achieved nine out of ten of its performance goals. The Company’s return on equity was not greater than the industry average as reported by Reuters. As a result, the named executive officers earned annual bonuses in the following amounts: Mr. Myers, $244,728; Mr. Indest, $222,480; Mr. Roman, $95,625; Mr. Doise, $104,287; and Mr. Stelly, earned 80% of his 2007 target annual bonus, equal to $96,498, which represents approximately 48% of his base salary.
Mr. Roman
Because Mr. Roman was not one of our executive officers at the beginning of 2007 (he was promoted to the position of chief financial officer in September 2007), he was not granted a 2007 annual cash incentive opportunity in line with our other executive officers who were serving at the beginning of the year. Instead, Mr. Roman was awarded a discretionary cash bonus in the amount of $25,000 to recognize his increased responsibilities and reward his successful transition to the role of chief financial officer. In addition, Mr. Roman was awarded $37,107 pursuant to a discretionary quarterly bonus program available to non-executive employees that rewards such employees for the Company’s quarterly earnings per share performance.
$115,200.
Long-Term Equity Incentive Awards
The purpose of long-term incentives is to align our executive officers’ performance incentives more closely with the interests of stockholders. We provide long-term equity incentive awards in the form of restricted stock awards. We believe that these awards have been and remain an excellent vehicle for providing financial incentives for management because they align the executive’sexecutives’ interests with those of our stockholders and provide strong incentive for the creation of stockholder value. Time-based restricted stock also provides a strong retentive component to our compensation program.
21
Restricted Stock Awards Granted in 2007 Based on Performance during Fiscal Year 2006. In March 2007, the Compensation Committee granted awards of restricted stock to each named executive officer based on the Company’s achievement of its earnings per share goal for 2006 ($1.10). The maximum number of restricted shares that could be earned by the named executive officers was as follows: Mr. Myers, 16,500 shares; Mr. Stewart, 25,000 shares; Mr. Indest, 15,000 shares; Mr. Doise, 12,500 shares; and Mr. Stelly, 10,000 shares. The Company achieved 100% of its 2006 earnings per share target, and each of the named executive officers was granted the maximum potential number of restricted shares on March 1, 2007. In addition, Mr. Roman was granted 10,000 shares of restricted stock in recognition of his promotion to chief financial officer in September 2007, and Mr. Stelly also was granted 10,000 shares of restricted stock in recognition of his promotion to Senior Vice President of Operations. These awards are reflected in the 2007 Grants of Plan-Based Awards table later in this proxy statement.
Restricted Stock Awards Granted in 2008 Based on Fiscal Year 2007 Base Salary.Salary and Annual Cash Incentive. The Compensation Committee determined that the grant date value of the 2008 restricted stock awards would be equal to a percentage of the named executive officer’s base salary or target annual cash incentive award, multiplied by the percentage of the annual cash incentive award actually earned in 2007. The actual number of restricted shares awarded to the named executive officers was determined by dividing this grant date value by the fair market value of our Common Stock on the date of grant.
Each of Messrs. Myers Indest and StewartIndest had the opportunity to earn restricted shares with a grant date value equal to 150% of the named executive officer’s 2007 base salary, multiplied by the percentage of their 2007 annual cash incentive actually earned.
Mr. Doise had the opportunity to earn restricted shares with a grant date value equal to 80% of his 2007 base salary, multiplied by the percentage of his 2007 annual cash incentive actually earned.
Mr. Stelly had the opportunity to earn restricted shares with a grant date value equal to 200% of his 2007 annual cash incentive actually earned.
21
Mr. Roman was not one of our executive officers at the beginning of 2007 (he was promoted to the position of chief financial officer in September 2007) and therefore was not granted a 2008 long-term incentive award in line with our other executive officers who were serving at the beginning of 2007.
These awards are reflected in the 2008 Grants of Plan-Based Awards table later in this proxy statement.
Restricted Stock Awards Granted in 2009 Based on Fiscal Year 2008 Base Salary and Annual Cash Incentive. The Compensation Committee determined that the grant date value of the 2009 restricted stock awards would be equal to a percentage of the named executive officer’s base salary or target annual cash incentive award, multiplied by the percentage of the annual cash incentive award actually earned in 2008. The actual number of restricted shares awarded to the named executive officers was determined by dividing this grant date value by the fair market value of our Common Stock on the date of grant. Due to the changing reimbursement environment in the home health industry in 2008, the Compensation Committee placed a higher weight on compensation provided by the long term incentive plan.
Messrs. Myers and Indest had the opportunity to earn restricted shares with a grant date value equal to 180% of the named executive officer’s 2008 base salary, multiplied by the percentage of their 2008 annual cash incentive actually earned.
Messrs. Stelly and Doise had the opportunity to earn restricted shares with a grant date value equal to 125% of the named executive officer’s 2008 base salary, multiplied by the percentage of their 2008 annual cash incentive actually earned.
Mr. Roman had the opportunity to earn restricted shares with a grant date value equal to 100% of his 2008 base salary, multiplied by the percentage of his 2008 annual cash incentive actually earned.
These awards will be reflected in the 20082009 Grants of Plan-Based Awards table in next year’s proxy statement.
Timing of Equity Grants. Since our initial public offering in 2005, we have made threefour regular grants of restricted stock to our executive officers .officers. In each case, these awards were approved at a regularly scheduled meeting of our Compensation Committee during the first fiscal quarter of the year, after review and consideration of the Company’s performance during the prior fiscal year and achievement of pre-established performance goals. We expect to continue this practice going forward, and we do not have any program, practice or policy of timing equity awards in connection with the release of material non-public information.
Employee Stock Purchase Plan. Executive officers may also participate in our Employee Stock Purchase Plan, which permits participants to purchase shares of our Common Stock at a 5% discount to the market price. Executive officers are entitled to participate in the Employee Stock Purchase Plan on the same terms as non-executive employees who meet the applicable eligibility criteria, subject to any legal limitations on the amounts that may be contributed or the benefits that may be payable under the Employee Stock Purchase Plan.
22
Perquisites and Other Executive Benefits
We provide our named executive officers with certain perquisites, including club memberships (which we believe facilitates community involvement by our executive officers) and occasional use of company aircraft for personal reasons (which we provide to our executive officers for reasons of efficiency and convenience). We believe the perquisites provided to our named executive officers are reasonable and conservative in light of industry practices.
Retirement Benefits
Retirement benefits fulfill an important role within our overall executive compensation objective by providing a financial security component which promotes retention. We maintain a 401(k) plan, a tax-qualified defined contribution retirement plan, in which our named executive officers are eligible to participate, along with a substantial majority of our employees. Effective January 1, 2006, we implemented a discretionary match of up to 2% of employee contributions. We do not maintain any excess benefit plans, defined benefit or pension plans, or any deferred compensation plans.
Severance and Change in Control Arrangements
During 2007,2008, we maintained employment agreements with each of our named executive officers except with Mr. Roman, that provide, among other things, that the executive will be entitled to receive certain severance benefits in the event of a termination of his employment, and the executive will be entitled to increased benefits in the event that a termination of his employment follows a change in control of the company. We believe these employment agreements are an important element of our executive officers’ overall compensation package because they serve to ensure the continued focus and dedication of our executive officers notwithstanding any personal concerns they may have regarding their own continued employment, either prior to or following a change in control. The increased benefits that are payable in the event of a termination following a change in control are designed to attract and retain qualified executives who might not otherwise join or remain with our Company without financial protection in the event that they are forced out of the Company following a change in control. These provisions are also intended to provide for continuity of management in the event of a change in control of our Company. We believe that our severance and change in control arrangements are comparable to those provided by the companies in our peer group and competitive within our industry.
We entered into new employment agreements with each of our named executive officers, to be effective in 2008. The new agreements contain substantially similar terms to the employment agreements discussed in the paragraph above, with technical changes to address Internal Revenue Code Section 409A. Additionally, the
22
new agreements contain the following changes related to severance and change in control payments and benefits:
| | |
| – | the circumstances under which an employee may be terminated for “cause” were expanded in order to give the Company greater flexibility in making such a determination; |
|
| – | the amount of severance payable upon a termination without cause, except in connection with a change of control, was reduced; and |
|
| – | non-competition provisions were added to further protect the Company’s interests in the wake of a departing executive. |
The potential severance and change in control benefits payable under these agreements are more fully described under “Potential Payments upon Termination of Employment” later in this proxy statement.
Tax and Accounting Considerations
The accounting and tax treatment of compensation generally has not been a factor in determining the amounts of compensation for our executive officers. However, the Compensation Committee and management have considered the accounting and tax impact of various program designs to balance the potential cost to us with the benefit/value to the executive.
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to our named executive officers unless certain conditions are met. Currently, awards granted under the Company’s 2005 Long-Term Incentive Plan are exempt from the deduction limits of Section 162(m). It is the Compensation Committee’s intent to maximize deductibility of executive compensation while retaining some discretion needed to compensate executives in a manner commensurate with performance and the competitive landscape for executive talent. All compensation paid to our executive officers in 20072008 was fully deductible by the Company.
