R
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from ________
to ________
|
|
Commission
File Number: 1-8865
|
SIERRA
HEALTH SERVICES, INC.
(Exact
Name of Registrant as Specified in Its
Charter)
|
||
Nevada
|
88-0200415
|
|
(State
or Other Jurisdiction
of
Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
2724
North Tenaya Way, Las Vegas, NV
|
89128
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange which registered
|
|
Common
Stock, par value $.005
|
New
York Stock Exchange
|
Securities
Registered Pursuant to Section 12(g) of the Act:
None
|
|
Indicate
by check mark if the registrant is a well-known seasoned issuer,
as
defined in Rule 405 of the Securities Act. YesR
No
ྈ
|
|
Indicate
by check mark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act. Yes ྈNo R
|
|
Indicate
by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past
90 days. Yes R No ྈ
|
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained,
to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any
amendment to this Form 10-K. ྈ
|
|
Indicate
by check mark whether the registrant is a large accelerated filer,
an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of
the Exchange Act (check one).
|
Large
accelerated filerR Accelerated
filer Non-accelerated
filer
|
|
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Exchange Act). Yes NoR
|
|
The
aggregate market value of the voting stock held by non-affiliates
of the
registrant at June 30, 2006 was $2,301,974,000 (which represents
shares of 51,121,000 Common Stock held by such non-affiliates multiplied
by $45.03, the closing sales price of such stock on the New York
Stock
Exchange on June 30, 2006).
|
|
The
number of shares outstanding of the registrant’s Common Stock as of
April 26, 2007 was 55,967,000.
|
|
Documents
Incorporated By Reference
|
Name
|
Age
|
Position
|
||
Anthony
M. Marlon, M.D.
|
64
|
Chief
Executive Officer and Chairman of the Board
|
||
Jonathon
W. Bunker
|
48
|
President and
Chief Operating Officer
|
||
Frank
E. Collins
|
52
|
Senior
Executive Vice President, Legal and Administration and
Secretary
|
||
Donald
J. Giancursio
|
48
|
Senior
Vice President, Sales and Marketing
|
||
Paul
H. Palmer
|
45
|
Senior
Vice President, Chief Financial Officer and Treasurer
|
||
Darren
G.D. Sivertsen
|
45
|
Senior
Vice President, Operations
|
||
Marc
R. Briggs
|
37
|
Vice
President, Finance and Chief Accounting Officer
|
||
Thomas
Y. Hartley
|
73
|
Lead
Director
|
||
Charles
L. Ruthe
|
72
|
Director
|
||
Albert
L. Greene
|
57
|
Director
|
||
Michael
E. Luce
|
56
|
Director
|
||
Anthony
L. Watson
|
65
|
Director
|
·
|
Corporate
Governance Guidelines
|
·
|
Code
of Ethics
|
·
|
Code
of Ethics for Directors
|
·
|
Code
of Conduct for the Chief Executive Officer and Senior Financial
Officers
|
·
|
Audit
Committee Charter
|
·
|
Nominating
and Governance Committee Charter
|
·
|
Compensation
Committee Charter
|
·
|
Selection
and monitoring of the performance of senior
management;
|
·
|
Succession
planning for senior management;
|
·
|
Qualifications
for Board membership, including mandatory retirement for Board members
upon completion of a term after attaining age
78;
|
·
|
Functioning
of the Board, including the requirement for meetings of the independent
Directors; and
|
·
|
Standards
and procedures for determining independence of
Directors.
|
·
|
A
Director cannot be independent if he or she fails to meet the objective
requirements as to “independence” under the New York Stock Exchange
(“NYSE”) listing standards.
|
·
|
If
a Director meets the objective NYSE standards, he or she will be
deemed
independent, absent unusual circumstances, if in the current year
and the
past three years the Director has had no related-party transaction
or
relationship with the Company or an “interlocking” relationship with
another entity triggering disclosure under the SEC disclosure
rules (such disclosure is required in the Company’s proxy statements
and Form 10-K).
|
·
|
If
a Director who meets the objective NYSE independence requirements
has had
a disclosable transaction or relationship, or if the Nominating and
Governance Committee or the Senior Executive Vice President, Legal
and
Administration request that the Board consider any other circumstances
in
determining the Director’s independence, the Board will make a subjective
determination of independence.
|
(a)
|
Have
not had, during 2005 or earlier years, a transaction or relationship
with
Sierra triggering disclosure under Item 404(a) or (b) of
Regulation S-K under the Securities Exchange Act of 1934 as then
in
effect;
|
Note:
A charitable organization that employs the Director will be treated
as a
business entity and Sierra contributions to it will be treated as
payments
in applying Item 404(b);
|
(b)
|
Have
not had, during 2006 and later years, a direct or indirect material
interest in a transaction in which Sierra was a participant triggering
disclosure under Item 404(a) of Regulation S-K as in effect from
November 7, 2006;
and
|
(c)
|
Have
not had an “interlocking” relationship in 2005 or earlier years, of the
type required to be disclosed under Item 402(j)(3) of Regulation S-K
or, in 2006 or later years, of the type required to be disclosed
under
Item 407(e)(iii) of Regulation S-K as in effect from November 7,
2006 (in both cases this can arise where a Director is an executive
officer of another entity and an executive officer of Sierra is a
Director
of the other entity, if either of the two individuals has authority
to set
the compensation of the other).
|
Explanatory
Note: Section (1) contains the stated NYSE bright line
criteria for director “independence;” it is not reprinted
here.
|
|
Board
of Directors
Sierra
Health Services, Inc.
c/o
Audit Committee
2724
North Tenaya Way
Las
Vegas, NV 89128
(overnight
mail)
|
or
|
Board
of Directors
Sierra
Health Services, Inc.
c/o
Lead Director
P.
O. Box 15645
Las
Vegas, NV 89114-5645
(regular
mail)
|
|
·
|
All
concerns and complaints will be received and processed by the Sierra
Health Services Corporate Compliance Officer and/or the Company’s Director
of Internal Audit.
|
·
|
Any
communications that such officers deem to be credible and to contain
substantive allegations will be reported to the Lead Director and
to the
Chair of the Audit Committee.
|
·
|
Priority
will be assigned to communications involving an allegation of a threat
to
a person, property or the environment, and to ongoing or time-sensitive
issues.
|
·
|
If
you have provided your name, or have received a control number to
permit
anonymous or confidential treatment, you will receive a response
to your
communication, by telephone or in
writing.
|
·
|
The
Lead Director or Chair of the Audit Committee will decide whether
to
forward your communication to other Directors, including the
non-management Directors, taking into account the substance of your
communication and any request you may have made regarding such
dissemination.
|
Ÿ
|
Base
salary;
|
Ÿ
|
Long-term
incentives (“LTIs”), which are comprised of annual grants of restricted
stock units (“RSUs”), with most RSUs granted to NEOs subject to
achievement of a performance
condition;
|
Ÿ
|
Broad-based
benefits, which are generally available to all of Sierra’s employees ,
including retirement, health care, life insurance and employee stock
purchase plan benefits;
|
Ÿ
|
Supplemental
executive benefits, including supplemental executive retirement plans
(“SERPs”) and supplemental life insurance and certain
perquisites;
|
Ÿ
|
Employment
agreements and severance provisions;
and
|
Ÿ
|
Executive
stock ownership guidelines.
|
Ÿ
|
Responsibly
address the concerns of other stakeholders and interested parties
including employees, customers, suppliers, communities served by
the
Company, government officials and the public at large;
and
|
Ÿ
|
Possess
the skills, knowledge, experience and dedication required to lead
Sierra
toward realizing its mission while adhering to our values. A key
part of
this is achievement of our strategic and competitive business
objectives.
