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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
HEALTH MANAGEMENT ASSOCIATES, 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)(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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[HMA LOGO]
HEALTH MANAGEMENT ASSOCIATES, INC.
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------
February 15, 2000
The Annual Meeting of Stockholders of HEALTH MANAGEMENT ASSOCIATES, INC.
(the "Company") will be held at the Philharmonic Center for the Arts, Daniels
Pavilion, 5833 Pelican Bay Blvd., Naples, Florida 34108 on Tuesday, February
15, 2000 at 1:30 p.m., local time, for the following purposes more fully
described in the accompanying proxy statement:
1. To elect six directors of the Company.
2. To consider and act upon a proposal to approve and adopt an amendment
to the Company's 1996 Executive Incentive Compensation Plan to increase
the base number of shares of Common Stock available for Awards
thereunder from 16,875,000 shares to 34,875,000 shares.
3. To consider and act upon a proposal to approve and ratify the selection
of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending September 30, 2000.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on December 17, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting and any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
Timothy R. Parry,
Corporate Secretary
Dated: December 30, 1999
<PAGE>
Health Management Associates, Inc.
5811 Pelican Bay Boulevard
Naples, Florida 34108-2710
-----------------
PROXY STATEMENT
-----------------
GENERAL
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of Health Management
Associates, Inc. (the "Company") to be used at the Annual Meeting of
Stockholders of the Company, which will be held on Tuesday, February 15, 2000,
and at any adjournments thereof (the "Meeting"). This proxy statement and
accompanying form of proxy are being first mailed to stockholders on or about
December 30, 1999. The proxy, when properly executed and received by the
Corporate Secretary of the Company prior to the Meeting, will be voted as
therein specified unless revoked by filing with the Corporate Secretary prior
to the Meeting a written revocation or a duly executed proxy bearing a later
date. Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, a signed proxy will be
voted FOR the election of the six director nominees named herein and, unless
otherwise indicated, FOR the other two proposals described in this proxy
statement and in the accompanying notice of meeting.
As of December 17, 1999, the record date for the Meeting, there were
240,858,205 shares of the Company's Class A Common Stock, par value $.01 per
share (the "Common Stock"), issued and outstanding. Only holders of Common
Stock of record on the books of the Company at the close of business on
December 17, 1999 are entitled to notice of and to vote at the Meeting and at
any adjournments thereof. Each such stockholder is entitled to one vote for
each share of Common Stock registered in his name. A majority of the
outstanding Common Stock, represented in person or by proxy at the Meeting,
will constitute a quorum for the transaction of all business. Directors will
be elected by a plurality of the votes cast at the Meeting. The affirmative
vote of a majority of the shares of Common Stock present at the Meeting, in
person or by proxy, will be required to approve each of the other two
proposals described in this proxy statement and in the accompanying notice of
meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by use of the mails, directors, officers or regular employees of
the Company, without extra compensation, may solicit proxies personally or by
telephone or other telecommunication. In addition, the Company has retained
Corporate Investor Communications, Inc., a professional soliciting firm, which
may assist in soliciting proxies for a fee of $6,000 plus reimbursement of
out-of-pocket expenses. The Company has requested persons holding stock for
others in their names or in the names of nominees to forward soliciting
material to the beneficial owners of such shares and will, if requested,
reimburse such persons for their reasonable expenses in so doing.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 17, 1999 certain information
concerning shares of Common Stock held by (i) each stockholder known by the
Company to own beneficially more than 5% of the class, (ii) each director of
the Company, (iii) each "Named Executive" (see "EXECUTIVE COMPENSATION"), and
(iv) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
-------------------
Name and Address of No. of Percent
Beneficial Owner (1) Shares of Class
-------------------- ---------- --------
<S> <C> <C>
William J. Schoen (2) 15,097,266 6.0%
5811 Pelican Bay Blvd.
Naples, FL 34108-2710
Kent P. Dauten (3) 382,557 0.2
520 Lake Cook Road
Suite 650
Deerfield, IL 60015
Robert A. Knox 201,904 0.1
717 Fifth Avenue
New York, NY 10022
Charles R. Lees (4) 102,358 -
2659 Townsgate Road
Suite 226
Westlake Village, CA 91361
Kenneth D. Lewis (5) 63,003 -
Bank of America Corporate Center
100 North Tryon Street
58th Floor
Charlotte, NC 28255
William E. Mayberry, M.D. (6) 24,190 -
826 Rue de Ville
Naples, FL 34108
Earl P. Holland (7) 2,881,194 1.2
5811 Pelican Bay Blvd.
Naples, FL 34108-2710
Joseph V. Vumbacco (8) 1,148,765 0.5
5811 Pelican Bay Blvd.
Naples, FL 34108-2710
Stephen M. Ray (9) 1,209,024 0.5
5811 Pelican Bay Blvd.
Naples, FL 34108-2710
Timothy R. Parry (10) 62,575 -
5811 Pelican Bay Blvd.
Naples, FL 34108-2710
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
-------------------
Name and Address of No. of Percent
Beneficial Owner (1) Shares of Class
-------------------- ---------- --------
<S> <C> <C>
The Equitable Companies 25,723,561 10.7
Incorporated, et al. (11)
1290 Avenue of the Americas
New York, New York 10104
All Directors and Executive Officers 21,172,836 8.4
as a Group (10 persons) (12)
</TABLE>
- --------
(1) Unless otherwise indicated, each stockholder shown on the table has sole
voting and investment power with respect to the shares beneficially owned
by him or it. Negligible percentages have been omitted from the table.
(2) The amount shown includes: (a) 8,963,645 shares issuable upon exercise of
currently exercisable options; (b) 460,120 shares held by Mr. Schoen
individually; (c) 11,389 shares held by Mr. Schoen, and 6,500 shares held
by his wife, each as custodian for their son (as to which shares Mr.
Schoen disclaims beneficial ownership); and (d) an aggregate of 5,655,612
shares held by various trusts of which Mr. Schoen is settlor, trustee
and/or beneficiary.
(3) The amount shown includes 4,782 shares issuable upon exercise of
currently exercisable options.
(4) The amount shown includes 91,108 shares issuable upon exercise of
currently exercisable options.
(5) The amount shown includes 34,316 shares issuable upon exercise of
currently exercisable options.
(6) The amount shown includes: (a) 19,128 shares issuable upon exercise of
currently exercisable options; and (b) 5,062 shares held by Dr. Mayberry
as Trustee of the W.E. Mayberry Trust.
(7) The amount shown includes: (a) 697,500 shares issuable upon exercise of
currently exercisable options; (b) 975,412 shares held by Mr. Holland
individually; (c) an aggregate of 989,375 shares held by Mr. Holland in
joint tenancy with members of his family; (d) 80,000 shares held by Mr.
Holland's wife as custodian for their daughter (as to which shares Mr.
Holland disclaims beneficial ownership); and (e) 138,907 shares held by
Mr. Holland as sole Trustee of the Declaration of Trust Established for
the Benefit of Earl P. Holland.
(8) The amount shown includes: (a) 1,024,950 shares issuable upon exercise of
currently exercisable options; (b) 16,580 shares held in Mr. Vumbacco's
account under the Company's Retirement Savings Plan, as to which shares
he has investment power only; and (c) 107,235 shares held by Mr. Vumbacco
individually, certain of which shares are held in a self-directed IRA in
which Mr. Vumbacco has the sole power of disposition.
(9) The amount shown includes: (a) 531,000 shares issuable upon exercise of
currently exercisable options; (b) 55,774 shares held by Mr. Ray
individually; and (c) 622,250 shares held by Mr. Ray as sole Trustee of
the Stephen M. Ray Living Trust.
