UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (Amendment
No. )
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U.S.
Physical Therapy, Inc.
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in its Charter)
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Form, Schedule or Registration Statement No.:
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U. S.
PHYSICAL THERAPY, INC.
NOTICE OF 2010 ANNUAL MEETING OF
STOCKHOLDERS
DATE:
Tuesday, May 18,
2010
TIME:
9:00 a.m. (CT)
PLACE:
1300 West Sam Houston
Parkway South, Suite 300, Houston, Texas 77042
MATTERS
TO BE ACTED ON:
1. Election of ten directors to serve until the next annual
meeting of stockholders.
2. Approval of the Amended and Restated 2003 Stock
Incentive Plan (Amended 2003 Plan), which amends the
current 2003 Stock Incentive Plan (2003 Plan) to:
(i) increase the number of shares of common stock
authorized for issuance under the 2003 Plan from 900,000 to
1,250,000, (ii) extend the effective date of the 2003 Plan
until March 26, 2020, and (iii) provide for such other
changes required or desirable under applicable law and good
corporate governance practices.
3. Ratification of the appointment of Grant Thornton LLP as
our independent registered public accounting firm for 2010.
4. Consideration of any other matters that may properly
come before the meeting or any adjournments.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE ELECTION OF EACH OF THE TEN NOMINEES FOR DIRECTOR, THE
APPROVAL OF THE AMENDED AND RESTATED 2003 STOCK INCENTIVE PLAN
AND THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2010.
Your Board of Directors has set Wednesday, March 31, 2010,
as the Record Date for the Annual Meeting of Stockholders to be
held on May 18, 2010 (Annual Meeting). Only
holders of our common stock of record at the close of business
on that date will be entitled to notice of and to attend and
vote at the Annual Meeting or any adjournments. A complete list
of stockholders will be available for examination at the Annual
Meeting and at our offices at 1300 West Sam Houston Parkway
South, Suite 300, Houston, Texas 77042, for a period of ten
days prior to the Annual Meeting.
You are cordially invited to join us at the Annual Meeting.
However, to ensure your representation at the Annual Meeting, we
request that you return your signed proxy card at your earliest
convenience, whether or not you plan to attend the Annual
Meeting. Your proxy card will be returned to you if you are
present at the Annual Meeting and request its return.
By Order of the Board of Directors,
Chris Corrigan, Secretary
April 9, 2010
TABLE OF CONTENTS
U.S.
PHYSICAL THERAPY, INC.
1300 West Sam Houston Parkway South, Suite 300
Houston, Texas 77042
(713) 297-7000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2010
Proxy
Statement
This proxy statement is being provided to stockholders in
connection with the solicitation of proxies by the Board of
Directors for use at the Annual Meeting of Stockholders (the
Annual Meeting) of U.S. Physical Therapy, Inc.
(USPT or the Company) to be held on
Tuesday, May 18, 2010 at 9:00 a.m. (central time) at
the Companys principal executive offices located at
1300 West Sam Houston Parkway, Suite 300, Houston,
Texas, 77042. This Proxy Statement and the enclosed proxy card
are being mailed on behalf of our Board of Directors on or about
April 9, 2010 to all of our stockholders of record as of
the close of business on the record date, Wednesday,
March 31, 2010.
Your Vote
is Important
Whether or not you plan to attend the Annual Meeting, please
take time to vote your shares by signing and returning a proxy
card as soon as possible.
Proposals To
Be Voted On and the Boards Voting
Recommendations
The following three proposals are scheduled to be voted on at
the Annual Meeting:
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Election of ten director nominees.
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Approval of the Amended and Restated 2003 Stock Incentive Plan.
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Ratification of the appointment of Grant Thornton LLP as our
independent registered public accounting firm for 2010.
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YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE ELECTION OF EACH OF THE TEN NOMINEES FOR DIRECTOR, THE
APPROVAL OF THE AMENDED AND RESTATED 2003 STOCK INCENTIVE PLAN
AND THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2010.
Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting to be Held on May 18,
2010
We have elected to provide access to our proxy materials both by
sending you this full set of proxy materials, including a Notice
of 2010 Annual Meeting of Stockholders, proxy card and Annual
Report for the year ended December 31, 2009, and by
notifying you of the availability of our proxy materials on the
Internet.
The Notice of 2010 Annual Meeting of Stockholders,
this Proxy Statement, proxy card and Annual Report for the year
ended December 31, 2009 are available at
http://www.cstproxy.com/usph/2010.
The materials on the website are searchable, readable and
printable and the website does not have cookies or
other tracking devices which identify visitors. To obtain
directions to attend the Annual Meeting and vote in person,
please contact Chris Corrigan, our Secretary, at
800-530-6285
or via email at investorrelations@usph.com.
Who Can
Vote:
All holders of record of our common stock at the close of
business on March 31, 2010 are entitled to vote at the
Annual Meeting. Holders of our common stock are entitled to one
vote per share.
Proxies
Solicited By:
Your vote and proxy are being solicited by our Board of
Directors for use at the Annual Meeting. This Proxy Statement
and the enclosed proxy card are being mailed on behalf of our
Board of Directors on or about April 9, 2010 to all of our
stockholders of record as of the close of business on the record
date, Wednesday, March 31, 2010.
Your presence at the Annual Meeting will not automatically
revoke your proxy. You may, however, revoke your proxy at any
time prior to its exercise by delivering to us another proxy
bearing a later date, by attending the Annual Meeting and voting
in person, or by filing a written notice of revocation before
the Annual Meeting with Chris Corrigan, our Secretary, at our
principal executive offices located at 1300 West Sam
Houston Parkway South, Suite 300, Houston, Texas 77042. If
you receive multiple proxy cards, this indicates that your
shares are held in more than one account, such as two brokerage
accounts, or are registered in different names. You should vote
each of the proxy cards received to ensure that all of your
shares are voted.
Proxies:
Properly executed but unmarked proxies will be voted FOR the
election of our ten director nominees, FOR the approval of the
Amended and Restated 2003 Stock Incentive Plan and FOR the
ratification of the appointment of Grant Thornton LLP as our
independent registered public accounting firm for 2010.
If
you withhold your vote for any of the nominees, this
will be counted as a vote
AGAINST
that nominee. If any
other matters are properly brought before the Annual Meeting,
the persons named in the proxy card will vote your shares as
directed by a majority of the Board of Directors.
Quorum:
Only shares of our common stock can be voted, with each share
entitling its owner to one vote on all matters. The close of
business on Wednesday, March 31, 2010 (Record
Date) was fixed by the Board of Directors as the Record
Date for determination of stockholders entitled to vote at the
Annual Meeting. The number of shares of our common stock
outstanding on the Record Date was 11,614,508. The presence, in
person or by proxy, of at least a majority of the shares
outstanding on the Record Date is necessary to constitute a
quorum at our Annual Meeting. Abstentions will be treated as
present for determining a quorum at the Annual Meeting. If a
broker holding your shares in street name indicates
to us on a proxy card that the broker lacks discretionary
authority to vote your shares for all matters at the meeting, we
will not consider your shares as present or entitled to vote for
any purpose. There is no cumulative voting in the election of
directors and, as required by Nevada law, the directors will be
elected by a plurality of the votes cast at the Annual Meeting.
Cost of
Proxy Solicitation:
We will bear the cost of soliciting proxies. Some of
our directors, officers and regular employees may solicit
proxies, without additional compensation, personally or by
telephone. Proxy materials will also be furnished without cost
to brokers and other nominees to forward to the beneficial
owners of shares held in their names.
Questions
and Additional Information:
You may call our President and Chief Executive Officer,
Christopher J. Reading, or our Chief Financial Officer, Lawrance
W. McAfee, at
800-580-6285
or email us at investorrelations@usph.com if you have any
questions. A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2009 accompanies this Proxy
Statement.
We have filed an Annual Report on
Form 10-K
for the year ended December 31, 2009 (the
Form 10-K)
with the Securities and Exchange Commission (the
SEC). You may obtain additional copies of the
Form 10-K
by downloading it from our website at
www.usph.com
, by
writing to U.S. Physical Therapy, Inc., 1300 West Sam
Houston Parkway South, Suite 300, Houston, Texas 77042,
Attention: Chris Corrigan, Secretary or by emailing us at
investorrelations@usph.com.
PLEASE
VOTE YOUR VOTE IS IMPORTANT
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ITEM 1
ELECTION OF DIRECTORS
The accompanying proxy card, unless marked to the contrary, will
be voted in favor of the election of Daniel C. Arnold,
Christopher J. Reading, Lawrance W. McAfee, Mark J. Brookner,
Bruce D. Broussard, Dr. Bernard A. Harris, Jr., Marlin
W. Johnston, Jerald L. Pullins, Reginald E. Swanson and Clayton
K. Trier. These ten nominees are current directors standing for
reelection at the Annual Meeting to serve until the next annual
meeting of stockholders. Mr. J. Livingston Kosberg, a
current director of the Company, is not standing for reelection,
but has indicated he will serve until the end of his term, which
will expire at the Annual Meeting. Effective as of the date of
the Annual Meeting, the Board of Directors has reduced the
number of directors to ten, and consequently,
Mr. Kosbergs position will not be filled. The
Governance and Nominating Committee, which consists solely of
directors who are independent under the applicable NASDAQ
Listing Standards, recommended the ten directors to the Board of
Directors. Based on that recommendation, the Board nominated
such directors for election at the Annual Meeting.
The Board of Directors has determined that Messrs. Arnold,
Brookner, Broussard, Johnston, Pullins and Trier, and
Dr. Harris are considered independent under the applicable
NASDAQ Listing Standards. Messrs. McAfee and Reading, who
are officers of the Company, and Mr. Swanson, who is an
employee of the Company, are not considered independent under
the applicable NASDAQ Listing Standards. The nominees for
director are:
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Director
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Nominees:
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Age
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Since
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Position(s) Held
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Daniel C. Arnold
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80
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1992
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Chairman of the Board
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Christopher J. Reading
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2004
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President, Chief Executive Officer and Director
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Lawrance W. McAfee
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2004
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Executive Vice President, Chief Financial Officer and Director
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Jerald L. Pullins
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68
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2003
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Vice Chairman of the Board
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Mark J. Brookner
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65
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1990
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Director
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Bruce D. Broussard
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47
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1999
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Director
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Dr. Bernard A. Harris, Jr
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53
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2005
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Director
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Marlin W. Johnston
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78
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1992
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Director
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Reginald E. Swanson
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2007
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Director and Managing Director of STAR Physical Therapy, LP (*)
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Clayton K. Trier
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2005
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Director
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*
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STAR Physical Therapy, LP is a subsidiary of the Company.
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Director
Biographies:
Daniel C. Arnold
was named our Chairman of the Board on
July 6, 2004. Mr. Arnold is a private investor engaged
primarily in managing his personal investments. He previously
served as Chairman of the Board of Trustees of the Baylor
College of Medicine. He is currently serving only on the Board
of U.S. Physical Therapy, Inc.
Christopher J. Reading
was promoted to President and
Chief Executive Officer and elected to our Board of Directors
effective November 1, 2004. Prior to 2004, Mr. Reading
served as our Chief Operating Officer since joining us in 2003.
From 1990 to 2003, Mr. Reading served in various executive
and management positions with HealthSouth Corporation where most
recently he served as Senior Vice President of Operations
responsible for over 200 facilities located in 10 states.
Mr. Reading is a physical therapist.
Lawrance W. McAfee
was promoted to Executive Vice
President and elected to our Board of Directors effective
November 1, 2004. Mr. McAfee also serves as our Chief
Financial Officer, a position he has held since joining us in
2003. Mr. McAfees experience includes having served
as Chief Financial Officer of three public companies and
President of two private companies.
Mark J. Brookner
has served on our Board since August
1998. Mr. Brookner is currently a private investor. He
served as our Chief Financial Officer from 1992 to 1998 and as
our Secretary and Treasurer during portions of that period.
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Bruce D. Broussard
has served on our Board since
1999. Since February 2008, Mr. Broussard has
been Chief Executive Officer and a Director of
U.S. Oncology, Inc., a cancer-care services company
formerly listed on The Nasdaq Stock Market. Prior to that time,
since November 2005, Mr. Broussard was the President of
U.S. Oncology, Inc. From August 2000 through October 2005,
he was the Chief Financial Officer of U.S. Oncology, Inc.
From December 1997 to August 2000, Mr. Broussard was the
Chief Executive Officer of HarborDental Properties, a dental
development company specializing in free-standing upscale
dedicated dental buildings. Mr. Broussard served as the
Chief Financial Officer for Regency Health Services, Inc., a
national chain of nursing homes and provider of long-term health
services formerly listed on the New York Stock Exchange, from
1996 to 1997 and as a Director and Chief Financial Officer for
Sun Health Care Group, a health care provider, from 1993 to 1996.
Dr. Bernard A. Harris
joined our Board on
August 23, 2005. From 2001, Dr. Harris has been
President and Chief Executive Officer of Vesalius Ventures, a
venture capital firm that invests in early stage medical
informatics and technology. From 2006, Dr. Harris has
served as a Class III director of Sterling Bancshares,
Inc., a bank holding company. From 1996 to 2001, he served as
Chief Medical Officer and Vice President for Space Hab, an
aerospace company. Dr. Harris is a former astronaut, having
completed two space shuttle missions. He completed his residency
in Internal Medicine at the Mayo Clinic and trained as a flight
surgeon at the Aerospace School of Medicine at Brooks Air Force
Base.
Marlin W. Johnston
has served on our Board since
1992. Mr. Johnston has been a management
consultant with Tonn & Associates, a management
consulting firm, since 1993. During 1992 and 1993,
Mr. Johnston served as a management consultant to the Texas
Department of Health and the Texas Department of Protective and
Regulatory Services.
Jerald L. Pullins
has served on our Board since
2003. He is currently engaged in the development and
management of private enterprises in the healthcare field. From
October 2007 to the present, Mr. Pullins has been the
Managing Member of SeniorCare Homes, LLC, which develops, owns
and operates supervised, residential homes for senior citizens
with Alzheimers, dementia and other memory impairment
conditions. From 2007 to present, he has also served as Chairman
of the Board of Directors of Pet Partners, LLC, a private
enterprise involved in the acquisition and management of primary
care, small animal veterinary hospitals.
Reginald E. Swanson
joined our Board on September 6,
2007. Mr. Swanson is Managing Director of STAR Physical
Therapy, LP, a subsidiary of the Company. Mr. Swanson is
founder of STAR Physical Therapy, LLC, and from 1997 to 2007,
was its president and managing member. He is a licensed athletic
trainer and has been involved with sports medicine and physical
therapy for over 25 years.
Clayton K. Trier
joined our Board on February 23,
2005. Mr. Trier is a private investor. He was a founder and
former Chairman and Chief Executive Officer of
U.S. Delivery Systems, Inc., which developed the first
national network providing
same-day
delivery service, from 1993 to 1997. Before it was acquired in
1996, U.S. Delivery was listed for two years on the New
York Stock Exchange.
The persons named on the proxy card will vote FOR all of the
nominees for director listed above unless you withhold authority
to vote for one or more of the nominees. Under current
regulations, a broker is prohibited from voting for directors
without receiving instructions from you. As required by Nevada
law, nominees will be elected by a plurality of the votes cast
at the Annual Meeting. Abstentions and broker non-votes will not
be treated as a vote for or against any particular nominee and
will not affect the outcome of the election of directors.
Continental Stock Transfer & Trust Co. will
tabulate the votes cast by proxy or in person at the Annual
Meeting.
All of our nominees have consented to serve as directors. Our
Board has no reason to believe that any of the nominees will be
unable to act as a director. However, if any director is unable
to serve, the Board may designate a substitute. If a substitute
nominee is named, the persons named on the proxy card will vote
FOR the election of the substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE ELECTION OF THE TEN NOMINEES FOR DIRECTOR
NAMED IN THE PROXY STATEMENT.
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CORPORATE
GOVERNANCE AND BOARD MATTERS
Board
Leadership Structure
Our Board is led by an independent Chairman and Vice-Chairman.
Mr. Reading, our Chief Executive Officer, Mr. McAfee,
our Executive Vice President and Chief Financial Officer, and
Mr. Swanson, the managing director of our subsidiary, STAR
Physical Therapy, LP, are members of the Board who are not
independent. We believe the leadership structure enhances the
accountability of the executive management to the Board. Because
seven members of our Board are considered independent, we
believe the Board is independent from management. Further,
separating the Chairman and Chief Executive Officer roles allows
Mr. Reading to focus his efforts on running our business
and managing the Company in the best interest of our
stockholders while we are able to benefit from prior experiences
of our independent Board members, especially our Chairman and
Vice Chairman.
Board
Oversight of Risk
Our management is responsible for the Companys
day-to-day
risk management activities. Our Board, which functions in an
oversight role in risk management, focuses on understanding the
nature of the risks inherent in our business, including our
operations, strategic directions and overall risk management
systems. Our Board receives periodic updates on our business
operations, financial results, strategy and specific risks
related to our business. These updates are primarily
communicated through presentations by management at Board
meetings and through discussions with appropriate management,
compliance and audit personnel at the meetings of the
Boards Audit Committee and Compliance Committee.
Independent
Directors
The Board has affirmatively determined that Messrs. Arnold,
Brookner, Broussard, Johnston, Pullins and Trier, and
Dr. Harris have no relationship with the Company or its
subsidiaries that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director and are independent, as defined in the applicable
NASDAQ Listing Standards. Specifically, the Board determined
that the foregoing seven nominees are independent as
defined in Rule 4200 of the NASDAQ Marketplace Rules, and
that the directors comprising the Companys Audit Committee
are independent as defined in
Rule 10A-3(b)(1)
under the Exchange Act. The size of our Board is being reduced
to 10 directors, contemporaneous with the elections to be
held at the 2010 Annual Meeting of Stockholders.
Attendance
at Board Meetings and Board Committees
The Board of Directors conducts its business through its
meetings and through meetings of certain committees of the Board
of Directors. The Board of Directors is comprised of a majority
of independent directors as required by the applicable NASDAQ
Listing Standards.
The Board has the following standing committees:
(i) Governance and Nominating, (ii) Corporate
Compliance
(sub-committee
of the Audit Committee), (iii) Compensation, and
(iv) Audit Committees. During 2009, the Board of Directors
met 4 times, the Governance and Nominating Committee met 1 time,
the Corporate Compliance Committee met 4 times, the Compensation
Committee met 5 times and the Audit Committee met 7 times. Each
of our directors, with the exception of Mr. Kosberg,
attended at least 75% of the aggregate meetings of the Board of
Directors. All members of the various committees attended at
least 75% of the meetings for the committees on which they
served. These committees are constituted as follows:
Governance
and Nominating Committee
The Governance and Nominating Committee currently consists of
Messrs. Arnold (Chairman), Broussard and Trier, all of whom
are independent, as defined in the applicable NASDAQ
Listing Standards. The function of the committee is to select,
screen and recommend to the full Board nominees for election as
directors, including any nominees proposed by stockholders who
have complied with the procedures described below. The committee
also has ongoing responsibility for oversight review of Board
performance and ensuring each Board members continuing
commitment to the Board and the Companys goals and
objectives. Additional functions include
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regularly assessing the appropriate size of the Board, and
whether any vacancies on the Board are expected due to
retirement or otherwise. In the event that vacancies are
anticipated, or otherwise arise, the committee will consider
various potential candidates for director. Candidates may come
to the attention of the committee through current Board members,
stockholders, or other persons. The committee may also hire
third parties to identify, to evaluate, or to assist in
identifying or evaluating potential nominees should it be
determined necessary. The committee is required to meet at least
annually and operates under a written charter, a copy of which
is available on our website at
www.usph.com
.
Nomination Criteria.
In its consideration of
Board candidates, the Governance and Nominating Committee
considers the following criteria: the candidates general
understanding of the health care sector, marketing, finance and
other disciplines relevant to the success of a publicly-traded
company; strategic business contacts and regard or reputation in
the community, industry and civic affairs; financial, regulatory
and business experience; integrity, honesty and reputation; size
of the Board of Directors; and regulatory obligations. In the
case of incumbent directors whose terms of office are set to
expire, the committee reviews each such directors overall
service to the Company during said directors terms,
including the number of meetings attended, level of
participation, quality of performance, and whether the director
continues to meet the independence standards set forth in the
applicable SEC rules and regulations and the applicable NASDAQ
Listing Standards. In the case of new director candidates, the
questions of independence and financial expertise are important
to determine which roles can be performed by the candidate, and
the committee preliminarily determines whether the candidate
meets the independence standards set forth in the SEC rules and
regulations and the applicable NASDAQ Listing Standards, and the
level of the candidates financial expertise. Candidates
are first screened by the committee, and if approved by the
committee, then they are screened by other members of the Board.
The full Board approves the final nomination(s) based on
recommendations from the committee. The Chairman of the Board,
acting on behalf of the full Board, will extend the formal
invitation to become a nominee of the Board of Directors.
Qualified candidates for membership on the Board will be
considered without regard to race, color, religion, sex,
ancestry, national origin or disability.
Stockholder Nomination Procedures.
The
Governance and Nominating Committee will consider director
candidates recommended by the stockholders. Generally, for a
stockholder of the Company to make a nomination, he or she must
give written notice to our Corporate Secretary so that such
notice is received at least 120 calendar days prior to the first
anniversary of the date the Companys proxy statement is
sent to the stockholders in connection with the previous
years annual meeting of stockholders. If no annual meeting
of stockholders was held in the previous year (or if the date of
the annual meeting of stockholders was changed by more than 30
calendar days from the date of the previous years annual
meeting), the notice must be received by the Company within a
reasonable period prior to the time the Company begins to print
and send its proxy materials for the applicable annual meeting.
The stockholders notice must set forth as to each nominee:
(i) the name, age, business address and residence address
of such nominee, (ii) the principal occupation or
employment of such nominee, (iii) the number of shares of
our common stock which are beneficially owned by such nominee,
and (iv) any other information relating to such nominee
that may be required under federal securities laws to be
disclosed in solicitations of proxies for the election of
directors (including the written consent of the person being
recommended as a director candidate to being named in the proxy
statement as a nominee and to serve as a director if elected).
The stockholders notice must also set forth as to the
stockholder giving notice: (i) the name and address of such
stockholder and (ii) the number of shares of our common
stock which are beneficially owned by such stockholder.
If the information supplied by the stockholder is deficient in
any material aspect or if the foregoing procedure is not
followed, the chairman of the applicable annual meeting may
determine that such stockholders nomination should not be
brought before the meeting and that such nominee is not eligible
for election as a director of the Company. The committee will
not alter the manner in which it evaluates candidates, including
the minimum criteria set forth above, based on whether or not
the candidate was recommended by a stockholder.
Corporate
Compliance Committee
The Corporate Compliance Committee is a
sub-committee
of the Audit Committee, and consists of four independent
directors. The current members of the committee are
Messrs. Johnston (Chairman) and Brookner, Pullins, and
Dr. Harris, all of whom are independent, as
defined in the applicable NASDAQ listing standards.