|
·
|
Helps
attract
high quality individuals; helps retain
them, particularly in a competitive talent market in which our executives
may be strongly sought after by other organizations, including larger
organizations; and helps motivate
them to achieve our annual and longer-term strategic
goals;
|
·
|
Aligns
pay with performance, by augmenting salary and other fixed elements
of
compensation with “upside” pay opportunities through cash and stock-based
incentive compensation tied to Sierra’s performance; which ties
executives’ interests to Sierra’s success and further encourages
executives to optimize stockholder
returns;
|
·
|
References
but is not bound entirely by “competitive” or “typical” practices; rather,
reflects those practices which best support our objectives and serve
stockholders’ interests; and
|
·
|
Is
relatively simple and straightforward for both stockholders and executive
participants to understand.
|
Ÿ
|
Primary
market for executive talent:
U.S.-based health insurers and health care providers, which have
a
business mix similar to the Company’s, are not closely held, and are of
similar size to us (i.e., generally ranging from one-half to two-times
Sierra’s size with respect to market capitalization and annual
revenue);
|
Ÿ
|
Secondary
market for executive talent (for tracking broader competitive
practices):
Other U.S.-based health insurers and health care providers which
may fall
outside designated company-size parameters of the primary market
for
executive talent but with which we also compete for such talent;
also
similar size companies in other service-based industries, particularly
for
functional executives who may be recruited from or to such
organizations.
|
AMERIGROUP
Corporation
|
Great
American Financial Resources
|
Aviva,
fka AmerUs Group Co.
|
Health
Net, Inc.
|
Apria
Healthcare Group, Inc.
|
HealthMarkets,
Inc., fka UICI
|
Centene
Corporation
|
Humana,
Inc.
|
Chemed
Corporation
|
Molina
Healthcare, Inc.
|
Coventry
Health Care, Inc.
|
Universal
American Financial Corporation
|
FBL
Financial Group, Inc.
|
Wellcare
Health Plans, Inc.
|
Ÿ
|
Aggregate
base salaries near
the 50th
percentile;
|
Ÿ
|
Aggregate
target total direct compensation
(“TDC”), which is base salary, annual bonus and LTI opportunities for
target level performance near the 50th
percentile, while providing for upper-quartile TDC opportunities
for
achieving sustained, superior performance at the individual, business
unit
and corporate levels; and
|
Ÿ
|
Aggregate
target total remuneration
(which is TDC plus benefits and perquisites) at competitive levels
in the
market by maintaining benefits and perquisites at market-competitive
levels.
|
·
|
Setting
the amount of additional compensation that should be paid for performance
that exceeds targeted levels to provide an incentive for outstanding
performance;
|
·
|
Setting
reduced rates of payment of compensation for performance below targeted
levels;
|
·
|
Establishing
the nature of the performance goals and levels of performance set
as
targets;
|
·
|
Allocating
TDC between salary, annual bonus and LTIs;
and
|
·
|
Determining
the forms in which to grant LTIs.
|
Annual
(Short-term) Pay-for-Performance Assessment
|
|
Senior
Executive Pay
|
Corporate
Financial Performance
|
Approach:
Compared the actual realized total cash compensation (i.e., base
salary
plus annual bonus) given to our fiscal 2005 NEOs with actual realized
total cash compensation delivered to 14 selected peer companies’ NEOs.
Expressed Sierra’s pay results as a percentile ranking.
|
Approach:
Compared Sierra’s annual corporate financial performance with that of the
14 selected peer companies, based on a composite of four corporate
financial performance metrics: total stockholder return (“TSR”), growth in
sales, growth in earnings per share (“EPS”), and growth in earnings before
interest, taxes, depreciation and amortization (“EBITDA”, as a measure of
cash flow).
Omitted
discontinued Texas and military operations from the Company’s income
statement results. Expressed the Company’s performance results as a
percentile ranking.
|
Findings:
Sierra’s
relative senior executive pay was between
the 65th
percentile and about the 80th
percentile,
based on a one-year only view and a three-year average view.
- Fiscal
2005: 67th
percentile
- Average
of fiscal 2003-2005: 81st
percentile
|
Findings:
Sierra’s
relative corporate financial performance was also between
the 65th
percentile and about the 80th
percentile,
based on a one-year only view and a three-year average view.
- Fiscal
2005: 65th
percentile
- Average
of fiscal 2003-2005: 78th
percentile
|
Three-year
(Longer-term) Pay-for-Performance Assessment
|
|
Senior
Executive Pay
|
Corporate
Financial Performance
|
Approach:
Compared three-year stock compensation gains realizable by our fiscal
2005
NEOs with three-year stock compensation gains realizable by the 14
selected peer companies’ NEOs. Expressed Sierra’s pay results as a
percentile ranking.
|
Approach:
Compared our three-year corporate financial performance with that
of the
14 selected peer companies, based on a composite of four corporate
financial performance metrics: TSR, growth in sales, growth in EPS,
and
growth in (EBITDA, as a measure of cash flow.)
Omitted
discontinued Texas and military operations from the Company’s income
statement results. Expressed Sierra’s performance results as a percentile
ranking.
|
Findings:
Sierra’s
relative senior executive pay for the three-year period from fiscal
2003
to 2005 was at the 78th
percentile.
|
Findings:
Sierra’s
relative corporate financial performance for the three-year period
from
fiscal 2003 to 2005 was also at the 78th
percentile.
|
Ÿ
|
NEOs’
target 2006 annual bonus amounts, as a percentage of 2006 base salary,
were as follows: Dr. Marlon, 100%; Mr. Bunker, 100%; Mr. Collins,
100%;
Mr. Palmer, 90%; Mr. Giancursio, 60%.
|
Ÿ
|
NEOs’
2006 annual bonuses under the MICP would be payable only if 2006
EPS,
fully diluted, was at or above $2.02; otherwise, no bonuses would
be
payable to the NEOs.
This designated EPS level was based on our budgeted EPS as of December
2005, and represented a target level that was 11.6% above our 2005
fully
diluted EPS of $1.81.
|
|
Ÿ
|
Assuming
2006 EPS was at or above $2.02 as discussed above, NEOs’ 2006 MICP annual
bonus payouts would be determined based on achievement of other financial
and operational and/or individual objectives, with the Committee
having
discretion to pay additional bonus up to the designated maximum.
The
specified additional performance measures and their weighting under
the
2006 MICP were as follows:
|
Performance
Metric
|
Weighting
in Bonus Calculation
|
Range
of Earnings
|
Operating
income as a percentage of targeted operating income (for this purpose,
operating income included the expense of the bonuses to be paid under
the
MICP) and
Financial
cash flow (measured as EBITDA) as a percentage of targeted financial
cash
flow
|
Weighted
85% for purposes of preliminary bonus amount
|
0%
to 175% (of the 85%)
|
Measures
of quality of care and quality of service
|
Weighted
10% for purposes of preliminary bonus amount
|
0%
to 150% (of the 10%)
|
Voluntary
employee turnover rates
|
Weighted
5% for purposes of preliminary bonus amount
|
0%
to 200% (of the 5%)
|
Individual
performance and development
|
Multiplier
|
0%
to 125% times preliminary bonus amount
|
CEO’s
challenge - prescription drug program profit margin
|
A
pool equal to 10% of the aggregate bonus pool
|
Allocated
to participants at the Committee’s discretion
|
·
|
Encourage
efforts to increase stockholder
value;
|
·
|
Promote
achievement of strategic goals;
|
·
|
Design
LTIs which are relatively simple to
understand;
|
·
|
Encourage
ownership of Sierra stock; and
|
·
|
Effectively
manage stock compensation cost with regards to accounting expense,
stockholder value transfer (i.e., expense as a percentage of market
capitalization), share utilization and tax
deductibility.
