<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
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL HEALTH SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fees 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:
- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
[UHS LOGO]
UNIVERSAL HEALTH SERVICES, INC.
April 19, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Universal Health Services, Inc. to be held at the offices of the Company,
Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania,
on May 17, 2000, at 10:00 a.m., Eastern Daylight Time, for the following
purposes:
(1) the election of two directors by the holders of Class A and Class C
Common Stock; and
(2) the adoption of the Amendment to the 1992 Stock Option Plan.
Detailed information concerning these matters is set forth in the attached
Notice of Annual Meeting of Stockholders and Proxy Statement.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR SHARES FOR THE
ELECTION OF DIRECTORS, AND FOR THE ADOPTION OF THE AMENDMENT TO THE 1992 STOCK
OPTION PLAN.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE EITHER VOTE BY
TELEPHONE, OR PROMPTLY SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE.
If you then attend and wish to vote your shares in person, you still may do so.
In addition to the matters noted above, we will discuss the business of the
Company and be available for Stockholders' comments and discussion relating to
the Company.
I look forward to seeing you at the meeting.
Sincerely,
Alan B. Miller
Chairman, President and
Chief Executive Officer
<PAGE> 3
[UHS Logo]
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
Notice is hereby given that the Annual Meeting of Stockholders of Universal
Health Services, Inc. (the "Company") will be held on Wednesday, May 17, 2000 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, all directors to serve for a term of three years until the
annual election of directors in the year 2003 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 1992 Stock Option Plan, adopted
by the Board of Directors of the Company.
(3) 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 5, 2000, are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person. IN
ANY EVENT, PLEASE EITHER VOTE BY TELEPHONE OR 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
STEVE G. FILTON, Secretary
King of Prussia, Pennsylvania
April 19, 2000
<PAGE> 4
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 19,
2000) 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 17, 2000 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, all of whom will serve for
terms of three years until the annual election of directors in 2003 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 1992 Stock Option Plan, which was adopted by the Board of
Directors of the Company; and (3) 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, 1999 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 and
FOR the approval of the Amendment to the 1992 Stock Option Plan. 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 5, 2000
are entitled to vote at the Annual Meeting. On that date, 2,030,566 shares of
Class A Common Stock, par value $.01 per share, 204,593 shares of Class C Common
Stock, par value $.01 per share, 28,425,247 shares of Class B Common Stock, par
value $.01 per share, and 23,913 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
<PAGE> 5
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.
As to matters other than the election of directors, including the approval
of the Amendment to the 1992 Stock Option 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, except as
otherwise provided by law. 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). 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 1992 Stock Option 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, thereby
making it easier to obtain the approval of holders of a majority of the
aggregate voting power of the shares entitled to vote as is required for
approval of the proposal.
As of April 5, 2000, the shares of Class A and Class C Common Stock
constituted 7.3% of the aggregate outstanding shares of the Company's Common
Stock, had the right to elect six members of the Board of Directors and
constituted 87.9% of the general voting power of the Company; and as of that
date the shares of Class B and Class D Common Stock constituted 92.7% of the
outstanding shares of the Company's Common Stock, had the right to elect two
members of the Board of Directors and constituted 12.1% of the general voting
power of the Company.
As of February 29, 2000, the Company's current directors and officers as a
group owned of record or beneficially 2,023,065 shares of Class A Common Stock,
674,226 shares of Class B Common Stock (excluding shares issuable upon exercise
of options), 203,084 shares of Class C Common Stock and 630 shares of Class D
Common Stock, representing 99.6%, 2.4%, 99.3% and 2.6% respectively, of the
outstanding shares of each class and constituting 87.6% of the general voting
power of the Company on that date.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 29, 2000, 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 executive 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>
Leatrice Ducat 1,750 (5)(14) (5)
National Disease Research
Interchange
645 N. Michigan Avenue
Ste. 800
Chicago, IL 60611
John H. Herrell 7,900 (5)(14) (5)
Mayo Clinic
200 First Street, SW
Rochester, MN 55905
Robert H. Hotz 22,500 (5)(14) (5)
Warburg Dillon Read LLC
299 Park Avenue, 39th Fl.
New York, NY 10171
Alan B. Miller 1,910,890(6) 2,778,283 (4)(6)(14) 191,447 (82.4%)
(94.1%) (9.7%) (93.5%)
Sidney Miller 95,323 139,008 (4)(5)(7)(14) 9,539 (4.1%)
(4.6%) (4.6%)
Anthony Pantaleoni 4,452(5) 17,670 (4)(5)(8) 548(5) 280(5)(8) (5)
Fulbright & Jaworski L.L.P. (14)
666 Fifth Avenue
New York, NY 10103
John F. Williams, Jr., M.D. 150 (5) (5)
George Washington University
2300 Eve Street, N.W.
Suite 713E
Washington, DC 20037
Thomas J. Bender 147,987 (5)(14) (5)
Kirk E. Gorman 88,071 (5)(14) (5)
Steve G. Filton 87,444 (5)(14) (5)
</TABLE>
3
<PAGE> 7
<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>
Richard C. Wright 12,400(5) 58,078 (5)(14) 1,550(5) 350(5) (5)
Debra K. Osteen 45,164 (5) (5)
FMR Corp. 1,505,100 (9) (5)
82 Devonshire Street (5.8%)
Boston, MA 02109
Capital Research 2,474,900 (10) (5)
and Management Company (9.6%)
333 South Hope St.
Los Angeles, CA 90071
The Growth Fund of America,
Inc. 1,450,000 (11) (5)
333 South Hope Street (5.6%)
Los Angeles, CA 90071
Westport Asset Management, Inc. 1,798,724 (12) (5)
253 Riverside Avenue (7%)
Westport, CT 06880
Private Capital Management,
Inc. 5,806,077 (13) 2.2%
3003 Tamiami Trail, N. (22.7%)
Naples, FL 33940
All directors & executive
officers as a group 2,023,065 3,394,005 (14) 203,084 630 87.6%
(12 persons) (94.1%) (11%) (99.2%) (2.5%)
</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.