(10) The amount shown includes: (a) 49,825 shares issuable upon exercise of
currently exercisable options; (b) 7,250 shares held by Mr. Parry
individually; and (c) 5,500 shares held by his wife in a self-directed
IRA.
(11) The amount shown and the following information is derived from Schedule
13G dated August 10, 1999 filed jointly on behalf of The Equitable
Companies Incorporated, AXA, and four French mutual insurance companies
as a group. Such shares are beneficially owned by Sun Life & Provincial
Holdings PLC (U.K.) (AXA entity) (1,000 shares), and Alliance Capital
Management L.P. (22,513,855 shares), Donaldson, Lufkin & Jenrette
Securities Corporation (244,650 shares), The Equitable Life Assurance
Society of the United States (2,566,200 shares), and Wood, Struthers &
Winthrop Management Corporation (397,856 shares) (subsidiaries of The
Equitable Companies Incorporated). All of the shares were acquired
solely for investment purposes and by Alliance Capital Management, L.P.
and Wood,
3
<PAGE>
Struthers & Winthrop Management Corporation on behalf of client
discretionary investment advisory accounts. Sun Life & Provincial Holdings
PLC (U.K.), Alliance Capital Management L.P. and The Equitable Life
Assurance Society of the United States have sole power to vote a total of
9,313,007 of such shares, shared power to vote a total of 15,860,200 of
such shares and sole power to dispose of 25,543,766 of such shares.
Donaldson, Lufkin & Jenrette Securities Corporation has shared power to
dispose of 184,650 of such shares.
(12) See footnotes (2) through (10) to this table.
4
<PAGE>
ELECTION OF DIRECTORS
A Board of Directors consisting of six directors is to be elected by the
stockholders at the Meeting, each to hold office until the next Annual Meeting
of Stockholders or until his successor is duly elected and qualified.
The Board of Directors recommends the election of the six nominees named
below, all of whom are currently directors of the Company. Unless authority to
vote for one or more of the nominees is specifically withheld according to the
instructions, proxies in the enclosed form will be voted FOR the election of
each of the six nominees named below. The Board of Directors does not
contemplate that any of the nominees will not be able to serve as a director,
but if that contingency should occur prior to the voting of the proxies, the
persons named in the enclosed proxy reserve the right to vote for such
substitute nominee or nominees as they, in their discretion, shall determine.
<TABLE>
<CAPTION>
Year
First
Elected
Name and Background Director
------------------- --------
<S> <C>
William J. Schoen, age 64, has served as Chairman of the Board and 1983
Chief Executive Officer of the Company since April 1986. He was
first elected a director in February 1983, became President and
Chief Operating Officer in December 1983, and Co-Chief Executive
Officer in December 1985. He relinquished the position of President
in April 1997. From 1982 to 1987 Mr. Schoen was Chairman of
Commerce National Bank, Naples, Florida, and from 1973 to 1981 he
was President, Chief Operating Officer and Chief Executive Officer
of The F&M Schafer Corporation, a consumer products company. From
1971 to 1973, Mr. Schoen was President of the Pierce Glass
subsidiary of Indian Head, Inc., a diversified company. Mr. Schoen
also serves on the Board of Directors of Horace Mann Insurance
Companies.
Kent P. Dauten, age 44, served as a director of the Company from 1981
March 1981 through May 1983, and from June 1985 through September
1988. He was again elected a director in November 1988. Since
February 1994 Mr. Dauten has been President of Keystone Capital,
Inc., a private investment advisory firm founded by him. From
January 1993 until February 1994, Mr. Dauten was a Senior Vice
President of Madison Dearborn Partners, Inc., an investment
management company. Mr. Dauten was formerly a Senior Vice President
of First Chicago Investment Corporation and First Capital
Corporation of Chicago, the venture capital subsidiaries of First
Chicago Corporation, where he had been employed in various
investment management positions since 1979. Mr. Dauten also serves
on the Boards of Directors of Iron Mountain, Incorporated and
ElderTrust.
Robert A. Knox, age 47, became Senior Managing Director of 1985
Cornerstone Equity Investors, LLC, an investment advisory firm, in
December 1996. From 1994 until December 1996, he was Chairman and
Chief Executive Officer, and from 1984 to 1994 he was President, of
Prudential Equity Investors, Inc., an investment capital firm.
Prior to that and since 1975, Mr. Knox was employed by The
Prudential Insurance Company of America. He also serves on the
Board of Directors of Lechters, Inc. and various private companies,
and is a Trustee of Boston University.
Charles R. Lees, age 80, served as a director of the Company from 1988
April through September 1988, and was again elected a director in
February 1989. Mr. Lees has been in the private practice of law,
concentrating in tax matters, since May 1985. For more than 25
years prior to his retirement in 1979, Mr. Lees was a Partner of
the accounting firm of KPMG International, formerly known as KPMG
Peat Marwick LLP, specializing in tax matters.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Year
First
Elected
Name and Background Director
------------------- --------
<S> <C>
Kenneth D. Lewis, age 52, has served as President and Chief Operating 1991
Officer of Bank of America since October 1999. From January 1999 to
October 1999, he served as President, and from September 1998 to
January 1999, he served as President, Consumer and Commercial
Banking, of Bank of America. Prior to that, he was President of
NationsBank Corporation, a position that he had held since November
1993. From December 1991 to November 1993 he served as President of
General Banking of NationsBank. Prior to that, Mr. Lewis had been
employed by NCNB Corporation in various capacities since 1969,
including President of NCNB Texas from 1988 to 1990 and President of
NCNB National Bank of Florida from 1986 to 1988.
William E. Mayberry, M.D., age 70, is the retired President and Chief 1994
Executive Officer of the Mayo Foundation and the retired Chairman of
the Board of Governors of the Mayo Clinic, Rochester, Minnesota,
where he had been employed in various capacities from 1960 until his
retirement in 1992.
</TABLE>
Board Meetings and Committees of the Board
During the fiscal year ended September 30, 1999 ("Fiscal 1999"), the Board
of Directors held seven meetings. Each director attended at least 75% of the
Board meetings and meetings of the Board Committees on which he served.
The Company has standing Audit and Compensation Committees of the Board of
Directors. Although the Company has no standing Nominating Committee, the
Board of Directors will consider director nominees recommended by
stockholders. Such recommendations should be sent to the Company, to the
attention of the Corporate Secretary.
The members of the Audit Committee are Messrs. Dauten (Chairman), Lees and
Dr. Mayberry. The Committee reviews with Ernst & Young LLP, the Company's
independent auditors, the Company's financial statements and internal
accounting procedures, Ernst & Young LLP's auditing procedures and fees, and
the possible effects of professional services upon the independence of Ernst &
Young LLP. In addition, the Audit Committee provides oversight review of the
Company's Corporate Compliance Program. The Audit Committee held four meetings
during Fiscal 1999.
The members of the Compensation Committee are Messrs. Knox (Chairman),
Dauten and Lewis. The Committee makes recommendations to the Board with
respect to compensation and benefits paid to the Company's senior management.
The Compensation Committee also makes determinations under the Company's
various plans providing incentive compensation for management. See "EXECUTIVE
COMPENSATION." The Compensation Committee held five meetings during Fiscal
1999.
Compensation of Outside Directors
During Fiscal 1999, the Company paid its non-employee directors $2,000 per
quarter for their services as directors, $2,000 for each Board meeting
attended prior to January 1, 1999, and $3,000 for each Board meeting attended
thereafter. All of the Company's directors other than Mr. Schoen qualified for
such payments, and during Fiscal 1999 such fees paid aggregated $133,000. The
Company also reimburses all of its directors for reasonable expenses incurred
in connection with attending Board and Board committee meetings. Except as
described under "Outside Directors' Stock Options" immediately below, the
Company had no other compensation arrangements with non-employee directors
during Fiscal 1999.
