pre14c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment No. __)
Check the appropriate box:
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Preliminary Information Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) |
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Definitive Information Statement |
HCA INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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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. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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HCA INC.
One Park Plaza
Nashville, Tennessee 37203
RE: Notice of Action by Written Consent of Stockholders
Dear Stockholder:
We are notifying our stockholders of record on [], 2010 that our Board of Directors has
approved and a stockholder representing approximately 97% of our outstanding common stock on [], 2010 has executed a written consent approving: (1) our Amended and Restated Certificate of
Incorporation and (2) the adoption of the 2006 Stock Incentive Plan for Key Employees of HCA Inc.
and its Affiliates, as Amended and Restated (the Stock Incentive Plan).
A copy of the Amended and Restated Certificate of Incorporation, in substantially the form to
be filed with the Secretary of State of the State of Delaware, is attached to this information
statement as Appendix A. A copy of the Stock Incentive Plan is attached to this
information statement as Appendix B.
Under the General Corporation Law of the State of Delaware, stockholder action may be taken by
written consent without a meeting of stockholders. The written consent of the holder of a majority
of our outstanding common stock is sufficient under the General Corporation Law of the State of
Delaware and our
existing Amended and Restated
Certificate of Incorporation and Bylaws to approve the action described above.
Accordingly, the action described above will not be submitted to you and our other stockholders for
a vote. This letter and the accompanying information statement are intended to notify you of the
aforementioned stockholder action in accordance with applicable Securities and Exchange Commission
(SEC) rules as a result of our common stock being registered with the SEC. Pursuant to the
applicable SEC rules, this corporate action will be effective 20 calendar days after the date of
the initial mailing of the accompanying information statement, or on or about [], 2010.
Under Section 228(e) of the General Corporation Law of the State of Delaware, where
stockholder action is taken without a meeting by less than unanimous written consent, prompt notice
of the taking of such corporate action must be given to those stockholders who have not consented
in writing and who, if the action had been taken at a meeting, would have been entitled to notice
of the meeting if the record date for such meeting had been the date that written consents signed
by a sufficient number of holders to take the action were delivered to the corporation as provided
in subsection (c) of Section 228. This letter is also intended to serve as the notice required by
Section 228(e) of the General Corporation Law of the State of Delaware.
An information statement containing a detailed description of the matters adopted by
written consent accompanies this notice. You are urged to read the information statement in its
entirety for a description of the action taken by the holder of a majority of the voting power of
the Company. HOWEVER, WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. We are only furnishing you an information statement as a matter of regulatory compliance
with SEC rules. No action is required of you. The Company will mail or make available this
information statement to stockholders on or about [], 2010.
References to HCA, the Company, we, us, or our in this notice and information
statement refer to HCA Inc. and its affiliates unless otherwise indicated by context.
By order of the Board of Directors,
John M. Franck II
Vice President and Corporate Secretary
Nashville, TN
[], 2010
NOTICE OF INTERNET AVAILABILITY OF INFORMATION STATEMENT MATERIALS
Important Notice Regarding the Availability of Information Statement Materials
Pursuant to rules promulgated by the SEC, we have elected to provide access to this
information statement both by sending you this information statement and by notifying you of the
availability of such on the Internet.
This information statement is available at: [INSERT HYPERLINK].
The proposals acted upon by written consent were for approval of (1) our Amended and Restated
Certificate of Incorporation and (2) the adoption of the 2006 Stock Incentive Plan for Key
Employees of HCA Inc. and its Affiliates, as Amended and Restated.
This corporate action will be effected 20 calendar days after the date of the initial mailing
of this information statement, or on or about [], 2010. We are not soliciting you for a proxy or
for consent authority. We are only furnishing an information statement as a matter of regulatory
compliance with SEC rules.
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INFORMATION STATEMENT |
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QUESTIONS AND ANSWERS |
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BACKGROUND |
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ACTION 1 AMENDMENT AND RESTATATEMENT OF CERTIFICATE OF INCORPORATION |
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ACTION 2 APPROVAL OF 2006 STOCK INCENTIVE PLAN FOR KEY EMPLOYEES OF HCA INC. AND ITS AFFILIATES, AS AMENDED AND RESTATED |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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EXECUTIVE COMPENSATION |
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
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HOUSEHOLDING OF MATERIALS |
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WHERE TO FIND ADDITIONAL INFORMATION |
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HCA INC.
One Park Plaza
Nashville, Tennessee 37203
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. NO ACTION IS
REQUIRED OF YOU.
QUESTIONS AND ANSWERS
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Why did I receive the information statement? |
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We sent you the information statement as a matter of regulatory compliance with SEC rules
and Delaware law to inform you of the action taken by the holder of a majority of our outstanding
common stock by written consent. |
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Does this mean HCAs stock is publicly traded? |
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No. Due to the number of HCA stockholders, most of whom are employees, the Companys stock
is required to be registered with the SEC and the Company is required to make certain disclosures
with the SEC, such as the information statement. However, HCAs stock is not currently publicly
traded. However, on May 7, 2010, HCA filed with the SEC a Registration Statement on Form S-1
giving notice of a proposed initial public offering of HCAs common stock. It is not currently
determinable when or if the Registration Statement will be declared effective by the SEC, or if the
offering will occur. However, upon the effectiveness of the Registration Statement and listing of
our common stock on the New York Stock Exchange (NYSE), HCAs common stock will be publicly
traded. |
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Who sent me this information statement? |
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The information statement was sent to you and paid for by HCA. |
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Do I need to return anything? |
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No. The information statement is merely to inform you of the action taken by written
consent by holders of a majority of the Companys outstanding common stock. No action is required
by you. |
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When was this information statement mailed or made available to stockholders? |
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This information statement was first mailed or made available to stockholders on or about [], 2010. |
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What is an action taken by written consent? |
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Pursuant to Delaware law, any action required to be taken at an annual or special meeting
may be taken without a meeting, without prior notice and without a vote, if a consent in writing is
signed by the holders of the outstanding stock having more than the minimum number of votes
necessary to authorize such action at a meeting at which all shares entitled to vote thereon were
present and voted. |
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Why was there no special meeting? |
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Because Delaware law allows action to be taken by written consent, and holders of a
majority of our outstanding shares of common stock acted by written consent, a special meeting was
not necessary. |
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What action was taken by written consent? |
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The holder of a majority of our outstanding common stock executed a written consent
approving (1) our Amended and Restated Certificate of Incorporation and (2) the adoption of the
Stock Incentive Plan. |
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Do I need to vote on these matters? |
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No. Since holders of a majority of our common stock have already executed a written
consent, your vote is not necessary. |
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How many votes were required to approve the proposal? |
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The approval and adoption of the action taken by written consent requires the consent of
the holders of a majority of the shares of our outstanding common stock. |
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How many shares were voted for the action? |
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The record date for the action taken by written consent is [], 2010. We had []
outstanding shares of our common stock on the record date. Each share of our common stock is
entitled to one vote. The holder of 91,845,692 shares of our common stock, representing
approximately 97% of our outstanding common stock shares entitled to vote on [], 2010
executed a written consent. The written consent of the holder of a majority of our outstanding
common stock will be sufficient under the General Corporation Law of the State of Delaware and our existing
Amended and Restated Certificate of Incorporation and Bylaws to approve the actions described
above. |
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When will the corporate action be effected? |
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Pursuant to applicable SEC rules, the earliest date on which this corporate action may be
effected is 20 calendar days after the date of the initial mailing of this information statement.
Accordingly, we anticipate the action taken by written consent being effective on or about [],
2010. |
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Am I entitled to dissenters rights? |
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No. |
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BACKGROUND
On November 17, 2006, we completed our merger (the Merger) with Hercules Acquisition
Corporation, pursuant to which we were acquired by Hercules Holding II, LLC (Hercules Holding), a
Delaware limited liability company owned by a private investor group comprised of affiliates of or
funds sponsored by Bain Capital Partners, LLC (Bain Capital), Kohlberg Kravis Roberts & Co.
(KKR), Merrill Lynch Global Private Equity (MLGPE) (each a Sponsor), affiliates of Citigroup
Inc. (Citigroup) and Bank of America Corporation (together, the Sponsor Assignees) and
affiliates of HCA founder, Dr. Thomas F. Frist, Jr., (the Frist Entities, and together with the
Sponsors and the Sponsor Assignees, the Investors) and by members of management and certain other
investors (the Management Participants). The Merger, the financing transactions related to the
Merger and other related transactions are collectively referred to in this information statement as
the Recapitalization. The Merger was accounted for as a recapitalization in our financial
statements, with no adjustments to the historical basis of our assets and liabilities. As a result
of the Recapitalization, our outstanding capital stock is owned by the Investors and the Management
Participants. On April 29, 2008, we registered our common stock pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the Exchange Act), thus subjecting us to the
reporting requirements of Section 13(a) of the Exchange Act. Our common stock is not currently
traded on a national securities exchange.
On May 7, 2010, HCA filed with the SEC a Registration Statement on Form S-1 giving notice of a
proposed initial public offering of HCAs common stock (the Registration Statement). It is not
currently determinable when or if the Registration Statement will be declared effective by the SEC,
or if the offering will occur. However, upon the effectiveness of the Registration Statement and
listing of our common stock on the NYSE, HCAs common stock will be publicly traded. The Amended
and Restated Certificate of Incorporation and the Stock Incentive Plan were approved by our Board
of Directors and majority stockholder to be effective upon and subject to the effectiveness of the
anticipated initial public offering of our common stock.
ACTION 1 AMENDMENT AND RESTATATEMENT OF CERTIFICATE OF INCORPORATION
Our Board of Directors has approved and the holder of 91,845,692 shares of our common stock,
representing approximately 97% of the shares of our common stock entitled to vote on the record
date, has executed a written consent approving an amendment and restatement of our Amended and
Restated Certificate of Incorporation in order to effect a [] for 1 stock split and to make
certain changes to the Amended and Restated Certificate of Incorporation to reflect the Companys
status as a publicly traded company following completion of its proposed initial public offering.
The full text of the Amended and Restated Certificate of Incorporation is set forth as Appendix
A of this information statement. The Amended and Restated Certificate of Incorporation was
approved by our Board of Directors and majority stockholder to be effective and filed immediately
prior to the effectiveness of the anticipated initial public offering of our common stock.
Reasons for the Amended and Restated Certificate of Incorporation
On May 7, 2010, HCA filed with the SEC a Registration Statement on Form S-1 giving notice of a
proposed initial public offering of HCAs common stock. It is not currently determinable when or
if the Registration Statement will be declared effective by the SEC, or if the offering will occur.
If the offering does not occur, the Amended and Restated Certificate of Incorporation will not be
filed with the Delaware Secretary of State and will not be effective.
However, upon the effectiveness of the Registration Statement and listing of our common stock on
the NYSE, HCAs common stock will be publicly traded.
The Board of Directors of the Company deemed it advisable and in the best interest of the
Company and its stockholders to amend and restate the Companys Amended and Restated Certificate of
Incorporation to effect a [] for 1 stock split and to add certain provisions and make certain
changes suitable to the Companys anticipated status as a publicly traded company following the
proposed initial public offering. A summary of the Amended and Restated Certificate of
Incorporation is set forth below but such summary is qualified in its entirety by reference to the
Amended and Restated Certificate of Incorporation, itself, a copy of which is attached as
Appendix A and incorporated herein by reference.
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Summary of Amended and Restated Certificate of Incorporation
Common Stock
The Amended and Restated Certificate of Incorporation authorizes the issuance of [One Billion Eight Hundred Million (1,800,000,000)] shares of
common stock, par value $.01 per share.
Voting Rights. Under the terms of the Amended and Restated Certificate of Incorporation, each
holder of the common stock is entitled to one vote for each share on all matters submitted to a
vote of the stockholders, including the election of directors. Our stockholders do not have
cumulative voting rights. Because of this, the holders of a majority of the shares of common stock
entitled to vote and present in person or by proxy at any annual meeting of stockholders can elect
all of the directors standing for election, if they should so choose.
Dividends. Subject to preferences that may be applicable to any then outstanding preferred
stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be
declared from time to time by the Board of Directors out of legally available assets or funds.
Liquidation. In the event of our liquidation, dissolution, or winding up, holders of common
stock will be entitled to share ratably in the net assets legally available for distribution to
stockholders after the payment of all of our debts and other liabilities and the satisfaction of
any liquidation preference granted to the holders of any outstanding shares of preferred stock.
Rights and Preferences. Holders of common stock have no preemptive or conversion rights, and
there are no redemption or sinking fund provisions applicable to the common stock. The rights,
preferences, and privileges of the holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred stock, which we may
designate in the future.
Preferred Stock
The Amended and Restated Certificate of Incorporation authorizes our Board of Directors,
without further action by the stockholders, to issue up to [Two Hundred Million (200,000,000)] shares of preferred stock, par value $.01 per share, in one or
more classes or series, to establish from time to time the number of shares to be included in each
such class or series, to fix the rights, preferences, and privileges of the shares of each such
class or series and any qualifications, limitations, or restrictions thereon.
Stock Split
The Amended and Restated Certificate of Incorporation provides that, upon the filing and
effectiveness of the Amended and Restated Certificate of Incorporation with the Secretary of State
of the State of Delaware (the Effective Time), a forward split (the Forward Split) of our
issued and outstanding common stock will occur whereby each outstanding share of common stock of
the Company (the Old Common Stock) shall be automatically split up, reclassified and converted
into [___(_)] shares of common stock (the New Common Stock), thereby increasing the number of
outstanding shares of our common stock to approximately [] shares.
The Forward Split shall occur without any further action on the part of the Company or the
holders of shares of New Common Stock and whether or not certificates representing such holders
shares prior to the Forward Split are surrendered for cancellation. No fractional interest in a
share of New Common Stock shall be deliverable upon the Forward Split. Stockholders who otherwise
would have been entitled to receive any fractional interests in the New Common Stock, in lieu of
receipt of such fractional interest, shall be entitled to receive from the Company an amount in
cash equal to the fair value of such fractional interest as of the Effective Time.
The Forward Split will be effected on a stockholder-by-stockholder (as opposed to
certificate-by-certificate) basis. Certificates dated as of a date prior to the Effective Time
representing outstanding shares of Old Common Stock shall, immediately after the Effective Time,
represent a number of shares equal to the same number of shares of New Common Stock as is reflected
on the face of such certificates, multiplied by [___(_)] and rounded down to the nearest whole
number. The Company may, but shall not be obliged to issue new certificates evidencing the shares
of New Common Stock outstanding as a result of the Forward Split unless and until the certificates
evidencing the shares held by a holder prior to the Forward Split are either delivered to the
Company or its transfer
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agent, or the holder notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates.
Board of Directors
The Amended and Restated Certificate of Incorporation provides for a Board of Directors of not
less than three members, the exact number to be determined from time to time by resolution adopted
by the affirmative vote of a majority of the total number of directors then in office. The Amended and Restated Certificate of
Incorporation provides that directors will be elected to hold office for a term expiring at the
next annual meeting of stockholders and until a successor is duly elected and qualified or until
his or her earlier death, resignation, disqualification or removal. Newly created directorships and
vacancies may be filled, so long as there is at least one remaining director, only by the Board of
Directors.
Amendment to Bylaws
The Amended and Restated Certificate of Incorporation provides that the Board of Directors is
expressly authorized to make, alter, amend, change, add to or repeal the Bylaws of the Company by
the affirmative vote of a majority of the total number of directors then in office. Prior to the
Trigger Date (as defined below), any amendment, alteration, change, addition or repeal of the
Bylaws of the Company by the stockholders of the Company shall require the affirmative vote of the
holders of a majority of the outstanding shares of the Company entitled to vote on such amendment,
alteration, change, addition or repeal. On or following the Trigger Date, any amendment,
alteration, change, addition or repeal of the Bylaws of the Company by the stockholders of the
Company shall require the affirmative vote of the holders of at least seventy-five percent (75%) of
the outstanding shares of the Company, voting together as a class, entitled to vote on such
amendment, alteration, change, addition or repeal.
For purposes of the Amended and Restated Certificate of Incorporation, (i) Trigger Date is
defined as the first date on which Hercules Holding (or its successor) ceases, or in the event of a
liquidation of Hercules Holding, the Equity Sponsors (as defined below) and their affiliates,
collectively, cease, to beneficially own (directly or indirectly) shares representing a majority of
the then issued and outstanding common stock of the Company (it being understood that the retention
of either direct or indirect beneficial ownership of a majority of the then issued and outstanding
shares of common stock by Hercules Holding (or its successor) or the Equity Sponsors and their
affiliates, as applicable, shall mean that the Trigger Date has not occurred) and (ii) the Equity
Sponsors shall mean each of Bain Capital, KKR, BAML Capital Partners, Citigroup, Bank of America Corporation, and
Dr. Thomas F. Frist Jr. and their respective affiliates, subsidiaries, successors and assignees
(other than the Company and its subsidiaries).
Limitation of Liability
The Amended and Restated Certificate of Incorporation provides that, to the fullest extent
permitted by the General Corporation Law of the State of Delaware, no director of the Company shall
be liable to the Company or its stockholders for monetary damages arising from a breach of
fiduciary duty owed to the Company or its stockholders.
Indemnification
The Amended and Restated Certificate of Incorporation provides that:
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we will indemnify our directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware; |
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we may advance expenses to our directors and officers in connection with a legal
proceeding to the fullest extent permitted by law; and |
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the rights provided in our Amended and Restated Certificate of Incorporation are not
exclusive. |
The Amended and Restated Certificate of Incorporation also permits us to secure insurance on
behalf of any officer, director, employee or other agent for any liability arising out of his or
her actions in connection with
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their services to us, regardless of whether the Company would have the power to indemnify such
person against such expenses, liability or loss under the General Corporation Law of the State of
Delaware.
Special Meetings of Stockholders
The Amended and Restated Certificate of Incorporation provides that special meetings of
stockholders of the Company may be called only by either the Board of Directors pursuant to a
resolution adopted by the affirmative vote of the majority of the total number of directors then in
office or by the Chairman of the Board or the Chief Executive Officer of the Company; provided
that, prior to the Trigger Date, special meetings of stockholders of the Company may also be called
by the secretary of the Company at the request of the holders of a majority of the outstanding
shares of common stock.
Action on Written Consent
Pursuant to the Amended and Restated Certificate of Incorporation, prior to the Trigger Date,
stockholders may take action by written consent; however, following the Trigger Date, any action
required or permitted to be taken at an annual or special meeting of stockholders of the Company
may be taken only upon the vote of the stockholders at an annual or special meeting duly called and
may not be taken by written consent of the stockholders.
Corporate Opportunities
The Amended and Restated Certificate of Incorporation provides that we renounce any interest
in the business opportunities of the Investors and of our directors who are affiliated with the
Investors, other than directors employed by us, and that neither our directors affiliated with the
Investors, other than directors employed by us, nor the Investors have any obligation to offer us
those opportunities, except that the forgoing have an obligation to communicate business
opportunities offered to such persons expressly in his or her capacity as a director or officer of
the Company.
Amendment to Amended and Restated Certificate of Incorporation
The Amended and Restated Certificate of Incorporation provides that on or following the
Trigger Date, the affirmative vote of the holders of at least seventy-five percent (75%) of the
voting power of all outstanding shares of the Company entitled to vote generally in the election of
directors, voting together in a single class, shall be required to adopt any provision inconsistent
with, to amend or repeal any provision of, or to adopt a bylaw inconsistent with certain specified
provisions of the Amended and Restated Certificate of Incorporation.
Effective Date
The Amended and Restated Certificate of Incorporation will become effective as of the date it
is filed with the Secretary of State of the State of Delaware, which we expect to occur prior to
the effectiveness of the anticipated initial public offering of our common stock.
ACTION 2 APPROVAL OF 2006 STOCK INCENTIVE PLAN FOR KEY EMPLOYEES OF HCA INC.
AND ITS AFFILIATES, AS AMENDED AND RESTATED
Our Board of Directors has approved and the holder of 91,845,692 shares of our common stock,
representing approximately 97% of the shares of our outstanding common stock entitled to vote on
the record date, has executed a written consent approving the Stock Incentive Plan. The 2006 Stock
Incentive Plan for Key Employees of HCA Inc. and its Affiliates (the Original Plan) was initially
entered into by the Company on November 17, 2006 in connection with the Merger.
This summary relates to shares of HCAs common stock, par value $.01 per share (Shares or
Common Stock), which may be offered to participants pursuant to the Stock Incentive Plan. All
references to Shares and Common Stock and numbers of shares generally in this summary are
intended to refer to shares of New Common Stock on a post-split basis.
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The amendments, among other things:
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provide that the Compensation Committee (the Committee) may delegate its duties
and powers to administer the Stock Incentive Plan to a subcommittee thereof consisting
of directors meeting applicable independence standards of Rule 16b-3 of the Exchange
Act, NYSE listed company rules and Section 162(m) of the Internal Revenue Code of 1986,
as amended (the Code); |
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provide that a member of the Board of Directors annual retainer, meeting fees
and/or other awards or compensation may be in the form of stock options, restricted
shares, restricted share units and/or other stock based awards as determined by the
Board of Directors; |
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provide that the Committee may grant performance-based awards pursuant to Section
162(m) of the Code, subject to certain terms and limitations (see Description of
Awards below); |
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increase the number of shares available for issuance under the Original Plan by []
shares (see Securities to be Offered below); |
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limit the number of shares with respect to which Incentive Stock Options may be
granted to no more than 1,000,000 per fiscal year; |
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provide that the Committee may allow grants to be made in assumption of, or
substitution for, outstanding awards previously granted by the Company or an acquired
company, and that such grants will not reduce the number of shares available for
issuance under the Stock Incentive Plan and also provide that shares under an acquired
companys plan may be used for grants to employees of such acquired company and shall
not reduce the number of shares available for issuance under the Stock Incentive Plan; |
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allow the Committee, after a change in control to (i) accelerate payment of earned,
but unpaid Performance-Based Awards, (ii) end all in-progress performance periods for
Performance-Based Awards and either (A) deem that all Performance-Based Awards should
be paid at target or (B) determine to what extent all Performance-Based Awards have
been earned; |
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provide that the Committee may specify in a grant that the participants rights,
payments and benefits are subject to reduction, cancellation, forfeiture or recoupment
upon the occurrence of certain specified events; and |
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extend the termination date of the Stock Incentive Plan to the date that is ten years from the effective date. |
The amendments to the Stock Incentive Plan also include additional amendments to add certain
provisions and make certain changes suitable to the Companys anticipated status as a publicly
traded company following the proposed initial public offering of our common stock, as well as
miscellaneous clarifications to plan language. The Stock Incentive Plan will become effective upon
the effectiveness of the anticipated initial public offering of our common stock.
The Original Plan authorized the issuance of up to 10,656,130 shares, or 10% of the fully
diluted number of shares of our then authorized common stock as of the effective date of the
Original Plan. Increasing the number of shares available for issuance under the Stock Incentive
Plan will enable the Company to continue to attract, retain, and motivate key officers, employees
and directors.
As
of April 30, 2010:
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286,100 shares were available for grant in the aggregate from all of our pre-existing
stock incentive plans; and |
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options representing 11,568,600 shares were outstanding. |
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General Plan Information
The principal features of the Stock Incentive Plan are summarized below, but such summary is
qualified in its entirety by reference to the Stock Incentive Plan itself, a copy of which is
attached as Appendix B and incorporated herein by reference.
All awards of stock options, stock appreciation rights and other stock-based awards made to
Stock Incentive Plan participants and all shares of Common Stock issued upon exercise of such
awards are subject to the terms and conditions (including certain restrictions) set forth in the
Stock Incentive Plan, the Grant Agreement (as hereinafter defined), the Management Stockholders
Agreement and the Sale Participation Agreement (both as defined in the Stock Incentive Plan), to
the extent applicable to the awards and such Shares.
The purposes of the Stock Incentive Plan are:
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(i) |
|
to promote the long term financial interests and growth of HCA and its
subsidiaries by attracting and retaining management and other personnel with the
training, experience and ability to enable them to make a substantial contribution to
the success of HCAs business; |
|
|
(ii) |
|
to motivate management personnel by means of growth-related incentives to
achieve long range goals; and |
|
|
(iii) |
|
to further the alignment of interests of participants with those of the
stockholders of HCA through opportunities for increased stock, or stock-based,
ownership in HCA. |
The Stock Incentive Plan was approved by the stockholders of HCA on [], 2010 and will become
effective upon the effectiveness of the anticipated initial public offering of our common stock,
and unless terminated earlier by HCAs Board of Directors, the Stock Incentive Plan will terminate
the date that is ten years from the effective date. However, awards granted prior on or prior to the termination may extend beyond that
date.
The Stock Incentive Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
The Committee (or, if the Board of Directors takes an action in place of the Committee, the Board of Directors) conducts
the general administration of the Stock Incentive Plan in accordance with the Stock Incentive
Plans provisions. The Committee is appointed by and serves at the pleasure of the HCA Board of
Directors. The Committee may adopt its own rules of procedure, and action of a majority of the
members of the Committee taken at a meeting, or action taken without a meeting by unanimous written
consent, constitutes action by the Committee. The Committee has the power and authority to
administer, construe and interpret the Stock Incentive Plan, and to make rules for carrying it out
and to make changes in such rules. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Stock Incentive Plan in the manner and to the extent the
Committee deems necessary or desirable. Any such interpretations, rules and administration must be
consistent with the basic purposes of the Stock Incentive Plan. The Committee has the full power
and authority to establish the terms and conditions of any grant under the Stock Incentive Plan
consistent with the provisions with the Stock Incentive Plan and to waive any such terms and
conditions at any time (including, without limitation, accelerating or waiving any vesting
conditions).
The Committee may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are intended to qualify as Non-Employee
Directors within the meaning of Rule 16b-3 under the Exchange Act (or any successor rule thereto),
independent directors within the meaning of NYSE listed company rules and outside directors
within the meaning of Section 162(m) of the Code (or any successor section thereto), to the extent
Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, respectively, are applicable to
the Company and the Stock Incentive Plan; provided, however, that the Board of Directors may, in its sole
discretion, take any action designated to the Committee under the Stock Incentive Plan as it may
deem necessary. The Committee may delegate to HCAs Chief Executive Officer and to other senior
officers of HCA its duties under the Stock Incentive Plan, subject to applicable law and such
conditions and limitations as the Committee may prescribe, except that only the Committee may
designate and make awards to Stock Incentive Plan
8
participants. The Committee may employ counsel, consultants, accountants, appraisers, brokers
or other persons. The Committee, HCA and the officers and directors of HCA shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be final and binding
upon all Stock Incentive Plan participants and their beneficiaries or successors.
Subject to the provisions of the Stock Incentive Plan, the Committee may from time to time
grant awards of stock options, stock appreciation rights, other stock-based awards, dividend
equivalent rights, non-employee director grants or performance-based awards to Stock Incentive Plan
participants, in such form and having such terms, conditions and limitations as the Committee may
determine. The terms, conditions and limitations of each award under the Stock Incentive Plan must
be evidenced by a written agreement executed by HCA and the participant (Grant Agreement), in a
form approved by the Committee, consistent, however, with the terms of the Stock Incentive Plan;
provided, however, that such Grant Agreement will contain provisions dealing with the treatment of
awards in the event of the termination of employment or other service relationship, death or
disability of a participant, and may also include provisions concerning the treatment of awards in
the event of a change in control of HCA. The Committee has the authority to make amendments to any
terms and conditions applicable to outstanding awards as are consistent with the Stock Incentive
Plan, provided that no such action may modify such awards that disadvantages participants in more
than a de minimis way but less than a material way without approval by a majority of affected
participants and, provided further, that, except for adjustments under the adjustment provisions of
the Stock Incentive Plan or as a result of a merger, consolidation or similar event, no such action
may materially disadvantage a participant with respect to outstanding awards without the
participants consent except as such modification is provided for or contemplated in the terms of
the Grant Agreement or the Stock Incentive Plan.
Securities to be Offered
The total number of shares of Common Stock available for awards under the Stock Incentive Plan
is the sum of (i) [] shares and (ii) the number of shares available for grant under the Stock
Incentive Plan as of the effective date of the amendment and restatement of the Stock Incentive
Plan, subject to adjustment as provided for in the Stock Incentive Plan. The number of shares of
Common Stock with respect to which options may be granted after the effective date of the Stock
Incentive Plan is no more than 1,000,000 per fiscal year. Unless restricted by applicable law,
shares of Common Stock related to awards that are forfeited, terminated, settled for cash, canceled
without the delivery of shares of Common Stock, expire unexercised, are withheld to pay taxes or
exercise prices or are repurchased by HCA will immediately become available for new awards.
Awards may, in the discretion of the Committee, be made under the Stock Incentive Plan in
assumption of, or in substitution for, outstanding awards previously granted by the Company or any
of its subsidiaries or a company acquired by the Company or with which the Company combines. The
number of shares of Common Stock underlying awards made in assumption of, or in substitution for,
outstanding awards previously granted by a company acquired by the Company or any of its
subsidiaries or with which the Company or any of its subsidiaries combines shall not be counted
against the aggregate number of shares of Common Stock available for awards under the Stock
Incentive Plan, nor shall the shares of Common Stock subject to such substitute awards become
available for new awards under the circumstances described in the prior paragraph. In addition, in
the event that a company acquired by the Company or any of its Subsidiaries or with which the
Company or any of its subsidiaries combines has shares available under a pre-existing plan approved
by stockholders and not adopted in contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent
appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for awards and shall
not reduce the shares of Common Stock authorized for issuance under the Stock Incentive Plan;
provided that awards using such available shares shall not be made after the date awards or grants
could have been made under the terms of the pre-existing plan, absent the acquisition or
combination, and shall only be made to individuals who were not employees or directors of the
Company or any of its subsidiaries prior to such acquisition or combination.
