Executive Compensation
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any in-the-money value of vested stock options; and
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shares owned jointly with, or in trust for, immediate family members residing in the same household.
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Continuing NEOs are required to hold all compensatory shares of our Common Stock until they have reached the required holding level described above. This holding requirement does not apply to shares purchased by an NEO in the market
or from the Company for cash unless acquired by exercise of a compensatory option. In the event an NEO does not achieve his or her holding level set forth above and sells shares of our Common Stock in violation of the Company’s stock ownership
guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances. Given that Mr. McMahon and Mr. Wilson joined the Company in 2020, and Mr. Greenleaf and Ms. Stalmack joined the Company
in 2019, none of them met these guidelines at December 31, 2020. The Company expects, however, that these executives will meet the guidelines over the next three to five years. Since Mr. Dotts and Ms. Smith are no longer employees of the Company,
this requirement is no longer applicable to them.
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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.
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Anti-hedging/anti-pledging
We have a policy that prohibits employees, executive officers 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 employees, executive officers and the Board from pledging our Common Stock as collateral for a loan or for a margin account.
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CHANGE IN CONTROL, SEVERANCE ARRANGEMENTS AND SEVERANCE PAYMENTS
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During fiscal year 2020, we had either employment agreements or employment offer letters with each of our NEOs. The employment agreements with Mr. Greenleaf, Ms. Stalmack and Mr. Dotts, and the employment letters with Mr. McMahon,
Mr. Wilson and Ms. Smith provided for a severance payment upon the termination of employment under certain circumstances and for a payment upon a change in control as described below under “—Employment Agreements and Offer Letters with the Named
Executive Officers” and “—Potential Payments Upon Termination or Change in Control.”
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IMPACT OF TAX TREATMENT ON COMPENSATION
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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.
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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.
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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.
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COMPENSATION COMMITTEE REPORT
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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.
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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.
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Compensation Committee
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Richard A. Kerley (Chairperson)
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Todd J. Carter
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David A. Coulter
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SUMMARY COMPENSATION TABLE
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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:
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Name
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Year
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Salary
($)
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Bonus(1)
($)
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Stock
Awards(2)
($)
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Option
Awards(3)
($)
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Non-Equity
Incentive Plan
Compensation(4)
($)
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All Other
Compensation(5)
($)
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Total
($)
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Daniel E.
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2020
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850,000
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—
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850,015
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849,630
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2,125,000
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16,494
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4,691,139
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Greenleaf
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2019
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32,692
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—
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1,191,162
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1,955,559
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—
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—
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3,179,413
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President and Chief Executive Officer
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John McMahon(6)
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2020
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104,135
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—
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71,215
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71,238
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87,836
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8,145
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342,569
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Chief Information Officer
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Kathryn Stalmack
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2020
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375,000
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100,000
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—
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—
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562,500
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21,550
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1,059,050
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Senior Vice President, General Counsel and Corporate Secretary
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2019
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132,692
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—
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343,743
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220,721
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—
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8,399
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705,556
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Kenneth W.
Wilson(7)
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2020
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321,154
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115,000
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356,044
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250,007
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526,776
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16,441
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1,585,422
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Chief Operating Officer
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Kevin M. Dotts(8)
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2020
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450,000
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—
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—
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—
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611,719
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20,379
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1,082,098
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Former Chief
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2019
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456,346
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—
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154,690
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364,204
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—
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24,281
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999,521
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Financial Officer
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2018
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118,462
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50,000
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—
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372,445
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50,000
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5,566
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596,473
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Suzanne G. Smith(9)
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2020
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268,904
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—
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—
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—
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127,753
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160,434
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557,091
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Former Chief
Accounting Officer
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2019
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243,346
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15,000
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106,853
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140,602
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—
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12,420
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518,221
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(1)
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Includes discretionary bonuses and sign-on bonuses, as applicable.
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(2)
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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.
