| ¨ | Preliminary Proxy Statement | |
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| 2017 |
Proxy Statement | |||
To Be Held April 10, 2014
Dear Shareholder:
On Friday, April 10, 2014, Kforce Inc. will hold its 2014
| 1. | Elect |
| 2. | Ratify the appointment of Deloitte & Touche LLP as Kforce’s independent registered public accountants for |
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| 4. | Conduct an advisory vote on the frequency of future advisory votes on executive compensation; |
| 5. | Approve the Kforce Inc. 2017 Stock Incentive Plan; and |
| 6. | Attend to other business properly presented at the meeting. |
card.
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Tampa, Florida
March 14, 2014
18, 2017. http://investor.kforce.com/annuals.cfm. |
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| Ralph Struzziero Lead Independent Director | |||
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To elect three Class II directors to hold office for a three-year term expiring in 2017;
To ratify the appointment of Deloitte & Touche LLP as Kforce’s independent registered public accountants for the fiscal year ending December 31, 2014; and
To approve Kforce’s executive compensation.
Shareholders voting via the Internet should understand that there might be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, which the shareholder must bear.
In order to pass Proposals 2 and 3, each of these proposals must receive the affirmative vote of a majority of the shares entitled to vote on the matter. An abstention is considered as present and entitled to vote and, for these purposes, as cast on the proposal. Because each of Proposals 2 and 3 requires the affirmative vote of a majority of the shares entitled to vote on the Proposal, an abstention will have the effect of a vote against each of Proposals 2 and 3. A broker non-vote, on the other hand, is not considered “entitled to vote.” Therefore, broker non-votes will not have an effect on Proposals 2 and 3. Proposal 3 is a non-binding advisory vote.
For Shares Registered in the Name of a Bank or Brokerage. A number of brokerage firms and banks are participating in a program for shares held in “street name” that offers Internet voting options. This program is different from the program provided by Computershare for shares registered in the name of the shareholder. If your shares are held in an account at a brokerage firm or bank participating in the street name program, you may have already been offered the opportunity to elect to vote using the Internet. Votes submitted via the Internet through the street name program must be received by 11:59 p.m., eastern time, on April 9, 2014.
Shareholders voting via the Internet should understand that there might be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, which the shareholder must bear.
Shareholders eligible to vote at the Annual Meeting, using a touch-tone telephone, may also vote by calling (toll free)1-800- 652-VOTE (8683) and following the recorded instructions.
Please note that the method of voting used will not affect your right to vote in person should you decide to attend the Annual Meeting. Also, please be aware that Kforce is not involved in the operation of either of these Internet voting procedures and cannot take responsibility for any access or Internet service interruptions that may occur or any inaccuracies, or erroneous or incomplete information that may appear.
PROPOSAL 1. ELECTIONOUR BOARD OF DIRECTORS
The Board has ninecurrently consists of eleven directors who are divided into three classes serving staggered three-year terms. The classes relatefollowing table sets forth the names, ages (as of February 24, 2017), and certain other information for each of our directors (including those who are nominees for election at the Annual Meeting). Class Age Position Director Since Current Term Expires Expiration of Term for Which Nominated Independent Audit Comm Comp. Comm Nomin. Comm Corp. Gov. Comm Exec. Comm Directors with Terms Expiring at the Annual Meeting/Nominees John N. Allred II 70 Director 1998 2017 2020 ü 
Richard M. Cocchiaro II 62 Director 1994 2017 2020 Ann E. Dunwoody II 64 Director 2016 2017 2020 ü A. Gordon Tunstall II 73 Director 1995 2017 2020 ü 
Randall A. Mehl III 49 Director 2017 2017 2018 ü Continuing Directors David L. Dunkel III 63 Chairman, CEODirector1994 2018 N/A Mark F. Furlong III 59 Director 2001 2018 N/A ü N. John Simmons III 61 Director 2014 2018 N/A ü Elaine D. Rosen I 64 Director 2003 2019 N/A ü Ralph E. Struzziero (1) I 72 Director 2000 2019 N/A þ Howard W. Sutter I 68 Director 1994 2019 N/A (1) In the course of determining Mr. Struzziero’s independence, the Board specifically considered the employment of Mr. Struzierro’s son described below in the “Related Party Transactions” section and determined that it did not impair Mr. Struzziero’s independence.Legend: þ Lead Independent Director Chair Member Financial Expert The Class II nominees identified above have been nominated to each director’sserve as directors for a three-year term of office. At eachexpiring at the 2020 annual meeting of shareholders, the successors to the directors whose terms expire at that meeting are elected for terms expiring at the third annual meeting after their election by the shareholders. At the Annual Meeting, you and the other shareholders will vote for the election of three individuals, who areClass III nominee identified below,above has been nominated to serve as Class II directorsa director for athree-year one-year term expiring at the 2017 Annual Meeting2018 annual meeting of Shareholders.shareholders. All of the nominees are currently directors of Kforce, previously elected by the shareholders.Pursuant toshareholders or appointed by the marketplace rulesBoard.BIOGRAPHICAL INFORMATION FOR OUR DIRECTOR NOMINEESThe biographies for each of The NASDAQ Stock Market (the “NASDAQ Rules”)our director nominees is set forth below along with a description of the experiences, qualifications, attributes or skills that caused the Nomination Committee and the lawsBoard to determine that they should serve as a director of Kforce.NOMINEES FOR ELECTION, CLASS II DIRECTORS - TERMS EXPIRE IN 2020John N. Allred Director Since: 1998 Age: 70 (Independent) Kforce Committees: Audit; Nomination (Chair); Corporate Governance 
Other Current Public Boards: None Mr. Allred has served as President of A.R.G., Inc., a provider of temporary and permanent physicians located in the Kansas City area since January 1994. He was a director at Source Services Corporation (Source) prior to its merger with Kforce in 1998 and served in various capacities with Source from 1976 to 1993 including Vice President (1987-1993), Regional Vice President (1983-1987) and Kansas City Branch Manager (1976-1983).Mr. Allred has extensive experience in the staffing industry. He is particularly knowledgeable in the area of healthcare, which is an important part of Kforce’s business. His staffing industry experience (other than his directorship in Kforce) is with companies other than Kforce, which allows him to address operational issues with a different perspective.Richard M. Cocchiaro Director Since: 1994 Age: 62 Kforce Committees: Executive 
Other Current Public Boards: None Mr. Cocchiaro served as a Vice Chairman of Kforce from 2004 through his retirement in January 2016, during which time he oversaw our Customer First Customer Loyalty Program and served on both Kforce’s internal executive committee and innovation council. Previously, Mr. Cocchiaro served as Vice President of Strategic Accounts for Kforce (2000–2004), Vice President of Strategic Alliances for Kforce.com Interactive (1999) and National Director of Strategic Solutions within Kforce’s emerging technologies group (1994-1999).Mr. Cocchiaro has extensive experience with Kforce’s field operations on a national basis, bringing an important perspective to the Board. He has served in numerous leadership roles within Kforce including, among others, the financial services group, leading the Chicago market, the emerging technologies group, strategic alliances, national accounts and most recently leading the Customer First Customer Loyalty Program.Ann E. Dunwoody Director Since: 2016 Age: 64 (Independent) Kforce Committees: Corporate Governance 