|
·
|
Reduced
levels of stock utilization (including dilution and potential dilution
from outstanding awards) caused by full-value
awards;
|
·
|
The
ability to qualify performance-based RSUs for full tax-deductibility
as
“performance-based compensation” under Internal Revenue Code
Section 162(m); and
|
·
|
Their
effectiveness toward motivating executives to achieve annual goals
(i.e.,
EPS performance) and longer-term, stockholder-related goals (i.e.,
stock
price growth), as well as encouraging executive retention (i.e.,
time-based service requirements applicable to a grant each
year).
|
THE COMPENSATION COMMITTEE |
CHARLES L. RUTHE, CHAIRMAN |
ALBERT L. GREENE |
THOMAS Y. HARTLEY |
MICHAEL E. LUCE |
ANTHONY L. WATSON |
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
(1)
|
Stock
Awards
($)
(2)
|
Option
Awards
($)
(3)
|
Non-Equity
Incentive Plan Compensation ($) (4)
|
Change
in Pension Value and Non-qualified Deferred Compensa-
tion
Earnings
($)
(5)
|
All
Other Compensa-tion
($)
(6 )
|
Total
($)
|
|||||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|||||||||||||||||||
Anthony
M. Marlon, M.D.
CEO
and Chairman of the
Board
|
2006
|
1,536,058
|
--
|
1,497,608
|
357,500
|
2,750,000
|
4,147,140
|
341,349
|
10,629,655
|
|||||||||||||||||||
Paul
H. Palmer
Sr.
Vice President and Chief
Financial
Officer
|
2006
|
327,692
|
--
|
21,800
|
175,275
|
700,000
|
695,908
|
90,987
|
2,011,662
|
|||||||||||||||||||
Jonathon
W. Bunker
President
and Chief Operating
Officer
|
2006
|
466,154
|
--
|
1,048,325
|
175,275
|
1,250,000
|
1,900,000
|
36,566
|
4,876,320
|
|||||||||||||||||||
Frank
E. Collins
Sr.
Exec. Vice President
Legal
& Administration & Secy
|
2006
|
368,654
|
--
|
823,684
|
175,275
|
900,000
|
1,358,618
|
60,229
|
3,686,460
|
|||||||||||||||||||
Donald
J. Giancursio
Sr.
Vice President,
Sales
|
2006
|
219,746
|
176,308
|
338,900
|
106,355
|
600,000
|
105,682
|
41,645
|
1,588,636
|
(1) |
The
amount in column (d) represents a sales bonus to Mr. Giancursio in
the
amount of $101,308 and a payment for entering into a non-competition
agreement in the amount of $75,000.
|
(2) |
The
amounts in column (e) reflect the expense we recognized for financial
statement reporting purposes for 2006, in accordance with Statement
of
Financial Accounting Standards No. 123(R) (“SFAS 123(R)”), for stock
awards under our 1995 Long-Term Incentive Plan (“LTIP”), without regard to
estimated forfeitures of such awards. The amount includes expense
from
awards granted in 2006. Assumptions used in the calculation of
these
amounts are discussed in Note 9 to our audited
|
financial
statements for the fiscal year ended December 31, 2006, included
in our
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 27,
2007.
|
(3) |
The
amounts in column (f) reflect the amount of expense we recognized
for
financial statement reporting purposes for 2006, in accordance with
SFAS
123(R), for options under our LTIP, without regard to estimated
forfeitures of such awards. The amount includes expense from options
granted before 2006 which remained unvested in any part of 2006.
We
granted no stock options in 2006. Assumptions used in the calculation
of
this amount for fiscal years ended December 31, 2001, 2002, and 2003
are
discussed in Note 16 to our audited financial statements for the
fiscal
year ended December 31, 2003, included in our Annual Report on Form
10-K
filed with the Securities and Exchange Commission on March 5, 2004,
and
assumptions used in the calculation of this amount for fiscal years
ended
December 31, 2004, and 2005 are discussed in Note 9 to the Company’s
audited financial statements for the fiscal year ended December 31,
2006,
included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 27, 2007.
|
(4) |
The
amounts in column (g) reflect the cash awards paid under the FY 2006
Management Incentive Compensation Plan, which is discussed further
below
under the heading Additional
Information Relating to Summary Compensation Table and Grants of
Plan-Based Awards Table.
This includes bonus amounts earned by performance in 2006, certain
portions of which were paid in 2007.
|
(5) |
The
amounts in column (h) reflect the increase in the present value of
the
NEO’s benefits under our pension plans determined using interest rate
and
related assumptions consistent with those used in our financial
statements, and, in the case of Mr. Giancursio, includes amounts
that the
NEO currently may not be entitled to receive because such amounts
are not
vested. The present values of pensions are calculated for this purpose
in
a manner consistent with the calculation of present value for purposes
of
the table under the caption “Pension Benefits”
below.
|
(6) |
The
table below shows the items comprising compensation in column (i),
which
include our matching contributions for each individual’s contributions
under our Profit Sharing/401(k) Plan and Trust (“401(k) Plan”), a defined
contribution retirement plan available to our employees; imputed
income
charge for the Company’s Split Dollar Life (“SDL”) Insurance premium; and
perquisites. We calculate our incremental cost of permitting personal
use
of the corporate aircraft based on the cost of fuel, trip-related
maintenance and maintenance and depreciation based on hours of use,
crew
travel expenses, on-board catering, landing fees, trip-related hangar
and
parking costs, and similar variable costs, offset by any time-share
lease
payments by the executive. Because the company-owned aircraft are
used
primarily for business travel, we do not include the fixed costs
that do
not change based on usage, such as pilots’ salaries, the purchase costs of
the company-owned aircraft, and the cost of maintenance not related
to
trips and hours of use.
|
Name
|
401(k)
Matching
Contribution
|
Imputed
Income Charge for SDL (a)
|
Perquisites
- Aircraft Use
|
Other
Perquisites (b)
|
Total
“All Other Compensation”
|
|||||||||||
Anthony
M. Marlon, M.D.
|
$
|
13,200
|
$
|
15,059
|
$
|
311,705
|
$
|
1,385
|
$
|
341,349
|
||||||
Paul
H. Palmer
|
10,800
|
914
|
77,869
|
1,404
|
90,987
|
|||||||||||
Jonathon
W. Bunker
|
10,800
|
1,391
|
12,431
|
11,944
|
36,566
|
|||||||||||
Frank
E. Collins
|
12,880
|
1,700
|
44,264
|
1,385
|
60,229
|
|||||||||||
Donald
J. Giancursio
|
10,800
|
¾
|
22,457
|
8,388
|
41,645
|
(a)
|
Amounts
in this column represent imputed income resulting from split-dollar
life
insurance policies. These amounts represent the taxable value of
the life
insurance provided to the NEO.
|
(b)
|
These
amounts include country club membership dues for Messrs. Bunker
and
Giancursio, spousal travel to a Board of Directors meeting
for NEOs other
than Mr. Giancursio and spousal travel to a sales conference
for Mr.
Bunker.