23
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and other compensation that we paid to our named executive officers or that was otherwise earned by our named executive officers for their services in all capacities during 2008, 2007 and 2006.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Non-Equity
| | | | | | | |
| | | | | | | | | | | | Stock
| | | Incentive Plan
| | | All Other
| | | | |
| | | | | | Salary
| | | Bonus
| | | Awards
| | | Compensation
| | | Compensation
| | | Total
| |
Name and Principal Position | | Year | | | ($) | | | ($) | | | ($)(1) | | | ($)(2) | | | ($) | | | ($) | |
| |
| Keith G. Myers | | | 2007 | | | | 339,900 | | | | 33,990 | (7) | | | 118,603 | | | | 135,960 | | | | 33,313 | (3) | | | 661,766 | |
| Chief Executive Officer and Chairman of the Board | | | 2006 | | | | 330,000 | | | | — | | | | 34,920 | | | | 260,040 | | | | 18,606 | (3) | | | 643,566 | |
| John L. Indest | | | 2007 | | | | 309,000 | | | | 30,900 | (7) | | | 107,821 | | | | 123,600 | | | | 13,318 | (3) | | | 584,639 | |
| President, Chief Operating Officer, Secretary, and Director | | | 2006 | | | | 300,000 | | | | — | | | | 31,746 | | | | 236,400 | | | | — | | | | 568,146 | |
| Barry E. Stewart | | | 2007 | | | | 298,700 | | | | — | | | | — | (5) | | | — | | | | 1,072,705 | (6) | | | 1,371,405 | |
| Former Executive Vice President, Chief Financial Officer and Treasurer | | | 2006 | | | | 163,962 | | | | — | | | | 21,537 | | | | 92,083 | | | | — | | | | 277,582 | |
| Peter J. Roman | | | 2007 | | | | 152,693 | | | | 62,107 | (8) | | | 21,835 | | | | — | | | | — | | | | 236,635 | |
| Senior Vice President, Chief Financial Officer and Treasurer(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Daryl J. Doise | | | 2007 | | | | 231,750 | | | | — | | | | 99,884 | | | | 155,071 | | | | — | | | | 461,961 | |
| Senior Vice President, Corporate Development | | | 2006 | | | | 225,000 | | | | — | | | | 23,809 | | | | 175,360 | | | | — | | | | 424,169 | |
| Donald D. Stelly | | | 2007 | | | | 200,000 | | | | — | | | | 58,437 | | | | 96,498 | | | | — | | | | 348,437 | |
| Senior Vice President, Operations | | | 2006 | | | | 162,500 | | | | — | | | | 12,726 | | | | 63,750 | | | | — | | | | 238,976 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Non-Equity
| | | | | | | |
| | | | | | | | | | | | Stock
| | | Incentive Plan
| | | All Other
| | | | |
| | | | | | Salary
| | | Bonus
| | | Awards
| | | Compensation
| | | Compensation
| | | Total
| |
Name and Principal Position | | Year | | | ($) | | | ($) | | | ($)(1) | | | ($)(2) | | | ($) | | | ($) | |
| |
| Keith G. Myers | | | 2008 | | | | 339,900 | | | | — | | | | 198,905 | | | | 244,728 | | | | 53,175 | (3) | | | 836,708 | |
| Chief Executive Officer | | | 2007 | | | | 339,900 | | | | 33,990 | (5) | | | 118,603 | | | | 135,960 | | | | 33,313 | (3) | | | 661,766 | |
| and Chairman of the Board | | | 2006 | | | | 330,000 | | | | — | | | | 34,920 | | | | 260,040 | | | | 18,606 | (3) | | | 643,566 | |
| John L. Indest | | | 2008 | | | | 309,000 | | | | — | | | | 180,832 | | | | 222,480 | | | | 20,686 | (3) | | | 732,998 | |
| President, Chief Operating | | | 2007 | | | | 309,000 | | | | 30,900 | (5) | | | 107,821 | | | | 123,600 | | | | 13,318 | (3) | | | 584,639 | |
| Officer, Secretary, and Director | | | 2006 | | | | 300,000 | | | | — | | | | 31,746 | | | | 236,400 | | | | — | | | | 568,146 | |
| Peter J. Roman | | | 2008 | | | | 200,000 | | | | — | | | | 61,216 | | | | 95,625 | | | | — | | | | 356,841 | |
| Senior Vice President, | | | 2007 | | | | 152,693 | | | | 62,107 | (6) | | | 21,835 | | | | — | | | | — | | | | 236,635 | |
| Chief Financial Officer and Treasurer(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Daryl J. Doise | | | 2008 | | | | 231,750 | | | | — | | | | 140,928 | | | | 104,287 | | | | — | | | | 476,965 | |
| Senior Vice President, | | | 2007 | | | | 231,750 | | | | — | | | | 99,884 | | | | 155,071 | | | | — | | | | 486,705 | |
| Corporate Development | | | 2006 | | | | 225,000 | | | | — | | | | 23,809 | | | | 175,360 | | | | — | | | | 424,169 | |
| Donald D. Stelly | | | 2008 | | | | 240,000 | | | | — | | | | 136,541 | | | | 115,200 | | | | — | | | | 491,741 | |
| Senior Vice President, | | | 2007 | | | | 200,000 | | | | — | | | | 58,437 | | | | 96,498 | | | | — | | | | 354,935 | |
| Operations | | | 2006 | | | | 162,500 | | | | — | | | | 12,726 | | | | 63,750 | | | | — | | | | 238,976 | |
| | |
| (1) | | Reflects the proportionate amount of the total grant date fair value of stock awards recognized by the Company as an expense in the applicable year for financial statement reporting purposes, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The grant date fair value of the stock awards is based on the fair market value of the underlying shares on the date of grant. The fair values of these awards and the amounts expensed in each year were determined in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (which we refer to as FAS 123R). |
| |
| (2) | | Reflects annual cash incentive awards earned based on 2007 performance. For information regarding our annual cash incentive program, see the discussion in the Compensation Discussion and Analysis section of this Proxy Statement. |
| |
| (3) | | Reflects the incremental cost to the Company of Mr. Myers and Mr. Indest’s personal use of Company-owned aircraft. The incremental cost (hourly rate) of the Company-owned aircraft is calculated by dividing the total cost to operate the aircraft during each quarter of the fiscal year and dividing that by the number of hours used during the same period. During 2008, Mr. Myers’ and Mr. Indest’s were permitted 25 and 20 hours, respectively of personal plane usage. Mr. Indest and Mr. Myers reimburse the Company for any usage exceeding the permitted hours. In 2009, the personal use of the plane will no longer be included as part of the compensation package. |
| |
| (4) | | Mr. Roman became an executive officer on September 6, 2007. |
| |
| (5) | | Mr. Stewart resigned from the Company effective August 15, 2007. In connection with his resignation, Mr. Stewart forfeited 8,000 shares of restricted stock that were granted on January 3, 2006, and 25,000 shares of restricted stock that were granted on March 1, 2007. |
24
| | |
(6) | | Reflects amounts payable to Mr. Stewart pursuant to a Severance and Consulting Agreement entered into between the Company and Mr. Stewart in connection with his termination of employment. The agreement provides that Mr. Stewart will receive an aggregate amount of $1,072,705, to be paid in monthly installments of $44,696 over twenty-four months beginning September 1, 2007. |
| | |
(7) | | Reflects discretionary portion of annual cash incentive awards. The Compensation Committee approved discretionary bonuses in 2007 for Mr. Myers and Mr. Indest in amounts of $67,980 and $61,800, respectively. However, Mr. Myers and Mr. Indest each elected not to receive one-half of these approved amounts. |
| | |
(8)(6) | | Reflects $25,000 discretionary bonus awarded in connection with Mr. Roman’s promotion to chief financial officer in September 2007, and $37,000 awarded pursuant to a discretionary quarterly bonus program available to non-executive employees. |
24
20072008 GRANTS OF PLAN-BASED AWARDS
The following table sets forth the individual grants of plan-based awards made to each of our named executive officers during 2007.2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | All Other
| | | | |
| | | | | | | | | | | | | | | | | | Stock
| | | | |
| | | | | | | | | | | | | | | | | | Awards:
| | | | |
| | | | | | | | | | | | | | | | | | Number of
| | | Grant Date
| |
| | | | | | | | | Estimated Potential Payouts Under
| | | Shares of
| | | Fair Value
| |
| | | | | | | | | Non-Equity Incentive Plan Awards(1) | | | Stock or
| | | of Stock
| |
| | | | | | Approval
| | | Threshold
| | | Target
| | | Maximum
| | | Units
| | | Awards
| |
Name | | Grant Date | | | Date | | | ($) | | | ($) | | | ($) | | | (#)(2) | | | ($)(3) | |
| |
| Keith G. Myers | | | | | | | | | | | 67,980 | | | | 203,940 | | | | 203,940 | | | | | | | | | |
| | | | 03/01/07 | | | | 12/28/06 | | | | | | | | | | | | | | | | 16,500 | | | | 502,095 | |
| John L. Indest | | | | | | | | | | | 61,800 | | | | 185,400 | | | | 185,400 | | | | | | | | | |
| | | | 03/01/07 | | | | 12/28/06 | | | | | | | | | | | | | | | | 15,000 | | | | 456,450 | |
| Barry E. Stewart | | | | | | | | | | | 59,740 | | | | 179,220 | | | | 179,220 | | | | | | | | | |
| | | | 03/01/07 | | | | 12/28/06 | | | | | | | | | | | | | | | | 25,000 | | | | 760,750 | |