In the event of any change in or exchange of, the outstanding Common Stock by reason of a
stock dividend, stock split, extraordinary distribution, reorganization, recapitalization, merger,
consolidation, spin-off, combination, combination or transaction or exchange of shares of Common
Stock, any equity restructuring (as defined under Financial Accounting Standards Board Accounting
Standards Codification (FASB ASC) Topic 718) or other
9
corporate change, or any distribution to stockholders other than regular cash dividends, or
any transaction similar to any of the foregoing, the Committee will in an equitable and
proportionate manner as it deems reasonably necessary to address on an equitable basis the effect
of such event, and in such manner as is consistent with Section 162(m), 422, and 409A of the Code
and the regulations thereunder, make such substitution or adjustment, if any, (a) as to the number
and kind of shares of Common Stock subject to the Stock Incentive Plan and available for or covered
by awards, (b) as to share prices per share of Common Stock related to outstanding awards, or by
providing for an equivalent award in respect of securities of the surviving entity of any merger,
consolidation, or other transaction or event having a similar effect, or (c) by providing for a
cash payment to the holder of an outstanding award, and make such other revisions to outstanding
awards as it deems, in good faith, are equitably required (including, without limitation, to the
exercise price of stock options).
The Stock Incentive Plan provides that, unless the Committee determines otherwise, no benefit
or promise under the Stock Incentive Plan will be secured by any specific assets of HCA, nor shall
any assets of HCA, be designated as attributed or allocated to the satisfaction of HCAs
obligations under the Stock Incentive Plan. Neither the Stock Incentive Plan nor any award
thereunder will create or be construed to create a fiduciary relationship between the Company or
any subsidiary or affiliate thereof and a participant or any other person. To the extent that any
person acquires a right to receive payments from the Company or any subsidiary or affiliate thereof
pursuant to an award, such right will be no greater than the right of any secured general creditor
of the Company or any subsidiary or affiliate thereof.
The Committee may, in its sole discretion, specify in any grant made on or after the
effective date of the amendment and restatement of the Stock Incentive Plan that the participants
rights, payments, and benefits shall be subject to reduction, cancellation, forfeiture or
recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of a grant. Such events may include, but shall not be limited to,
termination of employment for cause, termination of the participants provision of services to the
Company or any of its subsidiaries, breach of noncompetition, confidentiality, or other restrictive
covenants that may apply to the participant, or restatement of the Companys financial statements
to reflect adverse results from those previously released financial statements, as a consequence of
errors, omissions, fraud, or misconduct.
No awards shall be made under the Stock Incentive Plan beyond ten years after the effective
date of the Stock Incentive Plan, but the terms of awards made on or before the expiration of the
Stock Incentive Plan may extend beyond such expiration. At the time an award is made or amended or
the terms or conditions of an award are changed in accordance with the terms of the Stock Incentive
Plan or the Grant Agreement, the Committee may provide for limitations or conditions on such award.
Unless otherwise expressly provide in the Stock Incentive Plan or in an applicable Grant
Agreement, any grant made under the Stock Incentive Plan, and the authority of the Board of Directors or the
Committee to amend, alter, adjust, suspend, discontinue or terminate any such grant or to waive any
conditions or rights under any such grant shall, continue after the tenth anniversary of the
effective date of the Stock Incentive Plan.
Who May Participate
Grants under the Stock Incentive Plan may be awarded to Employees or other persons having a
relationship with HCA or any of its subsidiaries or affiliates. As of
[ ], 2010,
approximately [] individuals were eligible to participate in the Stock Incentive Plan. However,
the Company has not at the present time determined who will receive the shares of Common Stock that
will be authorized for issuance under the Stock Incentive Plan or how they will be allocated.
Employees are persons, including officers, in the regular employment of HCA (or any subsidiary or
affiliate of HCA), who, in the opinion of the Committee, are, or are expected to be, involved in
the management, growth or protection of some part or all of the business of HCA. As used herein
and in the Stock Incentive Plan, the term participant means an Employee, non-employee member of
the Board of Directors, consultant or other person having a relationship with HCA (or any subsidiary or
affiliate of HCA), to whom one or more awards have been made pursuant to the Stock Incentive Plan
and remain outstanding.
10
Description of Awards
Stock Options. Options to purchase Common Stock (Stock Options) may be granted to
participants under the Stock Incentive Plan. At the time of grant, the Committee shall determine
the option exercise period, the option exercise price, vesting requirements, and such other terms,
conditions or restrictions on the grant or exercise of the option as the Committee deems
appropriate including, without limitation, the right to receive dividend equivalent payments on
vested options. The exercise price per share of a Stock Option will be determined by the Committee
and may not be less than the fair market value of HCAs Common Stock on the date the Stock Option
is granted (subject to later adjustment pursuant to the Stock Incentive Plan). In addition to
other restrictions contained in the Stock Incentive Plan, a Stock Option granted under the Stock
Incentive Plan may not be exercised more than 10 years after the date it is granted. Payment of
the Stock Option exercise price shall be made (i) in cash, (ii) with the consent of the Committee,
in shares of Common Stock (any such Shares valued at fair market value on the date of exercise)
having an aggregate fair market value equal to the aggregate exercise price for the shares of
Common Stock being purchased and that the participant has held for at least six months (or such
other period of time as may be required to attain tax or financial reporting treatments that are
not considered to be adverse to the Company), (iii) through the withholding of shares of Common
Stock (any such shares of Common Stock valued at fair market value on the date of exercise)
otherwise issuable upon the exercise of the Stock Option in a manner that is compliant with
applicable law, (iv) if there is a public market for the shares of Common Stock at such time, to
the extent permitted by, and subject to such rules as may be established by the Committee, through
delivery of irrevocable instructions to a broker to sell shares of Common Stock obtained upon the
exercise of the Stock Option and to deliver promptly to the Company an amount out of the proceeds
of such sale equal to the aggregate exercise price for the shares of Common Stock being purchased,
or (v) a combination of the foregoing methods, in each such case in accordance with the terms of
the Stock Incentive Plan, the Grant Agreement and of any applicable guidelines of the Committee in
effect at the time.
Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights (as hereinafter
defined) independent of, or in connection with, the grant of a Stock Option or a portion thereof.
Each Stock Appreciation Right shall be subject to such other terms as the Committee may determine;
however, the exercise price per Share of a Stock Appreciation Right shall in no event be less than
the fair market value on the date the Stock Appreciation Right is granted. Each Stock Appreciation
Right granted independent of a Stock Option shall be defined as a right of a Stock Incentive Plan
participant, upon exercise of such Stock Appreciation Right, to receive an amount equal to the
product of (i) the excess of (A) the fair market value on the exercise date of one share of Common
Stock over (B) the exercise price per share of such Stock Appreciation Right, multiplied by
(ii) the number of shares of Common Stock covered by the Stock Appreciation Right. Payment of the
Stock Appreciation Right shall be made in shares of Common Stock or in cash, or partly in shares of
Common Stock and partly in cash (any such Shares valued at the fair market value on the date of the
payment), all as shall be determined by the Committee.
Other Stock-Based Awards. The Committee may grant or sell awards of Shares, awards of
restricted Shares and awards that are valued in whole or in part by reference to, or are otherwise
based on the fair market value of, Shares (including, without limitation, restricted stock units).
Such Other Stock-Based Awards shall be in such form, and dependent on such conditions, as the
Committee may determine, including, without limitation, the right to receive, or vest with respect
to, one or more Shares (or the equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of performance
objectives. Other Stock-Based Awards may be granted alone or in addition to any other awards under
the Stock Incentive Plan. Subject to the provisions of the Stock Incentive Plan, the Committee
shall determine to whom and when Other Stock-Based Awards will be made, the number of Shares to be
awarded under (or otherwise related to) such Other Stock-Based Awards; whether such Other
Stock-Based Awards shall be settled in cash, Shares or a combination of cash and Shares; and all
other terms and conditions of such awards (including, without limitation, the vesting provisions
thereof and provisions ensuring that all Shares so awarded and issued shall be fully paid and
non-assessable).
Dividend Equivalent Rights. The Committee may grant Dividend Equivalent Rights either alone
or in connection with the grant of a Stock Option, Stock Appreciation Right, Other Stock Based
Award, or director grant described in the paragraph below. A Dividend Equivalent Right shall be
the right to receive a payment in respect of one Share (whether or not subject to a Stock Option)
equal to the amount of any dividend paid in respect of one Share held by a stockholder of HCA.
Each Dividend Equivalent Right shall be subject to such terms as the Committee may determine. All
dividend or dividend equivalents which are not paid currently may, at the Committees discretion,
accrue interest, be reinvested into additional Shares, or, in the case of dividends or dividend
11
equivalents credited in connection with Performance-Based Awards be credited as additional
Performance-Based Awards and be paid to the participant if and when, and to the extent that,
payment is made pursuant to such grant. The total number of Shares available for grant under the
Stock Incentive Plan shall not be reduced to reflect any dividends or dividend equivalents that are
reinvested into additional Shares or credited as Performance-Based Awards.
Director Grants. The Board of Directors may provide that all or a portion of any member of
the Board of Directors annual retainer, meeting fees and/or other awards or compensation as determined by the
Board of Directors, be payable (either automatically or at the election of such member) in the form of
non-qualified Stock Options, restricted shares, restricted share units and/or Other Stock-Based
Awards, including unrestricted Shares. The Board of Directors shall determine the terms and conditions of any
such grants, including the terms and conditions which shall apply
upon a termination of such Board of Directors members service
as a member of the Board of Directors, and shall have full power and authority in its
discretion to administer such grants, subject to the terms of the Stock Incentive Plan and
applicable law.
Performance-Based Awards. During any period when Section 162(m) of the Code is applicable to
the Company and the Stock Incentive Plan, the Committee, in its sole discretion, may grant grants
which are denominated in Shares or cash (which, for avoidance of doubt, may include a grant of
Stock Options, Stock Appreciation Rights, Other Stock-Based Awards, or Dividend Equivalent Rights)
(such grants, Performance-Based Awards), which grants may, but for the avoidance of doubt are not
required to, be granted in a manner which is intended to be deductible by the Company under
Section 162(m) of the Code (or any successor section thereto). Such Performance-Based Awards shall
be in such form, and dependent on such conditions, as the Committee shall determine, including,
without limitation, the right to receive, or vest with respect to, one or more Shares or the cash
value of the grant upon the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Performance-Based Awards may be granted alone or
in addition to any other grants granted under the Stock Incentive Plan. Subject to the provisions
of the Stock Incentive Plan, the Committee shall determine to whom and when Performance-Based
Awards will be made, the number of Shares or aggregate amount of cash to be awarded under (or
otherwise related to) such Performance-Based Awards, whether such Performance-Based Awards shall be
settled in cash, Shares or a combination of cash and Shares, and all other terms and conditions of
such grants (including, without limitation, the vesting provisions thereof and provisions ensuring
that all Shares so awarded and issued, to the extent applicable, shall be fully paid and
non-assessable).
12
A participants Performance-Based Award shall be determined based on the attainment of written
performance goals approved by the Committee for a performance period established by the Committee
(A) while the outcome for that performance period is substantially uncertain and (B) no more than
90 days after the commencement of the performance period to which the performance goal relates or,
if less, the number of days which is equal to 25 percent of the relevant performance period. The
performance goals, which must be objective, shall be based upon one or more of the following
criteria: (i) consolidated income before or after taxes (including income before interest, taxes,
depreciation and amortization); (ii) EBITDA; (iii) adjusted EBITDA; (iv) operating income; (v) net
income; (vi) net income per Share; (vii) book value per Share; (viii) return on members or
stockholders equity; (ix) expense management; (x) return on investment; (xi) improvements in
capital structure; (xii) profitability of an identifiable business unit or product; (xiii)
maintenance or improvement of profit margins; (xiv) stock price; (xv) market share; (xvi) revenue
or sales; (xvii) costs; (xviii) cash flow; (xix) working capital; (xx) multiple of invested
capital; (xxi) total return; and (xxii) such other objective performance criteria as determined by
the Committee in its sole discretion to the extent such criteria would be a permissible performance
criteria under Section 162(m) of the Code. The foregoing criteria may relate to the Company, one
or more of its subsidiaries or one or more of its or their divisions or units, or any combination
of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer
group companies or indices, or any combination thereof, all as the Committee shall determine. The
Committee may appropriately adjust any evaluation of performance under criteria set forth in the
Stock Incentive Plan to exclude any of the following events that occurs during a performance
period: (1) gains or losses on sales of assets, (2) asset impairments or write-downs, (3)
litigation or claim judgments or settlements, (4) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, (5) accruals for
reorganization and restructuring programs, (6) any extraordinary non-recurring items as described
in FASB ASC Topic 225-20 and/or in managements discussion and analysis of financial condition and
results of operations appearing in the Companys annual report to stockholders for the applicable
year, and (7) the effect of adverse or delayed federal, state or local governmental or regulatory
action; provided that the Committee commits to make any such adjustments within the 90 days
following the commencement of each performance period (or such other time as may be required or
permitted by Section 162(m) of the Code).
The maximum amount of a Performance-Based Award during a fiscal year to any participant shall
be: (x) with respect to Performance-Based Awards that are denominated in Shares, 1,000,000 per
fiscal year and (y) with respect to Performance-Based Awards that are denominated in cash,
$5,000,000 per fiscal year. To the extent that a Performance-Based Award may be earned over a
period that is longer than one fiscal year, the foregoing limitations shall apply to each full or
partial fiscal year during or in which such grant may be earned.
The Committee shall determine whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given participant and, if they have, during any
period when Section 162(m) of the Code is applicable to the Company and the Stock Incentive Plan
and such Performance-Based Award is intended to be deductible by the Company under Section 162(m)
of the Code, shall so certify and ascertain the amount of the applicable Performance-Based Award.
No Performance-Based Awards will be paid for such performance period until such certification, to
the extent applicable, is made by the Committee. The amount of the Performance-Based Award
actually paid to a given participant may be less than the amount determined by the applicable
performance goal formula, at the discretion of the Committee. The amount of the Performance-Based
Award determined by the Committee for a performance period shall be paid to the participant at such
time as determined by the Committee in its sole discretion after the end of such performance
period; provided, however, that a participant may, if and to the extent permitted by the Committee
and consistent with the provisions of Sections 162(m) and 409A of the Code, to the extent
applicable, elect to defer payment of a Performance-Based Award.
Determination of Fair Market Value of Common Stock
The fair market value of the Common Stock means, on a per Share basis, on any given date,
the closing trading price of the Common Stock on the NYSE, unless otherwise determined by the
Board of Directors.
Assignment of Awards
Other than as specifically provided in the Management Stockholders Agreement between the
participant and HCA or Sale Participation Agreement between the participant and Hercules Holdings,
if applicable to a grant, no benefit under the Stock Incentive Plan shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to do so shall be void. If no Management Stockholders Agreement or Sale Participation
Agreement is applicable to a grant, then except as otherwise provided
13
in the Stock Incentive Plan, a Grant Agreement, or by the Committee at or after grant, no
grant shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered
by a participant, except by will or the laws of descent and distribution; provided, however, that
no such transfer of a grant by will or by laws of descent and distribution shall be effective to
bind the Company unless the Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may deem necessary or
appropriate to establish the validity of the transfer. No benefit under the Stock Incentive Plan
shall, prior to receipt thereof by the participant, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements, or torts of the participant.
Resale Restrictions
Any resales of Shares received by participants pursuant to the Stock Incentive Plan may be
limited as provided in an applicable Management Stockholders Agreement. Additionally, to the
extent the Common Stock described herein is not then registered with the SEC, any resales of Shares
received by participants pursuant to the Stock Incentive Plan must be made in reliance upon
exemptions from registration under the Securities Act of 1933, as amended (the Securities Act).
Additional restrictions on transfer may be imposed by state, local or foreign securities
commissions or regulators, as applicable. To the extent a participant is an affiliate of HCA (as
defined in the Securities Act), additional restrictions may be imposed on resale, regardless of
whether the Common Stock is then registered under the Securities Act, including as provided in Rule
144 under the Securities Act.
Change in Control Provisions
In the event of a Change in Control, as defined in the Stock Incentive Plan, (i) if
determined in the applicable Grant Agreement or otherwise determined by the Committee in its sole
discretion, any outstanding awards then held by participants which are unexercisable or otherwise
unvested or subject to lapse restrictions may automatically be deemed exercisable or otherwise
vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to
such Change in Control and (ii) the Committee may, to the extent determined by the Committee to be
permitted under Section 409A of the Code, but shall not be obligated to, (A) cancel such awards for
fair value (as determined in the sole discretion of the Committee) which, in the case of Stock
Options and Stock Appreciation Rights, may equal the excess, if any, of value of the consideration
to be paid in the Change in Control transaction to holders of the same number of Shares subject to
such Stock Options or Stock Appreciation Rights (or, if no consideration is paid in any such
transaction, the fair market value of the Shares subject to such Stock Options or Stock
Appreciation Rights) over the aggregate option price of such Stock Options or the aggregate
exercise price of such Stock Appreciation Rights, as the case may be, (B) provide for the issuance
of substitute awards that will substantially preserve the otherwise applicable terms of any
affected awards previously granted under the Stock Incentive Plan as determined by the Committee in
its sole discretion or (C) provide that for a period of at least 15 days prior to the Change in
Control, any Stock Options or Stock Appreciation Rights shall be exercisable as to all Shares
subject thereto and that upon the occurrence of the Change in Control, such Stock Options or Stock
Appreciation Rights shall terminate and be of no further force and effect; provided, however, that
subpart (ii) shall not apply to a Change in Control under clause (C) of such definition that
occurs due to a gradual sell down of voting stock of the Company by the Investors (as defined in
the Stock Incentive Plan) or their affiliates.
In connection with the foregoing, the Committee may, in its discretion, provide that in the
event of a Change in Control, (i) any outstanding Performance-Based Awards relating to performance
periods ending prior to the Change in Control which have been earned but not paid shall become
immediately payable and (ii) all then-in-progress performance periods for Performance-Based Awards
that are outstanding shall end, and either (A) any or all Participants shall be deemed to have
earned an award equal to the relevant target award opportunity for the performance period in
question, or (B) at the Committees discretion, the Committee shall determine the extent to which
performance criteria have been met with respect to each such Performance-Based award.
A Change in Control shall mean (as defined in the Stock Incentive Plan), in one or more of a
series of transactions, (i) the transfer or sale of all or substantially all of the assets of HCA
to a person (or group of persons acting in concert) who is not an Investor, an affiliate of any of
the Investors or any entity in which any Investor holds, directly or indirectly, a majority of the
economic interests in such entity (an Unaffiliated Person); (ii) a merger, consolidation,
recapitalization or reorganization of HCA with or into another Unaffiliated Person, or a transfer
or sale of the voting stock of HCA, an Investor, or any affiliate of any of the Investors to an
Unaffiliated Person, in any such event that results in more than 50% of the Common Stock of HCA (or
any resulting company
14
after a merger) being held by an Unaffiliated Person; or (iii) a merger, consolidation,
recapitalization or reorganization of HCA with or into another Unaffiliated Person, or a transfer
or sale by HCA, an Investor or any affiliate of any of the Investors, in any such event after which
the Investors and their affiliates (x) collectively own less than 15% of the Common Stock of and
(y) collectively have the ability to appoint less than 50% of the directors to the Board of
Directors of HCA (or any resulting company after a merger).
Amendment and Termination
HCAs Board of Directors may at any time amend, suspend or terminate the Stock Incentive Plan
except that no such action, other than an action under the adjustment provisions of the Stock
Incentive Plan or as a result of a merger, consolidation or similar event, may be taken which
would, without stockholder approval, increase the aggregate number of shares of Common Stock
available for awards under the Stock Incentive Plan, decrease the price of outstanding awards,
change the requirements relating to the Committee, extend the term of the Stock Incentive Plan or
otherwise require the approval of the stockholders of the Company to the extent such approval is
required by or desirable to satisfy the requirements of, in each case, any applicable law,
regulation or other rule, including, the listing standards of the securities exchange, which is, at
the applicable time, the principal market for shares of Common Stock. However, no amendment,
suspension or termination of the Stock Incentive Plan may disadvantage participants in more than a
de minimis way but less than a material way without the consent of a majority of the affected
participants and no such action shall materially disadvantage a participant (without their consent)
with respect to any outstanding grants, other than as contemplated by the Stock Incentive Plan or
the Grant Agreement.
Withholding Taxes
HCA shall have the right to deduct from any payment made under the Stock Incentive Plan any
federal, state or local income or other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of HCA to deliver Shares upon the exercise of a
Stock Option that the participant pays to HCA such amount as may be requested by HCA for the
purpose of satisfying any liability for such withholding taxes; provided, however, that a
participant may satisfy the statutory amount of such taxes due upon exercise of any Stock Option
through the withholding of Shares (valued at fair market value on the date of exercise) otherwise
issuable upon the exercise of such Stock Option. For awards other than Stock Options, the
Committee may in its discretion permit a participant to satisfy or arrange to satisfy, in whole or
in part, the tax obligations incident to an grant by: (a) electing to have the Company withhold
Shares or other property otherwise deliverable to such participant pursuant to the grant (provided,
however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy
required federal, state local and foreign withholding obligations using the minimum statutory
withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes,
that are applicable to supplemental taxable income) and/or (b) tendering to the Company Shares
owned by such participant (or by such participant and his or her spouse jointly) and purchased or
held for the requisite period of time as may be required to avoid the Companys or the affiliates
or subsidiaries incurring an adverse accounting charge, based, in each case, on the fair market
value of the Shares on the payment date as determined by the Committee. All such elections shall
be irrevocable, made in writing, signed by the participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Certain Federal Income Tax Consequences
The following is a brief summary of certain federal income tax aspects of awards under the
Stock Incentive Plan based upon the United States federal income tax laws in effect on the date
hereof. This summary is not intended to be exhaustive and the exact tax consequences to any
participant will depend upon his or her particular circumstances and other factors. Participants
may also be subject to certain United States state and local taxes and foreign taxes, which are not
described herein. The Stock Incentive Plan participants are encouraged to consult their own tax
advisors with respect to any state tax considerations or particular federal tax implications of
awards granted under the Stock Incentive Plan.
PURSUANT TO THE MANAGEMENT STOCKHOLDERS AGREEMENT WHERE APPLICABLE, TO THE EXTENT THAT ANY
SHARES TO BE TRANSFERRED TO THE PARTICIPANT ARE SUBJECT TO A SUBSTANTIAL RISK OF FORFEITURE
(WITHIN THE MEANING OF TREASURY REGULATION SECTION 1.83-3(c) APPLICABLE TO THE TRANSFER OF SUCH
STOCK) AT THE TIME OF SUCH
15
TRANSFER, THE PARTICIPANT IS REQUIRED, UNLESS HCA SHALL AGREE OTHERWISE WITH SUCH PARTICIPANT,
TO MAKE A SECTION 83(b) ELECTION WITH RESPECT TO SUCH SHARES WITHIN THIRTY DAYS AFTER THE
TRANSFER.
Stock Options. The grant of a non-qualified stock option with an exercise price equal to the
fair market value of the Common Stock on the date of grant is not generally a taxable event.
Subject to the discussion Section 83(b) Considerations below, on the exercise of a Stock Option,
a participant will recognize ordinary income to the extent that the fair market value of the Common
Stock acquired pursuant to the exercise of the Stock Option, as of the exercise date, is greater
than the exercise price of the Stock Option. Any income recognized by the participant as a result
of the exercise of a Stock Option (including by reason of making the Section 83(b) Election (as
defined below)) will be compensation income and will be subject to income and employment tax
withholding at the time the Common Stock is acquired. If a Stock Option held by a participant is
purchased by HCA, such participant will recognize ordinary income in an amount equal to the amount
paid by HCA for such option.
Section 83(b) Considerations. Participants who acquire shares of Common Stock subject to a
substantial risk of forfeiture (within the meaning of Treasury Regulation Section 1.83-3(c))
through the exercise of Stock Options are generally required, under the Management Stockholders
Agreement, to make a Section 83(b) election (a Section 83(b) Election) with respect to such
shares of Common Stock within 30 days after the date of purchase. If Common Stock acquired upon
the exercise of a Stock Option is subject to a substantial risk of forfeiture and a participant was
not required to make a Section 83(b) Election, such participant would be subject to tax at ordinary
income rates on the excess, if any, of the fair market value of the Common Stock, on the date or
dates that the Common Stock becomes free of the transfer and forfeiture restrictions, over the
price paid for such Common Stock. A participant would be required to include that amount in income
whether or not such Common Stock was sold or marketable on such date or dates. In contrast, a
participant who makes the Section 83(b) Election will be required to include in income the
difference, if any, between the fair market value of the Common Stock acquired on the exercise date
and the exercise price of the Stock Option and would not be subject to United States federal income
tax upon the lapsing of any such transfer or forfeiture restrictions. Any further appreciation in
the fair market value of such Common Stock generally will be taxed as a capital gain, rather than
as ordinary income, as discussed more fully below. In addition, a participant who makes a Section
83(b) Election may choose when to recognize such capital gain, because once the Section 83(b)
Election has been made, no other taxable event occurs with respect to such Common Stock until the
disposition of such Common Stock.
A Section 83(b) Election may be disadvantageous, however, if the participant was required to
include amounts in income as a result of making the Section 83(b) Election and the Common Stock
subsequently decreases in value, inasmuch as any losses recognized on a subsequent disposition of
such Common Stock would be capital losses, the deductibility of which is subject to certain
limitations. Additionally, if the participant ultimately forfeits the Common Stock (pursuant to
restrictions in the Management Stockholders Agreement), no deduction will be available to such
participant with respect to any income inclusion that resulted from the Section 83(b) Election.
There can be no assurances as to whether the applicable tax rates will change or whether the
value of the Common Stock will appreciate. A participant who purchases Common Stock subject to a
substantial risk of forfeiture is urged to consult his or her personal tax advisor regarding the
effects of a Section 83(b) Election.
The following discussion assumes that the Section 83(b) Election is made when applicable.
Sale of Common Stock. The sale or other taxable disposition of Common Stock acquired upon the
exercise of a Stock Option will be a taxable event. In general, the participant selling such
Common Stock will recognize gain or loss equal to the difference between the amount realized by
such participant upon such sale or disposition and the participants adjusted tax basis in such
Common Stock. A participants adjusted tax basis in Common Stock purchased upon exercise of a
Stock Option will generally be the amount paid for such shares plus the amount, if any, of ordinary
income recognized on purchase. Any gain or loss resulting from a sale or disposition of Common
Stock obtained by the participant, either purchased or through the exercise of an Option, generally
will be taxed as capital gain or loss if such Common Stock was a capital asset in the hands of the
participant and will be taxed as long-term capital gain or loss if at the time of any such sale or
disposition the participant has held such Common Stock for more than one year. The time that such
participant holds a Stock Option (rather than the Common Stock attributable to such Stock Option)
is not taken into account for purposes of determining whether the participant has held such Common
Stock for more than one year. In addition, there are limits on the deductibility of capital losses
by the
16
participant. The tax consequences described above may differ, however, in the case of a sale
or other taxable disposition of Common Stock to HCA, particularly if the participant has not
experienced a meaningful reduction in his or her proportionate interest in HCA as a result of such
transaction.
Stock Appreciation Rights. When a Stock Appreciation Right is granted, there are no income
tax consequences for the participant or HCA. The exercise of a Stock Appreciation Right will
result in the participant recognizing ordinary income on the value of the Stock Appreciation Right
at the time of exercise. HCA will be allowed a deduction for the amount of ordinary income
recognized by a participant with respect to a Stock Appreciation Right. The participant also is
subject to capital gains treatment on the subsequent sale of any Common Stock acquired through the
exercise of a Stock Appreciation Right award. For this purpose, the participants basis in the
Common Stock is its fair market value at the time the Stock Appreciation Right is exercised (or at
the time of grant, if an election under Section 83(b) is made).
Other Stock-Based Awards. A participant who is granted any other stock-based award will
generally recognize, in the year of grant (or, if later, payment in case of restricted stock units
and similar awards), ordinary income equal to the fair market value of the cash or other property
received. If such other stock-based award is in the form of property that is subject to
restrictions, the participant might not recognize ordinary income until the restrictions lapse,
unless the participant makes a Section 83(b) Election. HCA is entitled to a deduction for the
amount of ordinary income recognized by the participant with respect to the other stock-based award
in the same year as the ordinary income is recognized by the participant.
Dividend Equivalent Rights. A participant who is granted Dividend Equivalent Rights either
alone or in connection with the grant of a Stock Option, Stock Appreciation Right or certain other
stock-based awards generally will recognize, in the year such Dividend Equivalent Rights are paid
in cash, compensation income equal to the amount of the payment; provided, that if the Dividend
Equivalent Rights are paid in the form of Common Stock subject to transfer and forfeiture
restrictions, the considerations set forth above in Certain Federal Income Tax Consequences
Section 83(b) Considerations will apply. Dividends paid to a participant on account of Dividend
Equivalent Rights granted with respect to other stock-based awards with respect to which the
participant has made a valid Section 83(b) Election may qualify for the reduced tax rates
applicable to qualified dividends if certain other conditions are met. Participants eligible to
make Section 83(b) Elections are urged to consult their personal tax advisors regarding the effects
of a Section 83(b) Election. HCA is entitled to a deduction for the amount of ordinary income
recognized by the participant with respect to the Dividend Equivalent Rights in the same year as
the ordinary income is recognized by the participant.
Performance-Based Awards. Payments made under performance awards are taxable as ordinary
income at the time an individual attains the performance goals and the payments are made available
to, and are transferable by, the participant. Participants receiving performance awards settled in
shares of the Companys common stock will recognize ordinary income equal to the fair market value
of the shares of the Companys common stock received as the performance goals are met and such
shares vest, less any amount paid by the participant for the performance shares, unless the
participant makes an election under Section 83(b) of the Code to be taxed at the time of the grant.
A Section 83(b) election may not be available with respect to certain forms of performance awards.
