| • | | Communicateo
| communicate directly with any director, including our independent directors, as discussed in this Proxy Statement under “Stockholder“Stockholder Communications”; |
Propose director nominees to the Nominating and Governance Committee; and
Directly submit nominations of director candidates at our annual meetings, subject to the conditions set forth in our By-laws.
| o | propose director nominees to the Nominating and Governance Committee; |
| o | directly submit nominations of director candidates at our annual meetings, subject to the conditions set forth in our By-laws; and |
| o | submit proposals for consideration at our annual meetings. |
We do not have a “poison pill” which would limit the amount of shares any group of stockholders could hold.
Since its founding in 1979 UHS has become one of the largest and most respected hospital management companies in the nation. As a Fortune 500 corporation, with net revenues of approximately $9.0$10.41 billion in annual revenuegenerated during the twelve-month period ended December 31, 2017 that produced net income attributable to UHS of more than $680approximately $752 million, in 2015, UHS subsidiaries ownowned and operate 260operated 326 inpatient acute care and behavioral health care facilities in 37 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and the United Kingdom, and employ more than 74,00083,000 people. Our governance structure has enabled us to grow our 18
business and to succeed despite a rapidly changing landscape and changes in technology, market structure and regulatory regimes. The tenure of our directors enables the Board to provide insight into the rationale and historical context for past decisions and strategies that has allowed us to successfully adapt to our evolving business environment. This continuity increases the full Board’s collective experience, provides new directors the opportunity to learn about our business from the continuing directors and improves the Board’s ability to develop, refine, and execute our long-term strategic plans. All of this is even more important in today’s uncertain environment with increased challenges and opportunities facing companies within the healthcare industry. An abrupt change in the composition of our Board could impair our progress in achieving our strategic goals. The proposal would undermine the important role of the independent Nominating and Governance Committee.Committee. Allowing stockholders to nominate competing candidates for director in our proxy statement would seriously undercut the role of the independent Nominating and Governance Committee and our Board in one of the most crucial elements of corporate governance, the election of directors. An effective Board of Directors is composed of individuals with a diverse and complementary blend of experiences, skills and perspectives. Our independent Nominating and Governance Committee and our Board of Directors are in the best position to assess the particular qualifications of potential director nominees and determine whether they will contribute to an effective and well-rounded Board that operates openly and collaboratively and represents the interests of all stockholders, not just those with special interests. The Nominating and Governance Committee, which is comprised of independent, non-management directors who owe fiduciary duties to act in the best interests of all stockholders, has developed criteria and a process for identifying and recommending director candidates for election by our Class B and D stockholders, which are described in this Proxy Statement under “Committees of the Board of Directors-Nominating and Governance Committee.” As part of this process, stockholders can recommend prospective director candidates for the Nominating and Governance Committee’s consideration. No stockholders have recommended prospective director candidates through this process to date, which we believe reflects the confidence of our stockholders in the nomination process of the Nominating and Governance Committee outlined above. However, any nominee proposed by stockholders for the Committee’s consideration through this process would be evaluated and considered in the same manner as a nominee recommended by a Board member, management, search firm or other source. This process is designed to identify and nominate qualified director candidates who possess a combination of skills, professional experience and diversity of backgrounds necessary to oversee our business and who can contribute to the overall effectiveness of our Board. The Nominating and Governance Committee also carefully reviews and considers the independence of potential nominees. ShareholdersStockholders already have a voice in this process and the ability to nominate potential directors for consideration by the Committee. Through this process, we believe that our Nominating and Governance Committee and Board achieve the optimal balance of directors and best serve the Company and all of our stockholders.
This proxy access proposal would potentially enable a holder, or a group of holders, with ownership of as little as 3% of our outstanding shares to completely bypass this process by placing directly into nomination 19
candidates who may fail to meet the qualifications established by the Board, fail to contribute to the desired mix of perspectives, or fail to represent the interests of stockholders as a whole. In addition, this proposal, if implemented, would allow a constantly shifting alignment of stockholders that have held shares for the requisite three-year period to aggregate their shares to reach this 3% threshold creating a never ending cycle of stockholders seeking to disrupt the Company’s governance. The proposal could have a number of other significant adverse consequences.consequences. In addition to proxy access being unnecessary, the Board believes that proxy access as proposed in this stockholder proposal could have a number of significant adverse consequences and harm the Company and stockholders by: Creating an Uneven Playing Field and Increasing Company Costs. In the absence of proxy access, the playing field is level, in that a stockholder seeking to elect its own nominee to the Board outside of the process of the Nominating and Governance Committee outlined above would, like the Company, need to undertake the expense of preparing proxy materials and soliciting proxies on its nominee’s behalf. We see little reason why a stockholder owning 3% or more of the outstanding shares of the Company (which as of December 31, 2017 constituted approximately $320 million worth of shares) should not, if the stockholder has a legitimate interest in having representation on the Board, bear the expense of preparing proxy materials and soliciting proxies. Moreover, in a contested election resulting from proxy access, we would likely feel compelled to undertake an additional and potentially expensive campaign in support of Board-nominated candidates and inform stockholders of the reasons why we believe the Board-nominated candidates rather than the stockholder nominee(s) should be elected. In this regard, the United States Court of Appeals for the District of Columbia overturned the SEC’s proxy access rule because it determined that the SEC failed to adequately assess the economic effects of the rule, including the expense and distraction that contested director elections arising out of proxy access would entail. | • | | Creating an Uneven Playing Field and Increasing Company Costs. In the absence of proxy access, the playing field is level, in that a stockholder seeking to elect its own nominee to the Board outside of the process of the Nominating and Governance Committee outlined above would, like the Company, need to undertake the expense of preparing proxy materials and soliciting proxies on its nominee’s behalf. We see little reason why a stockholder owning 3% or more of the outstanding shares of the Company (which as of the record date would constitute over $320 million worth of shares) should not, if the stockholder has a legitimate interest in having representation on the Board, bear the expense of preparing proxy materials and soliciting proxies. Moreover, in a contested election resulting from proxy access, we would likely feel compelled to undertake an additional and potentially expensive campaign in support of Board-nominated candidates and inform stockholders of the reasons why we believe the Board-nominated candidates rather than the stockholder nominee(s) should be elected. In this regard, the United States Court of Appeals for the District of Columbia overturned the SEC’s proxy access rule because it determined that the SEC failed to adequately assess the economic effects of the rule, including the expense and distraction that contested director elections arising out of proxy access would entail.
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Increasing the Influence of Special Interest Groups. Proxy access creates the potential for a stockholder with a special interest to use the proxy access process to promote a specific agenda rather than the interests of all stockholders or to extract concessions from the Company related to that stockholder’s special interests, thereby creating the risk of politicizing the Board election process at virtually no cost to the proponent. | • | | Increasing the Influence of Special Interest Groups. Proxy access creates the potential for a stockholder with a special interest to use the proxy access process to promote a specific agenda rather than the interests of all stockholders or to extract concessions from the Company related to that stockholder’s special interests, thereby creating the risk of politicizing the Board election process at virtually no cost to the proponent.
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Encouraging Short-Termism. With proxy access, contested director elections could become routine. The Board believes that the potential for frequent contested elections arising from proxy access would not only be highly distracting to the Board and management, but could also encourage a short-term focus with respect to the management of the business that would not be in the long-term interests of our stockholders. We believe that our Board’s stability has driven, and will continue to drive, long-term value for stockholders who are committed to holding our stock for extended periods. As a testament to this belief, our shares have outperformed leading stock indices by significant margins since our initial public offering in 1981. More recently, since 2000, our stock performance has outperformed the S&P 500 Index by a margin of 5.3 to 1 during the 18-year period ended December 31, 2017. After various stock splits and reinvested dividends are considered, an investor who purchased $1,000 of our Class B Common Stock on January 1, 2000, would have had an investment valued at $13,609 as of December 31, 2017, as compared to $2,579 for a $1,000 investment made in the S&P 500 Index during the same period. | • | | Encouraging Short-Termism. With proxy access, contested director elections could become routine. The Board believes that the potential for frequent contested elections arising from proxy access would not only be highly distracting to the Board and management, but could also encourage a short-term focus with respect to the management of the business that would not be in the long-term interests of our stockholders. We believe that our Board’s stability has driven, and will continue to drive, long-term value for stockholders who are committed to holding our stock for extended periods. As a testament to this belief, our shares have outperformed leading stock indices by significant margins since our initial public offering in 1981. More recently, since 2000, our stock performance has outperformed the S&P 500 Index by a margin of more than 7.5 to 1 during the 16-year period ended December 31, 2015. After various stock splits and reinvested dividends are considered, an investor who purchased $1,000 of our Class B Common Stock on January 1, 2000, would have had an investment valued at $14,249 as
Disrupting Board Operations. Frequent contested director elections arising out of proxy access could also disrupt our Board operations and dynamics in various ways. Abrupt changes in the composition of our Board arising out of proxy access could disrupt continuity on our Board in a manner that could interfere with our ability to develop, refine, monitor and execute our long-term strategic and business plans. In addition, the election of stockholder-nominated directors through proxy access could create factions on the Board, leading to dissension and delay, and thereby potentially preclude the Board’s ability to function effectively and serve the best interests of all our stockholders. Finally, the potential for frequent contested elections arising out of proxy access could hinder collegiality among our Board members by creating the potential for our Board members to be pitted against one another in contested director elections on a regular basis where there would be more nominees up for election than available director positions.
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Discouraging Highly Qualified Director Candidates from Serving. Under the current process overseen by the Nominating and Governance Committee, we have a well-functioning team of directors with a diverse range of expertise and experience. However, the prospect of routinely standing for election in a contested situation may deter highly qualified individuals from Board service. Moreover, the prospect of perennial contested elections may cause incumbent directors to become excessively risk adverse, thereby impairing their ability to provide sound and prudent guidance with respect to our operations and interests. 20
| December 31, 2015, as compared to $1,891 for a $1,000 investment made in the S&P 500 Index during the same period.
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| • | | Disrupting Board Operations. Frequent contested director elections arising out of proxy access could also disrupt our Board operations and dynamics in various ways. Abrupt changes in the composition of our Board arising out of proxy access could disrupt continuity on our Board in a manner that could interfere with our ability to develop, refine, monitor and execute our long-term strategic and business plans. In addition, the election of stockholder-nominated directors through proxy access could create factions on the Board, leading to dissension and delay, and thereby potentially preclude the Board’s ability to function effectively and serve the best interests of all our stockholders. Finally, the potential for frequent contested elections arising out of proxy access could hinder collegiality among our Board members by creating the potential for our Board members to be pitted against one another in contested director elections on a regular basis where there would be more nominees up for election than available director positions.
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| • | | Discouraging Highly Qualified Director Candidates from Serving. Under the current process overseen by the Nominating and Governance Committee, we have a well-functioning team of directors with a diverse range of expertise and experience. However, the prospect of routinely standing for election in a contested situation may deter highly qualified individuals from Board service. Moreover, the prospect of perennial contested elections may cause incumbent directors to become excessively risk adverse, thereby impairing their ability to provide sound and prudent guidance with respect to our operations and interests.
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The Board believes that the current measures the Company employs for the nomination and election of directors, as well as the Company’s stockholder engagement program, have led to a Board that is responsive to stockholder input and promotes a strategy of long-term value creation. Indeed over the years our nominees routinely receive in excess of 90% of all votes cast. While our Board strives to implement corporate governance best practices when appropriate, our Board believes that proxy access would be unnecessary and counterproductive for the Company. Moreover, our Board believes that proxy access could disrupt the functioning of our Board and adversely affect the implementation of our long-term strategy. Finally, while proxy access has been the subject of significant publicity this proxy season,in recent years, proxy access has only been implemented by a relatively small number of U.S. public companies, which we believe creates the potential for other unforeseen problems in light of the complicated issues associated with the implementation of proxy access. For the foregoing reasons, the Board believes that this proposal is not in the best interests of the Company or its stockholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THE SHAREHOLDERSTOCKHOLDER PROPOSAL REGARDING STOCKHOLDER PROXY ACCESS DESCRIBED IN PROPOSAL NO. 3. 21
EXECUTIVE COMPENSATION Compensation Discussion and Analysis Our 20152017 Performance The following are highlights of our 20152017 financial and operating performance: During 2015,2017, our adjusted net income attributable to UHS (see A. below) increased 19% to $692.0$725.5 million, or $6.87$7.53 per diluted share, as compared to $581.8$720.2 million, or $5.78$7.32 per diluted share, during 2014.2016. Our net revenues increased 10.2%6.6% to $9.04$10.41 billion during 20152017 as compared to $8.21$9.77 billion during 2014.2016. Net revenues at our acute care hospitals owned during both years increased 8.7%4.7% during 20152017 as compared to 2014.2016. During 20152017 at these facilities, adjusted admissions (adjusted for outpatient activity) increased 5.4%5.5% and adjusted patient days increased 5.5%2.8% as compared to 2014.2016. Net revenues at our behavioral health care facilities owned during both years increased 5.0%1.7% during 20152017 as compared to 2014.2016. During 20152017 at these facilities, adjusted admissions increased 2.9%2.4% and adjusted patient days increased 1.2%0.2% as compared to 2014.2016. In addition to strong financial performance, we continued to focus on delivering quality care to our patients. The following are a few of the 2015 quality and patient care highlights:highlights achieved in 2017: We invested more than $300 million in our acute care division, and approximately $250 million in our behavioral health care division, to construct, expand, equip and improve our facilities. Our acute care hospital delivered nearly $1.8 billion in uncompensated care. The Joint Commission released its listPatient Safety Index 90 (“PSI-90”) is a composite of Top Performers on Key Quality Measures (based on 2014 performance results)indicators created by the Agency for Healthcare, Research and 46Quality. The PSI-90 provides an overview of hospital level quality as it relates to a set of potentially preventable hospital related events associated with harmful outcomes for patients. Our overall internal data indicates that our facilities were included on the list including 8 acute care hospitals and 38 behavioral health care facilities. Our behavioral health care facilities that achieved this recognition comprised approximately 35% of all freestanding psychiatric facilitiesrealized a 64% improvement in the nation recognized by The Joint Commission.PSI-90 score from 2014 to 2017.
Our inpatient behavioral health care facilities exceeded national averages for quality reporting measures reported to the federalThe Centers for Medicare and Medicaid Services,Services’ inpatient psychiatric facility quality reporting measures compare our facilities to approximately 1,500 providers across the country. Our behavioral health results exceed the average in some cases by more than 25%.8 out of 12 indicators.
More than 318,000 ofIn 2017, patients in our behavioral health care patients participated in the division’s Patient Satisfaction Survey, scoring our behavioral health facilities rated their overall care, on average, as 4.5 out of 5 on each question asked, within our patient satisfaction surveys. More than 92% indicating thatindicated they felt better afterfollowing care at one of our facilities and would refer a friend or family member in need of care.
A. | The adjustedAdjusted net income and adjusted net income per diluted share for 20152017 and 20142016 were publicly disclosed and reconciled to our reported results for each year on the Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information, included with our earnings for the years ended December 31, 20152017 and 2014,2016, as filed on Form 8-K on February 25, 2016.28, 2018. |
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Compensation Philosophy and Objectives Our compensation practices are alignedphilosophy of aligning pay strongly with our philosophy byperformance is grounded in best practices that are regulatory compliant, financially sound and provide long-term value to shareholders and generally include the following:stockholders. Specifically, we: Review peer group market data on an annual basis; Performance discussion is included onDiscuss financial and operational performance rigorously in determining any base salary and incentive decisionsdecisions;
Enforce maximums on incentive payments to limit undue riskrisk; Practices evaluated annuallyEvaluate our compensation practices on an annual basis;
The Compensation Committee seeks guidance fromRetain an independent, outside consultantconsultant;
Do not provide plans generally outside of current market practices, and; Do not offer excessive perquisites to our executives In designing our compensation programs for our named executive officers, we follow our belief that compensation should reflect the value created for stockholders while supporting our strategic business goals. In doing so, our compensation programs reflect the following objectives: Compensation should encourage increases in stockholder value; Compensation programs should support our short-term and long-term strategic business goals and objectives; Compensation programs should reflect and promote our core values set forth in our mission statement, which includes commitment to excellence, high ethical standards, teamwork and innovation; Compensation should reward individuals for outstanding performance and contributions toward business goals, and; Compensation programs should enable us to attract, retain and motivate highly qualified professionals. These objectives govern the decisions that the Compensation Committee of the Board of Directors (the “Compensation Committee”) and management of the Company make with respect to the amount and type of compensation payable to our named executive officers. The Compensation Committee believes that linking executive compensation to corporate performance results in a strong alignment of compensation with corporate business goals and stockholder value. This belief has been adhered to through the use of incentive pay programs that provide competitive compensation and for achieving superior performance. Our compensation programs are designed to reward our employees for outstanding performance and contributions that increase our stock price thereby increasing stockholder value. Both short-term and long-term incentive compensation are based on our performance and thecreating value received byfor stockholders. Executives are rewarded commensurately for the achievement of specified business goals and performance objectives, which may increase the value of our stock. The majority of ourOur compensation programs are reviewed annually to ensure that these objectives continue to be met. 23
Compensation Setting Process The Compensation Committee has traditionally taken into account the input and recommendations of our Chairman and Chief Executive Officer, Mr. Alan Miller, with respect to our compensation programs, including the compensation arrangements with our named executive officers other than himself. The Compensation Committee believes that Mr. Alan Miller, due to his role within the Company, his years of healthcare experience and other factors, as mentioned below, providesis a valuable resource to the Compensation Committee. Mr. Alan Miller attends certain Compensation Committee meetings by invitation, however, he does not have the right to vote on
matters addressed by the Compensation Committee and he does not participate in the discussions with respect to his own compensation. Mr. Alan Miller conducts formal performance evaluations on an annual basis of the named executives who have direct reporting responsibility to him. Unlike our other named executive officers, Mr. Alan Miller’s base salary, minimum annual bonus and certain perquisites are determined under his employment agreement. Please also refer to the discussion of Mr. Alan Miller’s employment agreement in theChief Executive Officer Employment Agreement section of this Proxy Statement. In addition, the compensation setting process for Mr. Alan Miller varies from that of our other named executive officers because it is determined by the Compensation Committee without Mr. Alan Miller’s participation. The Compensation Committee, in determining Mr. Alan Miller’s compensation, takes into account his position as Chief Executive Officer, his role as a founder of our Company in 1978, his years of dedicated service and his expertise and reputation in the hospital management industry. The Compensation Committee also considers Mr. Alan Miller’s responsibilities in overseeing all of our Company’s businesses, operations, development and overall strategy and his role as the public face of our Company, which shapes our corporate image and identity. These factors differentiate Mr. Alan Miller from the other named executive officers. In addition, for Mr. Alan Miller and the Company’s other named executive officers, the Compensation Committee reviewed data prepared in early 20152017 by Pay Governance LLC that compared the Company’s executive compensation levels to data for comparable positions from two reference points: a primary reference of other similar companies within the healthcare industry; and a secondary reference of size-adjusted (by revenues) data from the broader general industry. Data for the primary reference were drawn from publicly filed proxies of peer healthcare companies, and data for the secondary reference were drawn from published compensation surveys covering a range of companies and industries. Data were compiled for all elements of compensation including base salary, annual incentive opportunity, and equity/long-term incentive awards. These data, as well as Company-specific factors including the prior year performance of our executives and the Company’s operating and shareholder return performance relative to our competitors, were considered by the Committee in determining 20152017 compensation rates for Mr. Alan Miller and our other named officers. In light of the above factors, the Compensation Committee approved the base salary, annual cash incentive opportunity, and long-term compensation award to each of the named executive officers in 20152017 and believes that the forms and amounts of compensation for each year adequately reflect our compensation goals and policies. 24
Elements of Compensation Our executive compensation is based on six primary components, each of which is intended to serve the overall compensation objectives. These components include: long-term incentive awards;awards, and; compensation, retirement benefits;benefits and other benefits, including perquisites. Annual Base Salary Our annual base salary levels are intended to be consistent with competitive pay practices and level of responsibility, with salary increases reflecting competitive trends, our overall financial performance, the performance of each individual executive and general economic conditions.
