<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than
the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PROVINCE HEALTHCARE COMPANY
(Name of Registrant as Specified in Its Charter)
-------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
<TABLE>
<S> <C> <C>
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
-----------------------------------------------------
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------------------------------------
(4) Date Filed:
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</TABLE>
<PAGE> 2
PROVINCE HEALTHCARE COMPANY
105 WESTWOOD PLACE, SUITE 400
BRENTWOOD, TN 37027
April 18, 2000
TO OUR SHAREHOLDERS:
You are cordially invited to attend our 2000 annual meeting of
shareholders, to be held on Thursday, May 25, 2000, at 9:00 a.m. (Central
Daylight Time) at the Marriott Cool Springs, Franklin, Tennessee 37067. The
following pages contain the formal notice of our annual meeting and proxy
statement, which describe the specific business that you will consider and vote
upon at the annual meeting.
Please read the enclosed annual report to shareholders and proxy
statement for our 2000 annual meeting. It is important that your shares be
represented at the annual meeting. Regardless of whether you intend to attend
the annual meeting, please sign, date and return the enclosed proxy card, which
our board of directors is soliciting, as soon as possible in order that we may
record your vote. If you attend the meeting, you may withdraw your proxy should
you wish to vote in person.
Sincerely,
Martin S. Rash
President, Chief Executive Officer and
Chairman of the Board
Enclosures:
1. Proxy Card and Business Reply Envelope
2. 1999 Annual Report
IMPORTANT
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY.
<PAGE> 3
PROVINCE HEALTHCARE COMPANY
105 WESTWOOD PLACE, SUITE 400
BRENTWOOD, TN 37027
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
---------------
TO OUR SHAREHOLDERS:
Our 2000 annual meeting of shareholders will be held on May 25, 2000,
at 9:00 a.m. (Central Daylight Time) at The Marriott Cool Springs, 700 Cool
Springs Boulevard, Franklin, Tennessee 37067, for the following purposes:
(1) To elect six nominees as directors;
(2) To ratify the appointment of the accounting firm of Ernst
& Young LLP as independent auditors of our company and its subsidiaries
for the 2000 fiscal year of our company;
(3) To consider and approve an amendment to our certificate of
incorporation to increase the number of authorized shares of our common
stock;
(4) To consider and approve an amendment to increase the
number of authorized shares under our 1997 long-term equity incentive
plan; and
(5) To transact such other business as may come before the
annual meeting and any adjournment thereof.
Our board of directors has fixed the close of business on
April 6, 2000 as the record date for determining shareholders entitled
to notice of and to vote at our annual meeting and any adjournment
thereof.
By order of the board of directors,
Howard T. Wall III, Esq.
Secretary
Nashville, Tennessee
April 18, 2000
IMPORTANT
REGARDLESS OF WHETHER YOU INTEND TO ATTEND THE MEETING IN PERSON, TO
ASSURE THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO
VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
EXERCISED.
<PAGE> 4
PROVINCE HEALTHCARE COMPANY
105 WESTWOOD PLACE, SUITE 400
BRENTWOOD, TN 37027
--------------
PROXY STATEMENT
--------------
INTRODUCTION
We are furnishing proxy materials to you in connection with the
solicitation of proxies by our board of directors, to be voted at the 2000
annual meeting of shareholders for the purposes set forth in the accompanying
notice, and at any meeting following an adjournment thereof. The annual meeting
will be held at the Marriott Cool Springs, 700 Cool Springs Boulevard, Franklin,
Tennessee 37067, on Thursday, May 25, 2000, at 9:00 a.m. (Central Daylight
Time). We are mailing this proxy statement and the accompanying form of proxy to
our shareholders on or about April 18, 2000.
If you properly execute, return and do not revoke the enclosed proxy,
the proxy will be voted in accordance with your instructions, if any, and if you
do not provide instructions, your proxy will be voted (a) FOR the election as
directors of the nominees listed thereon and described in this proxy statement,
(b) FOR ratification of the appointment of the firm of Ernst & Young LLP as
independent auditors of our company and its subsidiaries for our company's 2000
fiscal year, (c) FOR approval of an amendment to our certificate of
incorporation to increase the number of authorized shares of our common stock,
(d) FOR approval of an amendment to increase the number of authorized shares
under our 1997 long-term equity incentive plan and (e) in accordance with the
recommendation of the board of directors on any other proposal that may come
before our annual meeting.
If anyone properly presents matters at the annual meeting for
consideration, including, among other things, consideration of a motion to
adjourn the annual meeting to another time or place, the persons named as
proxies and acting thereunder will have discretion to vote on those matters
according to their judgment to the same extent as the person delivering the
proxy would be entitled to vote. At the date that this proxy statement was
printed, we did not anticipate that any other matters would be raised at the
annual meeting.
Those of you who sign proxies have the right to revoke them by written
request to us at any time before they are voted. The giving of the proxy will
not affect your right to attend our annual meeting and vote in person.
Our board of directors has fixed the close of business on April 6,
2000, as the record date for determining shareholders entitled to notice of and
to vote at the annual meeting and any adjournment thereof. As of the close of
business on April ___, 2000, there were 25,000,000 shares of our common stock
authorized for issuance, of which _____ shares were outstanding and entitled to
vote at the annual meeting. Our common stock is our only outstanding voting
stock.
<PAGE> 5
PROPOSAL 1: ELECTION OF DIRECTORS
INTRODUCTION
Our bylaws provide that our first board of directors shall consist of
six directors; thereafter, the number of directors is established from time to
time by resolution of the board of directors. The terms of our current
directors, Martin S. Rash, Richard D. Gore, Bruce V. Rauner, Joseph P. Nolan,
A.E. Brim, David L. Steffy and Winfield C. Dunn expire at the annual meeting.
Our board of directors has determined that the size of the board of
directors shall be set at six directors and has nominated the persons listed
below for election at the 2000 annual meeting as directors to serve until our
annual meeting of shareholders in 2001 or until their successors have been
elected and qualified. Each of the nominees has consented to be a candidate and
to serve as a director, if elected.
In accordance with our bylaws, we elect directors by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote at the annual meeting of shareholders, provided a quorum is present. Our
certificate of incorporation does not provide for cumulative voting, and,
accordingly, the holders of our common stock do not have cumulative voting
rights with respect to the election of directors. Consequently, you may cast
only one vote per share of common stock you hold for each of the nominees.
Unless your proxy specifies otherwise, the persons named in your proxy
shall vote your shares for the individuals nominated by our board of directors.
Should any nominee become unavailable for election, your shares will be voted
for a substitute nominee selected by our current board of directors.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
FOLLOWING NOMINEES:
NOMINEES
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DIRECTOR SINCE
<S> <C> <C> <C>
Martin S. Rash 45 President and Chief Executive Officer, Province February 1996
Healthcare Company (Dec. 1996 - present); Chairman of
the Board, Province Healthcare Company (May 1998 -
present); Chief Executive Officer, Principal Hospital
Company (Feb. 1996 - Dec. 1996); Chief Operating
Officer, Community Health Systems, Inc. (Feb. 1994 -
Feb. 1996); Community Health Systems, Inc. (1986 -
1996)
Richard D. Gore 47 Vice Chairman of the Board, Province Healthcare December 1999
Company (Dec. 1999-present); Chief Financial Officer
(Apr. 1996-present); Executive Vice President (Apr.
1996-Dec. 1999); Vice President and Controller,
Quorum Health Group, Inc. (Feb. 1990-Apr. 1996)
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Joseph P. Nolan 35 Principal, GTCR Golder Rauner, LLC (Apr. 1998 - February 1996
present); Principal, Golder, Thoma, Cressey, Rauner,
Inc. (July 1996 - Apr. 1998); Director, Principal
Hospital Company (Feb. 1996 - Dec. 1996); Vice
President Corporate Finance, Dean Witter Reynolds
Inc. (May 1990 - Jan. 1994); Director, Lason, Inc.;
Director, Esquire Communications, Ltd.
A.E. Brim 69 Director, Chairman and Chief Executive Officer, Brim, December 1996
Inc. (founding - Dec. 1996)
David L. Steffy 56 Director, Arcadian Healthcare Management August 1997
(1997-present); Director, Odyssey Healthcare, Inc.
(1996-present); Director, Intensiva Health Care
Corporation; Vice Chairman and Director, Community
Health Systems, Inc. (1985-1996)
Winfield C. Dunn 72 Vice Chairman of Board, Total eMed (June February 2000
1998-present); Corporate Secretary, Total eMed (June
1998 - March 2000); Director, PhyCor, Inc. (1988 -
present; Chairman of Board of Advisors, Medshares,
Inc. (Jan. 1995 - Jan. 1998)
</TABLE>
3
<PAGE> 7
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
From January 1, 1999 until December 31, 1999, our board of directors
took one action by unanimous written consent. In addition, the board of
directors held four regular meetings during that period. Our board of directors
has established the three standing committees described below.