6
<PAGE>
Outside Directors' Stock Options
Pursuant to the Company's Stock Option Plan for Outside Directors, during
Fiscal 1999 the Company granted to each of Messrs. Dauten, Knox, Lees, Lewis
and Dr. Mayberry (the "Optionees"), each a non-employee director of the
Company, an option, expiring on May 27, 2009, to purchase 2,000 shares of
Common Stock at an exercise price of $13.00 per share. Each option is
exercisable in 500-share annual increments commencing one year from the date
of the grant. None of such options is transferable except by will or
intestacy, and during the Optionee's lifetime they are exercisable only by
him. Unexercised options lapse 90 days after the Optionee ceases to be a
director of the Company, except that if the Optionee dies while serving as a
director, his options lapse six months after death.
No non-employee directors exercised options during Fiscal 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation for services rendered to the Company in all capacities, for the
fiscal years ended September 30, 1999, 1998 and 1997, paid by the Company to
those persons who were, at the end of Fiscal 1999, the Chief Executive Officer
of the Company and the four other executive officers of the Company
(collectively, the "Named Executives").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------- -----------------------------
Awards Payouts
Other -------------------- --------
Annual Restricted All Other
Compen- Stock LTIP Compen-
Salary Bonus sation Awards Options Payouts sation
Name and Principal Position Year ($) (1) ($) (2) ($) (3) ($) (4) (#) (5) ($) (6) ($)
- --------------------------- ---- -------- -------- ------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Schoen 1999 $581,250 $383,625 $3,333 $383,625 1,000,000 $300,000 0
Chairman and Chief 1998 525,000 525,000 3,333 525,000 0 300,000 0
Executive Officer 1997 518,750 518,750 3,167 518,750 4,500,000 49,194 0
Earl P. Holland 1999 $356,250 $235,125 $3,333 $235,125 500,000 0 0
Vice Chairman and Chief 1998 300,000 300,000 3,333 300,000 0 0 0
Operating Officer 1997 271,392 236,831 3,167 236,831 675,000 0 0
Joseph V. Vumbacco 1999 $368,750 $243,375 $2,458 $243,375 500,000 0 0
President and Chief 1998 350,000 350,000 2,333 350,000 0 0 0
Administrative Officer 1997 295,685 260,599 583 260,599 900,000 0 0
Stephen M. Ray 1999 $191,000 $ 90,486 $3,333 $ 90,486 200,000 0 0
Executive Vice President 1998 164,000 98,400 3,166 98,400 0 0 0
and Chief Financial 1997 162,375 97,425 3,248 97,425 281,250 0 0
Officer
Timothy R. Parry (7) 1999 $149,000 $ 49,170 $3,333 $ 40,170 100,000 0 0
Vice President, General 1998 146,000 73,000 2,920 73,000 37,500 0 0
Counsel and Corporate 1997 130,625 65,313 1,375 65,313 16,875 0 0
Secretary
</TABLE>
- --------
(1) The amounts shown include cash compensation earned and paid during the
fiscal year indicated as well as cash compensation deferred at the
election of the Named Executive.
(2) The bonuses shown were awarded and paid in the succeeding fiscal year for
services rendered during the fiscal year indicated.
(3) The amounts shown include employer contributions to the Company's
Retirement Savings Plan, a 401(k) plan. The amounts shown do not include
the value of perquisites and other personal benefits because the
aggregate amount of such compensation for each fiscal year shown did not
exceed the lesser of $50,000 or 10% of the total amount of annual salary
and bonus shown for the Named Executive.
(4) The amounts shown reflect contingent awards of Common Stock pursuant to
the Company's 1996 Executive Incentive Compensation Plan (the "EICP").
See "PROPOSAL TO AMEND 1996 EXECUTIVE INCENTIVE COMPENSATION PLAN." The
awards shown were made in the succeeding fiscal year for services
rendered during the fiscal year indicated, and the dollar values shown
represent the aggregate market value of the shares awarded on the
respective dates of the awards. Without giving effect to awards made
after the close of Fiscal 1999, the aggregate numbers and dollar values
of such shares credited to the respective individuals' contingent award
accounts at Fiscal 1999 year-end, based on the market value of the Common
Stock at Fiscal 1999 year-end ($7.75 per share), were: Mr. Schoen--
169,005 shares ($1,309,789); Mr. Holland--70,253 shares ($544,461); Mr.
8
<PAGE>
Vumbacco--44,761 shares ($346,898); Mr. Ray--29,993 shares ($232,446); and
Mr. Parry--9,837 shares ($76,237). Dividends are not payable on such
shares, but customary anti-dilution adjustments apply in the event of stock
splits and stock dividends.
(5) The amounts shown have been adjusted to give effect, as applicable, to
two 3-for-2 stock splits in the form of stock dividends paid on October
23, 1997 and July 17, 1998.
(6) The amounts shown reflect the payment of benefits under the Company's
Supplemental Executive Retirement Plan. See "EXECUTIVE COMPENSATION--
Supplemental Executive Retirement Plan."
(7) Mr. Parry first became an executive officer at the close of Fiscal 1997,
but the amounts shown for Fiscal 1997 reflect his compensation for the
full fiscal year.
Stock Options
Shown below is further information on grants of stock options during Fiscal
1999 to the Named Executives under the EICP. No stock appreciation rights
("SARs") were granted in Fiscal 1999 and there are no SARs outstanding.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
- ------------------------------------------------------------------ -------------
Percent of
Total
Options
Granted to
Options Employees Exercise Grant Date
Granted in Fiscal Price Expiration Present Value
Name (#) Year ($/Sh) Date ($) (1)
---- --------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
William J. Schoen........ 1,000,000 27.1% $13.00 5/27/09 $6,090,000
Earl P. Holland.......... 500,000 13.6 13.00 5/27/09 3,045,000
Joseph V. Vumbacco....... 500,000 13.6 13.00 5/27/09 3,045,000
Stephen M. Ray........... 200,000 5.4 13.00 5/27/09 1,218,000
Timothy R. Parry......... 100,000 2.7 13.00 5/27/09 609,000
</TABLE>
- --------
(1) The hypothetical grant date present value for the options granted during
Fiscal 1999 is presented pursuant to the rules of the Securities and
Exchange Commission (the "SEC") and is calculated under the modified
Black-Scholes Model for pricing options, a mathematical formula used to
value options traded on stock exchanges. This formula considers a number
of factors in forecasting an option's present value. Factors used to
value the options shown on the table include the expected volatility rate
of the shares underlying the options (.446), risk free rate of return
(5.72%), dividend yield (0%), projected time of exercise (5 years) and
projected risk of forfeiture rate for vesting period (0% per annum). The
actual before-tax amount, if any, realized upon the exercise of stock
options will depend upon the excess, if any, of the market price of the
Common Stock over the exercise price per share of the Common Stock at the
time an option is exercised. There is no assurance that the hypothetical
grant date present value of the options reflected on this table will be
realized.
Shown below is information with respect to option exercises by the Named
Executives during Fiscal 1999 and unexercised options to purchase Common
Stock, granted to the Named Executives during and prior to Fiscal 1999 under
the EICP and the Company's prior stock option plans and held by them at the
end of Fiscal 1999.