Mr. Brookner was added to this committee on May 19,
2009. The committee has general oversight of our
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Companys compliance with the legal and regulatory
requirements regarding healthcare operations. The Chairman of
the committee is provided with information regarding calls
received on the Companys compliance hotline and reports
findings to the committee. The committee relies on the expertise
and knowledge of management, especially our Compliance Officer
(CO), who regularly communicates with the Chairman
of the Committee, and other compliance, management, operations
and/or
legal
personnel. The committee meets at least two times a year and as
necessary to carry out its responsibilities and reports
periodically to the Board of Directors regarding its actions and
recommendations. The committee reviews and assesses the
activities and findings of clinic internal audits, reviews
reports of material noncompliance and reviews and approves
corrective actions proposed by management.
Compensation
Committee
The current members of the Compensation Committee are
Messrs. Arnold (Chairman), Broussard and Trier all of whom
are independent, as defined in the applicable NASDAQ
Listing Standards. As more fully described in the Compensation
Committee Charter, which can be found on our website at
www.usph.com, the committee is responsible for, among other
things:
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establishing goals and objectives relevant to incentive
compensation awards (annual and long-term) for the Chief
Executive Officer and other senior executive officers of the
Company;
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evaluating the Chief Executive Officers and other senior
executive officers performance and the overall corporate
performance in light of these goals and objectives and approve
any incentive compensation for such executives;
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determining any periodic adjustments to be made in the Chief
Executive Officers and other senior executive
officers base salary level based on the committees
evaluation thereof;
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for officers and key employees of the Company other than the
senior executives, reviewing the proposed salary levels and
annual adjustments thereto and the incentive compensation plans
formulated by senior management and the annual bonus payments to
be made thereunder, and providing input and advice to senior
management with respect to these compensation decisions;
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approving all executive perquisites and any special benefit
plans to be made available to senior executive officers;
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advising on compensation of non-employee members of the Board;
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administering the Companys equity compensation plans and
approving grants to executive officers, employees, directors,
and consultants under such plans;
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reviewing the Compensation Discussion and Analysis to be
included in the Companys annual proxy statement as
required by the rules of the Securities and Exchange Commission
and recommending to the Board of Directors whether such
Compensation Discussion and Analysis should be included in the
annual proxy statement; and
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annually reviewing the committees performance of its
responsibilities and duties and reviewing and reassessing the
adequacy of the Compensation Committee Charter and recommending
to the Board of Directors any necessary revisions/improvements
to the Charter that the committee considers appropriate.
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The committee may delegate its responsibilities to subcommittees
of one or more directors. The committee meets at least two times
a year to carry out its responsibilities. Messrs. Reading,
McAfee and McDowell are not permitted to be present during any
deliberations or voting with respect to his or her compensation.
The committees processes and procedures for determining
executive compensation are described below under
Compensation Discussion and Analysis.
Audit
Committee
The Audit Committee currently consists of Messrs. Johnston
(Chairman), Brookner, Harris, Pullins and Trier.
Mr. Brookner was added to the committee on May 19,
2009. Our Board of Directors has determined that
Messrs. Brookner, Pullins and Trier are audit
committee financial experts under the rules of the SEC. As
more
7
fully described in the Audit Committee Charter, which can be
found on our website,
www.usph.com
, the committee is
responsible for, among other things:
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overseeing our financial reporting processes, including the
quarterly reviews and annual audits of our financial
statements by the independent auditors;
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the appointment, compensation, retention and oversight of the
work of the independent auditors;
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pre-approving audit and permitted non-audit services, and
related fees and terms of engagement, provided by the
independent auditors; and
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reviewing with management and independent auditors issues
relating to disclosure controls and procedures and internal
control over financial reporting.
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The Audit Committee Charter requires that the committee consist
of at least three independent members of our Board and that the
committee meet at least four times per year on a quarterly
basis. Each member of the Audit Committee is
independent, as defined in the applicable NASDAQ
Listing Standards and the rules of the SEC.
Codes of
Conduct and Procedures Regarding Related Party
Transactions
Codes
of Conduct
Our Board has approved and we have adopted a Code of Business
Conduct and Ethics for our officers and all employees, and an
additional Code of Business Conduct and Ethics which is
applicable to our directors. The Codes are available on our
website at
www.usph.com
. Our Board, or a committee of its
independent members, is responsible for reviewing and approving
or rejecting any requested waivers to the Codes, as such waivers
may apply to our directors and officers. Any waivers of these
Codes for directors, officers and employees will be disclosed in
a
Form 8-K
filed with the SEC, which will be available on the SECs
website at
www.sec.gov
. The Code applicable to directors
requires each director to disclose to the Board any interest he
or she may have in a potential transaction, arrangement or
agreement to which the Company is or will be a party, and
refrain from participating directly or indirectly in the
transaction unless the Board approves such participation with
all interested directors abstaining from the consideration and
deliberation of, and any votes concerning, such matter.
Our Board has further approved and we have adopted an additional
Code of Business Conduct and Ethics, applicable to our Chief
Executive Officer, Chief Financial Officer and senior financial
officers, relating to dealings with our auditors and the
preparation of our financial statements and other disclosures
made to the public under SEC rules and regulations. This Code is
available on our website at
www.usph.com
. The Board, or a
committee of its independent members, is responsible for
reviewing and approving or rejecting any requested waivers from
and amendments to this Code. Neither the Board, nor a committee
of its independent members received any requests for waivers or
amendments to the Code, and none were granted. Any waivers from
and amendments to the Code will be disclosed in a
Form 8-K
filed with the SEC, which will be available on the SECs
website at
www.sec.gov
. The Code requires the officers to
disclose directly to the Audit Committee any conflicts of
interest, including any material transaction or relationship
involving a potential conflict of interest.
Certain
Relationships and Related Transactions
The charter of the Audit Committee requires that the Audit
Committee review and approve all insider and affiliated party
transactions. The Audit Committee did not consider any insider
or affiliated party transaction in 2009.
Communications
with the Board of Directors and Attendance at Annual
Meeting
The Board of Directors maintains an informal process for
stockholders to communicate with the Board of Directors.
Stockholders wishing to communicate with the Board of Directors
should send any communication to Chris Corrigan, our Secretary,
at our principal executive offices, 1300 West Sam Houston
Parkway South, Suite 300, Houston, Texas 77042. Any such
communication must state the number of shares beneficially owned
by the stockholder making the communication. The Corporate
Secretary will forward such communication to the full Board of
Directors or to any individual director or directors to whom the
communication is directed unless the
8
communication is unduly hostile, threatening, illegal or
similarly inappropriate, in which case the Corporate Secretary
has the authority to discard the communication or take
appropriate legal action regarding the communication.
Although the Company does not have a formal policy requiring
them to do so, all of the members of our Board of Directors are
encouraged to attend our annual meeting of stockholders. At the
2009 annual meeting, all directors were in attendance.
Compensation
of Directors
For 2009, each of our non-employee directors received $7,500 per
quarter (Retainer Fee) for serving as a member of
our Board of Directors and, beginning in February 2010, are paid
$1,000 for each Audit and Compensation Committee meeting and
$500 for each Governance & Nominating and Compliance
Committee meeting attended in person or telephonically
(hereinafter referred to as Meeting Fees).
Each of the Chairman of the Audit Committee and Compliance
Committee is paid a $5,000 annual fee and the Chairman of the
Board is paid a $20,000 annual chairman fee (hereinafter all
referred to as Chairman Fees). Directors are
also reimbursed for their out-of-pocket travel and related
expenses incurred in attending Board and committee meetings.
Directors who are also our employees are not compensated
separately for serving on our Board. In addition, in May 2009,
each of the non-employee directors received a grant of 3,000
shares of restricted stock vesting quarterly through March 2010.
Director
Compensation Table
The following table discloses the cash, equity awards and other
compensation earned, paid or awarded, as the case may be, to
each of the Companys directors who are not Named Executive
Officers during the fiscal year ended December 31, 2009.
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Change in
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Pension
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Value and
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Fees
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Nonqualified
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Earned
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Non-Equity
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Deferred
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or Paid
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name
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in Cash(1)
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Awards(2)
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Daniel C. Arnold
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$
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52,000
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$
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39,150
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$
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$
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$
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$
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$
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91,150
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Mark J. Brookner
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$
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31,500
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$
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39,150
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$
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$
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$
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$
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$
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70,650
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Bruce D. Broussard
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$
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32,000
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$
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39,150
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$
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$
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$
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$
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$
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71,150
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Dr. Bernard A. Harris, Jr
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$
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35,000
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$
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39,150
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$
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$
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$
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$
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$
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74,150
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Marlin W. Johnston
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$
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40,000
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$
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39,150
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$
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$
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$
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$
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$
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79,150
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J. Livingston Kosberg
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$
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30,000
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$
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39,150
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$
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$
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$
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$
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$
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69,150
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Jerald L. Pullins
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$
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34,500
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$
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39,150
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$
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$
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$
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$
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$
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73,650
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Reginald E. Swanson(3)
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$
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$
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$
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$
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$
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$
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169,231
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$
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169,231
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Clayton K. Trier
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$
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35,500
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$
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39,150
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$
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$
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$
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$
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$
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74,650
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(1)
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Includes Retainer Fees, Chairman Fees and Meeting Fees.
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(2)
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Stock awards were granted as restricted stock under the terms of
the Amended and Restated 1999 Stock Option Plan. For each
individual, restrictions lapsed as to 750 shares on
June 30, 2009, 750 shares on September 30, 2009,
750 shares on December 31, 2009 and 750 shares on
March 31, 2010. Amounts shown are the grant date fair value
of the awards computed in accordance with FASB ASC Topic 718
which amounted to $13.05 per share. See our Annual Report on
Form 10-K
for the year ended December 31, 2009 for a discussion of
restricted
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9
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stock grants Footnote 9 Equity Based
Plans. The non-employee directors have the following outstanding
stock options as December 31, 2009. All stock options are
fully vested and exercisable.
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Name
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Daniel C. Arnold
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40,000
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Mark J. Brookner
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25,000
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Bruce D. Broussard
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40,002
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Dr. Bernard A. Harris, Jr
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30,000
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Marlin W. Johnston
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37,500
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J. Livingston Kosberg
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30,000
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Jerald L. Pullins
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57,500
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Clayton K. Trier
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32,500
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(3)
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Other compensation represents salary received by
Mr. Swanson in his role as Managing Director of STAR
Physical Therapy, LP, a subsidiary of the Company. During 2009,
Mr. Swanson did not receive any additional compensation for
being a director.
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STOCK
OWNERSHIP
Stock
Owned by Directors, Nominees and Executive Officers
The following table shows the number and percentage of shares of
our common stock beneficially owned by our directors, executive
officers named in the Summary Compensation Table and all
directors and executive officers as a group as of March 31,
2010. Each person has sole voting and investment power for the
shares shown below unless otherwise indicated.
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Number of
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Percent of
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Shares
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Right to
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Common
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Name of Beneficial Owner
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Owned(1)
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Acquire(2)
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Stock
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Directors:
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Daniel C. Arnold
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133,002
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40,000
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1.1
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%
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Chairman of the Board
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Christopher J. Reading
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285,000
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(3)
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250,000
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2.4
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%
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President, Chief Executive Officer and Director
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Lawrance W. McAfee
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260,000
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(4)
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225,000
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2.2
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%
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Executive Vice President, Chief Financial Officer and Director
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Jerald L. Pullins
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71,000
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57,500
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*
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Vice Chairman of the Board
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Mark J. Brookner
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101,500
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(5)
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25,000
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*
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Bruce D. Broussard
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56,002
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40,002
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*
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Dr. Bernard A. Harris, Jr
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31,800
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30,000
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*
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Marlin W. Johnston
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61,000
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37,500
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*
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J. Livingston Kosberg
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225,210
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(6)
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30,000
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1.9
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%
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Reginald E. Swanson
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144,442
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(7)
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1.2
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%
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Clayton K. Trier
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42,500
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32,500
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*
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Non-Director
Executive Officers:
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Glenn D. McDowell
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74,000
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(4)
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49,000
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*
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Chief Operating Officer
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All directors and executive officers as a group (12 persons)
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1,485,456
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816,502
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12.2
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%
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|
|
|
|
|
|
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10
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*
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Less than 1%.
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(1)
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Includes shares of our common stock subject to outstanding
options that are currently exercisable or exercisable through
May 30, 2010. None of the shares are pledged.
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(2)
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Number of shares of our common stock (of the total beneficially
owned) that can be acquired through stock options exercisable
through May 30, 2010.
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(3)
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Includes 17,500 restricted shares with a quarterly vesting
schedule as to the lapse of restrictions thereof with
2,500 shares vesting quarterly with the next vesting date
of June 30, 2010 and continuing through December 31,
2011.
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(4)
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Includes 14,585 restricted shares with a quarterly vesting
schedule as to the lapse of restrictions thereof with
2,083 shares vesting quarterly with the next vesting date
of June 30, 2010 and continuing through September 30,
2011 with the final 2,087 shares vesting on
December 31, 2011.
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(5)
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Includes 33,500 shares of our common stock owned directly
by Mr. Brookner and 43,000 shares of common stock held
in various trusts of which Mr. Brookner is the trustee.
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(6)
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Includes 174,000 shares of our common stock held by the
Livingston Kosberg Trust of which Mr. Kosberg is the
trustee and income beneficiary. Also includes 21,700 shares
of our common stock held directly by Mr. Kosberg,
15,000 shares of our common stock held in a trust of which
Mr. Kosberg is the trustee and 3,510 shares of our
common stock held by Mr. Kosbergs spouse for which
Mr. Kosberg disclaims beneficial ownership.
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(7)
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Includes 141,442 shares of our common stock held by the
Regg E. Swanson Revocable Trust of which Mr. Swanson is the
trustee and beneficiary. Also includes 3,000 shares of our
common stock held directly by Mr. Swanson.
|
Stock
Owned by Certain Beneficial Holders
The table below shows the ownership of our shares of common
stock by persons known to us to beneficially own more than 5% of
our common stock. The information is based on the most recent
statements filed with the SEC on Schedule 13G, submitted to
us by those persons.
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Amount and
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Percent of
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Nature of
|
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Common Stock
|
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Name and Address of Beneficial Owner
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|
Beneficial Ownership
|
|
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Outstanding
|
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Royce & Associates, LLC
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1,564,475
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(1)
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13.5
|
%
|
745 Fifth Avenue
New York, NY 10151
|
|
|
|
|
|
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Bank of America Corporation
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810,358
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(2)
|
|
|
7.0
|
%
|
100 North Tryon Street, Floor 25
Charlotte, NC 28255
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|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
707,637
|
(3)
|
|
|
6.1
|
%
|
40 East 52nd Street
New York, NY 10022
|
|
|
|
|
|
|
|
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Renaissance Technologies LLC
|
|
|
648,674
|
(4)
|
|
|
5.6
|
%
|
600 University Street, Suite 2500
Seattle, WA 98101
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|
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(1)
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Royce & Associates, LLC has sole voting and
dispositive power over all of the shares as disclosed in a
Schedule 13G filed on January 26, 2010. Various
accounts managed by Royce & Associates, LLC have the
right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of shares of the issuer. The
interest of one account, Royce Pennsylvania Mutual Fund, an
investment company registered under the Investment Company Act
of 1940 and managed by Royce & Associates, LLC,
amounted to 905,675 shares or 7.8% of the total shares
outstanding.
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(2)
|
|
Based on a Schedule 13G/A filed on February 3, 2010 by
Bank of America Corporation, Bank of America, NA, Columbia
Management Advisors, LLC, Banc of America Investment Advisors,
Inc. and IQ Investment
|
11
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|
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Advisors LLC, Bank of America Corporation has shared power to
vote or direct the vote of 631,581 shares and shared power
to dispose or direct the disposition of 810,358 shares.
Bank of America, NA has shared power to vote or direct the vote
of 629,881 shares and shared power to dispose or to direct
the disposition of 808,658 shares. Columbia Management
Advisors, LLC has sole power to vote or direct the vote of
616,873 shares, sole power to dispose or to direct the
disposition of 804,370 shares and shared power to dispose
or to direct the disposition of 4,288 shares. Banc of
America Investment Advisors, Inc. has shared power to vote or
direct the vote of 13,008 shares. IQ Investment Advisors
LLC has shared power to vote or direct the vote of
1,700 shares and shared power to dispose or to direct the
disposition of 1,700 shares.
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(3)
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|
BlackRock, Inc. has sole voting and dispositive power over all
of the shares as disclosed in a Schedule 13G filed on
January 29, 2010. Various persons have the right to receive
or the power to direct the receipt of dividends from, or the
proceeds from the sale of the issuer. No one persons
interest in the common stock of the issuer is more than five
percent of the total outstanding common shares.
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(4)
|
|
Pursant to a Schedule 13G filed on February 12, 2010,
Renaissance Technologies LLC and James H. Simons has sole voting
power over 640,900 of the shares, sole dispositive power over
645,990 of the shares and shares dispositive power over 2,684 of
the shares. The Schedule 13G was filed by Renaissance
Technologies LLC and James H. Simons because of
Mr. Simons position as a control person of
Renaissance Technologies LLC.
|
EXECUTIVE
OFFICERS
The current executive officers of the Company are as follows
(Named Executives):
|
|
|
Name
|
|
Position
|
|
Christopher J. Reading
|
|
President and Chief Executive Officer
|
Lawrance W. McAfee
|
|
Executive Vice President and Chief Financial Officer
|
Glenn D. McDowell
|
|
Chief Operating Officer
|
For information concerning Messrs. Reading and McAfee see
Election of Directors above.
Glenn D. McDowell,
53, was promoted to Chief Operating
Officer effective January 24, 2005. Mr. McDowell
served as our Vice President of Operations overseeing the west
region since joining us in October 2003 until January 2005. From
1996 to 2003, Mr. McDowell was employed by HealthSouth
Corporation, a provider of outpatient surgery, diagnostic
imaging and rehabilitative healthcare services. His most recent
position with HealthSouth Corporation was Vice President of
Operations West Ambulatory Division where he oversaw
the operations of more than 165 outpatient rehabilitation and
other facilities.
COMPENSATION
DISCUSSION AND ANALYSIS
The Compensation Committee, composed entirely of independent
directors, administers the Companys executive compensation
program. The role of the committee includes establishing and
overseeing compensation and benefit programs for our executive
officers including the Chief Executive Officer (CEO)
and the other Named Executives. The committee also evaluates the
performance of the CEO and reviews the performance of our other
executive officers every year. Based upon these performance
evaluations, the committee establishes compensation for the CEO
and other executive officers, and executive management consults
with the committee with respect to compensation levels and plans
for key employees. Elements of our executive compensation
program include: base salary; annual cash incentive
compensation; long-term equity incentive awards; post-employment
benefits; and benefits and perquisites.
In establishing and overseeing the program, the committees
goal is to ensure that we can attract and retain superior
management talent critical to our long-term success. To ensure
that executive compensation is aligned with the performance of
the Company and the interests of its stockholders, a significant
portion of compensation available to executives is linked
directly with financial results and other factors that influence
stockholder value.
Compensation
Support
Our management, our Human Resources department and our outside
consultants, from time to time, support the committee in
discharging its duties. In performing duties relating to the
development and administration of our
12
executive compensation program, our Human Resources department
and the committee periodically review matters that relate to the
competitive position, value and design of our short-term and
long-term incentive compensation plans, performance goals and
rewards available at various levels of performance.
Under its charter, the committee also may retain, at the
Companys expense, compensation consultants to provide
independent advice and counsel directly to the committee. In
2009, the Compensation Committee did not use any compensation
consulting services.
Peer
Group and Compensation Targets
During 2006, with the assistance of an external consulting firm,
the committee selected a compensation peer group consisting of a
number of publicly traded companies (the Peer
Group). The committee reviewed the Peer Group compensation
data to ensure competitiveness of the executive compensation
program.
Compensation
Philosophy and Objectives
Our compensation policies are designed to enable us to attract,
motivate and retain experienced and qualified executives. We
seek to provide competitive compensation. Historically, our
policy has been to provide a significant component of an
executive officers compensation through the grant of stock
options or restricted shares that vest over a number of years.
We believe that grants of equity-based incentives to executives
and key employees help to align the interests of these persons
with the interests of our stockholders.
The committees policy is to compensate and reward
executive officers and other key employees based on the
combination of some or all of the following factors, depending
on the persons responsibilities: corporate performance,
business unit performance and individual performance. The
committee evaluates corporate performance and business unit
performance by reviewing the extent to which the Company has
accomplished strategic business objectives, such as improved
profitability, cash flow and management of working capital. The
committee evaluates individual performance by comparing actual
accomplishments to the objectives established for the individual
under the Companys management development program. The
committee determines increases in base salary and annual cash
incentive awards based on actual accomplishments during the
performance period and determines long-term incentive awards
based on LTIP (as defined below) criteria.
The committee believes that compensation to executive officers
should be aligned closely with the Companys performance on
both a short-term and long-term basis. As a result, a
significant portion of compensation to each executive officer is
at risk and tied directly to the attainment of
financial performance goals. The executive compensation program
is also designed to incentivize continuous improvements in
financial performance by providing enhanced compensation as
results improve. While a significant portion of compensation to
the Companys executive officers is performance-based, the
committee also believes it prudent to provide competitive base
salaries and benefits in order to attract and retain the
management talent necessary to achieve our long-term strategic
objectives. The committee also takes into account the
compensation practices of comparable companies to ensure that
the Company is able to attract, retain and reward executive
officers whose contributions are critical to our long-term
success.
Base
Salaries
Other than the base salary of our Chief Executive Officer, Chief
Financial Officer and Chief Operating Officer which were
initially set by an employment agreement (see Employment
and Consulting Agreements below), base salaries of
executives are initially determined by evaluating the
responsibilities of the position, the experience and knowledge
of the individual and the competitive marketplace for executive
talent. Base salaries for executive officers are reviewed
annually by the committee based on, among other things,
individual performance and responsibilities, inflation and
competitive market conditions.
13
Annual
Cash Incentive Compensation
Based on individual and Company performance, incentive
compensation opportunities are available to a wide range of our
employees. We believe that incentive compensation is effective
in reinforcing both the overall values of our Company and our
specific operating goals.
Incentive compensation programs are designed to focus
employees attention on our key performance goals, to
identify the expected levels of performance and to reward
individuals who meet or exceed our expectations. The aggregate
amounts available for incentive awards are determined by our
overall financial performance. The actual awards paid to
individual recipients, other than to executive officers, are
formulated by management, generally payable on an annual basis
and reviewed by the committee prior to payment. The committee
formulates and determines incentive awards for Named Executives.
See Summary Compensation Table below.
For the 2009 fiscal year, the Companys Chief Executive
Officer, Chief Financial Officer and Chief Operating Officer
(the Participants) were eligible to earn up to 50%
of their respective base salaries dependent upon the Company
achieving diluted earnings per share in the range of $0.83 to
$0.96. Based on actual reported diluted earnings per share of
$1.00 for 2009, which represented an improvement over 2008 of
20.5%, the Participants were entitled to 100% of the 50% tied to
the objective criteria. The remaining portion of the
Participants cash bonus award was based upon a subjective
determination of the committee. The committee utilizes certain
performance criteria as listed above but generally does not
consider it practicable to, nor does it generally attempt to,
quantify, rank or otherwise assign relative weights to the
specific performance criteria it considers in reaching its
decision. In considering these performance criteria, the
individual members of the committee may have given different
weights to different performance criteria. The performance
criteria are not intended to be rigid or formulaic but rather
serve as a framework under which the committee reviews the total
compensation and performance of the Participants to determine
what incentive amount is appropriate for any specific year. For
2009, Messrs. Reading, McAfee and McDowell received $191,250,
$183,600 and $115,000, respectively, for their subjective
portion.