Other Current Public Boards: Republic Services Inc. (NYSE: RSG); L-3 Communications (NYSE: LLL) General (Ret.) Dunwoody was the first woman in U.S. military history to achieve the rank of four-star general. From 2008 until her retirement in 2012, she led and ran the largest global logistics command in the Army comprising 69,000 military and civilian individuals, located in all 50 states and over 140 countries with a budget of $60 billion dollars. General (Ret.) Dunwoody also served as a strategic planner for the Chief of Staff of the Army. During her 38-year military career, she was decorated for distinguished service and has received many major military and honorary awards. General (Ret.) Dunwoody currently serves on the Board of Directors of Republic Services Inc., L-3 Communications and Logistics Management Institute. She also serves on the Council of Trustees for the Association of the United States Army and the Board of Trustees for the Florida Institute of Technology and she is the president of First 2 Four LLC, a leadership mentoring and strategic advisory services company that offers visionary insights for managing large organizations to posture them for the future. She has recently authored “A Higher Standard” Leadership Strategies from the First Female Four Star General and is a recipient of The Ellis Island Medal of Honor.General (Ret.) Dunwoody brings to the Board extensive military and management experience, including managing over 50% of the United States Army’s budget as Commanding General, U.S. Army Materiel Command. She also serves as a member of the Board of Directors of several other publicly traded companies and is engaged in numerous charitable and civic activities, which the Board believes allows her to provide valuable and varied perspective. General (Ret.) Dunwoody is also certified as an NACD Governance Fellow.A. Gordon Tunstall Director Since: 1995 Age: 73 (Independent) Kforce Committees: Nomination; Corporate Governance; Executive 
Other Current Public Boards: None Mr. Tunstall is the founder, and for more than 30 years has served as President, of Tunstall Consulting, Inc., a provider of strategic consulting and financial planning services. He has also served as a director of Tabula Rasa Healthcare, Inc., a medication risk management and distribution pharmacy, since March 2012. Mr. Tunstall previously served as a director for JLM Industries, Inc., Orthodontics Center of America, Inc., Discount Auto Parts, Inc., Advanced Lighting Technologies Inc., Health Insurance Innovations, Horizon Medical Products Inc., and L.A.T. Sportswear.Mr. Tunstall provides the Board a unique point of view regarding strategy given his background as a successful strategic consultant for over 30 years advising a large number of companies in a variety of industries. He also qualifies as an Audit Committee financial expert and stands willing to assume this role if for any reason the current Audit Committee financial experts cease to serve on the Board.NOMINEE FOR ELECTION, CLASS III DIRECTOR - TERM EXPIRES IN 2018Randall A. Mehl Director Since: 2017 Age: 49 (Independent) Kforce Committees: Corporate Governance 
Other Current Public Boards: None Mr. Mehl is President and Chief Investment Officer of Stewardship Capital Advisors, LLC, which manages an equity fund focused on making investments in business and technology services. He previously served as a Managing Director and a partner with Baird Capital, a middle market private equity group, and led a team focused on the business and technology services sector from 2005 until the end of 2016. From 1996 to 2005, Mr. Mehl was a senior equity research analyst with Robert W. Baird & Company, covering various areas within the broader business and technology services sector, including staffing.Mr. Mehl has previously served on various boards of directors, including Workforce Insight LLC, Myelin Communications, Vitalyst LLC, MedData, LLC, now a subsidiary of MEDNAX, American Auto Auction, LLC, Accume Partners, Inc, and Harris Research Inc. Mr. Mehl has previously served on the investment committee for several funds, and has expertise analyzing, acquiring and selling businesses. He also qualifies as an Audit Committee financial expert and stands willing to assume this role if for any reason the current Audit Committee financial experts cease to serve on the Board.PROPOSAL 1. ELECTION OF DIRECTORSNOMINEESThe Nomination Committee has recommended, and regulationsour Board has approved, each John N. Allred, Richard M. Cocchiaro, Ann E. Dunwoody and A. Gordon Tunstall as nominees for election as Class II directors and Randall A. Mehl for election as a Class III director at the Annual Meeting. If elected, the Class II directors will serve until our 2020 annual meeting of the SEC (the “SEC Rules”), the Board determined that Messrs. Allredshareholders and TunstallMr. Mehl, who is a Class III director, will serve until our 2018 annual meeting of shareholders, and until their successors are independent while Mr. Cocchiaro is not independent.The individuals named as proxies will vote the enclosed proxy for the election of the individuals nominated by the Board unless you direct them to withhold your votes.duly elected and qualified. Each of the nominees is currently a director of the Firm. For information concerning the nominees, please see the section titled “Biographical Information for our Director Nominees.”Each of the nominees is willing and able to stand for election at the Annual Meeting, and we do not know of noany reason why any of the nominees would be unable to serve as a director. However, ifIf any nominee becomes unable or unwilling to stand for election, the Board may reduce its size or designate a substitute. If a substitute is designated, proxies voting for the original nominee will be cast for the substituted nominee.The biographies of each of the nominees and continuing directors below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nomination Committee and the Board to determine that the person should serve as a director of Kforce.Nominees for Election, Class II DirectorsTerms Expire in 2017John N. Allred, 67, has served as a director of Kforce since April 1998. Mr. Allred has served as President of A.R.G., Inc., a provider of temporary and permanent physicians located in the Kansas City area since January 1994. Mr. Allred was a director at Source Services Corporation (“Source”) prior to its merger with Kforce in 1998 and served in various capacities with Source from 1976 to 1993 including Vice President (1987-1993), Regional Vice President (1983-1987) and Kansas City Branch Manager (1976-1983).Mr. Allred has extensive experience in the staffing industry. He is particularly knowledgeable in the area of healthcare, which is an important part of Kforce’s business. His staffing industry experience (other than his directorship in Kforce) is with companies other than Kforce, which allows him to address operational issues with a different perspective.Richard M. Cocchiaro, 59, has served as a director of Kforce since its formation in August 1994. Mr. Cocchiaro has served as a Vice Chairman since 2004, oversees our Customer First Customer Loyalty Program and serves on both Kforce’s internal executive committee and innovation council. Previously, Mr. Cocchiaro served as Vice President of Strategic Accounts for Kforce (2000–2004), Vice President of Strategic Alliances for Kforce.com Interactive (1999) and National Director of Strategic Solutions within Kforce’s emerging technologies group (1994-1999).Mr. Cocchiaro has extensive experience in Kforce’s field operations on a national basis, bringing an important perspective to the Board. He has served in numerous leadership roles within Kforce including, among others, the financial services group, leading the Chicago market, the emerging technologies group, strategic alliances, national accounts and most recently leading the Customer First Customer Loyalty Program.A. Gordon Tunstall, 69, has served as a director of Kforce since October 1995. He is the founder, and for more than 30 years has served as President of Tunstall Consulting, Inc., a provider of strategic consulting and financial planning