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
Estimated
Possible Payouts Under Equity Incentive Plan Awards
|
All
Other Stock Awards: Number of Shares or Stock Units (#)
(4)
|
Grant
Date Fair Value of Stock and Option Awards
($)
(5)
|
||||
Threshold
($)
|
Target
($)
(1)
|
Maximum
($)
|
Threshold
(#
)
|
Target
(#
) (3)
|
Maximum
(#
) (3)
|
||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Anthony
M. Marlon, M.D.
|
8/17/06
|
|
|
|
¾
|
40,000
|
40,000
|
¾
|
1,497,608
|
3/14/06
|
¾
|
1,537,500
|
(2)
|
|
|
|
|
|
|
Paul
H. Palmer
|
8/17/06
|
|
|
|
|
|
|
500
|
21,800
|
|
3/14/06
|
¾
|
295,200
|
(2)
|
|
|
|
|
|
Jonathon
W. Bunker
|
8/17/06
|
|
|
|
¾
|
28,000
|
28,000
|
¾
|
1,048,325
|
|
3/14/06
|
¾
|
525,000
|
(2)
|
|
|
|
|
|
Frank
E. Collins
|
8/17/06
|
|
|
|
¾
|
22,000
|
22,000
|
¾
|
823,684
|
|
3/14/06
|
¾
|
369,000
|
(2)
|
|
|
|
|
|
Donald
J. Giancursio
|
8/17/06
|
|
|
|
¾
|
8,400
|
8,400
|
5,600
|
518,781
|
|
3/14/06
|
¾
|
132,034
|
(2)
|
|
|
|
|
|
(1)
|
This
is an amount equal to the NEO’s 2006 salary.
|
(2)
|
The
maximum amounts payable under this award were subject to two formulaic
limitations. First, under the LTIP, the maximum award could not exceed
4%
of pre-tax operating income for 2006 (for the year, this amount was
$8,619,720). Second, under the MICP, the maximum individual award
was
subject to limits based on the Plan’s formulas and bonus pools, as
explained in the Compensation Discussion and Analysis—Discussion of Each
Component of the Executive Compensation Program—Annual Bonus.
|
(3)
|
The
amounts shown in these columns represent the number of performance-related
restricted stock units (“RSUs”) that were granted to each of the NEOs on
August 17, 2006. At that date, the closing price of our common stock
was
$43.60 a share. The vesting of these RSUs was subject to Sierra meeting
its earnings per share goal for 4th
quarter 2006 of $0.53. We met this goal and all of the RSUs in this
column
vested on December 31, 2006. The vested performance-based RSUs will
be
settled on August 17, 2009, subject to accelerated settlement in
certain
cases.
|
(4)
|
The
amounts shown in this column represent time-vested RSUs granted on
August
17, 2006. In the case of Mr. Palmer, all of his RSUs vested and became
settleable on December 31, 2006. In the case of Mr. Giancursio, the
non-performance-based RSUs shown in this column represent 40% of
his 2006
grant of RSUs. These RSUs will vest as to 25% on each of May 10,
2007, May
10, 2008, May 10, 2009 and May 10, 2010.
The first three tranches that vest will be settled on August 17,
2009; the
fourth tranche will vest and be settled on May 10, 2010. Vesting
and
settlement are subject to acceleration in the event of certain types
of
termination of employment or a change in
control.
|
(5)
|
The amounts shown in this column represent the fair value of the stock awards at the date of grant, as computed in accordance with SFAS 123(R). See also footnote (1) to the Summary Compensation Table. |
|
The closing price of our stock on the date of grant was $43.60. Fair value, determined in accordance with SFAS 123(R), is lower than the grant-date market price of common stock in the case of RSUs that are subject to a mandatory deferral period after vesting. |
Option
Awards (2)
|
Stock
Awards
|
|||||
Name
|
Number
of Securities Underlying Unexercised
Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value of Shares of Units of
Stock
That Have Not Vested
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
Anthony
M. Marlon, M.D.
|
24,000
(3)
|
¾
|
30.06
|
04/20/2010
|
¾
|
¾
|
Paul
H. Palmer
|
12,000
(3)
|
¾
|
30.06
|
04/20/2010
|
¾
|
¾
|
|
|
23,750
(4)
|
6.31
|
04/13/2013
|
¾
|
¾
|
Jonathon
W. Bunker
|
12,000
(3)
|
¾
|
30.06
|
04/20/2010
|
¾
|
¾
|
|
|
23,750
(4)
|
6.31
|
04/13/2013
|
¾
|
¾
|
Frank
E. Collins
|
6,332
(5)
|
¾
|
5.83
|
12/09/2012
|
¾
|
¾
|
|
12,000
(3)
|
¾
|
30.06
|
04/20/2010
|
¾
|
¾
|
|
40,000
(4)
|
23,750
(4)
|
6.31
|
04/13/2013
|
¾
|
¾
|
Donald
J. Giancursio
|
3,000
(6)
|
|
4.47
|
12/09/2011
|
¾
|
¾
|
|
3,000
(5)
|
3,000
(5)
|
5.83
|
12/09/2012
|
5,600
(7)
|
201,824
(8)
|
|
|
10,000
(4)
|
6.31
|
04/13/2013
|
|
|
|
|
3,000
(9)
|
38.62
|
12/06/2010
|
|
|
(1)
|
No
NEO had any unearned equity awards outstanding at December 31,
2006.
|
(2)
|
All
options were granted at an exercise price equal to the fair market
value
of our Common Stock on the option grant date. The exercise price
may be
paid by the optionee in cash or, if permitted by the Compensation
Committee, by surrender of unrestricted shares of our Common Stock
(at
their fair market value on the date of exercise). All awards were
non-qualified stock options granted pursuant to our LTIP. Upon a
change in
control of Sierra, as defined in the LTIP, the vesting of the options
will
be automatically accelerated. With the exception of the options granted
on
December 7, 2005, the options shown above will terminate and may
no longer
be exercised if the optionee ceases to be an employee or Director
of
Sierra, except post-termination exercise periods are specified in
the case
of death, disability, or other involuntary termination other than
a
termination by us for “cause.” The options, together with a portion of the
gains realized upon exercise of the options during a specified period,
will be subject to forfeiture if the optionee engages in competition
with
us, misuses our proprietary information, or fails to assist us in
litigation. Cashless withholding of option shares to satisfy tax
obligations may be permitted by the Compensation
Committee.
|
(3)
|
These
options were granted on April 21, 2005 and became vested and
exercisable in full on December 30,
2005.
|
(4)
|
These
options were granted on April 14, 2003. The options originally granted
to
Messrs. Palmer, Bunker and Collins vested at 25% a year over four
years;
the unvested options shown in column (c) became vested on April 14,
2007.
The options originally granted to Mr. Giancursio vested at 20% a
year over
five years, so the remaining unvested options became vested as to
5,000
shares on April 14, 2007 and will vest as to 5,000 shares on April
14,
2008.
|
(5)
|
These
options were part of grants made on December 10, 2002. Mr. Collins’
original option grant vested at 33 1/3% a year over three years.
Mr.