9
<PAGE>
Aggregated Option Exercises in Fiscal 1999
and Fiscal Year-End Option Values*
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at in-the-Money Options at
Shares Fiscal Year-End (#) Fiscal Year-End ($)(1)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Schoen....... 1,000,000 $5,620,000 8,963,645 2,500,000 $21,328,128 0
Earl P. Holland......... 337,500 1,042,875 697,500 725,000 0 0
Joseph V. Vumbacco...... 0 0 1,024,950 800,000 0 0
Stephen M. Ray.......... 0 0 531,000 293,750 452,603 0
Timothy R. Parry........ 0 0 49,825 133,750 0 0
</TABLE>
- --------
* Pursuant to anti-dilution provisions of the respective plans, all numbers
of shares and per share prices have been adjusted to give effect, as
applicable, to seven 3-for-2 stock splits in the form of stock dividends
paid on April 9, 1992, November 3, 1993, June 17, 1994, October 20, 1995,
June 14, 1996, October 23, 1997 and July 17, 1998.
(1) Expressed as the excess of the market value of the Common Stock at Fiscal
1999 year-end ($7.75 per share) over the exercise price of each option.
Employment Agreements
The Company has an Amended and Restated Employment Agreement with William J.
Schoen, dated December 15, 1992, providing for him to serve as the Company's
Chairman of the Board, President and Chief Executive Officer at an annual base
salary of $400,000, subject to cost of living increases by the Board of
Directors. Mr. Schoen is also guaranteed participation in the Company's
Incentive Compensation Plan for Corporate Officers and Management Staff (the
"Incentive Compensation Plan") (see "EXECUTIVE COMPENSATION--Report of
Compensation Committee With Respect to Executive Compensation") at the 100%
category, and certain fringe benefits. Mr. Schoen's employment is terminable
upon his death, disability, voluntary termination or for defined cause. Should
the Company otherwise terminate Mr. Schoen's employment or reduce his
responsibilities or authority, or should there be a defined change in control
of the Company, then Mr. Schoen will be entitled to a lump sum payment equal
to the gross income paid him by the Company for the preceding three years. Mr.
Schoen has agreed not to compete with the Company or its affiliates during the
term of this agreement.
The Company does not have employment agreements with any of its other
executive officers.
Supplemental Executive Retirement Plan
The Company's Supplemental Executive Retirement Plan (the "Supplemental
Plan") is a deferred compensation plan for key executive employees that is not
intended to be tax-qualified. It commenced on May 1, 1990 for the Company's
executive officers. Each participant in the Supplemental Plan is entitled to
receive a fixed monthly benefit, commencing on his normal retirement date, for
the longer of 120 months or his life. The monthly benefit, which is determined
by the Board of Directors, may vary for each participant and may be increased
periodically by the Board. During Fiscal 1999, the Company recorded $240,000
of deferred compensation expense in respect of the Supplemental Plan. To
qualify for benefits, a participant must continue as an employee until age 62
and must be an employee for at least five years after commencing
participation. No benefit is paid if employment is terminated earlier,
regardless of the reason, except if a participant's employment is terminated
by the Company for reasons other than "cause," or by the participant for a
"stated good reason," within two years after a "change of ownership" of the
Company (as those terms are defined in the Supplemental Plan). In that case,
the actuarial equivalent of a participant's retirement benefit is paid in
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a single sum as soon as practicable after termination of employment. If such a
change of ownership occurs after a participant has already begun to receive
benefit payments, the actuarial equivalent of the remaining benefits payable
will be paid in a single sum. In the event a participant dies after qualifying
for retirement benefits but before all retirement benefits are paid, the
remaining benefits payable will be paid to the participant's designated
beneficiary or legal representative. Life insurance contracts may be purchased
by the Company to provide some or all of the benefits under the Supplemental
Plan.
Report of Compensation Committee With Respect to Executive Compensation
The following report of the Compensation Committee required by the rules of
the SEC to be included in this Proxy Statement shall not be deemed
incorporated by reference by any statement incorporating this Proxy Statement
by reference into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under either such Act.
Executive Compensation Philosophy:
The fundamental compensation philosophy of the Board of Directors is that
there should be a substantial and meaningful connection between executive
compensation and stockholder value. Under the supervision of the Compensation
Committee of the Board of Directors (the "Committee"), which is comprised of
outside directors and which also administers the EICP, the Company's prior
Stock Incentive Plan for Corporate Officers and Management Staff (the "Stock
Incentive Plan") and the Company's prior stock option plans, the Company has
developed and implemented compensation policies, plans and programs designed
to enhance the quality of health care services as well as increase stockholder
value by aligning closely the financial interests of the Company's executive
officers with those of its stockholders. In furtherance of these goals, annual
base salaries are intended to serve as only a portion of an executive's total
achievable compensation. The Board of Directors believes that attracting and
retaining executives of high quality is essential to the Company's growth and
success. The Board of Directors further believes that the long term success of
the Company is enhanced by a comprehensive compensation program that includes
different types of incentives for motivating executives and rewarding
outstanding service, including awards that link compensation to applicable
measures of Company performance. The Company relies to a large degree on
annual and long-term incentive compensation to attract and retain executives
of outstanding ability and to motivate them to perform to the full extent of
their abilities. Both the annual and long-term components of the incentive
compensation policy are closely tied to quality of health care services
provided, profitability and stockholder value. In years of outstanding
achievement, executive officers will be substantially rewarded for their
respective contributions to the Company's success through a combination of
cash and stock-based incentive awards.
The EICP:
The EICP, which was approved by the stockholders in 1996, is a comprehensive
executive compensation plan which provides for grants of performance or annual
incentive awards that may be settled in cash, stock or other property, as well
as stock options, SARs, restricted stock, deferred stock and other stock-
related awards. See "PROPOSAL TO AMEND 1996 EXECUTIVE INCENTIVE COMPENSATION
PLAN" for a more detailed description of the EICP.
Executive Officer Compensation:
The Company's current total compensation program for executive officers
consists of both cash and stock-based compensation. The annual cash
compensation consists of a base salary determined at the beginning of each
calendar year and the awarding of incentive bonuses pursuant to the EICP, as
described
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below. The base salaries are fixed at levels that the Committee believes to be
generally below amounts paid to highly qualified senior executives at other
large companies engaged in similar businesses as the Company. Salaries are
reviewed on an annual basis and may be increased at that time based on (i) the
Committee's consensus that the individual's contribution to the Company has
increased and (ii) increases in competitive pay levels.
In general, annual cash compensation incentives for executives are intended
to reflect the Company's belief that management's contribution to improving
the quality of health care services and stockholder return are related to
earnings growth. Under the current incentive compensation program under the
EICP (which parallels the prior Incentive Compensation Plan), a bonus
(calculated as a percentage of base salary) is paid to participants for each
year in which the Company achieves, in audited fiscal year-end results, at
least 75% of its profit plan. Each participant in this incentive compensation
program is in one of seven bonus categories (ranging from 20% to 100% of base
salary), and his proportionate share of the annual bonus depends upon the
profit percentage achieved by the Company. Participants in this incentive
compensation program are selected and assigned to bonus categories by the
Committee, and all of the Company's executive officers are participants.
Long-term incentives are currently intended to be provided through the grant
of stock options and contingent stock awards. Under the EICP, the Committee
has the authority to determine the individuals to whom stock options are
granted, the terms on which option grants are made, and the term of and the
number of shares subject to each option. Through the grant of stock options,
the objective of aligning executive officers' long-range interests with
improving health care services and stockholder return are met by providing the
executive officers with the opportunity to build a meaningful stake in the
Company. In granting stock options to the Company's senior management, the
Committee reviews and considers the individual awards, taking into account the
respective scope of accountability, strategic and operational goals, and
anticipated performance requirements and contributions of each option grantee.