services. Mr. Tunstall has also served as a director of CareKinesis, Inc., a privately-held medication management and distribution pharmacy, since March 2012. Mr. Tunstall previously served as a director for JLM Industries, Inc., Orthodontics Center of America, Inc., Discount Auto Parts, Inc., Advanced Lighting Technologies Inc., Health Insurance Innovations, Horizon Medical Products Inc., and L.A.T. Sportswear.Mr. Tunstall provides the Board a unique point of view regarding strategy, given his background as a successful strategic consultant for over 30 years advising a large number of companies in a variety of industries. He also qualifies as an Audit Committee financial expert and stands willing to assume this role if for any reason the current Audit Committee financial expert ceases to serve on the Board.Continuing Directors, Class III DirectorsTerms Expire in 2015W. R. Carey, Jr., 66, has served as a director of Kforce since October 1995. He is currently the Chairman and Chief Executive Officer of Corporate Resource Development, Inc., an Atlanta, Georgia-based sales and marketing consulting and training firm which formed in 1981 and assists some of America’s largest firms in design, development, and implementation of strategic and tactical product marketing. Mr. Carey is the National Chairman of the Council of Growing Companies. Mr. Carey previously served on the Board of Directors of Lime Energy Corp. from March 2006 to January 2012 and Outback Steakhouse, Inc. from 1992 to June 2007. Mr. Carey served in the U.S. Navy for seven years as an aviator.Mr. Carey has had valuable experience on several significant boards and is a noted author and speaker. He also has a nationally recognized expertise in sustainability, a subject of significant importance to Kforce, its clients and to the market generally.David L. Dunkel, 60, has served as Kforce’s Chairman, Chief Executive Officer and a director since its formation in 1994. Prior to August 1994, he served as President and Chief Executive Officer of Romac-FMA, one of Kforce’s predecessors, for 14 years. In addition to the significant value that Mr. Dunkel brings to Kforce, we believe it is customary for the Chief Executive Officer to be a member of the Board of Directors.Mark F. Furlong, 56, has served as a director of Kforce since July 2001. He has served as the President and Chief Executive Officer of BMO Harris Bank, N.A. since July 2011. Mr. Furlong has served as a director of BMO Harris Bank, N.A. and BMO Financial Corporation since July 2011. Prior to its acquisition by BMO Harris Bank, N.A. in 2011, he served as Chairman of Marshall & Ilsley Corporation since October 2010, Chief Executive Officer since April 2007 and as President since July 2004. He also served as Chief Financial Officer of Marshall & Ilsley Corporation from April 2001 to October 2004. Mr. Furlong’s prior experience also includes service as an audit partner with Deloitte & Touche LLP.Mr. Furlong is the President and Chief Executive Officer of BMO Harris Bank, N.A., former Chairman, President and Chief Executive Officer of Marshall & Ilsley Corporation, a former audit partner with Deloitte & Touche LLP and the Audit Committee financial expert. Kforce believes his considerable expertise brings unique insight to the Board concerning banking issues, in addition to his overall management and financial expertise.Nominees for Election, Class I DirectorsTerms Expire in 2016Elaine D. Rosen, 61, has served as a director of Kforce since June 2003. Ms. Rosen has served as a director of Assurant, Inc., a publicly traded corporation, and a provider of specialized insurance and insurance-related products and services since March 1, 2009 and became non-executive Chair of the Board in November 2010. Ms. Rosen has also served as the Chair of the Board of The Kresge Foundation since January 2007. Ms. Rosen serves as trustee or director of several non-profit organizations, is the immediate past Chair of the Board of Preble Street, a homeless collaborative in Portland, Maine and is a trustee of the Foundation for Maine’s Community Colleges since 2008. Ms. Rosen was a director of the Elmina B. Sewall Foundation from 2008 to 2012 and Downeast Energy Corp., a privately-held company that provides heating products and building supplies, from 2003 until its sale in April 2012. From 1975 to March 2001, Ms. Rosen held a number of positions with Unum Life Insurance Company of America, including President.Ms. Rosen has extensive experience as a senior executive in the insurance industry and as a director of companies, as well as substantial experience with charitable organizations, particularly as the Chair of the Board of one of the largest private foundations in the country. Through this background, as well as her experience as Chair of the Compensation Committee of Kforce and her experience on the Board of Assurant Inc., where she currently serves as the non-executive Chair and previously served on the compensation committee, she has considerable expertise in, among other things, executive compensation, a subject matter that is undergoing dynamic change.Howard W. Sutter, 65, has served as a director of Kforce since its formation in 1994. Mr. Sutter has served as a Vice Chairman since 2005, and oversees mergers and acquisitions. Prior to August 1994, Mr. Sutter served as Vice President of Romac-FMA(1984-1994), and Division President of Romac-FMA’s South Florida location (1982-1994).Mr. Sutter has led Kforce’s merger, acquisition, and divestiture efforts for the past 18 years and, over this time, has led the effort on a significant number of acquisitions, including those of two public companies, and divestitures. The Board believes that Mr. Sutter’s knowledge of the staffing industry, and more specifically the mergers and acquisition market, brings an important expertise to the Board. Mr. Sutter also has extensive experience in staffing operations.Ralph E. Struzziero, 69, has served as a director of Kforce since October 2000. Mr. Struzziero currently serves as a director of Prism Medical Ltd., a publicly traded corporation on the TSX Venture Exchange in Canada, and a manufacturer and distributor ofmoving and handling equipment for the mobility challenged (since July 2011). Since 1995, Mr. Struzziero has operated an independent business consulting practice. In addition, he served as an adjunct professor at the University of Southern Maine from 1997 to 2006. Mr. Struzziero previously served as Chairman (1990-1994) and President (1980-1994) of Romac & Associates, Inc., one of Kforce’s predecessors. Mr. Struzziero is also currently a director of Automobile Club of Southern California, a travel club and property and casualty insurer in California, AAA of Northern New England, a travel club serving Maine, New Hampshire and Vermont, and Auto Club Enterprise, a holding company of the two aforementioned companies. Mr. Struzziero previously served on the Board of Directors of Downeast Energy Corp, a provider of heating products and building supplies, from January 2001 until its sale in April 2012.Mr. Struzziero has extensive experience in the staffing industry generally and, in particular, with predecessors to Kforce. The Board believes this gives Mr. Struzziero, in his capacity as lead independent director, a unique insight among the non-employee directors relating to Kforce’s business and operations.THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFOR EACH OF THE NOMINEES FOR ELECTION AS DIRECTOR.Our Board believes that sound corporate governance is fundamental to the overall success of Kforce and believes that it has adopted corporate governance practices that are aligned with the interests of our shareholders, our corporate business strategy and the opinions expressed by recognized corporate governance authorities. Our Board regularly reviews our corporate governance practices for compliance with applicable rules, listing standards and regulations, as well as best practices suggested by recognized governance authorities, and modifies our practices as warranted.Corporate Governance GuidelinesThe Corporate Governance Guidelines, which were adopted by our Board, along with the charters for the standing committees of the Board and our Code of Ethics and Business