1
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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] Confidential, For Use of the SEC Only (as permitted by Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
LIFEPOINT HOSPITALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (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:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------
2
[LIFEPOINT LOGO]
To Our Stockholders:
You are cordially invited to attend the annual meeting of stockholders,
which is to be held on Monday, May 14, 2001, at 10:00 a.m., local time, at the
Nashville City Center, 511 Union Street, 25th Floor, Nashville, Tennessee. The
following pages contain the formal notice of the annual meeting and our proxy
statement which describe the specific business to be considered and voted upon
at the annual meeting.
If you are unable to attend the annual meeting in person, the meeting
will be simultaneously broadcast live over the Internet. The listen-only
web-simulcast of the meeting is available through our Website,
www.lifepointhospitals.com. The web-simulcast will be available for replay for
thirty (30) days after the meeting.
It is important that your shares be represented at the meeting. Whether
or not you expect to attend in person, we would greatly appreciate your efforts
to return the enclosed proxy as soon as possible. If you decide to attend the
annual meeting, you may withdraw your proxy should you wish to vote in person.
We look forward to seeing you at the annual meeting.
Sincerely yours,
/s/ JAMES M. FLEETWOOD, JR.
JAMES M. FLEETWOOD, JR.
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY.
3
LIFEPOINT HOSPITALS, INC.
103 POWELL COURT, SUITE 200
BRENTWOOD, TENNESSEE 37027
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MONDAY, MAY 14, 2001
--------------------
Notice is hereby given that the annual meeting of stockholders of
LifePoint Hospitals, Inc. will be held on Monday, May 14, 2001, at 10:00 a.m.,
local time, at the Nashville City Center, 511 Union Street, 25th Floor,
Nashville, Tennessee, for the following purposes:
(1) To elect two nominees as Class II directors of the Company;
(2) To approve the Company's 1998 Long-Term Incentive Plan;
(3) To approve an amendment to the Company's 1998 Long-Term
Incentive Plan increasing the number of shares of common stock
authorized thereunder from 5,425,000 to 7,125,000;
(4) To ratify the appointment of Ernst & Young LLP as independent
auditors to audit the consolidated financial statements of the
Company and its subsidiaries for the year ending December 31,
2001; and
(5) To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 23, 2001
will be entitled to notice of and to vote at the annual meeting or any
adjournment thereof.
The enclosed proxy statement contains more information regarding
matters to be voted on at the annual meeting. Please read the proxy statement
carefully.
Dated: April 11, 2001
By Order of the Board of Directors,
/s/ WILLIAM F. CARPENTER III
WILLIAM F. CARPENTER III
Senior Vice President, General Counsel
and Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, TO
ASSURE THE PRESENCE OF A QUORUM, PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED, POSTAGE-PAID ENVELOPE. IF YOU
DECIDE TO ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY SHOULD YOU WISH
TO VOTE IN PERSON.
4
LIFEPOINT HOSPITALS, INC.
--------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 2001
--------------------
This proxy statement is furnished to the holders of common stock of
LifePoint Hospitals, Inc. in connection with the solicitation of proxies by the
Board of Directors of the Company to be voted at the annual meeting of
stockholders of the Company to be held on Monday, May 14, 2001, at 10:00 a.m.,
local time, at the Nashville City Center, 511 Union Street, 25th Floor,
Nashville, Tennessee, and at any adjournments or postponements thereof.
Only the holders of common stock of record at the close of business on
March 23, 2001 will be entitled to vote at the annual meeting. On such date,
34,742,766 shares of common stock were outstanding and entitled to vote. Each
stockholder is entitled to one vote per share held of record on the record date.
This proxy statement and the accompanying proxy are first being mailed on or
about April 11, 2001.
A majority of the shares of common stock entitled to vote, represented
in person or by proxy, is required to constitute a quorum. If a quorum is not
present at the time of the annual meeting, the stockholders entitled to vote,
present in person or represented by proxy, shall have the power to adjourn the
meeting until a quorum shall be present or represented by proxy. Any meeting of
stockholders may be adjourned from time to time, whether or not a quorum is
present, by the affirmative vote of a majority of the votes present and entitled
to be cast at the meeting, or by the officer of the Company presiding over the
meeting, or by the Board of Directors.
All shares of common stock represented at the annual meeting by
properly executed proxies received prior to or at the annual meeting and not
properly revoked will be voted at the annual meeting in accordance with the
instructions indicated thereon. If no specification is made, the proxies will be
voted in the following manner:
(1) FOR the election of both nominees as directors of the Company;
(2) FOR the approval of the Company's 1998 Long-Term Incentive
Plan;
(3) FOR the approval of the proposed amendment to the Company's
1998 Long-Term-Incentive Plan; and
(4) FOR ratification of the appointment of Ernst & Young LLP as
independent auditors of the Company.
Directors must be elected by a plurality of votes of the shares present
(in person or by proxy) and entitled to vote at the annual meeting if a quorum
is present. Abstentions
5
and broker non-votes will be counted for purposes of determining the presence of
a quorum at the annual meeting, but will not have the effect of voting in
opposition to a director.
All matters other than the election of directors shall be determined
based upon the vote of the majority of shares present (in person or by proxy)
and entitled to vote at the annual meeting if a quorum is present. Abstentions
will have the effect of a vote against such proposals. If a broker does not
receive voting instructions from the beneficial owner of shares on a particular
matter and indicates on the proxy that it does not have discretionary authority
to vote on that matter, those shares will be considered as present and entitled
to vote with respect to that matter, but will not be counted in the number of
votes cast "for" or "against" the matter.
All expenses of the annual meeting, including the cost of soliciting
proxies, will be paid by the Company. The Company may reimburse persons holding
shares in their names for others, or holding shares for others who have the
right to give voting instructions, such as brokers, banks, fiduciaries and
nominees, for such persons' reasonable expenses in forwarding the proxy
materials to their principals.
Any stockholder giving a proxy may revoke it by delivering a written
notice of the revocation to the Secretary of the Company at 103 Powell Court,
Suite 200, Brentwood, Tennessee 37027 prior to the annual meeting, by submitting
to the Company a more recently dated proxy or by attending the annual meeting
and voting at any time before it is exercised.
2
6
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's certificate of incorporation provides that the Board of
Directors shall consist of not less than three nor more than 15 directors as
established by the Board of Directors. The size of the Board of Directors has
been established at six directors. The certificate of incorporation also
provides that the Board of Directors shall be divided into three classes of as
nearly equal size as possible. One-third of the directors are elected each year.
The Board of Directors has nominated the two individuals named below under the
caption "Nominees for Election" for election as directors to serve until the
annual meeting of stockholders in 2004 or until their successors have been
elected and qualified.
REQUIRED VOTE
Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present. The
Company's certificate of incorporation does not provide for cumulative voting
and, accordingly, the holders of the Company's common stock do not have
cumulative voting rights with respect to the election of directors.
Consequently, each stockholder may cast one vote per share for each nominee.
Unless a proxy specifies otherwise, the persons named in the proxy will vote the
shares covered thereby FOR the nominees designated by the Board of Directors
listed below. Should any nominee become unavailable for election, an event not
now anticipated, shares covered by a proxy will be voted for a substitute
nominee selected by the current Board of Directors.
NOMINEES FOR ELECTION
CLASS II - TERM WILL EXPIRE IN 2004
DEWITT EZELL, JR.
Age -- 62
Director since May 1999
DeWitt Ezell, Jr. served as State President, BellSouth Corporation from
January 1995 until his retirement on April 30, 1999. Mr. Ezell is a director of
BlueCross BlueShield of Tennessee.
WILLIAM V. LAPHAM
Age -- 62
Director since May 1999
William V. Lapham acted as Chief Financial Officer of Uptons Department
Stores, a division of American Retail Group, from January 1999 to June 1999.
Prior to that time, Mr. Lapham served as a partner at Ernst & Young LLP for 26
years until his retirement on September 30, 1998. He was a member of the Ernst &
Young International Council until December 31, 1997. Mr. Lapham is a director of
Renal Care Group, Inc. and Avado Brands, Inc.
3
7
CONTINUING DIRECTORS
The persons named below will continue to serve as directors until the
annual meeting of stockholders in the year indicated or until their successors
are elected and take office. Stockholders are not voting at this annual meeting
on the election of Class I and Class III directors. The following shows the
names, ages and principal occupations of each continuing director and the year
in which each was first elected to the Board of Directors.
CLASS III - TERM WILL EXPIRE IN 2002
JAMES M. FLEETWOOD, JR.
Age-- 53
Director since June 2000
James M. Fleetwood, Jr. has been the Chairman and Chief Executive
Officer of LifePoint since his appointment to those positions on June 8, 2000.
Mr. Fleetwood has served as the President and Chief Operating Officer of
LifePoint since May 11, 1999. From January 1, 1998 until May 11, 1999, Mr.
Fleetwood served as President of the America Group of HCA - The Healthcare
Company. Mr. Fleetwood served as President of the Florida Group of HCA from May
1996 to January 1, 1998; President of the North Florida Division of HCA from
April 1995 to May 1996; and as Regional Vice President of Healthtrust, Inc. -
The Hospital Company prior thereto.
RICHARD H. EVANS
Age -- 56
Director since June 2000
Richard H. Evans serves as Chairman of Evans Holdings, a real estate
investment and real estate services company. Prior to forming Evans Holdings,
Mr. Evans served as President and Chief Executive Officer for Huizenga Sports
and Entertainment Group, a sports and entertainment ownership and management
company, and President and Chief Operating Officer of Florida Panthers Holdings,
a sports and entertainment ownership and management company, from November 1996
to April 1998. Prior to that time, he was Chief Operating Officer of Gaylord
Entertainment Group, a diversified entertainment, communications and hospitality
company, from April 1993 to October 1996.
CLASS I - TERM WILL EXPIRE IN 2003
RICKI TIGERT HELFER
Age-- 56
Director since May 1999
Ricki Tigert Helfer is currently an Associate Professor of Law at
American University's Washington College of Law. Ms. Helfer was a non-resident
Senior Fellow at the Brookings Institution from February 1998 to July 1999.
Since June 1997, Ms. Helfer has been a consultant in the field of International
Banking. Prior to that time, she was the Chairman of the Board of Directors and
Chief Executive Officer of the Federal Deposit Insurance Corporation from
October 1994 to June 1997; and a partner at Gibson, Dunn & Crutcher prior
thereto.
4
8
JOHN E. MAUPIN, JR., D.D.S.
Age-- 54
Director since May 1999
John E. Maupin, Jr., D.D.S. has been the President of Meharry Medical
College since July 1994 and served as the Executive Vice President of Morehouse
School of Medicine prior thereto. Dr. Maupin is a director of Pinnacle Financial
Partners, Inc., North American Funds, Monarch Dental Corp. and USLIFE Income
Fund, Inc.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held six meetings during 2000, including regular
and special meetings. Each incumbent director attended at least 75% of the
meetings of the Board of Directors and committees thereof on which the director
serves.
The LifePoint Board of Directors has a number of standing committees,
including an Audit and Compliance Committee and a Compensation Committee.
Audit and Compliance Committee. The Audit and Compliance Committee
reviews and makes reports and recommendations to the Board of Directors with
respect to the selection of our independent auditors, the arrangements for and
the scope of the audits to be performed by them and our internal audit
activities, accounting procedures and controls and reviews our annual
consolidated financial statements. The committee also monitors adherence to our
regulatory compliance program. The members of the Audit and Compliance Committee
are Ms. Helfer, Dr. Maupin and Messrs. Evans, Ezell and Lapham, with Mr. Lapham
serving as chair. During 2000, the Audit and Compliance Committee held four
meetings.
Compensation Committee. The Compensation Committee is responsible for
approving compensation arrangements for our executive management, reviewing
compensation plans relating to officers, grants of options and other benefits
under our employee benefit plans and reviewing generally our employee
compensation policy. The members of the Compensation Committee are Ms. Helfer,
Dr. Maupin and Messrs. Evans, Ezell and Lapham, with Mr. Ezell serving as chair.
During 2000, the Compensation Committee held four meetings.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for serving on the Company's Board of Directors. The annual
retainer for outside directors who are neither officers nor employees of
LifePoint is $18,000 and the board meeting fee is $1,500 per meeting. In
addition to the annual retainer, DeWitt Ezell, Jr. received $10,000 in 2000 for
his services as interim, non-executive Chairman of the Board following the death
of Scott L. Mercy. Committee members receive a fee of $1,000 per meeting payable
only for attendance at committee meetings not held in conjunction with a meeting
of the Board of Directors. The chairperson of each Committee receives an
additional $500 per meeting. Directors also are reimbursed for expenses incurred
relating to attendance at meetings. Under the outside directors stock and
incentive compensation plan, each non-employee director may elect to receive, in
lieu of all or any portion, in multiples of 25%, of such director's annual
retainer, deferred stock units, the payout of which, at the election of
5
9
the director, may be deferred for two years or until the end of such director's
term of office. The payment of deferred stock units will be made through the
issuance of a stock certificate for a number of shares equal to the number of
deferred stock units.
Pursuant to the outside directors plan, each non-employee director
receives a one-time grant of an option, as of a date selected by the Board, to
acquire shares of LifePoint common stock, exercisable at the fair market value
of LifePoint common stock on the date of grant, for a number of shares
determined by the Board. Each of Ms. Helfer, Dr. Maupin and Messrs. Ezell and
Lapham received on June 7, 1999 a one-time grant of an option to acquire 3,329
shares of LifePoint common stock, exercisable at the fair market value of
LifePoint common stock on the date of grant. These one-time options become
exercisable as to all of the shares covered by the option on the third
anniversary of the date of grant. Each of Ms. Helfer, Dr. Maupin and Messrs.
Ezell and Lapham also received on September 12, 2000 an additional one-time
grant of an option to acquire 6,335 shares of LifePoint common stock,
exercisable at the fair market value of LifePoint common stock on the date of
grant. These one-time options were exercisable as to 1,416 of the shares covered
by the option on the date of grant and become exercisable as to 696 of the
shares on June 7, 2001 and the remaining 4,223 shares on June 7, 2002. The
Company granted the options on September 12, 2000 to correct an error in the
calculation of the number of shares subject to options that were to be granted
to the directors in connection with LifePoint's spin-off from HCA.