The participant is also subject to capital gain or loss treatment on the subsequent sale of any of
the Companys common stock awarded to a participant as a
performance award.
Unless a participant
makes a Section 83(b) election, his or her basis in the stock is its fair market value at the time
the performance goals are met and the shares become vested.
Section 162(m) of the Code generally disallows a public companys tax deduction for
compensation paid in excess of $1 million in any tax year to its chief executive officer and
certain other most highly compensated executives. However, compensation that qualifies as
performance-based compensation is excluded from this $1 million deduction limit and therefore
remains fully deductible by the company that pays it. HCA generally 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
qualify as
performance-based compensation so that these awards will not be subject to the Section 162(m)
deduction limitations. In addition, the Committee may also
grant certain performance awards pursuant to the Stock Incentive Plan
that may qualify as performance-based compensation.
HCA will not necessarily limit executive compensation to amounts
deductible under Section 162(m) of the Code, however, if such limitation is not in the best
interests of HCA and its stockholders.
The Stock Incentive Plan is not intended to be qualified under Section 401(a) of the Code.
17
Securities Authorized for Issuance Under Equity Compensation Plans
The
following table provides certain information as of December 31,
2009 with respect to our
equity compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
(a) |
|
|
|
|
|
securities |
|
|
Number of |
|
(b) |
|
remaining for |
|
|
securities to be |
|
Weighted |
|
future issuance |
|
|
issued upon |
|
average exercise |
|
under equity |
|
|
exercise of |
|
price of |
|
compensation |
|
|
outstanding |
|
outstanding |
|
plans (excluding |
|
|
options, |
|
options, |
|
securities |
|
|
warrants and |
|
warrants and |
|
reflected in |
Plan Category |
|
rights |
|
rights |
|
column (a)) |
Equity compensation
plans approved by
security holders |
|
|
11,527,000 |
|
|
$ |
52.78 |
|
|
|
392,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,527,000 |
|
|
$ |
52.78 |
|
|
|
392,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our common
stock as of April 30, 2010 for:
|
|
|
each person who is known by us to own beneficially more than 5% of the
outstanding shares of our common stock; |
|
|
|
each of our directors; |
|
|
|
|
each of our executive officers named in the Summary Compensation Table; and |
|
|
|
|
all of our directors and executive officers as a group. |
The
percentages of shares outstanding provided in the tables are based on
94,633,323 shares of
our common stock, par value $0.01 per share, outstanding as of
April 30, 2010. Beneficial ownership
is determined in accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares issuable upon the exercise of options that are exercisable
within 60 days of April 30, 2010 are considered outstanding for the purpose of calculating the
percentage of outstanding shares of our common stock held by the individual, but not for the
purpose of calculating the percentage of outstanding shares held by any other individual. The
address of each of our directors and executive officers listed below is c/o HCA Inc., One Park
Plaza, Nashville, Tennessee 37203.
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner |
|
Number of Shares |
|
|
Percent |
|
Hercules Holding II, LLC |
|
|
91,845,692 |
(1) |
|
|
97.1 |
% |
Christopher J. Birosak |
|
|
|
(1) |
|
|
|
|
Jack O. Bovender, Jr. |
|
|
552,843 |
(2) |
|
|
* |
|
Richard M. Bracken |
|
|
563,580 |
(3) |
|
|
* |
|
John P. Connaughton |
|
|
|
(1) |
|
|
|
|
James D. Forbes |
|
|
|
(1) |
|
|
|
|
Kenneth W. Freeman |
|
|
|
(1) |
|
|
|
|
Thomas F. Frist III |
|
|
|
(1) |
|
|
|
|
William R. Frist |
|
|
|
(1) |
|
|
|
|
Christopher R. Gordon |
|
|
|
(1) |
|
|
|
|
Samuel N. Hazen |
|
|
243,143 |
(4) |
|
|
* |
|
R. Milton Johnson |
|
|
354,442 |
(5) |
|
|
* |
|
Michael W. Michelson |
|
|
|
(1) |
|
|
|
|
James C. Momtazee |
|
|
|
(1) |
|
|
|
|
Stephen G. Pagliuca |
|
|
|
(1) |
|
|
|
|
W. Paul Rutledge |
|
|
179,935 |
(6) |
|
|
* |
|
Nathan C. Thorne |
|
|
|
(1) |
|
|
|
|
Beverly B. Wallace |
|
|
163,664 |
(7) |
|
|
* |
|
All directors and executive officers as a group (28 persons) |
|
|
2,441,244 |
(8) |
|
|
2.5 |
% |
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Hercules Holding holds 91,845,692 shares, or approximately 97.1%, of our outstanding common stock.
Hercules Holding is held by a private investor group, including affiliates of Bain Capital, KKR and
MLGPE (previously the private equity arm of Merrill Lynch & Co., Inc., which is a wholly-owned
subsidiary of Bank of America Corporation), and affiliates of HCA founder Dr. Thomas F. Frist, Jr.,
including Mr. Thomas F. Frist III and Mr. William R. Frist, who serve as directors. Messrs.
Connaughton, Gordon and Pagliuca are affiliated with Bain Capital, whose affiliated funds may be
deemed to have indirect beneficial ownership of 23,373,333 shares, or 24.7%, of our outstanding common
stock through their interests in Hercules Holding. Messrs. Freeman, Michelson and Momtazee are
affiliated with KKR, which indirectly holds 23,373,332 shares, or 24.7%, of our outstanding common
stock through the interests of certain of its affiliated funds in Hercules Holding. Messrs. Birosak,
Forbes and Thorne are affiliated with Bank of America Corporation, which indirectly holds 23,373,333
shares, or 24.7%, of our outstanding common stock through the interests of certain of its affiliated
funds in Hercules Holding and 980,393, or 1.0%, of our outstanding common stock through Banc of
America Securities LLC. Thomas F. Frist III and William R. Frist may each be deemed to indirectly,
beneficially hold 17,804,125 shares, or 18.8%, of our outstanding common stock through their interests
in Hercules Holding. Each of such persons, other than Hercules Holding, disclaims membership in any
such group and disclaims beneficial ownership of these
securities, except to the extent of its
pecuniary interest therein. The principal office addresses of Hercules Holding are c/o Bain Capital
Partners, LLC, 111 Huntington Avenue, Boston, MA 02199, c/o Kohlberg Kravis Roberts & Co. L.P., 2800
Sand Hill Road, Suite 200, Menlo Park, CA 94025, c/o Merrill Lynch Global Private Equity, Four World
Financial Center, Floor 23, New York, NY 10080 and c/o Dr. Thomas F. Frist, Jr., 3100 West End Ave.,
Suite 500, Nashville, TN 37203. |
|
(2) |
|
Includes 242,721 shares issuable upon exercise of options. Effective December 15, 2009, Mr. Bovender
retired as executive Chairman of the Board. |
|
(3) |
|
Includes 482,097 shares issuable upon exercise of options. |
|
(4) |
|
Includes 209,171 shares issuable upon exercise of options. |
|
(5) |
|
Includes 311,669 shares issuable upon exercise of options. |
|
(6) |
|
Includes 147,185 shares issuable upon exercise of options. |
|
(7) |
|
Includes 161,264 shares issuable upon exercise of options. |
|
(8) |
|
Includes 2,013,633 shares issuable upon exercise of options. Does not include shares beneficially owned
by Mr. Bovender, who retired as executive Chairman of the Board effective December 15, 2009. |
18
EXECUTIVE COMPENSATION
Compensation
Risk Assessment
In consultation with the Compensation Committee, members of
Human Resources, Legal, Enterprise Risk Management and Internal
Audit, management conducted an assessment of whether the
Companys compensation policies and practices encourage
excessive or inappropriate risk taking by our employees,
including employees other than our named executive officers.
This assessment included a review of the risk characteristics of
our business and the design of our incentive plans and policies.
Although a significant portion of our executive compensation
program is performance-based, the Compensation Committee has
focused on aligning the Companys compensation policies
with the long-term interests of the Company and avoiding rewards
or incentive structures that could create unnecessary risks to
the Company.
Management reported its findings to the Compensation Committee,
which agreed with managements assessment that our plans
and policies do not encourage excessive or inappropriate risk
taking and determined such policies or practices are not
reasonably likely to have a material, adverse effect on the
Company.
Compensation
Discussion and Analysis
The Compensation Committee (the Committee) of the
Board of Directors is generally charged with the oversight of
our executive compensation and rewards programs. The Committee
is currently composed of John P. Connaughton, James D. Forbes
and Michael W. Michelson. In early 2009, the Committee also
included George A. Bitar, and determinations with respect to
2009 compensation were made by such Committee. Responsibilities
of the Committee include the review and approval of the
following items:
|
|
|
|
|
Executive compensation strategy and philosophy;
|
|
|
|
Compensation arrangements for executive management;
|
|
|
|
Design and administration of the annual cash-based Senior
Officer Performance Excellence Program (PEP);
|
|
|
|
Design and administration of our equity incentive plans;
|
|
|
|
Executive benefits and perquisites (including the HCA
Restoration Plan and the Supplemental Executive Retirement
Plan); and
|
|
|
|
Any other executive compensation or benefits related items
deemed appropriate by the Committee.
|
In addition, the Committee considers the proper alignment of
executive pay policies with Company values and strategy by
overseeing executive compensation policies, corporate
performance measurement and assessment, and Chief Executive
Officer performance assessment. The Committee may retain the
services of independent outside consultants, as it deems
appropriate, to assist in the strategic review of programs and
arrangements relating to executive compensation and performance.
The following executive compensation discussion and analysis
describes the principles underlying our executive compensation
policies and decisions as well as the material elements of
compensation for our named executive officers. Our named
executive officers for 2009 were:
|
|
|
|
|
Richard M. Bracken, Chairman and Chief Executive Officer;
|
|
|
|
R. Milton Johnson, Executive Vice President and Chief Financial
Officer;
|
|
|
|
Beverly B. Wallace, President Shared Services Group;
|
|
|
|
Samuel N. Hazen, President Western Group;
|
|
|
|
W. Paul Rutledge, President Central Group; and
|
|
|
|
Jack O. Bovender, Jr., Executive Chairman of the Board
(Retired).
|
19
Effective December 31, 2008, Mr. Bovender retired as
Chief Executive Officer but retained the role of executive
Chairman of the Board, and effective January 1, 2009,
Mr. Bracken was appointed to serve as Chief Executive
Officer and President of the Company. Mr. Bovender retired
as executive Chairman of the Board on December 15, 2009,
and Mr. Bracken assumed the additional responsibilities as
Chairman of the Board at such time.
As discussed in more detail below, the material elements and
structure of the named executive officers compensation
program were negotiated and determined in connection with the
Recapitalization, subject to annual adjustments in the
Committees discretion.
Compensation
Philosophy and Objectives
The core philosophy of our executive compensation program is to
support the Companys primary objective of providing the
highest quality health care to our patients while enhancing the
long term value of the Company to our stockholders.
Specifically, the Committee believes the most effective
executive compensation program (for all executives, including
named executive officers):
|
|
|
|
|
Reinforces HCAs strategic initiatives;
|
|
|
|
Aligns the economic interests of our executives with those of
our stockholders; and
|
|
|
|
Encourages attraction and long term retention of key
contributors.
|
The Committee is committed to a strong, positive link between
our objectives and our compensation and benefits practices.
Our compensation philosophy also allows for flexibility in
establishing executive compensation based on an evaluation of
information prepared by management or other advisors and other
subjective and objective considerations deemed appropriate by
the Committee, subject to any contractual agreements with our
executives. The Committee will also consider the recommendations
of our Chief Executive Officer. This flexibility is important to
ensure our compensation programs are competitive and that our
compensation decisions appropriately reflect the unique
contributions and characteristics of our executives.
Compensation
Structure and Benchmarking
Our compensation program is heavily weighted towards
performance-based compensation, reflecting our philosophy of
increasing the long-term value of the Company and supporting
strategic imperatives. Total direct compensation and other
benefits consist of the following elements:
|
|
|
Total Direct Compensation
|
|
Base Salary
|
|
|
Annual Cash-Based Incentives (offered
through
|
|
|
our PEP)
|
|
|
Long-Term Equity Incentives (in the form
of
|
|
|
Stock Options)
|
Other Benefits
|
|
Retirement Plans
|
|
|
Limited Perquisites and Other Personal
Benefits
|
|
|
Severance Benefits
|
The Committee does not support rigid adherence to benchmarks or
compensatory formulas and strives to make compensation decisions
which effectively support our compensation objectives and
reflect the unique attributes of the Company and each executive.
Our general practice, however, with respect to pay positioning,
is that executive base salaries and annual incentive (PEP)
target values should generally position total annual cash
compensation between the median and 75th percentile of
similarly-sized general industry companies. We utilize the
general industry as our primary source for competitive pay
levels because HCA is significantly larger than its industry
peers. See the discussion of benchmarking below for further
information. The named executive officers pay fell within
the range noted above for jobs with equivalent market
comparisons.
20
The cash compensation mix between salary and PEP has
historically been more weighted towards salary than competitive
practice among our general industry peers would suggest. Over
time, we have made steps towards a mix of cash compensation that
will place a greater emphasis on annual performance-based
compensation.
Although we look at competitive long-term equity incentive award
values in similarly-sized general industry companies when
assessing the competitiveness of our compensation programs, we
do not make annual executive option grants (and we did not base
our initial post-Recapitalization 2007 stock option grants on
these levels) since equity is structured differently in closely
held companies than in publicly-traded companies. As is typical
in similar situations, the Investors wanted to share a certain
percentage of the equity with executives shortly after the
consummation of the Recapitalization and establish performance
objectives and incentives up front in lieu of annual grants to
ensure our executives long-term economic interests would
be aligned with those of the Investors. This pool of equity was
then further allocated based on the executives
responsibilities and anticipated impact on, and potential for,
driving Company strategy and performance. The resulting total
direct pay mix on a cumulative basis, is heavily weighted
towards performance-based pay (PEP plus stock options) rather
than fixed pay, which the Committee believes reflects the
compensation philosophy and objectives discussed above.
In accordance with agreements entered into at the time of the
Recapitalization, our named executive officers received the 2x
Time Options (as defined below) in 2009 with an exercise price
equal to two times the share price at the Recapitalization (or
$102.00). The Committee allocated those options in consultation
with our Chief Executive Officer based on past executive
contributions and future anticipated impact on Company
objectives. For additional information regarding the 2x Time
Options, see Elements of
Compensation Long-Term Equity Incentive Awards:
Options below.
Compensation
Process
The Committee ensures executives pay levels are materially
consistent with the compensation strategy described above, in
part, by conducting annual assessments of competitive executive
compensation. Management (but no named executive officer), in
collaboration with the Committees independent consultant,
Semler Brossy Consulting Group, LLC, collects and presents
compensation data from similarly-sized general industry
companies, based to the extent possible on comparable position
matches and compensation components. The following nationally
recognized survey sources were utilized in anticipation of
establishing 2009 executive compensation:
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|
|
Survey
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|
Revenue Scope
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|
Towers Perrin Executive Compensation Database
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|
Greater than $20B
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Hewitt Total Compensation Measurement
|
|
$10B - $25B
|
Hewitt Total Compensation Measurement
|
|
Greater than $25B
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These particular revenue scopes were selected because they were
the closest approximations to HCAs revenue size. Each
survey that provided an appropriate position match and
sufficient sample size to be used in the compensation review was
weighted equally. For this purpose, the two Hewitt survey cuts
were considered as one survey, and we used a weighted average of
the two surveys (65% for the $10B $25B cut and 35%
for the Greater than $25B).
Data was also collected from health care providers within our
industry including Community Health Systems, Inc., Health
Management Associates, Inc., Kindred Healthcare, Inc., LifePoint
Hospitals, Inc., Tenet Healthcare Corporation and Universal
Health Services, Inc. These health care providers are used only
to obtain a general understanding of current industry
compensation practices since we are significantly larger than
these companies. CEO and CFO compensation data was also
collected and reviewed for large public health care companies
which included, in addition to health care providers, companies
in the health insurance, pharmaceutical, medical supplies and
related industries. This peer groups 2008 revenues ranged
from $7.2 billion to $81.2 billion with median
revenues of $21.3 billion. The companies in this analysis
included Abbott Laboratories, Aetna Inc., Amgen Inc., Baxter
International Inc., Boston Scientific Corporation, Bristol-Myers
Squibb Company, CIGNA Corporation, Coventry Health Care, Inc.,
Express Scripts, Inc., Humana Inc.,
21
Johnson & Johnson, Eli Lilly and Company, Medco
Health Solutions Inc., Merck & Co., Inc., Pfizer Inc.,
Quest Diagnostics Incorporated, Schering-Plough Corporation,
Tenet Healthcare Corporation, Thermo Fisher Scientific Inc.,
UnitedHealth Group Incorporated, WellPoint, Inc. and Wyeth.
Consistent with our flexible compensation philosophy, the
Committee is not required to approve compensation precisely
reflecting the results of these surveys, and may also consider,
among other factors (typically not reflected in these surveys):
the requirements of the applicable employment agreements, the
executives individual performance during the year, his or
her projected role and responsibilities for the coming year, his
or her actual and potential impact on the successful execution
of Company strategy, recommendations from our Chief Executive
Officer and compensation consultants, an officers prior
compensation, experience, and professional status, internal pay
equity considerations, and employment market conditions and
compensation practices within our peer group. The weighting of
these and other relevant factors is determined on a
case-by-case
basis for each executive upon consideration of the relevant
facts and circumstances.
Employment
Agreements
In connection with the Recapitalization, we entered into
employment agreements with each of our named executive officers
and certain other members of senior management to help ensure
the retention of those executives critical to the future success
of the Company. Among other things, these agreements set the
executives compensation terms, their rights upon a
termination of employment, and restrictive covenants around
non-competition, non-solicitation, and confidentiality. These
terms and conditions are further explained in the remaining
portion of this Compensation Discussion and Analysis and under
Narrative Disclosure to Summary Compensation
Table and 2009 Grants of Plan-Based Awards Table
Employment Agreements.
In light of Mr. Bovenders retirement from the
position of Chief Executive Officer, effective December 31,
2008, and continuing service to the Company as executive
Chairman until December 15, 2009, the Company entered into
an Amended and Restated Employment Agreement with
Mr. Bovender, effective December 31, 2008. The
material amendments to Mr. Bovenders prior employment
agreement as set forth in the Amended and Restated Employment
Agreement are described below under Severance
and Change in Control Benefits
Mr. Bovenders Continuing Severance Benefits and
under Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Employment Agreements.
The Company also amended Mr. Brackens employment
agreement, effective January 1, 2009, to reflect his
appointment to the position of Chief Executive Officer.
Elements
of Compensation
Base
Salary
Base salaries are intended to provide reasonable and competitive
fixed compensation for regular job duties. The threshold base
salaries for our executives are set forth in their employment
agreements. We did not increase named executive officer base
salaries in 2009, other than an increase in
Mr. Johnsons base salary, as detailed below, in order
to better align his salary with market for his position as Chief
Financial Officer based on general industry surveys. In light of
Mr. Bovenders retirement from the position of Chief
Executive Officer and continuing role as executive Chairman and
Mr. Brackens assumption of the responsibilities of
Chief Executive Officer, Mr. Bovenders base salary
for 2009 was reduced to $1.144 million (as described
further in Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Employment Agreements
Mr. Bovenders Employment Agreements), and
Mr. Brackens 2009 base salary was increased to
$1.325 million. Similarly, taking into consideration the
additional responsibilities being assumed by the position of
Executive Vice President and Chief Financial Officer and
relevant market comparables from the survey data,
Mr. Johnsons 2009 salary was set at $850,000,
reflecting an increase of approximately 7.6% from his 2008
salary. In light of actual total cash compensation realized for
2009 and current target cash compensation opportunities levels,
no merit base salary increases are planned for 2010 at this
time. Mr. Rutledges salary will be increased by 3.7%
effective April 1, 2010 as an internal equity adjustment to
internal peer roles.
22
Annual
Incentive Compensation: PEP
The PEP is intended to reward named executive officers for
annual financial performance, with the goals of providing high
quality health care for our patients and increasing stockholder
value. Accordingly, in 2008, the Companys
2008-2009
Senior Officer Performance Excellence Program, as amended (the
2008-2009
PEP), was approved by the Committee to cover annual cash
incentive awards for both 2008 and 2009. Each named executive
officer in the
2008-2009
PEP was initially assigned a maximum 2009 annual award target
expressed as a percentage of salary ranging from 72% to 132%,
which under the terms of the
2008-2009
PEP applies to the lesser of (a) the named executive
officers 2009 base salary, or (b) 125% of the named
executive officers 2008 base salary. The Committee had the
discretion to reduce, but not increase, the 2009 Threshold,
Target and Maximum percentages as set forth in the
2008-2009
PEP. Mr. Bovenders 2009 PEP target and an additional
one-time $250,000 bonus opportunity based on his contributions
to certain legislative initiatives as determined by the
Committee were set forth in his Amended Employment Agreement, as
described in Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Employment Agreements
Mr. Bovenders Employment Agreement. The
Committee set Mr. Brackens 2009 target percentage at
130% of his 2009 base salary in connection with his appointment
as Chief Executive Officer and amended the
2008-2009
PEP to set Mr. Johnsons 2009 target percentage at 80%
of his 2009 base salary in light of the additional
responsibilities assumed by the position of Executive Vice
President and Chief Financial Officer. The 2009 target
percentage for each of Ms. Wallace and Messrs. Hazen
and Rutledge was set at 66% of their respective 2009 base
salaries (see individual targets in the table below). These
targets were intended to provide a meaningful incentive for
executives to achieve or exceed performance goals.
The
2008-2009
PEP was designed to provide 100% of the target award for target
performance, 50% of the target award for a minimum acceptable
(threshold) level of performance, and a maximum of 200% of the
target award for maximum performance, while no payments were to
be made for performance below threshold levels. The Committee
believes this payout curve is consistent with competitive
practice. More importantly, it promotes and rewards continuous
growth as performance goals have consistently been set at
increasingly higher levels each year. Actual awards under the
PEP are generally determined using the following two steps:
1. The executives conduct must reflect our mission
and values by upholding our Code of Conduct and following our
compliance policies and procedures. This step is critical to
reinforcing our commitment to integrity and the delivery of high
quality health care. In the event the Committee determines the
participants conduct during the fiscal year is not in
compliance with the first step, he or she will not be eligible
for an incentive award.
2. The actual award amount is determined based upon Company
performance. In 2009, the PEP for all named executive officers,
other than Mr. Hazen and Mr. Rutledge, incorporated
one Company financial performance measure, EBITDA, defined in
the
2008-2009
PEP as earnings before interest, taxes, depreciation,
amortization, minority interest expense (now, net income
attributable to noncontrolling interests), gains or losses on
sales of facilities, gains or losses on extinguishment of debt,
asset or investment impairment charges, restructuring charges,
and any other significant nonrecurring non-cash gains or charges
(but excluding any expenses for share-based compensation under
ASC 718, Compensation-Stock Compensation (ASC
718)) (EBITDA). The Company EBITDA target for
2009, as adjusted, was $4.768 billion for the named
executive officers. Mr. Hazens 2009 PEP, as the
Western Group President, was based 50% on Company EBITDA and 50%
on Western Group EBITDA (with a Western Group EBITDA target for
2009 of $2.352 billion, as adjusted) to ensure his
accountability for his groups results. Similarly,
Mr. Rutledges 2009 PEP, as the Central Group
President, was based 50% on Company EBITDA and 50% on Central
Group EBITDA (with a Central Group EBITDA target for 2009 of
$1.137 billion, as adjusted). The Committee chose to base
annual incentives on EBITDA for a number of reasons:
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It effectively measures overall Company performance;
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It can be considered an important surrogate for cash flow, a
critical metric related to paying down the Companys
significant debt obligation;
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23
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It is the key metric driving the valuation in the internal
Company model, consistent with the valuation approach used by
industry analysts; and
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It is consistent with the metric used for the vesting of the
financial performance portion of our option grants.
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These EBITDA targets should not be understood as
managements predictions of future performance or other
guidance and investors should not apply these in any other
context. Our 2009 threshold and maximum goals were set at
approximately +/- 3.6% of the target goal to reflect likely
performance volatility. EBITDA targets were linked to the
Companys short-term and long-term business objectives to
ensure incentives are provided for appropriate annual growth.
Upon review of the Companys 2009 financial performance,
the Committee determined that Company EBITDA performance for the
fiscal year ended December 31, 2009 was above the maximum
performance levels as set by the Compensation Committee, as
adjusted; likewise, the EBITDA performance of the Western Group
and Central Group also exceeded the maximum performance targets,
as adjusted.
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2009 Adjusted
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2009 Actual
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EBITDA Target
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Adjusted EBITDA
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Company
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$
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4.768 billion
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$
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5.512 billion
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Western Group
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$
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2.352 billion
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$
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2.841 billion
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Central Group
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$
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1.137 billion
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$
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1.325 billion
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Accordingly, the 2009 PEP was paid out as follows to the named
executive officers (the actual 2009 PEP payout amounts are
included in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table):
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2009 Actual PEP
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2009 Target PEP
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Award
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Named Executive Officer
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(% of Salary)
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(% of Salary)
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Richard M. Bracken (Chairman and CEO)
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130
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%
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260
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%
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R. Milton Johnson (Executive Vice President and CFO)
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80
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%
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160
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%
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Beverly B. Wallace (President, Shared Services Group)
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66
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%
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132
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%
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Samuel N. Hazen (President, Western Group)
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66
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%
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132
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%
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W. Paul Rutledge (President, Central Group)
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66
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%
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132
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%
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Jack O. Bovender, Jr. (Retired Chairman)
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50
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%
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100
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%
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Mr. Bovender also received the additional bonus of $250,000
based upon his contributions to certain of the Companys
legislative initiatives as described above.
On March 31, 2010, the Committee adopted the 2010 Senior
Officer Performance Excellence Program (the 2010
PEP). Under the 2010 PEP, the named executive officers of
the Company shall be eligible to earn performance awards based
upon the achievement of certain specified performance targets.
The specified performance criteria for the Companys named
executive officers and other participants is EBITDA (as defined
in the 2010 PEP), and with respect to the Western and Central
Group Presidents, 50% of their respective award opportunities
are based on EBITDA for the Companys Western and Central
Groups, respectively. Target awards for the named executive
officers are the same as for 2009 and are as follows:
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130% of base salary for Richard M. Bracken, our Chairman and CEO;
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80% of base salary for R. Milton Johnson, our Executive Vice
President and CFO;
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66% of base salary for Beverly B. Wallace, our
President Shared Services Group;
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66% of base salary for Samuel N. Hazen, our
President Western Group; and
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66% of base salary for W. Paul Rutledge, our
President Central Group.
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Participants will receive 100% of the target award for target
performance, 25% of the target award for a minimum acceptable
(threshold) level of performance, and a maximum of 200% of the
target award for
24
maximum performance. No payments will be made for performance
below specified threshold amounts. Payouts between threshold and
maximum will be calculated by the Committee in its sole
discretion using straight-line interpolation. The Committee may
make adjustments to the terms and conditions of, and the
criteria included in, awards under the 2010 PEP in recognition
of unusual or nonrecurring events affecting a participant or the
Company, or the financial statements of the Company, or in
certain other instances specified in the 2010 PEP.
The Committee set the named executive officers 2010 target
performance goals under the PEP based on realistic expectations
of Company performance, ensuring successful execution of our
plans in order to realize the most value from these awards.
While we do not intend to disclose our 2010 PEP EBITDA target,
as an understanding of that target is not necessary for a fair
understanding of the named executive officers compensation
for 2009 and could result in competitive harm and market
confusion, we consistently set targets that require an increase
in EBITDA year over year to promote continuous growth consistent
with our business plan. For 2010, the Committee has the ability
to apply negative discretion based on performance of
company-wide quality metrics against industry benchmarks, and
for Ms. Wallace, negative discretion can be applied based
on performance of individual goals related to the operations of
the Shared Services Group.
Awards pursuant to the 2010 PEP that are attributable to the
performance goals being met at target level or below
will be paid solely in cash, and, in the event performance goals
are achieved above the target level, the amount of
an award attributable to performance results in excess of
target levels shall be payable 50% in cash and 50%
in restricted stock units.
The Company can recover (or clawback) incentive
compensation pursuant to our 2010 PEP that was based on
(i) achievement of financial results that are subsequently
the subject of a restatement due to material noncompliance with
any financial reporting requirement under either GAAP or federal
securities laws, other than as a result of changes to accounting
rules and regulations, or (ii) a subsequent finding that
the financial information or performance metrics used by the
Committee to determine the amount of the incentive compensations
are materially inaccurate, in each case regardless of individual
fault. In addition, the Company may recover any incentive
compensation awarded or paid pursuant to this policy based on
the participants conduct which is not in good faith and
which materially disrupts, damages, impairs or interferes with
the business of the Company and its affiliates. The Committee
may also provide for incremental additional payments to
then-current executives in the event any restatement or error
indicates that such executives should have received higher
performance-based payments. This policy is administered by the
Committee in the exercise of its discretion and business
judgment based on the relevant facts and circumstances.
Long-Term
Equity Incentive Awards: Options
In connection with the Recapitalization, the Board of Directors
approved and adopted the 2006 Stock Incentive Plan for Key
Employees of HCA Inc. and its Affiliates (the 2006
Plan). The purpose of the 2006 Plan is to:
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Promote our long term financial interests and growth by
attracting and retaining management and other personnel and key
service providers with the training, experience and abilities to
enable them to make substantial contributions to the success of
our business;
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Motivate management personnel by means of growth-related
incentives to achieve long range goals; and
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Further the alignment of interests of participants with those of
our stockholders through opportunities for increased stock or
stock-based ownership in the Company.
