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2021 Proxy Statement |
Table of Contents
THE PROVIDENCE SERVICE CORPORATION700 Canal St., Third Floor
Stamford, CT 06902_________________
June 14, 20164700 S Syracuse St, 4th Floor
Denver, CO 80237
Dear Stockholder:
We are pleased to invite you to attend the 2016 Annual Meeting of Stockholders of The Providence Service Corporation (the “Company”) that will be held at 700 Canal St., Stamford, CT 06902, at 8:00 a.m. (local time) on July 27, 2016. Registration and seating will begin at 7:30 a.m. Details of the business to be conducted at the 2016 Annual Meeting are given in the Notice Regarding the Availability of Proxy Materials for the 2016 Annual Meeting of Stockholders (the “Notice”) and in the Proxy Statement.
Your vote is important and we encourage you to vote promptly. For record holders, whether or not you are able to attend the 2016 Annual Meeting in person, please follow the instructions contained in the Notice on how to vote via the Internet, by phone, or request a paper proxy card to complete, sign and return by mail so that your shares may be voted. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares.
On behalf of the Board of Directors and management of The Providence Service Corporation,
DEAR STOCKHOLDER, April 30, 2021 | We are pleased to invite you to attend the 2021 Annual Meeting of Stockholders of ModivCare Inc., which will be held on Tuesday, June 15, 2021, at 10:00 a.m. Mountain Daylight Time, at 6900 Layton Avenue, 12th Floor, Denver, CO 80237. We intend to hold the annual meeting in person. We are sensitive, however, to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may continue to impose on public gatherings in respect of the COVID-19 pandemic. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the annual meeting as promptly as practicable by issuing a press release and filing such announcement on the SEC’s website. Alternative arrangements may include holding the annual meeting solely by means of remote communication. You may also monitor our website at www.modivcare.com for updated information. If you are planning to attend our annual meeting, please check the website one week prior to the annual meeting date. As always, we encourage you to vote your shares prior to the annual meeting. At the annual meeting you will be asked to consider and vote on the proposals described in the accompanying notice of annual meeting and proxy statement, as well as such other business as may properly come before the annual meeting. Your vote is important, and we encourage you to vote promptly. For record holders, regardless of whether you are able to attend the upcoming annual meeting in person, please follow the instructions contained in the proxy statement on how to vote via the Internet, by telephone, or request a paper proxy card to complete, sign and return by mail so that your shares may be voted. If your shares are held in the name of a broker, bank or other intermediary holder of record, follow the voting instructions you receive from the holder of record to vote your shares. On behalf of the board of directors and management of the Company, I extend our appreciation for your continued support.
Denver, CO 80237
Table of Contents
Table of Contents Table of Contents
Table of Contents
The presence, in person or represented by proxy, of the holders of a majority of the outstanding shares of Common Stock Abstentions will be included in the number of shares
If you hold your shares in “street name” (that is,
The following table sets forth certain information, as of the Record Date, with respect to the beneficial ownership of
The Company’s The Board
Under the Company’s
The Board proposes the election of
The Board
If elected,
Unless directed otherwise, the persons
The Board unanimously recommends that the
The following table sets forth certain information with respect to the current directors and the director nominees as of the Record Date.
The process undertaken by the Nominating and Governance Committee in selecting qualified director candidates is described below under the caption “Corporate Governance—Director Nomination Process—Director Nominee Selection
DIRECTOR NOMINEES
The aggregate number of unvested stock awards outstanding for each non-employee director as of December 31, 2020 is shown below:
The aggregate number of unvested stock equivalent units outstanding for each non-employee director as of December 31, 2020 is shown below:
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Special Bonuses
The Compensation Committee awarded special discretionary bonuses for certain NEOs serving at the holding company in recognition of their numerous accomplishments in 2015, including, but not limited to, the sale of the Human Services segment and the transition to the holding company structure. Messrs. Lindstrom and David Shackelton and Ms. Uzzell received $400,000, $240,000, and $135,000, respectively.
Mr. Schwarz also received a special discretionary bonus of $855,779 in recognition of his contribution to the outstanding performance of LogistiCare in 2015 and the impact his leadership has had on value creation over a multi-year period.
Long-Term Incentives
HoldCo LTI Plan
The HoldCo LTI Plan is a multi-year plan with a contingent share based payout based on stock price performance, thus providing direct alignment with stockholders. The Compensation Committee selected participants of the HoldCo LTI Plan based on individuals who could have a significant impact on Company results in support of the business strategy. Performance will be measured from August 6, 2015 (the “award date”) to December 31, 2017 (the “determination date”). No further LTI plans are expected to be put into place for participants of the HoldCo LTI Plan through December 31, 2017.
Under the HoldCo LTI Plan, executives will earn Providence common shares based on the degree to which Providence’s compound annual stockholder returns exceed 8% (“Extraordinary Shareholder Value”) over the specified performance period. No award will be payable if compound annual stockholder returns are below 8%. If returns are above 8%, all participating executives will share in a total pool equal to 8% of the Extraordinary Shareholder Value. The pool will be capped based on 8% of 40% compound annual stockholder returns. The beginning and ending value will be measured based on the 90-day volume-weighted average stock price (“VWAP”) ending on the award date and determination date, respectively.
The LTI opportunity was set such that, at a compound annual growth rate of 15%, our executives’ compensation would be below the median of our peers. In order to earn compensation at or above median, performance above 15% compound annual would be required, such that at the plan maximum of 40%, our executives’ compensation would be positioned towards the high end of the peer group, aligned with the outstanding results to the stockholders.
The table set forth below illustrates the payouts that would be achieved under the HoldCo LTI Plan based on each of the assumed Compound Annual Growth Rates set forth in the table, which are provided solely for purposes of illustration of the operation of the HoldCo LTI Pool.
HoldCo LTI Pool Value at Varying Levels of Stock Price Performance | ||||||||||||
($ in millions, except per share amounts) | ||||||||||||
(Threshold) | ||||||||||||
Compound Annual Growth Rate (1) | 0.0 | % | 8.0 | % | 15.0 | % | ||||||
Determination Share Price (2) | $ | 47.20 | $ | 56.79 | $ | 66.04 | ||||||
Stockholder Value (3) | $ | 914.8 | $ | 1,100.6 | $ | 1,279.8 | ||||||
Less: Hurdle Shareholder Value | $ | (1,100.6 | ) | $ | (1,100.6 | ) | $ | (1,100.6 | ) | |||
Extraordinary Shareholder Value | $ | - | $ | - | $ | 179.3 | ||||||
HoldCo LTI Pool Value(4) | $ | - | $ | - | $ | 14.3 | ||||||
Implied # of RSUs (5) | - | - | 217,157 |
(1) Compound annual growth rate of Providence 90 Day VWAP from August 6, 2015 to December 31, 2017
(2) Assumed PRSC 90 Day VWAP as of December 31, 2017 based on the assumed compound annual growth rates listed in the table
(3) Based upon 19.38 million shares of Providence common stock being outstanding plus the number of any unissued shares of stock from any Company outstanding securities, including any shares of convertible preferred stock which remain subject to conversion and any outstanding options or restricted stock units as of August 6, 2015
(4) Calculated as 8% of Extraordinary Shareholder Value
(5) Calculated as the projected HoldCo LTI Pool Value divided by the projected Determination Share Price, in each case based on the assumptions set forth in the table
Participants in the HoldCo LTI Plan receive a percentage allocation of this pool and will receive their awards in Providence shares of common stock, subject to the below vesting schedule. The number of shares will be determined based on each participant’s percentage allocation of the pool in dollars divided by the 90-day VWAP ending on the determination date.
Each NEO who is participating in the HoldCo LTI Plan was allocated the following percentage of the pool as of December 31, 2015:
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60% of each HoldCo LTI Plan participant’s shares will be issued on or shortly following the determination date, 25% will vest on the one-year anniversary of the determination date (December 31, 2018), and the remaining 15% will vest on the second anniversary of the determination date (December 31, 2019). Participants must be employed as of the vesting dates in order for each tranche to vest. Accordingly, because Mr. Hicks resigned in 2016 prior to any vesting date, he forfeited his award upon his resignation.
Senior Executive Long Term Incentive Plan (“Senior Executive LTIP”).
The Senior Executive LTIP, a program under the 2006 Plan, is designed to align the interests of the executive teams at each subsidiary with the value creation goals of the Company. The plan is intended to motivate the subsidiary executives to make decisions that create long-term value for stockholders by achieving growth for their business. Mr. Schwarz is the only NEO who participates in a Senior Executive LTIP, and he participates in the LogistiCare Vertical LTIP in particular. Ingeus and Matrix also have similar Senior Executive LTIP programs for their senior management.
The Senior Executive LTIP is a cash incentive awarded for each subsidiary based on growing such subsidiary’s intrinsic value (as measured by EBITDA growth over a three-year period times a 6X multiple) and free cash flow metrics. Additionally, in order to qualify the award for performance-based compensation under Section 162(m) of the Internal Revenue Code (the “IRC”), the Senior Executive LTIP is subject to a performance condition of 2% EBITDA margin for the twelve-month period beginning on either October 1, 2015, January 1, 2016, or January 1, 2017 (“162(m) Performance Period”).
The performance period for each subsidiary program is from December 31, 2014 to December 31, 2017. For LogistiCare in particular, the baseline intrinsic value is based on 2014 EBITDA and the ending intrinsic value is based 70% on 2017 EBITDA and 30% on 2016 EBITDA.
Value Created is defined for each subsidiary program as the result of subtracting the subsidiary’s baseline intrinsic value from the subsidiary’s ending intrinsic value. A Value Creation Pool is generated for each subsidiary plan based on the sum of the amounts derived from the percentages of Value Created determined in accordance with the following table based on the subsidiary’s Compound Annual Growth Rate (“CAGR”) over the performance period:
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The Value Creation Pool may be funded up to an implied three-year CAGR of 40%.
Separately, a Free Cash Flow Pool (“FCF Pool”) is generated equal to the three year cumulative Free Cash Flow for the performance period multiplied by the quotient of the amount of the Value Creation Pool divided by Value Created.
The Value Creation Pool and the FCF Pool are added to generate the total award pool. To the extent an award pool is created for LogistiCare and subject to his continued employment during the performance period, Mr. Schwarz will receive a cash payment subject to extended multi-year vesting. In 2015, Mr. Schwarz was allocated a participation percentage of 40% of the LogistiCare total award pool.
60% of the product of the pool created and Mr. Schwarz’s participation percentage allocation will pay out at the end of the performance period. On the first and second anniversaries of the determination date, Mr. Schwarz will receive additional payments equal to 25% and 15%, respectively, of the payout, subject to continued employment as of the date of payment.
Participants may elect to receive up to 50% of the award in Common Stock of the Company. Any portion of the award elected to be received in shares will payout in the first tranche.
Definitions of Performance Measures for Senior Executive LTIP
Specific definitions of EBITDA margin, EBITDA and free cash flow for purposes of the Senior Executive LTIP are as follows.
“EBITDA Margin” means, for each 162(m) Performance Period, the quotient obtained when LogistiCare’s EBITDA for the 162(m) Performance Period (after making adjustments that add back any one-time costs associated with acquisitions or divestitures, stock-based compensation, gain or loss on equity investments, and other non-cash related items) is divided by its revenues for such 162(m) Performance Period, as determined by the Administrator.
“EBITDA” means LogistiCare’s earnings before income taxes, depreciation, and amortization, adjusted for certain items related to acquisitions/divestitures, share-settled equity costs, contingent consideration, gain/loss on equity investment, asset impairment, foreign currency translation gains/losses, amortization of start-up costs for contracts and Senior Vertical LTIP accrual.
“Free Cash Flow” means LogistiCare’s free cash flow. Free Cash Flow will be the operating cash flow for LogistiCare, including corporate allocations, adjusted for certain items related to pro-forma adjustments, cash transfers, acquisition costs, dividends from equity investment, capital expenditures, estimated interest payments, and tax payments.
Stock Matching Program
In August 2015, the Compensation Committee offered the Stock Matching Program for certain NEOs. Under this program, certain NEOs were invited to purchase equity from the Company, essentially investing in the stock alongside stockholders, in order to further align with stockholder interests and establish an ownership mindset in the Company. The program functions such that for every share of Providence stock that an executive purchased, the executive received an option that vests at the end of three years and expires after five years, so long as the executive does not sell any shares for three years and remains employed by the Company during the three-year period. Because the match is in options, executives will receive no benefit from this plan unless the stock price increases.
Mr. Lindstrom and Mr. David Shackelton each purchased $500,000 of common shares under this program. To implement this program, each of our NEOs as of August 2015 was issued 11,319 options with a 10-day exercise period (“Special Options”) and 11,319 Matching Options (subject to three-year cliff vesting) based on an exercise price of $44.17. Messrs. Lindstrom and David Shackelton exercised their Special Options by paying the exercise price and kept their Matching Options. Other NEOs did not exercise their Special Options and therefore forfeited their Special and Matching Options.
The Matching Options are otherwise subject to terms substantially identical to those applicable to Providence’s previously granted time-vested stock options, including continued employment, and will vest fully in connection with a Change in Control (as defined by the 2006 Plan). All options were granted pursuant to the 2006 Plan.
New Hire Grants
Upon Mr. Lindstrom’s appointment as CFO, he was awarded a restricted stock unit (“RSU”) award valued at $500,000 on June 1, 2015 in connection with his employment agreement. This award was subject to Mr. Lindstrom purchasing at least $100,000 of our common stock, which was purchased between May 28, 2015 and June 1, 2015. One-third of the RSUs were deemed vested on the date of grant, one-third vested on July 26, 2015, and one-third vested on January 26, 2016. Although these awards have vested, the stock will not be issued to Mr. Lindstrom until the earlier of (a) the third anniversary of the date of grant and (b) six months following the termination of his employment.
Annual Equity Grants
At the beginning of 2015, the Compensation Committee granted PBRSUs and TBRS to Messrs. Rustand, Hicks and Schwarz, consistent with the annual equity program that was approved by the Board of Directors in March 2015. Specifically, equity grants were made based on a mix of 80% PBRSUs and 20% TBRS.
As Messrs. Rustand and Hicks are no longer with the Company, specific treatment of their outstanding equity grants is provided for in their respective Separation Agreements. See “Employment Agreements with the Named Executive Officers” for further detail.
PBRSUs vest based on return on equity, or ROE, performance over a 3-year period commencing on January 1, 2015 and ending December 31, 2017. ROE will be measured based on consolidated net income for the performance period divided by the average of stockholder’s equity over the same period. PBRSUs are subject to the following payout scale:
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Each vested PBRSU will be settled through the issuance of a share of Providence common stock. Vesting criteria for PBRSU awards require employment with Providence throughout the performance period ending December 31, 2017, as well as achievement of the performance goal.
TBRS will vest in three equal annual installments on the first, second and third anniversaries of the date of grant, provided that the recipient is employed by us on each vesting date.
To determine the amount of PBRSUs and TBRS to award each NEO, the Compensation Committee made a subjective determination, after considering the internal pay comparisons within the executive group at Providence, individual performance, overall financial performance of the company, and market data. Specific 2015 equity grants made to Messrs. Rustand, Hicks and Schwarz were as follows. Messrs. David Shackelton and Ms. Uzzell did not receive grants under this program given their roles at the time of grant, and Mr. Lindstrom did not receive grants under this program given the new hire grants awarded in connection with his employment agreement, as specified above.
Executive | Total Target $ Value | # of PBRSUs at Maximum | # of TBRS | |||||||||
Rustand | $ | 851,000 | 13,085 | 3,271 | ||||||||
Hicks | $ | 315,000 | 4,843 | 1,211 | ||||||||
Schwarz | $ | 575,000 | 8,841 | 2,210 | ||||||||
Total | 26,769 | 6,692 |
The PBRSUs grants made in 2013 covered the performance period from January 1, 2013 to December 31, 2015. ROE for this time period performed below the threshold level of performance, and therefore, none of the PBRSUs vested in connection with this award.
Policy Regarding the Timing of Equity Award Grants
The Compensation Committee makes its decisions regarding the number of stock options, shares of restricted stock and PBRSUs to be awarded to the NEOs without regard to the effects that the release of our financial results might have on our stock price. The exercise price per share for option grants and the per share value used to determine the number of shares of stock subject to PBRSU and TBRS awards are equal to the closing market price of our Common Stock on the date of grant. Thus, the exercise price of the options granted and the value of the restricted stock and/or PBRSUs awarded are not known until after the close of regular trading on NASDAQ on the day the Compensation Committee meets.
Equity awards may be granted during the year to new hires and employees receiving a promotion and in other special circumstances. Our policy is that only the Compensation Committee may make such grants to officers subject to the reporting requirements of Section 16 under the Exchange Act.
Approach for Developing the Executive Compensation Program
The compensation of our CEO is determined and approved by the Compensation Committee. Our CEO annually reviews the performance of each NEO, other than himself, relative to the annual performance goals established for the year. Our CEO then makes recommendations to the Compensation Committee with respect to all aspects of the compensation of the other NEOs, but does not participate in the final deliberations of the Compensation Committee with respect thereto. The Compensation Committee exercises discretion in modifying compensation recommendations relating to the other NEOs that were made by our CEO and approves all compensation decisions for the NEOs.
In 2015, the Compensation Committee engaged ClearBridge, a nationally recognized consulting firm, to assess the competitiveness of pay for the executive officers and provide independent advice and recommendations to the Compensation Committee regarding executive compensation. In order to avoid conflicts of interest, ClearBridge only does work for or authorized by the Compensation Committee. Prior to retaining ClearBridge, the Compensation Committee reviewed ClearBridge’s independence as contemplated by the committee’s charter and applicable NASDAQ rules, and determined that there were no conflicts of interest.
We believe it is appropriate for NEO pay to be competitive with the market for comparable executives. To achieve this objective, we will assess market data for a peer group of companies established by the Compensation Committee from time to time. We periodically review our peer group for competitive compensation benchmarking analysis. In determining pay levels for 2015, the following peer group was used:
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We believe it is appropriate for NEO pay to be competitive with the market for comparable executives. To achieve this objective, we assess market data for a peer group of companies established by the Compensation Committee, with the assistance of its compensation consultant, from time to time. The peer group chosen for purposes of the 2020 compensation decisions is provided below. The group is composed of 12 health services related companies that were comparable to us in terms of business mix and size (e.g., revenue, EBITDA, and market capitalization) when it was chosen for 2020. |
2020 Peer Group | |||
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| CorVel Corporation | LHC Group |
Allscripts Healthcare Solutions, Inc. | Hanger, Inc. | Option Care Health, Inc. | |
American Renal Associates Holdings, Inc. | Ensign Group | National HealthCare Corporation | |
Capital Senior Living Corporation | HMS Holdings | Tivity Health |
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Executive Compensation | Table of Contents |
In addition to comparative market data, the Compensation Committee takes into consideration other factors, including global economic conditions and an individual’s role, tenure, experience, skills and performance when making compensation decisions. In 2020, the Compensation Committee was particularly cognizant of the challenges imposed by the COVID-19 global pandemic. The Compensation Committee actively monitored the impact of COVID-19 on the Company’s business and employees and evaluated the need for any changes to the Company’s executive compensation programs, determining that no such changes were needed during 2020. | ||
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*IPC Healthcare was acquired by Team Health Holdings, Inc. in November 2015.
In addition to market data, the Compensation Committee takes into consideration other factors, including an individual’s role, tenure, experience, skills and performance when making compensation decisions.
Benefits and Perquisites
401(k) Plans
All NEOs are eligible to participate in our 401(k) Plan and to receive a company match, subject to plan requirements and contribution limits established by the IRS. NEOs receive matching contributions under our 401(k) Plan equal to 10% of participant elective contributions up to a maximum amount of $400. At the end of each plan year, we also may make a contribution on a discretionary basis on behalf of participants who have made elective contributions for the plan year.
Deferred Compensation
Previously we maintained a deferred compensation plan to compensate for the inability of certain of our highly compensated employees to take full advantage of our 401(k) plan. None of our NEOs participated in this plan and it was terminated in December 2015. We maintain a Rabbi Trust Plan for highly compensated employees of LogistiCare. However, none of our NEOs participated in this plan during 2015.
Other Benefits and Perquisites
During 2015, our NEOs received, to varying degrees, a limited amount of other benefits, including certain group life, health, medical and other non-cash benefits generally available to all salaried employees. In addition, we also pay for the premiums of certain health and dental benefits for their families and additional disability and life insurance premiums on their behalf, which are not available to all salaried employees. We also provide certain perquisites to our NEOs, primarily relating to commuting. More detail on these benefits and perquisites may be found in the “Summary Compensation Table.”