(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).
(4) Includes shares issuable upon the conversion of Classes A, C and/or D
Common Stock.
(5) Less than 1%.
(6) Includes 46,000 shares of Class A Common Stock which are beneficially owned
by The Alan B. Miller Family Foundation, Alan B. Miller, as Trustee; and
100,000 shares of Class A Common Stock which are beneficially owned by Mr.
Miller and are held by Mr. Miller in trust for the benefit of his spouse.
(7) Includes 30,000 shares of Class B Common Stock which are beneficially owned
by Mr. Miller's spouse.
(8) Includes 2,890 shares of Class B Common Stock and 280 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 FMR Corp., a parent holding company.
Information is based on Amendment No. 11 to Schedule 13G dated February 14,
2000.
(10) These securities are held by Capital Research and Management Company.
Information is based on Schedule 13G dated February 10, 2000.
(11) These securities are held by The Growth Fund of America, Inc., which is
advised by Capital Research and Management Company, a registered investment
advisor. Information is based on Schedule 13G dated February 10, 2000.
(12) These securities are held by Westport Asset Management, Inc., a registered
investment advisor. Information is based on Schedule 13G dated February 16,
2000.
4
<PAGE> 8
(13) These securities are held by Private Capital Management, Inc. and SPS
Partners, L.P., registered investment advisors. Bruce S. Sherman is
Chairman of Private Capital Management, Inc. and Managing General Partner
of SPS Partners, L.P., and exercises shared dispositive power with respect
to the shares beneficially owned by those entities. Information is based on
Schedule 13G dated February 14, 2000.
(14) Includes 493,000 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 29, 2000 as follows: Leatrice Ducat
(1,250); John H. Herrell (2,500); Robert H. Hotz (2,500); Alan B. Miller
(363,750); Sidney Miller (2,500); Anthony Pantaleoni (2,500); Thomas J.
Bender (33,250); Kirk E. Gorman (39,000); Steve G. Filton (28,750); Richard
C. Wright (11,250) and Debra K. Osteen (5,750).
5
<PAGE> 9
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 eight 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 six directors, two in Class I, two 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, Mr. John H. Herrell and Ms.
Leatrice Ducat, expires at the 2000 Annual Meeting. Mr. John H. Herrell and Ms.
Leatrice Ducat 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 any of the
nominees will be unavailable for election; however, if any nominee becomes
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. All 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 2000
- ----------------------------
John H. Herrell............. I A Common 59 Vice President and Chief Administrative 1993
C Common Officer of Mayo Foundation since 1993.
Prior thereto, Chief Financial Officer
of Mayo Foundation since 1984 and
various other capacities since 1968.
Leatrice Ducat.............. I A Common 67 President and Founder, National Disease 1997
C Common Research Interchange since 1980;
President and Founder, Human Biological
Data Interchange since 1988; Founder,
Juvenile Diabetes Foundation, National
and International Organization of the
Juvenile Diabetes Foundation; Past
Chairman and Founder, National Diabetes
Research Coalition.
DIRECTORS WHOSE TERMS
EXPIRE IN 2001
- ----------------------------
Anthony Pantaleoni.......... II A Common 60 Partner in the law firm of Fulbright & 1982
C Common Jaworski L.L.P., New York, New York.
Director of AAON, Inc. and Westwood
Corporation. The Company utilized
during the year ended December 31, 1999
and currently utilizes the services of
Fulbright & Jaworski L.L.P. as counsel.
</TABLE>
6
<PAGE> 10
<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>
Robert H. Hotz.............. II B Common 55 Managing Director and Co-Head of 1991
D Common Corporate Finance in the Americas for
Warburg Dillon Read; Director of
Mikasa, Inc., Formerly Co-Head of
Corporate Finance and Director at
Dillon, Read & Co., Inc.
Joseph T. Sebastianelli..... II A Common 53 Currently Executive Vice President of 2000
C Common Scripps Health, a multi-hospital system
in San Diego, California. Formerly,
President of Aetna, Inc. and prior to
its merger with Aetna in 1996,
Co-President and Principal Medical
Administrative Officer of U.S.
Healthcare, Inc.
DIRECTORS WHOSE TERMS
EXPIRE IN 2002
- ----------------------------
Alan B. Miller.............. III A Common 62 Chairman of the Board, President and 1978
C Common Chief Executive Officer of the Company
since 1978. Prior thereto, President,
Chairman of the Board and Chief
Executive Officer of American Medicorp,
Inc. Trustee of Universal Health Realty
Income Trust. Director of CDI Corp. and
Penn Mutual Life Insurance Company.
