SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
TRIAD HOSPITALS, INC.
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TRIAD HOSPITALS, INC.
13455 Noel Road, 20th Floor
Dallas, Texas 75240
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2002 AT 10:00 A.M., LOCAL TIME
-----------------
To our stockholders:
The 2002 Annual Meeting of Stockholders of Triad Hospitals, Inc. will be
held at the offices of Triad Hospitals, Inc. at 13455 Noel Road, Suite 2000,
Dallas, Texas 75240 on Tuesday, May 21, 2002, beginning at 10:00 a.m., local
time. The meeting will be held for the following purposes:
1. To elect three directors to serve until the 2005 annual meeting of
stockholders, or until their respective successors shall have been
duly elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as our independent
auditors.
3. To consider and vote on an amendment to the Triad Hospitals, Inc.
Outside Directors Stock and Incentive Compensation Plan to increase
the number of authorized shares thereunder from 400,000 to 500,000.
4. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on April 8, 2002 are
entitled to notice of, and to vote at, the Annual Meeting. A complete list of
the stockholders entitled to vote at the Annual Meeting will be available for
examination by any stockholder at our executive offices, during ordinary
business hours, for a period of at least ten days prior to the Annual Meeting.
You are cordially invited to be present. Stockholders who do not expect to
attend in person are requested to sign and return the enclosed form of proxy in
the envelope provided, or vote by telephone or Internet (instructions are on
your proxy card). At any time prior to their being voted, proxies are revocable
by written notice to the Secretary of the company or by voting at the meeting
in person.
By order of the Board of Directors
DONALD P. FAY
Executive Vice President, General
Counsel and Secretary
April 15, 2002
TRIAD HOSPITALS, INC.
13455 Noel Road, 20th Floor
Dallas, Texas 75240
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
To be held May 21, 2002
-----------------
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Triad Hospitals, Inc. ("Triad" or the "Company")
from holders of the Company's outstanding shares of common stock entitled to
vote at the 2002 Annual Meeting of Stockholders of the Company (and at any and
all adjournments or postponements thereof) (the "2002 Annual Meeting") for the
purposes referred to below and set forth in the accompanying Notice of Annual
Meeting of Stockholders. Stockholders of record at the close of business on the
record date, April 8, 2001, are entitled to notice of and to vote at the 2002
Annual Meeting. This Proxy Statement and the accompanying proxy materials are
first being mailed to stockholders on or about April 15, 2002.
Triad's common stock trades on the New York Stock Exchange under the ticker
symbol "TRI."
GENERAL INFORMATION ABOUT THE MEETING
Voting At The Annual Meeting
As of the record date, there were approximately 72,470,627 shares of the
Company's common stock outstanding and entitled to vote. Each share of common
stock entitles the holder to one vote on all matters presented at the 2002
Annual Meeting.
The presence at the meeting, in person or by proxy, of at least a majority
of the outstanding shares of common stock entitled to vote is necessary to
constitute a quorum to transact business at the 2002 Annual Meeting. The
affirmative vote of a plurality of the shares of common stock represented at
the 2002 Annual Meeting, in person or by proxy, is necessary for the election
of directors. Stockholders will determine any other matters submitted to them
by a majority of the votes present or represented by proxy and entitled to
vote, provided that, in the case of the proposal to increase the number of
shares authorized under the Triad Hospitals, Inc. Outside Directors Stock and
Incentive Compensation Plan, the total votes cast on the proposal represents at
least a majority of the outstanding shares of common stock entitled to vote at
the 2002 Annual Meeting.
A stockholder who is present or represented by proxy at the 2002 Annual
Meeting will be counted for purposes of determining if a quorum exists even if
the stockholder abstains from voting. Votes withheld from the election of any
nominee for director and abstentions from any other proposal will not be
counted in the number of votes cast on any matter. If a broker does not receive
voting instructions from the beneficial owner of shares on a particular matter
and indicates on the proxy that it does not have discretionary authority to
vote on that matter, those shares will be considered as present and entitled to
vote with respect to that matter, but will not be counted in the number of
votes cast "for" or "against" the matter.
Shares of common stock represented by properly executed proxies will be
voted at the 2002 Annual Meeting according to the directions marked on the
proxies, unless they have previously been revoked. If the stockholders do not
give directions on the proxies, the proxy holder will vote them for the
election of each
1
nominee named under "Election of Directors," for the ratification of Ernst &
Young LLP as our independent auditors, and for the approval of the amendment to
increase the number of shares authorized under the Triad Hospitals, Inc.
Outside Directors Stock and Incentive Compensation Plan.
Stockholders can vote their shares:
. through the Internet at the website shown on the proxy card;
. by telephone using the toll-free number shown on the proxy card;
. by returning the enclosed proxy card; or
. in person at the 2002 Annual Meeting.
Votes submitted through the Internet or by telephone must be received by
11:59 P.M., Eastern Time, on May 20, 2002. Internet and telephone voting are
available 24 hours a day, and a stockholder that uses one of these methods does
not need to return a proxy card. Voting in person at the meeting supersedes any
earlier voting instructions.
The beneficial owner of shares held in "street name" by a broker, bank or
other nominee is entitled to instruct the broker, bank or nominee, as the
record holder of the shares, how to vote those shares. The broker, bank or
nominee should have enclosed a voting instruction card to use in directing it
on how to vote such shares.
A stockholder may change his or her voting instructions at any time prior to
the vote at the 2002 Annual Meeting. For shares held directly, a vote may be
changed by granting a new proxy, through the Internet, by telephone or in
writing, which bears a later date (thereby automatically revoking the earlier
proxy) or by attending the 2002 Annual Meeting and voting in person. The proxy
holder's powers will be suspended if you attend the meeting in person and so
request, although attendance at the meeting will not by itself revoke a
previously granted proxy. For shares beneficially owned by a stockholder, but
held in "street name" by a broker, bank or other nominee, a vote may be changed
by submitting new voting instructions to the broker, bank or nominee.
Solicitation Expenses
Expenses in connection with the solicitation of proxies will be borne by
Triad. Brokers, custodians and fiduciaries will be requested to transmit proxy
material to the beneficial owners of common stock held of record by such
persons, at Triad's expense. Triad has retained Georgeson Shareholder
Communications Inc. to aid in the solicitation of proxies, and for its services
expects to pay fees of approximately $9,000 plus expenses.
2
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the ownership of
Triad's common stock by persons known by Triad to own more than 5% of its
outstanding common stock, Triad's directors and Triad's executive officers. The
stock ownership information presented in the table for Triad's directors and
executive officers is as of March 31, 2001. All other stock ownership
information is based on filings with the Securities and Exchange Commission
("SEC") that report stock ownership information as of the dates indicated in
the notes below.
Number of Percent of
Name of Beneficial Owner Shares(1)(2) Class
------------------------ ------------ ----------
Wellington Management Company, LLP (3)......................... 6,076,807 8.4%
Welsh Carson Anderson & Stowe VIII, L.P (4).................... 5,762,726 8.0%
James E. Dalton, Jr. (5)....................................... 40,087 *
Nancy-Ann DeParle (5).......................................... 5,000 *
Barbara A Durand, R.N., Ed. D. (5)............................. 21,387 *
Thomas F. Frist III (5)........................................ 353,224 *
Donald B. Halverstadt, M.D (5)................................. 25,924 *
Dale V. Kesler (5)............................................. 32,726 *
Thomas G. Loeffler, Esq. (5)................................... 33,952 *
Michael J. Parsons (5)......................................... 505,593 *
Uwe E. Reinhardt, Ph.D (5)..................................... 30,500 *
Marvin T. Runyon (5)........................................... 10,030 *
Gale E. Sayers (5)............................................. 7,387 *
James D. Shelton (5)........................................... 1,291,793 1.8%
Donald P. Fay (5).............................................. 190,897 *
Wayne G. McAlister (5)......................................... 163,834 *
Burke W. Whitman (5)........................................... 562,897 *
All Directors and Executive Officers as a Group (22 persons)(5) 4,345,977 5.8%
--------
* Less than one percent.
(1) Unless otherwise indicated, each stockholder shown on the table has sole
voting and investment power with respect to the shares beneficially owned.
The number of shares shown does not include the interest of certain persons
in shares held by family members in their own right.
(2) Each named person or group is deemed to be the beneficial owner of
securities which may be acquired within 60 days through the exercise or
conversion of options, warrants and rights, if any, and such securities are
deemed to be outstanding for the purpose of computing the percentage
beneficially owned by such person or group. Such securities are not deemed
to be outstanding for the purpose of computing the percentage beneficially
owned by any other person or group. Accordingly, the indicated number of
shares includes shares issuable upon conversion of convertible securities
or upon exercise of options (including employee stock options) held by such
person or group.
(3) The ownership given for Wellington Management Company, LLP is based on
information contained in the Schedule13G dated February 14, 2002, filed
with the SEC by Wellington Management Company, LLP in respect of its
beneficial ownership of Triad Hospitals, Inc. common stock as of December
31, 2001. The address of Wellington Management Company Group, Inc. is 75
State Street, Boston, Massachusetts 02109. Wellington Management Company,
LLP has reported in its Schedule 13G dated as of February 14, 2002 that it
has shared investment power over all of the shares reported and shared
voting power with respect to 3,040,201 of the shares reported.
(4) The ownership given for Welsh Carson Anderson & Stowe VIII, L.P. is based
on information contained in the Schedule 13D dated April 9, 2002, filed
with the SEC by Welsh, Carson, Anderson & Stowe VIII, L.P. in respect of
its beneficial ownership of Triad Hospitals, Inc. common stock as of March
28, 2002. The address of Welsh, Carson, Anderson & Stowe VIII, L.P. is 320
Park Avenue, Suite 2500, New York, New York 10022.
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(5) Of the shares reported for Drs. Durand, Halverstadt and Reinhardt, and
Messrs. Dalton, Fay, Frist, Kesler, Loeffler, Parsons, Runyon, Sayers,
Shelton, McAlister and Whitman, and Ms. DeParle 19,500; 24,500; 30,500;
4,500; 150,388; 30,500; 30,500; 30,500; 419,937; 4,500; 4,500; 890,037;
123,882; 383,455; and 5,000 shares, respectively, represent shares that are
issuable pursuant to options that are exercisable within 60 days. Of the
shares reported for all directors and executive officers as a group,
3,035,003 shares represent shares that are issuable pursuant to options
exerciseable within 60 days.
PROPOSAL 1--ELECTION OF DIRECTORS
The Company's certificate of incorporation provides that the Board of
Directors is to be divided into three classes of directors, which are required
to be as nearly equal in number as possible. At each annual meeting of
stockholders, one class of directors is elected to a term of three years.
Directors for Class III are to be elected at this 2002 Annual Meeting for
three-year terms expiring in 2005.
Uwe E. Reinhardt, Ph.D., Thomas G. Loeffler and Michael J. Parsons (the
"Nominees") have been nominated by the Board of Directors for election as Class
III directors at the 2002 Annual Meeting, each to serve for a term of three
years, until the 2005 Annual Meeting of Stockholders or until his successor is
duly elected and qualified. Russell L. Carson, who was appointed a director of
the Company upon the merger of Quorum Health Group, Inc. ("Quorum") into Triad
on April 27, 2001 (the "Merger"), resigned from the Board of Directors in
November 2001. The Board of Directors has not yet identified a candidate to
fill this vacancy and stockholders may vote at the 2002 Annual Meeting only for
the nominees named above.
The Board of Directors recommends a vote "FOR" the election of these
nominees as directors.
Proxies in the enclosed form received from holders of common stock prior to
the 2002 Annual Meeting will be voted for the election of the three nominees
named above as directors of the Company unless stockholders indicate otherwise.
If any of the foregoing nominees is unable to serve for any reason (which event
is not anticipated), the shares represented by the enclosed proxy may be voted
for such other person or persons as may be determined by the holders of such
proxy unless stockholders indicate otherwise. Directors will be elected by the
affirmative vote of a plurality of the shares of common stock present in person
or represented by proxy and entitled to vote at the 2002 Annual Meeting. Thus,
those nominees who receive the three highest numbers of votes for their
election as directors will be elected, regardless of the number of shares that
are not voted for the election of such nominees. Shares with respect to which
authority to vote for any nominee or nominees is withheld will not be counted
in the total number of shares voted for such nominee or nominees.