In establishing the base salary for our named executive officers, various criteria are reviewed including the following: the executive officer’s achievements, performance in his or her position with us, taking into account the tenure of service, the complexity of the position and current job responsibilities; Mr. Alan Miller’s recommendations as to the proposed base salary, other than his own; company financial performance, and; salaries of similar positions in our healthcare competitor companies.companies and general industry comparisons. For our named executive officers, an analysis was conducted in 20152017 utilizing the most currently available proxy statements, as filed with the Securities and Exchange Commission, from sixseven companies that we believe are our most direct competitors. We believe these companies, which are indicated below, are comparable peer companies based upon the median revenues of this peer group, which were approximately $12.8$6.3 billion as compared to our 20152017 revenues of $9.0$10.4 billion. The companies are: Acadia Healthcare Company, Inc. Community Health Systems Inc. LifePoint Hospitals, Inc. Tenet Healthcare Corporation In addition, Pay Governance LLC provided assistance in the development of our new equity plan and provided additional market data on competitive levels of incentive plan participation.
For Mr. Alan Miller, his 20152017 base salary exceeded the 75th percentile of the peer group,and general industry groups, due to his long tenure in the position, his value as the Company’s founder, his status within the healthcare industry and his performance. The median years of same company/role experience of other executives in thisthe peer group was 106.2 years compared to Mr. Alan Miller’s 3739 years. For 2015,2017, the actual base salary rates for our named executives (excluding Mr. Alan B. Miller) were within approximately 15% of their respective median base salary market rates (as assessed relative to our peer and general industry groups). For 2017, for our other named executive officers (excluding Mr. Alan Miller), we targeted the median (fiftieth(50th percentile) base salary paid by the comparablepeer companies (listed above), along with the median of broader general industry data, to establish our base market rate. We generally consider our base salaries to be competitive if they are approximately within a 15% range of the median market rate. However, actual base salaries are not dictated solely by the median market rate. We also take into account an individual’s expertise, tenure in the position, responsibilities and achievements. For 2015, the actual base salary rates for Messrs. Marc Miller, Filton, Pember and Ms. Osteen were within approximately 15% of their respective median base salary market rates (as assessed relative to our peer group). Annual Cash Incentives Cash incentives for our named executive officers are awarded under the Executive Incentive Plan, which was adopted by our stockholders at our 2010 Annual Meeting and re-approved by our stockholders at our 2015 Annual Meeting. The Executive Incentive Plan is intended to support our efforts to attract, retain and motivate highly qualified senior management and other executive officers of the Company and its affiliates through the payment of performance-based incentive compensation. Annual incentive compensation may be awarded under the Executive Incentive Plan to our named executive officers and others as selected by the Compensation
Committee for any calendar year. The Compensation Committee believes that the payment of cash incentives to our named executive officers under the Executive Incentive Plan is consistent with the objectives for our compensation programs by rewarding such officers for the achievement of specified business goals and performance objectives and that may increase the value of our stock. The amount of an employee’s cash incentive award for a calendar year is based upon the employee’s target cash incentive and the extent to which the performance goal(s) applicable to the employee are achieved. For each calendar year, an employee’s target cash incentive will be equal to a fixed percentage of the employee’s base salary earned during the year. The Compensation Committee establishes performance goals for the named executive officers using such business criteria and other measures of performance discussed herein; provided that, in the case of incentive 26
awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Compensation Committee will establish objective performance goals based upon one or more of the following business criteria: attainment of certain target levels of, or a specified increase in, after-tax or pre-tax profits; attainment of certain target levels of, or a specified increase in, earnings per diluted share or adjusted earnings per diluted share, and; attainment of certain target levels of, or a specified increase in, return on capital or return on invested capital. In the case of an award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, except as otherwise permitted under Section 162(m) of the Code, the applicable target cash incentive, performance goals and performance factors with respect to any calendar year will be established in writing by the Compensation Committee no later than 90 days after the commencement of that year. Promptly after the date on which the necessary financial or other information for a particular year becomes available, the Compensation Committee will determine the amount, if any, of the cash incentive compensation payable to each participant for that calendar year and will certify in writing prior to payment that the performance goals for the year were in fact satisfied. The maximum incentive award which any participant may earn under the Executive Incentive Plan for any calendar year shall not exceed $5 million. The Executive Incentive Plan provides the Compensation Committee with the discretion to establish higher or lower performance factors for levels of performance that are more or less than the target levels. Performance goals may be adjusted for changes in accounting methods, corporate transactions and other similar types of events, provided that, such adjustment is permitted under Section 162(m) of the Code. 2016On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and 2015Jobs Act of 2017 (the “TCJA-17”). TCJA-17 modifies Section 162(m) removing the exception for performance-based compensation applicable to years beginning after December 31, 2017. This change does not apply to compensation stemming from contracts entered into on or before November 2, 2017, unless such contracts were materially modified on or after that date. Compensation agreements entered into and share-based payment awards granted after this date will be subject to the revised terms of Section 162(m).
2017 Annual Cash Incentive Formula and Performance Goals: The Compensation Committee approved the specific formula for the determination of the target annual cash incentive compensation for our executive officers pursuant to the Executive Incentive Plan with respect to the years ending December 31, 2016 and 2015.2017. Under the formulae approved by the Compensation Committee, each of the Company’s executive officers was assigned a percentage of such executive officer’s base salary as a target bonus to be paid based upon corporateon pre-specified performance
criteria. The corporate performance criteria target bonus award indicated below for Mr. Alan B. Miller is stipulated in his employment agreement dated July 24, 2013. 27
The following table shows each named executive officer’s corporate performance criteria target bonus as a percentage of his or her base salary for 2016 and 2015.2017. With respect to Messrs. Alan B. Miller, Marc D. Miller and Steve G. Filton, 100% of their annual incentive bonus for 2016 and 2015 will be/2017 was determined using the corporate performance criteria, as described below. With respect to Ms. Osteen and Mr. Pember, their 2016 and 2015 annual incentive bonus will be/was determined utilizing: (i) 25% of their annual salaryincentive bonus was based upon the achievement of the corporate performance criteria and; (ii)and 75% of their annual salaryincentive bonus was based upon the achievement of the divisional income targets, as described below. | | | | | | | | | | | Name | | Title | | Target Award
as a % of salary | | | | | 2016 | | | 2015 | | Alan B. Miller | | Chief Executive Officer and
Chairman of the Board | | | 100 | % | | | 100 | % | Marc D. Miller | | President | | | 65 | % | | | 65 | % | Steve G. Filton | | Senior Vice President and
Chief Financial Officer | | | 50 | % | | | 50 | % | Debra K. Osteen | | Senior Vice President and
President, Behavioral
Health Division | | | 50 | % | | | 50 | % | Marvin G. Pember | | Senior Vice President and
President, Acute Care
Division | | | 50 | % | | | 50 | % |
Name | | Title | | Target Incentive Bonus Award as a % of salary | | Alan B. Miller | | Chief Executive Officer and Chairman of the Board | | | 100 | % | Marc D. Miller | | President and Director | | | 65 | % | Steve G. Filton | | Executive Vice President and Chief Financial Officer | | | 50 | % | Debra K. Osteen | | Executive Vice President and President-Behavioral Health Division | | | 50 | % | Marvin G. Pember | | Executive Vice President and President-Acute Care Division | | | 50 | % |
As part of our peer company compensation review for executive officers as discussed above inAnnual Base Salary, we also target the median (fiftieth(50th percentile) market rate from our healthcare peers and the broader general industry data when determining each officer’s target annual incentive. For 2015,2017, our target annual incentive opportunities were assessed as being at or below the market 25th percentile. Actual cash incentive awards, however, appropriately vary from this targeted level based upon performance, consistent with our pay for performance philosophy, and are detailed in the Summary Compensation Table in this Proxy Statement. The Compensation Committee believes that the annual and long-term incentive opportunities offered to our named executive officers are appropriate to facilitate our ability to attract, retain, motivate and reward our named executive officers, and that actual incentive payouts appropriately reflect the Company’s performance. Pursuant to the Plan and the formulae approved by the Compensation Committee, each executive officer is entitled to receive between 0% and 250% of that executive officer’s target bonus based, either entirely or in part, on the Company’s achievement of a combination of: (i) a specified range of target levels of adjusted net income per diluted share attributable to UHS, and; (ii) a specified range of target levels of return on capital (adjusted net income attributable to UHS divided by quarterly average net capital) for the yearsyear ending December 31, 2016 and 2015.2017. The adjusted net income per diluted share attributable to UHS generally excludes, among other things, the impact of the incentive incomedepreciation and incremental expensesamortization expense incurred in connection with the implementation of electronic health records applications at our acute care hospitals, the impact on our provision for income taxes resulting from our adoption of ASU 2016-09 which amended the accounting for employee share-based payment transactions, the impact of the Tax Cuts and Jobs Act of 2017, as well as other amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years.
On March 29, 2017, the Compensation Committee approved specific bonus formulae for the determination of annual incentive compensation for our named executive officers pursuant to the Executive Incentive Plan for the year ending December 31, 2017. Pursuant to the terms of the Executive Incentive Plan for 2017, our named executive officers were eligible to receive the applicable portion of their annual cash incentive (which were based on the corporate performance criteria) at various increments ranging from 0% of their bonus target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $7.22 or less, and Return on Capital of 7.9% or less) up to 250% of their annual cash incentive target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $8.67 or greater and Return on Capital of 9.6% or greater). Although the cash incentive formula in for 2017 was unchanged from 2016’s cash incentive formula, the Targets have been adjusted, as necessary, to correlate to the range of our estimated 2017 adjusted net income per diluted share attributable to UHS, as publicly disclosed. On February 28, 2017, we publicly disclosed our 2017 estimated range of adjusted net income per diluted share attributable to UHS of $7.70 to $8.20. The 2017 Target of adjusted net income per diluted share attributable to UHS, which represented the approximate midpoint within the publicly disclosed range of our projected consolidated earnings per diluted share estimate for the year, was $7.95 per diluted share. The 2017 Return on Capital Target was 8.8%. In July of 2017, and October of 2017, based upon our actual operating results experienced during the first six months of 2017, and the first nine months of 2017, respectively, we publicly disclosed decreases to our previously disclosed estimated range of adjusted net income per diluted share attributable to UHS for 2017; however, our annual incentive performance targets were not impacted by these publicly disclosed revisions. 28
The divisional income targets consist of the projected aggregate pre-tax income for our Acute Care and Behavioral Health Services segments, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The actual divisional income and the targets generally exclude, among other things, amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. The divisional income targets may be adjusted to include the impact of acquisitions or divestitures made during the year, if material. ToFor 2017, to the extent that the actual divisional results exceeded the targets, Ms. Osteen and Mr. Pember arewere entitled to 75% of the following (as applied to their annual base salary) as the portion of their annual bonus that is based upon divisional income targets: (i) 25% if actual results meet divisional income targets; (ii) 50% if actual results exceed divisional income targets by the greater of 5%; or $10 million; (iii) 75% if actual results exceed divisional income targets by the greater of 10%, or $20 million, and; (iv) 100% if actual results exceed divisional income targets by 15%.
The 2015 Targetthe greater of adjusted net income per diluted share attributable to UHS, which represented a specified point within the publicly disclosed range of our projected consolidated earnings per diluted share estimate for the year, was $6.35 per diluted share. The 2015 Return on Capital Target was 9.1%. On February 26, 2015, we publicly disclosed our 2015 estimated range of adjusted net income per diluted share attributable to UHS of $6.15 to $6.55.
In July of 2015, based upon our actual operating results experienced during the first six months of 2015, we publicly disclosed an increase to our 2015 estimated range of adjusted net income attributable to UHS to $6.75 to $7.15 per diluted share. In October of 2015, based upon our actual operating results experienced during the first nine months of 2015, we publicly disclosed a slight reduction to the upper end of the revised range to $7.05 per diluted share from $7.15 per diluted share. For annual cash incentive computation purposes, the above-mentioned 2015 Target of adjusted net income per diluted share attributable to UHS, and the 2015 Return on Capital Target, were not impacted by these publicly disclosed revisions to our annual 2015 estimated range of adjusted net income per diluted share attributable to UHS.
Pursuant to the terms of the Executive Incentive Plan and the formula approved by our Compensation Committee, our named executive officers were eligible to receive the applicable portion of their annual cash incentive (which were based on the corporate performance criteria) at various increments ranging from 0% of their bonus target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $5.7615% or less, and Return on Capital of 8.2% or less) up to 250% of their annual cash incentive target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $6.93 or greater and Return on Capital of 10.0% or greater). Although the cash incentive formula in fiscal year 2015 was unchanged from 2014’s cash incentive formula, the Targets have been adjusted, as necessary, to correlate to the range of our estimated 2015 adjusted net income per diluted share attributable to UHS, as publicly disclosed on February 26, 2015.$30 million.
In determining the corporate and divisional performance criteria, various factors are considered, including the projected revenue and earnings growth over the prior year. Since the value received by stockholders is measured, in large part, by an increase in stock price, which is in turn typically influenced by increases in 29
revenues and earnings, our performance criteria are established at reasonably aggressive levels to encourage the attainment of our financial objectives which, if accomplished, may result in an increase to our stock price and increased value to stockholders. As mentioned above, the corporate performance criteria are established annually and the Target of adjusted net income per diluted share attributable to UHS directly correlates to our annual earnings guidance that is typically publicly disclosed by us during the first quarter of each year. The divisional performance criteria are also established annually and represent each division’s respective portion of the corporate performance criteria.
The actual cash incentives awarded for 20152017 (which were based upon corporate performance criteria) were based upon the achievement of 219%44% of the target, as determined by the Compensation Committee in March 2016,2018, based upon our 20152017 actual operating results. During 2015,2017, our adjusted net income per diluted share attributable to UHS was $6.87.$7.53, as compared to a target of $7.95 per diluted share. This adjusted net income per diluted share attributable to UHS for 20152017 was publicly disclosed and reconciled to our reported 20152017 net income per diluted share attributable to UHS of $6.76,$7.81, on the Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information, included with our earnings for the year ended December 31, 2015,2017, as filed on Form 8-K on February 25, 2016.28, 2018. The Return on Capital was 9.6%8.2% for 2015,2017, as compared to a target of 9.1%8.8%. The Return on Capital is calculated by dividing our annual adjusted net income attributable to UHS by the consolidated average net capital. For 2015,2017, Ms. Osteen’s divisional income target was $301$279 million. The divisional income target consists of the projected aggregate pre-tax income for our Behavioral Health Services segment, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The 2017 actual divisional income, as calculated, was $181 million. If applicable, the divisional income target or the actual divisional income was adjusted to include the impact of acquisitions or divestitures made during the year as well as otherfor certain amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. The 2015 actual divisional income, as calculated, was $334 million. Since the actual divisional income exceededwas less than the divisional target by more than 10% (the $301 million target was exceeded by $33 million, or 11%),income, Ms. Osteen was not entitled to 75% of the portion of her bonus (75%) that was based upon the achievement of the divisional income target. For 2015,2017, Mr. Pember’s divisional income/lossincome target was a loss of $138$61 million. The divisional income/lossincome target consists of the projected aggregate pre-tax income for our Acute Care Services segment, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The actual divisional income/lossincome as calculated, was $67 million. If applicable, the divisional income target or actual divisional income was adjusted for certain amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. The 2015 actual divisional income/loss, as calculated, was a loss of $116 million. Since the actual divisional income/lossincome compared favorably to the target by more than 15% (the $1385% ($67 million actual divisional income exceeded the $61 million divisional income target loss was favorably reduced by $229%), but did not exceed by $10 million or 16%)(exceeded by $6 million), Mr. Pember was entitled to 100%25% of the portion of his bonus (75%) that was based upon the achievement of the divisional income target. The performance goals related to the Executive Incentive Plan, as outlined above, are generally based upon the achievement of our business plan financial objectives. Performance goals are established at reasonably aggressive levels to encourage and motivate executive performance and attainment of our financial objectives. At the time the Compensation Committee approved the Executive Incentive Plan for fiscal years 2016 and 2015year 2017, we 30
believed that the performance goals were attainable, but not certain. Based uponSince the achievement of the corporate performance criteria 219% during 2015, 250% during 2014 and 154% during 2013 of 44% of target for 2017 contrasts with the 85% of target awards were earned showingfor 2016, we believe that our system demonstrates the variability and performance-oriented nature of payouts over time. For a further description of the cash incentives and other elements of compensation granted to our named executive officer for 2015, 20142017, 2016 and 2013,2015, please refer to the Summary Compensation Table in this Proxy Statement. Long-Term Incentives The Compensation Committee believes that the grant of equity-based, long-term compensation, primarily in the form of stock options and restricted shares, to our named executive officers is appropriate to attract motivate and retain such individuals and to motivate them to enhance stockholder value through the use of equity incentive compensation opportunities.value.
