<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 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL HEALTH SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
UNIVERSAL HEALTH SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LOGO]
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1994
Notice is hereby given that the Annual Meeting of Stockholders of Universal
Health Services, Inc. (the "Company") will be held on Wednesday, May 18, 1994 at
10:00 a.m., at the offices of the Company, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania for the following purposes:
(1) To have the holders of Class A and Class C Common Stock elect two Class
I directors, both directors to serve for a term of three years until
the annual election of directors in 1997 and election and qualification
of their respective successors.
(2) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the Amendment to the 1989 Non-Employee Director Stock
Opton Plan adopted by the Board of Directors of the Company.
(3) To have the holders of Class A, B, C and D Common Stock vote upon the
proposal to adopt the 1994 Executive Incentive Plan adopted by the
Board of Directors of the Company.
(4) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on April 8, 1994, are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person. IN
ANY EVENT, PLEASE MARK YOUR VOTES, THEN DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. YOU MAY REVOKE YOUR PROXY IF YOU
DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
SIDNEY MILLER
Secretary
King of Prussia, Pennsylvania
April 20, 1994
<PAGE> 3
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
PROXY STATEMENT
GENERAL
This Proxy Statement (first mailed to stockholders on or about April 20,
1994) is furnished in connection with the solicitation by the Board of Directors
of Universal Health Services, Inc. (the "Company") of proxies for use at the
Annual Meeting of Stockholders, or at any adjournment thereof. The meeting will
be held on Wednesday, May 18, 1994 at 10:00 a.m., at the offices of the Company,
Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania.
The Annual Meeting is being held (1) to have the holders of Class A and C Common
Stock elect two Class I directors of the Company who will serve for terms of
three years until the annual election of directors in 1997 and the election and
qualification of their respective successors; (2) to have the holders of Class
A, B, C and D Common Stock vote upon the proposal to adopt the Amendment to the
1989 Non-Employee Director Stock Option Plan which was adopted by the Board of
Directors of the Company; (3) to have the holders of Class A, B, C and D Common
Stock vote upon the proposal to adopt the 1994 Executive Incentive Plan which
was adopted by the Board of Directors of the Company, and (4) to transact such
other business as may properly be brought before the meeting or any adjournment
thereof.
A copy of the Company's Annual Report to Stockholders, including financial
statements for the year ended December 31, 1993, is enclosed herewith.
A separate form of Proxy applies to the Company's Class A and Class C
Common Stock and a separate form of Proxy applies to the Company's Class B and
Class D Common Stock. Enclosed is a Proxy for the shares of stock held by you on
the record date. Unless otherwise indicated on the Proxy, shares represented by
any Proxy will, if the Proxy is properly executed and received by the Company
prior to the Annual Meeting, be voted FOR each of the nominees for directors,
FOR the approval of the Amendment to the 1989 Non-Employee Director Stock Option
Plan, and FOR the approval of the 1994 Executive Incentive Plan, as shown on the
form of Proxy. Any Proxy executed and returned to the Company is revocable by
delivering a later signed and dated Proxy or other written notice to the
Secretary of the Company at any time prior to its exercise. A Proxy is also
subject to revocation if the person executing the Proxy is present at the
meeting and chooses to vote in person.
VOTING
Only stockholders of record as of the close of business on April 8, 1994
are entitled to vote at the Annual Meeting. On that date, 1,139,123 shares of
Class A Common Stock, par value $.01 per share, 114,482 shares of Class C Common
Stock, par value $.01 per share, 13,022,238 shares of Class B Common Stock, par
value $.01 per share, and 24,210 shares of Class D Common Stock, par value $.01
per share, were outstanding.
The Company's Restated Certificate of Incorporation provides that, with
respect to the election of directors, holders of Class A Common Stock vote as a
class with the holders of Class C Common Stock, and holders of Class B Common
Stock vote as a class with holders of Class D Common Stock, with holders of all
classes of Common Stock entitled to one vote per share. Each holder of Class A
Common Stock may cumulate his votes for directors giving one candidate a number
of votes equal to the number of directors to be elected, multiplied by the
number of Shares of Class A Common Stock, or he may distribute his votes on the
same principle among as many candidates as he shall see fit. For a holder of
Class A Common Stock to exercise his cumulative voting rights, the stockholder
must give notice at the meeting of his intention to cumulate his votes.
<PAGE> 4
As to matters other than the election of directors, including the approval
of the Amendment to the 1989 Non-Employee Director Stock Option Plan, and the
1994 Executive Incentive Plan, the Company's Restated Certificate of
Incorporation provides that holders of Class A, Class B, Class C and Class D
Common Stock all vote together as a single class. Each share of Class A Common
Stock entitles the holder thereof to one vote; each share of Class B Common
Stock entitles the holders thereof to one-tenth of a vote; each share of Class C
Common Stock entitles the holder thereof to 100 votes (provided the holder of
Class C Common Stock holds a number of shares of Class A Common Stock equal to
ten times the number of shares of Class C Common Stock that holder holds); and
each share of Class D Common Stock entitles the holder thereof to ten votes
(provided the holder of Class D Common Stock holds a number of shares of Class B
Common Stock equal to ten times the number of shares of Class D Common Stock
that holder holds). In the event a holder of Class C or Class D Common Stock
holds a number of shares of Class A or Class B Common Stock, respectively, less
than ten times the number of shares of Class C or Class D Common Stock that
holder holds, then that holder will be entitled to only one vote for every share
of Class C, or one-tenth of a vote for every share of Class D Common Stock,
which that holder holds in excess of one-tenth the number of shares of Class A
or Class B Common Stock, respectively, held by that holder. The Board of
Directors, in their discretion, may require beneficial owners to provide
satisfactory evidence that such owner holds ten times as many shares of Class A
or Class B Common Stock as Class C or Class D Common Stock, respectively, if
such facts are not apparent from the stock records of the Company.
Stockholders entitled to vote for the election of Directors can withhold
the authority to vote for any one or more nominees. Nominees receiving a
plurality of the votes cast will be elected. Abstention from the vote to
consider the adoption of the Amendment to the 1989 Non-Employee Director Stock
Option Plan, and for the approval of the 1994 Executive Incentive Plan or the
approval of such other matters as may properly come before the meeting, or any
adjournment thereof, are treated as votes against the proposal. Broker non-votes
are treated as shares as to which the beneficial owners have withheld voting
authority and therefore as shares not entitled to vote on the matter as to
whether there is a broker non-vote, thereby making it easier to obtain the
approval of holders of a majority of the shares entitled to vote which is
required for approval of the various proposals.
As of April 8, 1994, the shares of Class A and Class C Common Stock
constituted 8.8% of the aggregate outstanding shares of the Company's Common
Stock, had the right to elect five members of the Board of Directors and
constituted 89.1% of the general voting power of the Company; and as of that
date the shares of Class B and Class D Common Stock constituted 91.2% of the
outstanding shares of the Company's Common Stock, had the right to elect two
members of the Board of Directors and constituted 10.9% of the general voting
power of the Company.
As of February 11, 1994, the Company's current directors and officers as a
group owned of record or beneficially 1,135,373 shares of Class A Common Stock,
191,563 shares of Class B Common Stock (excluding shares issuable upon exercise
of options), 113,727 shares of Class C Common Stock and 415 shares of Class D
Common Stock, representing 99.7%, 1.6%, 99.3% and 1.6%, respectively, of the
outstanding shares of each class and constituting 89.1% of the general voting
power of the Company on that date. Holders of approximately 1,129,173 shares of
Class A Common Stock and 112,952 shares of Class C Common Stock constituting
99.1% of the outstanding Class A Common Stock, 98.7% of the outstanding Class C
Common Stock and 88.4% of the general voting power of the Company have agreed
pursuant to a Stockholders Agreement, dated September 26, 1985, as amended, to
vote their shares of Class A Common Stock and Class C Common Stock, to approve
or disapprove such matters as shall be presented to the stockholders of the
Company for approval, in accordance with written instructions from Alan B.