Long-term
Equity Incentive Awards
Our Amended and Restated 2003 Stock Incentive Plan and Amended
and Restated 1999 Employee Stock Option Plan (1999
Plan) are intended to align employee and outside director
interests with stockholders interests, to provide
incentives to our key employees by encouraging their ownership
of our common stock and to aid us in attracting and retaining
key employees, upon whose efforts our success and future growth
depends.
Equity grants are made at the discretion of the committee, which
administers the Companys equity compensation plans.
Previously, the committee made such grants in the form of stock
options, but has favored using restricted stock grants over the
past three years, which is a growing trend among publicly-traded
companies in the United States. The objective of such long-term
equity-based awards, which generally vest over three to five
years, is primarily to incentivize management and key employees
for future performance rather than to reward specific past
performance. Individual grant sizes, which tend to be less for
restricted shares than would otherwise be granted for stock
options are primarily determined based on the employees
duties and level of responsibility and his or her ability to
exert significant influence and make meaningful contributions to
the overall future success of the Company and, to a lesser
degree, organizational and individual performance. At the
discretion of the committee, and based on the recommendation of
management, equity grants may also be used as an incentive for
candidates recruited to fill key positions and for existing
employees who receive significant promotions with increased
responsibilities.
During 2009, the committee granted a total of 73,000 restricted
shares of common stock to 23 employees. In May 2009, 24,000
restricted shares of common stock were granted to eight
non-employee directors. During 2009, there were no grants of
equity-based awards to Named Executives. There were no stock
options granted in 2009.
Post-Employment
Benefits
We have entered into employment and termination agreements with
our Named Executives which provide for the payment of severance
and other post-termination benefits depending on the nature of
the termination, including, severance payments in the event of a
termination following a change in control. The
committee believes that the
14
terms and conditions of these agreements are reasonable and
assist us in retaining the executive talent needed to achieve
our objectives. In particular, the termination agreements, in
the event of a change in control, help executives
focus their attention on the performance of their duties in the
best interests of the stockholders without being concerned about
the consequences to them of a change in control and help promote
continuity of senior management. Information regarding the
specific payments that are applicable to each termination event,
as well as the effect on unvested equity awards, is provided
under the heading Executive Compensation Post
Termination/Change-in-Control
Benefits below.
Benefits
and Perquisites
Defined Contribution Plan.
The Company
maintains a qualified retirement plan pursuant to Internal
Revenue Code Section 401(k) (the 401(k) Plan)
covering substantially all employees subject to certain minimum
service requirements. The 401(k) Plan allows employees to make
voluntary contributions and provides for discretionary matching
contributions by the Company. The assets of the 401(k) Plan are
held in trust for grantees and are distributed upon the
retirement, disability, death or other termination of employment
of the grantee. The Board, in its discretion, determines the
amount of any Company contributions. We did not make any
contributions to the 401(k) Plan during 2009.
Life Insurance.
The Company maintains, at its
expense, for the benefit of each of its full-time employees,
life insurance policies in the amount of one times the
employees annual salary, up to $200,000.
Health and Welfare Benefits.
All executive
officers, including the Named Executives, are eligible for
welfare benefits from the Company including: medical, dental,
vision, life insurance, short-term disability and long-term
disability. Named Executives participate in these plans on the
same basis and subject to the same costs, terms and conditions
as other salaried employees at their assigned work location.
Employment
and Consulting Agreements
In October 2004, each of Messrs. Reading and McAfee entered
into new employment agreements effective as of November 1,
2004 that superseded their employment agreements that were
effective in September 2003. These employment agreements had
three-year terms with automatic one-year renewals if not
terminated on at least 12 months notice. Both
Messrs. Reading and McAfee are entitled to a special
benefit payment equal to $500,000 (payable in equal amounts over
the remaining term of the agreement) as defined by their
respective employment agreements in the event of a change in
control and Mr. Reading does not continue as the President
and Chief Executive Officer of the Company after the change in
control, or Mr. McAfee does not continue as the Executive
Vice President and Chief Financial Officer of the Company after
the change in control. In addition, if either executive is
terminated without cause or resigns for good reason (as defined
under their respective agreement), he is entitled to his base
salary through the remaining term of the contract, an amount
equal to his last years bonus or the average over the last
three years, whichever is greater, and accrued but unpaid
vacation. The employment agreements also provide for certain
non-competition and non-solicitation covenants that extend up to
two years after termination of employment. These agreements were
amended and restated in May 2007 and December 2008 to change the
expiration dates to December 31, 2009 and December 31,
2011, respectively. In February 2010, these agreements were
further amended to provide for automatic one-year renewals if
not terminated on at least 12 months notice. No other
material changes were made to the agreements. Effective
January 4, 2010, the annual base salaries under the
agreements were increased to $393,000 for Mr. Reading and
$370,000 for Mr. McAfee.
On May 24, 2007, Glenn D. McDowell entered into a new
employment agreement (the McDowell Employment
Agreement) which was subsequently amended on
December 2, 2008, to change the expiration date from
December 31, 2009 to December 31, 2011. In February
2010, the agreement was further amended to provide for automatic
one-year renewals if not terminated on at least 12 months
notice. Effective January 4, 2010, Mr. McDowells
annual base salary was increased to $255,000 per year. If a
change in control (as defined in the McDowell
Employment Agreement) occurs and Mr. McDowell does not
continue as our Chief Operating Officer after the change of
control, Mr. McDowell will be entitled to a change of
control benefit payment of $283,333 (payable in equal amounts
over the remaining term of the agreement). If the employment of
Mr. McDowell is terminated by the Company without
cause or by Mr. McDowell for good
reason, he would be entitled to receive
15
the compensation then in effect for the remainder of the term of
the agreement and the greater of: (i) the bonus paid or
payable to Mr. McDowell with respect to the last fiscal
year completed prior to the termination, or (ii) the
average of the bonuses paid to Mr. McDowell over the last
three fiscal years of employment ending with the last fiscal
year prior to termination.
Messrs. Reading, McAfee and McDowell are eligible to
receive annual cash bonuses and are entitled to participate in
any employee benefit plans adopted by us.
Messrs. Reading, McAfee and McDowells employment
agreements may each be terminated by the Company prior to the
expiration of their term in the event their respective
employment is terminated for cause (as defined in
each such agreement). See discussion below entitled Post
Termination/Change-in-Control
Benefits regarding Change in Control provisions.
We do not have any executive retention and severance
arrangements or change in control agreements with our Named
Executives other than those described above.
Long-Term
Incentive Plan 2007 -09
On June 20, 2007, the Compensation Committee approved and
adopted the USPH Executive Long-Term Incentive Plan
2007-09
(LTIP) under which cash-based awards could be earned
by the Companys executive management including the Chief
Executive Officer, Chief Financial Officer and Chief Operating
Officer, upon satisfaction of certain performance criteria
established by the Compensation Committee. The LTIP is included
as Exhibit 10.1 to the Companys current report on
Form 8-K
filed with the SEC on June 20, 2007. The discussions set
forth below are qualified in their entirety by reference to such
Exhibit 10.1.
Incentive and Reward for Stockholder Return Based upon Stock
Price Appreciation
No cash award was accrued or
paid to the Companys executive management related to this
portion during 2007, 2008 and 2009.
Incentive and Reward for Growth in Diluted Earnings per
Share
No amounts were accrued or paid under the
LTIP relating to the years ended 2007 and 2008. For 2009,
Messrs. Reading, McAfee and McDowell earned $737,000,
$708,000 and $375,000, respectively and such amounts were
accrued as a charge against the 2009 earnings and were paid in
cash in March 2010. For 2009, the diluted earnings per share of
the Company from continuing operations was $1.00 which was 42.8%
higher than the 2006 baseline of $0.70. Pursuant to the LTIP, if
the growth in diluted earnings per share of the Company during
the
3-year
period of the LTIP is 42% or greater, all the Performance Awards
and Deferred Performance Awards available during such
3-year
period shall be considered to have been earned.
Incentive
Plans
On February 25, 2010, the Compensation Committee approved
and adopted, subject to legal and tax review, the following
incentive plans for the Companys executive
management Mr. Reading, Chief Executive Officer
(CEO), Mr. McAfee, Chief Financial Officer
(CFO), and Mr. McDowell, Chief Operating
Officer (COO) (hereinafter as a group referred to as
Executives). The following plans are effective
March 30, 2010 (Effective Date).
|
|
|
|
|
Objective Long-Term Incentive Plan
|
|
|
|
Discretionary Long-Term Incentive Plan
|
|
|
|
Objective Cash Bonus Plan
|
|
|
|
Discretionary Cash Bonus Plan
|
The above plans are included as Exhibits 99.1, 99.2, 99.3
and 99.4 to the Companys current report on
Form 8-K
filed with the SEC on March 29, 2010. The discussions set
forth below are qualified in their entirety by reference to such
exhibits.
Objective Long-Term Incentive Plan
(Objective
LTIP). Under the Objective LTIP, Executives have an
opportunity to receive restricted stock awards
(RSAs) under the 1999 Plan, to be granted by
the Compensation Committee in the first quarter of 2011 if the
performance goals set forth below are achieved in 2010. The
following
16
number of RSAs may be granted under this Objective LTIP based
upon the achievement of the performance goals relating to
diluted earnings per share as follows: CEO = up to
15,000 shares; CFO = up to 10,000 shares; and COO = up
to 10,000 shares.
The performance goals relating to earnings per share are
detailed below:
|
|
|
|
|
|
|
Objective
|
|
|
Amount of
|
|
|
Maximum Shares
|
|
|
That May
|
Performance Goals 2010 EPS
|
|
Be Awarded
|
|
$1.14
|
|
|
40
|
%
|
$1.15
|
|
|
46
|
%
|
$1.16
|
|
|
52
|
%
|
$1.17
|
|
|
58
|
%
|
$1.18
|
|
|
64
|
%
|
$1.19
|
|
|
70
|
%
|
$1.20
|
|
|
76
|
%
|
$1.21
|
|
|
82
|
%
|
$1.22
|
|
|
88
|
%
|
$1.23
|
|
|
94
|
%
|
$1.24
|
|
|
100
|
%
|
Any RSAs earned under the Objective LTIP will be granted no
later than March 15, 2011. The Executive must be employed
by the Company or its affiliates from the Effective Date through
the actual date of the grant of RSAs to receive a RSA. The
Compensation Committee shall certify in writing that the
performance goals have been obtained in accordance with
Section 162(m) of the Internal Revenue Code (the
Code), and any RSAs to be granted hereunder shall be
made no later than March 15, 2011. All RSAs shall be
granted in writing and subject to the terms of the 1999 Plan and
the terms and conditions (including without limitation,
restrictions in transfer and substantial risk of forfeiture) as
determined by the Compensation Committee in its sole discretion.
RSAs that are granted under this Objective LTIP will vest evenly
over 16 quarters, beginning March 31, 2011 and ending
December 31, 2014. To vest, the Executive must be a
full-time employee/officer of the Company at the vesting date.
In the event of a Change in Control (as defined in
Executives employment agreements) occurring after the
actual grant date while the Executive is a full-time
employee/officer of the Company, any unvested RSAs will be fully
vested at or contemporaneous and in conjunction with such Change
in Control.
The Compensation Committee has established this Objective LTIP
under the 1999 Plan, and the RSAs, if any, granted hereunder are
intended to meet the performance-based exception under
Section 162(m) of the Code. The Compensation Committee has
authority to administer the Objective LTIP, grant awards and
decide all questions of interpretation; provided, however, that
the Compensation Committee shall have no discretion to increase
the maximum award amounts that are payable as provided in the
Objective LTIP
and/or
otherwise increase or modify an award which would disqualify the
award for the performance-based exception under
Section 162(m) of the Code. There will be no acceleration
of the grant of an award due to the Executives termination
for cause or without good reason or Executives voluntary
retirement that would violate Section 162(m) of the Code as
provided under Revenue Ruling
2008-13.
The
Compensation Committees determinations and interpretations
under the Objective LTIP shall be final and binding on all
persons.
Discretionary Long-Term Incentive Plan
(Discretionary LTIP). The Committee may, in its
judgment and at its sole discretion, award RSAs under the 1999
Plan, based on its evaluation of an Executives performance
and the collective corporate performance for 2010. Factors to be
considered may include, but shall not be limited to
(i) general operational management relative to the external
environment, (ii) accretive acquisitions, share
repurchases, etc. (effective deployment of capital),
(iii) management development, (iv) same store growth,
(v) initiatives to enhance/improve the overall quality of
patient care, (vi) clinic productivity improvements,
(vii) clinic development, including number and quality of
new partners, (viii) sales and marketing,
(ix) regulatory compliance, (x) maintaining adequate
internal controls, (xi) investor relations, (xii) cash
flow, including management of accounts receivables and
(xiii) stock
17
price performance. More weight may be given to strategies
implemented and management decisions made during 2010 that
enhance (or are likely to enhance) the long-term value of the
Company. The following shall be the maximum amount of shares
that may be awarded under the Discretionary LTIP to each
specified participant: CEO = up to 15,000 shares; CFO = up
to 10,000 shares; and COO = up to 10,000 shares.
The Discretionary LTIP is administered by the Compensation
Committee. The Compensation Committee has the exclusive
authority to interpret and construe the terms of the
Discretionary LTIP and make all determinations under the plan,
and its decisions shall be final and binding in all persons.
Any RSAs granted under this Discretionary LTIP shall be granted
under the 1999 Plan in the first quarter of 2011 after the
Compensation Committee determines the amount of the RSAs, if
any, to be awarded to each participant, but in all events on or
before March 15, 2011. In addition, RSAs shall be granted
only if the participant remains employed by the Company (or its
affiliates) continuously from March 30, 2010 through the
actual date of the grant of the RSA. All RSAs shall be granted
in writing and subject to the terms of the 1999 Plan and the
terms and conditions (including without limitation,
restrictions in transfer and substantial risk of forfeiture) as
determined by the Compensation Committee in its sole discretion.
RSAs that are granted under this Plan will vest evenly over 16
quarters, beginning March 31, 2011 and ending
December 31, 2014. To vest, the Executive must be a
full-time employee/officer of the Company at the vesting date.
In the event of a Change in Control (as defined in
Executives employment agreements) occurring after the
actual grant date while the Executive is a full-time
employee/officer of the Company, any unvested RSAs will be fully
vested at or contemporaneous and in conjunction with such Change
in Control.
The Compensation Committee in its discretion has determined that
this program is not intended to meet the performance based
exemption under Section 162(m) of the Code. Any awards
actually granted under this program shall be subject to
Section 83(b) of the Code.
Objective Cash Bonus Plan.
Under the Objective
Cash Bonus Plan, Executives have an opportunity to receive a
cash bonus of up to 50% of the Executives annual base
salary for 2010 (Base) based on 2010 earnings per
share growth as detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base EPS
|
|
2010 EPS
|
|
% Change
|
|
Bonus %
|
|
$
|
1.10
|
|
|
$
|
1.10
|
|
|
|
0.00
|
%
|
|
|
0
|
%
|
|
|
|
|
$
|
1.11
|
|
|
|
0.91
|
%
|
|
|
0
|
%
|
|
|
|
|
$
|
1.12
|
|
|
|
1.82
|
%
|
|
|
0
|
%
|
|
|
|
|
$
|
1.13
|
|
|
|
2.70
|
%
|
|
|
0
|
%
|
|
|
|
|
$
|
1.14
|
|
|
|
3.60
|
%
|
|
|
40
|
%
|
|
|
|
|
$
|
1.15
|
|
|
|
4.50
|
%
|
|
|
46
|
%
|
|
|
|
|
$
|
1.16
|
|
|
|
5.40
|
%
|
|
|
52
|
%
|
|
|
|
|
$
|
1.17
|
|
|
|
6.40
|
%
|
|
|
58
|
%
|
|
|
|
|
$
|
1.18
|
|
|
|
7.30
|
%
|
|
|
64
|
%
|
|
|
|
|
$
|
1.19
|
|
|
|
8.20
|
%
|
|
|
70
|
%
|
|
|
|
|
$
|
1.20
|
|
|
|
9.10
|
%
|
|
|
76
|
%
|
|
|
|
|
$
|
1.21
|
|
|
|
10.00
|
%
|
|
|
82
|
%
|
|
|
|
|
$
|
1.22
|
|
|
|
10.90
|
%
|
|
|
88
|
%
|
|
|
|
|
$
|
1.23
|
|
|
|
11.80
|
%
|
|
|
94
|
%
|
|
|
|
|
$
|
1.24
|
|
|
|
12.70
|
%
|
|
|
100
|
%
|
Any bonuses earned under the Objective Cash Bonus Plan will be
awarded by the Compensation Committee in the first quarter of
2011 and will be paid no later than March 15, 2011. Before
any cash bonus is paid, the Committee shall certify in writing
that the performance goals have been obtained in accordance with
Section 162(m) of the Code. The Executive must be
continuously employed by the Company or its affiliates through
December 31, 2010 to receive the cash bonus.
18
Awards, if any, granted under the Objective Cash Bonus Plan are
intended to meet the performance-based exception under
Section 162(m) of the Code. The Compensation Committee has
authority to administer the Objective Cash Bonus Plan, grant
awards and decide all questions of interpretation; provided,
however, that the Compensation Committee shall have no
discretion to increase the maximum award amounts that are
payable as provided below
and/or
otherwise increase or modify an award which would disqualify the
award for the performance-based exception under
Section 162(m) of the Code. The Compensation
Committees determinations and interpretations under the
Objective Cash Bonus Plan shall be final and binding on all
persons.
Discretionary Cash Bonus Plan.
Each Executive
has the potential to be awarded a cash bonus of up to 50% of his
Base. This Discretionary Cash Bonus Plan shall be administered
by the Compensation Committee and the committee shall have the
sole authority to grant awards and establish the amounts payable
under the plan, make all determinations and interpret and
construe all of the terms of the plan. The amount, if any, of
the Discretionary Cash Bonus payable under the plan shall be
determined by the Compensation Committee in its sole discretion
based upon the following subjective criteria: (i) general
operational management relative to the external environment,
(ii) accretive acquisitions, share repurchases, etc.
(effective deployment of capital),
(iii) management development, (iv) same store growth,
(v) initiatives to enhance/improve the overall quality of
patient care, (vi) clinic productivity improvements,
(vii) clinic development, including number and quality of
new partners, (viii) sales and marketing,
(ix) regulatory compliance, (x) maintaining adequate
internal controls, (xi) investor relations, (xii) cash
flow, including management of accounts receivables and
(xiii) stock price performance. All decisions of the
Compensation Committee shall be final and binding on all persons.
Any cash bonuses awarded by the Compensation Committee under
this Discretionary Cash Bonus Plan shall be paid no later than
March 15, 2011 in a lump sum amount. Any bonus earned shall
be payable only if the Executive remains continuously employed
through the date of the determination of the amount payable in
the first quarter of 2011 by the Compensation Committee.
The Compensation Committee in its discretion has determined that
this program is not intended to meet the performance based
exemption under Section 162(m) of the Code. Any awards
actually granted under this program shall be subject to
Section 83(b) of the Code.
Compensation
of Named Executive Officers
Mr. Reading joined our Company in November 2003 as Chief
Operating Officer and, effective November 1, 2004, was
promoted to President and Chief Executive Officer. Under his
employment agreement with us (see Employment and
Consulting Agreements above), Mr. Readings
annual base salary was increased by the Compensation Committee
to $341,250 effective February 27, 2006, to $355,000
effective January 7, 2007, to $375,000 effective
January 7, 2008, to $382,500 effective January 4, 2009
and to $393,000 effective January 4, 2010. Mr. Reading
received a bonus of $75,000 for 2006, which was paid in March
2007, a bonus of $177,500 for 2007 which was paid in March 2008
and a bonus of 279,750 for 2008 which was paid in March 2009.
For 2009, Mr. Reading received a bonus of $382,500 of which
half was paid in December 2009 and the remaining half in March
2010. Effective beginning in 2007, Mr. Reading participated
in the LTIP under which he was eligible for cash awards based on
Company performance during 2007 through 2009, as previously
described. During 2009, Mr. Reading earned $737,000 in
accordance with the LTIP which was paid in March 2010. In
addition to cash compensation, under our 2003 Stock Incentive
Plan, during 2008, Mr. Reading was granted
30,000 shares of restricted stock which restrictions lapse
in equal quarterly installments of 2,500 shares which began
on March 31, 2009 and continuing through December 31,
2011. Although Mr. Reading participated in our 401(k) Plan
in 2009, we did not make any matching contributions to the plan
during the year. No stock options were granted to
Mr. Reading in 2009, 2008 and 2007. For 2009, approximately
$500,000 of Mr. Readings total compensation was not
tax deductible by the Company based on Section 162
(m) of the Code.
Mr. McAfee joined our Company in September 2003 as Chief
Financial Officer and, effective November 1, 2004, was
promoted to Executive Vice President. Under his employment
agreement with us (see Employment and Consulting
Agreements above), Mr. McAfees annual base
salary was increased by the Compensation Committee
19
to $341,250 effective February 27, 2006, to $345,000
effective January 7, 2007, to $360,000 effective
January 7, 2008, to $367,200 effective January 4, 2009
and to $370,000 effective January 4, 2010. Mr. McAfee
received a bonus of $75,000 for 2006, which was paid in March
2007, a bonus of $172,500 for 2007 which was paid in March 2008
and a bonus of $268,560 for 2008 which was paid in March 2009.
For 2009, Mr. McAfee received a bonus of $367,200 of which
half was paid in December 2009 and the remaining half in March
2010. Effective beginning in 2007, Mr. McAfee participated
in the LTIP under which he was eligible for cash awards based on
Company performance through 2009, as previously described.
During 2009, Mr. McAfee earned $708,000 in accordance with
the LTIP which was paid in March 2010. In addition to cash
compensation, under our 2003 Stock Incentive Plan, during 2008,
Mr. McAfee was granted 25,000 shares of restricted
stock which restrictions lapse in equal quarterly installments
of 2,083 shares which began on March 31, 2009 and
continuing through December 31, 2011 in which the
restrictions on the remaining 2,087 shares will lapse.
Although Mr. McAfee participated in our 401(k) Plan in
2009, we did not make any matching contributions to the plan
during the year. No stock options were granted to
Mr. McAfee in 2009, 2008 and 2007.
Mr. McDowell joined our Company in October 2003 as Vice
President of Operations overseeing the west region and,
effective January 24, 2005, was promoted to Chief Operating
Officer. Under his employment agreement, entered into on
May 24, 2007 with an annual base salary of $195,000 (see
Employment and Consulting Agreements above),
Mr. McDowells annual base salary was increased by the
Compensation Committee to $215,000 effective January 7,
2008, to $230,000 effective January 4, 2009 and to $255,000
effective January 4, 2010. Mr. McDowell received a
bonus of $35,000 for 2006, which was paid in March 2007, a bonus
of $100,000 for 2007 which was paid in March 2008 and a bonus of
$160,390 for 2008 which was paid in March 2009. For 2009,
Mr. McDowell received a bonus of $230,000 of which half was
paid in December 2009 and the remaining half in March 2010.