Giancursio’s original grant vested at 20% a year over five years, so the
remaining unvested options will vest December 10,
2007.
|
(6)
|
These
options were part of a grant made on December 10, 2001 which vested
at 20%
a year over five years.
|
(7)
|
These
RSUs were granted on August 17, 2006 and will vest at 25% on each
of May
10, 2007, May 10, 2008, May 10, 2009 and May 10, 2010. The first
three
tranches will be settled on August 17, 2009 and the
fourth
|
(8)
|
The
value of these RSUs is based on the closing price of our Common Stock,
$36.04 per share, on December 29, 2006.
|
(9)
|
These
options were granted on December 7, 2005 and vested 100% on December
30,
2005. They have a three-year holding period from date of grant. Upon
termination of employment other than for “cause,” the employee has 30 days
in which to exercise these options.
|
Option
Awards
|
Stock
Awards
|
|||
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise
($)
(1)
|
Number
of Shares Acquired on Vesting
(#)
(2)
|
Value
Realized on Vesting
($)
(2)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Anthony
M. Marlon, M.D.
|
229,544
|
8,388,857
|
40,000
|
1,441,600
|
Paul
H. Palmer
|
52,150
|
1,779,549
|
500
|
18,020
|
Jonathon
W. Bunker
|
50,416
|
1,751,323
|
28,000
|
1,009,120
|
Frank
E. Collins
|
28,500
|
999,135
|
22,000
|
792,880
|
Donald
J. Giancursio
|
18,750
|
417,307
|
8,400
|
302,736
|
(1)
|
Amounts
reflect the difference between the exercise price of the option and
the
market value of the shares acquired upon exercise at the time of
exercise.
|
(2)
|
These
RSUs were granted on August 17, 2006. Amounts in column (e) reflect
the
market value of the stock underlying the restricted stock units (“RSUs”),
based on the closing price of our Common Stock on December 29, 2006
($36.04), the last trading date preceding the vesting date of December
31,
2006. The vesting of the RSUs for NEOs other than Mr. Palmer was
subject
to a requirement that Sierra achieve fourth quarter earnings of at
least
$0.53 per share, and such RSUs remain subject to a mandatory holding
period, deferring the settlement of the award until August 17,
2009.
|
Name
|
Plan
Name
|
Number
of Years of Credited Service
|
Present
Value of Accumulated Benefit
($)
(2)
|
Payments
During Last Fiscal Year
($)
|
Anthony
M. Marlon, M.D.
|
SERP
I
|
34
|
19,328,804
|
¾
|
Paul
H. Palmer
|
SERP
I
|
17
|
3,087,571
|
¾
|
Jonathon
W. Bunker
|
SERP
I
|
18
|
5,649,684
|
¾
|
Frank
E. Collins
|
SERP
I
|
24
|
6,312,608
|
¾
|
Donald
J. Giancursio
|
SERP
III
|
2
|
351,683
|
¾
|
Number
of years of credited service as of December 31, 2006 valuation date.
The maximum number of years of service used in calculating the benefit
under the Supplemental Executive Retirement Plan (“SERP I”) is 20, so any
years of service in excess of 20 do not result in any additional
benefit
for the participant. Since the inception of the SERP I in 1997, we
have
provided for the crediting of four years of additional service to
Messrs.
Palmer, Collins and Bunker, and in 2005, at the inception of the
Supplemental Executive Retirement Plan III (“SERP III”), we provided that
Mr. Giancursio could earn two additional years of service by continuing
in
employment through December 31, 2008. We have agreed to credit Mr.
Palmer
with a full year of service if he continues in employment until May
4,
2007, the scheduled date of his resignation from full-time employment.
At
that date, Mr. Palmer would have served approximately three-fourths
of a
year of service, so in effect he will be credited with approximately
three
months of additional service.
|
(2)
|
The
present value of accumulated benefits is based on a discount rate
of 5.6%
at December 31, 2006 and, in the case of SERP I participants, employment
termination and commencement of SERP benefits at December 31, 2006
in the
case of Dr. Marlon, or the later date at which the participant has
attained both age 55 and 20 years of service (in the case of Mr.
Palmer,
Feb. 22, 2016; Mr. Bunker, December 2, 2013; and Mr. Collins, April
10,
2009). In the case of Mr. Giancursio, present value under SERP III
is
based on assumed termination at the date he has attained age 55 with
eight
years of participation (April 28, 2013). Pre-retirement mortality
is
ignored in the calculation of the present value of accumulated plan
benefits. All other assumptions were those reflected in Note 9 to
our
audited financial statements included in our Annual Report on Form
10-K
for the year ended December 31, 2006.
|
Name
|
Executive
Contributions in Last FY
($)
(1)
|
Registrant
Contributions in Last FY ($)
|
Aggregate
Earnings in Last FY
($)
(2)
|
Aggregate
Withdrawals/Distributions
($)
|
Aggregate
Balance at Last FYE
($)
(3)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
Anthony
M. Marlon, M.D.
|
1,441,600
|
¾
|
¾
|
¾
|
6,054,720
|
Paul
H. Palmer
|
¾
|
¾
|
4,016
|
¾
|
2,432,901
|
Jonathon
W. Bunker
|
1,009,120
|
¾
|
¾
|
¾
|
4,468,960
|
Frank
E. Collins
|
792,880
|
¾
|
31,670
|
¾
|
3,412,481
|
Donald
J. Giancursio
|
302,736
|
¾
|
¾
|
¾
|
302,736
|
(1)
|
Amounts
in this column represent the market value of shares deliverable in
settlement of RSUs at their vesting date in 2006. Such RSUs are subject
to
a mandatory deferral of settlement until August 17, 2009. These amounts
are the same as shown in the “Stock Awards” column of the Option
Exercises and Stock Vested - 2006 Table.
Such a deferral delays the date at which we will deliver shares but
does
not result in additional compensation expense for financial reporting
purposes in connection with the award or enhance the value of the
award to
the executive, although the executive may benefit through the delay
in
taxation. The grant-date market value of the shares underlying the
RSUs is
reflected in full as compensation for each named executive in the
“Stock
Awards” column of the Summary
Compensation Table,
and in the right-most column of the Grants
of Plan-Based Awards Table.
|
(2)
|
Earnings
represents the appreciation in value of cash-denominated deferrals
under
the Deferred Compensation Plan in 2006. Earnings excludes the decrease
during 2006 in the value of shares deliverable in settlement of RSUs
that
had vested but the settlement of which has been mandatorily deferred,
as
follows: Dr. Marlon, a decrease of $504,320; Mr. Palmer, a decrease
of
$252,160; Mr. Bunker, a decrease of $378,240; Mr. Collins, a decrease
of
$252,160. This decrease resulted from the fact that the market price
of
our common stock was $39.98 per share on December 31, 2005 as compared
to
$36.04 on December 31, 2006.
|
(3)
|
The
aggregate balance at the end of the year consists of the market value
of
shares deliverable in the future to settle RSUs that have vested
but the
settlement of which has been deferred, and the aggregate value of
the
executive’s accounts under our Deferred Compensation Plan. Market value
per share is equal to the $36.04 closing price per share of common
stock
on December 29, 2006. Deferred RSUs include those which resulted
in the
amounts reflected in column (b) (see footnote (1) above) and the
following
RSUs which, prior to 2006, were mandatorily deferred: (i) RSUs deferred
until May 20, 2007: Dr. Marlon, 80,000; Mr. Palmer, 40,000; Mr. Bunker,
60,000, and Mr. Collins, 40,000; and (ii) RSUs deferred until April
21,
2008: Dr. Marlon, 48,000; Mr. Palmer, 24,000; Mr. Bunker, 36,000,
and Mr.
Collins, 24,000.
|
Incremental
Value of Payments and Benefits Upon Change in Control (“CIC”)and Various
Types of Terminations
|
||||||||||||||||
Termination
Scenario (12/31/06)
|
Dr.
Marlon
|
|
Mr.
Bunker
|
|
Mr.
Collins
|
|
Mr.
Palmer
|
|
Mr.
