The Governance and Nominating Committee of Community Health Systems, Inc. (“CHS,” the “Company” or “we”) has developed, and our Board of Directors has approved, the following guidelines. Our Governance and Nominating Committee reviews and modifies these guidelines at least annually.
1. Role of the Board of Directors and Management.
Our officers and employees, under the direction of our chief executive officer (“CEO”) and the oversight of our Board of Directors, work to enhance the long-term value of the Company for our stockholders. In addition to its general oversight of management, the Board also performs a number of specific functions including: (1) selecting, evaluating and compensating the CEO and overseeing CEO succession planning, (2) providing counsel and oversight on the selection, evaluation, development and compensation of senior management, (3) reviewing, approving and monitoring fundamental financial and business strategies and major corporate actions, (4) as further described in Section 2 below, assessing major risks facing the Company and reviewing options for their mitigation and (5) ensuring processes are in place for maintaining the integrity of the Company.
2. Risk Management.
Risk management is primarily the responsibility of the Company’s management team, which is administered through a broad-based committee that includes executives from our operations, internal audit, compliance, quality, revenue management, accounting, risk management, finance, human resources, information technology and legal departments. The Board of Directors is responsible for the overall supervision of the Company’s risk management activities. The Board’s oversight of the material risks faced by the Company occurs at both the full Board level and at the Board committee level.
The Audit and Compliance Committee has oversight responsibility for financial reporting with respect to the Company’s major financial exposures and the steps management has taken to monitor and control such exposures as well as for the effectiveness of management’s enterprise risk management process that monitors key business risks facing the Company. The Audit and Compliance Committee also oversees the delegation of responsibility for the oversight of specific risk areas among the other Board committees, consistent with the committees’ charters and responsibilities.
Management provides regular updates throughout the year to the respective committees regarding the management of the risks each committee oversees, and each of these committees discusses these risks with the full Board at either regular meetings of the Board or at committee meetings in which all Board members participate. At least annually, the Audit and Compliance Committee reviews the allocation of responsibility for the oversight of risk areas among the Board’s committees and implements any changes it deems appropriate.
In addition to the reports from the committees, the Board receives presentations throughout the year from various department and business unit leaders that include discussions of risks as necessary. At each Board meeting, the Chair and CEO addresses, in a director-only session, matters of particular importance or concern, including any areas of risk that require Board attention. Additionally, through dedicated sessions focusing entirely on corporate strategy, the full Board reviews in detail the Company’s short- and long-term strategies, including consideration of risks facing the Company and their potential impact.
We believe that our approach to risk oversight, as described above, optimizes our ability to assess inter-relationships among the various risks, make informed cost-benefit decisions, and approach emerging risks in a proactive manner for the Company. We also believe that our risk structure complements our current board leadership structure, as it allows our independent directors, through the Lead Director and the three fully independent board committees and otherwise, to exercise effective oversight of the actions of management, led by our Chair and CEO, in identifying risks and implementing effective risk management policies and controls.
3. Meetings of Board; Lead Director.
The Board of Directors is responsible for determining the appropriate number of regular meetings held each year, but under no circumstances shall it have fewer than four meetings of the full Board in any calendar year. At each regular meeting, the Board reviews and discusses reports by management on the performance of the Company, the Company’s plans and prospects, as well as immediate issues facing the Company. Directors are expected to attend scheduled Board and committee meetings. The Board believes that the substantive duties of the Chair of the Board, including, for example, calling and organizing meetings and preparing agendas (in consultation with the Lead Director), are best performed by someone who has day-to-day familiarity with the business issues confronting the Company and the understanding of the specific areas in which management seeks advice and counsel from the Board. For that reason, the Board believes that the most effective and appropriate leadership model for the Company is that of a combined Chair of the Board and CEO.