The board of directors has appointed a compensation committee to
administer our stock plans and recommend to our board of directors appropriate
compensation for our executive officers. The compensation committee currently is
comprised of Messrs. Steffy and Dunn. During 1999, the compensation committee
was comprised of Messrs. Brim, Nolan and Willis, held five meetings, and took
five actions by unanimous written consent.
Our board of directors has appointed an audit committee to recommend
the annual appointment of our auditors, with whom the audit committee reviews:
- the scope of audit and non-audit assignments and related fees;
- accounting principles used by our company in financial
reporting;
- internal auditing procedures; and
- the adequacy of our company's internal control principles.
The audit committee currently is comprised of Messrs. Steffy and Nolan. During
1999, the audit committee was comprised of Messrs. Willis and Steffy and held
four meetings.
Our board of directors appointed a compliance committee in February
2000 to oversee our corporate compliance program. The compliance committee is
comprised of Messrs. Brim, Nolan and Dunn.
DIRECTOR COMPENSATION
Directors who are also employees of our company or its subsidiaries are
not entitled to receive any fees for serving on our board of directors.
Non-employee directors of our company receive an annual retainer of $15,000 and
a fee of $1,500 per board meeting attended, and we reimburse them for their
out-of-pocket expenses incurred in their performance of services as directors.
In addition, non-employee directors of our company are eligible to participate
in our 1997 long-term equity incentive plan. Non-employee directors, however,
are not eligible to participate in our employee stock purchase plan.
4
<PAGE> 8
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The audit committee of our board of directors has selected the firm of
Ernst & Young LLP as our independent auditors for the year ending December 31,
2000, subject to ratification by our shareholders. Ernst & Young LLP has served
as our independent auditors (or our company's predecessor, Principal Hospital
Company) since April 1996. We anticipate that one or more representatives of
Ernst & Young LLP will be present at this year's annual meeting of shareholders,
and that they will have an opportunity to make a statement if they desire, and
will be available to respond to your questions.
In order to ratify the appointment of Ernst & Young LLP as our
independent auditors for the year ending December 31, 2000, we need the
affirmative vote of the holders of a majority of the shares of our common stock
present or represented and entitled to vote at our annual meeting of
shareholders. If the appointment is not ratified, we will refer the matter to
the audit committee for further review.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP.
5
<PAGE> 9
PROPOSAL 3: APPROVAL OF AMENDMENT TO AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
REASONS FOR AMENDMENT
We are seeking shareholder approval to amend and restate our amended
and restated certificate of incorporation to increase the number of authorized
shares of our common stock. Our amended and restated certificate of
incorporation currently authorizes the issuance of 25,000,000 shares of common
stock, par value $.01 per share, 25,000 shares of Series A Senior Preferred
Stock, no par value, 50,000 shares of Series B Junior Preferred Stock, no par
value, and 100,000 shares of preferred stock, par value $.01. On April __, 2000,
we completed a public offering of 4,222,504 shares of our common stock that
raised approximately $95.2 million of net proceeds to our company. As a result
of the public offering, the number of shares of our common stock outstanding
increased from 15,912,982 to 20,135,486 shares. An additional 2,641,302 shares
of common stock have been reserved for issuance under our stock option plan and
our employee stock purchase plan, leaving 2,223,212 shares of common stock
available for future issuance.
We anticipate that we may require additional shares of common stock to
continue our acquisition strategy and to permit future equity financings.
Historically, we have purchased or leased individual hospital facilities for
cash, although from time to time we have considered, and may in the future
consider, financing hospital acquisitions by issuing shares of our common stock.
In certain circumstances, paying all or a portion of the purchase price for an
acquisition with stock may be economically advantageous to our company. In
addition, we may in the future find it necessary, or to our advantage, to issue
shares of common stock or securities convertible into shares of common stock in
order to raise additional capital to finance operations, acquisitions or to
repay indebtedness. We currently have no plans or obligations to issue shares of
our common stock in connection with any acquisition or financing activity.
In addition to increasing the number of authorized shares of common
stock, we would like to eliminate the Series A Senior Preferred Stock and Series
B Junior Preferred Stock in the amended and restated certificate of
incorporation. As stated above, the amended and restated certificate of
incorporation authorizes the issuance of 25,000 shares of Series A Senior
Preferred Stock, no par value, and 50,000 shares of Series B Junior Preferred
Stock, no par value. In February 1998, we redeemed all of the outstanding shares
Series A Senior Preferred Stock and Series B Junior Preferred Stock in
connection with our initial public offering. Our amended and restated
certificate of incorporation provides that, upon redemption, these shares were
canceled and retired to authorized but unissued shares and may not be reissued,
sold or transferred. Because these shares cannot be reissued, sold or
transferred, we are eliminating the references to these two series from the
amended and restated certificate of incorporation. We do not propose to
eliminate the 100,000 shares of undesignated preferred stock that are currently
authorized in our amended and restated certificate of incorporation. For these
reasons, our board of directors believes it is in the best interests of our
company and recommends that you consider and approve an amendment to our amended
and restated certificate of incorporation providing for the changes described
herein.
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
On March [14], 2000, our board of directors approved an amendment to
our amended and restated certificate of incorporation to:
- increase the number of authorized shares of common stock to
50,000,000 shares, which is an increase of 100% over the
current number of authorized shares of common stock; and
6
<PAGE> 10
- eliminate references to the Series A Senior Preferred Stock
and Series B Junior Preferred Stock from the amended and
restated certificate of incorporation.
REQUIRED VOTE
Our company's amended and restated certificate of incorporation and
Delaware law require shareholder approval of any amendment to our certificate of
incorporation. We must receive the affirmative vote of a majority of the holders
of shares of common stock entitled to vote at the annual meeting.
The foregoing is intended to be a description of the principal features
of the amendment and is qualified in its entirety by reference to the complete
text of the certificate of amendment to our amended and restated certificate of
incorporation, a copy of which amendment is attached hereto as Appendix A and
will be available for inspection at our annual meeting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
7
<PAGE> 11
PROPOSAL 4: APPROVAL OF AMENDMENT TO THE PROVINCE HEALTHCARE
COMPANY 1997 LONG-TERM EQUITY INCENTIVE PLAN
Our board of directors has adopted an amendment to our 1997 long-term
equity incentive plan to increase the number of authorized shares of our common
stock that are available for incentive awards by 1,000,000 shares. We will
provide a copy of the 1997 plan to you upon request. The following brief
description and explanation is qualified in its entirety by reference to the
full text of the 1997 plan and the amendment. We have attached a copy of the
amendment hereto as Appendix B.
DESCRIPTION OF PROPOSED AMENDMENT
The amendment to the 1997 plan provides for an increase in the number
of shares of our common stock available for issuance under the 1997 plan from
2,609,016 to 3,609,016. We have granted options to purchase 1,576,001 shares
under the 1997 plan as of April 4, 2000. We have not issued other types of
awards (i.e., restricted stock, performance awards, reload options, stock
appreciation rights) under the 1997 plan.
REASON FOR CHANGES
Our board of directors believes that this increase in shares under the
1997 plan is necessary to enable us to operate a meaningful stock incentive
program, which constitutes a key component of our executive recruitment and
expansion programs. Prior to the amendment, the number of authorized shares
under the 1997 plan constituted 13.0% of our outstanding stock on a
fully-diluted basis. Nearly all of these shares are subject to outstanding
options. The increase will raise the percentage to 17.9%. Our board of directors
believes this increase is needed to enable us to provide meaningful incentives
to individuals as we execute our acquisition plans and business strategies.
GENERAL DESCRIPTION OF 1997 PLAN
The compensation committee administers the 1997 plan. The compensation
committee may award grants of "incentive stock options," as defined in section
422 of the Internal Revenue Code ("incentive options"), stock options that do
not qualify as incentive options ("nonqualified options"), stock appreciation
rights ("SARs"), reload options, restricted stock, performance awards, or any
combination thereof. Awards of options and SARs to any person under the 1997
plan cannot exceed 114,754 shares of common stock in any calendar year. The
number of shares of common stock that are subject to an award, the vesting
schedule and the exercise price of any option will be determined by the
compensation committee in its discretion. However, with respect to incentive
options, the exercise price may not be less than the fair market value of common
stock on the date of grant (110% for 10% shareholders), and the maximum term is
ten years from the date of grant. In addition, incentive options must terminate
three months after the date on which a grantee ceases to be an employee of our
company or its subsidiaries (one year after death or disability). The
compensation committee also may grant "reload options" at the time an option is
awarded or exercised to replace options that are exercised. The exercise price
of reload options is the fair market value of common stock on the date that the
options being replaced are exercised.