Other compensation policies
Stock Ownership Guidelines for NEOs
We believe that promoting stock ownership aligns the interests of our NEOs with those of our stockholders and provides strong motivation to build stockholder value. Under the guidelines, NEOs are expected to own shares of our Common Stock with a value equal to the following multiple of their respective salaries:
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The following shares held by our NEOs will count towards meeting the required holding level:
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Base Salary The Compensation Committee has periodically reviewed and set salaries for NEOs at levels intended to be competitive, as further discussed under the caption “—Approach for Developing the Executive Compensation Program,” and to provide the appropriate level of fixed compensation for each individual’s role at the Company. In determining the NEOs’ base salaries, the Compensation Committee has considered the internal pay comparisons within the executive group at the Company, individual performance, overall financial performance of the Company, and market data, as appropriate. Salaries for our NEOs were as follows: |
| 2020 ($) | |
Daniel E. Greenleaf | 850,000 | |
John McMahon | 285,000 | |
Kathryn Stalmack | 375,000 | |
Kenneth W. Wilson | 500,000 | |
Kevin M. Dotts | 450,000 | |
Suzanne G. Smith | 285,000 |
(1) | Reflects base salaries for our NEOs as of December 31, 2020, except for Ms. Smith, who ceased being our Chief Accounting Officer effective August 12, 2020. |
For fiscal year 2020, our AIP provided for a bonus opportunity based 50% on consolidated financial performance, measured by Adjusted EBITDA, and 50% on individual performance goals established by the Compensation Committee. Under the AIP, no payouts would be made unless Adjusted EBITDA was at least at the threshold level shown below, even if an NEO met his or her individual performance goals. In setting the target for fiscal year 2020, the Compensation Committee took into account, among other factors, the Company’s budget and projected performance for 2020. |
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Named Executive Officer | Target Incentive Plan Opportunity as a % of Salary | Target Incentive Plan Opportunity Value ($) | |
Daniel E. Greenleaf | 125% | 1,062,500 | |
John McMahon | 40% | 114,000 | |
Kathryn Stalmack | 75% | 281,250 | |
Kenneth W. Wilson | 80% | 400,000 | |
Kevin M. Dotts | 75% | 337,500 | |
Suzanne G. Smith | 50% | 142,500 |
Our 2020 Adjusted EBITDA threshold was $62.1 million, and the target was $73.1 million, as shown in the table below. |
Adjusted EBITDA* | Threshold | Target | Maximum | 2020 Actual | |
Company Results | $62.1 million | $73.1 million | $97.1 million | $169.3 million* | |
Payout% | 50% | 100% | 200% | 200% |
* | Adjusted EBITDA is a financial measure that is not presented in accordance with GAAP. A reconciliation of Adjusted EBITDA to net income (loss) from continuing operations, its most directly comparable GAAP financial measure, is provided in Appendix A to this Proxy Statement. |
For fiscal year 2020, the Compensation Committee determined that on the basis of the Company’s financial results, the Company achieved its Adjusted EBITDA target at the 200% level. Therefore, for the AIP in 2020, participants were eligible to receive a payout of 200% of target for both (i) the portion of the AIP tied to financial performance and (ii) the portion of the AIP tied to individual performance. | ||
With respect to the portion of the AIP that was tied to individual performance, the amount of the award for each executive was calculated as (A) 50% of the Target Incentive Plan Opportunity Value set forth above multiplied by (B) the total of: 200% multiplied by the percentage of individual performance objectives achieved. The CEO’s individual performance objectives included (i) restructuring the Company and the management team, (ii) improving the Company’s EBITDA margin as compared to 2019, and (iii) generating savings from contact center operations. For the other NEOs, performance objectives included, among other things: | ||
• | Migrating a certain number of employees to work from home environment by year-end; | |
• | Achieving certain company-wide gross margin targets; | |
• | Reducing accounts receivables aging by year-end; | |
• | Achieving certain levels of procurement savings; | |
• | Rolling out the Company rebranding project by year-end; and | |
• | Spearheading certain federal legislative lobbying efforts. |
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As a result of their respective performance, each of Messrs. Greenleaf, Wilson and McMahon and Ms. Stalmack was determined to have achieved 100% of his or her performance goals, and Mr. Dotts was determined to have achieved 81.25% of his performance goals. As a result, the NEOs that remained in their roles through the end of 2020 were awarded 200% of their total target bonuses, except that Mr. Dotts was awarded 181.25% of his target bonus. Ms. Smith, who departed the Company in November 2020, received 100% of her target bonus, prorated through her separation date, pursuant to the terms of her separation agreement. | ||
Long-Term Incentives In an effort to retain, motivate, and continue to align the Company’s executive officers’ interests with stockholders’ interests and stockholder value creation, the Compensation Committee grants long-term incentive awards under its LTI to the executive officers as deemed appropriate by the Compensation Committee from year to year or as required by contractual arrangements, as applicable. In 2020, the Compensation Committee determined that awards consisting of both (1) stock options, which align executives’ interests with stockholders’ interests given their inherent performance-based value tied to stock price appreciation, and (2) restricted share units, which have inherent retention value, were the best equity compensation mix to meet the Company’s long-term objectives. | ||
In furtherance of the foregoing, Mr. Greenleaf received an award in February 2020 as mandated by his employment agreement that consisted of 50% stock | ||
The following table summarizes the equity grants made to the NEOs during 2020. |
Named Executive Officer | Grant Date | Exercise Price of Stock Options ($) | Stock Options (# of underlying shares) | Restricted Stock Units | |
Daniel E. Greenleaf(1) | 02/13/2020 | 69.18 | 45,119 | 12,287 | |
John McMahon(2) | 08/19/2020 | 95.08 | 2,719 | 749 | |
Kathryn Stalmack | — | — | — | — | |
Kenneth W. Wilson(3) | 05/04/2020 | 55.45 | 16,684 | 6,420 | |
Kevin M. Dotts | — | — | — | — | |
Suzanne G. Smith | — | — | — | — |
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(1) | The stock options and RSUs | |
(2) | Granted in connection with Mr. McMahon’s appointment as Chief Accounting Officer. The stock options and RSUs vest in 1/3 increments on August 19, 2021, August 19, 2022 and August 19, 2023, subject to continued employment through such dates. | |
(3) | Granted in connection with Mr. Wilson’s appointment as Chief Operating Officer. The stock options and RSUs vest in 1/3 increments on May 4, 2021, May 4, 2022 and May 4, 2023, subject to continued employment through such dates. |
BENEFITS AND PERQUISITES | 401(k) Plans All NEOs are eligible to participate in our 401(k) Plan and to receive a Company match, subject to plan requirements and contribution limits established under the Internal Revenue Code of 1986, as amended (the “IRC”). In 2020, NEOs were eligible to receive established matching contributions under our 401(k) Plan up to (i) the lesser of 5% of the amount of the participant’s elective contributions and $400, plus (ii) a discretionary end-of-year additional matching contribution in an amount equal to three times the amount of the established matching contribution actually made by the Company. Beginning in February 2021, NEOs are eligible to receive matching contributions under our 401(k) Plan up to 4% of the amount of the participant’s elective contributions. | |
Other Benefits and Perquisites | ||
During fiscal year 2020, our NEOs received, to varying degrees, a limited amount of other benefits, including certain group life, health, medical and other non-cash benefits generally available to all salaried employees. More detail on these benefits and perquisites may be found in the “Summary Compensation Table.” | ||
OTHER COMPENSATION POLICIES | Stock Ownership Guidelines for NEOs We believe that promoting stock ownership aligns the interests of our continuing NEOs with those of our stockholders and provides strong motivation to build stockholder value. In furtherance of these beliefs, we recently revised the stock ownership guidelines to increase the required ownership of the CEO and the other NEOs beginning in 2021. Under the new guidelines, continuing NEOs are expected to own shares of our Common Stock with a value equal to the following multiple of their respective base salaries: |
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CEO | 5x annual base salary | |
Other NEOs | 3x annual base salary |
The following will count towards meeting the required holding level: | ||
• | shares held directly or indirectly; | |
• | any vested restricted shares or RSUs received under our annual equity-based compensation program; | |
• | any unvested time-based restricted shares or RSUs received under our annual equity-based compensation program (calculated on an assumed net after-tax basis) |
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• | any in-the-money value of vested stock options; and | |
• | shares owned jointly with, or in trust for, |
Compliance with the established holding level requirement as determined under the amended guidelines was required by December 31, 2014 or within five years of a person becoming a NEO, whichever is later, and will be calculated and determined as of December 31 of each year. Further, NEOs are allowed to sell shares of Common Stock to satisfy tax obligations upon vesting of PBRSUs and TBRS and the exercise price and taxes owed upon the exercise of stock options. Once the ownership requirement has been achieved, the executive officers are free to sell shares of our Common Stock above the required holding level (subject to Company policies and applicable law). In determining whether the executive meets the required holding level, the stock ownership guidelines were amended to require use of the greater of (a) the closing market share price as of the date an executive is granted or purchases such shares and (ii) the closing market share price on December 31 of the year the calculation is performed (or the last trading day of that year, if the markets are closed on December 31). In the event a NEO does not achieve his or her holding level set forth above or thereafter sells shares of our Common Stock in violation of the stock ownership guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances.
As of December 31, 2015, other than Mr. Schwarz, none of our NEOs have been NEOs for more than five years and is yet required to meet their respective ownership guideline. Based on the number of shares Mr. Schwarz held as of December 31, 2015, the Compensation Committee determined that he is in compliance with these guidelines.
Clawback
It is the Board’s policy that the Compensation Committee will, to the extent permitted by governing law, have the sole and absolute authority to make retroactive adjustments to any excess cash or equity-based incentive compensation paid to executive officers and certain other officers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Any such incentive compensation received within the three fiscal years prior to the restatement is subject to retroactive adjustment. The Company may seek cash repayment from the executive, offset compensation due to the executive by the amount subject to retroactive adjustment or cancel the executive’s outstanding awards. Where applicable, we will seek to recover any amount determined to have been inappropriately received by the individual executive.
Anti-hedging / anti-pledging
We have a policy that prohibits employees and the Board from engaging in any hedging or monetization transactions, or other financial arrangements that establish a short position in our Common Stock or otherwise are designed to hedge or offset a decrease in market value. In addition, we have a policy that prohibits our executive officers and the Board from pledging our Common Stock as collateral for a loan or for a margin account.
Change in Control and Severance Arrangements and Severance Payments in 2015
During 2015, we had employment agreements or offer letters with each of our NEOs, which provided for a severance payment upon the termination of employment under certain circumstances and for a payment upon a change in control for all NEOs other than Ms. Uzzell as described below under “—Employment Agreements with the Named Executive Officers” and “—Potential Payments Upon Termination or Change in Control”.
When entering into these employment agreements with the NEOs, both during 2015 and in prior years, the Compensation Committee evaluated the Company’s past practice with respect to change in control provisions and severance arrangements and evaluated current market practices for such provisions. The Company has historically included similar provisions in its employment arrangements in order to attract the quality leadership it believes important to the execution of its strategy. The Committee believes that it is important to incentivize management to focus on the execution of the Company’s strategy and to minimize the distraction that may occur as a result of concerns over issues of termination or if the Company were to face a potential change in control transaction. In structuring the provisions included in the employment agreements, the Committee balanced the need to eliminate such distractions with the protection that it believed necessary to provide a competitive employment package to the Company’s NEOs, taking into account all of the terms of the employment agreements. The Compensation Committee considered certain legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that would have triggered payments under the employment agreements noted above. Potential payments to executives upon the occurrence of the events noted above did not impact the Compensation Committee’s decisions regarding other compensation elements.
Certain payment provisions of these employment agreements are also triggered by a change in control which is defined in the employment agreements, and an ensuing negative employment event. However, if the sum of any lump payments, the value of any accelerated vesting of stock options and restricted stock awards, and the value of any other benefits payable to the executive officer on a change in control would constitute an “excess parachute payment” (as defined in Section 280G of the IRC), then such lump sum payment or other benefit will be reduced to the largest amount that will not result in receipt by the executive officer of a parachute payment. See “—Potential Payments Upon Termination or a Change in Control—Change in Control Payments.”
The HoldCo LTI Plan provides for pro rata participation by a participant who has had a Qualified Termination (as defined in the HoldCo LTI Plan) payable when awards are paid to other participants, and provides for forfeiture of all participation rights for a termination other than a Qualified Termination. The program provides that in the event of a Change in Control (as defined by the 2006 Plan) on or before December 31, 2017, all outstanding awards will be settled on the closing date of the Change in Control in an amount of cash and/or unrestricted stock that together have a fair market value equal to the total amount otherwise payable to the participant under the program determined as of such closing date without regard to the otherwise applicable vesting requirements. In the event of a Change in Control after December 31, 2017, each participant will receive on the closing date of the Change in Control cash and/or unrestricted stock having a fair market value equal to the total amount otherwise payable to the participant based on the determination as of December 31, 2017 without regard to the otherwise applicable vesting requirements.
In addition, in the event of a Change in Control of the Company during any performance period, the PBRSUs will be deemed earned by each executive and settled in shares at the maximum level established by the Committee and distributed to the executive within the number of days set forth in the Form of Performance Restricted Stock Unit Agreement.
Impact of tax treatment on compensation
Under Section 162(m) of the IRC, we may not take a tax deduction for compensation paid to any NEO (other than our CFO) that exceeds $1 million in any year unless the compensation is “performance-based.” While the Compensation Committee endeavors to structure compensation so that we may take a tax deduction, it does not have a policy requiring that all compensation must be deductible and it may, from time to time, authorize compensation that is not tax deductible. The Holdco LTI Plan and Senior Executive LTIP have been structured to take advantage of the performance-based exemption under Section 162(m).
Other provisions of the IRC can also affect compensation decisions. Section 409A of the IRC, which governs the form and timing of payment of deferred compensation, imposes sanctions, including a 20% penalty and an interest penalty, on a recipient of deferred compensation that does not comply with Section 409A. The Compensation Committee takes into account the potential implications of Section 409A in determining the form and timing of compensation awarded to our executives and strives to structure its compensation plans to meet these requirements.
Section 280G of the IRC disallows a company’s tax deduction for payments received by certain individuals in connection with a change in control to the extent that the payments exceed an amount approximately three times their average annual compensation, an excess parachute payment, and Section 4999 of the IRC imposes a 20% excise tax on those payments. The Compensation Committee also takes the provisions of Sections 280G and 4999 into account in structuring compensation, endeavoring to enable the Company to take a tax deduction and executives to avoid the excise tax. For example, our change in control provisions and severance arrangements with our NEOs contain provisions reducing such payments to an amount that will not constitute an excess parachute payment.
Compensation Committee Report
The Compensation Committee operates under a written charter and is comprised entirely of directors meeting the independence requirements of NASDAQ listing requirements. The Board established this committee to discharge the Board’s responsibilities relating to compensation of our Chief Executive Officer and each of our other executive officers. The Compensation Committee has overall responsibility for decisions relating to all compensation plans, policies, and benefit programs as they affect the Chief Executive Officer and other executive officers.
The Compensation Committee has reviewed and discussed with Providence’s management the preceding section entitled “Compensation Discussion and Analysis.” Based on this review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s annual report through filing of this proxy statement.
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Summary Compensation Table
The following table sets forth certain information with respect to compensation paid by us for services rendered in all capacities to us and our subsidiaries during the fiscal years ended December 31, 2015, 2014 and 2013 to our NEOs, which group is comprised of (1) each person who served as our Chief Executive Officer during 2015, (2) each person who served as our Chief Financial Officer during 2015, and (3) each of our three other most highly compensated executive officers employed on December 31, 2015:
Name and Principal Position | Year | Salary | Bonus | Stock | Option | Non-Equity | All Other | Total ($) | ||||||||||||||||||||||||
James M. Lindstrom | 2015 | 559,744 | 400,000 | 5,536,022 | 198,190 | - | 25,661 | 6,719,617 | ||||||||||||||||||||||||
Chief Executive Officer, Former Chief Financial Officer | ||||||||||||||||||||||||||||||||
David Shackelton | 2015 | 268,385 | 240,000 | 2,518,000 | 198,190 | - | 24,762 | 3,249,337 | ||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
Christopher Shackelton (8) | 2015 | - | - | - | - | - | 347,711 | 347,711 | ||||||||||||||||||||||||
Former Interim Chief Executive Officer | ||||||||||||||||||||||||||||||||
Warren S. Rustand | 2015 | 745,692 | - | 394,858 | - | - | 54,272 | 1,194,822 | ||||||||||||||||||||||||
Former Chief Executive Officer | 2014 | 590,000 | - | 378,082 | 4,134,397 | 590,000 | 53,589 | 5,746,068 | ||||||||||||||||||||||||
2013 | 633,619 | 123,238 | 205,281 | - | 386,329 | 44,357 | 1,392,824 | |||||||||||||||||||||||||
Robert E. Wilson | 2015 | 91,026 | - | - | - | - | 6,015 | 97,041 | ||||||||||||||||||||||||
Former Chief Financial Officer | 2014 | 400,000 | 200,000 | - | - | - | 22,446 | 622,446 | ||||||||||||||||||||||||
2013 | 400,000 | 200,000 | - | - | - | 30,383 | 630,383 | |||||||||||||||||||||||||
Michael-Bryant Hicks | 2015 | 352,693 | - | 1,090,412 | 198,190 | - | 15,655 | 1,656,950 | ||||||||||||||||||||||||
Former Senior Vice President and General Counsel | 2014 | 345,962 | - | 143,732 | - | 344,896 | 24,126 | 858,716 | ||||||||||||||||||||||||
Justina Uzzell | 2015 | 251,923 | 135,000 | 944,250 | 198,190 | - | 14,086 | 1,543,449 | ||||||||||||||||||||||||
Chief People Officer | ||||||||||||||||||||||||||||||||
Herman M. Schwarz (9) | 2015 | 489,539 | 855,779 | 266,785 | 198,190 | - | 5,918 | 1,816,211 | ||||||||||||||||||||||||
Chief Executive Officer of LogistiCare Solutions, LLC, our wholly-owned subsidiary | 2014 | 432,000 | - | 230,513 | - | 432,000 | 11,939 | 1,106,452 | ||||||||||||||||||||||||
| 2013 | 428,069 | - | 230,521 | - | 432,000 | 14,699 | 1,105,289 |
___________________Anti-hedging/anti-pledging
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CHANGE IN CONTROL, SEVERANCE ARRANGEMENTS AND SEVERANCE PAYMENTS | During fiscal year 2020, we had either employment agreements or employment offer letters with each of our |
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IMPACT OF TAX TREATMENT ON COMPENSATION | The Compensation Committee endeavors to structure compensation so that we may take a tax deduction, but it does not have a policy requiring that all compensation must be deductible and it may, from time to time, authorize compensation that is not tax deductible, including where it deems appropriate or necessary in order to ensure competitive levels of total compensation for our NEOs and where doing so would be in the best interests of the Company. For taxable years beginning after 2017, Section 162(m) of the IRC generally disallows tax deductions for annual compensation in excess of $1.0 million paid to our NEOs. | |
Other provisions of the IRC can also affect compensation decisions. Section 409A of the IRC, which governs the form and timing of payment of deferred compensation, imposes sanctions, including a 20% additional tax and an interest penalty, on a recipient of deferred compensation that does not comply with Section 409A. The Compensation Committee takes into account the potential implications of Section 409A in determining the form and timing of compensation awarded to our executives and strives to structure its compensation plans to meet these requirements. | ||
Section 280G of the IRC disallows a company’s tax deduction for payments received by certain individuals in connection with a change in control to the extent that the payments exceed an amount approximately three times their average annual compensation (an “excess parachute payment”) and Section 4999 of the IRC imposes a 20% excise tax on those payments. The Compensation Committee also takes the provisions of Sections 280G and 4999 into account in structuring compensation, endeavoring to enable the Company to take a tax deduction and executives to avoid the excise tax. For example, employment agreements with certain of our NEOs contain provisions reducing parachute payments to an amount that will not constitute an excess parachute payment in certain circumstances. | ||
COMPENSATION COMMITTEE REPORT | The Compensation Committee operates under a written charter and is comprised entirely of directors meeting the independence requirements of NASDAQ listing rules. The Board established this committee to discharge the Board’s responsibilities relating to compensation of our CEO and each of our other executive officers. The Compensation Committee has overall responsibility for decisions relating to all compensation plans, policies, and benefit programs as they affect the CEO and other executive officers. | |
The Compensation Committee has reviewed and discussed with ModivCare’s management the preceding section entitled “Compensation Discussion and Analysis.” Based on this review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the 2020 Annual Report through filing of this Proxy Statement. |
Compensation Committee | |||
Richard A. Kerley (Chairperson) | Todd J. Carter | David A. Coulter |