Sidney Miller............... III A Common 73 Secretary of the Company from 1990 to 1978
C Common 1999. Assistant to the President during
1993 and 1994. 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.
John F. Williams, Jr., M.D.,
Ed.D. .................... III B Common 51 Vice President for Health Affairs and 1999
D Common Executive Dean of George Washington
University since 1997; Prior thereto,
Medical Director of The George
Washington University Hospital, and
Associate Vice President for Graduate
Medical Education at the School of
Medicine and Health Sciences; Member of
the American Public Health Association,
the American Medical Association, the
New York Academy of Sciences, the
American Society of Anesthesiologists
and the Society of Critical Care
Medicine.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. Mr. Robert H. Hotz failed to file a Form 4, Statement
of Changes of Beneficial Ownership, in a timely manner and John F. Williams,
Jr., M.D. failed to file a Form 3, Initial Statement of Beneficial Ownership, in
a timely manner.
7
<PAGE> 11
PROPOSAL NO. 2
ADOPTION OF THE AMENDMENT TO THE
UNIVERSAL HEALTH SERVICES, INC.
1992 STOCK OPTION PLAN
On September 28, 1999, the Board of Directors of the Company adopted an
amendment to the 1992 Stock Option Plan (the "1992 Plan"), subject to
stockholder approval. The 1992 Plan will increase the aggregate number of shares
of Class B Common Stock as to which purchase rights may be granted from time to
time under the Plan from 3,000,000 shares to 4,000,000 shares. The 1992 Plan
will become effective only if approved by stockholders representing a majority
of the aggregate voting power of the shares of outstanding Common Stock present
and entitled to vote at the meeting. The essential features of the 1992 Plan are
summarized below. The full text of the Amended and Restated 1992 Stock Option
Plan is set forth in Exhibit A to this Proxy Statement, and the following
discussion is qualified in its entirety by reference thereto.
The 1992 Plan is intended to aid the Company in attracting and retaining
officers, directors and employees who are in a position to contribute materially
to the successful conduct of the Company's business and affairs. The amendment
is intended to furnish additional incentives whereby present and future
officers, directors and employees may be encouraged to acquire, or to increase
their holdings of, the Company's Class B Common Stock.
A total of 574,500 options have been granted under the 1992 Plan, as
amended, subject to stockholder approval. The table below indicates options
which have been granted, subject to stockholder approval, to the named persons
and to the indicated groups of persons. Other awards under the 1992 Plan, as
amended, are not yet determinable. The closing price of the Company's Class B
Common Stock on the New York Stock Exchange on April 5, 2000 was $50.0625. The
dollar value listed below is the excess of the closing price of the Company's
Class B Common Stock on April 5, 2000 over the exercise price of the total
options granted under the 1992 Plan. In September and November of 1999, 305,000
options and 25,000 options, respectively, were granted subject to stockholder
approval of the Amendment to the 1992 Plan. An additional 244,500 options were
granted on January 19, 2000, subject to stockholder approval of the Amendment to
the 1992 Plan.
PLAN BENEFITS GRANTED TO DATE
1992 STOCK OPTION PLAN, AS AMENDED
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) OPTIONS(2)
- ----------------- ---------- ----------
<S> <C> <C>
Alan B. Miller.............................................. $5,390,625 240,000
Kirk E. Gorman.............................................. $ 637,500 40,000
Thomas J. Bender............................................ $ 400,125 31,000
Steve G. Filton............................................. $ 358,875 23,500
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) OPTIONS(2)
- ----------------- ---------- ----------
<S> <C> <C>
Richard C. Wright........................................... $ 68,750 12,500
All current executives as a Group........................... $ 213,250 16,000
Non-Executive Directors as a Group.......................... $ 421,563 27,500
Non-Executive Officers, Employees as a Group................ $2,306,250 184,000
</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 April
5, 2000 of $50.0625 per share.
(2) The table shown above, contains the options granted pursuant to the 1992
Stock Option Plan, as amended, which are subject to stockholder approval.
For options granted to the five named executives shown above during the
last fiscal year, pursuant to the 1992 Plan, including options granted both
before and after giving effect to the amendment, see "Executive
Compensation -- Option Grants in Last Fiscal Year."
DESCRIPTION OF THE AMENDED AND RESTATED 1992 STOCK OPTION PLAN
The 1992 Plan permits the granting of options to purchase an aggregate of
4,000,000 shares of the Company's Class B Common Stock to certain key employees,
directors of and consultants to the Company or any of its subsidiaries.
Directors are eligible to receive options under the Plan, regardless of whether
they are otherwise employed by the Company. The number of shares which may be
issued under the 1992 Plan will not qualify as incentive stock plans under the
federal income tax law.