Giancursio
|
|||||||
Events
Not Within Two Years After Change in Control
|
||||||||||||||||
Voluntary
Resignation
|
||||||||||||||||
Health
benefits continuation
|
$
|
7,688
|
$
|
259,665
|
$
|
184,315
|
$
|
366,853
|
$
|
175,669
|
||||||
Termination
for Cause
|
||||||||||||||||
Severance
pay
|
$
|
118,269
|
$
|
40,385
|
$
|
28,385
|
$
|
25,231
|
$
|
16,927
|
||||||
Termination
by Us Without Cause
|
||||||||||||||||
Severance
pay
|
$
|
3,075,000
|
$
|
656,250
|
$
|
461,250
|
$
|
328,000
|
$
|
220,056
|
||||||
Health
benefits continuation
|
7,688
|
259,665
|
184,315
|
366,853
|
175,669
|
|||||||||||
RSUs
- Pro rata vesting (1)
|
¾
|
¾
|
¾
|
¾
|
48,576
|
|||||||||||
Total
|
$
|
3,082,688
|
$
|
915,915
|
$
|
645,565
|
$
|
694,853
|
$
|
444,301
|
||||||
Disability
|
||||||||||||||||
Severance
pay (2)
|
$
|
3,072,116
|
$
|
932,308
|
$
|
737,308
|
$
|
311,307
|
$
|
175,797
|
||||||
RSUs
vesting
(1)
|
¾
|
¾
|
¾
|
¾
|
201,824
|
|||||||||||
Health
benefits continuation
|
7,688
|
259,665
|
184,315
|
366,853
|
175,669
|
|||||||||||
Total
|
$
|
3,079,804
|
$
|
1,191,973
|
$
|
921,623
|
$
|
678,160
|
$
|
553,290
|
||||||
Death
|
||||||||||||||||
Severance
pay
|
$
|
¾
|
$
|
¾
|
$
|
¾
|
$
|
¾
|
$
|
230,264
|
||||||
RSUs
vesting
(1)
|
¾
|
¾
|
¾
|
¾
|
201,824
|
|||||||||||
Total
|
$
|
¾
|
$
|
¾
|
$
|
¾
|
$
|
¾
|
$
|
432,088
|
||||||
Events
Within Two Years After Change in Control
|
||||||||||||||||
CIC
-- Assuming no termination
|
||||||||||||||||
Options/RSUs
vesting
(1)
|
$
|
¾
|
$
|
706,088
|
$
|
706,088
|
$
|
706,088
|
$
|
589,754
|
||||||
CIC
-- SERP Enhanced benefit for
|
||||||||||||||||
certain
terminations (3)
|
¾
|
793,347
|
¾
|
648,359
|
721,298
|
|||||||||||
Termination
Without Cause or for Good Reason
|
||||||||||||||||
Severance
pay
|
12,294,232
|
2,963,550
|
2,205,585
|
1,862,539
|
943,807
|
|||||||||||
Health
benefits continuation
|
7,688
|
259,665
|
184,315
|
366,853
|
175,669
|
|||||||||||
280G/4999
Tax Gross-Up (4)
|
¾
|
¾
|
¾
|
¾
|
¾
|
|||||||||||
Total
(including CIC items)
|
$
|
12,301,920
|
$
|
4,722,650
|
$
|
3,095,988
|
$
|
3,583,839
|
$
|
2,430,528
|
||||||
Death,
disability, and voluntary termination (5)
|
(1)
|
These
amounts represent the market value of shares underlying RSUs and
the
aggregate in-the-money value of options which would become vested
as a
direct result of the termination event or change in control before
the
award's stated vesting date. This calculation of value does not attribute
any additional value to options based on their remaining term and
does not
discount the value of awards based on the portion of the vesting
period
elapsed at the date of the termination event or change in control.
Market
value and in-the-money value are based on the closing price of our
common
stock, $36.04, on December 29,
2006.
|
(2)
|
The
executive officer can be terminated by us for a disability only if
a
disability has continued for more than 12 months (for Dr. Marlon
and
Messrs. Collins and Bunker) or six months (for Messrs. Palmer and
Giancursio) beyond the executive’s accrued sick leave. For purposes of
calculating the severance payable in connection with a termination
due to
disability, we are showing the value of the applicable number of
months of
salary and target bonus as in effect during 2006.
|
(3)
|
These
amounts represent the enhanced present value of SERP benefits resulting
from crediting of full years of service upon certain terminations
following a change in control, except in the case of Mr. Giancursio
the
amount represents the present value at December 31, 2006 of his entire
SERP benefit which would be deemed vested upon a change in control.
For
Messrs. Bunker and Palmer, termination for any reason other than
death,
disability, or by us for cause before completing the year of service
which
includes the change in control would result in rounding up to a full
year
of service, which would confer one-half of the benefit amount shown,
and
any termination other than by us for cause within six years after
the
change in control would result in crediting of one additional year
of
service, which would confer one-half of the benefit amount
shown.
|
(4)
|
Executives
are entitled to gross-up payments if a golden parachute excise tax
would
be imposed under Section 4999 of the Internal Revenue Code, but we
estimate that in the illustrated change in control and termination
scenarios no golden parachute excise taxes would be incurred so no
tax
gross-up would be payable.
|
(5)
|
Severance
payments and health benefits continuation provided to Messrs. Bunker,
Collins, Palmer and Giancursio in the event of death, disability,
or a
voluntary termination of employment, which did not qualify as "good
reason" in the two-year period following a change in control would
be the
same as shown for those termination events not within the two-year
period
following a change in control, but would qualify for enhanced SERP
benefits as explained in footnote (3) above. RSUs and options would
have
vested upon the CIC, as shown in the row marked "CIC -- Assuming
no
termination."
|
Name
(1)
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
(2)
|
Option
Awards
($)
(3)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|||||||||||
Albert
L. Greene
|
$
|
38,188
|
$
|
36,356
|
$
|
159,185
|
$
|
¾
|
$
|
233,728
|
||||||
Thomas
Y. Hartley
|
46,500
|
36,356
|
159,185
|
¾
|
242,041
|
|||||||||||
Michael
E. Luce
|
43,000
|
36,356
|
159,185
|
¾
|
238,541
|
|||||||||||
Erin
E. MacDonald (4)
|
283,539
|
¾
|
175,275
|
16,489(5
|
)
|
475,303
|
||||||||||
Charles
L. Ruthe
|
51,500
|
36,356
|
159,185
|
7,000
(6
|
)
|
254,041
|
||||||||||
Anthony
L. Watson (7)
|
38,188
|
36,356
|
159,185
|
¾
|
233,728
|
|||||||||||
William
J. Raggio (8)
|
16,000
|
153,958
|
¾
|
14,553
(9
|
)
|
184,511
|
(1)
|
Anthony
M. Marlon, M.D., our Chief Executive Officer and Chairman of the
Board, is
not included in this table. He is an employee of the Company and
thus
receives no separate compensation for his services as a Director.
His
compensation is shown in the Summary Compensation Table and related
compensation tables above.