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SUMMARY COMPENSATION TABLE | The following table sets forth certain information with respect to compensation paid by us for services rendered in all capacities to us and our subsidiaries during the fiscal years ended December 31, 2020, 2019 and 2018 to our NEOs, which group is composed of (1) each person who served as our CEO during fiscal year 2020, (2) each person who served as our CFO during fiscal year 2020, (3) each of our three other most highly compensated executive officers who were employed by us on December 31, 2020, and (4) one other former executive officer who would have been included as one of the three most highly compensated executive officers if such person had remained employed by us through December 31, 2020: |
Name | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||||||
Daniel E. | 2020 | 850,000 | — | 850,015 | 849,630 | 2,125,000 | 16,494 | 4,691,139 | ||||||||
Greenleaf | 2019 | 32,692 | — | 1,191,162 | 1,955,559 | — | — | 3,179,413 | ||||||||
President and Chief Executive Officer | ||||||||||||||||
John McMahon(6) | 2020 | 104,135 | — | 71,215 | 71,238 | 87,836 | 8,145 | 342,569 | ||||||||
Chief Information Officer | ||||||||||||||||
Kathryn Stalmack | 2020 | 375,000 | 100,000 | — | — | 562,500 | 21,550 | 1,059,050 | ||||||||
Senior Vice President, General Counsel and Corporate Secretary | 2019 | 132,692 | — | 343,743 | 220,721 | — | 8,399 | 705,556 | ||||||||
Kenneth W. Wilson(7) | 2020 | 321,154 | 115,000 | 356,044 | 250,007 | 526,776 | 16,441 | 1,585,422 | ||||||||
Chief Operating Officer | ||||||||||||||||
Kevin M. Dotts(8) | 2020 | 450,000 | — | — | — | 611,719 | 20,379 | 1,082,098 | ||||||||
Former Chief | 2019 | 456,346 | — | 154,690 | 364,204 | — | 24,281 | 999,521 | ||||||||
Financial Officer | 2018 | 118,462 | 50,000 | — | 372,445 | 50,000 | 5,566 | 596,473 | ||||||||
Suzanne G. Smith(9) | 2020 | 268,904 | — | — | — | 127,753 | 160,434 | 557,091 | ||||||||
Former Chief Accounting Officer | 2019 | 243,346 | 15,000 | 106,853 | 140,602 | — | 12,420 | 518,221 |
(1) | Includes discretionary bonuses and sign-on bonuses, as applicable. |
(2) | The compensation included in this column represents the aggregate grant date fair value of the equity awards granted during the year indicated. For additional information on the valuation assumptions with respect to the expense, refer to Note 16 of the Company’s consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC. The amounts do not necessarily reflect the actual value received by the executive, which may be more or less than the amount shown or zero. |
(3) | This column shows the aggregate grant date fair value of the |
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| Includes annual incentive bonuses earned for the year indicated, but paid in March of the following year. |
(5) | We provide the NEOs |
Name | Health, Dental, Life and Disability Insurance Premiums | Matching Contributions under Retirement Savings Plans | Other Insurance Plan Premiums (a) | |||||||||
James Lindstrom | $ | 3,547 | $ | 400 | — | |||||||
David Shackelton | $ | 4,435 | — | — | ||||||||
Warren Rustand | $ | 11,121 | — | $ | 43,151 | |||||||
Robert Wilson | $ | 4,638 | — | — | ||||||||
Michael-Bryant Hicks | $ | 14,041 | $ | 400 | $ | 1,214 | ||||||
Herman Schwarz | $ | 4,063 | $ | 400 | $ | 1,455 | ||||||
Justina Uzzell | $ | 13,717 | $ | 369 | — |
Name | Health, Dental, Life and Disability Insurance Premiums ($) | Matching Contributions under Retirement Savings Plans ($) | |
Daniel E. Greenleaf | 14,894 | 1600 | |
John McMahon | 7,794 | 351 | |
Kathryn Stalmack | 19,950 | 1600 | |
Kenneth W. Wilson | 14,841 | 1600 | |
Kevin M. Dotts | 18,779 | 1600 | |
Suzanne G. Smith | 12,534 | 400 |
(6) |
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(7) |
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(8) | Mr. |
(9) | Ms. Smith served as Chief Accounting Officer from March 1, 2019 until August 12, 2020. Ms. Smith remained with |
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James Lindstrom | 2015 | 21,714 | |||
Chief Executive Officer | |||||
Robert E. Wilson | 2015 | 1,377 | |||
Former Chief Financial Officer | |||||
David Shackelton | 2015 | 20,327 | |||
Chief Financial Officer |
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_________________
GRANTS OF PLAN BASED AWARDS TABLE | The following Grants of Plan Based Awards Table* provides additional information about stock and option awards and non-equity incentive plan awards granted to the NEOs during the fiscal year ended December 31, 2020. The compensation plans under which the grants in the following table were made are described under “2020 Executive Compensation Program Decisions—Annual Incentive Program” and “2020 Executive Compensation Program Decisions—Long-Term Incentives” in the “Compensation Discussion and Analysis” section |
Grants of Plan Based Awards Table
The following Grants of Plan Based Awards Table provides additional information about stock and option awards and non-equity incentive plan awards granted to the Named Executive Officers during the year ended December 31, 2015. The compensation plans under which the grants in the following table were made are described under “Determinations Made Regarding Executive Compensation for 2015—Annual Incentive Cash Compensation” and “Determinations Made Regarding Executive Compensation for 2015—Equity-Based Compensation” in the “Compensation Discussion and Analysis” section.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | |||||||||||||||||||||||||||||||||||||||||||
Name (1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) (4) | All Other Option Awards; Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||
Lindstrom | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 444,124 | 592,165 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
6/1/15 | - | - | - | - | - | - | 10,361 | - | - | 500,022 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 11,715 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 186,475 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | 86,862 | 287,734 | - | - | - | 5,036,000 | ||||||||||||||||||||||||||||||||||
David Shackelton | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 147,267 | 187,438 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 11,715 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 186,475 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | 43,431 | 143,867 | - | - | - | 2,518,000 | ||||||||||||||||||||||||||||||||||
Rustand (6) | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 740,000 | 925,000 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | 4,318 | - | 13,085 | - | - | - | 224,668 | ||||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | - | - | - | 3,271 | - | - | 170,190 | ||||||||||||||||||||||||||||||||||
Hicks (6) | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 262,500 | 350,000 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | 1,598 | - | 4,843 | - | - | - | 83,154 | ||||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | - | - | - | 1,211 | - | - | 63,008 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 11,715 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 186,475 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | 16,286 | 53,950 | - | - | - | 944,250 | ||||||||||||||||||||||||||||||||||
Uzzell | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 125,000 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 11,715 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 186,475 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | 16,286 | 53,950 | - | - | - | 944,250 | ||||||||||||||||||||||||||||||||||
Schwarz | ||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | - | 375,000 | 500,000 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | 2,918 | - | 8,841 | - | - | - | 151,799 | ||||||||||||||||||||||||||||||||||
3/18/15 | - | - | - | - | - | - | 2,210 | - | - | 114,986 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 11,715 | ||||||||||||||||||||||||||||||||||
8/6/15 | - | - | - | - | - | - | - | 11,319 | 44.17 | 186,475 | ||||||||||||||||||||||||||||||||||
(7 | ) | - | 2,417,880 | - | - | - | - | - | - | - | - |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: | All Other Options Awards; | Exercise or | Grant Date Fair Value | |||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | Number of Shares of Stock or Units | Number of Securities Underlying Options (#) | Base Price of Options Awards ($/SH) | of Stock and Option Awards ($)(2) | |||||||||||
Daniel E. Greenleaf | N/A | 531,250 | 1,062,500 | 2,125,500 | — | — | — | — | — | — | — | |||||||||||
2/13/20 | — | — | — | — | — | — | 12,287 | 45,119 | 69.18 | 1,699,644 | ||||||||||||
John McMahon | N/A | 57,000 | 114,000 | 228,000 | — | — | — | — | — | — | — | |||||||||||
8/19/20 | — | — | — | — | — | — | 749 | 2,719 | 95.08 | 142,453 | ||||||||||||
Kathryn Stalmack | N/A | 140,625 | 281,250 | 562,500 | — | — | — | — | — | — | — | |||||||||||
Kenneth W. Wilson | N/A | 200,000 | 400,000 | 800,000 | — | — | — | — | — | — | — | |||||||||||
5/4/20 | — | — | — | — | — | — | 6,420 | 16,684 | 55.45 | 606,051 | ||||||||||||
Kevin M. Dotts | N/A | 168,750 | 337,500 | 675,000 | — | — | — | — | — | — | — | |||||||||||
Suzanne G.Smith | N/A | 71,250 | 142,500 | 285,000 | — | — | — | — | — | — | — |
(1) |
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| Amounts represent the threshold, target |
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EMPLOYMENT AGREEMENTS AND OFFER LETTERS WITH THE NAMED EXECUTIVE OFFICERS | The following discussion and the discussion below under “—Potential Payments Upon Termination or a Change in Control” describe certain terms of the employment agreements and offer letters with Daniel E. Greenleaf Effective December 11, 2019, Daniel Greenleaf was appointed to serve as President and CEO of |
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In addition, on December 11, 2019, Mr. While employed, Mr. Greenleaf is entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Mr. Greenleaf is also eligible to receive severance benefits in the event his employment is terminated by the Company without Cause or by him for Good Reason (as defined below). Details with respect to the severance and change in control provisions under the Greenleaf Employment Agreement are set forth below under the caption “—Potential Payments Upon Termination or Change in Control.” The Greenleaf Employment Agreement includes restrictive covenants providing for Mr. Greenleaf’s non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of the non-competition, non-solicitation and non-piracy covenants is the period that includes the term of Mr. Greenleaf’s employment and two years thereafter. John McMahon Effective August 12, 2020, John McMahon was appointed to serve as Chief Accounting Officer. Under the terms of Mr. McMahon’s employment letter dated August 11, 2020, he had an initial base salary of $285,000 and was eligible to receive a short-term incentive bonus for 2020 at a target of 40% of his base salary. In addition, Mr. McMahon was granted a long-term incentive equity grant In the event Mr. McMahon’s employment is terminated by the Company without Cause or by Mr. McMahon for Good Reason, Mr. McMahon will be entitled to six (6) months of severance pay, at his base compensation in |
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well as, non-disclosure and non-disparagement covenants. Kathryn Stalmack Effective August 19, 2019, Kathryn Stalmack was appointed to serve as Senior Vice President. General Counsel & Corporate Secretary of the Company. The Under the terms of the Stalmack Employment Agreement, Ms. Stalmack’s annual base salary was $375,000 in In addition, pursuant to Stalmack Employment Agreement, the Company granted Ms. Stalmack restricted share awards valued at $250,000 on September 20, 2019. The restricted share awards vest ratably in equal installments on each of March 15, 2021, March 15, 2022 and While employed, Ms. Stalmack is entitled to participate in all employee fringe benefits generally available to the The Stalmack Employment Agreement includes restrictive covenants providing for Ms. Stalmack’s non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of the non-solicitation and non-piracy covenants is the period that includes the term of Ms. Stalmack’s employment and two years thereafter. The term of the non-competition covenant is the period that includes the term of Ms. Stalmack’s employment and one year following the termination Kenneth W. Wilson Effective May 4, 2020, Kenneth W. Wilson was appointed to serve as Chief Operating Officer. Under the terms of Mr. Wilson’s employment letter dated April 7, 2020, he had an initial base salary of $500,000 and was eligible to receive a pro-rata portion of a short-term incentive bonus for 2020 at a target of 80% of his base salary. Mr. Wilson was granted restricted stock units (RSUs) valued at $106,000 on May 4, 2020 based on the market price of the Company’s stock on that |
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In the event Mr. Wilson’s employment is terminated without Cause, Mr. Wilson will be entitled to twelve (12) months of severance pay, at his base compensation in effect at that time. The severance benefits will be contingent upon Mr. Wilson’s execution of a release of claims in favor of the Company. Mr. Wilson also entered into a Restrictive Covenants Agreement that contains one-year post-employment non-competition and non-solicitation covenants, as well as, non-disclosure and non-disparagement covenants. Kevin M. Dotts Mr. Dotts Employment Agreement with the Company expired in accordance with its terms on December 31, 2020, and Mr. Dotts’ employment with the Company ceased on March 15, 2021. Mr. Dotts’ annual base salary was $450,000 under the Dotts Employment Agreement before it expired, and he was eligible for an annual bonus equal to 75% of his base salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. Mr. Dotts was also eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee. In addition, Mr. Dotts was granted an option to purchase 24,685 shares of Company common stock, with the exercise price of each option equal to the closing price of a share of the Company’s common stock on August 27, 2018. These options While employed, Mr. Dotts was entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Mr. Dotts was also eligible to receive severance benefits in connection with the termination of The Dotts Employment Agreement included restrictive covenants providing for Mr. Dotts’ non-competition, non-solicitation, non-piracy, non-disclosure and In connection with Mr. Dotts’ resignation and |
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Suzanne G. Smith The terms of Ms. Smith’s employment under her employment letter dated January 14, 2019 (the “Smith Employment Letter”) terminated on November 12, 2020, when she ceased being an employee of the Company. Prior to her departure, Ms. Smith was eligible to participate in the Company’s short-term incentive bonus plan with her 2020 bonus equal to up to 50% of her base salary, based upon achievement of 100% of the performance Ms. Smith was also eligible to receive severance benefits in connection with the termination of |
Employment Agreements with the Named Executive Officers
The following discussion and the discussion below under “—Potential Payments Upon Termination or a Change in Control” describe certain terms of the employment agreements with the NEOs.
James Lindstrom
Mr. Lindstrom served as the Company’s Chief Financial Officer from January 14, 2015 to August 6, 2015 under the terms of an employment agreement (the “Prior Lindstrom Employment Agreement”) dated January 14, 2015. The Company and Mr. Lindstrom entered into an employment agreement (the “Lindstrom Employment Agreement”), dated August 6, 2015 (the “Effective Date”), in connection with the appointment of Mr. Lindstrom as President and Chief Executive Officer. The Lindstrom Employment Agreement replaces the Prior Lindstrom Employment Agreement. The Lindstrom Employment Agreement provides for a term commencing as of the Effective Date and ending December 31, 2017.
Under the terms of the Lindstrom Employment Agreement, as of the Effective Date Mr. Lindstrom’s annual base salary is $650,000. In addition to his annual base salary, during the term of the Lindstrom Employment Agreement Mr. Lindstrom is eligible to participate in bonus plans or incentive compensation programs, if any, as may be in effect from time to time, at a level consistent with his position and with the Company’s then current policies and practices. For the period commencing January 14, 2015 and for the remainder of 2015, Mr. Lindstrom was eligible to participate in a bonus program under which he will be paid an amount equal to 75% of his aggregate base salary payable during 2015 under the Prior Lindstrom Employment Agreement and the Lindstrom Employment Agreement (the “Lindstrom Base Salary”), upon the achievement of a financial performance target set by the Board for 2015, and up to an additional 25% for performance in excess of such target. Details with respect to the severance and change in control provisions under the Lindstrom Employment Agreement are set forth below under “—Potential Payments Upon Termination or Change in Control”.
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The Company will maintain term life insurance on the life of Mr. Lindstrom for a period of five years. Mr. Lindstrom will have the absolute right to designate the beneficiaries under his policy. The Company will pay the premium for the shorter of (i) the period of five years commencing on the later of (a) the Effective Date or (b) the date the insurance goes into effect or (ii) the period Mr. Lindstrom is employed by the Company. Premiums in respect thereof will thereafter be paid by Mr. Lindstrom.
David Shackelton
Effective October 1, 2015, David Shackelton became Senior Vice President and Chief Financial Officer. On November 18, 2015, the Company and David Shackelton entered into an employment agreement (the “D. Shackelton Employment Agreement”), effective as of September 28, 2015 (the “Effective Date”). The D. Shackelton Employment Agreement provides for a term commencing as of the Effective Date and ending December 31, 2017.
Under the terms of the D. Shackelton Employment Agreement, David Shackelton’s annual base salary is $450,000. In addition to his annual base salary, during the term of the D. Shackelton Employment Agreement, David Shackelton is eligible to participate in bonus plans or incentive compensation programs, if any, as may be in effect from time to time, at a level consistent with his position and with the Company’s then current policies and practices. For the calendar year 2015, David Shackelton was eligible to participate in a bonus program under which he will be paid: (i) an amount equal to 25% of the base salary to which he was entitled starting on January 1, 2015 and ending on August 5, 2015 upon the achievement of the financial performance targets set by the Board for 2015; and (ii) an amount equal to 75% of his aggregate base salary payable for the period commencing August 6, 2015 and ending December 31, 2015 (the “CFO Base Salary”) upon the achievement of the financial performance targets set by the Board for 2015, and up to an additional 25% of the CFO Base Salary for performance in excess of such target. Details with respect to the severance and change in control provisions under the D. Shackelton Employment Agreement are set forth below under “—Potential Payments Upon Termination or Change in Control”.
The Company will maintain term life insurance on the life of David Shackelton for a period of five years. David Shackelton will have the absolute right to designate the beneficiaries under his policy. The Company will pay the premium for the shorter of (i) the period of five years commencing on the later of (a) the Effective Date or (b) the date the insurance goes into effect or (ii) the period David Shackelton is employed by the Company. Premiums in respect thereof will thereafter be paid by David Shackelton.
Warren S. Rustand
Effective May 7, 2013, Mr. Rustand was appointed Chief Executive Officer and the Company entered into an employment agreement (the “Rustand Employment Agreement”) with Mr. Rustand with a term through December 31, 2015. The Rustand Employment Agreement replaced a letter agreement that governed his employment as interim Chief Executive Officer, except for certain bonus provisions described below. Under the Rustand Employment Agreement, Mr. Rustand was entitled to an annual base salary of $590,000, which was increased to $740,000 on December 14, 2014.
In addition, Mr. Rustand was eligible to participate in a bonus program whereby he was paid a pro-rata portion (based on the number of days during the fiscal year following May 7, 2013) of an amount equal to 75% of his annual base salary upon the achievement of a financial performance target set by the Board for 2013 and a pro-rata portion of an additional amount equal to a portion of a pool equal to 20% of the amount by which the Company exceeds such financial performance target for 2013 up to 25% of Mr. Rustand’s annual base salary. Additionally, Mr. Rustand was entitled to receive a bonus equal to 50% of his annualized based compensation specified under the prior letter agreement which was calculated, paid and pro-rated based on the number of days elapsed commencing January 1, 2013 and through May 7, 2013. Bonus opportunities for 2014 and 2015 were provided through the Company’s annual cash incentive program.
Mr. Rustand was also eligible to receive certain severance benefits in the event he is terminated by the Company without Cause (as defined by the Rustand Employment Agreement) including if such termination occurred in connection with or following a change in control.
The Rustand Employment Agreement contained restrictive covenants providing for Mr. Rustand’s non-competition, non-solicitation/non-piracy, non-disclosure and non-disparagement. The term of the non-competition and non-solicitation covenants was for a period that includes the term of the Rustand Employment Agreement, and for a period of two years after the Rustand Employment Agreement was terminated for any reason.
The Rustand Employment Agreement terminated upon Mr. Rustand’s separation with the Company, other than the provisions related to non-competition, non-solicitation, non-piracy and non-disclosure, intellectual property and non-disparagement, which by their terms survive termination.
In connection with Mr. Rustand’s resignation as Chief Executive Officer and as a board member, on May 29, 2015, Mr. Rustand and the Company entered into a separation and general release agreement (the “Rustand Separation Agreement”), which, to the extent applicable, supersedes the Rustand Employment Agreement.
Pursuant to, and subject to the terms of, the Rustand Separation Agreement, Mr. Rustand remained with the Company as a senior advisor through December 31, 2015, and continued to receive the same base salary applicable in 2015 during his tenure as Chief Executive Officer. Mr. Rustand was also eligible to receive annual performance cash awards based on previously granted performance awards related to his performance during 2015, which amount was calculated based on the same criteria and paid at the same time as payments are made in respect of similar awards to which other executives of the Company are entitled, as well as certain other benefits. As further consideration for entering into the Separation Agreement, Mr. Rustand was eligible to receive amounts payable in respect of certain outstanding PBRSUs and TBRS grants, and was eligible to exercise certain outstanding option awards.
Robert E. Wilson
Effective September 13, 2013, Mr. Wilson entered into an Employment Agreement (the “Wilson Employment Agreement”). The term of the Wilson Employment Agreement extended to December 31, 2014.
Mr. Wilson was entitled to an annual base salary of $400,000. In addition to the annual base salary during the term of the Wilson Employment Agreement, Mr. Wilson was eligible to receive an annual bonus in the amount of 50% of his base salary upon the achievement of 100% of budgeted EBITDA performance for each of the 2013 and 2014 calendar years, as determined by the Board of Directors or the Compensation Committee.
Mr. Wilson was eligible to receive certain severance benefits in the event he was terminated by the Company without Cause (as such term is defined in the Wilson Employment Agreement), including if such termination occurred in connection with or following a change in control.
The Wilson Employment Agreement contained non-competition, non-solicitation/non-piracy, non-disclosure and non-disparagement covenants. The non-competition and non-solicitation covenants applied during the term of the Wilson Employment Agreement and will apply for a period of two years after the Wilson Employment Agreement is terminated for any reason.
The Wilson Employment Agreement terminated upon Mr. Wilson’s separation with the Company, other than the provisions related to non-competition, non-solicitation, non-piracy and non-disclosure, intellectual property and non-disparagement, which by their terms survive termination.
In connection with Mr. Wilson’s resignation as Chief Financial Officer, the Company and Mr. Wilson entered into an Employment and Separation Agreement (the “Wilson Separation Agreement”), dated February 2, 2015, which provided for the termination of Mr. Wilson’s employment with Providence effective March 20, 2015. Details with respect to the benefits provided to Mr. Wilson under the Wilson Separation Agreement are set forth below under “—Potential Payments Upon Termination or Change in Control”.