In addition to meetings of the full Board, our independent directors meet in regularly scheduled executive sessions without management present. The Board has determined that a Lead Director selected by the Board will preside at such meetings. The Lead Director also has the authority to call meetings of the independent directors and prepare agendas for such meetings. The Lead Director serves as the principal liaison between the independent directors and the Chair and other members of management. The Lead Director, along with the Audit and Compliance Committee, will also assist management in assuring the Company’s compliance with all applicable state and federal healthcare laws and implementation of all applicable compliance programs thereunder. As set forth in Section 4 below, the Lead Director also takes an active role in approving and setting agendas and approving the materials to be sent to the Board of Directors prior to its meeting. As requested, the Lead Director is also available for consultation and direct communication with major shareholders.
4. Setting Board Agenda.
The Board shall be responsible for its agenda. At the December Board meeting, the CEO will propose for the Board’s and committees’ approval key issues of strategy, risk and integrity to be scheduled and discussed during the course of the next calendar year. Before that meeting, the Board and committees will be invited to offer suggestions. As a result of this process, a schedule of major discussion items for the balance of the year will be established. Prior to each Board meeting, the CEO will discuss the other specific agenda items for the meeting with the Lead Director. The CEO and the Lead Director, or committee chair, as appropriate, shall determine the nature and extent of information that shall be provided regularly to the directors before each scheduled Board or committee meeting. In consulation with the Governance and Nominating Committee, the Lead Director will advise the Board on the quality, sufficiency and currency of information furnished by management to the directors in connection with Board and Committee meetings and other activities of the directors. The Board believes it is each director’s responsibility to ensure that meeting agendas are appropriate and that sufficient time and information are available to address the issues requiring attention. Directors are urged to make suggestions for agenda items, or additional pre-meeting materials, to the CEO, the Lead Director or appropriate committee chair at any time.
5. Size of the Board.
The number of directors constituting the full Board shall be determined from time to time by the Board within the limits prescribed by the Company’s Certificate of Incorporation and By-laws. In determining the number of directors constituting the full Board, the Board should consider, among other things, the size and breadth of the Company’s business and the Company’s goals and needs.
6. Newly-Created Directorships and Vacancies.
Newly-created directorships resulting from any increase in the number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or any other cause shall, unless otherwise provided by law or by resolution of the Board, be filled by a majority vote of the directors then in office. Any director appointed to the Board to fill a newly-created directorship or other vacancy shall be subject to election at our next Annual Meeting of Stockholders. The foregoing procedures are subject to the rights of the holders of any series of Preferred Stock then outstanding.
The Governance and Nominating Committee establishes selection criteria for directors. At a minimum each director must possess (1) a reputation for the highest ethical and moral standards, (2) good judgment, (3) a positive record of achievement, (4) if on other boards, an excellent reputation for preparation, attendance, participation, interest and initiative, (5) business knowledge and experience relevant to the Company and (6) a willingness to devote sufficient time to carrying out his or her duties and responsibilities effectively.
The Governance and Nominating Committee considers a variety of factors in selecting and nominating individuals to serve on the Board, including, without limitation:
(a) The Board’s and the Company’s needs for input and oversight about the strategy, business, regulatory environment, and operations of the Company;
(b) The management directors’ views as to areas in which additional advice and counsel could be provided by the Board;
(c) The mix of perspectives, experience, and competencies currently represented on the Board (while this is primarily directed to the professional acumen of an individual, it may also include gender, ethnic, and cultural diversity);
(d) The results of the Board’s annual self-assessment process; and
(e) As to incumbent directors, meeting attendance, participation and contribution, and the director’s current independence status.
The Governance and Nominating Committee shall seek candidates with broad background and experience that will enable them to serve on and contribute to any of the Board’s three standing committees. Every director nominee should demonstrate a strong record of integrity and ethical conduct, an absence of conflicts that might interfere with the exercise of his or her independent judgment, and a willingness and ability to represent all stockholders of the Company.
8. Independence of Directors.
A majority of the directors must be “independent” under the New York Stock Exchange (“NYSE”) Listed Company Corporate Governance Standards and the NASDAQ Global Market Listing Rules.1 The Board believes it is in the best interest of the Company and will endeavor to maintain a super-majority of “independent” directors. The Board believes, however, that directors who do not meet the NYSE and NASDAQ independence standards also make valuable contributions to the Board and to the Company by reason of their experience and wisdom.