|
(2)
|
The
amounts in column (c) reflect the amount of expense we recognized
for
financial statement reporting purposes for 2006, in accordance with
SFAS
123(R), for stock awards, without regard to estimated forfeitures
of such
awards. For the non-employee Directors, the amount includes expense
from
restricted stock units (“RSUs”) granted in 2006. No other unvested stock
awards were held by any non-employee Director in 2006. Assumptions
used in
the calculation of these amounts were the same as those for stock
awards
granted to employees, as discussed in footnote (1) to the Summary
Compensation Table. As of December 31, 2006, each Director held the
following number of RSUs: Mr. Greene: 4,000; Mr. Hartley: 4,000;
Mr. Luce:
4,000; Mr. Ruthe: 4,000; and Mr. Watson: 4,000. All of Mr. Raggio’s 4,000
RSUs vested on May 23, 2006, the
date
|
(3)
|
The
amounts in column (d) reflect the amount of expense we recognized
for
financial statement reporting purposes for 2006, in accordance with
SFAS
123(R), without regard to estimated forfeitures of such awards. The
amounts include expense from options granted before 2006 which remained
unvested in any part of 2006. The Company granted no stock options
in
2006. Assumptions used in the calculation of these amounts were the
same
as those for stock options granted to employees, as discussed in
footnote
(2) to the Summary Compensation Table. As of December 31, 2006, the
non-employee Directors held the following number of outstanding options:
Mr. Greene: 85,200; Mr. Hartley: 37,000; Mr. Luce: 46,000; Mr. Ruthe:
81,000; and Mr. Watson: 85,000. Ms. MacDonald had 77,000 outstanding
options at year-end 2006. On November 23, 2005, all of Mr. Raggio’s
unvested options became immediately vested and exercisable pursuant
to the
terms of the 1995 Non-Employee Directors’ Stock Plan. Under that Plan, an
option becomes exercisable in full at the date six months prior to
the
expiration of the Participant’s term of office as a Director during which
term the Participant reaches the maximum age permitted for election
as a
Director our Bylaws. Consequently, all of the expense of Mr. Raggio’s
options that became exercisable in 2005 was recognized as expense
for 2005
and no expense was recognized for Mr. Raggio’s options in 2006.
|
(a)
|
(b)
|
(c)
|
|||||||||
Number
Of Securities
|
Number
Of Securities
|
||||||||||
To
Be Issued Upon
|
Weighted-Average
|
Remaining
Available For
|
|||||||||
Exercise
Of
|
Exercise
Price Of
|
Future
Issuance Under
|
|||||||||
Plan
Category
|
Outstanding
Awards
|
Outstanding
Awards
|
Equity
Compensation Plans
|
(1) | |||||||
|
|||||||||||
Equity
compensation plans approved by security holders
|
626
|
$
|
4.82
|
1,580
|
(2) | ||||||
|
|||||||||||
Equity
compensation plans not approved by security holders
(3)
|
1,689
|
11.81
|
3,406
|
||||||||
Total
|
2,315
|
9.92
|
4,986
|
(1)
|
All
of the shares available for future issuance include: (i) 3,986,000
shares
under the 1995 Long-Term Incentive Plan (“LTIP”), as amended and restated,
issuable as restricted stock, as a bonus, or otherwise as “full-value”
awards; (ii) 230,000 shares under the 1995 Non-Employee Directors'
Stock
Plan (“Directors’ Plan”), as amended and restated, issuable as restricted
stock units or as shares or deferred shares in lieu of directors’ fees;
and (iii) 770,000 shares under the Amended and Restated 1985 Employee
Stock Purchase Plan (“ESPP”), which may be sold directly to employees at a
discount. Shares other than those under the ESPP may also be issued
in
connection with options, warrant and
rights.
|
(2)
|
Includes
770,000 shares remaining available for future issuance under the
ESPP, of
which 49,000 were issued in January
2007.
|
(3)
|
The
LTIP was approved by stockholders in 1995, with additional shares
authorized by stockholders in 1998. Subsequent amendments to the
Plan by
the Board of Directors reserved additional shares for the LTIP, resulting
in 1,354,000 shares in column (a) and 3,406,000 shares in column
(c) at
December 31, 2006. The LTIP authorizes grants of incentive and
non-qualified stock options, stock appreciation rights, restricted
stock,
deferred stock, bonus stock (including in lieu of other payment
obligations), dividend equivalents, and other stock-based awards.
To date,
we have granted primarily options and deferred stock (designated
as
restricted stock units) under the LTIP. Options must have an exercise
price of at least 100% of the fair market value of our Common Stock
on the
grant date, and generally have a term not exceeding ten years. The
exercise price may be paid in cash or by surrender of previously
acquired
shares. Restricted stock units granted under the LTIP are generally
to be
settled only in shares, and are subject to a risk of forfeiture upon
termination of employment for a specified period, except more favorable
terms apply to termination due to death, disability and in other
specified
cases. The LTIP provides that certain awards will become vested upon
a
change in control of Sierra.
|
Name of Beneficial
Owner
|
Amount and Nature of
Beneficial Ownership |
Percentage of
Outstanding Common Stock |
||||
Anthony
M. Marlon, M.D.
|
4,452,080
|
(1)
|
8.0%
|
|||
Jonathon
W. Bunker
|
126,240
|
(2)
|
*
|
|||
Frank
E. Collins
|
201,420
|
(3)
|
*
|
|||
Paul
H. Palmer
|
86,159
|
(4)
|
*
|
|||
Donald
J. Giancursio
|
13,437
|
(5)
|
*
|
|||
Albert
L. Greene
|
69,051
|
(6)
|
*
|
|||
Thomas
Y. Hartley
|
20,000
|
(7)
|
*
|
|||
Michael
E. Luce
|
25,000
|
(8)
|
*
|
|||
Charles
L. Ruthe
|
76,900
|
(9)
|
*
|
|||
Anthony
L. Watson
|
63,253
|
(10)
|
*
|
|||
All
Directors and Executive Officers as a Group (12 persons)
|
5,155,088
|
(11)
|
9.2%
|
|||
Putnam,
LLC dba Putnam Investments
|
3,533,127
|
(12)
|
6.4%
|
|||
UnitedHealth
Group Incorporated
|
4,452,080
|
(13)
|
8.0%
|
*
|
Indicates
beneficial ownership of less than
1%.
|
(1)
|
Includes
104,000 shares that can be acquired within 60 days of March 26, 2007,
upon
the exercise of stock options and settlement of restricted stock
units
(“RSUs”) that vested before 2006 but which are subject to mandatory
deferral of settlement until May 20, 2007. The number of shares reported
as beneficially owned includes 3,826,954 shares held indirectly through
a
total of four trusts established by Dr. Marlon and his wife, 3,000
shares
held indirectly through a limited partnership (the "Partnership"),
and
305,296 shares held indirectly by the AMM&RM Family Limited
Partnership ("ARFLP"). Dr. Marlon may be deemed to have or share
voting power and/or dispositive power over the shares held by the
four
trusts and, therefore, to have beneficial ownership with respect
to such
shares. Dr. Marlon, as managing general partner of the Partnership,
has
sole voting and dispositive power over the shares held by the Partnership.
Dr. Marlon, as a general
|
(2)
|
Includes
95,750 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options and settlement of RSUs that vested
before 2006 but which are subject to mandatory deferral of settlement
until May 20, 2007. Mr. Bunker’s beneficial ownership includes 8,000
shares held in his 401(k) plan account; it does not include 64,000
shares
deliverable in the future in settlement of vested but deferred RSUs.
|
(3)
|
Includes
122,082 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options and settlement of RSUs that vested
before 2006 but which are subject to mandatory deferral of settlement
until May 20, 2007. Mr. Collins’ beneficial ownership includes 7,572
shares held in his 401(k) plan account; it does not include 46,000
shares
deliverable in the future in settlement of vested but deferred
RSUs.
|
(4)
|
Includes
75,750 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options and settlement of RSUs that vested
before 2006 but which are subject to mandatory deferral of settlement
until May 20, 2007. Mr. Palmer’s beneficial ownership includes 1,790
shares held in his 401(k) plan account; it does not include 24,000
shares
deliverable in the future in settlement of vested but deferred
RSUs.
|
(5)
|
Includes
11,000 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options. Mr. Giancursio’s beneficial ownership
includes 2,314 shares held in his 401(k) plan account; it does not
include
14,000 shares deliverable in the future in settlement of unvested
and
vested but deferred RSUs.
|
(6)
|
Includes
62,200 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options. Mr. Greene’s beneficial ownership does
not include 6,000 shares deliverable in the future in settlement
of
RSUs.