Mr. Evans joined the Board on May 12, 2000 and received a one-time
grant of an option to acquire 3,622 shares of LifePoint common stock,
exercisable at the fair market value of LifePoint common stock on the date of
grant. This one-time option becomes exercisable as to all of the shares covered
by the option on the third anniversary of the date of grant. Mr. Evans also
received on July 19, 2000 an additional one-time grant of an option to acquire
1,484 shares of LifePoint common stock, exercisable at the fair market value of
LifePoint common stock on the date of grant. This one-time option was
exercisable as to one-third of the shares covered by the option on the date of
grant and each of the two next succeeding anniversaries of the date of grant.
Each person who is a non-employee director on the day of the annual
meeting of LifePoint's stockholders will be granted on a date to be selected by
the LifePoint Board of Directors an option to acquire shares of LifePoint common
stock, exercisable at the fair market value of LifePoint common stock on the
date of grant, for a number of shares to be determined by the LifePoint Board of
Directors. The annual options will become exercisable as to one-third of the
shares covered by the option on the date of grant and each of the two next
succeeding anniversaries of the date of grant. Upon the occurrence of a change
in control of LifePoint, each outstanding option shall become fully and
immediately exercisable.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE ELECTION OF BOTH OF THE PROPOSED
CLASS II NOMINEES TO THE BOARD OF DIRECTORS.
6
10
PROPOSAL 2: APPROVAL OF THE COMPANY'S 1998 LONG-TERM INCENTIVE PLAN
Set forth below is a description of the Company's 1998 Long-Term
Incentive Plan (the "Incentive Plan") which was approved by the LifePoint Board
of Directors and also by the LifePoint stockholders prior to LifePoint's
spin-off from HCA. Since approval of the Incentive Plan occurred prior to the
spin-off, re-approval is required at this time under Section 162(m) of the
Internal Revenue Code (the "Code"). Stockholder approval ensures that all future
compensation earned under the Incentive Plan qualifies as "performance-based
pay" for purposes of Section 162(m) so that such compensation is fully
deductible for tax purposes by the Company. A more detailed discussion of
Section 162(m) is contained in the Compensation Committee Report on Executive
Compensation elsewhere in this proxy statement.
The Board of Directors believes that the Incentive Plan constitutes a
key component of the Company's executive recruitment and expansion programs. The
Incentive Plan promotes the interests of the Company and its stockholders by
strengthening the Company's ability to attract, motivate, and retain personnel
upon whose judgement, initiative, and efforts the financial success and growth
of the business of the Company largely depends. Awards pursuant to the Incentive
Plan offer such personnel additional incentives to put forth maximum efforts for
the success of the business, and afford them an opportunity to acquire a
proprietary interest in the Company through stock ownership and other rights.
The following brief description and explanation of the plan is qualified in its
entirety by reference to the full text of the Incentive Plan, a copy of which is
attached as Appendix A.
GENERAL DESCRIPTION OF PLAN
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee may award grants of "incentive
stock options," as defined in Section 422 of the Code ("incentive options"),
stock options that do not qualify as incentive options ("nonqualified options"),
stock appreciation rights ("SARs") restricted stock awards, performance awards,
phantom stock awards, dividend equivalent awards, or any combination thereof.
All employees of the Company and its subsidiaries and, in the case of awards
other than incentive options, any consultant or independent contractor providing
services to the Company or a subsidiary, are eligible to be granted awards under
the Incentive Plan, as selected from time to time by the Compensation Committee.
Awards of options and SARs to any person under the Incentive Plan cannot exceed
700,000 shares of common stock in any calendar year, and awards of restricted
stock and performance awards cannot exceed 280,000 shares in a calendar year.
The number of shares of common stock that are subject to an award, the vesting
schedule and the exercise price of any option will be determined by the
Compensation Committee in its discretion. However, with respect to incentive
options, the exercise price may not be less than the fair market value of common
stock on the date of grant (110% of fair market value for 10% stockholders) and
the maximum term is ten years from the date of grant (five years for 10%
stockholders). In addition, incentive options must terminate three months after
the date on which a grantee ceases to be an employee of the Company or its
subsidiaries (one year after death or disability).
7
11
A total of 5,425,000 shares have been reserved for issuance under the
plan. Of this total, approximately 245,000 shares are available for grant as of
March 31, 2001. The Board of Directors adopted, subject to approval of the
stockholders, an amendment to the Incentive Plan to increase the number of
authorized shares of common stock that are available for incentive awards by
1,700,000 shares.
The Compensation Committee may grant SARs in tandem with stock options
to any optionee pursuant to the Incentive Plan or may grant SARs without any
related option. Tandem SARs become exercisable only when and to the extent that
the related options are exercisable, and they expire at the same time the
related options expire. The exercise of an option results in the immediate
forfeiture of any related SAR to the extent the option is exercised, and the
exercise of a tandem SAR results in the immediate forfeiture of any related
option to the extent the tandem SAR is exercised. Upon exercise of an SAR, the
grantee will receive an amount in cash and/or shares of common stock equal to
the fair market value of a share of common stock on the date of exercise and the
exercise price of the option to which it relates, multiplied by the number of
shares as to which the SAR is exercised.
The Compensation Committee may award restricted stock subject to such
conditions and restrictions, and for such duration as it determines in its
discretion. Except as otherwise provided by the Compensation Committee, all
restrictions will lapse at the time of the recipient's death, disability or
retirement. Otherwise, restrictions lapse at the time set in an award, and the
recipient is permitted to freely dispose of such vested shares. However,
restricted stock cannot become fully vested unless the recipient performs
services for at least one year. If a recipient's relationship with the Company
terminates for any other reason, all restricted stock as to which the applicable
restrictions have not lapsed will be forfeited immediately.
The Compensation Committee may grant performance awards under which the
recipient can earn cash payments ("performance units") or Company stock
("performance shares") upon achieving specified performance goals. The value of
a performance award may be fixed or fluctuate on the basis of specified
performance criteria. Performance awards are paid at the time that a recipient
achieves performance goals that are set in advance by the Compensation
Committee. The performance goals are generally set in accordance with
performance criteria that are specified in the plan.
The Compensation Committee may grant phantom stock awards under which
the recipient receives the right to receive payment at the end of a fixed
vesting period based on the value of a share of Company stock at the time of
vesting. Phantom stock awards are subject to such restrictions and conditions as
the Compensation Committee determines are appropriate. Payment is made in the
form of cash, Company stock or a combination thereof, at the discretion of the
Compensation Committee.
The Compensation Committee may grant dividend equivalent awards under
which the recipient is entitled to receive cash payments determined by reference
to dividends declared on Company stock during the term of the award. Dividend
equivalent awards may be granted on a stand-alone basis or in tandem with other
awards under the Incentive Plan.
8
12
All awards granted under the Incentive Plan become fully vested upon a
change in the corporate control of the Company. With respect to performance
awards, a recipient shall earn at least the amount that would have been earned
if the performance period ended on the change in control of the Company.
The Board may amend or terminate the Incentive Plan in its discretion,
except that no amendment will become effective without approval of the Company's
stockholders if such approval is necessary for continued compliance with the
incentive option requirements of Section 422 of the Code, the performance-based
compensation exception of Section 162(m) of the Code, or any stock exchange
listing requirements. If not previously terminated by the Board, the Incentive
Plan will terminate on November 4, 2008.
FEDERAL INCOME TAX CONSEQUENCES
Tax consequences to the Company and to individuals receiving awards
will vary with the type of award. Generally, a participant will not recognize
income, and the Company is not entitled to take a deduction, upon the grant of
an incentive option, a nonqualified option, SARs or restricted stock
performance, phantom stock or dividend equivalent awards. An individual who
exercises incentive options will not recognize income on exercise. However, the
exercise of an incentive option does give rise to a preference under the
alternative minimum tax rules. Provided that the participant holds the stock for
at least two years after the incentive option is granted and one year after the
date of exercise, the individual will be subject to capital gains tax on the
difference between the price paid to exercise the incentive option and the fair
market value of the Company stock at the time it is sold. However, if the stock
is sold before the end of the holding period for incentive options, as described
above, the sale is treated as a "disqualifying disposition" and the individual
is taxed at ordinary income rates on the difference between the exercise price
of the option and the fair market value of Company common stock at the time of
sale.
An individual will be taxed at the time he or she exercises a
nonqualified option on the difference between the exercise price and the fair
market value of Company stock at the time of exercise. This difference is taxed
as ordinary compensation income. The individual's tax basis in Company stock
acquired through a nonqualified option is the exercise price plus the amount of
taxable income that is recognized. Any subsequent gain or loss on the sale of
Company stock acquired through a nonqualified option is subject to capital gains
tax treatment. Reduced capital gains rates apply if the stock is held for at
least twelve months after exercise. Similar capital gains rules apply to a
disqualifying disposition of stock acquired through an incentive option.
The exercise of an SAR will result in ordinary income on the value of
the SAR to the individual at the time of exercise. An individual will recognize
ordinary income on the fair market value of the Company stock at the time shares
of restricted stock become vested. Payments made under performance awards are
taxable as ordinary income at the time an individual attains the performance
goals and cash payments are made available under performance units or, if
applicable, the performance shares become vested, based on the fair market value
of Company stock at that time. Similarly, the value of cash or stock paid under
phantom stock awards or dividend equivalent awards are taxable as ordinary
income at the time payment is made by the Company. However, an individual may
elect to be taxed at the time restricted stock or performance shares are granted
under Section 83(b) of the Code.
9
13
The Company is entitled to a tax deduction on the amount of ordinary
income that the individual recognizes on the exercise of a nonqualified option
or upon the disqualifying disposition of Company stock acquired through an
incentive option. The Company does not obtain a tax deduction upon the grant of
an option or the exercise of an incentive option. The Company generally is
allowed to deduct from its taxable income an amount that corresponds to the
ordinary income an individual recognizes with respect to options, SARs,
restricted stock, performance shares, phantom stock awards or dividend
equivalent awards at the same time the income is recognized by the individual.
NEW PLAN BENEFITS
As grants to be awarded under the Incentive Plan are made entirely in
the discretion of the Compensation Committee, the recipients, amounts and values
of future benefits to be received pursuant to the Incentive Plan are not
determinable.
REGISTRATION UNDER THE SECURITIES ACT OF 1933
The Company has registered the common stock authorized for issuance
under the Incentive Plan on a Registration Statement on Form S-8.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR APPROVAL OF THE COMPANY'S
1998 LONG-TERM INCENTIVE PLAN.
10
14
PROPOSAL 3: APPROVAL OF PROPOSED AMENDMENT TO THE COMPANY'S 1998 LONG-TERM
INCENTIVE PLAN
The Board of Directors adopted, subject to approval of the
stockholders, an amendment to the Company's 1998 Long-Term Incentive Plan to
increase the number of authorized shares of common stock that are available for
incentive awards by 1,700,000 shares. A description of the Incentive Plan can be
found in Proposal 2 above. The following brief description and explanation of
the amendment to the Incentive Plan is qualified in its entirety by reference to
the full text of the amendment, a copy of which is attached as Appendix B.
DESCRIPTION OF PROPOSED AMENDMENT
The amendment to the Incentive Plan provides for an increase in the
number of shares of common stock available for issuance under the Incentive Plan
from 5,425,000 to 7,125,000.
REASON FOR CHANGES
The Board of Directors believes that this increase in shares under the
Incentive Plan is necessary to enable the Company to operate a meaningful stock
incentive program, a key component of the Company's executive recruitment and
expansion programs. The Company strives to provide an outstanding work
environment for its employees. Accordingly, the Company does not limit the grant
of stock incentives to senior executives but rather provides stock incentives to
a broad base of employees including corporate office personnel and hospital
leadership. Of the 5,425,000 shares authorized for issuance under the Incentive
Plan, approximately 245,000 are available for grant as of March 31, 2001.
On March 28, 2001, the Company issued 3,680,000 shares of common stock
in a public offering. Prior to the amendment to the Incentive Plan, and giving
effect to the issuance of shares in the public offering, the number of shares
authorized under the Incentive Plan constituted approximately 13% of the
Company's outstanding stock on a fully-diluted basis. The increase will raise
the percentage to approximately 16% of the Company's outstanding stock on a
fully-diluted basis. The Board of Directors believes that this level is typical
for hospital companies in the Company's peer group.
REGISTRATION UNDER THE SECURITIES ACT OF 1933
The Company intends to register the additional shares of common stock
authorized for issuance under the Incentive Plan on a Registration Statement on
Form S-8 following approval of the amendment by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE
COMPANY'S 1998 LONG-TERM INCENTIVE PLAN.
11
15
PROPOSAL 4: SELECTION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit and Compliance Committee, our
Board of Directors has appointed, subject to the approval of the stockholders,
the firm of Ernst & Young LLP as independent auditors to audit the Company's
consolidated financial statements for the year ending December 31, 2001. If the
appointment of Ernst & Young LLP is not approved by the stockholders, the matter
will be referred to the Audit and Compliance Committee for further review.
It is anticipated that representatives of Ernst & Young LLP will attend
the annual meeting and will have an opportunity to make a statement, if they
determine to do so, and will be available to respond to questions at that time.
AUDIT FEES
The aggregate fees billed by Ernst & Young LLP for professional
services rendered for the audit of LifePoint's annual financial statements for
the fiscal year ended December 31, 2000, and the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were approximately $301,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not pay any financial information systems design and
implementation fees to Ernst & Young LLP during the fiscal year ended December
31, 2000.
ALL OTHER FEES
The aggregate fees billed by Ernst & Young LLP for professional
services rendered during the fiscal year ended December 31, 2000, other than as
stated above under the caption Audit Fees, were approximately $302,000.
The Audit and Compliance Committee has considered the services covered
under the caption All Other Fees and has determined that such services are
compatible with maintaining the independence of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS TO AUDIT
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND ITS
SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 2001.
12
16
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding beneficial
ownership as of March 23, 2001 (unless otherwise indicated) by (i) each
director, nominee for director and executive officer, (ii) each person known by
the Company to be the beneficial owner of more than 5% of the common stock of
the Company and (iii) all directors and executive officers as a group. Except as
otherwise indicated, the beneficial owners listed below have sole voting and
investment power with respect to all shares owned by them, except to the extent
such power is shared by a spouse under applicable law.