| Peter J. Roman | | | | | | | | | | | — | | | | — | | | | — | | | | | | | | | |
| | | | 03/01/07 | | | | 02/12/07 | | | | | | | | | | | | | | | | 1,000 | | | | 30,430 | |
| | | | 11/01/07 | | | | 10/30/07 | | | | | | | | | | | | | | | | 10,000 | | | | 230,200 | |
| Daryl J. Doise | | | | | | | | | | | — | | | | 185,400 | | | | 185,400 | | | | | | | | | |
| | | | 03/01/07 | | | | 12/28/06 | | | | | | | | | | | | | | | | 15,000 | | | | 456,450 | |
| Donald D. Stelly | | | | | | | | | | | — | | | | 120,000 | | | | 120,000 | | | | | | | | | |
| | | | 03/01/07 | | | | 12/28/06 | | | | | | | | | | | | | | | | 7,500 | | | | 228,225 | |
| | | | 11/01/07 | | | | 10/30/07 | | | | | | | | | | | | | | | | 10,000 | | | | 230,200 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | All Other
| | | | |
| | | | | | | | | | | | | | | | | | Stock
| | | | |
| | | | | | | | | | | | | | | | | | Awards:
| | | | |
| | | | | | | | | | | | | | | | | | Number of
| | | Grant Date
| |
| | | | | | | | | Estimated Potential Payouts Under
| | | Shares of
| | | Fair Value
| |
| | | | | | | | | Non-Equity Incentive Plan Awards(1) | | | Stock or
| | | of Stock
| |
| | | | | | Approval
| | | Threshold
| | | Target
| | | Maximum
| | | Units
| | | Awards
| |
Name | | Grant Date | | | Date | | | ($) | | | ($) | | | ($) | | | (#)(2) | | | ($)(3) | |
| |
| Keith G. Myers | | | | | | | | | | | — | | | | 271,920 | | | | 271,920 | | | | | | | | | |
| | | | 03/01/08 | | | | 01/11/08 | | | | | | | | | | | | | | | | 22,495 | | | | 382,415 | |
| John L. Indest | | | | | | | | | | | — | | | | 247,200 | | | | 247,200 | | | | | | | | | |
| | | | 03/01/08 | | | | 01/11/08 | | | | | | | | | | | | | | | | 20,450 | | | | 347,650 | |
| Peter J. Roman | | | | | | | | | | | — | | | | 100,000 | | | | 100,000 | | | | | | | | | |
| Daryl J. Doise | | | | | | | | | | | — | | | | 115,875 | | | | 115,875 | | | | | | | | | |
| | | | 03/01/08 | | | | 01/11/08 | | | | | | | | | | | | | | | | 9,125 | | | | 155,125 | |
| Donald D. Stelly | | | | | | | | | | | — | | | | 120,000 | | | | 120,000 | | | | | | | | | |
| | | | 03/01/08 | | | | 01/11/08 | | | | | | | | | | | | | | | | 11,355 | | | | 193,035 | |
| | |
| (1) | | Represents threshold, target and maximum payout levels for 20072008 performance. The actual amount earned by each named executive officer in 20072008 is reported under the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. For more information regarding our annual cash incentive program, see the discussion in the Compensation Discussion and Analysis section of this Proxy Statement. |
| |
| (2) | | Award of time-vesting restricted stock under the 2005 Incentive Plan. The restricted stock vests in five equal annual installments on each of the first five anniversaries of the grant date. |
| |
| (3) | | The grant date fair value of the awards is determined pursuant to FAS 123R and is based on the fair market value of the underlying shares on the date of grant. |
Employment Agreements
Prior to 2007, we entered intoWe currently have employment agreements with Messrs. Myers, Stewart, Indest and Doise that were in effect during 2007 (the “Prior Employmenteach named executive officer (collectively, the “Employment Agreements”). We entered into an employment agreementThe Employment Agreement with Mr. Stelly (effectivebecame effective November 1, 2007)2007; with Mr. Doise, June 1, 2008; and with Mr.Messrs. Roman, (effective January 1, 2008), and we also entered into new employment agreements with Messrs. Myers, Indest and Doise (effective January 1, 2008 for Messrs. Myers and Indest and JuneJanuary 1, 2008 for Mr. Doise) (collectively, the “Current Employment
25
Agreements”). The Prior Employment Agreements contained substantially similar terms and conditions as the Current Employment Agreements (which are described below), with the exception of certain payments and benefits payable upon termination of employment (which are described under “Potential Payments Upon Termination or Change in Control” later in this proxy statement). In addition, upon Mr. Stewart’s resignation, we entered into a Severance and Consulting Agreement with Mr. Stewart effective as of August 15, 2007 that provided for certain severance
payments, which are also described under “Potential Payments Upon Termination or Change in Control” later in this proxy statement.2008.
Term. The initial term of the Current Employment Agreements with Messrs. Myers, Indest, Roman Doise and Stelly is for a period of three years (expiring January 1, 2011, except in the case of Mr. Stelly, expiring November 1, 2010). The initial term of the Employment Agreements with Mr. Doise is for a period of two years and 7 months (expiring January 1, 2011), with. The Employment Agreements have automatic renewal for additional one-year periods unless expressly not renewed.
Salary and Benefits. The Current Employment Agreements provide that each executive is entitled to an annual base salary (subject to annual review and increases for merit performance) and is entitled to participate in all incentive, savings, retirement and welfare benefit plans generally made available to our senior executive officers. Each of these executives will have an opportunity to earn an annual cash bonus based upon achievement of performance goals established by the Compensation Committee. In addition, each of the executives is entitled to fringe benefits generally made available to our senior executive officers.
Equity Awards. The Current Employment Agreements provide that the executives will be eligible for grants under the Company’s long-term incentive plan or plans generally made available to the Company’s senior executive officers.
Termination. The Current Employment Agreements may be terminated by us at any time with or without “cause” (as defined therein), or by the executive with or without “good reason” (as defined therein). The agreements also terminate upon the death, disability or retirement of the executive. Depending on the reason
25
for the termination and when it occurs, the executive will be entitled to certain severance benefits, as described below under “Potential Payments Upon Termination or Change In Control” later in this proxy statement..
OUTSTANDING EQUITY AWARDS AT 20072008 FISCAL YEAR-END
The following table provides information concerning stock awards that are outstanding as of December 31, 20072008 for each of our named executive officers. Our named executive officers do not hold any option awards.
| | | | | | | | | | | | | | | | | |
| | | Stock Awards | | | Stock Awards | |
| | | Number of
| | | | | Number of
| | | |
| | | Shares or Units
| | Market Value of Shares
| | | Shares or Units
| | Market Value of Shares
| |
| | | of Stock That
| | or Units of Stock That
| | | of Stock That
| | or Units of Stock That
| |
| | | Have Not Vested
| | Have Not Vested
| | | Have Not Vested
| | Have Not Vested
| |
Name | | (#)(1) | | ($)(2) | | | (#)(1) | | ($)(2) | |
| |
| Keith G. Myers | | | 24,183 | | | | 604,091 | | | | 41,458 | | | | 1,492,488 | |
| John L. Indest | | | 21,985 | | | | 549,185 | | | | 37,689 | | | | 1,356,804 | |
| Barry E. Stewart(3) | | | — | | | | — | | |
| Peter J. Roman | | | 13,000 | | | | 324,740 | | | | 10,300 | | | | 370,800 | |
| Daryl J. Doise | | | 20,238 | | | | 505,545 | | | | 25,054 | | | | 901,944 | |
| Donald D. Stelly | | | 20,300 | | | | 507,094 | | | | 27,455 | | | | 988,380 | |
| | |
| (1) | | Reflects restricted stock awarded granted on January 3, 2006, March 1, 2007, and March 1, 20072008 under the 2005 Incentive Plan. Mr. Stelly and Mr. Roman also received restricted stock grants on November 1, 2007. The restricted shares vest in five equal annual installments beginning on the first anniversary of the date of grant provided that the executive is then still employed by the Company, or earlier upon the occurrence of the executive’s death, disability or retirement, or termination by the Company without cause or resignation for good reason within two years following a change of control of the Company. |
| |
| (2) | | Reflects the value as calculated using the closing market price of our Common Stock as of December 31, 20072008 ($24.98)36.00). |
26
| | |
(3) | | Mr. Stewart forfeited all outstanding unvested restricted stock awards upon his resignation on August 15, 2007. |
20072008 OPTION EXERCISES AND STOCK VESTED
The following table provides information concerning stock awards that vested in 20072008 for each of our named executive officers. Our named executive officers do not hold any option awards.