Conduct Policy serve to guide the operation and direction of the Board and its committees. These documents are published under “Corporate Governance” in the Investor Relations section of our website atwww.kforce.com.The Board’s primary functions are to:Oversee management performance on behalf of our shareholders;Advocate on behalf of the long-term interests of our shareholders;Monitor adherence to Kforce’s established procedures, standards and policies;Be actively involved in the oversight of risk that could affect Kforce;Promote the exercise of sound corporate governance; andCarry out other duties and responsibilities as may be required by state and federal laws, as well as the NASDAQ Rules.During 2013, the Board held seven meetings and committees of the Board held a total of 35 meetings. Each director attended a minimum of 91% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which each director served.The Board believes that Mr. Dunkel’s service as both Chairman of the Board and CEO is in the best interests of Kforce and its shareholders. In his capacity as CEO, Mr. Dunkel frequently meets with current and prospective shareholders to understand their perspectives and insights, which Mr. Dunkel is able to bring back to the full Board. Given Mr. Dunkel’s experience and understanding of the professional staffing industry, as one of Kforce’s founders and significant investors, and the issues, opportunities and challenges facing Kforce and its businesses, the Board believes Mr. Dunkel is best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. The Board believes that Mr. Dunkel is a strong and effective leader and that Kforce has been well served by the combination of the two roles since its initial public offering in 1994. Additionally, Mr. Dunkel beneficially owns greater than 5% of Kforce’s outstanding common stock which the Board believes closely aligns Mr. Dunkel’s interest with those of our other shareholders. The Board believes the grant of this dual role signals its confidence in the leadership abilities of Mr. Dunkel, enhances information flow, enhances Kforce’s culture, ensures clear accountability and promotes efficient decision making, all of which we believe are essential to effective governance. The Board believes Mr. Dunkel’s CEO duties and in-depth knowledge of Kforce’s business and industry, operations and challenges places him in the best position to both guide and implement the Board’s direction. We also believe that the combined role allows for more productive Board meetings.The Board also believes that any perceived negative aspects of Mr. Dunkel’s dual role are mitigated by the role of Mr. Struzziero as Chair of the Corporate Governance Committee and lead independent director. Mr. Struzziero serves as a key additional communication point for the independent directors with Mr. Dunkel relating to any concerns raised in the meetings of the independent directors (which occur no less frequently than once a calendar quarter). He also addresses agenda items with Mr. Dunkel. The Board considers Mr. Struzziero to be very effective in this role.Board’s Role in Risk ManagementThe Board takes an active role with respect to risk management activities of Kforce and believes that it is effective in its role. This oversight is conducted primarily through committees of the Board, as disclosed in the descriptions of each of the committees
below and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risks. The Board accumulates and assesses information regarding risk management on a regular basis.
The Board carries out this responsibility through committee reports as well as through regular reports directly from officers of Kforce who are responsible for oversight of the various risks within Kforce. Materials regularly provided at each Board meeting include: (i) an executive summary that includes, among other items, a risk factors section; (ii) Kforce’s financial and operational status; (iii) management’s assessment of the current state of the capital markets and macro-economic environment; (iv) management’s analysis on the current state of the staffing industry; (v) corporate development activities; (vi) a claims and litigation summary; and (vii) reports on other matters that may arise from time to time, which require reporting to the Board.
Also at each regularly-scheduled quarterly meeting of the Board, updates are provided by each of the Audit Committee, Compensation Committee, Nomination Committee and Corporate Governance Committee. The committee reports are meant to summarize committee activities and bring any necessary items to the attention of the full Board. In addition, Kforce’s Business Process and Assurance Services (“BPAS”) team, which reports to the Audit Committee, sets forth a comprehensive internal audit plan, which is approved on an annual basis by the Audit Committee. This plan is formulated based on BPAS’s assessment of risk within Kforce, which is partly based on discussions with Kforce’s officers, directors and other key personnel as well as the results of their previous operational and financial audits.
In addition, on a monthly basis, the Board receives a financial update from management along with a description of certain significant events and risk factors that have occurred in each period as well as any other necessary items requiring the attention of the full Board.
Kforce believes the backgrounds and experiences of its directors are diverse and enable it to achieve a healthy mix of different perspectives on the Board. Although Kforce has not adopted any formal diversity policy, it believes its Nomination Committee has been successful in crafting a desirable mix of skill sets and backgrounds on the Board. Various Board members have significant expertise in fields such as banking, executive compensation, healthcare, investment banking/strategic advisory, insurance, and sustainability, as well as staffing. Kforce has at least two individuals who qualify as audit committee financial experts, bringing important points of view and skills to the Board. The Nomination Committee periodically reviews the composition of the Board and examines its functionality, in order to ensure the Board has a well functioning mix of diverse backgrounds and expertise.
Code of Ethics and Business Conduct
The Board has adopted a Code of Ethics and Business Conduct that is applicable to all employees of Kforce, including the chief executive officer, chief financial officer and chief accounting officer. The Code of Ethics and Business Conduct is available on the Investor Relations section of our website atwww.kforce.com.
Minimum Director Stock Ownership
To strengthen the alignment of interests between directors and shareholders, our Board has adopted formal ownership guidelines, which require directors to hold the lesser of three times retainer or 5,000 shares of Common Stock. As of the Record Date, all of our directors were in compliance with the policy. The stock ownership policy is incorporated into the Corporate Governance Guidelines, which is available on the Investor Relations section of our website atwww.kforce.com.
Minimum Executive Stock Ownership
To further align the interests between executives and shareholders, our Board has adopted formal ownership guidelines. For its named executive officers (“NEOs”), the following minimum stock ownership guidelines are required by position:
CEO – the lesser of five times base salary or 200,000 shares of Common Stock;
President – the lesser of three times base salary or 100,000 shares of Common Stock;
CFO – the lesser of three times base salary or 100,000 shares of Common Stock; and
All other NEOs – the lesser of two times base salary or 50,000 shares of Common Stock.
Additionally, the formal ownership guidelines requires all other members of its internal executive committee (a total of 9 members in addition to its 5 NEOs, or an aggregate of 14 members) to hold a minimum of 15,000 shares of Common Stock. As of the Record Date, all NEOs and other members of its executive committee were in compliance with the policy. The executive stock
ownership policy is incorporated into the Corporate Governance Guidelines, which is available on the Investor Relations section of our website atwww.kforce.com.
