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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement. |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)). |
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Definitive Proxy Statement. |
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Definitive Additional Materials. |
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Soliciting Material Pursuant to §240.14a-12. |
LIFEPOINT HOSPITALS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Notice of 2011
Annual Meeting of Stockholders
and Proxy Statement
LIFEPOINT HOSPITALS, INC.
LIFEPOINT HOSPITALS, INC.
103 Powell Court
Brentwood, Tennessee 37027
April 27, 2011
Dear Stockholders:
It is my pleasure to invite you to attend the 2011 Annual Meeting of Stockholders, which is to be
held on Tuesday, June 7, 2011 at 3:00 p.m. local time at 511 Union Street, Suite 2700, Nashville,
Tennessee 37219. The following pages contain the formal notice of the Annual Meeting and the
Companys Proxy Statement, which describe the specific business to be considered and voted upon at
the Annual Meeting.
It is important that your shares be represented at the Annual Meeting. Whether or not you expect to
attend in person, the Company would greatly appreciate your efforts to vote your shares as soon as
possible by following the instructions located in the Notice of Internet Availability of Proxy
Materials sent to you or in the Companys Proxy Statement. If you decide to attend the Annual
Meeting and wish to vote in person, you may withdraw your proxy.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
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/s/ William F. Carpenter III
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WILLIAM F. CARPENTER III |
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Chairman and Chief Executive Officer |
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NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS
To our Stockholders:
Notice is hereby given that the 2011 Annual Meeting of Stockholders of LifePoint Hospitals, Inc.
will be held on Tuesday, June 7, 2011 at 3:00 p.m. local time at 511 Union Street, Suite 2700,
Nashville, Tennessee 37219, for the following purposes, as more fully described in the accompanying
Proxy Statement:
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Elect three nominees as Class III directors of the Company; |
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Ratify the selection of Ernst & Young LLP as the Companys independent registered
public accounting firm for 2011; |
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To conduct an advisory vote on compensation of the Companys named executive
officers; |
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To conduct an advisory vote on the frequency of the advisory vote on compensation of
the Companys named executive officers; and |
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Transact such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof. |
Stockholders of record at the close of business on April 14, 2011 are entitled to vote at the
meeting. On such date, there were 52,479,500 shares of Companys common stock outstanding.
By Order of the Board of Directors,
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/s/ Paul D. Gilbert
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PAUL D. GILBERT |
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Executive Vice President, Chief Legal and Development
Officer, Corporate Governance Officer and Corporate Secretary |
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April 27, 2011
CONTENTS
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PROXY STATEMENT
As a holder of common stock (Common Stock) of LifePoint Hospitals, Inc. (the Company), this
Proxy Statement and the Annual Report to Stockholders for the Year Ended 2010 (the Annual Report
to Stockholders) are available to you on the Internet or, upon your request, will be delivered to
you by mail or email in connection with the solicitation of proxies by the Board of Directors of
the Company to be voted at the 2011 Annual Meeting of Stockholders to be held on Tuesday, June 7,
2011 at 3:00 p.m. local time at 511 Union Street, Suite 2700, Nashville, Tennessee 37219, and at
any adjournments or postponements thereof (the Annual Meeting). Distribution of the Notice of
Internet Availability of Proxy Materials is scheduled to begin on or about April 27, 2011.
You can ensure that your shares are voted at the Annual Meeting by submitting your instructions by
telephone or by Internet, or if you requested a hard copy of the proxy materials, by completing,
signing, dating and returning the proxy card accompanying the materials in the envelope provided to
you. Submitting your instructions or proxy by any of these methods will not affect your right to
attend and vote at the Annual Meeting. We encourage our stockholders to submit proxies in advance
of the Annual Meeting. A stockholder who gives a proxy may revoke it at any time before it is
exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy or by
notifying the inspectors of election in writing of such revocation. If your shares of Common Stock
are held for you in a brokerage, bank or other institutional account, you must obtain a proxy from
that entity and bring it with you to hand in with your ballot in order to be able to vote your
shares at the Annual Meeting.
1
PROPOSAL 1: ELECTION OF DIRECTORS
Upon the recommendation of the Corporate Governance and Nominating Committee, which consists
entirely of independent directors, the Board of Directors has nominated the three individuals named
below under the caption Nominees for Election for election as directors to serve until the annual
meeting of stockholders in 2014 or until their successors have been elected and qualified. In
addition to the information presented below regarding each directors specific experience,
qualifications, attributes and skills that led to the conclusion that the person should serve as a
director of the Company, a discussion of the director nomination process and the general standards
for directors established by the Corporate Governance and Nominating Committee is contained in the
section entitled Board of Directors and Committees Director Nomination Process beginning on
page 10 of this Proxy Statement.
Nominees for Election
CLASS III DIRECTORS TERM WILL EXPIRE IN 2014
William F. Carpenter III, 56, Director since June 2006
William F. Carpenter III has served as Chief Executive Officer (CEO) of the Company since his
appointment on June 2006 and as Chairman of the Company since December 2010. Prior to June 2006,
Mr. Carpenter served as Executive Vice President of the Company from February 2004 until his
appointment as CEO. In addition, Mr. Carpenter served as General Counsel and Secretary of the
Company from May 1999 to June 2006 and Corporate Governance Officer from February 2003 to June
2006. From May 1999 to February 2004, Mr. Carpenter served as Senior Vice President of the Company.
From 2004 to 2007, he served as a director of Psychiatric Solutions, Inc. Among his other skills
and expertise, Mr. Carpenter brings to the Board of Directors his perspective as the Companys CEO,
decades of legal, development and corporate governance experience and the perspective gained from
serving on the Board of Directors of the Federation of American Hospitals, including serving as
Chair since 2010.
Richard H. Evans, 66, Director since June 2000
Richard H. Evans currently serves as the Chair of the Companys Compensation Committee. Mr. Evans
has been the chairman of Evans Holdings, LLC, a real estate investment and real estate services
company, since April 1999. Prior to that time, Mr. Evans served as chief executive officer of
Huizenga Sports, Entertainment Group, Madison Square Garden Corporation and Radio City Music Hall
Productions, chief operating officer of Gaylord Entertainment Company and chief operating officer
and corporate director of Florida Panthers Holdings, Inc. Mr. Evans currently serves as a member
of the board of directors of TharpeRobbins Company, Inc., an employee recognition company, and
previously served as a member of the Board of Governors of the National Basketball Association, the
National Hockey League, Major League Baseball and the National Football League. Among his other
skills and expertise, Mr. Evans brings to the Board of Directors decades of expertise in managing
employee-intensive businesses, consumer-facing organizations and entities with substantial real
estate holdings.
Michael P. Haley, 60, Director since April 2005
Michael P. Haley has served as executive chairman of Coach America, a transportation services
operator, since September 2007 and as an advisor to Fenway Partners, LLC, a private equity
investment firm, since April 2006 and a managing partner of its affiliate, Fenway Resources, since
2008. From January 2005 to June 2005, Mr. Haley served as chairman of MW Manufacturers, Inc., a
producer and distributor of window and door products for the residential construction industry, and
served as president and chief executive officer of MW Manufacturers, Inc., from 2001 to January
2005. Mr. Haley is chairman of the board of directors of Stanley Furniture Company (NASDAQ: STLY),
a furniture manufacturer, and a member of the board of directors of Ply Gem Industries, Inc. and
American National Bankshares, Inc. (NASDAQ: AMNB), a bank holding company. Among his other skills
and expertise, Mr. Haley brings to the Board of Directors substantial executive experience and
community leadership in markets like those in which the Company operates.
2
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 or Class II
directors.
CLASS I DIRECTORS TERM WILL EXPIRE IN 2012
Marguerite W. Kondracke, 65, Director since November 2007
Marguerite W. Kondracke has served as president and chief executive officer of Americas Promise
Alliance, a not-for-profit childrens advocacy organization, since October 2004. Prior to that
time, Ms. Kondracke served as special assistant to U.S. Senator Lamar Alexander, as well as the
staff director, Senate Subcommittee on Children and Families, between April 2003 and September
2004. From September 2001 to March 2003, Ms. Kondracke served as president and chief executive
officer of The Brown Schools, a leading provider of behavioral services for adolescents. Ms.
Kondracke is the co-founder, former chief executive officer and current Board member of Bright
Horizons Family Solutions, LLC, which provides childcare and other workplace services for employers
and families. Ms. Kondracke is currently a member of the Board of Directors of Saks, Inc. (NYSE:
SKS), a public company that operates department stores in the United States and overseas. Ms.
Kondracke also serves on the Board of Trustees of Duke University and Duke University Medical
Center. Her prior experience includes having served as Commissioner of Human Services for the State
of Tennessee, where her responsibilities included making eligibility determinations for the states
Medicaid program. She earlier served in various leadership capacities for the Tennessee Department
of Public Health. Among her other skills and expertise, Ms. Kondracke brings to the Board of
Directors experience in dealing with the legislative and executive branches of government and
executive experience in healthcare and other caregiving services, including experience as a chief
executive officer.
John E. Maupin, Jr., 64, Director since May 1999
John E. Maupin, Jr., currently serves as Chair of the Companys Corporate Governance and Nominating
Committee. Dr. Maupin has served as president and chief executive officer of Morehouse School of
Medicine since July 2006. From July 1994 through June 2006, he was president and chief executive
officer of Meharry Medical College. His other senior administrative positions have included
Executive Vice President and Chief Operating Officer of the Morehouse School of Medicine; Chief
Executive Officer of Southside Healthcare, Inc. Atlanta, Georgia; and Deputy Commissioner for
Medical Services, Baltimore City Health Department, Baltimore, Maryland. Dr. Maupin has served on
numerous health-related advisory councils and scientific panels. Most notably, he was recently
appointed to the National Healthcare Workforce Commission, which was created by the Patient
Protection and Affordable Care Act to serve as a national advisory resource to the U.S. Congress
and President. Dr. Maupin is a director of HealthSouth Corporation (NYSE:HLS), a post-acute
healthcare management company, and Regions Financial Corporation (NYSE:RF), a bank holding company.
He also serves as a director/trustee for VALIC family of funds, a group retirement fund complex.
From 2000 to 2006, Dr. Maupin served on the board of directors of Pinnacle Financial Partners, Inc.
(NASDAQ:PNFP), a bank holding company. As noted above, Dr. Maupin brings to the Board of Directors
a diverse experience as an executive in academic medicine, public health and ambulatory health
care, as well as experience in dealing with legislative and executive branches of government and
agencies within the U.S. Department of Health and Human Services.
Owen G. Shell, Jr., 74, Director since December 2002
Owen G. Shell, Jr. currently serves as the Companys Lead Director. From 2006 to December 2010,
Mr. Shell served as non-executive Chairman of the Companys Board of Directors. Mr. Shell has over
40 years of executive management experience in the banking industry. He served as president of the
Asset Management Group of Bank of America Corporation from November 1996 until his retirement in
June 2001. From 1986 through 1996, Mr. Shell served as the president of Bank of America for the
Tennessee
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region. Prior to that, Mr. Shell held several positions, including chairman, president and chief
executive officer of First American National Bank in Nashville, Tennessee. From 2004 to 2007, Mr.
Shell served as director of Central Parking Corporation. Among his other skills and expertise, Mr.
Shell brings to the Board of Directors his perspective from several years as Lead Director and
non-executive Chairman of the Company, as well as his decades of financial experience as an
executive in a highly regulated industry.
CLASS II DIRECTORS TERM WILL EXPIRE IN 2013
Gregory T. Bier, 64, Director since February 2008
Gregory T. Bier currently serves as Chair of the Companys Audit and Compliance Committee. Mr.
Bier retired in 2002 from Deloitte & Touche LLP. Prior to his retirement, Mr. Bier was the managing
partner of the Cincinnati Office of Deloitte & Touche LLP from 1998 to 2002. Mr. Bier joined
Haskins & Sells, which later became part of Deloitte, in 1968, and he became a certified public
accountant in 1970. Mr. Bier served on the audit committee of Catholic Healthcare Partners, one of
the largest not-for-profit health systems in the United States, from 2002 to 2007. He currently
serves as a director of Cincinnati Financial Corporation (NASDAQ: CINF), a public company that
markets commercial, personal and life insurance through independent insurance agencies. Among his
other skills and expertise, Mr. Bier brings to the Board of Directors financial expertise, public
company accounting experience and experience with auditing of health care service providers.
DeWitt Ezell, Jr., 72, Director since May 1999
DeWitt Ezell, Jr. served as state president of Tennessee for BellSouth Corporation, a
communications services company, from January 1990 until his retirement in April 1999. Mr. Ezell
served in various engineering, regulatory and public relations positions during his 37-year tenure
with BellSouth Corporation. Mr. Ezell served as the chairman of the board of BlueCross BlueShield
of Tennessee, a non-profit health insurance company, until April 2009. Among his other skills and
expertise, Mr. Ezell brings to the Board of Directors decades of executive experience with
regulated entities and experience with a large health care payor.
Your Board of Directors Recommends a Vote FOR Proposal 1
4
CORPORATE GOVERNANCE
The fundamental duties of the Board of Directors are to oversee the CEO and senior management in
the appropriate operation of the Company, to advise the CEO and senior management with respect to
the conduct of the Companys business and its strategic direction, and to protect the long-term
interests of the stockholders. To satisfy these duties, the directors take a proactive approach
through active and frequent communication with the CEO and other members of senior management, by
setting the correct tone at the top and ensuring that it permeates the Companys relationships,
and by defining what information the Board of Directors should receive and how. The Board of
Directors sets its own meeting agendas through its Lead Director and committee chairs.
The Board of Directors believes that governance is far more than a check the box activity.
Rather, the Board of Directors believes that how it functions is more important than the structure
in which it functions. To this end, each director completes detailed evaluations of the performance
and effectiveness of the Board of Directors, each of its committees and other directors on an
annual basis. As part of this process, the Companys Chief Legal Officer interviews each director
privately in an effort to identify any concerns that have not otherwise been identified. The
governance structure of the Company is designed to enable the Board of Directors to be an active,
collegial body that is prepared to make prompt, principled decisions, provide sound advice and
counsel and monitor the Companys compliance efforts, risk management and performance. The key
practices and procedures of the Board of Directors are outlined in the Corporate Governance
Standards available under the Corporate Governance section of the Companys website at
www.lifepointhospitals.com.
Independence of Directors
The Board has determined that all Board members except Mr. Carpenter are independent in accordance
with the applicable rules of The NASDAQ Stock Market LLC. All committee members, except our
Chairman who also serves as chair of the Quality Committee, are independent in accordance with
NASDAQs listing standards.
Code of Conduct and Code of Ethics
The Company has a Code of Conduct that provides guidance to all employees, including the Companys
CEO, Chief Financial Officer (CFO), principal accounting officer and the Board of Directors (the
Code of Conduct). The Board of Directors has also adopted the Code of Ethics for Senior Financial
Officers and the CEO, which specifically addresses the unique roles of these officers in corporate
governance (the Code of Ethics). Many of the topics covered in the Code of Ethics are also
addressed in the Companys Code of Conduct, and each of the officers subject to the Code of Ethics
is subject to, and has agreed to comply with, the Code of Conduct.
The Companys Code of Conduct and Code of Ethics are available under the Corporate Governance
section of its website at www.lifepointhospitals.com.
Compliance Hotline
The Audit and Compliance Committee has adopted a policy on the reporting of concerns regarding
accounting, internal controls or auditing matters. Any person, whether or not an employee, who has
a concern about the conduct of the Company or any of the Companys personnel, including with
respect to the Companys accounting, internal controls or auditing matters, may, in a confidential
and anonymous manner, communicate that concern through an external compliance hotline by calling
1-877-508-5433. The hotline services are available 24 hours a day, seven days a week. All calls to
the compliance hotline will be handled on an expedited basis and, under certain circumstances, will
be communicated directly to the Chair of the Audit and Compliance Committee.