| | | | | | | | | | | | | | | | | |
| | | Stock Awards | | | Stock Awards | |
| | | Number of
| | Value
| | | Number of
| | Value
| |
| | | Shares Acquired
| | Realized on
| | | Shares Acquired
| | Realized on
| |
| | | on Vesting
| | Vesting
| | | on Vesting
| | Vesting
| |
Name | | (#) | | ($) | | | (#) | | ($) | |
| |
| Keith G. Myers(1) | | | 1,921 | | | | 51,944 | | | | 5,220 | | | | 103,447 | |
| John L. Indest(1) | | | 1,746 | | | | 47,212 | | | | 4,746 | | | | 94,056 | |
| Barry E. Stewart(2) | | | 2,000 | | | | 56,540 | | |
| Peter J. Roman(1) | | | 500 | | | | 13,520 | | |
| Peter J. Roman(1)(2) | | | | 2,700 | | | | 86,290 | |
| Daryl J. Doise(1) | | | 1,310 | | | | 35,422 | | | | 4,309 | | | | 83,280 | |
| Donald D. Stelly(1) | | | 700 | | | | 18,928 | | |
| Donald D. Stelly(1)(2) | | | | 4,200 | | | | 113,322 | |
| | |
| (1) | | Reflects restricted stock award granted on January 3, 2006 with one-fifth vesting on January 3, 20072008 at the closing market price of our Common Stock of $27.04.$24.66 and restricted stock award granted on March 1, 2007 with one-fifth vesting on March 1, 2008 at the closing market price of our Common Stock of $17.00. |
| |
| (2) | | Reflects restricted stock award granted on June 5, 2006November 1, 2007 with one-fifth vesting on June 5, 2007November 1, 2008 at the closing market price of our Common Stock of $28.27.$35.28. |
26
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The Prior Employment Agreements with Messrs. Myers, Indest and Doise, and the Current Employment Agreements of Messrs. Myers, Indest, Roman, Doise and Stelly, provide certain payments benefits to the executive in the event of the termination of his employment under certain conditions as described below. Except as noted below, the amounts of such payments and benefits are the same under the Prior Agreements and the Current Agreements.
conditions.
Termination for Cause; Resignation Without Good Reason.
If an executive is terminated for cause or resigns without good reason (as such terms are defined in the agreements), the executive receives only the salary and vested benefits that have accrued through the date of termination. No other severance benefits are payable.
Termination Due to Disability, Death Disability or Retirement.
If thean executive dies, we terminate the executive’s employmentis terminated due to disability or death or the executive retires, the executive (or his estate) receives salary and vested benefits accrued through the date of termination, plus a pro-rata portion of the executive’s annual bonus earned through the date of termination, based on target bonus for the portion of the year prior to termination. The executive’s outstanding equity awards will vest and become immediately exercisable pursuant to the terms of our 2005 Incentive Plan.
Termination Without Cause; Resignation for Good Reason.
If the executive is terminated without cause or resigns for good reason, then the executive will be entitled to accrued salary, vested benefits, and a pro-rata portion of his annual bonus earned through the date of termination. In addition, the executive will receive a severance payment equal to two times (under the Prior Employment Agreements) or one times (under the Current Employment Agreements) his annual base salary in effect as of the date of termination. Under the Prior Agreements, the executive would also be entitled to continuation of health welfare benefits for a period of two years and vesting of all outstanding equity awards.
27
Termination Without Cause or by Executive for Good Reason Within 24 Months Following a Change of ControlControl.
If the executive is terminated without cause or resigns for good reason within two years24 months following a change of control of the Company, then the executive will be entitled to accrued salary, vested benefits, and a pro-rata portion of his annual bonus earned through the date of termination. In addition, the executive will be entitled to:
| | |
| | • | a severance payment equal to the product of 2.5 times the sum of (1) his base salary in effect as of the date of termination, and (2) the greater of the average of the annual bonuses earned by him for the two prior fiscal years, or his target bonus for the year in which the date of termination occurs, andoccurs; |
| | |
| | • | continuation of health and welfare benefits for a period of 21/2 years (under the Prior Employment Agreements) or the COBRA-eligible period (under the Current Employment Agreements)period; and |
| | |
| | • | all of the executiveexecutive’s outstanding equity awards shall become fully vested. |
Gross Up.
The employment agreements provide that if a payment to or for the benefit of the executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then he will receive a full gross up of any excise tax imposed, including income and excise taxes on suchgross-up amount, subject to a $50,000 threshold benefit amount.
Restrictive Covenants.
Each of the employment agreementsEmployment Agreements contains confidentiality, non-compete and non-solicitation covenants that apply during the executive’s employment with the Company and for a two year period after the executive’s termination of employment (or for a six month period if the executive’s termination occurs within two years after a change in control).
Severance and Consulting Agreement with Mr. Stewart.
Mr. Stewart resigned from the Company effective as of August 15, 2007. Pursuant to our Severance and Consulting Agreement with Mr. Stewart, he will receive an aggregate amount of $1,072,705 to be paid in monthly installments of $44,696 over twenty-four months beginning September 1, 2007. As of his resignation date, Mr. Stewart owned 2,000 shares of the Company’s Common Stock. The vested shares will remain outstanding and continue to be held by Mr. Stewart. Mr. Stewart forfeited 33,000 shares of unvested restricted stock.
2827
Summary of Termination Payments and Benefits.
The following table summarizes the estimated value of the termination payments and benefits that our named executive officers would have received under their Prior Employment Agreements that were in effect as of December 31, 2007 (in the case of Messrs. Myers, Indest and Doise) or under his Current Employment Agreement (in the case of Mr. Stelly), in each case as if they had terminated employment on December 31, 20072008 under the circumstances shown. The amounts shown in the table exclude distributions under our 401(k) retirement plan and any additional benefits that are generally available to all of our salaried employees. Mr. Stewart is not included in the chart below because he resigned from the Company effective as of August 15, 2007 and is entitled to the severance payments described in the paragraph above.
| | | | | | | | | | | | | | | | | | | | | |
| | | Myers | | | Indest | | | Roman(6) | | | Doise | | | Stelly | |
| |
Reason for Termination: | | | | | | | | | | | | | | | | | | | | |
By Company Without Cause; by Executive for Good Reason | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | — | | | $ | 185,400 | | | $ | 120,000 | |
| Cash Severance(2) | | | 1,223,640 | | | | 1,112,400 | | | | — | | | | 834,300 | | | | 200,000 | (7) |
| Health & Welfare Continuation(3) | | | 24,482 | | | | 14,570 | | | | — | | | | 23,005 | | | | — | |
| Value of Accelerated Equity Awards(4) | | | 604,091 | | | | 549,185 | | | | — | | | | 505,545 | | | | — | |
Total Estimated Value of Payments and Benefits | | $ | 2,124,133 | | | $ | 1,923,355 | | | $ | — | | | $ | 1,548,250 | | | $ | 320,000 | |
Termination Without Cause or by Executive for Good Reason Within 24 Months Following a Change of Control | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | — | | | $ | 185,400 | | | $ | 120,000 | |
| Cash Severance(2) | | | 1,529,550 | | | | 1,390,500 | | | | — | | | | 1,042,875 | | | | 800,000 | |
| Health and Welfare Continuation(3) | | | 30,603 | | | | 18,213 | | | | — | | | | 28,757 | | | | 24,482 | |
| Value of Accelerated Equity Awards(4) | | | 604,091 | | | | 549,185 | | | | 324,740 | | | | 505,545 | | | | 507,094 | |
Estimated 280GGross-Up Payment(5) | | | 809,828 | | | | 697,134 | | | | — | | | | 482,926 | | | | 465,743 | |
Total Estimated Value of Payments and Benefits | | $ | 3,245,992 | | | $ | 2,902,232 | | | $ | 324,740 | | | $ | 2,245,503 | | | $ | 1,917,310 | |
Death, Disability or Retirement | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | — | | | $ | 185,400 | | | $ | 120,000 | |
| Value of Accelerated Equity Awards(4) | | | 604,091 | | | | 549,185 | | | | — | | | | 505,545 | | | | 507,094 | |
Total Estimated Value of Payments and Benefits | | $ | 876,011 | | | $ | 796,385 | | | $ | — | | | $ | 690,945 | | | $ | 627,094 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Myers | | | Indest | | | Roman | | | Doise | | | Stelly | |
| |
Reason for Termination: | | | | | | | | | | | | | | | | | | | | |
By Company Without Cause; by Executive for Good Reason | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | 100,000 | | | $ | 115,875 | | | $ | 120,000 | |
| Cash Severance(2) | | | 611,820 | | | | 556,200 | | | | 300,000 | | | | 396,966 | | | | 360,000 | |