Michael-Bryant Hicks
Effective February 25, 2016, Mr. Hicks resigned his position as Senior Vice President and General Counsel of the Company. On January 6, 2014, Mr. Hicks was appointed Senior Vice President and General Counsel, and the Company entered into a letter agreement (the “Hicks Offer Letter”). Under the Hicks Offer Letter, Mr. Hicks was entitled to an annual base salary of $350,000. In addition to an annual base salary, Mr. Hicks was eligible to participate in bonus plans or incentive compensation programs, if any, as may be in effect from time to time, at a level consistent with his position and with the Company’s then current policies and practices.
In addition, Mr. Hicks was eligible to participate in a bonus program whereby he would be paid an amount equal to 75% of his annual base salary, measured on a similar basis to that of other senior executives. Mr. Hicks was also entitled to earn an additional bonus of up to 25% of his base salary through sharing with other eligible executive officers 20% of the amount, if any, by which EBITDA of the Company exceeded the EBITDA target, after expensing the actual bonus amounts (including the additional bonus opportunity).
Per the Hicks Offer Letter, Mr. Hicks was eligible to receive benefits on the same basis as others in the senior executive group, including life insurance and disability coverage.
Mr. Hicks was also eligible to receive certain severance benefits equal to two times his base salary in the event he is terminated by the Company without cause if such termination occurred in connection with or following a change in control. In connection with his resignation of his position with the Company in 2016, Mr. Hicks is no longer eligible for severance payments.
In connection with Mr. Hicks’ resignation, on February 15, 2016, Mr. Hicks and the Company entered into the Hicks Separation Agreement, effective February 8, 2016, which, to the extent applicable, superseded the Hicks Offer Letter. Details with respect to the benefits provided to Mr. Hicks under the Hicks Separation Agreement are set forth below under “—Potential Payments Upon Termination or Change in Control”.
Herman Schwarz
On March 24, 2014, we entered into a new employment agreement with Mr. Schwarz (the “Schwarz Employment Agreement”). The Schwarz Employment Agreement commenced upon the expiration of the then existing employment agreement with him on March 22, 2014 and expired on March 21, 2016. Subsequently, the Schwarz Employment Agreement was extended until July 31, 2016.
Among other things, the Schwarz Employment Agreement includes provisions for compensation and benefits (including term life insurance maintained by Providence for Mr. Schwarz’s benefit) and restrictive covenants as well as severance in the event of termination of employment under certain circumstances and a payment upon certain termination events in connection with or following a change in control. Details with respect to the severance and change in control provisions are set forth below under “—Potential Payments Upon Termination or Change in Control.”
Mr. Schwarz is entitled to an annual base salary of $500,000. The annual base salary paid to Mr. Schwarz is reviewed at least annually by the Board and the Compensation Committee or other applicable committee of the Board in accordance with our compensation polices and guidelines and may be modified as a result of such review at the sole discretion of the Board and/or the Compensation Committee. Mr. Schwarz’s agreement provided that he was also eligible to participate in a bonus program whereby he would be paid an amount equal to 75% of his annual base salary, measured on a similar basis to that of other senior executives. Mr. Schwarz was entitled to earn an additional bonus of up to 25% of his base salary through sharing with other eligible executive officers 20% of the amount, if any, by which EBITDA of the Company exceeded the EBITDA target, after expensing the actual bonus amounts (including the additional bonus opportunity). This bonus eligibility was replaced by the Senior Executive LTIP.
The Schwarz Employment Agreement contains restrictive covenants providing for Mr. Schwarz’s non-competition, non-solicitation/non-piracy and non-disclosure. The term of the non-competition and non-solicitation covenants is for a period that includes the term of the Schwarz Employment Agreement and for a period of 18 months after the Schwarz Employment Agreement is terminated for any reason.
Justina Uzzell
Effective March 5, 2014, Ms. Uzzell was appointed Senior Vice President and Chief People Officer and the Company entered into a letter agreement (the “Uzzell Offer Letter”) with Ms. Uzzell. Under the Uzzell Offer Letter, Ms. Uzzell is entitled to an annual base salary of $250,000.
In addition, Ms. Uzzell was eligible to participate in a bonus program whereby she would be paid an amount equal to 25% of her annual base salary at the sole discretion of the Company.
Outstanding Equity Awards at December 31, 2015
The following table reflects the equity awards granted by us to the NEOs outstanding at December 31, 2015:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name and Grant Date | Number of Securities Underlying Unexercised Options (1) | Number of Securities Underlying Unexercised Options (#) ble (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (2)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2)(3) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(4) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(5) | ||||||||||||||||||||||||
James M. Lindstrom | ||||||||||||||||||||||||||||||||
6/1/15 (6) | — | — | — | — | 3,453 | 162,015 | — | — | ||||||||||||||||||||||||
8/6/15 | — | 11,319 | 44.17 | 8/6/20 | — | — | — | — | ||||||||||||||||||||||||
8/6/15 | — | — | — | — | — | — | 287,734 | 13,500,479 | ||||||||||||||||||||||||
David Shackelton | ||||||||||||||||||||||||||||||||
9/11/14 | 33,333 | 16,667 | 43.81 | 9/11/24 | — | — | — | — | ||||||||||||||||||||||||
8/6/15 | — | 11,319 | 44.17 | 8/6/20 | — | — | — | — | ||||||||||||||||||||||||
8/6/15 | — | — | — | — | — | — | 143,867 | 6,750,339 | ||||||||||||||||||||||||
Warren S. Rustand (7) | ||||||||||||||||||||||||||||||||
9/11/14 | 133,333 | — | 43.81 | 6/30/18 | — | — | — | — | ||||||||||||||||||||||||
Justina Uzzell | ||||||||||||||||||||||||||||||||
12/15/14 | — | 10,000 | 36.27 | 3/31/18 | — | — | — | — | ||||||||||||||||||||||||
8/6/15 | — | — | — | — | — | — | 53,950 | 2,531,334 | ||||||||||||||||||||||||
Michael-Bryant Hicks (8) | ||||||||||||||||||||||||||||||||
3/7/14 | — | — | — | — | 1,431 | 67,143 | 2,835 | 133,018 | ||||||||||||||||||||||||
3/18/15 | — | — | — | — | 1,211 | 56,820 | 1,598 | 74,987 | ||||||||||||||||||||||||
8/6/15 | — | — | — | — | — | — | 53,950 | 2,531,334 | ||||||||||||||||||||||||
Herman M. Schwarz (9) | ||||||||||||||||||||||||||||||||
6/9/08 | 8,898 | — | 26.14 | 6/9/18 | — | — | — | — | ||||||||||||||||||||||||
5/15/09 | 3,000 | — | 11.72 | 5/15/19 | — | — | — | — | ||||||||||||||||||||||||
5/20/10 | 30,000 | — | 17.35 | 5/20/20 | — | — | — | — | ||||||||||||||||||||||||
3/14/11 | 12,000 | — | 14.72 | 3/14/21 | — | — | — | — | ||||||||||||||||||||||||
3/28/13 | — | — | — | — | 1,791 | 84,034 | — | — | ||||||||||||||||||||||||
3/7/14 | — | — | — | — | 2,296 | 107,728 | 4,546 | 213,298 | ||||||||||||||||||||||||
3/18/15 | — | — | — | — | 2,210 | 103,693 | 2,918 | 136,891 |
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EQUITY AWARDS AT DECEMBER 31, 2020 | The |
Option Awards | Stock Awards | |||||||||||||||
Name and Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($) | ||||||||
Daniel E. Greenleaf(4) | ||||||||||||||||
12/11/19 | — | — | — | — | 15,078 | 2,090,263 | — | — | ||||||||
12/11/19 | 16,773 | 50,317 | 59.25 | 12/11/26 | — | — | — | — | ||||||||
12/11/19 | 10,108 | 30,324 | 68.14 | 12/11/26 | — | — | — | — | ||||||||
2/13/20 | — | — | — | — | 12,287 | 1,703,347 | — | — | ||||||||
2/13/20 | — | 45,119 | 69.18 | 2/13/27 | — | — | — | — | ||||||||
John McMahon(5) | ||||||||||||||||
8/19/20 | — | — | — | — | 749 | 103,834 | — | — | ||||||||
8/19/20 | — | 2,719 | 95.08 | 8/19/25 | — | — | — | — | ||||||||
Kathryn Stalmack(5) | ||||||||||||||||
9/20/19 | — | — | — | — | 1,593 | 220,838 | — | — | ||||||||
9/20/19 | — | — | — | — | 2,833 | 392,739 | — | — | ||||||||
9/20/19 | — | 15,257 | 58.84 | 9/20/24 | — | — | — | — | ||||||||
Kenneth W. Wilson(5) | ||||||||||||||||
5/4/20 | — | 16,684 | 55.45 | — | 6,420 | 890,005 | — | — | ||||||||
Kevin M. Dotts(5) | ||||||||||||||||
8/27/18 | 24,865 | — | 67.00 | 12/31/21 | — | — | — | — | ||||||||
9/20/19 | — | — | — | — | 2,629 | 364,458 | — | — | ||||||||
9/20/19 | — | 25,175 | 58.84 | 9/20/24 | — | — | — | — | ||||||||
Suzanne G. Smith | — | — | — | — | — | — | — | — |
(1) | Except for Premium Priced Options, the options |
(2) | Represents restricted share awards or RSUs. The RSUs granted to Mr. Greenleaf on December 11, 2019 vest in four equal annual installments on each of the first, second, third, and fourth anniversary of the grant date, |
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Option Exercises and Stock VestingVested Table
The following table provides additional information about the value realized by the Named Executive OfficersNEOs on option award exercises and stock and PBRSU award vesting during the year ended December 31, 2015.2020.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of | Value Realized on Exercise | Number of | Value | ||||||||||||
James M. Lindstrom (1) | 11,319 | - | 81 | 3,909 | ||||||||||||
David Shackelton | 11,319 | 19,242 | - | - | ||||||||||||
Warren S. Rustand (2) | 32,314 | 1,174,892 | 7,312 | 312,185 | ||||||||||||
Robert Wilson | 45,000 | 1,723,230 | - | - | ||||||||||||
Michael Bryant-Hicks | - | - | 716 | 31,905 | ||||||||||||
Herman M. Schwarz | 20,825 | 790,547 | 15,583 | 717,656 |
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Daniel E. Greenleaf | — | — | 5,026 | 718,567 | ||||
John McMahon | — | — | — | — | ||||
Kathryn Stalmack | — | — | 1,416 | 134,633 | ||||
Kenneth W. Wilson | — | — | — | — | ||||
Kevin M. Dotts | — | — | — | — | ||||
Suzanne G. Smith | 4,600 | 258,134 | — | — |
Non-qualified Deferred Compensation
None of our NEOs participated in or had account balances in non-qualified defined contribution plans or other non-qualified deferred compensation plans maintained by us during fiscal year 2020.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
The employment agreements, offer letters and the Company’s executive severance policy, as applicable during 2020 to each of In entering into these agreements and letters and adopting the policy, the Compensation Committee considered legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that will trigger payments under the employment agreements, letters and policies, as noted below. The |
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Non-qualified Deferred Compensation
Name | Executive Contributions in Last FY ($) | Registrant Contributions in last FY($) (1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FY ($)(3) | ||||||
James Lindstrom | — | 320,180 | 143 | — | 320,323 |
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Resignation by Employee for Good Reason Each of Messrs. Greenleaf, McMahon and Dotts and Ms. Stalmack is entitled to certain payments upon a resignation for Good Reason. “Good Reason” is defined for these purposes for each of Messrs. Greenleaf and Dotts and Ms. Stalmack as the occurrence of any of the following that is not cured within thirty days of executive’s written notice that the occurrence constitutes Good Reason: (i) a material reduction of executive’s position, duties, or responsibilities with the Company, including a requirement that the executive report directly to any person other than as provided in the |
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Previously we maintained a deferred compensation plan to compensate for the inability of certain of our highly compensated employees to take full advantage of our 401(k) plan. None of our Named Executive Officers participated in this plan and it was terminated in December 2015.
Potential Payments Upon Termination or Change in Control
General
Each NEO’s employment agreement, other than Mr. Hicks’ and Ms. Uzzell’s Offer Letters, provides for severance payments in the event of termination of employment under certain circumstances and, each NEO’s employment agreement, other than Ms. Uzzell’s Offer Letter, provides for a payment in the event of a change in control (none of which include excise tax gross-ups).
The receipt of the payments and benefits to the NEOs under the employment agreements are generally conditioned upon their complying with non-competition, non-solicitation/non-piracy and non-disclosure provisions. By the terms of such agreements, the executives acknowledge that a breach of some or all of the covenants described therein will entitle us to injunctive relief restraining the commission or continuance of any such breach, in addition to any other available remedies.
The Compensation Committee considered certain legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that will trigger payments under the employment agreements noted below.
Severance Payments
James Lindstrom and David Shackelton
Under their respective employment agreements, Messrs. Lindstrom and David Shackelton would be eligible to receive a severance benefit, upon executing a general release in favor of us in the event of a termination of the executive officer by us without Cause (as defined below). The severance payment to which Mr. Lindstrom will be entitled is equal to (i) the lesser of (a) his base salary that would have been paid from the date of termination through December 31, 2017 and (b) his base salary in effect at termination, or, (ii) if greater, a payment of six months of base salary, and any bonus earned for the prior completed fiscal year, but not yet paid, and a pro-rata portion of any bonus earned for the then fiscal year through the date of termination. The severance payment to which David Shackelton will be entitled is equal to twelve months’ base salary and any bonus earned for the prior completed fiscal year, but not yet paid, and a pro-rata portion of any bonus earned for the then fiscal year through the date of termination.
Under the employment agreements with Messrs. Lindstrom and David Shackelton, “Cause”1275 Peachtree Street, Atlanta, GA 30309. Any resignation that is purported to be made for Good Reason must be made by the executive within 60 days of the occurrence establishing the facts supporting such termination. “Good Reason” is defined for these purposes for Mr. McMahon as: (a) a material reduction of his job duties, responsibilities and requirements inconsistent with his position with the Company and his prior duties, responsibilities and requirements; (b) a material reduction in his base compensation; or (c) a relocation of his principal business location to another Company facility or location more than 50 miles from the Company’s location in Denver, Colorado.
In the event of resignation for Good Reason: Mr. Greenleaf would be entitled to (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, (ii) twenty-four months’ base salary and two times the target bonus for the full fiscal year 2020, (iii) continued healthcare coverage for eighteen months following the date of termination, and (iv) accelerated vesting of RSU and option awards as if he had been employed for 24 months beyond the date of termination; each of Ms. Stalmack and Mr. Dotts would be entitled to (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, and (ii) twelve months of her or his base salary; and Mr. McMahon would be entitled to six months of his base salary.
Termination by Company without Cause
Each of Messrs. Greenleaf, McMahon, Wilson and Dotts and Ms. Stalmack is entitled to certain payments upon a termination without “Cause”, as defined with respect to each of Messrs. Greenleaf and Dotts and Ms. Stalmack as:
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either case, in material economic or reputational harm to us or our Affiliates; |
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• | breach of any provision by the employee of the employment agreement or breach of any fiduciary duty or duty of loyalty owed to us or our Affiliates; |
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• | conduct of the employee tending to bring us or our Affiliates into public disgrace or embarrassment, or which is |
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• | neglect or refusal by the employee to perform duties or responsibilities as directed by us, the Board or any executive committee established by the Board, or violation by the employee of any express direction of any lawful rule or regulation established by us or the Board or any committee established by the Board which is consistent with the scope of the employee’s duties under the employment agreement, if such failure, refusal,or violation continues uncured for a period 10 days after written notice from us to the employee specifying the failure, refusal, or violation and our intention to terminate the employment agreement for Cause; |
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• | commission of any acts or omissions by the employee resulting in or intended to result in direct material personal gain to the employee at our or our Affiliates’ expense; or |
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Action or inaction by the employee is not considered “willful” unless done or omitted by him or her intentionally and without his or her reasonable belief that his or her action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of total or partial incapacity due to physical or mental illness. | ||
With respect to Messrs. Wilson and McMahon, “Cause” is defined as: (a) an intentional act of fraud, embezzlement, theft or any other material violation of law in the course of employment; (b) the willful and continued failure to substantially perform the required duties for the Company (other than as a result of incapacity due to physical or mental illness); (c) conviction of a crime involving moral turpitude; and (d) with respect only to Mr. McMahon, any material violation of ModivCare Solutions’ material written policies. | ||
In the event of termination without Cause: Mr. Greenleaf would be entitled to (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, (ii) twenty-four months’ base salary and two times the target bonus for the full fiscal year 2020, (iii) continued healthcare coverage for eighteen months following the date of termination, and (iv) accelerated vesting of RSU and option awards as if he had been employed for 24 months beyond the date of termination; each of Ms. Stalmack and Mr. Dotts would be entitled to (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, and (ii) twelve months of her or his base salary; and Messrs. McMahon and Wilson would be entitled to six months and twelve months, respectively, of his base salary. |
Action or inaction by the employee is not considered “willful” unless done or omitted by him intentionally and without his reasonable belief that his action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of total or partial incapacity due to physical or mental illness.
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Justina Uzzell
Ms. Uzzell will not be entitled to severance payments pursuant to the Uzzell Offer Letter.
Michael-Bryant Hicks
Pursuant to the Hicks Offer Letter, Mr. Hicks was eligible for a lump sum payment, equal to two times Mr. Hicks’ then current base salary, on the same basis and terms as applicable to the Company’s senior executives, upon termination by the Company without cause following a change in control of the Company. Mr. Hicks stepped down from his position, effective February 25, 2016, and in accordance with the Hicks Separation Agreement, Mr. Hicks is no longer entitled to the change of control benefit.
Herman Schwarz
Under the Schwarz Employment Agreement, Mr. Schwarz will be eligible to receive a severance benefit equal to one and one half times his base salary then in effect, upon executing a general release in favor of us in the event of a termination either by us without Cause, or by Mr. Schwarz for Good Reason (each as defined below).
Under the Schwarz Employment Agreement, “Cause” is defined as:
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Cause does not include a bona fide disagreement over a corporate policy, so long as the employee does not willfully violate on a continuing basis specific written directions from the Board or any executive committee of the Board, which directions are consistent with the provisions of the Schwarz Employment Agreement. Action or inaction by the employee is not considered “willful” unless done or omitted by him intentionally and without his reasonable belief that his action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of total or partial incapacity due to physical or mental illness.
Under the Schwarz Employment Agreement, “Good Reason” is defined as:
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The table below includes a description and the amount of estimated payments and benefits that would be provided by us (or our successor) to each of the NEOs employed by us as of December 31, 2015, under the employment agreements or offer letters, assuming that such agreement had been in effect and the termination circumstance occurred on December 31, 2015 and did not involve a Change in Control (as defined below):
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The Company’s current benefit program includes a Company-paid life insurance policy for
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| The Company’s current benefit program includes a Company-paid disability insurance policy for all named executive officers. In addition, the employment agreements with Mr. Greenleaf, Ms. Stalmack and Mr. Dotts provide for certain payments in the event of | employee’s duties, with or without reasonable accommodations, for a period of not less than 150 consecutive days or for an aggregate of 180 days during any period of 12 consecutive months. Pursuant to Mr. Greenleaf’s agreement, in the event of Disability, he would be entitled to a pro rata portion of any bonus earned for the then fiscal year through the date of termination and accelerated vesting of RSUs and option awards as if he had been employed for 24 months beyond the date of termination. Pursuant to Ms. Stalmack’s and Mr. Dotts’ agreements, in the event of Disability, each would be entitled to a pro rata portion of any bonus earned for the then fiscal year through the date of termination. | ||||||||||||||||||||
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In connection with Mr. Rustand’s resignation as Chief Executive Officer and as a board member, on May 29, 2015, Mr. Rustand and the Company entered into the Rustand Separation Agreement, which, to the extent applicable, superseded the Rustand Employment Agreement, including applicable severance provisions. Pursuant to the Rustand Separation Agreement, Mr. Rustand remained with the Company as a senior advisor through December 31, 2015, and received the same base salary applicable in 2015 during his tenure as Chief Executive Officer. Mr. Rustand was also eligible to receive annual performance cash awards based on previously granted performance awards related to his performance during 2015, which amount was calculated based on the same criteria and paid at the same time as payments are made in respect of similar awards to which other executives of the Company are entitled, as well as certain other benefits. As further consideration for entering into the Rustand Separation Agreement, Mr. Rustand was eligible to receive amounts payable in respect of certain outstanding PBRSUs and TBRS grants, and was eligible to exercise certain outstanding option awards.
In connection with Mr. Wilson’s resignation as Chief Financial Officer, the Company and Mr. Wilson entered into the Wilson Separation Agreement, which provided for the termination of Mr. Wilson’s employment with Providence effective March 20, 2015. Under the Wilson Separation Agreement, Mr. Wilson was entitled to the following: (i) his base salary through the Resignation Effective Date, as provided in the Wilson Employment Agreement; (ii) subject to Mr. Wilson’s execution of a release agreement, an amount based on the annual performance cash bonus award relating to the performance of Providence during 2015, pro-rated for the number of days during the fiscal year prior to the effective date of his resignation, which amount was to be calculated based on the same criteria and paid at the same time as payments made in respect to similar awards to which other executives of the Company are entitled; (iii) reimbursement for any reasonable expenses incurred prior to the effective date of his resignation and (iv) the benefits to which Mr. Wilson was entitled during the term of the Employment Agreement, as well as certain other benefits as set forth in the Wilson Separation Agreement. These payments satisfied the requirements of Mr. Wilson’s Employment Agreement with Providence.