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(3)
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This column shows the aggregate grant date fair value of the stock option awards granted. The grant date fair values have been determined based on the assumptions set forth in our Annual Report on Form 10-K for the
year ended December 31, 2020 (Note 16, Stock-Based Compensation and Similar Arrangements), calculated in accordance with FASB ASC Topic 718.
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(4)
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Includes annual incentive bonuses earned for the year indicated, but paid in March of the following year.
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(5)
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We provide the NEOs with certain group life, health, medical and other non-cash benefits generally available to all salaried employees, which are included in this column. For fiscal year 2020, the amounts in this
column include the following:
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Name
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Health, Dental, Life and
Disability Insurance Premiums ($)
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Matching Contributions under
Retirement Savings Plans ($)
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Daniel E. Greenleaf
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14,894
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1600
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John McMahon
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7,794
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351
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Kathryn Stalmack
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19,950
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1600
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Kenneth W. Wilson
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14,841
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1600
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Kevin M. Dotts
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18,779
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1600
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Suzanne G. Smith
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12,534
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400
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Mr. McMahon has served as Chief Accounting Officer since August 12, 2020.
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(7)
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Mr. Wilson has served as Chief Operating Officer since May 4, 2020.
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(8)
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Mr. Dotts served as Chief Financial Officer throughout 2020, with his resignation effective February 26, 2021.
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(9)
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Ms. Smith served as Chief Accounting Officer from March 1, 2019 until August 12, 2020. Ms. Smith remained with the Company in a transitional role until November 12, 2020. The total listed in the “Salary” column
includes $5,673 of accrued vacation pay. The total listed in the “All Other Compensation” column includes $147,500 of severance pay.
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GRANTS OF PLAN BASED AWARDS TABLE
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The following Grants of Plan Based Awards Table* provides additional information about stock and option awards and non-equity incentive plan awards granted to the NEOs during the fiscal year ended December 31, 2020. The compensation plans under
which the grants in the following table were made are described under “2020 Executive Compensation Program Decisions—Annual Incentive Program” and “2020 Executive Compensation Program Decisions—Long-Term Incentives” in the “Compensation
Discussion and Analysis” section
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Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
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Estimated Future Payouts Under
Equity Incentive Plan Awards
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All Other
Stock Awards:
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All Other
Options
Awards;
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Exercise or
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Grant Date
Fair Value
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Name
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Grant
Date
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Threshold
($)
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Target
($)
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Maximum
($)
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Threshold
($)
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Target
($)
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Maximum
($)
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Number
of Shares
of Stock
or Units
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Number of
Securities
Underlying
Options (#)
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Base Price
of Options
Awards
($/SH)
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of Stock
and Option
Awards
($)(2)
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Daniel E. Greenleaf
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N/A
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531,250
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1,062,500
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2,125,500
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—
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—
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—
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—
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—
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—
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—
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2/13/20
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—
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—
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—
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—
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—
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—
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12,287
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45,119
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69.18
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1,699,644
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John McMahon
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N/A
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57,000
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114,000
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228,000
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—
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—
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—
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—
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—
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—
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—
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8/19/20
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—
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—
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—
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—
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—
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—
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749
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2,719
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95.08
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142,453
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Kathryn Stalmack
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N/A
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140,625
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281,250
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562,500
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—
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—
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—
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—
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—
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—
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—
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Kenneth W. Wilson
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N/A
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200,000
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400,000
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800,000
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—
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—
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—
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—
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—
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—
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—
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5/4/20
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—
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—
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—
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—
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—
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—
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6,420
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16,684
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55.45
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606,051
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Kevin M. Dotts
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N/A
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168,750
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337,500
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675,000
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—
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—
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—
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—
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—
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—
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—
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Suzanne G.Smith
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N/A
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71,250
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142,500
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285,000
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—
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—
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—
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—
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—
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—
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—
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(1)
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Amounts represent the threshold, target and to the extent applicable, maximum, under the AIP for fiscal year 2020 or similar provisions of the NEOs’ employment agreements or offer letters. The
actual amounts earned by the NEOs in fiscal year 2020 under the AIP are set forth under the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table.”