To be considered independent under the NYSE and NASDAQ rules, the Board must determine that a director does not have any material relationship with the Company (either directly or as an officer, employee, shareholder or partner of an organization that has a relationship with the Company). The Board has established the following standards to assist it in determining director independence in accordance with that rule:
Independence Standards for Directors (Including Service on Governance and Nominating Committee)
Independent Directors shall:
- a. Not have been an employee of the Company, nor have an immediate family member who is or has been an executive officer, within the last three years. “Executive Officer” has the same meaning specified for the term “officer” in Rule 16a-1(f) under the Securities Exchange Act of 1934.
- b. Not have been the recipient of, or have an immediate family member who has been the recipient of, more than $120,000 in direct compensation from the Company, excluding director and committee fees and pension or other deferred compensation for prior services, during any twelve-month period within the last three years.
- c. Not have been the recipient of, or have an immediate family member who was the recipient of, more than $120,000 in direct or indirect compensation in any form from the Company, excluding director and committee fees, compensation paid to an Immediate Family Member who is a non-executive employee of the Company, benefits under a tax-qualified retirement plan and non-discretionary compensation, during any twelve-month period within the last three years.
- d. Not (i) be a partner of or have an immediate family member who is a current partner of a firm that is the Company’s current internal or external auditor; (ii) be an employee of a firm that is the Company’s current internal or external auditor; (iii) have an immediate family member who is a current employee of a firm that is the Company’s internal or external auditor and who personally works on the Company’s audit; or (iv) have been or have an immediate family member who was, within the last three years, a partner or employee of the firm that is the Company’s internal or external auditor and personally worked on the Company’s audit within that time.
- e. Not have been part of an interlocking directorate within the last three years; for the purpose of evaluating an interlocking directorate, the employment of the director’s immediate family members shall also be evaluated.
- f. Not be an employee, or have an immediate family member who is an executive officer, of another company that has made payments to, or received payments from, the Company for property or services in an amount which exceeds the greater of (i) $1 million or (ii) 2% of the other company’s consolidated gross revenues, in any of the last three fiscal years.
- g. Not be or have an immediate family member who is a partner (other than a limited partner), a controlling shareholder or an executive officer of any entity or organization (including law firms and charitable entities) that has made payments to, or received payments from, the Company for property or services (other than payments which arose solely from investments in the securities of the Company and payments under non-discretionary charitable contribution matching programs) in an amount which exceeds the greater of (i) $200,000 or (ii) 5% of the recipient’s consolidated gross revenues for that year, in the current year or any of the last three fiscal years.
The Board will also evaluate, on a case-by-case basis, any other relationship, direct or indirect, between a director and the Company and its officers, which might have the appearance of potentially impairing the director’s independence of judgment. Special attention will be paid to service on a non-profit or charitable Board by the director or a close personal relationship between the director and any executive officer.
Additional Standards for Independence for Audit and Compliance Committee Members
Audit and Compliance Committee members shall:
- Not receive any compensation from the Company other than fees for service as a director or committee member.
- Not have been involved in preparing the Company’s financial statements in the last three years.
- Not be an “affiliate” of the Company, as defined by SEC regulations, which include within the “affiliate” definition a 10% or greater shareholder.
Additional Standards for Independence for Compensation Committee Members (to allow the committee to approve Section 16(b) transactions for securities law purposes and approve “performance goals” for purposes of 162(m) of the Internal Revenue Code) Compensation Committee members shall:
- Never have been an officer of the Company.
- Not receive any compensation from the Company other than fees for service as a director or committee member.
- Not be engaged in any business relationship or have an interest in any transaction that is required to be disclosed under Item 404(a) or (b) of Regulation S-K.
- Not have any relationship with the Company that is material to his or her ability to be independent from the Company’s management in connection with his or her duties as a member of the Compensation Committee.