Further, long-term incentive awards reward individuals for their performance and achievement of business goals. The Compensation Committee believes that our best interests will be advanced by enabling our named executive officers, thatwho are responsible for our management, growth and success, to receive compensation in the form of long-term incentive awards whichthat may increase in value in conjunction with an increase in the value of our common stock and which will provide our named executive officersstock. As is the case with an incentiverespect to remain in their positions with us. Like base salaries, with respect toa number of factors are taken into account in calibrating grants of long-term incentive awards, including an individual’s performance is reviewed in light of his or her position, responsibilities and contribution to our financial performance. In addition, the Compensation Committee takes into account an individual’s potential contribution to our growth and productivity. ThereIn determining appropriate long-term incentive grants, there is no other predetermined formula, factors or specified list of criteria that is followed.
For a description of the long-term incentive awards granted to our named executive officers for 2015,2017, please read the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement. Stock options. Our Third Amended and Restated 2005 Stock Incentive Plan (the “Stock Incentive Plan”), as amended in 2008, 2011, 2015 and 2011 and 2015,2017, provides for the issuance of options to purchase shares of our Class B Common Stock at an exercise price equal to the fair market value on the date of grant. The Stock Incentive Plan is intended to provide a flexible vehicle through which we may offer equity based compensation incentives to our named executive officers and other eligible personnel in support of our compensation objectives. Awards under the Stock Incentive Plan may be in the form of options to purchase shares of Class B Common Stock (including options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code and options which do not qualify as “incentive stock options”) and stock appreciation rights (“SARs”). Awards may be granted to our present or future employees, our affiliates and our directors and consultants who are not employees. To date, no SARs have been granted. 31
Typically, option awards are granted by the Compensation Committee on specific dates that are scheduled in advance, which generally coincide with regularly scheduled meetings of the Compensation Committee and the Board of Directors. There is no separate policy with respect to the timing of option awards to our named executive officers. Typically, option awards are granted to our named executive officers at the same time as option awards are granted to our other employees. In certain circumstances, such as new hires or promotions, option awards are granted separately by the Compensation Committee or our Chief Executive Officer and Chief Financial Officer who are duly authorized by the Compensation Committee. Subject to the provisions of the Stock Incentive Plan, the Compensation Committee has the responsibility and full power and authority to select the persons to whom awards will be made, to prescribe the terms and conditions of each award and make amendments thereto, to construe, interpret and apply the provisions of the Stock Incentive Plan and of any agreement or other instrument evidencing an award and to make any and all determinations and take any and all other actions as it deems necessary or desirable in order to carry out the terms of the Stock Incentive Plan. The grant of stock options is based primarily on an employee’s level in the organization and their contribution to our growth and profitability. Stock options have such vesting and other terms and conditions as the Compensation Committee, acting in its discretion, may determine. Generally, grants of stock options vest in equal amounts over four years and, unless otherwise determined, employees must be employed by us for such options to vest. We do not have any plan to select option grant dates for our named executive officers in coordination with the release of material non-public information. The exercise price per share of Class B Common Stock covered by an option may not be less than
100% of the fair market value of the underlying Class B Common Stock on the date of grant. For purposes of the Stock Incentive Plan, unless otherwise determined by the Compensation Committee, the fair market value of a share of Class B Common Stock as of any given date is the closing sale price per share reported on a consolidated basis for securities listed on the principal stock exchange or market on which the Class B Common Stock is traded on the date as of which such value is being determined or, if there is no sale on that day, then on the next day on which a sale was reported. In March of 2015,2017, Mr. Alan Miller made recommendations to our Compensation Committee with respect to stock option awards to our named executive officers (except for himself) and other eligible employees. The number of stock options awarded to each of our named executive officers during 2015 was2017 were as follows: Alan B. Miller (590,000); Marc D. Miller (90,000)(103,000); Steve G. Filton (70,000); Debra K. Osteen (70,000); and; Marvin G. Pember (50,000)(60,000). In determining the number of options to award to our named executive officers, the Compensation Committee considered Mr. Alan Miller’s recommendations and took into account individual performance in light of a named executive officer’s position, responsibilities and contribution to our financial performance as well as his or her potential contribution to our growth and productivity. In addition, the Compensation Committee also reviewed and considered the compensation data and competitive performance data prepared by Pay Governance LLC in January 2015, including stock-based compensation, and reviewed historical company practices with respect to stock option and long-term incentive awards. The grant date value of the above-mentioned 2015 stock option awards for Mr. Alan Miller, Mr. Pember and Ms. Osteen exceeded the median and the grants for Mr. Marc Miller and Mr. Filton approximated the median. For a description of the long-term incentive awards granted to our named executive officers in 2015, please see the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement. 32
Additionally, in March of 2016, Mr. Alan Miller made recommendations to our Compensation Committee with respect to stock option awards to our named executive officers (except for himself) and other eligible employees. The number of stock options awarded to each of our named executive officers during 2016 were as follows: Alan B. Miller (590,000); Marc D. Miller (100,000); Steve G. Filton (70,000); Debra K. Osteen (70,000); and; Marvin G. Pember (55,000). In determining the number of options to award to our named executive officers, the Compensation Committee considered Mr. Alan Miller’s recommendations and took into account individual performance in light of a named executive officer’s position, responsibilities and contribution to our financial performance as well as his or her potential contribution to our growth and productivity. In addition, the Compensation Committee also reviewed and considered the compensation data and competitive performance data prepared by Pay Governance LLC in January, 2016,2017, including stock-based compensation, and reviewed historical company practices with respect to stock option and long-term incentive awards.
Restricted Stock Awards. The Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan (the “Restricted Stock Plan”), which is administered by the Compensation Committee, provides for the grant of shares of our Class B Common Stock to eligible personnel for a purchase price equal to par value. Shares of our Class B Common Stock may be granted under the Restricted Stock Plan to any of our employees or consultants. Historically, our restricted grants have had a scheduled vesting period ranging from one to five years. Vesting conditions on shares issued under the Restricted Stock Plan may consist of continuing employment for a specified period of time following the purchase date. Alternatively, or in addition, vesting may be tied to the satisfaction of specific performance objectives established by the Compensation Committee based upon any one or more of the business criteria used in determining the bonuses for our named executive officers, as mentioned above. We have the right to repurchase the shares for the same purchase price (par value) if specified vesting conditions are not met. The Compensation Committee believes restricted stock awards, at times, can be effective in achieving our compensation objectives because it provides employees with a strong retention incentive and aligns the value of the award with our stock price performance. Additionally, cash dividends are paid on all outstanding awards of restricted stock as an additional element of compensation and to provide employees incentives to sustain or increase our performance. We do not have any plan to select restricted stock award grant dates for our named executive officers in coordination with the release of material non-public information. Mr. Alan Miller is entitled to an annual grant of restricted stock having a minimum value of $1.5 million of restricted stock pursuant to his Employment Agreement with the Company
Deferred Compensation Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides that eligible employees may elect to defer a portion of their base salary and bonus award into deferred compensation accounts that accrue earnings based upon the selection of available investment options. An “eligible employee” underUnder the Deferred Compensation Plan, is: (i) an employee whoseis deemed eligible if their base compensation for 2015 is expected to be
2017 was $120,000 or higher and has been approved by our Chief Executive Officer, or; (ii) any other employee who has been approved by our Chief Executive Officer.they are performing duties in a qualified position. The base compensation threshold is adjusted annually for cost-of-living increases. Pursuant to the terms of the Deferred 33
Compensation Plan, the minimum annual amount that can be deferred is $2,000. Prior to January 1, 2016, no more than 25% of an employee’s base salary or 50% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Effective January 1, 2016, noNo more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity). Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. TwoThree of our named executive officers deferred a portion of their base salary and/or bonus paid during 20152017 to the Deferred Compensation Plan. The Compensation Committee believes that, by offering an alternative savings alternativevehicle for our named executive officers, the Deferred Compensation Plan supports our objectives to attract, retain and motivate talented personnel. For a further description of the Deferred Compensation Plan, please refer tothe Nonqualified Deferred Compensationtable and the narrative discussion included in this Proxy Statement. Retirement Benefits Our retirement benefits consist of our Executive Retirement Income Plan and a 401(k) plan. These plans are designed in combination to provide an appropriate level of replacement income upon retirement. The Compensation Committee believes that these retirement benefits provide a balanced and competitive retirement program and support our objectives to attract, retain and motivate talented personnel. Executive Retirement Income Plan. In October 1993, the Board of Directors adopted the Executive Retirement Income Plan, which was closed to new participants effective January 1, 2015. Pursuant to the terms of this plan, certain management or other highly compensated employees, who had been previously designated as plan participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits. The monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the plan before 2008) or age 65 (applicable to participants added to the plan after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Payment of the benefit will be made in 60 monthly installments following the participant’s retirement date. If an employee ceases employment with us prior to the applicable retirement age, or an employee has not completed at least 10 years of active employment with us, no retirement income will be payable to the employee unless the Board of Directors 34
determines otherwise. For a further description of the Executive Retirement Income Plan, please refer to the Pension Benefits Table included in this Proxy Statement. 401(k) Plan. We maintain a 401(k) plan for all employees, including our named executive officers, as an additional source of retirement income. Pursuant to the 401(k) plan, in 2015,2017, we made matching contributions (subject to highly compensated employee limits set by the Internal Revenue Code) to the 401(k) plan of approximately $41$50 million. All of the named executive officers participated in the 401(k) plan in 2015.2017. Accordingly, we made matching contributions equal to $7,950$8,100 to the 401(k) plan for each of the participating named executives.
Benefits Our named executive officers are eligible to participate in the benefit plans generally available to all of our employees, which include health, dental, life insurance, vision and disability plans, all of which the Compensation Committee believes are commensurate with plans of other similarly situated public companies in the hospital management industry. Company Aircraft. We have a partial ownership interest in a fixed wing aircraft that is available for business purpose use by members of our management team, including our named executive officers, and for personal use by Mr. Alan Miller, as stipulated in his employment agreement. When the aircraft is utilized for personal purposes by Mr. Alan Miller and/or his family members, the incremental costs incurred, including the regular hourly charges, variable fuel charges and associated fees and taxes, are directly reimbursed to us by Mr. Alan Miller and therefore no imputed amounts are included in theSummary Compensation Table. Automobile.Automobile. Mr. Alan Miller utilizes his automobiles for both business and personal purposes. As partial reimbursement for his business-related usage, we paid 70% of the cost of a vehicle purchased in 2006 and Mr. Alan Miller paid the remainder. Included in theSummary Compensation Table in “All other compensation” for 2015,2017, is $1,536$980 related maintenance and fuel costs paid by the Company deemed to be related to his personal vehicle use. Reimbursement of Relocation Expenses. In the normal course of business, in an effort to satisfy our staffing needs with high-quality personnel and/or support the career development of an employee by enabling them to assume a position of broader scope and complexity, we may need to place an executive in a position in a geographic location which differs from that in which the individual resides. The relocation benefits for our executives are patterned on standard industry practices and are competitive in design. The provisions for relocation benefits are the same for several of the top layers of management and consistently administered. Included in the relocation benefits are reimbursements or direct payment to vendors for expenses that include items like a short duration house hunting trip, movement of household goods and personal items, short duration of interim living expenses and certain closing costs for the sale and purchase of a house. Relocation reimbursement that is taxable to the individual is typically grossed-up to cover the resulting incremental income tax expense. During 2015,2017, we did not pay any relocation expenses on behalf of our named executive officers. 35
Other Perquisites. From time to time, we make tickets to cultural and sporting events available to our employees, including our named executive officers, for business purposes. If not utilized for business purposes, the tickets are made available to our employees, including our named executive officers, for personal use. Split-Dollar Life Insurance Agreements. In October 1998, we entered into split dollar life insurance agreements, with a combined face value of $16 million, in connection with second to die insurance policies issued on the lives of our chief executive officer, Alan B. Miller and his wife and owned by the Alan B. Miller 1998 Dual Life Insurance Trust (the “1998 Trust”). In January, 2002, we entered into two additional split dollar life insurance agreements, with a combined face value of $30 million, in connection with life insurance policies issued on the life of Alan B. Miller and owned by the Alan B. Miller 2002 Trust (the “2002 Trust”). Anthony Pantaleoni, a director of the Company, is Trustee of the 1998 Trusts and the 2002 Trusts. In December 2010, with assistance from its advisors, the Compensation Committee of the Board of Directors recommended, and theour Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements withon the 1998 Trustlives of our chief executive officer (“CEO”) and the 2002 Trust (collectively, the “Trusts”) previously established by Mr. Miller and which previously owned the policies. The supplemental life agreements replaced the existing arrangements. The supplemental life agreements are intended to constitute a “non-equity endorsement split-dollar arrangement” as defined by Internal Revenue Code and Regulations. In order to effectuate the supplemental life agreements, the Trusts transferred the life insurance policies to the Company in exchange for cancellation of the previously existing split-dollar agreement obligation to repay the Company’s premium advances. This transfer terminated the previously existing split-dollar arrangements.his wife. As a result of these transfers, the Company owns the policies and agreed to endorse a portion of the death benefit to the Trusts. The Company (and the Trusts) agreed to resume making premium payments on the policies, which had been suspended since 2002, with the consent of Mr. Miller, due to uncertainties regarding the legality of the fundings of the previously existing split-dollar arrangements pursuant to the Sarbanes-Oxley Act of 2002. Premium payments will be shared by the Company and the Trusts, with the Trusts’ portion determined under the principles established by applicable U.S. Treasury Department pronouncements, notices, rulings and regulationsagreements, as amended in effect for determining such costs for insurance (the same premium division contemplated in the original arrangement). As a result of these Agreements,October 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, and including amounts paid through 2015, the Companywe would pay approximately $25.3$28 million in premiums, and the Trustscertain trusts owned by our CEO, would pay approximately $8.2$9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, the Companywe will be entitled to receive death benefit proceeds of no less than $33.5approximately $37 million representing the $25.3$28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the Company as well as the $8.2trusts. In connection with these policies, we paid approximately $1.2 million of aggregate premiums paid by the Trusts. The Trusts will receive the remaining death benefit proceeds under the policies.and $1.3 million in premium payments during 2017 and 2016, respectively.
Based on these projections, which are subject to the achievement of certain investment income and life expectancy assumptions, the total economic pre-tax cost to the Company (which includes the projected cost of capital net of the income resulting from the Company’s expected future receipt of the $8.2$9 million of premiums paid by the Trusts) would be $11.3approximately $10 million over the life expectancies of the insureds. During eachWe estimate that our
share of 2015 and 2014, the Company paid approximately $1.3premium payments due on these policies will approximate $1.1 million in premium payments. The Company expects2018 and decrease annually to expend between $1.3 million and $500,000 during eachapproximately $200,000 over the life expectancies of the next ten years and lesser amounts thereafter. All of 36
the Company’sinsureds. Our aggregate premium payments (as well as the Trusts’)Trust’s) are expected to be repaid to the Companyus utilizing the death benefit proceeds. The Company recorded net after-tax income of $232,000 during 2015, $156,000 during 2014 and $86,000 during 2013, in connection with the present value computations related to the Company’s projected premium funding commitment over the terms of the policies and the projected death benefit proceeds due to the Company in the future, as discussed above.
The Compensation Committee has determined to offer the above-described fringe benefits and perquisites in order to attract and retain our named executive officers by offering compensation opportunities that are competitive. In determining the total compensation payable to our named executive officers, for a given fiscal year, the Compensation Committee considers such fringe benefits and perquisites. However, with the exception of the above-mentioned split dollar life insurance agreements related to Mr. Alan B. Miller, given the fact that such other fringe benefits and perquisites, which are available to our named executive officers, represent a relatively insignificant portion of their total compensation, they do not materially influence the decisions made by the Compensation Committee with respect to other elements of each individual’s total compensation. For a further description of the fringe benefits and perquisites received by our named executive officers during 2015,2017, please refer to theAll Other Compensation table included in this Proxy Statement. Rewards/Compensation Risk Analysis: As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The review found that there were no excessive risks encouraged by the Company’s reward programs and the rewards programs do not produce payments that have a material impact on the financial performance of the organization. Approximately 465500 employees (including the named executive officers) of our 52,400approximate 55,000 full-time employees (comprising 0.8%approximately 1% of our full-time employees) have incentive plans that entitle those individuals to larger bonus awards if profitability increases. However, although the plans are based on profitability, the bonus awards for these employees are capped at specific award levels (typically at 125% or less of base salary). Therefore, should our profitability increase, even by significant amounts, we do not believe the additional aggregate bonus awards would have a material unfavorable impact on our future results of operations. Tax Considerations Our chief executive officer, our chief financial officer and the next three most highly compensated officers are referred to herein as the named executive officers. For years beginning prior to January 1, 2018, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) placesplaced a limit of $1 million on the amount of compensation we may deduct for federal income tax purposes in any one year with respect to our named executive officers with the exception of our chief financial officer. However,officer however, performance-based compensation that meetsmet certain requirements is excluded from this $1 million limitation. On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA-17”). TCJA-17 modifies Section 162(m) by (1) expanding which employees are considered covered employees by including the chief financial officer applicable to years beginning after December 31, 2017, (2) providing that if an individual is a covered employee for a year beginning after December 31, 2016, the individual remains a covered employee for all future years, and (3) removing the exceptions for performance-based compensation applicable to years beginning after December 31, 2017. These changes do not apply to compensation stemming from contracts entered into on or before November 2, 2017, unless such contracts were materially modified on or after that date. Compensation agreements entered into and share-based payment awards granted after this date will be subject to the revised terms of Section 162(m).
In reviewing the effectiveness of the executive compensation program, the Compensation Committee considers the anticipated tax treatment to us and to the named executive officers of various payments and 37
benefits. However, the deductibility of certain compensation payments depends upon the timing of an executive’s vesting or exercise of previously granted awards, as well as interpretations and changes in the tax laws and other factors beyond the Compensation Committee’s control. For these and other reasons, including to maintain flexibility in compensating the named executive officers in a manner designed to promote varying corporate goals, the Compensation Committee willdid not necessarily, or in all circumstances, limit executive compensation to that which is deductible under Section 162(m) of the Code and hashad not adopted a policy requiring all compensation to be deductible. The Compensation Committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives. The portion of Mr. Alan Miller’s 2015 base salary exceeding $1 million will not be deductible by virtue of Section 162(m) of the Code.