5
Certain Relationships and Related Person Transactions
In addition to the Companys Corporate Governance Standards, Code of Conduct and Code of Ethics,
the Board has approved written policies and procedures that govern the review, approval and/or
ratification of transactions between the Company and its directors, director nominees, executive
officers, greater than five percent beneficial owners and each of their respective family members,
where the amount involved in the transaction exceeds or is expected to exceed $100,000 in any
single calendar year. A copy of the Related Person Transactions Policies and Procedures is
available under the Corporate Governance section of the Companys website at
www.lifepointhospitals.com.
This policy is administered under the oversight of the Audit and Compliance Committee. To assist
this committee in identifying potential related person transactions, each director and executive
officer is annually required to identify his or her family members and provide certain information
about them. The Companys Corporate Governance Officer disseminates a list of the related persons
to various officers and departments of the Company so that such transactions can readily be
identified. If a related person transaction is identified in advance and the Corporate Governance
Officer determines that the transaction is subject to this policy, he must submit the transaction
to the Audit and Compliance Committee (or its Chair, if time is of the essence) for consideration.
The Audit and Compliance Committee may generally approve such transactions that are in, or not
inconsistent with, the best interests of the Company and its stockholders. The policy also
enumerates certain related person transactions that are deemed automatically pre-approved by the
Audit and Compliance Committee because the SEC has determined that such transactions are not
required to be disclosed or they are unlikely to raise the concerns underlying the SECs disclosure
requirements.
During 2010, there were no reportable related person transactions for the Company, and no related
person had any reportable indebtedness to the Company or any of its subsidiaries.
6
BOARD OF DIRECTORS AND COMMITTEES
The Companys Board of Directors consists of eight members, seven of whom are independent. The
Companys Amended and Restated Certificate of Incorporation provides that the Board of Directors
shall be divided into three classes of as nearly equal size as possible. Approximately one-third of
the directors are elected each year. The Corporate Governance and Nominating Committee conducts an
annual evaluation of the Board of Directors, its committees and the directors, including the
Chairman and Lead Director, in order to evaluate their performance prior to nominating any director
for additional terms. During this process, the Corporate Governance and Nominating Committee
received from the Companys Chief Legal Officer a report regarding any matters of concern found
through the review of detailed background checks obtained by the Companys Chief Legal Officer from
a third party. In addition, the Corporate Governance and Nominating Committee considers a number
of subjective, objective, qualitative and quantitative factors before recommending any nominee to
the Board of Directors.
Directors are expected to attend all meetings of the Board of Directors, the annual meeting of
stockholders and all meetings of the committees on which they serve, with the understanding that on
occasion a director may be unable to attend a meeting. The Board of Directors held 11 meetings
(including regularly scheduled and special meetings) during 2010. During 2010, all directors
attended the annual meeting of stockholders. Additionally, no director attended fewer than 75% of
the aggregate of the total number of meetings of the Board of Directors and the total number of
meetings of the committees on which the director served.
Board Leadership Structure
Currently, the offices of Chairman of the Board and CEO of the Company are held by the same person.
From 2006 to December 2010, the Company had a non-executive Chairman. In December 2010, the Board
of Directors determined that the Companys stockholders would be best served by electing Mr.
Carpenter to be Chairman of the Board. The Board reached this decision after considering the
Companys governance structure and how it functioned, the number of companies in the healthcare
services industry that combined the Chairman and CEO roles, Mr. Carpenters contributions to the
Company, including a recognition of his role in setting the Companys strategic direction and in
attracting new executive management to the Company, and the importance of the Lead Director
position, as defined by the Company and set out in the written job description of the Lead
Director. The By-Laws and the Corporate Governance Standards of the Company allow the Chairman and
CEO roles to be held by the same person, and in such case, the Board of Directors is required to
have an independent Lead Director. The independent members of the Board of Directors selected Mr.
Shell, who previously served as the non-executive Chairman of the Board, to serve as the Lead
Director. The Lead Director advises and counsels the Chairman, coordinates with the Chairman on
the agenda and format for meetings of the Board, chairs executive sessions of the Board and serves
as a primary liaison between the independent directors and the CEO.
Executive Sessions of the Board
Routinely, the Board of Directors meets in executive sessions in which William F. Carpenter III,
the Companys Chairman and CEO and sole management director, and other members of management do not
participate. With respect to meetings during 2010, the non-executive Chairman presided over the
executive sessions of the Board of Directors. In 2011, the Lead Director began presiding over
these sessions.
Committees of the Board of Directors
The Board has adopted written charters for each of its four standing committees: the Audit and
Compliance Committee; the Compensation Committee; the Corporate Governance and Nominating
Committee; and the Quality Committee. The committee charters are available on the Companys website
under the Corporate Governance Section at www.lifepointhospitals.com.
7
Except for the Quality Committee, the committees of the Board of Directors are composed exclusively
of independent directors. The following table shows the current membership of each committee:
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Gregory T. Bier
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Richard H. Evans
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Chair
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DeWitt Ezell, Jr.
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Michael P. Haley
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Marguerite W. Kondracke
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John E. Maupin, Jr.
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Chair
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Owen G. Shell, Jr.
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William F. Carpenter III
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Chair |
Audit and Compliance Committee
The Audit and Compliance Committee is primarily responsible for selecting and overseeing the
services performed by the Companys independent registered public accounting firm, evaluating the
Companys accounting policies and its system of internal controls, monitoring compliance with the
Code of Conduct and the Code of Ethics, and monitoring and overseeing the internal audit and
compliance departments of the Company and their respective work plans and programs. The Board has
determined that Mr. Bier, Chair of the Audit and Compliance Committee, is qualified as an audit
committee financial expert, as defined by SEC rules, and that each member is independent in
accordance with the applicable rules of The NASDAQ Stock Market, LLC. During 2010, the Audit and
Compliance Committee held nine meetings. The report of the Audit and Compliance Committee is on
page 36 of this Proxy Statement.
Compensation Committee
The Compensation Committee is primarily responsible for approving compensation arrangements for the
CEO and other senior management of the Company and administering the Companys compensation plans.
Pursuant to its Charter, the Compensation Committee has authority to delegate any of its
responsibilities to subcommittees as the Compensation Committee may deem appropriate.
Additionally, the Compensation Committee engaged Mercer Consulting as compensation consultant for
2010 to assist in evaluating the Companys executive and director compensation. During 2010, the
Compensation Committee held six meetings. The report of the Compensation Committee is on page 11 of
this Proxy Statement.
The Compensation Committee has retained, without recommendation from management, Mercer Consulting
as its compensation consultant. Mercer Consulting, which does not directly or indirectly perform
any other services for the Company, is a subsidiary of Marsh & McLennan Companies, Inc., and, as a
result, has over 700 affiliates that operate in numerous distinct areas of business unrelated to
Mercers compensation consulting practice, including in property and casualty insurance. In
connection with insurance activities, as well as fees paid to Mercer as compensation consultant,
the Company paid Mercer and its affiliates an aggregate of approximately $0.5 million during 2010,
of which approximately $0.2 million was for Mercers services as compensation consultant. Neither
the Compensation Committee nor the Board of Directors approved in advance the services of Mercers
affiliates that were not related to executive compensation.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee is primarily responsible for identifying persons
qualified to become members of the Board of Directors and, when appropriate, recommending such
persons to the Board of Directors as proposed nominees for Board membership; ensuring that a
succession plan is in place for the position of CEO and other senior management positions; leading
the Board and directors in their respective annual reviews of the performance of the Board, its
committees
8
and individual directors; and regularly reviewing and considering evolving governance practices.
During 2010, there were no material changes to the procedures by which a stockholder may recommend
nominees to the Board of Directors. During 2010, the Corporate Governance and Nominating Committee
held five meetings.
Quality Committee
The Board of Directors of the Company established the Quality Committee in February 2010 to monitor
and provide leadership with respect to the quality of care provided at hospitals owned by the
Company. The Quality Committee has the authority and responsibility to: monitor the Companys
performance on established internal and external benchmarking regarding clinical performance and
outcomes; facilitate the development of industry best practices based on internal and external data
comparisons; consult with the Companys clinical leadership regarding leading edge strategies,
including clinical practices to be evaluated for the Companys adoption; foster enhanced awareness
of the Companys clinical performance; and help to establish a long-term, strategic clinical vision
for the Company. During 2010, the Quality Committee held three meetings.
Boards Role in Risk Oversight
The Board of Directors considers risk oversight as a high priority. The role of the Board of
Directors is to oversee and monitor the Companys risk management processes. Throughout the year,
the Board of Directors and the committees to which it has delegated responsibility dedicate a
portion of their meetings to review and discuss specific risk topics. The Board of Directors has
delegated responsibility for the oversight of specific risks to the following committees:
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The Enterprise Risk Management Committee of the Company, which is comprised of
individuals from all major areas of the Company including operational, financial, human
resource, legal and risk functions of the Company, is responsible for, among other
things, establishing a comprehensive process for the management of risk across the
Company and measurement methodologies for quantifying, comparing, benchmarking and
prioritizing risks facing the Company; |
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The Audit and Compliance Committee oversees the Companys guidelines, policies and
processes for monitoring and mitigating risk relating to the financial statements and
financial reporting processes, as well as key credit risks, liquidity risks, market
risks and compliance efforts, and receives reports from the Companys compliance and
audit services departments at each of its regular, quarter end and year end meetings; |
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The Compensation Committee monitors any risks related to the Companys executive
compensation policies and practices and the Companys compensation practices in
general; |
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The Corporate Governance and Nominating Committee oversees risks related to the
Companys governance structure, processes and risks arising from related person
transactions; and |
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The Quality Committee plays a significant role in evaluating risks with respect to
clinical performance and industry practices. |
Compensation Committee Interlocks and Insider Participation
During 2010, the Compensation Committee of the Board of Directors consisted of Dr. Maupin, Messrs.
Evans, Bier, Ezell, Haley and Shell and Ms. Kondracke. None of the members of the Compensation
Committee has at any time been an officer or employee of the Company, nor has any of the members
had any relationship requiring disclosure by the Company. None of the Companys executive officers
serves, or in the past year served, as a member of the board of directors or compensation committee
of any entity that has or had one or more of its executive officers serving on the Companys Board
of Directors or Compensation Committee.
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Director Nomination Process
The information required to be provided by a stockholder nominating a candidate for the Board of
Directors is set forth in the Companys By-Laws, and the general experience, qualifications,
attributes and skills established by the Corporate Governance and Nominating Committee for
directors are included in the Companys Corporate Governance Standards. The Company believes that
directors should possess the highest personal and professional ethics, integrity and values and be
committed to representing the long-term interests of the stockholders. They must also have an
inquisitive and objective perspective, practical wisdom and mature judgment. The Company endeavors
to have a Board of Directors representing diverse experience, and the Corporate Governance and
Nominating Committee will evaluate all potential nominees in the same manner. This committee also
considers candidates recommended by current directors, company officers and others.
The deadlines for timely submission by stockholders of persons for election as directors (other
than persons nominated by or at the direction of the Board of Directors) at the 2012 annual meeting
of stockholders is described in this Proxy Statement under the caption Additional Information
Other Stockholder Proposals for Presentation at the 2012 Annual Meeting. The Corporate Governance
and Nominating Committee will consider nominations by any Company stockholder of record who is
entitled to vote at the applicable meeting and who has complied with the notice procedures set
forth in the Companys By-Laws.
Nominations by stockholders of persons for election to the Board of Directors also may be made at a
special meeting of stockholders if the stockholders notice required by the Companys 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.
Stockholder Communication with the Board of Directors
Stockholders who wish to communicate with the Board of Directors (or specified individual
directors), including the non-management directors as a group, may do so by addressing their
correspondence to the appropriate member(s) of the Board of Directors (or the Board as a whole),
c/o the Corporate Secretary, LifePoint Hospitals, Inc., 103 Powell Court, Brentwood, Tennessee
37027. All written communications received in such manner from stockholders of the Company will be
forwarded to the members of the Board of Directors to whom the communication is directed or, if the
communication is not directed to any particular member(s) of the Board of Directors, the
communication will be forwarded to all members of the Board of Directors.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the disclosures contained in
the section entitled Compensation Discussion and Analysis required by SEC Regulation S-K, Item
402(b) beginning on page 12 of this Proxy Statement. Based on such review and discussions, the
Compensation Committee recommended to the Board of Directors that the section entitled
Compensation Discussion and Analysis be included in this Proxy Statement for the Annual Meeting
and incorporated by reference in the Companys Annual Report on Form 10-K for the year ended
December 31, 2010.
COMPENSATION COMMITTEE
Richard H. Evans, Chair
Gregory T. Bier
DeWitt Ezell, Jr.
Michael P. Haley
Marguerite W. Kondracke
John E. Maupin, Jr.
Owen G. Shell, Jr.
Dated: April 21, 2011
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary and 2010 Highlights
The Companys executive compensation program is designed to balance stockholder interests with the
Companys needs to retain and motivate executive talent. The Company also strives to conform its
pay practices with sound governance practices.
Key features of the Companys program include:
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Pay-for-performance: Over 75% of the targeted total compensation for the NEOs is at
risk based on the Companys financial performance and the performance of the Companys
stock price. |
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Performance-based equity: All of the NEOs long-term equity awards are
performance-based, through the granting of stock options and restricted stock awards,
and typically are subject to time-vesting. Additionally, restricted stock awards
typically require the Company to achieve certain financial goals before vesting. |
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Strategic alignment: The Companys non-equity incentive plan contains specific
targets regarding financial measures, such as growth in revenue, earnings before
interest, taxes, depreciation and amortization (EBITDA), and earnings per share
(EPS), and on patient satisfaction and quality care, consistent with our business
strategy. The Compensation Committee sets these targets at the beginning of each year. |
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Stockholder-friendly policies: The Company has adopted stock ownership guidelines
for the NEOs and a recoupment policy that provides for reimbursement of incentive
compensation paid based on a financial restatement because of fraud. Additionally,
with limited exceptions, the Companys executive compensation approach does not involve
the use of perquisites beyond those available to employees generally. |
The operation of the Companys executive compensation plan and actions taken by the Compensation
Committee in 2010 highlight our emphasis on pay-for-performance.
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The Company achieved financial results exceeding its targets while also achieving
all of its patient satisfaction and quality metrics goals. Compared to 2009, the
Companys: |
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revenues increased by 10.1% |
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EBITDA increased by 6.6% |
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EPS increased by 12.4% |
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As a result of the Companys financial performance and achievement of patient
satisfaction and quality metrics goals, the annual cash bonus payouts under the
Companys non-equity incentive plan were at 169% of the Target Bonus. |
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The 2010 financial goals set for our restricted share awards were also achieved, and
the shares will become unrestricted in 2013. |
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No salary increases were given to any of our NEOs in 2010. |
Principles of Executive Compensation
The Compensation Committee is comprised solely of the Companys seven independent directors. The
Compensation Committee oversees and directs the Companys executive compensation program and, on an
annual basis, sets the compensation of the executive officers who are named in the section titled
Compensation of Executive Officers Summary Compensation Table (the NEOs) and of a number of
other officers of the Company.
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When setting executive compensation, the Compensation Committee seeks to correctly balance the
following five principles (the Principles): (i) to attract, motivate and retain exceptional
leaders, the Companys compensation must be competitive, in form and amount, with the compensation
available from other employers and professional opportunities; (ii) to foster the tone at the top
that it desires and to ensure equity among all senior executives, the compensation paid to each NEO
should be within a reasonable range of that paid to the other NEOs and the Companys other senior
executives; (iii) the Company benefits from a compensation system that is easy to monitor,
implement, understand and describe; (iv) the Companys compensation program should drive the best
financial results; and (v) the Companys compensation program must take into account the heavily
regulated nature of the Companys business, the harm that could be done to the Company if its
compensation policies incentivize unacceptable risks or if employees feel that they can benefit
financially by taking improper legal or ethical risks, and the need for high quality care to be
provided in the Companys hospitals. The Principles are not applied in a rigid or formulaic manner,
but in a manner intended to further the long-term interests of the Company, its stockholders and
other stakeholders.
Components of Compensation
In 2010, the Companys executive compensation program was comprised of three main elements. These
elements were: (i) base salary; (ii) the possibility of receiving an annual cash bonus under the
Executive Performance Incentive Plan (the EPIP) if pre-established performance criteria were met;
and (iii) long-term equity-based incentives in the form of stock options and performance-based
restricted shares.