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In January 2007, pursuant to the terms of the named executive
officers respective employment agreements, the Committee
approved long-term stock option grants to our named executive
officers under the 2006 Plan consisting solely of a one-time,
multi-year stock option grant in lieu of annual long-term equity
incentive award grants (New Options). In addition to
the New Options granted in 2007, the Company committed to grant
the named executive officers 2x Time Options (as defined below)
in their respective employment agreements, as described in more
detail below under Narrative Disclosure to
Summary Compensation Table and 2009 Grants of Plan-Based Awards
Table Employment Agreements. The
25
Committee believes stock options are the most effective
long-term vehicle to directly align the interests of executives
with those of our stockholders by motivating performance that
results in the long-term appreciation of the Companys
value, since they only provide value to the executive if the
value of the Company increases. As is typical in leveraged
buyout situations, the Committee determined that granting all of
the stock options (except the 2x Time Options) up front rather
than annually was appropriate to aid in retaining key leaders
critical to the Companys success over the next several
years and, coupled with the executives significant
personal investments in connection with the Recapitalization,
provide an equity incentive and stake in the Company that
directly aligns the long-term economic interests of the
executives with those of the Investors.
The New Options have a ten year term and are divided so that
1/3
are time vested options,
1/3
are EBITDA-based performance vested options and
1/3
are performance options that vest based on investment return to
the Sponsors, each as described below. The combination of time,
performance and investor return based vesting of these awards is
designed to compensate executives for long term commitment to
the Company, while motivating sustained increases in our
financial performance and helping ensure the Sponsors have
received an appropriate return on their invested capital before
executives receive significant value from these grants.
The time vested options are granted to aid in retention.
Consistent with this goal, the time vested options granted in
2007 vest and become exercisable in equal increments of 20% on
each of the first five anniversaries of the grant date. The time
vested options have an exercise price equivalent to fair market
value on the date of grant. Since our common stock is not
currently traded on a national securities exchange, fair market
value was determined reasonably and in good faith by the Board
of Directors after consultation with the Chief Executive Officer
and other advisors.
The EBITDA-based performance vested options are intended to
motivate sustained improvement in long-term performance.
Consistent with this goal, the EBITDA-based performance vested
options granted in 2007 are eligible to vest and become
exercisable in equal increments of 20% at the end of fiscal
years 2007, 2008, 2009, 2010 and 2011 if certain annual EBITDA
performance targets are achieved. These EBITDA performance
targets were established at the time of the Recapitalization and
can be adjusted by the Board of Directors in consultation with
the Chief Executive Officer as described below. We chose EBITDA
(defined in the award agreements as earnings before interest,
taxes, depreciation, amortization, minority interest expense
(now, net income attributable to noncontrolling interests),
gains or losses on sales of facilities, gains or losses on
extinguishment of debt, asset or investment impairment charges,
restructuring charges, and any other significant nonrecurring
non-cash gains or charges (but excluding any expenses for
share-based compensation under ASC 718 with respect to any
awards granted under the 2006 Plan)) as the performance metric
since it is a key driver of our valuation and for other reasons
as described above in the Elements of
Compensation Annual Incentive Compensation:
PEP section of this Compensation Discussion and Analysis.
Due to the number of events that can occur within our industry
in any given year that are beyond the control of management but
may significantly impact our financial performance (e.g., health
care regulations, industry-wide significant fluctuations in
volume, etc.), we have incorporated vesting provisions. The
EBITDA-based performance vested options may vest and become
exercisable on a catch up basis, such that options
that were eligible to vest but failed to vest due to our failure
to achieve prior EBITDA targets will vest if at the end of any
subsequent year or at the end of fiscal year 2012, the
cumulative total EBITDA earned in all prior years exceeds the
cumulative EBITDA target at the end of such fiscal year.
As discussed above, we do not intend to disclose the
2010-2011
EBITDA performance targets as they reflect competitive,
sensitive information regarding our budget. However, we
deliberately set our targets at increasingly higher levels.
Thus, while designed to be attainable, target performance levels
for these years require strong, improving performance and
execution, which in our view, provides an incentive firmly
aligned with stockholder interests.
As with the EBITDA targets under our PEP, pursuant to the terms
of the 2006 Plan and the Stock Option Agreements governing the
2007 grants, the Board of Directors, in consultation with our
Chief Executive Officer, has the ability to adjust the
established EBITDA targets for significant events, changes in
accounting rules and other customary adjustment events. We
believe these adjustments may be necessary in order to
effectuate the intents and purposes of our compensation plans
and to avoid unintended consequences that are
26
inconsistent with these intents and purposes. For example, the
Board of Directors exercised its ability to make adjustments to
the Companys
2009-2011
EBITDA performance targets (including cumulative EBITDA targets)
for facility dispositions and accounting changes occurring
during the 2009 fiscal year.
The options that vest based on investment return to the Sponsors
are intended to align the interests of executives with those of
our principal stockholders to ensure stockholders receive their
expected return on their investment before the executives can
receive their gains on this portion of the option grant. These
options vest and become exercisable with respect to 10% of the
common stock subject to such options at the end of fiscal years
2007, 2008, 2009, 2010 and 2011 if the Investor Return (as
defined below) is at least equal to two times the price paid to
stockholders in the Recapitalization (or $102.00), and with
respect to an additional 10% at the end of fiscal years 2007,
2008, 2009, 2010 and 2011 if the Investor Return is at least
equal to
two-and-a-half
times the price paid to stockholders in the Recapitalization (or
$127.50). Investor Return means, on any of the first
five anniversaries of the closing date of the Recapitalization,
or any date thereafter, all cash proceeds actually received by
affiliates of the Sponsors after the closing date in respect of
their common stock, including the receipt of any cash dividends
or other cash distributions (including the fair market value of
any distribution of common stock by the Sponsors to their
limited partners), determined on a fully diluted, per share
basis. The Sponsor investment return options also may become
vested and exercisable on a catch up basis if the
relevant Investor Return is achieved at any time occurring prior
to the expiration of such options.
Upon review of the Companys 2009 financial performance,
the Committee determined the Company achieved the 2009 EBITDA
performance target of $4.821 billion, as adjusted, under
the New Option awards; therefore, pursuant to the terms of the
2007 Stock Option Agreements, 20% of each named executive
officers EBITDA-based performance vested options vested as
of December 31, 2009. Further, 20% of each named executive
officers time vested options vested on the second
anniversary of their grant date, January 30, 2009. As of
the end of the 2009 fiscal year, no portion of the options that
vest based on Investor Return have vested; however, such options
remain subject to the catch up vesting provisions
described above.
In each of the employment agreements with the named executive
officers, we also committed to grant, among the named executive
officers and certain other executives, 10% of the options
initially authorized for grant under the 2006 Plan at some time
before November 17, 2011 (but with a good faith commitment
to do so before a change in control (as defined in
the 2006 Plan) or a public offering (as defined in
the 2006 Plan) and before the time when our Board of Directors
reasonably believes that the fair market value of our common
stock is likely to exceed the equivalent of $102.00 per share)
at an exercise price per share that is the equivalent of $102.00
per share (2x Time Options). On October 6,
2009, the 2x Time Options were granted. The Committee allocated
those options in consultation with our Chief Executive Officer
based on past executive contributions and future anticipated
impact on Company objectives. Forty percent of the 2x Time
Options were vested upon grant to reflect employment served
since the Recapitalization, an additional twenty percent of the
options vested on November 17, 2009, and twenty percent of
the options granted to each recipient will vest on
November 17, 2010 and November 17, 2011, respectively.
The terms of the 2x Time Options are otherwise consistent with
other time vesting options granted under the 2006 Plan.
For additional information concerning the options awarded in
2007 and 2009, see the 2009 Grants of Plan-Based Awards and
Outstanding Equity Awards at 2009 Fiscal Year-End Tables.
Ownership
Guidelines
While we have maintained stock ownership guidelines in the past,
as a non-listed company, we no longer have a policy regarding
stock ownership guidelines. However, we do believe equity
ownership aligns our executive officers interests with
those of the Investors. Accordingly, all of our named executive
officers were required to rollover at least half their
pre-Recapitalization equity and, therefore, maintain significant
stock ownership in the Company.
27
Retirement
Plans
We currently maintain one qualified retirement plan for which
the named executive officers are eligible, the HCA 401(k) Plan,
to aid in retention and to assist employees in providing for
their retirement. We also used to maintain the HCA Retirement
Plan, which as of April 1, 2008, merged into the HCA 401(k)
Plan resulting in one qualified retirement plan. Generally all
employees who have completed the required service are eligible
to participate in the HCA 401(k) Plan. Each of our named
executive officers participates in the plan. For additional
information on these plans, including amounts contributed by HCA
in 2009 to the named executive officers, see the Summary
Compensation Table and related footnotes and narratives and
2009 Pension Benefits.
Our key executives, including the named executive officers, also
participate in two supplemental retirement programs. The
Committee and the Board initially approved these supplemental
programs to:
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Recognize significant long-term contributions and commitments by
executives to the Company and to performance over an extended
period of time;
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Induce our executives to continue in our employ through a
specified normal retirement age (initially 62 through 65, but
reduced to 60 upon the change in control at the time of the
Recapitalization in 2006); and
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Provide a competitive benefit to aid in attracting and retaining
key executive talent.
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The Restoration Plan provides a benefit to replace a portion of
the contributions lost in the HCA 401(k) Plan due to certain IRS
limitations. Effective January 1, 2008, participants in the
SERP (described below) are no longer eligible for Restoration
Plan contributions; however, the hypothetical accounts
maintained for each named executive officer as of
January 1, 2008 will continue to be maintained and will be
increased or decreased with hypothetical investment returns
based on the actual investment return of the Mix B fund within
the HCA 401(k) Plan. For additional information concerning the
Restoration Plan, see 2009 Nonqualified Deferred
Compensation.
Key executives also participate in the Supplemental Executive
Retirement Plan (the SERP), adopted in 2001. The
SERP benefit brings the total value of annual retirement income
to a specific income replacement level. For named executive
officers with 25 years or more of service, this income
replacement level is 60% of final average pay (base salary and
PEP payouts) at normal retirement, a competitive level of
benefit at the time the plan was implemented. Due to the
Recapitalization, all participants are fully vested in their
SERP benefits and the plan is now frozen to new entrants. For
additional information concerning the SERP, see
2009 Pension Benefits.
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits the rights to any
further payment, and must repay any payments already made. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
Personal
Benefits
Our executive officers receive limited, if any, benefits outside
of those offered to our other employees. Generally, we provide
these benefits to increase travel and work efficiencies and
allow for more productive use of the executives time.
Mr. Bracken is permitted to use the Company aircraft for
personal trips, subject to the aircrafts availability.
Prior to his retirement, Mr. Bovender was also permitted to
use the Company aircraft for personal trips, subject to the
aircrafts availability. The named executive officers may
have their spouses accompany them on business trips taken on the
Company aircraft, subject to seat availability. In addition,
there are times when it is appropriate for an executives
spouse to attend events related to our business. On those
occasions, we will pay for the travel expenses of the
executives spouse. We will, on an as needed basis, provide
mobile telephones and personal digital assistants to our
employees and certain of our executive officers have obtained
such devices through us. The value of these personal benefits,
if any, is included in the executive officers income for
tax purposes and, in certain limited circumstances, the
additional income
28
attributed to an executive officer as a result of one or more of
these benefits will be grossed up to cover the taxes due on that
income. Except as otherwise discussed herein, other welfare and
employee-benefit programs are the same for all of our eligible
employees, including our executive officers. For additional
information, see footnote (4) to the Summary Compensation
Table.
Severance
and Change in Control Benefits
As noted above, all of our named executive officers have entered
into employment agreements, which provide, among other things,
each executives rights upon a termination of employment in
exchange for non-competition, non-solicitation, and
confidentiality covenants. We believe that reasonable severance
benefits are appropriate in order to be competitive in our
executive retention efforts. These benefits should reflect the
fact that it may be difficult for such executives to find
comparable employment within a short period of time. We also
believe that these types of agreements are appropriate and
customary in situations such as the Recapitalization wherein the
executives have made significant personal investments in the
Company and that investment is generally illiquid for a
significant period of time. Finally, we believe formalized
severance arrangements are common benefits offered by employers
competing for similar senior executive talent.
Severance
Benefits for Named Executive Officers (other than
Mr. Bovender)
If employment is terminated by the Company without
cause or by the executive for good
reason (whether or not the termination was in connection
with a
change-in-control),
the executive would be entitled to accrued rights
(cause, good reason and accrued rights are as defined in
Narrative Disclosure to Summary Compensation Table
and 2009 Grants of Plan-Based Awards Table
Employment Agreements) plus:
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Subject to restrictive covenants and the signing of a general
release of claims, an amount equal to two times for
Ms. Wallace and Messrs. Hazen and Rutledge and three
times in the case of Messrs. Bracken and Johnson the sum of
base salary plus PEP paid or payable in respect of the fiscal
year immediately preceding the fiscal year in which termination
occurs, payable over a two year period;
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Pro-rata bonus; and
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Continued coverage under our group health plans during the
period over which the cash severance is paid.
|
Additionally, unvested options will be forfeited; however,
vested New Options (including 2x Time Options) will remain
exercisable until the first anniversary of the termination of
the executives employment.
Because we believe a termination by the executive for good
reason (a constructive termination) is conceptually the same as
an actual termination by the Company without cause, we believe
it is appropriate to provide severance benefits following such a
constructive termination of the named executive officers
employment. All of our severance provisions are believed to be
within the realm of competitive practice and are intended to
provide fair and reasonable compensation to the executive upon a
termination event.
Mr. Bovenders
Continuing Severance Benefits
In light of his long-term service to the Company and his
retirement from the position of Chief Executive Officer, the
Company entered into an Amended and Restated Employment
Agreement with Mr. Bovender, effective December 31,
2008 (the Amended Employment Agreement).
Mr. Bovenders Amended Employment Agreement provides
that, effective as of the expiration of the Employment Term (as
defined in Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Employment Agreements),
Mr. Bovender was entitled to receive the accrued
rights as described above for the other named executive
officers. Mr. Bovender was also entitled to receive a pro
rata portion of his bonus under the
2008-2009
PEP based on the Companys actual results for 2009
(Mr. Bovenders Prorated Bonus).
Mr. Bovender is also entitled to continued coverage under
the Companys group health plans for Mr. Bovender and
his wife until age 65, reimbursement of any unreimbursed
business expenses properly incurred and such
29
employee benefits, if any, as to which Mr. Bovender would
be entitled under the Companys employee benefit plans.
The Amended Employment Agreement also provides that, effective
as of the expiration of the Employment Term (December 15,
2009), (i) neither Mr. Bovender nor the Company have
any put or call rights with respect to Mr. Bovenders
New Options or stock acquired upon the exercise of any such
options; (ii) Mr. Bovenders rollover
stock options will remain exercisable as if
Mr. Bovenders employment terminated by reason of
retirement in accordance with the terms of the
applicable equity plans and award agreements; (iii) the
unvested New Options (including the 2x Time Options) held by
Mr. Bovender that vest solely based on the passage of time
will vest as if Mr. Bovenders employment had
continued through the next three anniversaries of their date of
grant; (iv) the unvested New Options held by
Mr. Bovender that are EBITDA performance options will
remain outstanding and will vest, if at all, on the next four
dates that they would have otherwise vested had
Mr. Bovenders employment continued, based upon the
extent to which performance goals are met; (v) the unvested
New Options held by Mr. Bovender that are Investor
Return performance options will remain outstanding and
will vest, if at all, on the dates that they would have
otherwise vested had Mr. Bovenders employment
continued through the expiration of such options, based upon the
extent to which performance goals are met; and
(vi) Mr. Bovenders New Options will remain
exercisable until the second anniversary of the last date on
which his EBITDA performance options are eligible to vest (which
is December 31, 2014), except that
(a) Mr. Bovenders 2x Time Options will remain
exercisable until the fifth anniversary of the last date on
which his EBITDA performance options are eligible to vest (which
is December 31, 2017), and
(b) Mr. Bovenders Investor Return
performance options will remain exercisable until the expiration
of such options.
Change in
Control Benefits
Pursuant to the Stock Option Agreements governing the New
Options granted in 2007 and the 2x Time Options granted in 2009,
both under the 2006 Plan, upon a Change in Control of the
Company (as defined below), all unvested time vesting New
Options and 2x Time Options (that have not otherwise terminated
or become exercisable) shall become immediately exercisable.
Performance options that vest subject to the achievement of
EBITDA targets will become exercisable upon a Change in Control
of the Company if: (i) prior to the date of the occurrence
of such event, all EBITDA targets have been achieved for years
ending prior to such date; (ii) on the date of the
occurrence of such event, the Companys actual cumulative
total EBITDA earned in all years occurring after the performance
option grant date, and ending on the date of the Change in
Control, exceeds the cumulative total of all EBITDA targets in
effect for those same years; or (iii) the Investor Return
is at least
two-and-a-half
times the price paid to the stockholders in the Recapitalization
(or $127.50). For purposes of the vesting provision set forth in
clause (ii) above, the EBITDA target for the year in which
the Change in Control occurs shall be equitably adjusted by the
Board of Directors in good faith in consultation with the chief
executive officer (which adjustment shall take into account the
time during such year at which the Change in Control occurs).
Performance vesting options that vest based on the investment
return to the Sponsors will only vest upon the occurrence of a
Change in Control if, as a result of such event, the applicable
Investor Return (i.e., at least two times the price paid to the
stockholders in the Recapitalization for half of these options
and at least
two-and-one-half
times the price paid to the stockholders in the Recapitalization
for the other half of these options) is also achieved in such
transaction (if not previously achieved). Change in
Control means in one or more of a series of transactions
(i) the transfer or sale of all or substantially all of the
assets of the Company (or any direct or indirect parent of the
Company) to an Unaffiliated Person (as defined below);
(ii) a merger, consolidation, recapitalization or
reorganization of the Company (or any direct or indirect parent
of the Company) with or into another Unaffiliated Person, or a
transfer or sale of the voting stock of the Company (or any
direct or indirect parent of the Company), an Investor, or any
affiliate of any of the Investors to an Unaffiliated Person, in
any such event that results in more than 50% of the common stock
of the Company (or any direct or indirect parent of the Company)
or the resulting company being held by an Unaffiliated Person;
or (iii) a merger, consolidation, recapitalization or
reorganization of the Company (or any direct or indirect parent
of the Company) with or into another Unaffiliated Person, or a
transfer or sale by the Company (or any direct or indirect
parent of the Company), an Investor or any affiliate of any of
the Investors, in any such event after which the Investors and
their affiliates
30
(x) collectively own less than 15% of the common stock of
and (y) collectively have the ability to appoint less than
50% of the directors to the Board (or any resulting company
after a merger). For purposes of this definition, the term
Unaffiliated Person means a person or group who is
not an Investor, an affiliate of any of the Investors or an
entity in which any Investor holds, directly or indirectly, a
majority of the economic interest in such entity.
Additional information regarding applicable payments under such
agreements for the named executive officers is provided under
Narrative Disclosure to Summary Compensation
Table and 2009 Grants of Plan-Based Awards Table
Employment Agreements and Potential Payments
Upon Termination or Change in Control.
Recoupment
of Compensation
Information regarding the Companys policy with respect to
recovery of incentive compensation is provided under
Elements of Compensation Annual
Incentive Compensation: PEP above.
Tax
and Accounting Implications
On April 29, 2008, we registered our common stock pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as
amended; and the Company became subject to Section 162(m)
of the Internal Revenue Code, as amended (the Code)
for fiscal year 2008 and beyond, so long as the Companys
stock remains registered with the SEC. The Committee considers
the impact of Section 162(m) in the design of its
compensation strategies. Under Section 162(m), compensation
paid to executive officers in excess of $1,000,000 cannot be
taken by us as a tax deduction unless the compensation qualifies
as performance-based compensation. We have determined, however,
that we will not necessarily seek to limit executive
compensation to amounts deductible under Section 162(m) if
such limitation is not in the best interests of our
stockholders. While considering the tax implications of its
compensation decisions, the Committee believes its primary focus
should be to attract, retain and motivate executives and to
align the executives interests with those of our
stakeholders.
The Committee operates its compensation programs with the good
faith intention of complying with Section 409A of the
Internal Revenue Code. We account for stock based payments with
respect to our long term equity incentive award programs in
accordance with the requirements of ASC 718.
31
2009
Summary Compensation Table
The following table sets forth information regarding the
compensation earned by the Chief Executive Officer, the Chief
Financial Officer and our other three most highly compensated
executive officers during 2009 and Mr. Bovender, who would
have been one of our most highly compensated executive officers
had he not retired as an executive officer on December 15,
2009.
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Changes in
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Pension
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Non-Equity
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Value and
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Incentive
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Nonqualified
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Option
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Plan
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Deferred
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All Other
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Salary
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Awards
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Compensation
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Compensation
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Compensation
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Name and Principal Positions
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Year
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($)
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($)(1)
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($)(2)
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Earnings ($)(3)
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($)(4)
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Total ($)
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Richard M. Bracken
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2009
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$
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1,324,975
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$
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3,361,016
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$
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3,445,000
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$
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4,096,368
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$
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25,532
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$
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12,252,891
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Chairman and Chief
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2008
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$
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1,060,872
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$
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694,370
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$
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1,740,620
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$
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31,781
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$
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3,527,643
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Executive Officer
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2007
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$
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1,060,872
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$
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5,560,666
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$
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1,909,570
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$
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590,370
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$
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142,932
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$
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9,264,410
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R. Milton Johnson
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2009
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$
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849,984
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$
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2,520,714
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$
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1,360,000
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$
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2,032,089
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$
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17,674
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$
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6,780,461
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Executive Vice President,
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2008
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$
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786,698
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$
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355,491
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$
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1,871,790
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$
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38,769
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$
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3,052,748
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Chief Financial Officer
and Director
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2007
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$
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750,379
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$
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3,971,905
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$
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900,455
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$
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509,442
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$
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82,462
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$
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6,214,643
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Beverly B. Wallace
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2009
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$
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700,000
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$
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997,771
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$
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924,018
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$
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2,047,036
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$
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16,500
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$
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4,685,325
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President Shared
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2008
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$
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700,000
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$
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314,992
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$
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2,080,836
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$
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15,651
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$
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3,111,479
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Services Group
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2007
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$
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700,000
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$
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2,224,258
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$
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840,000
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$
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676,111
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$
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75,013
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$
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4,515,382
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Samuel N. Hazen
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2009
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$
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788,672
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$
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997,771
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$
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1,041,067
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$
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1,725,405
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$
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16,499
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$
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4,569,414
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President Western Group
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2008
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$
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788,672
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$
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350,807
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$
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810,462
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$
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15,651
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$
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1,965,592
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2007
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$
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788,672
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$
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2,542,007
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$
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830,779
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$
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258,787
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$
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84,767
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$
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4,505,012
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W. Paul Rutledge
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2009
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$
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675,000
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$
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997,771
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$
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891,017
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$
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1,510,040
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$
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16,500
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$
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4,090,328
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President Central Group
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Jack O. Bovender, Jr.
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2009
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$
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1,288,676
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$
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1,470,443
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$
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1,250,000
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$
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4,127,725
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$
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76,399
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$
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8,213,243
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Executive Chairman*
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2008
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$
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1,620,228
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$
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1,391,886
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$
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3,926,217
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$
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45,321
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$
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6,983,652
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2007
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$
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1,620,228
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$
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6,355,038
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$
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3,888,547
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$
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197,092
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$
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12,060,905
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* |
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Mr. Bovender retired as executive Chairman of the Company
effective December 15, 2009. |
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(1) |
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Option Awards for 2007 and 2009 include the aggregate grant date
fair value of the stock option awards granted during fiscal
years 2007 and 2009, respectively, in accordance with ASC 718
with respect to New Options (including the 2x Time Options) to
purchase shares of our common stock awarded to the named
executive officers in fiscal years 2007 and 2009, respectively,
under the 2006 Plan. See Note 2 to our consolidated
financial statements included in our Annual Report on Form 10-K
for the year ended December 31, 2009. |
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(2) |
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Non-Equity Incentive Plan Compensation for 2009 reflects amounts
earned for the year ended December 31, 2009 under the
2008-2009
PEP, which amounts were paid in the first quarter of 2010
pursuant to the terms of the
2008-2009
PEP. For 2009, the Company exceeded its maximum performance
level, as adjusted, with respect to the Companys EBITDA
and the Central and Western Group EBITDA; therefore, pursuant to
the terms of the
2008-2009
PEP, awards under the
2008-2009
PEP were paid out to the named executive officers, at the
maximum level of 200% of their respective target amounts.
Mr. Bovender was also awarded, pursuant to his Amended
Employment Agreement, an additional one-time bonus of $250,000
based upon his contributions to certain legislative initiatives
as determined by the Committee. |
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Non-Equity Incentive Plan Compensation for 2008 reflects amounts
earned for the year ended December 31, 2008 under the
2008-2009
PEP, which amounts were paid in the first quarter of 2009
pursuant to the terms of the
2008-2009
PEP. For 2008, the Company did not achieve its target
performance level, but exceeded its threshold performance level,
as adjusted, with respect to the Companys EBITDA;
therefore, pursuant to the terms of the
2008-2009
PEP, 2008 awards under the
2008-2009
PEP were paid out to the named executive officers at
approximately 68.2% of each such officers respective
target amount, with the exception of Mr. Hazen, whose award
was paid out at approximately 67.4% of his target amount, due to
the 50% of his PEP based on the Western Group EBITDA, which also
exceeded the threshold performance level but did not reach the
target performance level. |
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Non-Equity Incentive Plan Compensation for 2007 reflects amounts
earned for the year ended December 31, 2007 under the 2007
PEP, which amounts were paid in the first quarter of 2008
pursuant to |
32
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the terms of the 2007 PEP. For 2007, the Company exceeded its
maximum performance level, as adjusted, with respect to the
Companys EBITDA; therefore, pursuant to the terms of the
2007 PEP, awards under the 2007 PEP were paid out to the named
executive officers, at the maximum level of 200% of their
respective target amounts, with the exception of Mr. Hazen,
whose award was paid out at 175.6% of the target amount, due to
the 50% of his PEP based on the Western Group EBITDA, which
exceeded the target but did not reach the maximum performance
level. |
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(3) |
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All amounts for 2009 are attributable to changes in value of the
SERP benefits. Assumptions used to calculate these figures are
provided under the table titled 2009 Pension
Benefits. The changes in the SERP benefit value during
2009 were impacted mainly by: (i) the passage of time which
reflects another year of pay and service plus actual investment
return, (ii) the discount rate changing from 6.25% to
5.00%, which resulted in an increase in the value and
(iii) the use of the actual 2009 interest rate of 4.24% for
Mr. Bovender who retired in 2009. The impact of these
events on the SERP benefit values was: |
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Bracken
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Johnson
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Wallace
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Hazen
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Rutledge
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Bovender
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Passage of Time
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$
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1,655,097
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$
|
618,320
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|
|
$
|
788,376
|
|
|
$
|
343,653
|
|
|
$
|
420,979
|
|
|
$
|
2,053,402
|
|
Discount Rate Change
|
|
$
|
2,441,271
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|
|
$
|
1,413,769
|
|
|
$
|
1,258,660
|
|
|
$
|
1,381,752
|
|
|
$
|
1,089,061
|
|
|
|
|
|
Actual Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,074,323
|
|
All amounts for 2008 are attributable to changes in value of the
SERP benefits. Assumptions used to calculate these figures are
provided under the table titled 2009 Pension
Benefits. The changes in the SERP benefit value during
2008 were impacted mainly by: (i) the passage of time which
reflects another year of pay and service plus actual investment
return, (ii) the discount rate changing from 6.00% to
6.25%, which resulted in a decrease in the value and
(iii) the opportunity for participants to change their
benefit election before 2009 for terminations and retirements
occurring after 2008. Mr. Bovender elected to change his
benefit payment from an annuity to a lump sum. The impact of
these events on the SERP benefit values was:
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|
|
|
|
|
Bracken
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|
Johnson
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|
Wallace
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|
Hazen
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|
Bovender
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|
Passage of Time
|
|
$
|
2,142,217
|
|
|
$
|
2,100,290
|
|
|
$
|
2,301,107
|
|
|
$
|
1,037,631
|
|
|
$
|
1,432,831
|
|
Discount Rate Change
|
|
$
|
(401,597
|
)
|
|
$
|
(228,500
|
)
|
|
$
|
(220,271
|
)
|
|
$
|
(227,169
|
)
|
|
$
|
(467,374
|
)
|
Change in Election
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,960,760
|
|
All amounts for 2007 are attributable to changes in value of the
SERP benefits. Assumptions used to calculate these figures are
provided under the table titled 2009 Pension
Benefits. The changes in the SERP benefit value during
2007 were impacted mainly by: (i) the passage of time which
reflects another year of pay and service, (ii) the discount
rate changing from 5.75% to 6.00%, which resulted in a decrease
in the value and (iii) the use of the named executive
officers actual elections compared to 2006 when benefits
were valued assuming a 50% probability of electing a lump sum
and a 50% probability of electing an annuity. All named
executive officers elected a lump sum payment at retirement,
with the exception of Mr. Bovender, who elected an annuity.