The compensation committee may grant SARs in tandem with stock options
to any optionee pursuant to the 1997 plan. SARs become exercisable only when and
to the extent that the related options are exercisable, and they expire at the
same time the related options expire. The exercise of an option results in the
immediate forfeiture of any related SAR to the extent the option is exercised,
and the exercise of an SAR results in the immediate forfeiture of any related
option to the extent the SAR is exercised. Upon exercise of an SAR, the grantee
will receive an amount in cash and/or shares of our common stock equal to the
difference between the fair market value of a share of common stock on the date
of exercise and the exercise price of the option to which it relates, multiplied
by the number of shares as to which the SAR is exercised.
8
<PAGE> 12
The compensation committee may award restricted stock subject to
conditions and restrictions, and duration, which shall be at least six months
except as otherwise described below, as it determines in its discretion. Except
as otherwise provided by the compensation committee, all restrictions on a
grantee's restricted stock will lapse at the time of the grantee's death,
disability or retirement. If a grantee's relationship with our company
terminates for any other reason, all restricted stock as to which the applicable
restrictions have not lapsed will be forfeited immediately.
The compensation committee may grant performance awards under which the
recipient can earn cash payments upon achieving specified performance goals.
Performance awards may include specific dollar-value target awards, performance
units, the value of which is established by the compensation committee at the
time of grant, and/or performance shares, the value of which is equal to the
fair market value of a share of common stock on the date of grant. The value of
a performance award may be fixed or fluctuate on the basis of specified
performance criteria.
All awards granted under the 1997 plan fully vest upon a change in the
corporate control of our company. With respect to performance awards, a
recipient shall earn at least the amount that would have been earned if the
performance period ended on the change in control of our company.
Our board of directors may amend or terminate the 1997 plan in its
discretion, except that no amendment will become effective without approval of
our company's shareholders if such approval is necessary for continued
compliance with the incentive option requirements of section 422 of the Internal
Revenue Code, the performance-based compensation exception of Section 162(m) of
the Internal Revenue Code, or any stock exchange listing requirements. If not
previously terminated by our board of directors, the 1997 plan will terminate on
March 3, 2007.
As grants to be awarded under the 1997 plan are made entirely in the
discretion of the compensation committee, the recipients, amounts and values of
future benefits to be received pursuant to the 1997 plan are not determinable.
FEDERAL INCOME TAX CONSEQUENCES
Tax consequences to our company and to individuals receiving awards
will vary with the type of award. Generally, a participant will not recognize
income, and our company is not entitled to take a deduction, upon the grant of
an incentive option, a nonqualified option, a reload option, SARs or a
restricted stock award. An individual who exercises incentive options will not
recognize income on exercise if he or she does not sell the shares of common
stock acquired for at least two years after the date of grant and one year after
exercising the incentive option. The exercise of an incentive option does,
however, give rise to an adjustment under the alternative minimum tax rules. Any
gain or loss on the sale of the common stock after these statutory holding
periods will be subject to capital gains treatment. The exercise price of the
incentive option is the basis for purposes of determining capital gains. For
options exercised after December 31, 2000, reduced capital gains rates apply if
the common stock is held for at least five years after the date of exercise.
An individual who disposes of the common stock before the holding
periods referenced above are satisfied will have engaged in a "disqualifying
disposition" and will recognize ordinary compensation income on the difference
between the exercise price of the incentive option and the fair market value of
our common stock at the time of sale. The individual's basis in the common stock
after a disqualifying disposition is its fair market value at the time of sale.
The individual also will be subject to tax on capital gain, if any, upon the
sale of our common stock on the amount realized in excess of the basis.
Upon exercise of a nonqualified option, the individual recognizes
ordinary income on the difference between the fair market value of the common
stock and the exercise price paid under the nonqualified option. Similarly, the
exercise of an SAR will result in ordinary income on the value of
9
<PAGE> 13
the SAR to the individual at the time of exercise. Unless an individual makes an
election under Section 83(b) of the Internal Revenue Code to be taxed at the
time of grant, he or she will recognize ordinary income on the fair market value
of the common stock at the time shares of restricted stock become vested. The
individual also is subject to capital gains treatment on the subsequent sale of
the common stock acquired through a nonqualified option or restricted stock. For
this purpose, the individual's basis in the common stock is its fair market
value at the time the nonqualified option is exercised or the restricted stock
becomes vested, or transferred, if an election under Section 83(b) is made.
Reload options are taxed in the same manner as incentive options and
nonqualified options, depending on the type of option that is issued under the
reload grant. Payments made under performance shares are taxable as ordinary
income at the time an individual attains the performance goals and the payments
are made available to him or her.
Generally, our company is not entitled to a tax deduction upon the
exercise of an incentive option under the 1997 plan. However, if the individual
engages in a disqualifying disposition, we may take a tax deduction for the
amount of ordinary income recognized by the individual. We are allowed to deduct
from our taxable income an amount that corresponds to the ordinary income an
individual recognizes with respect to options, SARs, restricted stock or
performance shares at the same time the individual recognizes the income.
REGISTRATION UNDER THE SECURITIES ACT OF 1933
We intend to register the additional shares of common stock authorized
for issuance under the 1997 plan on a registration statement on Form S-8
following approval of the amendment by the shareholders.
REQUIRED VOTE
Approval of the proposed amendment to the 1997 plan requires the
affirmative vote of a majority of the votes cast, in person or by proxy, by the
holders of our common stock entitled to vote at the Annual Meeting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1997 LONG-TERM EQUITY INCENTIVE PLAN.
10
<PAGE> 14
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following table sets forth certain information concerning our
executive officers as of April 18, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Martin S. Rash 45 President, Chief Executive Officer and Chairman of the Board
Richard D. Gore 47 Chief Financial Officer and Vice Chairman of the Board
John M. Rutledge 42 Executive Vice President and Chief Operating Officer
James Thomas Anderson 46 Senior Vice President of Acquisitions and Development
Howard T. Wall III 41 Senior Vice President, General Counsel and Secretary
Brenda B. Rector 52 Vice President and Controller
</TABLE>
Biographical information about Messrs. Rash and Gore can be found on
page 3 of this proxy statement.
Mr. Rutledge has served as Chief Operating Officer of our company since
December 1996 and was named Executive President in December 1999. Mr. Rutledge
served as Senior Vice President of our company from December 1996 to December
1999. From 1986 to October 1996, Mr. Rutledge served in several senior
management positions with Community Health Systems, Inc., most recently serving
as a Regional Vice President/Group Director from 1992 to October 1996.
Mr. Anderson has served as Senior Vice President of Acquisitions and
Development of our company since January 1998. From January 1994 to January
1998, Mr. Anderson served as a Vice President/Group Director of Community Health
Systems, Inc.
Mr. Wall has served as Senior Vice President and General Counsel of our
company since September 1997 and has served as Secretary since March 1998. From
1990 to September 1997, Mr. Wall served as a member of at Waller Lansden Dortch
& Davis, a law firm based in Nashville, Tennessee, where he chaired the health
care group.
Ms. Rector has served as Vice President and Controller of our company
since October 1996. From October 1990 to October 1996, Ms. Rector served as a
partner in Ernst & Young LLP's health care industry practice.
11
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information with respect to ownership of
our common stock as of April ___, 2000, by:
- each person known by us to be the beneficial owner of more
than 5% of our company's common stock;
- each of our directors;
- each of our executive officers named in the summary
compensation table on page 11; and
- all of our directors and executive officers as a group.
To our knowledge, unless otherwise indicated, each stockholder listed
below has sole voting and investment power with respect to the shares
beneficially owned. We are unaware of any person other than those listed below
that beneficially owns more than 5% of the outstanding shares of common stock.
Under Securities and Exchange Commission rules, the number of shares shown as
beneficially owned includes shares of common stock subject to options that
currently are exercisable or will be exercisable within 60 days of April 4,
2000. Shares of common stock subject to options that are currently exercisable
or will be exercisable within 60 days of April 4, 2000 are considered to be
outstanding for the purpose of determining the percentage of the shares held by
a holder, but not for the purpose of computing the percentage held by others.
All computations are based on 20,135,486 shares of common stock
outstanding on April ___, 2000.