In order to continually enhance the alignment of our corporate governance practices with the interests of our shareholders, the Board amended the Corporate Governance Guidelines in March 2012 to include a clawback policy. Accordingly, in the event of a restatement of our financial statements as a result of the material noncompliance with any financial reporting requirements under the federal securities laws, the Board will, if it determines appropriate (in its sole discretion and to the extent permitted or required by governing law), recover from current executives any incentive-based compensation for any relevant performance periods beginning after March 30, 2012.
Insider Trading, Anti-Pledging and Anti-Hedging
In February 2013, the Board adopted the Kforce Inc. Amended and Restated Insider Trading and Disclosure Policy, which superseded the previous insider trading policy. This Policy governs the trading in Firm securities by directors, officers and employees, their family members, other members of their household, entities controlled by a person covered by the policy, and designated outsiders who have or may have access to the Firm’s material, nonpublic information (collectively referred to as “Insiders”). In addition to other prohibited activities identified within the Policy, the Policy states that (i) no employee, including Insiders, may trade in Kforce securities while in the possession of material, nonpublic information concerning the Firm, (ii) no Insider may trade in Kforce securities during designated black-out periods, (iii) certain Insiders are required to obtain pre-approval to trade in Kforce securities, (iv) no Insider may margin, make any offer to margin, hold any Kforce securities in a margin account or otherwise pledge any of the Firm’s securities as collateral in any way and (v) no Insider may engage in any hedging transaction relating to Kforce securities (including, without limitation, prepaid variable forwards, equity swaps, collars and exchange funds) or otherwise trade in any interest or position relating to the future price of Kforce securities, such as a put, call or short sale.
Shareholders may communicate with the full Board or individual directors by submitting such communications in writing to David M. Kelly, Corporate Secretary, Kforce Inc., 1001 East Palm Avenue, Tampa, Florida 33605. Such communications will be delivered directly to Kforce’s Board.
Director Attendance at Annual Meetings
Pursuant to its Corporate Governance Guidelines, all directors are invited to attend the Annual Meeting of Shareholders. Mr. Dunkel, Chairman, attended Kforce’s 2013 Annual Meeting of Shareholders and the other directors did not.
Our directors are elected in uncontested elections byuse a majority vote. In contested director elections, the pluralityvoting standard will apply, which means the nominees receiving the greatest numbers of votes will be elected to serve as directors.for uncontested elections. The election of directors at this year’s Annual Meeting is an uncontested election and thus the majority voting standard applies.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFOR PROPOSAL 1. |
| David L. Dunkel | Director Since: | 1994 | Age: | 63 | ||
 | Kforce Committees: | Executive (Chair) | ||||
| Other Current Public Boards: | None | |||||
| Mr. Dunkel has served as Kforce’s Chairman, Chief Executive Officer and a director since its incorporation in 1994. Prior to August 1994, he served as President and Chief Executive Officer of Romac-FMA, one of Kforce’s predecessors, for 14 years. | ||||||
| Mark F. Furlong | Director Since: | 2001 | Age: | 59 | ||
| (Independent) | Kforce Committees: | Audit (Chair); Compensation; Corporate Governance | ||||
 | Other Current Public Boards: | Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) | ||||
Mr. Furlong has served as a director of Boston Private Financial Holdings, Inc., a provider of wealth management, trust and private banking services, since September 2016 and of Antares Capital, a provider of financing solutions for middle market, private equity-backed transactions, since December 2015. He served as the President and Chief Executive Officer of BMO Harris Bank, N.A. from July 2011 to June 2015. Mr. Furlong served as a director of BMO Harris Bank, N.A. and BMO Financial Corporation from July 2011 to June 2015. Prior to its acquisition by BMO Harris Bank, N.A. in 2011, he served as Chairman of Marshall & Ilsley Corporation from October 2010, Chief Executive Officer from April 2007 and as President from July 2004. He also served as Chief Financial Officer of Marshall & Ilsley Corporation from April 2001 to October 2004. Mr. Furlong’s prior experience also includes service as an audit partner with Deloitte & Touche LLP. Mr. Furlong is an Audit Committee financial expert. Kforce believes his considerable expertise, including his experience as President and Chief Executive Officer of BMO Harris Bank, N.A., the former Chairman, President and Chief Executive Officer of Marshall & Ilsley Corporation and a former audit partner with Deloitte & Touche LLP, brings unique insight to the Board concerning capital allocation strategies and banking issues, in addition to his overall management and financial expertise. | ||||||
| N. John Simmons | Director Since: | 2014 | Age: | 61 | ||
| (Independent) | Kforce Committees: | Audit; Corporate Governance | ||||
 | Other Current Public Boards: | None | ||||
Mr. Simmons is the Chief Executive Officer of Growth Advisors, LLC, a provider of C-level advisory services to high-growth companies. He has served on various boards of directors, including Bonds.com Group, Inc. from 2013 to 2014, Loyola University New Orleans as Chairman of the Audit Committee, Executive Committee and Board of Trustees member from 2009 to 2015, Technology Research Corporation as Chairman of the Compensation Committee from 2010 to 2011 and as Lead Director and Chairman of the Governance & Nominating Committee from 2009 to 2010, Medquist, Inc. as Chairman of the Audit Committee from 2005 to 2007, and SRI Surgical Express, Inc. as Lead Director, then Chairman of the Board from 2001 to 2008. From 2001 to 2012, Mr. Simmons was a Board member of Lifestyle Family Fitness, Inc. and served as its CEO and President from 2008 to 2012. Mr. Simmons’ prior experience also includes service as President of New Homes Realty, a Florida-based residential real estate company operating in 35 states for two years, President of Quantum Capital Partners, a privately held venture capital firm for 14 years, Vice President and Controller for Eckerd Corporation for three years, Chief Financial Officer of Checkers Drive-In Restaurants for two years and as an audit partner with KPMG Peat Marwick. Mr. Simmons is an Audit Committee financial expert. Mr. Simmons has extensive financial, accounting, management and director experience in several different industries. As a result, the Board believes that he brings valuable insight due to his extensive and varied experiences as a chief executive officer, chief financial officer, audit partner and director. | ||||||
| Elaine D. Rosen | Director Since: | 2003 | Age: | 64 | ||
| (Independent) | Kforce Committees: | Compensation (Chair); Nomination; Corporate Governance | ||||
 | Other Current Public Boards: | Assurant, Inc. (NYSE: AIZ) | ||||
Ms. Rosen has served as a director of Assurant, Inc., a provider of specialized insurance and insurance-related products and services since March 2009 and became non-executive Chair of the Board in November 2010. Ms. Rosen has also served as the Chair of the Board of The Kresge Foundation since January 2007. Ms. Rosen serves as trustee or director of several non-profit organizations, is a past Chair of the Board of Preble Street, a homeless collaborative in Portland, Maine, and has served as a trustee of the Foundation for Maine’s Community Colleges since 2008. Ms. Rosen was a director of the Elmina B. Sewall Foundation from 2008 to 2012 and Downeast Energy Corp., a privately-held company that provides heating products and building supplies, from 2003 until its sale in April 2012. From 1975 to March 2001, Ms. Rosen held a number of positions with Unum Life Insurance Company of America, including President. Ms. Rosen has extensive experience as a senior executive in the insurance industry and as a director of companies, as well as substantial experience with charitable organizations, particularly as the Chair of the Board of one of the largest private foundations in the country. Through this background, as well as her experience as Chair of the Compensation Committee of Kforce and her experience on the Board of Assurant, Inc., where she currently serves as the non-executive Chair and serves on the compensation committee, she has considerable expertise in, among other things, executive compensation, a subject matter that is undergoing dynamic change. | ||||||