Effective beginning in 2007, Mr. McDowell participated in
the LTIP under which he was eligible for cash awards based on
Company performance through 2009, as previously described.
During 2009, Mr. McDowell earned $375,000 in accordance
with the LTIP which was paid in March 2010. In addition to cash
compensation, under our 2003 Stock Incentive Plan, during 2008,
Mr. McDowell was granted 25,000 shares of restricted
stock which restrictions lapse in equal quarterly installments
of 2,083 shares which began on March 31, 2009 and
continuing through December 31, 2011 in which the
restrictions on the remaining 2,087 shares will lapse.
Although Mr. McDowell participated in our 401(k) Plan in
2009, we did not make any matching contributions to the plan
during the year. No stock options were granted to
Mr. McDowell in 2009, 2008 and 2007.
During 2007 and 2008, Messrs. Reading, McAfee and McDowell
received no compensation under the LTIP.
In determining the appropriate compensation for
Messrs. Reading, McAfee and McDowell, the Compensation
Committee evaluates our overall corporate performance under
their leadership, as well as each individual contribution to key
strategic, financial and development objectives. The committee
utilizes a combination of quantitative measures and qualitative
factors in reviewing the performance and compensation. In 2006,
the committee used the services of a third party consulting firm
to review the compensation packages of the Named Executives and
to compare their present level of compensation to
comparably-sized publicly traded companies and to other
comparably-sized healthcare companies.
Compensation
Deductibility Policy
Under Section 162(m) of the Code and applicable Treasury
regulations, no deduction is allowed for annual compensation in
excess of $1 million paid by a publicly traded corporation
to its chief executive officer and the four other most highly
compensated officers. Under those provisions, however, there is
no limitation on the deductibility of qualified
performance-based compensation.
In general, our policy is to maximize the extent of tax
deductibility of executive compensation under the provisions of
Section 162(m) so long as doing so is compatible with the
most appropriate methods and approaches for the design and
delivery of compensation to our executive officers.
20
Executive
Compensation
Summary
Compensation
The following table sets forth the compensation paid or accrued
for services rendered in all capacities on behalf of our Company
during 2009, 2008 and 2007 to Messrs. Reading, McAfee and
McDowell (Named Executives).
Summary
Compensation Table
For the Fiscal Years Ended December 31, 2009, 2008
and 2007
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Change in
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Pension
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Value and
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Non-
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Non-Equity
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Qualified
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Incentive
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Deferred
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Stock
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Option
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Plan
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Compensation
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All Other
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Salary
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Bonus
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Awards(1)
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Awards
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Compensation(2)
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Earnings
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Compensation(3)
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Total
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Name and Principal Position
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Year
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($)
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($)
|
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($)
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($)
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($)
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($)
|
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($)
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($)
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Christopher J. Reading
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2009
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382,212
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1,119,500
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810
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1,502,522
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Chief Executive Officer
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2008
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374,231
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327,300
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279,750
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810
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982,091
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2007
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354,471
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|
|
|
|
|
|
|
|
|
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177,500
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|
|
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|
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540
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532,511
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Lawrance W. McAfee
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2009
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|
|
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366,923
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|
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1,075,200
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|
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1,242
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|
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1,443,365
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Chief Financial Officer
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2008
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359,423
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272,750
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268,560
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1,242
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|
|
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901,975
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2007
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344,856
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|
|
|
|
|
|
|
|
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172,500
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1,242
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518,598
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Glenn D. McDowell
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2009
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229,423
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|
605,000
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|
|
|
|
|
|
|
1,116
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|
|
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835,539
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|
Chief Operating Officer
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2008
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|
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214,249
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|
|
|
|
|
|
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272,750
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|
|
|
|
|
|
|
160,390
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|
|
|
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1,028
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|
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648,417
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|
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2007
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|
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195,310
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|
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|
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100,000
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938
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296,248
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|
|
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1.
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Stock awards were granted as restricted stock under the terms of
the Amended and Restated 1999 Stock Option Plan as follows:
Mr. Reading, 30,000 shares and Messrs. McAfee and
Mr. McDowell, 25,000 shares each. Amounts shown are
the grant date fair value of the awards computed in accordance
with FASB ASC Topic 718 which amounted to $10.91 per share. See
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 for a description of
the valuations and a description of the equity plans
Footnote 9 Equity Based Plans.
|
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2.
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For 2009, the amounts represent the annual incentive bonuses
earned by Messrs. Reading, McAfee and McDowell in the
amounts of $382,500, 367,200 and 230,000, respectively. Half of
the annual incentive bonuses was paid in December 2009 and the
remaining half in March 2010. For 2009, the amount also
represent the portion payable under the LTIP for
Messrs. Reading, McAfee and McDowell in the amounts of
$737,000, $708,000 and $375,000, respectively. The amounts
related to the LTIP were paid in March 2010. For fiscal years
2008 and 2007, the amounts shown represent annual incentive
bonuses earned by the Named Executives which were paid in March
2009 and March 2008, respectively. See Compensation
Discussion and Analysis Annual Cash Incentive
Compensation for further details.
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3.
|
|
Represents the value of life insurance premiums for life
insurance coverage provided to the Named Executives.
|
Grants of
Plan-Based Awards
The following table sets forth the grants of plan-based awards
during 2009 to the Named Executives:
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Estimated Possible Payouts
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Under Non-Equity
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Incentive Plan Awards(1):
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Grant
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Threshold
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Target
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Maximum
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Name
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Date
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($)
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($)
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($)
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Christopher J. Reading
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5/19/2009
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$
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$
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382,500
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$
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382,500
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Lawrance W. McAfee
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5/19/2009
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$
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$
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367,200
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$
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367,200
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Glenn D. McDowell
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5/19/2009
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$
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$
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230,000
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$
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230,000
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|
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1.
|
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Possible payments under the Executive Officer Incentive Plan for
2009. See Summary Compensation Table for actual amounts earned
for 2009 of which half were paid in December 2009 and half in
March 2010.
|
21
There were no grants of equity based grants during 2009 to the
Named Executives.
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
See Employment and Consulting Agreements
above and
Post-Termination/Change-in-Control
Benefits below for the material terms of our employment
agreement with our Named Executives. See
Compensation Discussion and
Analysis above for an explanation of the amount of salary
and bonus in proportion to total compensation. See the footnotes
to the Summary Compensation Table and Grants of Plan-Based
Awards Table for narrative disclosure with respect to those
tables.
Outstanding
Equity Awards at Fiscal Year-End
The following table shows outstanding stock option awards
classified as exercisable and unexercisable and stock awards
that have not vested as of December 31, 2009 for each Named
Executive.
Outstanding
Equity Awards at Fiscal Year-End December 31,
2009
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Option Awards
|
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Stock Awards
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|
Equity
|
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|
Equity
|
|
Equity Incentive
|
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Incentive
|
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Number
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Market
|
|
Incentive
|
|
Plan Awards
|
|
|
|
|
|
|
Plan Awards:
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|
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|
|
|
of Shares
|
|
Value of
|
|
Plan Awards:
|
|
Market or
|
|
|
Number of
|
|
Number of
|
|
Number
|
|
|
|
|
|
or Units
|
|
Shares or
|
|
Number of
|
|
Payout Value of
|
|
|
Securities
|
|
Securities
|
|
of Securities
|
|
|
|
|
|
of Stock
|
|
Units of
|
|
Unearned Shares,
|
|
Unearned Shares,
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
That Have
|
|
Stock
|
|
Units or Other
|
|
Units or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Not
|
|
That Have
|
|
Rights That
|
|
Rights That Have
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Vested
|
|
Not Vested
|
|
Have Not Vested
|
|
Not Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
(#)
|
|
($)(1)
|
|
(#)
|
|
($)
|
|
Christopher J. Reading
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
14.32
|
|
|
|
11/18/2013
|
|
|
|
20,000
|
(2)
|
|
$
|
338,600
|
|
|
|
|
|
|
$
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
$
|
12.51
|
|
|
|
6/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.54
|
|
|
|
10/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrance W. McAfee
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
14.32
|
|
|
|
11/18/2013
|
|
|
|
16,668
|
(3)
|
|
$
|
282,189
|
|
|
|
|
|
|
$
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
$
|
12.51
|
|
|
|
6/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.54
|
|
|
|
10/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn D. McDowell
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
$
|
14.32
|
|
|
|
11/18/2013
|
|
|
|
16,668
|
(3)
|
|
$
|
282,189
|
|
|
|
|
|
|
$
|
|
|
|
|
|
36,000
|
|
|
|
9,000
|
(4)
|
|
|
|
|
|
$
|
13.97
|
|
|
|
2/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Calculated based on the closing market price of our common stock
on December 31, 2009 of $16.93 per share.
|
|
2.
|
|
The transfer restriction on these shares of restricted stock
will lapse as follows: 2,500 shares on March 31,
June 30, September 30 and December 31 of each year until
December 31, 2011.
|
|
3.
|
|
The transfer restriction on these shares of restricted stock
will lapse as follows: 2,083 shares March 31,
June 30, September 30 and December 31 of each year with the
final portion of 2,087 vesting on December 31, 2011.
|
|
4.
|
|
These options vested on February 23, 2010.
|
Option
Exercises and Stock Vested Table
The following table shows stock awards vested during the year
ended December 31, 2009 for each Named Executive.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
|
Shares
|
|
Value
|
|
|
Acquired
|
|
Realized on
|
Name
|
|
on Vesting (#)
|
|
Vesting
|
|
Christopher J. Reading
|
|
|
10,000
|
|
|
$
|
141,075
|
|
Lawrance W. McAfee
|
|
|
8,332
|
|
|
$
|
117,544
|
|
Glenn D. McDowell
|
|
|
8,332
|
|
|
$
|
117,544
|
|
22
The value realized on vesting is computed by multiplying the
number of shares of stock by the market value of the underlying
shares on the vesting date. The closing price of the stock is
used as the market value. No stock options were exercised by the
Named Executives during the year ended December 31, 2009.
Post
Termination/Change-in-Control
Benefits
Messrs. Reading, McAfee and McDowells employment
agreements may be terminated by us prior to the expiration of
its term in the event their respective employment is terminated
for cause (as defined in each agreement). If a
change in control (as defined in each agreement)
occurs and Mr. Reading does not continue as the President
and Chief Executive Officer of the Company after the change of
control, or Mr. McAfee does not continue as Executive Vice
President and Chief Financial Officer of the Company after the
change of control, each of Messrs. Reading and McAfee, as
applicable, will be entitled to a change of control benefit of
$500,000 (payable in equal amounts over the remaining term of
the agreement). If the employment of Mr. Reading or
Mr. McAfee is terminated by us without cause or
by the executive for good reason, he would be
entitled to receive the compensation then in effect for the
remainder of the term of the agreement and the greater of:
(i) the bonus paid or payable to Mr. Reading or
Mr. McAfee, as applicable, with respect to the last fiscal
year completed prior to the termination, or (ii) the
average of the bonuses paid to Mr. Reading or
Mr. McAfee, as applicable, over the last three fiscal years
of employment ending with the last fiscal year prior to
termination. If a change in control (as defined in
the McDowell Employment Agreement) occurs and Mr. McDowell
does not continue as our Chief Operating Officer after the
change of control, Mr. McDowell will be entitled to a
change of control benefit of $283,333 (payable in equal amounts
over the remaining term of the agreement). If the employment of
Mr. McDowell is terminated by the Company without
cause or by Mr. McDowell for good
reason, he would be entitled to receive the compensation
then in effect for the remainder of the term of the McDowell
Employment Agreement and the greater of: (i) the bonus paid
or payable to Mr. McDowell with respect to the last fiscal
year completed prior to the termination, or (ii) the
average of the bonuses paid to Mr. McDowell over the last
three fiscal years of employment ending with the last fiscal
year prior to termination.
The amount of compensation payable to each Named Executive under
the agreements is detailed in the tables below:
Christopher
Reading Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Resigns
|
|
|
|
|
Executive Benefits and Payments
|
|
or For
|
|
|
Without
|
|
|
For Good
|
|
|
Change In
|
|
Upon Termination(1)
|
|
Cause
|
|
|
Cause
|
|
|
Reason
|
|
|
Control
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(2)
|
|
$
|
|
|
|
$
|
786,000
|
|
|
$
|
786,000
|
|
|
$
|
393,000
|
|
Annual Cash Incentive(3)
|
|
|
|
|
|
|
382,500
|
|
|
|
382,500
|
|
|
|
382,500
|
|
Change of Control Benefit(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
Restricted Stock (Unvested and (Accelerated)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338,600
|
|
Benefits and Perquisities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Dental Coverage(6)
|
|
|
|
|
|
|
18,720
|
|
|
|
18,720
|
|
|
|
9,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
1,187,220
|
|
|
$
|
1,187,220
|
|
|
$
|
1,623,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Lawrance
McAfee Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Resigns
|
|
|
|
|
Executive Benefits and Payments
|
|
or For
|
|
|
Without
|
|
|
For Good
|
|
|
Change In
|
|
Upon Termination(1)
|
|
Cause
|
|
|
Cause
|
|
|
Reason
|
|
|
Control
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(2)
|
|
$
|
|
|
|
$
|
740,000
|
|
|
$
|
740,000
|
|
|
$
|
370,000
|
|
Annual Cash Incentive(3)
|
|
|
|
|
|
|
367,200
|
|
|
|
367,200
|
|
|
|
367,200
|
|
Change of Control Benefit(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
Restricted Stock (Unvested and (Accelerated)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,189
|
|
Benefits and Perquisities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Dental Coverage(6)
|
|
|
|
|
|
|
18,720
|
|
|
|
18,720
|
|
|
|
9,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
1,125,920
|
|
|
$
|
1,125,920
|
|
|
$
|
1,528,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
McDowell Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Resigns
|
|
|
|
|
Executive Benefits and Payments
|
|
or For
|
|
|
Without
|
|
|
For Good
|
|
|
Change In
|
|
Upon Termination(1)
|
|
Cause
|
|
|
Cause
|
|
|
Reason
|
|
|
Control
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance(2)
|
|
$
|
|
|
|
$
|
510,000
|
|
|
$
|
510,000
|
|
|
$
|
255,000
|
|
Annual Cash Incentive(3)
|
|
|
|
|
|
|
230,000
|
|
|
|
230,000
|
|
|
|
230,000
|
|
Change of Control Benefit(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283,333
|
|
Restricted Stock (Unvested and (Accelerated)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,189
|
|
Benefits and Perquisities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Dental Coverage(6)
|
|
|
|
|
|
|
18,720
|
|
|
|
18,720
|
|
|
|
9,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
758,720
|
|
|
$
|
758,720
|
|
|
$
|
1,059,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
For purposes of this analysis, we assumed the effective date of
termination is December 31, 2009, the price per share of
our common stock on the date of termination is $16.93 and that
the executives base salary is as follows:
Mr. Reading $393,000;
Mr. McAfee $370,000; and
Mr. McDowell $255,000.
|
|
2.
|
|
Under Without Cause and Executive Resigns for
Good Reason, severance is calculated as base salary over
the remaining term of the employment agreement which expires
December 31, 2011.
|
|
3.
|
|
Annual cash incentive is based on the greater of (i) the
bonus paid or payable to the executive with respect to last
fiscal year of the Company completed prior to termination or
(ii) the average of the bonuses paid to the executive over
the three fiscal years of the Company ending with the last
fiscal year completed prior to the termination.
|
|
4.
|
|
Based on amounts stipulated in the respective employment
agreements.
|
|
5.
|
|
Pursuant to the Restricted Stock Agreement for each executive,
all restrictions and conditions on shares of restricted stock
will be deemed satisfied and shares will be fully vested upon a
Change in Control.
|
|
6.
|
|
Calculated for the remaining term of the agreement which expires
on December 31, 2011. In the event of a Change in
Control, the remaining term of the agreements is one year
from such event.
|
24
COMPENSATION
COMMITTEE REPORT
The Compensation Committee was composed of three independent
directors during 2009. It acts under a written charter adopted
by the Board. The primary function of the Compensation Committee
is to recommend to the Board the compensation to be paid to our
directors, determine the compensation for our executive officers
and administer incentive stock plans. The committee has reviewed
and discussed with management the Compensation Discussion and
Analysis set forth herein. Based on its review, the related
discussions and such other matters deemed relevant and
appropriate by the committee, the committee has recommended to
the Board that the Compensation Discussion and Analysis be
included in the Companys Proxy Statement relating to the
2010 Annual Meeting of Stockholders.
Respectfully submitted,
The Compensation Committee
Daniel C. Arnold, Chairman
Bruce D. Broussard
Clayton K. Trier
Consideration
of Risk
Our Managements approach to compensation practices and
policies applicable to employees throughout our Company is
consistent with that followed for Named Executives and,
accordingly, we believe the practices and policies are not
reasonably likely to have a material adverse effect on our
Company.
Compensation
Committee Interlocks and Insider Participation
The current members of the Compensation Committee are
Messrs. Arnold (Chairman), Broussard and Trier. None of the
members of the Compensation Committee is or has been an officer
or employee of the Company or any of its subsidiaries and none
of our executive officers has served on the board of directors
or compensation committee of any other entity that has or has
had an executive officer who served as a member of our Board of
Directors or Compensation Committee during 2009.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides information about our common stock
that may be issued upon the exercise of options and rights under
all of our existing equity compensation plans as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
|
|
|
Remaining Available for
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Future Issuance Under Equity
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Outstanding Options
|
|
|
Outstanding
|
|
|
Excluding Securities
|
|
Plan Category
|
|
and Rights
|
|
|
Options and Rights
|
|
|
Reflected in 1st Column
|
|
|
Equity Compensation Plans Approved by Stockholders(1)
|
|
|
750,192
|
|
|
$
|
14.29
|
|
|
|
264,589
|
|
Equity Compensation Plans Not Approved by Stockholders(2)
|
|
|
124,000
|
|
|
$
|
13.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
874,192
|
|
|
$
|
14.24
|
|
|
|
264,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
The 1992 Stock Option Plan, as amended (the 1992
Plan), expired in 2002, and no new option grants can be
awarded subsequent to this date. The Amended and Restated 2003
Stock Incentive Plan (the 2003 Plan) permits us to
grant stock-based compensation to employees, consultants and
outside directors of the Company. The Amended and Restated 1999
Employee Stock Option Plan (the Amended 1999 Plan)
permits us to grant stock-based compensation to employees and
non-employee directors.
|
|
2.
|
|
Inducement options were granted to certain individuals in
connection with their offers of employment or initial
affiliation with us. Each inducement option was made pursuant to
an option grant agreement.
|
25
For further descriptions of the 1992 Plan, Amended 1999 Plan and
the inducement options, see Equity Based Plans in
Note 9 of the Notes to the Consolidated Financial
Statements in Item 8 of our Annual Report on
Form 10-K
for the year ended December 31, 2009. See description of
the Amended and Restated 2003 Stock Incentive Plan below.
Certain
Relationships and Related Transactions
The charter of the Audit Committee requires that the Audit
Committee review and approve all insider and affiliated party
transactions. The Audit Committee did not consider any insider
or affiliated party transaction in 2009.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own more than 10% of our equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership
of our common stock. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish us with
copies of all Section 16(a) reports they file.
To our knowledge, based solely on a review of the copies of
those forms furnished to the Company and written representations
from the executive officers and directors, we believe that
during 2009 all other Section 16(a) filing requirements
applicable to our directors and officers were complied with on a
timely basis, except that Dr. Harris was late in filing a
Form 4 disclosing one transaction.
|
|
ITEM 2.
|
APPROVAL
OF THE AMENDED 2003 PLAN
|
Description
of Equity Based Plans
The Company has the following equity based plans:
The 1992 Stock Option Plan, as amended (the 1992
Plan), permitted the Company to grant to key employees and
outside directors of the Company incentive and nonstatutory
options to purchase up to 3,495,000 shares of our common
stock (subject to proportionate adjustments in the event of
stock dividends, splits, and similar corporate transactions).
The 1992 Plan expired in 2002 and no new option grants can be
awarded subsequent to this date under the 1992 Plan. There are
presently options to purchase 15,002 shares of the
Companys common stock outstanding under the 1992 Plan.
The Amended and Restated 1999 Employee Stock Option Plan (the
Amended 1999 Plan) permits the Company to grant to
non-employee directors and employees of the Company up to
600,000 non-qualified options to purchase shares of common stock
and restricted stock (subject to proportionate adjustments in
the event of stock dividends, splits, and similar corporate
transactions). The exercise prices of options granted under the
Amended 1999 Plan are determined by the Compensation Committee.
The period within which each option will be exercisable is
determined by the Compensation Committee. The Amended 1999 Plan
was approved by the stockholders of the Company at the 2008
Stockholders Meeting on May 20, 2008.
During 2003, the Board of Directors granted inducement options
covering 145,000 options to five individuals in connection with
their offers of employment. As of December 31, 2009,
124,000 of the 145,000 options are outstanding. Inducement
options may be exercised for a 10 year term from the date
of the grant.
In addition to the above incentive stock plans, the Company has
the 2003 Plan, which as amended and restated is described below.
The purposes of our incentive stock plans are to provide an
incentive for eligible individuals to remain in the employ or
service of the Company or its affiliates, to extend to them the
opportunity to acquire a proprietary interest in the Company so
that they will apply their best efforts for the benefit of the
Company and to aid the Company in attracting able persons to
serve the Company and its affiliates.
26
The following table includes a cumulative summary of restricted
stock issued and stock options outstanding, exercised, and
exercisable as of December 31, 2009 (the 350,000 additional
shares under the Amended 2003 Plan are included in this table):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Restricted
|
|
|
Outstanding
|
|
|
Stock Options
|
|
|
Stock Options
|
|
|
Available
|
|
Equity Plans
|
|
Authorized
|
|
|
Stock Issued
|
|
|
Stock Options
|
|
|
Exercised
|
|
|
Exercisable
|
|
|
for Grant
|
|
|
1992 Plan
|
|
|
3,495,000
|
|
|
|
|
|
|
|
15,002
|
|
|
|
2,781,010
|
|
|
|
15,002
|
|
|
|
|
|
1999 Plan
|
|
|
600,000
|
|
|
|
287,800
|
|
|
|
57,690
|
|
|
|
85,621
|
|
|
|
50,440
|
|
|
|
168,889
|
|
2003 Plan
|
|
|
1,250,000
|
|
|
|
21,000
|
|
|
|
677,500
|
|
|
|
105,800
|
|
|
|
668,500
|
|
|
|
445,700
|
|
Inducements
|
|
|
164,000
|
|
|
|
|
|
|
|
124,000
|
|
|
|
40,000
|
|
|
|
124,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,509,000
|
|
|
|
308,800
|
|
|
|
874,192
|
|
|
|
3,012,431
|
|
|
|
857,942
|
|
|
|
614,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed
Amendments to the 2003 Plan (Amended 2003 Plan)
The Companys 2003 Stock Incentive Plan provides for awards
of stock options and restricted stock and was approved by
stockholders on May 25, 2004. The Amended 2003 Plan will
amend and restate the 2003 Plan, if approved, to:
|
|
|
|
|
increase the number of shares authorized for issuance from
900,000 to 1,250,000;
|
|
|
|
extend the effective date of the 2003 Plan until March 26,
2020;
|
|
|
|
increase the maximum amount of a cash payout granted in a
calendar year to any individual or employee to $1,000,000;
|
|
|
|
provide the business criteria for performance based compensation
under Section 162 (m) of the Internal Revenue Code;
|
|
|
|
revise the definition of change of control to mean, among other
things, a person acquiring 50% or more of the voting stock
outstanding;
|
|
|
|
provide for adjustment to shares and awards on reorganization,
recapitalization or change of control, and
|
|
|
|
provide for such other changes required or desirable by recent
changes under applicable law and tax and accounting rules.
|
The proposed share increase and other changes will ensure that a
sufficient reserve of common stock is available under the plan
to be able to attract, retain and motivate the best available
talent essential to our long term growth and success.