Miller, relating to: (a) a merger or consolidation of the Company with or into
any other individual, corporation,
2
<PAGE> 5
partnership or other person or entity other than a merger or consolidation
pursuant to which the Company is the continuing corporation and the result of
which is not a sale, transfer or other disposition of or a modification of the
form of ownership of the Company as it exists on the date of such Agreement; (b)
any sale, lease, exchange, transfer or other disposition, including without
limitation a mortgage or other security device, of all or any substantial part
of the assets of the Company (including without limitation any voting securities
of a subsidiary of the Company) or of a subsidiary (which assets of the
subsidiary constitute a substantial part of the assets of the Company) to any
other individual, corporation, partnership or other person or entity; (c) the
election of directors; or (d) any agreement, contract or other arrangement
providing for any of the transactions described above.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 11, 1994, the number of
shares of equity securities of the Company and the percentage of each class
owned beneficially, within the meaning of Securities and Exchange Commission
Rule 13d-3, and the percentage of the general voting power of the Company
currently held, by (i) all stockholders known by the Company to own more than 5%
of any class of the Company's equity securities, (ii) all directors of the
Company who are stockholders, (iii) the executive officers named in the Summary
Compensation Table and (iv) all directors and officers as a group. Except as
otherwise specified, the named beneficial owner has sole voting and investment
power.
<TABLE>
<CAPTION>
PERCENTAGE
CLASS A CLASS B CLASS C CLASS D OF GENERAL
NAME AND ADDRESS OF COMMON COMMON COMMON COMMON VOTING
BENEFICIAL OWNER(1) STOCK(2) STOCK(2) STOCK(2) STOCK(2) POWER(3)
- ------------------------- --------- -------------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin Meyerson
University of
Pennsylvania 9,600 (4)(5)(12) 100(5) (5)
225 Van Pelt Library
Philadelphia, PA 19103
Alan B. Miller(6) 1,044,780 1,195,056 (4)(12) 104,458 81.7%
(91.7%) (8.9% ) (91.2%)
Sidney Miller(6) 82,167 138,754 (4)(7) 8,220 6.5%
(7.2%) (1.0% ) (7.2%)
Anthony Pantaleoni(6) 2,226(5) 6,085 (4)(5)(8) 274(5) 140(5)(8) (5)
666 Fifth Avenue (12)
New York, NY 10103
Kirk E. Gorman 26,750 (5) (5)
Thomas J. Bender 48,073 (5)(12) (5)
Michael G. Servais 14,737 (5)(12) (5)
Richard C. Wright 6,200(5) 21,303 (4)(5) 775(5) 175(5) (5)
The Bass Management Trust
and Other Related
Parties 927,632 (9) (5)
c/o W. Robert Cotham (7.6% )
2600 First City Bank
Tower
Fort Worth, TX 76102
Neuberger & Berman 1,035,717 (10) (5)
605 Third Avenue (8.5% )
New York, NY 10158
FMR Corp. 1,239,300 (11) (5)
82 Devonshire Street (10.2% )
Boston, MA 02109
All directors & officers 1,135,373 1,477,203 (12) 113,727 415 89.1%
as a group (12 persons) (99.7%) (11% ) (99.3%) (1.6)%
</TABLE>
- ---------------
(1) Unless otherwise shown, the address of each beneficial owner is c/o
Universal Health Services, Inc., Universal Corporate Center, 367 South
Gulph Road, King of Prussia, PA 19406.
(2) Each share of Class A, Class C and Class D Common Stock is convertible at
any time into one share of Class B Common Stock.
4
<PAGE> 7
(3) As to matters other than the election of directors, holders of Class A,
Class B, Class C and Class D Common Stock vote together as a single class.
Each share of Class A Common Stock entitles the holder thereof to one vote;
each share of Class B Common Stock entitles the holder thereof to one-tenth
of a vote; each share of Class C Common Stock entitles the holder thereof
to 100 votes (provided the holder of Class C Common Stock holds a number of
shares of Class A Common Stock equal to ten times the number of shares of
Class C Common Stock that holder holds); and each share of Class D Common
Stock entitles the holder thereof to ten votes (provided the holder of
Class D Common Stock holds a number of shares of Class B Common Stock equal
to ten times the number of shares of Class D Common Stock that holder
holds). The percentages indicated do not reflect the voting power of shares
issuable upon the exercise of stock options or conversion of 7.5%
Convertible Subordinated Debentures due 2008.
(4) Includes shares issuable upon the conversion of Classes A, C and/or D
Common Stock.
(5) Less than 1%.
(6) Messrs. Alan B. Miller, Sidney Miller, and Anthony Pantaleoni have entered
into a Stockholders Agreement pursuant to which they have agreed to vote
their shares of Classes A and C Common Stock with respect to certain
matters as directed by Alan B. Miller. Parties to this Stockholders
Agreement beneficially own an aggregate of 1,129,173 shares of Class A
Common Stock and 112,952 shares of Class C Common Stock, constituting 88.4%
of the general voting power of the Company.
(7) Includes 30,000 shares of Class B Common Stock which are beneficially owned
by Mr. Miller's spouse.
(8) Includes 1,445 shares of Class B Common Stock and 140 shares of Class D
Common Stock which are beneficially owned by Mr. Pantaleoni and are held by
Mr. Pantaleoni in trust for the benefit of certain members of his family.
(9) These securities are held by The Bass Management Trust, Perry R. Bass,
Nancy L. Bass, Thomas M. Taylor, The Airlie Group, L.P., EBD L.P., Dort A.
Cameron III, TMT-FW, Inc., Sid R. Bass Management Trust, and Sid R. Bass.
Information is based on Amendment No. 9 to Schedule 13D Statement dated
December 15, 1993.
(10) These securities are held by Neuberger & Berman, as investment advisor and
broker dealer manager of assets for individuals and various pension plans
and accounts. Information is based on a statement on Amendment No. 3 to
Schedule 13G dated January 31, 1994.
(11) These securities are held by FMR Corp., a parent holding company.
Information is based on Amendment No. 4 to Schedule 13G dated February 11,
1994.
(12) Includes 36,125 shares issuable pursuant to stock options to purchase Class
B Common Stock held by directors and officers of the Company and
exercisable within 60 days of February 11, 1994 as follows: Alan B. Miller
(25,000); Anthony Pantaleoni (2,000); Thomas J. Bender (625); Michael G.
Servais (4,000); Martin Meyerson (1,000); Leonard W. Cronkhite, Jr., M.D.
(2,000); and Steve G. Filton (1,500).
5
<PAGE> 8
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a Board of
Directors of not fewer than three members nor more than nine members. The Board
of Directors is currently fixed at seven members, and is divided into three
classes, with members of each class serving for a three-year term. At each
Annual Meeting of Stockholders, directors are chosen to succeed those in the
class whose term expires at such Annual Meeting. Under the Company's Restated
Certificate of Incorporation, holders of shares of the Company's outstanding
Class B and Class D Common Stock are entitled to elect 20% (but not less than
one) of the directors, currently two directors, one in each of Class II and
Class III, and the holders of Class A and Class C Common Stock are entitled to
elect the remaining directors, currently five directors, two in Class I, one in
Class II, and two in Class III.