|
(7)
|
Includes
14,000 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options. Mr. Hartley’s beneficial ownership
does not include 6,000 shares deliverable in the future in settlement
of
RSUs.
|
(8)
|
Includes
23,000 shares that can be acquired within 60 days of March 26, 2007,
upon
the exercise of stock options. Mr. Luce’s beneficial ownership does not
include 6,000 shares deliverable in the future in settlement of
RSUs.
|
(9)
|
Includes
58,000 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options. Mr. Ruthe’s beneficial ownership does
not include 6,000 shares deliverable in the future in settlement
of
RSUs.
|
(10)
|
Includes
62,000 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options. Mr. Watson’s beneficial ownership does
not include 6,000 shares deliverable in the future in settlement
of
RSUs.
|
(11)
|
Includes
645,182 shares that can be acquired within 60 days of March 26, 2007,
upon the exercise of stock options and settlement of RSUs, and 232,957
shares held in 401(k) plan accounts for employees.
|
(12)
|
This
information is derived from this stockholder’s Schedule 13G/A filed with
the SEC on February 13, 2007, reporting the number of shares beneficially
owned at an unspecified date. The business address of Putnam LLC
dba
Putnam Investments (“Putnam”) is One Post Office Square, Boston, MA 02109.
Putnam, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc.
(“MMC”), filed the Schedule 13G/A on behalf of itself and its parent, MMC,
and two of its wholly-owned subsidiaries: Putnam Investment Management,
LLC (“PIM”), which is the investment adviser to the Putnam family of
mutual funds, and The Putnam Advisory Company, LLC (“PAC”), which is the
investment adviser to Putnam’s institutional clients. Putnam reported
having shared voting power over 343,532 shares and shared dispositive
power over 3,533,127 shares, representing beneficial ownership of
6.2% of
the outstanding class. PIM reported having shared voting power over
14,600
shares and shared dispositive power over 2,918,183 shares, representing
beneficial ownership of 5.1% of the outstanding class. PAC reported
having
shared voting power over 328,932 shares and shared dispositive power
over
614,944 shares, representing beneficial ownership of 1.1% of the
outstanding class. MMC reported beneficial ownership of no shares
of our
Common Stock. PIM and PAC have dispositive power over the shares
as
investment managers, but the mutual fund’s trustees rather than PIM have
voting power over the shares held by each fund, and PAC has shared
voting
power over the shares held by institutional clients. Pursuant to
Rule
13d-4, MMC and PIM declared that the filing of the Schedule 13G/A
shall
not be deemed an admission by either or both of them that they are
the
beneficial owner of the securities covered by the filing, and further
stated that neither of them have any power to vote or dispose of,
or
direct the voting or disposition of, any of the securities covered
by the
filing.
|
(13)
|
These
shares may be deemed to be beneficially owned by UnitedHealth Group
Incorporated (“UNH”) by virtue of a Voting and Support Agreement, dated as
of March 11, 2007 (the “Voting Agreement”), between UNH and Anthony M.
Marlon. These are the same shares as are shown in the table as
beneficially owned by Dr. Marlon, as described more fully in footnote
(1)
above. UNH and Sierra entered into an Agreement and Plan of Merger,
dated
as of March 11, 2007, which provides for the merger of Sierra and a
subsidiary of UNH. If the merger is completed, Sierra will become
a
subsidiary of UNH and each share held by Sierra’s stockholders will be
converted into a right to receive $43.50. Before the merger is completed,
it must be approved by Sierra’s stockholders; completion of the merger is
also subject to a number of other conditions. Under the Voting Agreement,
Dr. Marlon agreed that his Sierra shares will be voted (i) in favor
of approval of the Merger Agreement and otherwise to cause the merger
to
be completed, and (ii) against any other action that could be
expected to result in Sierra breaching its agreements with UNH relating
to
the merger, including any competing takeover proposal. Dr. Marlon
also
granted UNH an irrevocable proxy coupled with an interest to vote
his
shares as provided for in the Voting Agreement. Dr. Marlon’s commitment
applies only to shares as to which he has the right to vote, including
shares he may acquire, but does not require that he in fact exercise
options or take other actions to acquire additional shares, and does
not
provide any right of UNH to acquire his shares. UNH disclaims beneficial
ownership of the shares subject to the Voting Agreement. The principal
executive offices of UNH are located at UnitedHealth Group Center,
9900
Bren Road East, Minnetonka, Minnesota.
|
2006
|
2005
|
||||||
Audit
fees (1)
|
$
|
1,058,400
|
$
|
934,000
|
|||
Audit-related
fees (2)
|
81,000
|
32,000
|
|||||
Tax
fees (3)
|
¾
|
36,000
|
|||||
All
other fees (4)
|
¾
|
¾
|
|||||
Total
|
$
|
1,126,400
|
$
|
1,002,000
|
(1)
|
Audit
fees consist of fees for the audit of our annual financial statements,
the
review of quarterly financial statements, consents related to SEC
registration statements, as well as work that generally only the
independent registered public accounting firm can reasonably be expected
to provide, such as statutory audits and financial audits of subsidiaries.
Audit fees also included fees for professional services rendered
for the
audit of (i) management’s assessment that the Company maintained effective
internal control over financial reporting, and (ii) the effectiveness
of
the Company’s internal control over financial
reporting.
|
(2)
|
Audit-related
fees consist principally of fees for assurance and related services
that
are reasonably related to the performance of an audit and fees for
the
audit of the Company’s employee benefit
plans.
|
(3)
|
There
were no fees paid to Deloitte for tax compliance, tax advice, or
tax
planning in 2006 or 2005. Tax fees for 2005 consisted of fees for
tax
compliance software and associated training.
|
(4)
|
There
were no other fees and no fees paid to Deloitte Consulting during
the
years ended December 31, 2006 or
2005.
|
(31.1)
|
Rule
13a - 14(a) Certification of Chief Executive Officer.
|
(31.2)
|
Rule
13a - 14(a) Certification of Chief Financial Officer.
|
(32.1) | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer. |
(32.2) | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer. |
SIGNATURES
|
||||||||||
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange
Act
of 1934, the Registrant has caused this report to be signed on
its behalf
by the undersigned thereto duly authorized.
|
||||||||||
SIERRA
HEALTH SERVICES, INC.
|
||||||||||
By:
|
/s/
Anthony M. Marlon, M.D.
|
|||||||||
Date:
April 30, 2007
|
Anthony
M. Marlon, M.D.
|
|||||||||
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report
has been signed below by the following persons on behalf of the
Registrant
and in the capacities and on the dates indicated.
|
||||||||||
Signature
|
Title
|
Date
|
||||||||
/s/
Anthony M. Marlon, M.D.
Anthony
M. Marlon, M.D.
|
Chief
Executive Officer
and
Chairman of the Board
(Chief
Executive Officer)
|
April
30, 2007
|
||||||||
/s/
Marc R. Briggs
Marc
R. Briggs
|
Senior
Vice President of Finance,
Chief
Financial Officer
and
Treasurer
|
April
30, 2007
|
||||||||
/s/
Thomas Y. Hartley
Thomas
Y. Hartley
|
Lead
Director
|
April
30, 2007
|
||||||||
/s/
Charles L. Ruthe
Charles
L. Ruthe
|
Director
|
April
30, 2007
|
||||||||
/s/
Albert L. Greene
Albert
L. Greene
|
Director
|
April
30, 2007
|
||||||||
/s/
Michael E. Luce
|
Director
|
April
30, 2007
|
||||||||
Michael
E. Luce
|
||||||||||
/s/
Anthony L. Watson
Anthony
L. Watson
|
Director
|
April
30, 2007
|