The plan is a new plan for purposes of the Internal Revenue Code
governing incentive stock options. The plan is being submitted
for your approval to enable us to grant incentive stock options
under the plan and in order to ensure options or other incentive
awards as determined by the Committee granted under the plan
qualify for exemption from the limitation on deductibility of
compensation under Section 162 (m) of the Code.
The grant of incentive awards under the Amended 2003 Plan to
employees, including the Named Executives, consultants and
non-employee directors is subject to the discretion of the
Committee. As of the date of this Proxy Statement, there has
been no determination by the Committee with respect to future
awards under the Amended 2003 Plan. Accordingly, future awards
to employees, including the Named Executives, consultants and
non-employee directors are not determinable.
Description
of the 2003 Stock Incentive Plan
The principal provisions of the 2003 Plan, as amended and
restated (Amended 2003 Plan) are summarized below.
Such summary does not, however, purport to be complete and is
qualified in its entirety by the terms of the Amended 2003 Plan.
A copy of the 2003 Incentive Plan is included as Appendix A
to this proxy statement.
Eligibility and Types of Awards
.
The
Amended 2003 Plan provides for the grant of options that are
intended to qualify as Non-qualified Options as well as
incentive stock options (Incentive
Options) under Section 422 of
27
the Internal Revenue Code of 1986, as amended (the
Code) (collectively Options), Purchased
Stock, Bonus Stock, Stock Appreciation Rights, Phantom Shares,
Restricted Stock, Other Stock-Based Awards and Other
Performance-Based Awards (payable in stock or cash). The 2003
Incentive Plan is administered by the compensation committee,
which is appointed by the Board of Directors. The compensation
committee, with input from executive management, selects the
employees, consultants and non-employee directors
(Participants) of the Company and its affiliates to
whom options are granted. The current members of the
compensation committee are Messrs. Arnold (Chairman),
Mr. Broussard and Mr. Trier.
Amendment and Termination
.
The Board
may amend, suspend or terminate the Amended 2003 Plan at any
time; provided, however, any amendment of the Amended 2003 Plan
which (a) except as provided in Section 1.2 or 12.10
of the Amended 2003 Plan, increases the maximum number of shares
of stock which may be issued under the Amended 2003 Plan,
(b) materially modifies the requirements as to eligibility
for participation in the Amended 2003 Plan, or
(c) materially increases benefits under the Amended 2003
Plan, shall be subject to Company stockholder approval. In
addition, except as otherwise provided in the plan, no such
amendment will be made without the consent of the holder of an
Award to terminate such Award or adversely affect such
persons rights with respect to such Award.
Shares Subject to the Amended 2003
Plan
.
The aggregate number of shares of
Common Stock, $.01 par value per share, of the Company that
may be issued under the Amended 2003 Plan for Awards that are
granted wholly or partially or by reference to Common Stock
(including Options and Incentive Options that may be exercised
for or settled in Common Stock) shall not exceed 1,250,000; of
this amount 1,250,000 shares of Common Stock reserved under
this Amended 2003 Plan shall be available for any one of the
types of Awards available under the Amended 2003 Plan including
Non-Qualified Options, Incentive Options, Purchased Stock, Bonus
Stock, Stock Appreciation Rights, Phantom Stock or Other Stock
or Performance-Based Awards. Notwithstanding the above, however,
in the event that at any time after the Effective Date the
outstanding shares of Common Stock are changed into or exchanged
for a different number or kind of shares or other securities of
the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and
class of securities available under the Amended 2003 Plan shall
be ratably adjusted by the compensation committee, whose
determination shall be final and binding upon the Company and
all other interested persons. In the event the number of shares
to be delivered upon the exercise or payment of any Award
granted under the Amended 2003 Plan is reduced or not issued for
any reason whatsoever or in the event any Award granted under
the Amended 2003 Plan can no longer under any circumstances be
exercised or paid, including but not limited to, Awards that are
terminated, forfeited, expired, settled in cash or withheld for
taxes or withheld for the purchase price, the number of shares
no longer subject to such Award shall thereupon be released from
such Award and shall thereafter be available under the Amended
2003 Plan for the grant of additional Awards.
The maximum aggregate number of shares of Common Stock
(including, but not limited to, Non-Qualified Options, Incentive
Options, Restricted Stock, or Other Stock-Based Awards paid out
in shares of Common Stock) that may be granted in any calendar
year pursuant to any award held by any individual or employee is
100,000 shares. The maximum aggregate cash payout
(including Other Stock-Based Awards paid out in cash) with
respect to Awards granted in any calendar year which may be made
to any individual or employee is One Million Dollars
($1,000,000). The term or Restricted Period of each Award that
is an Option, Stock Appreciation Right, Phantom Stock or
Restricted Stock shall be for such period as may be determined
by the compensation committee; provided that in no event shall
the term of any such Award exceed a period of ten years (or such
shorter terms as may be required in respect of an Stock
Incentive Option under Section 422 of the Code). Any
issuance of Company stock pursuant to the exercise of an Option
or payment of any other Award under the Amended 2003 Plan shall
not be made until appropriate arrangements satisfactory to the
Company have been made for the payment of the purchase price,
(if applicable) or of any tax amounts (federal, state, local or
other) that may be required to be withheld or paid by the
Company.
Term of the Amended 2003 Plan
. The
Amended 2003 Plan as amended and restated herein shall be
effective as of March 26, 2010 (Effective Date)
subject to subsequent approval by stockholders of the Company on
or before the 18th day of May, 2010 at the Companys 2010
annual stockholders meeting and if the stockholders of the
Company do not approve the Amended 2003 Plan as amended and
restated, any Awards granted after the Effective Date shall be
null and void and the Amended 2003 Plan as in effect prior to
the Effective Date shall continue in
28
accordance with its terms. The provisions of the Amended 2003
Plan are applicable to all Awards granted on or after the
Effective Date. If not sooner terminated by the Board, the
Amended 2003 Plan shall terminate upon, and no further Awards
shall be made, after the 10th anniversary of the Effective
Date.
Description
of Awards.
Non-qualified Options.
Non-qualified stock
options granted under the Amended 2003 Plan may be granted to
employees, consultants or non-employee directors of the Company
or a corporate subsidiary and at a per share exercise price of
not less than the fair market value (also referred to as
FMV) of a share of Company common stock on the date
of grant. The compensation committee determines which eligible
individuals receive options and how many are issued. No
non-qualified option may be granted more than 10 years
after the effective date of the Amended 2003 Plan. Payment for
shares purchased under the Amended 2003 Plan may be made either
in cash or cash equivalents or by tendering to the Company
shares of common stock owned by the person for more than six
months having an aggregate fair market value equal to or less
than the total option price plus cash for any difference, as
determined in the discretion of the compensation committee. The
compensation committee may, in its sole discretion, also permit
payment of a purchase price or withholding of taxes by the
withholding of shares of Common Stock to be purchased. Unless
otherwise provided in the Award agreement, non-qualified option
grants shall not be exercisable more than six months after the
optionee ceases employment for any reason other than death or
Disability, or more than one year after the optionee ceases
employment due to death or disability.
Incentive Options.
Incentive Options are
subject to the terms above under the caption Non-qualified
Options. Additionally, Incentive Options (those intended
to qualify for special tax treatment under the Code) granted
under the Amended 2003 Plan may be granted only to employees of
the Company or a company parent or subsidiary and at a per share
exercise price of not less than 100% of the fair market value
per share of Companys common stock on the date of grant.
Notwithstanding any contrary provision in the Amended 2003 Plan,
to the extent that the aggregate FMV (determined as of the time
the Incentive Option is granted) of the shares of Common Stock
with respect to which Incentive Options are exercisable for the
first time by any optionee during any single calendar year
(under the Amended 2003 Plan and any other stock option plans of
the Company and its Subsidiaries or Parent) exceeds the sum of
$100,000, such Incentive Option shall be treated as a
Non-Qualified Stock Option to the extent in excess of the
$100,000 limit, and not an Incentive Option, but all other terms
and provisions of such Option shall remain unchanged. No person
may be granted an Incentive Option if, at the time of the grant,
such person owns, directly or indirectly, more than 10% of the
total combined voting power of the Company or of any affiliate
unless the option price is at least 110% of the fair market
value of the common stock on the date of grant of the option and
the exercise period of such incentive option is by its terms
limited to five years from the option grant date. No Incentive
Option shall be exercisable more than ninety days months after
the optionee ceases to be an Employee for any reason other than
death or disability, or more than one year after the optionee
ceases to be an Employee due to death or disability.
Purchased Stock.
The compensation committee
shall have the authority to sell shares of Common Stock to such
Employees, Consultants and Non-Employee Directors of the Company
or its parent or subsidiaries as may be selected by it, on such
terms and conditions as it may establish. Each issuance of
Common Stock under the Amended 2003 Plan shall be evidenced by
an agreement. The price per share of common stock to be
purchased by a participant shall not be less than the FMV Per
Share at the time of purchase. Payment of the purchase price of
Purchased Stock under the Amended 2003 Plan shall be made in
full in cash.
Bonus Stock.
The compensation committee may
grant shares of Bonus Stock to Employees, Consultants or
Non-Employee Directors. Bonus Stock shall be shares of Common
Stock that are not subject to a restricted period.
Stock Appreciation Rights.
The compensation
committee is authorized to grant Stock Appreciation Rights to
Employees, Consultants or Non-Employee Directors. A Stock
Appreciation Right shall confer on the Participant to whom it is
granted a right to receive, upon exercise, the excess of the FMV
per share on the date of exercise over the grant price of the
Stock Appreciation Right as determined by the compensation
committee. The Stock Appreciation Right shall be granted with an
exercise price equal to FMV per share on the date of grant. A
Stock Appreciation Right granted in connection with an option
shall entitle a participant, upon exercise, to surrender that
option or any portion thereof, to the extent unexercised, and to
receive payment of an amount computed pursuant to the preceding
29
sentence. That option shall then cease to be exercisable to the
extent surrendered. A Stock Appreciation Right granted in
connection with an option shall be exercisable only at such time
or times and only to the extent that the related option is
exercisable and shall not be transferable (other than by will or
the laws of descent and distribution) except to the extent that
the related option is transferable. A Stock Appreciation Right
granted independent of an option shall be exercisable as
determined by the compensation committee and set forth in the
Award Agreement governing the Stock Appreciation Right. The
compensation committee shall determine at the date of grant the
time or times at which and the circumstances under which a Stock
Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals
and/or
future service requirements), the method of exercise, whether or
not a Stock Appreciation Right shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right as provided in the
Award Agreement.
Phantom Stock.
The compensation committee is
authorized to grant Phantom Stock Awards to Participants, which
are rights to receive cash equal to the Fair Market Value of a
specified number of shares of Common Stock at the end of a
specified deferral period. Satisfaction of a Phantom Stock Award
occurs upon expiration of the deferral period specified for such
Phantom Stock Award Agreement by the compensation committee or,
if permitted by the compensation committee, as elected by the
Participant. In addition, Phantom Stock Awards are subject to
such restrictions as the compensation committee may impose.
These restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals
and/or
future service requirements), separately or in combination,
installments or otherwise, as the compensation committee
determines in the award Agreement. Except as otherwise
determined by the compensation committee or as set forth in any
Award, employment or other agreement pertaining to a Phantom
Stock Award, upon termination of employment or services during
the applicable deferral period or portion thereof to which
forfeiture conditions apply, all Phantom Stock Awards that are
at that time subject to deferral (other than a deferral at the
election of the Participant) shall be forfeited; provided that
the compensation committee may provide, by rule or regulation or
in any Award agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Phantom
Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
compensation committee may in other cases waive in whole or in
part the forfeiture of Phantom Stock Awards. To the extent the
Committee determines that any award granted shall constitute
Performance-Based Compensation for purposes of
Section 162(m) of the Code, the grant or settlement of the
award shall, in the compensation committees discretion, be
subject to the achievement of performance goals. Also, these
Awards may be subject to Code Section 409A as described
below.
Restricted Stock.
Participants are eligible
for grants of Restricted Stock. Restricted Stock is subject to
such restrictions on transfer by the Participant and repurchase
by the Company as the compensation committee, in its sole
discretion, shall determine. Prior to the lapse of such
restrictions the Participant shall not be permitted to transfer
such shares. The Company shall have the right to repurchase or
recover such shares for the amount of cash paid, if any, if the
Participant shall terminate employment from or services to the
Company prior to the lapse of such restrictions or the
Restricted Stock is forfeited by the Participant pursuant to the
terms of the Award. Unless the Award specifically provides
otherwise, all Restricted Stock not otherwise vested shall vest
upon termination of an Employee or Consultant or removal of a
Non-Employee Director without Cause; termination, resignation or
removal of an Employee, Consultant or Non-Employee Director for
any reason within one year from the effective date of a Change
of Control; or death or Disability of the Participant. Each
certificate representing Restricted Stock awarded under the
Amended 2003 Plan shall be registered in the name of the
Participant and, during the Restricted Period, shall be left in
deposit with the Company and a stock power endorsed in blank.
The grantee of Restricted Stock shall have all the rights of a
stockholder with respect to such shares including the right to
vote and the right to receive dividends or other distributions
paid or made with respect to such shares.
Performance Awards.
The compensation committee
may grant Performance Awards based on performance criteria
measured over a period of not less than one year and not more
than five years as determined by the compensation committee in
its sole discretion. Each grant of a Performance Award shall be
evidenced by an Agreement in such amount and terms as determined
by the compensation committee. The compensation committee may
use such business criteria and other measures of performance as
it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to increase the
amounts payable under any Award subject to performance
conditions except as limited by the Amended 2003 Plan in the
case of a Performance Award granted to an
30
executive officer. The compensation committee shall designate
whether a Performance Award is intended to be performance-based
compensation under Code Section 162(m). The business
criteria that may be used for Performance Awards that are
designated by the compensation committee to be performance-based
compensation under Code Section 162(m) are:
(i) earnings per share; (ii) increase in revenues;
(iii) increase in cash flow; (iv) increase in cash
flow return; (v) return on net assets; (vi) return on
assets; (vii) return on investment; (viii) return on
equity; (ix) economic value added; (x) gross margin;
(xi) net income; (xii) pretax earnings;
(xiii) pretax earnings before interest, depreciation and
amortization; (xiv) pretax operating earnings after
interest expense and before incentives, service fees, and
extraordinary or special items; (xv) operating income;
(xvi) total stockholder return; (xvii) debt reduction;
(xviii) the price of a Share of Common Stock; and
(xix) any of the above goals determined on the absolute or
relative basis or as compared to the performance of a published
or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poors 500
Stock Index or a group of comparable companies.
Other Stock-Based Awards and Other Performance-Based
Awards.
The compensation committee is authorized
to grant Other Stock-Based Awards or Other Performance-Based
Awards. An Other Stock-Based Award shall consist of a right
which is not an award described above and is denominated or
payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of Common Stock
(including, without limitation, securities convertible into
shares of Common Stock) and may be paid in Common Stock or cash.
Other Performance-Based Awards may be paid in Common Stock or
Cash. The compensation committee shall determine the terms and
conditions of any such Other Stock-Based or Performance-Based
Awards and to the extent such awards are performance-based
compensation under Code Section 162(m) or otherwise
performance-based.
Federal
Income Tax Implications of the Amended 2003 Plan
The following is a brief description of the federal income tax
consequences generally arising with respect to awards under the
Amended 2003 Plan.
The grant of an Option will create no tax consequences for the
participant or the Company. A participant will not recognize
taxable income upon exercising an Incentive Option (except that
the alternative minimum tax may apply). Upon exercising an
option other than an Incentive Option, the participant must
generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the freely
transferable and non-forfeitable shares acquired on the date of
exercise.
The Company generally will be entitled to a tax deduction equal
to the amount recognized as ordinary income by the participant
in connection with an Option. The Company generally is not
entitled to a tax deduction relating to amounts that represent a
capital gain to a participant. Accordingly, the Company will not
be entitled to any tax deduction with respect to an Incentive
Option if the participant holds the shares for the Incentive
Option holding periods prior to disposition of the shares.
With respect to awards granted under the Amended 2003 Plan that
result in the payment or issuance of cash or shares or other
property that is either not restricted as to transferability or
not subject to a substantial risk of forfeiture, the participant
must generally recognize ordinary income equal to the cash or
the fair market value of shares or other property received.
Thus, deferral of the time of payment or issuance will generally
result in the deferral of the time the participant will be
liable for income taxes with respect to such payment or
issuance. The Company generally will be entitled to a deduction
in an amount equal to the ordinary income recognized by the
participant.
With respect to awards involving the issuance of shares or other
property that is restricted as to transferability and subject to
a substantial risk of forfeiture, the participant must generally
recognize ordinary income equal to the fair market value of the
shares or other property received at the first time the shares
or other property becomes transferable or is not subject to a
substantial risk of forfeiture, whichever occurs earlier. A
participant may elect to be taxed at the time of receipt of
shares or other property rather than upon lapse of restrictions
on transferability or substantial risk of forfeiture, but if the
participant subsequently forfeits such shares or property, the
participant would not be entitled to any tax deduction,
including as a capital loss, for the value of the shares or
property on which he previously paid tax. The participant must
file such election with the Internal Revenue Service within
30 days of the receipt of the shares or other property. The
Company generally will be entitled to a deduction in an amount
equal to the ordinary income recognized by the participant.
31
Awards that are granted, accelerated or enhanced upon the
occurrence of a change in control may give rise, in whole or in
part, to excess parachute payments within the meaning of Code
Section 280G and, to such extent, will be non-deductible by
the Company and subject to a 20% excise tax by the participant.
Code Section 409A of the Code generally provides that any
deferred compensation arrangement which does not meet specific
requirements regarding: (i) timing of payouts,
(ii) advance election of deferrals, and
(iii) restrictions on acceleration of payouts results in
immediate taxation of any amounts deferred to the extent not
subject to a substantial risk of forfeiture. In addition, taxes
on the amounts included in income are also subject to a 20%
excise tax and interest. In general, to avoid a violation of
Section 409A of the Code, amounts deferred may only be paid
out on separation from service, disability, death, a specified
time, a change in control (as defined by the Treasury
Department) or an unforeseen emergency, Furthermore, the
election to defer generally must be made in the calendar year
prior to performance of services, and any provision for
accelerated payout other than for reasons specified by the
Treasury may cause the amounts deferred to be subject to early
taxation and to the imposition of the excise tax.
Section 409A of the Code is broadly applicable to any form
of deferred compensation other than tax-qualified retirement
plans and bona fide vacation, sick leave, compensatory time,
disability pay or death benefits, and may be applicable to
certain awards under the Amended 2003 Plan. The Treasury
Department has provided final regulations under
Section 409A of the Code. Awards, if any, under the Amended
2003 Plan that are subject to Section 409A of the Code that
are intended to satisfy the requirements of Section 409A of
the Code will be so specified in the Award agreement.
Under Section 162(m) of the Code, the Company is denied a
deduction for annual compensation paid to covered
employees in excess of one million dollars ($1,000,000),
unless such compensation qualified as performance-based
compensation. Generally, taxable compensation earned by
covered employees (as defined in Section 162(m)
of the Code) for Options or certain other applicable awards is
intended to constitute qualified performance-based compensation.
However, the Committee may determine, within its sole
discretion, to grant Awards to such covered employees that do
not qualify as performance-based compensation.
THE FOREGOING IS A SUMMARY OF THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES THAT GENERALLY WILL ARISE UNDER THE CODE
WITH RESPECT TO AWARDS GRANTED UNDER THE AMENDED 2003 PLAN AND
DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF ALL RELEVANT
PROVISIONS OF THE CODE. MOREOVER, THIS SUMMARY IS BASED UPON
CURRENT FEDERAL INCOME TAX LAWS UNDER THE CODE, WHICH ARE
SUBJECT TO CHANGE. THE TREATMENT OF FOREIGN, STATE, LOCAL OR
ESTATE TAXES IS NOT ADDRESSED. THE TAX CONSEQUNCES OF THE AWARDS
ARE COMPLEX AND DEPENDENT UPON EACH INDIVIDUALS PERSONAL
TAX SITUATION. ALL GRANTEES ARE ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR RESPECTING AWARDS.
The Board of Directors believes the Amended 2003 Plan is
necessary to promote the interest of the Company and its
stockholders by encouraging grantees to acquire or increase
their equity interest in the Company, thereby giving them an
added incentive to work toward the continued growth and success
of the Company. The Board of Directors also contemplates that
through the Amended 2003 Plan, the Company will be better able
to compete for the services of the individuals needed for the
continued growth and success of the Company.
REQUIRED
VOTE
The approval by the affirmative vote of a majority of the shares
present, in person or by proxy, and entitled to vote at the
Annual Meeting is required to adopt the Amended 2003 Plan. As a
result, abstentions will have the same effect as votes against
this proposal. Because brokers do not have discretionary
authority to vote on the adoption of our amendments to stock
incentive plans, broker no votes will not affect the outcome of
the vote on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE APPROVAL OF THE AMENDED AND RESTATED
2003 STOCK INCENTIVE PLAN.
32
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ITEM 3
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RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
Our Audit Committee has appointed and recommends the
ratification of the appointment of Grant Thornton LLP as our
independent registered public accounting firm to conduct the
audit of our financial statements for the year ending
December 31, 2010 and to render other services as required
and approved by the committee. Grant Thornton LLP has acted as
our independent registered public accounting firm since
August 27, 2004. Representatives of Grant Thornton LLP are
expected to attend our Annual Meeting, are expected to be
available to respond to questions by stockholders and will have
an opportunity to make a statement if they desire to do so,
although it is not expected that a statement will be made.
If the stockholders fail to ratify the appointment of Grant
Thornton LLP, the Audit Committee will consider whether or not
to retain that firm since shareholder ratification of the
appointment is not required and the committee has the
responsibility for appointment of our independent registered
public accounting firm. Even if the stockholders ratify the
appointment, the committee, in its discretion, may direct the
appointment of a different independent firm at any time during
the year if it determines that such a change would be in the
best interests of the Company and our stockholders.
Properly executed but unmarked proxies will be voted FOR
approval of the ratification of the appointment of Grant
Thornton LLP as our independent registered public accounting
firm for the year ending December 31, 2010.
The Board
of Directors believes that ratifying the appointment of Grant
Thornton LLP is in the best interest of the Company. The
approval of the ratification of Grant Thornton LLP will require
the affirmative vote of holders of a majority of votes cast on
this matter in person or by proxy. Accordingly, abstentions
applicable to shares present at the meeting will not be included
in the tabulation of votes cast on this matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2010
INDEPENDENT
PUBLIC ACCOUNTANTS
Grant Thornton LLP has acted as our independent registered
public accounting firm since August 27, 2004.