Summary The foregoing discussion describes the compensation objectives and policies that were utilized with respect to our named executive officers during 2015 and 2016.2017. In the future, as the Compensation Committee continues to review each element of the executive compensation program with respect to our named executive officers, the objectives of our executive compensation program, as well as the methods that the Compensation Committee utilizes to determine both the types and amounts of compensation to award to our named executive officers, may change. Compensation Committee Report The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. COMPENSATION COMMITTEE Robert H. Hotz Lawrence S. Gibbs Elliot J. Sussman, M.D. John H. Herrell Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Directors is composed of Robert H. Hotz, Lawrence S. Gibbs, Elliot J. Sussman and John H. Herrell. All the members of the Compensation Committee are independent directors and no member has ever been one of our officers or employees or had a relationship with us that required disclosure.
38
SUMMARY COMPENSATION TABLE The following table sets forth certain compensation information for our Chief Executive Officer, our Chief Financial Officer and the other most highly compensated executive officers for services rendered to UHS and its subsidiaries during the past three fiscal years. We refer to these officers collectively as our named executive officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and principal
position | | Year | | | Salary ($) | | | Bonus
($) | | | Grant
Date Fair
Value
Stock
Awards
($) | | | Grant
Date Fair
Value
Option
Awards
(2.) ($) | | | Non-Equity
Incentive Plan
Compensation
(3.) ($) | | | Change in
Pension
Value and
Nonqualified
Deferred
Compen-
sation
Earnings (4.)
($) | | | All
other
compen-
sation
(6.) ($) | | | Total ($) | | Alan B. Miller,
Chairman of the
Board and Chief
Executive
Officer | | | 2015 | | | $ | 1,568,310 | | | $ | 0 | | | | 1,500,022 | (1). | | $ | 12,553,430 | | | $ | 3,434,599 | | | $ | 49,722 | | | $ | 1,370,948 | | | $ | 20,477,031 | | | | | 2014 | | | | 1,537,560 | | | | 0 | | | | 1,500,004 | (1). | | | 10,098,440 | | | | 3,843,900 | | | | 48,748 | | | | 1,396,923 | | | | 18,425,575 | | | | | 2013 | | | | 1,500,058 | | | | 0 | | | | 0 | | | | 7,846,233 | | | | 2,310,089 | | | | 79,913 | | | | 1,414,824 | | | | 13,151,117 | | Marc D. Miller,
President and
Director | | | 2015 | | | $ | 695,027 | | | $ | 0 | | | $ | 0 | | | $ | 1,914,930 | | | $ | 989,371 | | | $ | 46,133 | | | $ | 13,877 | | | $ | 3,659,338 | | | | | 2014 | | | | 666,692 | | | | 0 | | | | 0 | | | | 1,540,440 | | | | 1,083,375 | | | | 98,957 | | | | 14,189 | | | | 3,403,653 | | | | | 2013 | | | | 644,692 | | | | 0 | | | | 0 | | | | 1,196,883 | | | | 645,337 | | | | 30,960 | | | | 421 | | | | 2,518,293 | | Steve G. Filton,
Senior Vice
President, Chief
Financial Officer
and Secretary | | | 2015 | | | $ | 566,022 | | | $ | 0 | | | $ | 0 | | | $ | 1,489,390 | | | $ | 619,794 | | | $ | 29,305 | | | $ | 17,443 | | | $ | 2,721,954 | | | | | 2014 | | | | 546,321 | | | | 0 | | | | 0 | | | | 1,198,120 | | | | 682,901 | | | | 32,993 | | | | 17,293 | | | | 2,477,628 | | | | | 2013 | | | | 525,320 | | | | 0 | | | | 0 | | | | 930,909 | | | | 404,496 | | | | 25,358 | | | | 8,542 | | | | 1,894,625 | | Debra K. Osteen,
Senior Vice
President and
President,
Behavioral Health
Division | | | 2015 | | | $ | 620,024 | | | $ | 0 | | | $ | 0 | | | $ | 1,489,390 | | | $ | 518,495 | | | $ | 28,315 | | | $ | 17,115 | | | $ | 2,673,339 | | | | | 2014 | | | | 601,023 | | | | 0 | | | | 0 | | | | 1,198,120 | | | | 413,203 | | | | 26,616 | | | | 16,965 | | | | 2,255,927 | | | | | 2013 | | | | 583,517 | | | | 0 | | | | 0 | | | | 930,909 | | | | 331,146 | | | | 21,337 | | | | 8,510 | | | | 1,875,419 | | Marvin G. Pember,
Senior Vice
President and
President, Acute
Care Division | | | 2015 | | | $ | 599,210 | | | $ | 0 | | | $ | 0 | | | $ | 1,063,850 | | | $ | 613,441 | | | $ | 0 | | | $ | 17,697 | | | $ | 2,294,198 | | | | | 2014 | | | | 581,823 | | | | 0 | | | | 0 | | | | 855,800 | | | | 618,187 | | | | 0 | | | | 17,547 | | | | 2,073,357 | | | | | 2013 | | | | 575,022 | | | | 1,000,000 | (5.) | | | 0 | | | | 664,935 | | | | 110,692 | | | | 0 | | | | 8,971 | | | | 2,359,620 | |
Name and principal position | | Year | | Salary ($) | | | Bonus ($) | | | Grant Date Fair Value Stock Awards (1.) ($) | | | Grant Date Fair Value Option Awards (2.) ($) | | | Non-Equity Incentive Plan Compensation (3.) ($) | | | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings (4.) ($) | | | All other compen- sation (5.) ($) | | | Total ($) | | Alan B. Miller, Chairman of the Board and Chief Executive Officer | | 2017 | | $ | 1,635,063 | | | $ | 0 | | | $ | 2,000,060 | | | $ | 15,978,734 | | | $ | 719,428 | | | $ | 43,407 | | | $ | 1,254,169 | | | $ | 21,630,861 | | | | 2016 | | | 1,600,061 | | | | 0 | | | | 1,500,069 | | | | 14,024,359 | | | | 1,360,053 | | | | 44,599 | | | | 1,338,607 | | | | 19,867,748 | | | | 2015 | | | 1,568,310 | | | | 0 | | | | 1,500,022 | | | | 12,553,430 | | | | 3,434,599 | | | | 49,722 | | | | 1,370,948 | | | | 20,477,031 | | Marc D. Miller, President and Director | | 2017 | | $ | 752,216 | | | $ | 0 | | | $ | 0 | | | $ | 2,789,508 | | | $ | 215,134 | | | $ | 43,152 | | | $ | 15,285 | | | $ | 3,815,295 | | | | 2016 | | | 720,861 | | | | 0 | | | | 0 | | | | 2,377,010 | | | | 398,276 | | | | 30,819 | | | | 14,107 | | | | 3,541,073 | | | | 2015 | | | 695,027 | | | $ | 0 | | | | 0 | | | | 1,914,930 | | | | 989,371 | | | | 46,133 | | | | 13,877 | | | | 3,659,338 | | Steve G. Filton, Executive Vice President, Chief Financial Officer and Secretary | | 2017 | | $ | 608,518 | | | $ | 0 | | | $ | 0 | | | $ | 1,895,782 | | | $ | 133,874 | | | $ | 30,290 | | | $ | 17,593 | | | $ | 2,686,057 | | | | 2016 | | | 584,606 | | | | 0 | | | | 0 | | | | 1,663,907 | | | | 248,458 | | | | 18,688 | | | | 17,443 | | | | 2,533,102 | | | | 2015 | | | 566,022 | | | | 0 | | | | 0 | | | | 1,489,390 | | | | 619,794 | | | | 29,305 | | | | 17,443 | | | | 2,721,954 | | Debra K. Osteen, Executive Vice President and President, Behavioral Health Division | | 2017 | | $ | 662,788 | | | $ | 0 | | | $ | 0 | | | $ | 1,895,782 | | | $ | 36,453 | | | $ | 39,420 | | | $ | 17,637 | | | $ | 2,652,080 | | | | 2016 | | | 638,025 | | | | 0 | | | | 0 | | | | 1,663,907 | | | | 67,790 | | | | 28,200 | | | | 17,114 | | | | 2,415,036 | | | | 2015 | | | 620,024 | | | | 0 | | | | 0 | | | | 1,489,390 | | | | 518,495 | | | | 28,315 | | | | 17,115 | | | | 2,673,339 | | Marvin G. Pember, Executive Vice President and President, Acute Care Division | | 2017 | | $ | 643,451 | | | $ | 0 | | | $ | 0 | | | $ | 1,624,956 | | | $ | 156,037 | | | $ | 0 | | | $ | 17,847 | | | $ | 2,442,291 | | | | 2016 | | | 618,502 | | | | 0 | | | | 0 | | | | 1,307,356 | | | | 529,592 | | | | 0 | | | | 17,926 | | | | 2,473,376 | | | | 2015 | | | 599,210 | | | | 0 | | | | 0 | | | | 1,063,850 | | | | 613,441 | | | | 0 | | | | 17,697 | | | | 2,294,198 | |
(1.) | Represents the grant date fair value of award made during 20152017, 2016 and 20142015 under the 2010 Amended and Restated Employees’ Restricted Stock Purchase Plan (the “2010 Plan”). The 20152017, 2016 and 20142015 awards are scheduled to vest ratably over a four-year period. Dividends declared by the Company are paid with respect to outstanding shares of restricted stock. |
39
(2.) | Represents grant date fair value of $27.08 in 2017, $23.77 in 2016 and $21.28 in 2015 for awards made pursuant to our Amended and Restated 2005 Stock Incentive Plan. For the assumptions used for the fair value valuations, please refer to Note 5—Common Stock, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended December 31, 2015, 20142017, 2016 and 2013.2015. |
(3.) | Reflects the dollar value of annual bonuses earned during each of the last three years pursuant to the terms of our Executive Incentive Plan as approved by our Compensation Committee on March 27, 2018 (for 2017), March 29, 2017 (for 2016) and March 23, 2016 (for 2015), March 18, 2015 (for 2014) and on March 26, 2014 (for 2013). As a percentage of each individual’s annual base salary, the bonus amounts earned were as follows: Alan B. Miller 44% in 2017, 85% in 2016 and 219% in 2015, 250% in 2014 and 154% in 2013;2015; Marc D. Miller 29% in 2017, 55% in 2016 and 142% in 2015, 163% in 2014 and 100% in 2013;2015; Steve G. Filton 22% in 2017, 43% in 2016 and 110% in 2015, 125% in 2014 and 77% in 2013;2015; Debra K. Osteen 6% in 2017, 11% in 2016 and 84% in 2015, 69% in 2014 and 57% in 2013, and; Marvin G. Pember 24% in 2017, 86% in 2016 and 102% in 2015, 106% in 2014 and 19% in 2013.2015. |
(4.) | These amounts represent the aggregate change in the present value that accrued for each named executive in 2015, 20142017, 2016 and 20132015 under the UHS Executive Retirement Plan. The amounts in this column do not reflect compensation deferrals pursuant to our Nonqualified Deferred Compensation Plan since there are no contributions or benefits provide by us in connection with the plan. |
(5.) | The $1 million supplemental cash compensation payment for Mr. Marvin Pember was paid in August, 2013, the second anniversary date of his employment. This supplemental compensation payment was intended to compensate Mr. Pember for a deferred compensation arrangement with his previous employer that he forfeited upon resignation. |
(6.) | Components of All Other Compensation are as follows: |
ALL OTHER COMPENSATION TABLE | Name | | Year | | | Perquisites
and Other
Personal
Benefits
($) (1.) | | | Tax
Reimbur-
sements
($) (2.) | | | Insurance
Premiums
($) (3.) | | | Company
Contributions
to Retirement and
401(k) Plans ($) | | | Dividends
Paid on
Unvested
Stock | | | Total ($) | | | Year | | Perquisites and Other Personal Benefits ($) (1.) | | | Tax Reimbur- sements ($) (2.) | | | Insurance Premiums ($) (3.) | | | Company Contributions to Retirement and 401(k) Plans ($) | | | Dividends Paid on Unvested Stock | | | Total ($) | | Alan B. Miller | | | 2015 | | | $ | 46,391 | | | $ | 0 | | | $ | 1,306,534 | | | $ | 7,950 | | | $ | 10,073 | | | $ | 1,370,948 | | | 2017 | | $ | 46,605 | | | $ | 0 | | | $ | 1,185,260 | | | $ | 8,100 | | | $ | 14,204 | | | $ | 1,254,169 | | | | | 2014 | | | | 45,004 | | | | 0 | | | | 1,334,303 | | | | 7,800 | | | | 9,816 | | | | 1,396,923 | | | | | | 2013 | | | | 47,846 | | | | 0 | | | | 1,351,442 | | | | 7,650 | | | | 7,886 | | | | 1,414,824 | | | 2016 | | | 46,986 | | | | 0 | | | | 1,271,403 | | | | 7,950 | | | | 12,268 | | | | 1,338,607 | | | | | 2015 | | | 46,391 | | | | 0 | | | | 1,306,534 | | | | 7,950 | | | | 10,073 | | | | 1,370,948 | | Marc D. Miller | | | 2015 | | | $ | 230 | | | $ | 0 | | | $ | 5,697 | | | $ | 7,950 | | | $ | 0 | | | $ | 13,877 | | | 2017 | | $ | 1,488 | | | $ | 0 | | | $ | 5,697 | | | $ | 8,100 | | | $ | 0 | | | $ | 15,285 | | | | | 2014 | | | | 692 | | | | 0 | | | | 5,697 | | | | 7,800 | | | | 0 | | | | 14,189 | | | 2016 | | | 460 | | | | 0 | | | | 5,697 | | | | 7,950 | | | | 0 | | | | 14,107 | | | | | 2013 | | | | 421 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 421 | | | 2015 | | | 230 | | | | 0 | | | | 5,697 | | | | 7,950 | | | | 0 | | | | 13,877 | | | Steve G. Filton | | | 2015 | | | $ | 0 | | | $ | 0 | | | $ | 9,493 | | | $ | 7,950 | | | $ | 0 | | | $ | 17,443 | | | 2017 | | $ | 0 | | | $ | 0 | | | $ | 9,493 | | | $ | 8,100 | | | $ | 0 | | | $ | 17,593 | | | | | 2014 | | | | 0 | | | | 0 | | | | 9,493 | | | | 7,800 | | | | 0 | | | | 17,293 | | | | | | 2013 | | | | 0 | | | | 0 | | | | 892 | | | | 7,650 | | | | 0 | | | | 8,542 | | | 2016 | | | 0 | | | | 0 | | | | 9,493 | | | | 7,950 | | | | 0 | | | | 17,443 | | | | | 2015 | | | 0 | | | | 0 | | | | 9,493 | | | | 7,950 | | | | 0 | | | | 17,443 | | Debra K. Osteen | | | 2015 | | | $ | 0 | | | $ | 0 | | | $ | 9,165 | | | $ | 7,950 | | | $ | 0 | | | $ | 17,115 | | | 2017 | | $ | 372 | | | $ | 0 | | | $ | 9,165 | | | $ | 8,100 | | | $ | 0 | | | $ | 17,637 | | | | | 2014 | | | | 0 | | | | 0 | | | | 9,165 | | | | 7,800 | | | | 0 | | | | 16,965 | | | 2016 | | | 0 | | | | 0 | | | | 9,165 | | | | 7,950 | | | | 0 | | | | 17,115 | | | | | 2013 | | | | 421 | | | | 0 | | | | 439 | | | | 7,650 | | | | 0 | | | | 8,510 | | | 2015 | | | 0 | | | | 0 | | | | 9,165 | | | | 7,950 | | | | 0 | | | | 17,115 | | | Marvin G. Pember | | | 2015 | | | $ | 900 | | | $ | 0 | | | $ | 8,847 | | | $ | 7,950 | | | $ | 0 | | | $ | 17,697 | | | 2017 | | $ | 900 | | | $ | 0 | | | $ | 8,847 | | | $ | 8,100 | | | $ | 0 | | | $ | 17,847 | | | | | 2014 | | | | 900 | | | | 0 | | | | 8,847 | | | | 7,800 | | | | 0 | | | | 17,547 | | | 2016 | | | 1,130 | | | | 0 | | | | 8,847 | | | | 7,950 | | | | 0 | | | | 17,927 | | | | | 2013 | | | | 1,321 | | | | 0 | | | | 0 | | | | 7,650 | | | | 0 | | | | 8,971 | | | 2015 | | | 900 | | | | 0 | | | | 8,847 | | | | 7,950 | | | | 0 | | | | 17,697 | |
Amounts for Mr. Miller consist of the following: (i) $25,000 for professional tax services; (ii) $15,713 for payment of country club dues; (iii) $1,306 for accounting services; (iv) $2,806 for maintenance on personal residence; (v) $980 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $500 for sporting event tickets paid for by us. Amount for Mr. Marc D. Miller consists of $1,488 for sporting event tickets paid for by us. Amount for Ms. Debra K. Osteen consists of $372 for sporting event tickets paid for by us. Amount for Mr. Marvin G. Pember consist of $900 for cell phone stipend. 2016: Amount for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $14,990 for payment of country club dues; (iii) $2,642 for accounting services; (iv) $2,740 for maintenance on personal residence; (v) $854 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $460 for sporting event tickets paid for by us. Amount for Mr. Marc D. Miller consists of $460 for sporting event tickets paid for by us. Amount for Mr. Marvin G. Pember consist of: (i) $900 cell phone stipend, and; (ii) $230 for sporting event tickets paid for by us. 2015: Amount for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $13,846 for payment of country club dues; (iii) $2,548 for accounting services; (iv) $2,707 for maintenance on
personal residence; (v) $1,530 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $460 for sporting event tickets paid for by us. Amount for Mr. Marc D. Miller consists of $230 for sporting event tickets paid for by us. Amount for Mr. Marvin G. Pember consist of a $900 cell phone stipend. 40
2014:
Amount for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $14,075 for payment of country club dues; (iii) $2,686 for accounting services; (iv) $2,545 for maintenance on personal residence; (v) $167 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $231 for sporting event tickets paid for by us.
Amount for Mr. Marc D. Miller consists of $692 for sporting event tickets paid for by us.
Amount for Mr. Marvin G. Pember consist of a $900 cell phone stipend.
2013:
Amount for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $12,025 for payment of country club dues; (iii) $2,866 for accounting services; (iv) $3,948 for maintenance on personal residence; (v) $3,286 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $421 for sporting event tickets paid for by us.
Amount for Mr. Marc D. Miller and Ms. Debra K. Osteen consists of $421 each for sporting event tickets paid for by us.
Amount for Mr. Marvin G. Pember consist of: (i) $421 for sporting event tickets paid for by us, and; (ii) $900 cell phone stipend.