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(2)
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The amounts shown in this column, include the grant date fair value of option awards granted in 2020 determined based on the assumptions set forth in our 2020 Annual Report on Form 10-K for the year ended December
31, 2020 (Note 16, Stock-Based Compensation and Similar Arrangements).
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EMPLOYMENT AGREEMENTS AND OFFER LETTERS WITH THE NAMED EXECUTIVE OFFICERS
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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 the NEOs.
Daniel E. Greenleaf
Effective December 11, 2019, Daniel Greenleaf was appointed to serve as President and CEO of the Company. The Company and Mr. Greenleaf entered into an employment agreement (the “Greenleaf Employment Agreement”), dated
November 29, 2019, in connection with Mr. Greenleaf’s appointment. The Greenleaf Employment Agreement provides for a term commencing as of December 11, 2019 and continuing until his employment is terminated in accordance with the terms of the
Greenleaf Employment Agreement (the “Term”).
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Under the terms of the Greenleaf Employment Agreement, Mr. Greenleaf’s annual base salary is $850,000. Mr. Greenleaf is eligible for an annual bonus equal to 125% of his base salary, based upon achievement of 100% of the
performance targets established by the Compensation Committee. Mr. Greenleaf’s annual bonus is subject to a maximum of 250% of his base salary. Mr. Greenleaf is also eligible to receive annual equity grants with a grant date value of at least
200% of his base salary, under the terms and conditions approved by the Compensation Committee.
In addition, on December 11, 2019, Mr. Greenleaf was granted RSUs covering 20,104 shares of the Company’s common stock and an option to purchase 67,090 shares of Company common stock with an exercise price of $59.25 and
40,432 Premium Priced Options to purchase shares of Company common stock with an exercise price of $68.14. The RSUs and the options vest ratably in equal installments on each of the first, second, third and fourth anniversaries of the grant
date, in each case subject to his continued employment through the applicable anniversary date and expire on December 11, 2026.
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 for 2020 comprised of 50% RSUs and 50% options equal to 50% of his base salary based
on the market price of the common stock on August 19, 2020.
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 effect at that
time. The severance benefits will be contingent upon Mr. McMahon’s execution of a release of claims in favor of the Company. Mr. McMahon also entered into a Restrictive Covenants Agreement that contains one-year post-employment non-competition
and non-solicitation covenants, as
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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 Company and Ms. Stalmack
entered into an employment agreement (the “Stalmack Employment Agreement”), dated August 8, 2019, in connection with Ms. Stalmack’s appointment. The Stalmack Employment Agreement provides for a term commencing as of August 19, 2019 and ending
on December 31, 2021 (the “Term”).
Under the terms of the Stalmack Employment Agreement, Ms. Stalmack’s annual base salary was $375,000 in 2020. Ms. Stalmack is eligible for an annual bonus equal to 75% of her base
salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. Ms. Stalmack’s annual bonus is subject to a maximum performance of up to 150% of her base salary. Ms. Stalmack is also eligible to
participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee.
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 March 15, 2023, in each case subject to her continued employment through the applicable anniversary date.
While employed, Ms. Stalmack is entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Ms. Stalmack is also eligible to receive
severance benefits in the event her employment is terminated by the Company without Cause or by her for Good Reason. Details with respect to the severance and change in control provisions under the Stalmack Employment Agreement are set forth
below under the caption “—Potential Payments Upon Termination or Change in Control.”
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 of her employment.
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 date. In addition, Mr. Wilson was granted a long-term incentive equity grant for 2020 comprised of 50% RSUs and 50% options
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equal to 100% of his base salary based on the market price of the common stock on May 4, 2020. Mr. Wilson also received a sign-on bonus of $115,000 in cash, with
one-half paid within one week of his start date and one-half paid on November 30, 2020.