The Compensation Committee allocates compensation to individuals both as to specific components and
as a whole (Total Compensation), and strives to target Total Compensation opportunities for each
NEO within the range of Total Compensation for comparable executives at publicly-reporting
healthcare companies that the Compensation Committee considered comparable to the Company in terms
of revenue, market capitalization and/or other relevant indicators (which are referred to as the
comparator companies).1
In 2010, over 75% of the targeted Total Compensation of the NEOs was performance-based, consisting
of (i) annual cash bonuses if performance criteria were met, (ii) performance-based restricted
shares and (iii) stock options. Through this mix of compensation components, the Compensation
Committee seeks to incentivize year-to-year progress, long-term performance, and retention. Also,
because a significant portion of each NEOs compensation is performance-based, the actual
compensation realized by each NEO depends on the performance of the Company, and the value of its
shares of Common Stock, over both the short and long terms.
Base Salary
The base salaries of the NEOs are determined on an annual basis by the Compensation Committee based
largely on its application of the Principles. The Compensation Committee believes that base
salaries should be targeted within the range of base salaries for comparable executives at
comparator companies, and that they should also take into account other relevant factors such as
the NEOs unique roles and responsibilities, his or her performance over a period of years,
experience and results. Accordingly, the base salary of any particular individual may be above or
below the median of the applicable range of base salaries paid by the comparator companies.
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The Compensation Committee considered the
following comparator companies when making its 2010 compensation decisions:
Brookdale Senior Living Inc., Community Health Systems, Inc., DaVita Inc.,
Gentiva Health Services, Inc., HealthSouth Corp, Health Management Associates,
Inc., Kindred Healthcare, Inc., Lincare Holdings, Inc., Psychiatric Solutions,
Inc., Sun Healthcare Group, Inc., Sunrise Senior Living, Inc., Universal Health
Services, Inc. and Varian Medical Systems, Inc. The Compensation Committee
determined that the comparator companies constituted a relevant group for
purposes of comparing compensation data, although in some cases it also
evaluated proprietary survey data relating to a larger group of companies. |
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Annual Cash Bonuses
The Compensation Committee sets a target annual cash bonus expressed as a percentage of each NEOs
base salary (the Target Bonus). A significant amount of each NEOs potential annual cash
compensation, the Target Bonus is earned only if the Company meets or exceeds annual performance
targets set by the Compensation Committee at the start of each year (the Performance Criteria).
The opportunity to earn a Target Bonus is intended to incentivize the NEOs, from year to year, to
manage the Company in a manner that emphasizes the Companys performance against the Performance
Criteria. The NEOs can earn an amount less than their Target Bonuses if Performance Criteria are
partially achieved, but in excess of minimum, threshold targets. The NEOs also have the
opportunity to earn an amount greater than their Target Bonuses if goals for certain Performance
Criteria are exceeded, as was the case in 2010 with respect to three of the Performance Criteria.
The maximum potential bonus for an NEO in 2010 was equal to 200% of the Target Bonus.
Although the Performance Criteria may be revised by the Compensation Committee to reflect a
material change in the Companys strategic initiatives, no such revision was made with respect to
the 2010 Performance Criteria.
With respect to specific Performance Criteria for 2010, 75% of the Target Bonus of each NEO was
based on the Companys actual financial performance against the following goals:
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twenty-five percent (25%) of the Target Bonus was payable if the Company achieved
annual net revenues from continuing operations of at least $3,163.6 million and,
because the Companys actual result of $3,262.4 million in annual net revenues from
continuing operations exceeded the goal, 58% of the Target Bonus was earned, which was
the maximum potential for this Performance Criteria; |
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twenty-five percent (25%) of the Target Bonus was payable if the Company achieved
annual adjusted EBITDA from continuing operations of at least $497.6 million and,
because the Companys actual result of $500.1 million in adjusted EBITDA from
continuing operations exceeded the goal, 33% of the Target Bonus was earned; and |
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twenty-five percent (25%) of the Target Bonus was payable if the Company achieved
annual diluted earnings per share (EPS) from continuing operations of at least $2.78
and, because the Companys actual result of $2.91 in annual diluted EPS from continuing
operations exceeded the goal, 53% of the Target Bonus was earned. |
The remaining twenty-five percent (25%) of the Target Bonus was payable if the Company achieved
patient satisfaction and quality metrics with respect to the care provided at the Companys
hospitals, including improved core measure scores, Hospital Consumer Assessment of Healthcare
Providers and Systems scores and Emergency Department satisfaction scores in excess of the national
average, and the full 25% was earned for 2010 achievements.
Annual cash bonus payments to the NEOs are made under the terms of the EPIP. The Compensation
Committee may reduce any such bonus in its sole and absolute discretion, regardless of the
achievement of the Performance Criteria. The actual cash bonus paid for 2010 to each NEO is shown
in the Summary Compensation Table.
Long-Term Equity-Based Incentives
Long-term equity-based awards are intended to incentivize the NEOs to: manage the Company in a
manner that emphasizes long-term value creation for the Companys stockholders, including share
price appreciation; minimize any reason to seek short-term gains at the expense of long-term growth
and value creation; emphasize ethical and legal compliance throughout the Company and its
hospitals; and remain employed with the Company. These awards also consider the fact that, in
contrast to several comparator companies, the Company offers no supplemental welfare or retirement
benefits to the NEOs beyond
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those available to employees generally, except for the recently approved supplemental long-term
disability plan.
The Compensation Committee awards options and restricted shares to offer competitive compensation
arrangements with substantial performance and employee retention components. In administering the
Companys equity-based incentive programs, the Compensation Committee regularly evaluates the total
cost of such programs.
Stock Option Awards
In 2010, the Compensation Committee made its annual grant of stock option awards to the NEOs at its
first regularly scheduled meeting. All stock option awards granted in 2010 to NEOs vest in three
equal installments on the first, second and third anniversary following the date of the grant. The
Compensation Committee believes that stock options are inherently performance-based as value is
realized only if the price per share of the Common Stock increases.
The regularly scheduled meetings of the Compensation Committee at which stock option awards are
granted do not typically coincide with earnings releases or other periodic filings of the Company
that may have a material effect on the stock price of the Company and are scheduled in advance
without regard to those events. Under the provisions of the Companys 1998 Amended and Restated
Long-Term Incentive Plan (the LTIP), which is the sole plan under which stock options are granted
to NEOs, the exercise price of an option is set as the closing price of the Common Stock on the
most recent trading date before the grant date. The Compensation Committee does not grant stock
option awards with reload features and follows a policy against the re-pricing of stock options.
Restricted Share Awards
In 2010, the Compensation Committee granted restricted share awards to the NEOs under the LTIP
pursuant to the EPIP. As with stock option awards, the Compensation Committee granted restricted
share awards to the NEOs at its first regularly scheduled meeting. Additionally, Mr. Dill received
a supplemental grant of restricted share awards in June 2010 in connection with the Compensation
Committees mid-year analysis discussed in more detail below. In order to realize any value from
the restricted shares, (i) the NEO must remain employed by the Company through the three-year
anniversary of the grant date, and (ii) the Company must exceed an annual net revenue or EBITDA
performance target established by the Compensation Committee on each annual grant date. For the
2010 grant of restricted share awards to the NEOs, the Compensation Committee conditioned the grant
of restricted shares upon achievement by the Company during any one of the fiscal years 2010, 2011
or 2012 of either (a) annual net revenues from continuing operations of $3,163.6 million or (b)
annual adjusted EBITDA from continuing operations of $497.6 million.
Benefits and Perquisites
The NEOs generally receive only those benefits and perquisites available to employees generally.
The NEOs are eligible to participate in the Companys health and welfare programs, the 401(k) Plan,
and other employee recognition programs on the same basis as other employees. The Company offers
all employees group life, disability, medical, dental and vision insurance and other comparable
benefits.
The Company maintains a Management Stock Purchase Plan (the MSPP), available to approximately 306
management level employees of the Company, including the NEOs, which allows participants to
purchase shares of the Common Stock at an amount equal to 75% of the average market value of the
Common Stock since the last grant date. Shares purchased under the MSPP are restricted until the
third anniversary of the date of purchase and vest only if the participant continues to be employed
by the Company.
Effective as of January 1, 2010, the Company implemented a deferred compensation plan (the
Deferred Compensation Plan) for which the NEOs and certain other senior executives of the Company
are eligible. Pursuant to the Deferred Compensation Plan, the NEOs and other participants in the
Deferred
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Compensation Plan may defer up to 50% of their annual base compensation and up to 100% of any
annual cash bonus. In the discretion of the Compensation Committee, the Company may make additional
contributions to be credited to the account of any or all participants in the Deferred Compensation
Plan. Any such additional Company contributions generally will vest after two years or upon a
change of control of the Company. In September 2010, management of the Company recommended and the
Compensation Committee approved the implementation of a restoration match program under the
Deferred Compensation Plan. Under the restoration match program, the Company matches funds in the
Deferred Compensation Plan in an amount equal to the gap between IRS limitations and the maximum
amount participants can achieve under the Companys 401(k) Plan. Effective January 1, 2011, the
Deferred Compensation Plan was amended to describe the restoration match program. Also, on March
14, 2011, the Deferred Compensation Plan was amended to allow for mid-year deferral elections under
limited circumstances.
Additionally, in September 2010, management of the Company recommended and the Compensation
Committee approved the implementation of a supplemental long-term disability plan to accommodate
certain employees, including the NEOs, who cannot receive a maximum payout under the existing
long-term disability plan because of limitations within the plan.
Change in Control Protections
The NEOs are covered by the Companys Change in Control Severance Plan (the Change in Control
Plan). The Change in Control Plan provides certain payments and benefits to the NEOs upon a change
in control, if the employment of the NEOs is subsequently terminated or materially diminished. For
more information about the Change in Control Plan, please refer to the section below entitled
COMPENSATION OF EXECUTIVE OFFICERS Potential Payments upon Termination or Change in Control
Change in Control Arrangements.
Compensation of the Named Executive Officers
The compensation of individual NEOs is determined by the Compensation Committee. The Chair of the
Compensation Committee has a significant role in determining the compensation recommendations made
to the committee for its consideration, and works closely with John P. Bumpus, the Companys
Executive Vice President and Chief Administrative Officer, and Mercer Consulting, the Compensation
Committees compensation consultant in formulating such recommendations. Periodically, Mr.
Carpenter also provides input regarding these recommendations to Mr. Bumpus or directly to the
Chair of the Compensation Committee. The recommendations made to the Compensation Committee
regarding base salaries, annual cash bonuses and related Performance Criteria, and long-term
equity-based incentive recommendations for the Companys NEOs were based largely on the competitive
market data contained in the compensation consultants reports, application of the Principles and
other relevant factors including the experience, responsibilities and performance of each NEO.
For compensation set in 2010, the compensation consultant assisted the Compensation Committee in
its comparative evaluation of the compensation practices of the Company compared to those of the
comparator companies. The Compensation Committee uses the compensation practices of the comparator
companies to benchmark the compensation paid to the NEOs.
As noted above, the Compensation Committee strives to establish the Total Compensation of the
individual NEOs within the range of Total Compensation paid to comparable executives by the
comparator companies. When exercising its judgment in this regard, the Compensation Committee
considers other factors including the experience, responsibilities and performance of each NEO, the
performance of the NEOs as a team and the Companys overall financial performance. The Compensation
Committee also takes into account whether each NEO is, in its judgment, fairly compensated and
sufficiently incentivized to remain with the Company. Owen G. Shell, Jr., the Companys Lead
Director, directly and significantly influences compensation decisions made with respect to Mr.
Carpenter. Mr. Shell reviews Mr. Carpenters performance based on his observations and with input
from all other
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independent directors and discusses the results of this performance review with Mr. Carpenter. Mr.
Shell also makes compensation recommendations to the Compensation Committee with respect to Mr.
Carpenter.
The Compensation Committee recognizes that the NEOs have significant experience relevant to the
execution of the Companys strategic initiatives and goals, and that they also have substantial
operating history with the Company. As a result, when considering the retention risk posed by the
compensation decisions made with respect to each NEO, the Compensation Committee takes into account
the disruption that could be caused by the unplanned or unexpected departure of one or more NEOs,
including the time that might be required for any successor to fully transition into his or her
duties, and the potential costs that the Company would incur if it is required to replace an NEO
(or fill the position vacated by his or her internal successor) with an external candidate.
Ultimately, the Compensation Committee seeks to balance its view that it is fairly compensating and
incentivizing the NEOs (without over-compensating any NEO or establishing incentives that might
reasonably be expected to lead to risky or inappropriate behavior) with the Companys desire to
retain the NEOs.
Recommendations for merit increases in base salary for the NEOs historically occurred at the
Compensation Committees first meeting each year. For 2010, the Compensation Committee deferred
any recommendations for merit increases until the second quarter meeting. In June 2010, the
Compensation Committee reviewed managements recommendations regarding merit increases for the
senior management team, including the NEOs, and received the compensation consultants report
regarding comparator company compensation practices. At the recommendation of management, the
Compensation Committee did not approve any merit increases in 2010 base salary for the NEOs, but
did approve a supplemental grant of 6,500 restricted share awards to Mr. Dill.
Recent Compensation Committee Actions
As discussed above, at its meeting in September 2010, the Compensation Committee accepted
managements recommendation that the Company implement a restoration program under the Deferred
Compensation Plan and a supplemental long-term disability plan.
At its meeting in February 2011, the Compensation Committee approved managements recommendation
for merit increases to the base salary of each NEO, including a larger percentage increase for Mr.
Dill in consideration of his promotion to the role of President of the Company and evaluation of
his compensation relative to comparable executives at comparator companies. At this meeting, the
Compensation Committee also set the 2011 Performance Criteria for the NEOs and certified that the
Restricted Shares granted in 2010 had met the Performance Criteria set at the time they were
granted.
The Compensation Committee made certain changes in its approach to the 2011 Performance Criteria
from 2010. First, the Compensation Committee bifurcated the percentage of the Target Bonus
previously allocated to annual net revenue by creating performance goals for adjusted revenue from
the trailing 12 months of acquisitions closed in the calendar year. The calculation of adjusted
acquisition revenue will be based on the trailing 12 month performance of an acquisition target at
the time of the closing of the acquisition. Revenue and EBITDA from an acquired entity or asset
that are generated after the closing of such acquisition will be included in the Companys
financial results from continuing operations. The Compensation Committee believes that this
approach incentivizes growth through acquisitions in 2011 without losing focus on the importance of
identifying acquisition targets that are accretive to the Companys overall financial health.
Second, while the maximum percentage of the Target Bonus attributable to the Companys achievement
of defined patient satisfaction and quality metrics with respect to the care provided at the
Companys hospitals remained unchanged, the Compensation Committee approved parameters that allow
for the realization of less than the maximum Target Bonus. Third, the Compensation Committee
increased the maximum bonus from 200% of the Target Bonus to 250% of the Target Bonus.
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The Target Bonus of each NEO will be based on the Companys actual performance against the
following goals:
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twenty-five percent (25%) of the Target Bonus is payable if the Company achieves
certain defined patient satisfaction and quality metrics with respect to the care
provided at the Companys hospitals; |
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twelve and one-half percent (12.5%) of the Target Bonus is payable if the Company
achieves targeted annual net revenue from continuing operations; |
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twelve and one-half percent (12.5%) of the Target Bonus is payable if the revenue of
facilities acquired by the Company during 2011 exceeds a targeted amount (as determined
based on the pre-acquisition revenue of acquired facilities); |
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twenty-five percent (25%) of the Target Bonus is payable if the Company achieves
targeted annual adjusted EBITDA from continuing operations; and |
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twenty-five percent (25%) of the Target Bonus is payable if the Company achieves
targeted annual diluted EPS from continuing operations. |
Also in 2011, the Compensation Committee changed its approach to granting equity-based
compensation. Under the new approach, equity-based grants to NEOs are tied to the specific dollar
value of such grants (such that the number of restricted share awards and stock option awards
granted to NEOs is determined based on the Companys stock price divided by the target dollar value
of the grant). Prior to 2011, NEOs were granted a fixed number of restricted share awards and
stock option awards (which number was not specifically a function of the Common Stock price or the
dollar value of such grant). The primary factor in the Compensation Committee adopting this
approach, which resulted in a lower grant value in 2011, was to allow the Company to better monitor
its benchmarking of NEO compensation to comparator companies. The Company has experience using the
fixed value approach in recent years with respect to the compensation of its directors.