9. Selection Process.
Our stockholders elect our entire Board of Directors each year at the Annual Meeting of Stockholders. All director nominees are nominated for election to one-year terms. All candidates for director are evaluated and recommended for nomination by the Governance and Nominating Committee, unless nominated by a stockholder in accordance with the procedures and requirements set forth in the advance notice or proxy acess provisions, as applicable, of our Bylaws, or as set forth in a written contract between the Company and a third party. The Governance and Nominating Committee will conduct the same analysis of any director nominations properly submitted by a stockholder in accordance with our Bylaws that it conducts with respect to its director nominees and, as a result of that process, will formulate its recommendation to support or oppose that person’s election as a member of the Board of Directors.2
Stockholders may propose candidates for the Board by complying with the procedures and requirements set forth in the advance notice or proxy access provisions, as applicable, of our Bylaws. All stockholder recommendations as to possible Board members must comply with all applicable timing, information and other requirements set forth in our Bylaws. Such proposals should be sent to: Secretary, Community Health Systems, Inc., 4000 Meridian Blvd., Franklin, TN 37067.
10. Limitation Regarding Service on Other Boards.
No non-management director may serve on more than four (4) public companies’ boards of directors, in addition to the Company’s. No member of the Audit and Compliance Committee may serve on more than two other companies’ audit committees. A director should notify the chair of the Governance and Nominating Committee and the secretary of the Company in a timely fashion of his or her appointment to or resignation from the board of directors of another public company. Likewise, a member of the Audit and Compliance Committee should notify the chair of the Governance and Nominating Committee and the secretary of the Company of his or her appointment to or resignation from another company’s audit committee. The Company’s CEO shall serve on no more than two (2) other public companies’ boards of directors and shall obtain the approval of the Governance and Nominating Committee prior to accepting such nomination or appointment. No other executive officer of the Company shall accept nomination or appointment to any public company board of directors without prior approval of the CEO and advice of counsel, and the Governance and Nominating Committee shall be advised of all such appointments.
11. No Term Limits.
The Board does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe in a mandatory retirement age. The advantage of potentially providing new ideas and viewpoints of new directors is offset by the significant disadvantage of losing the experience and insight into the Company and its operations gained over time. The Board self-evaluation process described below will be an important determinant for Board tenure.
12. Submission of Resignation From Board Upon Change of Circumstance, Including Failure to Receive a Majority of Votes Cast in an Uncontested Director Election.
Company officers who also serve as directors must tender their resignations from the Board at the same time they resign or retire from the Company. Any other director who has a significant change in circumstances, such as a change in his or her primary occupation, should also give notice and tender his or her resignation from the Board in conjunction with such change in circumstances. The Governance and Nominating Committee, in its discretion, will determine whether to accept such resignation after considering the appropriateness of continued service on the Board.
Any nominee for election to the Board of Directors who is then serving as a director and, in an election at which the standard for election of directors is a majority vote in accordance with the Company’s By-laws, receives a greater number of “against” votes than “for” votes shall promptly tender his or her resignation following certification of the vote. A form of such resignation may be obtained from the secretary of the Company. The Governance and Nominating Committee of the Board shall then consider the resignation offer and recommend to the Board whether to accept or reject the resignation, or whether other action should be taken; provided that any director whose resignation is under consideration shall not participate in the committee’s recommendation regarding whether to accept the resignation. The Board shall take action on the committee’s recommendation within 90 days following certification of the vote, and promptly thereafter publicly disclose its decision and the reasons therefor.
13. Board Committees.
The Board has established the following committees to assist it in discharging its responsibilities: (1) Audit and Compliance Committee; (2) Compensation Committee; and (3) Governance and Nominating Committee. Current charters of these committees are published on the CHS website, and will be mailed to stockholders on written request. The committee chairs present the minutes of their meetings to the full Board following each meeting of the respective committees.
14. Independence of Committee Members.
In addition to the requirement that a majority of the Board satisfy the independence standards discussed in Section 8 above, all members of the Audit and Compliance, Governance and Nominating and Compensation Committees must be independent. Members of the Audit and Compliance Committee and the Compensation Committee must also satisfy additional independence requirements as set forth above.
15. Director Orientation.
The general counsel and the chief financial officer shall be responsible for providing an orientation for new directors, and for periodically providing materials or briefing sessions for all directors on subjects that would assist them in discharging their duties. Each new director shall, within six months of election to the Board, spend a day at corporate headquarters for personal briefing by senior management on the company’s strategic plans, its financial statements, and its key policies and practices.