<TABLE>
<CAPTION>
Name of Beneficial Owner, Executive Officer or
----------------------------------------------- Number of Shares Percent of Common Stock
Director Beneficially Owned Beneficially Owned
-------- ------------------ ------------------
<S> <C> <C>
AMVESCAP PLC (1)
11 Devonshire Square
London EC2M 4YR
England..................................... 1,603,650 8.0%
Putnam Investments, Inc.(2)
One Post Office Square
Boston, MA 02109............................ 1,592,000 7.9
J. & W. Seligman & Co. Incorporated(3)
100 Park Avenue
New York, NY 10017......................... 1,350,571 6.7
Martin S. Rash(4)(11)............................ 612,319 3.0
Joseph P. Nolan(5)............................... 112,432 *
Richard D. Gore(6)(11)........................... 454,647 2.3
John M. Rutledge(7)(11).......................... 202,476 1.0
James T. Anderson(8)(11)......................... 81,819 *
Howard T. Wall III(9)(11)........................ 61,513 *
Winfield C. Dunn(11)............................. 0 0
A. E. Brim(10)
305 N.E. 102d Ave
Portland, OR 97020 49,043 *
David L. Steffy(11)(12) 67,221 *
All executive officers and directors as a group (11
persons)(13)................................ 1,749,319 8.5
</TABLE>
- --------------
* Less than 1%
12
<PAGE> 16
(1) The number of shares listed as beneficially owned by AMVESCAP PLC
includes shares held by certain of its affiliates. Information is
derived from a Schedule 13G/A filed by AMVESCAP PLC with the Securities
and Exchange Commission on March 9, 2000.
(2) The number of shares listed as beneficially owned by Putnam
Investments, Inc. includes shares held by certain of its affiliates.
Information is as of December 31, 1999 and is derived from a Schedule
13G/A filed by Putnam Investments, Inc. with the Securities and
Exchange Commission on February 17, 2000.
(3) Includes shares owned directly by Mr. William C. Morris, owner of a
majority of the outstanding voting securities of J. & W. Seligman & Co.
Incorporated. Information is as of December 31, 1999 and is derived
from a Schedule 13G/A filed by J. & W. Seligman & Co. Incorporated with
the Securities and Exchange Commission on February 10, 2000.
(4) Includes 541,660 shares owned directly by Mr. Rash and options to
purchase 70,659 shares granted under the 1997 stock option plan.
(5) Includes 501,258 shares held by GTCR Fund IV. GTCR is the general
partner of GTCR IV, L.P., which in turn is the general partner of GTCR
Fund IV. As a principal of GTCR, Mr. Nolan may be deemed to share the
power to vote and dispose of the shares held by GTCR Fund IV. Mr. Nolan
disclaims beneficial ownership of the shares of common stock owned by
GTCR Fund IV. Mr. Nolan also owns 11,174 shares individually. The
address for Mr. Nolan is 6100 Sears Tower, Chicago, IL 60606.
(6) Includes options to purchase 59,185 shares granted under the 1997 stock
option plan.
(7) Includes options to purchase 161,387 shares granted under the 1997
stock option plan.
(8) Includes options to purchase 54,184 shares granted under the 1997 stock
option plan.
(9) Includes options to purchase 61,513 shares granted under the 1997 stock
option plan.
(10) Includes 40,046 shares held of record by Brim Capital Corporation, and
options owned by Mr. Brim individually to purchase 8,997 shares under
the 1997 stock option plan.
(11) The address of each of Messrs. Rash, Gore, Anderson, Rutledge, Steffy,
Dunn and Wall is 105 Westwood Place, Suite 400, Nashville, TN 37027.
(12) Includes options to purchase 7,221 shares granted under the 1997 stock
option plan.
(13) Includes options to purchase 476,514 shares granted under the 1997
stock option plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that our directors, executive officers and persons who own more than
10% of our common stock file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of our common stock.
The Securities and Exchange Commission rules also require these officers,
directors and shareholders to furnish us with copies of all Section 16(a)
reports they file. In the event that these reports are not filed timely, we are
required to report in our proxy statement the failure to file the reports during
1999.
Based solely upon review of the reports furnished to us and written
representations that no other reports were required, we believe that the
reporting persons have complied with the filing requirements during 1999, except
that we have learned that David L. Steffy purchased 10,000 shares of our common
stock on March 18, 1999. Mr. Steffy did not report this purchase on a Form 4 by
May 10, 1999, but subsequently reported the purchase on a Form 5 filed February
14, 2000. In addition, it has come to our attention that James O. McKinney, who
resigned as our Senior Vice President of Managed Operations effective November
1, 1999, exercised his option to purchase 3,278 shares of our common stock on
November 1, 1999. Mr. McKinney did not report the purchase on a Form 4 by
December 10, 1999; however, he did report the purchase on a Form 5 filed
February 9, 2000.
13
<PAGE> 17
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by our company
for each of the years ended December 31, 1997, 1998 and 1999 to our Chief
Executive Officer and our four other most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation Compensation Compensation
-------------------------- ------------ ------------
Securities
Name and Principal Position Year Salary Annual Bonus Underlying Options
- --------------------------- ---- ------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
Martin S. Rash (1) 1999 $ 324,006 $ 0 39,858 $ 19,941
Chairman of the Board, 1998 299,729 0 0 22,373
President, and Chief 1997 261,458 130,729 0 15,333
Executive Officer
Richard D. Gore (2) 1999 $ 273,006 $ 0 33,556 $ 19,693
Vice Chairman of the 1998 241,689 0 0 23,804
Board and Chief Financial 1997 181,205 90,602 0 10,236
Officer
John M. Rutledge(3) 1999 $ 271,254 $ 0 29,433 $ 13,410
Executive Vice President 1998 238,005 0 40,000 14,520
And Chief Operating Officer 1997 172,005 86,002 109,290 9,959
James T. Anderson (4) 1999 $ 259,377 $ 275,000 22,069 $ 21,676
Senior Vice President 1998 243,598 90,000 83,770 31,373
of Acquisitions and 1997 0 0 0 0
Development
Howard T Wall III (5) 1999 $ 234,000 $ 0 24,484 $ 12,543
Senior Vice President, 1998 213,750 0 37,322 10,887
General Counsel and 1997 53,308 26,654 0 0
Secretary
</TABLE>
- -----------------------
(1) All other compensation for 1999 included contributions by our company of:
$4,800 under a 401(k) plan; $9,770 under a supplemental deferred
compensation plan; $740 for life insurance; $3,932.56 for disability
insurance; $422.50 for group life insurance over $50,000; and $275 for
membership fees in a health club. All other compensation for 1998 included
contributions by our company of $4,800 under a 401(k) plan; $12,911 under
a supplemental deferred compensation plan; $750 for life insurance; and
$3,912 for disability insurance. All other compensation for 1997 included
contributions of: $4,800 under a 401(k) plan; $7,897 under a supplemental
deferred compensation plan; $740 for life insurance; and $1,946 for
disability insurance.
(2) All other compensation for 1999 included contributions by our company of :
$8,000 under a 401(k) plan; $8,240.81 under a supplemental deferred
compensation plan; $5,957.48 for disability insurance; and $695 for group
life insurance in excess of $50,000. All other compensation for 1998
included contributions by our company of: $4,800 under a 401(k) plan;
$9,969 under a supplemental deferred compensation plan; $8,760 for
disability insurance; and $275 for membership fees in a health club.
(3) All other compensation for 1999 included contributions by our company of:
$4,800 under a 401(k) plan; $8,188.25 under a supplemental deferred
compensation plan; and $422.50 for group life insurance in excess of
$50,000. All other compensation for 1998 included contributions by our
company of $4,800 under a 401(k) plan and $9,720 under a supplemental
deferred compensation plan.
(4) All other compensation for 1999 included contributions by our company of:
$4,800 under a 401(k) plan; $16,031.31 under a supplemental deferred
compensation plan; $695 for group life insurance in excess of $50,000; and
$150 for membership fees in a health club. Mr. Anderson's annual bonus,
14
<PAGE> 18
unlike the other named executive officers' annual bonuses, is based
exclusively on completed acquisitions. All other compensation for 1998
included $18,440 in loan interest, contributions by our company of $3,525
under a 401(k) plan and $9,408 under a supplemental deferred compensation
plan.