Change in Control Payments
Certain payment provisions of the employment agreements, except the Uzzell Offer Letter, are also triggered by a “Change in Control.” Under the employment agreements with Messrs. Lindstrom, David Shackelton, and Schwarz a “Change in Control” is defined as an event or events, in which:
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Had a Change in Control occurred during the term of Mr. Greenleaf’s employment agreement and he was terminated following such Change in Control, Mr. Greenleaf’s employment agreement would have entitled him to receive (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, (ii) thirty months’ |
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Potential Payments upon Termination or Change in Control Table | ||
The following table quantifies the estimated maximum amount of payments and benefits under the employment agreements, offer letters, and agreements relating to awards granted under our 2006 Plan to which the NEOs employed by us as of December 31, 2020 would have been entitled upon termination of employment for the various reasons listed, as defined above, that occurred on December 31, 2020, but without giving effect to any reduction for excess parachute payments. |
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Name | Reason for Termination of Employment | Cash Payment(s) ($) | Value of Accelerated Vesting of RSUs ($)(1) | Value of Accelerated Vesting of Options ($)(1) | Value of Health Insurance Payments ($) | Life or Disability Insurance Proceeds ($)(2) | Total ($)(3) | |||||||
Daniel E. Greenleaf | Resignation for Good Reason(4) | 5,950,000 | 2,529,166 | 6,176,884 | 24,350 | – | 14,680,400 | |||||||
Termination without Cause(4) | 5,950,000 | 2,529,166 | 6,176,884 | 24,350 | – | 14,680,400 | ||||||||
Death | 2,125,000 | 2,529,166 | 6,176,884 | – | 100,000 | 10,931,050 | ||||||||
Disability | 2,125,000 | 2,529,166 | 6,176,884 | – | 10,000 | 10,831,050 | ||||||||
Change in Control(5) | 6,906,250 | 3,793,610 | 9,265,217 | 24,350 | – | 19,989,427 | ||||||||
John McMahon | Resignation for Good Reason(6) | 142,500 | – | – | – | – | 142,500 | |||||||
Termination without Cause(6) | 142,500 | – | – | – | – | 142,500 | ||||||||
Death | – | – | – | – | 100,000 | 100,000 | ||||||||
Disability | – | – | – | – | 10,000 | – | ||||||||
Change in Control(6) | 142,500 | – | – | – | – | 142,500 | ||||||||
Kathryn Stalmack | Resignation for Good Reason(7) | 937,500 | – | – | – | – | 937,500 | |||||||
Termination without Cause(7) | 937,500 | – | – | – | – | 937,500 | ||||||||
Death | 562,500 | – | – | – | 100,000 | 662,500 | ||||||||
Disability | 562,500 | – | – | – | 10,000 | 562,500 | ||||||||
Change in Control(8) | 1,218,750 | 613,576 | 1,217,356 | – | – | 3,049,682 | ||||||||
Kenneth W. Wilson | Resignation for Good Reason | – | – | – | – | – | – | |||||||
Termination without Cause(9) | 500,000 | – | – | – | – | 500,000 | ||||||||
Death | – | – | – | – | 100,000 | 100,000 | ||||||||
Disability | – | – | – | – | 10,000 | – | ||||||||
Change in Control(9) | 500,000 | – | – | – | – | 500,000 | ||||||||
Kevin M. Dotts | Resignation for Good Reason(10) | 1,061,719 | – | – | – | – | 1,061,719 | |||||||
Termination without Cause(10) | 1,061,719 | – | – | – | – | 1,061,719 | ||||||||
Death | 611,719 | – | – | – | 100,000 | 711,719 | ||||||||
Disability | 611,719 | – | – | – | 10,000 | 611,719 | ||||||||
Change in Control(11) | 1,282,292 | – | – | – | – | 1,282,292 |
(1) | Calculated based on the closing market price of our Common Stock on December 31, 2020. |
(2) | Under our Long-Term Disability insurance, each NEO under the age of 60 who is terminated due to Disability is entitled to a monthly payment of $10,000 until he or she is 65 years old. |
(3) | Amounts in the |
(4) | Cash Payment includes Mr. |
(5) | Cash Payment includes Mr. Greenleaf’s annual bonus for the full fiscal year 2020 and the sum of 30 months of base salary plus 2.5 times the annual bonus for the full fiscal year 2020, with such sums payable in |
(6) | Cash Payment includes six months of base salary, paid in installments over six months. |
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(7) | Cash Payment includes 12 months of base salary plus Ms. Stalmack’s annual bonus for the full fiscal year 2020. The base salary payments would be paid in installments over 12 months. |
(8) | Cash Payment includes Ms. Stalmack’s annual bonus for the full fiscal year 2020 and the sum of 12 months of base salary plus the average annual bonus previously paid to Ms. Stalmack, with such sums payable in one lump payment. Value of accelerated vesting of RSUs includes acceleration of all outstanding unvested RSUs. |
(9) | Cash Payment includes 12 months of base salary. |
(10) | Cash Payment includes 12 months of base salary plus Mr. Dotts’ annual bonus for the full fiscal year 2020. The base salary payments would be paid in installments over 12 months. |
(11) | Cash Payment includes Mr. Dotts’ annual bonus for the full fiscal year 2020 and the sum of 12 months of base salary plus the average annual bonus previously paid to Mr. Dotts, with such sums payable in one lump payment. |
Mr. Lindstrom’s employment agreement entitles himPayments Made to receive (i) the product of two multiplied by his twelve-month base salary; and (ii) a pro-rata portion of any bonus earned for the then fiscal year through the date of termination if a Change in Control occurs during the agreement term and after such Change in Control but prior to the end of the term, he is terminated without Cause.Suzanne G. Smith upon Termination
David Shackelton’s employment agreement entitles him to receive twelve months’ base salary and a pro-rata portion of any bonus earned for the then fiscal year through the date of termination if a Change in Control occurs during the agreement term and after such Change in Control but prior to the end of the term, he is terminated without Cause.
Prior to their resignations from the Company, each of Messrs. Rustand’s and Wilson’s employment agreements would have entitled them to receive (i) the greater of (a) annual base salary through the end of the term of the employment agreement or (b) 50% of annual base salary, and (ii) a pro-rata portion of any bonus earned prior to termination if a Change in Control occurs during the agreement term and after such Change in Control but prior to the end of the term, they are terminated without Cause. However, Mr. Wilson stepped down from his position, effective as of January 14, 2015, and in accordance with the Wilson Separation Agreement, Mr. Wilson is no longer entitled to this change of control benefit. Mr. Rustand stepped down from his position, effective June 1, 2015, and in accordance with the Rustand Separation Agreement, Mr. Rustand is no longer entitled to this change of control benefit.
In connection with Ms. Smith’s termination of employment in 2020, which was treated as a termination without cause and in connection with which she entered into a Transition and Separation Agreement with the event of a Change in ControlCompany, Ms. Smith, subject to the terms of the Company duringagreement, (i) remained eligible to earn her annual bonus for 2020 (up to a maximum of 100% of her target bonus) prorated through her separation date, based on the term of the Schwarz Employment Agreement,Company’s actual performance, and prior to the 24 month anniversary of the consummation date of the Change in Control (i) we terminate Mr. Schwarz’s employment without Cause, (ii) Mr. Schwarz terminates his employment for Good Reason, in lieu of any other amounts payablewas permitted continued vesting on outstanding equity grants until her separation date. In addition, under the Schwarz Employment Agreement, or (iii) Mr. Schwarz’s agreement, expires by its terms and we do not offer to renewprovided she remains in compliance with the agreement, for an additional termMs. Smith was entitled to expire no earlier than the 24 month anniversary of the consummation date of the Change in Control, Mr. Schwarz would receive(i) a lump sum payment equal to two timessix months of her current base salary minus required tax and other withholdings; and (ii) subject to her timely enrollment in continuation coverage under the average of his annual W-2 compensation from usConsolidated Omnibus Budget Reconciliation Act (COBRA), reimbursement for the most recent five taxable years ending beforeemployer portion of the effectivecost of her medical coverage at the same rate as in effect on the separation date until the earlier of a Change in Control. The lump sum payment will be paid to Mr. Schwarz within ten days of his termination of employment(x) six months following the Changeseparation date and (y) the date on which she ceases to be eligible for COBRA continuation coverage or stops making the required payments in Control.respect of such coverage. The agreement includes a customary release of claims by Ms. Smith in favor of the Company and its affiliates.
Upon a Change in Control each of Messrs. Lindstrom and Schwarz is and Messrs. Hicks, Rustand and Wilson were, entitled to an accelerated vesting and payment of stock options, restricted stock and target PBRSU awards granted to that executive officer. However, if the sum of any lump payments, the value of any accelerated vesting of stock options and restricted stock awards, and the value of any other benefits payable to the executive officer, would constitute an “excess parachute payment” (as defined in Section 280G of the IRC), then such lump sum payment or other benefit will be reduced to the largest amount that will not result in receipt by the executive officer of a parachute payment. Mr. Wilson stepped down from his position, effective as of January 14, 2015, and in accordance with the Wilson Separation Agreement dated February 2, 2015, Mr. Wilson is no longer entitled to this change of control benefit. Mr. Rustand stepped down from his position, effective June 1, 2015, and in accordance with the Rustand Separation Agreement dated May 29, 2015, Mr. Rustand is no longer entitled to this change of control benefit.
The Hicks Offer Letter entitled Mr. Hicks to compensation equal to two times Mr. Hicks’ then applicable base salary, in a lump sum, on the same basis and terms as would be the case for senior executives of the Company. Mr. Hicks stepped down from his position, effective February 25, 2016, and in accordance with the Hicks Separation Agreement, Mr. Hicks is no longer entitled to the change of control benefit.
The following table quantifies the estimated maximum amount of payments and benefits under the employment agreements, offer letters, and agreements relating to awards granted under our 2006 Plan to which the NEOs employed by us as of December 31, 2015 would have been entitled upon a Change in Control of our Company that occurred on December 31, 2015 and termination of employment.
Name | Change in Control Payment | Value of Accelerated Vesting of Equity Awards | Total Termination Benefits | |||||||||
James M. Lindstrom | 1,300,000 | 24,931 | 1,324,931 | |||||||||
David Shackelton | 450,000 | 24,852 | 474,852 | |||||||||
Justina Uzzell | - | 27,572 | 27,572 | |||||||||
Michael-Bryant Hicks | 700,000 | 644,407 | 1,344,407 | |||||||||
Herman M. Schwarz | 1,082,368 | 1,774,306 | 2,856,674 |
CEO PAY RATIO DISCLOSURE |
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To determine the estimated ratio of CEO pay to The CEO pay used for purposes of calculating the Pay Ratio is $4,691,139, the SCT total compensation paid to our CEO, Daniel E. Greenleaf, from January 1, 2020 through December 31, 2020. As a result, the reasonable estimated ratio of CEO pay to median employee pay, calculated in a manner consistent with Item 402(u) of Regulation S-K of the Securities Act is 156:1. The SEC’s pay ratio disclosure rules permit the use of estimates, assumptions, and adjustments. We believe that |
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PROPOSAL 2 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATIONTable of Contents
Advisory vote to approve named |
The Dodd-Frank Wall Street Reform and Consumer Protection
Section 14A of the Exchange Act of 2010, or the Dodd-Frank Act, enables our stockholdersprovides shareholders an opportunity to vote, oncast a non-binding advisory basis, onvote to approve the compensation of our NEOs as disclosedthe “named executive officers” identified in the Summary Compensation Table included on page 48 of this proxy statement in accordance with the SEC’s compensation disclosure rules.document.
The Compensation Committee has considered that the holders of over 86.1%approximately 98% and 82% of the votes cast at our 20152020 and 2019 annual meeting of stockholders, respectively, approved, on an advisory basis approved the compensation of our NEOs as disclosed in the proxy statementProxy Statement for thatthose annual meeting.meetings.
As described in detail under the heading “Executive Compensation—Compensation Discussion and Analysis,” above, our executive compensation programs are designed to attract, motivate, and retain our NEOs, who are critical to our success. Under these programs, our NEOs are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value. Please read the “Compensation Discussion and Analysis” beginning on page 2819 for additional details about our executive compensation programs, including information about the fiscal year 20152020 compensation of our NEOs.
We believe that the compensation programs offered to our NEOs should support the creation of stockholder value and achievement of our financial goals. Accordingly, our guiding compensation principles focus on:
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Our Compensation Committee has a long history of performance basedperformance-based pay practices and considers numerous factors when setting compensation for our NEOs including:
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Other considerations include individual performance, internal pay comparisons within the executive group at the Company, overall financial performance of the Company, and market data.
Performance based portions of our executive compensation for any given year are awardedearned primarily based on the respective priorCompany’s financial performance for such year financial performance.and are paid the following year. Our annual incentive cash compensation and equity-based compensation programs are designed to be performance-based incentives requiringand to incentivize achievement of performance goals set by the Board in order to earn payouts.Company’s short- and long-term financial, operation and strategic goals. Our new long-term incentive program is designedhas historically used equity grants to drive extraordinary stockholder value andincentivize performance, reward our executives for substantial stockholder value creation. This multi-year program rewards our executives only for sustained returns exceeding 8% compounded annual growth over a specified period.creation and drive extraordinary stockholder value. We believe this structure encourages an ownership mentality that incentivizes our management to create stockholder value over a multi-year period.
Our Compensation Committee continually reviews the compensation programs for our NEOs to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices.
We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement.Proxy Statement. This proposal, commonly known as a “say-on-pay”“Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement.Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company stockholders approve, on a non-binding advisory basis, the compensation of the Named Executive Officers,named executive officers, as disclosed in the Company’s Proxy Statement for the 20162021 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 20152020 Summary Compensation Table and the other related tables and disclosure.”
The say-on-paySay-on-Pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. The Company values the opinions of our stockholders and to the extent there is any significant vote against the NEO compensation as disclosed in this proxy statement,Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. We conduct this vote on an annual basis, and the next such vote will take place with our 2022 annual meeting of stockholders.
The Board unanimously recommends that you vote “FOR” the compensation of our Named Executive Officers,named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.Proxy Statement.
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PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTable of Contents
Ratification of appointment of independent |
The Company’s independent registered public accounting firm for the fiscal year ended December 31, 20152020 was the firm of KPMG LLP. The Audit Committee of the Board has selected KPMG as its independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2016.2021.
Although we are not required to do so, we believe that it is appropriate for us to request stockholder ratification of the appointment of KPMG as our independent registered public accounting firm. If stockholders do not ratify the appointment, though it may nevertheless retain KPMG, the Audit Committee will investigate the reasons for the stockholders’ rejection and reconsider the appointment. In addition, even if the stockholders ratify the selection of KPMG, the Audit Committee may in its discretion appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that a change is in the best interest of the Company.
The Company has been advised that representatives of KPMG will be present at the Annual Meeting with the opportunity to make a statement if the representatives desire to do so. It is expected that the representatives will be available to respond to appropriate questions.
The Board unanimously recommends that you vote “FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December31, 2016.
PROPOSAL 4 – APPROVAL OF ADOPTION OF THE AMENDED 2006 LONG-TERM INCENTIVE PLAN2021.
At the 2016 Annual Meeting, our stockholders are being asked to approve amendments to The Providence Service Corporation 2006 Long-Term Incentive Plan (as amended and restated June 30, 2015, the “2006 Plan”) that are described below, including, among other things:
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If our stockholders approve these amendments to the 2006 Plan, it will allow us to use the additional shares and the increased limit to retain and hire key employees who we expect to assist the Company in achieving its corporate and financial goals, including increasing intrinsic value on a per share basis, while also affording us the opportunity to qualify for a federal income tax deduction under Section 162(m) of the Code for certain performance-based compensation paid under the 2006 Plan.
In addition, we are proposing to add a clawback provision to the 2006 Plan that will allow us to recover compensation paid under the 2006 Plan, if required by applicable law, including Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Dodd-Frank and Wall Street Reform and Consumer Protection Act of 2010 and Section 304 of the Sarbanes-Oxley of 2002, or our clawback policy. Furthermore, we are proposing to allow our Compensation Committee to decide at the time an award is granted under the 2006 Plan that if a change in control occurs the award may be assumed or substituted by the acquiring or surviving company, rather than automatic acceleration and cashout of the award. We are also proposing amendments that build upon existing provisions in the 2006 Plan to ensure that the value of outstanding awards under the 2006 Plan will not be diminished or enlarged following extraordinary corporate events that affect the Company’s common stock. Finally, we believe that the definition of change in control in the 2006 Plan is more limiting than is customary and denies our employees protection from a hostile takeover, and therefore we are proposing to amend the definition of change in control in the 2006 Plan to provide that a change in control will include a change in the majority of the Board within a consecutive two year period that is not approved by at least two-thirds of the incumbent board.
The 2006 Plan is intended to advance the interests of the Company and its stockholders by providing for the grant of stock-based and other incentive awards to enhance the Company’s ability to attract and retain employees, directors, consultants, advisors and others who are in a position (i) to make contributions to the success of the Company and its affiliates and (ii) to encourage such persons to take into account the long-term interests of the Company and its stockholders through ownership of the Company’s common stock or securities with value tied to common stock. Accordingly, generally, we intend for awards under the 2006 to be limited to approximately 30 executives who participate in the Plan through the Holdco LTI Plan or the Senior Executive LTIP and to nonemployee directors (of whom there are currently 4). However, the 2006 Plan allows us the flexibility to grant or award stock options, stock appreciation rights (“SARs”), restricted stock, unrestricted stock, stock units, including restricted stock units, and performance awards, in cash or stock, to other eligible persons. Also, the 2006 Plan allows us to make awards that qualify as performance-based compensation under Section 162(m) of the Code. Under Section 162(m) of the Code, in order for the Company to deduct compensation paid in any year to a “covered employee” that exceeds $1,000,000, such compensation must qualify as “performance-based.” Section 162(m) of the Code defines a covered employee as a company’s chief executive officer or any of such company’s three other most highly compensated executive officers who are named in the proxy statement, not including the chief financial officer.
On June 13, 2016, upon recommendationTable of our Compensation Committee, the Board adopted, subject to stockholder approval, amendments to the 2006 Plan to, among other things: (i) increase the share reserve by 1,000,000 shares of the Company’s common stock, so that a total of 5,400,000 ordinary shares of the Company (including awards outstanding as of the date of the Annual Meeting) may be issued under the 2006 Plan, (ii) clarify, consistent with the intent of the 2006 Plan, that individual stock-based and cash-based limits in the 2006 Plan apply only to awards intended to qualify as performance-based compensation under Section 162(m) of the Code, (iii) increase the maximum cash amount that may be paid as performance-based compensation for purposes of Section 162(m) of the Code to $10,000,000, (iv) extend the term of the 2006 Plan until May 25, 2026, (v) make certain changes to the change in control and adjustment provisions in the 2006 Plan and (vi) add clawback provisions to the 2006 Plan (collectively, the “2006 Plan Amendments”).
Without giving effect to these amendments, our stockholders have previously approved a pool of 4,400,000 shares of the Company’s common stock under the 2006 Plan, subject to adjustment upon certain changes of our capital structure. This increase of 1,000,000 shares is intended to meet our anticipated needs in the next three to five years and to successfully attract and retain the best possible candidates for employment with the Company during that time. Also, going forward, if we grant the full amount of the available shares under the 2006 Plan, either as full value shares or options or a mix, those grants will be counted on a one for one basis against the authorized share pool of the 2006 Plan (which is a departure from our prior practice). The 2006 Plan Amendments will also confirm that the 2006 Plan will not recycle shares underlying awards under the 2006 Plan that are withheld by the Company for participants’ taxes or tendered to the Company by participants to pay the exercise price for stock options. In 2015, we introduced the Holdco LTI Plan (as described above under “Executive Compensation—2015 Executive Compensation Program Decisions—Long Term Incentives—Holdco LTI Plan”), which uses a significant portion of the shares currently available under the 2006 Plan. We believe an increase in shares under the 2006 Plan is appropriate and necessary for ongoing equity grants, as well as new hires, promotions and special situations, and also to position the Company for a second iteration of the Holdco LTI Plan at the end of the 2017 fiscal year when the current Holdco LTI Plan ends.