16. Self-Evaluation and Director Education.
The Board and each of the committees will perform an annual self-evaluation. In the fourth quarter of each year, the directors will be requested to provide their assessments of the effectiveness of the Board and the committees on which they serve. The individual assessments will be organized and summarized by the general counsel for discussion with the Board and the committees. The full Board’s self-assessment of its effectiveness shall include questions regarding the preparedness and contributions of directors. The Governance and Nominating Committee shall consider the input received in this self-assessment and take appropriate action including, for example, offering feedback to a particular director or suggesting or arranging for additional training. Directors are offered the opportunity to complete self-assessments as a way to communicate expectations and the factors by which effective directorship can be measured. In conjunction with this director self-assessment, each director is able to self-identify his or her individual needs or desires for additional training or orientation related to discharging his or her duties as a director. Directors are encouraged to attend, at the Company’s expense, third-party director education conferences.
17. Code of Conduct.
The Board expects its directors, as well as officers and employees, to act ethically at all times and to acknowledge their adherence to the policies comprising CHS’ Code of Conduct, which is the cornerstone of the Company’s compliance program overseen and implemented by the Company’s Corporate Compliance Officer in consultation with the Compliance Coordinator (pursuant to the terms of the final order of settlement referenced in Footnote 2). The Board will not permit any waiver of any ethics policy for any director or executive officer.
18. Conflicts of Interest.
If an actual or potential conflict of interest arises for a director, the director shall promptly inform the CEO and the Lead Director. If a significant conflict exists and cannot be resolved, the director should resign. All directors must recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Audit and Compliance Committee shall resolve any conflict of interest question involving the CEO and the CEO shall resolve any conflict of interest issue involving any other officer of the Company.
19. Compensation Clawback Policy.
As further described in the Company’s Compensation Clawback Policy, as approved by the Board, to the extent permitted by applicable law, the Chief Executive Officer, Chief Financial Officer and other elected officers of the Company may be required to reimburse the Company for the amount and/or value of performance-based cash, stock or equity-based awards received by such elected officers, and/or gains realized by such elected officers in connection with these awards in the event of a restatement of the Company’s financial statements.
20. Insider Trading Policy.
The Company’s insider trading policy, as approved by the Board, is overseen by a “Trading Compliance Committee” consisting of the chief financial officer and the general counsel, prohibits directors, officers and designated employees from trading in any put or engaging in any short sale or other hedging transaction (including a short sale “against the box”) or equity swap of Company securities, or trading in any call or other derivative on Company securities. The insider trading policy also prohibits any director, officer or designated employee from pledging Company securities, including holding such securities in a margin account. On a case-by-case basis, the Trading Compliance Committee may approve an exception to the prohibition on pledging Company securities as collateral for a loan (not including margin debt) where the director, officer or designated employee clearly demonstrates the financial capacity to repay the loan without resorting to the pledged securities. The insider trading policy also prohibits repurchases of the Company’s common stock from its directors or executive officers, except in connection with the payment of taxes.
21. Political Contributions Policy.
Pursuant to the Company’s political contributions policy, as approved by the Board, political contributions by the Company or its affiliates are overseen by the Governance and Nominating Committee and are subject to the approval of senior management. Such political contributions will be made solely to promote the interests of the Company, without regard to personal interests of its directors or officers. The Governance and Nominating Committee will annually review a report detailing the Company’s political contributions and expenditures during the prior 12 months. The Governance and Nominating Committee will also annually review the political contributions policy and recommend to the Board changes to the policy. Any contributions that must be reported to a federal or state agency will also be disclosed on the www.chs.net website.