Total Estimated Value of Payments and Benefits | | $ | 883,740 | | | $ | 803,400 | | | $ | 400,000 | | | $ | 512,841 | | | $ | 480,000 | |
Termination Without Cause or by Executive for Good Reason Within 24 Months Following a Change of Control | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | 100,000 | | | $ | 115,875 | | | $ | 120,000 | |
| Cash Severance(2) | | | 1,529,550 | | | | 1,390,500 | | | | 750,000 | | | | 992,415 | | | | 900,000 | |
| Health and Welfare Continuation(3) | | | 13,089 | | | | 10,359 | | | | 13,089 | | | | 13,089 | | | | 13,089 | |
| Value of Accelerated Equity Awards(4) | | | 1,492,488 | | | | 1,356,804 | | | | 370,800 | | | | 901,944 | | | | 988,380 | |
Estimated 280GGross-Up Payment(5) | | | 874,814 | | | | 771,633 | | | | 421,527 | | | | 0 | | | | 549,891 | |
Total Estimated Value of Payments and Benefits | | | 4,181,861 | | | | 3,776,496 | | | | 1,655,416 | | | | 2,023,323 | | | | 2,571,360 | |
Death, Disability or Retirement | | | | | | | | | | | | | | | | | | | | |
| Pro-rata Annual Bonus(1) | | $ | 271,920 | | | $ | 247,200 | | | $ | 100,000 | | | $ | 115,875 | | | $ | 120,000 | |
| Value of Accelerated Equity Awards(4) | | | 1,492,488 | | | | 1,356,804 | | | | 370,800 | | | | 901,944 | | | | 988,380 | |
Total Estimated Value of Payments and Benefits | | $ | 1,764,408 | | | $ | 1,604,004 | | | $ | 470,800 | | | $ | 1,017,819 | | | $ | 1,108,380 | |
| | |
| (1) | | Reflects a pro-rata payment of the executive’s target annual bonus for 2007,2008, based on the portion of the year elapsed prior to termination. |
| | |
| (2) | | Reflects a severance payment equal to the product of 24one times (or 302.5 times, in the event of a change in control) one-twelfth of the sum of (1) the executive’s base salary in effect as of the date of termination, and (2) the greater of the average of the annual bonuses earned by the executive for the two fiscal years, or his target bonus for the year in which the date of termination occurs. |
29
| | |
| (3) | | Reflects the cost of providing continued health and welfare benefits to the executive for 2 years after his date of termination of employment, or 21/2 years, inemployment. The Company shall pay the eventexcess of a change in control.the COBRA cost of such coverage over the amount that the executive would have had to pay for such coverage. The Company’s obligations to provide health and welfare benefits cease in the event the executive participates in another employer sponsored plan. In the case of Mr. Stelly, this amount reflects the excess ofplan or when the COBRA cost of continued medical, dental, vision and/or prescription drug plan benefits over the amount Mr. Stelly would have paid for such coverage if he had remained employed during the COBRA-eligible period.benefit expires (18 months from qualifying event). |
28
| | |
| (4) | | Represents the fair market value of restricted shares that would become fully vested upon termination (each based on $36.00, closing market price of our Common Stock as of the last trading day in 2007,2008, December 31, 2007 ($24.98))2008). |
| |
| (5) | | Employment agreements with the named executive officers provide that the Company will reimburse the executive for any 280G excise taxes that are imposed on the executive and any income and excise taxes that are payable by the executive as a result of any reimbursement for 280G excise taxes, provided that the net after-tax benefit to the executive is at least $50,000 as compared with the net after-tax proceeds to the executive of a “cut-back” to the extent necessary to avoid imposition of the 280G excise tax. The calculation of the estimated 280Ggross-up payment is based upon a 280G excise tax rate of 20%, a 35% federal income tax rate, a 6% state income tax rate, and a 1.45% Medicare tax rate. |
|
(6) | | Mr. Roman did not have an employment agreement with the Company in 2007, and, therefore, would not have been entitled to severance or change in control payments or benefits as of December 31, 2007. |
| | |
(7) | | Reflects severance payment equal to one times Mr. Stelly’s base salary pursuant to his Current Employment Agreement. |
2007 DIRECTOR COMPENSATION
The following table sets forth the cash and equity compensation that we paid to our non-employee directors during 2007.
| | | | | | | | | | | | | | | | | |
| | | Fees Earned
| | | | | | | | | | |
| | | or Paid in
| | | Stock
| | | Option
| | | | |
| | | Cash(1)
| | | Awards
| | | Awards
| | | Total
| |
Name | | ($) | | | ($)(2) | | | ($)(3) | | | ($) | |
| |
| W.J. Tauzin | | | 52,500 | | | | 47,396 | | | | — | | | | 99,896 | |
| Ted W. Hoyt | | | 51,000 | | | | 40,130 | | | | — | | | | 91,130 | |
| George A. Lewis | | | 55,000 | | | | 40,130 | | | | — | | | | 95,130 | |
| John B. Breaux(4) | | | 34,000 | | | | 95,076 | | | | — | | | | 129,076 | |
| Ronald T. Nixon | | | 47,000 | | | | 40,130 | | | | — | | | | 87,130 | |
| Dan S. Wilford | | | 47,000 | | | | 49,454 | | | | — | | | | 96,454 | |
| Monica Azare(5) | | | 4,500 | | | | 33,932 | | | | — | | | | 38,432 | |
| Nancy G. Brinker(6) | | | 25,250 | | | | 56,309 | | | | — | | | | 81,559 | |
| | |
(1) | | Amounts reflect the following retainers and meeting fees: |
30
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Supplemental Retainers ($) | |
| | | Base
| | | Board and
| | | | | | | | | | | | Nominating and
| |
| | | Annual
| | | Committee
| | | | | | Audit
| | | Compensation
| | | Governance
| |
| | | Retainer
| | | Meeting
| | | Lead
| | | Committee
| | | Committee
| | | Committee
| |
Director | | ($) | | | Fees ($) | | | Director | | | Chair/Member | | | Chair/Member | | | Chair/Member | |
| |
| Tauzin | | | 30,000 | | | | 2,500 | | | | 20,000 | | | | | | | | | | | | | |
| Hoyt | | | 30,000 | | | | 5,000 | | | | | | | | 6,000 | | | | 10,000 | | | | | |
| Lewis | | | 30,000 | | | | 5,000 | | | | | | | | 14,000 | | | | 6,000 | | | | | |
| Breaux | | | 26,000 | | | | 2,500 | | | | | | | | | | | | | | | | 5,500 | |
| Nixon | | | 30,000 | | | | 5,000 | | | | | | | | 6,000 | | | | | | | | 6,000 | |
| Wilford | | | 30,000 | | | | 5,000 | | | | | | | | | | | | 6,000 | | | | 6,000 | |
| Azare | | | 3,500 | | | | — | | | | | | | | | | | | 1,000 | | | | | |
| Brinker | | | 22,750 | | | | 2,500 | | | | | | | | | | | | | | | | | |
| | |
(2) | | Reflects the proportionate amount of the grant date fair value of stock awards recognized by the Company as an expense in 2007 for financial statement reporting purposes, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The fair values of these awards and the amounts expensed in 2007 were determined in accordance with FAS 123R. The total number of restricted shares held by each of the directors as of December 31, 2007 was as follows: Tauzin, 1,300; Hoyt, 1,300; Lewis, 1,300; Breaux, 3,634; Nixon, 1,300; Wilford, 1,300; Azare, 2,334; and Brinker, 0. |
|
(3) | | There were no option grants in 2007. The total number of stock options held by each of the directors as of December 31, 2007 was as follows: Tauzin, 7,000; Hoyt, 0; Lewis, 4,000; Breaux, 0; Nixon, 4,000; Wilford, 4,000; Azare, 0; and Brinker, 0. |
|
(4) | | John B. Breaux joined the Board of Directors on February 14, 2007. |
|
(5) | | Monica Azare joined the Board of Directors on November 14, 2007. |
|
(6) | | Nancy G. Brinker resigned from the Board of Directors on September 14, 2007 and forfeited 2,467 in outstanding restricted stock awards. |
Director Compensation Plan. Our Amended and Restated 2005 Non-Employees Director Compensation Plan, which we refer to as the “director compensation plan,” provides for both cash and equity compensation for our non-employee directors. Employees of the Company do not receive any compensation for serving on our Board.
Cash Compensation. Each of our non-employee directors receives a base annual cash retainer of $30,000, and our lead independent director receives an additional annual cash retainer of $20,000. In addition, our non-employee directors receive $6,000 per year for each committee on which they serve, or $10,000 per year for serving as the compensation committee chairperson, or $14,000 per year for serving as the audit committee chairperson, and $1,250 per attendance at regularly-scheduled quarterly board of directors’ meetings.
Equity Compensation.
New directors, other than the lead director, receive an initial grant of 3,500 shares of restricted stock. The lead director receives an initial grant of 7,000 shares of restricted stock. Additionally, the director compensation plan provides for annual grants of restricted stock to non-employee directors. On the day following each annual meeting of stockholders, each non-employee director serving on that date shall be granted an award of restricted stock having an aggregate value equal to $38,000, based on the price of our common stock on such date. The restricted stock vests as to one-third on the date of grant and one-third on each of the first two anniversaries of the grant date.
Benefits. We reimburse each non-employee director for expenses associated with attending board and committee meetings and other board-related activities. Non-employee directors do not receive other benefits from the Company.