(5) All other compensation for 1999 included contributions by our company of:
$4,800 under a 401(k) plan; $7,070.63 under a supplemental deferred
compensation plan; $422.50 for group life insurance in excess of $50,000;
and $300 for membership fees in a health club. All other compensation for
1998 included contributions by our company of: $3,375 under a 401(k) plan;
$7,212 under the supplemental deferred compensation plan; and $300 for
membership fees in a health club.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of
stock options under our 1997 stock option plan made to the executive officers
listed in the summary compensation table during the year ended December 31,
1999. No stock appreciation rights have been granted under our 1997 stock
option plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR PER SHARE(1) DATE 5% 10%
- ------------------------ ------------ --------------- -------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Martin S. Rash 27,825 4.4% $ 15.125 February 25, 2009 $ 264,671.40 $ 670,732.76
12,033 1.9 14.250 July 14, 2009 107,836.14 273,279.06
Richard D. Gore 23,850 3.8% $ 15.125 February 25, 2009 $ 226,861.20 $ 574,913.79
9,706 1.5 14.250 July 14, 2009 86,982.26 220,431.02
John M. Rutledge 19,875 3.1% $ 15.125 February 25, 2009 $ 189.051.00 $ 479,094.86
9,558 1.5 14.250 July 14, 2009 85,665.93 217,069.83
James T. Anderson 15,900 2.5% $ 15.125 February 25, 2000 $ 151,240.80 $ 383,275.86
6,169 1.0 14.250 July 14, 2009 55,284.73 140,102.93
Howard T. Wall III 15,900 2.5% $ 15.125 February 25, 2009 $ 151,240.73 $ 303,275.86
8,584 1.4 14.250 July 14, 2009 76,927.23 194,949.51
</TABLE>
- ----------------
(1) Based upon the fair market value of our common stock on the date of grant
of options, as determined by our board of directors.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any of the executive officers set forth above
or any other holder of our company's securities that the actual stock
price appreciation over the term will be at the assumed 5% and 10% levels
or at any other defined level. Unless the market price of the common stock
appreciates over the option term, no value will be realized from the
option grants made to the above executive officers.
15
<PAGE> 19
OPTION EXERCISES AND YEAR-END VALUES
The following table provides certain information with respect to the
Named Executive Officers concerning the exercise of options during 1999 and
with respect to unexercised options at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at December 31,
Options at December 31, 1999 1999(1)
----------------------------
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin S. Rash - - 12,033 27,825 $ 57,157 $ 107,822
Richard D. Gore - - 9,706 23,850 46,104 92,419
John M. Rutledge - - 9,558 19,875 45,401 77,016
James T. Anderson - - 6,169 15,900 29,303 61,613
Howard T. Wall III - - 8,584 15,900 40,774 61,613
</TABLE>
- -------------------------
(1) Based upon the closing price of the common stock of $19.00 per share as
reported on the Nasdaq National Market on December 31, 1999, less the
exercise price of the options.
EMPLOYMENT AGREEMENTS
Our company entered into Senior Management Agreements with Messrs.
Rash and Gore effective as of December 17, 1996. Messrs. Rash and Gore are our
company's Chief Executive Officer and Chief Financial Officer, respectively,
and currently receive annual base salaries determined by our board of
directors, which are subject to adjustment by the compensation committee. Mr.
Rash's annual base salary may not be less than $250,000 and Mr. Gore's salary
may not be less than $175,000. Each will be eligible to receive a bonus each
year of up to fifty percent (50%) of his annual base salary for such year,
based on the achievement of certain operational and financial objectives. Their
employment periods continue until their resignation, disability, or death, or
until our board of directors determines that termination of their employment is
in our company's interests. In the event that our company terminates Mr. Rash
or Mr. Gore without cause or as a result of death or disability, we have agreed
to pay each of them an amount equal to twice his annual base salary; provided
that such severance payments cease upon acceptance of employment with an entity
that owns and operates rural hospitals. Messrs. Rash and Gore have agreed not
to compete with us or solicit our employees following the termination of their
employment for a period of two years in the case of Mr. Rash, or one year in
the case of Mr. Gore.
SEVERANCE AGREEMENTS
Our company entered into executive severance agreements with each of our
executive officers, effective October 18, 1999. Each of Messrs. Rash, Gore,
Rutledge, Anderson and Wall and Ms. Rector have entered into such an agreement.
The agreements for Messrs. Rash, Gore, Rutledge, Anderson and Wall provide
benefits to such executive officers upon:
- - termination by our company without cause;
- - termination by the executive officer with cause; and
16
<PAGE> 20
- - termination following a change in control.
In the event that we terminate any of these executive officers without cause or
he terminates his employment with us for cause, he will receive an amount equal
to 200% of his annual base compensation determined by reference to his base
salary in effect at the time of termination. Should the executive officer be
terminated within 24 months after a change in control he will receive:
- - an amount equal to 200% of his annual base compensation determined by
reference to his base salary in
- - an amount equal to 200% of the highest annual bonus that he would be
eligible to receive during the fiscal year ending during which the change
in control occurs; and
- - continued insurance coverage and fringe benefits for 24 months following
the change in control.
Our company also entered into a similar executive severance agreement
with Ms. Rector, effective October 18, 1999, which provides different benefits
under the three circumstances previously mentioned. In the event that we
terminate Ms. Rector without cause or she terminates her employment with cause,
she will receive an amount equal to her annual base compensation determined by
reference to her base salary in effect at the time of termination. Should Ms.
Rector be terminated within 24 months after a change in control she will
receive:
- - an amount equal to her annual base compensation determined by reference to
her base salary in effect at the time of change in control;
- - an amount equal to her highest annual bonus that she would be eligible to
receive during the fiscal year ending during which the change in control
occurs; and
- - continued insurance coverage and fringe benefits for 24 months following
the change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Brim, Nolan and Willis comprised our compensation committee
for the year ended December 31, 1999. Mr. Brim served as Chairman and Chief
Executive Officer of Brim, Inc. until the merger with Principal Hospital
Company in December 1996, and he is currently one of our employees.
No executive officer of our company served as a member of the
compensation committee or as a director of any other entity whose executive
officer serves as a director of our company.
17
<PAGE> 21
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
This report is submitted by the members of the 1999 compensation
committee, excluding Michael T. Willis who resigned from the board of directors
effective January 1, 2000, pursuant to the rules adopted by the Securities and
Exchange Commission which require disclosure with respect to compensation
policies applicable to our company's executive officers, and with respect to
the basis for the compensation of Martin S. Rash as our Chief Executive
Officer. Generally, the compensation committee is responsible for establishing
and administering our company's executive compensation policies and programs
within the framework and strategy approved by the board of directors.
Compensation Strategy
Our company has developed and implemented a strategic compensation
strategy designed to improve its ability to attract, retain, and motivate
superior executive talent. The foundation of this strategy is a belief that
executive and shareholder interests should be aligned through the extensive use
of variable compensation opportunities, including both annual and long-term
incentives. To this end, our company targets base salaries at the median market
level based on comparable positions in comparable organizations, and relies
exclusively on annual and long-term incentives to provide total compensation
opportunities at the 75th percentile market level when our executives achieve
superior performance. This highly-leveraged compensation mix is consistent with
other growth companies, and allows for executive compensation levels to move in
tandem with changes in shareholder value over time.
Compensation Program
Our company currently has three primary components to its executive
compensation program:
Base Salary. Our company believes that base salary ranges should
reflect the competitive employment market at the 50th percentile (median) for
comparable positions in comparable organizations. The company establishes
individual base salary levels in accordance with these guidelines, with
potential adjustments to reflect any unique roles and responsibilities and/or
the performance of the individual. We determine annual increases to base salary
by assessing each executive's annual performance, while taking into
consideration the salary budget for our company. For the year ended December
31, 1999, aggregate base salary levels for officers of our company increased
from $1,058,000 to $1,529,643, representing an average annual increase in
compensation of 7.4% per officer.
Annual Incentives. Our company believes that incentive compensation
programs should be designed to provide superior pay for superior performance.
Accordingly, the company targets total cash compensation levels (base salary
plus annual incentives) at the 75th percentile of the competitive market when
superior performance is achieved. For the year ended December 31, 1999, Mr.
Anderson earned annual incentive compensation awards of $275,000, representing
an average incentive equal to 106% of his base salary. Mr. Anderson's annual
incentive award was based exclusively on completed acquisitions for our
acquisition and development program. With respect to the other executive
officers named in the summary compensation table on page 11, their bonuses are
based on various other factors, including budgeted earnings and growth targets
for our entire company as set in the beginning of each year by the compensation
committee. While our company met its own internal earnings and growth targets
for 1999, it did not exceed such targets sufficiently to qualify the executive
18
<PAGE> 22
officers named in the summary compensation table on page 11 for an annual bonus
for 1999 as provided by the compensation program.
Target award opportunities for our company's officers under the 2000
annual incentive compensation plan range from 50% to 75% of their respective
base salary levels. Actual incentive awards earned under the program can be
higher or lower than targeted levels based on actual net income performance at
the end of the year relative to budgeted net income performance at the
beginning of the year.
Long-Term Incentive. Our company believes that the interests of our
executives should be aligned with the interests of shareholders through the use
of equity-based compensation. Accordingly, the company makes periodic grants of
stock options to key executives in order to align compensation opportunities
with the creation of shareholder value. During the year ended December 31,
1999, Messrs. Rash, Gore, Rutledge, Anderson and Wall received option grants of
39,858, 33,556, 29,433, 22,069 and 24,484 shares, respectively. This represents
approximately 24% of total options granted to all employees during the year
ended December 31, 1999.
We will determine stock option grant levels in 2000 using the
Black-Scholes Option Pricing Model and base them on targeting total direct
compensation, which is the total cash compensation plus long-term incentives,
opportunities at the 75th percentile market levels for comparable
organizations.