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES CLASS
---------- ----------
LifePoint Hospitals, Inc. Retirement Plan(1).............. 2,781,260 8.0%
AIM Management Group, Inc.(2)............................. 2,088,740 6.0%
Kenneth C. Donahey(3)(4).................................. 341,806 *
James M. Fleetwood, Jr.(3)(4)............................. 331,882 *
William F. Carpenter III(3)(4)............................ 301,687 *
Neil D. Hemphill(3)(4).................................... 181,952 *
Daniel S. Slipkovich(3)(4)(5)............................. 158,483 *
William M. Gracey(3)(4)(6)................................ 156,031 *
DeWitt Ezell, Jr.(3)(7)................................... 8,156 *
William V. Lapham(3)(8)................................... 6,283 *
Todd J. Kerr(3)(4)........................................ 5,719 *
Ricki Tigert Helfer(3)(7)................................. 5,472 *
Roberto G. Pantoja(3)(4).................................. 4,794 *
Dr. John E. Maupin, Jr., D.D.S.(3)(7)..................... 4,639 *
Richard H. Evans(3)....................................... 494 *
All directors and executive officers as a group (13
persons)(3)(4)(5)(6)(7)(8)................................ 1,507,398 4.2%
- --------------
*Less than one percent.
(1) The ownership for the Employee Stock Ownership Plan component of the
LifePoint Hospitals, Inc. Retirement Plan is based on information
contained in the Schedule 13G dated January 19, 2001, filed with the
SEC. The address of the Plan is c/o U.S. Trust Company, National
Association, 515 S. Flower Street, #2800, Los Angeles, California
90071.
(2) The ownership given for AIM Management Group, Inc., on behalf of itself
and its wholly owned subsidiaries, AIM Advisors, Inc. and AIM Capital
Management, Inc. is based on information contained in the Schedule 13G
dated February 9, 2001, filed with the SEC. The address of AIM is 11
Greenway Plaza, Suite 100, Houston, Texas 77046.
(3) Includes shares that are issuable by options that are exercisable
within 60 days (Mr. Donahey, 185,112; Mr. Fleetwood, 184,079; Mr.
Carpenter, 154,878; Mr. Hemphill, 111,859; Mr. Slipkovich, 81,839; Mr.
Gracey, 81,849; Mr. Pantoja, 946; Mr. Kerr, 4,300; Mr. Ezell, 3,733;
Mr. Lapham, 3,733; Ms. Helfer, 3,733; Dr. Maupin, 3,733; and Mr. Evans,
494).
(4) Includes shares indirectly owned through the Company's retirement plan
(Mr. Donahey, 1,257; Mr. Fleetwood, 786; Mr. Carpenter, 468; Mr.
Hemphill, 689; Mr. Slipkovich, 777; Mr. Gracey, 695; Mr. Pantoja, 942;
and Mr. Kerr, 325). Share
13
17
amounts are estimates based on unit accounting and based upon a March
23, 2001 value of $29.63 per share.
(5) Includes 98 shares held by Mr. Slipkovich's wife, as to which he
disclaims beneficial ownership.
(6) Includes 55 shares and options to purchase 416 shares held by Mr.
Gracey's wife, as to which he disclaims beneficial ownership.
(7) Mr. Ezell has sole voting power to 1,852 shares. The remaining 2,571
shares listed for Mr. Ezell, the 1,739 shares listed for Ms. Helfer and
the 906 shares listed for Dr. Maupin represent Deferred Stock Units
payable in common stock, granted under our Outside Directors Stock and
Incentive Compensation Plan. (8) Includes 1,250 shares held by Mr.
Lapham's wife, as to which he disclaims beneficial ownership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a registered
class of the Company's securities to file reports of ownership and changes in
ownership with the SEC.
Based solely on a review of copies of reports filed with the SEC and
written representations from certain of the Company's directors and executive
officers that no other reports were required, the Company notes that Daniel S.
Slipkovich filed a report on Form 5 after inadvertently failing to report in a
timely manner the ownership of 98 shares of common stock by his wife. The
Company also notes that Richard H. Evans filed a report on Form 3 after
inadvertently failing to report in a timely manner his appointment to the Board
of Directors.
14
18
EXECUTIVE COMPENSATION
The information under this heading relates to the compensation paid to
each person who served as the Company's Chief Executive Officer during the year
and the four executive officers of LifePoint who were, based on such
compensation, the most highly compensated executive officers for the year ended
December 31, 2000 (hereinafter, collectively referred to as the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
-------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- --------------------------- ---- ---------- --------- ------------ ------------
Scott L. Mercy..................... 2000 $135,137(2) $ -- -- $ 4,121(3)
Former Chairman and Chief 1999 198,694(4) 150,512 599,512 3,588(3)
Executive Officer
James M. Fleetwood, Jr............. 2000 $313,274 $ 192,500 80,000 $ 2,687(3)
Chairman, Chief Executive Officer, 1999 180,200(4) 74,237 418,957 2,675(3)
Chief Operating Officer and
President
Kenneth C. Donahey................. 2000 $264,592 $ 115,500 -- $ 4,121(3)
Executive Vice President and Chief 1999 176,327(4) 74,237 419,990 3,588(3)
Financial Officer
William M. Gracey.................. 2000 $225,724 $ 99,000 -- $ 4,121(3)
Division President 1999 149,826(4) 65,433 187,288(5) 3,418(3)
Daniel S. Slipkovich............... 2000 $226,022 $ 99,000 -- $ 2,687(3)
Division President 1999 149,703(4) 63,932 187,278 86,675(6)
William F. Carpenter III............ 2000 $234,677 $ 103,840 -- $ 2,687(3)
Senior Vice President, General 1999 147,742(4) 64,834 359,756 2,806(3)
Counsel and Secretary
- --------------
(1) Perquisites and other personal benefits did not exceed the lesser of
either $50,000 or 10% of the total of annual salary and bonus for any
Named Executive Officer.
(2) Reflects amounts that Mr. Mercy received prior to his death on May 30,
2000.
(3) Contributions under the Company's Retirement Plan.
(4) The Company first became a separate, publicly-traded company effective
May 11, 1999, the date of the distribution of all of the issued and
outstanding common stock of LifePoint to the stockholders of HCA.
However, the Company assumed payroll obligations for LifePoint
employees effective May 1, 1999. Accordingly, the compensation reported
covers only the compensation of fiscal year 1999 beginning May 1, 1999.
The Named Executive Officers did not earn any compensation from
LifePoint prior to May 1, 1999, and the table does not include
compensation paid by HCA prior to May 1, 1999.
(5) Includes options to purchase 416 shares originally granted by HCA to
Mr. Gracey's wife, as to which Mr. Gracey disclaims beneficial
ownership.
(6) Includes contributions of approximately $2,675 under the Company's
Retirement Plan and a one-time payment of $84,000 to compensate Mr.
Slipkovich for a reduction in salary at the time of the distribution
described in Note 4.
15
19
The following table sets forth information concerning the stock options
granted to the Named Executive Officers in 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANT
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OF OPTION TERM(1)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10%($)
---- ---------- ------------- ----------- ---------- ---------- ----------
Scott L. Mercy ............ -- -- -- -- -- --
James M. Fleetwood, Jr..... 80,000(2) 30.69% $24.25 7/19/2010 $1,220,056 $3,091,860
Kenneth C. Donahey......... -- -- -- -- -- --
William M. Gracey.......... -- -- -- -- -- --
Daniel S. Slipkovich....... -- -- -- -- -- --
William F. Carpenter III... -- -- -- -- -- --
- --------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term and based
upon assumed rates of appreciation in the market price of the common
stock of 5% and 10% compounded annually from the date of grant to the
expiration date. Actual gains, if any, upon the exercise of stock
options will depend on the future performance of the common stock and
the date on which the options are exercised.
(2) Options were granted pursuant to the 1998 Long-Term Incentive Plan and
become exercisable in four (4) equal installments on July 19, 2001,
July 19, 2002, July 19, 2003 and July 19, 2004.
The following table provides certain information with respect to the
Named Executive Officers concerning the exercise of options during the last
fiscal year and unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)(1)
---------------------------- ------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Scott L. Mercy................ 599,512(2) $11,156,658(2) -- -- -- --
James M. Fleetwood, Jr........ -- -- 184,079 314,878 $7,277,431 $11,338,798
Kenneth C. Donahey............ -- -- 184,586 234,878 7,311,595 9,268,798
William M. Gracey............. -- -- 81,849(3) 105,439 3,228,450 4,162,649
Daniel S. Slipkovich.......... -- -- 81,839 105,439 3,235,491 4,162,649
William F. Carpenter III...... -- -- 154,878 204,878 6,123,798 8,089,423
- --------------
(1) The closing price for the LifePoint common stock, as reported by the
Nasdaq National Market, on December 29, 2000 was $50.13. Value is
calculated on the basis of the difference between the option exercise
price and $50.13, multiplied by the number of shares of LifePoint
common stock underlying the option.
(2) The estate of Mr. Mercy exercised all of the options held by Mr. Mercy
on August 4, 2000.
(3) Includes options to purchase 416 shares owned by Mr. Gracey's wife, as
to which Mr. Gracey disclaims beneficial ownership.
16
20
EMPLOYMENT AGREEMENT, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENT OF SCOTT L. MERCY
LifePoint is the successor to the America Group, a division created by
HCA in November 1997 to operate general, acute care hospitals located in
non-urban areas. HCA established the America Group as an independent,
publicly-traded company by distributing all outstanding shares of LifePoint to
its stockholders on May 11, 1999 (the "Distribution").
HCA entered into an employment agreement with Scott Mercy effective
April 30, 1999, which LifePoint assumed and by which it became bound following
the Distribution. Mr. Mercy served as Chairman of the Board and Chief Executive
Officer of LifePoint prior to his death in May 2000. His annual base salary was
$300,000, subject to review annually. Pursuant to the employment agreement, Mr.
Mercy had the opportunity to earn an annual target bonus equal to not more than
100% of his base salary, based upon certain annual targets.
EMPLOYMENT AGREEMENT OF JAMES M. FLEETWOOD, JR.
LifePoint entered into an employment agreement with James M. Fleetwood,
Jr., the Company's President and Chief Operating Officer since its inception,
effective June 8, 2000. The employment agreement provides for a term of
employment of three years with automatic one-year renewals on the second and
each subsequent anniversary of the effective date of such employment agreement,
absent notice of non-extension and subject to earlier termination as provided in
the employment agreement. This agreement also provides that Mr. Fleetwood will
serve as Chief Executive Officer, a director and Chairman of the Board of
Directors of LifePoint at an annual base salary of $350,000, subject to review
at least annually. Pursuant to the employment agreement, Mr. Fleetwood received
a bonus of $192,500 (representing 55% of Mr. Fleetwood's base salary in effect
on December 31, 2000) following the close of 2000. Effective for calendar year
2000, the employment agreement provides that Mr. Fleetwood will have an
opportunity to earn an annual target bonus equal to not more than 100% of his
base salary, based on annual targets. The target bonus for 2000 was established
at 50% of Mr. Fleetwood's base salary.
In the event that Mr. Fleetwood's employment is involuntarily
terminated without "cause" or if he resigns with "good reason," each as defined
in the employment agreement, Mr. Fleetwood will be entitled to payment of his
earned but unpaid base salary, any earned but unpaid bonus for the calendar year
that ended prior to termination, his benefit rights, payments for certain other
accrued amounts and the costs of continued insurance coverage, continued monthly
payments of his base salary from the date of termination until the second
anniversary of such termination, and 50% of his base salary for each calendar
year in which such termination occurs. In addition, Mr. Fleetwood will be
entitled to certain payments if his employment is terminated for death or
disability. In the event that Mr. Fleetwood's employment is terminated following
the term of the employment agreement, in addition to his benefit rights and a
lump-sum payment equal to his accrued payments, under certain circumstances, Mr.
Fleetwood will be entitled to a pro rata portion of 50% of his then-current base
salary. Mr. Fleetwood will be indemnified in the event that any payment or
benefit provided to him under the employment agreement would subject Mr.
Fleetwood to an excise tax under Section 4999 of the Internal Revenue Code.
17
21
The employment agreement includes certain restrictive covenants for the
benefit of LifePoint relating to non-disclosure by Mr. Fleetwood of LifePoint's
confidential business information and trade secrets and non-competition by Mr.
Fleetwood with regards to any business that is in competition with the hospitals
owned by LifePoint.
CERTAIN TERMINATION ARRANGEMENTS
In July 1999, the Company established a severance policy for all of its
full-time corporate employees, including the Named Executive Officers. The
policy provides that if an employee is involuntarily terminated, except in
certain specified circumstances, the employee is entitled to receive severance
payments of up to one year's base compensation. The amount of the payments is
based on the employee's compensation at the time of termination and the number
of completed years of continuous employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors during 2000
consisted of Ms. Helfer, Dr. Maupin and Messrs. Evans, Ezell and Lapham. None of
the members of the Compensation Committee have at any time been an officer or
employee of the Company nor have any of the members had any relationship with
the Company requiring disclosure by the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The following list identifies the name, age and position(s) with the
executive officers of the Company:
NAME AGE POSITION WITH LIFEPOINT
- ---- --- -----------------------
James M. Fleetwood, Jr............... 53 Chairman, Chief Executive Officer, Chief Operating
Officer and President
Kenneth C. Donahey................... 50 Executive Vice President and Chief Financial Officer
William F. Carpenter III............. 46 Senior Vice President, General Counsel and
Secretary
Neil D. Hemphill..................... 47 Senior Vice President of Administration and Human
Resources
William M. Gracey.................... 47 Division President
Daniel S. Slipkovich................. 43 Division President
Todd J. Kerr......................... 38 Senior Vice President of Audit and Compliance
Roberto G. Pantoja................... 37 Vice President and Controller
The term of each executive officer runs until his or her successor is
elected and qualified, or until his or her earlier death, resignation or
removal. The following is a biographical summary of the experience of the
executive officers of the Company who are not members of the Company's Board of
Directors.
Kenneth C. Donahey. Mr. Donahey has been an Executive Vice President of
LifePoint since March 4, 2001 and Chief Financial Officer since May 11, 1999.
Mr. Donahey served as a Senior Vice President of LifePoint from May 11, 1999
until March 4, 2001. From November 5, 1998 until May 11, 1999, Mr. Donahey
served as Senior Vice President and Chief Financial Officer of the America Group
of HCA. Mr. Donahey served
18
22
as Senior Vice President and Controller of HCA from April 1995 through November
4, 1998; and as Senior Vice President and Controller of Healthtrust, Inc. - The
Hospital Company prior thereto.