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 vested on October 31, 2020, and will expire if not exercised within 90 days of the termination of Mr. Dotts employment with the Company.
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 his employment by the Company. Details with respect to the severance and change in control provisions under the Dotts Employment Agreement are set forth below under the caption
“—Potential Payments Upon Termination or Change in Control.”
The Dotts Employment Agreement included restrictive covenants providing for Mr. Dotts’ non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of
the non-solicitation and non-piracy covenants were to last for a period of two years after his separation from the Company. The term of the non-competition covenant to last for one year following the termination of his employment.
In connection with Mr. Dotts’ resignation and the transitional role he served at the Company from February 26, 2021 until March 15, 2021 (the “Separation Date”), the Company and Mr.
Dotts entered into a Transition and Separation Agreement, effective March 11, 2021 (the “Separation Agreement”). The Separation Agreement provided that (i) Mr. Dotts would continue at his current base salary and current benefit plan
participation through the Separation Date, (ii) Mr. Dotts would continue to be eligible to earn his annual
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bonus for 2020, based on the Company’s actual performance and the terms of the Company’s AIP in 2020, and (iii) Mr. Dotts’ outstanding equity awards would continue to vest through and
including the Separation Date. In addition, after the Separation Date, Mr. Dotts was entitled to (i) a lump sum payment equal to 12 months of his current base salary minus required tax and other withholdings; and (ii) subject to his timely
enrollment in continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), fully-subsidized COBRA coverage for 12 months which is to be paid directly by the Company to the carrier. The Separation Agreement includes a
customary release of claims by Mr. Dotts in favor of the Company.
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
targets established by the Compensation Committee. In addition, Ms. Smith was eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee.
Ms. Smith was also eligible to receive severance benefits in connection with the termination of her employment by the Company. Details with respect to the severance she received
pursuant to her Transition and Separation Agreement with the Company are set forth below under the caption “—Potential Payments Upon Termination or Change in Control.”
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Executive Compensation
|
Table of Contents
|
OUTSTANDING
EQUITY AWARDS AT
DECEMBER 31, 2020
|
|
The following table reflects the equity awards granted by us to the NEOs outstanding at December 31, 2020:
|
|
|
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 listed in this table have an exercise price equal to the closing market price of our Common Stock on the grant date.
|
(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, in each case, subject to Mr. Greenleaf’s continued employment. The RSUs granted to Messrs. Greenleaf, McMahon, and Wilson during fiscal 2020 vest in three equal installments on each of the first, second, and third anniversary of the grant
date, in each case, subject to their continued employment. The restricted share award granted to Mr. Dotts on September 20, 2019, and 1,593 of the restricted share awards granted to Ms. Stalmack on September 20, 2019 vest in three equal
installments on March 15, 2021, 2022 and 2023, in each case, subject to their continued employment. The remaining 4,249 restricted share awards granted to Ms. Stalmack on September 20, 2019, vest in three equal installments on August 19, 2020,
2021, and 2022, in each case, subject to Ms. Stalmack’s continued employment.
|
(3)
|
The market value of the unvested restricted share awards was calculated using a value of $138.63 per share of Common Stock, which was the closing market price of our Common Stock on December 31, 2020.
|
(4)
|
The options granted to Mr. Greenleaf on December 11, 2019 consisted of 67,090 options and 40,432 Premium Priced Options which have an exercise price 15% above the market price on date of grant. Mr. Greenleaf’s
December 2019 options vest ratably in four equal installments on each of the first, second, third and fourth anniversary of the grant date in each case, subject to Mr. Greenleaf’s continued employment. The options granted to Mr. Greenleaf on
February 13, 2020, vest in three equal installments on each of the first, second, and third anniversary of the date of grant, in each case, subject to Mr. Greenleaf’s continued employment.