Information concerning each of the nominees named for election as directors
along with information concerning the Class I and Class II directors, whose
terms of office will continue after the 2002 Annual Meeting, is set forth below.
4
NOMINEES FOR ELECTION
CLASS III--TERM WILL EXPIRE IN 2005
MICHAEL J. PARSONS Director since 1999 Age 46
Michael J. Parsons has served as Executive Vice President and Chief
Operating Officer and a Director of Triad since May 11, 1999. From January 1,
1998 through May 11, 1999, he served as the Chief Operating Officer of the
Pacific Group of Columbia/HCA Healthcare Corporation, now known as HCA Inc.
("HCA"). Prior to that time, Mr. Parsons served as Chief Financial Officer of
the Central Group of HCA from July 1994 until January 1, 1998; and Chief
Financial Officer of the Central Group of National Medical Enterprises, Inc.
prior thereto. Mr. Parsons is a director of the Federation of American
Hospitals.
THOMAS G. LOEFFLER, ESQ. Director since 1999 Age 55
Thomas G. Loeffler, Esq. serves as a partner at the law firm of Loeffler,
Jonas & Tuggey, LLP. From June 1993 to April 30, 2001, Mr. Loeffler served as a
partner at the law firm of Arter & Hadden LLP; he was an attorney and a
consultant prior thereto. Mr. Loeffler served as a member of the U.S. Congress
from 1979 to 1987. Mr. Loeffler is a Member of the Chancellor's Council of the
University of Texas and serves as a Trustee of the University of Texas School
of Law Foundation. Mr. Loeffler is a recent appointee to the Governor's Council
on Science and Biotechnology Development for the State of Texas.
UWE E. REINHARDT, PH.D. Director since 1999 Age 62
Uwe E. Reinhardt, Ph.D. is the James Madison Professor of Political Economy
and Professor of Economics and Public Affairs at Princeton University. Dr.
Reinhardt is a Trustee of Duke University Health Center, H&Q Healthcare
Investors and H&Q Life Sciences Investors, a Member of the Board of the Center
for Healthcare Strategies, Inc., a Director of Amerigroup Corporation and a
Member of the External Advisory Panel for Health, Nutrition and Population, The
World Bank.
DIRECTORS CONTINUING IN OFFICE
CLASS I--TERM WILL EXPIRE IN 2003
DALE V. KESLER Director since 1999 Age 63
Dale V. Kesler served as a partner at Arthur Andersen LLP until April 1996
and as Managing Partner of Arthur Andersen's Dallas/Fort Worth office from 1983
to 1994. Mr. Kesler is a director of CellStar Corporation, Elcor Corporation,
New Millenium Homes and Resource Services, Inc.
BARBARA A. DURAND, R.N., ED.D. Director since 2000 Age 64
Barbara A. Durand, R.N. has served as Professor and Dean of the Arizona
State University College of Nursing since 1993. Prior to such time, she was
Professor and Chairperson in the Department of Maternal-Nursing, Rush
University, Rush-Presbyterian-St. Luke's Medical Center. Dr. Durand is a fellow
of the American Academy of Nursing.
DONALD B. HALVERSTADT, M.D. Director since 1999 Age 67
Donald B. Halverstadt, M.D. has served as Chief, Pediatric Urology Service,
Children's Hospital of Oklahoma, University of Oklahoma Health Science Center,
since 1967. He is also the Chairman of the University Board of Regents. Dr.
Halverstadt is a member of the corporate board of trustees of the Presbyterian
Health Foundation and the board of directors of Lincoln National Bank.
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JAMES E. DALTON, JR. Director since 2001 Age 59
James E. Dalton, Jr. was President, Chief Executive Officer and a director
of Quorum from May 1, 1990 until the Merger on April 27, 2001. Prior to joining
Quorum, he served as Regional Vice President, Southwest Region for HealthTrust,
Inc., division Vice President of HCA, and Regional Vice President of HCA
Management Company. Mr. Dalton is a past chairman of the Nashville Health Care
Council and the Federation of American Health Systems. He is a trustee of the
American Hospital Association and Universal Health Realty Income Trust. He also
serves on the board of directors of AmSouth Bancorporation, Genesis Health
Ventures, Inc., Select Medical Corporation, and U.S. Oncology, Inc. Mr. Dalton
is a Fellow of the American College of Healthcare Executives.
CLASS II--TERM WILL EXPIRE IN 2004
MARVIN T. RUNYON Director since 1999 Age 77
Marvin T. Runyon is chairman of Runyon Group, a business consulting firm in
Nashville, Tennessee. Mr. Runyon served as the 70th Postmaster General of the
United States from 1992 through 1998. Mr. Runyon was Chairman of the Board of
the Tennessee Valley Authority from 1988 to 1992 and President and Chief
Executive Officer of Nissan Motor Manufacturing Corporation U.S.A. prior
thereto. Mr. Runyon is a Director of several private entities.
JAMES D. SHELTON Director since 1999 Age 48
James D. Shelton has served as Chairman of the Board, President and Chief
Executive Officer of Triad since the date of the Company's spin-off from HCA on
May 11, 1999. From January 1, 1998 through May 11, 1999, he served as the
President of the Pacific Group of HCA. Prior to that time, Mr. Shelton served
as President of the Central Group of HCA from June 1994 until January 1, 1998;
Executive Vice President of the Central Division of National Medical
Enterprises, Inc. (now known as Tenet Healthcare Corporation) from May 1993 to
June 1994; and Senior Vice President of Operations of National Medical
Enterprises, Inc. prior thereto.
THOMAS F. FRIST III Director since 1999 Age 33
Thomas F. Frist III is the Co-founder of FS Partners, LLC, a private
investment firm formed in 1994. Prior to such time, he was assistant to a
principal at Rainwater, Inc., a private investment firm.
GALE E. SAYERS Director since 1999 Age 58
Gale E. Sayers is President and CEO of Sayers, a valued-added technology
provider that he co-founded in 1984. Mr. Sayers manages Sayers and Sayers
Enterprises, a sport marketing and public relations firm. Mr. Sayers is a
director of American Century Mutual Funds.
NANCY-ANN DEPARLE Director since 2001 Age 45
Nancy-Ann DeParle is a health care consultant in Washington, D.C., a Senior
Advisor to J.P. Morgan Partners, LLC and an Adjunct Professor at the Wharton
School of the University of Pennsylvania. From November 1997 through October
2000, she served as the Administrator of the Health Care Financing
Administration. Prior to that time, she served as Associate Director for Health
and Personnel at the White House Office of Management and Budget. Ms. DeParle
is a director of Cerner Corporation, Davita, Inc., Guidant Corporation and
Specialty Laboratories, Inc.
6
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings in 2001. Each director attended at
least seventy-five percent of the aggregate of (a) all meetings of the Board of
Directors held during his or her tenure as a director and (b) all meetings of
the committees of the Board of Directors on which such director served, during
the period when he or she served on such committee.
The Board of Directors has a number of standing committees, including an
Executive Committee, an Audit Committee, a Compliance Committee, a Quality
Committee and a Compensation Committee. The Board of Directors does not have a
standing nominating committee, but rather acts as a committee of the whole to
screen candidates to be nominated for election thereto by the stockholders or
chosen to fill newly created directorships or vacancies on the Board of
Directors.
The Executive Committee may exercise certain powers of the Board of
Directors regarding the management and direction of the business and affairs of
the Company when the Board of Directors is not in session. All action taken by
the Executive Committee is reported to and reviewed by the Board of Directors.
The members of the Executive Committee are Mr. Loeffler, Mr. Kesler and Mr.
Shelton, with Mr. Shelton serving as Chair. The Executive Committee held one
meeting in 2001.
The Audit Committee of the Board of Directors reviews and makes reports and
recommendations to the Board of Directors with respect to the selection of the
independent auditors of the Company and its subsidiaries, the arrangements for
and the scope of the audits to be performed by them and the internal audit
activities, accounting procedures and controls of the Company, and reviews the
annual consolidated financial statements of the Company. Prior to the formation
of the Compliance Committee in May 2001, the Audit Committee also monitored
adherence to the Company's regulatory compliance program. The members of the
Audit Committee are Mr. Frist, Mr. Kesler and Mr. Runyon, with Mr. Kesler
serving as Chair. The Audit Committee held 14 meetings in 2001; certain of
these meetings related principally to the committee's former compliance
function.
The Compliance Committee of the Board of Directors monitors adherence to the
Company's regulatory compliance program, and monitors and oversees the
Company's compliance with various provisions of the Corporate Integrity
Agreement entered into as of November 1, 2001 between the Company and the
Office of the Inspector General of the Department of Health and Human Services.
The members of the Compliance Committee are Ms. DeParle, Dr. Halverstadt, Mr.
Kesler and Dr. Reinhardt, with Dr. Halverstadt serving as chair. The Compliance
Committee held 3 meetings in 2001.
The Quality Committee of the Board of Directors is responsible for reviewing
the quality of services provided to patients at various health care facilities
operated by the Company's subsidiaries. The members of the Quality Committee
are Mr. Parsons, Mr. Dalton and Dr. Durand, and Dr. E.A. Clark, president of
the Company's National Physician Leadership Group, serving in an ex officio
capacity. The Quality Committee held 4 meetings in 2001.
The Compensation Committee of the Board of Directors is responsible for
approving compensation arrangements for executive management of the Company,
reviewing compensation plans relating to officers, grants of options and other
benefits under the Company's employee benefit plans and reviewing generally the
Company's employee compensation policy. The members of the Compensation
Committee are Mr. Sayers, Dr. Durand and Mr. Loeffler, with Mr. Loeffler
serving as Chair. The Compensation Committee held 6 meetings in 2001.
7
COMPENSATION OF DIRECTORS
The annual retainer for outside directors who are neither officers nor
employees of the Company is $24,000 and the Board meeting fee is $1,500 per
meeting. Committee members receive a fee of $500 per meeting payable only for
attendance at committee meetings not held in conjunction with a meeting of the
Board of Directors. Directors also are reimbursed for expenses incurred
relating to attendance at meetings. Outside directors may elect to receive
deferred stock units convertible into common stock, in lieu of all or a portion
(in multiples of 25%) of their annual retainer. The payout of deferred stock
units may be deferred, at the outside director's election, for a period of five
years or until the end of such director's term of office.
New outside directors are awarded an initial option to acquire a number of
shares of common stock determined by the Board of Directors. In addition, each
outside director receives an annual option to acquire a number of shares of
common stock determined by the Board of Directors. Discretionary options may
also be awarded by the Board of Directors to the outside directors. Initial
options and annual options become exercisable as to 25% of the shares covered
by the option on each of the first four anniversaries of the date of the grant.
All options have a maximum term of 10 years, are exercisable at the fair market
value of the common stock on the date of the grant, and become immediately
exercisable upon a change of control of Triad. On May 29, 2001, each of the
continuing outside directors received an annual option grant covering 18,000
shares of Triad common stock, and Ms. DeParle, as a new director, received an
option grant covering 20,000 shares of Triad common stock, at an exercise price
of $24.98 per share.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
BURKE W. WHITMAN, age 46, has served as Executive Vice President and Chief
Financial Officer of the Company since May 11, 1999. From May 11, 1999 to June
21, 2001 he also served as Treasurer of the Company. From February 1, 1999
through May 11, 1999, he served as Chief Financial Officer of the Pacific Group
of HCA. From May 1994 until January 31, 1999, he served as President, Chief
Financial Officer, Director and Co-founder of Deerfield Healthcare Corporation.
Mr. Whitman is a member of the board of the Federation of American Hospitals.
DONALD P. FAY, age 58, has served as Executive Vice President, Secretary and
General Counsel of the Company since May 11, 1999. From January 1, 1998 through
May 11, 1999, he served as Senior Vice President of the Pacific Group of HCA.
Mr. Fay served as Vice President--Legal of HCA from February 1994 through
December 1997, and Senior Counsel of HCA prior thereto.
CHRISTOPHER A. HOLDEN, age 38, has served as a Division President of the
Company since May 29, 2001. From May 11, 1999 through May 29, 2001, he served
as a Senior Vice President of the Company. From January 1, 1998 through May 11,
1999, he served as President--West Division of the Pacific Group of HCA. Prior
to such time, Mr. Holden was President of the West Texas Division of the
Central Group of HCA from September 1997 until January 1, 1998; Vice President
of Administration for the Central Group of HCA from August 1994 until September
1997; and Assistant Vice President--Administration of the Central Group of
National Medical Enterprises, Inc. prior thereto.