William F. Carpenter III. Mr. Carpenter has been a Senior Vice
President, General Counsel and Secretary of LifePoint since May 11, 1999. From
November 16, 1998 until May 11, 1999, Mr. Carpenter served as General Counsel of
the America Group of HCA. Mr. Carpenter served as a member of the law firm of
Waller Lansden Dortch & Davis, A Professional Limited Liability Company through
December 31, 1998.
Neil D. Hemphill. Mr. Hemphill has been a Senior Vice President of
Administration and Human Resources of LifePoint since May 11, 1999. From
September 1, 1998 until May 11, 1999, Mr. Hemphill served as Senior Vice
President of Administration and Human Resources of the America Group of HCA. Mr.
Hemphill served as Senior Vice President of Human Resources of HCA from February
1994 to September 1, 1998; and as Vice President of Human Resources of Columbia
Healthcare Corporation prior thereto.
William M. Gracey. Mr. Gracey has been a Division President of
LifePoint since May 11, 1999. From July 1998 until May 11, 1999, Mr. Gracey
served as a Division President of the America Group of HCA. Mr. Gracey served as
President of Operations Support for the Atlantic Group of HCA from January 1998
through June 1998; Division President of HCA from September 1995 to December
1997; Chief Operating Officer of the Pacific Division of HCA from February 1995
to September 1995; and as Chief Executive Officer of other facilities of
Hospital Corporation of America prior thereto.
Daniel S. Slipkovich. Mr. Slipkovich has been a Division President of
LifePoint since May 11, 1999. From October 1998 until May 11, 1999, Mr.
Slipkovich served as a Division President of the America Group of HCA. Mr.
Slipkovich served as Chief Financial Officer of the America Group of HCA from
January 1998 to October 1998; Chief Financial Officer and Vice President of the
Florida Group of HCA from July 1996 to December 1997; Chief Financial Officer
and Vice President of the North Florida Division of HCA from April 1995 to June
1996; and as Regional Assistant Vice President of Healthtrust, Inc. - The
Hospital Company prior thereto.
Todd J. Kerr. Mr. Kerr has been a Senior Vice President of Audit and
Compliance of LifePoint since March 4, 2001. From May 11, 1999 until March 4,
2001, Mr. Kerr served as Vice President of Audit and Compliance of LifePoint.
Mr. Kerr served as Director of Compliance for HCA for April 1998 until May 1999.
From January 1995 to April 1998, Mr. Kerr served as Senior Manager of Internal
Audit at BlueCross BlueShield of Tennessee.
Roberto G. Pantoja. Mr. Pantoja has been a Vice President and the
Controller of LifePoint since May 11, 1999. From January 1995 until May 1999,
Mr. Pantoja served as the Director of Financial Reporting of HCA.
19
23
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation for the Company's executives are made by the
Compensation Committee of the Board of Directors. Each member of the
Compensation Committee is a non-employee director. No member of the Compensation
Committee is a current or former employee or officer of the Company or any of
its affiliates. The Compensation Committee is responsible for approving
compensation arrangements for executive management of the Company, reviewing
compensation plans relating to officers, grants of options and other benefits
under the Company's employee benefit plans and reviewing generally the Company's
employee compensation policy. Pursuant to certain rules of the SEC designed to
enhance disclosure of corporate policies toward executive compensation, set
forth below is a report submitted by the Compensation Committee.
COMPENSATION PHILOSOPHY AND POLICIES OF EXECUTIVE OFFICERS
This report is submitted by the Compensation Committee pursuant to the
rules adopted by the SEC which require disclosure with respect to compensation
policies applicable to the Company's executive officers (including the Named
Executive Officers), and with respect to the basis for the compensation of Scott
L. Mercy and James M. Fleetwood, Jr. as the Company's Chief Executive Officers
for 2000. As an independent public company, the Company is able to provide
equity-based compensation and incentives to enable it to retain and recruit
senior management and motivate employees throughout the organization.
The Committees' general philosophy is that executive officer
compensation should
- Promote stockholder returns by linking compensation with an
appropriate balance of near- and long-term objectives and
strategies;
- Be competitive within the Company's industry and community;
and
- Attract, retain, motivate and reward individuals with the
experience and skills necessary to promote the Company's
success.
Consistent with these objectives, the Company adopted its current
executive compensation programs. The Committee retained an executive
compensation consultant to prepare a report that included a comprehensive
analysis of total direct compensation and its individual components relative to
competitive market data for certain of the Company's executive officer
positions.
ANNUAL COMPENSATION
Considering all of the forgoing, the Company's executive compensation
program consists of three basic elements: base salary, near-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of
non-qualified stock options.
Base Salaries. The base salaries of the Named Executive Officers are listed
in the Summary Compensation Table found under "Executive Compensation" in this
Proxy Statement. These salaries and the salaries of the other executive officers
are evaluated annually. The Company believes that base salary ranges should
reflect the competitive
20
24
employment market for comparable positions in comparable organizations.
Individual base salary levels are established based on these guidelines,
considering any unique roles and responsibilities and/or the performance of the
individual.
Annual Incentives. Annual cash bonuses are intended to motivate
executive officers to achieve pre-determined near-term financial and qualitative
objectives consistent with the Company's overall business strategies. These
bonus opportunities were structured as potential cash awards under the Company's
Annual Cash Bonus Plan. Target award opportunities for the officers of the
Company under the plan for 2000 range from 25% to 50% of their respective base
salary levels. Actual incentive awards earned under the program can be higher or
lower than targeted levels based on actual performance. For 2000, actual awards
for officers ranged from 28% to 55%.
Long-Term Incentives. The Company believes that the interests of
executives should be aligned with the interests of stockholders through the use
of equity-based compensation. Accordingly, the Company makes periodic grants of
stock options to key executives in order to align compensation opportunities
with the creation of stockholder value. In fiscal 2000, the Committee approved
the grant of options to purchase 80,000 shares of common stock to Mr. Fleetwood
upon his appointment as Chairman and Chief Executive Officer. No other grants
were made to the Named Executive Officers during 2000.
CHIEF EXECUTIVE OFFICER COMPENSATION IN 2000
The compensation program for the Chief Executive Officer falls under
the general compensation strategy, framework and guidelines established for all
executive officers of the Company, with specific compensation levels and award
opportunities established by the Compensation Committee and approved by the
Board.
As former Chairman and Chief Executive Officer of the Company, Mr.
Mercy's base salary for 2000 was set at $300,000, $135,137 of which he received
prior to his death in May 2000. Mr. Mercy's annual base salary was set under his
1999 employment agreement and he had the opportunity to earn an annual bonus of
up to $300,000 for 2000.
When Mr. Fleetwood was appointed the Company's Chairman and Chief
Executive Officer in June 2000, his base salary was set at $350,000 (33% below
the consultant's competitive market analysis). Mr. Fleetwood received a cash
bonus of $192,500 for the year ended December 31, 2000. For the year, Mr.
Fleetwood's total annual cash compensation (base salary plus bonus) was
approximately 33% below the consultant's competitive market analysis.
Soon after his appointment as Chairman and Chief Executive Officer, Mr.
Fleetwood received a grant of an option to purchase 80,000 shares of common
stock at an exercise price equal to the fair market value on the date of grant.
Details of the option grant can be found elsewhere in this proxy statement (See
"Executive Compensation - Option Grants in Last Fiscal Year.")
Mr. Fleetwood's total direct compensation (total annual cash
compensation plus expected value of options) was $1,501,800 on an annualized
basis, 29% below consultant's competitive market analysis. The Compensation
Committee is aware of this compensation
21
25
gap and has honored Mr. Fleetwood's request to maintain this conservative
position at this early stage of the Company's development.
INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally limits the
corporate tax deduction for compensation beyond a statutorily defined amount
that is paid to an executive officer named in the Summary Compensation Table in
the proxy statement. However, compensation that is paid under a "performance
based" plan, as defined in Section 162(m), is fully deductible without regard to
the general Section 162(m) limit. The Compensation Committee has carefully
considered the impact of Section 162(m) and its limitation on deductibility in
determining and administering the Company's compensation policies and plans. The
Company has taken action to confirm certain of its compensation plans so that
they qualify for an exception to the limitations of Section 162(m) and the
Company may fully deduct compensation paid under these plans.
COMPENSATION COMMITTEE
DeWitt Ezell, Jr., Chairman
Richard H. Evans
Ricki Tigert Helfer
William V. Lapham
John E. Maupin, Jr., D.D.S.
22
26
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee of the Board of Directors of the
Company consists entirely of directors who meet Nasdaq's independence and
experience requirements.
The Company's management has primary responsibility for preparing the
Company's financial statements and implementing internal controls over financial
reporting. The Company's independent auditors, Ernst & Young LLP, are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements to accounting principles generally accepted in the United
States and for monitoring the effectiveness of the internal controls over
financial reporting.
The role and responsibilities of the Audit and Compliance Committee are
set forth in a written Charter adopted by the Company's Board, which is attached
as Appendix C to this Proxy Statement. In fulfilling its responsibilities for
fiscal year 2000, the committee:
- Reviewed and discussed with management the Company's audited
financial statements for the fiscal year ended December 31, 2000;
- Discussed with Ernst & Young the matters required to be discussed
under Statement on Auditing Standards No. 61, as amended or supplemented,
relating to the conduct of the audit; and
- Received the written disclosures and the letter from Ernst & Young
regarding Ernst & Young's independence as required by Independence Standards
Board Standard No. 1, and discussed with Ernst & Young their independence from
the Company.
Based on the committee's review of the audited financial statements and
discussions with management and Ernst & Young as described above and in reliance
thereon, the committee recommended to the Company's Board that the audited
financial statements for the fiscal year ended December 31, 2000 be included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000
for filing with the SEC.
AUDIT COMMITTEE
William V. Lapham, Chairman
Richard H. Evans
DeWitt Ezell, Jr.
Ricki Tigert Helfer
John E. Maupin, Jr., D.D.S.
23
27
COMPARATIVE PERFORMANCE GRAPH
The following graph compares the percentage change of cumulative total
stockholder return on the Company's common stock with (a) the performance of a
broad equity market indicator, the Nasdaq Stock Market (U.S.) Index (the "Broad
Index") and (b) the performance of an industry index, the S & P Health Care
(Hospital Management) Index (the "Industry Index"). The graph begins on May 11,
1999, the date on which the Company's common stock first began trading on the
Nasdaq National Market, and assumes the investment of $100 on such date in the
Company's common stock, the Broad Index and the Industry Index, and reinvestment
of all dividends.
[GRAPH]
5/11/99 12/99 12/00
------- ----- -----
LifePoint Hospitals, Inc. 100 95 401
Nasdaq Stock Market (US) 100 161 97
S&P Healthcare (Hospital Management) 100 117 190
24
28
CERTAIN TRANSACTIONS
LifePoint made loans to certain executive officers in connection with
such officers' initial purchases of LifePoint common stock under the LifePoint
executive stock purchase plan as follows: Messrs. Mercy - $2,977,134; Fleetwood
- - $1,488,567; Donahey - $1,488,567; Carpenter - $1,488,567; Hemphill - $695,290;
Gracey - $744,284 and Slipkovich - $744,284. The loans bear interest at rates
ranging from 5.15% to 5.30%. As of March 31, 2001, amounts outstanding under the
loans were as follows: Messrs. Mercy - $-; Fleetwood - $1,630,687; Donahey -
$1,630,687; Carpenter - $1,630,687; Hemphill - $761,671; Gracey - $815,343 and
Slipkovich - $815,343.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Company's by-laws provide that nominations of persons for election
as directors (other than persons nominated by or at the direction of the Board
of Directors) and proposals of business to be transacted by the stockholders
(other than proposals submitted by or at the direction of the Board of
Directors) at an annual meeting of stockholders may be made by any stockholder
of record who is entitled to vote and who provides proper notice. In order for
any such nomination or submission to be proper, the notice must contain certain
information concerning the nominating or proposing stockholder and the nominee
or the proposal, as the case may be, and must be delivered to the Secretary of
the Company at the Company's principal executive offices not less than 90 days
prior to the first anniversary of the preceding year's annual meeting of
stockholders. If, however, the date of the annual meeting is advanced more than
30 days prior to or delayed more than 60 days after such anniversary date,
notice by the stockholder to be timely must be delivered not later than the
close of business on the later of the 90th day prior to such annual meeting or
the tenth day following the day on which the public announcement of the date of
such meeting is first made.
In the event that the number of directors to be elected to the Board of
Directors is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors
made by the Company at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by the
Company's by-laws shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it is delivered not
later than the close of business on the tenth day following the day on which
such public announcement is first made by the Company.
Nominations by stockholders of persons for election to the Board of
Directors may be made at a special meeting of stockholders if the stockholder's
notice required by the Company's by-laws is delivered not later than the close
of business on the later of 90 days prior to such special meeting or the tenth
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
If a stockholder wishes to have a proposal considered for inclusion in
the Company's proxy materials for the 2002 annual meeting of stockholders, the
proposal must comply with the SEC's proxy rules, be stated in writing and be
received by the Company on or before the close of business on December 12, 2001.
25
29
Any proposals should be mailed to the Company at 103 Powell Court,
Suite 200, Brentwood, Tennessee 37027, Attention: William F. Carpenter III,
Senior Vice President, General Counsel and Secretary.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be brought
before the annual meeting. If any other matters, however, are properly brought
before the annual meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY HOLDER OF THE COMPANY'S COMMON STOCK
ENTITLED TO VOTE AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS, THE COMPANY WILL
FURNISH, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2000, AS FILED WITH THE SEC. REQUESTS SHOULD BE
DIRECTED TO WILLIAM F. CARPENTER III, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY, LIFEPOINT HOSPITALS, INC., 103 POWELL COURT, SUITE 200, BRENTWOOD,
TENNESSEE 37027.
By Order of the Board of Directors,
/s/ William F. Carpenter III
William F. Carpenter III
Senior Vice President, General Counsel
and Secretary
26
30
APPENDIX A
LIFEPOINT HOSPITALS, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the LifePoint Hospitals, Inc. 1998 Long-Term Incentive
Plan is to promote the interests of the Corporation and its shareholders by
strengthening the Corporation's ability to attract, motivate, and retain
personnel upon whose judgment, initiative, and efforts the financial success and
growth of the business of the Corporation largely depend, to offer such
personnel additional incentives to put forth maximum efforts for the success of
the business, and to afford them an opportunity to acquire a proprietary
interest in the Corporation through stock ownership and other rights.