(2.) | There were no reimbursements for taxes during 2015, 20142017, 2016 or 2013.2015. |
(3.) | Amounts for Messrs. Marc. D. Miller, Steve G. Filton and Marvin G. Pember and Ms. Osteen consist of premiums paid in connection with long term disability coverage. |
Amounts for Mr. Alan B. Miller consist of: (i) $1,173,435 in 2017, $1,259,578 in 2016 and $1,294,709 in 2015, $1,322,392 in 2014 and $1,344,683 in 2013, of premium payments made in connection with split-dollar-life insurance agreements, as discussed inSplit Dollar Life Insurance Agreement, included herein, and; (ii) $11,825 in 2015, $11,911 in 2014each of 2017, 2016 and $6,759 in 20132015 of premiums paid in connection with long term disability coverage.
41
GRANTS OF PLAN-BASED AWARDS The following table provides information regarding plan-based awards granted during fiscal year 20152017 to our named executive officers. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other Stock | | | | | | | | | | | | | | | | | | Name | | Approval /
Grant
Date | | | Estimated Future
Payouts Under
Non-Equity Incentive Plan
Awards (1.) | | Estimated Future
Payouts Under
Equity Incentive Plan
Awards | | All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
Units
(3.) (#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(4.) (#) | | | Exercise
or
Base
Price
of
Option
Awards
($ /Sh) | | | Grant
Date
Fair
Value of
Stock
and Option
Awards (5.)
($) | | | Closing
Price
on
Grant
Date
($ / Sh) | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | All Other | | | Exercise | | | Grant | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number | | | Option | | | or | | | Date | | | | | | | | | | | Estimated Future | | | Estimated Future | | of | | | Awards: | | | Base | | | Fair | | | Closing | | | | | | | Payouts Under | | | Payouts Under | | Shares | | | Number of | | | Price | | | Value of | | | Price | | | | | | | Non-Equity Incentive Plan | | | Equity Incentive Plan | | of | | | Securities | | | of | | | Stock | | | on | | | | | Approval/ | | Awards (1.) | | | Awards | | Stock or | | | Underlying | | | Option | | | and Option | | | Grant | | | | | Grant | | Threshold | | | Target | | | Maximum | | | Threshold | | Target | | Maximum | | Units | | | Options | | | Awards | | | Awards (5.) | | | Date | | Name | | Approval /
Grant
Date | | | Threshold
($) (2.) | | Target
($) (2.) | | Maximum
($) (2.) | | Threshold
($) | | Target
($) | | Maximum
($) | | All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
Units
(3.) (#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(4.) (#) | | | Exercise
or
Base
Price
of
Option
Awards
($ /Sh) | | | Grant
Date
Fair
Value of
Stock
and Option
Awards (5.)
($) | | | Closing
Price
on
Grant
Date
($ / Sh) | | | Date | | ($) (2.) | | | ($) (2.) | | | ($) (2.) | | | ($) | | ($) | | ($) | | (3.) (#) | | | (4.) (#) | | | ($ /Sh) | | | ($) | | | ($ / Sh) | | | | $ | 78,416 | | | $ | 1,568,310 | | | $ | 3,920,775 | | | | | | | | | | 3/29/2017 | | $ | 81,753 | | | $ | 1,635,063 | | | $ | 4,087,658 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/18/2015 | | | | | | | | | | | | | | | | 12,789 | | | | | | | $ | 1,500,022 | | | $ | 117.29 | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | 16,057 | | | | | | | | | | | $ | 2,000,060 | | | $ | 124.56 | | | | | 3/18/2015 | | | | | | | | | | | | | | | | — | | | | 590,000 | | | $ | 117.29 | | | $ | 12,553,430 | | | $ | 117.29 | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | — | | | | 590,000 | | | $ | 124.56 | | | $ | 15,978,734 | | | $ | 124.56 | | | Marc D. Miller | | | 3/18/2015 | | | $ | 22,588 | | | $ | 451,768 | | | $ | 1,129,419 | | | | | | | | | | | | | | | | | | | 3/29/2017 | | $ | 24,447 | | | $ | 488,940 | | | $ | 1,222,351 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/18/2015 | | | | | | | | | | | | | | | | — | | | | 90,000 | | | $ | 117.29 | | | $ | 1,914,930 | | | $ | 117.29 | | | | | | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | — | | | | 103,000 | | | $ | 124.56 | | | $ | 2,789,508 | | | $ | 124.56 | | Steve G. Filton | | | 3/18/2015 | | | $ | 14,151 | | | $ | 283,011 | | | $ | 707,528 | | | | | | | | | | | | | | | | | | | 3/29/2017 | | $ | 15,213 | | | $ | 304,259 | | | $ | 760,648 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/18/2015 | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 117.29 | | | $ | 1,489,390 | | | $ | 117.29 | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 124.56 | | | $ | 1,895,782 | | | $ | 124.56 | | | Debra K. Osteen | | | 3/18/2015 | | | $ | 3,875 | | | $ | 193,758 | | | $ | 658,776 | | | | | | | | | | | | | | | | | | | 3/29/2017 | | $ | 4,142 | | | $ | 207,121 | | | $ | 704,212 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/18/2015 | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 117.29 | | | $ | 1,489,390 | | | $ | 117.29 | | | | | | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 124.56 | | | $ | 1,895,782 | | | $ | 124.56 | | Marvin G. Pember | | | 3/18/2015 | | | $ | 3,745 | | | $ | 187,253 | | | $ | 636,661 | | | | | | | | | | | | | | | | | | | 3/29/2017 | | $ | 4,022 | | | $ | 201,078 | | | $ | 683,667 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/18/2015 | | | | | | | | | | | | | | | | — | | | | 50,000 | | | $ | 117.29 | | | $ | 1,063,850 | | | $ | 117.29 | | | 3/29/2017 | | | | | | | | | | | | | | | | | | | | | — | | | | 60,000 | | | $ | 124.56 | | | $ | 1,624,956 | | | $ | 124.56 | |
(1.) | Pursuant to the Executive Incentive Plan and the formula approved by the Compensation Committee, each named executive officer is entitled to receive between 0% and 250% of that executive officer’s target bonus based, either entirely or in part, on our achievement of certain corporate and divisional performance criteria. As discussed in theCompensation Discussion and Analysis, with respect to Messrs. Alan B. Miller, Marc D. Miller and Steve G. Filton, 100% of their 20152017 annual incentive bonus was determined using certain corporate performance criteria, and with respect to Ms. Osteen and Mr. Pember, their 20152017 annual incentive bonus was determined utilizing: (i) 25% of their annual salary based upon the achievement of certain corporate performance criteria, and; (ii) 75% of their annual salary based upon the achievement of certain divisional income targets. |
(2.) | Estimates calculated based upon 20152017 salaries. |
(3.) | Restricted shares of Class B Common Stock issued under the Company’s Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan. |
(4.) | Stock option awards issued on March 18, 201529, 2017 were issued under our Third Amended and Restated 2005 Stock Incentive Plan. |
(5.) | Represents the full grant date fair value for the stock awards and option awards, calculated in accordance with ASC 718 as described in our Form 10-K for the year ended December 31, 2015.2017. |
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Chief Executive Officer Employment Agreement As discussed in theCompensation Discussion and Analysis, unlike our other named executive officers, Mr. Alan Miller’s compensation is determined in large part by the terms of his employment agreement. Mr. Miller’s base salary, minimum annual bonus and certain perquisites are determined under his employment agreement. On July 24, 2013, we entered into an employment agreement with Alan B. Miller (effective July 1, 2013) that provides that Mr. Miller will continue to serve as Chief Executive Officer and Chairman of our Board of Directors through December 31, 2017, and subject further to automatic annual renewal for one additional year unless either party elects otherwise. Mr. Miller’s employment agreement was automatically renewed for one year through December 31, 2019. Mr. Alan Miller participates in benefit plans and programs that are made available to other employees and he receives certain executive perquisites, including, but not limited to, split dollar life insurance benefits, payment of certain automobile costs, payment of country club dues, tax and accounting services, use of a private plane for personal purposes for up to 60 hours per year, subject to reimbursement by Mr. Alan Miller of the incremental costs incurred at market rates, and such other fringe benefits as the Compensation Committee of our Board of Directors may determine (as discussed in theCompensation Discussion and Analysis). Mr. Alan Miller’s salary as our Chief Executive Officer will be $1,600,000$1,665,000 for 20162018 which is a 2.0%1.8% increase over his 20152017 salary. Mr. Miller is also entitled to an annual bonus opportunity target equal to 100% of his salary. The amount of the annual bonus for any year may be more or less than the target amount and will be determined by the Board of Directors in accordance with pre-established performance measures. In addition to the stock options and/or restricted stock granted to Mr. Alan Miller during the years discussed above in theCompensation Discussion and Analysis-Restricted Stock Awards and Stock Options, he was also eligible to receive awards under our long-term incentive plan(s), including shares of restricted stock. For a further description of the employment agreement, please refer to thePotential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Miller, please refer to theCompensation Discussion and Analysis section above. Chief Executive Officer Restricted Stock Grants in 2016, 20152017 and 20142016 Pursuant to Mr. Alan Miller’s employment agreement, in March of 2017, 2016 2015 and 2014,2015, as indicated below, the Compensation Committee approved the issuance of restricted shares of our Class B Common Stock to Mr. Alan Miller pursuant to the Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan. TheseThe restricted shares eachissued in March, 2017 had a market value of which$2.0 million and the shares issued in March, 2016 had a market value of $1.5 million on the date of grant,grant. Each of these restricted stock grants have a vesting schedule of 25% on each of the first, second, third and fourth anniversaries of the grant date. The forfeiture of these shares prior to the vesting dates are determined pursuant to the terms set forth in the Restricted Stock Purchase Agreement. Dividends declared by the Company are paid with respect to outstanding shares of restricted stock. 16,057 restricted shares of our Class B Common Stock issued on March 29, 2017 (grant date market value of $124.56 per share) 12,646 restricted shares of our Class B Common Stock issued on March 23, 2016 (grant date market value of $118.62 per share).
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12,789 restricted shares of our Class B Common Stock issued on March 18, 2015 ((grant date market value of $117.29 per share).
19,189 restricted shares of our Class B Common Stock issued on March 26, 2014 ((grant date market value of $78.17 per share).
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 20152017 The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2015.2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Option Awards (1.) | | | Stock Awards (2.) | | | | Number of
Securities
Underlying
Unexercised
Options (#) | | | Number of
Securities
Underlying
Unexercised
Options (#) | | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | | Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($) (3.) | | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) | | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($) | | | | Exercisable | | | Unexercisable | | | | | | | | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 27,181 | | | $ | 3,247,858 | | | | 0 | | | | 0 | | | | | 442,500 | | | | 147,500 | | | | 0 | | | $ | 36.95 | | | | 01/17/2017 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 295,000 | | | | 295,000 | | | | 0 | | | $ | 53.38 | | | | 01/15/2018 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 147,500 | | | | 442,500 | | | | 0 | | | $ | 78.17 | | | | 03/25/2019 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 590,000 | | | | 0 | | | $ | 117.29 | | | | 03/17/2020 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Marc D. Miller | | | 45,000 | | | | 22,500 | | | | 0 | | | $ | 36.95 | | | | 01/17/2017 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 45,000 | | | | 45,000 | | | | 0 | | | $ | 53.38 | | | | 01/15/2018 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 22,500 | | | | 67,500 | | | | 0 | | | $ | 78.17 | | | | 03/25/2019 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 90,000 | | | | 0 | | | $ | 117.29 | | | | 03/17/2020 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Steve G. Filton | | | 52,500 | | | | 17,500 | | | | 0 | | | $ | 36.95 | | | | 01/17/2017 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 35,000 | | | | 35,000 | | | | 0 | | | $ | 53.38 | | | | 01/15/2018 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 17,500 | | | | 52,500 | | | | 0 | | | $ | 78.17 | | | | 03/25/2019 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 117.29 | | | | 03/17/2020 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Debra K. Osteen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 17,500 | | | | 0 | | | $ | 36.95 | | | | 01/17/2017 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 35,000 | | | | 35,000 | | | | 0 | | | $ | 53.38 | | | | 01/15/2018 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 17,500 | | | | 52,500 | | | | 0 | | | $ | 78.17 | | | | 03/25/2019 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 117.29 | | | | 03/17/2020 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Marvin G. Pember | | | 15,000 | | | | 0 | | | | 0 | | | $ | 38.12 | | | | 08/10/2016 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 12,500 | | | | 12,500 | | | | 0 | | | $ | 36.95 | | | | 01/17/2017 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 12,500 | | | | 25,000 | | | | 0 | | | $ | 53.38 | | | | 01/15/2018 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 12,500 | | | | 37,500 | | | | 0 | | | $ | 78.17 | | | | 03/25/2019 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 50,000 | | | | 0 | | | $ | 117.29 | | | | 03/17/2020 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
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| | Option Awards (1.) | | Stock Awards (2.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incentive | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plan | | | Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | Plan | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | Number | | | Awards: | | | | | | | | | | | | Incentive | | | | | | | | | Number | | | | | | | of | | | Market or | | | | | | | | | | | | Plan | | | | | | | | | of | | | Market | | | Unearned | | | Payout | | | | | | | | | | | | Awards: | | | | | | | | | Shares | | | Value of | | | Shares, | | | Value of | | | | | | | | | | | | Number of | | | | | | | | | or Units | | | Shares | | | Units or | | | Unearned | | | | Number of | | | Number of | | | Securities | | | | | | | | | of Stock | | | or Units | | | Other | | | Shares, | | | | Securities | | | Securities | | | Underlying | | | | | | | | | That | | | of Stock | | | Rights | | | Units or | | | | Underlying | | | Underlying | | | Unexercised | | | Option | | | | | Have | | | That | | | That | | | Other Rights | | | | Unexercised | | | Unexercised | | | Unearned | | | Exercise | | | Option | | Not | | | Have Not | | | Have Not | | | That Have | | | | Options (#) | | | Options (#) | | | Options | | | Price | | | Expiration | | Vested | | | Vested | | | Vested | | | Not Vested | | Name | | Exercisable | | | Unexercisable | | | (#) | | | ($) | | | Date | | (#) | | | ($) (3.) | | | (#) | | | ($) | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | 36,735 | | | $ | 4,163,912 | | | | 0 | | | | 0 | | | | | 442,500 | | | | 147,500 | | | | 0 | | | $ | 78.17 | | | 03/25/2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 295,000 | | | | 295,000 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 147,500 | | | | 442,500 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 590,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marc D. Miller | | | 67,500 | | | | 22,500 | | | | 0 | | | $ | 78.17 | | | 03/25/2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 45,000 | | | | 45,000 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 25,000 | | | | 75,000 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 103,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Steve G. Filton | | | 52,500 | | | | 17,500 | | | | 0 | | | $ | 78.17 | | | 03/25/2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 35,000 | | | | 35,000 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 17,500 | | | | 52,500 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debra K. Osteen | | | 52,500 | | | | 17,500 | | | | 0 | | | $ | 78.17 | | | 03/25/2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 35,000 | | | | 35,000 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 17,500 | | | | 52,500 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marvin G. Pember | | | 37,500 | | | | 12,500 | | | | 0 | | | $ | 78.17 | | | 03/25/2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 25,000 | | | | 25,000 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 13,750 | | | | 41,250 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 60,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
1. | Stock option awards. All of the stock options are scheduled to vest ratably on the first, second, third and fourth anniversary dates from the date of grant. The applicable grant dates for the options indicated above are set forth below: |
On August 11, 2011, stock options were granted with an exercise price of $38.12.
On January 18, 2012, stock options were granted with an exercise price of $36.95.
On January 16, 2013, stock options were granted with an exercise price of $53.38.
On March 26, 2014, stock options were granted with an exercise price of $78.17. On March 18, 2015, stock options were granted with an exercise price of $117.29
On March 23, 2016, stock options were granted with an exercise price of $118.62. On March 29, 2017, stock options were granted with an exercise price of $124.56. 2. | Restricted Stock Awards. The outstanding restricted stock awards for Mr. Alan B. Miller are scheduled to vest as follows: |
3,197 shares on March 18, 2016; 4,797 shares on March 26, 2016; 3,197 shares on March 18, 2017; 4,797 shares on March 26, 2017; 3,197 on March 18, 2018; 4,798 shares on March 26, 2018, and; 3,198 on March 18, 2019.
| | | | | | | | | | | | | | | | | | | | | Date | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | TOTAL | | | | | | | | | | | | | | | | | | | | | | | March 18, | | | 3,197 | | | | 3,198 | | | | - | | | | - | | | | 6,395 | | March 23, | | | 3,162 | | | | 3,161 | | | | 3,162 | | | | - | | | | 9,485 | | March 26, | | | 4,798 | | | | - | | | | - | | | | - | | | | 4,798 | | March 29, | | | 4,014 | | | | 4,014 | | | | 4,014 | | | | 4,015 | | | | 16,057 | | TOTAL | | | 15,171 | | | | 10,373 | | | | 7,176 | | | | 4,015 | | | | 36,735 | |
3. | Based on the closing sale price of the Class B Common Stock on the New York Stock Exchange on December 31, 20152017 of $119.49$113.35 per share. |
OPTION EXERCISES AND STOCK VESTED The following table provides information about stock option exercises by, and the vesting of stock for, our named executive officers during fiscal year 2015:2017: | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise
($) | | | Number of Shares
Acquired on Vesting
(#) (1.) | | | Value Realized
on Vesting
($) | | Alan B. Miller | | | 590,000 | | | $ | 45,357,600 | | | | 13,532 | | | $ | 1,464,433 | | | | | | | | | | | | | 4,797 | | | $ | 565,950 | | | | | | | Marc D. Miller | | | 45,000 | | | $ | 3,447,450 | | | | | | | | | | | | | | | Steve G. Filton | | | 70,000 | | | $ | 5,362,700 | | | | | | | | | | | | | | | Debra K. Osteen | | | 35,000 | | | $ | 2,873,150 | | | | | | | | | | | | | 17,500 | | | $ | 1,658,475 | | | | | | | | | | | | | | | Marvin Pember | | | 0 | | | $ | 0 | | | | | | | | | |
| | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) (1.) | | | Value Realized on Vesting ($) | | Alan B. Miller | | | 590,000 | | | $ | 31,374,900 | | | | 3,197 | | | $ | 383,896 | | | | | | | | | | | | | 3,161 | | | $ | 375,274 | | | | | | | | | | | | | 4,797 | | | $ | 584,706 | | Marc D. Miller | | | 90,000 | | | $ | 4,701,375 | | | | | | | | | | Steve G. Filton | | | 70,000 | | | $ | 3,987,200 | | | | | | | | | | Debra K. Osteen | | | 17,500 | | | $ | 856,625 | | | | | | | | | | Marvin Pember | | | 37,500 | | | $ | 2,136,000 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1.) | Restricted stock vested as follows: |
On JanuaryMarch 18, 2015, 13,5322017, 3,197 shares of restricted stock vested for Mr. Alan B Miller. On March 23, 2017, 3,161 shares of restricted stock vested for Mr. Alan B Miller. On March 26, 2015,2017, 4,797 shares of restricted stock vested for Mr. Alan B Miller.