The 1992 Plan will be administered by the Board of Directors; however, the
Board of Directors may appoint a committee (the "Committee") of the Board whose
members shall satisfy the requirements of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the requirements of Rule
16b-3(a)(3)(i) under the Securities and Exchange Act of 1934, as amended (or any
further successor laws or regulations), to grant options to executive officers
of the Company. Subject to the provisions of the 1992 Plan, the Board of
Directors has the authority to determine the individuals to whom stock options
will be granted, the number of shares to be covered by each option, the option
price, the type of option, the terms for the payment of the option price and
other terms and conditions. In the case of options granted by the Committee, the
exercise price shall not be less than the fair market value of the Class B
Common Stock. Payment for shares acquired upon exercise of an option may be made
(as determined by the Board of Directors) in cash, by promissory note or by
shares of Class B Common Stock. The Company provides a three-year loan for
participants in the 1992 Plan, to cover the tax liability incurred by optionees
upon exercise of the option ("Option Loan"). Payment of interest is deferred
during the term of the loan. The loan and all interest thereon will be forgiven
on the maturity date if the optionee is employed by the Company on that date. No
person may receive grants of options to purchase more than 200,000 shares in any
one calendar year.
All options must expire no later than ten years from the date of grant. In
general, except as otherwise provided by the Board of Directors, no option may
be exercised after the termination of the optionee's service
9
<PAGE> 13
with the Company and subsidiaries. However, the option exercise is extended to
twelve months after termination if the optionee's service is terminated by
reason of disability or death.
Options may be transferred to members of the immediate family of an
optionee or to trusts for the benefit of immediate family members unless
otherwise prohibited. The Board of Directors may amend or terminate the 1992
Plan, at any time, without the consent of the Company's stockholders. In any
event, no options may be granted under the 1992 Plan after July 15, 2002.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the salient federal income tax consequences
associated with awards made under the 1992 Plan.
The grant of an option under the 1992 Plan is not a taxable event. In
general, if and when the option is exercised, the optionee will recognize
ordinary income equal to the excess of the value of the Common Stock acquired
upon the exercise over the exercise price (i.e., the option spread), and the
Company will be entitled to a corresponding deduction. If shares of Common Stock
acquired upon the exercise of an option are subject to the six-month sale
restriction under Section 16(b) of the Securities Exchange Act of 1934, then the
optionee will recognize ordinary income attributable to the exercise on the date
the restriction lapses unless an early income recognition election is made. Upon
a later sale of the shares, the optionee will realize capital gain or loss equal
to the difference between the selling price and the value of the shares at the
time ordinary income is recognized.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Common Stock votes of the Company entitled to vote at the 2000 Annual Meeting of
Stockholders is required for the adoption of the proposal set forth above.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 2 -- ADOPTION OF THE AMENDMENT
TO THE 1992 STOCK OPTION PLAN," TO BE IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
10
<PAGE> 14
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 AWARDS
ANNUAL COMPENSATION -----------------------
----------------------------------------- RESTRICTED
OTHER STOCK SECURITIES ALL OTHER
ANNUAL AWARDS UNDERLYING COMPEN-
FISCAL COMPENSATION ($) ($) OPTIONS SATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (a) (b) (#) (c)($)
--------------------------- ------ ---------- --------- ---------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan B. Miller, Chairman of the
Board, President, and Chief
Executive Officer............ 1999 $920,000 $ 0 $1,996,327 $ 24,342 220,000 $11,172
1998 884,000 593,406 4,556 196,930 150,000 12,772
1997 850,000 357,000 4,556 128,529 40,000 12,772
Kirk E. Gorman, Senior Vice
President, Treasurer and
Chief Financial Officer...... 1999 $282,719 $ 0 $ 160,025 $ 5,684 30,000 $ 1,600
1998 267,975 118,981 0 40,873 22,000 3,200
1997 250,800 84,280 4,906 30,225 22,000 3,200
Thomas J. Bender, Senior Vice
President.................... 1999 $225,750 $148,148 $ 248,694 $ 6,096 33,500 $ 1,600
1998 207,500 127,364 0 43,023 15,000 3,200
1997 198,000 118,510 0 34,568 15,000 3,200
Steve G. Filton, Vice
President, Controller and
Secretary.................... 1999 $213,450 $ 0 $ 133,670 $ 3,542 21,000 $ 1,600
1998 196,650 69,850 0 24,417 15,000 3,200
1997 183,500 53,960 4,163 19,052 15,000 3,200
Richard C. Wright, Vice
President.................... 1999 $203,333 $ 15,000 $ 104,233 $ 8,526 15,000 $ 1,600
1998 193,333 30,022 0 22,640 15,000 3,200
1997 183,333 133,500 0 42,490 15,000 3,200
</TABLE>
- ---------------
(a) Other annual compensation for Mr. Alan B. Miller includes: (i) $1,991,771 in
1999 which represents forgiveness of principal under Option Loans, and; (ii)
$4,556 in 1999, $4,556 in 1998 and $4,556 in 1997 for other compensation.
Other annual compensation for Messrs. Gorman, Bender, Filton and Wright in
1997 and 1999 represents forgiveness of principal under Option Loans.
(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") for 1997 and 1998 only;
(ii) the portion of additional restricted shares ("Premium Shares") equal to
20% of the
11
<PAGE> 15
Bonus Shares issued in prior years which vested in 1999, and; (iii) the
value of the Class B Common Shares issued in connection with the 1990
Employees' Restricted Stock Purchase Plan (the "1990 Plan"). Restrictions on
one-half of the Bonus Shares and the Premium Shares lapse after one year
from date of grant and restrictions on the remaining Bonus Shares and
Premium Shares lapse two years after the date of grant.