The impact of these events on the SERP benefit values was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bracken
|
|
Johnson
|
|
Wallace
|
|
Hazen
|
|
Bovender
|
|
Passage of Time
|
|
$
|
399,630
|
|
|
$
|
510,118
|
|
|
$
|
549,404
|
|
|
$
|
266,066
|
|
|
$
|
(966,974
|
)
|
Discount Rate Change
|
|
$
|
(351,603
|
)
|
|
$
|
(145,992
|
)
|
|
$
|
(165,945
|
)
|
|
$
|
(186,325
|
)
|
|
$
|
(542,195
|
)
|
Actual Election
|
|
$
|
542,343
|
|
|
$
|
145,315
|
|
|
$
|
292,652
|
|
|
$
|
179,046
|
|
|
$
|
(1,322,788
|
)
|
|
|
|
(4) |
|
2009 amounts generally consist of: |
|
|
|
|
|
Matching Company contributions to our 401(k) Plan as set forth
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bracken
|
|
Johnson
|
|
Wallace
|
|
Hazen
|
|
Rutledge
|
|
Bovender
|
|
HCA 401(k) matching contribution
|
|
$
|
16,500
|
|
|
$
|
16,500
|
|
|
$
|
16,500
|
|
|
$
|
16,499
|
|
|
$
|
16,500
|
|
|
$
|
16,500
|
|
|
|
|
|
|
Personal use of corporate aircraft. In 2009,
Messrs. Bracken, Johnson and Bovender were allowed personal
use of Company aircraft with an estimated incremental cost of
$5,025, $1,129 and $13,141, respectively, to the Company.
Ms. Wallace and Messrs. Hazen and Rutledge did not
have any personal
|
33
|
|
|
|
|
travel on Company aircraft in 2009. We calculate the aggregate
incremental cost of the personal use of Company aircraft based
on a methodology that includes the average aggregate cost, on a
per nautical mile basis, of variable expenses incurred in
connection with personal plane usage, including trip-related
maintenance, landing fees, fuel, crew hotels and meals, on-board
catering, trip-related hangar and parking costs and other
variable costs. Because our aircraft are used primarily for
business travel, our incremental cost methodology does not
include fixed costs of owning and operating aircraft that do not
change based on usage. We grossed up the income attributed to
Mr. Bracken with respect to certain trips on Company
aircraft. The additional income attributed to him as a result of
gross ups was $594. In addition, we will pay the expenses of our
executives spouses associated with travel to
and/or
attendance at business related events at which spouse attendance
is appropriate. We paid approximately $2,477 and $13,327 for
travel
and/or other
expenses incurred by Messrs. Brackens and
Bovenders wives, respectively, for such business related
events, and additional income of $891 and $4,793 was attributed
to Messrs. Bracken and Bovender, respectively, as a result
of the gross up on such amounts.
|
|
|
|
|
|
Additional income of $28,638 was attributed to Mr. Bovender
for gifts received from the Company in connection with his
retirement.
|
2008 amounts consist of:
|
|
|
|
|
Company contributions to our former Retirement Plan and matching
Company contributions to our 401(k) Plan as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bracken
|
|
|
Johnson
|
|
|
Wallace
|
|
|
Hazen
|
|
|
Bovender
|
|
|
HCA Retirement Plan
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
|
$
|
3,163
|
|
HCA 401(k) matching contribution
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
|
$
|
12,488
|
|
HCA Restoration Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective January 1, 2008, participants in the SERP are no
longer eligible for Restoration Plan contributions.
|
|
|
|
|
Personal use of corporate aircraft. In 2008,
Messrs. Bovender, Bracken and Johnson were allowed personal
use of Company aircraft with an estimated incremental cost of
$28,913, $15,233 and $4,546, respectively, to the Company.
Ms. Wallace and Mr. Hazen did not have any personal
travel on Company aircraft in 2008. We calculate the aggregate
incremental cost of the personal use of Company aircraft based
on a methodology that includes the average aggregate cost, on a
per nautical mile basis, of variable expenses incurred in
connection with personal plane usage, including trip-related
maintenance, landing fees, fuel, crew hotels and meals, on-board
catering, trip-related hangar and parking costs and other
variable costs. Because our aircraft are used primarily for
business travel, our incremental cost methodology does not
include fixed costs of owning and operating aircraft that do not
change based on usage. We grossed up the income attributed to
Messrs. Bovender and Bracken with respect to certain trips
on Company aircraft. The additional income attributed to them as
a result of gross ups was $588 and $599, respectively. In
addition, we will pay the expenses of our executives
spouses associated with travel to
and/or
attendance at business related events at which spouse attendance
is appropriate. We paid approximately $107, $189 and $13,660 for
travel
and/or other
expenses incurred by Messrs. Bovenders,
Brackens and Johnsons wives, respectively, for such
business related events, and additional income of $62, $109 and
$4,912 was attributed to Messrs. Bovender, Bracken and
Johnson, respectively, as a result of the gross up on such
amounts.
|
2007 amounts consist of:
|
|
|
|
|
Company contributions to our former Retirement Plan, matching
Company contributions to our 401(k) Plan and Company accruals
for our Restoration Plan as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bracken
|
|
|
Johnson
|
|
|
Wallace
|
|
|
Hazen
|
|
|
Bovender
|
|
|
HCA Retirement Plan
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
|
$
|
19,388
|
|
HCA 401(k) matching contribution
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
|
$
|
2,250
|
|
HCA Restoration Plan
|
|
$
|
91,946
|
|
|
$
|
57,792
|
|
|
$
|
52,250
|
|
|
$
|
62,004
|
|
|
$
|
153,475
|
|
34
|
|
|
|
|
Personal use of corporate aircraft. In 2007,
Messrs. Bovender and Bracken were allowed personal use of
Company aircraft with an estimated incremental cost of $21,350
and $26,895, respectively, to the Company, calculated as
described above. Ms. Wallace and Mr. Hazen did not
have any personal travel on Companys aircraft in 2007. We
grossed up the income attributed to Messrs. Bovender and
Bracken with respect to certain trips on Company aircraft. The
additional income attributed to them as a result of gross ups
was $629 and $863, respectively. In addition, we will pay the
travel expenses of our executives spouses associated with
travel to business related events at which spouse attendance is
appropriate. We paid approximately $342 for travel by
Mr. Brackens wife on a commercial airline and related
expenses for such an event, and additional income of $123 was
attributed to Mr. Bracken as a result of the gross up on
such amount.
|
2009
Grants of Plan-Based Awards
The following table provides information with respect to awards
made under our 2006 Plan and
2008-2009
PEP during the 2009 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
Estimated Possible Payouts
|
|
|
Awards:
|
|
|
Exercise or
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Under Equity Incentive
|
|
|
Number of
|
|
|
Base Price
|
|
|
Grant Date
|
|
|
|
|
|
|
Plan Awards ($)(1)
|
|
|
Plan Awards (#)
|
|
|
Securities
|
|
|
of Option
|
|
|
Fair Value
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Underlying
|
|
|
Awards
|
|
|
of Option
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
Options(2)
|
|
|
($/sh)
|
|
|
Awards
|
|
|
Richard M. Bracken
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315,742
|
|
|
$
|
102.00
|
|
|
$
|
3,361,016
|
|
Richard M. Bracken
|
|
|
N/A
|
|
|
$
|
861,250
|
|
|
$
|
1,722,500
|
|
|
$
|
3,445,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Milton Johnson
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,802
|
|
|
$
|
102.00
|
|
|
$
|
2,520,714
|
|
R. Milton Johnson
|
|
|
N/A
|
|
|
$
|
340,000
|
|
|
$
|
680,000
|
|
|
$
|
1,360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly B. Wallace
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,733
|
|
|
$
|
102.00
|
|
|
$
|
997,771
|
|
Beverly B. Wallace
|
|
|
N/A
|
|
|
$
|
231,004
|
|
|
$
|
462,009
|
|
|
$
|
924,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel N. Hazen
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,733
|
|
|
$
|
102.00
|
|
|
$
|
997,771
|
|
Samuel N. Hazen
|
|
|
N/A
|
|
|
$
|
260,267
|
|
|
$
|
520,534
|
|
|
$
|
1,041,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Paul Rutledge
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,733
|
|
|
$
|
102.00
|
|
|
$
|
997,771
|
|
W. Paul Rutledge
|
|
|
N/A
|
|
|
$
|
222,754
|
|
|
$
|
445,509
|
|
|
$
|
891,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
10/6/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,137
|
|
|
$
|
102.00
|
|
|
$
|
1,470,443
|
|
Jack O. Bovender, Jr.
|
|
|
N/A
|
|
|
$
|
250,000
|
|
|
$
|
500,000
|
|
|
$
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Non-equity incentive awards granted to each of the named
executive officers pursuant to our
2008-2009
PEP for the 2009 fiscal year, as described in more detail under
Compensation Discussion and Analysis
Elements of Compensation Annual Incentive
Compensation: PEP. The amounts shown in the
Threshold column reflect the threshold payment,
which is 50% of the amount shown in the Target
column. The amount shown in the Maximum column is
200% of the target amount. Mr. Bovenders Amended
Employment Agreement set forth his PEP target for the 2009
fiscal year. Pursuant to the terms of the
2008-2009
PEP, the Company exceeded its maximum performance level, as
adjusted, for 2009 with respect to the Companys EBITDA and
the Central and Western Group EBITDA; therefore, pursuant to the
terms of the
2008-2009
PEP, awards were paid out to the named executive officers, at
the maximum level of 200% of their respective target amounts for
2009. Messrs. Bracken, Johnson, Hazen, Rutledge and
Bovender and Ms. Wallace received $3,445,000, $1,360,000,
$1,041,067, $891,017, $1,000,000 and $924,018, respectively,
under the
2008-2009
Senior Officer PEP for the 2009 fiscal year. Such amounts are
reflected in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table. |
|
(2) |
|
Stock options awarded under the 2006 Plan, pursuant to the named
executive officers respective employment agreements, by
the Compensation Committee as a part of the named executive
officers long term equity incentive award. The 2x Time
Options granted in 2009 are structured, pursuant to the named
executive officers respective employment agreements, so
that 40% were vested on the grant date to reflect employment
served since the Recapitalization, an additional 20% vested on
November 17, 2009 and an additional 20% will vest on each
of November 17, 2010 and November 17, 2011,
respectively. The terms of these option awards are described in
more detail under Compensation Discussion and
Analysis Elements of Compensation Long Term
Equity Incentive Awards: Options. The aggregate grant date
fair value of these option grants in accordance with ASC 718 is
reflected in the Option Awards column of the Summary
Compensation Table. |
35
Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table
Total
Compensation
In 2009, 2008 and 2007, total direct compensation, as described
in the Summary Compensation Table, consisted primarily of base
salary, annual PEP awards payable in cash, and, in 2007, long
term stock option grants designed to be one-time grants to cover
at least five years of service and, in 2009, 2x Time Option
grants as set forth in each named executive officers
employment agreement to be fully vested on the fifth anniversary
of the Recapitalization. This mix was intended to reflect our
philosophy that a significant portion of an executives
compensation should be equity-linked
and/or tied
to our operating performance. In addition, we provided an
opportunity for executives to participate in two supplemental
retirement plans; however, effective January 1, 2008,
participants in the SERP are no longer eligible for Restoration
Plan contributions, although Restoration Plan accounts will
continue to be maintained for such participants (for additional
information concerning the Restoration Plan, see
2009 Nonqualified Deferred Compensation).
Options
In January 2007, New Options to purchase common stock of the
Company were granted under the 2006 Plan to members of
management and key employees, including the named executive
officers. The New Options were designed to be long term equity
incentive awards, constituting a one-time stock option grant in
lieu of annual equity grants. The New Options granted in 2007
have a ten year term and are structured so that
1/3
are time vested options (vesting in five equal installments on
the first five anniversaries of the grant date),
1/3 are
EBITDA-based performance vested options and
1/3
are performance options that vest based on investment return to
the Sponsors. The terms of the New Options granted in 2007 are
described in greater detail under Compensation
Discussion and Analysis Elements of Compensation
Long Term Equity Incentive Awards: Options. The aggregate
grant date fair value of the New Options granted in 2007 in
accordance with ASC 718 is included under the Option
Awards column of the Summary Compensation Table.
In accordance with their employment agreements entered into at
the time of the Recapitalization, as each may have been or may
be subsequently amended, our named executive officers received
the 2x Time Options in October 2009 with an exercise price equal
to two times the share price at the Recapitalization (or
$102.00). The Committee allocated the 2x Time Options in
consultation with our Chief Executive Officer based on past
executive contributions and future anticipated impact on Company
objectives. The 2x Time Options have a ten year term and are
structured so that forty percent were vested upon grant, an
additional twenty percent of the options vested on
November 17, 2009, and twenty percent of the options
granted to each recipient will vest on November 17, 2010
and November 17, 2011, respectively. Thereby, a portion of
the grant was vested on the date of the grant based on
employment served since the Recapitalization. The terms of the
2x Time Options are otherwise consistent with other time vesting
options granted under the 2006 Plan. The terms of the 2x Time
Options granted in 2009 are described in greater detail under
Compensation Discussion and
Analysis Elements of Compensation Long
Term Equity Incentive Awards: Options. The aggregate grant
date fair value of the 2x Time Options granted in 2009 in
accordance with ASC 718 is included under the Option
Awards column of the Summary Compensation Table.
As a result of the Recapitalization, all unvested awards under
the HCA 2005 Equity Incentive Plan (the 2005 Plan)
(and all predecessor equity incentive plans) vested in November
2006. Generally, all outstanding options under the 2005 Plan
(and any predecessor plans) were cancelled and converted into
the right to receive a cash payment equal to the number of
shares of common stock underlying the option multiplied by the
amount by which the Recapitalization consideration of $51.00 per
share exceeded the exercise price for the options (without
interest and less any applicable withholding taxes). However,
certain members of management, including the named executive
officers, were given the opportunity to convert options held by
them prior to consummation of the Recapitalization into options
to purchase shares of common stock of the surviving corporation
(Rollover Options). Immediately after the
consummation of the Recapitalization, all Rollover Options
(other than those with an exercise price below $12.75) were
adjusted so that they retained the same spread value
(as defined below) as immediately prior to the Recapitalization,
but the new per share exercise price for all Rollover Options
would be $12.75. The term spread value means the
difference between (x) the
36
aggregate fair market value of the common stock (determined
using the Recapitalization consideration of $51.00 per share)
subject to the outstanding options held by the participant
immediately prior to the Recapitalization that became Rollover
Options, and (y) the aggregate exercise price of those
options.
New Options, 2x Time Options and Rollover Options held by the
named executive officers are described in the Outstanding Equity
Awards at 2009 Fiscal Year-End Table.
Employment
Agreements
In connection with the Recapitalization, on November 16,
2006, Hercules Holding entered into substantially similar
employment agreements with each of the named executive officers
and certain other executives, which agreements were shortly
thereafter assumed by the Company and which agreements govern
the terms of each executives employment. However, in light
of Mr. Bovenders retirement from the positions of
Chief Executive Officer and Chairman, effective
December 31, 2008 and December 15, 2009, respectively,
the Company entered into an Amended and Restated Employment
Agreement with Mr. Bovender, effective December 31,
2008, the terms of which are described below. The Company also
entered into an amendment to Mr. Brackens employment
agreement, effective January 1, 2009, to reflect his
appointment to the position of Chief Executive Officer.
Executive
Employment Agreements (Other than
Mr. Bovenders)
The term of employment under each of these agreements is
indefinite, and they are terminable by either party at any time;
provided that an executive must give no less than 90 days
notice prior to a resignation.
Each employment agreement sets forth the executives annual
base salary, which will be subject to discretionary annual
increases upon review by the Board of Directors, and states that
the executive will be eligible to earn an annual bonus as a
percentage of salary with respect to each fiscal year, based
upon the extent to which annual performance targets established
by the Board of Directors are achieved. The employment
agreements committed us to provide each executive with annual
bonus opportunities in 2008 that were consistent with those
applicable to the 2007 fiscal year, unless doing so would be
adverse to our interests or the interests of our stockholders,
and for later fiscal years, the agreements provide that the
Board of Directors will set bonus opportunities in consultation
with our Chief Executive Officer. With respect to the 2009 and
2008 fiscal years and the 2007 fiscal year, each executive was
eligible to earn under the
2008-2009
PEP and the
2007-2008
PEP, respectively, (i) a target bonus, if performance
targets were met; (ii) a specified percentage of the target
bonus, if threshold levels of performance were
achieved but performance targets were not met; or (iii) a
multiple of the target bonus if maximum performance
goals were achieved, with the annual bonus amount being
interpolated, in the sole discretion of the Board of Directors,
for performance results that exceeded threshold
levels but do not meet or exceed maximum levels. The
annual bonus opportunities for 2009 were set forth in the
2008-2009
PEP, as described in more detail under Compensation
Discussion and Analysis Annual Incentive
Compensation: PEP. As described above, the Company
exceeded its maximum performance level, as adjusted, for 2009
with respect to the Companys EBITDA and the Central and
Western Group EBITDA; therefore, pursuant to the terms of the
2008-2009
PEP, awards were paid out to the named executive officers, at
the maximum level of 200% of their respective target amounts for
2009. As described above, awards under the 2008 PEP were paid
out to the named executive officers at approximately 68.2% of
each such officers respective target amount, with the
exception of Mr. Hazen, whose award was paid out at
approximately 67.4% of the target amount. Awards under the 2007
PEP were paid out to the named executive officers, at the
maximum level of 200% of their respective target amounts, with
the exception of Mr. Hazen, whose award was paid out at
175.6% of his target amount. Each employment agreement also sets
forth the number of options that the executive received pursuant
to the 2006 Plan as a percentage of the total equity initially
made available for grants pursuant to the 2006 Plan. Such option
awards, the New Options, were made January 30, 2007 and are
described above under Options.
In each of the employment agreements with the named executive
officers, we also committed to grant, among the named executive
officers and certain other executives, the 2x Time Options,
which were granted, as described above, on October 6, 2009.
Additionally, pursuant to the employment agreements, we agree to
37
indemnify each executive against any adverse tax consequences
(including, without limitation, under Section 409A and 4999
of the Internal Revenue Code), if any, that result from the
adjustment by us of stock options held by the executive in
connection with Recapitalization or the future payment of any
extraordinary cash dividends.
Pursuant to each employment agreement, if an executives
employment terminates due to death or disability, the executive
would be entitled to receive (i) any base salary and any
bonus that is earned and unpaid through the date of termination;
(ii) reimbursement of any unreimbursed business expenses
properly incurred by the executive; (iii) such employee
benefits, if any, as to which the executive may be entitled
under our employee benefit plans (the payments and benefits
described in (i) through (iii) being accrued
rights); and (iv) a pro rata portion of any annual
bonus that the executive would have been entitled to receive
pursuant to the employment agreement based upon our actual
results for the year of termination (with such proration based
on the percentage of the fiscal year that shall have elapsed
through the date of termination of employment, payable to the
executive when the annual bonus would have been otherwise
payable (the pro rata bonus)).
If an executives employment is terminated by us without
cause (as defined below) or by the executive for
good reason (as defined below) (each a
qualifying termination), the executive would be
(i) entitled to the accrued rights; (ii) subject to
compliance with certain confidentiality, non-competition and
non-solicitation covenants contained in his or her employment
agreement and execution of a general release of claims on behalf
of the Company, an amount equal to the product of (x) two
(three in the case of Richard M. Bracken and R. Milton Johnson)
and (y) the sum of (A) the executives base
salary and (B) annual bonus paid or payable in respect of
the fiscal year immediately preceding the fiscal year in which
termination occurs, payable over a two-year period;
(iii) entitled to the pro rata bonus; and
(iv) entitled to continued coverage under our group health
plans during the period over which the cash severance described
in clause (ii) is paid. The executives vested New
Options and 2x Time Options would also remain exercisable until
the first anniversary of the termination of the executives
employment. However, in lieu of receiving the payments and
benefits described in (ii), (iii) and (iv) immediately
above, the executive may instead elect to have his or her
covenants not to compete waived by us. The same severance
applies regardless of whether the termination was in connection
with a change in control of the Company.
Cause is defined as an executives
(i) willful and continued failure to perform his material
duties to the Company which continues beyond 10 business days
after a written demand for substantial performance is delivered;
(ii) willful or intentional engagement in material
misconduct that causes material and demonstrable injury,
monetarily or otherwise, to the Company or the Sponsors;
(iii) conviction of, or a plea of nolo contendere
to, a crime constituting a felony, or a misdemeanor for
which a sentence of more than six months imprisonment is
imposed; or (iv) willful and material breach of his
covenants under the employment agreement which continues beyond
the designated cure period or of the agreements relating to the
new equity. Good Reason is defined as (i) a
reduction in the executives base salary (other than a
general reduction that affects all similarly situated employees
in substantially the same proportions which is implemented by
the Board in good faith after consultation with the chief
executive officer and chief operating officer), a reduction in
the executives annual incentive compensation opportunity,
or the reduction of benefits payable to the executive under the
SERP; (ii) a substantial diminution in the executives
title, duties and responsibilities; or (iii) a transfer of
the executives primary workplace to a location that is
more than 20 miles from his or her current workplace (other
than, in the case of (i) and (ii), any isolated,
insubstantial and inadvertent failure that is not in bad faith
and is cured within 10 business days after the executives
written notice to the Company).
In the event of an executives termination of employment
that is not a qualifying termination or a termination due to
death or disability, he or she will only be entitled to the
accrued rights (as defined above).
Additional information with respect to potential payments to the
named executive officers pursuant to their employment agreements
and the 2006 Plan is contained in Potential
Payments Upon Termination or Change in Control.
38
Mr. Bovenders
Employment Agreement
The Company entered into the Amended Employment Agreement with
Jack O. Bovender, Jr. on October 27, 2008, which
became effective on December 31, 2008. Pursuant to the
terms of the Amended Employment Agreement, Mr. Bovender was
employed by HCA Management Services, L.P., an affiliate of the
Company, and served as executive Chairman of the Company for a
period commencing December 31, 2008 and ending
December 15, 2009 (the Employment Term).
The Amended Employment Agreement provided that Mr. Bovender
receive a base salary (i) at the monthly rate of $135,000
for the first three months of the Employment Term and
(ii) at the monthly rate of $86,957 for the next eight and
one-half months of the Employment Term
(Mr. Bovenders Base Salary).
Mr. Bovender was also entitled to the full amount of any
annual bonus earned, but unpaid, as of the effective date of the
Amended Employment Agreement for the year ended
December 31, 2008 under the Companys
2008-2009
PEP. For calendar year 2009, Mr. Bovender was eligible to
earn a bonus under the
2008-2009
PEP with a target bonus of $500,000.
Mr. Bovender had an additional 2009 bonus opportunity of up
to $250,000 based upon his contributions to certain legislative
initiatives as determined by the Committee
(Mr. Bovenders Additional Bonus).
Pursuant to the terms of the
2008-2009
PEP, the Company exceeded its maximum performance level, as
adjusted, for 2009 with respect to the Companys EBITDA;
therefore, pursuant to the terms of the
2008-2009
PEP, Mr. Bovenders award for the 2009 fiscal year was
paid out at the maximum level of 200% of his target amount.
Mr. Bovender was also awarded, pursuant to his Amended
Employment Agreement, an additional one-time bonus of $250,000
based upon his contributions to certain legislative initiatives
as determined by the Committee. The Amended Employment Agreement
generally provides for the provision of or reimbursement of
expenses associated with office space, shared clerical support
and office equipment until Mr. Bovender reaches age 70.
The terms of Mr. Bovenders employment agreement with
respect to termination of his employment are described in detail
under Compensation Discussion and Analysis
Severance and Change in Control Agreements
Mr. Bovenders Continuing Severance Benefits.
Additional information with respect to payments to
Mr. Bovender pursuant to his Amended Employment Agreement
and the 2006 Plan is contained in Potential
Payments Upon Termination or Change in Control.
Outstanding
Equity Awards at 2009 Fiscal Year-End
The following table includes certain information with respect to
options held by the named executive officers as of
December 31, 2009.
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|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
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|
|
|
|
|
|
|
|
|
Number of
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|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable(#)(1)(2)(3)
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|
|
Unexercisable(#)(2)(3)
|
|
|
Options(#)(2)
|
|
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($)(4)(5)(6)
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|
|
Date
|
|
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Richard M. Bracken
|
|
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8,052
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
Richard M. Bracken
|
|
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26,248
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
7/26/2011
|
|
Richard M. Bracken
|
|
|
29,934
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
Richard M. Bracken
|
|
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40,490
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
Richard M. Bracken
|
|
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30,235
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
Richard M. Bracken
|
|
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10,739
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
Richard M. Bracken
|
|
|
7,095
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
Richard M. Bracken
|
|
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116,550
|
|
|
|
69,932
|
|
|
|
163,172
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
Richard M. Bracken
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|
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189,444
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|
|
|
126,298
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|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
R. Milton Johnson
|
|
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6,039
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
R. Milton Johnson
|
|
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9,579
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
R. Milton Johnson
|
|
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9,254
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
R. Milton Johnson
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|
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8,062
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|
|
|
|
|
|
|
|
|
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$
|
12.75
|
|
|
|
1/29/2014
|
|
39
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable(#)(1)(2)(3)
|
|
|
Unexercisable(#)(2)(3)
|
|
|
Options(#)(2)
|
|
|
($)(4)(5)(6)
|
|
|
Date
|
|
|
R. Milton Johnson
|
|
|
26,013
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
7/22/2014
|
|
R. Milton Johnson
|
|
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6,441
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|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
R. Milton Johnson
|
|
|
4,301
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
R. Milton Johnson
|
|
|
83,250
|
|
|
|
49,951
|
|
|
|
116,552
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
R. Milton Johnson
|
|
|
142,080
|
|
|
|
94,722
|
|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
Beverly B. Wallace
|
|
|
6,039
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
Beverly B. Wallace
|
|
|
9,579
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
Beverly B. Wallace
|
|
|
13,882
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
Beverly B. Wallace
|
|
|
11,422
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
Beverly B. Wallace
|
|
|
4,601
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
Beverly B. Wallace
|
|
|
3,559
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
Beverly B. Wallace
|
|
|
46,620
|
|
|
|
27,973
|
|
|
|
65,268
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
Beverly B. Wallace
|
|
|
56,238
|
|
|
|
37,495
|
|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
Samuel N. Hazen
|
|
|
6,039
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
3/22/2011
|
|
Samuel N. Hazen
|
|
|
13,124
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
7/26/2011
|
|
Samuel N. Hazen
|
|
|
19,158
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
Samuel N. Hazen
|
|
|
23,137
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
Samuel N. Hazen
|
|
|
16,797
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
Samuel N. Hazen
|
|
|
6,441
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
Samuel N. Hazen
|
|
|
4,301
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
Samuel N. Hazen
|
|
|
53,280
|
|
|
|
31,969
|
|
|
|
74,592
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
Samuel N. Hazen
|
|
|
56,238
|
|
|
|
37,495
|
|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
W. Paul Rutledge
|
|
|
8,381
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/24/2012
|
|
W. Paul Rutledge
|
|
|
9,254
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2013
|
|
W. Paul Rutledge
|
|
|
5,375
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/29/2014
|
|
W. Paul Rutledge
|
|
|
2,297
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/27/2015
|
|
W. Paul Rutledge
|
|
|
5,395
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
10/1/2015
|
|
W. Paul Rutledge
|
|
|
4,301
|
|
|
|
|
|
|
|
|
|
|
$
|
12.75
|
|
|
|
1/26/2016
|
|
W. Paul Rutledge
|
|
|
46,620
|
|
|
|
27,973
|
|
|
|
65,268
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
W. Paul Rutledge
|
|
|
56,238
|
|
|
|
37,495
|
|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
Jack O. Bovender, Jr.
|
|
|
133,200
|
|
|
|
79,922
|
|
|
|
186,482
|
|
|
$
|
51.00
|
|
|
|
1/30/2017
|
|
Jack O. Bovender, Jr.
|
|
|
82,881
|
|
|
|
55,256
|
|
|
|
|
|
|
$
|
102.00
|
|
|
|
10/6/2019
|
|
|
|
|
(1) |
|
Reflects Rollover Options, as further described under
Narrative Disclosure to Summary Compensation
Table and 2009 Grants of Plan-Based Awards Table
Options, the 40% of the named executive officers
time vested New Options, comprised of the 20% that vested as of
January 30, 2008 and January 30, 2009, respectively,
the 60% of the named executive officers EBITDA-based
performance vested New Options, comprised of the 20% that vested
as of December 31, 2007, December 31, 2008 and
December 31, 2009, respectively (upon the Committees
determination that the Company achieved the 2007, 2008 and 2009
EBITDA performance targets under the option awards, as adjusted,
as described in more detail under Compensation
Discussion and Analysis Elements of
Compensation Long Term Equity Incentive Awards:
Options) and the 60% of the named executive officers
vested 2x Time Options, comprised of the 40% that were vested on
the grant date and the 20% that vested on November 17, 2009. |
|
(2) |
|
Reflects New Options awarded in January 2007 under the 2006 Plan
by the Compensation Committee as part of the named executive
officers long term equity incentive award. The New Options
granted in 2007 are structured so that
1/3
are time vested options (vesting in five equal installments on
the first five anniversaries of the January 30, 2007 grant
date),
1/3
are EBITDA-based performance vested options (vesting in equal
increments of 20% at the end of fiscal years 2007, 2008, 2009,
2010 and 2011 if certain annual EBITDA performance targets are
achieved, subject to catch up vesting, such that,
options that were |
40
|
|
|
|
|
eligible to vest but failed to vest due to our failure to
achieve prior EBITDA targets will vest if at the end of any
subsequent year or at the end of fiscal year 2012, the
cumulative total EBITDA earned in all prior years exceeds the
cumulative EBITDA target at the end of such fiscal year) and
1/3
are performance options that vest based on investment return to
the Sponsors (vesting with respect to 10% of the common stock
subject to such options at the end of fiscal years 2007, 2008,
2009, 2010 and 2011 if the Investor Return is at least $102.00
and with respect to an additional 10% at the end of fiscal years
2007, 2008, 2009, 2010 and 2011 if the Investor Return is at
least $127.50, subject to catch up vesting if the
relevant Investor Return is achieved at any time occurring prior
to January 30, 2017, so long as the named executive officer
remains employed by the Company). The time vested options are
reflected in the Number of Securities Underlying
Unexercised Options Unexercisable column (with the
exception of the 40% of the time vested options that were vested
as of December 31, 2009, which are reflected in the
Number of Securities Underlying Unexercised Options
Exercisable column), and the EBITDA-based performance
vested options and investment return performance vested options
are both reflected in the Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned
Options column (with the exception of the 60% of the
EBITDA-based performance vested options that were vested as of
December 31, 2009, which are reflected in the Number
of Securities Underlying Unexercised Options Exercisable
column). The terms of these option awards are described in more
detail under Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Options. |
|
(3) |
|
Reflects 2x Time Options awarded in October 2009 under the 2006
Plan by the Compensation Committee, pursuant to the named
executive officers employment agreement, as part of the
named executive officers long term equity incentive award.