In addition, the 2006 Plan allows us to pay short-term or long-term cash awards, but, under the 2006 Plan, no cash award to any individual may exceed $750,000. This cash-based limit was included in the 2006 Plan for purposes of allowing certain compensation paid under the 2006 Plan to qualify as performance-based compensation under Section 162(m) of the Code (as indicated by the heading to that section in the 2006 Plan), and for that purpose the limit is required only for our executives who are “covered employees” under Section 162(m) of the Code for any completed tax year or who may become covered employees in any future tax year. However, the 2006 Plan applies this limit on cash awards to all participants in the 2006 Plan. We anticipate that this cash limit will be insufficient for our short-term and long-term compensation needs. For example, in 2015, we introduced the Senior Executive LTIP, a three year plan, which provides for cash awards to certain executives at the Company’s subsidiaries (as described above under “Executive Compensation—2015 Executive Compensation Program Decisions—Long Term Incentives—Senior Executive Long Term Incentive Plan”). Therefore, in order to incentivize and retain our management team and raise this limit to a competitive level, we are proposing to increase the annual limit on cash awards under the 2006 Plan to $10 million and, as noted above, to clarify that it applies only to cash awards intended to qualify as performance-based compensation under Section 162(m) of the Code, which requires a limit in order to qualify for a federal income tax deduction. Similarly, while the 2006 Plan provides that no individual participant may receive more than 800,000 shares in any fiscal year, this too was a limit intended to apply to participants who are or may become “covered employees” under Section 162(m). Therefore, we are also proposing that this individual share limit apply only to stock-based awards intended to qualify as performance-based compensation for Section 162(m) of the Code.
We anticipate that approval of the 2006 Plan Amendments will allow the Company, in the Compensation Committee’s discretion, to structure awards, including short-term or long-term cash bonuses, in a manner that is exempt as performance-based compensation from the $1,000,000 deduction limitation imposed by Section 162(m) of the Code, and which we believe will be advantageous to the Company’s stockholders. However, even if our stockholders approve this Proposal 4, there can be no assurance that particular awards granted under the 2006 Plan will satisfy the requirements of Section 162(m) of the Code and be deductible, and nothing in this proposal precludes the Company from granting awards that do not satisfy those requirements. See below “—Federal Income Tax Consequences.”
We are seeking stockholder approval of the 2006 Plan Amendments in order to help position the Company to use the 2006 Plan for incentivizing, retaining and recruiting employees who we expect to assist the Company in achieving its corporate and financial goals, including increasing intrinsic value on a per share basis, and, as evidenced by the addition of the clawback provisions, to improve the Company’s ability to recover incentive compensation from participants if it is required by applicable law to do so or if the Compensation Committee otherwise determines, within its authorized discretion, to do so.
Equity Dilution and Burn Rate of the 2006 Plan
We believe that our recent share usage and equity dilution are within market range, and we expect this will continue be the case after the proposed increase of 1,000,000 shares to the 2006 Plan. Specifically, dilution from the 2006 Plan, without giving effect to the proposed share increase of the 2006 Plan Amendments, of 12.9% is below the peer group median of 15.2%. After giving effect to the share increase proposed in the 2006 Plan Amendments and assuming that the increased shares cover the Company’s needs for three to five years, the dilution from the 2006 Plan will be 19.6%, which is below the peer group 75th percentile of 19.9%. We have calculated this 19.6% dilution on the basis, as of the Record Date, of 14,826,760 shares of Stock outstanding (excluding treasury shares of 2,394,898), 467,267 stock options outstanding, 91,574 unvested restricted stock and performance restricted stock units (at maximum levels) outstanding, 15,140 vested but unissued RSUs and restricted stock awards outstanding, 1,337,605 shares available for grant under the 2006 Plan (from the previously approved pool of 4,400,000 shares) and 1,000,000 proposed additional shares to be available for grant. Additional detail about the percentage of these outstanding awards held by current and former management, respectively, is shown in the table below.
Actual future equity dilution under the 2006 Plan will be impacted by the following factors, among others:
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For more detail about our multi-year LTI plans, see above under “Executive Compensation—2015 Executive Compensation Program Decisions—Long Term Incentives.”
Also, the Company’s adjusted three year average burn rate (excluding one-time grants primarily made to a director and former chief executive officer in 2014) is below the peer median of 1.7%. If all those one-time grants are included in the calculation, the actual three year average burn rate of the Company is 3.2%, which is slightly above the peer group 75th percentile of 3.0%.
The following table sets forth information regarding outstanding stock options, restricted stock, restricted stock units and performance share units, as of the Record Date:
Outstanding Equity Awards as ofthe Record Date | ||||
Stock Options | ||||
Number Outstanding | 467,267 | |||
Held by Current Executive Officers | 82,638 | |||
Held by Former Executive Officers | 194,110 | |||
Held by Current Directors | 24,480 | |||
Weighted Average Exercise Price | $ | 35.31 | ||
Weighted Average Remaining Term (in years) | 3.51 | |||
Number of Full Value Awards Outstanding (restricted stock, restricted stock units and performance share units) | 106,714 |
Summary of the 2006 Plan as amended by the 2006 Plan Amendments
The following summary of the material features of the 2006 Plan as modified by the 2006 Plan Amendments (the “Amended 2006 Plan”) in this Proxy Statement is qualified in its entirety by the language in the Amended 2006 Plan, which is attached as Appendix A to this Proxy Statement. Stockholders should read the Amended 2006 Plan in its entirety.
Administration
The Compensation Committee administers the Amended 2006 Plan and has discretionary authority to operate, manage and administer the Amended 2006 Plan in accordance with its terms. The Compensation Committee determines participants who will be granted awards under the Amended 2006 Plan, the size and types of awards, the terms and conditions of awards and the form and content of the award agreements representing awards. The Compensation Committee is authorized to establish, administer and waive terms, conditions and performance goals of outstanding awards and to accelerate the vesting or exercisability of awards, in each case, subject to limitations contained in the Amended 2006 Plan. In the case of any award intended, in the Compensation Committee’s discretion, to be eligible for the performance-based compensation exception under Section 162(m) of the Code the Administrator will exercise its discretion consistent with qualifying the award for that exception. The Compensation Committee interprets the Amended 2006 Plan and award agreements and has authority to correct any defects, supply any omissions and reconcile any inconsistencies in the Amended 2006 Plan and/or any award agreements. The Compensation Committee’s decisions and actions concerning the Amended 2006 Plan are final and conclusive. References to Administrator in this summary of the material features of the Amended 2006 Plan mean the Compensation Committee and persons delegated responsibilities under the Amended 2006 Plan.
Within the limitations of the Amended 2006 Plan and applicable law, the Compensation Committee may delegate (i) to one or more of its members such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant rights or options to the extent permitted by Section 157(c) of the Delaware General Corporation Law; (iii) to one or more officers of the Company the authority to allocate other awards among such persons (other than officers of the Company) eligible to receive awards under the Amended 2006 Plan as such delegated officer or officers determine consistent with such delegation; provided, that with respect to any delegation described in this clause (iii) the Compensation Committee (or a properly delegated member or members of such Committee) will have authorized the issuance of a specified number of shares of common stock under such awards and will have specified the consideration, if any, to be paid therefore; and (iv) to such employees or other persons as it determines such ministerial tasks as it deems appropriate.
Limits on Awards
The maximum number of shares of the Company’s common stock that may be issued under the Amended 2006 Plan, taking into account awards outstanding on the date of the Annual Meeting and the increase of 1,000,000 shares from the 2006 Plan Amendments, may not exceed, in the aggregate, 4,400,000 shares. Of the aggregate number of shares eligible for issuance under the Amended 2006 Plan, the number of shares of common stock that may be issued pursuant to incentive stock option (“ISOs”) is 800,000. The Amended 2006 Plan provides that for purposes of determining the number of shares of common stock available for delivery under the Amended 2006 Plan, generally, any shares subject to an award or portion of an award that is terminated, surrendered or cancelled will be available for future awards under the Amended 2006 Plan. However, shares used to pay the exercise price or required tax withholding for an award under the Amended 2006 Plan will not be available for future awards under the Amended 2006 Plan (e.g., when a stock option or SAR is exercised and settled in shares, the full number of shares covered by the exercised portion of the stock options or SAR will be deducted from the shares available for delivery under the Amended 2006 Plan). Generally, any shares of common stock subject to awards, including stock options and SARs will be counted against the authorized share limit of the Amended 2006 Plan as one share for every one share subject to such award.
To the extent consistent with Section 422 of the Code, if the Company or a subsidiary acquires or combines with another company, any awards that may be granted under the Amended 2006 Plan in substitution or exchange for outstanding stock options or other awards of the other company will not reduce the shares available for issuance under the Amended 2006 Plan. Common stock delivered by the Company under the Amended 2006 Plan may be authorized but unissued common stock or previously issued common stock acquired by the Company. No fractional shares of common stock will be delivered under the Amended 2006 Plan.
Under the Amended 2006 Plan, taking into account the 2006 Plan Amendments, for any awards that are intended to qualify as performance-based compensation for Section 162(m) of the Code, (A) the maximum number of stock options, SARs or other awards based solely on the increase in the value of common stock that a participant may receive in any fiscal year is 800,000; (B) a participant may receive a maximum 800,000 shares under other stock-based awards in any fiscal year; and (C) the maximum dollar value that may be earned in connection with the grant of a cash-based award during any fiscal year may not exceed $10,000,000.
Participation
The Administrator may grant awards under the Amended 2006 Plan to employees, directors, consultants and advisors of the Company and its affiliates (“participants”). However, only employees of the Company and its subsidiaries will be eligible to receive ISOs under the Amended 2006 Plan.
Rules Applicable to Awards Granted Under the Amended 2006 Plan
The Administrator determines the terms of all awards, subject to the limitations provided under the Amended 2006 Plan. All awards are evidenced by an agreement approved by the Administrator. By accepting any award granted under the Amended 2006 Plan, the participant agrees to the terms of the award and the Amended 2006 Plan. Notwithstanding any provision of the Amended 2006 Plan to the contrary, awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition may contain terms and conditions that are inconsistent with the terms and conditions specified under the Amended 2006 Plan, as determined by the Administrator.Contents
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Stock Options and SARs
A stock option is the right to purchase a specified number of shares of common stock in the future at a specified exercise price and subject to the other terms and conditions specified in the option agreement and the Amended 2006 Plan. SARs may be granted under the Amended 2006 Plan alone or together with specific stock options granted under the Amended 2006 Plan. SARs are awards that, upon their exercise, give a participant the right to receive from the Company an amount equal to (1) the number of shares for which the SAR is exercised, multiplied by (2) the excess of the fair market value of a share of the Company’s common stock on the exercise date over the grant price of the SAR.
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Restricted Stock and Other Awards not Requiring Exercise
Restricted stock awards are shares of the Company’s common stock that are awarded to a participant subject to the satisfaction of the terms and conditions established by the Administrator. A recipient of restricted stock has the rights of a stockholder during the restriction period, including the right to receive any dividends, which may be subject to the same restrictions as the restricted stock, unless the Administrator provides otherwise in the grant. A restricted stock unit is a unit, equivalent in value to a share of common stock, credited by means of a bookkeeping entry in our books to a participant’s account, which is settled in stock or cash upon or after vesting.
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Performance Compensation Awards
The Compensation Committee may also designate share-based or cash-based awards under the Amended 2006 Plan as “performance compensation awards” intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The Compensation Committee has sole discretion to select the length of any applicable performance periods, the types of performance compensation awards to be issued, the applicable performance criteria and performance goals, and the kinds and/or levels of performance goals that are to apply.
The performance criteria will be established by the Administrator, other than the mere continuation of a participant’s employment or the mere passage of time, and, for purposes of awards that are intended to qualify for the performance-based compensation exception under Section 162(m) of the Code will mean an objectively determinable measure of performance relating to or based upon any or any combination or component of the following (measured either absolutely or by reference to an index or indices, and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return or stockholder value; sales of particular products or services; customer acquisition or retention; safety, health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. Any performance criteria and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Code, the Administrator may provide in the case of any award intended to qualify for such exception that one or more of the performance criteria applicable to such award will be adjusted in an objectively determinable manner to reflect events (for example, acquisitions or dispositions) occurring during the performance period that affect the applicable performance criteria.
Deferred Share Units
A deferred share unit is a unit credited to a participant’s account in our books that represents the right to receive a share of the Company’s common stock or the equivalent cash value of a share of common stock upon a predetermined settlement date. Deferred share units may be granted by the Administrator independent of other awards or compensation.
Events Affecting Outstanding Awards
Events affecting outstanding awards include termination of employment, change in control, termination of awards and change in and distributions with respect to the Company’s common stock.
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Other Forfeiture Provisions
A participant will be required to forfeit and disgorge any awards granted or vested and all gains earned or accrued due to the exercise of stock options or SARs or the sale of any common stock acquired from equity awards to the extent required by applicable law, including Section 304 of the Sarbanes-Oxley Act of 2002 and Section 10D of the Exchange Act. In addition, the Administrator, in its sole and absolute discretion, may impose such other clawback, recovery or recoupment provisions as the Administrator determines is necessary, advisable or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares or other cash or property upon the occurrence of a termination for cause and/or violation of post-employment restrictive covenants.
Amendment and Termination
The Administrator at any time or times may amend the Amended 2006 Plan or any outstanding award for any purpose which may at the time be permitted by law, and may at any time terminate the Amended 2006 Plan as to any future grants of awards. However, the Administrator may not, without a participant’s consent, alter the terms of an award so as to affect adversely the participant’s right under the award, unless otherwise expressly provided in the Amended 2006 Plan or the Administrator expressly reserved the right to do so at the time of the award. The Administrator may not, without stockholder approval, (i) materially increase the number of securities that may be issued under the Amended 2006 Plan, or (ii) materially modify the requirements for participation under the Amended 2006 Plan. Any other amendment to the Amended 2006 Plan is conditioned upon stockholder approval only to the extent, if any, such approval is required by law or the applicable listing requirements of The Nasdaq Stock Market, LLC, as determined by the Administrator.
U.S. Federal Income Tax Implications
The following is a brief summary of the U.S. federal income tax consequences applicable to certain awards granted under the 2006 Plan, based upon the federal income tax laws in effect on the date of this Proxy Statement. This summary is not intended to be exhaustive, and the exact tax consequences may vary depending on each participant’s particular situation.
Options and SARs. A recipient of a stock option or SAR will not have taxable income upon the grant of the stock option or SAR. Upon the exercise of a nonstatutory stock option or SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares on the date of exercise and the exercise price. Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss. The tax basis of the shares generally will be equal to the fair market value of the shares on the exercise date.
Upon the exercise of an ISO, the acquisition of shares will not result in taxable income to the participant, except possibly for purposes of the alternative minimum tax. The gain or loss recognized by the participant on a later sale or other disposition of the shares will either be long-term capital gain or loss or ordinary income, depending upon whether the participant holds the shares for the legally required period of two years from the date of grant and one year from the date of exercise. If the shares are not held for the legally required period, the participant will recognize ordinary income equal to the lesser of (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the sales price and the exercise price, and the balance of the participant’s gain, if any, will be taxed as short-term or long-term capital gain, as the case may be.
Restricted Stock. A recipient of restricted stock will not have taxable income upon the grant of the restricted stock, unless the participant elects to be taxed at the time the restricted stock is granted rather than when it becomes vested. The shares of restricted stock will generally be subject to tax upon vesting as ordinary income equal to the fair market value of the shares at the time of vesting less the amount paid for the shares, if any.
RestrictedStockUnits and PerformanceShareUnits. A participant is not deemed to receive taxable income when a restricted stock unit or performance share unit is granted. When the awards (and dividend equivalents, if any) are settled and paid, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of shares received less the amount paid for the awards, if any.
The Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an award. The Company generally is not entitled to a tax deduction relating to amounts that are taxable as capital gain to a participant. However, Section 162(m) of the Code can limit the federal income tax deductibility of compensation paid to covered employees. Under Code Section 162(m), the general rule is that annual compensation paid to any of these covered employees will be deductible only to the extent that it does not exceed $1 million. However, we can preserve the deductibility of certain compensation in excess of $1 million if the compensation qualifies as “performance-based compensation” by complying with certain conditions imposed by the Section 162(m) of the Code, including the establishment of a maximum number of shares with respect to which awards may be granted to any one employee during one fiscal year. The rules and regulations promulgated under Section 162(m) of the Code, however, are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the Amended 2006 Plan will be deductible under all circumstances.
Option History
From the inception of the 2006 Plan through the Record Date, stock options granted under the 2006 Plan include the stock options shown in the table below (but exclude options that have been cancelled). Except as indicated below, no other person has been granted 5% or more of the total amount of stock options granted under the 2006 Plan.
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New Plan Benefits; Market Value of Common Stock
The number, amount and type of awards to be granted in the future to eligible persons under the Amended 2006 Plan cannot be determined at this time. Future awards under the Amended 2006 Plan will be granted at the discretion of the Administrator. As of June 7, 2016, the closing price of our common stock was $48.02 per share.
Required Vote
The Amended 2006 Plan must be approved by the affirmative vote of holders of a majority of the votes of our shareholders cast for that proposal. Abstentions and broker non-votes are not considered votes cast and thus will have no effect on the election of a director or the approval of the Amended 2006 Plan.
The Board unanimously recommends that you vote “FOR” the adoption of the Amended 2006 Plan.
AUDIT COMMITTEE
Audit Committee Report
The Audit Committee of the Board consists ofMr. Wright. Mr. Kerley Ms. Meints and Ms. Norwalk. Ms. Meints is the Chairperson of the Audit Committee.
The Audit Committee operates under a written charter adopted by the Board, a copy of which is available on the Company’s website at www.prscholdings.com under “Investor Relations.”www.modivcare.com/governance.
The Audit Committee has reviewed and discussed with management its assessment and report on the effectiveness of Providence’sModivCare’s internal control over financial reporting as of December 31, 2015,2020, which it made using the criteria set forthestablished in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).Commission. The Audit Committee has also reviewed and discussed with KPMG, the Company’s independent registered public accounting firm, its review and report on Providence’sModivCare’s internal control over financial reporting. ProvidenceModivCare published these reports in its 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2015.Report.
The Audit Committee has reviewed and discussed with management and KPMG the audited consolidated financial statements of ProvidenceModivCare for the fiscal year ended December 31, 2015.2020. Management represented to the Audit Committee that Providence’sModivCare’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States. The Audit Committee also discussed with representatives of KPMG the matters required to be discussed by Statement on Auditing Standards No. 16 as adopted bythe applicable requirements of the Public Company Accounting Oversight Board in Rule 3200T.(“PCAOB”).
The Audit Committee received the written disclosures and the confirming letter from KPMG required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with KPMG its independence from Providence.ModivCare.
Based on these reviews and discussions and in reliance thereon, the Audit Committee recommended to the Board that the audited financial statements be included in Providence’sthe 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the SEC on March 11, 2016.Report.
The Audit Committee
Richard A. Kerley (Chairperson)
Leslie V. Norwalk
Frank J. Wright
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Table of Contents
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FEES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTSACCOUNTING FIRM
Fees of Independent Registered Public Accounting Firm
Fees for professional services provided by KPMG, the Company’s independent registered public accounting firm, for the fiscal years ended December 31, 20152020 and 2014,2019, in each of the following categories were:
Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2020 ($) | 2019($) | ||||||||||||
Audit fees and fees for services provided in connection with statutory and regulatory filings | $ | 3,107,040 | $ | 2,455,000 | |||||||||||
Audit fees | 1,605,000 | 1,532,083 | |||||||||||||
Audit related fees | – | 5,000 | 235,400 | – | |||||||||||
Tax fees | 1,593,983 | 729,000 | 101,042 | 453,805 | |||||||||||
All other fees | 100,185 | 576,000 | – | – | |||||||||||
Total | $ | 4,801,208 | $ | 3,765,000 | 1,941,442 | 1,985,888 |
Audit Fees. fees
Audit fees consisted of amounts incurred for services performed in association with the annual financial statement audit (including required quarterlyinterim reviews), the audit of the Company’s internal control over financial reporting, and other procedures normally required by the independent auditor in order to be able to form an opinion on the Company’s consolidated financial statements. The increase in audit fees in 2015, compared to 2014 is primarily attributable to the Company’s growth due to 2014 acquisitions and the change in scope of audit work with respect to operations subject to internal control testing. Other procedures included consultations relating to the audit or quarterly reviews, andfor services performed by KPMGprovided in connection with SEC registration statements, periodic reportsstand-alone or statutory audits and other documents filed with the SECregulatory filings or other documents issued in connection with securities offerings.engagements.
Audit Related Fees.
Audit related fees consisted of amounts incurred for the stand alone audit of one of the Company’s subsidiaries.a comfort letter rendered in connection with a debt offering.
Tax Fees.
Tax fees consisted of amounts incurred for professional services rendered by KPMG for tax compliance, transfer pricing and tax consulting in 2015 and 2014.consulting.
All Other Fees. Other fees primarily consisted of
There were no other fees incurred for services rendered by KPMG in 2015 and 2014 forduring the audit of information technology security and internal control over protected client health information related to our non-emergency transportation management services operating segment.periods presented.
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Independent Registered Public Accountants | Table of Contents |
The Audit Committee has considered and determined that the services provided by KPMG were compatible with KPMG maintaining their independence.
The Audit Committee has adopted a policy that requires advance approval of all audit, audit related, tax services and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee pre-approved all of the foregoing services provided to the Company by KPMG in fiscal years 2015ended December 31, 2020 and 2014.2019.