Restricted stock awards for Mr. Alan B. Miller include: (i) $148,352 in 1998
and $89,250 in 1997 representing the value of the Bonus Shares, and; (ii)
$24,342 in 1999, $48,578 in 1998 and $39,279 in 1997 representing the value
of the vested portion of the Premium Shares.
Restricted stock awards for Mr. Kirk E. Gorman include: (i) $29,745 in 1998
and $21,070 in 1997 representing the value of the Bonus Shares, and; (ii)
$5,684 in 1999, $11,128 in 1998 and $9,155 in 1997 representing the value of
the vested portion of the Premium Shares. Restricted stock awards for Mr.
Thomas J. Bender include: (i) $31,841 in 1998 and $29,628 in 1997
representing the value of the Bonus Shares, and; (ii) $6,096 in 1999,
$11,182 in 1998 and $4,940 in 1997 representing the value of the vested
portion of the Premium Shares. Restricted stock awards for Mr. Steve G.
Filton include: (i) $17,462 in 1998 and $13,490 in 1997 representing the
value of the Bonus Shares, and; (ii) $3,542 in 1999, $6,955 in 1998 and
$5,562 in 1997 representing the value of the vested portion of the Premium
Shares. Restricted stock awards for Mr. Richard C. Wright include: (i)
$3,755 in 1998 and $29,625 in 1997 representing the value of the Bonus
Shares, and; (ii) 8,526 in 1999, $18,885 in 1998 and $12,865 in 1997
representing the value of the vested portion of the Premium Shares. There
were no Bonus Shares issued in 1999.
At December 31, 1999, Messrs. Miller, Gorman, Bender, Filton and Wright held
5,179 1,073, 1,228, 643 and 438 shares, respectively, of restricted Bonus
Shares and Premium Shares, with a value based on the closing price of the
shares on that date of $186,444, $38,628, $44,208, $23,148 and $15,768,
respectively.
(c) All other compensation includes the Company's match of officers'
contributions 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.
LOANS TO CHIEF EXECUTIVE OFFICER
Option Loans have been advanced by the Company to Mr. Alan B. Miller in
connection with the Amended and Restated 1992 Stock Option Plan as well as a
loan advanced pursuant to the terms of the 1992 Corporate Ownership Program, As
Amended. Additionally, during the second quarter of 2000, the Company loaned Mr.
Miller $1 million pursuant to the terms of a promissory note which is payable on
demand and provides for interest at an annual rate of 8%.
12
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENTAGE OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS EXERCISE STOCK PRICE
OPTIONS GRANTED TO PER APPRECIATION FOR
GRANTED EMPLOYEES SHARE OPTION TERM
(#) IN FISCAL PRICE EXPIRATION -----------------------
NAME (a) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Miller................................. 25,000 3.9% $41.6250 04/01/04 $ 287,504 $ 635,312
195,000 30.4% $23.6875 09/28/04 $1,276,162 $2,819,984
Kirk E. Gorman................................. 10,000 1.6% $41.6250 04/01/04 $ 115,002 $ 254,125
20,000 3.1% $23.6875 09/28/04 $ 130,888 $ 289,229
Thomas J. Bender............................... 20,000 3.1% $41.6250 04/01/04 $ 230,003 $ 508,250
2,500 0.4% $51.1250 05/19/04 $ 35,312 $ 78,031
11,000 1.7% $23.6875 09/28/04 $ 71,988 $ 159,076
Steve G. Filton................................ 10,000 1.6% $41.6250 04/01/04 $ 115,002 $ 254,125
11,000 1.7% $23.6875 09/28/04 $ 71,988 $ 159,076
Richard C. Wright.............................. 15,000 2.3% $41.6250 04/01/04 $ 172,502 $ 381,187
</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.
AGGREGATED OPTION EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-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......................... 195,000 $4,570,313 357,500 352,500 $5,831,250 $2,400,938
Kirk E. Gorman......................... 20,000 $ 467,500 36,500 57,500 $ 388,750 $ 246,250
Thomas J. Bender....................... 11,000 $ 257,125 28,250 53,250 $ 317,063 $ 148,188
Steve G. Filton........................ 11,000 $ 257,125 26,250 39,750 $ 291,563 $ 135,438
Richard C. Wright...................... 23,500 $ 779,500 7,500 33,750 $ 0 $ 0
</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, 1999 of $36.00 per share.
13
<PAGE> 17
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, 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 was entitled
to a salary of $675,000 for the year ended December 31, 1992, to be 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 (which he elected to waive for 1999) 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 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, Steve G. Filton and Richard C. Wright assuming their
annual compensation increases by 4% annually, would be $287,000 $147,000,
$127,000, $146,000 and $94,000, 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Committee of the Board of Directors was comprised during 1999 of four
non-employee directors, Anthony Pantaleoni, Robert H. Hotz, John H. Herrell and
Leatrice Ducat. Anthony Pantaleoni is a partner in Fulbright & Jaworski L.L.P.,
which serves as the Company's principal outside counsel. Robert H. Hotz serves
as Managing Director at Warburg Dillon Read LLC, which provided consulting
services and brokerage services for the Company's share buy-back program.
COMMITTEE REPORT TO SHAREHOLDERS
The report of the Stock Option and Compensation 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
14
<PAGE> 18
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
COMPENSATION PHILOSOPHY
The 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.