The persons listed below currently constitute the Company's Board of
Directors. The term of the Class I directors, Dr. Martin Meyerson and Mr. John
H. Herrell, expire at the 1994 Annual Meeting. Dr. Martin Meyerson and Mr. John
H. Herrell have been nominated to be elected by the holders of Class A and Class
C Common Stock. The Company has no reason to believe that either of the nominees
will be unavailable for election; however, if either of the nominees become
unavailable for any reason, the shares represented by the Proxy will be voted
for the person, if any, who is designated by the Board of Directors to replace
the nominee. Both nominees have consented to be named and have indicated their
intent to serve if elected.
The following information is furnished with respect to each of the nominees
for election as a director and each member of the Board of Directors whose term
of office will continue after the meeting.
<TABLE>
<CAPTION>
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCE
- --------------------------- -------- ----------------- --- ------------------------------------- --------
<S> <C> <C> <C> <C> <C>
NOMINEES FOR TERMS
EXPIRING IN 1997
- -------------------------------------
Martin Meyerson............ I A Common 71 Chairman, University of Pennsylvania 1985
C Common Foundation, and President Emeritus
and University Professor, University
of Pennsylvania, since 1981;
President, University of Pennsylvania
from 1970 to 1981. Director of Penn
Mutual Life Insurance Company, Avatar
Holdings, Inc., First Fidelity
Bancorporation (honorary) and Saint
Gobain Corp. and its operating
companies, CertainTeed and Norton;
Founding board member, the
International Centre for the study of
East Asian Development (Japan);
Honorary President, International
Association of Universities (Paris);
President of the Foundation for the
International Exchange of Scientific
and Cultural Information by
Telecommunications (Switzerland and
U.S.); Senior Advisor, Taylor
International.
John H. Herrell............ I A Common 53 Vice President and Chief 1993
C Common Administrative Officer of Mayo
Foundation since 1993. Prior thereto,
Chief Financial Officer of Mayo
Foundation since 1984 and various
other capacities since 1968. Chairman
of the Board of Kahler Corporation,
and a member of the Board of Advisory
Directors, First Trust National
Association, an affiliate of the
First Bank System, Inc.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
CLASS OF PRINCIPAL OCCUPATION
CLASS OF STOCKHOLDERS DURING THE LAST DIRECTOR
NAME DIRECTOR ENTITLED TO VOTE AGE FIVE YEARS SINCE
- --------------------------- -------- ----------------- --- ------------------------------------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS WHOSE TERMS
EXPIRE IN 1995
- -------------------------------------
Anthony Pantaleoni......... II A Common 54 Partner in the law firm of Fulbright 1982
C Common & Jaworski L.L.P., New York, New York
since 1970. Director of Faircom Inc.,
Martech USA, Inc., AAON, Inc. and
Westwood Corporation. The Company
utilized, during the year ended
December 31, 1993, and currently
utilizes the services of Fulbright &
Jaworski L.L.P., as counsel.
Robert H. Hotz............. II B Common 49 Managing Director, Member of the 1991
D Common Operating Committee, and Co-Head of
Corporate Finance at Dillon, Read &
Co., Inc. Prior thereto, Senior
Executive Vice President and Head of
Corporate Finance at Smith Barney,
Harris Upham & Co. Director of
Heckler Manufacturing and Investment
Group, Inc. and Dillon, Read & Co.,
Inc.
DIRECTORS WHOSE TERMS
EXPIRE IN 1996
- -------------------------------------
Alan B. Miller............. III A Common 56 Chairman of the Board, President & 1978
C Common Chief Executive Officer of the
Company since 1978. Prior thereto,
President, Chairman of the Board &
Chief Executive Officer of American
Medicorp, Inc. Trustee of Universal
Health Realty Income Trust. Director
of GMIS Inc., Genesis Health
Ventures, and Penn Mutual Life
Insurance Company.
Sidney Miller.............. III.. A Common 67 Secretary of the Company since 1990. 1978
C Common Prior thereto, Executive Vice
President of the Company since 1983,
Senior Vice President of the Company
since 1982 and Vice President of the
Company since 1978; Prior thereto,
Vice President -- Financial Services
and Control of American Medicorp,
Inc.; Trustee of Universal Health
Realty Income Trust.
Leonard W. Cronkhite, Jr.,
M.D. .................... III B Common 74 Retired as President of MCW Research 1982
D Common Foundation, a medical organization, a
position he held since 1984.
President of the Medical College of
Wisconsin from 1977 to 1984. Director
of Nancy Sayles Day Foundation,
Bigelow Laboratories for Ocean
Science, and Senior Member, Institute
of Medicine.
</TABLE>
7
<PAGE> 10
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based on reports filed with the Company, the Company
believes all required reports of executive officers and directors were filed in
a timely manner.
PROPOSAL NO. 2
ADOPTION OF AMENDMENT TO
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In 1989, the Company adopted a stock option plan for non-employee directors
of the Company (the "Option Plan"). The Board of Directors believes that the
continued growth and success of the Company will depend, in large part, upon the
ability of the Company to maintain and attract to its Board of Directors
knowledgeable persons who, through their efforts and expertise, can make a
significant contribution to the success of the Company's business and to provide
incentive for such directors to work for the best interests of the Company and
its stockholders through ownership of its Common Stock. Pursuant to the Option
Plan as originally adopted, each non-employee director on the date the Option
Plan was adopted and each new non-employee director who has served a period of
three years as a director of the Company (the "Non-Employee Director")
automatically received on the third anniversary of his service as a director
(the "Grant Date"), an option to purchase 2,000 shares of the Company's Class B
Common Stock (the "Option") at a per share exercise price equal to the fair
market value of the Common Stock on the Grant Date. A maximum of 25,000 shares
may be issued under the Option Plan. The Board believes that in order to
continue to attract directors of high caliber, an amendment to the Plan is
necessary.
THE AMENDMENT
Under the Plan as amended by the Board of Directors on March 23, 1994,
subject to Stockholder approval, Non-Employee Directors will be granted options
to purchase 2,500 shares of Class B Common Stock on the date the amendment to
the Plan was adopted by the Board of Directors or, in the case of new Directors,
on their appointment to the Board, rather than 2,000 shares on the third
anniversary of their appointment.
Options may be exercised as to 25% of the shares on each of the four
successive anniversaries of the Grant Date. Options granted under the Option
Plan shall have a term of five years from the Grant Date and shall not be
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
The Option Plan will be administered by the Board of Directors of the
Company. However, the Option Plan prescribes the individuals who would be
awarded Options, the number of shares subject to the Options, and the terms and
conditions of each award. The Board of Directors may at any time terminate the
Option Plan and may from time to time alter or amend the Option Plan or any part
thereof, provided that, unless otherwise required by law, the rights of a
Non-Employee Director with respect to an option granted prior to such
termination, alteration or amendment may not be impaired without the consent of
such Non-Employee Director.
Messrs. Cronkhite, Meyerson, Hotz, Herrell and Pantaleoni were each granted
on January 18, 1994, the date of the adoption of the amendment to the Option
Plan by the Board of Directors, options to purchase 2,500 shares of Class B
Common Stock under the Option Plan, at a per share exercise price of $19.625,
the
8
<PAGE> 11
fair market value of the Common Stock on January 18, 1994. As a group, all
Non-Employee Directors will have outstanding options to purchase 12,500 shares,
which, had they all been in effect on December 31, 1993, would have had an
aggregate potential unrealized value of $7,813 as of December 31, 1993; and
$48,437 as of March 31, 1994.