CEO Compensation in 1999
The compensation program for our Chief Executive Officer falls within
the general compensation strategy, framework, and guidelines established for
all our executive officers, with specific compensation levels and award
opportunities established by the compensation committee and approved by our
board of directors.
For the year ended December 31, 1999, Mr. Rash's base salary was set
at $324,006, representing a 8.1% increase over his base salary for 1998. This
base salary level is believed to be competitive at the 50th percentile for
chief executive officers of similarly sized companies in the health care
industry, based on the review of published survey sources and peer company
data, and reflective of our company's performance.
For the year ended December 31, 1999, Mr. Rash, like all the other
executive officers named in the summary compensation table on page 11 of our
company (other than Mr. Anderson), did not receive an annual bonus for 1999.
While our company met its own internal earnings and growth targets for 1999, it
did not exceed such targets sufficiently to qualify the executive officers
named in the summary compensation table on page 11 for an annual bonus for
1999, as provided by the compensation program administered by the compensation
committee.
Internal Revenue Code Section 162(m)
The committee believes that all compensation paid to officers of our
company during the year ended 1999 qualified for deductibility under Section
162(m) of the Internal Revenue Code.
COMPENSATION COMMITTEE
A.E. Brim, Chairman
Joseph P. Nolan
19
<PAGE> 23
COMPARATIVE PERFORMANCE GRAPH
Rules promulgated by the Securities and Exchange Commission require
that we include in this proxy statement a line graph that compares the yearly
percentage change in cumulative total shareholder return on our company's
common stock with (a) the performance of a broad equity market indicator, the
CRSP Index for Nasdaq Stock Market (U.S. Companies) (the "Broad Index") and (b)
the performance of a published industry index or peer group index, the CRSP
Index for hospital companies (SIC 8060-8069) (U.S. Companies) (the "Industry
Index"). The following graph compares the yearly percentage change in the
return on our common stock since February 11, 1998, the date on which our
company's common stock first began trading on the Nasdaq National Market, with
the cumulative total return on the Broad Index and the Industry Index. The
graph assumes the investment of $100 in our common stock on February 11, 1998,
the investment of $100 in the Broad Index and the Industry Index on February
11, 1998, and that with respect to each hypothetical investment, all dividends
were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD ENDING DECEMBER 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
Legend
Symbol CRSP Total Returns Index for: 02/1998 06/1998 12/1998 06/1999 12/1999
------ ---------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
- Province Healthcare Company 100.0 140.2 181.6 98.7 96.2
- Nasdaq Stock Market (US Companies) 100.0 110.3 129.3 158.3 233.6
- NYSE/AMEX/NASDAQ Stocks (SIC 8060-8069 100.0 109.8 91.8 74.4 90.0
US Companies) Hospitals
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 02/11/1998.
20
<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE NOTES
In December 1996, Brim, Inc., a predecessor-in-interest by merger to
our company, was recapitalized. In connection with the recapitalization, we
loaned $112,956 to Mr. Rash and $67,768 to Mr. Gore pursuant to two promissory
notes, respectively. We loaned such amounts to Messrs. Rash and Gore to finance
a portion of their purchase of our securities pursuant to the recapitalization.
The notes bear interest at a rate per annum equal to the lesser of: (i) the
rate designated in The Wall Street Journal as the "prime rate" and (ii) the
highest rate permitted by applicable law. The principal amount of the notes and
all interest accrued thereon mature on December 17, 2002. On March 14, 2000,
our board of directors voted to forgive the indebtedness of Messrs. Rash and
Gore, which included outstanding amounts of principal and interest of
$143,255.69 and $84,946.26, respectively.
STOCKHOLDERS AGREEMENT AND SENIOR MANAGEMENT AGREEMENTS
In connection with the recapitalization referred to above, and in
addition to becoming parties to the stockholders agreement, dated December 17,
1996, Messrs. Rash and Gore entered into senior management agreements with GTCR
Fund IV, Leeway & Co. and our company. These agreements provide that a portion
of our common stock purchased by each of Messrs. Rash and Gore is subject to
vesting. Upon completion of our initial public offering in February 1998, 50%
of the vesting shares became vested, and the remaining vesting shares will
become vested in equal installments on the first three anniversaries of the
completion of the offering. Unvested shares are subject to repurchase by us or,
if we do not elect to repurchase such shares, by GTCR Fund IV, at their
original cost upon termination of the executive's employment for any reason.
For purposes of determining earnings per share, 100% of the common stock that
Messrs. Rash and Gore purchased is considered outstanding. The executive
agreements entitle GTCR Fund IV and us to repurchase from each of Messrs. Rash
and Gore upon the termination of his employment: (i) junior preferred stock and
vested common stock at a price equal to fair market value; and (ii) unvested
common stock at a price equal to original cost. The stockholders agreement
entitles GTCR Fund IV and us to repurchase shares of our common stock and
junior preferred stock from an employee stockholder upon the termination of
such employee's employment by us at a price equal to fair market value. The
stockholders agreement and the executive agreements also contain restrictions
on the transfer of our securities. Pursuant to the stockholders agreement, the
stockholders agree to consent to and participate in any sale of our company
approved by our board of directors and by the holders of a majority of the
common stock. The stockholders agreement and the portions of the executive
agreements that restrict the transfer of our securities were terminated in
February 1998 in connection with our initial public offering.
REGISTRATION AGREEMENT
In connection with the recapitalization, the stockholders of Brim,
Inc. at such time, which we refer to as the original stockholders, entered into
a registration agreement with Brim, Inc. The registration agreement provides
for certain demand registration rights to the original stockholders and to
subsequent holders of the common stock acquired by the original stockholders in
connection with the recapitalization. The demand registration rights commence
from and after the 180th day after the closing of our initial public offering
of securities. The holders of a majority of the registrable securities held by
the original stockholders, and their permitted transferees, other than Leeway &
Co., are entitled to request two long-form registrations in which we pay all
registration expenses and an unlimited number of short-form registrations in
which we pay all registration expenses. Such holders
21
<PAGE> 25
also are entitled to request an unlimited number of long-form registrations in
which holders of registrable securities pay their pro-rata share of
registration expenses. The holders of a majority of the registrable securities
held by Leeway & Co., and their permitted transferees, are entitled to request
one long-form registration in which we pay all registration expenses and an
unlimited number of long-form registrations in which the holders of registrable
securities pay their share of registration expenses. We may postpone a demand
registration for up to one year under certain circumstances, and we are not
required to effect a demand registration within one year of a previous
registration in which holders of registrable securities participated without
reduction of the number of their included shares.
The registration agreement also provides that, subject to certain
limitations, the original stockholders, and their permitted transferees, may
request inclusion of their shares in a registration of securities by us, other
than pursuant to the initial public offering of our common stock or a demand
registration. We must bear the expenses incurred in connection with the
exercise of such piggyback registration rights.
22
<PAGE> 26
GENERAL INFORMATION
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
We must receive shareholder proposals intended to be presented at the
2001 annual meeting of shareholders at our principal executive offices at 105
Westwood Place, Suite 400, Brentwood, Tennessee 37027 no later than December
19, 2000, in order for the proposals to be included in the proxy statement and
form of proxy for that meeting.
The deadline for delivering your notice of shareholder proposal, other
than a proposal to be included in the proxy statement, for the 2001 annual
meeting of shareholders will be March 2, 2001, pursuant to Rule 14a-4 under the
Securities Exchange Act of 1934. The persons named as proxies in the proxy
statement may exercise discretionary voting authority with respect to any
matter that is not submitted to us by such date.
COUNTING OF VOTES
All matters specified in this proxy statement that are to be voted on
at the annual meeting will be by written ballot. We will appoint inspectors of
election to, among other things:
- determine the number of shares outstanding, the shares
represented at the annual meeting, the existence of a quorum and
the authenticity, validity and effect of proxies;
- receive votes of ballots;
- hear and determine all challenges and questions in any way
arising in connection with the right to vote; and
- count and tabulate all votes and to determine the result.
Each item presented in this proxy statement to be voted on at the
annual meeting must be approved by the affirmative vote of the holders of the
number of shares described under each such item. The inspectors of election
will treat shares represented by proxies that reflect abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. Abstentions, however, do not constitute a vote "for" or "against"
any matter and thus will be disregarded in the calculation of "votes cast."
Inspectors of election will treat shares referred to as "broker
non-votes" as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has indicated physically on the
proxy that it does not have discretionary authority to vote, inspectors of
election will treat those shares as not present and not entitled to vote with
respect to that matter, even though those shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other matters.