| Ralph E. Struzziero | Director Since: | 2000 | Age: | 72 | ||
| (Independent) | Kforce Committees: | Compensation; Corporate Governance (Chair) | ||||
 | Other Current Public Boards: | None | ||||
Since 1995, Mr. Struzziero has operated an independent business consulting practice, providing interim executive-level advisory and professional services to a variety of organizations. In addition, he served as an adjunct professor at the University of Southern Maine from 1997 to 2006. Mr. Struzziero previously served as Chairman (1990-1994) and President (1980-1994) of Romac & Associates, Inc., one of Kforce’s predecessors. Mr. Struzziero is also currently a director of Automobile Club of Southern California, a travel club and property and casualty insurer in California, AAA of Northern New England, a travel club serving Maine, New Hampshire and Vermont, and Auto Club Enterprise, a holding company of these two companies. Mr. Struzziero previously served on the Board of Directors of Prism Medical Ltd., a publicly traded corporation on the TSX Venture Exchange in Canada and manufacturer and distributor of moving and handling equipment for the mobility challenged, from July 2011 until its sale in August 2016, and Downeast Energy Corp., a privately-held company that provides heating products and building supplies, from January 2001 until its sale in April 2012. Mr. Struzziero has extensive experience in the staffing industry. The Board believes this gives Mr. Struzziero, in his capacity as lead independent director, a unique insight among the non-employee directors relating to Kforce’s business and operations. | ||||||
| Howard W. Sutter | Director Since: | 1994 | Age: | 68 | ||
 | Kforce Committees: | Executive | ||||
| Other Current Public Boards: | None | |||||
Mr. Sutter has served as a Vice Chairman of Kforce since 2005 and oversees Kforce’s mergers, acquisitions and divestitures. Prior to August 1994, Mr. Sutter served as Vice President of Romac-FMA (1984-1994) and Division President of Romac-FMA’s South Florida location (1982-1994). Mr. Sutter has led Kforce’s merger, acquisition, and divestiture efforts for the past 18 years and, over this time, has led the effort on a significant number of acquisitions, including those of two public companies, and several divestitures. The Board believes that Mr. Sutter’s knowledge of the staffing industry, and more specifically the mergers and acquisition market, brings an important expertise to the Board. Mr. Sutter also has extensive experience in staffing operations. | ||||||
| At each Board meeting our Board receives: | On a monthly basis our Board receives: | ||
| l | an executive summary that includes, among other items, a risk factors section; | l | a description of certain significant events and risk factors that have occurred in each period; |
| l | Kforce’s financial and operational performance; | l | a financial update from management; and |
| l | management’s assessment of the current state of the capital markets and macro-economic environment; | l | any other necessary items requiring the attention of the full Board. |
| l | management’s analysis on the current state of the staffing industry; corporate development activities; | ||
| l | a claims, litigation and ethics hotline summary; | ||
| l | a report on the Firm’s risk and enterprise risk management program; and | ||
| l | reports on other matters that may arise from time to time, that require reporting to the Board. | ||
The Board considers all major decisions. The Board, however, has established the following five standing committees so that certain important areas can be addressed in more depth than may be possible in a full Board meeting: an Audit Committee, a Compensation Committee, a Corporate Governance Committee, a Nomination Committeeas banking, executive compensation, healthcare, investment banking/strategic advisory, insurance, government/military and an Executive Committee. The written charters of the Audit Committee, Compensation Committee, Corporate Governance Committee and Nomination Committee are available on the Investor Relations sectionstaffing. Four of our website atwww.kforce.com.
The following table describes the current members of each of the committees and the number of meetings held during 2013.
| AUDIT | COMPENSATION | CORPORATE GOVERNANCE | NOMINATION | EXECUTIVE | ||||||
John N. Allred * | X | X | X | |||||||
W.R. Carey, Jr. * | X | X | X | Chair | ||||||
Richard M. Cocchiaro ** | X | |||||||||
David L. Dunkel ** | Chair | |||||||||
Mark F. Furlong * | Chair | X | X | |||||||
Elaine D. Rosen * | Chair | X | X | |||||||
Ralph E. Struzziero * | X | Chair | ||||||||
Howard W. Sutter ** | X | |||||||||
A. Gordon Tunstall * | X | X | ||||||||
Number of Meetings | 22 | 7 | 4 | 2 | 0 |
Audit Committee
The Audit Committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,directors qualify as amended (the “Exchange Act”). The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of our accounting and reporting practices and such other duties as directed by the Board. In discharging this oversight role, the Audit Committee is empowered to investigate any matter brought to its attention, with full access to all books, records, facilities and personnel of Kforce, and the power to retain outside counsel or other experts for this purpose. The Audit Committee has the sole responsibility for the selection, compensation, oversight and termination of the independent auditors who audit our financial statements. In carrying out its responsibilities, the Audit Committee selects, provides for the compensation of, and oversees the work of the independent auditors; pre-approves the fees, terms, and services under all audit and non-audit engagements; reviews the performance of the independent auditors; and monitors and periodically reviews the independence of the independent auditors by obtaining and reviewing a report from the independent auditors at least annually regarding all relationships between the independent auditors and Kforce.
Other responsibilities of the Audit Committee include: (1) reviewing with the internal auditors and the independent auditors their respective annual audit plans, staffing, reports, and the results of their audits; (2) reviewing with management and the independent auditors Kforce’s annual and quarterly financial results, financial statements and results of the independent auditors’ audits and reviews, as applicable, of such financial information; (3) reviewing with the independent auditors any matters of significant disagreement between management and the independent auditors and any other problems or difficulties encountered during the course of the audit and management’s response to such disagreements, problems, or difficulties; (4) conferring with the independent auditors with regard to the adequacy of internal controls; and (5) reviewing with the independent auditors (i) all critical accounting policies and practices, (ii) all alternative treatments of financial accounting and disclosures within accounting principles generally accepted in the United States (“GAAP”) that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and (iii) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences as well as meeting with the independent auditors in executive session to discuss any other matters that the independent auditors believe should be discussed privately with the Audit Committee.
The Audit Committee also oversees Kforce’s internal audit function and compliance with procedures for the receipt, retention and treatment of complaints received by Kforce regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission of concerns regarding accounting or auditing matters.
Each member of the Audit Committee is independent within the meaning of NASDAQ Rules and SEC Rules. The Board has determined that Mr. Furlong is an “audit committee financial expert,” as defined by SEC Rules. The Audit Committee’s responsibilities are more fully set forth in its written charter.