Stock Ownership Guidelines
The Compensation Committee has established stock ownership guidelines applicable to senior
executives (including the NEOs) and non-employee directors. These ownership guidelines provide
that the subject persons should own Company stock equal in value to their annual salary (or, in the
case of directors, their annual retainer) within five years from the date they become subject to
the ownership guidelines. The Compensation Committee will monitor compliance with the stock
ownership guidelines on an annual basis.
Recoupment Policy
The NEOs are subject to a Recoupment Policy Relating to Unearned Incentive Compensation of
Executive Officers (the Recoupment Policy). Generally, the Recoupment Policy provides that if the
Board of Directors determines that a senior executive (including, but not limited to, one of the
NEOs) has committed fraud and such fraud caused the Company to be required to restate its financial
statements, the Board of Directors may take, in its discretion, such action as it deems appropriate
with respect to the fraud.
The Board of Directors will, in all cases it determines appropriate, require reimbursement of any
incentive compensation paid to an executive subject to the policy. The Board of Directors may also
require reimbursement from executives subject to the Recoupment Policy of gains realized upon the
exercise of any equity-based awards previously made to such person that vested after the date of
adoption of the Recoupment Policy. The Recoupment Policy would allow reimbursement from an
executive subject to the policy only if and to the extent that (a) the amount paid to or realized
was calculated based upon the achievement of certain financial results that were subsequently
reduced due to the restatement, (b) if the Board of Directors determines that such person actually
committed a fraud that
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obligated the Company to restate its financial statements, and (c) the amount of the incentive
compensation that would have been paid to, or the amount of the gains realized by, an executive
subject to the policy, had the financial results not been restated, would have been lower than the
amount actually paid or realized. The Board of Directors will not seek to recover compensation paid
or amounts realized more than three years prior to the date that the applicable restatement is
first publicly disclosed.
Impact of Tax Treatment
Under Section 162(m) of the Internal Revenue Code, publicly held corporations may not take a tax
deduction for compensation in excess of $1.0 million paid to an NEO unless that compensation meets
the Internal Revenue Codes definition of performance-based compensation. Section 162(m) allows a
deduction for compensation to a specified executive that exceeds $1.0 million only if it is paid
solely upon attainment of one or more performance goals pursuant to a qualifying performance-based
compensation plan adopted by the Compensation Committee, the terms of which are approved by the
stockholders before payment of the compensation.
The Compensation Committee considers deductibility under Section 162(m) with respect to
compensation arrangements for executive officers. The Committee believes that it is in the
Companys best interests for the Committee to retain its flexibility and discretion to make
compensation awards to foster achievement of performance goals established by the Compensation
Committee and the Principles. The Compensation Committee believes that the Companys outstanding
stock options and restricted share grants qualify as performance-based compensation and are not
subject to any deductibility limitations under Section 162(m). Grants of restricted stock,
restricted stock units, stock options or other equity-based awards that are not subject to specific
quantitative performance measures will likely not qualify as performance-based compensation and,
in such event, would be subject to Section 162(m) deduction restrictions.
19
COMPENSATION OF EXECUTIVE OFFICERS
Executive Officers of the Company
The following list identifies the name, age and position(s) of the executive officers of the
Company:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
William F. Carpenter III
|
|
|
56 |
|
|
Chairman and Chief Executive Officer |
David M. Dill
|
|
|
42 |
|
|
President and Chief Operating Officer |
Jeffrey S. Sherman
|
|
|
45 |
|
|
Executive Vice President and Chief Financial Officer |
Paul D. Gilbert
|
|
|
44 |
|
|
Executive Vice President, Chief Legal and Development
Officer; Corporate Governance Officer; Corporate
Secretary |
John P. Bumpus
|
|
|
50 |
|
|
Executive Vice President and Chief Administrative Officer |
Lanny R. Copeland, M.D.
|
|
|
66 |
|
|
Chief Medical Officer |
Joné Law Koford
|
|
|
54 |
|
|
President, Strategic Growth and Development |
R. Scott Raplee
|
|
|
45 |
|
|
President, Operations Support and Planning |
Michael S. Coggin
|
|
|
41 |
|
|
Senior Vice President and Chief Accounting Officer |
The term of each executive officer runs until his or her successor is appointed by the Board,
or until his or her earlier death, resignation or removal. Below is a biographical summary of the
experience of the executive officers of the Company. Information pertaining to Mr. Carpenter, who
is both a director and an executive officer of the Company, may be found in the section entitled
Proposal 1 Election of Directors.
David M. Dill has served as President of the Company since January 2011 and as Chief Operating
Officer of the Company since April 2009. Mr. Dill served as Executive Vice President from April
2009 to January 2011. From February 2008 to April 2009, Mr. Dill served as the Companys Executive
Vice President and Chief Financial Officer. Mr. Dill joined the Company in July 2007 as Chief
Financial Officer. From March 2006 until Mr. Dill joined the Company, he served as executive vice
president of Fresenius Medical Care North America and as chief executive officer of one of two
United States divisions of Fresenius Medical Care Services, a wholly owned subsidiary of Fresenius
Medical Care AG & Co. KGaA. Mr. Dill previously served as executive vice president, chief financial
officer and treasurer of Renal Care Group, Inc., a publicly traded dialysis services company, from
November 2003 until Renal Care Group was acquired by Fresenius Medical Care in March 2006. From
1996 to November 2003, Mr. Dill served in various finance and accounting roles with Renal Care
Group, Inc. Mr. Dill served as a member of the board of directors of Psychiatric Solutions, Inc., a
behavioral health services company, from 2005 until 2010.
Jeffrey S. Sherman has served as Executive Vice President and Chief Financial Officer since joining
the Company in April 2009. From September 2005 until he joined the Company, Mr. Sherman served as
Vice President and Treasurer of Tenet Healthcare, where he managed all aspects of corporate
finance, including cash flow management and capital structure, and was responsible for risk
management. Mr. Sherman worked in various capacities for Tenet and its predecessor company since
1990, including as a hospital chief financial officer, regional vice president and ultimately as
the companys treasurer.
Paul D. Gilbert has served as Executive Vice President, Chief Legal Officer and Corporate
Governance Officer of the Company since February 2008. Since February 2009, Mr. Gilbert has also
served as the Companys Chief Development Officer and, since December 15, 2010, he has also served
as Corporate Secretary. From August 2006 until February 2008, Mr. Gilbert served as Senior Vice
President, General Counsel, Secretary and Corporate Governance Officer of the Company. Prior to
such time, Mr. Gilbert was a partner in the law firm of Waller Lansden Dortch & Davis, LLP from
January 1999 to August 2006. While in private practice, Mr. Gilbert advised hospitals and
healthcare systems in the acquisition, affiliation, joint venture, sale or merger of acute care
hospitals and behavioral or psychiatric hospitals throughout the United States and the Caribbean.
John P. Bumpus has served as Executive Vice President and Chief Administrative Officer of the
Company since February 2008. From April 2005 until February 2008, Mr. Bumpus served as Senior Vice
President,
20
Human Resources and Administration of the Company. Prior to joining the Company in April 2005, Mr.
Bumpus served as vice president human resources with Province Healthcare Company.
Lanny R. Copeland, M.D. has served as the Companys Chief Medical Officer since August 2007. Prior
to joining LifePoint, Dr. Copeland served as Vice President, Medical Affairs, for Triad Hospitals
Inc., from 2001-2007. Dr. Copelands background includes numerous academic appointments and
professional memberships. He served terms as Chairman and President for the American Academy of
Family Physicians. He also served as President of the American Board of Family Medicine and
Professor for the Department of Family and Community Medicine at Mercer University School of
Medicine in Macon, Georgia. He practiced medicine for more than 20 years in private practices in
Indiana and Georgia.
Joné Law Koford has served as the Companys President, Strategic Growth and Development since
November 2009. From January 2008 to November 2009, Ms. Koford served as one of the Group
Presidents of the Company. From September 2001 to January 2008, Ms. Koford served as a Division
President of the Company. From May 2001 until August 2001, Ms. Koford served as Vice President of
Development for the Company. Prior to that, Ms. Koford served in various operations positions with
Altius Health Plans, Strategic Health Initiatives, Arcon Healthcare, Inc., HCA Inc. and
HealthTrust, Inc.
R. Scott Raplee has served as the Companys President, Operations Support and Planning since
January 2011. From November 2009 to January 2011, he served as the Companys President,
Operations. From January 2008 to November 2009, Mr. Raplee served as one of the Group Presidents
of the Company. From March 2004 to January 2008, Mr. Raplee served as Senior Vice President,
Operations Chief Financial Officer of the Company. From May 1999 until February 2004, Mr. Raplee
served as a Division Chief Financial Officer of the Company. Prior to that time, Mr. Raplee served
in various financial positions with HCA Inc.
Michael S. Coggin has served as Senior Vice President and Chief Accounting Officer of the Company
since December 2008. From September 2007 until December 2008, Mr. Coggin served as Chief Financial
Officer of Specialty Care Services Group, a multi-service line healthcare provider primarily
focused on providing perfusion and auto-transfusion services to hospitals. Mr. Coggin was a senior
vice president in the finance, accounting and internal audit groups of Renal Care Group, Inc., a
publicly-traded kidney dialysis services company, from April 2004 until its acquisition by
Fresenius Medical Care AG & Co. KGaA in March 2006. Following the acquisition, Mr. Coggin provided
finance and accounting oversight for business units within the East Division of Fresenius. Prior to
that time, Mr. Coggin was an audit manager at KPMG Peat Marwick in Nashville, Tennessee.
21
Summary Compensation Table
The table below sets forth the compensation of the CEO, the CFO, and the three other most highly
compensated executive officers who were serving as executive officers on December 31, 2010. These
individuals are referred to in this Proxy Statement as the Named Executive Officers or NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
All Other |
|
|
Name and Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Compen- |
|
Compen- |
|
|
Position |
|
Year(1) |
|
Salary |
|
Bonus(2) |
|
Awards(3) |
|
Awards(4) |
|
sation(5) |
|
sation |
|
Total |
William F. Carpenter III |
|
|
2010 |
|
|
$ |
940,000 |
|
|
|
|
|
|
$ |
2,986,052 |
|
|
$ |
2,637,499 |
|
|
$ |
1,588,600 |
|
|
|
|
|
|
$ |
8,152,151 |
|
Chairman and |
|
|
2009 |
|
|
|
949,231 |
|
|
|
|
|
|
|
4,320,998 |
|
|
|
1,532,900 |
|
|
|
1,137,400 |
|
|
|
|
|
|
|
7,940,529 |
|
Chief Executive Officer |
|
|
2008 |
|
|
|
800,000 |
|
|
|
|
|
|
|
1,308,918 |
|
|
|
803,371 |
|
|
|
868,000 |
|
|
|
|
|
|
|
3,780,289 |
|
Jeffrey S. Sherman |
|
|
2010 |
|
|
|
435,000 |
|
|
|
|
|
|
|
952,162 |
|
|
|
673,404 |
|
|
|
551,363 |
|
|
|
198,245 |
(6) |
|
|
2,810,174 |
|
Executive Vice President, |
|
|
2009 |
|
|
|
301,154 |
|
|
|
|
|
|
|
819,000 |
|
|
|
607,020 |
|
|
|
296,072 |
|
|
|
74,921 |
(6) |
|
|
2,098,167 |
|
Chief Financial Officer |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Dill |
|
|
2010 |
|
|
|
535,000 |
|
|
|
|
|
|
|
1,200,554 |
|
|
|
673,404 |
|
|
|
813,735 |
|
|
|
|
|
|
|
3,222,693 |
|
President and |
|
|
2009 |
|
|
|
553,654 |
|
|
|
|
|
|
|
665,859 |
|
|
|
458,946 |
|
|
|
582,615 |
|
|
|
|
|
|
|
2,261,074 |
|
Chief Operating Officer |
|
|
2008 |
|
|
|
481,231 |
|
|
|
|
|
|
|
591,499 |
|
|
|
363,581 |
|
|
|
397,653 |
|
|
|
|
|
|
|
1,833,964 |
|
Paul D. Gilbert |
|
|
2010 |
|
|
|
465,000 |
|
|
|
|
|
|
|
787,750 |
|
|
|
561,170 |
|
|
|
589,388 |
|
|
|
|
|
|
|
2,403,308 |
|
Executive Vice President, |
|
|
2009 |
|
|
|
476,827 |
|
|
|
|
|
|
|
535,250 |
|
|
|
383,225 |
|
|
|
421,988 |
|
|
|
|
|
|
|
1,817,290 |
|
Chief Legal and |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development Officer;
Corporate Governance
Officer; Corporate
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Scott Raplee |
|
|
2010 |
|
|
|
412,000 |
|
|
|
|
|
|
|
630,200 |
|
|
|
448,936 |
|
|
|
417,768 |
|
|
|
|
|
|
|
1,908,904 |
|
President, Operations |
|
|
2009 |
|
|
|
425,539 |
|
|
|
|
|
|
|
428,200 |
|
|
|
306,580 |
|
|
|
299,112 |
|
|
|
|
|
|
|
1,459,431 |
|
Support and Planning |
|
|
2008 |
|
|
|
393,654 |
|
|
|
|
|
|
|
386,850 |
|
|
|
242,387 |
|
|
|
260,400 |
|
|
|
|
|
|
|
1,283,291 |
|
|
|
|
(1) |
|
In accordance with SEC rules, this table reflects compensation for the three most recently
completed fiscal years for individuals who were NEOs during 2010 and compensation for the two
most recently completed fiscal years for two individuals who became NEOs in 2009. |
|
(2) |
|
Reflects discretionary bonuses under the EPIP. No such bonuses were paid in 2008, 2009 or
2010. |
|
(3) |
|
Reflects the grant date fair value for restricted stock awards granted under the LTIP and the
share purchase date fair value relating to the incremental value of restricted Common Stock
received pursuant to the MSPP, in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 718-10, Compensation-Stock Compensation
(ASC 718-10), as follows for 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
Restricted Stock |
|
Common |
|
|
|
|
Awards |
|
Stock Acquired |
|
|
|
|
Granted under the |
|
under |
|
Total Stock |
Name |
|
LTIP |
|
the MSPP |
|
Awards |
Carpenter |
|
$ |
2,930,430 |
|
|
$ |
55,622 |
|
|
$ |
2,986,052 |
|
Sherman |
|
|
945,300 |
|
|
|
6,862 |
|
|
|
952,162 |
|
Dill |
|
|
1,168,900 |
|
|
|
31,654 |
|
|
|
1,200,554 |
|
Gilbert |
|
|
787,750 |
|
|
|
|
|
|
|
787,750 |
|
Raplee |
|
|
630,200 |
|
|
|
|
|
|
|
630,200 |
|
|
|
|
|
|
The assumptions used in calculating the accrued values are set forth in Note 9 to the
Companys financial statements included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2010. |
|
(4) |
|
Reflects the grant date fair value for stock option awards granted under the LTIP in
accordance with ASC 718-10. The assumptions used in calculating the values are set forth in
Note 9 to the Companys financial statements included in the Companys Annual Report on Form
10-K for the year ended December 31, 2010. |
|
(5) |
|
Reflects cash awards earned under the EPIP. |
|
(6) |
|
Reflects expenses paid by the Company in connection with Mr. Shermans relocation. |
22
Grants of Plan-Based Awards
The following table provides information about equity and non-equity incentive plan awards granted
to the NEOs in 2010, including: (1) the grant date; (2) possible future payouts under non-equity
incentive plan awards and estimated future payouts under equity incentive plan awards; (3) the
number of shares underlying all other stock awards; (4) the number of shares underlying all other
stock option awards; (5) the exercise price of the stock option awards, which reflects the closing
price of the Common Stock on the date of grant; and (6) the grant date fair value of each equity
award computed under ASC 718-10.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
Exercise |
|
Grant Date |
|
|
|
|
|
|
Possible Future Payouts Under |
|
Estimated Future Payouts |
|
Number of |
|
Number of |
|
or Base |
|
Fair Value |
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
Under Equity Incentive Plan |
|
Shares of |
|
Securities |
|
Price of |
|
of Stock |
|
|
Grant |
|
Awards(1) |
|
Awards(2) |
|
Stock or |
|
Underlying |
|
Option |
|
and Option |
Name |
|
Date |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
Units(3) |
|
Options |
|
Awards(4) |
|
Awards(5) |
Carpenter |
|
|
N/A |
|
|
$ |
47,000 |
|
|
$ |
940,000 |
|
|
$ |
1,880,00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
01/01/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,587 |
|
|
|
|
|
|
|
|
|
|
|
40,784 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,930,430 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,000 |
|
|
|
31.51 |
|
|
|
2,637,499 |
|
|
|
|
07/01/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,545 |
|
|
|
|
|
|
|
|
|
|
|
14,838 |
|
Sherman |
|
|
N/A |
|
|
$ |
16,313 |
|
|
$ |
326,250 |
|
|
$ |
652,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945,300 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
31.51 |
|
|
|
673,404 |
|
|
|
|
07/01/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,177 |
|
|
|
|
|
|
|
|
|
|
|
6,862 |
|
Dill |
|
|
N/A |
|
|
$ |
24,075 |
|
|
$ |
481,500 |
|
|
$ |
963,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,041 |
|
|
|
|
|
|
|
|
|
|
|
23,206 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945,300 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
31.51 |
|
|
|
673,404 |
|
|
|
|
06/07/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,600 |
|
|
|
|
07/01/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,449 |
|
|
|
|
|
|
|
|
|
|
|
8,448 |
|
Gilbert |
|
|
N/A |
|
|
$ |
17,438 |
|
|
$ |
348,750 |
|
|
$ |
697,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787,750 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
31.51 |
|
|
|
561,170 |
|
Raplee |
|
|
N/A |
|
|
$ |
12,360 |
|
|
$ |
247,200 |
|
|
$ |
494,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
630,200 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
31.51 |
|
|
|
448,936 |
|
|
|
|
(1) |
|
Reflects cash bonus awards granted under the EPIP where receipt is contingent upon the
achievement of certain performance goals. Threshold amount is equal to 5% of target amount.