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Executive Compensation
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Table of Contents
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(5)
|
The options granted to Mr. Dotts on August 27, 2018 vested on October 31, 2020. The options granted to Mr. Dotts on September 20, 2019
will vest ratably in three equal annual installments on March 15, 2021, 2022, and 2023, in each case, subject to Mr. Dotts’ continued employment. The options granted to Ms. Stalmack on September 20, 2019 will vest in three equal annual
installments on March 15, 2021, 2022, and 2023, in each case, subject to Ms. Stalmack’s continued employment. The options granted to Messrs. McMahon and Wilson during fiscal 2020 will vest ratably in three equal installments on the first,
second, and third anniversary of the grant date.
|
Option Exercises and Stock Vested Table
The following table provides additional information about the value realized by the NEOs on option award exercises and stock award vesting during the year ended December 31, 2020.
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized
on Exercise
($)
|
|
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.
|
|
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
|
General
The employment agreements, offer letters and the Company’s executive severance policy, as applicable during 2020 to each of Messrs. Greenleaf, McMahon, Wilson and Dotts and Ms.
Stalmack and Ms. Smith, provided for severance payments in the event of termination of employment under certain circumstances, including in the event of a change in control (none of which include excise tax gross-ups). The receipt of the
payments and benefits to these NEOs under the employment agreements, letters and policies are generally conditioned upon their complying with non-competition, non-solicitation/non-piracy and non-disclosure provisions. By the terms of such
agreements, letters and policies, the executives acknowledge that a breach of some or all of the restrictive 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.
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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Executive Compensation
|
Table of Contents
|
|
following summaries describe payouts that would have been made under the applicable arrangements if the termination event described had happened at the end of 2020, except that the
description with respect to Ms. Smith reflects the amounts that were actually paid in respect of the termination of her services.
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 agreement; (ii) a reduction of executive’s base salary other than a reduction which
is generally applicable to all executives of the Company; (iii) a material breach by the Company of the employment agreement; and (iv) with respect only to Mr. Dotts, the relocation of his primary place of employment more than 75 miles from the
Company’s office at 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:
|
|
•
|
fraud or theft committed by the employee against us or any of our subsidiaries, affiliates, joint ventures and related organizations, including any entity managed by us (collectively
referred to as “Affiliates”), or commission of a felony or any crime involving fraud or moral turpitude;
|
|
|
|
|
•
|
gross negligence of the employee or willful misconduct by the employee that results, in
|
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2021 Proxy Statement
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Executive Compensation
|
Table of Contents
|
|
|
either case, in material economic or reputational harm to us or our Affiliates;
|
|
|
|
|
•
|
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;
|
|
|
|
|
•
|
conduct of the employee tending to bring us or our Affiliates into public disgrace or embarrassment, or which is reasonably likely to cause one or more of its customers or clients to cease
doing business with, or reduce the amount of business with, the Company or its Affiliates;
|
|
|
|
|
•
|
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;
|
|
|
|
|
•
|
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
|
|
•
|
employee materially compromises our or our Affiliates’ trade secrets or other confidential and proprietary information.
|
|
|
|
|
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.
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Termination due to Death
|
|
|
|
The Company’s current benefit program includes a Company-paid life insurance policy for all named executive officers. In the event an NEO’s employment were terminated due to the
NEO’s death, the NEO’s heirs, personal representatives or estate would receive the life insurance proceeds. In addition, the employment agreements with Mr. Greenleaf, Ms. Stalmack and Mr. Dotts provide for certain payments in the event of
death. Pursuant to Mr. Greenleaf’s agreement, in the event of death, 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 death, each would be entitled to a pro rata portion of any bonus earned for the then fiscal year through
the date of termination.
|
|
|
|
|
Termination due to Disability
|
|
|
|
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 Disability. The term “Disability” is defined by the employment agreements to mean any physical or mental illness, disability or incapacity which prevents the
employee from performing the essential functions 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.