Under the current stock incentive program under the EICP (which parallels
the prior Stock Incentive Plan), the Committee has the authority to award
shares of Common Stock to all executive officers and senior managers of the
Company. In making such awards, the Committee considers all of the factors
discussed, and follows the procedure described, in the preceding paragraph.
Stock awards under the prior Stock Incentive Plan and the stock incentive
program under the EICP are generally contingent upon completion of four
additional years of employment with the Company. The market value as of the
award grant date of the shares credited to an executive's contingent award
account for any fiscal year may not exceed 100% of the executive's bonus for
the same year under the incentive compensation program discussed above. No
shares are issued or reserved for the executive's account at the time of an
award, but are instead issued after the fourth anniversary of the award grant
date, provided the executive is still an employee of the Company. During
Fiscal 1999, the Company recorded $1,500,000 of deferred compensation expense
in respect of such stock awards.
Executive officers may also participate in the Company's Retirement Savings
Plan, a 401(k) plan, which includes both employer and employee contributions.
In addition, the Company has a deferred compensation program which provides
payments to key executive employees selected by the Board of Directors who
reach normal retirement age. The amount of the benefit provided each executive
is at the discretion of the Board. See "EXECUTIVE COMPENSATION--Supplemental
Executive Retirement Plan."
Chief Executive Officer Compensation:
The key performance measure used to determine Mr. Schoen's Fiscal 1999
compensation package was the Committee's assessment of his ability and
dedication to provide the leadership and vision necessary to enhance the long-
term value of the Company.
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Pursuant to the terms of his employment agreement with the Company (see
"EXECUTIVE COMPENSATION--Employment Agreements"), which was approved by the
Board of Directors in 1992, Mr. Schoen's annual salary is $400,000, subject to
cost of living increases by the Board of Directors. For Fiscal 1999, his
salary amounted to $581,250. The Committee believes that Mr. Schoen's salary
is fixed at a level which is below the amounts paid to other chief executive
officers with comparable qualifications, experience, responsibilities and
proven results at other large companies engaged in similar businesses.
Consistent with the Company's executive compensation philosophy, Mr.
Schoen's total compensation package depends largely on annual and long-term
incentive compensation. The annual incentive component is currently made up of
a cash bonus under the incentive compensation program under the EICP, paid
after the end of the fiscal year and based on the quality of health care
services delivered by the Company's hospitals and the profitability of the
Company. The long-term incentive component currently takes the form of stock
options and contingent stock awards under the EICP. Mr. Schoen is also
eligible to receive other Awards under the EICP. Both the annual and long-term
components of Mr. Schoen's incentive compensation are variable and closely
tied to corporate performance in a manner which encourages dedication to
improving health care services and building stockholder value.
In evaluating the performance and setting the incentive compensation of Mr.
Schoen as the Company's Chief Executive Officer, the Committee has taken
particular note of outstanding QSM patient satisfaction survey results during
Fiscal 1999. QSM is a quality management program that questions patients on
various topics relating to health care services and compares the results
against specific patient-care objectives set by management and staff
physicians. In addition, the Committee considered Mr. Schoen's leadership in
the Company's acquisition of three hospital systems during Fiscal 1999,
increasing the Company's licensed beds by 22%, as well as substantial annual
increases in the Company's stockholder value since 1991, despite a decline
during Fiscal 1999.
Among the key indicators of the Company's performance in Fiscal 1999, net
patient service revenue increased 19.1% from $1,138.9 million in Fiscal 1998
to $1,355.7 million in Fiscal 1999, and net income increased 9.5% from $136.8
million in Fiscal 1998 to $149.8 million in Fiscal 1999. Diluted earnings per
share increased 9.3% from $.54 in Fiscal 1998 to $.59 in Fiscal 1999. In
addition, the Company has paid seven 3-for-2 stock splits in the form of stock
dividends since April 1992.
In addition to leading the Company to outstanding financial achievements,
Mr. Schoen has established a strong record in the areas of quality of health
care services provided, innovation and management efficiency, and has built a
strong management team and aggressively pursued new areas for growth. He has
been the architect of the Company's industry niche and its successful
acquisition strategy.
Mr. Schoen's short-term and long-term incentive compensation package for
Fiscal 1999 includes a cash bonus of $383,625 and a contingent stock award in
an amount equal to his cash bonus. Since 1991, Mr. Schoen's compensation
package has successfully focused on the importance of improving the health
care services delivered by the Company's hospitals as well as increasing
stockholder value, by providing him with significant short-term and long-term
incentive compensation during periods when performance objectives have been
met or exceeded.
Compensation Committee:
Robert A. Knox, Chairman
Kent P. Dauten
Kenneth D. Lewis
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Stock Price Performance Graph
The following graph sets forth a comparison of the cumulative total
stockholder return on the Common Stock during the five-year period ended
September 30, 1999, based on the market price thereof and taking into account
all stock splits in the form of stock dividends paid through Fiscal 1999 year-
end, with the cumulative total return of companies on the Standard & Poor's 500
Stock Index and companies on the S&P Health Care Sector Index.
[LINE GRAPH]
COMPARISON of CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENTS OF $100 AND REINVESTMENT OF DIVIDENDS
Health Management S & P 500 S & P Health Care Sector
Associates, Inc.
9/30/94 $100.00 $100.00 $100.00
9/30/95 $130.47 $129.74 $143.38
9/30/96 $228.43 $156.12 $187.80
9/30/97 $288.98 $219.27 $257.11
9/30/98 $375.21 $239.11 $355.47
9/30/99 $159.33 $305.19 $365.60
Assumes $100 invested on September 30, 1994 in the Company's Common Stock,
the companies comprising the Standard & Poor's 500 Stock Index and the
companies currently comprising the S&P Health Care Sector Index. Total
return assumes reinvestment of dividends.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The Company will neither make nor endorse any predictions as to future stock
performance.
The Stock Price Performance Graph above shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under either such Act.
CERTAIN TRANSACTIONS
Pursuant to a Registration Agreement dated as of September 2, 1988, certain
of the Company's executive officers (William J. Schoen, Earl P. Holland and
Stephen M. Ray), and Robert A. Knox, a director of the Company, have certain
demand registration rights and "piggyback" registration rights, at the
Company's expense, with respect to registration under the Securities Act of all
of their shares of Common Stock.
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PROPOSAL TO AMEND THE
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
Background of Plan and Description of Amendment: At their 1996 Annual
Meeting, the Company's stockholders approved the Health Management Associates,
Inc. 1996 Executive Incentive Compensation Plan (the "EICP"). The terms of the
EICP provide for grants of stock options, stock appreciation rights ("SARs"),
restricted stock, deferred stock, other stock-related awards, and performance
or annual incentive awards that may be settled in cash, stock, or other
property (collectively, "Awards"). The EICP superseded the Company's 1993 Non-
Statutory Stock Option Plan, 1991 Non-Statutory Stock Option Plan, Amended and
Restated 1989 Stock Option Plan, Stock Incentive Plan for Corporate Officers
and Management Staff, and Incentive Compensation Plan for Corporate Officers
and Management Staff (collectively, the "Preexisting Plans"), which terminated
the Company's authority to make further grants under the Preexisting Plans.