Maximum amount is equal to 200% of target amount for all NEOs. For more information about the
cash bonus awards and performance goals for the NEOs, please refer to the section above
entitled COMPENSATION DISCUSSION AND ANALYSIS. |
|
(2) |
|
Reflects restricted stock awards where vesting is contingent upon the achievement of certain
performance goals defined pursuant to the EPIP and continued employment with the Company
through the third anniversary of the date of grant. For more information about the performance
criteria for the NEOs, please refer to the section above entitled COMPENSATION DISCUSSION AND
ANALYSIS. |
|
(3) |
|
Reflects restricted stock issued under the MSPP. |
|
(4) |
|
For stock option awards granted under the LTIP, reflects the fair market value of a share of
Common Stock, defined in the LTIP as the closing sales price of the Common Stock on the
trading day immediately preceding the date of grant. |
|
(5) |
|
Reflects the grant date fair value of stock and option awards granted under the LTIP and MSPP
in accordance with ASC 718-10. The assumptions used in calculating the grant date fair values
of option awards are set forth in Note 9 to the Companys financial statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2010. |
23
Outstanding Equity Awards at Fiscal Year-End
The following tables provide information on the current holdings of option and stock awards for
each NEO outstanding as of the end of the 2010 fiscal year. These tables include unexercised and
unvested option awards and unvested restricted stock awards with vesting conditions that were not
satisfied as of December 31, 2010. Each equity grant is shown separately for each NEO. The vesting
schedule for each outstanding award is shown following these tables, based on the option or stock
award grant date. For additional information about the option and stock awards, see the description
of equity-based incentive compensation in the Compensation Discussion and Analysis beginning on
page 12.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Number of |
|
Underlying |
|
|
|
|
|
|
Option |
|
Securities Underlying Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
|
Award |
|
Options |
|
Unearned |
|
Exercise |
|
Expiration |
Name |
|
Grant Date |
|
Exercisable |
|
Unexercisable |
|
Options |
|
Price |
|
Date |
Carpenter |
|
|
02/25/02 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
02/24/03 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
21.05 |
|
|
|
02/24/2013 |
|
|
|
|
02/20/04 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
33.17 |
|
|
|
02/20/2014 |
|
|
|
|
04/22/05 |
|
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
02/22/06 |
|
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
09/18/06 |
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
36.22 |
|
|
|
09/18/2016 |
|
|
|
|
02/28/08 |
|
|
|
66,666 |
|
|
|
33,334 |
(1) |
|
|
|
|
|
|
25.79 |
|
|
|
02/28/2018 |
|
|
|
|
02/24/09 |
|
|
|
66,666 |
|
|
|
133,334 |
(2) |
|
|
|
|
|
|
21.41 |
|
|
|
02/24/2019 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
235,000 |
(3) |
|
|
|
|
|
|
31.51 |
|
|
|
02/23/2020 |
|
Sherman |
|
|
05/12/09 |
|
|
|
20,000 |
|
|
|
40,000 |
(4) |
|
|
|
|
|
|
27.30 |
|
|
|
05/12/2019 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
60,000 |
(3) |
|
|
|
|
|
|
31.51 |
|
|
|
02/23/2020 |
|
Dill |
|
|
05/08/07 |
|
|
|
90,000 |
|
|
|
|
|
|
|
|
|
|
|
38.22 |
|
|
|
05/08/2017 |
|
|
|
|
02/28/08 |
|
|
|
30,000 |
|
|
|
15,000 |
(1) |
|
|
|
|
|
|
25.79 |
|
|
|
02/28/2018 |
|
|
|
|
02/24/09 |
|
|
|
20,000 |
|
|
|
40,000 |
(2) |
|
|
|
|
|
|
21.41 |
|
|
|
02/24/2019 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
60,000 |
(3) |
|
|
|
|
|
|
31.51 |
|
|
|
02/23/2020 |
|
Gilbert |
|
|
08/07/06 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
32.77 |
|
|
|
08/07/2016 |
|
|
|
|
02/28/08 |
|
|
|
|
|
|
|
11,667 |
(1) |
|
|
|
|
|
|
25.79 |
|
|
|
02/28/2018 |
|
|
|
|
02/24/09 |
|
|
|
|
|
|
|
33,334 |
(2) |
|
|
|
|
|
|
21.41 |
|
|
|
02/24/2019 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
50,000 |
(3) |
|
|
|
|
|
|
31.51 |
|
|
|
02/23/2020 |
|
Raplee |
|
|
02/11/01 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
37.13 |
|
|
|
02/11/2011 |
|
|
|
|
02/25/02 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
36.51 |
|
|
|
02/25/2012 |
|
|
|
|
04/22/05 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
42.60 |
|
|
|
04/22/2015 |
|
|
|
|
02/22/06 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
33.02 |
|
|
|
02/22/2016 |
|
|
|
|
02/28/08 |
|
|
|
20,000 |
|
|
|
10,000 |
(1) |
|
|
|
|
|
|
25.79 |
|
|
|
02/28/2018 |
|
|
|
|
02/24/09 |
|
|
|
13,333 |
|
|
|
26,667 |
(2) |
|
|
|
|
|
|
21.41 |
|
|
|
02/24/2019 |
|
|
|
|
02/23/10 |
|
|
|
|
|
|
|
40,000 |
(3) |
|
|
|
|
|
|
31.51 |
|
|
|
02/23/2020 |
|
|
|
|
(1) |
|
These options became exercisable on February 28, 2011. |
|
(2) |
|
One-half of these options became exercisable on February 24, 2011 and the remainder will
become exercisable on February 24, 2012. |
|
(3) |
|
One-third of these options became exercisable on February 23, 2011, and the remaining
two-thirds will become exercisable one-half on February 23, 2012 and the remainder on February
23, 2013. |
|
(4) |
|
One-half of these options become exercisable on May 12, 2011 and the remainder will become
exercisable on May 12, 2012. |
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive |
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
Plan Awards: |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
Market or Payout |
|
|
|
|
|
|
Shares or Units |
|
Market Value of |
|
Unearned Shares, |
|
Value of Unearned |
|
|
|
|
|
|
of Stock That |
|
Shares or Units of |
|
Units or Other |
|
Shares, Units or |
|
|
Stock Award |
|
Have Not |
|
Stock That Have |
|
Rights That Have |
|
Other Rights That |
Name |
|
Grant Date |
|
Vested |
|
Not Vested(12) |
|
Not Vested |
|
Have Not Vested |
Carpenter |
|
|
02/28/08 |
|
|
|
50,000 |
(1) |
|
$ |
1,837,500 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
07/01/08 |
|
|
|
2,806 |
(2) |
|
|
103,121 |
|
|
|
|
|
|
|
|
|
|
|
|
01/01/09 |
|
|
|
2,945 |
(3) |
|
|
108,229 |
|
|
|
|
|
|
|
|
|
|
|
|
02/24/09 |
|
|
|
100,000 |
(4) |
|
|
3,675,000 |
|
|
|
|
|
|
|
|
|
|
|
|
02/24/09 |
|
|
|
100,000 |
(5) |
|
|
3,675,000 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/09 |
|
|
|
3,741 |
(6) |
|
|
137,482 |
|
|
|
|
|
|
|
|
|
|
|
|
01/01/10 |
|
|
|
3,587 |
(7) |
|
|
131,822 |
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
93,000 |
(8) |
|
|
3,417,750 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/10 |
|
|
|
2,545 |
(9) |
|
|
93,529 |
|
|
|
|
|
|
|
|
|
Sherman |
|
|
05/12/09 |
|
|
|
30,000 |
(10) |
|
|
1,102,500 |
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
30,000 |
(8) |
|
|
1,102,500 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/10 |
|
|
|
1,177 |
(9) |
|
|
43,255 |
|
|
|
|
|
|
|
|
|
Dill |
|
|
02/28/08 |
|
|
|
22,500 |
(1) |
|
|
826,875 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/08 |
|
|
|
1,622 |
(2) |
|
|
59,609 |
|
|
|
|
|
|
|
|
|
|
|
|
01/01/09 |
|
|
|
1,841 |
(3) |
|
|
67,657 |
|
|
|
|
|
|
|
|
|
|
|
|
02/24/09 |
|
|
|
30,000 |
(4) |
|
|
1,102,500 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/09 |
|
|
|
2,242 |
(6) |
|
|
82,394 |
|
|
|
|
|
|
|
|
|
|
|
|
01/01/10 |
|
|
|
2,041 |
(7) |
|
|
75,007 |
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
30,000 |
(8) |
|
|
1,102,500 |
|
|
|
|
|
|
|
|
|
|
|
|
06/07/10 |
|
|
|
6,500 |
(11) |
|
|
238,875 |
|
|
|
|
|
|
|
|
|
|
|
|
07/01/10 |
|
|
|
1,449 |
(9) |
|
|
53,251 |
|
|
|
|
|
|
|
|
|
Gilbert |
|
|
02/28/08 |
|
|
|
17,500 |
(1) |
|
|
643,125 |
|
|
|
|
|
|
|
|
|
|
|
|
02/24/09 |
|
|
|
25,000 |
(4) |
|
|
918,750 |
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
25,000 |
(8) |
|
|
918,750 |
|
|
|
|
|
|
|
|
|
Raplee |
|
|
02/28/08 |
|
|
|
15,000 |
(1) |
|
|
551,250 |
|
|
|
|
|
|
|
|
|
|
|
|
02/24/09 |
|
|
|
20,000 |
(4) |
|
|
735,000 |
|
|
|
|
|
|
|
|
|
|
|
|
02/23/10 |
|
|
|
20,000 |
(8) |
|
|
735,000 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The restricted stock awards granted to the executives on February 28, 2008 became
unrestricted on February 28, 2011. |
|
(2) |
|
These shares of restricted stock purchased pursuant to the MSPP will become unrestricted on
July 1, 2011. |
|
(3) |
|
These shares of restricted stock purchased pursuant to the MSPP will become unrestricted on
January 1, 2012. |
|
(4) |
|
The restricted stock awards granted to the executives on February 24, 2009 will become
unrestricted on February 24, 2012. |
|
(5) |
|
One-half of this one-time, special grant of restricted stock awards will become unrestricted
on February 24, 2013, and one-half will become unrestricted on February 24, 2014. |
|
(6) |
|
These shares of restricted stock purchased pursuant to the MSPP will become unrestricted on
July 1, 2012. |
|
(7) |
|
These shares of restricted stock purchased pursuant to the MSPP will become unrestricted on
January 1, 2013. |
|
(8) |
|
The restricted stock awards granted to the executives on February 23, 2010 will become
unrestricted on February 23, 2013. |
|
(9) |
|
These shares of restricted stock purchased pursuant to the MSPP will become unrestricted on
July 1, 2013. |
|
(10) |
|
These restricted stock awards will become unrestricted on May 12, 2012. |
|
(11) |
|
These restricted stock awards will become unrestricted on June 7, 2013. |
|
(12) |
|
Reflects the value of stock awards granted under the LTIP and MSPP based on the closing price
of the Common Stock as of December 31, 2010. |
25
Option Exercises and Stock Vested at Fiscal Year-End
The following table provides information for each NEO on (1) stock option awards exercised during
2010, including the number of shares acquired upon exercise and the value realized, and (2) the
number of shares acquired during 2010 upon the vesting of restricted stock awards and the value
realized, each before payment of any applicable withholding tax and brokerage commission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
Shares |
|
Value |
|
Shares |
|
Value |
|
|
Acquired |
|
Realized |
|
Acquired |
|
Realized |
Name |
|
on Exercise |
|
On Exercise |
|
on Vesting |
|
on Vesting |
Carpenter |
|
|
40,000 |
|
|
$ |
29,789 |
|
|
|
62,000 |
|
|
$ |
2,024,040 |
|
Sherman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dill |
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
1,702,500 |
|
Gilbert |
|
|
39,999 |
|
|
|
461,151 |
|
|
|
15,000 |
|
|
|
469,800 |
|
Raplee |
|
|
|
|
|
|
|
|
|
|
16,666 |
|
|
|
567,641 |
|
Potential Payments upon Termination or Change in Control
The Company has entered into certain agreements and maintains certain plans that will require the
Company to provide compensation to NEOs in the event of a termination of employment or a change in
control of the Company. The amount of compensation payable to each NEO entitled to benefits if any
such event had occurred on December 31, 2010 is listed for each type of event in the tables below.
Mr. Carpenter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Payments upon Termination |
|
Retirement |
|
Without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
5,057,200 |
(1) |
|
$ |
|
|
|
$ |
5,640,000 |
(2) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,642,084 |
(3) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,605,250 |
(4) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
29,880 |
(5) |
|
|
|
|
|
|
14,940 |
(6) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,947,106 |
(7) |
|
|
|
|
|
|
|
(1) |
|
Reflects a severance payment of Mr. Carpenters base salary as of December 31, 2010 for 24
months after termination plus an amount equal to two times the last bonus payment made to Mr.
Carpenter the prior fiscal year in accordance with the Carpenter Severance Agreement. The
severance payment to Mr. Carpenter is payable in several installments. |
|
(2) |
|
Reflects a severance payment of three times the sum of (a) the rate of Mr. Carpenters normal
annual compensation, which rate shall not be less than the highest rate in effect during the
six-month period immediately prior to the change in control, plus (b) Mr. Carpenters target
cash bonus amount, in accordance with the Change in Control Plan. |
|
(3) |
|
Reflects the intrinsic value of the outstanding, unvested stock options, which become vested
in accordance with the LTIP in the event either (a) a surviving or acquiring entity does not
assume such options or substitute similar awards for such options or (b) a surviving or
acquiring entity assumes such options or substitutes such options with similar awards but Mr.