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MISCELLANEOUS
We will bear the cost of printing, mailing and other expenses in
connection with this solicitation of proxies and will reimburse brokers and
other persons holding shares in their names or in the names of nominees for
their expenses in forwarding this proxy material to the beneficial owners of
such shares. Certain of our directors, officers and employees may, without any
additional compensation, solicit proxies in person or by telephone.
Management is not aware of any matters other than those described
above that may be presented for action at the meeting. With respect to other
matters that properly come before the annual meeting, we intend that the
proxies will be voted in accordance with the judgment of the person or persons
voting such proxies, subject to the direction of our board of directors.
We are enclosing a copy of our 1999 annual report to shareholders
along with this proxy statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We incorporate by reference our annual report on Form 10-K for the
fiscal year ended December 31, 1999 (with respect only to: Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations; Item
7A. Quantitative and Qualitative Disclosures About Market Risk; and Financial
Statements) that we filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
FOR INFORMATION CONCERNING OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
AVAILABLE TO SHAREHOLDERS FREE OF CHARGE, PLEASE WRITE: MERILYN H. HERBERT,
VICE PRESIDENT, INVESTOR RELATIONS, PROVINCE HEALTHCARE COMPANY, 105 WESTWOOD
PLACE, SUITE 400, BRENTWOOD, TENNESSEE 37027.
By order of the board of directors,
Howard T. Wall III, Esq.
Secretary
April 18, 2000
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APPENDIX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PROVINCE HEALTHCARE COMPANY
ARTICLE ONE
The name of the Corporation is Province Healthcare Company.
ARTICLE TWO
The name of the Corporation's registered agent in the State of
Delaware is Corporation Service Company. The address of such registered agent
is 1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware
19805. The registered office and/or registered agent of the Corporation may be
changed from time to time by action of the Board of Directors.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware (the "Delaware
General Corporation Law") either alone or with others through wholly or
partially owned subsidiaries, as a partner (limited or general) in any
partnership, as a joint venturer in any joint venture, or otherwise.
ARTICLE FOUR
SECTION 1. The aggregate number of shares of stock which the
Corporation has authorized to issue is 50,000,000, consisting of 100,000 shares
of Preferred Stock, par value $.01 per share (the "Preferred Stock"), and
50,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"). All of such shares shall be issued as fully paid and non-assessable
shares, and the holder thereof shall not be liable for any further payments in
respect thereof.
SECTION 2. The preferences, limitations, designations and relative
rights of the shares of each class and the qualifications, limitations or
restrictions thereof shall be as follows:
I. Preferred Stock
A. Authorization; Series; Provisions.
1. The Board of Directors of the Corporation
is authorized, subject to limitations prescribed by law and the provisions of
this Article Four, to provide for the issuance of
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<PAGE> 29
shares of the Preferred Stock in series, and by filing a certificate pursuant
to the General Corporation Law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
2. The Preferred Stock may be issued from time
to time in one or more series, the shares of each series to have such powers,
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as are
stated and expressed herein or in a resolution or resolutions providing for the
issuance of such series, adopted by the Board of Directors as hereinafter
provided.
3. Authority is hereby expressly granted to
the Board of Directors, subject to the provisions of this Section 2.I.A. of
Article Four, to authorize the issuance of one or more series of Preferred
Stock, and with respect to each such series to fix by resolution or resolutions
providing for the issuance of such series:
a. the maximum number of shares to
constitute such series and the distinctive
designation thereof;
b. whether the shares of such series
shall have voting rights, in addition to any voting
rights provided by law, and, if so, the terms of
such voting rights;
c. the dividend rate, if any, on the
shares of such series, the conditions and dates upon
which such dividends shall be payable, the
preference or relation which such dividends shall
bear to the dividends payable on any other class or
classes or on any other series of capital stock, and
whether such dividends shall be cumulative or
noncumulative;
d. whether the shares of such series
shall be subject to redemption by the Corporation
and, if made subject to redemption, the times,
prices and other terms and conditions of such
redemption;
e. the rights of the holders of
shares of such series upon the liquidation,
dissolution or winding up of the Corporation;
f. whether or not the shares of such
series shall be subject to the operation of a
retirement or sinking fund and, if so, the extent to
and manner in which any such retirement or sinking
fund shall be applied to the purchase of redemption
of the shares of such series for retirement or to
other corporate purposes and the terms and
provisions relative to the operation thereof;
g. whether or not the shares of such
series shall be convertible into, or exchangeable
for shares of stock of any other class or classes,
or of any other series of the same class, and if so
convertible or exchangeable, the price or prices or
the rate or rates of conversion or exchange and the
method, if any, of adjusting the same;
h. the limitations and restrictions,
if any, to be effective while any shares of such
series are outstanding upon the payment of dividends
or making of other distributions on, and upon the
purchase, redemption or other acquisition by the
Corporation of, Common Stock or any other class or
classes
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of stock of the Corporation ranking junior to the
shares of such series either as to dividends or upon
liquidation;
i. the conditions or restrictions, if
any, upon the creation of indebtedness of
Corporation or upon the issue of any additional
stock (including additional shares of such series or
of any other series or of any other class) ranking
on a parity with or prior to the shares of such
series as to dividends or distribution of assets on
liquidation, dissolution or winding up; and
j. any other preference and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof
as shall not be inconsistent with this Section
2.I.A. of Article Four.
B. Series Identical; Rank. All shares of any one series
of Preferred Stock shall be identical with each other in all respects, except
that shares of any one series issued at different times may differ as to the
dates from which dividends, if any, thereon shall be cumulative; and all series
shall rank equally and be identical in all respects, except as permitted by the
foregoing provisions of Section 2.I.A.3. of Article Four, and all shares of
Preferred Stock shall rank senior to the Common Stock both as to dividends and
upon litigation.
C. Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of any class or classes of stock
of the Corporation ranking junior to the Preferred Stock upon liquidation, the
holders of the shares of the Preferred Stock shall be entitled to receive
payment at the rate fixed herein or in the resolution or resolutions adopted by
the Board of Directors providing for the issue of such series, plus (if
dividends on shares of such series of Preferred Stock shall be cumulative) an
amount equal to all dividends (whether or not earned or declared) accumulated
to the date of final distribution to such holders, but they shall be entitled
to no further payment. If, upon any liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation or proceeds thereof,
distributable among the holders of the shares of the Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid, then such
assets, or the proceeds thereof, shall be distributed among such holders
ratably in accordance with the respective amounts which would be payable on
such shares if all amounts payable thereon were paid in full.
D. Voting Rights. Except as shall be otherwise stated
and expressed herein or in the resolution or resolutions of the Board of
Directors providing for the issue of any series and except as otherwise
required by the laws of the State of Delaware, the holders of shares of
Preferred Stock shall have, with respect to such shares, no right or power to
vote on any question or in any proceeding or to be represented at, or to
receive notice of, any meeting of stockholders.
E. Reacquired Shares. Shares of any Preferred Stock
which shall be issued and thereafter acquired by the Corporation through
purchase, redemption, exchange, conversion or otherwise shall return to the
status of authorized but unissued Preferred Stock unless otherwise provided in
the resolution or resolutions of the Board of Directors.
F. Increase/Decrease in Authorized Shares of a Series.
Unless otherwise provided in the resolution or resolutions of the Board of
Directors providing for the issuance thereof, the number of authorized shares
of stock of any such series may be increased or decreased (but not below the
number of shares thereof outstanding) by resolution or resolutions of the Board
of Directors. In case the number of shares of any such series of Preferred
Stock shall be decreased, the shares representing such decrease shall, unless
otherwise provided in the resolution or resolutions of the Board of Directors
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<PAGE> 31
providing for the issuance thereof, resume the status of authorized but
unissued Preferred Stock, undesignated as to series.
II. Common Securities.
A. Rights Identical. Except as otherwise provided in
this Section 2.II. of Article Four or as otherwise required by applicable law,
all shares of Common Stock shall be identical in all respects and shall entitle
the holders thereof to the same rights and privileges, subject to the same
qualifications, limitations and restrictions.
B. Voting Rights. Except as otherwise provided in this
Section 2.II. of Article Four or as otherwise required by applicable law,
holders of Common Stock shall be entitled to one vote per share on all matters
to be voted on by the stockholders of the Corporation.
C. Dividends. Subject to the rights of each series of
the Preferred Stock, dividends may be declared and paid or set apart for
payment upon the Common Stock out of any assets or funds of the Corporation
legally available for the payment of dividends, and the holders of Common Stock
shall be entitled to participate in such dividends ratably on a per share
basis.
D. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, and after the
holders of the Preferred Stock of each series shall have been paid in full the
amounts to which they shall be entitled in accordance with Section 2.I. of
Article Four, the terms of any outstanding Preferred Stock and applicable law,
or an amount sufficient to pay the aggregate amount to which the holders of the
Preferred Stock of each series shall be entitled shall have been deposited with
a bank or trust company having capital, surplus and undivided profits of at
least Twenty-Five Million Dollars ($25,000,000) as a trust fund for the benefit
of the holders of such Preferred Stock, the remaining net assets of the
Corporation shall be distributed pro rata to the holders of the Common Stock,
to the exclusion of the holders of such Preferred Stock.