Audit and
Non-Audit Fees
The following table sets forth the fees billed for services
performed by Grant Thornton LLP for fiscal years 2009 and 2008:
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2009
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
460,435
|
|
|
$
|
440,725
|
|
Audit-Related Fees
|
|
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Tax Fees
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All Other Fees
|
|
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|
|
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|
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$
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460,435
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|
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$
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440,725
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Audit fees include fees for professional services rendered in
connection with the audit of our financial statements and
internal controls over financial reporting for the fiscal year
as well as reviews of our interim financial statements included
in our quarterly reports on
Form 10-Q.
The Audit Committee is authorized to delegate to one or more of
its members the authority to pre-approve any defined audit and
permitted non-audit services to be provided by the independent
auditors, and related fees and other terms of engagement on
these matters, provided that each pre-approval decision is
presented to the full Audit Committee at its next scheduled
meeting. In 2009 and 2008, 100% of the audit-related services
were pre-approved
33
under authority granted by the committee to its chairman
pursuant to these pre-approval procedures. Grant Thornton LLP
has not provided any tax or other non-audit services to the
Company.
Report of
the Audit Committee
The following Audit Committee Report is provided in accordance
with the rules and regulations of the SEC. Pursuant to such
rules and regulations, this report does not constitute
soliciting materials and should not be deemed filed
with or incorporated by reference into any other Company filings
with the SEC under the Securities Act of 1933 or the Securities
Exchange Act of 1934 or subject to the liabilities of
Section 18 of the Exchange Act, except to the extent the
Company specifically incorporates such information by reference.
The Board of Directors has appointed an Audit Committee
consisting of Messrs. Johnston (Chairman), Brookner,
Pullins and Trier, and Dr. Harris, all of whom are
financially literate and independent (as that term is defined by
applicable NASDAQ Listing Standards and SEC
Rule 10A-3(b)).
The Board of Directors has determined Messrs. Brookner,
Pullins and Trier to be the audit committee financial
experts under the rules of the SEC.
Under the Sarbanes-Oxley Act, the Audit Committee is directly
responsible for the selection, appointment, retention,
compensation and oversight of the Companys independent
auditors, including the pre-approval of both audit and non-audit
services (including fees and other terms), and the resolution of
disagreements between management and the auditors regarding
financial reporting, accounting, internal controls, auditing or
other matters.
In carrying out its responsibilities, the committee:
(i) makes such inquiries and reviews as are necessary to
monitor the Companys financial reporting, its external
audits and its processes for compliance with laws and
regulations, (ii) monitors the adequacy and effectiveness
of the accounting and financial controls of the Company and
elicits recommendations for the improvement of internal control
processes and systems, (iii) reviews the planning, scope
and results of the annual audit of the Companys financial
statements conducted by the Companys independent auditors,
(iv) reviews the scope and approves in advance any other
services to be provided by the Companys independent
auditors, and (v) provides to the Board of Directors the
results of its reviews and any recommendations derived
therefrom, including such additional information and materials
as it may deem necessary to make the Board aware of significant
financial matters that may require Board attention.
The Audit Committee has a
sub-committee
which provides general oversight of our Companys
compliance with legal and regulatory requirements regarding
healthcare operations (Compliance Committee). The
Compliance Committee also monitors the Companys telephone
hotline by which it can directly receive, on an
anonymous and confidential basis, complaints regarding any
subject, including accounting, internal accounting controls,
questionable accounting, auditing or other matters that the
Companys employees, and non-employees, may have. Members
of the Compliance Committee are Messrs. Johnston
(Chairman), Brookner and Pullins, and Dr. Harris.
The Audit Committee is authorized to engage independent counsel
and other advisors it determines necessary to carry out its
duties. The committee did not deem it necessary to engage
independent counsel for any matters during 2009.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal controls, and for the preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America. The Companys
independent auditors are responsible for auditing the financial
statements and expressing an opinion on the conformity of those
audited financials statements with accounting principles
generally accepted in the United States of America. The Audit
Committee monitors and reviews these processes, and reviews the
Companys periodic reports and quarterly earning releases
before they are filed with the SEC, but is not responsible for
the preparation of the Companys financial statements and
reports.
In fulfilling its oversight responsibilities, the Audit
Committee reviewed and discussed the audited financial
statements included in the Companys 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 financial statements. The committee also met
with the Companys Chief Executive Officer and Chief
Financial Officer to discuss their review of the Companys
disclosure controls and procedures and
34
internal control over financial reporting in connection with the
filing of the Annual Report on
Form 10-K
and other periodic reports with the SEC. However, members of the
committee are not employees of the Company and have relied,
without independent verification, on managements
representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America
and on the representations of the independent auditors included
in their report on the Companys financial statements.
Prior to commencement of audit work, the committee reviewed and
discussed with representatives of Grant Thornton LLP, the
Companys independent auditors for fiscal 2009, the overall
scope and plans for their audit of the Companys financial
statements for fiscal 2009. The committee also reviewed and
discussed with Grant Thornton LLP, who are responsible for
expressing an opinion on the conformity of those audited
financial statements with accounting principles generally
accepted in the United States of America, their judgments as to
the quality, not just the acceptability, of the Companys
financial statements, any changes in accounting policies,
sensitive accounting estimates, accounting principles and such
other matters as are required to be discussed with the committee
under auditing standards generally accepted in the United States
of America, including the matters required to be discussed by
the 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 committee met
with Grant Thornton LLP, with and without Company management
present, to discuss whether any significant matters regarding
internal controls over financial reporting had come to the
auditors attention during the conduct of the audit, and
the overall quality of the Companys financial reporting.
The committee has received the written disclosures and the
letter from Grant Thornton LLP required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent auditors communications with the
committee concerning independence and the committee has
discussed with Grant Thornton LLP their independence. The
committee considered, among other things, whether the services
Grant Thornton LLP provided to the Company were compatible with
maintaining Grant Thornton LLPs independence. The
committee also considered the amount of fees Grant Thornton LLP
received for audit and non-audit services.
Based on the reviews and discussions referred to above, the
committee recommended to the Board of Directors that the audited
financial statements be included in the Annual Report on
Form 10-K
for the year ended December 31, 2009 for filing with the
SEC.
The committee is governed by a written charter, adopted by the
Board of Directors of the Company, which is included on our
website at www.usph.com.
Respectfully submitted,
The Audit Committee
Marlin W. Johnston, Chairman
Mark J. Brookner
Dr. Bernard A. Harris
Jerald L. Pullins
Clayton K. Trier
35
DEADLINE
FOR SUBMISSION OF STOCKHOLDER PROPOSALS TO BE
PRESENTED AT THE 2011 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented by any stockholder for
action at the 2011 annual meeting of Stockholders (2011
Annual Meeting) must be received by us on or before
December 6, 2010 in order for the proposal to be considered
for inclusion in the proxy statement and form of proxy relating
to the 2011 Annual Meeting. If the date of next years 2011
Annual Meeting is changed by more than 30 days from
May 18, 2011, the deadline will be a reasonable time before
we print and mail our proxy materials. However, we are not
required to include in our proxy statement and form of proxy for
the 2011 Annual Meeting any stockholder proposal that does not
meet all of the requirements for inclusion established by the
SEC in effect at the time the proposal is received. In order for
any stockholder proposal that is not included in such proxy
statement and form of proxy to be brought before the 2011 Annual
Meeting, such proposal must be received by the Corporate
Secretary of U.S. Physical Therapy, Inc. at its principal
executive offices at 1300 West Sam Houston Parkway South,
Suite 300, Houston, Texas 77042 by February 19, 2011.
If a timely proposal is received, the Board may exercise any
discretionary authority granted by the proxies to be solicited
on behalf of the Board in connection with the 2011 Annual
Meeting of stockholders.
OTHER
MATTERS
As of the date of this Proxy Statement, our Board of Directors
does not know of any other matters to be presented for action by
stockholders at the 2010 Annual Meeting. If, however, any other
matters not now known are properly brought before the meeting,
the persons named in the accompanying proxy will vote the proxy
as directed by a majority of the Board of Directors.
By Order of the Board of Directors,
Chris Corrigan
Secretary
Houston, Texas
April 9, 2010
36
U.S.
PHYSICAL THERAPY, INC.
2003 STOCK INCENTIVE PLAN
DECEMBER 15, 2003
(as amended and restated effective March 26, 2010)
U.S.
PHYSICAL THERAPY, INC.
2003
STOCK INCENTIVE PLAN
TABLE OF
CONTENTS
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ARTICLE I
INTRODUCTION
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1.1
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Purpose and Amendment and Restatement
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A-1
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1.2
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Shares Subject to the Plan
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A-1
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1.3
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Administration of the Plan
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A-2
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1.4
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Amendment and Discontinuance of the Plan
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A-2
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1.5
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Granting of Awards to Participants
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A-2
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1.6
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Term of Plan
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A-2
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1.7
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Leave of Absence
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A-2
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1.8
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Definitions
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A-2
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ARTICLE II
NONQUALIFIED STOCK OPTIONS
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2.1
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Grants
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A-5
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2.2
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Calculation of Exercise Price
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A-5
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2.3
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Terms and Conditions of Options
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A-6
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2.4
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Amendment
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A-7
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2.5
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Acceleration of Vesting
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A-7
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2.6
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Other Provisions
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A-7
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ARTICLE III
INCENTIVE OPTIONS
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3.1
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Eligibility
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A-8
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3.2
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Exercise Price
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A-8
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3.3
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Dollar Limitation
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A-8
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3.4
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10% Stockholder
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A-8
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3.5
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Options Not Transferable
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A-8
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3.6
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Reload Options
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A-8
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3.7
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Compliance with 422
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A-8
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3.8
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Limitations on Exercise
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A-8
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ARTICLE IV
PURCHASED STOCK
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4.1
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Eligible Persons
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A-8
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4.2
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Purchase Price
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A-8
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4.3
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Payment of Purchase Price
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A-8
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ARTICLE V
BONUS STOCK
ARTICLE VI
STOCK APPRECIATION RIGHTS AND PHANTOM STOCK
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6.1
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Stock Appreciation Rights
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A-9
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6.2
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Phantom Stock Awards
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A-9
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A-i
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ARTICLE VII
RESTRICTED STOCK
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7.1
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Eligible Persons
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A-10
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7.2
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Restricted Period and Vesting
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A-10
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ARTICLE VIII
PERFORMANCE AWARDS
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8.1
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Performance Awards
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A-10
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8.2
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Performance Goals
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A-11
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ARTICLE IX
OTHER STOCK OR PERFORMANCE BASED AWARDS
ARTICLE X
CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
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10.1
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General
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A-12
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10.2
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Stand-Alone, Additional, Tandem, and Substitute Awards
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A-12
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10.3
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Term of Awards
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A-12
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10.4
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Form and Timing of Payment under Awards; Deferrals
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A-12
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10.5
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Vested and Unvested Awards
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A-13
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10.6
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Requirements of Law
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A-13
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10.7
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Rule 16b-3
Securities Law Compliance and Compliance with Company Policies
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A-13
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10.8
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Disqualification and Forfeiture
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A-13
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ARTICLE XI
WITHHOLDING FOR TAXES
ARTICLE XII
MISCELLANEOUS
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12.1
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No Rights to Awards
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A-14
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12.2
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No Right to Employment or Continued Services
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A-14
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12.3
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Governing Law
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A-14
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12.4
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Severability
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A-14
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12.5
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Shareholder Agreements
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A-14
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12.6
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Indemnification of Committee
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A-14
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12.7
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Designation of Beneficiary by Participant
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A-14
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12.8
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Successors
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A-15
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12.9
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Gender, Tense and Headings
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A-15
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12.10
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Recapitalization or Reorganization
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A-15
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12.11
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Miscellaneous.
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A-16
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12.12
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No Guarantee of Tax Consequences
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A-16
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12.13
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Code Section
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A-16
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A-ii
ARTICLE I
INTRODUCTION
1.1
Purpose and Amendment and
Restatement
.
The U.S. Physical Therapy,
Inc. 2003 Stock Incentive Plan is hereby amended and restated in
its entirety as provided herein (the Plan). This
amendment and restatement is not intended to modify any
outstanding Award in violation of Code Section 409A or
other applicable requirement of the Code. This Plan is intended
to promote the interests of U.S. Physical Therapy, Inc., a
Nevada corporation, (the Company) and its
stockholders by encouraging Employees, Consultants and
Non-Employee Directors of the Company or its Parent and
Subsidiaries (as defined below) to acquire or increase their
equity interests in the Company, thereby giving them an added
incentive to work toward the continued growth and success of the
Company. The Board of Directors of the Company (the
Board) also contemplates that through the Plan, the
Company and its Parent and Subsidiaries will be better able to
compete for the services of the individuals needed for the
continued growth and success of the Company.
1.2
Shares Subject to the
Plan
.
The aggregate number of shares of
Common Stock, $.01 par value per share, of the Company
(Common Stock) that may be issued under the Plan for
Awards that are granted wholly or partially or by reference to
Common Stock (including Options and Incentive Options that may
be exercised for or settled in Common Stock) shall not exceed
1,250,000; of this amount 1,250,000 shares of Common Stock
reserved under this Plan shall be available for any one of the
types of Awards available under the Plan including Non-Qualified
Options, Incentive Options, Purchased Stock, Bonus Stock, Stock
Appreciation Rights, Phantom Stock or Other Stock or
Performance-Based Awards. Notwithstanding the above, however, in
the event that at any time after the Effective Date the
outstanding shares of Common Stock are changed into or exchanged
for a different number or kind of shares or other securities of
the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and
class of securities available under the Plan shall be ratably
adjusted by the Committee (as defined below), whose
determination shall be final and binding upon the Company and
all other interested persons. In the event the number of shares
to be delivered upon the exercise or payment of any Award
granted under the Plan is reduced or not issued for any reason
whatsoever or in the event any Award granted under the Plan can
no longer under any circumstances be exercised or paid,
including but not limited to, Awards that are terminated,
forfeited, expired, settled in cash or withheld for taxes or
withheld for the purchase price, the number of shares no longer
subject to such Award shall thereupon be released from such
Award and shall thereafter be available under the Plan for the
grant of additional Awards. Shares issued pursuant to the Plan
(i) may be treasury shares, authorized but unissued shares
or, if applicable, shares acquired in the open market and
(ii) shall be fully paid and nonassessable.
During such period that the Company is a Publicly Held
Corporation, the following rules shall apply to grants of Awards:
(a) Subject to only the adjustment as provided in the
second sentence of the first paragraph of this Section 1.2,
the maximum aggregate number of shares of Common Stock
(including, but not limited to, Non-Qualified Options, Incentive
Options, Restricted Stock, or Other Stock-Based Awards paid out
in shares of Common Stock) that may be granted in any calendar
year pursuant to any Award held by any individual or Employee
shall be one hundred thousand (100,000) shares.
(b) The maximum aggregate cash payout (including Other
Stock or Performance-Based Awards paid out in cash) with respect
to Awards granted in any calendar year which may be made to any
individual or Employee shall be One Million Dollars ($1,000,000).
(c) With respect to any Option granted to an Employee that
is canceled or repriced, the number of shares subject to such
Option shall continue to count against the maximum number of
shares of Common Stock that may be the subject of Options
granted to such Employee hereunder and, in this regard, such
maximum number shall be determined in accordance with
Section 162(m) of the Code.
(d) The limitations of subsections (a), (b) and
(c) above shall be construed and administered so as to
comply with Performance-Based Compensation requirements.
A-1
1.3
Administration of the
Plan
.
The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee
shall interpret the Plan and all Awards under the Plan, shall
make such rules as it deems necessary for the proper
administration of the Plan, shall make all other determinations
necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award under the Plan in the
manner and to the extent that the Committee deems desirable to
effectuate the Plan. Any action taken or determination made by
the Committee pursuant to this and the other paragraphs of the
Plan shall be conclusive on all parties. The act or
determination of a majority of the Committee shall be deemed to
be the act or determination of the Committee.
1.4
Amendment and Discontinuance of the
Plan
.
The Board may amend, suspend or
terminate the Plan at any time; provided, however, any amendment
of the Plan which (a) except as provided in
Section 1.2 or 12.10, increases the maximum number of
shares of Common Stock which may be issued under the Plan
pursuant to Section 1.2, (b) materially modifies the
requirements as to eligibility for participation in the Plan,
(c) materially increases benefits under the Plan, shall be
subject to Company stockholder approval. In addition, except as
otherwise provided herein, no such amendment will be made
without the consent of the holder of an Award to terminate such
Award or adversely affect such persons rights with respect
to such Award in any material respect.
1.5
Granting of Awards to
Participants
.
The Committee shall have the
authority to grant, prior to the expiration date of the Plan,
Awards to such Employees, Consultants and Non-Employee Directors
as may be selected by it on the terms and conditions hereinafter
set forth in the Plan. In selecting the persons to receive
Awards, including the type and size of the Award, the Committee
may consider any factors that it may deem relevant.
1.6
Term of Plan
.
The Plan as
amended and restated herein shall be effective as of
March 26, 2010 (Effective Date) subject to
subsequent approval by stockholders of the Company on or before
the 18th day of May, 2010 at the Companys 2010 annual
stockholders meeting and if the stockholders of the Company do
not approve the Plan as amended and restated, any Awards granted
after the Effective Date shall be null and void and the Plan as
in effect prior to the Effective Date shall continue in
accordance with its terms. The provisions of the Plan are
applicable to all Awards granted on or after the Effective Date.
If not sooner terminated under the provisions of
Section 1.4, the Plan shall terminate upon, and no further
Awards shall be made, after the tenth (10th) anniversary of the
Effective Date.
1.7
Leave of Absence
.
If an
employee is on military, sick leave or other bona fide leave of
absence, such person shall be considered an Employee
for purposes of an outstanding Award during the period of such
leave provided it does not exceed 90 days, or, if longer,
so long as the persons right to reemployment is guaranteed
either by statute or by contract. If the period of leave exceeds
90 days, the employment relationship shall be deemed to
have terminated on the 91st day of such leave, unless the
persons right to reemployment is guaranteed by statute or
contract.
1.8
Definitions
.
As used in the
Plan, the following terms shall have the meanings set forth
below:
1933 Act
means the Securities Act of 1933, as
amended.
1934 Act
means the Securities Exchange Act of
1934, as amended.
Affiliate
means (i) any entity in which
the Company, directly or indirectly, owns 10% or more of the
combined voting power, as determined by the Committee,
(ii) any Parent of the Company, (iii) any
subsidiary corporation of any such Parent
corporation (as defined in section 424(f) of the Code) of
the Company and (iv) any trades or businesses, whether or
not incorporated which are members of a controlled group or are
under common control (as defined in Sections 414(b) or
(c) of the Code) with the Company.
Agreement
means the written agreement entered
into between the Company and the Participant setting forth the
terms and conditions pursuant to which an Award is granted under
the Plan.
Awards
means, collectively, Options,
Purchased Stock, Bonus Stock, Stock Appreciation Rights, Phantom
Stock, Restricted Stock, Performance Awards, Other Stock-Based
Awards or Other Performance-Based Awards (payable in cash or
Shares of stock) awarded to a Participant subject to this plan
and the Agreement.
Board
shall mean the Board of Directors of
the Company.
A-2
Bonus Stock
is defined in Article V
below.
Cause
for termination of any Participant who
is a party to an agreement of employment with or renders
services to the Company shall mean termination for
Cause as such term is defined in such agreement, the
relevant portions of which are incorporated herein by reference.
If such agreement does not define Cause or if a
Participant is not a party to such an agreement or if the
Agreement does not provide otherwise, Cause means
(i) the willful commission by a Participant of a criminal
or other act that causes or is likely to cause substantial
economic damage to the Company or an Affiliate or substantial
injury to the business reputation of the Company or Affiliate;
(ii) the commission by a Participant of an act of fraud in
the performance of such Participants duties on behalf of
the Company or an Affiliate; or (iii) the continuing
willful failure of a Participant to perform the duties of such
Participant to the Company or an Affiliate (other than such
failure resulting from the Participants incapacity due to
physical or mental illness) after written notice thereof
(specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are
given to the Participant by the Committee. For purposes of the
Plan, no act, or failure to act, on the Participants part
shall be considered willful unless done or omitted
to be done by the Participant not in good faith and without
reasonable belief that the Participants action or omission
was in the best interest of the Company or an Affiliate, as the
case may be.
Change of Control
shall be deemed to have
occurred upon any of the following events:
(i) any person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and as modified in
Section 13(d) and 14(d) of the Exchange Act) other than
(A) the Company or any of its subsidiaries, (B) any
employee benefit plan of the Company or any of its subsidiaries,
(C) or any Affiliate, (D) a company owned, directly or
indirectly, by stockholders of the Company in substantially the
same proportions as their ownership of the Company, or
(E) an underwriter temporarily holding securities pursuant
to an offering of such securities (a Person),
becomes the beneficial owner (as defined in
Rule 13d-3
of the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the shares of voting
stock of the Company then outstanding; provided, however, that
an initial public offering of Common Stock shall not constitute
a Change of Control;
(ii) the consummation of any merger, organization, business
combination or consolidation of the Company or one of its
subsidiaries with or into any other company, other than a
merger, reorganization, business combination or consolidation
which would result in the holders of the voting securities of
the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger,
reorganization, business combination or consolidation more than
50% of the combined voting power of the voting securities of the
Company or the surviving company or the parent of such surviving
company;
(iii) the consummation of a sale or disposition by the
Company of all or substantially all of the Companys
assets, other than a sale or disposition if the holders of the
voting securities of the Company outstanding immediately prior
thereto hold securities immediately thereafter which represent
more than 50% of the combined voting power of the voting
securities of the acquiror, or parent of the acquiror, of such
assets, or the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company;
(iv) individuals who, as of the Effective Date, constitute
the Board (the Incumbent Board) cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Effective Date whose election by the Board, was approved by
a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption
of office occurs as a result of an election contest with respect
to the election or removal of directors or other solicitation of
proxies or consents by or on behalf of a person other than the
Board; or
(v) notwithstanding anything herein to the contrary, any
other event that a majority of the Board, in its sole
discretion, shall determine constitutes a Change in Control
hereunder.
Code
means the Internal Revenue Code of 1986,
as amended from time to time, and the rules and regulations
thereunder.
A-3
Committee
means the compensation committee
appointed by the Board to administer the Plan or, if none, the
Board; provided however, that with respect to any Award granted
which is intended to be Performance-Based Compensation,
including Options, the Committee shall consist solely of two or
more members who fulfill the non-employee director
requirements of
Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and the
outside directors as described in
Section 162(m)(4)(c)(i) of the Code and the regulations
thereunder. In either case, the Committee may be the
compensation committee of the Board or any subcommittee of the
compensation committee of the Board, provided that the members
of the Committee satisfy the requirements of the previous
provisions of these paragraphs.
Consultant
means an independent agent,
consultant, attorney or any other individual who is not an
outside director or Employee of the Company (or any
Parent or Subsidiary) and who (i), in the opinion of the
Committee, is in a position to contribute to the growth or
financial success of the Company (or any Parent or Subsidiary),
(ii) is a natural person and (iii) provides bona fide
services to the Company (or any Parent or Subsidiary), which
services are not in connection with the offer or sale of
securities in a capital raising transaction, and do not directly
or indirectly promote or maintain a market for the
Companys securities.