Although the types of Awards authorized under the EICP are generally similar
to those that were available under the Preexisting Plans, the Board determined
in 1995 to adopt the EICP as an entirely new plan in order to respond to a
number of changes and proposed changes then pending relating to Rule 16b-3
under the Exchange Act and regulations under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), to broaden the types of
performance goals that could be set by the Committee and otherwise to add
flexibility to annual incentive awards and other performance-based awards
intended to qualify for corporate tax deductions under Section 162(m), to
increase the number of shares of Common Stock that could be subject to Awards,
and otherwise to adopt provisions intended to enable the Committee to better
promote the goals and policies of the Company's annual and long-term incentive
programs. See "EXECUTIVE COMPENSATION--Report of the Compensation Committee
With Respect to Executive Compensation."
In an effort to ensure that the Company continues to receive the benefits of
the EICP, on December 17, 1999, the Board of Directors approved and adopted
Amendment No. 6 to the EICP, which amends the formula for determining the
total number of shares available for delivery in connection with Awards
granted under the EICP by increasing the base number of shares in that formula
from 16,875,000 (as adjusted for stock splits since the EICP was originally
approved in 1996) to 34,875,000, and directed that Amendment No. 6 be
submitted to the stockholders for their approval and adoption at the Meeting.
The Committee has granted option Awards and contingent stock incentive
Awards under the EICP to a number of key employees at various levels of
employment, and the Board of Directors believes that such grants have helped
to motivate the Company's key employees to excel in their work by aligning
their prospects with those of the Company's stockholders. The Company has to
date granted to approximately 200 key employees (including the Named
Executives) option Awards and contingent stock incentive Awards covering an
aggregate of 20,704,326 of the total 22,531,030 shares of Common Stock
available under the EICP as of November 30, 1999, leaving only 1,826,704
shares available for delivery in connection with future Awards. Therefore, if
this Amendment is not approved, the Company will not be able to make
significant additional Awards to new key employees or as further incentive to
existing key employees, including the Named Executives. The Board of Directors
believes that increasing the number of shares available for delivery in
connection with Awards granted under the EICP will greatly assist the Company
in continuing to attract, hire, retain and motivate superior employees and
thus continue to contribute to increasing the quality of health care services
provided by the Company's hospitals and increasing stockholder value.
The following is a summary of the principal features of the EICP, which is
qualified in its entirety by reference to the EICP itself. In view of the
comprehensive summary that follows, the Company believes that including a
complete copy of the EICP as a part of this Proxy Statement would not serve a
useful purpose and therefore has not done so. Any stockholder who wishes to
receive a copy of the EICP as heretofore
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amended may request one by writing to Timothy R. Parry, Vice President,
General Counsel and Corporate Secretary, at Health Management Associates,
Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, or
calling Mr. Parry at (941) 598-3176.
Shares Subject to EICP; Annual Per-Person Limitations: Under the EICP, the
total number of shares of Common Stock presently reserved and available for
delivery to participants in connection with Awards is (i) 16,875,000 (the
"Base Number of Shares"), plus (ii) any shares of Common Stock that were
available under the Preexisting Plans as of the December 12, 1995 effective
date of the EICP, together with any other shares of Common Stock that might
thereafter become available under the Preexisting Plans (due to cancellations
or forfeitures, etc.), plus (iii) 7% of the number of shares of Common Stock
issued by the Company on or before December 1, 1999 (but not thereafter)
(other than issuances under the EICP, the Preexisting Plans or any other
compensation or benefit plan of the Company). As of November 30, 1999, that
number totaled 22,531,030, of which only 1,826,704 shares remained available
for delivery in connection with future Awards. If this Amendment is approved
by the stockholders, the 16,875,000 Base Number of Shares would increase to
34,875,000 shares, which would increase the aggregate number of shares
available for delivery in connection with future Awards to 19,826,704.
Except as limited by applicable law, shares of Common Stock subject to an
Award (or subject to an award under a Preexisting Plan) that is canceled,
expired, forfeited, settled in cash or otherwise terminated without a delivery
of shares of Common Stock to the participant, including shares of Common Stock
withheld or surrendered in payment of any exercise or purchase price of an
Award or taxes relating to an Award, remain available for Awards under the
EICP. Shares of Common Stock issued under the EICP may be either newly issued
shares or treasury shares. As of December 10, 1999, the fair market value of
the Common Stock was $11.8125 per share, as reported on the New York Stock
Exchange.
In addition, the EICP imposes individual limitations on the amount of
certain Awards in order to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options, SARs, restricted
shares of Common Stock, deferred shares of Common Stock, shares granted as a
bonus or in lieu of other Company obligations, and other stock-based Awards
granted to any one participant may not exceed 6,750,000 (as adjusted for stock
splits since the EICP was originally approved in 1996) for each type of such
Award, subject to adjustment in certain circumstances. The maximum amount that
may be paid out as a final annual incentive award or other cash Award in any
fiscal year to any one participant is $2,000,000, and the maximum amount that
may be earned as a final performance award or other cash Award in respect of a
performance period by any one participant is $4,000,000.
The Committee is authorized to adjust the limitations described in the
preceding paragraph and is authorized to adjust outstanding Awards (including
adjustments to exercise prices of options and other affected terms of Awards)
in the event that a dividend or other distribution (whether in cash, shares of
Common Stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase,
share exchange or other similar corporate transaction or event affects the
Common Stock so that an adjustment is appropriate in order to prevent dilution
or enlargement of the rights of participants. The Committee is also authorized
to adjust performance conditions and other terms of Awards in response to
these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
Eligibility: Executive officers and other officers and employees of the
Company or its subsidiaries, including any such person who may also be a
director of the Company, are eligible to be granted Awards under the EICP. As
of December 10, 1999, approximately 250 people were eligible to participate in
the EICP.
Administration: The EICP is administered by the Committee, each member of
which is a "non-employee director" as defined under Rule 16b-3 under the
Exchange Act and an "outside director" for
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purposes of Section 162(m) of the Code. Subject to the terms of the EICP, the
Committee is authorized to select participants, determine the type and number
of Awards to be granted and the number of shares of Common Stock to which
Awards will relate, specify times at which Awards will be exercisable or
settled (including performance conditions that may be required as a condition
thereof), set other terms and conditions of such Awards, prescribe forms of
Award agreements, interpret and specify rules and regulations relating to the
EICP, and make all other determinations which may be necessary or advisable
for the administration of the EICP.
Stock Options and SARs: The Committee is authorized to grant stock options,
including both incentive stock options ("ISOs"), which can result in
potentially favorable tax treatment to the participant, and non-qualified
stock options, and SARs entitling the participant to receive the excess of the
fair market value of a share of Common Stock on the date of exercise (or
defined "change in control price" following a change in control) over the
grant price of the SAR. The exercise price per share subject to an option and
the grant price of an SAR are determined by the Committee, but must not be
less than the fair market value of a share of Common Stock on the date of the
grant, except to the extent of in-the-money awards or cash obligations
surrendered by the participant at the time of grant. The maximum term of each
option or SAR, the times at which each option or SAR will be exercisable, and
provisions requiring forfeiture of unexercised options at or following
termination of employment generally is fixed by the Committee, except that no
option or SAR may have a term exceeding ten years. Options may be exercised by
payment of the exercise price in cash, shares, outstanding Awards, or other
property having a fair market value equal to the exercise price, as the
Committee may determine from time to time. Methods of exercise and settlement
and other terms of the SARs are determined by the Committee. SARs granted
under the EICP may include "limited SARs" exercisable for a stated period of
time following a change in control of the Company, as discussed below. See
"EXECUTIVE COMPENSATION--Stock Options" and "--Report of Compensation
Committee With Respect to Executive Compensation" as to certain options
granted under the EICP. The Company currently has no SARs outstanding.