The 2x Time Options are structured, pursuant to the named
executive officers respective employment agreements, so
that 40% were vested on the grant date, an additional 20% vested
on November 17, 2009 and an additional 20% will vest on
November 17, 2010 and November 17, 2011, respectively.
The 60% of the 2x Time Options that were vested as of
December 31, 2009 are reflected in the Number of
Securities Underlying Unexercised Options Exercisable
column, and the 40% of the 2x Time Options that were not vested
as of December 31, 2009 are reflected in the Number
of Securities Underlying Unexercised Options Unexercisable
column. The terms of these option awards are described in more
detail under Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Options. |
|
(4) |
|
Immediately after the consummation of the Recapitalization, all
Rollover Options (other than those with an exercise price below
$12.75) were adjusted such that they retained the same
spread value (as defined below) as immediately prior
to the Recapitalization, but the new per share exercise price
for all Rollover Options would be $12.75. The term spread
value means the difference between (x) the aggregate
fair market value of the common stock (determined using the
Recapitalization consideration of $51.00 per share) subject to
the outstanding options held by the participant immediately
prior to the Recapitalization that became Rollover Options, and
(y) the aggregate exercise price of those options. |
|
(5) |
|
The exercise price for the New Options granted under the 2006
Plan to the named executive officers on January 30, 2007
was equal to the fair value of our common stock on the date of
the grant, as determined by our Board of Directors in
consultation with our Chief Executive Officer and other
advisors, pursuant to the terms of the 2006 Plan. |
|
(6) |
|
The exercise price for the 2x Time Options granted under the
2006 Plan to the named executive officers on October 6,
2009 was $102.00, pursuant to the named executive officers
employment agreements. |
41
Option
Exercises and Stock Vested in 2009
The following table includes certain information with respect to
options exercised by the named executive officers during the
fiscal year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of Shares
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
Name
|
|
Exercise(1)
|
|
Exercise ($)(2)
|
|
Jack O. Bovender, Jr.
|
|
|
188,340
|
|
|
$
|
21,243,911
|
|
|
|
|
(1) |
|
Mr. Bovender elected a cashless exercise of 360,494 stock
options resulting in net shares realized of 188,340. |
|
(2) |
|
Represents the difference between the exercise price of the
options and the fair market value of the common stock on the
date of exercise, as determined by our Board of Directors in
consultation with our Chief Executive Officer and other advisors. |
2009
Pension Benefits
Our SERP is intended to qualify as a top-hat plan
designed to benefit a select group of management or highly
compensated employees. There are no other defined benefit plans
that provide for payments or benefits to any of the named
executive officers. Information about benefits provided by the
SERP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
Name
|
|
Plan Name
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
|
Richard M. Bracken
|
|
|
SERP
|
|
|
|
28
|
|
|
$
|
14,303,696
|
|
|
|
|
|
R. Milton Johnson
|
|
|
SERP
|
|
|
|
27
|
|
|
$
|
6,353,324
|
|
|
|
|
|
Beverly B. Wallace
|
|
|
SERP
|
|
|
|
26
|
|
|
$
|
8,696,543
|
|
|
|
|
|
Samuel N. Hazen
|
|
|
SERP
|
|
|
|
27
|
|
|
$
|
5,330,983
|
|
|
|
|
|
W. Paul Rutledge
|
|
|
SERP
|
|
|
|
28
|
|
|
$
|
5,504,026
|
|
|
|
|
|
Jack O. Bovender, Jr.
|
|
|
SERP
|
|
|
|
29
|
|
|
|
|
|
|
$
|
26,300,528
|
|
Mr. Bovender retired in 2009, and he received a SERP
payment in April 2009. Mr. Bracken and Ms. Wallace are
eligible for early retirement. The remaining named executive
officers have not satisfied the eligibility requirements for
normal or early retirement. All of the named executive officers
are 100% vested in their accrued SERP benefit.
Plan
Provisions
In the event the employees accrued benefits under
the Companys Plans (computed using actuarial
factors) are insufficient to provide the life
annuity amount, the SERP will provide a benefit equal to
the amount of the shortfall. Benefits can be paid in the form of
an annuity or a lump sum. The lump sum is calculated by
converting the annuity benefit using the actuarial
factors. All benefits with a present value not exceeding
one million dollars are paid as a lump sum regardless of the
election made.
Normal retirement eligibility requires attainment of age 60
for employees who were participants at the time of the change in
control which occurred as a result of the Recapitalization,
including all of the named executive officers. Early retirement
eligibility requires age 55 with 20 or more years of
service. The service requirement for early retirement is waived
for employees participating in the SERP at the time of its
inception in 2001, including all of the named executive
officers. The life annuity amount payable to a
participant who takes early retirement is reduced by three
percent for each full year or portion thereof that the
participant retires prior to normal retirement age.
The life annuity amount is the annual benefit
payable as a life annuity to a participant upon normal
retirement. It is equal to the participants accrual
rate multiplied by the product of the participants
years of service times the participants
pay average. The SERP benefit for each year equals
the life annuity amount less the annual life annuity amount
produced by the employees accrued benefit under the
Companys Plans.
42
The accrual rate is a percentage assigned to each
participant, and is either 2.2% or 2.4%. All of the named
executive officers are assigned a percentage of 2.4%.
A participant is credited with a year of service for
each calendar year that the participant performs
1,000 hours of service for HCA or one of our subsidiaries,
or for each year the participant is otherwise credited by us,
subject to a maximum credit of 25 years of service.
A participants pay average is an amount equal
to one-fifth of the sum of the compensation during the period of
60 consecutive months for which total compensation is greatest
within the 120 consecutive month period immediately preceding
the participants retirement. For purposes of this
calculation, the participants compensation includes base
compensation, payments under the PEP, and bonuses paid prior to
the establishment of the PEP.
The accrued benefits under the Companys Plans
for an employee equals the sum of the employer-funded benefits
accrued under the former HCA Retirement Plan, the HCA 401(k)
Plan and any other tax-qualified plan maintained by us or one of
our subsidiaries, the income/loss adjusted amount distributed to
the participant under any of these plans, the account credit and
the income/loss adjusted amount distributed to the participant
under the Restoration Plan and any other nonqualified retirement
plans sponsored by us or one of our subsidiaries.
The actuarial factors include (a) interest at
the long term Applicable Federal Rate under Section 1274(d)
of the Code or any successor thereto as of the first day of
November preceding the plan year in or for which a benefit
amount is calculated, and (b) mortality being the
applicable Section 417(e)(3) of the Code mortality table,
as specified and changed by the U.S. Treasury Department.
Credited service does not include any amount other than service
with us or one of our subsidiaries.
Assumptions
The Present Value of Accumulated Benefit is based on a
measurement date of December 31, 2009.
The assumption is made that there is no probability of
pre-retirement death or termination. Retirement age is assumed
to be the Normal Retirement Age as defined in the SERP for all
named executive officers, as adjusted by the provisions relating
to change in control, or age 60. Age 60 also
represents the earliest date the named executive officers are
eligible to receive an unreduced benefit.
All other assumptions used in the calculations are the same as
those used for the valuation of the plan liabilities in this
information statement.
Supplemental
Information
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits his rights to any
further payment, and must repay any benefits already paid. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
43
2009
Nonqualified Deferred Compensation
Amounts shown in the table are attributable to the HCA
Restoration Plan, an unfunded, nonqualified defined contribution
plan designed to restore benefits under the HCA 401(k) Plan
based on compensation in excess of the Code
Section 401(a)(17) compensation limit ($245,000 in 2009).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance
|
|
|
|
in Last
|
|
|
in Last
|
|
|
in Last
|
|
|
Withdrawals/
|
|
|
at Last
|
|
Name
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Fiscal Year End
|
|
|
Richard M. Bracken
|
|
|
|
|
|
|
|
|
|
$
|
267,148
|
|
|
|
|
|
|
$
|
1,418,398
|
|
R. Milton Johnson
|
|
|
|
|
|
|
|
|
|
$
|
109,549
|
|
|
|
|
|
|
$
|
581,639
|
|
Beverly B. Wallace
|
|
|
|
|
|
|
|
|
|
$
|
90,252
|
|
|
|
|
|
|
$
|
479,186
|
|
Samuel N. Hazen
|
|
|
|
|
|
|
|
|
|
$
|
146,239
|
|
|
|
|
|
|
$
|
776,440
|
|
W. Paul Rutledge
|
|
|
|
|
|
|
|
|
|
$
|
80,356
|
|
|
|
|
|
|
$
|
426,642
|
|
Jack O. Bovender, Jr.
|
|
|
|
|
|
|
|
|
|
$
|
498,306
|
|
|
|
|
|
|
$
|
2,692,051
|
|
The following amounts from the column titled Aggregate
Balance at Last Fiscal Year have been reported in the
Summary Compensation Tables in prior years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restoration Contribution
|
|
Name
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Richard M. Bracken
|
|
$
|
87,924
|
|
|
$
|
146,549
|
|
|
$
|
162,344
|
|
|
$
|
192,858
|
|
|
$
|
172,571
|
|
|
$
|
409,933
|
|
|
$
|
91,946
|
|
R. Milton Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
71,441
|
|
|
$
|
212,109
|
|
|
$
|
57,792
|
|
Beverly B. Wallace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,250
|
|
Samuel N. Hazen
|
|
|
|
|
|
|
|
|
|
$
|
79,510
|
|
|
$
|
101,488
|
|
|
$
|
97,331
|
|
|
$
|
247,060
|
|
|
$
|
62,004
|
|
Jack O. Bovender, Jr.
|
|
$
|
187,193
|
|
|
$
|
268,523
|
|
|
$
|
289,899
|
|
|
$
|
363,481
|
|
|
$
|
295,062
|
|
|
$
|
856,424
|
|
|
$
|
153,475
|
|
Plan
Provisions
Until 2008, hypothetical accounts for each participant were
credited each year with a contribution designed to restore the
HCA Retirement Plan based on compensation in excess of the Code
Section 401(a)(17) compensation limit ($245,000 in 2009),
based on years of service. Effective January 1, 2008,
participants in the SERP are no longer eligible for Restoration
Plan contributions. However, the hypothetical accounts as of
January 1, 2008 will continue to be maintained and will be
increased or decreased with hypothetical investment returns
based on the actual investment return of the Mix B fund of the
HCA 401(k) Plan.
No employee deferrals are allowed under this or any other
nonqualified deferred compensation plan.
Prior to January 1, 2010, eligible employees make a one
time election prior to participation (or prior to
December 31, 2006, if earlier) regarding the form of
distribution of the benefit. Participants chose between a lump
sum and five or ten-year installments. Effective January 1,
2010, all distributions are paid in the form of a lump-sum
distribution unless the participant had submitted an installment
payment election prior to April 30, 2009. Distributions are
paid (or begin) during the July following the year of
termination of employment or retirement. All balances not
exceeding $500,000 are automatically paid as a lump sum.
Supplemental
Information
In the event a participant renders service to another health
care organization within five years following retirement or
termination of employment, he or she forfeits the rights to any
further payment, and must repay any payments already made. This
non-competition provision is subject to waiver by the Committee
with respect to the named executive officers.
44
Potential
Payments Upon Termination or Change in Control
The following tables show the estimated amount of potential cash
severance payable to each of the named executive officers
(except for Mr. Bovender) (based upon his or her 2009 base
salary and PEP payment received in 2009 for 2008 performance),
as well as the estimated value of continuing benefits, based on
compensation and benefit levels in effect on December 31,
2009, assuming the executives employment terminates or the
Company undergoes a Change in Control (as defined in the 2006
Plan and set forth above under Narrative Disclosure
to Summary Compensation Table and 2009 Grants of Plan-Based
Awards Table Options) effective
December 31, 2009. Due to the numerous factors involved in
estimating these amounts, the actual value of benefits and
amounts to be paid can only be determined upon an
executives termination of employment. Mr. Bovender
retired from the Company on December 15, 2009, and the
Normal Retirement column of the table relating to
Mr. Bovender shows the estimated value of continuing
benefits, as well as, where noted, actual amounts paid to
Mr. Bovender under his Amended Employment Agreement in
connection with his retirement. As noted above, in the event a
named executive officer breaches or violates those certain
confidentiality, non-competition
and/or
non-solicitation covenants contained in his or her employment
agreement, the SERP or the HCA Restoration Plan, certain of the
payments described below may be subject to forfeiture
and/or
repayment. See Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Executive Employment Agreements,
2009 Pension Benefits Supplemental
Information, and 2009 Nonqualified Deferred
Compensation Supplemental Information.
Richard
M. Bracken
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Early
|
|
|
Normal
|
|
|
Without
|
|
|
Termination
|
|
|
for Good
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Cause
|
|
|
for Cause
|
|
|
Reason
|
|
|
Disability
|
|
|
Death
|
|
|
Control
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,058,110
|
|
|
|
|
|
|
$
|
6,058,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
|
|
|
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
|
$
|
3,445,000
|
|
Unvested Stock Options(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,622,517
|
|
SERP(4)
|
|
$
|
15,493,294
|
|
|
$
|
15,493,294
|
|
|
|
|
|
|
$
|
15,493,294
|
|
|
$
|
15,493,294
|
|
|
$
|
15,493,294
|
|
|
$
|
15,493,294
|
|
|
$
|
13,722,318
|
|
|
|
|
|
Retirement Plans(5)
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
$
|
2,522,553
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability Income(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,819,299
|
|
|
|
|
|
|
|
|
|
Life Insurance Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,401,000
|
|
|
|
|
|
Accrued Vacation Pay
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
$
|
183,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,644,309
|
|
|
$
|
21,644,309
|
|
|
$
|
6,151,015
|
|
|
$
|
27,702,419
|
|
|
$
|
18,199,309
|
|
|
$
|
27,702,419
|
|
|
$
|
23,463,608
|
|
|
$
|
21,274,333
|
|
|
$
|
12,067,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amounts Mr. Bracken would be entitled to receive
pursuant to his employment agreement. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(2) |
|
Represents the amount Mr. Bracken would be entitled to
receive for the 2009 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(3) |
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Brackens unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2009 fiscal
year. The $102.00 per share exercise price of 2x Time Options
was greater than the December 31, 2009 fair value price;
therefore, this value does not include Mr. Brackens
unvested 2x Time Options. |
|
(4) |
|
Reflects the actual lump sum value of the SERP based on the 2009
interest rate of 4.24%. |
45
|
|
|
(5) |
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Bracken would be
entitled. The value includes $1,104,155 from the HCA 401(k) Plan
(which represents the value of the Companys contributions)
and $1,418,398 from the HCA Restoration Plan. |
|
(6) |
|
Reflects the estimated lump sum present value of all future
payments which Mr. Bracken would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 66, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65. |
|
(7) |
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Bracken.
Mr. Brackens payment upon death while actively
employed includes $1,326,000 of Company-paid life insurance and
$75,000 from the Executive Death Benefit Plan. |
R. Milton
Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Early
|
|
|
Normal
|
|
|
Without
|
|
|
Termination
|
|
|
for Good
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Cause
|
|
|
for Cause
|
|
|
Reason
|
|
|
Disability
|
|
|
Death
|
|
|
Control
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,616,473
|
|
|
|
|
|
|
$
|
3,616,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
|
|
|
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
|
$
|
1,360,000
|
|
Unvested Stock Options(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,158,946
|
|
SERP(4)
|
|
$
|
7,685,014
|
|
|
|
|
|
|
|
|
|
|
$
|
7,685,014
|
|
|
$
|
7,685,014
|
|
|
$
|
7,685,014
|
|
|
$
|
7,685,014
|
|
|
$
|
7,162,791
|
|
|
|
|
|
Retirement Plans(5)
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
$
|
1,520,116
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability Income(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,077,246
|
|
|
|
|
|
|
|
|
|
Life Insurance Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
851,000
|
|
|
|
|
|
Accrued Vacation Pay
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
$
|
117,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,682,822
|
|
|
$
|
2,997,808
|
|
|
$
|
2,997,808
|
|
|
$
|
14,299,295
|
|
|
$
|
9,322,822
|
|
|
$
|
14,299,295
|
|
|
$
|
12,760,068
|
|
|
$
|
11,011,599
|
|
|
$
|
7,518,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amounts Mr. Johnson would be entitled to receive
pursuant to his employment agreement. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(2) |
|
Represents the amount Mr. Johnson would be entitled to
receive for the 2009 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(3) |
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Johnsons unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation,
it is assumed that the Company achieved an Investor Return of at
least 2.5 times the Base Price of $51.00 at the end of the 2009
fiscal year. The $102.00 per share exercise price of 2x Time
Options was greater than the December 31, 2009 fair value
price; therefore, this value does not include
Mr. Johnsons unvested 2x Time Options. |
|
(4) |
|
Reflects the actual lump sum value of the SERP based on the 2009
interest rate of 4.24%. |
|
(5) |
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Johnson would be
entitled. The value includes $938,477 from the HCA 401(k) Plan
(which represents the value of the Companys contributions)
and $581,639 from the HCA Restoration Plan. |
|
(6) |
|
Reflects the estimated lump sum present value of all future
payments which Mr. Johnson would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 66 and 4 months, and monthly benefits of $10,000
per month from our Supplemental Insurance Program payable after
the six-month elimination period to age 65. |
46
|
|
|
(7) |
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Johnson.
Mr. Johnsons payment upon death while actively
employed with the Company includes $851,000 of Company-paid life
insurance. |
Beverly
B. Wallace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Early
|
|
|
Normal
|
|
|
Without
|
|
|
Termination
|
|
|
for Good
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Cause
|
|
|
for Cause
|
|
|
Reason
|
|
|
Disability
|
|
|
Death
|
|
|
Control
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,030,010
|
|
|
|
|
|
|
$
|
2,030,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
|
|
|
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
|
$
|
924,018
|
|
Unvested Stock Options(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,448,985
|
|
SERP(4)
|
|
$
|
8,658,884
|
|
|
$
|
8,658,884
|
|
|
|
|
|
|
$
|
8,658,884
|
|
|
$
|
8,658,884
|
|
|
$
|
8,658,884
|
|
|
$
|
8,658,884
|
|
|
$
|
7,794,032
|
|
|
|
|
|
Retirement Plans(5)
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
$
|
938,279
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability Income(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,354,785
|
|
|
|
|
|
|
|
|
|
Life Insurance Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
701,000
|
|
|
|
|
|
Accrued Vacation Pay
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
$
|
96,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,618,106
|
|
|
$
|
10,618,106
|
|
|
$
|
1,959,222
|
|
|
$
|
12,648,116
|
|
|
$
|
9,694,088
|
|
|
$
|
12,648,116
|
|
|
$
|
11,972,891
|
|
|
$
|
10,454,254
|
|
|
$
|
4,373,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amounts Ms. Wallace would be entitled to receive
pursuant to her employment agreement. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(2) |
|
Represents the amount Ms. Wallace would be entitled to
receive for the 2009 fiscal year pursuant to the
2008-2009
PEP and her employment agreement, which amount is also included
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(3) |
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Ms. Wallaces unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2009 fiscal
year. The $102.00 per share exercise price of 2x Time Options
was greater than the December 31, 2009 fair value price;
therefore, this value does not include Ms. Wallaces
unvested 2x Time Options. |
|
(4) |
|
Reflects the actual lump sum value of the SERP based on the 2009
interest rate of 4.24%. |
|
(5) |
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Ms. Wallace would be
entitled. The value includes $459,093 from the HCA 401(k) Plan
(which represents the value of the Companys contributions)
and $479,186 from the HCA Restoration Plan. |
|
(6) |
|
Reflects the estimated lump sum present value of all future
payments which Ms. Wallace would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 66, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the six-month
elimination period to age 65. |
|
(7) |
|
No post-retirement or post-termination life insurance or death
benefits are provided to Ms. Wallace.
Ms. Wallaces payment upon death while actively
employed includes $701,000 of Company-paid life insurance. |
47
Samuel
N. Hazen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Early
|
|
|
Normal
|
|
|
Without
|
|
|
Termination
|
|
|
for Good
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Cause
|
|
|
for Cause
|
|
|
Reason
|
|
|
Disability
|
|
|
Death
|
|
|
Control
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,278,988
|
|
|
|
|
|
|
$
|
2,278,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
|
|
|
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
|
$
|
1,041,067
|
|
Unvested Stock Options(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,941,691
|
|
SERP(4)
|
|
$
|
6,464,523
|
|
|
|
|
|
|
|
|
|
|
$
|
6,464,523
|
|
|
$
|
6,464,523
|
|
|
$
|
6,464,523
|
|
|
$
|
6,464,523
|
|
|
$
|
6,307,519
|
|
|
|
|
|
Retirement Plans(5)
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
$
|
1,316,591
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability Income(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,362,646
|
|
|
|
|
|
|
|
|
|
Life Insurance Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
789,000
|
|
|
|
|
|
Accrued Vacation Pay
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
$
|
109,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,931,384
|
|
|
$
|
2,466,861
|
|
|
$
|
2,466,861
|
|
|
$
|
11,210,372
|
|
|
$
|
7,890,317
|
|
|
$
|
11,210,372
|
|
|
$
|
11,294,030
|
|
|
$
|
9,563,380
|
|
|
$
|
4,982,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amounts Mr. Hazen would be entitled to receive
pursuant to his employment agreement. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(2) |
|
Represents the amount Mr. Hazen would be entitled to
receive for the 2009 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(3) |
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Hazens unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2009 fiscal
year. The $102.00 per share exercise price of 2x Time Options
was greater than the December 31, 2009 fair value price;
therefore, this value does not include Mr. Hazens
unvested 2x Time Options. |
|
(4) |
|
Reflects the actual lump sum value of the SERP based on the 2009
interest rate of 4.24%. |
|
(5) |
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Hazen would be
entitled. The value includes $540,152 from the HCA 401(k) Plan
(which represents the value of the Companys contributions)
and $776,440 from the HCA Restoration Plan. |
|
(6) |
|
Reflects the estimated lump sum present value of all future
payments which Mr. Hazen would be entitled to receive under
our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 67, and monthly benefits of $10,000 per month from our
Supplemental Insurance Program payable after the
six-month
elimination period to age 65. |
|
(7) |
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Hazen. Mr. Hazens
payment upon death while actively employed with the Company
includes $789,000 of
Company-paid
life insurance. |
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Early
|
|
|
Normal
|
|
|
Without
|
|
|
Termination
|
|
|
for Good
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
Termination
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Cause
|
|
|
for Cause
|
|
|
Reason
|
|
|
Disability
|
|
|
Death
|
|
|
Control
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,653,768
|
|
|
|
|
|
|
$
|
1,653,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(2)
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
|
|
|
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
|
$
|
891,017
|
|
Unvested Stock Options(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,448,985
|
|
SERP(4)
|
|
$
|
6,633,387
|
|
|
|
|
|
|
|
|
|
|
$
|
6,633,387
|
|
|
$
|
6,633,387
|
|
|
$
|
6,633,387
|
|
|
$
|
6,633,387
|
|
|
$
|
6,046,496
|
|
|
|
|
|
Retirement Plans(5)
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
$
|
1,102,803
|
|
|
|
|
|
Health and Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability Income(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,816,956
|
|
|
|
|
|
|
|
|
|
Life Insurance Benefits(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
751,000
|
|
|
|
|
|
Accrued Vacation Pay
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
$
|
93,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,720,670
|
|
|
$
|
2,087,283
|
|
|
$
|
2,087,283
|
|
|
$
|
10,374,438
|
|
|
$
|
7,829,653
|
|
|
$
|
10,374,438
|
|
|
$
|
10,537,626
|
|
|
$
|
8,884,779
|
|
|
$
|
4,340,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents amounts Mr. Rutledge would be entitled to
receive pursuant to his employment agreement. See
Narrative Disclosure to Summary Compensation Table and 2009
Grants of Plan-Based Awards Table Executive
Employment Agreements. |
|
(2) |
|
Represents the amount Mr. Rutledge would be entitled to
receive for the 2009 fiscal year pursuant to the
2008-2009
PEP and his employment agreement, which amount is also included
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. See Narrative
Disclosure to Summary Compensation Table and 2009 Grants of
Plan-Based Awards Table Executive Employment
Agreements. |
|
(3) |
|
Represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Rutledges unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation,
it is assumed that the Company achieved an Investor Return of at
least 2.5 times the Base Price of $51.00 at the end of the 2009
fiscal year. The $102.00 per share exercise price of 2x Time
Options was greater than the December 31, 2009 fair value
price; therefore, this value does not include
Mr. Rutledges unvested 2x Time Options. |
|
(4) |
|
Reflects the actual lump sum value of the SERP based on the 2009
interest rate of 4.24%. |
|
(5) |
|
Reflects the estimated lump sum present value of qualified and
nonqualified retirement plans to which Mr. Rutledge would
be entitled. The value includes $676,161 from the HCA 401(k)
Plan (which represents the value of the Companys
contributions) and $426,642 from the HCA Restoration Plan. |
|
(6) |
|
Reflects the estimated lump sum present value of all future
payments which Mr. Rutledge would be entitled to receive
under our disability program, including five months of salary
continuation, monthly long term disability benefits of $10,000
per month payable after the five-month elimination period until
age 66 and 2 months, and monthly benefits of $10,000
per month from our Supplemental Insurance Program payable after
the six-month elimination period to age 65. |
|
(7) |
|
No post-retirement or post-termination life insurance or death
benefits are provided to Mr. Rutledge.
Mr. Rutledges payment upon death while actively
employed includes $676,000 of Company-paid life insurance and
$75,000 from the Executive Death Benefit Plan. |
49
Jack
O. Bovender, Jr.
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
|
Change in
|
|
|
|
Retirement
|
|
|
Control
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Bonus(1)
|
|
$
|
1,250,000
|
|
|
$
|
1,250,000
|
|
Unvested Stock Options(2)
|
|
$
|
9,854,284
|
|
|
$
|
9,854,284
|
|
SERP(3)
|
|
$
|
26,300,528
|
|
|
|
|
|
Retirement Plans(4)
|
|
$
|
2,884,177
|
|
|
|
|
|
Health and Welfare Benefits(5)
|
|
$
|
6,234
|
|
|
|
|
|
Disability Income
|
|
|
|
|
|
|
|
|
Life Insurance Benefits
|
|
|
|
|
|
|
|
|
Accrued Vacation Pay(6)
|
|
$
|
144,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,439,708
|
|
|
$
|
11,104,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the amount Mr. Bovender received for the 2009
fiscal year pursuant to the
2008-2009
PEP and his Amended Employment Agreement, which amount is also
included in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table. See
Narrative Disclosure to Summary Compensation Table
and 2009 Grants of Plan-Based Awards Table
Mr. Bovenders Employment Agreement. |
|
(2) |
|
For the purposes of the Normal Retirement column,
represents the intrinsic value of all unvested stock options,
which, pursuant to Mr. Bovenders Amended Employment
Agreement, will continue to vest after his retirement,
calculated as the difference between the exercise price of
Mr. Bovenders unvested New Options and 2x Time
Options subject to such continued vesting provision and the fair
value price of our common stock on December 15, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation, it is
assumed that the 2010 and 2011 EBITDA performance targets under
the option awards are achieved by the Company and that the
Company achieves an Investor Return of at least 2.5 times the
Base Price of $51.00 at the end of each of the 2010 and 2011
fiscal years, respectively. The $102.00 per share exercise price
of 2x Time Options was greater than the December 15, 2009
fair value price; therefore, this value does not include
Mr. Bovenders unvested 2x Time Options. See
Compensation Discussion and Analysis
Severance and Change in Control Agreements. |
|
|
|
For purposes of the Change in Control column,
represents the intrinsic value of all unvested stock options,
which will become vested upon the Change in Control, calculated
as the difference between the exercise price of
Mr. Bovenders unvested New Options and the fair value
price of our common stock on December 31, 2009 as
determined by our Board of Directors in consultation with our
Chief Executive Officer and other advisors for internal purposes
($87.99 per share). For the purposes of this calculation, it is
assumed that the Company achieved an Investor Return of at least
2.5 times the Base Price of $51.00 at the end of the 2009 fiscal
year. The $102.00 per share exercise price of 2x Time Options
was greater than the December 31, 2009 fair value price;
therefore, this value does not include Mr. Bovenders
unvested 2x Time Options. |
|
(3) |
|
Reflects the actual SERP lump sum paid in April 2009. |
|
(4) |
|
Reflects the estimated lump-sum present value of qualified and
nonqualified retirement plans to which Mr. Bovender is
entitled as of his retirement date of December 15, 2009.
The value includes $192,126 from the HCA 401(k) Plan (which
represents the value of the Companys contributions) and
$2,692,051 from the HCA Restoration Plan. |
|
(5) |
|
Reflects the present value of the medical premiums for
Mr. Bovender from termination to age 65 as required
pursuant to Mr. Bovenders Amended Employment
Agreement. See Narrative Disclosure to Summary
Compensation Table and 2009 Grants of Plan-Based Awards
Table Mr. Bovenders Employment
Agreement. |
50
|
|
|
(6) |
|
Reflects the actual accrued vacation pay received by
Mr. Bovender in December 2009, which amount is also
included in the Salary column of the Summary
Compensation Table. |
Director
Compensation
During the year ended December 31, 2009, none of our
directors received compensation for their service as a member of
our Board. Our directors are reimbursed for any expenses
incurred in connection with their service. Upon completion of
the anticipated initial public offering of our common stock and listing on the NYSE, we intend to establish a
policy for non-management director compensation consistent with
our status as a public company.