FEDERAL INCOME TAX CONSEQUENCES
An option granted under the Option Plan will be a non-statutory stock
option and will be taxed in accordance with Section 83 of the Code and the
regulations thereunder. A director granted an option under the Option Plan
generally will realize income when the shares are purchased pursuant to the
exercise of the option. The income realized (the difference between the exercise
price of the option and the fair market value of the shares at the time the
option is exercised) will be ordinary income to the optionee for which the
Company will be able to claim a business expense deduction.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Common Stock votes
of the Company present or represented at the 1994 Annual Meeting of Stockholders
is required for the approval of the Amendment to the Option Plan. Neither the
law of the State of Delaware nor the Internal Revenue Code of 1986, as amended,
requires that the Option Plan be approved by the Company's stockholders.
However, the Company believes that if stockholders approve the Option Plan, the
Option Plan will meet all of the conditions of Rule 16b-3 under the Securities
Exchange Act of 1934, thereby exempting from the operation of the "short swing
profit" recovery provisions of Section 16(b) of the Securities Exchange Act of
1934 the acquisition by Non-Employee Directors of Options awarded to them under
the Option Plan. Therefore, in order to comply with Rule 16b-3, the Board of
Directors has decided to submit the Option Plan for approval by the Company's
stockholders at the 1994 Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3
ADOPTION OF 1994 EXECUTIVE INCENTIVE PLAN
On March 23, 1994, the Board of Directors adopted the Universal Health
Services Executive Incentive Plan (the "Executive Incentive Plan"), subject to
approval by the Company's stockholders. The purpose of the Executive Incentive
Plan is to provide a formal written program for the granting of annual
performance-based incentive bonuses to senior management and other executive
officers which will be maintained in lieu of the informal incentive bonus
program which presently exists for such high-level personnel. (The informal
bonus program will continue to exist for other personnel.) The following summary
describes the principal features of the Executive Incentive Plan and is
qualified in its entirety by reference to the plan document, a copy of which is
attached hereto as Exhibit A.
9
<PAGE> 12
The Executive Incentive Plan will be administered by a committee (the
"Committee") of at least two directors, all of whom must be "disinterested
directors" under SEC Rule 16b-3 and "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code. Bonuses may be awarded under the
Executive Incentive Plan to members of senior management and other executive
officers of the Company and its affiliates. The Committee will establish annual
performance targets based upon net income and/or return on capital, as defined
in the plan document. The Committee will also establish potential bonus amounts,
expressed as a percentage of each participant's base salary and determined with
reference to actual performance relative to the pre-established performance
targets. The performance targets and potential bonus amounts may vary from year
to year and from participant to participant, all as determined by the Committee.
Under the Company's 1992 Stock Bonus Plan, as amended, 20% of each participant's
Executive Incentive Plan bonus will be payable in stock, and each participant
will be entitled to receive a stock bonus premium, payable in Common Stock of
the Company, equal to 4% of the Participant's Executive Incentive Plan bonus. No
participant may receive a bonus under the Executive Incentive Plan for any year
which is more than 125% of the participant's base salary for the year (130%
after giving effect to the stock bonus premium which would be payable under the
Company's 1992 Stock Bonus Plan). For purposes of applying this percentage
limitation, the maximum amount of a participant's base salary which may be taken
into account for a given year (starting with 1994) may not exceed 125% of the
participant's base salary for the preceding year. Section 162(m) of the Internal
Revenue Code imposes a $1,000,000 limitation on the deductibility of
compensation paid to certain executives for taxable years beginning after 1993.
The deduction limitation does not apply to certain "performance-based
compensation" which is approved by a committee of outside directors and which is
disclosed to and approved by stockholders. Based upon regulations recently
proposed by the Treasury Department, the Company anticipates that, if the
Executive Incentive Plan is approved, incentive compensation paid thereunder
will qualify as performance-based compensation which is not subject to the
executive compensation deduction limitation.
The affirmative vote of the holders of a majority of the Common Stock
represented in person or by proxy at the 1994 Annual Meeting of Stockholders is
required for the approval of the Executive Incentive Plan.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
10
<PAGE> 13
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid by
the Company as well as certain other compensation paid or accrued, during the
fiscal years indicated, to the Chairman of the Board, President, and Chief
Executive Officer and the four highest paid executive officers of the Company
for such period in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- --------------------
OTHER RESTRICTED ALL OTHER
ANNUAL STOCK COMPEN-
FISCAL COMPENSATION ($) AWARDS ($) OPTIONS SATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (A) (B) (#) (C)
- --------------------------------- ------ ---------- --------- ---------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan B. Miller, Chairman of the
Board, President, and Chief
Executive Officer.............. 1993 $710,004 $340,800 $ 4,102 $ 94,767 0 $11,821
1992 683,280 273,312 1,992,269 68,328 100,000 11,754
1991 657,000 638,475 1,466,316 0 0 11,691
Kirk E. Gorman, Senior Vice
President and Chief Financial
Officer........................ 1993 202,998 77,952 0 21,663 0 2,249
1992 194,565 62,264 28,125 15,566 0 1,946
1991 184,185 99,460 0 0 0 1,842
Thomas J. Bender, Vice
President...................... 1993 165,621 98,546 0 27,749 0 2,249
1992 156,996 10,990 5,500 2,747 2,500 1,570
1991 144,000 83,632 0 27,878 0 2,119
Richard C. Wright, Vice
President...................... 1993 150,552 104,577 1,095 25,359 0 2,249
1992 142,161 84,586 40,108 21,146 0 2,182
1991 136,500 105,613 37,117 0 0 1,365
Michael G. Servais, Vice
President...................... 1993 145,000 73,950 0 20,216 2,000 2,249
1992 125,831 0 0 42,750 0 1,258
1991 113,333 53,125 0 17,708 2,000 0
</TABLE>
- ---------------
(a) Other annual compensation for Mr. Alan B. Miller includes: (i) $630,750 in
1992 and 1991 related to amounts forgiven under a 6.97% promissory note
executed in connection with the grant in 1985 of restricted stock (a "1985
Stock Grant Loan"), (ii) $392,927 in 1992 and $100,000 in 1991 related to
forgiveness of principal under a non-interest bearing demand note, (iii)
$272,714 in 1992 and $83,604 in 1991 related to forgiveness of principal
under loans made in connection with the exercise of stock options ("Option
Loans"), (iv) $45,370 in 1992 and $89,813 in 1991 related to interest
credited on the 1985 Stock Grant Loan, (v) $630,094 in 1992 and $526,893 in
1991 for income tax reimbursements related to the loan amounts forgiven and
(vi) $4,102 in 1993, $20,414 in 1992 and $35,256 in 1991 for other
compensation. Other annual compensation for Messrs. Gorman and Bender in
1992 represents forgiveness of principal under Option Loans. Other annual
compensation for Mr. Richard C. Wright includes: (i) $21,750 in 1992 and
1991 related to amounts forgiven under a 6.97% promissory note executed in
connection with a 1985 Stock Grant Loan, (ii) $3,265 in 1992 and $3,283 in
1991 related to interest credited on the 1985 Stock Grant Loan, (iii)
$13,050 in 1992 and $12,084 in 1991 for income tax reimbursements related to
the loan amounts forgiven and (vi) $1,095 in 1993 and $2,043 in 1992 related
to forgiveness of principal under an Option Loan.