Restricted and Deferred Stock: The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares of
Common Stock which may not be sold or disposed of, and which may be forfeited
in the event of certain terminations of employment, prior to the end of a
restricted period specified by the Committee in accordance with the EICP. A
participant granted restricted stock generally has all of the rights of a
stockholder of the Company, unless otherwise determined by the Committee. An
Award of deferred stock confers upon a participant the right to receive shares
of Common Stock at the end of a specified deferral period, subject to possible
forfeiture of the Award in the event of certain terminations of employment
prior to the end of a specified restricted period. Prior to settlement, an
Award of deferred stock carries no voting or dividend rights or other rights
associated with share ownership, although dividend equivalents may be granted,
as discussed below.
Dividend Equivalents: The Committee is authorized to grant dividend
equivalents conferring on participants the right to receive, currently or on a
deferred basis, cash, shares of Common Stock, other Awards, or other property
equal in value to dividends paid on a specific number of shares of Common
Stock or other periodic payments. Dividend equivalents may be granted alone or
in connection with another Award, may be paid currently or on a deferred basis
and, if deferred, may be deemed to have been reinvested in additional shares
of Common Stock, Awards or otherwise as specified by the Committee.
Bonus Stock and Awards in Lieu of Cash Obligations: The Committee is
authorized to grant shares of Common Stock as a bonus free of restrictions, or
to grant shares of Common Stock or other Awards in lieu of Company obligations
to pay cash under other plans or compensatory arrangements, subject to such
terms as the Committee may specify.
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Other Stock-Based Awards: The Committee is authorized to grant Awards that
are denominated or payable in, valued by reference to, or otherwise based on
or related to shares of Common Stock. Such Awards might include convertible or
exchangeable debt securities, other rights convertible or exchangeable into
shares of Common Stock, purchase rights for shares of Common Stock, Awards
with value and payment contingent upon performance of the Company or any other
factors designated by the Committee, and Awards valued by reference to the
book value of shares of Common Stock or the value of securities of or the
performance of specified subsidiaries. The Committee determines the terms and
conditions of such Awards.
Limitation on Certain Stock-Based Awards. The EICP provides that (subject to
anti-dilution adjustments), if at any time on or after December 1, 1999 the
Base Number of Shares is increased, then no more than 15% of such additional
shares may be issued in connection with Awards other than options or SARs.
Accordingly, if this Amendment is approved by the stockholders, of the
18,000,000 shares added to the Base Number of Shares, only a maximum of
2,700,000 shares would be available for Awards in the form of restricted or
deferred stock, bonus stock or other stock-based Awards other than options or
SARs.
Performance Awards, Including Annual Incentive Awards: The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Committee. In addition, the EICP authorizes specific annual
incentive awards, which represent a conditional right to receive cash, shares
of Common Stock, or other Awards upon achievement of preestablished
performance goals during a specified one-year period. Performance awards and
annual incentive awards granted to persons the Committee expects will, for the
year in which a deduction arises, be Named Executives will, if so intended by
the Committee, be subject to provisions that should qualify such Awards as
"performance-based compensation" not subject to the limitation on tax
deductibility by the Company under Code Section 162(m). See "EXECUTIVE
COMPENSATION--Report of the Compensation Committee With Respect to Executive
Compensation" as to incentive Awards granted under the EICP.
In granting annual incentive or performance awards, the Committee may
establish unfunded award "pools," the amounts of which will be based upon the
achievement of a performance goal or goals based on one or more of certain
business criteria described in the EICP (including, for example, total
stockholder return, net income, pretax earnings, EBITDA, earnings per share
and return on investment). During the first 90 days of a fiscal year or
performance period, the Committee will determine who will potentially receive
annual incentive or performance awards for that fiscal year or performance
period, either out of the pool or otherwise. After the end of each fiscal year
or performance period, the Committee will determine the amount, if any, of the
pool, the maximum amount of potential annual incentive or performance awards
payable to each participant in the pool, and the amount of any potential
annual incentive or performance award otherwise payable to a participant. The
Committee may, in its discretion, determine that the amount payable as a final
annual incentive or performance award will be increased or reduced from the
amount of any potential Award, but may not exercise discretion to increase any
such amount intended to qualify under Code Section 162(m).
Subject to the requirements of the EICP, the Committee will determine other
performance award and annual incentive award terms, including the required
levels of performance with respect to the business criteria, the corresponding
amounts payable upon achievement of such levels of performance, termination
and forfeiture provisions, and the form of settlement.
Other Terms of Awards: Subject to the limitations contained in the EICP,
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property, in the discretion of the Committee. The Committee
may require or permit participants to defer the settlement of all or part of
an Award in accordance with such terms and conditions as the Committee may
establish, including payment or crediting of interest or dividend equivalents
on deferred amounts, and the crediting of earnings, gains and losses based on
deemed investment of deferred amounts in specified investment vehicles. The
Committee is
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authorized to place cash, shares of Common Stock, or other property in trusts
or make other arrangements to provide for payment of the Company's obligations
under the EICP. The Committee may condition any payment relating to an Award
on the withholding of taxes and may provide that a portion of any shares of
Common Stock or other property to be distributed will be withheld (or
previously acquired shares of Common Stock or other property be surrendered by
the participant) to satisfy withholding and other tax obligations. Awards
granted under the EICP generally may not be pledged or otherwise encumbered
and are not transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the participant's death,
except that the Committee may, in its discretion, permit transfers for estate
planning or other purposes. Awards under the EICP are generally granted
without a requirement that the participant pay consideration in the form of
cash or property for the grant (as distinguished from the exercise), except to
the extent required by law.
Acceleration of Vesting: The Committee may, in its discretion, accelerate
the exercisability, the lapsing of restrictions, or the expiration of deferral
or vesting periods of any Award, and such accelerated exercisability, lapse,
expiration and vesting shall occur automatically in the case of a "change in
control" of the Company, as defined in the EICP (including the cash settlement
of SARs and "limited SARs" which may be exercisable only in the event of a
change in control). In addition, the Committee may provide that the
performance goals relating to any performance based award will be deemed to
have been met upon the occurrence of any "change in control." Upon the
occurrence of a change in control, limited SARs and other Awards may be cashed
out based on a defined "change in control price," which will be the higher of
(i) the cash and fair market value of property that is the highest price per
share paid (including extraordinary dividends) in any reorganization, merger,
consolidation, liquidation, dissolution, or sale of substantially all assets
of the Company, or (ii) the highest fair market value per share (generally
based on market prices) at any time during the 60 days before and 60 days
after a change in control.
Amendment and Termination: The Board of Directors may amend, alter, suspend,
discontinue or terminate the EICP or the Committee's authority to grant Awards
without further stockholder approval, except stockholder approval must be
obtained for any amendment if required by law or regulation or under the rules
of any stock exchange on which shares of Common Stock are then listed or
quoted. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the EICP or broaden eligibility.
Stockholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable
treatment of participants on such approval, although the Board may, in its
discretion, seek stockholder approval in any circumstance in which it deems
such approval advisable. Unless earlier terminated by the Board, the EICP will
terminate at such time as no shares of Common Stock remain available for
issuance under the EICP and the Company has no further rights or obligations
with respect to outstanding Awards under the EICP.
Securities Act Registration: The Company has registered all of the shares of
Common Stock now reserved and available for delivery under the EICP and the
Preexisting Plans pursuant to one or more Registration Statements on Form S-8
previously filed with the SEC. If this Amendment is approved by the
stockholders at the Meeting, the Company intends to register the additional
shares authorized for issuance under the EICP on a Registration Statement on
Form S-8, as soon as practicable.
Federal Income Tax Consequences of Awards of Options: The following is a
brief description of the federal income tax consequences generally arising
with respect to Awards of options under the EICP.