2. DEFINITIONS
Wherever the following capitalized terms are used in this Plan, they
shall have the meanings specified below:
(a) "Award" means an award of an Option, Restricted Stock Award,
Stock Appreciation Right, Performance Award, Phantom Stock Award or Dividend
Equivalent Award granted under the Plan.
(b) "Award Agreement" means an agreement entered into between the
Corporation and a Participant setting forth the terms and conditions of an Award
granted to a Participant.
(c) "Board" means the Board of Directors of the Corporation;
provided, however, that with regard to any action to be taken prior to the first
meeting of the Board of Directors of the Corporation, Board shall mean the Board
of Directors of Columbia/HCA.
(d) "Change in Control" shall have the meaning specified in
Section 12 hereof.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Columbia/HCA" means the Columbia/HCA Healthcare Corporation,
a Delaware corporation.
(g) "Committee" means the committee appointed to administer the
Plan and shall consist of two or more directors of the Corporation (i) none of
whom shall be officers or employees of the Corporation, and (ii) all of whom, to
the extent deemed necessary or appropriate by the Board, shall satisfy the
requirements for an "outside director" under Section 162(m) and a "non-employee
director" within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934. The members of the Committee shall be appointed by and serve at the
pleasure of the Board. Notwithstanding the foregoing, prior to the date
Columbia/HCA distributes all of its shares of the Corporation to the
shareholders of Columbia/HCA, Committee shall mean a committee of two or more
Directors of Columbia/HCA appointed to administer the plan (i) none of whom
shall be officers or employees of Columbia/HCA, and (ii) all of whom, to the
extent deemed necessary or
A-1
31
appropriate by the Board of Columbia/HCA, shall satisfy the requirements for an
"outside director" under Section 162(m) and a "non-employee director" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934. If the applicable
Board shall so direct, designated members of the applicable Committee shall act
as a separate subcommittee, which shall administer the Plan as to all Section
162(m) Awards. In such event, all references herein to the applicable Committee
relating to Section 162(m) Awards shall be considered to refer only to the
applicable separate subcommittee.
(h) "Common Stock" means the common stock of the Corporation.
(i) "Corporation" means LifePoint Hospitals, Inc., a Delaware
corporation.
(j) "Date of Grant" means the date on which an Award under the
Plan is made by the Committee, or such later date as the Committee may specify
to be the effective date of the Award.
(k) "Dividend Equivalent Award" means an Award under Section 11
hereof entitling the Participant to receive payments with respect to dividends
declared on the Common Stock.
(l) "Effective Date" means the Effective Date of this Plan, as
defined in Section 15.2 hereof.
(m) "Eligible Person" means any person who is an Employee of the
Corporation or any of its Subsidiaries and, in the case of Awards other than
Incentive Stock Options, any consultant or other independent contractor (not
including any non-employee outside director) providing services to the
Corporation or a Subsidiary.
(n) "Employee" means any person who is employed as a common-law
employee.
(o) "Fair Market Value" of a share of Common Stock as of a given
date shall mean the closing sales price of the Common Stock on the Nasdaq Stock
Market on the trading day immediately preceding the date as of which the Fair
Market Value is to be determined, or, in the absence of any reported sales of
Shares on such date, on the first preceding date on which any such sale shall
have been reported (in either case, as reported in the Two Star Edition of The
Wall Street Journal). If the Common Stock is not listed on the Nasdaq Stock
Market on the date as of which Fair Market Value is to be determined, the
Committee shall in good faith determine the Fair Market Value in whatever manner
it considers appropriate.
(p) "Incentive Stock Option" means an option to purchase Common
Stock that is intended to qualify as an incentive stock option under section 422
of the Code and the Treasury Regulations thereunder.
(q) "Non-qualified Stock Option" means an option to purchase
Common Stock that is not an Incentive Stock Option.
(r) "Option" means an Incentive Stock Option or a Non-qualified
Stock Option granted under Section 6 hereof.
(s) "Participant" means any Eligible Person who holds an
outstanding Award under the Plan.
A-2
32
(t) "Phantom Stock Award" means an Award under Section 10 hereof
entitling a Participant to a payment at the end of a vesting period of a unit
value based on the Fair Market Value of a share of Common Stock.
(u) "Plan" means the LifePoint Hospitals, Inc. 1998 Long-Term
Incentive Plan as set forth herein, as it may be amended from time to time.
(v) "Performance Award" means an Award under Section 9 hereof
entitling a Participant to a payment based on the Fair Market Value of a share
of Common Stock (a "Performance Share") or based on specified dollar units (a
"Performance Unit") at the end of a performance period, if certain conditions
established by the Committee are satisfied.
(w) "Restricted Stock Award" means an Award under Section 8 hereof
entitling a Participant to shares of Common Stock that are nontransferable and
subject to forfeiture until specific conditions established by the Committee are
satisfied.
(x) "Section 162(m)" means section 162(m) of the Code and the
Treasury Regulations thereunder.
(y) "Section 162(m) Award" means any Award that is intended to
qualify for the performance-based compensation exemption under Section 162(m).
(z) "Stock Appreciation Right" or "SAR" means an Award under
Section 7 hereof entitling a Participant to receive an amount, representing the
difference between the base price per share of the right and the Fair Market
Value of a share of Common Stock on the date of exercise.
(aa) "Subsidiary" means an entity (whether or not a corporation)
that is wholly or majority owned or controlled, directly or indirectly, by the
Corporation, or any other affiliate of the Corporation that is so designated,
from time to time, by the Committee; provided, however, that with respect to
Incentive Stock Options, the term "Subsidiary" shall include only an entity that
qualifies under section 424(f) of the Code as a "subsidiary corporation" with
respect to the Corporation.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1. Number of Shares. Subject to the following provisions of this
Section 3, the aggregate number of shares of Common Stock that may be issued
pursuant to all Awards under the Plan is 5,425,000 shares of Common Stock. The
shares of Common Stock to be delivered under the Plan will be made available
from authorized but unissued shares of Common Stock or issued shares that have
been reacquired by the Corporation. To the extent that any Award payable in
Common Stock is forfeited, cancelled, returned to the Corporation for failure to
satisfy vesting requirements or upon the occurrence of other forfeiture events,
or otherwise terminates without payment being made thereunder, shares of Common
Stock covered thereby will no longer be charged against the foregoing maximum
share limitations and may again be made subject to Awards under the Plan
pursuant to such limitations.
3.2. Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
distribution with respect to the shares of Common Stock, or other change in
corporate structure affecting the Common Stock, the Committee may, in the manner
and to the extent that it deems appropriate and equitable to
A-3
33
the Participants and consistent with the terms of this Plan, cause an adjustment
to be made in (i) the maximum number and kind of shares provided in Section 3.1
hereof, (ii) the maximum number and kind of shares set forth in Sections 6.1,
7.1, 8.1 and 9.4 hereof, (iii) the number and kind of shares of Common Stock,
share units, or other rights subject to then outstanding Awards, (iv) the price
for each share or unit or other right subject to then outstanding Awards, (v)
the performance targets or goals applicable to any outstanding Performance
Awards (subject to such limitations as are considered appropriate for Section
162(m) Awards), or (vi) any other terms of an Award that are affected by the
event. Notwithstanding the foregoing, in the case of Incentive Stock Options,
any such adjustments shall be made in a manner consistent with the requirements
of section 424(a) of the Code and, to the extent considered advisable by the
Committee, in a manner consistent with the requirements of Section 162(m).
4. ADMINISTRATION OF THE PLAN
4.1. Committee Members. The Plan shall be administered by the
Committee. The Committee shall have such powers and authority as may be
necessary or appropriate for the Committee to carry out its functions as
described in the Plan. No member of the Committee shall be liable for any action
or determination made in good faith by the Committee with respect to the Plan or
any Award thereunder.
4.2. Discretionary Authority. Subject to the express limitations of
the Plan, the Committee shall have authority in its discretion to determine the
Eligible Persons to whom, and the time or times at which, Awards may be granted,
the number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, the duration of the Award,
and all other terms of the Award. The Committee shall also have discretionary
authority to interpret the Plan, to make all factual determinations under the
Plan, and to make all other determinations necessary or advisable for Plan
administration. The Committee may prescribe, amend, and rescind rules and
regulations relating to the Plan. All interpretations, determinations, and
actions by the Committee shall be final, conclusive, and binding upon all
parties.
4.3. Changes to Awards. The Committee shall have the authority to
effect, at any time and from time to time, (i) the cancellation of any or all
outstanding Awards and the grant in substitution therefor of new Awards covering
the same or different numbers of shares of Common Stock and having an exercise
or base price which may be the same as or different than the exercise or base
price of the cancelled Awards, or (ii) the amendment of the terms of any and all
outstanding Awards; provided, however, that no such action by the Committee may
adversely impair the rights of a Participant (or any permitted transferee) under
any outstanding Award without the consent of the Participant (or transferee).
The Committee may in its discretion accelerate the vesting or exercisability of
an Award at any time or on the basis of any specified event.
5. ELIGIBILITY AND AWARDS
All Eligible Persons are eligible to be designated by the Committee to
receive an Award under the Plan. The Committee has authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are
A-4
34
granted under the Plan. Each Award will be evidenced by an Award Agreement
between the Corporation and the Participant that shall include such terms and
conditions (consistent with the Plan) as the Committee may determine; provided,
however, that failure to issue an Award Agreement shall not invalidate an Award.
6. STOCK OPTIONS
6.1. Grant of Option. An Option may be granted to any Eligible
Person selected by the Committee; provided, however, that only Employees of the
Corporation or a Subsidiary shall be eligible to receive Incentive Stock
Options. Subject to the applicable provisions of section 422 of the Code, each
Option shall be designated, in the discretion of the Committee, as an Incentive
Stock Option or a Non-qualified Stock Option. The maximum number of shares of
Common Stock that may be granted under Options to any Participant during any
calendar year shall be limited to 700,000 shares (subject to adjustment as
provided in Section 3.2 hereof).
6.2. Exercise Price. The exercise price under any Option shall be
determined by the Committee; provided, however, that the exercise price per
share under an Option shall not be less than 100 percent of the Fair Market
Value per share of the Common Stock on the Date of Grant.
6.3. Vesting; Term of Option. The Committee, in its sole
discretion, shall prescribe the time or times at which, or the conditions upon
which, an Option or portion thereof shall become vested and exercisable, and may
accelerate the exercisability of any Option at any time. The period during which
a vested Option may be exercised shall be ten years from the Date of Grant,
unless a shorter exercise period is specified by the Committee in an Award,
subject to such limitations as may apply under an Award relating to the
termination of a Participant's employment or other service with the Corporation
or any Subsidiary.
6.4. Option Exercise; Withholding. Subject to such terms and
conditions as shall be specified in an Award, an Option may be exercised in
whole or in part at any time during the term thereof by written notice to the
Corporation, together with payment of the aggregate exercise price therefor.
Payment of the exercise price shall be made (i) in cash or by cash equivalent,
(ii) at the discretion of the Committee, in shares of Common Stock acceptable to
the Committee, valued at the Fair Market Value of such shares on the date of
exercise, (iii) at the discretion of the Committee, by a delivery of a notice
that the Participant has placed a market sell order (or similar instruction)
with a broker with respect to shares of Common Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Corporation in satisfaction of the Option
exercise price (conditioned upon the payment of such net proceeds), (iv) at the
discretion of the Committee, by a combination of the methods described above, or
(v) by such other method as may be approved by the Committee and set forth in
the Award. In addition to and at the time of payment of the exercise price, the
Participant shall pay to the Corporation the full amount of any and all
applicable income tax and employment tax amounts required to be withheld in
connection with such exercise, payable under such of the methods described above
for the payment of the exercise price of the Options as may be approved by the
Committee.
6.5. Limited Transferability of Non-qualified Options. All Options
shall be nontransferable except (i) upon the Participant's death, by the
Participant's will or the laws of descent and distribution or (ii) in the case
Non-qualified Stock Options only, on a case-by-case
A-5
35
basis as may be approved by the Committee in its discretion, in accordance with
the terms provided below. An Award Agreement for a Non-qualified Stock Option
may provide that the Participant shall be permitted to, during his or her
lifetime and subject to the prior approval of the Committee at the time of
proposed transfer, transfer all or part of the Option to the Participant's
family member (as defined in the Award Agreement in a manner consistent with the
requirements for the Form S-8 registration statement, if applicable). Any such
transfer shall be subject to the condition that it is made by the Participant
for estate planning, tax planning, donative purposes or pursuant to a domestic
relations order, and no consideration (other than nominal consideration) is
received by the Participant therefor. The transfer of a Non-qualified Stock
Option may be subject to such other terms and conditions as the Committee may in
its discretion impose from time to time, including a condition that the portion
of the Option to be transferred be vested and exercisable by the Participant at
the time of the transfer. Subsequent transfers of an Option shall be prohibited
other than by will or the laws of descent and distribution upon the death of the
transferee.
6.6. Additional Rules for Incentive Stock Options.
(a) Annual Limits. No Incentive Stock Option shall be
granted to a Participant as a result of which the aggregate Fair Market Value
(determined as of the Date of Grant) of the stock with respect to which
Incentive Stock Options are exercisable for the first time in any calendar year
under the Plan and any other stock option plans of the Corporation, any
Subsidiary, or any parent corporation, would exceed the maximum amount permitted
under section 422(d) of the Code. This limitation shall be applied by taking
Options into account in the order in which granted.
(b) Termination of Employment. An Award of an Incentive
Stock Option may provide that such Option may be exercised not later than 3
months following termination of employment of the Participant with the
Corporation and all Subsidiaries, subject to special rules relating to death and
disability, as and to the extent determined by the Committee to be appropriate
with regard to the requirements of section 422 of the Code and Treasury
Regulations thereunder.
(c) Other Terms and Conditions; Nontransferability. Any
Incentive Stock Option granted hereunder shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as are deemed
necessary or desirable by the Committee, which terms, together with the terms of
this Plan, shall be intended and interpreted to cause such Incentive Stock
Option to qualify as an "incentive stock option" under section 422 of the Code.