SHORT-TERM INCENTIVES
On May 18, 1994, the Company's stockholders approved the adoption of the
Company's Executive Incentive Plan. Pursuant to that Plan, at the start of each
fiscal year, 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
recommended by senior management of the Company and approved by the Committee of
the Board of Directors which administers the Plan. In accordance with the Plan,
a subcommittee consisting of Mr. Herrell and Ms. Ducat established salary and
bonus targets in March 1999 for the 1999 calendar year. Similarly, a
subcommittee will establish salary and bonus targets for future years in
accordance with tax law requirements. The Committee expects to continue
15
<PAGE> 19
the basic policies outlined below. 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 fiscal 1999, Thomas J. Bender,
Vice President of the Company, was entitled to a bonus of 66% of his base salary
based on the achievement of the Division Targets. Seventy-five percent of Mr.
Bender's bonus was determined based on the achievement of the Division Targets,
and the remaining 25% of such bonus was based on the achievement of the Company
Targets, which were not met during fiscal 1999. Messrs. Miller, Gorman and
Filton were not entitled to bonuses for fiscal 1999, pursuant to the Plan, since
the Company Targets were not achieved. Depending upon the actual performance of
the Company and the Divisions compared to Company Targets and/or the Division
Targets, the senior executives can receive bonuses up to 150% of their base
salaries.
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.
1999 COMPENSATION
The base salary for the Chairman and President was increased during 1999 to
$920,000. This represents a 4% increase over 1998.
The Stock Option and 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 Stock Option and Compensation
Committee believes that compensation levels during 1999 adequately reflect the
Company's compensation goals and policies.
STOCK OPTION AND COMPENSATION COMMITTEE
John H. Herrell Robert H. Hotz
Leatrice Ducat Anthony Pantaleoni
16
<PAGE> 20
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 HEALTH SERVICES -
CL B S & P 500 INDEX PEER GROUP
--------------------------- --------------- ----------
<S> <C> <C> <C>
1994 100 100 100
1995 181.13 137.58 140.32
1996 233.67 169.17 167.29
1997 411.22 225.6 153.91
1998 423.47 290.08 132.06
1999 293.88 351.12 135.83
</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 1994.
The above graph compares the performance of the Company with that of the
S&P 500 Composite, and a group of peer companies where performance has been
weighted based on market capitalization. Companies in the peer group are as
follows: Columbia/HCA Healthcare Corporation, Community Health Systems, Inc.,
Transitional Hospitals Corporation (acquired by Vencor, Inc. in 1997), Health
Management Associates, Inc., OrNda HealthCorp. (acquired by Tenet Healthcare
Corporation in 1997), Quorum Health Group, Inc., Ramsay Health Care, Inc. and
Tenet Healthcare Corporation.
17
<PAGE> 21
During 1996, Community Health Systems, Inc. became a privately held company
and is no longer publicly traded. Stock price information is included for
Community Health Systems, Inc. through the period ended July 1996. OrNda
HealthCorp. merged with Tenet Healthcare Corporation on January 31, 1997.
Transitional Hospitals Corporation was acquired by Vencor, Inc. on September 15,
1997.
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.
During 1998, the Company adopted the Deferred Compensation Plan for UHS Board of
Directors (the "Plan"). The Plan allows the Company's Board of Directors to
elect: (i) the amount of their compensation to be deferred; (ii) the future date
when the deferred amounts should be paid; (iii) the method of distribution to be
used when the deferred amounts are paid, and; (iv) the investment measure to be
used for crediting earnings on deferred amounts during the period held pursuant
to he Plan. As of December 31, 1999, three members of the Company's Board of
Directors are participating in this Plan.
On November 18, 1997, Ms. Leatrice Ducat, upon being appointed to the Board
of Directors, received an option to purchase 2,500 shares of the Class B Common
Stock of the Company at an exercise price of $44.5625 per share. On January 21,
1998, pursuant to the Amendment and Restatement of the 1992 Stock Option Plan,
all non-employee directors of the Company who have served for more than eighteen
months received an option to purchase 5,000 shares of the Company's Class B
Common Stock at an exercise price of $47.8125 per share. On November 11, 1999
all non-employee directors of the Company received an option to purchase 5,000
shares of the Company's Class B Common Stock at an exercise price of $33.75 per
share. All the above 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.
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 1999, 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.
The Executive Committee, the Stock Option and Compensation 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 met once in
1999. Members of the Committee are Alan B. Miller, Sidney Miller, and Anthony
Pantaleoni.
Stock Option and Compensation Committee. The Stock Option and Compensation
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 1990 Employees' Restricted Stock
Purchase Plan, the 1992 Corporate Ownership Program, As Amended, the Amended and
Restated
18
<PAGE> 22
1992 Stock Bonus Plan, the Stock Purchase Plan, the 1992 Stock Option Plan, and
the Stock Compensation Plan. This Committee either met or took action through
unanimous written consent six times in 1999. The members of this Committee are
Anthony Pantaleoni, Robert H. Hotz, John H. Herrell and Leatrice Ducat. A
subcommittee of the Stock Option and Compensation Committee, comprised of Mr.
Herrell and Ms. Ducat, will administer the 1994 Executive Incentive Plan and the
various stock plans.
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 1999. Members of this Committee are John H. Herrell,
Sidney Miller, Leatrice Ducat and John F. Williams, Jr., M.D.