22. Reporting of Concerns to Non-Employee Directors or the Audit and Compliance Committee.
Anyone who has a concern about the Company’s conduct, or about the Company’s accounting, internal accounting controls or auditing matters, may communicate that concern directly to the Lead Director, to any non-employee directors, or to the Audit and Compliance Committee. Such communications may be confidential or anonymous, and may be e-mailed, submitted in writing, or reported by phone. The Company will adopt appropriate procedures to ensure that any contact received at the Company will be forwarded to the director(s) without delay or censor. Concerns may also be directed through the Company’s confidential disclosure program by using special addresses and a toll-free phone number that are published on the Company’s website. All such concerns will be reviewed and addressed by the Company’s Corporate Compliance Officer and Compliance Coordinator in the same way that other concerns are addressed by the Company and may be forwarded directly to the Lead Director, the non-employee directors or the Audit and Compliance Committee, if so directed in the correspondence or other contact. The status of all outstanding concerns addressed to the Lead Director, the non-employee directors or the Audit and Compliance Committee will be reported to the directors on a quarterly basis. The Lead Director, the non-employee directors or the Audit and Compliance Committee may direct special treatment, including the retention of outside advisors or counsel, for any concern addressed to them. The Board shall have the authority to reward employees who promptly bring meritorious complaints or concerns to the Company’s attention. The Company’s Code of Conduct prohibits any employee from retaliating or taking any adverse action against anyone for raising or helping to resolve an integrity concern.
23. Access to Senior Management.
Non-employee directors are encouraged to contact senior managers of the Company without senior corporate management present.
24. Access to Independent Advisors.
The Board and its committees shall have the right at any time to retain independent outside financial, legal or other advisors.
25. Compensation of Board.
The Governance and Nominating Committee is responsible for recommending to the Board compensation and benefits for non-employee directors. In discharging this duty, the Governance and Nominating Committee shall be guided by three goals: compensation should fairly pay directors for work required in a company of the Company’s size and scope; compensation should align directors’ interests with the long-term interests of stockholders, as evidenced in part by paying at least one-half of the directors’ annual compensation in the form of equity of the Company; and the structure of the compensation should be simple, transparent and straightforward for stockholders to understand. Non-employee directors should not receive perquisites, such as life insurance, health insurance, financial planning or automobile allowances nor are they eligible to receive any change-in-control payments or severance arrangements.
26. Succession Plan.
The Board shall be responsible for establishing a succession plan for the CEO and senior executives.
27. Annual Compensation Review of Senior Management.
The Compensation Committee shall annually approve the goals and objectives for compensating the CEO. That committee, along with the Lead Director, shall evaluate the CEO’s performance in light of these goals before setting the CEO’s salary, bonus and other incentive and equity compensation and shall meet with the CEO to discuss such evaluation. The Compensation Committee shall also annually approve the compensation structure for the Company’s officers, and shall evaluate the performance of the Company’s senior executive officers before approving their salary, bonus and other incentive and equity compensation.
28. Stock Ownership Guidelines and Holding Periods (Directors and Executive Officers).
The Community Health Systems Stock Ownership Guidelines align the interests of its directors and executive officers with the interests of stockholders and promote the Company’s commitment to sound corporate governance. The guidelines apply to the following Company leaders, in the indicated multiples of either an executive officer’s base salary or a non-executive director’s retainer fee at the time the participant becomes subject to the guideline:
|Position with the Company||Value of Shares Owned|
|Chair of the Board/Chief Executive Officer||5.0x|
|Members of the Board of Directors (including executives)||5.0x|
|Officers named in the Proxy Statement and Executive Vice Presidents||3.0x|
|Other Officers above Vice President||1.5x|
Company leaders subject to these guidelines are expected to achieve their respective guideline within five (5) years of becoming subject to the guideline (and an additional five (5) years in the event of a promotion to a higher guideline). Once achieved, ownership of the guideline amount must be maintained for as long as the individual is subject to these Stock Ownership Guidelines.
Until such time as a Company leader satisfies the ownership guidelines set forth above, that individual will also be required to hold, for at least one year, 100% of the shares received upon the exercise of stock options and upon the vesting of full value stock awards, including but not limited to restricted stock and restricted stock units, in each case net of those shares required to pay the exercise price and any taxes due upon exercise or vesting.