NICHOLAS J. MARZOCCO, age 47, has served as a Division President of the
Company since May 29, 2001. From May 11, 1999 through May 29, 2001, he served
as a Senior Vice President of the Company. From January 1, 1998 through May 11,
1999, he has served as President-- East Division of the Pacific Group of HCA.
Prior to that time, Mr. Marzocco served as Chief Operating Officer of the
Louisiana Division of HCA from September 1996 until January 1, 1998; and Chief
Executive Officer of North Shore Regional Medical Center, a 310-bed hospital
owned by National Medical Enterprises, Inc. and located in Slidell, Louisiana,
prior thereto.
8
G. WAYNE MCALISTER, age 55, has served as a Division President of the
Company since May 29, 2001. From May 11, 1999 through May 29, 2001, he served
as a Senior Vice President of the Company. From March 15, 1999 through May 11,
1999, he served as President--Central Division of the Pacific Group of HCA.
Prior to such time, Mr. McAlister was an independent senior hospital management
consultant from June 1997 until March 15, 1999; Regional Vice President of
Paracelsus Healthcare Corporation from June 1995 until May 1997; Vice
President, Operations, of Tenet Healthcare Corporation from August 1993 until
May 1995; and President/Chief Operating Officer and Vice President of
Operations of Healthcare International from February 1988 until November 1992.
W. STEPHEN LOVE, age 50, has served as Senior Vice President of Finance and
the Controller of the Company since May 11, 1999. From March 1, 1999 through
May 11, 1999, he served as Senior Vice President of Finance/Controller of the
Pacific Group of HCA. Prior to that time he served as Senior Vice
President/Corporate Chief Financial Officer-Operations of Charter Behavioral
Health Systems, L.L.C. (formerly Charter Medical System) from December 1997
until March 1, 1999; Senior Vice President/Corporate Chief Financial Officer of
Charter Behavioral Health Systems, L.L.C. from June 1997 until December 1997;
and Vice President, Financial and Hospital Operations of Charter Medical System
prior thereto.
WILLIAM R. HUSTON, age 47, has served as Senior Vice President of Finance of
the Company since May 11, 1999. From January 1999 through May 11, 1999, he
served as Senior Vice President of Finance of the Pacific Group of HCA. He
served as Division Chief Financial Officer of various divisions of the Central
Group of HCA from April 1995 to December 1998; and Division Chief Financial
Officer of Tenet Healthcare Corporation prior thereto.
WILLIAM L. ANDERSON, age 52, has served as a Division President of the
Company since April 27, 2001. From October 1997 through April 27, 2001, he
served as President, Midwest Region of Quorum. From September 1995 until
October 1997, he served as Chief Executive Officer of Lutheran Hospital of
Indiana, a 437-bed hospital owned by Quorum and located in Fort Wayne, Indiana.
From September 1987 until September 1995, he served as Chief Executive Officer
of Medical Center of Baton Rouge, a 371-bed hospital then owned by Healthtrust,
Inc. and located in Baton Rouge, Louisiana.
MARSHA D. POWERS, age 48, has served as a Division President of Triad since
April 27, 2001. From March 1996 through April 27, 2001, she served as
President, Southwest Region, for Quorum. From January 1994 through March 1996,
she served as Vice President, Physician/Hospital Integration, of Quorum. From
May 1989 through December 1993, she served as Chief Executive Officer of Fort
Bend Hospital, a 65-bed hospital then owned by Epic Healthcare Group, Inc. and
located in Missouri City, Texas.
THOMAS H. FRAZIER, JR., age 44, has served as Senior Vice President of
Administration of the Company since April 27, 2001. From May 1999 through April
27, 2001, he served as Chief Financial Officer of Triads' East division. From
July 1, 1998 through May 11, 1999, he served as Chief Financial Officer of the
East Division of the Pacific Group of HCA. From April 1998 through July 1,
1998, he served as interim chief executive officer of one of HCA's physician
management groups. From January 1998 through April 1998, he served as interim
chief executive officer for Douglas Community Medical Center, a general acute
care hospital owned by HCA and located in Roseburg, Oregon. From May 1996
through December 1997, he served as chief executive officer for HCA's Mesquite
Hospital development project, a project under which HCA intended to construct a
general acute care hospital in Mesquite, Texas. From April 1995 through April
1996, Mr. Frazier served as chief operating officer at Plaza Medical Center, a
general acute care hospital owned by HCA and located in Fort Worth, Texas.
9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Triad's
executive officers and directors, and persons who own more than ten percent of
the outstanding common stock of the Company, to file reports of ownership and
changes in ownership with the SEC and to provide Triad with copies of these
reports. To the Company's knowledge, based solely on its review of the copies
of such reports furnished to the Company and representations that no other
reports were required, all Section 16(a) filing requirements applicable to all
of its executive officers, directors and greater than ten-percent stockholders
were complied with during fiscal 2001, except that Mr. Holden inadvertently
reported late a disposition of Triad common stock, and Mr. Runyon inadvertently
reported late two acquisitions of Triad common stock.
10
EXECUTIVE COMPENSATION
The information under this heading relates to the chief executive officer
and the four other most highly compensated executive officers of the Company
serving as executive officers at the end of 2001, and reflects compensation
paid by the Company or, prior to the Company's spin-off from HCA on May 11,
1999, by HCA.
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------------------------- ----------------------
Restricted
Other Annual Stock Securities All Other
Bonus Compensation Awards ($) Underlying Compensation
Name and Principal Position Year Salary ($) ($) (1) (2) (3) Options (#) (4)
--------------------------- ---- ---------- -------- ------------ ---------- ----------- ------------
James D. Shelton........... 2001 $896,243 $731,250 $ -- $ -- 160,000 $ --
Chairman, President and 2000 670,900 353,154 -- -- 206,909 --
Chief Executive Officer 1999 614,528 245,884 -- -- 643,128 5,448
Michael J. Parsons......... 2001 448,396 228,820 -- -- 80,000 --
Executive Vice President 2000 415,533 130,589 -- 28,712 103,455 --
and Chief Operating
Officer 1999 374,039 129,976 -- 13,926 296,482 2,505
Burke W. Whitman........... 2001 429,950 220,500 -- 33,052 80,000 --
Executive Vice President 2000 385,979 125,566 -- 58,932 103,455 --
and Chief Financial
Officer 1999 293,754 78,605 -- 28,295 260,000 299
Donald P. Fay.............. 2001 327,793 168,500 -- -- 50,000 --
Executive Vice President, 2000 290,071 94,175 -- -- 41,382 --
Secretary and General 1999 238,050 63,403 -- -- 96,506 --
Counsel
G. Wayne McAlister......... 2001 328,472 136,474 -- 9,956 40,000 46,495
Division President 2000 312,979 98,888 -- 19,028 41,382 --
1999 237,661 63,366 124,330 26,116 72,500 --
--------
(1) Reflects bonus earned during the fiscal year. In some instances, all or a
portion of the bonus was paid during the following fiscal year.
(2) The amount reported for Mr. McAlister in 1999 consists of relocation
expenses and amounts paid for reimbursement of taxes in respect of such
amounts.
(3) Amounts reported represent the dollar value of the difference between
amounts paid by the executive officer to purchase shares of Triad common
stock under Triad's Management Stock Purchase Plan and the value of the
purchased Triad common stock on the date of purchase. As of December 31,
2001, Messrs. Whitman and McAlister held an aggregate of 4,772 and 1,433
shares of restricted Triad common stock, respectively. As of December 31,
2001, Messrs. Shelton, Parsons and Fay held no shares of restricted Triad
common stock. Pursuant to Commission rules, after deducting the
consideration paid therefor, the shares held by Messrs. Whitman and
McAlister had a net pre-tax value of $32,761 and $9,867, respectively.
Dividends will be payable on shares of restricted stock if and to the
extent paid on Triad's common stock generally, regardless of whether or not
the shares are vested.
Prior to the Merger, Messrs. Shelton, Parsons, Whitman, Fay and McAlister
held an aggregate of 400,000; 84,840; 169,967; 40,000 and 36,191 shares of
restricted Triad common stock, respectively. The Merger constituted a
"change of control" under the terms of the Triad Hospitals, Inc. Executive
Stock Purchase Plan, pursuant to which these shares of restricted stock
were purchased. Upon consummation of the Merger, the restrictions lapsed on
all shares of restricted Triad common stock then held by Messrs. Shelton,
Parsons, Whitman, Fay and McAlister and such shares became fully vested and
transferable and no longer subject to forfeiture.
(4) Consists of contributions to the savings and investment plan, money
purchase plan and stock bonus plan.
11
Option Grants In Last Fiscal Year
Individual Grants Potential Realizable Value at
----------------------------------------------------------------------------- Assumed Annual Rates of
Number of Percent of Total Stock Price Appreciation for
Securities Options Granted Exercise or Securities Option Term (4)
Underlying to Employees in Base Price Expiration -----------------------------
Name Options (#) (1) Fiscal Year ($/sh) (2) (3) Date 5% ($) 10% ($)
---- --------------- ---------------- -------------- ---------- ---------- ----------
James D. Shelton.. 160,000 5.43% $30.00 4/27/11 $3,018,694 $7,649,964
Michael J. Parsons 80,000 2.71% 30.00 4/27/11 1,509,347 3,824,982
Burke W. Whitman.. 80,000 2.71% 30.00 4/27/11 1,509,347 3,824,982
Donald P. Fay..... 50,000 1.70% 30.00 4/27/11 943,342 2,390,614
G. Wayne McAlister 40,000 1.36% 30.00 4/27/11 754,674 1,912,491
--------
(1) The options become exercisable with respect to 25% of the shares covered
thereby on the first, second, third and fourth anniversary dates following
the date of grant.
(2) The option exercise price may be paid in shares of Triad common stock owned
by the executive officer, in cash, or a combination thereof.
(3) The exercise price was equal to the fair market value of the Triad common
stock on the date of the grant.
(4) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Triad common stock over the term of the options. These
amounts do not take into account provisions of the options relating to
termination of the option following termination of employment,
non-transferability or vesting over periods of up to four years.
Aggregated Option Exercises In Last Fiscal Year And Fiscal
Year-End Option Values
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at Fiscal Year-
Shares Value Options at Fiscal Year End (#) End ($) (2)
Acquired on Realized ------------------------------ -----------------------------
Name Exercise (#) ($) Exercisable Unexercisable (1) Exercisable Unexercisable
---- ------------ -------- ----------- ----------------- ----------- -------------
James D. Shelton.. -- -- 850,037 160,000 $14,630,524 $0.00
Michael J. Parsons -- -- 399,937 80,000 6,678,893 $0.00
Burke W. Whitman.. -- -- 363,455 80,000 6,166,427 $0.00
Donald P. Fay..... -- -- 137,888 50,000 2,287,843 $0.00
G. Wayne McAlister -- -- 113,882 40,000 1,848,702 $0.00
--------
(1) Prior to the Merger, Messrs. Shelton, Parsons, Whitman, Fay and McAlister
held an aggregate of 573,209; 294,435; 268,455; 102,414 and 90,132
unexercisable options to acquire shares of Triad common stock,
respectively. The Merger constituted a "change of control" under the terms
of the Triad Hospitals, Inc. 1999 Long-Term Incentive Plan, pursuant to
which these options were granted. Upon consummation of the Merger, all of
these options became vested and exercisable. The vesting of certain of
these options had been waived pending receipt from the Internal Revenue
Service (the "IRS") of a supplemental private letter ruling relating to
private letter rulings previously issued to HCA; the previous letter
rulings related to the tax treatment of the spin-off of Triad and LifePoint
Hospitals, Inc. from HCA and the restructuring transactions that preceded
the spin-off. On June 27, 2001, Triad waived the IRS approval provision and
the options became vested and exercisable.
(2) The closing price for the Triad common stock, as reported by the New York
Stock Exchange, on December 31, 2001 was $ 29.35 per share. Value is
calculated on the basis of the difference between the option exercise price
and $ 29.35 per share, multiplied by the number of shares of Triad common
stock underlying the option.