Carpenters employment is terminated without cause or for good reason, as set forth in the
LTIP. |
|
(4) |
|
Reflects the intrinsic value of the outstanding, unvested restricted shares of Common Stock,
which become vested in accordance with the (i) LTIP in the event either (a) a surviving or
acquiring entity does not assume such restricted shares or substitute similar awards for such
restricted shares or (b) a surviving or acquiring entity assumes such restricted shares or
substitutes such restricted shares with similar awards but Mr. Carpenters employment is
terminated without cause or for good reason, as set forth in the LTIP, and (ii) MSPP. |
|
(5) |
|
Reflects the premiums for medical, dental, accidental death and dismemberment and life
insurance benefits for a 24-month period in accordance with the Carpenter Severance Agreement. |
|
(6) |
|
Reflects the premiums for medical, dental and life insurance benefits for a 12-month period
in accordance with the Change in Control Plan. |
26
|
|
|
(7) |
|
Reflects a payment of all excise taxes imposed under Section 4999 of the Internal Revenue
Code and any income and excise taxes that are payable as a result of any reimbursements for
Section 4999 excise taxes in accordance with the Carpenter Severance Agreement. This
calculation assumes maximum federal and state income and Medicare tax rates and is based on a
five-year average of earnings reported on Form W-2 for the tax years 2005 through 2009. The
Company does not expect that any such excise taxes will be imposed. |
Mr. Sherman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Payments upon Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,283,750 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692,400 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,205,000 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,226 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,391,280 |
(5) |
|
|
|
|
Mr. Dill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Payments upon Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,049,500 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092,400 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,270,750 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,478 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,760,571 |
(5) |
|
|
|
|
Mr. Gilbert
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Payments upon Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,441,250 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
901,214 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,480,625 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,398 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,281,181 |
(5) |
|
|
|
|
27
Mr. Raplee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Involuntary |
|
Involuntary |
|
Related to |
|
|
Executive Benefits and |
|
|
|
|
|
Termination |
|
Termination |
|
Change in |
|
Death or |
Payments upon Termination |
|
Retirement |
|
without Cause |
|
for Cause |
|
Control |
|
Disability |
Cash Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,977,600 |
(1) |
|
$ |
|
|
Stock Options (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
728,272 |
(2) |
|
|
|
|
Restricted Stock (unvested) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,021,250 |
(3) |
|
|
|
|
Insurance Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,338 |
(4) |
|
|
|
|
Excise Tax Gross-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
(5) |
|
|
|
|
|
|
|
(1) |
|
Reflects a severance payment of three times the sum of (a) the rate of the executives
normal annual compensation, which rate shall not be less than the highest rate in effect
during the six-month period immediately prior to the change in control, plus (b) the
executives target cash bonus amount, in accordance with the Change in Control Plan. |
|
(2) |
|
Reflects the intrinsic value of the outstanding, unvested options, which become vested in
accordance with the LTIP in the event either (a) a surviving or acquiring entity does not
assume such options or substitute similar awards for such options or (b) a surviving or
acquiring entity assumes such options or substitutes such options with similar awards but the
executives employment is terminated without cause or for good reason, as set forth in the
LTIP. |
|
(3) |
|
Reflects the intrinsic value of the outstanding, unvested restricted shares of Common Stock,
which become vested in accordance with the (i) LTIP in the event either (a) a surviving or
acquiring entity does not assume such restricted shares or substitute similar awards for such
restricted shares or (b) a surviving or acquiring entity assumes such restricted shares or
substitutes such restricted shares with similar awards but the executives employment is
terminated without cause or for good reason, as set forth in the LTIP, and (ii) MSPP. |
|
(4) |
|
Reflects the premiums for medical, dental and life insurance benefits for a 12-month period
in accordance with the Change in Control Plan. |
|
(5) |
|
Reflects a payment of all excise taxes imposed under Section 4999 of the Internal Revenue
Code and any income and excise taxes that are payable as a result of any reimbursements for
Section 4999 excise taxes in accordance with the Change in Control Plan. This calculation
assumes maximum federal and state income and Medicare tax rates and is based on a five-year
average of earnings reported on Form W-2 for the tax years 2005 through 2009. The Company does
not expect that any such excise taxes will be imposed. |
Executive Severance and Restrictive Covenant Agreement with Mr. Carpenter
On December 11, 2008, LifePoint CSGP, LLC, a wholly-owned subsidiary of the Company (LifePoint
CSGP), entered into an Amended and Restated Executive Severance and Restrictive Covenant Agreement
(the Carpenter Severance Agreement) with Mr. Carpenter. In the event that Mr. Carpenter is
terminated by LifePoint CSGP (other than pursuant to a change in control as discussed below), the
Carpenter Severance Agreement specifies the respective rights and obligations of LifePoint CSGP and
Mr. Carpenter. The Carpenter Severance Agreement amended and restated the prior Executive Severance
and Restrictive Covenant Agreement with Mr. Carpenter dated December 11, 2006 by adding provisions
to comply with Section 409A of the Internal Revenue Code.
Pursuant to the Carpenter Severance Agreement, Mr. Carpenter continues to be employed at will and
receives compensation in an amount determined by the Board of Directors or a committee thereof. The
Carpenter Severance Agreement includes provisions that prohibit Mr. Carpenter from competing with
or soliciting employees or consultants of the Company and its affiliates during his employment
period and for a period of 24 months thereafter or disclosing confidential information of the
Company and its affiliates. The Carpenter Severance Agreement imposes certain obligations on the
Company upon the termination of Mr. Carpenters employment, including, if he is terminated without
cause, the continuation of certain benefits for a period of 24 months and the payment of severance
(in addition to his salary and any earned but unpaid bonus through the date of termination). Any
such severance received by Mr. Carpenter would be conditioned upon Mr. Carpenters release of all
claims against the Company and be paid in an amount equal to his then current base salary for a
period of 24 months following the date of termination of his employment plus an amount equal to two
times Mr. Carpenters bonus earned for the prior fiscal year, which bonus amount would be paid in
equal amounts, ratably, over the 24-month period following the date of termination of his
employment. The commencement of the severance
28
payments may be delayed for a period of six months if such delay is required for compliance with
Section 409A of the Internal Revenue Code.
Cause is defined as (a) a material breach of the terms of the agreement or repeated failure to
perform his duties in a manner reasonably consistent with the criteria established or directions
given by the Board of Directors, (b) any action constituting fraud, self-dealing, embezzlement, or
dishonesty, or (c) conviction of a crime involving moral turpitude or any felony. In the event of a
breach by Mr. Carpenter of any of the restrictive covenants contained in the Carpenter Severance
Agreement, Mr. Carpenter would forfeit additional severance payments from the date of the breach.
The Carpenter Severance Agreement does not alter the payments and benefits due to Mr. Carpenter in
the event of his termination following a change in control of the Company, which are governed by
the Companys Change in Control Severance Plan (the Change in Control Plan).
Other than pursuant to the EPIP, MSPP and other similar compensation (or deferral) plans, no other
NEO is party to any severance, employment, confidentiality, non-compete or non-solicitation
agreement with the Company.
Retirement and Termination Arrangements
The Company maintains certain compensatory arrangements that are intended to provide payments to
the NEOs upon their resignation or retirement. These include the Retirement Plan, which is a
defined contribution retirement plan that is intended to be qualified under Section 401(a) of the
Internal Revenue Code. Eligible employees may elect to contribute a portion of their compensation
to the Retirement Plan, and the Company provides certain matching and other contributions. The
retirement benefit is based solely on the contributions to each employees account and the
investment of those contributions in the Retirement Plan.
Under the EPIP, upon the retirement of a participant in the EPIP during a period when performance
goals of an award are achieved, the award may be paid in full or may be prorated based on the
number of full months that lapsed in the performance period as of the date of the retirement, at
the sole and absolute discretion of the Compensation Committee. Upon the death or disability of a
participant in the EPIP, if the Company achieves the performance goals specified in an award, the
participant in the EPIP, or such participants estate, will be eligible to receive payments under
the award. Such award may be paid in full or may be prorated based on the number of full months
that have elapsed in the performance period as of the date of the death or disability, at the sole
and absolute discretion of the Compensation Committee. If, however, the Company fails to achieve
the performance goals, the Compensation Committee may in its discretion pay all or a portion of the
award.
Under the MSPP, if an NEOs employment is terminated either for cause by the Company or for any
reason by the executive, the executive forfeits all rights with respect to any restricted shares of
Common Stock purchased under the MSPP, which are automatically cancelled, and has only an unfunded
right to receive a cash payment equal to the lesser of (1) the fair market value of such shares on
the executives last day of employment or (2) the aggregate base salary foregone by the executive
as a condition of receiving such shares. If an NEOs employment is terminated without cause, the
executive will receive the lesser of such cash payments, with the Compensation Committee to have
the sole discretion as to which of such amounts shall be payable. Under the MSPP, upon retirement
of an NEO, the Compensation Committee shall determine, in its discretion, whether all outstanding
restrictions with respect to shares of Common Stock purchased under the MSPP shall expire or
whether the executive shall instead be treated as though the executives employment had been
terminated by the Company without cause.
The Carpenter Severance Agreement provides that if Mr. Carpenter is involuntarily terminated,
except for cause or in certain other circumstances, he is entitled to receive a severance payment
in the amount of his base salary for 24 months after termination plus an amount equal to two times
his earned but unpaid target cash bonus amount awarded under the EPIP, which bonus amount would be
paid in equal
29
amounts, ratably, over the 24-month period following the date of termination of his employment.
Commencement of these severance payments may be delayed for a period of six months if such delay is
required for compliance with Section 409A of the Internal Revenue Code. For more information about
the Carpenter Severance Agreement, please refer to the section above entitled EXECUTIVE
COMPENSATION Summary Compensation Table Executive Severance and Restrictive Covenant
Agreement with Mr. Carpenter.
Change in Control Arrangements
The Company maintains the Change in Control Plan for certain corporate employees, including the
NEOs. The Change in Control Plan provides benefits to those eligible corporate employees of the
Company who (i) are terminated within 18 months of a change in control for any reason other than
cause (as defined in the Change in Control Plan), (ii) are not offered a position by the Company
or a successor entity that is substantially equivalent to the one held with the Company immediately
prior to the change in control, or (iii) voluntary terminate employment within 18 months following
a change in control because employment by the successor entity is modified so that the position is
no longer substantially equivalent (as defined in the Change in Control Plan) to the position
immediately held prior to the change in control. Under these circumstances, an affected NEO is
entitled to receive a lump sum severance payment of three times the sum of the executives normal
annual compensation, which rate shall not be less than the highest rate in effect during the
six-month period immediately prior to the change in control, plus the target cash bonus amount that
the executive would be eligible to receive in the year in which the change in control occurs,
assuming all performance conditions were achieved. The Company will also provide each NEO, at no
greater cost than prior to the change in control, with participation in medical, life, disability
and similar benefit plans that were offered to similarly situated employees of the Company
immediately prior to the change in control. If these benefits are provided pursuant to continuation
rights pursuant to Part 6 of Title I of the Employee Retirement Income Security Act of 1974, the
Company will waive all premiums that would otherwise be due by the executive at the time of
severance for 12 months. In addition, each participant is indemnified against excise taxes that are
imposed on change in control payments under Section 4999 of the Internal Revenue Code. Benefits
under this plan are offset by any other payments that the participant is entitled to receive under
any other agreement, plan or arrangement upon a change in control of the Company.
The LTIP provides for full vesting of outstanding awards granted to employees, including the NEOs,
following a change in control to the extent the rights under such awards have not been previously
forfeited. Full vesting will only occur if (1) the successor entity does not assume the awards or
provide similar awards to replace the awards issued under the LTIP, or (2) employment is terminated
within 18 months after the change in control by the successor entity without cause or by the
employee because the position offered by the successor is not substantially equivalent to the one
held with the Company immediately prior to the change in control.
Under the EPIP, if a change in control occurs during a period when performance goals of an award
are not achieved, the Compensation Committee, in its discretion, may authorize payment to a
participant in the EPIP of the target bonus amount, or a portion of such amount, that would be
payable under an award. The payment of the awards will be made, at the discretion of the
Compensation Committee, after the end of the performance period or the change in control.
Under the MSPP, upon a change in control, restricted shares of Common Stock purchased under the
MSPP become unrestricted.
30
COMPENSATION OF DIRECTORS
Certain information concerning the compensation of directors for 2010 is set forth in the table
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified |
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
Non-Equity |
|
Deferred |
|
All Other |
|
|
|
|
or |
|
Stock |
|
Incentive Plan |
|
Compensation |
|
Compen- |
|
|
Name(1) |
|
Paid in Cash(2) |
|
Awards(3) |
|
Compensation |
|
Earnings |
|
sation |
|
Total |
Gregory T. Bier |
|
$ |
111,250 |
|
|
$ |
135,020 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
246,270 |
|
Richard H. Evans |
|
|
105,000 |
|
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240,020 |
|
DeWitt Ezell, Jr. |
|
|
91,250 |
|
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,270 |
|
Michael P. Haley |
|
|
91,250 |
|
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,270 |
|
Marguerite W. Kondracke |
|
|
91,250 |
|
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,270 |
|
John E. Maupin, Jr. |
|
|
100,750 |
|
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,770 |
|
Owen G. Shell, Jr. |
|
|
216,250 |
(4) |
|
|
135,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,270 |
|
|
|
|
(1) |
|
Mr. Carpenter, the Companys Chairman and CEO, does not receive compensation for serving as
a member of the Board of Directors. |
|
(2) |
|
Includes deferred stock units granted under the Directors Plan of $22,813 for Mr. Shell and
$5,000 for Ms. Kondracke. Under the Directors Plan, non-employee directors may elect to defer
payment of all or any part of their directors fees. For each term of the Board of Directors
(beginning on the date of an annual meeting of stockholders and ending on the date immediately
preceding the next annual meeting of stockholders), a non-employee director may elect to
receive, in lieu of all or any portion (in multiples of 25%) of his or her annual retainer
payable for such term, a deferred stock unit award pursuant to the Directors Plan. Such an
election applies to the number of deferred stock units determined by dividing (a) the
additional annual retainer amount that would have been payable to the non-employee director in
cash in the absence of his or her election, by (b) the fair market value of a share of Common
Stock on the date of grant. |
|
(3) |
|
Reflects the grant date fair value for restricted stock awards granted under the Directors
Plan, in accordance with ASC 718-10. The assumptions used in calculating the accrued values
are set forth in Note 9 to the Companys financial statements included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010. |
|
|
|
On June 7, 2010, all incumbent directors received an annual grant of 3,925 shares of
restricted stock. |
|
|
|
The grant date fair value of these restricted stock awards, computed in accordance with ASC
718-10 and based on the Common Stock closing price of $34.40 on June 4, 2010: |
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
Grant Date Fair |
Name |
|
Restricted Stock |
|
Value |
Bier |
|
|
3,925 |
|
|
$ |
135,020 |
|
Evans |
|
|
3,925 |
|
|
|
135,020 |
|
Ezell |
|
|
3,925 |
|
|
|
135,020 |
|
Haley |
|
|
3,925 |
|
|
|
135,020 |
|
Kondracke |
|
|
3,925 |
|
|
|
135,020 |
|
Maupin |
|
|
3,925 |
|
|
|
135,020 |
|
Shell |
|
|
3,925 |
|
|
|
135,020 |
|
|
|
|
(4) |
|
Mr. Shell received $125,000 annually for serving as the non-executive Chairman of the Board
of Directors in addition to the annual cash retainer for serving as a director. On December
14, 2010, Mr. Shell assumed the role of Lead Director of the Companys Board of Directors. |
Following the annual meeting each year, the Board of Directors, upon recommendation of the
Compensation Committee, determines the compensation payable to non-employee members of the Board of
Directors through the date immediately preceding the next annual meeting of stockholders. The
compensation consultants provided the Compensation Committee with information on peer comparisons
for director compensation, including a methodology overview, total board compensation, board-only
compensation and equity grants, committee service compensation and initial equity grants. The
compensation consultants also reported on current trends in director compensation, recent changes
31
adopted at peer group companies and the assumptions used by the compensation consultants in
determining the annual retainer amount.