(b) Restricted stock awards represent (i) the value of Class B Common Shares
received by those executives in lieu of cash payments pursuant to the
Company's 1992 Stock Bonus Plan ("Bonus Shares"), (ii) the
11
<PAGE> 14
vested portion of additional restricted shares ("Premium Shares") equal to
20% of the Bonus Shares. Restrictions on one-half of the Bonus Shares and
the Premium Shares lapse after one year and restrictions on the remaining
shares lapse after two years, (iii) the value of the Class B Common Shares
issued in connection with the 1990 Employee's Restricted Stock Purchase
Plan. Restrictions lapse as to one-third of the shares in 1995, 1996 and
1997.
Restricted stock awards for Mr. Alan B. Miller includes: (i) $85,200 in 1993
and $68,328 in 1992 representing the value of the Bonus Shares, and (ii)
$9,567 in 1993 representing the value of the vested portion of the Premium
Shares. Restricted stock awards for Mr. Kirk E. Gorman includes: (i) $19,488
in 1993 and $15,566 in 1992 representing the value of the Bonus Shares and,
(ii) $2,175 in 1993 representing the value of the vested portion of the
Premium Shares. Restricted stock awards for Mr. Thomas J. Bender includes:
(i) $24,637 in 1993, $2,747 in 1992 and $27,878 in 1991 representing the
value of the Bonus Shares and, (ii) $3,112 in 1993 representing the value of
the vested portion of the Premium Shares. Restricted stock awards for Mr.
Richard C. Wright includes: (i) $22,394 in 1993 and $21,146 in 1992
representing the value of the Bonus Shares and, (ii) $2,965 in 1993
representing the value of the vested portion of the Premium Shares.
Restricted stock awards for Mr. Michael G. Servais includes: (i) $18,488 in
1993 and $17,708 in 1991 representing the value of the Bonus Shares, (ii)
$1,728 in 1993 representing the value of the vested portion of the Premium
Shares and, (iii) $42,750 in 1992, representing the value of 3,000 shares of
the Company's Class B Common Shares, based on the closing market price of
the shares on the date of grant, issued in connection with the 1990
Employee's Restricted Stock Purchase Plan. The value of these shares as of
December 31, 1993 is $60,750 based on the closing market price of the shares
on that date.
At December 31, 1993, Messrs. Miller, Gorman, Bender, Wright and Servais
held 8,161, 1,864, 2,871, 2,329 and 1,926 shares, respectively, of
restricted Bonus Shares and Premium Shares, with a value based on the
closing market price of the shares on that date, of $165,260, $37,746,
$58,138, $47,162 and $39,002.
(c) All other compensation includes the Company's match of officers'
contribution to the Company's 401(k) plan and, for Mr. Alan B. Miller, the
total includes $9,572 in each year related to term life insurance premiums
paid for by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL
PERCENT OF REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL
OPTIONS RATES OF STOCK
OPTIONS GRANTED TO EXERCISE PRICE APPRECIATION
GRANTED EMPLOYEES PER SHARE FOR OPTION TERM
(#) IN FISCAL PRICE EXPIRATION ------------------
NAME (A) YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------------- ------- ----------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Miller........................ -0- -- -- -- -- --
Kirk E. Gorman........................ -0- -- -- -- -- --
Thomas J. Bender...................... -0- -- -- -- -- --
Richard C. Wright..................... -0- -- -- -- -- --
Michael G. Servais.................... 2,000 27% $ 14.875 8/12/98 $8,219 $18,163
</TABLE>
- ---------------
(a) Options are exercisable as follows: 25% one year after date of grant and an
additional 25% in each of the second, third and fourth years after date of
grant. The options expire five years after the date of grant.
12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE FISCAL YEAR-END FISCAL YEAR-END(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Miller........................... 0 $ 0 25,000 75,000 $ 196,875 $ 590,625
Kirk E. Gorman........................... 0 $ 0 750 0 $ 9,656 $ 0
Thomas J. Bender......................... 2,500 $26,250 625 1,875 $ 3,984 $ 11,953
Richard C. Wright........................ 837 $ 5,613 0 0 $ 0 $ 0
Michael G. Servais....................... 0 $ 0 4,000 4,000 $ 48,125 $ 32,875
</TABLE>
- ---------------
(1) Based on the difference between the exercise price and the closing sale
price of the Class B Common Stock on the New York Stock Exchange on the
date of exercise.
(2) Based on the difference between the exercise price and the closing sale
price of the Class B Common Stock on the New York Stock Exchange on
December 31, 1993.
EMPLOYMENT CONTRACT
The Company and Alan B. Miller have entered into an employment contract
pursuant to which Mr. Miller will act as President and Chief Executive Officer
of the Company until December 31, 1997, which period is subject to extension at
the option of Mr. Miller or the Company until December 31, 2002. In addition,
the Agreement provides for a five-year consulting arrangement commencing upon
termination of Mr. Miller's active employment, during which period he will be
paid an annual fee equal to one-half of his base salary at the date of
expiration of the term of active employment. During the period of his active
employment, Mr. Miller is entitled to a salary of $675,000 for the year ended
December 31, 1992, increased in each year thereafter by an amount equal to not
less than the percentage increase in the consumer price index over the previous
year. Mr. Miller is also entitled to an annual bonus of at least $100,000 and
payment of insurance premiums, including income tax reimbursements, of $13,674
per annum, as well as such other compensation as the Board of Directors may
determine in its discretion. Mr. Miller may be discharged only for cause or
permanent disability.
EXECUTIVE RETIREMENT INCOME PLAN
In October 1993, the Board of Directors adopted the Executive Retirement
Income Plan pursuant to which certain management or other highly compensated
employees designated by the Board of Directors who have completed at least 10
years of active employment with the Company may receive retirement income
benefits. The monthly benefit is payable to a participant who retires after he
or she reaches age 62 and is equal to 3% of the employee's average monthly base
salary over the three years preceding retirement multiplied by the number of
full years (not to exceed 10) of the participant's active employment following
the first 10 years of the participant's employment with the Company. Payment of
the benefit will be made in 60 monthly installments following the participant's
retirement date. Under certain circumstances, the participant may be entitled to
elect to receive the present value of the payments in one lump sum or receive
payments over a period of 10 years. The estimated annual benefits payable (for
the 60 months in which the participant receives benefits) upon retirement at age
65 for each of Alan B. Miller, Kirk E. Gorman, Thomas J. Bender, Richard C.
Wright and Michael G. Servais, assuming their annual compensation increases by
4% annually,
13
<PAGE> 16
would be $280,439, $133,507, $117,813, $88,023 and $81,516, respectively. If an
employee ceases employment with the Company prior to age 62, no retirement
income will be payable to the participant unless the Board of Directors
determines otherwise.
COMMITTEE REPORT TO SHAREHOLDERS
The report of the Compensation and Stock Option Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933,
as amended, or under the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors was
comprised during 1993 of three non-employee directors. Anthony Pantaleoni, a
member of the Committee, is a partner in Fulbright & Jaworski L.L.P., which
serves as the Company's principal outside counsel.
COMPENSATION PHILOSOPHY
The Compensation Committee regularly reviews and, with any changes it
believes appropriate, approves the Company's compensation program. The Company
believes that executive compensation should be closely related to the value
delivered to stockholders. This belief has been adhered to by developing
incentive pay programs which provide competitive compensation and reflect
Company performance. Both short-term and long-term incentive compensation are
based on Company performance and the value received by stockholders.
In designing its compensation programs, the Company follows its belief that
compensation should reflect the value created for stockholders while supporting
the Company's strategic business goals. In doing so, the compensation programs
reflect the following themes:
- Compensation should encourage increased stockholder value.