31
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock held beneficially, directly or indirectly, as of the Record Date by (a) each person known by the Company to be the beneficial owner of more than five percent (5%)5% of the Common Stock, (b) each director and director nominee of the Company, (c) each named executive officer of the Company, (except for Mr. Stewart, who resigned from the Company effective August 15, 2007), and (d) all directors, nominees and executive officers of the Company as a group, together with the percentage of the outstanding shares of Common Stock which such ownership represents. The percentage of beneficial ownership is based on 18,435,335 shares of common stock outstanding on the Record Date.
| | | | | | | | | |
| | | Beneficial
| |
| | | Ownership(1) | |
Name | | Number | | | Percent | |
| |
| Keith G. Myers(2) | | | 3,133,500 | | | | 17.2 | % |
| John L. Indest(3) | | | 123,562 | | | | * | |
| Peter J. Roman(4) | | | 13,439 | | | | * | |
| Daryl J. Doise | | | 32,238 | | | | * | |
| Donald D Stelly | | | 28,798 | | | | * | |
| Richard A. MacMillan(5) | | | 13,842 | | | | * | |
| Ted W. Hoyt | | | 24,581 | | | | * | |
| George A. Lewis(6) | | | 8,800 | | | | * | |
| Ronald T. Nixon(7) | | | 18,800 | | | | * | |
| W.J. “Billy” Tauzin(8) | | | 16,300 | | | | * | |
| Dan S. Wilford(9) | | | 12,800 | | | | * | |
| John B. Breaux | | | 4,800 | | | | * | |
| Monica Azare | | | 3,500 | | | | * | |
| AllianceBernstein LP(10) | | | 1,192,235 | | | | 6.6 | % |
| TimesSquare Capital Management LLC(11) | | | 1,081,300 | | | | 6.0 | % |
| Vaughan Nelson Investment Management LP(12) | | | 1,066,293 | | | | 5.9 | % |
| All directors, nominees and executive officers of the Company as a group (13 persons) | | | 3,434,960 | | | | 19.0 | % |
Except as noted in the footnotes below, we believe, based on information provided to us, that the persons named in the table below have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them.
| | | | | | | | | |
| | | Beneficial
| |
| | | Ownership(1) | |
Name | | Number | | | Percent | |
| |
| Keith G. Myers(2) | | | 2,868,321 | | | | 15.6 | % |
| John L. Indest(3) | | | 152,284 | | | | * | |
| Peter J. Roman | | | 26,353 | | | | * | |
| Daryl J. Doise | | | 40,399 | | | | * | |
| Donald D Stelly | | | 46,218 | | | | * | |
| Richard A. MacMillan(4) | | | 29,323 | | | | * | |
| Peter C. November | | | 22,814 | | | | * | |
| Ted W. Hoyt | | | 28,550 | | | | * | |
| George A. Lewis(5) | | | 13,100 | | | | * | |
| Ronald T. Nixon(6) | | | 23,100 | | | | * | |
| W.J. “Billy” Tauzin(7) | | | 20,600 | | | | * | |
| Dan S. Wilford(8) | | | 17,100 | | | | * | |
| John B. Breaux | | | 9,100 | | | | * | |
| Monica F. Azare | | | 7,800 | | | | * | |
| All directors, nominees and executive officers of the Company as a group (14 persons)(9) | | | 3,305,062 | | | | 17.9 | % |
| Vaughan Nelson Investment Management(10) | | | 983,108 | | | | 5.3 | % |
| FMR(11) | | | 948,085 | | | | 5.1 | % |
| Barclays(12) | | | 928,712 | | | | 5.0 | % |
| | |
| * | | Less than 1% |
| |
| (1) | | Unless otherwise noted below, the address of each beneficial owner listed in the table above isc/o LHC Group, Inc., 420 West Pinhook Rd., Suite A, Lafayette, LA 70503 |
29
| | |
| (2) | | Includes 360,490 shares held by Mr. Myers’sMyers’ wife, and 2,575,0022,275,002 shares held by K&G Family, LLC, of which Mr. Myers is a Manager. |
| |
| (3) | | Includes 81,081 shares held by Duperier Avenue Investors, LLC, of which Mr. Indest is a Manager. |
| |
| (4) | | Includes 200327 shares held by Mr. Roman’sMacMillan’s wife. |
| |
| (5) | | Includes 1,9954,000 shares held by Mr. MacMillan’s wife.issuable upon the exercise of stock options exercisable within 60 days of April 30. |
| |
| (6) | | Includes 4,000 shares issuable upon the exercise of stock options exercisable within 60 days.days of April 30. |
| |
| (7) | | Includes 7,000 shares issuable upon the exercise of stock options exercisable within 60 days of April 30. |
|
| (8) | | Includes 4,000 shares issuable upon the exercise of stock options exercisable within 60 days.days of April 30. |
| |
(8)(9) | | Includes 7,00019,000 shares issuable upon the exercise of stock options exercisable within 60 days. |
|
(9) | | Includes 4,000 shares issuable upon the exercisedays of stock options exercisable within 60 days.April 30, 2009. |
| |
| (10) | | The number of shares reported is as of December 31, 2007 as reported in a Form 13Fbased on the Schedule 13G/A filed with the SEC.SEC on February 17, 2009 jointly by Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”) and Vaughan Nelson Investment Management, Inc. (“General Partner”). The Schedule 13G/A reports that Vaughan Nelsons and General Partner each have sole voting power with respect to 691,784 shares, sole dispositive power with respect to 785,000 shares, and shared dispositive power with respect to 198,108 shares. General Partner is the general partner of Vaughan Nelson. According to the Schedule 13G/A, both Vaughan Nelson and General Partner disclaim beneficial ownership of the reported shares. The address for AllianceBernstein LPof both reporting persons is 1345 Avenue of the Americas, 38th Floor, New York, NY10105-0096.600 Travis Street, Suite 6300, Houston, Texas 77002. |
| |
| (11) | | The number of shares reported is as of December 31, 2007 as reported in a Form 13Fbased on the Schedule 13G/A filed with the SEC.SEC on February 17, 2009 jointly by FMR LLC (“FMR”), Edward C. Johnson, III (“Johnson”) and Fidelity Management & Research Company (“Fidelity”). The Schedule 13G/A reports that Johnson and FMR each have sole voting power with respect to 73,120 shares and sole dispositive power with respect to 948,085 shares and that Fidelity has sole voting power over 875,965 shares. Fidelity is a wholly-owned subsidiary of FMR and acts as an investment advisor to various investment companies holding the 875,965 shares over which Fidelity has sole voting power. According to the Schedule 13G/A, Pyramis Global Advisors Trust Company (“Pyramis”), an indirect wholly-owned subsidiary of FMR, serves as investment manager of institutional accounts holding 71.120 of the shares over which Johnson and FMR have sole voting power. FIL Limited (“FIL”), an investment advisor, beneficially owns 1,000 shares, and partnerships controlled predominately by members of Johnson’s family, or trusts for their benefit, have the right to control approximately 47% of the total votes of FIL. Johnson serves as chairman of FMR and FIL. The address for TimesSquare Capital Management LLC is 1177 Avenueof each of the Americas, 39th Floor, New York, NY10036-2714.reporting persons is 82 Devonshire Street, Boston, Massachusetts 02109. |
32
| | |
| (12) | | The number of shares reported is as of December 31, 2007 as reported in a Form 13Fbased on the Schedule 13G filed with the SEC.SEC on February 5, 2009 jointly by Barclays Global Investors, NA (“Investors”), Barclays Global Fund Advisors (“Advisors”), Barclays Global Investors, Ltd (“Ltd”), Barclays Global Investors Japan Limited (“Japan”), Barclays Global Investors Canada Limited (“Canada”), Barclays Global Investors Australia Limited (“Australia”), and Barclays Global Investors (Deutschland) AG (“Germany”). The Schedule 13G reports that Investors has sole voting power with respect to 283,742 shares and sole dispositive power with respect to 299,279 shares; Advisors has sole voting power with respect to 452,069 shares and sole dispositive power with respect to 619,986 shares; Ltd has sole dispositive power with respect to 9,447 shares and no voting power with respect to any shares; and Japan, Canada, Australia and Germany have no voting or dispositive power with respect to any shares. The address for Vaughan Nelson Investment Management LPof Investors and Advisors is 600 Travis400 Howard Street, San Francisco, California 94105; the address of Ltd is Murray House, 1 Royal Mint Court, London, EC3N 4HH; the address of Japan is Ebisu Prime Square Tower, 8th Floor, 1-1-39 Hiroo Shibuya-Ku, Tokyo150-8402, Japan; the address of Canada is Brookfield Place, 161 Bay Street, Suite 6300, Houston, TX77002-3071.2500, PO Box 614, Toronto, Ontario M5J 2S1, Canada; the address of Australia is Level 43, Grosvenor Place, 225 George Street, PO Box N43, Sydney, Australia NSW 1220; the address of Germany is Apianstrasse 6, D-85774, Unterfohring, Germany. |
30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 1616(a) of the Exchange Act, the Company’s directors, executive officers and any person holdingbeneficially owning more than ten percent10% of our Common Stock are required to report their ownership of the Common Stock and any changes in that ownership to the SEC and Nasdaq.SEC. These persons also are required by SEC regulations to furnish the Companyus with copies of these reports.all Section 16(a) reports they file. Specific due dates for these reports have been established, and the Company must report in this Proxy Statement any failure to make required filings on a timely basis for the fiscal year ended December 31, 2007.2008. Based solely on a review of the Section 16(a) reports furnished to the Company orus and written representations from the Company’sour directors and executive officers and ten percent beneficial owners,that no other reports were required for such persons, we believe that all reporting requirements were satisfied in fiscal 2008 with the following exception:exception; Form 5s were filed on February 13, 2009 to report late a grant of restricted stock on March 1, 2008 to each of the following individuals that occurred, which should have been reported on Form 4: Keith G. Myers; John L. Indest; Donald D. Stelly filed a late Form 4 on January 3, 2008 to report a transaction that occurred on November 1, 2007; Peter J. Roman filed a late Form 4 on January 3, 2008 to report a transaction that occurred on November 1, 2007;Stelly; Monica F. Azare filed a late Form 4 on January 3, 2008 to report a transaction that occurred on November 15, 2007; and Nancy G. Brinker filed a late Form 4 on June 28, 2007 for a transaction that occurred on June 15, 2007.Azare; Daryl J. Doise; Richard A. MacMillan; Ted W. Hoyt; Ronald T. Nixon; W. J. Tauzin; Dan S. Wilford; John B. Breaux; George A. Lewis.