|
|
|
|
|
Termination upon Change in Control
|
|
|
|
Each of Messrs. Greenleaf and Dotts and Ms. Stalmack is entitled to certain payments following a termination after or in connection with a “Change in Control”, which is defined
for these purposes as an event or events in which:
|
|
|
|
|
•
|
any “person” as defined in Sections 13(d) and 14(d) of the Exchange Act (other than (i) us or our subsidiaries, (ii) any fiduciary holding securities under our employee
benefit plan or our subsidiaries, or (iii) any company owned by our stockholders) is or becomes the “beneficial owner” of 50% or more of our
outstanding voting securities; or
|
|
|
|
|
•
|
we consummate (i) a merger or consolidation as more specifically described in the employment agreements, (ii) a liquidation or (iii) the sale or disposition of all or substantially all of
our assets.
|
|
|
|
|
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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Executive Compensation
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|
|
base salary and two and one-half (2.5) 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 all unvested RSU and option awards. Had a Change in Control occurred during the term of Ms. Stalmack’s employment agreement and she was terminated following such Change in Control, Ms. Stalmack’s
employment agreement would have entitled her to receive a lump sum payment of (i) a pro rata portion of any bonus earned for the then fiscal year through the date of termination, (ii) twelve months’ base salary, and (iii) accelerated vesting of
all outstanding unvested restricted share units and option awards. Had a Change in Control occurred during the term of Mr. Dotts’ employment agreement and he was terminated without cause or he resigns for good reason following such Change in
Control, Mr. Dotts’ would have been entitled to receive a lump sum payment of twelve months of his base salary and a pro rata portion of any bonus earned for the then fiscal year
through the date of termination. Although Messrs. McMahon and Wilson are not entitled to specific payments in connection with a change in control, each is entitled to severance pay if terminated for any reason other than Cause, as described
above.
|
|
|
|
|
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 total column do not include the $10,000 monthly payments each NEO would receive until the age of 65 if terminated due to Disability.
|
(4)
|
Cash Payment includes Mr. Greenleaf’s annual bonus for the full fiscal year 2020 and the sum of 24 months of base salary plus two times the annual bonus for the full fiscal year 2020, with such sum payable in equal
installments over 24 months. The equity awards are vested as if Mr. Greenleaf’s employment continued for 24 months following the date of termination. The value of healthcare coverage is based on 18 months of coverage following the date of
termination.
|
(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 one
lump payment. The value of healthcare coverage is based on 18 months of coverage following the date of termination.
|
(6)
|
Cash Payment includes six months of base salary, paid in installments over six months.
|
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|
Executive Compensation
|
Table of Contents
|
(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.
|
Payments Made to Suzanne G. Smith upon Termination
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 Company, Ms. Smith, subject to the terms of the agreement, (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 Company’s actual
performance, and (ii) was permitted continued vesting on outstanding equity grants until her separation date. In addition, under the agreement, provided she remains in compliance with the agreement, Ms. Smith was entitled to (i) a lump sum payment
equal to six months of her current base salary minus required tax and other withholdings; and (ii) subject to her timely enrollment in continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), reimbursement for the
employer portion of the cost of her medical coverage at the same rate as in effect on the separation date until the earlier of (x) six months following the separation date and (y) the date on which she ceases to be eligible for COBRA continuation
coverage or stops making the required payments in respect of such coverage. The agreement includes a customary release of claims by Ms. Smith in favor of the Company and its affiliates.
CEO PAY RATIO DISCLOSURE
|
|
Pay Ratio Methodology
To determine the estimated ratio of CEO pay to median employee pay (the “Pay Ratio”) in accordance with Item 402(u) of Regulation S-K of the Securities Act, we considered our entire
employee population of our NEMT Segment of approximately 3,800 employees who were on the payroll as of December 31, 2019 (excluding the CEO). We did not consider the approximately 14,000 Simplura employees in this calculation as permitted by
the SEC because our acquisition of Simplura did not occur until November 2020. We used compensation paid during fiscal year 2020 to determine our median employee, and annualized pay for those employees who commenced work during fiscal year
2020. We then identified our median employee, whose Summary Compensation Table (“SCT”) total compensation, as calculated in accordance with Item 402(u)(2) of Regulation S-K of the Securities Act, was $30,160 in fiscal year 2020.