- Compensation programs should support the short-term and long-term
strategic business goals and objectives of the Company.
- Compensation programs should reflect and promote the Company's values,
and reward individuals for outstanding contributions toward business
goals.
- Compensation programs should enable the Company to attract and retain
highly qualified professionals.
PAY MIX AND MEASUREMENT
The Company's executive compensation is based on three components, each of
which is intended to serve the overall compensation philosophy.
BASE SALARY
The Company's salary levels are intended to be consistent with competitive
pay practices and level of responsibility, with salary increases reflecting
competitive trends, the overall financial performance of the Company, the
performance of the individual executive and general economic conditions.
14
<PAGE> 17
SHORT-TERM INCENTIVES
At the start of each fiscal year, during the budgeting process, target
levels of net income and return on assets for the Company as a whole ("Company
Targets") and target levels of net income for each of the Company's individual
divisions and facilities ("Division Targets") are established by senior
management of the Company and approved by the Board of Directors.
All senior executives of the Company, including heads of divisions and
facilities have the opportunity to earn as a bonus for a fiscal year an amount
equal to a portion of their base salary for that fiscal year, depending on
whether and to what extent the Company Targets and/or the Division Targets are
achieved. For 1994 and future years, this program will be formalized for
officers of the Company in the 1994 Executive Incentive Plan. For fiscal 1993,
(i) Alan B. Miller, the Company's Chairman and President, was entitled to a
bonus of up to 50% of his base salary if the Company Targets were achieved, (ii)
Kirk E. Gorman, the Company's Senior Vice President, was entitled to a bonus of
up to 40% of his base salary if the Company Targets were achieved and (iii)
Thomas J. Bender, Richard C. Wright and Michael G. Servais, Vice Presidents of
the Company, were entitled to a bonus of up to 35% of their respective base
salaries if the Company Targets and the Division Targets were achieved.
Seventy-five percent (75%) of Messrs. Bender, Wright and Servais' respective
bonuses were to be determined based on the achievement of the Division Targets,
and the remaining 25% of such bonuses were to be determined based on the
achievement of the Company Targets. The Compensation Committee elected to
increase the bonus amounts paid to Messrs. Miller and Gorman by 20%. In the
event the Company Targets and/or the Division Targets are exceeded, the senior
executives can earn up to 250% of his or her base bonus.
LONG-TERM INCENTIVES
Stock options are granted from time to time to reward key employees'
contributions. The grant of options is based primarily on a key employee's
potential contribution to the Company's growth and profitability. Options are
granted at the prevailing market value of the Company's Common Stock and will
only have value if the Company's stock price increases. Generally, grants of
options vest in equal amounts over four years and executives must be employed by
the Company for such options to vest.
1993 COMPENSATION
The base salary for the Chairman and President was increased during 1993 to
$710,004. This represents a 4% increase over 1992. Further, the bonus of the
Chairman and President for 1993, determined as set forth above, was $426,000
(including $85,200 in restricted stock), reflecting 60% of his base salary. It
was the policy of the Compensation Committee to make every effort not to lower
base salaries for those executives and employees considered by the Board of
Directors to be important contributors to the Company's growth and development.
However, it has been the policy of the Board of Directors generally, as
implemented by the Compensation Committee, not to give raises in excess of
inflation unless required to meet competitive conditions.
1994 COMPENSATION
The Board of Directors has asked the Compensation and Stock Option
Committee to determine salaries and bonus targets prior to the start of each
fiscal year to conform the Company's procedures to recent changes in the tax
law. A subcommittee consisting of Messrs. Cronkhite and Hotz will establish
these targets pursuant to the 1994 Executive Compensation Plan in March 1994 for
the 1994 calendar year and in December of each
15
<PAGE> 18
year commencing in December 1994 for future years. The Committee expects to
continue the basic policies outlined above.
The Compensation Committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate business goals and stockholder value. As performance goals are met or
exceeded, resulting in increased value to stockholders, executives are rewarded
commensurately. The Compensation Committee believes that compensation levels
during 1993 adequately reflect the Company's compensation goals and policies.
COMPENSATION AND STOCK OPTION COMMITTEE
Leonard W. Cronkhite, Jr.
Robert H. Hotz
Anthony Pantaleoni
16
<PAGE> 19
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(THE COMPANY, S&P 500, PEER GROUP)
<TABLE>
<CAPTION>
UNIVERSAL
MEASUREMENT PERIOD HEALTH SER-
(FISCAL YEAR COVERED) VICES, INC. S & P 500 PEER GROUP
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 150.69 131.69 106.54
1990 148.65 127.60 107.62
1991 224.00 166.47 86.61
1992 230.11 179.15 96.13
1993 329.89 197.21 154.15
</TABLE>
The total cumulative return on investment (change in the year end stock
price plus reinvested dividends) for each of the periods for the Company, the
peer group and the S&P 500 Composite is based on the stock price or composite
index at the end of fiscal 1988.
The above graph compares the performance of the Company with that of the
S&P 500 Composite, and a group of peer companies with the investment weighted on
market capitalization. Companies in the peer group are as follows: American
Medical Holdings, Inc., Columbia Hospital Corporation, Community Psychiatric
Centers, HCA-Hospital Corporation of America, Health Management Associates,
Inc., HealthTrust, Inc., Humana Inc., OrNda HealthCorp., and Ramsay Health Care,
Inc.
COMPENSATION OF DIRECTORS
The non-employee directors are compensated for their service on the Board
of Directors and Committees of the Board on an annual basis at $20,000 each. In
1993, Dr. Cronkhite received $20,000; Messrs. Pantaleoni, Meyerson and Hotz each
received $17,500. Mr. George Strong (a former director) received $2,500.
17
<PAGE> 20
Pursuant to the Company's Non-Employee Director Stock Option Plan, each
director of the Company, other than Mr. Hotz and Mr. Herrell, was granted
options to purchase 2,000 shares of the Class B Common Stock of the Company at
an exercise price of $9.00 per share in March 1989. In January 1994, each
director of the Company received an option to purchase 2,500 shares of the Class
B Common Stock of the Company at an exercise price of $19.625 per share, subject
to approval by the stockholders of the Amendment to the 1989 Non-Employee
Director Stock Option Plan (see Proposal No. 2).
BOARD OF DIRECTORS
Meetings of the Board. Regular meetings of the Board are generally held
every other month, while special meetings are called when necessary. Before each
Board or Committee meeting, directors are furnished with an agenda and
background materials relating to matters to be discussed. During 1993, there
were seven Board meetings. All current directors attended more than 75% of the
meetings of the Board and of committees of the Board on which they served,
except for John H. Herrell, who was appointed as a director in November 1993.
The Executive Committee, the Compensation and Stock Option Committee, the
Audit Committee, and the Finance Committee are the standing committees of the
Board of Directors, and may meet concurrently with the Board of Directors'
meetings.
Executive Committee. The Executive Committee has the responsibility,
between meetings of the Board of Directors of the Company, to advise and aid the
officers of the Company in all matters concerning the management of the business
and, while the Board is not in session, has the power and authority of the Board
to the fullest extent permitted under law. The Executive Committee did not meet
in 1993. Members of the Committee are Alan B. Miller, Leonard W. Cronkhite, Jr.,
M.D., and Anthony Pantaleoni.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee has responsibility for reviewing and recommending to the Board of
Directors the compensation levels of officers and directors of the Company and
its subsidiaries and the administration of the 1985 Non-Statutory Stock Option
Plan, the 1990 Employees' Restricted Stock Purchase Plan, the 1992 Corporate
Ownership Program, the 1992 Stock Bonus Plan, and the 1992 Stock Option Plan.