COMPENSATION COMMITTEE REPORT
This report is submitted by the Company’s Compensation Committee at the direction of the Board. The Compensation Committee of the Board is responsible for reviewing and approving compensation for the Company’s executive officers. The Compensation Committee operates pursuant to a charter, which has been approved and adopted by the Board. The Compensation Committee is composed of four non-employee directors who meet the independence requirements of Nasdaq.NASDAQ. Because the Compensation Committee believes that each executive officer has the potential to affect the short-term and long-term profitability of the Company, the Compensation Committee places considerable importance on the task of creating and implementing the Company’s executive compensation program.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on this review and discussion , the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 20072008 and in its Proxy Statement for the 20082009 annual meeting of stockholders.
Submitted by the Compensation Committee of the Company’s Board of Directors.
Monica F. Azare — Chair
Ted W. Hoyt — Chairman
George A. Lewis
Dan S. Wilford
Monica F. Azare
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hoyt, Lewis, and Wilford served as members of the Compensation Committee of the Board during fiscal year 2007, and Ms. Azare has served as a member of the Compensation Committee since her appointment to the Board in November 2007. None of the members of the Compensation Committee during fiscal year 2007 or as of the date of this proxy statement is or has been an officer or employee of the Company. During fiscal year 2007, none of the Company’s executive officers served as a member of a board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board or Compensation Committee.
33
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee operates pursuant to a charter, which has been approved and adopted by the Board of Directors and is reviewed and reassessed annually by the Audit Committee. The text of the Audit Committee Charter is included in Appendix B to this Proxy Statement. The Audit Committee is comprised of three directors who meet the independence and experience requirements of the Nasdaq. One member of the Committee is an audit committee financial expert as that term is defined in Item 401(h) ofRegulation S-K.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the financial reporting process, including the systems of internal controls over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements for the fiscal year ended December 31, 2007,2008, including a discussion of the acceptability and quality of the accounting principles, the reasonableness of significant accounting judgments and the clarity of disclosures in the financial statements. In consultation with management, the Audit Committee also considered the Company’s financial reporting processes and reviewed and assessed the adequacy of internal controls over financial reporting.
The Audit Committee revieweddiscussed with KPMG, the Company’s independent registered public accounting firm, the overall scope and plans for the audit. The Audit Committee has met with the independent auditors, Ernst & Young LLP,with and without management present, to discuss the results of its observations of LHC Group’s internal controls, and the overall quality of the Company’s financial reporting.
31
The Audit Committee reviewed with KPMG, who are responsible for expressing an opinion on the conformity of thosethe Company’s audited financial statements with generally accepted accounting principles, their judgments as to the acceptability and quality of LHC Group’sthe Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards, including those matters required to be discussed by Statement on Auditing Standards No. 61,Communication with Audit Committees, as amended. The Audit Committee also reviewed and discussed with management and Ernst & Young LLP,KPMG, management’s report and Ernst & Young LLP’sKPMG’s report and attestation on internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
In addition, the Audit Committee has received the written disclosures from the independent auditors required by Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1,Independence Discussions Withregarding the independent auditor’s communications with the Audit Committees,Committee concerning independence and has discussed those disclosures with the auditors. In addition, the Audit Committee discussed with Ernst & Young LLPKPMG their independence from management and the Company. The Audit Committee also considered whether theKPMG’s provision, during fiscal 2008, of services during 2007 by Ernst & Young LLP that were unrelated to their audit of the Company’s financial statements referred to above and to their reviews of the Company’s interim financial statements during 20072008 is compatible with maintaining Ernst & Young’sKPMG’s independence.
The Audit Committee discussed with LHC Group’s independent auditors the overall scope and plans for its audit. The Audit Committee has met with the independent auditors, with and without management present, to discuss the results of its observations of LHC Group’s internal controls, and the overall quality of LHC Group’s financial reporting.
Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditors. In relianceBased on the foregoing reviews and discussions with management and with the independent auditors referred to above, and the receipt of an unqualified opinion from Ernst & Young LLPKPMG dated March 14, 200816, 2009 regarding the audited financial statements of LHC Group for the fiscal year ended December 31, 2007,2008, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 20072008 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Company’s Board of Directors.
George A. Lewis — Chairman
Chair
Ted W. Hoyt
Ronald T. Nixon
34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Indemnification Agreements with Directors
We have adopted provisions in our certificateCertificate of incorporationIncorporation that limit the liability of our directors for monetary damages for breach of their fiduciary duties, except for liability that cannot be eliminated under the Delaware General Corporation Law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following: (1) any breach of their duty of loyalty to the corporation or the stockholders; (2) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (3) unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or (4) any transaction from which the director derived an improper personal benefit. This limitation does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Our bylaws also provide that we will indemnify our directors and executive officers and we may indemnify our other officers and employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether our bylaws would permit indemnification. We have entered into separate indemnification agreements with our directors, in addition to the indemnification provided for inby our charter documents.Certificate of Incorporation and bylaws. These agreements, among other things, provide for indemnification of our directors for expenses, judgments, fines and settlement amounts incurred by any such person in any action or proceeding arising out of such person’s services as a director or at our request.
32
Company Policy
The Company believes that the transactions described above are on terms no less favorable to us as would have been obtainable from non-related parties. The Company requires that the Audit Committee of the Board review all related party transactions.
We believe that business decisions and actions taken by our officers, directors and employees should be based on the best interests of the Company, and must not be motivated by personal considerations or relationships. We attempt to analyze any transactions in which the Company participates and in which a related person may have a direct or indirect material interest, both due to the potential for a conflict of interest and to determine whether disclosure of the transaction is required under applicable Securities and Exchange CommissionSEC rules and regulations.
In April 2007, the Audit Committee adopted a written policy and set of procedures for reviewing transactions between the Company and related persons who includeincluding directors, nominees, executive officers, and any person known to be the beneficial owner of more than 5% of the Company’s voting securities or any immediate family member of such person. The policy also covers any firm, corporation or other entity in which any such person is employed or is a partner or principal, or in which such persons has a 5% or greater beneficial ownership interest. Prior to entering into a transaction with a related person, notice must be given to the Secretary of the Company containing (i) the related person’s relationship to the Company and interest in the transaction, (ii) the material facts of the transaction, (iii) the benefits to the Company of the transaction, (iv) the availability of any other sources of comparable products or services and (v) an assessment of whether the transaction is on terms comparable to those available to an unrelated third party. If the Company’s Secretary and Chief Financial Officer determine that it is a related party transaction, the proposed transaction is submitted to the Audit Committee for its approval. The policy also provides for the quarterly review of related person transactions whichthat have not previously been approved or ratified and any other such transactions which come to the attention of the Company’s Chief Executive Officer, Chief Financial Officer, Controller or Secretary. If the transaction is pending or ongoing, it will be promptly submitted to the Audit Committee for
35
approval. If the transaction is completed, it will be submitted to determine if ratification or rescission is appropriate.
GENERAL INFORMATION
Other Matters
The Board isdoes not awareknow of any other matters to be brought before the Annual Meeting.Meeting other than those referred to in the accompanying Notice of Annual Meeting and this Proxy Statement. If any other matters however, are properly broughtcome before the Annual Meeting or any adjournments, the persons named in the enclosed form of proxy will have authority to vote all proxies with respect to such matters in accordance with the recommendation of the Board.their best judgment.
Deadlines for Receipt of Stockholder Proposals for 20092010 Annual Meeting of Stockholders
TheIf a stockholder wants to have a proposal formally considered at the 2010 annual meeting of stockholders and included in the Company’s proxy statement for that meeting pursuant to SECRule 14a-8, the Company must receive stockholder proposals intended to be presented at the 2009 annual meeting of stockholdersproposal, at its principal executive offices at 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503, no laterin writing on or before December 31, 2009, and the proposal must comply with SEC rules; provided that if the date of the Company’s 2010 annual meeting of stockholders is more than February 27,30 days before or after June 11, 2010 (the anniversary date of the 2009 in orderAnnual Meeting of Stockholders), the deadline will be a reasonable time before the Company begins to print and send its proxy materials to stockholders.
In addition, if a stockholder desires to make a proposal or submit a director nomination for consideration at the proposals2010 annual meeting of stockholders other than pursuant to be includedSECRule 14a-8, the stockholder must comply with the advance notice provisions and other requirements set forth in the proxy statement and form of proxy for that meeting.