Disability
means an inability to perform the
Participants material services for the Company for a
period of 90 consecutive days or a total of 180 days,
during any
365-day
period, in either case as a result of incapacity due to mental
or physical illness, which is determined to be total and
permanent. A determination of Disability shall be made by a
physician satisfactory to both the Participant (or his guardian)
and the Company, provided that if the Participant (or his
guardian and the Company do not agree on a physician, the
Participant and the Company shall each select a physician and
these two together shall select a third physician, whose
determination as to Disability shall be binding on all parties.
Eligibility for the payment of disability benefits under any
policy for long-term disability benefits provided to the
Participant by the Company or a Parent or Subsidiary shall be
deemed a disability of the Participant for the purposes of this
Plan.
Employee
means any employee of the Company
(or any Parent or Subsidiary) within the meaning of
Section 3401(c) of the Code who, in the opinion of the
Committee, is in a position to contribute to the growth,
development and financial success of the Company (or any Parent
or Subsidiary), including, without limitation, officers who are
members of the Board.
Employment
includes any period in which a
Participant is an Employee or a paid Consultant to the Company
or the Parent or a Subsidiary.
Fair Market Value or FMV Per
Share.
The Fair Market Value or FMV Per
Share of the Common Stock shall be the closing price on the
principal exchange or
over-the-counter
market on which such shares are trading, if any, or as reported
on any composite index which includes such principal exchange,
for the date of the determination, or if no trade of the Common
Stock shall have been reported for such date, the closing sales
price quoted on such exchange for the most recent trade prior to
the determination date. If shares of the Common Stock are not
listed or admitted to trading on any exchange,
over-the-counter
market or any similar organization as of the determination date,
the FMV Per Share shall be determined by the Committee in good
faith using any fair and reasonable means in its discretion, and
if applicable in accordance with Code Section 409A, and
shall be final and binding.
Incentive Option
means any option that
satisfies the requirements of Code Section 422 and is
granted pursuant to Article III of the Plan.
Insider
shall mean an individual who is, on
the relevant date, an officer, director or ten percent (10%)
beneficial owner of any class of the Companys equity
securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the
Exchange Act.
Non-Employee Director
means persons who are
members of the Board but who are neither Employees nor
Consultants of the Company or any Parent or Subsidiary.
Non-Qualified Option
shall mean an option not
intended to satisfy the requirements of Code Section 422
and which is granted pursuant to Article II of the Plan.
Option
means an option to acquire Common
Stock granted pursuant to the provisions of the Plan, and refers
to either an Incentive Stock Option or a Non-Qualified Stock
Option, or both, as applicable.
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Option Expiration Date
means the date
determined by Committee which shall not be more than ten years
after the date of grant of an Option.
Optionee
means a Participant who has received
or will receive an Option.
Other Performance-Based Award
means an award
granted pursuant to Article IX, which is performance-based
and payable in cash or Shares of stock.
Other Stock-Based Award
means an award
granted pursuant to Article IX of the Plan that is not
otherwise specifically provided for, the value of which is based
in whole or in part upon the value of a share of Common Stock.
Outstanding Company Common Stock
means, as of
any date of determination, the then outstanding shares of Common
Stock of the Company.
Outstanding Company Voting Securities
means,
as of any date of determination, the combined voting power of
the then outstanding voting securities of the Company entitled
to vote generally on the election of the Board of Directors of
the Company.
Parent
means any corporation (whether now or
hereafter existing) which constitutes a parent of
the Company, as defined in Section 424(e) of the Code.
Participant
means any Non-Employee Director,
Employee or Consultant granted an Award under the Plan.
Performance Award
means an Award granted
pursuant to Article VIII of the Plan, which, if earned,
shall be payable in shares of Common Stock, cash or any
combination thereof as determined by the Committee.
Performance-Based Compensation
means the
performance-based exception from the tax deductibility
limitations of Section 162(m) of the Code, as prescribed in
Code sec. 162(m) and Treasury Regulation
sec. 1.162-27(e)
(or its successor), which is applicable during such period that
the Company is a Publicly Held Corporation.
Publicly Held Corporation
means a corporation
issuing any class of common equity securities required to be
registered under Section 12 of the Exchange Act.
Purchased Stock
means a right to purchase
Common Stock granted pursuant to Article IV of the Plan.
Phantom Shares
means an Award of the right to
receive shares of Common Stock issued at the end of a Restricted
Period which is granted pursuant to Article VI of the Plan.
Reload Option
means replacement Options that
permit the Optionee to purchase an additional number of shares
of Common Stock equal to the number of previously owned shares
surrendered by the Optionee to pay for all or a portion of an
Option price upon exercise of his Options.
Restricted Period
shall mean the period
established by the Committee with respect to an Award during
which the Award either remains subject to forfeiture or is not
exercisable by the Participant.
Restricted Stock
shall mean any share of
Common Stock, prior to the lapse of restrictions -hereon,
granted under Article VII of the Plan.
Stock Appreciation Rights
or SAR
means an Award granted pursuant to Article VI of the Plan.
Subsidiary
means any corporation (whether now
or hereafter existing) which constitutes a
subsidiary of the Company, as defined in
Section 424(f) of the Code.
ARTICLE II
NONQUALIFIED
STOCK OPTIONS
2.1
Grants
.
The Committee may
grant Options to purchase the Common Stock to any Employee,
Consultant or Non-Employee Director according to the terms set
forth below.
2.2
Calculation of Exercise
Price
.
The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each Option
granted under this Article II shall not be less than the
FMV Per Share on the date of
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grant of such Option. The exercise price for each Option granted
under Article II shall be specified in the Agreement as
determined by the Committee but shall be subject to adjustment
as provided in Section 2.3(g).
2.3
Terms and Conditions of Options
.
(a)
Written Agreement.
Each grant of an
Option shall be evidenced by a written Agreement. Among its
other provisions, each Agreement shall set forth the extent to
which the Optionee shall have the right to exercise the Option
following termination of the Optionees Employment. Such
provisions shall be determined in the discretion of the
Committee, shall be included in the Optionees Agreement
and need not be uniform among all Options granted pursuant to
the Plan.
(b)
Number of Shares.
Each Option shall
specify the number of shares of Common Stock to which it
pertains.
(c)
Option Period and Conditions and Limitations on
Exercise.
No Option shall be exercisable later
than the Option Expiration Date. To the extent not prohibited by
other provisions of the Plan, each Option shall be exercisable
at such time or times as the Committee in its discretion may
determine at the time such Option is granted.
(d)
Manner of Exercise.
In order to
exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company payment in full for the shares
being purchased, together with any required withholding taxes.
The payment of the exercise price for each Option shall either
be (i) in cash or by check payable and acceptable to the
Company, (ii) with the consent of the Committee, by
tendering to the Company shares of Common Stock owned by the
person for more than six months having an aggregate Fair Market
Value as of the date of exercise that is not greater than the
full exercise price for the shares with respect to which the
Option is being exercised and by paying any remaining amount of
the exercise price as provided in (i) above, or
(iii) subject to such instructions as the Committee may
specify, at the persons written request the Company may
deliver certificates for the shares of Common Stock for which
the Option is being exercised to a broker for sale on behalf of
the person, provided that the person has irrevocably instructed
such broker to remit directly to the Company on the
persons behalf the full amount of the exercise price from
the proceeds of such sale. In the event that the person elects
to make payment as allowed under clause (ii) above, the
Committee may, upon confirming that the optionee owns the number
of additional shares being tendered, authorize the issuance of a
new certificate for the number of shares being acquired pursuant
to the exercise of the Option less the number of shares being
tendered upon the exercise and return to the person (or not
require surrender of) the certificate for the shares being
tendered upon the exercise. If the Committee so requires, such
person or persons shall also deliver a written representation
that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection
with, any distribution of such shares.
(e)
Alternative Payment for Stock.
The
Committee in its sole discretion may permit a Participant to pay
the exercise price or satisfy withholding taxes, in whole or in
part, with shares of Common Stock with respect to which the
Option is being exercised. If payment is to be made in such
manner, then the Participant shall deliver to the Company a
notice of exercise as to the number of shares of Common Stock to
be issued to Participant as well as the number of shares of
Common Stock to be retained by the Company in payment. In such
case, the notice of exercise shall include (A) a statement
(i) directing the Company to retain the number of shares
from the exercise of the Options the Fair Market Value (as of
the date of delivery of such notice) of which is equal to the
portion of the exercise price
and/or
withholding with respect to which the Participant intends to
make payment, and (ii) confirming the aggregate number of
shares to be delivered to the Participant; and (B) such
additional payment in cash pursuant to the provision of
clause (d) or shares pursuant to the provisions of the
first paragraph of this clause (c) as shall be necessary,
when added to the consideration paid with shares subject to the
Option, to pay the exercise price in full for all such shares.
If the Company is required to withhold on account of any
federal, state or local tax imposed as a result of an exercise
of an Option with previously issued stock or by retention of
optioned shares under this Section, the Common Stock surrendered
or retained shall include an additional number of shares whose
Fair Market Value equals the amount thus required to be withheld
at the applicable minimum statutory rate.
(f)
Options not Transferable.
Except as
provided below, no Non-qualified Option granted hereunder shall
be transferable other than by (i) will or by the laws of
descent and distribution or (ii) pursuant to a domestic
relations
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order and, during the lifetime of the Participant to whom any
such Option is granted, and it shall be exercisable only by the
Participant (or his guardian). Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any Option granted
hereunder, or any right thereunder, contrary to the provisions
hereof, shall be void and ineffective, shall give no right to
the purported transferee, and shall, at the sole discretion of
the Committee, result in forfeiture of the Option with respect
to the shares involved in such attempt. With respect to a
specific Non-qualified Option, the Participant (or his guardian)
may transfer, for estate planning purposes, all or part of such
Option to one or more immediate family members or related family
trusts or partnerships or similar entities.
(g)
Listing and Registration of
Shares.
Each Option shall be subject to the
requirement that if at any time the Committee determines, in its
discretion, that the listing, registration, or qualification of
the shares subject to such Option under any securities exchange
or tinder any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the issue or purchase
of shares thereunder, such Option may not be exercised in whole
or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained and the
same shall have been free of any conditions not acceptable to
the Committee.
(h)
Reload Options.
No Reload Options
will be granted with respect to any Non-Qualified Option.
2.4
Amendment
.
The Committee may,
with the consent of the person or persons entitled to exercise
any outstanding Option, amend or cancel such Option. The
Committee may at any time or from time to time, in its
discretion, in the case of any Option which is not then
immediately exercisable in full, accelerate the time or times at
which such Option may be exercised to any earlier time or times.
Except for either adjustments pursuant to Sections 12.10 or
1.2 of the Plan (relating to the adjustments to Shares), the
purchase price for any outstanding Option or Stock Appreciation
Right may not be decreased after the date of grant (there shall
be no repricing of Options or Stock Appreciation Rights).
Furthermore, notwithstanding anything in the Plan to the
contrary, except for adjustments pursuant to Section 1.2
and 12.10 and except in connection with a corporate transaction
involving the Company (including, without limitation, any stock
dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up,
spin-off, combination, or exchange of shares), the terms of
outstanding awards may not be amended to reduce the exercise
price of outstanding Options or SARs or cancel outstanding
Options or SARS in exchange for cash, other awards or Options or
SARs with an exercise price that is less than the exercise price
of the original Options or SARs without stockholder approval.
2.5
Acceleration of Vesting
.
If a
Participants Agreement so specifies, any Option granted
hereunder which is not otherwise vested shall, as stated in said
Participants Agreement, become 100% vested upon
(i) termination of an Employees or Consultants
Employment or removal of a Non-Employee Director without Cause;
(ii) termination, removal or resignation of an Employee,
Consultant or Non-Employee Director from Employment for any
reason within one (1) year from the effective date of the
Change of Control; or (iii) death or Disability of the
Participant.
2.6
Other Provisions
.
(a) The person or persons entitled to exercise, or who have
exercised, an Option shall not be entitled to any rights as a
stockholder of the Company with respect to any shares subject to
such Option until he shall have become the holder of record of
such shares.
(b) No Option granted hereunder shall be construed as
limiting any right which the Company or any Parent or Subsidiary
may have to terminate at any time, with or without Cause or
otherwise, the Employment of any person to whom such Option has
been granted.
(c) Notwithstanding any provision of the Plan or the terms
of any Option, the Company shall not be required to issue any
shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or federal law or
of the rules or regulations of any governmental regulatory body.
(d) Unless the Agreement provides otherwise, no Option
shall be exercisable more than six (6) months after the
Optionee ceases Employment for any reason other than death or
Disability, or more than one (1) year after the Optionee
ceases Employment due to death or Disability.
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ARTICLE III
INCENTIVE
OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this
Article III, all the provisions of Article II shall be
applicable to Incentive Options. Options which are specifically
designated as Non-Qualified Options shall NOT be subject to the
terms of this Section III.
3.1
Eligibility
.
Incentive Options
may only be granted to Employees.
3.2
Exercise Price
.
The exercise
price per Share shall not be less than one hundred percent
(100%) of the FMV Per Share on the option grant date.
3.3
Dollar
Limitation
.
Notwithstanding any contrary
provision in the Plan, to the extent that the aggregate FMV
(determined as of the time the Incentive Stock Option is
granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by
any Optionee during any single calendar year (under the Plan and
any other stock option plans of the Company and its Subsidiaries
or Parent) exceeds the sum of $100,000, such Incentive Stock
Option shall be treated as a Non-Qualified Stock Option to the
extent in excess of the $100,000 limit, and not an Incentive
Stock Option, but all other terms and provisions of such Option
shall remain unchanged. This paragraph shall be applied by
taking Incentive Stock Options into account in the order in
which they were granted and shall be construed in accordance
with Section 422(d) of the Code. In the absence of such
regulations or other authority, or if such regulations or other
authority require or permit a designation of the Options which
shall cease to constitute Incentive Stock Options, then such
Incentive Stock Options, only to the extent of such excess,
shall automatically be deemed to be Non-Qualified Stock Options
but all other terms and conditions of such Incentive Stock
Options, and the corresponding Agreement, shall remain unchanged.
3.4
10% Stockholder
.
If any
Employee to whom an Incentive Option is granted is a 10%
stockholder, then the exercise price per share shall not be less
than one hundred ten percent (110%) of the FMV Per Share on the
option grant date and the option term shall not exceed five
(5) years measured from the option grant date.
3.5
Options Not Transferable
.
No
Incentive Option granted hereunder shall be transferable other
than by will or by the laws of descent and distribution and
shall be exercisable during the Optionees lifetime only by
such Optionee.
3.6
Reload Options
.
No Reload
Options shall be granted with respect to any Incentive Options.
3.7
Compliance with 422
.
All
Options that are intended to be Incentive Stock Options shall be
designated as such in the Option grant and in all respects shall
be issued in compliance with Code Section 422.
3.8
Limitations on Exercise
.
No
Incentive Option shall be exercisable more than ninety
(90) days months after the Optionee ceases to be an
Employee for any reason other than death or Disability, or more
than one (1) year after the Optionee ceases to be an
Employee due to death or Disability.
ARTICLE IV
PURCHASED
STOCK
4.1
Eligible Persons
.
The
Committee shall have the authority to sell shares of Common
Stock to such Employees, Consultants and Non-Employee Directors
of the Company or its Parent or Subsidiaries as may be selected
by it, on such terms and conditions as it may establish, subject
to the further provisions of this Article IV. Each issuance
of Common Stock under this Plan shall be evidenced by an
agreement, which shall be subject to applicable provisions of
this Plan and to such other provisions not inconsistent with
this Plan as the Committee may approve for the particular sale
transaction.
4.2
Purchase Price
.
The price per
share of Common Stock to be purchased by a Participant under
this Plan shall be the FMV Per Share at the time of purchase.
4.3
Payment of Purchase
Price
.
Payment of the purchase price of
Purchased Stock under this Plan shall be made in full in cash.
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ARTICLE V
BONUS STOCK
The Committee may, from time to time and subject to the
provisions of the Plan, grant shares of Bonus Stock to
Employees, Consultants or Non-Employee Directors. Bonus Stock
shall be shares of Common Stock that are not subject to a
Restricted Period under Article VII.
ARTICLE VI
STOCK
APPRECIATION RIGHTS AND PHANTOM STOCK
6.1
Stock Appreciation Rights
.
The
Committee is authorized to grant Stock Appreciation Rights to
Employees, Consultants or Non-Employee Directors on the
following terms and conditions.
(a)
Right to Payment.
A Stock
Appreciation Right shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of
(A) the FMV Per Share on the day of exercise over
(B) the grant price of the Stock Appreciation Right as
determined by the Committee. The SAR shall be granted with an
exercise price equal to FMV per Share on the date of grant.
(b)
Rights Related to Options.
A Stock
Appreciation Right granted in connection with an Option shall
entitle a Participant, upon exercise thereof, to surrender that
Option or any portion thereof, to the extent unexercised, and to
receive payment of an amount computed pursuant to Subsection
6.1(a) hereof. That Option shall then cease to be exercisable to
the extent surrendered. A Stock Appreciation Right granted in
connection with an Option shall be exercisable only at such time
or times and only to the extent that the related Option is
exercisable and shall not be transferable (other than by will or
the laws of descent and distribution) except to the extent that
the related Option is transferable.
(c)
Right Without Option.
A Stock
Appreciation Right granted independent of an Option shall be
exercisable as determined by the Committee and set forth in the
Award Agreement governing the Stock Appreciation Right.
(d)
Terms.
The Committee shall determine
at the date of grant the time or times at which and the
circumstances under which a Stock Appreciation Right may be
exercised in whole or in part (including based on achievement of
performance goals
and/or
future service requirements), the method of exercise, whether or
not a Stock Appreciation Right shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right as provided in the
Award Agreement.
6.2
Phantom Stock Awards
.
The
Committee is authorized to grant Phantom Stock Awards to
Participants, which are rights to receive cash equal to the Fair
Market Value of specified number of shares of Common Stock at
the end of a specified deferral period, subject to the following
terms and conditions:
(a)
Award and Restrictions.
Satisfaction
of a Phantom Stock Award shall occur upon expiration of the
deferral period specified for such Phantom Stock Award Agreement
by the Committee or, if permitted by the Committee, as elected
by the Participant. In addition, Phantom Stock Awards shall be
subject to such restrictions (which may include a risk of
forfeiture), if any, as the Committee may impose, which
restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals
and/or
future service requirements), separately or in combination,
installments or otherwise, as the Committee may determine in the
Award Agreement.
(b)
Forfeiture.
Except as otherwise
determined by the Committee or as may be set forth in any Award,
employment or other agreement pertaining to a Phantom Stock
Award, upon termination of Employment or services during the
applicable deferral period or portion thereof to which
forfeiture conditions apply, all Phantom Stock Awards that are
at that time subject to deferral (other than a deferral at the
election of the Participant) shall be forfeited; provided that
the Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Phantom Stock
Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part the forfeiture of
Phantom Stock Awards.
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(c)
Performance Goals.
To the extent the
Committee determines that any Award granted pursuant to this
Article VI shall constitute Performance-Based Compensation
for purposes of Section 162(m) of the Code, the grant or
settlement of the Award shall, in the Committees
discretion, be subject to the achievement of performance goals
determined and applied in a manner consistent with
Section 8.2.
ARTICLE VII
RESTRICTED
STOCK
7.1
Eligible Persons
.
All
Employees, Consultants and Non-Employee Directors shall, subject
to the direction of the Committee, be eligible for grants of
Restricted Stock.
7.2
Restricted Period and Vesting.
(a) The Restricted Stock shall be subject to such
restrictions on transfer by the Participant and repurchase by
the Company as the Committee, in its sole discretion, shall
determine. Prior to the lapse of such restrictions the
Participant shall not be permitted to transfer such shares. The
Company shall have the right to repurchase or recover such
shares for the amount of cash paid therefor, if any, if
(i) the Participant shall terminate Employment from or
services to the Company prior to the lapse of such restrictions,
subject to section 7.2(b) below; or (ii) the
Restricted Stock is forfeited by the Participant pursuant to the
terms of the Award.
(b) Notwithstanding the foregoing, unless the Award
specifically provides otherwise, all Restricted Stock not
otherwise vested shall vest upon (i) termination of an
Employee or Consultant or removal of a Non-Employee Director
without Cause; (ii) termination, resignation or removal of
an Employee, Consultant or Non-Employee Director for any reason
within one (1) year from the effective date of a Change of
Control; or (iii) death or Disability of the Participant.
(c) Each certificate representing Restricted Stock awarded
under the Plan shall be registered in the name of the
Participant and, during the Restricted Period, shall be left in
deposit with the Company and a stock power endorsed in blank.
The grantee of Restricted Stock shall have all the rights of a
stockholder with respect to such shares including the right to
vote and the right to receive dividends or other distributions
paid or made with respect to such shares. Any certificate or
certificates representing shares of Restricted Stock shall bear
a legend similar to the following:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against
transfer) contained in the U.S. Physical Therapy, Inc. 2003
Incentive Plan and an Award Agreement entered into between the
registered owner of such shares and U.S. Physical Therapy,
Inc. A copy of the Plan and the Award Agreement are on file in
the corporate offices of U.S. Physical Therapy, Inc.
ARTICLE VIII
PERFORMANCE
AWARDS
8.1
Performance Awards
.
The
Committee may grant Performance Awards based on performance
criteria measured over a period of not less than one year and
not more than five years as determined by the Committee in its
sole discretion (Performance Period). Each grant of
a Performance Award shall be evidenced by an Agreement in such
amount and terms as determined by the Committee. The Committee
may use such business criteria and other measures of performance
as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to increase the
amounts payable under any Award subject to performance
conditions except as limited under Section 8.2 in the case
of a Performance Award intended to be Performance-Based
Compensation under Code Section 162(m).
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8.2
Performance Goals
.
The grant
and/or
settlement of a Performance Award shall be contingent upon terms
set forth in this Section 8.2.
(a)
General.
The performance goals for
Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee.
In the case of any Award intended to be Performance-Based
Compensation, performance goals shall be designed to be
objective and shall otherwise meet the requirements of
Section 162(m) of the Code and regulations thereunder
(including Treasury Regulations sec. 1.162-27 and successor
regulations thereto), including the requirement that the level
or levels of performance targeted by the Committee are such that
the achievement of performance goals is substantially
uncertain at the time of grant. The Committee may
determine that such Performance Awards shall be granted
and/or
settled upon achievement of any one performance goal or that two
or more of the performance goals must be achieved as a condition
to the grant arid/or settlement of such Performance Awards.
Performance goals may differ among Performance Awards granted to
any one Participant or for Performance Awards granted to
different Participants.
(b)
Business Criteria.