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 met twice in 1999. Members
of this Committee are Alan B. Miller, Sidney Miller and Robert H. Hotz.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has been retained by the Board of Directors, on the
recommendation of the Audit Committee, to perform all accounting and audit
services during the 2000 fiscal year. It is anticipated that representatives of
Arthur Andersen LLP 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 THE 2001 ANNUAL MEETING
Any proposal that a stockholder wishes to present for consideration at the
2001 Annual Meeting must be received by the Company no later than December 21,
2000. This date provides sufficient time for inclusion of the proposal in the
2001 proxy materials.
19
<PAGE> 23
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 OR VOTE YOUR PROXY BY TELEPHONE AT YOUR EARLIEST
CONVENIENCE, WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
STEVE G. FILTON, Secretary
King of Prussia, Pennsylvania
April 19, 2000
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, P.O. BOX 61558, KING OF PRUSSIA, PENNSYLVANIA 19406-0958.
20
<PAGE> 24
EXHIBIT A
UNIVERSAL HEALTH SERVICES, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
1. Purpose. The purpose of the Universal Health Services, Inc. 1992 Stock
Option Plan (the "Plan") is to enable Universal Health Services, Inc. (the
"Company") and its stockholders to secure the benefits of common stock ownership
by personnel of the Company and its subsidiaries. The Board of Directors of the
Company (the "Board") believes that the granting of options under the Plan will
foster the Company's ability to attract, retain and motivate those individuals
who will be largely responsible for the continued profitability and long-term
future growth of the Company.
2. Stock Subject to the Plan. The Company may issue and sell a total of
4,000,000 shares of its Class B Common Stock, $.01 par value (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and unissued
or held by the Company in its treasury. New options may be granted under the
Plan with respect to shares of Common Stock which are covered by the unexercised
portion of an option which has terminated or expired by its terms, by
cancellation or otherwise.
3. Administration. The Plan will be administered by the Board. Subject to
the provisions of the Plan, the Board, acting in its sole and absolute
discretion, will have full power and authority to grant options under the Plan,
to interpret the provisions of the Plan and option agreements made under the
Plan, to supervise the administration of the Plan, and to take such other action
as may be necessary or desirable in order to carry out the provisions of the
Plan. The Board 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 decision
of the Board as to any disputed question, including questions of construction,
interpretation and administration, will be final and conclusive on all persons.
The Board will keep a record of its proceedings and acts and will keep or caused
to be kept such books and records as may be necessary in connection with the
proper administration of the Plan. Notwithstanding the foregoing, the Board
shall have the authority to appoint a committee (the "Committee") of the Board
whose members shall satisfy the requirements of Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"), and the requirements of Rule 16b-3(b)(3)(i)
under the Securities Exchange Act of 1934, as amended (or any successor laws or
regulations), to grant options to executive officers of the Company and, all
references to "the Board" hereunder with respect to the grant of such options
shall be deemed to refer to such Committee.
4. Eligibility. Options may be granted under the Plan to present or future
employees of the Company or a subsidiary of the Company (a "Subsidiary") within
the meaning of Section 424(f) of the Code, consultants to the Company or a
Subsidiary who are not employees, and to directors of the Company or a
Subsidiary whether or not they are employees of or consultants to the Company
and/or a Subsidiary. Subject to the provisions of the Plan, the Board may from
time to time select the persons to whom options will be granted, and will fix
the number of shares covered by each such option and establish the terms and
conditions thereof (including, without limitation, exercise price, which in the
case of grants by the Committee shall not be less than fair market value of the
Common Stock on the date of grant, and restrictions on exercisability of the
option or on the shares of Common Stock issued upon exercise thereof).
Notwithstanding anything to the
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contrary contained herein no person may receive grants of options to purchase
more than 200,000 shares in any one calendar year.
5. Terms and Conditions of Options. Each option granted under the Plan
will be evidenced by a written agreement in a form approved by the Board. Each
such option will be subject to the terms and conditions set forth in this
paragraph and such additional terms and conditions not inconsistent with the
Plan as the Board deems appropriate.
(a) Option Period. The period during which an option may be exercised
will be fixed by the Board and will not exceed 10 years from the date the
option is granted.
(b) Exercise of Options. An option may be exercised by transmitting
to the Company (1) a written notice specifying the number of shares to be
purchased, and (2) payment of the exercise price (or, if applicable,
delivery of a secured obligation therefor), together with the amount, if
any, deemed necessary by the Company to enable it to satisfy its income tax
withholding obligations with respect to such exercise (unless other
arrangements acceptable to the Company are made with respect to the
satisfaction of such withholding obligations).
(c) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan
may be paid in cash and/or such other form of payment as may be permitted
under the option agreement, including, without limitation, previously-owned
shares of Common Stock. The Board may permit the payment of all or a
portion of the purchase price in installments (together with interest) over
a period of not more than 5 years. The Board may permit the Company to lend
money to employees for purposes of exercising options and paying any income
tax due upon exercise. The Board may, in its sole discretion, forgive any
amounts due under the loans made hereunder under such conditions as it
deems appropriate.
(d) Rights as a Stockholder. No shares of Common Stock will be issued
in respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a portion
of the purchase price is being paid in installments). The holder of an
option will have no rights as a stockholder with respect to any shares
covered by an option until the date a stock certificate for such shares is
issued to him or her. Except as otherwise provided herein, no adjustments
shall be made for dividends or distributions of other rights for which the
record date is prior to the date such stock certificate is issued.