To the extent the Audit Committee deems it necessary in fulfilling its objectives, it meets in executive session (excluding the Chief Executive Officer, membersexperts, bringing important points of managementview and all other directors that are not committee members).
Compensation Committee
The Compensation Committee reviews overall compensation and employee benefit policies and practices; reviews and recommendsskills to the Board the adoption of, or amendments to, stock option, stock-based incentive, performance incentive plans or stock purchase plans; approves any new or amended employment agreements for executive management and grants or awards to executive management under any long-term incentive program; and prepares an annual report on our executive compensation policies and practices as required by SEC Rules. See the “Compensation Discussion and Analysis” section for a description of the role of executive officers in determining or recommending the amount or form of executive and director compensation. With regard to issues within its authority, the Compensation Committee has the sole authority to select, retain and terminate legal counsel, accountants, consultants, financial experts and advisors, including, without limitation, a compensation consultant to assist in the evaluation of director and executive officer compensation, and has the sole authority to approve the consultant’s fees and other retention terms. The Compensation Committee has retained Pearl Meyer & Partners (“PM&P”), an independent executive compensation consultant annually to review the Compensation Discussion & Analysis contained in the Proxy Statement, to advise on setting the NEO compensation framework, to regularly provide independent advice on current trends in compensation design and, as needed, to assist with certain other compensation arrangement matters for the NEOs. Additionally, the Compensation Committee considers information gathered by Georgeson, Inc., a strategic shareholder consulting firm, who was engaged by management for shareholder communications on executive compensation and to gather data on shareholder voting methodology and patterns with respect to executive compensation. In accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K, the Firm has determined that no conflicts of interest exist between the Firm and PM&P (or any individuals working on the Firm’s account on PM&P’s behalf).
To the extent the Compensation Committee deems it necessary in fulfilling its objectives, it meets in executive session (excluding the Chief Executive Officer, members of management and all non-independent directors).
Each member of the Compensation Committee is independent within the meaning of NASDAQ Rules and SEC Rules. The Compensation Committee’s responsibilities are more fully set forth in its written charter.
Corporate Governance Committee
The purposes of the Corporate Governance Committee are to: (i) encourage and enhance communication among independent directors; (ii) provide a forum for independent directors to meet separately from management; (iii) provide leadership and oversight related to ethical standards; and (iv) provide a channel for communication with the CEO. Each member of the Corporate Governance Committee is independent within the meaning of NASDAQ Rules and SEC Rules, and each member of the Board who is independent within the meaning of these rules serves on the Corporate Governance Committee. This committee is designed to fulfill the requirements of NASDAQ Rule 5605(b)(2) (i.e., through the meetings of this committee, our “independent” directors (as determined under the NASDAQ Rules) meet at least once annually in executive session without any of our management present). The Corporate Governance Committee meets on a quarterly basis. The Chair of the Corporate Governance Committee serves as the lead independent director.
The Corporate Governance Committee’s responsibilities are more fully set forth in its written charter.
Nomination Committee
The Nomination Committee makes recommendations to the Board regarding the size and composition of the Board. The Nomination Committee also establishes procedures forperiodically reviews the nomination process, recommends candidates for election to ourcomposition of the Board and nominates officers for election by the Board. To the extent the Nomination Committee deems it necessary in fulfilling its objectives; it meets in executive session (excluding the Chief Executive Officer, memberscommittees to ensure a well-functioning mix of managementdiverse backgrounds and all non-independent directors).
As set forth in the general guidelines established pursuant to its charter, theexpertise.
experience, diversity of background and the willingness to devote sufficient time to carrying out the responsibilities of a director. The Nomination Committee has not adopted a formal definition of diversity, but it applies diversity principles in the authoritybroadest sense to retain a search firmencourage the consideration and selection of board members who bring differences in skills, viewpoints, backgrounds and experience to be usedcontribute breadth and depth to identify director candidates and to approve the search firm’s fees and other retention terms. our Board’s decision-making process.
The Nomination Committee will consider nominees for the Board that are proposed by our shareholders. The same identifying and evaluating procedures apply to all candidates for director nomination, including candidates submitted by shareholders. Any shareholder who wishes to recommend a prospective nominee for the Board, for the Nomination Committee’s consideration, may do so by giving the candidate’s name and qualifications in writing to David M. Kelly, Corporate Secretary, Kforce Inc., 1001 East Palm Avenue, Tampa, Florida 33605.
Each membereach of the Audit, Compensation, Nomination, Committeeand Corporate Governance Committees is independent within the meaning of the NASDAQ Rules and SEC Rules. The Nomination Committee’scommittee members and independent directors meet regularly in executive session without management. Additional information regarding the composition and responsibilities are more fully set forth in its written charter.
Executive Committee
The Executive Committee has the authority to act in place of the Board on all matters which would otherwise come before the Board, except for such matters whichAudit, Compensation, Nomination and Corporate Governance Committees is described below and written charters of each committee are required by law or by our Articles of Incorporation or Bylaws to be acted upon exclusively by the Board.