Such terms shall include, if applicable, limitations on Incentive Stock Options
granted to ten-percent owners of the Corporation. An Award Agreement for an
Incentive Stock Option may provide that such Option shall be treated as a
Non-qualified Stock Option to the extent that certain requirements applicable to
"incentive stock options" under the Code shall not be satisfied. An Incentive
Stock Option shall by its terms be nontransferable otherwise than by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of a Participant only by such Participant.
(d) Disqualifying Dispositions. If shares of Common Stock
acquired by exercise of an Incentive Stock Option are disposed of within two
years following the Date of Grant or one year following the transfer of such
shares to the Participant upon exercise, the Participant shall, promptly
following such disposition, notify the Corporation in writing of the
A-6
36
date and terms of such disposition and provide such other information regarding
the disposition as the Committee may reasonably require.
6.7. Restrictions on Transfer of Stock. The Committee may, in its
sole discretion, impose in any Award of an Option restrictions on the
transferability of the shares of Common Stock issued upon exercise of such
Option. If any such restrictions are imposed, the Committee may require the
Participant to enter into an escrow agreement providing that the certificates
representing the shares subject to such transfer restrictions will remain in the
physical custody of an escrow holder until such restrictions are removed or have
expired. The Committee may require that certificates representing the shares
subject to such restrictions bear a legend making appropriate reference to the
restrictions imposed. Subject to any restrictions imposed in accordance with
this Section 6.7, the Participant will have all rights of a shareholder with
respect to any such shares acquired upon an Option exercise, including the right
to vote the shares and receive all dividends and other distributions paid or
made with respect thereto.
7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. A Stock Appreciation Right granted to a
Participant is an Award in the form of a right to receive, upon surrender of the
right but without other payment, an amount based on appreciation in the Fair
Market Value of the Common Stock over a base price established for the Award,
exercisable at such time or times and upon conditions as may be approved by the
Committee. The maximum number of shares of Common Stock that may be subject to
SARs granted to any Participant during any calendar year shall be limited to
700,000 shares (subject to adjustment as provided in Section 3.2 hereof).
7.2. Tandem SARs. A Stock Appreciation Right may be granted in
connection with an Option, either at the time of grant or at any time thereafter
during the term of the Option. An SAR granted in connection with an Option will
entitle the holder, upon exercise, to surrender such Option or any portion
thereof to the extent unexercised, with respect to the number of shares as to
which such SAR is exercised, and to receive payment of an amount computed as
described in Section 7.4 hereof. Such Option will, to the extent and when
surrendered, cease to be exercisable. An SAR granted in connection with an
Option hereunder will have a base price per share equal to the per share
exercise price of the Option, will be exercisable at such time or times, and
only to the extent, that a related Option is exercisable, and will expire no
later than the related Option expires.
7.3. Freestanding SARs. A Stock Appreciation Right may be granted
without any related Option, and in such case, will be exercisable as determined
by the Committee, but in no event after 10 years from the Date of Grant. The
base price of an SAR granted without any related Option shall be determined by
the Committee in its sole discretion; provided, however, that the base price per
share of any such freestanding SAR shall not be less than 100 percent of the
Fair Market Value of the Common Stock on the Date of Grant.
7.4. Payment of SARs. An SAR will entitle the holder, upon exercise
of the SAR, to receive payment of an amount determined by multiplying: (i) the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the SAR over the base price of such SAR, by (ii) the number of
shares as to which such SAR is exercised. Payment of the amount determined under
the foregoing may be made, in the discretion of the Committee, in
A-7
37
cash, in shares of Common Stock valued at their Fair Market Value on the date of
exercise, or in a combination of cash and shares of Common Stock.
8. RESTRICTED STOCK AWARD
8.1. Grant of Restricted Stock Awards. An Award of Restricted Stock
to a Participant represents shares of Common Stock that are issued subject to
such restrictions on transfer and other incidents of ownership and such
forfeiture conditions as the Committee may determine. The Committee may, in
connection with any Restricted Stock Award, require the payment of a specified
purchase price. The Committee may grant a Restricted Stock Award that is a
Section 162(m) Award (as described in Section 8.2 below), as well as Restricted
Stock Awards that are not Section 162(m) Awards; provided, however, that the
maximum number of shares of Common Stock that may be subject to a Restricted
Stock Award granted to a Participant during any one calendar year shall be
separately limited to 280,000 shares (subject to adjustment as provided in
Section 3.2 hereof).
8.2. Vesting Requirements. The restrictions imposed on shares
granted under a Restricted Stock Award shall lapse in accordance with the
vesting requirements specified by the Committee in the Award Agreement. Such
vesting requirements may be based on the continued employment of the Participant
with the Corporation or its Subsidiaries for a specified time period or periods,
provided that any such restriction shall not be scheduled to lapse in its
entirety earlier than the first anniversary of the Date of Grant. Such vesting
requirements may also be based on the attainment of specified business goals or
measures established by the Committee in its sole discretion. In the case of any
Restricted Stock Award that is a Section 162(m) Award, any such
performance-based vesting requirements shall be based upon the performance
criteria identified in Section 9.3 below, and the terms of the Award shall
otherwise comply with the Section 162(m) requirements described in Section 9.4
hereof.
8.3. Restrictions. Shares granted under any Restricted Stock Award
may not be transferred, assigned or subject to any encumbrance, pledge, or
charge until all applicable restrictions are removed or have expired, unless
otherwise allowed by the Committee. The Committee may require the Participant to
enter into an escrow agreement providing that the certificates representing the
shares granted or sold under a Restricted Stock Award will remain in the
physical custody of an escrow holder until all restrictions are removed or have
expired. Failure to satisfy any applicable restrictions shall result in the
subject shares of the Restricted Stock Award being forfeited and returned to the
Corporation, with any purchase price paid by the Participant to be refunded,
unless otherwise provided by the Committee. The Committee may require that
certificates representing the shares granted under a Restricted Stock Award bear
a legend making appropriate reference to the restrictions imposed.
8.4. Rights as Shareholder. Subject to the foregoing provisions of
this Section 8 and the applicable Award Agreement, the Participant will have all
rights of a shareholder with respect to the shares granted to him under a
Restricted Stock Award, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto, unless the
Committee determines otherwise at the time the Restricted Stock Award is
granted.
8.5. Section 83(b) Election. The Committee may provide in an Award
Agreement that the Restricted Stock Award is conditioned upon the Participant's
refraining from making
A-8
38
an election with respect to the Award under section 83(b) of the Code.
Irrespective of whether an Award is so conditioned, if a Participant makes an
election pursuant to section 83(b) of the Code with respect to a Restricted
Stock Award, the Participant shall be required to promptly file a copy of such
election with the Corporation.
9. PERFORMANCE AWARDS
9.1. Grant of Performance Awards. The Committee may grant
Performance Awards under the Plan, which shall be represented by units
denominated on the Date of Grant either in shares of Common Stock (Performance
Shares) or in dollars (Performance Units). The Committee may grant Performance
Awards that are Section 162(m) Awards, as well as Performance Awards that are
not Section 162(m) Awards. At the time a Performance Award is granted, the
Committee shall determine, in its sole discretion, one or more performance
periods and performance goals to be achieved during the applicable performance
periods, as well as such other restrictions and conditions as the Committee
deems appropriate. In the case of Performance Units, the Committee shall also
determine a target unit value or a range of unit values for each Award. No
performance period shall exceed ten years from the Date of Grant. The
performance goals applicable to a Performance Award grant may be subject to such
later revisions as the Committee shall deem appropriate to reflect significant
unforeseen events, such as changes in law, accounting practices or unusual or
nonrecurring items or occurrences. The Committees' authority to make such
adjustments shall be subject to such limitations as the Committee deems
appropriate in the case of a Performance Award that is a Section 162(m) Award.
9.2. Payment of Performance Awards. At the end of the performance
period, the Committee shall determine the extent to which performance goals have
been attained, or a degree of achievement between minimum and maximum levels, in
order to establish the level of payment to be made, if any, and shall determine
if payment is to be made in the form of cash or shares of Common Stock (valued
at their Fair Market Value at the time of payment) or a combination of cash and
shares of Common Stock. Payments of Performance Awards shall generally be made
as soon as practicable following the end of the performance period.
9.3. Performance Criteria. The performance criteria upon which the
payment or vesting of a Performance Award that is a Section 162(m) Award may be
based shall be limited to one or more of the following business measures, which
may be applied with respect to the Corporation, any Subsidiary or any business
unit, and which may be measured on an absolute or relative to peer-group basis:
(i) total shareholder return, (ii) stock price increase, (iii) return on equity,
(iv) return on capital, (v) earnings per share, (vi) EBIT (earnings before
interest and taxes), and (vii) cash flow (including operating cash flow, free
cash flow, discounted cash flow return on investment, and cash flow in excess of
costs of capital). In the case of Performance Awards that are not Section 162(m)
Awards, the Committee shall designate performance criteria from among the
foregoing or such other business criteria as it shall determine in its sole
discretion.
9.4. Section 162(m) Requirements. In the case of a Performance
Award that is a Section 162(m) Award, the Committee shall make all
determinations necessary to establish the terms of the Award within 90 days of
the beginning of the performance period (or such other time period as is
required under Section 162(m)), including, without limitation, the designation
of the Participant to whom the Performance Award is to be made, the performance
criteria or criterion applicable to the Award and the performance goals that
A-9
39
relate to such criteria, and the dollar amounts or number of shares of Common
Stock payable upon achieving the applicable performance goals. As and to the
extent required by Section 162(m), the terms of a Performance Award that is a
Section 162(m) Award must state, in terms of an objective formula or standard,
the method of computing the amount of compensation payable under the Award, and
must preclude discretion to increase the amount of compensation payable under
the terms of the Award (but may give the Committee discretion to decrease the
amount of compensation payable). The maximum amount of compensation that may be
payable to a Participant during any one calendar year under a Performance Unit
Award shall be $4.2 million. The maximum number of Common Stock units that may
be subject to a Performance Share Award granted to a Participant during any one
calendar year shall be 280,000 share units (subject to adjustment as provided in
Section 3.2 hereof).
10. PHANTOM STOCK AWARD
10.1. Grant of Phantom Stock Awards. A Phantom Stock Award is an
Award to a Participant of a number of hypothetical share units with respect to
shares of Common Stock, with an initial value based on the Fair Market Value of
the Common Stock on the Date of Grant. A Phantom Stock Award shall be subject to
such restrictions and conditions as the Committee shall determine. On the Date
of Grant, the Committee shall determine, in its sole discretion, the installment
or other vesting period of the Phantom Stock Award and the maximum value of the
Phantom Stock Award, if any. No vesting period shall exceed 10 years from the
Date of Grant. A Phantom Stock Award may be granted, at the discretion of the
Committee, together with a Dividend Equivalent Award covering the same number of
shares.
10.2. Payment of a Phantom Stock Awards. Upon the vesting date or
dates applicable to the Phantom Stock Award granted to a Participant, an amount
equal to the Fair Market Value of one share of Common Stock upon such vesting
dates (subject to any applicable maximum value) shall be paid with respect to
each Phantom Stock Award unit granted to the Participant. Payment may be made,
at the discretion of the Committee, in cash or in shares of Common Stock valued
at their Fair Market Value on the applicable vesting dates, or in a combination
thereof.
11. DIVIDEND EQUIVALENT AWARD
11.1. Grant of a Dividend Equivalent Awards. A Dividend Equivalent
Award granted to a Participant is an Award in the form of a right to receive
cash payments determined by reference to dividends declared on the Common Stock
from time to time during the term of the Award, which shall not exceed 10 years
from the Date of Grant. Dividend Equivalent Awards may be granted on a
stand-alone basis or in tandem with other Awards. Dividend Equivalent Awards
granted on a tandem basis shall expire at the time the underlying Award is
exercised or otherwise becomes payable to the Participant, or expires.
11.2. Payment of Dividend Equivalent Awards. Dividend Equivalent
Awards shall be payable in cash or in shares of Common Stock, valued at their
Fair Market Value on either the date the related dividends are declared or the
date the Dividend Equivalent Awards are paid to a Participant, as determined by
the Committee. Dividend Equivalent Awards shall be payable to a Participant as
soon as practicable following the time dividends are declared and paid with
respect to the Common Stock, or at such later date as the Committee shall
specify in the Award Agreement. Dividend Equivalent Awards granted with respect
to Options
A-10
40
intended to qualify as a Section 162(m) Award shall be payable regardless of
whether the Option is exercised.
12. CHANGE IN CONTROL
12.1. Effect of Change in Control. The Committee may, in an Award
Agreement, provide for the effect of a Change in Control on an Award. Such
provisions may include any one or more of the following: (i) the acceleration or
extension of time periods for purposes of exercising, vesting in, or realizing
gain from any Award, (ii) the elimination or modification of performance or
other conditions related to the payment or other rights under an Award, (iii)
provision for the cash settlement of an Award for an equivalent cash value, as
determined by the Committee, or (iv) such other modification or adjustment to an
Award as the Committee deems appropriate to maintain and protect the rights and
interests of Participants upon or following a Change in Control.
12.2. Definition of Change in Control. For purposes hereof, a
"Change in Control" shall be deemed to have occurred upon the occurrence of any
of the following after the date on which the Corporation becomes a publicly-held
Corporation:
(i) An acquisition (other than directly from the
Corporation) of any voting securities of the Corporation (the "Voting
Securities") by any "Person" (as the term Person is used for purposes
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty percent (20%) or more of the combined
voting power of the then outstanding Voting Securities; provided,
however, that in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Corporation or (B) any corporation or
other Person of which a majority of the voting power or the equity
securities or equity interests is owned directly or indirectly by the
Corporation (a "Control Subsidiary"), or (ii) the Corporation or any
Control Subsidiary.