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 the foregoing pay ratio is a reasonable estimate calculated in a manner consistent with the SEC’s pay ratio disclosure rules.
|
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|
Table of Contents
Proposal 2
Advisory vote to approve named
executive officer compensation
|
|
Section 14A of the Exchange Act provides shareholders an opportunity to cast a non-binding advisory vote to approve the compensation of the “named executive
officers” identified in the Summary Compensation Table included on page 48 of this document.
The Compensation Committee has considered that the holders of approximately 98% and 82% of the votes cast at our 2020 and 2019 annual meeting of stockholders,
respectively, approved, on an advisory basis the compensation of our NEOs as disclosed in the Proxy Statement for those annual 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 19 for additional details about our executive compensation programs, including information about the fiscal year 2020 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:
•
|
attracting, retaining, and motivating high-performing leaders;
|
|
|
•
|
aligning the interests of our executives with those of our stockholders, and incentivizing stockholder value creation;
|
|
|
•
|
linking a meaningful portion of executive compensation to achievement of key financial, operational, and capital allocation performance goals; and
|
|
|
•
|
maintaining a significant portion of compensation based on at-risk opportunities including equity awards tied to stock price.
|
Our Compensation Committee has a long history of performance-based pay practices and considers numerous factors when setting compensation for our NEOs including:
•
|
actual and adjusted EBITDA, earnings per share, return on equity performance, and stockholder value created;
|
|
|
•
|
goals and objectives set for each executive officer at the beginning of the year; and
|
|
|
•
|
recommendations of an independent third-party executive compensation consultant
|
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|
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|
Proposal 2: Advisory vote to approve named executive officer
compensation
|
Table of Contents
|
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 earned primarily based on the Company’s financial performance for such year and are paid the following year.
Our annual incentive cash compensation and equity-based compensation programs are designed to be performance-based and to incentivize achievement of the Company’s short- and long-term financial, operation and strategic goals. Our long-term incentive
program has historically used equity grants to incentivize performance, reward our executives for substantial stockholder value 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. This proposal, commonly known as a “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. 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, as disclosed in the Company’s Proxy Statement for the
2021 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 2020 Summary Compensation Table and the other related tables and disclosure.”
The Say-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, 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, as disclosed in this Proxy Statement.
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|
Table of Contents
Proposal 3
Ratification of appointment of independent
registered public accounting firm
|
|
The Company’s independent registered public accounting firm for the fiscal year ended December 31, 2020 was 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, 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 December 31, 2021.
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|
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|
Table of Contents
Audit Committee
Report
|
|
The Audit Committee of the Board consists of Mr. Kerley, Ms. Norwalk and Mr. Wright. Mr. Kerley 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.modivcare.com/governance.
The Audit Committee has reviewed and discussed with management its assessment and report on the effectiveness of ModivCare’s internal control over financial reporting as of December 31, 2020,
which it made using the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Audit Committee has also reviewed and discussed with KPMG, the Company’s
independent registered public accounting firm, its review and report on ModivCare’s internal control over financial reporting. ModivCare published these reports in its 2020 Annual Report.
The Audit Committee has reviewed and discussed with management and KPMG the audited consolidated financial statements of ModivCare for the fiscal year ended December 31, 2020. Management
represented to the Audit Committee that ModivCare’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 the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”).
The Audit Committee received the written disclosures and the confirming letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountant’s communications
with the Audit Committee concerning independence and discussed with KPMG its independence from 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 the 2020 Annual Report.