Stock that counts towards satisfaction of the Company’s Stock Ownership Guidelines includes: (i) shares held outright by the participant or his or her immediate family members living in the same household; (ii) restricted stock issued and held as part of an executive’s or director’s long term compensation, whether or not vested; (iii) shares underlying vested Community Health Systems stock options; and (iv) shares acquired on stock option exercises that the participant continues to hold. The Governance and Nominating Committee of the Board of Directors shall have the authority to review a participant’s progress and compliance with the applicable guideline and grant any hardship waivers or exceptions (i.e., in the event of a divorce) as such committee deems necessary and appropriate.
The Governance and Nominating Committee of the Board of Directors shall periodically review the participants’ base salaries and the relative value of their stock ownership pursuant to the guidelines to evaluate whether the intent of the guidelines is being achieved and may revise them from time to time.
29. No Personal Loans to Directors or Executive Officers.
The Company will not make any personal loans or extensions of credit to directors or executive officers.
30. Rights Plan Policy.
The Board of Directors shall seek and obtain stockholder approval before adopting a stockholder rights plan; provided, however, that the Board of Directors may determine to act on its own to adopt a stockholder rights plan without prior stockholder approval, if, under the circumstances, a majority of the independent directors, in the exercise of their fiduciary responsibilities, deem it to be in the best interests of the Company’s stockholders to adopt a stockholder rights plan without the delay in adoption that would come from the time reasonably anticipated to seek stockholder approval. If the Board of Directors adopts a stockholder rights plan without prior stockholder approval, the Board of Directors will submit the stockholder rights plan to the stockholders for ratification, or the stockholder rights plan must expire, without being renewed or replaced, within one year. If submitted by the Board of Dirctors for stockholder approval, the stockholder rights plan will immediately terminate if not approved by a majority of the votes cast.
The Governance and Nominating Committee will review this policy statement on an annual basis, and report to the Board of Directors any recommendations it may have concerning this policy.
APPROVAL AND ADOPTION
Reviewed and approved by the Governance and Nominating Committee on January 28, 2003 and adopted by the Board of Directors on February 25, 2003.
Revision reviewed and approved by the Governance and Nominating Committee on February 24, 2004 and adopted by the Board of Directors on February 24, 2004.
Revision adopted by the Board of Directors on April 8, 2004.
Revision reviewed and approved by the Governance and Nominating Committee on February 22, 2005 and adopted by the Board of Directors on February 23, 2005.
Revision adopted by the Board of Directors on May 25, 2005.
Revision adopted by the Board of Directors on February 27, 2008.
Revision adopted by the Board of Directors on September 10, 2008.
Revisions adopted by the Board of Directors on May 19, 2009.
Revisions adopted by the Board of Directors on May 18, 2010.
Revisions adopted by the Board of Directors on December 12, 2012.
Revisions adopted by the Board of Directors on February 26, 2014.
Revisions reviewed and approved by the Governance and Nominating Committee on December 9, 2014 and adopted by the Board of Directors on December 10, 2014.
Revisions reviewed and approved by the Governance and Nominating Committee and adopted by the Board of Directors on February 25, 2016.
Revisions reviewed and approved by the Governance and Nominating Committee and adopted by the Board of Directors on December 7, 2016.
Revisions reviewed and approved by the Governance and Nominating Committee and adopted by the Board of Directors on February 22, 2017.
1 In the event that the Company ceases to have securities listed on the New York Stock Exchange or NASDAQ Global Market, the listing requirements specific to the applicable exchange may be disregarded.
2 Pursuant to a final order of settlement by the United States District Court for the Middle District of Tennessee in the derivative actions In re Community Health Systems, Inc. Shareholder Derivative Litigation, Case No. 3:11-cv-0489 and Member Cases 3:11-cv-0589 and 3:11-cv-0952, for a period of four (4) years from the date of entry of such order, the Board of Directors will include two (2) independent Directors who are nominated by the Board for election by the Company’s stockholders at the next Annual Meeting of Stockholders from a pool of qualified candidates who are recommended for consideration by any stockholder (excluding employees of the Company) who has continuously held one percent (1%) of the Company’s outstanding common stock for a period of at least one (1) year.