This Committee met once in 1993. The members of this Committee are Leonard W.
Cronkhite, Jr., M.D., Anthony Pantaleoni, and Robert H. Hotz. A subcommittee of
the Compensation and Stock Option Committee, comprised of Messrs. Cronkhite and
Hotz, will administer the 1994 Executive Incentive Plan.
Audit Committee. The Audit Committee is responsible for providing
assistance to the Board of Directors in fulfilling its responsibilities relating
to corporate accounting and reporting practices and to maintain a direct line of
communication between the directors and the independent accountants. It
recommends the firm to be appointed independent auditor, reviews the scope and
results of the audit with the independent auditors and considers the adequacy of
the internal accounting and control procedures of the Company. The Audit
Committee met twice in 1993. Members of this Committee are Leonard W. Cronkhite,
Jr., M.D., Martin Meyerson, and John H. Herrell.
Finance Committee. The Finance Committee is responsible for reviewing the
Company's cash flow and capital commitments and is charged with overseeing its
long-term financial planning. The Finance Committee did not meet in 1993.
Members of this Committee are Sidney Miller and Robert H. Hotz.
18
<PAGE> 21
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen & Co. has been retained by the Board of Directors, on the
recommendation of the Audit Committee, to perform all accounting and audit
services during the 1994 fiscal year. It is anticipated that representatives of
Arthur Andersen & Co. will be present at the Annual Meeting and will have an
opportunity to make a statement, if they desire to do so, and to respond to any
appropriate inquiries of the stockholders or their representatives.
EXPENSES FOR PROXY SOLICITATION
The principal solicitation of proxies is being made by mail; however,
certain officers, directors and employees of the Company, none of whom will
receive additional compensation therefor, may solicit proxies by telegram,
telephone or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling and will
reimburse the reasonable expenses of brokerage firms and others for forwarding
material to beneficial owners of shares.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
FOR PRESENTATION AT 1995 ANNUAL MEETING
Any proposal that a stockholder wishes to present for consideration at the
1995 Annual Meeting must be received by the Company no later than December 23,
1994. This date provides sufficient time for inclusion of the proposal in the
1995 proxy materials.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action at the Annual Meeting. As for any
business that may properly come before the Annual Meeting, the Proxies confer
discretionary authority in the persons named therein. Those persons will vote or
act in accordance with their best judgment with respect thereto.
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
SIDNEY MILLER
Secretary
King of Prussia, Pennsylvania
April 20, 1994
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: INVESTOR RELATIONS,
UNIVERSAL HEALTH SERVICES, INC., UNIVERSAL CORPORATE CENTER, 367 SOUTH GULPH
ROAD, KING OF PRUSSIA, PENNSYLVANIA 19406.
19
<PAGE> 22
EXHIBIT A
UNIVERSAL HEALTH SERVICES
1994 EXECUTIVE INCENTIVE PLAN
1. Purpose. The purpose of the Plan is to foster the ability of the
Company and its Affiliates to attract, retain and motivate highly qualified
senior management and other executive officers of the Company and its Affiliates
through the payment of performance-based incentive bonuses.
2. Definitions. Wherever used herein, the masculine includes the
feminine, the singular includes the plural, and the following terms have the
following meanings unless a different meaning is clearly required by the
context.
(a) "Affiliate" means any entity (whether or not incorporated) which
is required to be aggregated with the Company under Section 414(b) or
414(c) of the Internal Revenue Code of 1986 (the "Code").
(b) "Board" means the Board of Directors of the Company.
(c) "Company" means Universal Health Services, Inc.
(d) "Committee" means the administrative committee appointed by the
Board in accordance with the provisions hereof.
(e) "Compensation" means the base salary of a Participant for a
calendar year, determined as of the beginning of the calendar year and
without regard to increases, if any, made during the calendar year.
(f) "Net Income" means the net income of the Company or of an
Affiliate, division, hospital or other units, as determined by the
Committee.
(g) "Participant" means, with respect to any calendar year, an
individual who is designated by the Committee as eligible to receive an
incentive bonus for the year upon achievement of the applicable performance
conditions.
(h) "Plan" means the incentive compensation plan as set forth herein
and any amendments thereto.
(i) "Return on Capital" means Net Income divided by the quarterly
average net capital of the Company or of an Affiliate, division, hospital
or other unit, as determined by the Committee.
3. Administration. The Plan will be administered by a committee
consisting of at least two directors appointed by and serving at the pleasure of
the Board. Each member of the Committee will be a "disinterested director"
within the meaning and for the purposes of Rule 16b-3 issued by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, and an
"outside director" within the meaning of Section 162(m) of the Code. Subject to
the provisions of the Plan, the Committee, acting in its sole and absolute
discretion, will have full power and authority to interpret, construe and apply
the provisions of the Plan and to take such action as may be necessary or
desirable in order to carry out the provisions of the Plan. A majority of the
members of the Committee will constitute a quorum. The Committee may act by the
vote of a majority of its members present at a meeting at which there is a
quorum or by unanimous written consent. The Committee will keep a record of its
proceedings and acts and will keep or cause to be kept such books and records as
may be necessary in connection with the proper administration of the Plan. The
Company shall indemnify and hold harmless each member of the Committee and any
employee or director of the Company or an Affiliate to whom any duty or power
relating to the administration or interpretation of the Plan is delegated from
and against any loss, cost, liability (including any sum paid in settlement of a
claim with the
A-1
<PAGE> 23
approval of the Board), damage and expense (including legal and other expenses
incident thereto) arising out of or incurred in connection with the Plan, unless
and except to the extent attributable to such person's fraud or wilful
misconduct.
4. Eligibility. Annual incentive bonuses may be awarded under the Plan to
any person who is a member of the senior management of the Company and to other
executive officers of the Company or an Affiliate. Subject to the provisions
hereof, the Committee will select the persons to whom incentive bonuses may be
awarded for any calendar year and will fix the terms and conditions of each such
award.
5. Annual Performance Bonus. The amount of a Participant's incentive
bonus for a year will be equal to the Participant's base bonus amount (described
in (a) below) multiplied by the applicable performance factor (described in (b)
below).
(a) Base Bonus Amount. For each calendar year, the Committee will
establish the amount of bonus ("base bonus amount") which will be payable
to a Participant if the performance goals for the year are met. A
Participant's base bonus amount will be expressed as a percentage of the
Participant's Compensation, which percentage may vary from year to year and
may be different for each Participant or class of Participants, all as
determined by the Committee.
(b) Applicable Performance Factor. For each calendar year, the
Committee will establish performance targets based upon the following
business criteria: increase in Net Income from the preceding calendar year,
and Return on Capital. As to any Participant or class of Participants, the
performance targets may be based upon either or both of such criteria and
on Company-wide figures, local or divisional figures, or a combination
thereof. If a Participant's performance targets for a calendar year are
achieved, then the Participant will be entitled to receive an incentive
bonus equal to 100% of the Participant's base bonus amount for the year. No
incentive bonus will be payable for a year if neither performance target is
achieved, and a performance bonus (which may be greater than 100% of a
Participant's base bonus amount) may be payable if either or both
performance targets are exceeded for a calendar year, all in accordance
with a Company performance matrix established by the Committee.
(c) Performance Conditions to be Pre-Established. Performance
targets, as well as percentage factors used to determine base bonus amounts
and performance percentages with respect to any calendar year will be
established in writing by the Committee before the beginning of that
calendar year; provided, however, that the Committee may establish any one
or more of said factors during the calendar year if and to the extent
permitted by the Treasury Department pursuant to Section 162(m) of the
Code.