On June 7, 2010, the Board of Directors, upon recommendation of the Compensation Committee,
approved an annual cash retainer of $95,000 payable to non-employee directors and an annual cash
retainer of $125,000 payable to the non-executive Chairman of the Board of Directors through the
date immediately preceding the Annual Meeting. An additional cash retainer of (i) $20,000 per year
is payable to the Chair of the Audit and Compliance Committee, (ii) $15,000 per year is payable to
the Chair of the Compensation Committee and (iii) $10,000 per year is payable to the Chair of the
Corporate Governance and Nominating Committee. No meeting fees are paid. Each of the foregoing
annual fees is paid in four quarterly pro-rata installments. Directors are also reimbursed for
expenses incurred relating to attendance at Board and committee meetings.
Also on June 7, 2010, pursuant to the Directors Plan, the Board of Directors, upon recommendation
of the Compensation Committee, approved the grant of approximately $135,000 of restricted stock
awards to each of the members of the Board of Directors who are not employees of the Company or any
of its subsidiaries. These awards will be fully vested and no longer subject to forfeiture upon the
earliest of any of the following conditions to occur: (1) six months and one day following the date
of grant; (2) the death or disability of the non-employee director; or (3) a change in control
(as defined in the Directors Plan) of the Company. The non-employee directors receipt of shares of
Common Stock pursuant to the restricted stock award is deferred until the first business day
following the earliest to occur of (A) the third anniversary of the date of grant, or (B) the date
the non-employee director ceases to be a member of the Board of Directors.
32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The tables below set forth certain information as of December 31, 2010 (unless otherwise indicated)
regarding beneficial ownership of Common Stock by (1) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (2) each director, nominee for
director and NEO of the Company who owns Common Stock and (3) all directors and executive officers
as a group. As of December 31, 2010, there were 51,458,782 shares of Common Stock outstanding.
Except as otherwise indicated, the beneficial owners listed below have sole voting and investment
power with respect to all shares owned by them, except to the extent such power is shared by a
spouse under applicable law.
Security Ownership of Certain Beneficial Owners
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
Name and Address of Beneficial Owner |
|
Beneficial Ownership |
|
Percent of Class |
Letko, Brosseau & Associates Inc.
|
|
|
4,414,995 |
(1) |
|
|
8.38 |
% |
1800 McGill College Avenue, Suite 2510
Montreal, Quebec
H3A 3J6
Canada |
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
3,863,467 |
(2) |
|
|
7.22 |
|
40 East 52nd Street
New York, NY 10022 |
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
|
|
|
3,347,952 |
(3) |
|
|
6.35 |
|
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As reported in the Schedule 13G filed on February 14, 2011 with the SEC. |
|
(2) |
|
As reported in the Schedule 13G filed on February 7, 2011 with the SEC. |
|
(3) |
|
As reported in the Schedule 13G filed on February 11, 2011 with the SEC, the beneficial owner
claims to have sole voting power with respect to 3,308,192 shares of Common Stock and sole
dispositive power with respect to 3,347,952 shares of Common Stock. |
Security Ownership of Management and Directors
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
|
|
Beneficial |
|
Percent of |
Name of Beneficial Owner |
|
Ownership(1) |
|
Class |
William F. Carpenter III |
|
|
1,128,719 |
(2)(3) |
|
|
2.19 |
% |
David M. Dill |
|
|
333,445 |
(2)(4) |
|
|
* |
|
R. Scott Raplee |
|
|
244,322 |
(2) |
|
|
* |
|
Paul D. Gilbert |
|
|
132,099 |
(2) |
|
|
* |
|
Jeffrey S. Sherman |
|
|
102,562 |
(2)(5) |
|
|
* |
|
Owen G. Shell, Jr. |
|
|
53,426 |
(6)(7) |
|
|
* |
|
DeWitt Ezell, Jr. |
|
|
51,063 |
(6) |
|
|
* |
|
Richard H. Evans |
|
|
35,471 |
(6) |
|
|
* |
|
John E. Maupin, Jr. |
|
|
35,291 |
(6) |
|
|
* |
|
Michael P. Haley |
|
|
30,474 |
(6) |
|
|
* |
|
Gregory T. Bier |
|
|
17,091 |
(6) |
|
|
* |
|
Marguerite W. Kondracke |
|
|
16,623 |
(6) |
|
|
* |
|
Directors and executive
officers as a group (15
persons) |
|
|
2,636,350 |
|
|
|
5.12 |
% |
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
In computing the number of shares beneficially owned by an individual and the percentage
ownership of that individual, shares of Common Stock underlying options held by that
individual that are currently exercisable, or will become |
33
|
|
|
|
|
exercisable within 60 days from December 31, 2010, are deemed outstanding. The total number of
shares of Common Stock underlying options, pursuant to which such individuals have rights to
acquire beneficial ownership of Common Stock within 60 days from December 31, 2010, is as
follows: |
|
|
|
|
|
|
|
Shares |
|
|
Underlying |
Name |
|
Options |
Carpenter |
|
|
566,666 |
|
Dill |
|
|
195,000 |
|
Raplee |
|
|
150,000 |
|
Gilbert |
|
|
64,999 |
|
Sherman |
|
|
40,000 |
|
Maupin |
|
|
11,500 |
|
Ezell |
|
|
11,500 |
|
Evans |
|
|
11,500 |
|
Shell |
|
|
11,000 |
|
|
|
|
(2) |
|
The ownership given for each individual includes shares of Common Stock indirectly owned
through the Retirement Plan as set forth in the table below. |
|
|
|
|
|
|
|
Shares Owned |
|
|
Through |
Name |
|
Retirement Plan |
Raplee |
|
|
3,236 |
|
Carpenter |
|
|
1,629 |
|
Dill |
|
|
547 |
|
Gilbert |
|
|
459 |
|
|
|
|
|
|
In addition, the ownership for each individual includes restricted stock awards granted on
February 28, 2008 under the LTIP as set forth in the table below. Generally, these shares of
restricted stock became unrestricted on February 28, 2011. |
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
Carpenter |
|
|
50,000 |
|
Dill |
|
|
22,500 |
|
Gilbert |
|
|
17,500 |
|
Raplee |
|
|
15,000 |
|
|
|
|
|
|
The ownership for each individual also includes restricted stock awards granted on February
24, 2009 under the LTIP as set forth in the table below. Generally, these shares of restricted
stock will become unrestricted on February 24, 2012. |
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
Carpenter |
|
|
100,000 |
|
Dill |
|
|
30,000 |
|
Gilbert |
|
|
25,000 |
|
Raplee |
|
|
20,000 |
|
|
|
|
|
|
The ownership for each individual also includes restricted stock awards granted on February
23, 2010 under the LTIP as set forth in the table below. Generally, these shares of
restricted stock will become unrestricted on February 23, 2013. |
|
|
|
|
|
|
|
Shares of |
Name |
|
Restricted Stock |
Carpenter |
|
|
93,000 |
|
Sherman |
|
|
30,000 |
|
Dill |
|
|
30,000 |
|
Gilbert |
|
|
25,000 |
|
Raplee |
|
|
20,000 |
|
|
|
|
(3) |
|
The ownership for Mr. Carpenter includes a one-time grant of 100,000 restricted stock awards
on February 24, 2009. One-half of these restricted stock awards will become unrestricted on
February 24, 2013, and one-half will become unrestricted on February 24, 2014. |
|
(4) |
|
The ownership for Mr. Dill includes 6,500 restricted stock awards granted on June 7, 2010
under the LTIP which will become unrestricted on June 7, 2013. |
|
(5) |
|
The ownership for Mr. Sherman includes 30,000 restricted stock awards granted on May 12, 2009
under the LTIP, which will become unrestricted on May 12, 2012. |
|
(6) |
|
The ownership for each individual includes 3,500 restricted stock awards granted on May 14,
2008 under the Directors Plan. These shares became unrestricted on November 15, 2008 with a
deferred settlement date on May 14, 2011. |
34
|
|
|
|
|
The ownership for each individual includes 4,966 restricted stock awards granted on May 13,
2009 under the Directors Plan. These shares became unrestricted on November 14, 2009 with a
deferred settlement date on May 13, 2012. |
|
|
|
The ownership for each individual includes 3,925 restricted stock awards granted on June 7,
2010 under the Directors Plan. These shares became unrestricted on December 8, 2010 with a
deferred settlement date on June 7, 2013. |
|
|
|
Further, the ownership for each individual includes deferred stock units, granted under the
Directors Plan, payable in shares of Common Stock as follows: |
|
|
|
|
|
|
|
Deferred |
Name |
|
Stock Units |
Evans |
|
|
1,080 |
|
Kondracke |
|
|
732 |
|
Maupin |
|
|
3,884 |
|
Shell |
|
|
6,035 |
|
|
|
|
(7) |
|
The ownership for Mr. Shell includes 10,500 shares that have been pledged to Bank of America
in connection with a transaction unrelated to the Company. |
35
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee consists entirely of independent directors in accordance with
the NASDAQ and SEC audit committee structure and membership requirements. The Audit and Compliance
Committee has certain duties and powers as described in its written Charter adopted by the Board. A
copy of this Charter is available under the Corporate Governance section of the Companys
website, www.lifepointhospitals.com.
In performing its functions, the Audit and Compliance Committee acts primarily in an oversight
capacity. The Audit and Compliance Committee relies on the work and assurances of the Companys
management, which has the primary responsibility for preparing financial statements and reports and
implementing internal control over financial reporting, and the work and assurances of the
Companys independent registered public accounting firm, which reviews quarterly and audits
annually the Companys financial statements. In addition, the Audit and Compliance Committee relies
on the Companys independent registered public accounting firm to express an opinion on the
conformity of the Companys annual financial statements to generally accepted accounting principles
and to attest managements assessment of the effectiveness of internal control over financial
reporting.
The Audit and Compliance Committee selected Ernst & Young LLP as the Companys independent
registered public accounting firm for 2010. This selection was subsequently approved by the Board
of Directors and was ratified by the Companys stockholders at the annual meeting of stockholders
held on June 8, 2010.
The Audit and Compliance Committee has reviewed and discussed the audited financial statements for
the fiscal year ended December 31, 2010 with the Companys management and Ernst & Young LLP. The
Audit and Compliance Committee has also discussed with Ernst & Young LLP the matters required to be
discussed by Statement of Auditing Standards No. 114 (SAS 114 or AU 380), as modified or
supplemented, Communication with Audit Committees.
The Audit and Compliance Committee has also received and reviewed the written disclosures and the
letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent auditors communications with the Audit Committee
concerning independence, and has discussed with the auditor the auditors independence.
In reliance on these reviews and discussions, and the report of Ernst & Young LLP, the Audit and
Compliance Committee recommended to the Board of Directors, and the Board of Directors determined,
that the audited financial statements be included for filing with the SEC in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010.
AUDIT AND COMPLIANCE COMMITTEE
Gregory T. Bier, Chair
Richard H. Evans
DeWitt Ezell, Jr.
Michael P. Haley
Marguerite W. Kondracke
John E. Maupin, Jr.
Owen G. Shell, Jr.
Dated: April 21, 2011
36
FEES AND SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Fees Paid to the Independent Registered Public Accounting Firm
The table below provides information concerning fees for services rendered by Ernst & Young LLP
during the last two fiscal years. The nature of the services provided in each such category is
described following the table.
|
|
|
|
|
|
|
|
|
|
|
Amount of Fees |
|
Description of Fess |
|
2009 |
|
|
2010 |
|
Audit Fees |
|
$ |
1,489,642 |
|
|
$ |
1,496,462 |
|
Audit-Related Fees |
|
|
|
|
|
|
39,084 |
|
Tax Fees |
|
|
135,759 |
|
|
|
89,412 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,625,401 |
|
|
|
1,624,958 |
|
|
|
|
|
|
|
|
Audit Fees These fees were primarily for professional services rendered by Ernst & Young
LLP in connection with the audit of the Companys consolidated annual financial statements, audit
of internal control over financial reporting (pursuant to Section 404 of Sarbanes-Oxley) and
reviews of the interim condensed consolidated financial statements included in the Companys
quarterly reports on Form 10-Q for the first three fiscal quarters of the fiscal years ended
December 31, 2009 and 2010. The fees also include separate opinion audits of certain subsidiaries,
as well as comfort letters and consents related to SEC filings.
Audit-Related Fees These fees were primarily for services rendered by Ernst & Young LLP for
matters such as consultation on accounting and reporting standards.
Tax Fees These fees were for services rendered by Ernst & Young LLP for assistance with tax
compliance regarding tax filings and also for other tax advice and consulting services.
The Audit and Compliance Committee considered and determined that the provision of non-audit
services by Ernst & Young LLP during 2009 and 2010 was compatible with maintaining auditor
independence. None of these services is of a type that is prohibited under the independent
registered public accounting firm independence standards of the SEC.
Pre-approval of Services Performed by the Independent Registered Public Accounting Firm
The Audit and Compliance Committee has implemented procedures to ensure the pre-approval of all
audit, audit-related, tax and other services performed by the Companys independent registered
public accounting firm. These procedures require that the Audit and Compliance Committee approve
all services prior to the commencement of work. Unless the specific service has been pre-approved
with respect to that year, the Audit and Compliance Committee must approve the permitted service
before the independent registered public accounting firm is engaged to perform it. The Audit and
Compliance Committee has delegated to Mr. Bier, the Chair of the Audit and Compliance Committee,
pre-approval authority with respect to audit or permitted non-audit services (in an amount not to
exceed $50,000 in each instance) to be provided by Ernst & Young LLP, subject to ratification of
such pre-approval by the Audit and Compliance Committee at its next scheduled meeting. On a
quarterly basis, the Audit and Compliance Committee reviews a summary listing of all service fees,
along with a reasonably detailed description of the nature of the engagement of Ernst & Young LLP.
The Audit and Compliance Committee pre-approved in accordance with SEC rules all audit,
audit-related, tax and other services performed by Ernst & Young LLP during 2010.
37
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Companys Audit and Compliance Committee has selected Ernst & Young LLP as the Companys
independent registered public accounting firm for 2011. Ernst & Young LLP has audited the Companys
financial statements since 1999 and is considered by management to be well qualified.
We are asking our stockholders to ratify the selection of Ernst & Young LLP as the Companys
independent registered public accounting firm. Ratification is not required by the Companys
By-Laws or otherwise; however, the Board of Directors is submitting the selection of Ernst & Young
LLP to our stockholders for ratification as a matter of good corporate practice. If the selection
of Ernst & Young LLP is not ratified by the stockholders, the selection of an independent
registered public accounting firm will be determined by the Audit and Compliance Committee after
careful consideration of any information submitted by the stockholders.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have
an opportunity to make any statement they consider appropriate and to respond to any appropriate
stockholders questions at that time.
Your Board of Directors Recommends a Vote FOR Proposal 2
38
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act)
enables the Companys stockholders to vote to approve, on an advisory basis, the compensation of
the NEOs as described in the Compensation Discussion and Analysis section and the executive
compensation tables contained in this Proxy Statement. Because your vote is advisory, it will not
be binding on the Board of Directors or the Compensation Committee; however, the Compensation
Committee will review the voting results and take them into consideration when making future
decisions regarding executive compensation.
The Companys compensation of its NEOs plays a material role in its ability to attract and
retain a highly experienced team of executives. The Compensation Committee believes that the NEO
compensation program is structured in the best manner possible to support the Company and its
business objectives. As described in detail in the Compensation Discussion and Analysis section
beginning on page 12 of this Proxy Statement, the key features of the Companys NEO compensation
program include:
|
|
|
Pay-for-performance: Over 75% of the targeted total compensation for the NEOs is at
risk based on the Companys financial performance and the performance of the Companys
stock price. |
|
|
|
|
Performance-based equity: All of the NEOs long-term equity awards are
performance-based, through the granting of stock options and restricted stock awards,
and typically are subject to time-vesting. Additionally, restricted stock awards
typically require the Company to achieve certain financial goals before vesting. |
|
|
|
|
Strategic alignment: The Companys non-equity incentive plan focuses on financial
measures, such as growth in revenue, earnings before interest, taxes, depreciation and
amortization (EBITDA), and earnings per share (EPS), and on patient satisfaction
and quality care, consistent with our business strategy. |
|
|
|
|
Stockholder-friendly policies: The Company has adopted stock ownership guidelines
for the NEOs and a recoupment policy that provides for reimbursement of incentive
compensation paid based on a financial restatement because of fraud. Additionally,
with limited exceptions, the Companys executive compensation approach does not involve
the use of perquisites beyond those available to employees generally. |
The Company is asking its stockholders to indicate their support for the compensation of the
NEOs disclosed in this Proxy Statement. This proposal, commonly known as a say-on-pay proposal,
gives our stockholders the opportunity to express their views on NEO compensation. This vote is
not intended to address any specific item of compensation, but rather the overall compensation of
the NEOs and the philosophy, policies and practices described in this Proxy Statement.