III. General Provisions.
A. Nonliquidating Events. A consolidation or merger of
the Corporation with or into another corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, or any combination
thereof, of all or substantially all of the assets of the Corporation shall not
be deemed or construed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Article Four.
B. No Preemptive Rights. No holder of Preferred Stock
or Common Stock of the Corporation shall be entitled, as such, as a matter of
right to subscribe for or purchase any part of any new or additional issue of
stock of any class or series whatsoever or of securities convertible into stock
of any class whatsoever, whether now or hereafter authorized and whether issued
for cash or other consideration, or by way of dividends.
ARTICLE FIVE
The Corporation is to have perpetual existence.
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ARTICLE SIX
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, and the directors need not be
elected by ballot unless required by the By-laws of the Corporation. In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to make, alter, amend,
change, add to or repeal the By-laws of the Corporation.
ARTICLE SEVEN
Meetings of stockholders may be held within or outside of the State of
Delaware, as the By-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
By-laws of the Corporation. The Board of Directors shall from time to time
decide whether and to what extent and at what times and under what conditions
and requirements the accounts and books of the Corporation, or any of them,
except the stock book, shall be open to the inspection of the stockholders, and
no stockholder shall have any right to inspect any books or documents of the
Corporation except as conferred by the laws of the State of Delaware or as
authorized by the Board of Directors.
ARTICLE EIGHT
Subject to the rights of the holders of the Preferred Stock, from and
after the date on which the Common Stock of the Corporation is registered
pursuant to the Securities Exchange Act of 1934, as amended, (A) any action
required or permitted to be taken by the stockholders of the Corporation must
be effected at an annual or special meeting of stockholders of the Corporation
and may not be affected in lieu thereof by any consent in writing by such
stockholders, and (B) special meetings of stockholders of the Corporation may
be called only by the Chairman of the Board, the president of the Board of
Directors pursuant to a resolution adopted by the affirmative vote of at least
two members then in office.
ARTICLE NINE
The number of directors which shall constitute the whole board shall
be such as from time to time shall be fixed by resolution adopted by
affirmative vote of a majority of the Board of Directors except that such
number shall not be less than one (1) nor more than nine (9), the exact number
to be determined by resolution adopted by affirmative vote of a majority of the
Board of Directors.
Vacancies and newly created directorships resulting from any increase
in the number of directors may be filled only by the affirmative vote of the
majority of the Board of Directors then in office, although less than a quorum,
or by a sole remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filing of
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<PAGE> 33
vacancies and other features of such directorship shall be governed by the
terms of this Certificate of Incorporation applicable thereto.
Except to the extent prohibited by law, the Board of Directors shall
have the right (which to the extent exercised, shall be exclusive) to establish
the rights, powers, duties, rules and procedures that from time to time shall
govern the Board of Directors and each of its members, including without
limitation the vote required for any action by the Board of Directors, and that
from time to time shall affect the directors' power to manage the business and
affairs of the Corporation; and no by-law shall be adopted by stockholders
which shall impair or impede the implementation of the foregoing.
ARTICLE TEN
ARTICLE EIGHT, ARTICLE NINE and this ARTICLE TEN of this Restated
Certificate of Incorporation and Section 2 and 1.I of Article II, Section 2, 3,
4 and 5 of Article III and Article V of the By-laws of the Corporation shall
not be altered, amended or repealed by, and no provision inconsistent therewith
shall be adopted by, the stockholders without the affirmative vote of the
holders of at least 80% of the Common Stock, voting together as a single class.
ARTICLE ELEVEN
To the fullest extent permitted by the Delaware General Corporation
Law as it now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto), no director of
the Corporation shall be liable to the Corporation or its stockholders for
monetary damages arising from a breach of fiduciary duty owed to the
Corporation or its stockholders.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE TWELVE
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law.
ARTICLE THIRTEEN
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed herein and by the laws
of the State of Delaware, and all rights conferred upon stockholders herein are
granted subject to this reservation.
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APPENDIX B
THIRD AMENDMENT TO THE
PROVINCE HEALTHCARE COMPANY
1997 LONG-TERM EQUITY INCENTIVE PLAN
THIS AMENDMENT (the "Amendment") to the Province Healthcare Company
1997 Long-Term Equity Incentive Plan (the "Plan") is made by Province
Healthcare Company (the "Company"), to be effective on ___________, 2000.
RECITALS:
WHEREAS, the Company originally established the Plan effective March
3, 1997, amended the Plan, effective March 24, 1998, to establish the number of
shares of common stock that are available to be awarded under the Plan as
affected by the reorganization of the Company and amended the Plan, effective
March 31, 1999 to increase the number of shares available under the Plan;
WHEREAS, the Company has granted options hereunder to certain
individuals to purchase shares of common stock and, having expanded its
business operations substantially, deems it necessary, appropriate and
desirable to increase the number of shares of common stock available under the
Plan by 1,000,000 shares to enable the Company to continue to provide
meaningful performance incentives to its employees; and
WHEREAS, the Company intends to seek shareholder approval of this
amendment to the Plan at the next annual meeting of shareholders;
NOW, THEREFORE, pursuant to action of the board of directors of the
Company taken on __________, 2000, the Plan is amended as follows:
1. The first paragraph of Section 4 of the Plan is restated as follows:
An aggregate of 3,609,016 shares of common stock (the
"Shares") may be issued pursuant to the Plan. Such Shares may be in
whole or in part authorized and unissued, or shares which are held by
the Company as treasury shares. If any grant under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited as to
any Shares, such unpurchased or forfeited Shares shall thereafter be
available for further grants under the Plan. In any one calendar year,
the Committee shall not grant to any one participant, options to
purchase a number of shares of common stock in excess of 114,754. The
number of shares of common stock referenced in this paragraph are
subject to adjustment as provided in Section 15.
IN WITNESS WHEREOF, the undersigned officer of the Company has
executed this Amendment to the Plan pursuant to authorization from the Company
on this ____ day of _________, 2000, but to be effective as provided herein.
PROVINCE HEALTHCARE COMPANY
By:
-------------------------------
Its:
-------------------------------
<PAGE> 35
PROXY CARD
PROVINCE HEALTHCARE COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Martin S. Rash and Richard D. Gore,
and either of them, as proxies, with full power of substitution and
resubstitution, to vote all of the shares of common stock that the undersigned
is entitled to vote at our 2000 annual meeting of shareholders, to be held on
Thursday, May 25, 2000, at 9:00 a.m. (Central Daylight Time) at The Marriott
Cool Springs, 700 Cool Springs Boulevard, Franklin, Tennessee 37077, and at any
adjournment thereof.
In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the meeting or any adjournment
thereof.
THIS PROXY IS BEING SOLICITED BY OUR BOARD OF DIRECTORS AND WILL BE
VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL
VOTE (A) FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW, (B) FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR COMPANY'S
INDEPENDENT AUDITORS, (C) FOR APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, (D)
FOR APPROVAL OF AN AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER
OUR 1997 LONG-TERM EQUITY INCENTIVE PLAN AND (E) IN ACCORDANCE WITH THE
RECOMMENDATIONS OF OUR BOARD OF DIRECTORS ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING.
(Continued on reverse side)
<PAGE> 36
1. Election of Directors. Nominees: Martin S. Rash, Richard D. Gore,
Joseph P. Nolan, A.E. Brim, Winfield C. Dunn and David L. Steffy.
<TABLE>
<S> <C> <C>
[ ] FOR nominees listed [ ]AGAINST nominees listed [ ]WITHHOLD AUTHORITY to
(except withheld to the vote for any individual nominee.
contrary) Write name of nominee(s) here:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
</TABLE>
2. Proposal to ratify the appointment of Ernst & Young LLP as our
company's independent auditors for the fiscal year ending December 31,
2000.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. Proposal to amend our amended and restated certificate of
incorporation to increase the number of authorized shares of common
stock.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. Proposal to amend our 1997 long-term equity incentive plan.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Dated:________________________________________________, 2000
------------------------------------------------------------
Signature
------------------------------------------------------------
Signature, if held jointly
IMPORTANT: Please sign exactly as your name or names appear
on this proxy and mail promptly in the enclosed envelope. If
you sign as agent or in any other capacity, please state the
capacity in which you sign.
<TABLE>
<S> <C>
[ ] I EXPECT TO ATTEND THE ANNUAL MEETING. [ ] I DO NOT EXPECT TO ATTEND THE ANNUAL
MEETING.
</TABLE>