(ii) The individuals who, as of the date the Corporation
issues any class of equity securities required to be registered under
Section 12 of the 1934 Act, are members of the Board (the "Incumbent
Board"), cease for any reason to constitute at least two-thirds of the
Board; provided, however, that if the election or nomination for
election by the Corporation's stockholders of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such
new director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided, further, however, that no
individual shall be considered a member of the Incumbent Board if (1)
such individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest or
(2) such individual was designated by a Person who has entered into an
agreement with the Corporation to effect a transaction described in
clause (i) or (iii) of this Section 12.2; or
A-11
41
(iii) Consummation, after approval by stockholders of the
Corporation, of:
(1) A merger, consolidation or reorganization
involving the Corporation, unless,
(A) The stockholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own, directly or
indirectly immediately following such merger,
consolidation or reorganization, at least
seventy-five percent (75%) of the combined voting
power of the outstanding Voting Securities of the
corporation resulting from such merger or
consolidation or reorganization or its parent
corporation (the "Surviving Corporation") in
substantially the same proportion as their ownership
of the Voting Securities immediately before such
merger, consolidation or reorganization;
(B) The individuals who were members of
the Incumbent Board immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization constitute at least
two-thirds of the members of the board of directors
of the Surviving Corporation; and
(C) No Person (other than the
Corporation, any Control Subsidiary, any employee
benefit plan (or any trust forming a part thereof)
maintained by the Corporation, the Surviving
Corporation or any Control Subsidiary, or any Person
who, immediately prior to such merger, consolidation
or reorganization, had Beneficial Ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities) has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding Voting
Securities.
(2) A complete liquidation or dissolution of the
Corporation; or
(3) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Control Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the
Corporation which, by reducing the number of Voting Securities outstanding,
increased the proportional number of shares Beneficially Owned by the Subject
Person, provided that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of Voting Securities by the
Corporation, and after such share acquisition by the Corporation, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
A-12
42
13. AWARD AGREEMENTS
13.1. Form of Agreement. Each Award under this Plan shall be
evidenced by an Award Agreement in a form approved by the Committee setting
forth the number of shares of Common Stock, units or other rights (as
applicable) subject to the Award, the exercise, base, or purchase price (if any)
of the Award, the time or times at which an Award will become vested,
exercisable or payable, the duration of the Award, and in the case of
Performance Awards, the applicable performance criteria and goals. The Award
Agreement shall also set forth other material terms and conditions applicable to
the Award as determined by the Committee consistent with the limitations of this
Plan. Award Agreements evidencing Awards that are Section 162(m) Awards shall
contain such terms and conditions as may be necessary to meet the applicable
requirements of Section 162(m). Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of section 422 of the Code.
13.2 Forfeiture Events. The Committee may specify in an Award that
the Participant's rights, payments and benefits with respect to an Award shall
be subject to reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but
shall not be limited to, termination of employment for cause, violation of
material Corporation or Subsidiary policies, breach of noncompetition,
confidentiality or other restrictive covenants that may apply to the
Participant, or other conduct by the Participant that is detrimental to the
business or reputation of the Corporation or any Subsidiary.
14. GENERAL PROVISIONS
14.1. No Assignment or Transfer; Beneficiaries. Except as provided
in Section 6.5 hereof, Awards under the Plan shall not be assignable or
transferable, except by will or by the laws of descent and distribution, and
during the lifetime of a Participant, the Award shall be exercised only by such
Participant or by his guardian or legal representative. Notwithstanding the
foregoing, the Committee may provide in the terms of an Award Agreement that the
Participant shall have the right to designate a beneficiary or beneficiaries who
shall be entitled to any rights, payments or other specified under an Award
following the Participant's death.
14.2 Deferrals of Payment. Notwithstanding any other provisions of
the Plan, the Committee may permit a Participant to defer the receipt of payment
of cash or delivery of shares of Common Stock that would otherwise be due to the
Participant by virtue of the exercise of a right or the satisfaction of vesting
or other conditions with respect to an Award. If any such deferral is to be
permitted by the Committee, the Committee shall establish the rules and
procedures relating to such deferral, including, without limitation, the period
of time in advance of payment when an election to defer may be made, the time
period of the deferral and the events that would result in payment of the
deferred amount, the interest or other earnings attributable to the deferral and
the method of funding, if any, attributable to the deferred amount.
14.3 Rights as Shareholder. A Participant shall have no rights as a
holder of Common Stock with respect to any unissued securities covered by an
Award until the date the Participant becomes the holder of record of such
securities. Except as provided in Section 3.2 hereof, no adjustment or other
provision shall be made for dividends or other shareholder
A-13
43
rights, except to the extent that the Award Agreement is a Dividend Equivalent
Award, or otherwise provides for dividend payments or similar economic benefits.
14.4 Employment or Service. Nothing in the Plan, in the grant of
any Award or in any Award Agreement shall confer upon any Eligible Person the
right to continue in the capacity in which he is employed by, or otherwise
serves, the Corporation or any Subsidiary.
14.5 Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed, have been fully met. As a
condition precedent to the issuance of shares pursuant to the grant or exercise
of an Award, the Corporation may require the Participant to take any reasonable
action to meet such requirements. The Committee may impose such conditions on
any shares of Common Stock issuable under the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities Act of 1933, as
amended, under the requirements of any stock exchange upon which such shares of
the same class are then listed, and under any blue sky or other securities laws
applicable to such shares.
14.6 Tax Withholding. The Participant shall be responsible for
payment of any taxes or similar charges required by law to be withheld from an
Award or an amount paid in satisfaction of an Award, which shall be paid by the
Participant on or prior to the payment or other event that results in taxable
income in respect of an Award. The Award Agreement shall specify the manner in
which the withholding obligation shall be satisfied with respect to the
particular type of Award.
14.7. Unfunded Plan. The adoption of this Plan and any setting aside
of cash amounts or shares of Common Stock by the Corporation with which to
discharge its obligations hereunder shall not be deemed to create a trust or
other funded arrangement. The benefits provided under this Plan shall be a
general, unsecured obligation of the Corporation payable solely from the general
assets of the Corporation, and neither a Participant nor the Participant's
permitted transferees or estate shall have any interest in any assets of the
Corporation by virtue of this Plan, except as a general unsecured creditor of
the Corporation. Notwithstanding the foregoing, the Corporation shall have the
right to implement or set aside funds in a grantor trust, subject to the claims
of the Corporation's creditors, to discharge its obligations under the Plan.
14.8. Other Compensation and Benefit Plans. The adoption of the Plan
shall not affect any other stock incentive or other compensation plans in effect
for the Corporation or any Subsidiary, nor shall the Plan preclude the
Corporation from establishing any other forms of stock incentive or other
compensation for employees of the Corporation or any Subsidiary. The amount of
any compensation deemed to be received by a Participant pursuant to an Award
shall not constitute compensation with respect to which any other employee
benefits of such Participant are determined, including, without limitation,
benefits under any bonus, pension, profit sharing, life insurance or salary
continuation plan, except as otherwise specifically provided by the terms of
such plan.
14.9 Plan Binding on Transferees. The Plan shall be binding upon
the Corporation, its transferees and assigns, and the Participant, his executor,
administrator and permitted transferees and beneficiaries.
A-14
44
14.10 Construction and Interpretation. Whenever used herein, nouns
in the singular shall include the plural, and the masculine pronoun shall
include the feminine gender. Headings of Articles and Sections hereof are
inserted for convenience and reference and constitute no part of the Plan.
14.11 Severability. If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of law
in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
14.12 Governing Law. The validity and construction of this Plan and
of the Award Agreements shall be governed by the laws of the State of Delaware.
15. EFFECTIVE DATE, TERMINATION AND AMENDMENT
15.1. Establishment of the Plan. This Plan is being adopted by the
Board in connection with the anticipated formation of the Corporation as a
Subsidiary of Columbia/HCA and the distribution shortly thereafter by
Columbia/HCA of all of its shares of the Corporation to the shareholders of
Columbia/HCA.
15.2. Effective Date; Shareholder Approval. The Effective Date of
the Plan shall be November 5, 1998; provided, however, that no amounts may be
paid or shares issued under any Award granted on or after the first meeting of
the shareholders of the Corporation that shall occur more than twelve months
after the date on which the Corporation becomes a publicly held corporation,
unless the shareholders of the Corporation shall have approved the Plan. At the
sole discretion of the Board, in order to comply with the requirements of
Section 162(m) for certain types of Awards under the Plan, the performance
criteria set forth in Section 9.3 shall be reapproved by the shareholders of the
Corporation no later than the first shareholder meeting that occurs in the fifth
calendar year following the calendar year of the initial shareholder approval of
such performance criteria.
15.3. Termination. The Plan shall terminate on the date immediately
preceding the tenth anniversary of the date the Plan is adopted by the Board.
The Board may, in its sole discretion and at any earlier date, terminate the
Plan. Notwithstanding the foregoing, no termination of the Plan shall adversely
affect any Award theretofore granted without the consent of the Participant or
the permitted transferee of the Award.
15.4. Amendment. The Board may at any time and from time to time and
in any respect, amend or modify the Plan; provided, however, that no amendment
or modification of the Plan shall be effective without the consent of the
Corporation's shareholders that would (i) change the class of Eligible Persons
under the Plan, (ii) increase the number of shares of Common Stock reserved for
issuance under the Plan in accordance with Section 3.1 hereof, or (iii) allow
the grant of Options at an exercise price below Fair Market Value. In addition,
the Board may seek the approval of any amendment or modification by the
Corporation's shareholders to the extent it deems necessary or advisable in its
sole discretion for purposes of compliance with Section 162(m) or section 422 of
the Code, the listing requirements of the Nasdaq Stock Market or for any other
purpose. No amendment or modification of the Plan shall adversely affect any
Award theretofore granted without the consent of the Participant or the
permitted transferee of the Award.
A-15
45
Appendix A
Notwithstanding anything elsewhere in the Plan to the contrary, the following
rules shall apply in connection with the distribution of Common Stock to
Columbia/HCA stockholders (the "Spin-off").
(i) In the case of each Columbia/HCA Non-Qualified Option that is a vested
option and covers more than 1000 shares, the Committee may grant an
option which covers a number of shares of Common Stock equal to the
Original Number of Shares multiplied by the LifePoint Share Multiple
and which has a per share exercise price equal to the per share
exercise price of the original Columbia/HCA Non-Qualified Option
multiplied by the LifePoint Ratio.
(ii) In the case of each Columbia/HCA ISO that is held by a LifePoint
Employee or LifePoint Terminee (or his estate), the Committee may grant
an option which covers a number of shares of Common Stock equal to the
Original Number of Shares divided by the LifePoint Ratio and (2) has a
per share exercise price equal to the original per share exercise price
multiplied by the LifePoint Ratio.
(iii) In the case of any options granted by the Committee pursuant to this
Appendix, any resulting per share exercise price which is not equal to
a whole multiple of a cent shall be rounded up to the next whole cent
and any resulting number of shares covered by an option which is not
equal to a whole multiple of a share shall be rounded down to the next
whole share.
(iv) The Committee may provide that the terms of any option granted under
this Appendix are to be substantially the same as those of the related
Columbia/HCA Option, subject to such exceptions as the Committee may
provide. Any such option may, in the discretion of the Committee, also
provide that (a) any period of prior employment or service with
Columbia/HCA or any related entity is to be credited as covered
employment or service for purposes of determining the vesting and
exercisability of such option (to the same extent as such period was
credited for such purposes under the related original Columbia/HCA
Option), and (b) in the case of any Columbia/HCA Non-Qualified Option,
the optionee is to be considered to be employed by or providing
services to the Corporation so long as he is employed by or providing
services to Columbia/HCA or Triad Hospitals, Inc. ("Triad") (or any
Subsidiary thereof), for purposes of determining when the option will
cease to be exercisable on account of termination of employment or
service, and at such time as the optionee ceases to be employed by or
provide services to Columbia/HCA or Triad (or any Subsidiary thereof),
such cessation of employment or service shall be treated as though it
were a cessation of employment or service with the Corporation under
comparable circumstances.
(v) For purposes hereof, the following definitions shall apply:
(a) "Affiliate" shall mean any entity required to be aggregated
with Columbia/HCA, LifePoint or Triad as appropriate, pursuant
to Code sections 414(b), 414(c), 414(m) or 414(o).
(b) "Columbia/HCA ISO" shall mean any option outstanding under a
Columbia/HCA Option Plan on the date of the Spin-off that is
intended to qualify as an "Incentive Stock Option" under
section 422 of the Code.
A-16
46
(c) "Columbia/HCA Non-Qualified Option" shall mean any stock
option outstanding under a Columbia/HCA Option Plan on the
date of the Spin-off that is not a Columbia/HCA ISO. Any such
option shall be considered a "vested option" to the extent
that it is exercisable on the date in question and shall be
considered a "non-vested option" to the extent that it is not
yet exercisable on such date.
(d) "Columbia/HCA Option" shall mean a Columbia/HCA ISO or
Columbia/HCA Non-Qualified Option, as the context shall
indicate.
(e) "Columbia/HCA Option Plan" shall mean any plan maintained by
Columbia/HCA under which there are stock options outstanding
on the date of the Spin-off.
(f) "Ex-Dividend Date" shall mean the first trading date on which
the Columbia/HCA stock shall trade on an ex-dividend basis
with respect to the distribution of the Corporation's Common
Stock and Triad's stock.
(g) "LifePoint Business" shall mean any business conducted by
LifePoint, or its Subsidiaries, on the date of the Spin-off.
(h) "LifePoint Employee" shall mean an employee of the
Corporation, or any direct or indirect Subsidiary of the
Corporation that is an Affiliate thereof, on the date of the
Spin-off.
(i) "LifePoint Ratio" shall mean a fraction whose numerator is the
closing price of the Common Stock on the trading date
immediately preceding the Ex-Dividend Date and whose
denominator is the closing price of the Columbia/HCA stock on
such trading date immediately preceding the Ex-Dividend Date.
(j) "LifePoint Share Multiple" shall mean the number of shares of
Common Stock to be distributed per share of Columbia/HCA stock
on the date of the Spin-off.
(k) "LifePoint Terminee" shall mean any individual who is no
longer employed by Columbia/HCA or any Affiliate thereof
immediately prior to the Spin-off but was employed by a
LifePoint Business immediately prior to his termination of
employment from Columbia/HCA and its Affiliates.
(l) "Original Number of Shares" shall mean, as to any Columbia/HCA
Option, the number of shares of Columbia/HCA stock covered by
such option immediately prior to the Spin-off.
Notwithstanding anything elsewhere in the Plan to the contrary, the Committee
may grant Non-qualified Stock Options, effective as of the twenty-first trading
date for the Common Stock, at an exercise price equal to the Fair Market Value
of the Common Stock on such date, in accordance with the attached Schedule and
in accordance with such other terms as shall be established by the Committee.
A-17
47
APPENDIX B
AMENDMENT TO THE LIFEPOINT HOSPITALS, INC.