12
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE IN
CONTROL ARRANGEMENTS
None of the executive officers of the Company has an employment contract
with the Company. All employees of the Company participate in the Company's
severance policy, under which, in certain circumstances, an employee whose
employment with the Company is involuntarily terminated may receive as a
severance benefit of up to 52 weeks of salary.
CERTAIN TRANSACTIONS
In 1999, Triad made loans to certain executive officers in connection with
such officers' initial purchases of Triad common stock under the Triad
executive stock purchase plan, the principal balances outstanding on these
loans as of the date hereof are as follows: Mr. Shelton, $3,746,000; Mr.
Parsons, $749,200; Mr. Marzocco, $377,100; Mr. Fay, $377,100; Mr. Huston,
$374,600; Mr. Love, $374,600; Mr. McAlister, $282,825; Mr. Frazier $377,100 and
Mr. Whitman, $1,498,400. In September 2001, Mr Holden repaid the $377,100 then
outstanding on his loan. Each loan matures at the earlier of (i) the fifth
anniversary of the loan, (ii) the termination of the executive's employment
with Triad, or (iii) the bankruptcy of the executive. Each loan bears interest
at 5.15%, compounded semi-annually (equal to the applicable Federal rate in
effect, under section 1274(d) of the Internal Revenue Code of 1986, as amended,
as of the date the loan was made).
As previously disclosed in the Company's current report on Form 8-K filed
with the SEC on July 31, 2001, Triad sold a hospital facility, Summit Hospital,
a 201-bed general acute care hospital located in Baton Rouge, Louisiana, for
$19 million to Ardent Health Services, an affiliate of Welsh, Carson, Anderson
& Stowe VIII, L.P., which holds in excess of 5% of Triad's outstanding common
stock, and of which Russell Carson, then a director of Triad, is a partner. The
hospital facility was acquired by Triad as part of the Merger and had a value
of approximately $19 million at the time it was acquired by Triad. The sale
price was determined through negotiations between representatives of the
Company, including the Chief Executive Officer and the Vice President of
Acquisition and Development, and representatives of Ardent Health Services.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation for the Company's executives are made by the
Compensation Committee of the Board of Directors. Each member of the
Compensation Committee is a non-employee director. No member of the
Compensation Committee is a current or former employee or officer of the
Company or any of its affiliates. The Compensation Committee is responsible for
approving compensation arrangements for executive management of the Company,
reviewing compensation plans relating to officers, grants of options and other
benefits under the Company's employee benefit plans and reviewing generally the
Company's employee compensation policy. Pursuant to certain rules of the
Securities and Exchange Commission designed to enhance disclosure of corporate
policies toward executive compensation, set forth below is a report submitted
by the Compensation Committee.
Compensation Philosophy and Policies of Executive Officers
The Company believes that the most effective executive compensation program
aligns the interests of stockholders and executives. The Company's primary
objective is to provide quality health care services while enhancing the
financial performance of the Company and long-term stockholder value. At the
Company there is a strong link between strategic business goals and
compensation and benefit goals.
Cash Compensation
The base salaries of the named executive officers are listed in the Summary
Compensation Table found under "Executive Compensation" in this Proxy
Statement. These salaries and the salaries of other executive
13
officers are evaluated annually. In determining appropriate salary levels and
salary increases, several factors are considered, including individual
performance, experience, level of responsibility and external pay practices. At
its regular meeting in December 2000, the Compensation Committee evaluated the
2001 base salaries for corporate office employees, including the executive
officers of the Company, and for the officers at each of the Company's
facilities (generally, the facility chief executive officer, chief financial
officer and chief nursing officer). In most instances, the Compensation
Committee determined to increase base salaries by approximately 4%, to reflect
anticipated cost of living and merit increases. In conjunction with the Merger,
the Compensation Committee granted certain base salary increases of up to
approximately 8% to three of the Company's executive vice presidents to reflect
their additional responsibilities as a result of the consummation of the Merger
and the consequent increase in size and complexity of the Company's business.
See "--Chief Executive Officer Compensation" below for additional information.
The Triad 2001 Annual Incentive Plan, as adopted by the Compensation
Committee at its regular meeting in December 2000, provides for the payment of
annual cash bonuses following the close of each plan year to eligible employees
based upon the achievement of objective performance criteria. Annual incentive
award opportunities at the Company are designed to focus management attention
on key operational goals deemed important for the upcoming fiscal year, and to
support the Company's strategic goal for consistent growth by highlighting
corporate and business unit earnings as the main performance measure affecting
incentive bonus payments. Bonus awards are contingent upon meeting or exceeding
certain performance goals such as, for corporate office employees, attainment
of the Company's budgeted earnings before interest, taxes, depreciation and
amortization, and for hospital employees, additional attainment of budgeted
facility net revenue, cash flow and pre-tax earnings for such plan year. The
maximum award payable to any individual for any plan year is $750,000.
Subsequent to the adoption of the Triad 2001 Annual Incentive Plan, the
Compensation Committee determined to increase certain of the bonus awards,
based on a report from an independent compensation consultant engaged by the
Company that indicated that, in certain instances, the bonuses which would be
paid under the 2001 Annual Incentive Plan (assuming performance targets were
achieved) as a percentage of base salary were significantly below median bonus
percentages at comparable companies.
After the 2001 financial performance of the Company and its various
hospitals and other facilities had been determined, the Compensation Committee
determined that the 2001 Annual Incentive Plan financial performance targets
had been achieved and authorized the payment of cash bonuses pursuant to such
incentive plan.
Equity-Based Compensation
Equity based compensation may be provided in the form of stock options,
performance awards and restricted shares of common stock.
Stock option grants provide an incentive that focuses the executive's
attention on managing the business of our company from the perspective of an
owner with an equity stake in the business and helps ensure that operating
decisions are based on long-term results that benefit the business and
ultimately our stockholders. Specifically, the option grants to executive
officers provide the right to purchase shares of common stock at the fair
market value on the date of the grant. Usually, each stock option becomes
vested and exercisable only over a period of time, generally one to five years.
The number of shares covered by each grant reflects the executive's level of
responsibility and past and anticipated contributions.
Triad has granted stock options to certain of its executive and other
employees pursuant to its 1999 Long-Term Incentive Plan, as amended. In
connection with the consummation of the Merger, the Compensation Committee
authorized a grant of options to various corporate office employees, including
the executive officers of the Company, and officers at the Company's hospitals
and other facilities, including hospitals and other facilities acquired from
Quorum in the Merger, to provide appropriate incentives for such employees and
officers to integrate all of such hospitals and other facilities into a
cohesive and efficient operating matrix after the Merger. Options to purchase
an aggregate of 2,713,000 shares were granted to 245 employees and officers. The
14
1999 Long-Term Incentive Plan also provides for the granting of restricted
stock awards and various other performance awards; however, Triad has not
granted any of such other awards under the plan.
Finally, certain officers may elect to receive up to a specified percentage
of their base salary (25% for senior vice presidents and above, and 10% for
corporate vice presidents and hospital chief executive officers) in restricted
shares of common stock. These restricted shares are granted at a 25% discount
from the fair market value of the common stock on the date of the grant. The
restricted period is generally three years from the date of grant. With certain
exceptions, if employment is terminated during the restricted period, the
employee receives a cash payment equal to the lesser of (a) the then-current
fair market value of the restricted shares or (b) the aggregate salary foregone
by the employee as a condition to receiving the restricted shares. Any
additional value is forfeited.
Chief Executive Officer Compensation
Mr. Shelton does not have an employment contract. During 2001 Mr. Shelton's
salary totaled $896,243. As Chief Executive Officer, Mr. Shelton's compensation
during 2001 consisted of the same components as for other executive officers,
namely base salary, Annual Incentive Plan bonus, and stock options. In
establishing Mr. Shelton's compensation, the Compensation Committee applied the
principles outlined above in the same manner as they were applied to other
executives. The Committee believes that the base salary paid to Mr. Shelton in
2001 was appropriate in light of his significant critical contributions to the
day-to-day business operations of the Company, including the continued
improvement in the operations of the Company's "core" healthcare facilities,
and Mr. Shelton's leadership in overseeing the consummation of the Merger and
the ongoing integration of the former Quorum hospitals into the Company's
operations.
Section 162(m) of the Internal Revenue Code of 1986
Section 162(m) of the Internal Revenue Code disallows a deduction to the
Company for any compensation paid to a "covered employee" in excess of $1
million per year, subject to certain exceptions. In general, "covered
employees" include the chief executive officer and the four other most highly
compensated executive officers of the Company who are in the employ of the
Company and are officers at the end of the tax year. Among other exceptions,
the deduction limit does not apply to compensation that meets the specified
requirements for "performance-based compensation." The Compensation Committee
has endeavored, to the extent it deems consistent with the best interests of
the Company and its stockholders, to obtain maximum deductibility of
compensation paid to executive officers. To that end, the Triad Hospitals, Inc.
1999 Long-Term Incentive Plan (the "LTIP Plan") was submitted to and approved
by the Company's stockholders during 2001 and the Company is able to make
awards under that plan which satisfy the requirements of Section 162(m) of the
Internal Revenue Code. All awards granted during 2001 pursuant to the LTIP Plan
were intended to be fully deductible "performance-based compensation." However,
the Compensation Committee also recognizes the need to retain flexibility to
make compensation decisions that may not meet Section 162(m) standards when
necessary to enable the Company to meet its overall objectives, even if the
Company may not deduct all of the compensation. Accordingly, the Board and the
Compensation Committee reserves the authority to award non-deductible
compensation in appropriate circumstances.
Because the Company establishes individual compensation based primarily upon
company performance and competitive considerations, executive officer
compensation may exceed $1 million in a given year. However, any compensation
received by an executive officer for 2001 that exceeded the amounts permitted
by Section 162(m) was not material to the Company.
Thomas G. Loeffler, Esq., Chairman
Gale E. Sayers
Barbara A. Durand, R.N., Ed. D.
Members of the Compensation Committee
15
PERFORMANCE GRAPH
The following graph compares at the end of 2001 the cumulative total
stockholder return on the Company's common stock, the cumulative total return
of the companies on the Standard & Poor's Midcap 400 Index and the cumulative
total return on the Standard and Poor's Hospital Management Index over the same
period.
[CHART]
Triad Hospitals S&P Hospital Management S&P MidCap 400
Inc Index Index
5/11/1999 100 100 100
12/31/1999 118.05 116.69 113.58
12/29/2000 254.15 189.55 133.47
12/31/2001 229.07 196.38 123.45
The foregoing performance graph assumes the investment of $100 on May 11,
1999 (the first day of regular trading of the common stock of the Company on
the NASDAQ), and the reinvestment of any cash dividend on the ex-dividend date
in respect of such dividend.
AUDIT COMMITTEE REPORT
The members of the Audit Committee are independent as defined in the New
York Stock Exchange's listing standards, which provide, among other things,
that directors shall have no relationship with Triad that may interfere with
the exercise of their independence from management and Triad. The Audit
Committee Charter amended and re-adopted by the Board of Directors on September
14, 2001 is attached as Exhibit A to this proxy statement.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. The Audit Committee's responsibility is to monitor
and review these processes and the activities of the Company's independent
auditors. The Audit Committee members are not acting as professional
accountants or auditors, and their functions are not intended to duplicate or
certify the activities of management and the independent auditors or to certify
the independence of the auditors under applicable rules.
The Audit Committee has reviewed and discussed Triad's audited financial
statements as of December 31, 2001 with management and Ernst & Young LLP,
Triad's independent auditors.
The Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees," as amended, as issued by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
16
The Audit Committee has received and reviewed the written disclosures and
the letter from Ernst & Young LLP required by Independence Standard No. 1, as
adopted by the Independence Standards Board, and has discussed with Ernst &
Young LLP its independence. When considering Ernst & Young LLP's independence,
the Audit Committee considered, among other matters, whether Ernst & Young
LLP's provision of information technology and non-audit services to the Company
is compatible with maintaining the independence of Ernst & Young LLP.
Based on the review and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited financial statements
as of December 31, 2001 be included in Triad's Annual Report on Form 10-K. The
Audit Committee also recommended to the Board of Directors that Ernst & Young
LLP be selected as independent auditors of the Company for the year 2002,
subject to stockholder ratification.