45
PENSION BENEFITS The following table provides information about pension benefits pursuant to our Executive Retirement Plan for our named executive officers. | Name | | Number of Years
Credited Service
(#) | | | Present Value of
Accumulated Benefit
($) (1.) | | | Payments During
Last Fiscal Year
($) | | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($) (1.) | | | Payments During Last Fiscal Year ($) | | Alan B. Miller | | | 37 | | | $ | 2,050,398 | | | | 0 | | | | 39 | | | $ | 2,138,404 | | | | 0 | | Marc D. Miller | | | 21 | | | $ | 773,974 | | | | 0 | | | | 23 | | | $ | 847,945 | | | | 0 | | Steve G. Filton | | | 30 | | | $ | 721,600 | | | | 0 | | | | 32 | | | $ | 770,578 | | | | 0 | | Debra K. Osteen | | | 31 | | | $ | 787,502 | | | | 0 | | | | 33 | | | $ | 855,122 | | | | 0 | | Marvin G. Pember | | | N/A | | | $ | 0 | | | | 0 | | | N/A | | | $ | 0 | | | | 0 | |
(1.) | 4% discount rate applied. |
In October 1993, the Board of Directors adopted the Executive Retirement Income Plan, which was closed to new participants effective January 1, 2015. Pursuant to the terms of this plan, certain management or other highly compensated employees, who had been previously designated as plan participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits. The monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the plan before 2008) or age 65 (applicable to participants added to the plan after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Payment of the benefit will be made in 60 monthly installments following the participant’s retirement date. Under certain circumstances, the participant may be entitled to elect to receive the present value of the payments in one lump sum or receive payments over a period of 10 years. If an employee ceases employment with us prior to the applicable retirement age, or an employee has not completed at least 10 years of active employment with us, no retirement income will be payable to the employee unless the Board of Directors determines otherwise. For Mr. Alan Miller the aggregate benefit payable (for the 60 months in which the participant receives benefits) assuming retirement as of December 31, 20152017 amounted to approximately $2.3$2.4 million. As of December 31, 2015,2017, the projected aggregate benefit payable for each of Marc D. Miller, Steve G. Filton and Debra K. Osteen were approximately $1.7 million, $925,000, $930,000,$914,000, $960,000, respectively, based upon the following assumptions: (i) each participant will retire at the age of 62, and; (ii) annual salary increases of 3% are provided until the age of 62 is attained.
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NONQUALIFIED DEFERRED COMPENSATION The following table provides information about our Deferred Compensation Plan for our named executive officers. | Name | | Executive Contributions
in Last Fiscal Year ($)
(1.) | | Registrant
Contributions in Last
Fiscal Year ($) (2.) | | Aggregate Earnings
in Last Fiscal Year
($) (2.) | | Aggregate
Withdrawals /
Distributions
($) | | Aggregate Balance at
Last Fiscal Year-
End
($) | | | Executive Contributions in Last Fiscal Year ($) (1.) | | | Registrant Contributions in Last Fiscal Year ($) (2.) | | | Aggregate Earnings in Last Fiscal Year ($) (2.) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at Last Fiscal Year-End ($) | | Alan B. Miller | | $ | 25,000 | | | $ | 0 | | | $ | 15,276 | | | $ | 0 | | | $ | 1,437,752 | | | $ | 100,000 | | | $ | 0 | | | $ | 248,552 | | | $ | 0 | | | $ | 1,884,263 | | Marc D. Miller | | $ | 0 | | | $ | 0 | | | $ | 217 | | | $ | 0 | | | $ | 46,679 | | | $ | 39,828 | | | $ | 0 | | | $ | 19,769 | | | $ | 0 | | | $ | 114,296 | | Steve G. Filton | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Debra K. Osteen | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Marvin G. Pember | | $ | 148,000 | | | $ | 0 | | | $ | 11,935 | | | $ | 0 | | | $ | 487,188 | | | $ | 414,796 | | | $ | 0 | | | $ | 264,269 | | | $ | 0 | | | $ | 1,651,832 | |
(1.) | Amounts included in “salary” in the Summary Compensation Table. |
(2.) | Amounts shown are not reported as compensation in the Summary Compensation Table. |
Deferred Compensation Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A provides that eligible employees may elect to convert and defer a portion of their base salary and bonus award into investment options in lieu of receiving cash. An “eligible employee” underUnder the Deferred Compensation Plan, is: (i) an employee whoseis deemed eligible if their base compensation is expected to be above the IRS threshold for highly compensated employees (currently2017 was $120,000 or higher)higher and who is employedthey are performing duties in an internally deemed eligible position, or; (ii) any other employee who has been internally deemed eligible.a qualified position. The base compensation threshold is adjusted annually for cost-of-living increases. Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is $2,000. Prior to January 1, 2016, no more than 25% of an employee’s base salary or 50% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Effective January 1, 2016, no more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity). Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. Our obligations under the Deferred Compensation Plan in connection with an employee’s retirement account are payable, beginning at retirement at age 55 and 10 years of service for deferrals made prior to January 1, 2016, and age 55 and 5 years of service for deferrals made on or after January 1, 2016, in equal 47
installments over a ten year period; except that an employee may make a distribution election to receive the balance of the participant’s retirement account in either a single one lump sum or equal annual or less frequent installments over a period not to exceed ten years. For deferrals made on or after January 1, 2016, an employee may elect to defer the retirement distribution to begin one year following retirement. An employee will receive a lump sum distribution as a result of termination of employment for other than for retirement, death or disability. An employee may change his distribution elections by making new distribution elections at least 12 months prior to
the date on which such payment was otherwise scheduled to be made and must be delayed until a date that is at least five years after the date the distribution was previously scheduled to begin. Our obligations under the Deferred Compensation Plan in connection with an employee’s scheduled distribution are payable in a lump sum or installments of two to ten years, commencing on the date indicated by the employee. If the employee’s employment is terminated prior to the distribution of obligations in accordance with a scheduled distribution then the amounts credited to such accounts will be transferred to the employee’s retirement account and distributed in accordance with the employee’s distribution election for that account. If an employee experiences a financial hardship that is the result of an “unforeseeable emergency,” as defined under the Deferred Compensation Plan, he or she may apply to the administrator of the Deferred Compensation Plan for an emergency withdrawal against his or her accounts. Such an emergency withdrawal may be allowed at the discretion of the administrator, in which case the employee’s account will be reduced accordingly. Executive Retirement Income Plan For a description of the Executive Retirement Income Plan and potential payments thereunder, please refer to the Pension Benefits Table and the related narrative discussion included in this Proxy Statement. Split-Dollar Life Insurance Agreements: See SeeSplit-Dollar Life Insurance Agreements as included above in this Proxy Statement. Potential Payments Upon Termination or Change-in-Control Mr. Alan Miller’s employment agreement dated July 24, 2013, provides that Mr. Alan Miller will continue to serve as Chief Executive Officer and Chairman of our Board of Directors through December 31, 2017, and subject further to automatic annual renewal for one additional year unless either party elects otherwise. Mr. Alan Miller’s agreement was automatically renewed for one year through December 31, 2019. The agreement also contemplates that Mr. Alan Miller will remain as Executive Chairman of our Board of Directors during the term of his CEO employment. The employment agreement also contains customary non-disparagement, non-solicitation and non-competition provisions. In general, Mr. Alan Miller’s long-term incentive awards granted pursuant to his employment agreement will become fully vested upon termination of his employment other than by us for “cause” or voluntarily by Mr. Alan Miller before the end of the applicable term (under circumstances not involving a breach of the employment agreement by us). 48
If Mr. Alan Miller’s employment is terminated for “cause”, as defined in the employment agreement, he will be entitled to any benefits payable to or earned by Mr. Miller with respect to any period of his employment or other service prior to the date of such discharge. If Mr. Alan Miller’s employment as Chief Executive Officer is terminated due to his disability, Mr. Alan Miller shall be paid a pro rata portion of the annual bonus which would otherwise have been payable for the year in which his employment terminates, plus an amount equal to one-half of Mr. Alan Miller’s base salary, payable in twelve equal monthly installments. If Mr. Alan Miller’s employment or service terminates due to his death, Mr. Alan Miller’s beneficiary shall receive a pro rata portion of the annual bonus which would otherwise have been payable to Mr. Alan Miller for the year of his death.
If Mr. Miller terminates his employment or other service under the employment agreement because of a material change in the duties of his office or any other breach by us of our obligations, or in the event of the termination of Mr. Alan Miller’s employment by us without cause or otherwise in breach of the employment agreement, Mr. Alan Miller will generally continue to receive all of the cash compensation, benefits and minimum long term incentive compensation set forth in the employment agreement as if his employment or service had not terminated, and the vesting of his long-term incentive plan awards will accelerate. The following table provides quantitative disclosure of the estimated payments that would be made to Mr. Alan Miller under his employment agreement as of December 31, 2015,2017, the last business day of our fiscal 2015,2017, assuming that the employment agreement would have been in effect at that time: | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance
Payment ($) | | | Perquisites/
Benefits ($) | | | Vesting Acceleration
of Previously
Granted Stock
Based
Awards ($) (e.) | | | Continuation of
Restricted Stock
Awards ($) | | | Total Termination
Benefits ($) | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | Termination by Us for “Cause” | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Termination Due to Mr. Alan Miller’s Disability | | $ | 1,600,000 | (a.) | | $ | 0 | | | $ | 28,256,518 | | | $ | 0 | | | $ | 29,856,518 | | Termination Due to Mr. Alan Miller’s Death | | $ | 0 | | | $ | 0 | | | $ | 28,256,518 | | | $ | 0 | | | $ | 28,256,518 | | Termination by Mr. Alan Miller for “Breach by the Company” or Termination by the Company Without Cause | | $ | 6,464,000 | (b.) | | $ | 2,721,693 | (c.) | | $ | 28,256,518 | | | $ | 3,000,000 | (d.) | | $ | 40,442,211 | |
| | Cash Severance Payment ($) | | | | Perquisites/ Benefits ($) | | | | Vesting Acceleration of Previously Granted Stock Based Awards ($) (e.) | | | Continuation of Restricted Stock Awards ($) | | | | Total Termination Benefits ($) | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | | | | Termination by Us for “Cause” | | $ | 0 | | | | $ | 0 | | | | $ | 0 | | | $ | 0 | | | | $ | 0 | | Termination Due to Mr. Alan Miller’s Disability | | $ | 1,665,000 | | (a.) | | $ | 0 | | | | $ | 39,548,584 | | | $ | 0 | | | | $ | 41,213,584 | | Termination Due to Mr. Alan Miller’s Death | | $ | 0 | | | | $ | 0 | | | | $ | 39,548,584 | | | $ | 0 | | | | $ | 39,548,584 | | Termination by Mr. Alan Miller for “Breach by the Company” or Termination by the Company Without Cause | | $ | 6,726,600 | | (b.) | | $ | 2,473,949 | | (c.) | | $ | 39,548,585 | | | $ | 3,000,000 | | (d.) | | $ | 51,749,134 | |
(a.) | Based upon 50% of the targeted 20162018 non-equity incentive plan bonus award and 50% (6 months) of Mr. Alan Miller’s 20162018 base salary. |
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(b.) | Assumes (i) continuation of all cash compensation through 2017;2019 (automatic annual renewal termination date); (ii) annual base salary increase of 2.0% through 2017,2019, and; (iii) an annual bonus award equal to 100% of his estimated base salary through 2017,2019, which assumes the achievement of the bonus opportunity target set forth under Mr. Alan Miller’s employment agreement. |
(c.) | Assumes (i) continuation of all entitled perquisites through 2017;2019; (ii) continuation of insurance premiums in connection with long-term disability, our 401(k) match and charges all of which were based upon the actual 20152017 amounts. Additionally, assumes premiums due in connection with split-dollar life insurance agreements through 2017.2019. Please see theSummary Compensation and the All Other Compensation table included herein. |
(d.) | Assumes continuation of minimum long-term incentive compensation through 2017.2019. |
(e.) | Represents grant date fair value of unvested awards as of December 31, 2015.2017. The full grant date fair values of these awards were also included in the Summary Compensation Table in the year of original grant. |
2015CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and Item 402(u) of Regulation S-K, we are providing the following information about the
relationship of the annual total compensation of our employees and the annual total compensation of Mr. Alan B. Miller, our Chairman and Chief Executive Officer. As is permitted under the SEC rules, we reasonably determined our median employee by using the greater of total annual W-2 wages of employees both in the U.S. and the U.K. who were employed as of December 31, 2017 (excluding Mr. Miller), or calculated annualized pay for those who commenced work during 2017 or were on a leave of absence. The employee population consisted of our full-time, part-time and temporary employees. The inclusion of part-time and temporary employees reduces the median of the annual total compensation for the overall group of our employees. We selected an employee from that group and determined that person’s total compensation was $39,978. The ratio of CEO pay to median worker pay is 541:1. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. A 2017 CEO pay ratio survey completed by Equilar of 356 public companies across the country indicated that our ratio fell between the 75th and 90Th percentile for companies with revenue between $5 and $15 billion. Our ratio is close to the 75th percentile for companies with greater than 43,000 employees. 2017 DIRECTOR COMPENSATION The following table provides information concerning the compensation of our Non-Employee Directors for 2015.2017. | Name | | Fees Earned
or Paid in
Cash ($) | | Grant Date
Fair Value
Stock Awards
(1.) ($) | | Grant Date
Fair Value
Option Awards
(2.) ($) | | Non-Equity
Incentive Plan
Compensation
($) | | All Other
Compensation
($) | | Total ($) | | | Fees Earned or Paid in Cash ($) | | | Grant Date Fair Value Stock Awards (1.) ($) | | | Grant Date Fair Value Option Awards (2.) ($) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) | | | Total ($) | | Lawrence S. Gibbs | | $ | 56,500 | | | $ | 0 | | | $ | 319,155 | | | $ | 0 | | | $ | 0 | | | $ | 375,655 | | | $ | 90,500 | | | $ | 0 | | | $ | 270,826 | | | $ | 0 | | | $ | 0 | | | $ | 361,326 | | John H. Herrell | | $ | 64,000 | | | $ | 0 | | | $ | 319,155 | | | $ | 0 | | | $ | 0 | | | $ | 383,155 | | | John H. Herrell (3.) | | | $ | 98,000 | | | $ | 0 | | | $ | 270,826 | | | $ | 0 | | | $ | 0 | | | $ | 368,826 | | Robert H. Hotz | | $ | 65,500 | | | $ | 0 | | | $ | 319,155 | | | $ | 0 | | | $ | 0 | | | $ | 384,655 | | | $ | 100,500 | | | $ | 0 | | | $ | 270,826 | | | $ | 0 | | | $ | 0 | | | $ | 371,326 | | Eileen C. McDonnell | | $ | 55,500 | | | $ | 0 | | | $ | 319,155 | | | $ | 0 | | | $ | 0 | | | $ | 374,655 | | | $ | 87,500 | | | $ | 0 | | | $ | 270,826 | | | $ | 0 | | | $ | 0 | | | $ | 358,326 | | Anthony Pantaleoni | | $ | 41,000 | | | $ | 0 | | | $ | 319,155 | | | $ | 0 | | | $ | 0 | | | $ | 360,155 | | | Anthony Pantaleoni (4.) | | | $ | 66,000 | | | $ | 0 | | | $ | 270,826 | | | $ | 0 | | | $ | 0 | | | $ | 336,826 | |
(1.) | There were no restricted stock awards made to our non-employee directors during 2015.2017. |
(2.) | Each non-employee director received 15,00010,000 stock options on March 18, 2015,29, 2017, which had a grant date fair value of $319,155. In addition,$270,826 or $27.08 per share. |
(3.) | Mr. John H. Herrell provided notice to us on March 23, 2016, each21, 2018 that he plans to retire from our Board of the members of the board of directors reflected above received 15,000 stock options.Directors when his current term expires on May 16, 2018. |
(4.) | Mr. Anthony Pantaleoni retired from the Board of Directors on January 17, 2018. |
| As of December 31, 20152017 the following stock options were outstanding for each director: |
| | | | | Lawrence S. Gibbs | | | 37,50051,250 | | John H. Herrell | | | 37,50047,500 | | Robert H. Hotz | | | 48,75055,000 | | Eileen C. McDonnell | | | 30,00043,750 | | Anthony Pantaleoni (a.) | | | 37,50043,750 | |
(a.) | Mr. Anthony Pantaleoni retired from the Board of Directors on January 17, 2018. At that time, Mr. Pantaleoni had the following outstanding stock options that were cancelled as of that date: (i) 11,250 granted on March 18, 2015 at $117.29 per share; (ii) 15,000 granted on March 23, 2016 at $118.62 per share, and; (iii) 10,000 granted on March 29, 2017 at $124.56 per share. On January 17, 2018, our Board of Directors approved an extension of the expiration date, to March 31, 2018, on 7,500 outstanding stock options granted on March 26, 2014 at $78.17 per share (3,750 of which were vested as of that date) enabling the remaining 3,750 stock options to vest, as scheduled, on March 26, 2018. All 7,500 stock options granted on March 26, 2014 at $78.17 per share were exercised by Mr. Pantaleoni on March 27, 2018. |
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2017 Cash Compensation. During 2015,2017, all active non-employee directors who were active in 2017 received an annual retainer of $40,000$65,000 for service on the Board of Directors. Additionally, during 2015,2017, John H. Herrell, Chairperson of the Audit Committee received an annual retainer of $10,000 for his services in that capacity and Eileen C. McDonnell, Lawrence S. Gibbs and Robert H. Hotz, members of the Audit Committee, each received an annual retainer of $2,500. Also during 2015,2017, Robert H. Hotz, received $5,000 for his services as Chairperson of the Compensation Committee and an additional $5,000 for his services as Chairperson of the Nominating & Governance Committee. Each non-employee director also was paid a $1,000 meeting fee for participation in each committee meeting in excess of 30 minutes. MeetingCommittee meeting fees paid during 20152017 were as follows: Robert H. Hotz was paid $13,000,$22,000, Eileen C. McDonnell was paid $13,000,$19,000, John H. Herrell was paid $14,000,$22,000, Lawrence S. Gibbs was paid $14,000$22,000 and Anthony Pantaleoni was not paid $1,000. During 2016, we anticipate thatfor any committee meeting fees during 2017. Additionally, each active non-employee director will receive an annual retainer of $40,000 for service on the Board of Directors. Additionally, during 2016, John H. Herrell, Chairperson of the Audit Committee, will receive an annual retainer of $10,000 for his service in that capacity and members of the Audit Committee will receive an annual retainer of $2,500 each. Also during 2016, Robert H. Hotz, Chairperson of the Compensation Committee and Chairperson of the Nominating & Governance Committee, will receive annual retainers of $5,000 each for his services in the respective capacities. Each non-employee director will bewas paid a meeting fee of $1,000 for participation in each committee meeting in excess of 30 minutes. All retainers and meeting fees will be paid in cash.a special meeting.