(e) Nontransferability of Options. Options granted under the Plan may
be assigned or transferred to members of the immediate family of optionee
or trusts for the benefit of immediate family members, unless otherwise
prohibited by the Option Agreement, by will or by the applicable laws of
descent and distribution or dissemination.
(f) Termination of Employment or Other Service. Unless otherwise
provided by the Board in its sole discretion, if an optionee ceases to be
employed by or to perform services for the Company and any Subsidiary for
any reason other than death or disability (defined below), then each
outstanding option granted to him or her under the Plan will terminate on
the date of termination of employment or service (or, if earlier, the date
specified in the option agreement). Unless otherwise provided by the Board
in its sole discretion, if an optionee's employment or service is
terminated by reason of the optionee's death or
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<PAGE> 26
disability (or if the optionee's employment or service is terminated by
reason of his or her disability and the optionee dies within one year after
such termination of employment or service), then each outstanding option
granted to the optionee under the Plan will terminate on the date one year
after the date of such termination of employment or service (or one year
after the later death of a disabled optionee) or, if earlier, the date
specified in the option agreement. For purposes hereof, the term
"disability" means the inability of an optionee to perform the customary
duties of his or her employment or other service for the Company or a
Subsidiary by reason of a physical or mental incapacity which is expected
to result in death or be of indefinite duration.
(g) Other Provisions. The Board may impose such other conditions with
respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws,
as it may deem necessary or advisable.
6. Capital Changes, Reorganization, Sale.
(a) Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares for which options may be granted under the Plan, the
maximum number of shares for which options may be granted to any person in
any one calendar year, the number and class of shares covered by each
outstanding option and the exercise price per share shall all be adjusted
proportionately for any increase or decrease in the number of issued shares
of Common Stock resulting from a split-up or consolidation of shares or any
like capital adjustment, or the payment of any stock dividend.
(b) Cash, Stock or Other Property for Stock. Except as provided in
subparagraph (c) below, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger have
the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the Stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares
of Common Stock, any option granted hereunder shall terminate, but the
optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation to exercise his or her option in whole or in part to the
extent permitted by the option agreement, and, if the Board in its sole
discretion shall determine, at the time of grant or otherwise, may exercise
the option whether or not the vesting requirements set forth in the option
agreement have been satisfied.
(c) Conversion of Options on Stock for Stock Exchange. If the
Stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or
stock, separation or reorganization (other than a mere reincorporation or
the creation of a holding company), all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock unless the
Company and the corporation issuing the Exchange Stock, in their sole
discretion, determine that any or all such options granted hereunder shall
not be converted into options to purchase shares of Exchange Stock but
instead shall terminate in accordance with the provisions of subparagraph
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<PAGE> 27
(b) above. The amount and price of converted options shall be determined by
adjusting the amount and price of the options granted hereunder in the same
proportion as used for determining the number of shares of Exchange Stock
the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. The Board
shall determine in its sole discretion if the converted options shall be
fully vested whether or not the vesting requirements set forth in the
option agreement have been satisfied.
(d) Fractional Shares. In the event of any adjustment in the number
of shares covered by any option pursuant to the provisions hereof, any
fractional shares resulting from such adjustment will be disregarded and
each such option will cover only the number of full shares resulting from
the adjustment.
(e) Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.
7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan at any time. No amendment or termination may affect adversely any
outstanding option without the written consent of the optionee.
8. No Rights Conferred. Nothing contained herein will be deemed to give
any individual any right to receive an option under the Plan or to be retained
in the employ or service of the Company or any Subsidiary.
9. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of Delaware.
10. Stockholder Approval; Term of the Plan. The Plan was adopted by the
Board on July 15, 1992 and amended on September 29, 1999, subject to the
approval of the Amendment by the Stockholders of the Company at the next Annual
Meeting of Stockholders. The Plan will terminate on July 15, 2002, unless sooner
terminated by the Board. The rights of optionees under options outstanding at
the time of the termination of the Plan shall not be affected solely by reason
of the termination and shall continue in accordance with the terms of the option
(as then in effect or thereafter amended).
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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 17, 2000
Alan B. Miller and Steve Filton 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 5, 2000 at the
Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 17,
2000, 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> 29
PLEASE MARK YOUR CHOICE LIKE THIS M IN BLUE OR BLACK INK
<TABLE>
<S> <C> <C> <C>
[ ]
------------------------ ------------------------ ------------------------
ACCOUNT NUMBER CLASS A COMMON CLASS C COMMON
</TABLE>
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<TABLE>
<S> <C>
</TABLE>
<TABLE>
<S> <C>
1. The Election of Directors. Nominees are: John H. Herrell 3. Discretionary authority is hereby granted with
and Leatrice Ducat respect to such other matters as may properly come
before the meeting.
[ ] For both Nominees [ ] Withheld
from both Nominees
[ ]
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For, except vote withheld from the above nominee:
------------------------------------------------
</TABLE>
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<TABLE>
<S> <C> <C>
2. Adoption of the Amendment to the 1992 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] N N
</TABLE>
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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.
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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, AND FOR ADOPTION OF THE AMENDMENT TO THE 1992 STOCK OPTION PLAN.
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