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STOCKHOLDER PROPOSALS FOR 2017 ANNUAL MEETINGTable of Contents
Pursuant to the proxyapplicable rules promulgated under the Exchange Act, Company stockholders are notified that the deadline for providing the Company with timely notice of any stockholder proposal to be submitted within the Rule 14a-8 process for consideration at the Company’s annual meeting to be held in 20172022 (the “2017“2022 Annual Meeting”) will be February 18, 2017.December 31, 2021.
Pursuant to the amended and restated bylaws,Company’s Bylaws, in order for a stockholder to bring a proposal (other than proposals sought to be included in the Company’s proxy statementProxy Statement pursuant to Rule 14a-8 of the Exchange Act) before, or make a nomination at, the 20172022 Annual Meeting, , such stockholder must deliver a written notice of such proposal and/or nomination to, or it must be mailed and received by, the Company’s Corporate Secretary at the principal executive offices of the Company, located at 700 Canal St., Third4700 South Syracuse Street, 4th Floor, Stamford, CT 06902,Denver, CO 80237, no earlier than the close of business on March 30, 2017,February 17, 2022, and not later than the close of business on May 29, 2017.April 18, 2022. Stockholders are also advised to review the Company’s amended and restated bylaws,Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
As to all such matters which the Company does not have notice on or prior to May 29, 2017,April 18, 2022, discretionary authority shall be granted to the persons designated in the Company’s proxy related to the 20172022 Annual Meeting to vote on such proposal.
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OTHER MATTERS
Table of Contents
Matters |
On the date we filed this Proxy Statement with the SEC, the Board did not know of any other matter to be raised at the Annual Meeting. If any other matters properly come before our stockholders at this Annual Meeting, the persons named on the enclosed proxy card intend to vote the shares they represent in accordance with their best judgment.
ADDITIONAL INFORMATION
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Table of Contents
Information |
The Company files reports and other information with the SEC. Copies of these documents may be obtained at the SEC’s public reference room in Washington, D.C. The Company’s SEC filings are also available on the SEC’s web site at http://www.sec.gov.www. sec.gov. Stockholders may also request additional copies of the Company’s 2020 Annual Report, on Form 10-K for the year ended December 31, 2015, except for exhibits to the report,2020 Annual Report, without charge, by submitting a written request to the Company’s Corporate Secretary at 700 Canal St., Third4700 South Syracuse Street, 4th Floor, Stamford, CT 06902.Denver, CO 80237.
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HOUSEHOLDINGTable of Contents
In order to reduce printing costs and postage fees,
the Company has adopted the process called “householding”. “householding.”
Under this procedure, the Company may deliver a single copy of the Notice, and if applicable, this proxy statementProxy Statement and annual report on Form 10-K,2020 Annual Report to multiple stockholders who share the same last name and address, unless the Company receives contrary instructions from stockholders at that address. Stockholders who participate in householding will continue to receive separate proxy cards, if applicable.
If you prefer to receive multiple copies of the Company’s Notice or proxy statementProxy Statement and annual report on Form 10-K,the 2020 Annual Report, at the same address, you may obtain additional copies by writing to the Company’s Corporate Secretary at 700 Canal St., Third4700 South Syracuse Street, 4th Floor, Stamford, CT 06902Denver, CO 80237 or by calling (520) 747-6600.(303) 728-7043. Eligible stockholders of record receiving multiple copies of the annual report on Form 10-Kthis Proxy Statement and proxy statement2020 Annual Report can request householding by contacting the Company in the same manner.
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Table of Contents
Appendix A |
June 14, 2016Stamford, Connecticut
Non-GAAP Financial Measures and Adjustments
THE PROVIDENCE SERVICE CORPORATIONIn addition to the financial results prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), this proxy statement includes EBITDA and Adjusted EBITDA for the Company, which are performance measures that are not recognized under GAAP but that we use to measure the Company’s performance and management’s performance against pre-established performance targets for purposes of determining payouts under our AIP. EBITDA is defined by us as income (loss) from continuing operations, net of taxes, before: (1) interest expense, net; (2) provision (benefit) for income taxes; and (3) depreciation and amortization. Adjusted EBITDA is calculated by us as EBITDA before certain items, including (as applicable): (1)restructuring and related charges, including severance and office closure and professional services costs related to our corporate reorganization; (2) equity in net (gain) loss of investee; (3) certain litigation related expenses, settlement income or other negotiated settlements relating to certain matters from prior periods; (4) certain transaction and related costs; and (5)COVID-19 related costs. Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP.
2006 LONG-TERM INCENTIVE PLANOur non-GAAP performance measures exclude certain expenses and amounts that are not driven by our core operating results and may be one time in nature. Excluding these expenses makes comparisons with prior periods as well as to other companies in our industry more meaningful. We believe such measures allow investors and other interested parties to gain a better understanding of the factors and trends affecting the ongoing operations of our business and how actual payouts under our AIP were determined in 2020 and how they fit within the Company’s broader executive compensation program. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. In addition, our net gain or loss in equity investee is excluded from these measures, as we and our management do not have the ability to manage the venture in which we have made our investment, allocate resources within the venture, or directly control its operations or performance.
(as amendedWe urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures included below, and restated effective [July 27], 2016)not to rely on any single financial measure to evaluate our business or the performance of our management.
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Appendix A | Table of Contents |
Reconciliation of Non-GAAP Financial Measures EBITDA and Adjusted EBITDA
(in thousands) (Unaudited)
1. DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms.
2. PURPOSE
The Plan has been established to advance the interests of the Company and its stockholders by providing for the grant to Participants of Stock-based and other incentive Awards to (i) enhance the Company’s ability to attract and retain Employees, directors, consultants, advisors and others who are in a position to make contributions to the success of the Company and its Affiliates and (ii) encourage Participants to take into account the long-term interests of the Company and its stockholders through ownership of shares of Stock or the potential to receive performance-based cash bonuses. The Plan is now being amended and restated effective upon its approval by the Company’s stockholders at their annual meeting in 2016, principally, in order to increase the authorized share reserve under the Plan, increase the limit on cash-based awards intended to qualify as performance-based compensation under Section 162(m) and extend the term until May 25, 2026.
3. ADMINISTRATION
(a) Generally. The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award (including applicable Performance Periods and Performance Criteria); prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the Plan. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Administrator will only exercise its discretion to the limited extent consistent with qualifying the Award for that exception. Determinations of the Administrator made under the Plan will be conclusive and will bind all parties.
(b) Specifically. Subject to the provisions of the Plan, the Administrator’s general authority to administer the Plan shall include, but not be limited to, exercising any and all of the following powers in its sole and absolute discretion:
(i) to determine, from time to time, the fair market value of the Stock subject to the Plan or any Awards;
(ii) to determine, and to set forth in Award agreements, the terms and conditions of all Awards, including what type or combination of types of Awards shall be granted, any applicable exercise or purchase price, the installments and conditions under which an Award shall become vested (which may be based on performance), terminated, expired, cancelled, or replaced, and the circumstances for vesting acceleration or waiver of forfeiture restrictions, and other restrictions and limitations;
(iii) to construe and interpret the terms of the Plan and any Award agreement, to determine the meaning of their terms, to correct any defect, omission or inconsistency in the Plan or any Award agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or an Award fully effective, and to prescribe, amend, and rescind rules and procedures relating to the Plan and its administration;
(iv) to interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion it deems to be appropriate, and to make any findings of fact needed in the administration of the Plan or Award agreements. (with the Administrator’s prior exercise of its discretionary authority not obligating it to exercise its authority in a like fashion thereafter);
(v) to require, as a condition precedent to the grant, vesting, exercise, settlement, and/or issuance of Stock pursuant to any Award, that a Participant agree to execute a general release of claims (in any form that the Committee may require, in its sole discretion, which form may include any other provisions,e.g. confidentiality and restrictions on competition, that are found in general claims release agreements that the Company utilizes or expects to utilize);
(vi) in the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting, settlement, or exercise of Awards, such as a system using an internet website or interactive voice response, to implement paperless documentation, granting, settlement, or exercise of Awards by a Participant may be permitted through the use of such an automated system;
(vii) subject to applicable law and the restrictions set forth in the Plan, to delegate administrative functions associated with the Plan to individuals who are directors or Employees; and
(viii) to make all determinations and to take all other actions that the Administrator may consider necessary or desirable to administer the Plan or to effectuate its purposes.
(c) Local Law Adjustments and Sub-plans. To facilitate the making of any grant of an Award under this Plan, the Administrator may adopt rules and provide for such special terms for Awards to Participants who are located within the United States, foreign nationals, or who are employed by the Company or any Affiliate outside of the United States of America as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Without limiting the foregoing, the Company is specifically authorized to adopt rules and procedures regarding the conversion of local currency, taxes, withholding procedures and handling of stock certificates which vary with the customs and requirements of particular countries. The Company may adopt sub-plans and establish escrow accounts and trusts, and settle Awards in cash in lieu of shares, as may be appropriate, required or applicable to particular locations and countries.
(d) Action by Committee. The Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to the Administrator by an officer or other Employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
(e) Claims Limitations Periods.Any Participant who believes he or she is being denied any benefit or right under the Plan or under any Award may file a written claim with the Administrator. Any claim must be delivered to the Administrator within forty-five (45) days after the specific event giving rise to the claim. Untimely claims will not be processed and shall be deemed denied. The Administrator or its designee, will notify the Participant of its decision in writing as soon as administratively practicable. Claims not responded to by the Administrator in writing within one hundred and twenty (120) days of the date the written claim is delivered to the Administrator shall be deemed denied. No lawsuit relating to the Plan may be filed before a written claim is filed with the Administrator and is denied or deemed denied, and any lawsuit must be filed within one year of such denial or deemed denial or such claim shall be forever barred.
(f) Deference to Committee Determinations. The Administrator’s interpretation and construction of any provision of the Plan, or of any Award or Award agreement, and all determinations the Administrator makes pursuant to the Plan shall be final, binding, and conclusive on any and all affected parties. The validity of any such interpretation, construction, decision or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly made in bad faith or materially affected by fraud.
(g) No Liability; Indemnification. Neither the Board nor any Administrator, nor any person acting at the direction of the Board or the Committee, shall be liable for any act, omission, interpretation, construction or determination made in good faith with respect to the Plan, any Award or any Award agreement. The Company shall pay or reimburse anyone acting as the Administrator, as well as any director, Employee, or consultant who in good faith takes action on behalf of the Plan, for all expenses incurred with respect to the Plan, and to the full extent allowable under applicable law shall indemnify each and every one of them for any claims, liabilities, and costs (including reasonable attorney’s fees) arising out of their good faith performance of duties on behalf of the Plan. The Company and its Affiliates may, but shall not be required to, obtain liability insurance for this purpose.
(h) Expenses.The expenses of administering the Plan shall be borne jointly and severally by the Company and its Affiliates.
4. LIMITS ON AWARDS UNDER THE PLAN
(a) Number of Shares. The maximum number of shares of Stock that may be issued pursuant to Awards under the Plan shall not exceed, in the aggregate, 5,400,000 shares. If any Award expires or is terminated, surrendered or canceled without having been fully exercised or results in any Stock not being issued, or if any shares of Stock subject to an Award are repurchased by the Company pursuant to the provisions of Section 7(a)(2)(B) of this Plan, the shares of Stock covered by such Award that are repurchased or not paid out shall again be available for the grant of Awards under the Plan. Notwithstanding the preceding, the following shares of Stock shall not be available for the grant of Awards under the Plan: shares not issued or delivered as the result of the net settlement of SARs, and shares used to pay the exercise or purchase price or any withholding taxes related to an Award. SARs or other Awards that may be settled in cash only will not reduce the number of shares available for award under the Plan. The limit set forth in this Section 4(a) shall be construed to comply with Section 422 of the Code and regulations thereunder, with not more than 800,000 shares to be awarded in the form of ISOs granted after July 23, 2014. To the extent consistent with the requirements of Section 422 of the Code and regulations thereunder, and with other applicable legal requirements (including applicable stock exchange requirements), Stock issued under awards of an acquired company that are converted, replaced, or adjusted in connection with the acquisition will not reduce the number of shares available for Awards under the Plan.
(b) Type of Shares. Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan.
(c) Section 162(m) Limits. For Awards intended to qualify as performance-based compensation under Section 162(m), (x) the maximum number of shares of Stock for which Stock Options may be granted to any person in any fiscal year and the maximum number of shares of Stock subject to SARs granted to any person in any fiscal year will each be 800,000, (y) the maximum number of shares subject to other Stock-based Awards granted to any person in any fiscal year will be 800,000 shares and (z) the maximum amount payable under cash-based Awards granted to any person in any fiscal year will be U.S. $10,000,000. The foregoing provisions will be construed in a manner consistent with Section 162(m).
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key Employees, directors, consultants and advisors to the Company or its Affiliates and others who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates. Eligibility for ISOs is limited to employees of the Company or of a “parent corporation” or “subsidiary corporation” of the Company as those terms are defined in Section 424 of the Code.
6. RULES APPLICABLE TO AWARDS
(a)All Awards
(1) Award Provisions.The Administrator will determine the terms of all Awards, subject to the limitations provided herein. By accepting any Award granted hereunder, the Participant agrees to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the contrary, awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Administrator.
(2) Term of Plan. No Awards may be made after May 25, 2026, but previously granted Awards may continue beyond that date in accordance with their terms.
(3) Transferability. Neither ISOs nor other Awards may be transferred other than by will or by the laws of descent and distribution (other than transfers to the Company pursuant to Section 7(a)(2)(B)), and during a Participant’s lifetime ISOs (and, except as the Administrator otherwise expressly provides), other non-transferable Awards requiring exercise may be exercised only by the Participant.
(4) Dividend Equivalents, Etc.The Administrator may provide for the payment of amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to any Award other than an Option or SAR.
(5) Rights Limited. Nothing in the Plan will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment for any reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant.
(6) Section 162(m).This Section 6(a)(6) applies to any Performance Award intended to qualify as performance-based for the purposes of Section 162(m) other than a Stock Option or SAR. In the case of any Performance Award to which this Section 6(a)(6) applies, the Plan and such Award will be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for the performance-based compensation exception under Section 162(m). With respect to such Performance Awards, the Administrator will preestablish, in writing, one or more specific Performance Criteria and Performance Period, no later than 90 days after the commencement of the Performance Period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). Once established for a Performance Period, the Performance Criteria shall not be amended or otherwise modified to the extent such amendment or modification would cause the compensation payable pursuant to the Award to fail to constitute qualified performance-based compensation under Section 162(m). Following the completion of a Performance Period, and prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator will certify whether the applicable Performance Criteria have been attained and, if so, to calculate and certify in writing that amount of the Awards earned for the Performance Period based upon the Performance Criteria, and such determination will be final and conclusive. The Administrator shall then determine the number of shares or dollar value (as applicable) of each Participant’s Award based on the Performance Criteria for the Performance Period and, in so doing, may apply Negative Discretion, if and when it deems appropriate.
(7) Clawbacks.Notwithstanding any other provision of this Plan, all Awards (whenever granted) will be subject to recoupment in accordance with any clawback policy that is both in effect at any time while the Award is outstanding, and established in order to comply with (i) the listing standards of any securities exchange, trading market or automated quotation system on which the Company’s securities are listed, quoted or traded, (ii) Section 304 of the Sarbanes-Oxley Act of 2002, or (iii) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including but not limited to Section 10D of the Securities Exchange Act of 1934, or any other Applicable Law.Any Participant who receives and accepts an Award on or after the effective date of this restatement shall be deemed automatically to have consented and agreed to the foregoing clawback terms.In addition, the Administrator, in its sole and absolute discretion, may impose such other clawback, recovery or recoupment provisions in an Award agreement as the Administrator determines is necessary, advisable or appropriate, including but not limited to a reacquisition right in respect of previously acquired Shares or other cash or property upon the occurrence of a termination for “cause” and/or violation of post-Employment restrictive covenants. No recovery of compensation under any clawback policy or provisions imposed under this paragraph will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company or its Affiliates, including an Award agreement.
(8) Section 409A of the Code.
(i) Awards under the Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules and shall be construed accordingly. However, the Company shall not be liable to any Participant or other holder of an Award with respect to any Award-related adverse tax consequences arising under Section 409A or other provision of the Code.
(ii) If any provision of the Plan or an Award agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award to be subject to the interest and penalties under Section 409A of the Code, such provision of the Plan or Award shall be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Administrator may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority will contravene Section 409A or the regulations or guidance promulgated thereunder.
(iii) Notwithstanding any provisions of this Plan or any Award granted hereunder to the contrary, no acceleration shall occur with respect to any Award to the extent such acceleration would cause the Plan or an Award granted hereunder to fail to comply with Section 409A of the Code.
(iv) Notwithstanding any provisions of this Plan or any applicable Award agreement to the contrary, no payment shall be made with respect to any Award granted under this Plan to a “specified employee” (as such term is defined for purposes of Section 409A of the Code) prior to the six-month anniversary of the employee’s separation of service to the extent such six-month delay in payment is required to comply with Section 409A of the Code.
(b) Stock Options and SARs
(1) Duration of Options and SARs.The latest date on which an Option or a SAR may be exercised will be the tenth anniversary of the date the Option (fifth anniversary in the case of an ISO granted to a ten percent shareholder within the meaning of Section 422(b)(6) of the Code) or SAR was granted, or such earlier date as may have been specified by the Administrator at the time the Option or SAR was granted.
(2) Vesting. The Administrator shall fix in an Award agreement the term during which each Stock Option or SAR may be exercised, but no Stock Option or SAR shall be exercisable after the tenth anniversary of its date of grant. Notwithstanding any other provision of the Plan, the Committee may determine with respect to an Award that the date on which any outstanding Stock Option or SAR or any portion thereof is exercisable shall be advanced to an earlier date or dates designated by the Administrator in accordance with such terms and subject to such conditions, if any, as the Administrator shall specify.
(3) Time and Manner of Exercise.Unless the Administrator expressly provides otherwise, an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a notice of exercise (in form acceptable to the Administrator) signed by the appropriate person and accompanied by any payment required under the Award. If the Award is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Award has the right to do so.
(4) Exercise Price. The exercise price (or in the case of a SAR, the base price above which appreciation is to be measured) of each Award requiring exercise shall be 100% (in the case of an ISO granted to a ten-percent shareholder within the meaning of Section 422(b)(6) of the Code, 110%) of the fair market value of the Stock subject to the Award, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, or other events described in Section 7(d)(1) and (2)), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARS in exchange for cash, other awards or Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs without stockholder approval.
(5) Payment Of Exercise Price.Where the exercise of an Award is to be accompanied by payment, the Administrator may determine the required or permitted forms of payment, subject to the following: all payments will be by cash or check acceptable to the Administrator, or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of shares of Stock that have been outstanding for at least six months (unless the Administrator approves a shorter period) and that have a fair market value equal to the exercise price, (ii) through a broker-assisted exercise program acceptable to the Administrator, (iii) by the Participant’s surrender of shares of Stock otherwise deliverable by the Company pursuant to the Award being exercised, (iv) by other means acceptable to the Administrator, or (v) by any combination of the foregoing permissible forms of payment. The delivery of shares in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(c) Restricted Stock and Other Awards Not Requiring Exercise
(1) Consideration in General. In general, Awards that do not require exercise may be made in exchange for such lawful consideration, including services, as the Administrator determines. Any purchase price payable by a Participant to the Company for Stock under an Award not requiring exercise shall be paid in cash or check acceptable to the Administrator, through the delivery of shares of Stock that have been outstanding for at least six months (unless the Administrator approves a shorter period) and that have a fair market value equal to the purchase price, if and to the extent permitted by the Administrator, by delivery to the Company of a promissory note of the Participant, payable on such terms as are specified by the Administrator, or by any combination of the foregoing permissible forms of payment.
(2) Vesting. Restricted Stock or Stock Units (including Restricted Stock Units) representing a future right to receive Stock shall be granted subject to such restrictions on the full enjoyment of the shares as the Administrator shall specify; which restrictions may be based on the passage of time, satisfaction of performance criteria, or the occurrence of one or more events; and shall lapse separately or in combination upon such conditions and at such time or times, in installments or otherwise, as the Administrator shall specify. The Administrator shall fix in an Award agreement the term during which each Award of Restricted Stock or Stock Units vests.
(d) Deferred Share Units.The Administrator may defer, or allow a Participant to elect to defer, the exercising of Awards, the issuance or delivery of Stock under any Award or any action permitted under the Plan to prevent the Company or any Affiliate from being denied a federal income tax deduction with respect to any Award (other than an ISO), in accordance with Treas. Reg. 1.409A-1(b)(4)(ii). In such case, payment of such deferred amounts must be made as soon as reasonably practicable following the first date on which the Company and/or Affiliate anticipates or reasonably should anticipate that, if the payment were made on such date, the Company’s and/or Affiliate’s deduction with respect to such payment would no longer be restricted due to the application of Section 409A of the Code.