2017 Stock Option Awards. On March 18, 2015,29, 2017, all non-employee directors active during 2017 received an option to purchase 15,00010,000 shares of our Class B Common Stock at an exercise price of $117.29$124.56 per share. These options have a fair value of $21.28 per share. These stock options were granted under our Second Amended and Restated 2005 Stock Incentive Plan, vest ratably over four years and expire on the fifth anniversary of the grant date. Additionally, on March 23, 2016, all non-employee directors received an option to purchase 15,000 shares of our Class B Common Stock at an exercise price of $118.62$27.08 per share. These stock options were granted under our Third Amended and Restated 2005 Stock Incentive Plan, vest ratably over four years and expire on the fifth anniversary of the grant date.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our Common Stock and other equity securities. Based upon a review of the copies of such reports furnished to us during fiscal year 20152017 and written representations from our executive officers and directors, we believe that during the 20152017 fiscal year, the officers, directors and holders of more than 10% of our Common Stock complied with all Section 16(a) filing requirements. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Alan B. Miller is the Chairman of our Board of Directors and our Chief Executive Officer. Alan B. Miller also serves as Chairman of the Board of Trustees, Chief Executive Officer and President of Universal Health Realty Income Trust (“UHT”), a publicly traded real estate investment trust which commenced operations in 1986. The Company acts as advisor to UHT pursuant to the terms of an annually renewable advisory agreement and also leases the real property of certain of its facilities from UHT. Marc D. Miller is a member of our Board of Directors and President of the Company. Marc D. Miller is the son of Alan B. Miller, the Chairman of our Board of Directors and our Chief Executive Officer. Marc D. Miller is a named executive officer and therefore the salary and other compensation arrangements between us and Marc D. Miller are disclosed and described throughout this Proxy Statement. Additionally, Marc D. Miller serves as a member of the Board of Trustees of UHT, and also serves as a member of the Board of Directors of Premier, Inc., a healthcare performance improvement alliance which contracts with the Company pursuant to a group purchasing agreement. All fees earned by Marc D. Miller in his capacity as a Board member of Premier, Inc. are paid to the Company. Anthony Pantaleoni,Warren J. Nimetz, a member of our Board of Directors and a member of the Executive Committee, is a Partner in Norton Rose Fulbright US LLP, the law firm we use as outside corporate counsel. We paid approximately $212,000 in legal fees to this law firm in 2017. This law firm also provides personal legal services to Alan B. Miller, our Chief Executive Officer. Mr. Nimetz in the trustee of certain trusts for the benefit of Alan B. Miller and his family.
Anthony Pantaleoni retired from the Board of Directors in January 2018. He was formerly Of Counsel to Norton Rose Fulbright US LLP, the law firm we use as outside corporate counsel. This law firm also provides personal legal services to Alan B. Miller, our Chief Executive Officer. Mr. Pantaleoni is alsoHe remains the trustee of certain trusts for the benefit of Alan B. Miller and his family. Pursuant to our Code of Business Conduct and Corporate Standards, all employees, officers and directors of the Company and its subsidiaries are prohibited from engaging in any relationship or financial interest which is a conflict of interest with, or which interferes or has the potential to interfere with, the interests of the Company or any of its subsidiaries or facilities. In addition, all employees, officers and directors of the Company and its subsidiaries are required to disclose to our chief compliance officer any financial interest or ownership interest or any other relationship that he or she (or a member of his or her immediate family) has with customers, vendors, 52
or competitors of the Company or any of its subsidiaries or facilities. James Caponi is currently our Chief Compliance Officer.
All employees, officers and directors of the Company and its subsidiaries are prohibited from entering into a related party transaction with the Company without the prior approval of our chief compliance officer. Any request for the Company to enter into a transaction with an employee, officer or director or any of such persons’ immediate family members must first be presented to our chief compliance officer for review, consideration and approval. In approving or rejecting the proposed agreement, our chief compliance officer will consider the relevant facts and circumstances available and deemed relevant, including but not limited to, the risks, costs, and benefits to the Company, the terms of the transactions, the availability of other sources for comparable services or products, and, if applicable, the impact on director independence. Our chief compliance officer shall only approve those agreements that, in light of known circumstances, are in or are not inconsistent with, the Company’s best interests, as determined in good faith by our chief compliance officer. Except as otherwise disclosed in this Proxy Statement, since the beginning of the Company’s last fiscal year, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any employee, executive officer or director, holder of more than 5% of our voting securities, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest. Please see “Corporate Governance—Director Independence” for additional information on the independence of our directorsdirectors. CORPORATE GOVERNANCE Director Independence Our Board of Directors has affirmatively determined that fourfive of its seveneight current members (John H. Herrell, Robert H. Hotz, Lawrence S. Gibbs, and Eileen C. McDonnell)McDonnell and Elliot J. Sussman, M.D.) are independent directors under the applicable rules and regulations of the SEC and the New York Stock Exchange listing standards. In determining independence, the Board of Directors affirmatively determines each year whether directors have any material relationship with us. When assessing the materiality of a director’s relationship with us, the Board of Directors considers all relevant facts and circumstances, not merely from the director’s standpoint, but also from the standpoint of the persons or organizations with which the director has an affiliation. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. The Board of Directors has concluded that no material relationship exists between us and any of our independent directors, other than each such person’s position as one of our directors. We are eligible to be treated as a controlled company under New York Stock Exchange Rule 303A due to the fact that the family of Alan B. Miller holds more than 95% of the shares of Class A and Class C Common 53
Stock, which is entitled to elect 80% of the entire Board of Directors and constitutes more than 50% of our aggregate voting power. New York Stock Exchange Rule 303A states that a controlled company need not have a majority of independent directors on its board or have nominating/corporate governance and compensation committees composed entirely of independent directors. We have elected to avail ourselves of a limited aspect of the Rule 303A exemption, determining that the Nominating & Governance Committee is not responsible for identifying and recommending qualified candidates for Board positions that, in accordance with our Restated Certificate of Incorporation, are to be elected by the holders of Class A and Class C Common Stock of the Company. We currently intend to have a majority of independent directors on our Board of Directors and all independent directors on our Audit Committee, Compensation Committee and Nominating & Governance Committee.
Meetings of the Board of Directors Regular meetings of the Board of Directors are generally held every other month, while special meetings are called when necessary. Before each Board of Directors or committee meeting, directors are furnished with an agenda and background materials relating to matters to be discussed. During 2015,2017, there were six regular meetings of the Board of Directors meetings and all activeDirectors. All directors participated in 100%each of the aggregate of the total number of meetings of the Board of Directors and of the total numberall or substantially all of meetings held by allthe respective committees of the Board of Directors on which they served.served, if applicable. Directors are expected to attend the Annual Meeting of Stockholders. All of our directors attended the 20152017 Annual Meeting of Stockholders. Our Corporate Governance Guidelines provide that the Board of Directors shall hold, in accordance with a schedule determined by the Nominating & Governance Committee of the Board of Directors, executive sessions where non-management directors (i.e., directors who are not our officers, but who do not otherwise have to qualify as “independent directors”) meet without management participation (except as otherwise specifically requested by the non-management directors). John H. Herrell presides over the executive sessions of the non-management directors. Interested parties may communicate directly and confidentially with the presiding director or with the non-management directors of the Board of Directors as a group by writing to that person or group at Universal Health Services, Inc., c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. Board Leadership Structure and Board of Directors Mr. Alan B. Miller serves as both the Company’s Chairman of the Board and Chief Executive Officer. John H. Herrell ishas been the presiding directorLead Independent Director who presides over the executive sessions of the non-management directors. The Company believes this structure allows all of the non-management directors to participate in the full range of the Board’s responsibilities with respect to its oversight of the Company’s management. The Board has determined that this leadership structure is appropriate given the size and complexity of the Company, the number of directors overseeing the Company and the Board’s oversight responsibilities. 54
The specific experience, qualifications, attributes or skills that led to the conclusion that each Director should serve as a Director of the Company, in light of the Company’s business and structure, are as follows: Alan B. Miller has been a Director of the Company since 1978. Mr. Alan Miller has been the Company’s Chairman of the Board and Chief Executive Officer since 1978, when he founded the Company. Prior thereto, he was President, Chairman of the Board and Chief Executive Officer of American Medicorp, Inc. Mr. Alan Miller currently serves as Chairman of the Board of Trustees, Chief Executive Officer and President of Universal Health Realty Income Trust. He was formerly a Director of Penn Mutual Life Insurance Company from 1994 until February 2013. Mr. Alan Miller oversees all of the Company’s businesses, its operations, development and overall strategy. As a result of his many years of service, Mr. Alan B. Miller provides expertise on the hospital management industry. Marc D. Miller has been a Director of the Company since 2006 and was appointed President of the Company in May 2009. Previously he has served in various management positions including: Senior Vice President and Co-Head of our Acute Care Division (2007-2009); Vice President, Acute Care Division (2004-2007), and; Assistant Vice President and Group Director of the Acute Care Division, Eastern Region (2003-2004). He has also served in other management positions at various acute care hospitals from 1999 to 2003. Additionally, Mr. Marc D. Miller serves as a member of the Board of Trustees of Universal Health Realty Income Trust and as a member of the Board of Directors of Premier, Inc. Mr. Marc D. Miller provides expertise on the hospital management industry. Anthony Pantaleoni has been a Director of the Company since 1982. He is Of Counsel to the law firm of Norton Rose Fulbright US LLP and he was a partner from 1970 to 2000. His corporate representation has involved a variety of complex transactions, including mergers, acquisitions, joint ventures, leveraged buyouts, exchange offers and corporate restructurings. Additionally, he has had substantial experience in public offerings and private placements of securities, having represented both issuers and investment banking firms in these transactions. Clients represented by Mr. Pantaleoni have included a wide variety of companies, such as a supplier of products that analyze medical health costs. Mr. Pantaleoni provides expertise on legal matters.
Robert H. Hotz has been a Director of the Company since 1991. He is Senior Managing Director, Global Co-Head of Corporate Finance and Co-ChairmanVice Chairman of Houlihan Lokey Howard & Zukin. He has also beenpreviously served as a member of the Board of Directors andof Houlihan Lokey Howard & Zukin from 2002-2015. He has also been a member of the Operating Committee of Houlihan Lokey Howard & Zukin since June 2002. Mr. Hotz previously served as Chairman of the Board of Directors of Pep Boys–Manny, Moe & Jack, and was formerformerly Senior Vice Chairman, Investment Banking for the Americas, of UBS LLC. Mr. Hotz provides expertise on financial and strategic advisory matters. John H. Herrell has been a Director of the Company since 1993. He was the former Chief Administrative Officer of the Mayo Foundation from 1993 through 2002. Mr. Herrell was the Chief Financial Officer of the Mayo Foundation from 1984 until 1993 and held various other capacities since 1968. Mr. Herrell provides expertise on health care companies and financial matters. Mr. Herrell’s term expires at the 2018 Annual Meeting on May 16, 2018 and he has provided notice to us that he plans to retire from our Board of Directors at that time. Lawrence S. Gibbs has been a Director of the Company since 2011. He has beenis currently a Portfolio Manager at Ramius, LLC since January, 2017 and from 2010 to 2014. Prior thereto, he was Managing Partner at Cannonball Trading, LLC since July 2014. Previously Mr. Gibbs was a Macro Portfolio Manager at Ramius LLC 55
from March 20102014 to July 2014. Prior thereto, he was2017, a Portfolio Manager at Millennium Partners, LLC from February 2009 to March 2010.2010 and a Portfolio Manager, Chief Investment Officer at JP Morgan Chase Bank N.A. from 2006 to 2009. Mr. Gibbs provides expertise on corporate finance and investment matters. Eileen C. McDonnell was appointed a Director of the Company in April 2013. Ms. McDonnell currently serves as Chairman and Chief Executive Officer of The Penn Mutual Life Insurance Company.Company since her appointment in February 2011. She joined Penn Mutual in 2008 and previously served as President of the company. Ms. McDonnell was also appointed to The Penn Mutual Board of Trustees in 2010. Before joining Penn Mutual, Ms. McDonnell founded ExecMPower, a strategic planning and executive coaching consultancy. Previously, she was president of New England Financial, a wholly owned subsidiary of MetLife, and senior vice president of the Guardian Life Insurance Company. Ms. McDonnell also serves on the Board of Managers of Janney Montgomery Scott LLC, a wholly owned subsidiary of Penn Mutual. In 2012,addition, Ms. McDonnell was named Chairman of the Insurance Federation of Pennsylvania and to the Boardis a member of the American Council of Life Insurers.Insurers Political Action Committee and the Insurance Federation of Pennsylvania. She is also a national advisor to Vision 2020, an initiative of Drexel University College of Medicine Institute for Women’s Health and Leadership. Ms. McDonnell provides expertise on the insurance industry and financial matters. Warren J. Nimetz was elected to the Board of Directors of the Company in January 2018. Mr. Nimetz is currently a Partner at the law firm of Norton Rose Fulbright US LLP. Mr. Nimetz focuses his practice on general corporate and securities law, with special emphasis on mergers and acquisitions of public and private companies and related corporate governance issues. Mr. Nimetz advises public and private companies’ boards of directors and their committees on all aspects of corporate governance and has special expertise in structuring and negotiating transactions involving the acquisition, financing and disposition of hospital and other health care and life science companies and properties. Mr. Nimetz provides expertise on legal matters. Elliot J. Sussman, M.D. was elected to the Board of Directors of the Company in March 2018. He is Chairman of The Villages Health. He previously served as President and Chief Executive Officer of Lehigh Valley Hospital and Health Network from 1993 through 2010. He has been a member of the Board of Directors of iCAD, Inc. since 2002. Dr. Sussman provides expertise on the management of hospitals and health systems. The Board holds six regular meetings each year to consider and address matters involving the Company. The Board also may hold special meetings to address matters arising between regular meetings. These meetings may take place in person or by telephone. The independent directors also regularly meet in executive sessions outside the presence of management. The Board has access to legal counsel for consultation concerning any issues
that may occur during or between regularly scheduled Board meetings. As discussed below, the Board has established a Compensation Committee, an Audit Committee, and a Nominating & Governance Committee, an Executive Committee and a Finance Committee to assist the Board in performing its oversight responsibilities. The Nominating & Governance Committee annually oversees a self-evaluation of the current Board members and those committees as the Board shall specify from time to time and reports to the Board with respect to whether the Board and its committees are functioning effectively. The full Board discusses each evaluation report to determine what, if any, actions should be taken to improve the effectiveness of the Board or any committee thereof. The Board’s Role in Risk Oversight Consistent with its responsibility for oversight of the Company, the Board, among other things, oversees risk management of the Company’s business affairs directly and through the committee structure that it has established. The principal risks associated with the Company are risks related to concentration of the locations of our facilities, dependence on payments from the government and other third party payors, the inability to collect payments from patients, a worsening of the economic and employment conditions in the United States, uncertainties regarding health care reform, competition for patients from other hospitals and health care providers, our ability to recruit and retain quality physicians, our ability to attract and retain qualified nurses and medical support staff, compliance with extensive laws and government regulations, liabilities from claims brought against our facilities, governmental investigations, regulatory actions, whistleblower lawsuits and whistleblowerpurported shareholder class action lawsuits, accreditation of our facilities, acquisition and integration of hospitals, state efforts to regulate the construction or 56
expansion of health care facilities, fluctuations in our operating results, quarter to quarter earnings and other factors, significant corporate regulation as a public company, and dependence on key management personnel. The Board’s role in the Company’s risk oversight process includes regular reports from senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic and reputational risks. The full Board (or the appropriate committee) receives these reports from management to identify and discuss such risks. The Board periodically reviews with management its strategies, techniques, policies and procedures designed to manage these risks. Under the overall supervision of the Board, management has implemented a variety of processes, procedures and controls to address these risks. The Board requires management to report to the full Board on a variety of matters at regular meetings of the Board and on an as-needed basis, including the performance and operations of the Company and other matters relating to risk management. The Audit Committee also receives regular reports from the Company’s independent registered public accounting firm on internal control and financial reporting matters. These reviews are conducted in conjunction with the Board’s risk oversight function and enable the Board to review and assess any material risks facing the Company. John H. Herrell,Herrell., the Lead Independent Director, periodically meets with management and the Company’s independent registered public accounting firm to review and discuss the activities of the Company and to provide direction with respect thereto. Stockholder Communications Stockholders who wish to send communications to the Board of Directors or an individual director should address such communications to Universal Health Services, Inc., c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. The Secretary will forward such communications
to the Board of Directors or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Secretary has the authority to discard the communication or take appropriate legal action regarding such communication. Committees of the Board of Directors The Compensation Committee, the Audit Committee, the Nominating & Governance Committee, the Executive Committee and the Finance Committee are the standing committees of the Board of Directors. A current copy of the our Corporate Governance Guidelines, Code of Business Conduct and Corporate Standards, Code of Ethics for Senior Financial Officers, Compensation Committee Charter, Nominating & Governance Committee Charter and Audit Committee Charter are available free of charge on our website at www.uhsinc.com. Copies of these documents also are available in print free of charge to any stockholder who requests them. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K relating to amendments to or waivers of any provision of our Code of Ethics for Senior Financial Officers by promptly posting the information on our website. 57
Compensation Committee. The current members of the Compensation Committee are Robert H. Hotz, Lawrence S. Gibbs, and John H. Herrell.Herrell and Elliot J. Sussman, M.D., The Compensation Committee met two timesonce during 2015.2017. The Board of Directors has determined, in its business judgment, that each member of the Compensation Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange. The Compensation Committee reviews and approves our goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates their performance, determines and approves their compensation level, reviews and determines the form and amount of compensation of the non-management members of the Board of Directors, administers incentive-compensation plans and equity-based plans and approves compensation awards, among other duties and responsibilities. The amount and mix of the compensation paid to our named executive officers and directors are evaluated on an annual basis. See the section titled “Compensation Setting Process,” in the Compensation Discussion & Analysis for an additional discussion. The Compensation Committee has the authority to establish one or more subcommittees that shall have the responsibilities and consist of those members of the Compensation Committee as the Compensation Committee may determine from time to time. The Compensation Committee also has the sole authority to retain and terminate compensation consultants to assist it in evaluating our compensation plans, particularly those pertaining to our directors, our Chief Executive Officer and our other executive officers, and to approve the fees and other terms relating to the provision of those services. As discussed in theCompensation Discussion and Analysis, unlike our other named executive officers, Mr. Alan Miller’s compensation is determined in large part by the terms of his employment agreement. Audit Committee. Current members of the Audit Committee are John H. Herrell, Robert H. Hotz, Lawrence S. Gibbs, and Eileen C. McDonnell.McDonnell and Elliot J. Sussman, M.D. (appointed in March, 2018). No member serves on the audit committee of more than three public companies. The Audit Committee met twelvenineteen times during 2015.2017. The Board of Directors has determined, in its business judgment, that each member of the Audit Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange and is financially literate and that John H. Herrell qualifiesand Eileen C. McDonnell qualify as an “audit committee financial expert”experts” under SEC regulations and has accounting or related financial management expertise.