Dale V. Kesler, Chairman
Marvin T. Runyon,
Uwe E. Reinhardt, Ph.D
Members of the Audit Committee
PROPOSAL 2--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent certified
public accountants, as independent auditors for the Company for the year 2002.
A resolution will be submitted to stockholders at the meeting for ratification
of such selection. Although ratification by stockholders is not a prerequisite
to the ability of the Board of Directors to select Ernst & Young LLP as the
Company's independent auditors, the Company believes such ratification to be
desirable. If the stockholders do not ratify the selection of Ernst & Young
LLP, the selection of independent auditors will be reconsidered by the Board of
Directors; however, the Board of Directors may select Ernst & Young LLP
notwithstanding the failure of the stockholders to ratify its selection.
Ernst & Young LLP have been the Company's independent auditors since it
became a publicly traded company on May 11, 1999, except during the period from
November 22, 1999 to November 17, 2000 when PricewaterhouseCoopers LLP served
as the Company's independent auditors.
On November 17, 2000, Triad dismissed PricewaterhouseCoopers LLP and
re-engaged Ernst & Young LLP as its independent auditors. The decision to
change independent auditors was approved by the Audit Committee of the Board of
Directors. The report of PricewaterhouseCoopers LLP on the financial statements
for the fiscal year ended December 31, 1999 did not contain an adverse opinion
or disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the fiscal years in which PricewaterhouseCoopers LLP served as the
Company's independent auditors, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused
it to make reference to the subject matter of the disagreement(s) in its
reports. In addition, during this period, there were no "reportable events" as
listed in Item 304(a)(1)(v)(A-D) of Regulation S-K.
It is expected that a representative of Ernst & Young LLP will be present at
the meeting, will have an opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate questions.
17
The following table summarizes the aggregate fees billed by Ernst & Young
LLP for services rendered for the year ended December 31, 2001:
Audit fees.................................................. $ 786,670
Financial information systems design and implementation fees --
All other fees:
Audit related fees.................. $ 591,202
Tax preparation and advice.......... 1,290,295
Compliance review................... 787,880
Other............................... 198,509
----------
Total of all other fees..................................... 2,867,886
----------
Total....................................................... $3,654,556
==========
The amount shown for audit fees includes fees for professional services
rendered for the audit by Ernst & Young LLP of Triad's annual financial
statements for 2001 and the reviews by Ernst & Young LLP of Triad's financial
statements included in its Quarterly Reports on Form 10-Q during 2001. The
amount shown for audit related fees includes fees for work performed in
connection with registration statements filed by Triad, due diligence
procedures performed in connection with acquisitions, including the Merger, and
audits of employee benefit plans. The amount shown for tax preparation and
advice includes all income tax services other than those directly related to
the audit of the income tax accrual. The amount shown for compliance review
includes fees for work performed in connection with Triad's regulatory
compliance program and the Corporate Integrity Agreement between Triad and the
Office of the Inspector General of the Department of Health and Human Services.
The Audit Committee has considered whether the provision of information
technology and non-audit services are compatible with maintaining the
independence of Ernst & Young LLP.
The Board of Directors recommends a vote "FOR" this proposal.
PROPOSAL 3--AMENDMENT TO THE OUTSIDE DIRECTORS STOCK AND INCENTIVE COMPENSATION
PLAN
Set forth below is a description of the Triad Hospitals, Inc. Outside
Directors Stock and Incentive Compensation Plan, as amended (the "Plan"). The
Plan became effective on May 11, 1999, the date of the spin-off of the Company
from HCA. The Plan is designed to encourage ownership of stock in the Company
by directors who are not also employees of the Company or any of its
subsidiaries ("Outside Directors"), to provide an incentive to such directors
to continue to serve the Company, and to aid the Company in attracting
qualified director candidates in the future. On February 7, 2002, the Company's
Board of Directors amended the Plan, subject to stockholder approval, to
increase the number of shares of common stock authorized for issuance under the
Plan to 500,000 from 400,000. In the event stockholder approval is not
obtained, the Company will not increase the number of shares authorized for
issuance under the Plan, but awards may continue to be made under the
previously existing terms of the Plan. The Plan has a term of ten years. A
brief description of the material features of the Plan is set forth below, but
is qualified by reference to the full text of the Plan attached as Exhibit B to
this proxy statement.
DESCRIPTION OF THE PLAN
Administration
The Plan is administered by the Board of Directors. The Board of Directors
has broad authority in the administration of the Plan and is authorized, among
other things, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to exercise all powers and authorities
either specifically granted under the Plan or necessary or advisable in the
administration of the Plan.
18
Reservation of Shares
On February 7, 2002, the Board of Directors amended the Plan, subject to
stockholder approval, to increase the number of shares of Triad common stock
authorized for issuance under the Plan to 500,000 from 400,000. The shares of
Triad common stock to be issued under the Plan will be made available from
authorized but unissued shares of Triad common stock or issued shares that have
been reacquired by Triad. If an option or a deferred stock unit award under the
Plan is canceled, terminates, expires unexercised or is exchanged for a
different award without the issuance of shares of Triad common stock, the
shares covered by the option or award will, to the extent of such termination
or non-use, again be available for awards thereafter granted during the term of
the Plan. In the event of a reorganization, recapitalization, or other
specified corporate events affecting Triad or Triad common stock, the Board of
Directors may make such adjustments or substitutions, as it may determine is
appropriate, in the number and kind of shares that may be distributed in
respect of options or deferred stock units under the Plan, as well as the
number and kind of shares under or representing outstanding options or deferred
stock units under the Plan.
Types of Awards
Four types of awards may be granted to Outside Directors under the Plan:
Initial Options, Annual Options, Discretionary Options and Deferred Stock Units.
Options. An "Initial Option" is a one-time grant of an option to acquire a
number of shares of Triad common stock as is determined from time to time by
the Board of Directors, and it is given to every new Outside Director who joins
the Triad Board. An "Annual Option" is granted to each person who is an Outside
Director on the first business day of each board term and covers a number of
shares of Triad common stock as is determined from time to time by the Board of
Directors. "Discretionary Options" may be granted to Outside Directors from
time to time at the discretion of the Board of Directors.
The amount of each option is at the discretion of the Board of Directors.
Initial Options and Annual Options become exercisable as to 25% of the shares
covered by the option on each of the first four anniversaries of the date of
the grant. All such options have a term of 10 years, are exercisable at the
fair market value of the Triad common stock on the date of the grant, and
become fully and immediately vested and exercisable upon a change of control of
Triad (as defined in the Plan). Discretionary Options have such terms as to
vesting, exercisability and exercise price as the Board of Directors may
determine at the time of grant, provided that the term of the option may not
exceed 10 years from the grant date and the exercise price of the option may
not be less than the fair market value of Triad common stock on the grant date.
All options granted under the Plan are nontransferable except for certain
limited transfers to family members (as provided in the Plan) for estate
planning, tax planning, donative purposes or pursuant to a domestic relations
order.
Subject to certain terms and conditions, an option may be exercised in whole
or in part at any time during the period permitted for the exercise thereof by
written notice to Triad, together with payment of the exercise price for the
number of shares with respect to which the option is being exercised. Vested
options granted under the Plan will generally remain exercisable for 6 months
after the death or disability of the Outside Director and for 90 days after any
other termination of service as an Outside Director. Upon a change in control
of Triad (as defined in the Plan), each outstanding option will become fully
and immediately vested and exercisable.
Deferred Stock Units. Outside Directors may each elect to receive Deferred
Stock Units, in lieu of all or a portion, in 25% increments, of their annual
retainer. The number of Deferred Stock Units received is determined based on
the fair market value of Triad common stock on the grant date. The grant date
is the first business day of each Board term. Amounts equivalent to any
dividends that would have been paid to Outside Directors in respect of a number
of shares of Triad common stock equal to the number of Deferred Stock Units are
credited under the Plan and converted into additional Deferred Stock Units.
Deferred Stock Units are immediately and fully vested and are paid out, at the
election of the Outside Director, on either the fifth anniversary of the grant
date or on the date the Outside Director ceases to be a member of the Board.
Payment is made in Triad common stock of a number of shares equal to the number
of Deferred Stock Units.
19
FEDERAL INCOME TAX CONSEQUENCES
Stock Options
An Outside Director will not generally recognize taxable income upon the
grant of a nonqualified stock option to purchase shares of Triad common stock.
Upon exercise of the option, the Outside Director will generally recognize
ordinary income for Federal income tax purposes equal to the excess of the fair
market value for the shares over the exercise price. Triad will be entitled to
a Federal income tax deduction equal to the amount of ordinary income
recognized by the Outside Director. The deduction will be allowed at the same
time as the Outside Director recognizes the income.
Deferred Stock Units
An Outside Director who receives Deferred Stock Units will not generally
recognize taxable income upon the crediting or vesting of the units. Taxable
ordinary income will be recognized upon the payment of the Deferred Stock
Units, based on the fair market value at the time of payment of the shares of
Triad common stock received by the Outside Director. Triad will be entitled to
a Federal income tax deduction equal to the amount of ordinary income
recognized by the Outside Director.
New Plan Benefits
The number of options or Deferred Stock Units to be granted in the future to
Outside Directors is not determinable at this time. During 2001, stock options
to purchase an aggregate of 182,000 shares of Triad common stock at an exercise
price of $24.98 per share were granted under the Plan to Outside Directors, and
Outside Directors elected to receive an aggregate of 6,246 Deferred Stock Units
in lieu of their annual retainers.
The Merger constituted a "change of control" under the terms of the Plan. As
a result, the outstanding and unvested stock options held by Outside Directors
became fully vested and exercisable as of April 27, 2001, the effective time of
the Merger. The aggregate number of unvested options held by Outside Directors
that became fully vested and exercisable as result of the Merger was
approximately 166,000 shares, having a value of approximately $1,964,770. The
value is based on the closing price of a share of Triad common stock on the
Nasdaq National Market System on April 20, 2001 ($26.97), reduced by the per
share exercise price of the options.
The Board of Directors recommends a vote "FOR" the approval of the amendment
to the Triad Hospitals, Inc. Outside Directors Stock and Incentive Compensation
Plan.
PROPOSAL 4--ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this statement, the Board of Directors knows of no
business that will be presented for consideration at the meeting other than
that referred to above. As to other business, if any, that may come before the
meeting, proxies in the enclosed form will be voted in accordance with the
judgment of the person or persons voting the proxies.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Board of Directors will receive at any time and will consider from time
to time suggestions from stockholders as to persons to be nominated by the
Board of Directors for election thereto by the stockholders or to be chosen by
the Board of Directors to fill newly created directorships or vacancies on the
Board of Directors.
The Company's bylaws require that there be furnished to the Secretary of the
Company at the Company's principal executive offices written notice with
respect to the nomination of a person for election as a director
20
(other than a person nominated by or at the direction of the Board of
Directors), as well as the submission of a proposal (other than a proposal
submitted by or at the direction of the Board of Directors), at an annual
meeting of stockholders. In order for any such nomination or submission to be
proper, the notice must contain certain information concerning the nominating
or proposing stockholder and the nominee or the proposal, as the case may be,
and must be delivered to the Secretary of the Company at the Company's
principal executive offices not less than 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that if the date of the annual meeting is advanced more than 30 days
prior to or delayed more than 60 days after such anniversary date, notice by
the stockholder to be timely must be delivered not later than the close of
business on the later of the 90th day prior to such annual meeting or the tenth
day following the day on which the public announcement of the date of such
meeting is first made.
In the event that the number of directors to be elected to the Board of
Directors is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of
Directors made by the Company at least 100 days prior to the first anniversary
of the preceding year's annual meeting, a stockholder's notice required by the
Company's by-laws shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it is delivered not
later than the close of business on the tenth day following the day on which
such public announcement is first made by the Company.
Nominations by stockholders of persons for election to the Board of
Directors may be made at a special meeting of stockholders if the stockholder's
notice required by the Company's by-laws is delivered not later than the close
of business on the later of the 90 days prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
A copy of the applicable by-law provisions may be obtained, without charge,
upon written request to the Secretary of the Company at the Company's principal
executive offices.
In accordance with the rules of the Securities and Exchange Commission, any
proposal of a stockholder intended to be presented at the Company's 2003 Annual
Meeting of Stockholders must be received by the Secretary of the Company before
December 16, 2002 in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 2003
Annual Meeting, currently scheduled for Tuesday, May 20, 2003.