Company’s bylaws. Under the Company’s Bylaws, no business may be brought before an annual meeting unless it is specified in the notice of the meeting or is otherwise brought before the meeting by or at the direction of the Board or bybylaws, a stockholder entitled to vote who has deliveredmust deliver written notice to the Company’s Secretary (containing certain information specified in the bylaws about the stockholder and the proposed action) not less than 60 or more than 90 days prior to the first anniversary of the date on which the Company first mailed its proxy statement to stockholders in connection with the preceding year’s annual meeting. With respect to the 20092010 annual meeting of stockholders, notice must be received by the Company, between January 29, 2009 and February 28, 2009. In the eventat its principal executive offices at 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503, by March 1, 2010. If that no proxy materials were mailed by the Corporation in connection with the preceding year’s annual meeting, or if the date of the 2010 annual meeting of stockholders is advanced more than thirty (30) days’ prior to30 days before or delay by more than thirty (30) days after theJune 11, 2010 (the anniversary date of the preceding year’s annual meeting, notice by the stockholder
33
2009 Annual Meeting of Stockholders), to be timely, the stockholder must be so delivereddeliver notice no later than the close of business on the later of the 90th day90 days prior to suchthe 2010 annual meeting of stockholders or the 10th day10 days following the day on which the Company first makes public announcement of the date of suchthe 2010 annual meeting is first made. The notice must contain specified information about the proposed business and the stockholder making the nomination or proposal.of stockholders
Stockholders seeking to submit a nomination to the Board for inclusion in the Company’s proxy statement must deliver written notice of the nomination within this time period and comply with the information requirements in the bylaws relating to stockholder nominations. See the section entitled “Stockholder Proposals” under the heading Corporate Governance for additional information about stockholder nominations pursuant to a proxy statement. These requirements are separate from and in addition to the requirements of the SEC that a stockholder must meet in order to have a stockholder proposal included in the Company’s proxy statement.
In addition, any stockholder who wishes to submit a recommendation to the Board for nomination by the Company (rather than for direct inclusion in the proxy statement) must deliver written notice of the nomination to the Nominating and Corporate Governance Committee not less than 120 calendar days nor more than 150 calendar days before the first anniversary of the date of the Company’s notice of annual meeting sent to stockholders in connection with the previous year’s annual meeting. Stockholders seeking to submit director nominations in this manner must also comply with the information requirements set forth in the Nominating and Corporate Governance Committee’s charter. See the section entitled “Director Nominee Evaluation Process” under the heading Corporate Governance for additional information about stockholder nominations made directly to the Board.
Counting of Votes
The matters that are specified in this Proxy Statement that are to be voted on at the Annual Meeting will be by ballot. Inspectors of election will be appointed to, among other things, determine the number of shares
36
outstanding, the shares represented at the Annual Meeting, the existence of a quorum and the authenticity, validity and effect of proxies, to receive votes of ballots, to hear and determine all challenges and questions in any way arising in connection with the right to vote, to count and tabulate all votes and to determine the results.
Certain Matters Relating toDelivery of Proxy Materials and Annual Reports
The delivery rules regarding proxy statements and annual reports may be satisfied by delivering a single copy of a proxy statement and annual report to an address shared by two or more stockholders. This method of delivery is referred to as “householding.” Currently, the Company is not householding for registered stockholders, but brokers, dealers, banks or other entities whichthat hold Common Stock in “street name”street name for beneficial owners of Common Stock and whichthat distribute proxy statements and annual reports they receive to beneficial owners may be householding. Such brokers, dealers, banks or other entities may deliver only one proxy statement and annual report to certain multiple stockholders who share an address, unless the Company or such other distributor has received contrary instructions from one or more of those stockholders. The Company undertakes to deliver promptly upon request a separate copy of the proxy statementand/or annual report to a stockholder at a shared address to which a single copy of these documents was delivered. If you hold sharesStockholders may notify the Company of Common Stock as a registered stockholder and prefer to receive separate copies of a proxy statementtheir requests by calling the Company at(337) 233-1307 or annual report either now or in the future, please sendby sending a written request addressed to the Company’s Secretary at LHC Group, Inc., 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503. StockholdersIn addition, stockholders who hold Common Stock through a broker, dealer, bankin street name who prefer to receive separate copies of the annual report or other entity,proxy statement, or who share an address and are receiving multiple copies of annual reports or proxy statements and who prefer to receive a single copy, of such material, either now or in the future, can request delivery of a single copy of a proxy statementand/or annual report, as requested, by contacting suchshould contact their broker, dealer, bank or other record holder entity.
Miscellaneous
The Company will bear the cost of printing, mailing and other expenses in connection with this solicitation of proxies and will also reimburse brokers and other persons holding shares in their names or in
34
the names of nominees for their expenses in forwarding this proxy material to the beneficial owners of such shares. Certain of the directors, officers and employees of the Company may, without any additional compensation, solicit proxies in person or by telephone.
2008 Annual Report
Upon the written request of any stockholder entitled to vote at the Annual Meeting, the Company will furnish, without charge, a copy of the Company’s Annual Report onForm 10-K for the year ended December 31, 2007,2008, as filed with the Securities and Exchange Commission. Requests should be directed to the Company’s Secretary at 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503. A copy of the Annual Report for the fiscal year ended December 31, 2007,2008, which includes theForm 10-K, is being mailed concurrently with this Proxy Statement to all stockholders entitled to notice of and to vote at the Annual Meeting. The Annual Report is not incorporated into this Proxy Statement and is not considered proxy solicitation materials.
LHC GROUP, INC.
Keith G. Myers
Chief Executive Officer
April 29, 2008
30, 2009
3735
| | | | | | | | | | | |
  | | | | | | | |   |
| | | | | | | | | |
  | | | | | | | Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting
methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
|
| | | | | | | Proxies submitted by the Internet or telephone must be received by
1:00 a.m., Central Time, on June 12, 2008.11, 2009.
|
| | | | | | | |
| | | | | | | |   | | Vote by Internet
• Log on to the Internet and go to
www.investorvote.comwww.investorvote.com/LHCG
• Follow the steps outlined on the secured website. |
| | | | | | | | | | |
| |
| | | | | | | | |   | | Vote by telephone
• Call toll free 1-800-652-VOTE (8683) within the United
States, Canada & Puerto Rico any time on a touch tone
telephone. There isNO CHARGEto you for the call. |
| | | | | | | | | | |
Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. | x | | | | | | | |
• Follow the instructions provided by the recorded message.
|
| | | |
| Annual Meeting Proxy Card |   | C0123456789 |
12345
|
| |
▼IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼
| | |
A Proposals — The Board of Directors recommends a voteFOR all the nominees listedFOR in Proposal 21 andFOR Proposal 3.2. |
| | | | | | | | | | | | | | | | | | | | | |
| 1. | Election of Directors: | | For | | Withhold | | | | | | For | | Withhold | | | | For | Withhold | | | | | | + |
| | | | | | | | | | | | | | | | | | | | | | |
| | 01 — Keith G. Myers- Monica F. Azare | | o | | o | | | | 02 — Ted W. Hoyt- John B. Breaux | | o | | o | | 03— George A. Lewis03 - Dan S. Wilford | | o | o | | |
| |
|
|
|
| |
| | | | | | | | | | | | | | | | | | | |
| | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | |
| | | | | | | | | | | | | | | | | | | |
| 2. | | To ratify the Stockholder Protection Rights Agreement. | | o | | o | | o | | 3. | | To ratify the appointment of Ernst & Young LLP as
independent registered public accounting firm. | | o | | o | | o | |
| | | | | | | | | | | | | | | | | | |
| 4. | | In their discretion, the proxies are authorized to vote upon
other business as may properly come before the meeting or
any adjournment or postponement thereof. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | For | | Against | | Abstain | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| 2. | | To ratify the appointment of KPMG LLP as LHC Group’s independent registered public accounting firm. | | o | | o | | o | | 3. | | In their discretion, the proxies are authorized to vote in accordance with their best judgment upon other business as may properly come before the meeting or any adjournment or postponement thereof. | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | |
B Non-Voting Items | | |
Change of Address — Please print new address below. | | |
| |
C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, guardian or other representative capacity, please give full title as such.
| | | | | |
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. |
| / / | | | | |
▼IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.▼
Proxy Solicited on Behalf of the Board of Directors for June 12, 2008the 2009 Annual Meeting of Stockholders to be held on June 11, 2009 at 10:00 a.m. (Central Time) at LHC Group’s Offices located at 420 West Pinhook Road, Suite A, Lafayette, Louisiana 70503
The undersigned hereby revokes all previous proxies and appoints John L. Indest and Peter J. Roman,Keith G. Myers, or either of them, as proxies with full power of substitution, with all the powers the undersigned would possess if personally present, to vote all of the shares of common stock of LHC Group, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders and any adjournment(s) thereof. To attend the Annual Meeting of Stockholders and vote in person, please see “Voting Procedures - Voting in Person” in the Proxy Statement.
This proxy, when properly signed, will be voted as directed by the undersigned stockholder(s). If no direction is specified, this proxy will be voted FOR the nominees listed on the reverse side, FOR proposal 2in Proposal 1 and FOR proposal 3Proposal 2, as recommended by the Board of Directors.
PLEASE MARK, DATE AND SIGN THIS PROXY, AND RETURN PROMPTLY IN THE ENCLOSED RETURN-ADDRESSED ENVELOPE.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 11, 2009.
LHC Group’s Proxy Statement and Annual Report onForm 10-K for the fiscal year ended December 31, 2008 are available athttp://investor.lhcgroup.com/annuals.cfm