The grant of an option will create no tax consequences for the participant
or the Company. A participant will not have taxable income upon exercising an
ISO (except that the alternative minimum tax may apply). Upon exercising an
option other than an ISO, the participant must generally recognize ordinary
income equal
19
<PAGE>
to the difference between the exercise price and fair market value of the
freely transferable and non-forfeitable shares of Common Stock acquired on the
date of exercise.
Upon a disposition of shares of Common Stock acquired upon exercise of an
ISO before the end of the applicable ISO holding periods, the participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares of Common Stock at the date of exercise of the ISO minus
the exercise price, or (ii) the amount realized upon the disposition of the
ISO shares of Common Stock minus the exercise price. Otherwise, a
participant's disposition of shares of Common Stock acquired upon the exercise
of an option (including an ISO for which the ISO holding periods are met)
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in
such shares of Common Stock (the tax basis generally being the exercise price
plus any amount previously recognized as ordinary income in connection with
the exercise of the option).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option. The Company generally is not entitled to a tax deduction relating to
amounts that represent a capital gain to a participant. Accordingly, the
Company will not be entitled to any tax deduction with respect to an ISO if
the participant holds the shares of Common Stock for the ISO holding periods
prior to disposition of the shares.
Section 162(m) of the Code generally disallows a public company's tax
deduction for compensation paid to its five most highly compensated executives
in excess of $1 million in any tax year beginning on or after January 1, 1994.
However, compensation that qualifies as "performance-based compensation" is
excluded from this $1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. As discussed above, the Company
intends that options granted with an exercise price at least equal to 100% of
fair market value of the underlying shares of Common Stock at the date of
grant, to employees the Committee expects to be Named Executives at the time a
deduction arises in connection with such Awards, qualify as such "performance-
based compensation," so that such Awards will not be subject to the Section
162(m) deductibility cap of $1 million.
The foregoing discussion is general in nature and is not intended to be a
complete description of the federal income tax consequences of the EICP. This
discussion does not address the effects of other federal taxes or taxes
imposed under state, local or foreign tax laws. Participants in the EICP
should consult a tax advisor as to the tax consequences of participation.
20
<PAGE>
New Plan Benefits: The following table sets forth the amount and dollar
value of all Awards actually received by the Named Executives and by certain
other groups of individuals during Fiscal 1999. The benefits or amounts to be
received by or allocated to the Named Executives or such groups in the future
are not determinable, because Awards are made only at the discretion of the
Committee.
<TABLE>
<CAPTION>
Options Contingent Stock Awards
---------------------- -------------------------
Dollar Value Number of Dollar Value Number of
Name and Position ($)(1) Units ($)(2) Units (2)
- ---------------------------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C>
William J. Schoen, Chairman
and 0 1,000,000 $ 525,000 27,273
Chief Executive Officer
Earl P. Holland, Vice
Chairman and 0 500,000 300,000 15,584
Chief Operating Officer
Joseph V. Vumbacco,
President and 0 500,000 350,000 18,182
Chief Administrative Officer
Stephen M. Ray, Executive
Vice President 0 200,000 98,400 5,112
and Chief Financial Officer
Timothy R. Parry, Vice
President, 0 100,000 73,000 3,792
General Counsel and
Corporate Secretary
All Executive Officers 0 2,300,000 1,346,400 69,943
All Directors Who Are Not
Executive 0 0 0 0
Officers
All Employees Who Are Not
Executive 0 1,388,000 1,963,250 101,987
Officers
</TABLE>
- --------
(1) All of the options shown on the table have an exercise price of $13.00
per share, which is greater than the market value of the Common Stock on
December 10, 1999 ($11.8125 per share).
(2) The Awards shown were made in Fiscal 1999 for services rendered during
Fiscal 1998. The dollar values shown represent the aggregate market value
of the shares awarded on the date of the Awards. The shares are payable
to each Award grantee if he remains an employee of the Company on the
fourth anniversary of the Award grant date.
Required Vote and Board Recommendation: The affirmative vote of at least a
majority of the shares of Common Stock represented in person or by proxy at
the Meeting is required for the approval of this Amendment. The Board of
Directors recommends a vote in favor of the proposal to approve and adopt this
Amendment to the EICP and the persons named in the enclosed proxy (unless
otherwise instructed therein) will vote such proxies FOR such proposal.
21
<PAGE>
SELECTION OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, Certified Public Accountants, served as the
independent auditors of the Company for Fiscal 1999, and the Board of
Directors has selected Ernst & Young LLP as the Company's independent auditors
for the fiscal year ending September 30, 2000. This selection will be
presented to the stockholders for their approval at the Meeting. The Board of
Directors recommends a vote in favor of the proposal to approve and ratify
this selection, and the persons named in the enclosed proxy (unless otherwise
instructed therein) will vote such proxies FOR such proposal. If the
stockholders do not approve this selection, the Board of Directors will
reconsider its choice.
The Company has been advised by Ernst & Young LLP that a representative will
be present at the Meeting and will be available to respond to appropriate
questions. In addition, the Company intends to give such representative an
opportunity to make any statements if he should so desire.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's proxy
statement to be issued in connection with the 2001 Annual Meeting of
Stockholders, such proposal must be received by the Company no later than
September 1, 2000.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
presented for action at the Meeting. Should any other matters come before the
Meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
Timothy R. Parry,
Corporate Secretary
Dated: December 30, 1999
22
<PAGE>
PROXY HEALTH MANAGEMENT ASSOCIATES, INC.
2000 Annual Meeting of Stockholders
The undersigned hereby appoints WILLIAM J. SCHOEN and TIMOTHY R. PARRY, and
each and any of them, proxies for the undersigned with full power of
substitution, to vote all shares of the Common Stock of HEALTH MANAGEMENT
ASSOCIATES, INC. (the "Company") owned by the undersigned at the Annual Meeting
of Stockholders to be held at the Philharmonic Center for the Arts, Daniels
Pavilion, 5833 Pelican Bay Blvd., Naples, Florida 34108, on Tuesday, February
15, 2000 at 1:30 p.m., local time, and at any adjournments thereof:
<TABLE>
<S> <C> <C> <C>
1. Election of Directors. FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary). [_] to vote for all nominees listed below. [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name
listed below.
William J. Schoen Kent P. Dauten Robert A. Knox Charles R. Lees Kenneth D. Lewis William E. Mayberry, M.D.
</TABLE>
2. Proposal to approve and adopt an amendment to the Company's 1996
Executive Incentive Compensation Plan to increase the base number of
shares of Common Stock available for Awards thereunder from 16,875,000
shares to 34,875,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to approve and ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending September 30,
2000.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
(Continued and to be signed, on reverse side)
<PAGE>
This Proxy is solicited on behalf of the Board of Directors of the Company.
This Proxy will be voted as specified by the undersigned. This proxy revokes any
prior proxy given by the undersigned. Unless authority to vote for one or more
of the nominees is specifically withheld according to the instructions, a signed
Proxy will be voted FOR the election of the six named nominees for directors
and, unless otherwise specified, FOR the other two proposals listed herein and
described in the accompanying Proxy Statement. The undersigned acknowledges
receipt with this Proxy of a copy of the Notice of Annual Meeting and Proxy
Statement dated December 30, 1999, describing more fully the proposals set forth
herein.
Dated: __________________, 2000
________________________________
________________________________
Signature(s) of stockholder(s)
Please date and sign name
exactly as it appears hereon.
Executors, administrators,
trustees, etc. should so
indicate when signing. If the
stockholder is a corporation,
the full corporate name should
be inserted and the proxy signed
by an officer of the
corporation, indicating his/her
title.