The Audit Committee provides assistance to the Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community and others relating to: the integrity of our financial statements, the financial reporting process, the systems of internal accounting and financial controls, the performance of our internal audit function and independent auditors, the independent auditors’ qualifications and independence and our compliance with legal and regulatory requirements. This Committee has the authority, duties and responsibilities set forth in its Audit Committee Charter, as amended. Nominating & Governance Committee. The current members of the Nominating & Governance Committee are Robert H. Hotz, Lawrence S. Gibbs, and John H. Herrell.Herrell, and Elliot J. Sussman, M.D. This Committee met once during 2015. 58
2017. The Board of Directors has determined, in its business judgment, that each member of the Nominating & Governance Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange. The Nominating & Governance Committee was established, with respect to those directors who are to be elected by the holders of Class B and Class D Common Stock of the Company in accordance with the our Restated Certificate of Incorporation, for the purpose of: (i) assisting the Board of Directors by identifying individuals who are qualified to become directors, consistent with the criteria approved by the Board of Directors; (ii) recommending to the Board of Directors Class B and D director nominees for the next annual meeting of stockholders at which a Class B and D director is to be elected; (iii) developing and recommending to the Board of Directors a set of corporate governance principals in the form of our corporate governance guidelines; (iv) leading and overseeing the Board of Directors in its annual review of the performance of the Board of Directors and our management, and; (v) recommending to the Board of Directors director nominees for each committee of the Board of Directors. The Nominating & Governance Committee provides such assistance in identifying and recommending Class A and Class C Common Stock director nominees as may be requested by the entire Board of Directors. The Nominating & Governance Committee adopted our Corporate Governance Guidelines. In light of the concentration of over 95% of the voting power of our Class A and Class C Common Stock in a single individual and related entities, and in accordance with the “Controlled Companies” exemption set forth in Section 303A of the New York Stock Exchange Listed Company Manual, the Nominating & Governance Committee is not responsible for identifying and recommending qualified candidates for directors that, in accordance with our Restated Certificate of Incorporation, are to be elected by the holders of Class A and Class C Common Stock. The Nominating & Governance Committee shall, however, provide such assistance in identifying and recommending Class A and C Director nominees as may be requested by the entire Board of Directors. The Nominating & Governance Committee will consider Class B and D director nominees recommended by stockholders. Under our Restated Certificate of Incorporation, the number of directors to be elected by the Class B and D Common stockholders is limited to 20% of the entire Board of Directors, or a maximum of two directors. Stockholders who wish to recommend a nominee for the Nominating & Governance Committee’s consideration may do so by submitting the individual’s name and qualifications to the Nominating & Governance Committee c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. Recommendations must be received by the Nominating & Governance Committee no later than the date by which stockholder proposals for presentation at the next Annual Meeting must be received. Recommended nominees will only be considered if there is a vacancy or if the Board of Directors decides to increase the number of directors. The Nominating & Governance Committee identifies and evaluates committee-recommended Class B and D director nominees considering, among other factors, the following minimum qualifications: the individual’s integrity, experience, education, expertise, independence and any other factors that the Board of Directors and the Nominating & Governance Committee deem would enhance the effectiveness of the Board of Directors and our 59
governance. The Nominating & Governance Committee seeks persons who have achieved prominence in their
fields and who possess significant experience in areas of importance to the Company. Additionally, strong analytical skills, independence, energy, forthrightness and integrity are desired characteristics that the Nominating & Governance Committee seeks in potential candidates. We do not have a formal policy with regard to the consideration of diversity in identifying director nominees. However, the Board of Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow the Board of Directors to best fulfill its responsibilities to the long-term interests of our stockholders. The Nominating & Governance Committee will evaluate a nominee on the same basis if the individual is recommended by a stockholder. The Nominating & Governance Committee does not currently pay a fee to a third party to identify or evaluate nominees, but may consider from time to time engaging a search firm to identify Class B and D director candidates. Executive Committee. The Executive Committee has the responsibility, between meetings of the Board of Directors, to advise and aid our officers in all matters concerning the management of the business and, while the Board of Directors is not in session, has the power and authority of the Board of Directors to the fullest extent permitted under law. The Executive Committee met oncedid not meet in 2015.2017. Members of the Committee are Alan B. Miller, Robert H. Hotz, Anthony Pantaleoni and Marc D. Miller.Miller and Warren J. Nimetz. Finance Committee. The Finance Committee is responsible for reviewing our overall long-term financial planning. The Finance Committee met oncedid not meet during 2015.2017. Members of this Committee are Alan B. Miller, Robert H. Hotz, Anthony Pantaleoni and Marc D. Miller.Miller and Warren J. Nimetz.
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AUDIT COMMITTEE REPORT The Board of Directors is committed to the accuracy and integrity of the Company’s financial reporting. The Audit Committee takes an involved and active role in delivering on this commitment. The Audit Committee provides independent, objective oversight of our accounting functions and internal controls. The Audit Committee reviews and evaluates, and discusses and consults with our management, internal audit personnel and the independent auditors about the following: the plan for, and the independent auditors’ report on, each audit of the Company’s consolidated financial statements and internal controls; changes in our accounting practices, principles, controls or methodologies, or in the Company’s financial statements; significant developments in accounting rules; the adequacy of our internal accounting controls, and accounting, financial and auditing personnel; and the establishment and maintenance of a work environment that promotes ethical behavior. The Audit Committee acts under a written charter that was originally adopted by the Board of Directors in 2004 and is reviewed and approved on an annual basis. The Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing, accounting, financial reporting, internal control and regulatory compliance matters. In discharging its oversight role, the Audit Committee may engage independent counsel and other advisers as it determines necessary. In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee also has the direct responsibility to select, evaluate, determine the compensation of, oversee, and where appropriate, replace our independent auditors, and has the authority to resolve disagreements between management and our auditors. The Audit Committee may establish procedures for the receipt, retention and treatment of complaints received by us regarding accounting and auditing matters, as well as confidential, anonymous submission by employees. The Board of Directors has determined that each of the members of the audit committee is “independent” within the meaning of the rules of the New York Stock Exchange and the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002. The Audit Committee recommended to the Board of Directors that the consolidated financial statements be included in the Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2015:2017: First, the Audit Committee discussed with our independent auditors the overall scope and plans for their audits. Second, the Audit Committee met with the independent auditors, to discuss the results of their audits, their evaluations of our internal controls and the overall quality of our financial reporting. 61
Third, the Audit Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements. Fourth, the Audit Committee reviewed with the independent auditors their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board (United States).
| | discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board (United States). |
Fifth, the Audit Committee discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures required by the Independence Standards Board, and considered the compatibility of non-audit services with the auditors’ independence. Finally, the Audit Committee obtained and reviewed a report from the independent auditor describing: (i) the independent auditor’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry or investigation by governmental or professional authorities within the preceding five years inspecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditor and the Company. The Audit Committee reviewed and discussed our consolidated financial statements with the Board of Directors and discussed them with PricewaterhouseCoopers LLP during the 20152017 fiscal year, along with the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA Professional Standards, Vol. 1 AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee received from PricewaterhouseCoopers LLP the written disclosures, including the letter, required by PCAOB 3524 and 3526 and discussed with PricewaterhouseCoopers LLP its independence. The Audit Committee discussed with the independent accountants matters required to be discussed by Statement of Auditing Standard No. 16, Communications with Audit Committees, as amended, and as adopted by the Public Company Accounting Oversight Board. Based on the discussions with PricewaterhouseCoopers LLP and management, the consolidated financial statement review, and such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our 20152017 Annual Report on Form 10-K.10-K, as filed on February 28, 2018. Audit Committee John H. Herrell Robert H. Hotz Lawrence S. Gibbs Eileen C. McDonnell
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RELATIONSHIP WITH INDEPENDENT AUDITORS PricewaterhouseCoopers LLP (“PwC”) served as our independent auditors during 20152017 and 2014.2016. Representatives from PwC will be present at the Annual Meeting and will have an opportunity to make a statement, if they desire to do so, and to respond to any appropriate inquiries of the stockholders or their representatives. PwC’s audit report on our consolidated financial statements as of and for the years ended December 31, 20152017 and 20142016 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. Set forth below are the fees paid or accrued for the services of PwC during 20152017 and 2014:2016: | | | | 2015 | | | 2014 | | | 2017 | | | 2016 | | Audit fees | | $ | 3,048,000 | | | $ | 2,937,846 | | | $ | 3,018,000 | | | $ | 3,263,500 | | Audit-related fees | | | — | | | | — | | | | — | | | | — | | Tax fees | | | 265,154 | | | | 384,350 | | | | 72,894 | | | | 60,130 | | All other fees | | | 96,900 | | | | 207,550 | | | | 559,384 | | | | 465,719 | | | | | | | | | | Total | | $ | 3,410,054 | | | $ | 3,529,746 | | | $ | 3,650,278 | | | $ | 3,789,349 | | | | | | | | | |
Audit fees consisted of professional services rendered to us or certain of our subsidiaries. Such audit services include audits of financial statements, audit of our annual management assessment of the effectiveness of internal control over financial reporting in 20152017 and 20142016 (as required by Section 404 of the Sarbanes-Oxley Act of 2002), reviews of our quarterly financial statements and audit services provided in connection with regulatory filings, acquisitions and other matters. Audit fees in 20142016 also included fees related to a bond offering. Fees for tax services in 20152017 and 20142016 consisted primarily of consultation on various tax matters related to us and our subsidiaries, including preparation of federal and state income tax returns for certain of our subsidiaries. The other fees in 2015 and 2014 represent fees to PwC forconsist of: 2017: (i) consulting services related to U.K. acquisitions ($459,784); (ii) consulting services related to an enhanced reimbursement project ($45,000), and; (iii) Independent Review Organization services ($54,600). 2016: (i) consulting services related to an acquisition in connection with our South Texas Health System affiliates (2014) and Sierra Vista Hospital (2014 and 2015) and certain revenue cycle benchmarking.the U.K. ($337,784); (ii) information technology consulting services ($74,690), and; (iii) Independent Review Organization services ($53,245). The Audit Committee has considered and determined that the provision of non-audit services by our principal auditor is compatible with maintaining auditor independence. All audit and permissible non-audit services provided to us by the independent auditors are pre-approved by the Audit Committee, which considers whether the proposed services would impair the independence of the independent auditors. The Chairperson of the Audit Committee may pre-approve audit and permissible non-audit 63
services during the time between Audit Committee meetings if the fees for the proposed services are less than $25,000.
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE YOUR PROXY BY TELEPHONE OR INTERNET AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. BY ORDER OF THE BOARD OF DIRECTORS  
STEVE G. FILTON, Secretary King of Prussia, Pennsylvania April 7, 2016 5, 2018 64
COMMON STOCK
CLASS C
COMMON STOCK
PROXY CLASS A COMMON STOCK CLASS C COMMON STOCK UNIVERSAL HEALTH SERVICES, INC. This Proxy Solicited By The Board Of Directors For The Annual Meeting Of Stockholders To Be Held On May 18, 2016 16, 2018 Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class A Common Stock and Class C Common Stock of Universal Health Services, Inc. (the “Company”) held of record by the undersigned on March 22, 201620, 2018 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 18, 201616, 2018 at the offices of the Company, Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof. Any and all proxies heretofore given are hereby revoked. Important Notice Regarding Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 18, 2016.16, 2018. The Proxy Statement and Annual Report to Stockholders are available atwww.edocumentview.com/uhs THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
ACCOUNT NUMBER PLEASE MARK YOUR CHOICE LIKE THIS IN BLUE OR BLACK INK ¨
ACCOUNT NUMBER
CLASS A COMMON CLASS C COMMON
| | | The Board of Directors recommends a voteFOR Proposals 1 and 2 andAGAINST Proposal 3:
1. The Election of Anthony Pantaleoni
¨ For ¨ Withhold Authority
2. To ratify the selection of PricewaterhouseCoopers LLP, as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2016
¨ For ¨ Against ¨ Abstain
3. To act on a shareholder proposal regarding proxy access if properly presented at the meeting
¨ For ¨ Against ¨ Abstain
| | Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting.
DATED:
SIGNATURE:
SIGNATURE:
IMPORTANT: Please sign exactly as name appears at the left. Each joint owner shall sign. Executors, administrators, trustees, etc. should give full title.
The above-signed acknowledges receipt of the Notice of Annual Meeting of Stockholders.
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The Board of Directors recommends a vote FOR Proposals 1, and 2, and AGAINST Proposal 3: 1. The Election of Elliot J. Sussman, M.D ‘ For ‘ Withhold Authority The Election of Marc. D. Miller ‘ For ‘ Withhold Authority The Election of Eileen C. McDonnell ‘ For ‘ Withhold Authority 2. To ratify the selection of PricewaterhouseCoopers LLP, as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. ‘ For ‘ Against ‘ Abstain 3. Stockholder proposal regarding proxy access if properly presented at the meeting. ‘ For ‘ Against ‘ Abstain Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting. DATED: SIGNATURE: SIGNATURE: IMPORTANT: Please sign exactly as name appears at the left. Each joint owner shall sign. Executors, administrators, trustees, etc. should give full title. The above-signed acknowledges receipt of the Notice of Annual Meeting of Stockholders. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTEDFOR THE ELECTION OF ANTHONY PANTALEONIELLIOT J. SUSSMAN, M.D., MARC D. MILLER, AND EILEEN C. MCDONNELL AS DIRECTOR,DIRECTORS, FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP, AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016,2018, AND AGAINST THE ACTION ON A SHAREHOLDERSTOCKHOLDER PROPOSAL REGARDING PROXY ACCESS IF PROPERLY PRESENTED AT THE MEETING.
| | | | | | | | | | | | | UNIVERSAL HEALTH SERVICES, INC.
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on May 17, 2016.
| | | | | | | | |  | | Vote by Internet
• Go towww.envisionreports.com/UHS
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure website
| | | | | | | | | Vote by telephone
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• Follow the instructions provided by the recorded message
| | | | | Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | | x | | | | | | |
UNIVERSAL HEALTH SERVICES, INC. Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on May 15, 2018. Vote by Internet • Go to www.envisionreports.com/UHS • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Proposals — The Board of Directors recommends a vote FOR Proposal 1 and AGAINST Proposal 2. For Against Abstain 1. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. 2. Stockholder Proposal regarding proxy access if properly presented at the meeting. Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting. For Against Abstain WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSAL 1, AND AGAINST STOCKHOLDER PROPOSAL 2. Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | A | | Proposals — The Board of Directors recommends a voteFOR Proposals 1 and 2 andAGAINST Proposal 3. | | | | | | | | | 1.
| | Nominee:
| | For
| | Withhold
| | | | | | | | | | | | + | | | | | | | 01 - Robert H. Hotz | | ¨
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | For | | Against | | Abstain | | | | | 2. Proposal to ratify the selection of PricewaterhouseCoopers LLP, as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.
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| | | | 3. To act on a shareholder proposal regarding proxy access if properly presented at the meeting.
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| | | | | WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 ANDAGAINST STOCKHOLDER PROPOSAL 3.
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| | | | | | | | | | | | | | | | | | | Change of Address — Please print your new address below. | | Comments — Please print your comments below. | | | | Meeting Attendance | | | | | | | | | | | | | | | | | | | Mark the box to the right if you plan to attend the Annual Meeting. | | ¨ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | | | Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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| | | | | | | | | | | | | Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | | | | // | | | | | | | | | | |
Annual Meeting of Universal Health Services, Inc. Stockholders Wednesday, May 18, 2016 16, 2018 10:00 a.m. Universal Corporate Center 367 South Gulph Road King of Prussia, PA | Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
held on Wednesday, May 18, 2016: The Proxy Statement and Annual Report to Stockholders are
available at http://www.envisionreports.com/UHS
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 16, 2018: The Proxy Statement and Annual Report to Stockholders are available at http://www.envisionreports.com/UHS q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — UNIVERSAL HEALTH SERVICES, INC. UNIVERSAL HEALTH SERVICES, INC. This Proxy Solicited By The Board Of Directors For The Annual Meeting Of Stockholders To Be Held On May 16, 2018 Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class B Common Stock and Class D Common Stock of Universal Health Services, Inc. held of record by the undersigned on March 20, 2018 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 16, 2018, at the offices of the Company, Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof. Please call 1-800-814-5819 to obtain directions to the Annual Meeting to vote in person. Any and all proxies heretofore given are hereby revoked. THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY. | | | | | | | q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q | | |
| | | | | | | | | | | | Proxy — UNIVERSAL HEALTH SERVICES, INC.
| | | | | | | | | | | | | UNIVERSAL HEALTH SERVICES, INC.
This Proxy Solicited By The Board Of Directors For
The Annual Meeting Of Stockholders To Be Held On May 18, 2016
Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class B Common Stock and Class D Common Stock of Universal Health Services, Inc. held of record by the undersigned on March 22, 2016 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 18, 2016, at the offices of the Company, Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania and at any adjournment thereof. Please call 1-800-814-5819 to obtain directions to the Annual Meeting to vote in person. Any and all proxies heretofore given are hereby revoked.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
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