By order of the Board of Directors
DONALD P. FAY
Executive Vice President, General
Counsel and Secretary
April 15, 2002
A copy of our Annual Report on Form 10-K for the year ended December 31,
2001, excluding certain of the exhibits thereto, is included with this proxy
statement.
21
EXHIBIT A
TRIAD HOSPITALS, INC.
Charter
Audit Committee
of the Board of Directors
Purpose
The Audit Committee is a committee of the Triad Hospitals, Inc. Board of
Directors. Its function is to assist the board in fulfilling its oversight
responsibilities by:
. Monitoring the integrity of financial information that will be provided
to the shareholders and others.
. Reviewing areas of potential significant financial risk to the Company
including evaluation of the system of internal controls which management
and the board of directors has established.
. Monitoring the independence and performance of the Company's external
auditors and internal auditing function.
. Reporting on all such matters to the Board of Directors.
Membership & Meetings
. Committee members shall meet the requirements of the New York Stock
Exchange.
. The Committee shall consist of not less than three independent directors
and will meet at least four times each year.
. All members of the Committee shall be financially literate and able to
read and understand fundamental financial statements. At least one
member of the Committee shall have accounting or related financial
management experience.
. The Committee should meet privately in executive session at least
annually with the Vice President of Audit Services and the independent
auditors to discuss any matters that the committee believes should be
discussed.
Duties & Responsibilities
General
. Consider, in consultation with the external and internal auditors, the
audit scope and plan for the Company.
. Review with management and the external auditors the Company's annual
and quarterly financial results prior to release of earnings. Discuss
certain matters required to be communicated to audit committees in
accordance with Statement of Auditing Standards (SAS) No. 61.
. Review with management, the external auditors and the internal auditors,
significant issues concerning litigation, contingencies, claims, or
assessments and all material accounting issues that require disclosure
in the financial statements. This review should include a discussion of
recent FASB or other regulatory agency pronouncements that have a
material impact on the organization.
. Review filings with the SEC and other published documents containing the
Company's financial statements and consider whether the information
contained in these documents is consistent with the information
contained in the financial statements.
A-1
. Review the Company's policies relating to compliance with laws and
regulations; the Company's Code of Conduct; ethics; officers' expense
accounts, perquisites, and use of corporate assets; conflict of interest
and the investigation of misconduct or fraud.
. Review legal and regulatory matters that may have a material impact on
the financial statements, the Company's related compliance policies and
programs and reports received from regulators.
. Annually, prepare a report to the shareholders as required by the
Securities and Exchange Commission. The report should be signed by the
chair of the Committee and included in the Company's annual proxy
statement.
. State in the annual proxy statement that the company's audit committee
has adopted a written charter, and include a copy at least every three
years.
. Provide a report of Committee activities to the board at regular
intervals.
. Review the Committee charter annually and recommend modifications to the
board as needed.
Management
. Review with management the "Management's Discussion and Analysis"
section of the annual report to shareholders.
. Monitor instances where management seeks second opinions on significant
accounting matters.
. Review management's evaluation of the adequacy of the organization's
internal control structure and the extent to which significant
recommendations made by the external auditors and the internal auditors
have been implemented.
Internal Auditors
. Review the services provided by the internal auditing function,
including:
. The planned scope for the internal audit program, its objectives, and
the staff required to attain these objectives.
. Reports that detail the activities of the internal auditing function.
. The working relationship between the internal auditing department and
the external auditors.
. The appointment and termination of the Vice President of Audit
Services (review and approve).
. Provide for periodic quality assurance reviews to ensure that the
internal auditing function is operating in accordance with The IIA's
Standards for Standards for the Professional Practice of Internal
Auditing.
External Auditors
. Recommend the external auditing firm for appointment by the board.
. Review and approve the annual audit fees of the external auditing firm.
. Review the independence of the external auditing firm and management's
evaluation of this independence.
. Review and approve the scope of other professional services performed
(or to be performed) by any independent public accountants as well as
the related fees, and consider the possible effect that these services
could have on the independence of such accountant.
A-2
. Discuss with the external auditor the results of its audit from the
proceeding year, including:
. A review of the audited financial statements and the memorandum
containing recommendations for improving accounting procedures and
internal controls.
. The adequacy of the organization's internal control structure.
. Management's cooperation with the external auditor.
. The quality of the organization's accounting principles and policies
and underlying estimates when compared to its industry in general.
. A determination that the organization's financial statements
constitute a full and meaningful report to its shareholders and
creditors.
. Ensure that the committee obtains from the external auditors a formal
written statement delineating all relationships between the auditor and
Triad, and its responsibility for discussing with the auditor and
disclosed relationships or services that may impact auditor objectivity
and independence (as set forth in Independence Standards Board No. 1).
. External auditors ultimate accountability is to the board and audit
committee, which has the ultimate authority and responsibility to
select, evaluate, and, where appropriate, replace the external auditors.
A-3
EXHIBIT B
TRIAD HOSPITALS, INC.
OUTSIDE DIRECTORS STOCK AND INCENTIVE COMPENSATION PLAN
as amended through February 7, 2002
1. Introduction.
This Plan shall be known as the "Triad Hospitals, Inc. Outside Directors
Stock and Incentive Compensation Plan" and is hereinafter referred to as the
"Plan." The purposes of the Plan are to encourage ownership of stock in the
Company by Outside Directors, through the granting of non-qualified stock
options and deferred stock unit awards, to provide an incentive to such
directors to continue to serve the Company and to aid the Company in attracting
qualified director candidates in the future. Options granted under the Plan
will not be incentive stock options within the meaning of section 422 of the
Code.
The provisions of the Plan are intended to satisfy any applicable
requirements of Section 16(b) of the Exchange Act, and shall be interpreted in
a manner consistent with any such requirements thereof, as now or hereafter
construed, interpreted and applied by regulation, rulings and cases.
The terms of the Plan shall be as set forth below, effective as of the date
the Company's Common Stock is distributed to Columbia/HCA Healthcare
Corporation stockholders.
2. Definitions.
As used in the Plan, the following words and phrases shall have the meanings
indicated:
(a) "Agreement" shall mean a written agreement entered into between the
Company and a Participant in connection with an Option granted under the
Plan.
(b) "Annual Option" shall mean an Option granted pursuant to Section 5.1
hereof.
(c) "Annual Retainer" shall mean the annual fee earned by the Participant
for his service on the Board.
(d) "Black-Scholes Evaluation Method" shall mean the generally accepted
option pricing model based on the Black-Scholes valuation model as adapted
for use in valuing stock options and using such assumptions as are
determined and adopted from time to time by the Board.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Board Term" shall mean each Board year beginning on the date of an
annual meeting of the Company's shareholders and ending on the date
immediately preceding the next annual meeting of the Company's shareholders.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean Triad Hospitals, Inc., a Delaware corporation,
or any successor corporation.
(j) "Deferred Stock Unit" shall mean a bookkeeping unit entitling a
Participant to a Share on the Realization Date applicable under the Plan
(and shall include fractional units).
B-1
(k) "Deferred Stock Unit Account" shall mean a bookkeeping account
maintained by the Company reflecting the number of Deferred Stock Units
credited to a Participant pursuant to Section 6.2 hereof as a result of the
Participant's Stock Election.
(l) "Deferred Stock Unit Award" shall mean an award under Section 6.2
hereof of Deferred Stock Units as a result of a Participant's Stock Election
for a Board Term.
(m) "Disability" shall mean a Participant's total and permanent inability
to perform his or her duties with the Company or any Subsidiary by reason of
any medically determinable physical or mental impairment, within the meaning
of Code section 22(e)(3).
(n) "Discretionary Option" shall mean an Option granted pursuant to
Section 5.3.
(o) "Election Notice" shall mean a written election, in such form as the
Board shall prescribe, submitted by a Participant to the Company in
connection with a Stock Election under the Plan.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(q) "Fair Market Value" per Share or per Deferred Stock Unit as of a
given date shall mean the closing sales price of the Common Stock on the New
York Stock Exchange on the trading day immediately preceding the date as of
which the Fair Market Value is to be determined, or, in the absence of any
reported sales of Shares on such date, on the first preceding date on which
any such sale shall have been reported (in either case, as reported in the
Two Star Edition of The Wall Street Journal). If the Shares are not listed
on the New York Stock Exchange on the date as of which Fair Market Value is
to be determined, the Committee shall in good faith determine the Fair
Market Value in whatever manner it considers appropriate.
(r) "Initial Option" shall mean an Option granted pursuant to Section 5.2
hereof.
(s) "Option" shall mean an Annual Option, Initial Option or Discretionary
Option, as the case may be.
(t) "Option Price" shall mean the price at which each Share subject to an
Option may be purchased, determined in accordance with Section 5.4 hereof.
(u) "Outside Director" shall mean any member of the Board who is not also
an employee of the Company (or any Subsidiary thereof).
(v) "Participant" shall mean any Outside Director who has received an
Option or other award (or credit) hereunder that has not yet terminated.
(w) "Realization Date" shall mean, as elected by the Participant, with
respect to any Deferred Stock Unit allocated to a Participant's Deferred
Stock Unit Account, the first business day following (i) the fifth
anniversary of the date such Deferred Stock Unit is credited to the
Participant's Deferred Stock Unit Account, or (ii) the date the Participant
ceases to be a member of the Board.
(x) "Shares" shall mean shares of Common Stock of the Company.
(y) "Stock Election" shall mean an election of the Participant to
receive, in lieu of all or part (in multiples of 25%) of his Annual
Retainer, a Deferred Stock Unit Award pursuant to Section 6.2 hereof.
(z) "Subsidiary" shall have the meaning set forth in Section 7.2.
B-2
3. Administration of the Plan.
3.1 General Authority. The Plan shall be administered by the Board. The
Board shall have plenary authority in its discretion, but subject to the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the details and provisions of
the Election Notices and Agreements and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The Board's
determinations on the foregoing matters shall be final and conclusive. No
member of the Board shall be liable for any action taken or determination made
in good faith with respect to the Plan or any grant hereunder.
4. Stock Subject to Plan.
4.1 Number of Shares. The maximum of Shares which may be issued pursuant
to Options and other awards under the Plan shall be 500,000 Shares, which
number shall be subject to adjustment as provided in Section 8 hereof. Such
Shares may be either authorized but unissued Shares, or Shares that shall have
been or may be reacquired by the Company.
4.2 Reuse of Shares. If an Option or a Deferred Stock Unit Award under the
Plan is canceled, terminates, expires unexercised or is exchanged for a
different award without the issuance of Shares, the covered Shares shall, to
the extent of such termination or non-use, again be available for awards
thereafter granted during the term of the Plan.
5. Options.
5.1 Grant of Annual Options. Each person who is an Outside Director on the
first business day of any Board Term shall be granted an Annual Option on such
date as shall be selected by the Board which shall cover a number of Shares
determined by the Board. Such Annual Option shall become exercisable in four
cumulative installments, each of which shall relate to 25% of the Shares
covered by the Annual Option, beginning on the first anniversary of the date of
grant and the three next succeeding anniversary dates thereof, respectively.
5.2 Grant of Initial Options. In addition to Annual Options granted under
Section 5.1, upon commencement of service as an Outside Director, each Outside
Director shall be granted an Initial Option, as of such date as shall be
selected by the Board, which shall cover a number of shares determined by the
Board. Such Initial Option shall become exercisable in four cumulative
installments, each of which shall relate to 25% of the Shares covered by the
Initial Option, beginning on the first anniversary of the date of grant and the
three next succeeding anniversary dates thereof, respectively.
5.3 Discretionary Options. The Board may, from time to time, in its sole
discretion, designate Outside Directors who are to be granted Discretionary
Options and determine the number of shares subject to such Discretionary
Options. The Board, in its sole discretion, shall prescribe the time or times
at which, or the conditions upon which, a Discretionary Option or portion
thereof shall become vested and exercisable, and may accelerate the
exercisability of any Discretionary Option at any time.
5.4 Option Price. The Option Price of each Share subject to an Annual
Option or Initial Option shall be 100 percent of the Fair Market Value of a
Share on the date of grant. The Option Price of each Share under a
Discretionary Option shall be determined by the Board; provided, however, that
the Option Price of each Share under such Discretionary Option shall not be
less than 100 percent of the Fair Market Value of a Share on the date of grant.