(d) Payment of Stock. Notwithstanding anything to the contrary
contained in the Company's 1992 Stock Bonus Plan, an amount equal to 20% of
a Participant's incentive bonus for a calendar year will be payable in the
form of Common Stock of the Company and no election may be made by the
Participant to receive a greater portion of his or her incentive bonus in
such form. Subject to the provisions of the 1992 Stock Bonus Plan, a
Participant will be entitled to receive an additional bonus, payable in the
form of shares of Common Stock of the Company, equal to 4% of the
Participant's incentive bonus (determined without regard to this section).
(e) Limitation on Amount of Incentive Bonuses. Notwithstanding
anything to the contrary contained herein, the maximum incentive bonus
which any Participant may earn hereunder for any calendar year is an amount
equal to 125% of the Participant's Compensation for that calendar year
(130% after taking into account the stock bonus premium described in the
preceding subsection). For purposes of the preceding sentence, a
Participant's Compensation for any calendar year will be disregarded to the
A-2
<PAGE> 24
extent it is greater than 125% of the Participant's Compensation
(determined with regard to this sentence) for the preceding calendar year.
6. Calculation and Payment of Performance Bonus. As soon as practicable
after the end of each calendar year, the Committee, based upon the Company's
financial statements for the year, will determine the amount, if any, of the
incentive bonus payable to each Participant for that calendar year. A
Participant's incentive bonus for a calendar year will be paid to the
Participant at such time as the Committee determines; provided, however, that
the Committee may authorize an advance payment based upon its preliminary
calculations, and provided further that the Committee may establish a procedure
pursuant to which payment of all or a portion of a Participant's incentive bonus
for a calendar year will be deferred. Unless the Committee determines otherwise,
no incentive bonus will be payable to a Participant with respect to a calendar
year if the Participant's employment with the Company and its Affiliates
terminates at any time prior to the payment thereof.
7. Amendment or Termination. The Board may amend or terminate the Plan at
any time.
8. Governing Law. The Plan and each award made under the Plan shall be
governed by the laws of the State of Delaware, it being understood, however,
that incentive bonuses awarded and paid under the Plan are intended to
constitute "performance-based compensation" within the meaning of Section 162(m)
of the Code, and the provisions of the Plan and any award made hereunder will be
interpreted and construed accordingly.
9. No Rights Conferred. Nothing contained herein will be deemed to give
any person any right to receive an incentive bonus award under the Plan or to be
retained in the employ or service of the Company or any Affiliate.
10. Decisions of the Board or Committee to be Final. Any decision or
determination made by the Board pursuant to the provisions hereof and, except to
the extent rights or powers under the Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee
hereunder, shall be final and binding.
A-3
<PAGE> 25
PROXY CLASS A
COMMON STOCK
CLASS C
COMMON STOCK
UNIVERSAL HEALTH SERVICES, INC.
THIS PROXY SOLICITED BY THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 18, 1994
Alan B. Miller and Sidney Miller and each of them, as the true and
lawful attorneys, agents and proxies of the undersigned, with full power
of substitution, are hereby authorized to represent and to vote, as
designated below, all shares of Class A Common Stock and Class C Common
Stock of Universal Health Services, Inc. held of record by the
undersigned on April 8, 1994 at the Annual Meeting of Stockholders to be
held at 10:00 a.m. on Wednesday, May 18, 1994, at the offices of the
Company, Universal Corporate Center, 367 South Gulph Road, King of
Prussia, Pennsylvania and at any adjournment thereof. Any and all
proxies heretofore given are hereby revoked.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE> 26
PLEASE MARK YOUR CHOICE LIKE THIS * IN BLUE OR BLACK INK
<TABLE>
<S> <C>
/ / ------------------------ ------------------------ ------------------------
ACCOUNT NUMBER CLASS A COMMON CLASS C COMMON
- --------------------------------------------------------------------------------
1. The Election of Directors: Nominees are Martin Meyerson and John H. Herrell 4. Discretionary authority is hereby granted
with respect to such other matters as may
/ / For Both Nominees / / Withheld from properly come before the meeting.
Both Nominees -------------------------------------------
/ / For EXCEPT Vote Withheld from
the Following Nominee:
------------------------------------------------------
- ------------------------------------------------------------------------
2. Adoption of the Amendment to the 1989 Non-Employee Director Stock Option Plan
FOR AGAINST ABSTAIN
/ / / / / /
- ------------------------------------------------------------------------
3. Adoption of the 1994 Executive Incentive Plan
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
- ------------------------------------------------------------------------
DATED:
SIGNATURE:
SIGNATURE:
IMPORTANT: Please sign exactly
as name appears at the left.
Each joint owner shall sign.
Executors, administrators,
trustees, etc. should give full
title.
The above-signed acknowledges
receipt of the Notice of Annual
Meeting of Stockholders and the
Proxy Statement furnished
therewith.
- --------------------------------------------------------------------------------
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE ABOVE. IF
NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR ELECTION OF THE NOMINEES FOR
DIRECTORS, FOR ADOPTION OF THE AMENDMENT TO THE 1989 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN, AND FOR ADOPTION OF THE 1994 EXECUTIVE INCENTIVE PLAN.
- --------------------------------------------------------------------------------
<PAGE> 27
PROXY CLASS B
COMMON STOCK
CLASS D
COMMON STOCK
UNIVERSAL HEALTH SERVICES, INC.
THIS PROXY SOLICITED BY THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 18, 1994
Alan B. Miller and Sidney Miller and each of them, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated
below, all shares of Class B Common Stock and Class D Common Stock of Universal
Health Services, Inc. held of record by the undersigned on April 8, 1994, at
the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May
18, 1994 at the offices of the Company, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof.
Any and all proxies heretofore given are hereby revoked.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 28
UNIVERSAL HEALTH SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1994, 10:00 A.M.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA.
<PAGE> 29
<TABLE>
<S> <C>
1. The election of two directors 2. Adoption of the Amendment
to be voted on by holders of Class to the 1989 Non-Employee Director
A Common and Class C Common stock Stock Option Plan.
only
FOR AGAINST ABSTAIN
/ / / / / /
3. Adoption of the 1994 Executive Discretionary authority is hereby WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED
Incentive Plan. granted with respect to such other AS DESIGNATED BY THE ABOVE. IF NO CHOICE IS
matters as may properly come before SPECIFIED, THE PROXY WILL BE VOTED FOR ADOPTION
the meeting. OF THE AMENDMENT TO THE 1989 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN, AND FOR ADOPTION OF THE 1994
FOR AGAINST ABSTAIN EXECUTIVE INCENTIVE PLAN.
/ / / / / / DATED: ----------------------------------------
SIGNATURE: ------------------------------------
SIGNATURE: ------------------------------------
IMPORTANT: Please sign exactly as name appears
at the left. Each joint owner shall sign.
Executors, administrators, trustees, etc. should
give full title.
The above-signed acknowledges receipt of the
Notice of Annual Meeting of Stockholders and the
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA Proxy Statement furnished therewith.
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 30
ANNUAL MEETING
OF
UNIVERSAL HEALTH SERVICES, INC. STOCKHOLDERS
WEDNESDAY, MAY 18, 1994
10:00 A.M.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA
AGENDA
* Election of Directors
* Adoption of Amendment to 1989 Non-Employee
Director Stock Option Plan
* Adoption of 1994 Executive Incentive Plan.
* Discussion on matters of current interest