1998 LONG-TERM INCENTIVE PLAN
The LifePoint Hospitals, Inc. 1998 Long-Term Incentive Plan (the
"Plan") is hereby amended as follows:
The provisions of Section 3.1 are hereby deleted in their entirety and
the following provisions are inserted in their place:
3.1 Number of Shares. Subject to the following provisions
of this Section 3, the aggregate number of shares of common stock that
may be issued pursuant to all Awards under the Plan is 7,125,000 shares
of Common Stock. The shares of Common Stock to be delivered under the
Plan will be made available from authorized but unissued shares of
Common Stock or issued shares that have been reacquired by the
Corporation. To the extent that any Award payable in Common Stock is
forfeited, cancelled, returned to the Corporation for failure to
satisfy vesting requirements or upon the occurrence of other forfeiture
events, or otherwise terminates without payment being made thereunder,
shares of Common Stock covered thereby will no longer be charged
against the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such limitations.
Except as otherwise set forth herein, all other terms and provisions of
the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Board has duly executed and delivered this
Amendment to the LifePoint Hospitals, Inc. 1998 Long-Term Incentive Plan as of
the _____ day of __________, 2001.
LIFEPOINT HOSPITALS, INC.
By:
------------------------------------
B-1
48
APPENDIX C
CHARTER OF THE
AUDIT AND COMPLIANCE COMMITTEE
OF THE BOARD OF DIRECTORS
OF
LIFEPOINT HOSPITALS, INC.
ARTICLE I. PURPOSE
The primary function of the Audit and Compliance Committee (the
"Committee") is to assist the Board of Directors (the "Board") of LifePoint
Hospitals, Inc. (the "Company") in fulfilling its oversight responsibilities by
reviewing: the integrity of the Company's financial reports; the Company's and
its subsidiaries' systems of internal controls regarding finance, accounting,
legal and corporate compliance; and the Company's auditing, accounting and
financial reporting processes generally. Consistent with this function, the
Committee should encourage continuous improvement of, and should foster
adherence to, the Company's finance, accounting, legal and corporate policies,
procedures and practices at all levels. The Committees' primary duties and
responsibilities are to:
- Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
system regarding finance, accounting, legal and corporate
compliance, and from time to time report on these matters to
the Board;
- Approve the selection, evaluate and, when appropriate,
recommend to the Board replacement of the independent auditors
whose duties it shall be to audit the books and accounts of
the Company and its subsidiaries for the fiscal year in which
they are appointed, and who shall report to the Committee and
the Board;
- Review and appraise the independence and performance of, and
the services provided and fees charged by, the Company's
independent auditors, and from time to time report on these
matters to the Board; and
- Provide an open avenue of communication among the independent
auditors, management, the internal auditing department and the
Board.
The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Article IV of this Charter. The Committee is
empowered to investigate any matter brought to its attention to fulfill its
responsibilities contained in this Charter, and it will have the authority to
communicate directly with the independent auditors as well as any employee of
the Company. The Committee will have the authority to retain, at the Company's
expense, special accounting, legal or other consultants or experts it deems
necessary in the performance of its duties.
ARTICLE II. COMPOSITION
Each Committee member shall meet the independence and financial
literacy requirements of The Nasdaq Stock Market, Inc. ("Nasdaq"). The Committee
shall be comprised of no fewer than three directors, the exact number to be
determined by the Board.
C-1
49
INDEPENDENCE REQUIREMENTS
Each member of the Committee must be an independent director, and be
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the
Committee. The independence of a Committee member is determined according to the
following definitions and rules of Nasdaq:
An "Independent" director means a person other than an officer or
employee of the Company or its subsidiaries or any other individual having a
relationship which, in the opinion of the Company's Board, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered Independent:
(a) a director who is employed by the Company or any of its
affiliates for the current year or any of the past three
years;
(b) a director who accepts any compensation from the Company or
any of its affiliates in excess of $60,000 during the previous
fiscal year, other than compensation for board service,
including deferred stock units, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
(c) a director who is a member of the "Immediate Family" of an
individual who is, or has been in any of the past three years,
employed by the Company or any of its affiliates as an
executive officer. "Immediate Family" includes a person's
spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder
or an executive officer of, any for-profit business
organization to which the Company made, or from which the
Company received, payments (other than those arising solely
from investments in the Company's securities) that exceed 5%
of the Company's or business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in any
of the past three years; or
(e) a director who is employed as an executive of another entity
where any of the Company's executives serve on that entity's
compensation committee.
Notwithstanding the requirements of subparagraphs (a) through (e)
above, one director who is not Independent as defined above, and is not a
current employee or a member of the Immediate Family of such employee, may be
appointed to the Committee, if the Board, under exceptional and limited
circumstances, determines that membership on the Committee by the individual is
required by the best interests of the Company and its stockholders, and the
Board discloses, in the next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination.
FINANCIAL LITERACY REQUIREMENTS
Each member of the Committee must have a working familiarity with basic
finance and accounting practices. This working familiarity with basic finance
and accounting
C-2
50
practices must be determined in accordance with the following financial literacy
definitions and rules of Nasdaq:
Each member of the Committee must be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement and cash flow statement, or undertake to become able to do so within a
reasonable period of time after his or her appointment or election to the
Committee.
The Company will certify to Nasdaq that it has, and will continue to
have, at least one member of the Committee that has past employment experience
in finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
ELECTION PROCEDURE
The members of the Committee will be elected by the Board at its annual
meeting or until their successors are duly elected and qualified. Unless a Chair
of the Committee is elected by the full Board, the members of the Committee may
designate a Chair by majority vote of the full Committee membership.
ARTICLE III. MEETINGS
The Committee will meet at least four times annually, and more
frequently if circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with management, the
Vice President of Internal Audit and Compliance and the independent auditors in
separate executive sessions to discuss any matters that the Committee or any of
these persons believe should be discussed privately. In addition, the Committee,
or at least its Chair, must communicate with the independent auditors and
management quarterly to review the Company's financial statements and
significant findings consistent with Article IV.3 below. A majority of the
members shall constitute a quorum for the transaction of business.
ARTICLE IV. RESPONSIBILITIES AND DUTIES
The Committees' responsibility is oversight, and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements. Additionally, the Committee recognizes that financial management
(including the internal audit staff), as well as the independent auditors, who
are ultimately accountable to the Board and the Committee, have more knowledge
and more detailed information about the Company than do the members of the
Committee; consequently, in carrying out its oversight responsibilities the
Committee is not providing any expert or special assurance as to the Company's
financial statements or any professional certification as to the independent
auditors' work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight responsibility. These functions are set
forth as a guide with the understanding that the Committee may diverge from this
guide as appropriate given the circumstances.
C-3
51
DOCUMENTS/REPORTS PREPARATION AND REVIEW
1. Review and reassess the adequacy of this Audit and Compliance Committee
Charter (the "Charter") periodically, and at least annually, as
conditions dictate. If the Committee determines that the Charter needs
amendment, it will submit its proposals for amendments to the Board for
approval.
2. Review, prior to the filing of the Company's Form 10-K, the annual
audited financial statements of the Company. Review any significant
disagreements among management and the independent auditors or the
internal auditing department in connection with the preparation of the
annual audited financial statements. This review should also include
discussion with management and the independent auditors of significant
issues regarding accounting principles, practices and judgments.
3. Review the quarterly financial results of the Company. Discuss any
significant changes to the Company's accounting principles and any
matters required to be communicated to the Committee by the independent
auditors as required by Statement on Auditing Standards No. 61 ("SAS
61"). Review any significant disagreements among the management and the
independent auditors or the internal auditing department in connection
with the preparation of the quarterly financial statements. The Chair
of the Committee may represent the entire Committee for purposes of
this review.
4. Annually prepare, in conjunction with the Company's legal counsel and
Chief Financial Officer, a report of the Committee to stockholders as
required by the Securities and Exchange Commission (the "SEC"). This
report must be included in the Company's annual proxy statement. At a
minimum, this report must include disclosure that the Committee
performed or received the following:
- Reviewed and discussed the Company's annual audited financial
statements and recommended to the Board that such audited
financial statements be included in the Annual Report on Form
10-K for the preceding fiscal year for filing with the SEC;
- Discussed with the independent auditors the matters required
to be discussed by SAS 61, as may be modified or supplemented;
and
- Received from the independent auditors the written disclosures
and the letter from the independent auditors regarding the
auditor's independence as required by Independent Standards
Board Statement No. 1 ("ISB 1"), as may be modified or
supplemented, and has discussed with the independent
5. Cooperate with management, the Board and the Company's legal counsel to
certify to Nasdaq that the Committee has adopted a written charter,
that the Committee complies with Nasdaq's structure and membership
requirements, and that the Committee has performed its annual review
and reassessment of the adequacy of the Charter.
C-4
52
INDEPENDENT AUDITORS
6. Recommend to the Board annually the selection of the independent
auditors, considering the independence and effectiveness of the
individual auditors, and approve the fees and other compensation to be
paid to the independent auditors. The independent auditors are
ultimately accountable to the Committee and the Board.
7. On an annual basis, ensure the receipt of, and review and discuss with
the independent auditors all significant relationships included in, the
report of the independent auditors to the Committee, as required under
ISB 1, that the auditors have with the Company to determine if these
relationships may impair the independent auditors' independence. In
response to the report of the independent auditors to the Committee
required under ISB 1, the Committee will review the independence and
performance of the independent auditors. The Committee will approve any
proposed dismissal of the independent auditors when circumstances
warrant.
8. Periodically consult with the independent auditors out of the presence
of management about internal controls, the completeness and accuracy of
the Company's financial statements, and other appropriate matters.
9. Prior to the filing of the Company's Form 10-K, discuss certain matters
with the independent auditors required to be communicated by the
independent auditors to the Committee in accordance with SAS 61, as
well as the results of the audit.
FINANCIAL REPORTING PROCESS
10. In consultation with the independent auditors and the internal
auditors, review the integrity of the Company's financial reporting
processes, both internal and external.
11. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
12. Consider any significant changes to the Company's accounting principles
and practices as recommended by the independent auditors, management or
the internal auditing department. Review any required disclosure
pertaining to the effects to the Company's financial statements of
significant changes in accounting principles and practices.
PROCESS IMPROVEMENT
13. Following completion of the annual audit, review separately with each
of management, the independent auditors and the internal auditing
department any significant difficulties encountered during the course
of the audit if raised by the independent auditors, management or the
internal auditing department, including any restrictions on the scope
of work or access to required information.
C-5
53
CORPORATE AND LEGAL COMPLIANCE
14. At least annually, meet with the Vice President of Internal Audit and
Compliance with oversight of the Company's ethics, compliance and
corporate responsibility programs, for a report on the Company's ethics
and compliance programs, including a review of any significant issues
that may affect the financial reporting process and internal control
system of the Company.
15. Review management's monitoring of the Company's compliance with the
Company's Corporate Integrity Agreement.
16. Review, assess and make recommendations, if deemed necessary, regarding
legal and regulatory issues that may have a material impact on the
Company's financial statements, policies, and reporting requirements.
17. Review, assess and make recommendations, if deemed necessary, regarding
management's compliance with applicable legal and regulatory
requirements or findings and with the policies and decisions of the
Board.
18. Review, with the Company's legal counsel, legal compliance matters
including corporate securities trading policies.
19. Cooperate with management, the Board and the Company's legal counsel to
ensure that the Charter is filed with the SEC at least every three
years as an appendix to the Company's proxy statement for its annual
meeting of stockholders in accordance with SEC rules and regulations.
20. Cooperate with management, the Board and the Company's legal counsel to
ensure that the Company discloses in its proxy statement for its annual
meeting of stockholders whether the Committee members are "Independent"
as defined in Article II of this Charter and Nasdaq listing standards,
and disclose certain information regarding any director of the
Committee who is not "Independent."
21. Review, with the Company's legal counsel, any legal matter that could
have a significant impact on the Company's financial statements,
including the Company's compliance with applicable laws and regulations
and inquiries received from regulators or governmental agencies.
22. Perform any other activities consistent with this Charter, the
Company's Bylaws and Delaware General Corporation Law, as the Committee
or the Board deems necessary or appropriate.
23. Receive reports from the Vice President of Internal Audit and
Compliance in charge of the Company's internal audit department and
review the internal audit plan at least annually.
24. Maintain minutes of meetings and periodically report to the Board on
significant results of the foregoing activities.
C-6
54
DETACH CARD
LIFEPOINT HOSPITALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 2001
The undersigned hereby authorizes and appoints Kenneth C. Donahey and
William F. Carpenter III, or either of them, with power of substitution,
as proxies to vote all stock of LifePoint Hospitals, Inc. (the "Company")
owned by the undersigned at the annual meeting of stockholders to be held
at the Nashville City Center, 511 Union Street, 25th Floor, Nashville,
Tennessee, at 10:00 a.m., local time, on May 14, 2001, and any
adjournment thereof, on the following matters as indicated below and such
other business as may properly come before the meeting:
1. ELECTION OF DIRECTORS:
[ ] FOR the election as director of both
nominees listed:
DeWitt Ezell, Jr. and William V. Lapham
(except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for both nominees
listed:
DeWitt Ezell, Jr. and William V. Lapham.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE,
WRITE HIS OR HER NAME IN THE SPACE PROVIDED BELOW:
-------------------------------------------------------------------------
2. Approval of the Company's 1998 Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the proposed amendment to the Company's 1998 Long-Term
Incentive Plan to increase from 5,426,000 to 7,125,000 the number of
shares of common stock authorized thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the appointment of Ernst & Young LLP as the
independent auditors of the Company for 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES NAMED ABOVE MAY VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
P
55
DETACH CARD
This Proxy is solicited on behalf of the Company's Board of Directors.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. A vote against any of the proposals will
not count as a vote for adjournment of the annual meeting. If no direction is
made, this proxy will be voted (i) FOR the election of both nominees as Class II
directors of the Company, (ii) FOR the approval of the Company's 1998 Long-Term
Incentive Plan, (iii) FOR the approval of the proposed amendment to the
Company's 1998 Long-Term Incentive Plan, and (iv) FOR ratification of the
appointment of Ernst & Young LLP as the independent auditors of the Company for
2001.
Dated: , 2001
-----------------------------
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
Please sign exactly as your name appears on
this Proxy Card. When signing as an attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.