B-3
5.5 Term. The term of any Option issued pursuant to the Plan shall be ten
years from the date of grant and may extend beyond the date of termination of
the Plan; provided, however, that the Board may, in the case of a Discretionary
Option, provide for a shorter exercise period in the Agreement.
5.6 Option Exercise. An Option may be exercised in whole or in part at any
time, with respect to whole Shares only, within the period permitted thereunder
for the exercise thereof, and shall be exercised by written notice of intent to
exercise the Option with respect to a specified number of Shares, delivered to
the Company at its principal office, and payment in full to the Company at said
office of the amount of the Option Price for the number of Shares with respect
to which the Option is then being exercised. Payment of the Option Price shall
be made (i) in cash or cash equivalents, (ii) in whole Shares valued at the
closing sales price of the Common Stock on the New York Stock Exchange on the
date of exercise (or next succeeding trading date, if the date of exercise is
not a trading date, in which case the exercise date shall instead be considered
to be such next trading date) or (iii) by a combination of such cash (or cash
equivalents) and such Stock; provided, however, that the optionee shall not be
entitled to tender Shares pursuant to successive, substantially simultaneous
exercises of an Option or any other stock option of the Company. Subject to
applicable securities laws, an Option may also be exercised by delivering a
notice of exercise of the Option and simultaneously selling the Shares thereby
acquired pursuant to a brokerage or similar agreement approved in advance by
proper officers of the Company, using the proceeds of such sale as payment of
the exercise price. Subject to the provisions of Section 9 hereof, the Company
shall issue a stock certificate for the Shares purchased by exercise of an
Option, in the name of the optionee (or other person exercising the Option in
accordance with the provisions of the Plan), as soon as practicable after due
exercise and payment of the aggregate Option Price for such Shares.
5.7 Limited Transferability of Options. All Options shall be
nontransferable except (i) upon the optionee's death, by the optionee's will or
the laws of descent and distribution or (ii) on a case-by-case basis, as may be
approved by the Board in its discretion, in accordance with the terms provided
below. Each Agreement shall provide that the optionee may, during his or her
lifetime and subject to the prior approval of the Board at the time of proposed
transfer, transfer all or part of the Option to a Family Member (as defined
below), provided that such transfer is made for estate planning, tax planning,
donative purposes or pursuant to a domestic relations order, and no
consideration (other than nominal consideration) is received by the Optionee.
The transfer of an Option shall be subject to such other terms and conditions
as the Board may in its discretion impose from time to time, including (without
limitation) a condition that the portion of the Option to be transferred be
vested and exercisable by the optionee at the time of the transfer and a
requirement that the terms of such transfer be documented in a written
agreement (in such form as the Board may prescribe). Subsequent transfers of an
Option transferred under this Section 5.7 shall be prohibited, other than by
will or the laws of descent and distribution upon the death of the transferee.
For purposes hereof, a "family member" shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee's household (other than a tenant or employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the employee) control the management of
assets, and any other entity in which these persons (or the employee) own more
than fifty percent of the voting interests.
No transfer of an Option by the optionee by will or by laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and an authenticated copy of
the will and/or such other evidence as the Board may deem necessary to
establish the validity of the transfer. During the lifetime of an optionee,
except as provided above, the Option shall be exercisable only by the optionee,
except that, in the case of an optionee who is legally incapacitated, the
Option shall be exercisable by the optionee's guardian or legal representative.
In the event of any transfer of an Option to a Family Member in accordance with
the provisions of this Section 5.7, such Family Member shall thereafter
B-4
have all rights that would otherwise be held by such optionee (or by such
optionee's guardian, legal representative or beneficiary), except as otherwise
provided herein. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of the Option contrary to the provisions hereof, and the levy
of any execution, attachment or similar process upon the Option, shall be null
and void and without effect.
5.8 Death of Optionee. If an optionee dies while he is an Outside
Director, the executor or administrator of the estate of the decedent (or the
person or persons to whom an Option shall have been validly transferred in
accordance with Section 5.7) shall have the right, during the period ending six
months after the date of the optionee's death (subject to the provisions of
Section 5.5 hereof concerning the maximum term of an Option), to exercise the
Option to the extent that it was exercisable at the date of such optionee's
death and shall not have been previously exercised.
5.9 Disability. If an optionee's service as an Outside Director shall be
terminated as a result of Disability, the optionee (or in the case of an
optionee who is legally incapacitated, his guardian or legal representative)
shall have the right, during a period ending six months after the date of his
disability (subject to the provisions of Section 5.5 hereof concerning the
maximum term of an Option), to exercise the Option to the extent that it was
exercisable at the date of such optionee's Disability and shall not have been
previously exercised.
5.10 Other Termination of Service. If an optionee's service as an Outside
Director shall be terminated for any reason other than death or Disability, the
optionee shall have the right, during the period ending ninety days after such
termination (subject to the provisions of Section 5.5 hereof concerning the
maximum term of an Option), to exercise the Option to the extent that it was
exercisable on the date of such termination of service and shall not have been
previously exercised.
6. Deferred Stock Unit Awards.
6.1 Stock Elections. For each Board Term during which the Plan is in
effect, a Participant may elect to receive, in lieu of all or any portion (in
multiples of 25%) of his Annual Retainer payable for such Board Term, a
Deferred Stock Unit Award pursuant to Section 6.2 hereof. Such an election
shall be made for a Board Term by filing an Election Notice with the Company,
in accordance with procedures adopted by the Board, prior to the commencement
of the Board Term for which such Annual Retainer is to be paid; provided,
however, that in the case of the Board Term beginning in 1999, such Election
Notice must be filed on or before May 31, 1999.
6.2 Deferred Stock Unit Awards. A Participant shall receive a Deferred
Stock Unit Award for each Board Term in respect of which he makes a Stock
Election. Such Deferred Stock Unit Award shall be granted as of the first
business day of the Board Term (except that in the case of the Board Term
beginning in 1999, such grant date shall be the twenty-first (21) trading date
of the Company's Common Stock) and shall be for a number of Deferred Stock
Units determined by dividing (A) the additional Annual Retainer amount that
would have been payable to the Participant in cash in the absence of his Stock
Election, by (B) the Fair Market Value of a Share on the date of grant.
6.3 Award Terms. Each Deferred Stock Unit Award granted under the Plan
shall have the following terms:
(a) Vesting. All Deferred Stock Units credited to a Participant's
Deferred Stock Unit Account shall immediately be 100% vested.
(b) Dividend Equivalents. A Participant shall be credited with dividend
equivalents on all Deferred Stock Units credited to his Deferred Stock Unit
Account at the time of any payment of dividends on Shares to stockholders.
The amount of any such dividend equivalents shall equal the amount that
would have been payable to the Participant as a stockholder in respect of a
number of Shares equal to the number of Deferred Stock Units then credited
to him. Any such dividend equivalent shall be credited to the Participant's
Deferred Stock Unit Account as of the date on which such dividend would have
been payable and shall be converted into additional Deferred Stock Units
(which shall be immediately vested) based upon the Fair Market Value of a
Share on the date of such crediting.
B-5
(c) Payment of Awards. A Participant shall be entitled to payment, in
respect of Deferred Stock Units credited to him, on the Realization Date for
such Deferred Stock Units indicated by Participant in the applicable
Election Notice. Subject to the provisions of Section 9, such payment in
respect of any Deferred Stock Units shall be made through the issuance to
the Participant of a stock certificate for a number of Shares equal to the
number of such Deferred Stock Units.
7. Change in Control.
7. Effect of Change in Control. Upon a "change in control" of the Company
(as defined below), each outstanding Option, to the extent that it shall not
otherwise have become exercisable, shall become fully and immediately
exercisable (without regard to the otherwise applicable provisions of Sections
5.1, 5.2 and 5.3 hereof concerning exercisability).
7.2 Definition. For purposes of Section 7.1 hereof, "change in control"
of the Company shall be deemed to have occurred upon the occurrence of any of
the following after the date on which the Corporation becomes a publicly-held
Corporation:
(a) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the
term Person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of twenty percent (20%) or more of the
combined voting power of the then outstanding Voting Securities; provided,
however, that in determining whether a change in control has occurred,
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause a
change in control. A "Non-Control Acquisition" shall mean an acquisition by
(i) an employee benefit plan (or a trust forming a part thereof) maintained
by (A) the Company or (B) any corporation or other Person of which a
majority of its voting power or its equity securities or equity interest is
owned directly or indirectly by the Company (a "Subsidiary") or (ii) the
Company or any Subsidiary.
(b) The individuals who, as of the date the Company issues any class of
equity securities required to be registered under Section 12 of the 1934
Act, are members of the Board (the "Incumbent Board"), cease for any reason
to constitute at least two-thirds of the Board; provided, however, that if
the election, or nomination for election, by the Company's stockholders of
any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered as a member of the Incumbent Board; provided, further, however,
that no individual shall be considered a member of the Incumbent Board if
(1) such individual initially assumed office as a result of either an actual
or threatened "Election Contest" (as described in Rule 14a-11 promulgated
under the 1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest or (2) such individual was designated
by a Person who has entered into an agreement with the Company to effect a
transaction described in clause (a) or (c) of this Section 7.2; or
(c) Consummation, after approval by stockholders of the Company, of:
(1) A merger, consolidation or reorganization involving the Company,
unless,
(A) The stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least seventy-five percent (75%) of the combined voting power of
the outstanding Voting Securities of the corporation resulting from
such merger or consolidation or reorganization or its parent
corporation (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization;
B-6
(B) The individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation; and
(C) No Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization, had Beneficial Ownership of twenty
percent (20%) or more of the then outstanding Voting Securities) has
Beneficial Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding Voting
Securities.
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than
a transfer to a Subsidiary).
Notwithstanding the foregoing, a change in control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increased the proportional number of shares Beneficially Owned by the
Subject Person, provided that if a change in control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a change in
control shall occur.
8. Antidilution Adjustments.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger or consolidation, or the sale,
conveyance, lease or other transfer by the Company of all or substantially all
of its property, or any other change in the corporate structure or shares of
the Company, pursuant to any of which events the then outstanding Shares are
split up or combined, or are changed into, become exchangeable at the holder's
election for, or entitle the holder thereof to, other shares of stock, or in
the case of any other transaction described in section 424(a) of the Code, the
Board may make such adjustment or substitution (including by substitution of
shares of another corporation) as it may determine to be appropriate, in its
sole discretion, in (i) the aggregate number and kind of shares that may be
distributed in respect of Option exercises and/or awards under the Plan, (ii)
the number and kind of shares subject to outstanding Options and/or the Option
Price of such shares and (iii) the number and kind of shares represented by
Deferred Stock Units outstanding under the Plan.
9. Conditions of Issuance of Stock Certificates.
9.1 Applicable Conditions. The Company shall not be required to issue or
deliver any certificate for Shares under the Plan prior to fulfillment of all
of the following conditions:
(a) the completion of any registration or other qualification of such
Shares, under any federal or state law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, that the Board shall, in its sole discretion, deem
necessary or advisable;
B-7
(b) the obtaining of any approval or other clearance from any federal or
state governmental agency that the Board shall, in its sole discretion,
determine to be necessary or advisable;
(c) the lapse of such reasonable period of time following the event
triggering the obligation to distribute shares as the Board from time to
time may establish for reasons of administrative convenience; and
(d) if required by the Board, in its sole discretion, the receipt by the
Company from a Participant of (i) a representation in writing that the
Shares received pursuant to the Plan are being acquired for investment and
not with a view to distribution and (ii) such other representations and
warranties as are deemed necessary by counsel to the Company.
9.2 Legends. The Company reserves the right to legend any certificate for
Shares, conditioning sales of such shares upon compliance with applicable
federal and state securities laws and regulations.
10. No Rights to Continued Service.
Nothing in the Plan, in any grant made, or in any Election Notice or
Agreement entered into pursuant hereto shall confer upon any Participant the
right to continue service as a member of the Board or to be entitled to any
remuneration or benefits not set forth in the Plan, Election Notice or
Agreement.