The Audit Committee
Richard A. Kerley (Chairperson)
Leslie V. Norwalk
Frank J. Wright
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|
Table of Contents
Independent
Registered Public
Accountants
|
|
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, 2020 and 2019, in
each of the following categories were:
|
|
Fiscal Year Ended December 31,
|
|
|
2020 ($)
|
|
|
2019($)
|
Audit fees
|
|
|
1,605,000
|
|
|
|
1,532,083
|
Audit related fees
|
|
|
235,400
|
|
|
|
–
|
Tax fees
|
|
|
101,042
|
|
|
|
453,805
|
All other fees
|
|
|
–
|
|
|
|
–
|
Total
|
|
|
1,941,442
|
|
|
|
1,985,888
|
Audit fees
Audit fees consisted of amounts incurred for services performed in association with the annual financial statement audit (including required interim reviews), the audit of the
Company’s internal control over financial reporting, and for services provided in connection with stand-alone or statutory audits and regulatory filings or engagements.
Audit Related Fees
Audit related fees consisted of amounts incurred for 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.
All Other Fees
There were no other fees incurred for services rendered by KPMG during the periods presented.
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|
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2021 Proxy Statement
|
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 ended December 31, 2020 and 2019.
ModivCare™
|
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|
Table of Contents
Stockholder
Proposals for 2022
Annual Meeting
|
|
Pursuant to the applicable 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 2022 (the “2022 Annual Meeting”) will be December 31, 2021.
Pursuant to the Company’s Bylaws, in order for a stockholder to bring a proposal (other than proposals sought to be included in the Company’s Proxy Statement pursuant to Rule 14a-8 of the
Exchange Act) before, or make a nomination at, the 2022 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 4700 South Syracuse Street, 4th Floor, Denver, CO 80237, no earlier than the close of business on February 17, 2022, and not later than the close of business on April 18, 2022. Stockholders are also advised
to review the Company’s 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 April 18, 2022, discretionary authority shall be granted to the persons designated in the Company’s proxy related
to the 2022 Annual Meeting to vote on such proposal.
ModivCare™
|
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|
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|
Table of Contents
Other
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.
ModivCare™
|
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|
2021 Proxy Statement
|
Table of Contents
Additional
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 www. sec.gov. Stockholders may also request additional copies of the Company’s 2020 Annual Report, except for exhibits to the 2020 Annual Report, without charge, by submitting a written request to the Company’s
Corporate Secretary at 4700 South Syracuse Street, 4th Floor, Denver, CO 80237.
ModivCare™
|
71
|
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|
Table of Contents
Householding
|
|
In order to reduce printing costs and postage fees,
the Company has adopted the process called “householding.”
Under this procedure, the Company may deliver a single copy of the Notice, and if applicable, this Proxy Statement and 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 Statement and the 2020 Annual Report, at the same address, you may obtain additional
copies by writing to the Company’s Corporate Secretary at 4700 South Syracuse Street, 4th Floor, Denver, CO 80237 or by calling (303) 728-7043. Eligible stockholders of record receiving multiple copies of this Proxy Statement and 2020 Annual Report can
request householding by contacting the Company in the same manner.
By Order of the Board of Directors,
|
|
|
|
|
|
|
|
Daniel E. Greenleaf
|
|
President and Chief Executive Officer
|
|
April 30, 2021
|
|
Denver, CO
|
|
ModivCare™
|
72
|
2021 Proxy Statement
|
Table of Contents
Appendix A
|
|
Non-GAAP Financial Measures and Adjustments
In 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.
Our 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.
We urge you to review the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures included below, and not to rely on any single
financial measure to evaluate our business or the performance of our management.
ModivCare™
|
A-1
|
2021 Proxy Statement
|
Appendix A
|
Table of Contents
|
Reconciliation of Non-GAAP Financial Measures EBITDA and Adjusted EBITDA
(in thousands) (Unaudited)
|
|
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
|
|
(1)
|
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
|