51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2009, the Compensation Committee of the Board of Directors was composed of John P.
Connaughton, George A. Bitar and Michael W. Michelson. Effective April 22, 2009, Mr. Bitar retired
from our Board of Directors, and James D. Forbes joined our Board of Directors and was appointed as
a member of the Compensation Committee. None of the members of the Compensation Committee have at
any time been an officer or employee of HCA or any of its subsidiaries. In addition, none of our
executive officers serves as a member of the board of directors or compensation committee of any
entity which has one or more executive officers serving as a member of our Board of Directors or
Compensation Committee. Each member of the Compensation Committee is also a manager of Hercules
Holding, and the Amended and Restated Limited Liability Company Agreement of Hercules Holding
requires that the members of Hercules Holding take all necessary action to ensure that the persons
who serve as managers of Hercules Holding also serve on our Board of Directors. Messrs. Michelson,
Forbes and Connaughton are affiliated with KKR, BAML Capital Partners (the private equity division
of Bank of America Corporation) and Bain Capital Partners, LLC respectively, each of which is a
party to the sponsor management agreement with us. Mr. Bitar was formerly associated with Merrill
Lynch Global Private Equity. The Amended and Restated Limited Liability Company Agreement of
Hercules Holding, the sponsor management agreement and certain transactions with affiliates of
BAML Capital Partners and KKR are described in greater detail in Certain Relationships and Related
Party Transactions in our 2009 Annual Report on Form 10-K.
HOUSEHOLDING OF MATERIALS
Some banks, brokers, and other nominee record holders may be participating in the
practice of householding information statements. This means that only one copy of this Notice of
Action by Written Consent of Stockholders and information statement may have been sent to multiple
stockholders in your household. If you would prefer to receive separate copies of an information
statement either now or in the future, please contact your bank, broker or other nominee. Upon
written or oral request to the Office of the Corporate Secretary, HCA Inc., One Park Plaza,
Nashville, Tennessee 37203, (615) 344-9551, we will provide a separate copy of the information
statement.
WHERE TO FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange Act and in accordance
therewith, we file annual, quarterly and current reports and other information with the SEC. This
information can be inspected and copied at the Public Reference Room at the SECs office at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Such information may also be accessed
electronically by means of the SECs home page on the internet at http://www.sec.gov. We are an
electronic filer, and the SEC maintains an Internet site at http://www.sec.gov that contains the
reports and other information we file electronically. Our website address is www.hcahealthcare.com.
Please note that our website address is provided as an inactive textual reference only. We make
available free of charge, through our website, our annual report on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the SEC.
The information provided on or accessible through our website is not part of this information
statement.
As a matter of regulatory compliance, we are furnishing you this information statement
which describes the purpose and effect of the approval of the Amended and Restated Certificate of
Incorporation and the Stock Incentive Plan. Your consent to the approval of the Amended and
Restated Certificate of Incorporation and the Stock Incentive Plan is not required and is not being
solicited in connection with this action. This information statement is intended to provide our
stockholders information required by the rules and regulations of the Securities Exchange Act of
1934.
By order of the Board of Directors,
John M. Franck II
Vice President and Corporate Secretary
Nashville, TN
[], 2010
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APPENDIX A
Amended and Restated Certificate of Incorporation
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HCA INC.
HCA INC. (the Corporation), a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify as follows:
FIRST: The name of the Corporation is HCA Inc.
SECOND: The original Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on July 7, 1993 under the name Columbia Healthcare
Corporation. The original Certificate of Incorporation was most recently amended and restated on
March 27, 2008 (the Amended and Restated Certificate of Incorporation).
THIRD: At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, setting forth this Amended and Restated Certificate of Incorporation and declaring this
Amended and Restated Certificate of Incorporation to be advisable. The stockholders of the
Corporation duly approved and adopted this Amended and Restated Certificate of Incorporation by
written consent in accordance with Sections 228, 242, and 245 of the General Corporation Law of the
State of Delaware.
FOURTH: The Amended and Restated Certificate of Incorporation of the Corporation, as
amended, is hereby amended and restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the Corporation is HCA Inc. (hereinafter, the Corporation).
ARTICLE II
REGISTERED OFFICE AND AGENT
The
address of the Corporations registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The nature of the business or purposes to be conducted or promoted is to engage in any lawful
act or activity for which corporations may be organized under the General Corporation Law of the
State of Delaware (the DGCL).
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of capital stock which the Corporation shall have
authority to issue is [Two Billion (2,000,000,000)], of which:
(i) [One Billion Eight Hundred Million (1,800,000,000)] shares shall be shares of common stock, par value $.01 per share (the
Common Stock); and
(ii) [Two Hundred Million (200,000,000)] shares shall be shares of preferred stock, par value $.01 per
share (the Preferred Stock).
Such stock may be issued from time to time by the Corporation for such consideration as may be
fixed by the Board of Directors of the Corporation.
SECTION 1. Stock Split. Upon the filing and effectiveness of this Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of Delaware (the Effective
Time) each outstanding share (including shares held in treasury) of Common Stock of the
Corporation (the Old Common Stock) shall be automatically split up, reclassified and converted
into [___(_)] shares of Common Stock (the New Common Stock). This stock split of the
outstanding shares of Common Stock shall not affect the total number of shares of Common Stock that
the Corporation is authorized to issue, which shall remain as set forth in the first sentence of
this Article IV.
The forward split of the Old Common Stock effected by the foregoing paragraph shall be
referred to herein as the Forward Split. The Forward Split shall occur without any further action
on the part of the Corporation or the holders of shares of New Common Stock and whether or not
certificates representing such holders shares prior to the Forward Split are surrendered for
cancellation. No fractional interest in a share of New Common Stock shall be deliverable upon the
Forward Split. Stockholders who otherwise would have been entitled to receive any fractional
interests in the New Common Stock, in lieu of receipt of such fractional interest, shall be
entitled to receive from the Corporation an amount in cash equal to the fair value of such
fractional interest as of the Effective Time. Except where the context otherwise requires, all
references to Common Stock in this Certificate of Incorporation shall be to the New Common Stock.
The Forward Split will be effected on a stockholder-by-stockholder (as opposed to
certificate-by-certificate) basis. Certificates dated as of a date prior to the Effective Time
representing outstanding shares of Old Common Stock shall, immediately after the Effective Time,
represent a number of shares equal to the same number of shares of New Common Stock as is reflected
on the face of such certificates, multiplied by [___(_)] and rounded down to the nearest whole
number. The Corporation may, but shall not be obliged to, issue new certificates evidencing the
shares of New Common Stock outstanding as a result of the Forward Split unless and until the
certificates evidencing the shares held by a holder prior to the Forward Split are either delivered
to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer
agent that such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss incurred
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by it in connection with such certificates. Every share number, dollar amount and other provision
contained in this Amended and Restated Certificate of Incorporation have been adjusted for the
Forward Split, and there shall be no further adjustments made to such share numbers, dollar amounts
or other provisions, except in the case of any stock splits, stock dividends, reclassifications and
the like occurring after the Effective Time.
SECTION 2. Common Stock. Except as (i) otherwise required by law or (ii) expressly
provided in this Amended and Restated Certificate of Incorporation (as may be amended from time to
time), each share of Common Stock shall have the same powers, rights, and privileges and shall rank
equally, share ratably, and be identical in all respects as to all matters.
(A) Dividends. Subject to applicable law and the rights of the holders of any class
or series of Preferred Stock, and to the other provisions of this Amended and Restated Certificate
of Incorporation (as may be amended from time to time), holders of Common Stock shall be entitled
to receive equally, on a per share basis, such dividends and other distributions in cash,
securities, or other property of the Corporation as may be declared thereon by the Board of
Directors from time to time out of assets or funds of the Corporation legally available therefor.
(B) Voting Rights. At every annual or special meeting of stockholders of the
Corporation, each holder of Common Stock shall be entitled to cast one vote for each share of
Common Stock standing in such holders name on the stock transfer records of the Corporation.
(C) Liquidation Rights. In the event of any liquidation, dissolution, or winding up
of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for
payment of the Corporations debts and amounts payable upon shares of any class or series of
Preferred Stock entitled to a preference, if any, over holders of Common Stock upon such
dissolution, liquidation, or winding up, the remaining net assets of the Corporation shall be
distributed among holders of shares of Common Stock equally on a per share basis. A merger or
consolidation of the Corporation with or into any other corporation or other entity, or a sale or
conveyance of all or any part of the assets of the Corporation (which shall not in fact result in
the liquidation of the Corporation and the distribution of assets to its stockholders) shall not be
deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation
within the meaning of this Paragraph (C).
(D) Conversion Rights. The Common Stock shall not be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of the same class of
the Corporations capital stock.
(E) Preemptive Rights. No holder of Common Stock shall have any preemptive rights
hereunder with respect to the Common Stock or any other securities of the Corporation, or to any
obligations convertible (directly or indirectly) into securities of the Corporation whether now or
hereafter authorized.
SECTION 3. Preferred Stock. The Board of Directors is authorized, subject to
limitations prescribed by law, to provide by resolution or resolutions for the issuance of all or
3
any of the shares of Preferred Stock in one or more class or series, to establish the number
of shares to be included in each such class or series, and to fix the voting powers, designations,
powers, preferences, and relative, participating, optional, or other rights, if any, of the shares
of each such class or series, and any qualifications, limitations, or restrictions thereof
including, without limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at
such times, and payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series; (iii) entitled to such rights upon the dissolution of,
or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other series of the same
or any other class or classes of stock, of the Corporation at such price or prices or at such rates
of exchange and with such adjustments; all as may be stated in such resolution or resolutions.
Irrespective of the provisions of Section 242(b)(2) of the DGCL, the number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of
the Corporation entitled to vote, without the separate vote of the holders of the Preferred Stock
as a class.
ARTICLE V
DURATION
The Corporation is to have perpetual existence.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. Number Of Directors. Subject to any rights of the holders of any class or
series of Preferred Stock to elect additional directors under specified circumstances as set forth
in a certificate of designation relating to any such class or series of Preferred Stock, the number
of directors which shall constitute the Board of Directors shall be not less than three, the exact
number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a
majority of the total number of directors then in office.
SECTION
2. Term of Office. Each director shall hold office for a term expiring at the next annual
meeting of stockholders of the Corporation and until a successor is duly elected and qualified or
4
until his or her earlier death, resignation, disqualification, or removal. Elections of
directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
SECTION 3. Newly-Created Directorships and Vacancies. Subject to the rights of the
holders of any series of Preferred Stock then outstanding, newly created directorships resulting
from any increase in the number of directors or any vacancies in the Board of Directors resulting
from death, resignation, retirement, disqualification, removal from office, or any other cause may
be filled, so long as there is at least one remaining director, only by the Board of Directors,
provided that a quorum is then in office and present, or by a majority of the directors then in
office, if less than a quorum is then in office, or by the sole remaining director. Directors
elected to fill a newly created directorship or other vacancies shall hold office until such
directors successor has been duly elected and qualified or until his or her earlier death,
resignation, disqualification or removal as hereinafter provided.
SECTION 4. Removal of Directors. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any director may be removed from office at any time, either
with or without cause, at a meeting of the stockholders called for that purpose.
SECTION 5. Rights of Holders of Preferred Stock. Notwithstanding the provisions of
this Article VI, whenever the holders of one or more series of Preferred Stock issued by
the Corporation shall have the right, voting separately or together by series, to elect directors
at an annual or special meeting of stockholders, the election, term of office, filling of
vacancies, and other features of such directorship shall be governed by the rights of such
Preferred Stock as set forth in the certificate of designations governing such series.
SECTION 6. Bylaws. The Board of Directors is expressly authorized to make, alter,
amend, change, add to or repeal the Bylaws of the Corporation by the affirmative vote of a majority
of the total number of directors then in office. Prior to the Trigger Date (as defined below), any
amendment, alteration, change, addition or repeal of the Bylaws of the Corporation by the
stockholders of the Corporation shall require the affirmative vote of the holders of a majority of
the outstanding shares of the Corporation entitled to vote on such amendment, alteration, change,
addition or repeal. On or following the Trigger Date, any amendment, alteration, change, addition
or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the
affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of
the Corporation, voting together as a class, entitled to vote on such amendment, alteration,
change, addition or repeal.
For purposes of this Amended and Restated Certificate of Incorporation, (i) Trigger Date
shall mean the first date on which Hercules Holding II, LLC (or its successor) ceases, or in the
event of a liquidation of Hercules Holding II, LLC, the Equity Sponsors (as defined below) and
their affiliates, collectively, cease, to beneficially own (directly or indirectly) shares
representing a majority of the then issued and outstanding shares of Common Stock of the
Corporation (it being understood that the retention of either direct or indirect beneficial
ownership of a majority of the then issued and outstanding shares of Common Stock by Hercules
Holding II, LLC (or its successor) or the Equity Sponsors and their affiliates, as applicable,
shall mean that the Trigger Date has not occurred) and (ii) the Equity Sponsors shall mean each
of
5
Bain
Capital Partners, Kohlberg Kravis Roberts & Co., BAML Capital
Partners,
Citigroup Inc., Bank of America Corporation, and Dr. Thomas F. Frist Jr. and their respective
affiliates, subsidiaries, successors and assignees (other than the Corporation and its
subsidiaries).
ARTICLE VII
LIMITATION OF LIABILITY
To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, no
director of the Corporation shall be liable to the Corporation or its stockholders for monetary
damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders. Any
repeal or modification of this Article VII shall not adversely affect any right or
protection of a current or former director of the Corporation existing at the time of such repeal
or modification.
ARTICLE VIII
INDEMNIFICATION; ADVANCEMENT OF EXPENSES
SECTION 1. Right To Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved (including, without limitation, as a witness) in
any actual or threatened action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including any appeal therefrom (hereinafter a proceeding), by reason of the fact
that he or she is or was, or has agreed to become, a director or officer of the Corporation or,
while a director or officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, employee, or agent of another corporation or of a partnership, limited
liability company, joint venture, trust, or other enterprise, including service with respect to an
employee benefit plan (hereinafter an Indemnitee), shall be indemnified and held harmless by the
Corporation to the full extent authorized by the DGCL, as the same exists or may hereafter be
amended, or by other applicable law as then in effect, against all expense, liability, and loss
(including attorneys fees and related disbursements, judgments, fines, excise taxes and penalties
under the Employee Retirement Income Security Act of 1974, as amended from time to time (ERISA),
other penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or
suffered by such Indemnitee in connection therewith, and such indemnification rights shall continue
as to a person who has ceased to be a director or officer of the Corporation or serving as a
director, officer, employee or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise at the request of the Corporation. Service by a
director or officer of the Corporation shall be deemed to be at the request of the Corporation if
he or she is or was serving as a director, officer, employee, or agent of a subsidiary of the
Corporation or an employee benefit plan of the Corporation or subsidiary of the Corporation.
Notwithstanding the first sentence of this Section 1, except as otherwise provided in Section 3 of
this Article VIII, the Corporation shall be required to indemnify an Indemnitee in
connection with a proceeding (or part thereof) commenced by such Indemnitee only if the
commencement of such proceeding (or part thereof) by the Indemnitee was authorized in advance by
the Corporations Board of Directors.
6
SECTION 2. Advancement Of Expenses. Expenses (including attorneys fees, costs, and
charges) incurred by an Indemnitee in defending a proceeding or, pursuing a claim described in
Section 3 of this Article VIII or the last sentence of Section 1 of this Article
VIII shall be paid by the Corporation in advance of the final disposition of such proceeding,
within twenty (20) days of the Corporations receipt of a request therefor and an undertaking by or
on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately
be determined that such Indemnitee is not entitled to be indemnified by the Corporation.
SECTION 3. Procedure For Indemnification. If a determination is required by the
DGCL, any indemnification (but not advancement of expenses) under this Article VIII (unless
ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the Indemnitee is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the DGCL, as the same exists or
hereafter may be amended. Such determination shall be made with respect to a person who is a
director or officer of the Corporation at the time of such determination (a) by a majority vote of
the directors who are not parties to such proceeding (the Disinterested Directors), even though
less than a quorum, (b) by a committee of Disinterested Directors designated by a majority vote of
Disinterested Directors, even though less than a quorum, (c) if there are no such Disinterested
Directors, or if such Disinterested Directors so direct, by independent legal counsel in a written
opinion, or (d) by the stockholders. Any indemnification under this Article VIII shall be
made promptly, and in any event within sixty (60) days after the Corporations receipt of a written
request therefor, provided that the Corporation shall not be required to pay a claim for
indemnification prior to the final disposition of the proceeding from which the claim arose. The
right to indemnification or advancement of expenses as granted by this Article VIII shall
be enforceable by the Indemnitee in any court of competent jurisdiction, if the Corporation denies
such request, in whole or in part, or if a claim for indemnification or advancement of expenses is
not timely paid in full. Such persons reasonable costs and expenses incurred in connection with
successfully establishing his or her right to indemnification or advancement of expenses, in whole
or in part, in any such action shall also be indemnified by the Corporation. In any such action
the Corporation shall have the burden of proving that the claimant is not entitled to the requested
indemnification or advancement of expenses under applicable law. Neither the failure of the
Corporation (including its Board of Directors, its independent legal counsel, and its stockholders)
to have made a determination prior to the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the DGCL, as the same exists or hereafter may be amended, nor the fact that
there has been an actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct. The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Indemnitee did not act in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
7
SECTION 4. Other Rights; Continuation of Right to Indemnification and Advancement.
The rights to indemnification and advancement of expenses provided by this Article VIII
shall not be deemed exclusive of, and shall be in addition to, any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under any law (common or
statutory), provision of this Amended and Restated Certificate of Incorporation, bylaw, agreement,
vote of stockholders or Disinterested Directors, or otherwise, and shall inure to the benefit of
the estate, heirs, executors, and administrators of such person. All rights to indemnification and
advancement of expenses conferred on any person under this Article VIII shall be deemed to
be contract rights and be retroactive and available with respect to events occurring prior to the
adoption of this Amended and Restated Certificate of Incorporation. Any repeal or modification of
this Article VIII or, to the fullest extent permitted by applicable law, any repeal or
modification of relevant provisions of the DGCL or any other applicable laws shall not in any way
diminish any rights to indemnification or advancement of expenses of such person or the obligations
of the Corporation arising hereunder with respect to any proceeding arising out of, or relating to,
any actions, omissions, transactions, or facts occurring prior to the final adoption of such
modification or repeal. For the purposes of this Article VIII, references to the
Corporation include all constituent corporations (including any constituent of a constituent)
absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that
any person who is or was a director or officer of such a constituent corporation or, while a
director or officer of such constituent corporation, is or was serving at the request of such
constituent corporation as a director, officer, employee, or agent of another corporation,
partnership, limited liability company, joint venture, trust, or other enterprise, shall stand in
the same position under the provisions of this Article VIII, with respect to the resulting
or surviving corporation, as he or she would if he or she had served the resulting or surviving
corporation in the same capacity.
SECTION 5. Insurance. The Corporation may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a director, officer, employee, or agent of the
Corporation or is or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, limited liability company, joint venture,
trust, or other enterprise against any expense, liability, or loss asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her status as such, whether
or not the Corporation would have the power to indemnify such person against such expense,
liability, or loss under the DGCL.
SECTION 6. Reliance. Persons who after the date of the adoption of this Amended and
Restated Certificate of Incorporation become or remain directors or officers of the Corporation or
who, while a director or officer of the Corporation, become or remain a director, officer,
employee, or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to
indemnity, advancement of expenses, and other rights contained in this Article VIII in
entering into or continuing such service. The rights to indemnification and to the advancement of
expenses conferred in this Article VIII shall apply to claims made against an Indemnitee
arising out of acts or omissions that occurred or occur both prior and subsequent to the adoption
hereof.
8
SECTION 7. Savings Clause. If this Article VIII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless (i) indemnify each person entitled to indemnification under the first paragraph of
this Article VIII as to all expense, liability, and loss (including attorneys fees and
related disbursements, judgments, fines, ERISA excise taxes and penalties, other penalties, and
amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such
person and for which indemnification is available to such person pursuant to this Article
VIII and (ii) advance expenses to each Indemnitee entitled to advancement of expenses under
Section 2 of this Article VIII in accordance therewith, in each case to the full
extent permitted by any applicable portion of this Article VIII that shall not have been
invalidated and to the full extent permitted by applicable law.
SECTION 8. Other Sources of Payment. Except as may be otherwise agreed to by the
Corporation and the Indemnitee, in the event of any payment under this Article VIII, the
Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of
such Indemnitee, who shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the Corporation to bring
suit to enforce such rights. Except as may be otherwise agreed to by the Corporation and the
Indemnitee, the Corporation shall not be obligated to an Indemnitee under this Article VIII
to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that such
Indemnitee has otherwise actually received such payment under any insurance policy maintained by
the Corporation, contract, agreement or otherwise, and in the event that the Corporation makes any
payment to an Indemnitee under this Article VIII and such Indemnitee subsequently otherwise
receives such payment under any insurance policy maintained by the Corporation, contract, agreement
or otherwise, such Indemnitee shall promptly refund such amounts to the Corporation. The
Corporations obligations under this Article VIII to an Indemnitee who while a director or
officer of the Corporation is or was serving at the request of the Corporation as a director,
officer, employee or agent of any other corporation, limited liability company, partnership, joint
venture, trust or other enterprise shall be reduced by any amount such Indemnitee has actually
received as indemnification or advancement of expenses from such other corporation, limited
liability company, partnership, joint venture, trust or other enterprise.
SECTION 9. Partial Indemnification. If an Indemnitee is entitled under any provision
of this Article VIII to indemnification by the Corporation for some or a portion of the
expenses (including attorneys fees), judgments, fines or amounts paid in settlement actually and
reasonably incurred by him or her or on his or her behalf in connection with any proceeding, but
not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the
Indemnitee for the portion of such expenses (including attorneys fees), judgments, fines or
amounts paid in settlement to which the Indemnitee is entitled.
SECTION 10. Successful Defense. In the event that any proceeding to which an
Indemnitee is a party is resolved in any manner other than by adverse judgment against the
Indemnitee (including, without limitation, settlement of such proceeding with or without payment of
money or other consideration) it shall be presumed that the Indemnitee has been successful on the
merits or otherwise in such proceeding pursuant to Section 145(c) of the
9
DGCL. Anyone seeking to overcome this presumption shall have the burden of proof and the
burden of persuasion by clear and convincing evidence.
ARTICLE IX
SPECIAL MEETINGS OF STOCKHOLDERS; ADVANCE NOTICE; ACTION BY
WRITTEN CONSENT
Special meetings of stockholders of the Corporation may be called only by either the Board of
Directors pursuant to a resolution adopted by the affirmative vote of the majority of the total
number of directors then in office or by the Chairman of the Board or the Chief Executive Officer
of the Corporation; provided that, prior to the Trigger Date, special meetings of stockholders of
the Corporation may also be called by the Secretary of the Corporation at the request of the
holders of a majority of the outstanding shares of Common Stock. Advance notice of stockholder
nominations for the election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws
of the Corporation. Prior to the Trigger Date, any action required or permitted to be taken at any
annual or special meeting of stockholders of the Corporation may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the books in which
proceedings of meetings of the stockholders are recorded. On or following the Trigger Date, any
action required or permitted to be taken at any annual or special meeting of the stockholders of
the Corporation may be taken only upon the vote of the stockholders at an annual or special meeting
duly called and may not be taken by written consent of the stockholders.
ARTICLE X
CORPORATE OPPORTUNITIES
To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and
its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in,
or in being offered an opportunity to participate in, business opportunities that are from time to
time presented to any of the Equity Sponsors or any of their respective officers, directors,
agents, shareholders, members, partners, affiliates and subsidiaries (other than the Corporation
and its subsidiaries) (each, a Specified Party), even if the opportunity is one that the
Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or
desire to pursue if granted the opportunity to do so and each such Specified Party shall have no
duty to communicate or offer such business opportunity to the Corporation and, to the fullest
extent permitted by applicable law, shall not be liable to the Corporation or any of its
subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by
reason of the fact that such Specified Party pursues or acquires such business opportunity, directs
such business opportunity to another person or fails to present such business opportunity, or
information regarding such business opportunity, to the Corporation or its subsidiaries.
Notwithstanding the
10
foregoing, a Specified Party who is a director or officer of the Corporation and who is offered a
business opportunity expressly in his or her capacity as a director or officer of the Corporation
(a Directed Opportunity) shall be obligated to communicate such Directed Opportunity to the
Corporation; provided, however, that all of the protections of this Article X shall
otherwise apply to the Specified Parties with respect to such Directed Opportunity, including,
without limitation, the ability of the Specified Parties to pursue or acquire such Directed
Opportunity or to direct such Directed Opportunity to another person.
Neither the amendment nor repeal of this Article X, nor the adoption of any provision
of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, nor, to
the fullest extent permitted by Delaware law, any modification of law, shall adversely affect any
right or protection of any person granted pursuant hereto existing at, or arising out of or related
to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption
or modification (regardless of when any proceeding (or part thereof) relating to such event, act or
omission arises or is first threatened, commenced or completed).
If any provision or provisions of this Article X shall be held to be invalid, illegal
or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity,
legality and enforceability of such provisions in any other circumstance and of the remaining
provisions of this Article X (including, without limitation, each portion of any paragraph
of this Article X containing any such provision held to be invalid, illegal or
unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this
Article X (including, without limitation, each such portion of any paragraph of this
Article X containing any such provision held to be invalid, illegal or unenforceable) shall
be construed so as to permit the Corporation to protect its directors, officers, employees and
agents from personal liability in respect of their good faith service to or for the benefit of the
Corporation to the fullest extent permitted by law.
This Article X shall not limit any protections or defenses available to, or
indemnification or advancement rights of, any director or officer of the Corporation under this
Amended and Restated Certificate of Incorporation or applicable law.
Any person or entity purchasing or otherwise acquiring any interest in any securities of the
Corporation shall be deemed to have notice of and to have consented to the provisions of this
Article X.
ARTICLE XI
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any provision contained
in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by the DGCL, and all rights conferred upon stockholders herein are granted subject to
this reservation. Notwithstanding any other provision of this Amended and Restated Certificate of
Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Amended and Restated Certificate of
Incorporation, the Bylaws of the Corporation, or otherwise, but in addition to any
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affirmative vote of the holders of any particular class or series of the capital stock required by
law, this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, or
otherwise, on or following the Trigger Date, the affirmative vote of the holders of at least
seventy-five percent (75%) of the voting power of all outstanding shares of the Corporation
entitled to vote generally in the election of directors, voting together as a single class, shall
be required to adopt any provision inconsistent with, to amend or repeal any provision of, or to
adopt a bylaw inconsistent with, Articles III, V, VI, VII,
VIII, IX, X and XI of this Amended and Restated
Certificate of Incorporation.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation, which restates,
integrates, and amends and restates the Amended and Restated Certificate of Incorporation of the
Corporation, and which has been duly adopted in accordance with Sections 228, 242, and 245 of the
General Corporation Law of the State of Delaware, has been executed on behalf of HCA Inc. by the
undersigned officer, thereunto duly authorized, this ___ day of , 2010.
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HCA INC.
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By: |
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John M. Franck II |
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Vice President Legal and Corporate Secretary |
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APPENDIX B
2006 Stock Incentive Plan for Key Employees of HCA Inc.
and its Affiliates, as Amended and Restated
2006 STOCK INCENTIVE PLAN
FOR KEY EMPLOYEES OF
HCA INC. AND ITS AFFILIATES,
AS AMENDED AND RESTATED
1. Purpose of Plan
The 2006 Stock Incentive Plan for Key Employees of HCA Inc. and its Affiliates, as amended and
restated (the Plan) is designed:
(a) to promote the long term financial interests and growth of HCA Inc. (the Company) and
its Subsidiaries by attracting and retaining management and other personnel and key service
providers with the training, experience and ability to enable them to make a substantial
contribution to the success of the Companys business;
(b) to motivate management personnel by means of growth-related incentives to achieve long
range goals; and
(c) to further the alignment of interests of participants with those of the stockholders of
the Company through opportunities for increased stock, or stock-based ownership in the Company.
2. Definitions
As used in the Plan, the following words shall have the following meanings:
(a) Affiliate means with respect to any Person, any entity directly or indirectly
controlling, controlled by or under common control with such Person.
(b) Board means the Board of Directors of the Company.
(c) Change in Control means in one or more of a series of transactions (i) the
transfer or sale of all or substantially all of the assets of the Company (or any direct or
indirect parent of the Company) to an Unaffiliated Person (as defined below); (ii) a merger,
consolidation, recapitalization or reorganization of the Company (or any direct or indirect parent
of the Company) with or into another Unaffiliated Person, or a transfer or sale of the voting stock
of the Company (or any direct or indirect parent of the Company), an Investor, or any Affiliate of
any of the Investors to an Unaffiliated Person, in any such event that results in more than 50% of
the common stock of the Company (or any direct or indirect parent of the Company) or the resulting
company being held by an Unaffiliated Person; or (iii) a merger, consolidation, recapitalization or
reorganization of the Company (or any direct or indirect parent of the Company) with or into
another Unaffiliated Person, or a transfer or sale by the Company (or any direct or indirect parent
of the Company), an Investor or any Affiliate of any of the Investors, in any such event after
which the Investors and their Affiliates (x) collectively own less than 15% of the Common Stock of
and (y) collectively have the ability to appoint less than 50% of the directors to the Board (or
any resulting company after a merger). For purposes of this definition, the term Unaffiliated
Person means a Person or Group who is not an Investor, an Affiliate of any of the Investors or
an entity in which any Investor holds, directly or indirectly, a majority of the economic interest
in such entity.
(d) Code means the United States Internal Revenue Code of 1986, as amended.
(e) Committee means either (i) the Compensation Committee of the Board or, (ii) the
Board, if the Board takes an action in place of the Compensation Committee.