11. No Rights to Assets of the Company.
Nothing in the Plan, in any grant made, or in any Election Notice or
Agreement entered into pursuant hereto shall confer upon any Participant any
right to any particular assets of the Company. A Participant's rights under the
Plan are limited to those rights of an unsecured creditor except to the extent
Shares are actually issued to such Participant.
12. Amendment and Termination of the Plan.
The Board, at any time and from time to time, may suspend, terminate, modify
or amend the Plan; provided, however, that an amendment which requires
stockholder approval for the Plan to continue to comply with any law,
regulation or stock exchange requirement shall not be effective unless approved
by the requisite vote of stockholders. No suspension, termination, modification
or amendment of the Plan shall adversely affect any grants previously made,
unless the written consent of the Participant is obtained.
13. Term of the Plan.
The Plan shall have a term of ten years. No grants or awards may be made
after such termination, but termination of the Plan shall not, without the
consent of any Participant who then holds Options or Deferred Stock Units,
alter or impair any rights or obligations in respect of such Options or
Deferred Stock Units.
14. Governing Law.
The Plan and the rights of all persons claiming hereunder shall be construed
and determined in accordance with the laws of the State of Texas without giving
effect to the choice of law principles thereof, except to the extent that such
laws are preempted by Federal law.
B-8
------------------------------
Vote By Telephone
------------------------------
Have your proxy card available
when you call the Toll-Free
number 1-800-542-1160 using a
touch-tone telephone. You will
be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
Vote by Internet
------------------------------
Have your card available when
you access the website
http://www.votefast.com. You
will be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
Vote by Mail
------------------------------
Please mark, sign and date
your proxy card and return
in the postage-paid envelope
provided or return it to:
Stock Transfer Dept (TRIH)
National City Bank, P.O. Box
92301, Cleveland, OH 44193-
0900.
--------------------------------------------------------------------------------
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Return your proxy
touch-tone telephone: cast your vote: in the Postage-Paid
1-800-542-1160 http://www.votefast.com envelope provided
--------------------------------------------------------------------------------
Vote 24 hours a day, 7 days a week!
Your telephone or Internet vote must be received by 11:59 p.m. eastern daylight
time on May 20, 2002, in order to be counted in the final tabulation.
If you vote by telephone or Internet, please do not send your proxy by mail.
====================================================
Your Control Number is:
====================================================
Please sign and date this card where indicated below before mailing.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
Proxy Triad Hospitals, Inc. Proxy
Proxy for Annual Meeting of Stockholders on May 21,2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Donald P. Fay and Burke W. Whitman proxies, each
with the power to appoint his substitute and with authority in each to act in
the absence of the other, to represent and to vote all shares of stock of Triad
Hospitals, Inc. which the undersigned is entitled to vote at the 2002 Annual
Meeting of Stockholders of Triad Hospitals, Inc. to be held at the offices of
Triad Hospitals, Inc. at 13455 Noel Road, Suite 2000, Dallas, Texas 75240 on May
21, 2002, at 10:00 a.m., local time, and any adjournments or postponements
thereof, as indicated on the proposals described in the Proxy Statement, and all
other matters properly coming before the 2002 Annual Meeting of Stockholders of
Triad Hospitals, Inc., or any adjournment or postponement thereof. This proxy
revokes all prior proxies given by the undersigned.
_________________________________________________
Signature (s)
_________________________________________________
Signature (s)
Date:_____________________________________ , 2002
Please sign exactly as your name or names appear
hereon. For joint accounts, both owners should
sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please
give your full title.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
Proxy Triad Hospitals, Inc. Proxy
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1 Through 3. Please Mark Vote
---
In The Following Manner [X] Using Dark Ink Only. This Proxy Will Be Voted In
Accordance With Specifications Made. If No Choices Are Indicated, This Proxy
Will Be Voted FOR Items 1 Through 3.
---
1. ELECTION of Directors
Nominees: (01) Thomas G. Loeffler (02) Michael J. Parsons (03) Uwe E. Reinhardt, Ph.D.
[_] FOR all nominees listed above [_] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees listed above
To withhold authority to vote for any individual nominee, write that nominee's name on the line below:
--------------------------------------------------------------------------------------------------
2. RATIFICATION of Ernst & Young LLP as independent auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL of an amendment to the Triad Hospitals, Inc. Outside
Directors Stock and Incentive Compensation Plan to increase
the number of authorized shares thereunder from 400,000 to 500,000.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Mark here if you plan to attend the 2002 Annual Meeting.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
------------------------------
Vote by Telephone
------------------------------
=========================== Have this form available when
U.S. Trust Company, N.A. you call the Toll-Free number
P. O. Box 1150 1-800-542-1160 using a
Pittsburgh, PA 15230-1150 touch-tone telephone. You will
=========================== be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
Vote by Internet
------------------------------
Have this form available when
you access the website
http://www.votefast.com. You
will be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
------------------------------
Vote by Mail
------------------------------
Please mark, sign and date
the card and return it in the
postage-paid envelope provided
or return it to: Corporate
Election Services, P.O. Box
1150, Pittsburgh, PA 15230.
--------------------------------------------------------------------------------
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Return your card
touch-tone telephone: cast your vote: below in the Postage-Paid
1-800-542-1160 http://www.votefast.com envelope provided
--------------------------------------------------------------------------------
Vote 24 hours a day, 7 days a week!
Your telephone or Internet vote must be received by 11:59 p.m. eastern daylight
time on May 14, 2002, in order to be counted in the final tabulation.
If you vote by telephone or internet, please do not send the card below by
mail.
=======================================================
Your Control Number is:
=======================================================
Please sign and date this card where indicated below before mailing.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
VOTING INSTRUCTIONS TO THE TRUSTEE OF THE TRIAD HOSPITALS, INC.
EMPLOYEE STOCK OWNERSHIP TRUST FOR THE
ANNUAL MEETING OF STOCKHOLDERS OF TRIAD HOSPITALS, INC. - MAY 21, 2002
The undersigned Participant in the Triad Hospitals, Inc. Retirement Savings Plan
(the "Plan") hereby instructs U.S. Trust Company, N.A., as Trustee under the
Triad Hospitals, Inc. Employee Stock Ownership Trust ("Trustee"), to vote in
accordance with the instructions on the reverse side all shares of common stock
of Triad Hospitals, Inc. ("Triad") credited, as of April 8, 2002, to the account
of the undersigned under the Plan, and to represent the undersigned at the 2002
Annual Meeting of Stockholders of Triad Hospitals, Inc. to be held on May 21,
2002, and at any adjournments or postponements thereof, and to act in its
discretion upon such other matters as may properly come before the meeting or
any adjournments or postponements thereof, all as set forth in the accompanying
Notice to Plan Participants dated April 15, 2002 and/or Triad's Proxy Statement,
the receipt of which the undersigned acknowledges.
______________________________________________________
Signature
Date: __________________________________________, 2002
Please sign exactly as your name appears to the left.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1 through 3.
---
1. ELECTION of Directors
Nominees: (01) Thomas G. Loeffler (02) Michael J. Parsons (03) Uwe E. Reinhardt, Ph.D.
[_] FOR all nominees listed above [_] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees listed above
To withhold authority to vote for an individual nominee, write that nominee's name on the line below:
-----------------------------------------------------------------------
2. RATIFICATION of Ernst & Young LLP as independent auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL of an amendment to the Triad Hospitals, Inc. Outside Directors Stock and Incentive Compensation Plan to increase
the number of authorized shares thereunder from 400,000 to 500,000.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Mark here if you plan to attend the 2002 Annual Meeting.
THIS FORM MUST BE PROPERLY COMPLETED, SIGNED, DATED, AND RECEIVED BY THE TRUSTEE
BY 11:59 P.M. EASTERN DAYLIGHT TIME ON MAY 15, 2002. IF YOUR VOTING INSTRUCTIONS
ARE NOT RECEIVED BY THIS ESTABLISHED DEADLINE, THE TRUSTEE CANNOT ENSURE THAT
YOUR VOTING INSTRUCTIONS WILL BE TABULATED. IF YOU SIGN, DATE AND RETURN THIS
FORM BUT DO NOT SPECIFICALLY INSTRUCT THE TRUSTEE HOW TO VOTE, THE TRUSTEE WILL
VOTE YOUR SHARES IN THE SAME MANNER AND PROPORTION AS THOSE SHARES FOR WHICH
VOTING INSTRUCTIONS WERE RECEIVED. YOUR VOTING INSTRUCTIONS TO THE TRUSTEE ARE
CONFIDENTIAL AS EXPLAINED IN THE ACCOMPANYING NOTICE TO PLAN PARTICIPANTS.
-----------------------------
Vote by Telephone
-----------------------------
Have your card available when
you call the Toll-Free number
1-800-542-1160 using a
touch-tone telephone. You will
be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
-----------------------------
Vote by Internet
-----------------------------
Have your card available when
you access the website
http://www.votefast.com. You
will be prompted to enter your
Control Number. Please follow
the simple prompts that will
be presented to you to record
your vote.
-----------------------------
Vote by Mail
-----------------------------
Please mark, sign and date
your card and return it in the
postage-paid envelope provided
or return it to: Stock
Transfer Dept (TRI) National
City Bank, P.O. Box 92301
Cleveland OH 44193-0900.
--------------------------------------------------------------------------------
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Return your card
touch-tone telephone: cast your vote: in the Postage-Paid
1-800-542-1160 http://www.votefast.com envelope provided
--------------------------------------------------------------------------------
Vote 24 hours a day, 7 days a week!
Your telephone or Internet vote must be received by 11:59 p.m. eastern
daylight time on May 14, 2002 in order to be counted in the final tabulation.
If you vote by telephone or internet, please do not send the card below by mail.
===================================================
Your Control Number is:
===================================================
Please sign and date this card where indicated below before mailing.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
Triad Hospitals, Inc.
Voting Instructions to the Record Keeper
of
The Triad Hospitals, Inc. Employee Stock Purchase Plan and the HCA Inc.
Employee Stock Purchase Plan For The 2002 Annual Meeting Of
Triad Hospitals, Inc. Stockholders on May 21, 2002
The undersigned, a Participant in either the Triad Hospitals, Inc. Employee
Stock Purchase Plan or the HCA Inc. Employee Stock Purchase Plan (individually,
a "Plan" and together, the "Plans") hereby instructs Computershare Trust
Company, as record keeper for each of the Plans (the "Record Keeper"), to vote
in accordance with the instructions on the reverse hereof all shares of common
stock of Triad Hospitals, Inc. credited, as of April 8, 2002, to the account of
the undersigned Participant under either Plan, and to represent the undersigned
Participant at the 2002 Annual Meeting of Stockholders of Triad Hospitals, Inc.
to be held on May 21, 2002 at 10:00 a.m., local time, and any adjournments or
postponements thereof.
_____________________________________________________
Signature
Date: , 2002
------------------------------------------------
Please sign exactly as your name appears to the left.
. Please fold and detach card at perforation before mailing. .
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1 through 3.
---
1. ELECTION of Directors
NOMINEES: (01) Thomas G. Loeffler (02) Michael J. Parsons (03) Uwe E. Reinhardt, Ph.D.
[_] FOR ALL [_] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees listed above
To withhold authority to vote for an individual nominee, write that nominee's name in the following space:
_______________________________________________________________________________________________
2. RATIFICATION of Ernst & Young LLP as independent auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL of an amendment to the Triad Hospitals, Inc. Outside Directors Stock and Incentive
Compensation Plan to increase the number of authorized shares thereunder from 400,000 to 500,000.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Mark here if you plan to attend the 2002 Annual Meeting.
THIS FORM MUST BE PROPERLY COMPLETED, SIGNED, DATED, AND RECEIVED BY THE
RECORD KEEPER BY 11:59 P.M. EASTERN DAYLIGHT TIME ON MAY15, 2002. IF YOUR
VOTING INSTRUCTIONS ARE NOT RECEIVED BY THIS ESTABLISHED DEADLINE, THE RECORD
KEEPER CANNOT ENSURE THAT YOUR VOTING INSTRUCTIONS WILL BE TABULATED. IF YOU
SIGN, DATE AND RETURN THIS FORM BUT DO NOT SPECIFICALLY INSTRUCT THE RECORD
KEEPER HOW TO VOTE, THE RECORD KEEPER WILL VOTE FOR ITEMS 1 THROUGH 3.
---