Accordingly, the Company is asking its stockholders to vote FOR the following resolution:
RESOLVED, that the Companys stockholders approve, on an advisory basis, the
compensation of the named executive officers, as disclosed in the Companys Proxy
Statement for the 2011 annual meeting of stockholders pursuant to the compensation
disclosure rules of the Securities and Exchange Commission, including the
Compensation Discussion and Analysis, the Summary Compensation Table and the other
related tables and disclosure.
Your Board of Directors recommends that stockholders vote FOR
the resolution to approve, on an advisory basis,
the compensation of the Companys named executive officers.
39
|
|
PROPOSAL 4: ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION |
The Dodd-Frank Act enables the Companys stockholders to indicate how frequently the Company
should seek an advisory vote on the compensation of the NEOs, as disclosed pursuant to the SECs
compensation disclosure rules. By voting on this Proposal 4, stockholders may indicate whether
they would prefer an advisory vote on NEO compensation once every year, every two years or every
three years.
After careful consideration, the Board of Directors has determined that an advisory vote on
NEO compensation that occurs once every year is the most appropriate alternative for the Company at
this time. The Board of Directors believes that setting the advisory vote on NEO compensation
every year will allow the Companys stockholders to provide feedback on the Companys compensation
philosophy, policies and practices as disclosed in the Proxy Statement every year and will enhance
stockholder communication by providing a clear, simple means for the Company to obtain information
on investor sentiment about its NEO compensation philosophy.
You may cast your vote on your preferred voting frequency by choosing the option of one year,
two year, three years, or abstain from voting when you vote in response to the following
resolution:
RESOLVED, that the option of once every one year, two years, or three years that
receives the highest number of votes cast for this resolution will be determined to
be the preferred frequency with which the Company is to hold a stockholder vote to
approve, on an advisory basis, the compensation of the named executive officers, as
disclosed pursuant to the Securities and Exchange Commissions compensation
disclosure rules.
Because this vote is advisory and not binding on the Board of Directors, the Board of
Directors may decide that it is in the best interests of the Company and its stockholders to hold
an advisory vote on NEO compensation more or less frequently than the option approved by the
stockholders.
Your Board of Directors recommends that stockholders vote FOR
the option of once every year as the frequency with which stockholders
are provided a vote to approve, on an advisory basis,
the compensation of the Companys named executive officers.
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ADDITIONAL INFORMATION
Stockholder Proposals for Inclusion in the 2012 Proxy Statement
To be considered for inclusion in next years proxy statement, stockholder proposals, submitted in
accordance with SEC Rule 14a-8, must be received at our corporate offices no later than the close
of business on December 29, 2011 for the Company to consider it for inclusion in the proxy
statement for the 2012 annual meeting of stockholders. Proposals should be addressed to the
Corporate Secretary, LifePoint Hospitals, Inc., 103 Powell Court, Brentwood, Tennessee 37027.
Other Stockholder Proposals for Presentation at the 2012 Annual Meeting
The Companys By-Laws require that any stockholder proposal that is not submitted for inclusion in
next years proxy statement under SEC Rule 14a-8, but is instead sought to be presented directly at
the 2012 annual meeting of stockholders, must be received at our corporate offices not less than 90
days prior to the first anniversary of the Annual Meeting. As a result, proposals submitted
pursuant to these provisions of the By-laws must be received no later than the close of business on
March 9, 2012. Proposals should be addressed to the Corporate Secretary, LifePoint Hospitals,
Inc., 103 Powell Court, Brentwood, Tennessee 37027 and include the information set forth in the
By-Laws, which are available under the Corporate Governance section of the Companys website at
www.lifepointhospitals.com. SEC rules permit management to vote proxies in its discretion
if the stockholder does not comply with this deadline, and in certain other cases notwithstanding
the stockholders compliance with this deadline.
Voting Securities
You are entitled to vote if you were a stockholder of record as of the close of business on April
14, 2011. On such date, there were 52,479,500 shares of Common Stock outstanding.
Vote Required for Election, Ratification and Approval
Election of Directors: If a quorum is present, directors are elected by a plurality of the
votes cast by the shares of Common Stock entitled to vote at the Annual Meeting. The Companys
Amended and Restated Certificate of Incorporation does not provide for cumulative voting and,
accordingly, the stockholders do not have cumulative voting rights with respect to the election of
directors. Consequently, each stockholder may cast one vote per share of Common Stock held of
record with respect to each nominee. Unless a proxy specifies otherwise, the persons named in the
proxy will vote the shares covered thereby FOR the nominees designated by the Board of Directors.
Should any nominee become unavailable for election, an event not now anticipated, shares covered by
a proxy will be voted for a substitute nominee recommended by the Corporate Governance and
Nominating Committee and selected by the current Board of Directors.
Ratification of the Selection of the Independent Registered Public Accounting Firm:
Stockholder ratification of the Audit and Compliance Committees selection of Ernst & Young LLP as
the Companys independent registered public accounting firm is not required by the By-Laws or
otherwise; however, the Board of Directors has elected to submit the selection of Ernst & Young LLP
to the Companys stockholders for ratification. If a quorum is present, approval of this proposal
requires the affirmative vote of a majority of the shares of Common Stock present, in person or
represented by proxy, at the Annual Meeting and entitled to vote.
Say on Pay and Say on Frequency: With respect to Proposal 3, if a quorum is present,
approval of the resolution to approve, on an advisory basis, the compensation of the NEOs requires
the affirmative vote of a majority of the shares of Common Stock present, in person or represented
by proxy, at the Annual Meeting and entitled to vote. With respect to Proposal 4, if a quorum is
present, the frequency of the advisory vote on compensation of the NEOs that receives the greatest
number of votes cast by stockholders every three years, two years or one year will be the
frequency approved by stockholders.
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Abstentions and Broker Non-Votes: If your shares are represented at the Annual Meeting, in
person or by proxy, but you abstain from voting on a matter, or include instructions in your proxy
to abstain from voting on a matter, your shares will be counted for the purpose of determining if a
quorum is present. If you abstain from voting on Proposals 1 or 4, your abstention will have no
effect on the outcome. Abstentions with respect to Proposals 2 or 3 will have the same effect as a
vote against such proposals.
If your broker holds your shares in its name, the broker is permitted to vote your shares on
Proposal 2, even if it does not receive voting instructions from you. Proposals 1, 3 and 4 are
non-discretionary, meaning that brokers who hold shares for the accounts of their clients and who
have not received instructions from their clients do not have discretion to vote on these
proposals. When a broker votes a clients shares on some but not all of the proposals at the Annual
Meeting, the missing votes are referred to as broker non-votes. Those shares that are the subject
of broker non-votes will be included in determining the presence of a quorum at the Annual
Meeting but are not considered present for purposes of voting on the non-discretionary items and
will therefore have no impact on the vote.
Manner for Voting Proxies
Each share of Common Stock represented at the Annual Meeting is entitled to one vote on each matter
properly brought before the meeting. All shares entitled to vote and represented by properly
completed and delivered proxies received by phone, by Internet or by mail before the polls are
closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in
accordance with the instructions indicated by those proxies.
We are not aware of any business to be conducted at the Annual Meeting other than the matters
described in this Proxy Statement. If any other business is properly brought before the meeting,
your proxy gives authority to Jeffrey S. Sherman, the Companys Executive Vice President and Chief
Financial Officer, and Paul D. Gilbert, the Companys Executive Vice President and Chief Legal
Officer, or either of them, with full power of substitution, to vote on such matters at their
discretion. All such other matters properly brought before the meeting shall be approved upon the
affirmative vote of a majority of the shares of Common Stock entitled to vote at the Annual
Meeting.
Solicitation of Proxies
The Company will pay all expenses of the Annual Meeting that it incurs, including any cost for
mailing the Notices of Internet Availability, mailing printed proxy materials upon request, and the
solicitation of proxies. The directors, officers and employees of the Company may also solicit
proxies by personal interview, mail, e-mail, telephone, facsimile or other electronic means. They
will not be paid additional remuneration for their efforts.
The Company also has retained Innisfree M&A Incorporated to assist in the solicitation of proxies.
The Company expects to pay Innisfree a fee of $15,000 for its services and will reimburse Innisfree
for reasonable out-of-pocket expenses. 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 Notice of Internet Availability and, if specifically requested, printed proxy materials to
their principals and will pay Innisfree a service fee for coordinating with such parties on the
Companys behalf.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys executive officers, directors and persons
who beneficially own more than ten percent (10%) of the Common Stock to file reports of ownership
and changes in ownership with the SEC. Such executive officers, directors and beneficial owners are
also required to furnish the Company with copies of all Section 16(a) reports they file. Based
solely on a review of (1) the applicable filings, and any amendments thereto, made with the SEC and
posted on its website and (2) written representations from the Companys executive officers and
directors, the Company believes that all reports were filed in a timely manner during 2010.
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All Section 16(a) reports are posted on the Investor Information SEC Filings section of the
Companys website, www.lifepointhospitals.com, by the end of the business day after filing
and remain accessible for at least 12 months.
Requesting Copies of 2010 Annual Report on Form 10-K
In addition to the Proxy Statement, a copy of the Annual Report is available on the Internet as
indicated on the Notice of Internet Availability. Upon the written request of any stockholder
entitled to vote at the Annual Meeting, the Company will furnish, without charge, a copy of the
Companys Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC. Such
requests should be directed to Investor Relations, LifePoint Hospitals, Inc., 103 Powell Court,
Brentwood, Tennessee 37027, (615) 372-8500. The Companys 2010 Annual Report to Stockholders and
Form 10-K for the year ended December 31, 2010 are also available on the Investor Information
SEC Filings section of the Companys website at www.lifepointhospitals.com. The Companys
Annual Report to Stockholders and Form 10-K are not proxy soliciting materials.
Delivery of Documents to Stockholders Sharing an Address
Householding is a program adopted by the SEC that permits companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for annual reports, proxy statements and the Notices
of Internet Availability of proxy materials sent to multiple stockholders of record who have the
same address by delivering a single annual report, proxy statement or Notice of Internet
Availability of proxy materials to that address. Householding is designed to reduce a companys
printing costs and postage fees. Brokers with account holders who are stockholders of the Company
may be householding the Companys proxy materials. If your household participates in the
householding program, you will receive one Notice of Internet Availability. If you are a beneficial
holder, you can request information about householding from your broker, bank or other nominee.
If you receive more than one Notice of Internet Availability, this means that you have multiple
accounts holding the Common Stock with brokers and/or the Companys transfer agent. Please vote all
of your shares by following the instructions included on each Notice of Internet Availability.
Additionally, to avoid receiving multiple sets of proxy materials in the future, the Company
recommends that you contact Broadridge Financial Services, Inc. at www.proxyvote.com or
(800) 579-1639 to consolidate as many accounts as possible under the same name and address. If you
are a beneficial holder, please call your broker for instructions.
Electronic Access to Proxy Statement and Annual Report
The Company has elected to provide its Proxy Statement and Annual Report over the Internet through
a notice and access model. The Notice of Internet Availability provides instructions on how you
may access this Proxy Statement and the Companys 2010 Annual Report on the Internet at
www.proxyvote.com or request a printed copy at no charge. In addition, the Notice of
Internet Availability provides instructions on how you may request to receive, at no charge, all
future proxy materials in printed form by mail or electronically by email. Your election to receive
proxy materials by mail or email will remain in effect until you revoke it. Choosing to receive
future proxy materials by email will save the Company the cost of printing and mailing documents to
stockholders and will reduce the impact of its annual meetings on the environment.
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LIFEPOINT HOSPITALS, INC.
103 POWELL COURT
BRENTWOOD, TN 37027
VOTE
BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting
date. Have your proxy card in hand when you
access the web site and follow the
instructions to obtain your records and to
create an electronic voting instruction
form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs
incurred by LifePoint Hospitals, Inc. in
mailing proxy materials, you can consent to
receiving all future proxy statements,
proxy/voting instruction cards and annual
reports electronically via e-mail or the
Internet. To sign up for electronic
delivery, please follow the instructions
above to vote using the Internet and, when
prompted, indicate that you agree to receive
or access shareholder communications
electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59 P.M.
Eastern Time the day before the meeting
date. Have your proxy/voting instruction
card in hand when you call and then follow
the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M35489-P06569 |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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LIFEPOINT HOSPITALS, INC. |
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For All |
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To withhold authority to vote for any individual |
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The Board of Directors recommends you vote FOR the following: |
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nominee(s), mark For
All Except and write the |
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number(s) of the nominee(s) on the line below. |
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1. Election of Director
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William F. Carpenter III |
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Richard H. Evans |
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Michael P. Haley |
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The Board of Directors recommends you vote FOR the following proposals: |
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Ratification of the selection of Ernst & Young LLP as the Companys independent registered public accounting firm for 2011.
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Advisory vote on the compensation of the Companys named executive officers as presented in the proxy statement. |
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The Board of Directors recommends you vote 1 year on the following proposal: |
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NOTE: In their discretion, the proxies named on the reverse side of this proxy/voting instruction card may vote upon such other matters as may properly come before the
Annual Meeting or any adjournment thereof. If you are a participant in the LifePoint Hospitals, Inc. Retirement Plan, the trustee named on the reverse side of this
proxy/voting instruction card may vote upon such other matters as may properly come before the Annual Meeting or any adjournment thereof.
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Please sign exactly as your name appears on this proxy/voting instruction card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by the President or other authorized officer. if a
partnership, please sign in partnership name by authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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YOUR VOTE IS IMPORTANT!
If you do not plan to vote by telephone or Internet, please sign and date this proxy card
and return it promptly
in the enclosed postage-paid envelope so that the shares may be represented at the Annual
Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M35490- P06569
This Proxy/Voting Instruction is solicited on behalf of the Companys Board of Directors
LIFEPOINT HOSPITALS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 7, 2011
The undersigned hereby authorizes and appoints Jeffrey S. Sherman and Paul D.
Gilbert, or either of them, with power of substitution, as proxies to vote all shares
of Common Stock of LifePoint Hospitals, Inc. (the Company) owned by the undersigned
at the Annual Meeting of Stockholders to be held at 511 Union Street, Suite 2700,
Nashville, Tennessee 37219, at 3:00 p.m. local time on June 7, 2011, and any
adjournment thereof, as indicated on the reverse side of this proxy/voting
instruction card.
The undersigned, if a participant in the LifePoint Hospitals, Inc. Retirement Plan,
hereby instructs Reliance Trust Company, the trustee (the Trustee) of the Trust
Fund under the LifePoint Hospitals, Inc. Retirement Plan, to vote all of the shares
of Common Stock of the Company allocated to the undersigned Plan account as specified
on the reverse side of the proxy/voting instruction card at the Annual Meeting of
Stockholders to be held on June 7, 2011.
This proxy/voting instruction, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. A vote against any of the proposals
will not count as a vote for adjournment of the Annual Meeting. If no direction is
made, this proxy will be voted FOR the election of directors, FOR ratification of the
selection of the independent registered public accounting firm, FOR the approval, on
an advisory basis, of the compensation of the Company named executive officers, and
FOR the option of once every year as the frequency with which stockholders are
provided a vote to approve, on an advisory basis, the compensation of the Company
named executive officers.
THIS PROXY/VOTING INSTRUCTION MUST BE DATED AND SIGNED ON THE REVERSE SIDE