7. EVENTS AFFECTING OUTSTANDING AWARDS
(a) Termination of Employment. In general, the treatment of an Award upon termination of a Participant’s Employment will be determined by the Administrator at the time of grant and specified in the document or documents by which the Award is granted, subject to the authority of the Administrator under Section 3 of the Plan to modify or waive terms and conditions of the Award. Except as otherwise so determined by the Administrator or otherwise explicitly provided herein, the following will apply in the event of termination of a Participant’s Employment:
(1) Disability or Death. If the termination of Employment is by reason of Disability (as determined by the Administrator) or death:
(A) Except as provided in subparagraph 7(a)(1)(C) below, or in an Award Agreement, Stock Options and SARs held by the Participant or any permitted transferees of the Participant will immediately become exercisable in full and will remain exercisable until the earlier of (x) the first anniversary of the date on which the Participant’s Employment ceased as a result of Disability or the third anniversary of the date on which the Participant’s Employment ceased as a result of death, and (y) the date on which the Award would have terminated had the Participant remained an Employee.
(B) Except as provided in subparagraph 7(a)(1)(C) below, the Participant’s unvested Restricted Stock and Restricted Stock Units will immediately vest and become free of restrictions.
(C) If vesting or exercisability of an Award, or the payment of cash pursuant to the Award, is conditioned upon satisfaction of Performance Criteria that have not been satisfied at the time the Participant’s Employment terminates, the Award will terminate unless the Administrator exercises its authority under Section 3 to waive or modify the conditions of the Award.
(2) Other Termination of Employment. If termination of Employment is for any reason other than disability (as determined by the Administrator) or death of the Participant:
(A) Stock Options and SARs held by the Participant or the Participant’s permitted transferees that were not exercisable immediately prior to cessation of Employment will terminate immediately. Each such Stock Option and SAR that were so exercisable will remain exercisable until the earlier of (x) the date which is three months after the date on which the Participant’s Employment ceased and (y) the date on which the Award would have terminated had the Participant remained an Employee. Nevertheless, if there is a blackout period under the Company’s insider trading policy or applicable law (or an Administrator-imposed blackout period) that prohibits the buying or selling of shares of Stock during any part of the ten day period before the expiration of any Option or SAR based on the termination of a Participant’s Employment, the period for exercising the Option or SAR shall be extended until ten days beyond when such blackout period ends. Notwithstanding any provision hereof or within an applicable Award agreement, no Option or SAR shall ever be exercisable after the expiration date of its original term as set forth in the Award agreement.
(B) The Company will have the right to reacquire the Participant’s unvested Restricted Stock at the lower of the Participant’s original purchase price, if any, for such Stock, and the fair market value of the Stock on the date of termination. If there was no purchase price, then the Restricted Stock will be forfeited. Restricted Stock Units will be forfeited.
(b) Change in Control. In the event of a Change in Control:
(1) Acceleration of Awards. Except as otherwise provided below: (i) Stock Options and SARs held by the Participant or the Participant’s permitted transferees will immediately become exercisable in full, (ii) the Participant’s unvested Restricted Stock will immediately vest and become free of restrictions, and (iii) the delivery of shares of Stock deliverable under each outstanding Award of Stock Units will be accelerated, and such shares will be delivered.
Upon the grant of any Award after [July 27, 2016], the Administrator shall have the authority to provide that (or to reserve the discretion to later determine whether) a Change in Control shall result in assumption of the Award by the acquiring or surviving company, replacement of the Award with a substantially equivalent award, or cancellation of the Award in exchange for the payment, on the date of the Change in Control, of cash or other consideration to the Participant in an amount equal to the excess (if any) of the fair market value of the shares subject to the Award being cancelled over the exercise or purchase price (if any) payable by the Participant for such shares.
(2) Performance Criteria.If vesting or exercisability of an Award, or delivery of Stock or payment of cash under an Award, is conditioned upon satisfaction of Performance Criteria that have not been satisfied at the time of the Change in Control, except as otherwise provided upon grant of the Award, vesting, exercisability and delivery of Stock or payment of cash will not be accelerated by the Change in Control unless the Administrator exercises its authority under Section 3 to waive or modify the conditions of the Award. Any share of Stock delivered as a result of such a waiver or modification may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect the Performance Criteria to which the Award was subject. In the case of Restricted Stock the vesting of which is conditioned upon satisfaction of Performance Criteria, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Change in Control be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.
(3) Cash-Out of Awards. If the Change in Control is one in which holders of Stock will receive upon consummation a payment (whether cash, non-cash or a combination of the foregoing), the Administrator may provide for payment (a “cash-out”), with respect to some or all Stock-based Awards, equal in the case of each affected Award to the excess, if any, of (i) the fair market value of one share of Stock (as determined by the Administrator in its reasonable discretion) times the number of shares of Stock subject to the Award, over (ii) the aggregate exercise price, if any, under the Award (or in the case of an SAR, the aggregate base price above which appreciation is measured), in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines.
(4) Compliance with Section 409A of the Code. In the case of an Award providing for the payment of deferred compensation subject to Section 409A of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if the Change in Control is one described in subsection (a)(2)(A)(v) of Section 409A and the guidance thereunder and shall be paid consistent with the requirements of Section 409A. If any deferred compensation that would otherwise be payable by reason of a Change in Control cannot be paid by reason of the immediately preceding sentence, it shall be paid as soon as practicable thereafter consistent with the requirements of Section 409A, as determined by the Administrator.
(c) Termination of Awards. Unless otherwise provided by the Administrator, each Award other than Restricted Stock (which, unless subject to Performance Criteria which have not been satisfied, will be treated in the same manner as other shares of Stock) will terminate upon consummation of a Covered Transaction, provided that, if the Covered Transaction follows a Change in Control or would give rise to a Change in Control, no Stock Option or SAR, other than an Award that is cashed out, will be so terminated prior to the Participant’s having been given adequate opportunity, as determined by the Administrator, to exercise Awards that are exercisable or become exercisable as a result of the Change in Control.
(d) Change in and Distributions With Respect to Stock
(1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization, reorganization, merger, consolidation, combination, split-up, spin-off, dissolution, liquidation, exchange of shares or other change in the Company’s capital structure, the Administrator will make appropriate adjustments, in its sole discretion, to equitably adjust the maximum number of shares of Stock specified in Section 4(a) that may be delivered under the Plan and the maximum share limits described in Section 4(c) and will also equitably adjust, in its sole discretion, the number and kind of shares of stock or securities or other property or cash subject to Awards then outstanding, as and to the extent appropriate to preserve the value of such Awards (and, if applicable in the Administrator’s discretion, Awards to be subsequently granted), any exercise prices relating to Awards and any other provision of Awards (including performance criteria) that the Administrator determines are affected by such change.
Unless the Administrator determines that another kind or form of adjustment is equitable and appropriate under this Section 7(d) (or required in accordance with any other provision of the Plan), subject to any required action by shareholders of the Company, in connection with any event that is a recapitalization, reorganization, merger, consolidation, combination, split-up, spin-off, dissolution, liquidation or similar transaction, any Award shall be deemed to pertain to the securities or other property, including cash, to which a holder of the number of shares of Stock covered by the Award would have been entitled to receive in connection with such event.
(2) Certain Other Adjustments. The Administrator will also make adjustments of the type described in Section 7(d)(1) above to take into account distributions to stockholders other than those provided for in Section 7(d)(1), including any extraordinary cash dividend paid on shares of Stock (but excluding, for the avoidance of doubt, a regular cash dividend) or any other unusual or infrequently occurring event, if the Administrator determines, in its discretion, that such adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder, having due regard for the qualification of ISOs under Section 422 of the Code, for the performance-based compensation rules of Section 162(m), where applicable, and for the deferred compensation rules of Section 409A of the Code.
(3) Continuing Application of Plan Terms. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
8. AMENDMENT AND TERMINATION
The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards;provided, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant’s consent, alter the terms of an Award so as to affect adversely the Participant’s rights under the Award, unless the Administrator expressly reserved the right to do so at the time of the Award. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code and applicable stock exchange requirements), as determined by the Administrator. The Administrator may not, without stockholder approval, (i) materially increase the number of securities which may be issued under the Plan or (ii) materially modify the requirements for participation under the Plan.
9. OTHER COMPENSATION ARRANGEMENTS
The existence of the Plan or the grant of any Award will not in any way affect the Company’s right to Award a person bonuses or other compensation in addition to Awards under the Plan.
10. WAIVER OF JURY TRIAL
By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim shall be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waiver.
11. MISCELLANEOUS
(a) No Shareholder Rights. Except as otherwise provided here, the holder of an Award shall have no rights as a Company shareholder with respect thereto unless, and until the date as of which, shares of Stock are issued upon exercise or payment in respect of such award.
(b) Transferability. Except as the Administrator shall otherwise determine in connection with determining the terms of Awards to be granted or shall thereafter permit, no Award or any rights or interests therein of the recipient thereof shall be assignable or transferable by such recipient except upon death to his or her designated beneficiary or by will or the laws of descent and distribution, and, except as aforesaid, during the lifetime of the recipient, an Award shall be exercisable only by, or payable only to such recipient or his or her guardian or legal representative. In no event shall an Award be transferable for consideration.
(c) Award Agreements.All Stock Options, SARs, Restricted Shares and Awards granted under the Plan shall be evidenced by agreements in such form and containing and/or incorporating such terms and conditions (not inconsistent with the Plan and applicable domestic and foreign law), in addition to those provided for herein, as the Administrator shall approve. More than one type of Award may be covered by the same agreement.
(d) Securities Restrictions. No shares of Stock shall be issued, delivered or transferred upon exercise or in payment of any Award granted hereunder unless and until all legal requirements applicable to the issuance, delivery or transfer of such shares have been complied with to the satisfaction of the Administrator and the Company, including, without limitation, the clawback requirements referenced in Section 6(a)(7) above and compliance with the provisions of the Securities Act of 1933, the Act and the applicable requirements of the exchanges on which the Company’s Stock may, at the time, be listed. The Administrator and the Company shall have the right to condition any issuance of shares of Stock made to any Participant hereunder on such Participant’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares as the Administrator and/or the Company shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions.
(e) Taxes. The Company shall have the right to deduct from all Awards hereunder paid in cash any federal, state, local or foreign taxes required by law to be withheld with respect to such cash awards. In the case of Awards to be distributed in Stock, the Company shall have the right to require, as a condition of such distribution, that the Participant or other person receiving such Stock either (i) pay to the Company at the time of distribution thereof the amount of any such taxes which the Company is required to withhold with respect to such Stock or (ii) make such other arrangements as the Company may authorize from time to time to provide for such withholding including without limitation having the number of the units of the award cancelled or the number of the shares of Stock to be distributed reduced by an amount with a value equal to the value of such taxes required to be withheld.
(f) No Employment Right. No employee or director of the Company, nor any Affiliate of the Company, shall have any claim or right to be granted an Award under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or Affiliate thereof or any director any right to continue as a director of the Company or Affiliate. All Company and Affiliate employees who have or may receive Awards under this Plan are employed, except to the extent provided by law, at the will of the Company or such Affiliate and in accord with all statutory provisions.
(g) Stock to be Used. Distributions of shares of Stock upon exercise, in payment or in respect of Awards made under this Plan may be made either from shares of authorized but unissued Stock reserved for such purpose by the Board or from shares of authorized and issued Stock reacquired by the Company and held in its treasury, as from time to time determined by the Committee, the Board, or pursuant to delegations of authority from either. The obligation of the Company to make delivery of Awards in cash or Stock shall be subject to currency or other restrictions imposed by any government.
(h) Expenses of the Plan. The costs and expenses of administering this Plan shall be borne by the Company and not charged to any Award or to any employee, director or Participant receiving an Award. However, the Company may charge the cost of any Awards that are made to employees of participating subsidiaries, including administrative costs and expenses related thereto, to the respective participating subsidiaries by which such persons are employed.
(i) Plan Unfunded. This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under this Plan and payment of awards shall be subordinate to the claims of the Company’s general creditors.
(j) Data Privacy.As a condition of receipt of any Award, each Participant explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, of personal data as described in this Section by and among, as applicable, the Company and its Affiliates for the purpose of implementing, administering, and managing this Plan and Awards and the Participant’s participation in this Plan. In furtherance of such implementation, administration, and management, the Company and its Affiliates may hold certain personal information about a Participant, including, but not limited to, Data. In addition to transferring the Data amongst themselves as necessary for the purpose of implementation, administration, and management of this Plan and Awards and the Participant’s participation in this Plan, the Company and its Affiliates may each transfer the Data to any third parties assisting the Company in the implementation, administration, and management of this Plan and Awards and the Participant’s participation in this Plan. Recipients of the Data may be located in the Participant’s country or elsewhere, and the Participant’s country and any given recipient’s country may have different data privacy laws and protections. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the purposes of assisting the Company in the implementation, administration, and management of this Plan and Awards and the Participant’s participation in this Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect to deposit any shares of Stock. The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage this Plan and Awards and the Participant’s participation in this Plan. A Participant may, at any time, view the Data held by the Company with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the Participant, in any case without cost, by contacting the Company’s General Counsel or Director of Human Resources. Notwithstanding the foregoing, the Company is authorized to impose jurisdiction specific requirements in connection with Awards granted outside the United States, if necessary to comply with applicable law in accordance with Section 3(c) of the Plan.
(k) Governing Law. This Plan shall be governed by the laws of the State of Delaware and shall be construed for all purposes in accordance with the laws of said State except as may be required by NASDAQ or other applicable exchange requirement or by applicable federal law.
Exhibit A: Definition of Terms
The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below:
“Administrator”: The Compensation Committee, provided that the Committee shall consist of two or more directors, all of whom are both “outside directors” within the meaning of Section 162(m) and “non-employee directors” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934; and provided further, that the Compensation Committee may delegate (i) to one or more of its members such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant rights or options to the extent permitted by Section 157(c) of the Delaware General Corporation Law; (iii) to one or more officers of the Company the authority to allocate other Awards among such persons (other than officers of the Company) eligible to receive Awards under the Plan as such delegated officer or officers determine consistent with such delegation and applicable law;provided, that with respect to any delegation described in this clause (iii) the Compensation Committee (or a properly delegated member or members of such Committee) shall have authorized in writing the issuance of a specified number of shares of Stock or other payment under such Awards and shall have specified the consideration, if any, to be paid therefor; and (iv) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term “Administrator” shall include the person or persons so delegated to the extent of such delegation.
“Affiliate”: Any corporation or other entity owning, directly or indirectly, 50% or more of the outstanding Stock of the Company, or in which the Company or any such corporation or other entity owns, directly or indirectly, 50% or more of the outstanding capital stock (determined by aggregate voting rights) or other voting interests.
“Award”: Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
(v) Stock Units, including Restricted Stock Units.
(vi) Performance Awards, including Stock-based and cash-based Awards.
(vii) Deferred Share Units.
“Board”: The Board of Directors of the Company.
“Change in Control”:An event or events, in which:
(A) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the 1934 Act), together with all affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;
(B) the consummation of a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the holders of voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, having at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) after which no “person” (with the method of determining “beneficial ownership” used in clause (A) of this definition) owns more than 50% of the combined voting power of the securities of the Company or the surviving entity of such merger or consolidation;
(C) the Company consummates its liquidation or sale or disposition by the Company of all or substantially all of the Company’s assets; or
(D) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has conducted or threatened a proxy contest, or has entered into an agreement with the Company to effect a transaction described in clause (A), (B) or (C) of this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof.
Notwithstanding the foregoing, with respect to Awards granted under the Plan prior to June 30, 2015, “Change in Control” shall mean an event or events, in which:
(AA) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the 1934 Act), together with all affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;
(BB1) With respect to awards granted under the Plan prior to April 19, 2010, the stockholders of the Company approve a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) after which no “person” (with the method of determining “beneficial ownership” used in clause (A) of this definition) owns more than 25% of the combined voting power of the securities of the Company or the surviving entity of such merger or consolidation; or
(BB2) With respect to awards granted under the Plan between April 19, 2010 and June 30, 2015, the Company consummates a merger or consolidation of the Company with any other company other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) after which no “person” (with the method of determining “beneficial ownership” used in clause (A) of this definition) owns more than 25% of the combined voting power of the securities of the Company or the surviving entity of such merger or consolidation;
(CC) during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has conducted or threatened a proxy contest, or has entered into an agreement with the Company to effect a transaction described in clause (AA), (BB1), (BB2) or (DD) of this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or
(DD) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
“Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.
“Compensation Committee”: The Compensation Committee of the Board.
“Company”: The Providence Service Corporation.
“Covered Transaction”: Any of (i) a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer.
“Data” shall mean, in respect of a Participant, the Participant’s name, home address, telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), information regarding any securities of the Company or any of its Affiliates, and details of all Awards.
“Disability” shall mean permanent and total disability of an employee or director participating in the Plan as determined by the Administrator in accordance with uniform principles consistently applied, upon the basis of such evidence as the Administrator deems necessary and desirable. Notwithstanding the foregoing, with respect to an Award that is subject to Section 409A of the Code, no condition shall constitute a “Disability” for purposes of the Plan unless such condition also constitutes a disability as defined under Section 409A.
“Deferral Election Form” shall mean an election form provided by and acceptable to the Administrator for purposes of DSUs.
“DSU” shall mean a deferred share unit granted under Section 6(d) above.
“Employee”: Any person who is employed by the Company or an Affiliate.
“Employment”: A Participant’s employment or other service relationship with the Company or its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 above to the Company or its Affiliates. If a Participant’s employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant’s Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates or the Administrator expressly determines otherwise.
“ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of Section 422 of the Code. Each option granted pursuant to the Plan will be treated as providing by its terms that it is to be a non-incentive stock option unless, as of the date of grant, it is expressly designated as an ISO.
“Negative Discretion”:The discretion authorized by the Plan to be applied by the Administrator to eliminate or reduce the size of an Award; provided that the exercise of such discretion would not cause the Award to fail to qualify as “performance-based compensation” under Section 162(m). By way of example and not by way of limitation, in no event shall any discretionary authority granted to the Administrator by the Plan including, but not limited to, Negative Discretion, be used to (a) grant or provide payment in respect of Awards for a Performance Period if the Performance Criteria for such Performance Period have not been attained, or (b) increase an Award above the maximum amount payable under the Plan.
“Participant”: A person who is granted an Award under the Plan.
“Performance Award”: An Award subject to Performance Criteria. The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) and Performance Awards that are not intended so to qualify.
“Performance Criteria”: Specified criteria established by the Administrator, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to or based upon any or any combination or component of the following (measured either absolutely or by reference to an index or indices, and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return or stockholder value; sales of particular products or services; customer acquisition or retention; safety, health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. A Performance Criterion and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), the Administrator may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.
“Plan”: The Providence Service Corporation 2006 Long-Term Incentive Plan as from time to time amended and in effect.
“Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered for sale to the Company if specified conditions are not satisfied.
“Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of Stock or cash in lieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.
“Retirement” shall mean:
(A) in the case of an employee Participant, separating from service with the Company or an affiliate, on or after a customary retirement age for the Participant’s location, with the right to begin receiving immediate pension benefits under the Company’s pension plan or under another pension plan sponsored or otherwise maintained by the Company or an affiliate for its employees, in either case as then in effect or, in the absence of such pension plan being applicable to any Participant, as determined by the Committee in its sole discretion; and
(B) in the case of a director, (i) resigning from serving as a director, failing to stand for re-election as a director or failing to be re-elected as a director after at least six (6) full years of service as a director of the Company. More than six (6) months’ service during any twelve (12) month period after a director’s first election by the shareholders to the Board shall be considered as a full year’s service for this purpose.
“Section 162(m)”: Section 162(m) of the Code and applicable rules and regulations.
“SAR”: A right entitling the holder upon exercise to receive an amount (payable in shares of Stock of equivalent value or cash) equal to the excess of the fair market value of the shares of Stock subject to the right over the fair market value of such shares at the date of grant.
“Stock”: Common Stock of the Company, par value $0.001 per share.
“Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the exercise price.
“Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock, to deliver Stock or cash measured by the value of Stock in the future.
“Unrestricted Stock”: Stock that is not subject to any restrictions under the terms of the Award.
Twelve Months Ended December 31, | ||||||||
2020 ($) | 2019($) | |||||||
Income from continuing operations, net of taxes | 89,614 | (12,583) | ||||||
Interest expense, net | 17,599 | 850 | ||||||
Income taxes | 24,805 | 6,877 | ||||||
Depreciation and amortization | 26,183 | 16,816 | ||||||
EBITDA | 158,201 | 11,960 | ||||||
Restructuring and related charges(1) | 6,179 | 6,691 | ||||||
Transaction costs(2) | 12,619 | 2,693 | ||||||
COVID-19 related costs | 1,204 | – | ||||||
Litigation Expense | – | 9 | ||||||
Equity in net (gain)/loss of investee | (8,860 | ) | 29,865 | |||||
Adjusted EBITDA | 169,343 | 51,218 |
Includes professional fees for strategic initiatives of $3,249 and severance and office closure costs of $2,930 in 2020, and organizational consolidation costs of $4,027, severance costs of $1,673, and professional services fees of $991 in 2019. | |
(2) | Includes fees incurred in the acquisitions of Simplura Health Group and National MedTrans, LLC in 2020, and fees and expenses incurred in the acquisition of Circulation, Inc., including with respect to its management incentive plan, in 2019. |
ModivCare™ | A-2 | 2021 Proxy Statement |