(f) Common Stock or Share means the common stock, par value $0.01 per
share, of the Company, which may be authorized but unissued, or issued and reacquired.
(g) Employee means a person, including an officer, in the regular employment of the
Company or any other Service Recipient who, in the opinion of the Committee, is, or is expected to
have involvement in the management, growth or protection of some part or all of the business of the
Company or any other Service Recipient.
(h) Exchange Act means the Securities Exchange Act of 1934, as amended.
(i) Fair Market Value means, on a per Share basis, on any given date, the closing
trading price of the Common Stock on the New York Stock Exchange, unless otherwise determined by
the Board.
(j) Grant means an award made to a Participant pursuant to the Plan and described in
Section 5, including, without limitation, an award of a Stock Option, Stock Appreciation Right,
Other Stock-Based Award, Dividend Equivalent Right, Non-Employee Director Grants or
Performance-Based Awards (as such terms are defined in Section 5), or any combination of the
foregoing.
(k) Grant Agreement means an agreement between the Company and a Participant that
sets forth the terms, conditions and limitations applicable to a Grant.
(l) Group means group, as such term is used for purposes of Section 13(d) or 14(d)
of the Exchange Act.
(m) Investors means, collectively, Bain Capital Fund IX, L.P., KKR Millennium Fund,
L.P., and ML Global Private Equity Fund, L.P.
(n) Management Stockholders Agreement shall mean that certain Management
Stockholders Agreement between the applicable Participant and the Company.
(o) Participant means an Employee, non-employee member of the Board, consultant or
other person having a service relationship with the Company or any other Service Recipient, to whom
one or more Grants have been made and remain outstanding.
(p) Person means person, as such term is used for purposes of Section 13(d) or
14(d) of the Exchange Act.
(q) Public Offering means any registered public offering of the Common Stock on the
New York Stock Exchange or the NASDAQ National Market or other nationally recognized stock exchange
or listing system.
(r) Sale Participation Agreement shall mean that certain Sale Participation
Agreement between the applicable Participant and Hercules Holdings II, LLC.
(s) Service Recipient shall mean, the Company, any Subsidiary of the Company, or any
Affiliate of the Company that satisfies the definition of service recipient within the meaning of
Proposed Treasury Regulation Section 1.409A-1(g) (or any successor regulation), with respect to
which the person is a service provider (within the meaning of Proposed Treasury Regulation
Section 1.409A-1(f) (or any successor regulation).
(t) Subsidiary means any corporation or other entity in an unbroken chain of
corporations or other entities beginning with the Company if each of the corporations or other
entities, or group of commonly controlled corporations or other entities, other than the last
corporation or other entity in the unbroken chain then owns stock or other equity interests
possessing 50% or more of the total combined voting power of all classes of stock or other equity
interests in one of the other corporations or other entities in such chain.
3. Administration of Plan
(a) The Plan shall be administered by the Committee, which may delegate its duties and powers
in whole or in part to any subcommittee thereof consisting solely of at least two individuals who
are intended to qualify as Non-Employee Directors within the meaning of Rule 16b-3 under the
Exchange Act (or any successor rule thereto), independent directors within the meaning of the New
York Stock Exchange listed company rules and outside directors within the meaning of Section
162(m) of the Code (or any successor section thereto), to the extent Rule 16b-3 under the Exchange
Act and Section 162(m) of the Code, respectively, are applicable to the Company and the Plan;
provided, however, that the Board may, in its sole discretion, take any action
designated to the Committee under this Plan as it may deem necessary. The Committee may delegate to
the Chief Executive Officer and to other senior officers of the Company its duties under the Plan,
subject to applicable law and such conditions and limitations as the Committee shall prescribe,
except that only the Committee may designate and make Grants to Participants.
(b) The Committee may adopt its own rules of procedure, and action of a majority of the
members of the Committee taken at a meeting, or action taken without a meeting by unanimous written
consent, shall constitute action by the Committee. The Committee shall have the power and authority
to administer, construe and interpret the Plan, and to make rules for carrying it out and to make
changes in such rules. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent the Committee deems necessary or
desirable. Any such interpretations, rules, and administration shall be consistent with the basic
purposes of the Plan. The Committee shall have the full power and authority to establish the terms
and conditions of any Grant consistent with the provisions of the Plan and to waive any such terms
and conditions at any time (including, without limitation, accelerating or waiving any vesting
conditions).
(c) The Committee may employ counsel, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company, and the officers and directors of the Company shall be
entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and
all interpretations and determinations made by the Committee in good faith shall be final and
binding upon all Participants and their beneficiaries or successors. No member of the Committee,
nor employee or representative of the Company shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or the Grants, and all
such members of the Committee, employees and representatives shall be fully protected and
indemnified to the greatest extent permitted by applicable law by the Company with respect to any
such action, determination or interpretation.
4. Eligibility
The Committee may from time to time make Grants under the Plan to such Employees, or other
persons having a relationship with Company or any other Service Recipient, and in such form and
having such terms, conditions and limitations as the Committee may determine. The terms, conditions
and limitations of each Grant under the Plan shall be set forth in a Grant Agreement, in a form
approved by the Committee, consistent, however, with the terms of the Plan; provided,
however, that such Grant Agreement shall contain provisions dealing with the treatment of
Grants in the event of the termination of
employment or other service relationship, death or disability of a Participant, and may also
include provisions concerning the treatment of Grants in the event of a Change in Control of the
Company.
5. Grants
From time to time, the Committee will determine the forms and amounts of Grants for
Participants. Such Grants may take the following forms in the Committees sole discretion:
(a) Stock Options These are options to purchase Common Stock (Stock
Options). At the time of Grant the Committee shall determine, and shall include in the Grant
Agreement or other Plan rules, the option exercise period, the option exercise price, vesting
requirements, and such other terms, conditions or restrictions on the grant or exercise of the
option as the Committee deems appropriate including, without limitation, the right to receive
dividend equivalent payments on vested options. Notwithstanding the foregoing, the exercise price
per Share of a Stock Option shall in no event be less than the Fair Market Value on the date the
Stock Option is granted (subject to later adjustment pursuant to Section 8 hereof). In addition to
other restrictions contained in the Plan, a Stock Option granted under this Section 5(a) may not be
exercised more than 10 years after the date it is granted. Payment of the Stock Option exercise
price shall be made (i) in cash, (ii) with the consent of the Committee, in Shares (any such Shares
valued at Fair Market Value on the date of exercise) having an aggregate Fair Market Value equal to
the aggregate exercise price for the Shares being purchased and that the Participant has held for
at least six months (or such other period of time as may be required to attain tax or financial
reporting treatments that are not considered to be adverse to the Company), (iii) through the
withholding of Shares (any such Shares valued at Fair Market Value on the date of exercise)
otherwise issuable upon the exercise of the Stock Option in a manner that is compliant with
applicable law, (iv) if there is a public market for the Shares at such time, to the extent
permitted by, and subject to such rules as may be established by the Committee, through delivery of
irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to
deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate
exercise price for the Shares being purchased, or (v) a combination of the foregoing methods, in
each such case in accordance with the terms of the Plan, the Grant Agreement and of any applicable
guidelines of the Committee in effect at the time.
(b) Stock Appreciation Rights The Committee may grant Stock Appreciation
Rights (as hereinafter defined) independent of, or in connection with, the grant of a Stock
Option or a portion thereof. Each Stock Appreciation Right shall be subject to such other terms as
the Committee may determine. The exercise price per Share of a Stock Appreciation Right shall in no
event be less than the Fair Market Value on the date the Stock Appreciation Right is granted. Each
Stock Appreciation Right granted independent of a Stock Option shall be defined as a right of a
Participant, upon exercise of such Stock Appreciation Right, to receive an amount equal to the
product of (i) the excess of (A) the Fair Market Value on the exercise date of one Share over (B)
the exercise price per Share of such Stock Appreciation Right, multiplied by (ii) the number of
Shares covered by the Stock Appreciation Right. Payment of the Stock Appreciation Right shall be
made in Shares or in cash, or partly in Shares and partly in cash (any such Shares valued at the
Fair Market Value on the date of the payment), all as shall be determined by the Committee.
(c) Other Stock-Based Awards The Committee may grant or sell awards of Shares,
awards of restricted Shares and awards that are valued in whole or in part by reference to, or are
otherwise based on the Fair Market Value of, Shares (including, without limitation, restricted
stock units). Such Other Stock-Based Awards shall be in such form, and dependent on such
conditions, as the Committee may determine, including, without limitation, the right to receive, or
vest with respect to, one or more Shares (or the equivalent cash value of such Shares) upon the
completion of a specified period of service, the occurrence of an event and/or the attainment of
performance objectives. Other Stock-Based Awards
may be granted alone or in addition to any other Grants under the Plan. Subject to the
provisions of the Plan, the Committee shall determine to whom and when Other Stock-Based Awards
will be made, the number of Shares to be awarded under (or otherwise related to) such Other
Stock-Based Awards; whether such Other Stock-Based Awards shall be settled in cash, Shares or a
combination of cash and Shares; and all other terms and conditions of such awards (including,
without limitation, the vesting provisions thereof and provisions ensuring that all Shares so
awarded and issued shall be fully paid and non-assessable).
(d) Dividend Equivalent Rights The Committee may grant Dividend Equivalent Rights
either alone or in connection with the grant of a Stock Option, SAR, Other Stock Based Award, or
other grant provided for in Section 5(e) below. A Dividend Equivalent Right shall be the right to
receive a payment in respect of one Share (whether or not subject to a Stock Option) equal to the
amount of any dividend paid in respect of one Share held by a shareholder in the Company. Each
Dividend Equivalent Right shall be subject to such terms as the Committee may determine. All
dividend or dividend equivalents which are not paid currently may, at the Committees discretion,
accrue interest, be reinvested into additional Shares, or, in the case of dividends or dividend
equivalents credited in connection with Performance-Based Awards be credited as additional
Performance-Based Awards and paid to the Participant if and when, and to the extent that, payment
is made pursuant to such Grant. The total number of Shares available for grant under Section 6
shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into
additional Shares or credited as Performance-Based Awards.
(e) Director Grants. The Board may provide that all or a portion of any member of the
Boards annual retainer, meeting fees and/or other awards or compensation as determined by the
Board, be payable (either automatically or at the election of such member) in the form of
non-qualified Stock Options, restricted shares, restricted share units and/or Other Stock-Based
Awards, including unrestricted Shares. The Board shall determine the terms and conditions of any
such Grants, including the terms and conditions which shall apply upon a termination of such Board
members service as a member of the Board, and shall have full power and authority in its
discretion to administer such Grants, subject to the terms of the Plan and applicable law.
(f) Performance-Based Awards.
(i) During any period when Section 162(m) of the Code is applicable to the Company and
the Plan, the Committee, in its sole discretion, may grant Grants which are denominated in
Shares or cash (which, for the avoidance of doubt, may include a Grant of Stock Options,
Stock Appreciation Rights, Other Stock-Based Awards or Dividend Equivalent Rights) (such
Grants, Performance-Based Awards), which Grants may, but for the avoidance of
doubt are not required to, be granted in a manner which is intended to be deductible by the
Company under Section 162(m) of the Code (or any successor section thereto). Such
Performance-Based Awards shall be in such form, and dependent on such conditions, as the
Committee shall determine, including, without limitation, the right to receive, or vest with
respect to, one or more Shares or the cash value of the Grant upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of performance
objectives. Performance-Based Awards may be granted alone or in addition to any other
Grants granted under the Plan. Subject to the provisions of the Plan, the Committee shall
determine to whom and when Performance-Based Awards will be made, the number of Shares or
aggregate amount of cash to be awarded under (or otherwise related to) such
Performance-Based Awards, whether such Performance-Based Awards shall be settled in cash,
Shares or a combination of cash and Shares, and all other terms and conditions of such
Grants (including, without limitation, the vesting provisions thereof and provisions
ensuring that all Shares so awarded and issued, to the extent applicable, shall be fully
paid and non-assessable).
(ii) A Participants Performance-Based Award shall be determined based on the
attainment of written performance goals approved by the Committee for a performance period
established by the Committee (A) while the outcome for that performance period is
substantially uncertain and (B) no more than 90 days after the commencement of the
performance period to which the performance goal relates or, if less, the number of days
which is equal to 25 percent of the relevant performance period. The performance goals,
which must be objective, shall be based upon one or more of the following criteria: (i)
consolidated income before or after taxes (including income before interest, taxes,
depreciation and amortization); (ii) EBITDA; (iii) adjusted EBITDA; (iv) operating income;
(v) net income; (vi) net income per Share; (vii) book value per Share; (viii) return on
members or shareholders equity; (ix) expense management; (x) return on investment; (xi)
improvements in capital structure; (xii) profitability of an identifiable business unit or
product; (xiii) maintenance or improvement of profit margins; (xiv) stock price; (xv) market
share; (xvi) revenue or sales; (xvii) costs; (xviii) cash flow; (xix) working capital; (xx)
multiple of invested capital; (xxi) total return; and (xxii) such other objective
performance criteria as determined by the Committee in its sole discretion, to the extent
such criteria would be a permissible performance criteria under Section 162(m) of the Code.
The foregoing criteria may relate to the Company, one or more of its Subsidiaries or one or
more of its or their divisions or units, or any combination of the foregoing, and may be
applied on an absolute basis and/or be relative to one or more peer group companies or
indices, or any combination thereof, all as the Committee shall determine. The Committee
may appropriately adjust any evaluation of performance under criteria set forth in this
Section 5(f) to exclude any of the following events that occurs during a performance period:
(1) gains or losses on sales of assets (2) asset impairments or write-downs, (3) litigation
or claim judgments or settlements, (4) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, (5) accruals for
reorganization and restructuring programs, (6) any extraordinary non-recurring items as
described in Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 225-20 and/or in managements discussion and analysis of financial condition
and results of operations appearing in the Companys annual report to stockholders for the
applicable year, and (7) the effect of adverse or delayed federal, state or local
governmental or regulatory action; provided that the Committee commits to make any such
adjustments within the 90 days following the commencement of each performance period (or
such other time as may be required or permitted by Section 162(m) of the Code).
(iii) The maximum amount of a Performance-Based Award during a fiscal year to any
Participant shall be: (x) with respect to Performance-Based Awards that are denominated in
Shares, 1,000,000 per fiscal year and (y) with respect to Performance-Based
Awards that are denominated in cash, $5,000,000 per fiscal year. To the extent that a
Performance-Based Award may be earned over a period that is longer than one fiscal year, the
foregoing limitations shall apply to each full or partial fiscal year during or in which
such Grant may be earned.
(iv) The Committee shall determine whether, with respect to a performance period, the
applicable performance goals have been met with respect to a given Participant and, if they
have, during any period when Section 162(m) of the Code is applicable to the Company and the
Plan and such Performance-Based Award is intended to be deductible by the Company under
Section 162(m) of the Code, shall so certify and ascertain the amount of the applicable
Performance-Based Award. No Performance-Based Awards will be paid for such performance
period until such certification, to the extent applicable, is made by the Committee. The
amount of
the Performance-Based Award actually paid to a given Participant may be less than the
amount determined by the applicable performance goal formula, at the discretion of the
Committee. The amount of the Performance-Based Award determined by the Committee for a
performance period shall be paid to the Participant at such time as determined by the
Committee in its sole discretion after the end of such performance period; provided,
however, that a Participant may, if and to the extent permitted by the Committee and
consistent with the provisions of Sections 162(m) and 409A of the Code, to the extent
applicable, elect to defer payment of a Performance-Based Award.
6. Limitations and Conditions
(a) The number of Shares available for Grants under this Plan shall be the sum of (i)
[] and (ii) the number of shares available for grant under the Plan as of the end of
the day that is the Effective Date of the amendment and restatement of this Plan, subject to
adjustment as provided for in Sections 8 and 9, unless restricted by applicable law. The number of
Shares with respect to which Incentive Stock Options may be granted after the Effective Date shall
be no more than 1,000,000 per fiscal year. Shares related to Grants that are forfeited,
terminated, settled for cash, canceled without the delivery of Shares, expire unexercised, withheld
to satisfy tax withholding obligations or exercise prices, or are repurchased by the Company shall
immediately become available for new Grants.
(b) Grants may, in the discretion of the Committee, be made under the Plan in assumption of,
or in substitution for, outstanding awards previously granted by the Company or any of its
Subsidiaries or a company acquired by the Company or with which the Company combines. The number
of Shares underlying awards made in assumption of, or in substitution for, outstanding awards
previously granted by a company acquired by the Company or any of its Subsidiaries or with which
the Company or any of its Subsidiaries combines shall not be counted against the aggregate number
of Shares available for Grants under the Plan, nor shall the Shares subject to such substitute
awards become available for new Grants under the circumstances described in the prior paragraph of
this Section 3. In addition, in the event that a company acquired by the Company or any of its
Subsidiaries or with which the Company or any of its Subsidiaries combines has shares available
under a pre-existing plan approved by shareholders and not adopted in contemplation of such
acquisition or combination, the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the entities party to such acquisition or
combination) may be used for Grants and shall not reduce the Shares authorized for issuance under
the Plan; provided that Grants using such available shares shall not be made after the date awards
or grants could have been made under the terms of the pre-existing plan, absent the acquisition or
combination, and shall only be made to individuals who were not employees or directors of the
Company or any of its Subsidiaries prior to such acquisition or combination.
(c) No Grants shall be made under the Plan beyond ten years after the Effective Date, but the
terms of Grants made on or before the expiration of the Plan may extend beyond such expiration. At
the time a Grant is made or amended or the terms or conditions of a Grant are changed in accordance
with the terms of the Plan or the Grant Agreement, the Committee may provide for limitations or
conditions on such Grant.
(d) Nothing contained herein shall affect the right of the Company or any other Service
Recipient to terminate any Participants employment or other service relationship at any time or
for any reason.
(e) Other than as specifically provided in the Management Stockholders Agreement or Sale
Participation Agreement, if applicable to a Grant, no benefit under the Plan shall be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge,
and any attempt to do so shall be void. If no Management Stockholders Agreement or Sale
Participation Agreement is applicable to a Grant, then except as otherwise provided in the Plan, a
Grant Agreement, or by the Committee at or after grant, no Grant shall be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or
the laws of descent and distribution; provided, however, that no such transfer of a Grant
by will or by laws of descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and an authenticated copy of the will
and/or such other evidence as the Committee may deem necessary or appropriate to establish the
validity of the transfer. No benefit under the Plan shall, prior to receipt thereof by the
Participant, be in any manner liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the Participant.
(f) Participants shall not be, and shall not have any of the rights or privileges of,
stockholders of the Company in respect of any Shares purchasable or deliverable in connection with
any Grant unless and until certificates representing any such Shares have been issued by the
Company to such Participants (or book entry representing such Shares has been made and such Shares
have been deposited with the appropriate registered book-entry custodian). All certificates, if
any, evidencing Shares or other securities of the Company delivered under the Plan pursuant to any
Grant or the exercise thereof shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission or other applicable governmental authority,
any stock exchange or market upon which such securities are then listed, admitted or quoted, as
applicable, and any applicable Federal, state or any other applicable laws, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate reference to such
restrictions.
(g) No election as to benefits or exercise of any Grant may be made during a Participants
lifetime by anyone other than the Participant except by a legal representative appointed for or by
the Participant.
(h) Absent express provisions to the contrary, any Grant under this Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any retirement or severance
plan of the Company or other Service Recipient and shall not affect any benefits under any other
benefit plan of any kind now or subsequently in effect under which the availability or amount of
benefits is related to level of compensation. This Plan is not a Retirement Plan or Welfare
Plan under the Employee Retirement Income Security Act of 1974, as amended.
(i) Unless the Committee determines otherwise, no benefit or promise under the Plan shall be
secured by any specific assets of the Company or any other Service Recipient, nor shall any assets
of the Company or any other Service Recipient be designated as attributed or allocated to the
satisfaction of the Companys obligations under the Plan. Neither the Plan nor any Grant shall
create or be construed to create a fiduciary relationship between the Company or any Subsidiary or
Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to
receive payments from the Company or any Subsidiary or Affiliate pursuant to a Grant, such right
shall be no greater than the right of any unsecured general creditor of the Company or any
Subsidiary or Affiliate.
(j) The Committee may, in its sole discretion, specify in any Grant made on or after the
Effective Date of the amendment and restatement of the Plan that the Participants rights,
payments, and benefits shall be subject to reduction, cancellation, forfeiture or recoupment upon
the occurrence of certain specified events, in addition to any otherwise applicable vesting or
performance conditions of a Grant. Such events may include, but shall not be limited to,
termination of Employment for cause, termination of the Participants provision of services to the
Company or any of its Subsidiaries, breach of noncompetition, confidentiality, or other restrictive
covenants that may apply to the Participant, or restatement of the Companys financial statements
to reflect adverse results from those previously released financial statements, as a consequence of
errors, omissions, fraud, or misconduct.
7. Transfers and Leaves of Absence
For purposes of the Plan, unless the Committee determines otherwise: (a) a transfer of a
Participants employment without an intervening period of separation among the Company and any
other Service Recipient shall not be deemed a termination of employment, and (b) a Participant who
is granted in writing a leave of absence or who is entitled to a statutory leave of absence shall
be deemed to have remained in the employ of the Company (and other Service Recipient) during such
leave of absence.
8. Adjustments
In the event after the Effective Date, any Share dividend, Share split, extraordinary
distribution, reorganization, recapitalization, merger, consolidation, spin-off, combination,
combination or transaction or exchange of Shares, any equity restructuring (as defined under FASB
ASC Topic 718) or other corporate change, or any distribution to Shareholders other than regular
cash dividends, or any transaction similar to any of the foregoing, the Committee shall, in an
equitable and proportionate manner as it deems reasonably necessary to address on an equitable
basis the effect of such event, and in such manner as is consistent with Sections 162(m), 422, and
409A of the Code and the regulations thereunder, make such substitution or adjustment, if any, (a)
as to the number and kind of shares subject to the Plan and available for or covered by Grants; (b)
as to share prices related to outstanding Grants (including, without limitation, the exercise price
of Stock Options), or by providing for an equivalent award in respect of securities of the
surviving entity of any merger, consolidation, or other transaction or event having a similar
effect; or (c) by providing for a cash payment to the holder of an outstanding Grant, and shall
make such other revisions to outstanding Grants as it deems, in good faith, are equitably required.
9. Change in Control
(a) Generally. In the event of a Change in Control: (i) if determined by the Committee
in the applicable Grant Agreement or otherwise determined by the Committee in its sole discretion,
any outstanding Grants then held by Participants which are unexercisable or otherwise unvested or
subject to lapse restrictions may automatically be deemed exercisable or otherwise vested or no
longer subject to lapse restrictions, as the case may be, as of immediately prior to such Change in
Control and (ii) the Committee may, to the extent determined by the Committee to be permitted under
Section 409A of the Code, but shall not be obligated to: (A) cancel such awards for fair value (as
determined in the sole discretion of the Committee) which, in the case of Stock Options and Stock
Appreciation Rights, may equal the excess, if any, of the value of the consideration to be paid in
the Change in Control transaction to holders of the same number of Shares subject to such Stock
Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the
Fair Market Value of the Shares subject to such
Stock Options or Stock Appreciation Rights) over the aggregate option price of such Stock
Options or the aggregate exercise price of such Stock Appreciation Rights, as the case may be; (B)
provide for the issuance of substitute awards that will substantially preserve the otherwise
applicable terms of any affected Grants previously granted hereunder, as determined by the
Committee in its sole discretion; or (C) provide that for a period of at least 15 days prior to the
Change in Control, any Stock Options or Stock Appreciation Rights shall be exercisable as to all
Shares subject thereto and that upon the occurrence of the Change in Control, such Stock Options or
Stock Appreciation Rights shall terminate and be of no further force and effect: provided,
however, that subpart (ii) shall not apply to a Change in Control under clause (C) of such
definition that occurs due to a gradual sell down of voting stock of the Company by the Investors
or their Affiliates.
(b) Performance-Based Awards. In connection with the foregoing, the Committee may, in
its discretion, provide that in the event of a Change in Control, (i) any outstanding
Performance-Based Awards relating to performance periods ending prior to the Change in Control
which have been earned but not paid shall become immediately payable and (ii) all then-in-progress
performance periods for Performance-Based Awards that are outstanding shall end, and either (A) any
or all Participants shall be deemed to have earned an award equal to the relevant target award
opportunity for the performance period in question, or (B) at the Committees discretion, the
Committee shall determine the extent to which performance criteria have been met with respect to
each such Performance-Based Award.
10. Amendment and Termination; Section 409A of the Code
(a) The Committee shall have the authority to make such amendments to any terms and conditions
applicable to outstanding Grants as are consistent with this Plan, provided that no
amendment may modify Grants that disadvantages Participants in more than a de minimis way but less
than a material way without approval by a majority of affected Participants; and provided,
further, that no such action shall modify any Grant in a manner that materially
disadvantages a Participant with respect to any outstanding Grants, other than pursuant to Section
8 or 9 hereof, without the Participants consent, except as such modification is provided for or
contemplated in the terms of the Grant or this Plan.
(b) The Board may amend, suspend or terminate the Plan, except that no such action,
other than an action under Section 8 or 9 hereof, may be taken which would, without stockholder
approval, increase the aggregate number of Shares available for Grants under the Plan, decrease the
price of outstanding Grants, change the requirements relating to the Committee, extend the term of
the Plan, or otherwise require the approval of the stockholder of the Company to the extent such
approval is (i) required by or (ii) desirable to satisfy the requirements of, in each case, any
applicable law, regulation or other rule, including, the listing standards of the securities
exchange, which is, at the applicable time, the principal market for the Shares. However, no
amendment, suspension or termination of the Plan may disadvantage Participants in more than a de
minimis way but less than a material way without approval by a majority of affected Participants,
and no such action shall materially disadvantage a Participant with respect to any outstanding
Grants, other than pursuant to Section 8 or 9 hereof, without the Participants consent, except as
otherwise contemplated in the terms of the Grant or the Plan.
(c) This Plan and all Grants granted hereunder are intended to comply with Section 409A of the
Code and will be interpreted in a manner intended to comply with Section 409A of the Code.
References under the Plan or any Grants to the Participants termination of Employment shall be
deemed to refer to the date upon which the Participant has experienced a separation from service
within the meaning of Section 409A of the Code. Notwithstanding anything herein to the contrary,
(a) if at the time of the Participants separation from service with any Service Recipient the
Participant is a specified employee as defined in Section 409A of the Code, and the deferral of
the commencement of any payments or benefits otherwise payable hereunder as a result of such
separation from service is necessary
in order to prevent the imposition of any accelerated or additional tax under Section 409A of
the Code, then the Company will defer the commencement of the payment of any such payments or
benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided
to the Participant) until the date that is six months and one day following the Participants
separation from service with all Service Recipients (or the earliest date as is permitted under
Section 409A of the Code), if such payment or benefit is payable upon a termination of Employment
and (b) if any other payments of money or other benefits due to the Participant hereunder would
cause the application of an accelerated or additional tax under Section 409A of the Code, such
payments or other benefits shall be deferred, if deferral will make such payment or other benefits
compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be
restructured, to the minimum extent necessary, in a manner, reasonably determined by the Board,
that does not cause such an accelerated or additional tax or result in an additional cost to the
Company (without any reduction in such payments or benefits ultimately paid or provided to the
Participant). Unless otherwise provided in a Grant Agreement or any other agreement between the
Company or any of its Subsidiaries and any Participant, the Company shall not be liable to any
Participant for any tax, interest, or penalties that Participant might owe as a result of the
grant, holding, vesting, exercise, or payment of any Grant under the Plan.
11. Governing Law; International Participants
(a) This Plan shall be governed by and construed in accordance with the laws of Delaware
applicable therein.
(b) With respect to Participants who reside or work outside the United States of America, the
Committee may, in its sole discretion, amend the terms of the Plan or awards with respect to such
Participants in order to conform such terms with the requirements of local law or to obtain more
favorable tax or other treatment for a Participant, the Company or any other Service Recipient.
12. Withholding Taxes
The Company shall have the right to deduct from any payment made under the Plan any federal, state
or local income or other taxes required by law to be withheld with respect to such payment. It
shall be a condition to the obligation of the Company to deliver Shares upon the exercise of a
Stock Option that the Participant pays to the Company such amount as may be requested by the
Company for the purpose of satisfying any liability for such withholding taxes; provided,
however, that a Participant may satisfy the statutory amount of such taxes due upon exercise of any
Stock Option through the withholding of Shares (valued at Fair Market Value on the date of
exercise) otherwise issuable upon the exercise of such Stock Option. For awards other than Stock
Options, the Committee may in its discretion permit a Participant to satisfy or arrange to satisfy,
in whole or in part, the tax obligations incident to an Grant by: (a) electing to have the Company
withhold Shares or other property otherwise deliverable to such Participant pursuant to the Grant
(provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary
to satisfy required federal, state local and foreign withholding obligations using the minimum
statutory withholding rates for federal, state, local and/or foreign tax purposes, including
payroll taxes, that are applicable to supplemental taxable income) and/or (b) tendering to the
Company Shares owned by such Participant (or by such Participant and his or her spouse jointly) and
purchased or held for the requisite period of time as may be required to avoid the Companys or the
Affiliates or Subsidiaries incurring an adverse accounting charge, based, in each case, on the
Fair Market Value of the Shares on the payment date as determined by the Committee. All such
elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to
any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
13. Effective Date and Termination Dates
The Plan
shall be effective on [], 2010 (the Effective Date), and shall terminate
ten years later, subject to earlier termination by the Board pursuant to Section 10. Unless
otherwise expressly provided in the Plan or in an applicable Grant Agreement, any Grant made
hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue or terminate any such Grant or to waive any conditions or rights under any such Grant
shall, continue after the tenth anniversary of the Effective Date.