One or more of the
following business criteria for the Company, on a consolidated
basis,
and/or
for
specified subsidiaries, divisions or business or geographical
units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be
used by the Committee in establishing performance goals for
Performance Awards granted to a Participant: (i) earnings
per share; (ii) increase in revenues; (iii) increase
in cash flow; (iv) increase in cash flow return;
(v) return on net assets; (vi) return on assets;
(vii) return on investment; (viii) return on equity;
(ix) economic value added; (x) gross margin;
(xi) net income; (xii) pretax earnings;
(xiii) pretax earnings before interest, depreciation and
amortization; (xiv) pretax operating earnings after
interest expense and before incentives, service fees, and
extraordinary or special items; (xv) operating income;
(xvi) total stockholder return; (xvii) debt reduction;
(xviii) the price of a Share of Common Stock; and
(xix) any of the above goals determined on the absolute or
relative basis or as compared to the performance of a published
or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poors 500
Stock Index or a group of comparable companies.
(c)
Performance Period; Timing for Establishing
Performance Goals.
Achievement of performance
goals in respect of Performance Awards shall be measured over a
Performance Period of not less than one year and not more than
five years, as specified by the Committee. Performance goals in
the case of any Award granted to a Participant shall be
established not later than 90 days after the beginning of
any Performance Period applicable to such Performance Awards, or
at such other date as may be required or permitted for
Performance-Based Compensation under Section 162(m) of the
Code.
(d)
Settlement of Performance Awards; Other
Terms.
After the end of each Performance Period,
the Committee shall determine the amount, if any, of Performance
Awards payable to each Participant based upon achievement of
business criteria over a Performance Period. No Performance
Award shall be payable unless the pre-established performance
goals have been achieved. The Committee may not exercise
discretion to increase any such amount payable in respect of a
Performance Award designed to comply with Section 162(m) of
the Code. The Committee shall specify the circumstances in which
such Performance Awards shall be paid or forfeited in the event
of termination of Employment by the Participant prior to the end
of a performance period or settlement of Performance Awards.
(e)
Written Determinations.
All
determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award, and the
achievement of performance goals relating to Performance Awards
and any other terms material to the Performance Award shall be
made in writing in the case of any Award granted to a
Participant. The Committee may not delegate any responsibility
relating to such Performance Awards.
(f)
Status of Performance Awards under
Section 162(m) of the Code.
It is the intent
of the Company that Performance Awards intended to be
Performance-Based Compensation shall, if so designated by the
Committee, constitute Performance-Based Compensation within the
meaning of Section 162(m) of the Code and regulations
thereunder. Accordingly, the terms of this Section 8.2
shall be interpreted in a manner consistent with
Section 162(m) of the Code and regulations thereunder. If
any provision of the Plan as in effect on the date of adoption
or any agreements relating to Performance Awards that are
designated as intended to comply with Section 162(m) of the
Code does not comply or is inconsistent with the requirements of
Section 162(m) of the Code or regulations thereunder, such
provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
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ARTICLE IX
OTHER STOCK
OR PERFORMANCE BASED AWARDS
The Committee is hereby authorized to grant to Employees,
Non-Employee Directors and Consultants of the Company or its
Parent or Subsidiaries, Other Stock or Performance-Based Awards,
which shall consist of a right which (i) is not an Award
described in any other Article and (ii) is denominated or
payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of Common Stock
(including, without limitation, securities convertible into
shares of Common Stock) or (iii) is payable in cash as are
deemed by the Committee to be consistent with the purposes of
the Plan. Subject to the terms of the Plan, the Committee shall
determine the terms and conditions of any such Other Stock or
Performance-Based Award. A Performance-Based Award under this
Article shall meet the requirements of Article 8.
ARTICLE X
CERTAIN
PROVISIONS APPLICABLE TO ALL AWARDS
10.1
General
.
Awards may be
granted on the terms and conditions set forth herein. In
addition, the Committee may impose on any Award or the exercise
thereof, such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall
determine, including terms requiring forfeiture of Awards in the
event of termination of Employment by the Participant and terms
permitting a Participant to make elections relating to his or
her Award. The Committee shall retain full power and discretion
to accelerate or waive, at any time, any term or condition of an
Award that is not mandatory under the Plan; provided, however,
that the Committee shall not have a discretion to accelerate or
waive any term or condition of an Award that is intended to
qualify as Performance-Based Compensation for purposes of
Section 162(m) of the Code if such discretion would cause
the Award not to so qualify. Except in cases in which the
Committee is authorized to require other forms of consideration
under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of the Nevada General
Corporation Law, no consideration other than services may be
required for the grant of any Award.
10.2
Stand-Alone, Additional, Tandem, and Substitute
Awards
.
Awards granted under the Plan may, in
the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution or exchange for,
any other Award or any award granted under another plan of the
Company, any Parent or Subsidiary, or any business entity to be
acquired by the Company or Parent or Subsidiaries, or any other
right of a Participant to receive payment from the Company or
any Parent or Subsidiary. Such additional, tandem and substitute
or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award, the
Committee shall require the surrender of such other Award in
consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or
any Parent or Subsidiary.
10.3
Term of Awards
.
The term or
Restricted Period of each Award that is an Option, Stock
Appreciation Right, Phantom Stock or Restricted Stock shall be
for such period as may be determined by the Committee; provided
that in no event shall the term of any such Award exceed a
period of ten years (or such shorter terms as may be required in
respect of an Incentive Stock Option under Section 422 of
the Code).
10.4
Form and Timing of Payment under Awards;
Deferrals
.
Subject to the terms of the Plan
and any applicable Award agreement, payments to be made upon the
exercise of an Option or other Award or settlement of an Award
may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may, subject to
any limitations set forth in the Award agreement, be accelerated
and cash paid in lieu of shares in connection with such
settlement, in the discretion of the Committee or upon
occurrence of one or more specified events. In the discretion of
the Committee, Awards granted pursuant to Article VI or
VIII of the Plan may be payable in shares to the extent
permitted by the terms of the applicable Award agreement.
Installment or deferred payments may be required by the
Committee (subject to Section 1.4 of the Plan, including
the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award
agreement) or permitted at the election of the Participant on
terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred
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payments or the grant or crediting of amounts in respect of
installment or deferred payments denominated in shares. Any
deferral shall only be allowed as is provided in a separate
deferred compensation plan adopted by the Company. The Plan
shall not constitute any employee benefit plan for
purposes of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.
10.5
Vested and Unvested
Awards
.
After the satisfaction of all of the
terms and conditions set by the Committee with respect to an
Award of (i) Restricted Stock, a certificate, without the
legend set forth in Section 7.2(a), for the number of
shares that are no longer subject to such restrictions, terms
and conditions shall be delivered to the Employee,
(ii) Phantom Stock, to the extent not paid in cash, a
certificate for the number of shares equal to the number of
shares of Phantom Stock earned, and (iii) Stock
Appreciation Rights or Performance Awards, cash
and/or
a
certificate for the number of shares equal in value to the
number of Stock Appreciation Rights or amount of Performance
Awards vested shall be delivered to the person. Upon
termination, resignation or removal of a Participant under
circumstances that do not cause such Participant to become fully
vested, any remaining unvested Options, shares of Restricted
Stock, Phantom Stock, Stock Appreciation Rights or Performance
Awards, as the case may be, shall either be forfeited back to
the Company or, if appropriate under the terms of the Award,
shall continue to be subject to the restrictions, terms and
conditions set by the Committee with respect to such Award.
10.6
Requirements of Law
.
The
granting of Awards and the issuance of shares of Common Stock
under the Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.
The Committee may refuse to issue or transfer any shares or
other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such
shares or such other consideration might violate any applicable
law. Certificates evidencing shares of Common Stock delivered
under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules
and regulations of the Securities and Exchange Commission, any
securities exchange or transaction reporting system upon which
the Common Stock is then listed or to which it is admitted for
quotation, and any applicable federal or state securities law,
if applicable. The Committee may cause a legend or legends to be
placed upon such certificates (if any) to make appropriate
reference to such restrictions.
10.7
Rule 16b-3
Securities Law Compliance and Compliance with Company
Policies
.
WITH RESPECT TO INSIDERS TO THE
EXTENT APPLICABLE, TRANSACTIONS UNDER THE PLAN ARE INTENDED TO
COMPLY WITH ALL APPLICABLE CONDITIONS OF
RULE 16B-3
UNDER THE 1934 ACT. WITH RESPECT TO ALL PARTICIPANTS,
TRANSACTIONS UNDER THE PLAN ARE INTENDED TO COMPLY WITH
SECURITIES REGULATION BTR AND THE COMPANYS INSIDER
TRADING POLICIES AS REVISED FROM TIME TO TIME OR SUCH OTHER
SIMILAR COMPANY POLICIES, INCLUDING BUT NOT LIMITED 7O, POLICIES
RELATING TO BLACK OUT PERIODS. ANY AMBIGUITIES OR
INCONSISTENCIES IN THE CONSTRUCTION OF AN AWARD OR THE PLAN
SHALL BE INTERPRETED TO GIVE EFFECT TO SUCH INTENTION. HOWEVER,
TO THE EXTENT ANY PROVISION OF THE PLAN OR AGREEMENT OR ACTION
BY THE COMMITTEE FAILS TO SO COMPLY, IT SHALL BE DEEMED NULL AND
VOID TO THE EXTENT PERMITTED BY LAW AND DEEMED ADVISABLE BY THE
COMMITTEE IN ITS DISCRETION.
10.8
Disqualification and
Forfeiture
.
Notwithstanding anything herein
to the contrary, any Awards hereunder shall terminate and be
forfeited if the Participant fails to consent to and authorize
the disclosure of the information for the determination of
Disability or Cause including any information that is protected
health information under the Health Insurance Portability and
Accountability Act of 1996.
ARTICLE XI
WITHHOLDING
FOR TAXES
Any issuance of Common Stock pursuant to the exercise of an
Option or payment of any other Award under the Plan shall not be
made until appropriate arrangements satisfactory to the Company
have been made for the payment of any tax amounts (federal,
state, local or other) that may be required to be withheld or
paid by the Company with respect thereto. Such arrangements may,
at the discretion of the Committee, include allowing the person
to tender to the Company shares of Common Stock owned by the
person, or to request the Company to withhold shares of
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Common Stock being acquired pursuant to the Award, whether
through the exercise of an Option or as a distribution pursuant
to the Award, which have an aggregate FMV Per Share as of the
date of such withholding that is not greater than the sum of all
tax amounts to be withheld with respect thereto, together with
payment of any remaining portion of such tax amounts in cash or
by check payable and acceptable to the Company.
ARTICLE XII
MISCELLANEOUS
12.1
No Rights to Awards
.
No
Participant or other person shall have any claim to be granted
any Award, there is no obligation for uniformity of treatment of
Participants, or holders or beneficiaries of Awards and the
terms and conditions of Awards need not be the same with respect
to each recipient.
12.2
No Right to Employment or Continued
Services
.
The grant of an Award shall not be
construed as giving a Participant the right to be retained in
the employ or services of the Company or any Parent or
Subsidiary. Further, no grant of any Award shall be construed as
limiting any right which the Company or any Parent or Subsidiary
may have to terminate at any time, with or without Cause, the
Employment or services of any Participant to whom such Award has
been granted.
12.3
Governing Law
.
The validity,
construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in
accordance with applicable federal law arid the laws of the
State of Nevada, without regard to any principles of conflicts
of law.
12.4
Severability
.
If any
provision of the Plan or any Award is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as
to any Participant or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction, Participant or Award
and the remainder of the Plan and any such Award shall remain in
full force and effect.
12.5
Shareholder Agreements
.
The
Committee may condition the grant, exercise or payment of any
Award upon such person entering into a stockholders
agreement in such form as approved from time to time by the
Board.
12.6
Indemnification of
Committee
.
Each person who is or was a member
of the Committee, or of the Board, shall be indemnified by the
Company against and from any damage, loss, liability, cost and
expense that may be imposed upon or reasonably incurred by him
in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under
the Plan (including such indemnification for a persons
own, sole, concurrent or joint negligence or strict liability),
except for any such act or omission constituting willful
misconduct or gross negligence. Such person shall be indemnified
by the Company for all amounts paid by him in settlement
thereof, with the Companys approval, or paid by him in
satisfaction of any judgment in any such action, suit, or
proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be
entitled under the Companys articles of incorporation or
bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
12.7
Designation of Beneficiary by
Participant
.
EACH PARTICIPANT MAY, FROM TIME
TO TIME, NAME ANY BENEFICIARY OR BENEFICIARIES (WHO MAY BE NAMED
CONTINGENTLY OR SUCCESSIVELY) TO WHOM ANY BENEFIT UNDER THE PLAN
IS TO BE PAID IN CASE OF HIS DEATH BEFORE HE RECEIVES ANY OR ALL
OF SUCH BENEFIT. EACH SUCH DESIGNATION SHALL REVOKE ALL PRIOR
DESIGNATIONS BY THE SAME PARTICIPANT, SHALL BE IN A
FORM PRESCRIBED BY THE COMMITTEE, AND WILL BE EFFECTIVE
ONLY WHEN FILED BY THE PARTICIPANT IN WRITING WITH THE COMMITTEE
DURING THE PARTICIPANTS LIFETIME. IN THE ABSENCE OF ANY
SUCH DESIGNATION, BENEFITS REMAINING UNPAID AT THE
PARTICIPANTS DEATH SHALL BE PAID TO THE PARTICIPANTS
ESTATE.
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12.8
Successors
.
All obligations
of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business
and/or
assets of the Company.
12.9
Gender, Tense and
Headings
.
Whenever the context so requires,
words of the masculine gender used herein shall include the
feminine and neuter, and words used in the singular shall
include the plural. Section headings as used herein are inserted
solely for convenience and reference and constitute no part of
the interpretation or construction of the Plan.
12.10
Recapitalization or Reorganization.
(a)
No Effect on Right or Power.
The
existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the
Companys or any Affiliates capital structure or its
business, any merger or consolidation of the Company or any
Affiliate, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or
liquidation of the Company or any Affiliate or any sale, lease,
exchange or other disposition of all or any part of its assets
or business or any other corporate act or proceeding.
(b)
Subdivision or Consolidation of Shares; Stock
Dividends.
If, and whenever, prior to the
expiration of an Award previously granted, the Company shall
effect a subdivision or consolidation of shares of Common Stock
or the payment of a dividend on Common Stock which is paid in
the form of Company stock without receipt of consideration by
the Company, the number of shares of Common Stock with respect
to which such Award may thereafter be exercised or satisfied,
shall be adjusted as follows: (i) in the event of an
increase in the number of outstanding shares, the number shares
of Common Stock subject to the Award shall be proportionately
increased, and the purchase price per share shall be
proportionately reduced; and (ii) in the event of a
reduction in the number of outstanding shares, the number shares
of Common Stock subject to the Award shall be proportionately
reduced, and the purchase price per share shall be
proportionately increased, other than in the event of a
Company-directed share repurchase program. Any fractional share
resulting from such adjustment shall be rounded up to the next
whole share. Such proportionate adjustments will be made for
purposes of making sure that to the extent possible, the fair
value of the Awards after the subdivision, consolidation or
dividend is equal to the fair value before the change and shall
be made in accordance with Code Section 409A, if applicable.
(c)
Change of Control.
Subject to any
accelerated vesting provisions in any Agreement or provided
herein, upon a Change in Control, the Committee, acting in its
sole discretion without the consent or approval of any
Participant, may effect one or more of the following
alternatives, which alternatives may vary among individual
Participants and which may vary among Awards held by any
individual Participant: (i) require the mandatory surrender
to the Company by selected Participants of some or all of the
outstanding Options, stock-settled Phantom Stock, stock-settled
Stock Appreciation Rights or other Shares of Stock settled
Awards held by such Participants as of a date, before or after
such Change of Control, specified by the Committee, in which
event the Committee shall thereupon cancel such Awards and the
Company shall pay (or cause to be paid) to each such Participant
an amount of cash (or fair cash equivalent if a portion of the
consideration is other than cash) per share equal to the excess,
if any, of the amount of the Change in Control value (as
determined by the Committee) of the shares subject to such
Awards over the exercise price(s), if any, under such Awards for
such shares, or (ii) provide that the number and class of
shares of Common Stock covered by such Awards shall be adjusted
(in accordance with Code Section 409A or Code
Section 424, if applicable) so that such Awards shall
thereafter cover securities of the surviving or acquiring
corporation or other property (including, without limitation,
cash) as determined by the Committee in its sole discretion.
(d)
Other Changes in the Common Stock.
In
the event of changes in the outstanding Common Stock by reason
of recapitalization, reorganization, merger, consolidation,
combination, stock split, stock dividend, spin-off, exchange or
other relevant changes in capitalization or distributions to the
holders of Common Stock occurring after the date of the grant of
any Award and not otherwise provided for by this
Section 12.10, which would have the effect of diluting or
enlarging the rights of Participants, such Award and any notice
evidencing such Award shall be subject to equitable or
proportionate adjustment by the Committee at its sole discretion
as to the number and price of shares of Common Stock or other
consideration subject to such Award, subject to the requirements
of Code Sections 409A and 424, if applicable.
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12.11
Miscellaneous.
(a) No Shares of Common Stock shall be issued hereunder
unless counsel for the Company is then reasonably satisfied that
such issuance will be in compliance with federal and state
securities laws, if applicable.
(b) The expenses of the Plan shall be borne by the Company.
(c) By accepting any Incentive Award, each Participant and
each person claiming by or through him shall be deemed to have
indicated his acceptance of the Plan.
12.12
No Guarantee of Tax
Consequences
.
Neither the Company nor the
Committee makes any commitment or guarantee that any federal,
state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
12.13
Code Section
.
To the extent
that any Award is deferred compensation subject to Code
Section 409A, as determined by the Committee, the Award
Agreement shall comply with the requirements of Code
Section 409A in a manner as determined by the Committee in
its sole discretion including, but not limited to, using the
more restrictive definition of Change in Control as provided in
Code Section 409A to the extent that it is more restrictive
than as defined in the Plan, using the more restrictive
definition of disability or disabled as provided in Code
Section 409A and specifying a time and form of payment
schedule. In addition, if any Incentive Award constitutes
deferred compensation under Section 409A of the Code (a
Section 409A Plan), then the Incentive Award
and Participant shall be subject to the following requirements,
if and to the extent required to comply with Code
Section 409A, and as determined by the Committee and
specified in the Award Agreement:
(a) Payments under the Section 409A Plan may not be
made earlier than (i) the Participants separation
from service, (ii) the date the Participant becomes
disabled, (iii) the Participants death, (iv) a
specified time (or pursuant to a fixed schedule) specified in
the Award Agreement at the date of the deferral of such
compensation, (v) a change in the ownership or effective
control of the corporation, or in the ownership of a substantial
portion of the assets of the corporation, or (vi) the
occurrence of an unforeseeable emergency;
(b) The time or schedule for any payment of the deferred
compensation may not be accelerated, except to the extent
provided in applicable Treasury Regulations or other applicable
guidance issued by the Internal Revenue Service;
(c) Any elections with respect to the deferral of such
compensation or the time and form of distribution of such
deferred compensation shall comply with the requirements of
Section 409A(a)(4) of the Code; and
(d) In the case of any Participant who is specified
employee, a distribution on account of a separation from service
may not be made before the date which is six months after the
date of the Participants separation from service (or, if
earlier, the date of the Participants death).
For purposes of the foregoing, the terms separation from
service and specified employee, all shall be
defined in the same manner as those terms are defined for
purposes of Section 409A of the Code, and the limitations
set forth herein shall be applied in such manner (and only to
the extent) as shall be necessary to comply with any
requirements of Section 409A of the Code that are
applicable to the Award as determined by the Committee.
If an Incentive Award is subject to Code Section 409A, as
determined by the Committee, the Committee may amend any Award
to comply with Code Section 409A without a
Participants consent even if such amendment would have an
adverse affect on a Participants Award. With respect to an
Award that is subject to Code Section 409A, the Board may
amend the Plan as it deems necessary to comply with
Section 409A and no Participant consent shall be required
even if such an amendment would have an adverse effect on a
Participants Award.
IN WITNESS WHEREOF, U.S. Physical Therapy, Inc. has caused
this Plan to be duly executed in its name and on its behalf by
its duly authorized officer, subject to shareholder approval at
the 2010 Annual Meeting of Stockholders.
U.S. PHYSICAL THERAPY, INC.
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FOLD AND DETACH HERE AND READ THE REVERSE SIDE PROXY U.S. PHYSICAL THERAPY, INC. PROXY PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 18, 2010 THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS I, the undersig ned stockholder of U.S. Physical Therapy, Inc. (the Company), hereby
appoint Chris topher J. Readin g and Lawrance W. McAfee, and each of them, with ful power of
substit ution, as my true and lawful attorneys, agents and proxie s to cast al votes wit h respect
to the Companys common stock, which I am entitled to cast at the 2010 Annual Meeting of
Stockholders to be held on Tuesday, May 18, 2010, at 9:00 a.m. (CT), at the Companys offices at
1300 West Sam Houston Parkway South, Suite 300, Houston, Texas 77042, and at any adjo urnments or
postponements of such meetings, upon the following matters. This proxy wil be voted as directed by
you. PROPERLY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR
DIRECTOR LISTED, FOR THE APPROVAL OF THE AMENDED AND RESTATED 2003 STOCK INCENTIVE PLAN AND FOR THE
RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2010 AND AS DIRECTED BY A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER
MATTERS. The undersigned stockholder hereby acknowledges receipt of the Notice of Annual Meetin g
and Proxy Statement and the 2009 Annual Report on Form 10-K, and hereby revokes any proxy or proxie
s heretofore giv en with respect to such shares of the Companys common stock. This proxy may be
revoked at any time before its exercis e. (cont inude a n d to b e si g n e d a n d d a t d e on
reverse side)
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held May 18, 2010 The Proxy Statement and our 2009 Annual Report to Stockholders
are available at: http://www.cstproxy.com/usph/2010 FOLD AND DETACH HERE AND READ THE REVERSE
SIDE Please mark 1. ELECTION OF DIRECTORS FOR your votes X all nominees lis ted WITHOUT like this
Election of ten directors to serve until the next annual meetin g (except as marked AUTHORITY of
stockholders. Nominees: to the contrary to vote for all below) nominees li sted. FOR AGAINST
ABSTAIN Danie l C. Arnold Bernard A. Harris, Jr. Chris topher J. Reading Martin W. Johnston 2.
Approval of the Amended and Restated Lawrance W. McAfee Jerald L. Pullins 2003 Stock Incentiv e
Plan. Mark J. Brookner Reginald E. Swanson Bruce D. Broussard Clayton K. Trier. FOR AGAINST ABSTAIN
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEES (Print Name in Space Provided.) 3. Ratific
atio n of the appoin tment of Grant Thornton LLP as our independent registered public accounting
firm for 2010. 4. As determined by a majority of our Board of Directors, the proxies are authorized
to vote upon other business as may properly come before Label Area 4 x 1 1/2 the meeting or any
adjournments. PRINT AUTHORIZATION (THIS BOXED AREA DOES NOT PRINT) COMPANY ID: Toc ommence printin
g on this proxy card please sign, date and fax this c ardt o this number: 212-691-9013 or emailu s
your approval. PROXY NUMBER: SIGNATURE: DATE: TIME: Registered Quantity Broker Quantity ACCOUNT
NUMBER: Note: SCOTTI o t Email f i nal approvedc opyf or Electronic Voting website setu p: Y es
Signature Sig nature Date Ple ase date and sign exactly as name appears hereon and return in the
enclosed envelo pe. Signature of Stockholder or Authorized Representative (Only one signature IS
required in the case of stock ownership in the name of two or more persons.)
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