The following table shows the annual compensation of our directors, except Mr. Dunkel, for the fiscal year ended December 31, 2013, which consisted of the following components:
Name (a) | Year (b) | Fees Earned or Paid In Cash (1) (c) | Stock Awards (2) (d) | All Other Compensation (e) | Total (f) | |||||||||||||||
John N. Allred | 2013 | $ | 90,000 | $ | 73,300 | $ | 0 | $ | 163,300 | |||||||||||
W.R. Carey, Jr. | 2013 | $ | 114,000 | $ | 73,300 | $ | 0 | $ | 187,300 | |||||||||||
Richard M. Cocchiaro | 2013 | — | — | $ | 403,220 | (3) | $ | 403,220 | ||||||||||||
Mark F. Furlong | 2013 | $ | 115,000 | $ | 73,300 | $ | 0 | $ | 188,300 | |||||||||||
Patrick D. Moneymaker (4) | 2013 | $ | 40,000 | $ | 73,300 | $ | 42,752 | (5) | $ | 156,052 | ||||||||||
Elaine D. Rosen | 2013 | $ | 75,000 | $ | 73,300 | $ | 0 | $ | 148,300 | |||||||||||
Ralph E. Struzziero | 2013 | $ | 71,000 | $ | 73,300 | $ | 0 | $ | 144,300 | |||||||||||
Howard W. Sutter | 2013 | — | — | $ | 686,137 | (6) | $ | 686,137 | ||||||||||||
A. Gordon Tunstall | 2013 | $ | 42,000 | $ | 73,300 | $ | 0 | $ | 115,300 | |||||||||||
| Audit Committee | |
| Members: | Roles and Responsibilities of the Committee: |
Mark F. Furlong (Chair) | The Audit Committee oversees the accounting and financial reporting processes of the Firm and the audits of the Firm’s financial statements. In discharging this oversight role, the Audit Committee is empowered to investigate any matter brought to its attention, with full access to all books, records, facilities and personnel of Kforce, and the power to retain outside counsel or The Board has determined that each Mr. Furlong and Mr. Simmons, who are both members of the Audit Committee, as well as each Mr. Tunstall and Mr. Mehl is an “audit committee financial expert,” as defined by SEC Rules. |
| John N. Allred | |
| N. John Simmons | |
| Number of Meetings: | |
| 6 | |
| Compensation Committee | |
| Members: | Roles and Responsibilities of the Committee: |
Elaine D. Rosen (Chair) | The Compensation Committee is responsible for development of the compensation principles to guide design of the Firm’s executive compensation program. It is also responsible for reviewing and approving the overall compensation and fringe benefit policies and practices of the Firm, approving any new or amended employment agreements for executive management including grants or awards to executive management under the Firm’s long-term incentive program and preparing an annual |
| Mark F. Furlong | |
| Ralph E. Struzziero | |
| Number of Meetings: | |
| 6 | |
| Nomination Committee | |
| Members: | Roles and Responsibilities of the Committee: |
John N. Allred (Chair) | The Nomination Committee is responsible for The Nomination Committee has not established “minimum qualifications” for director nominees because it is the view of this committee that the establishment of rigid “minimum qualifications” might preclude the consideration of otherwise desirable candidates for election to the Board. The Nomination Committee will consider director candidates recommended by shareholders. Please see the section titled “Shareholder Communications, Proposals and Other Matters” below. |
| Elaine D. Rosen | |
| A. Gordon Tunstall | |
| Number of Meetings: | |
| 5 | |
| Corporate Governance Committee | |
| Members: | Roles and |
| Ralph E. Struzziero | The functions of the Corporate Governance Committee |
Each member of the | |
| John N. Allred | |
| Ann E. Dunwoody | |
| Mark F. Furlong | |
| Randall A. Mehl | |
| Elaine D. Rosen | |
| N. John Simmons | |
| A. Gordon Tunstall | |
| Number of Meetings: | |
| 4 |
| Executive Committee | |
| Members: | Roles and Responsibilities of the Committee: |
David L. Dunkel (Chair) | The Executive Committee has the authority to act in |
| Richard M. Cocchiaro | |
| Howard W. Sutter | |
| A. Gordon Tunstall | |
| Number of Meetings: | |
| None | |
| Audit | Compensation | Nomination | Corporate Governance | ||||
l | Monitors risk relating to the Firm’s financial statements, systems, reporting process and | l | Oversees executive compensation risk | l | Oversees director succession risk | l | Leadership and oversight of |
l | Responsible for the | l | Responsible for preparation and required disclosures regarding compensation practices | l | Establishes procedures for the | l | Provides a forum for |
l | Reviews and approves related party transactions and relationships involving directors and executive officers | l | Responsible for | l | Recommends candidates for election to the Board | l | Reviews and recommends to the Board any changes to the corporate governance guidelines |
The following table shows the aggregate number of stock awards and options to purchase Kforce stock held by our non-employee directors at December 31, 2013:
Name | Aggregate Number of Stock Awards Held (1) | Aggregate Number of Unexercised Options Held (1) | ||||||||||
John N. Allred | 7,725 | 10,000 | ||||||||||
W.R. Carey, Jr. | 7,725 | 24,464 | ||||||||||
Mark F. Furlong | 7,725 | 10,000 | ||||||||||
Patrick D. Moneymaker | 7,725 | 10,000 | ||||||||||
Elaine D. Rosen | 7,725 | 15,000 | ||||||||||
Ralph E. Struzziero | 7,725 | 15,000 | ||||||||||
A. Gordon Tunstall | 7,725 | 7,768 | ||||||||||
l | Monitors and receives reports on the Firm’s cybersecurity risks |
shareholders. During 2013,2016, Mr. Struzziero’s son was employed by KGS.Kforce Government Solutions (KGS), a wholly owned subsidiary of Kforce. Mr. Struzziero’s son was hired by KGS leadershipcurrently serves in a non-executive business development role and was hired in 2011 based on his extensive experience and knowledge of sales within the government contracting industry. Mr. Struzziero’s son has no involvement in management decisions of either Kforce or KGS. Mr. Struzziero had no influence in the hiring of his son nor does Mr. Struzzierohe have any involvement in the ongoing compensation and performance-related decisions for his son. Total remuneration paid to Mr. Struzziero’s son was approximately $184,400,$211,000, which consists of base salary and incentive-based compensation. The Nomination Committee specifically considered the employment of Mr. Struzziero’s son by KGS when determining whether to renominate Mr. Struzziero. It concluded that his son’s employment would not impair Mr. Struzziero’s independence.
The Board recognizes that related party transactions can present a heightened risk of potentialwas formerly an officer or actual conflicts of interest and may create the appearance that decisions are based on considerations other than the best interestsan employee of Kforce andor its shareholders. As a result, the Board prefers to avoid related party transactions. However, the Board also recognizes that there are situations where related party transactions may be in,subsidiaries or may not be inconsistenthad any relationship with the best interests of Kforce and its shareholders. As a result, the Board has placed responsibility to review related party transactions with the Audit Committee, as indicated in the Audit Committee’s charter. The Audit Committee has the authority to approve all related party transactions that Kforce would be required to disclose in accordance withrequiring disclosure under Item 404 of Regulation S-K. This review and approval takes into account whether
| Name | Fees Earned or Paid in Cash ($)(1)(2) | Stock Awards ($)(3) | All Other Compensation ($)(4)(5) | Total ($) | Aggregate Number of Unvested Restricted Stock Awards Held (6) | Aggregate Number of Unexercised Options Held (6) | ||||||||||
| John N. Allred | $ | 97,000 | $ | 99,993 | $ | 2,769 | $ | 199,762 | 5,355 | — | ||||||
| Richard M. Cocchiaro | $ | 70,000 | $ | 99,993 | $ | 1,913 | $ | 171,906 | 5,355 | — | ||||||
| Ann E. Dunwoody | $ | 44,000 | $ | 99,993 | $ | 1,913 | $ | 145,906 | 5,355 | — | ||||||
| A. Gordon Tunstall | $ | 67,000 | $ | 99,993 | $ | 2,769 | $ | 169,762 | 5,355 | — | ||||||
| Mark F. Furlong | $ | 97,000 | $ | 99,993 | $ | 2,769 | $ | 199,762 | 5,355 | — | ||||||
| N. John Simmons | $ | 67,000 | $ | 99,993 | $ | 3,087 | $ | 170,080 | 5,355 | — | ||||||
| Elaine D. Rosen | $ | 97,000 | $ | 99,993 | $ | 2,769 | $ | 199,762 | 5,355 | — | ||||||
| Ralph E. Struzziero | $ | 82,000 | $ | 99,993 | $ | 2,769 | $ | 184,762 | 5,355 | 5,000 | ||||||
| Howard W. Sutter | $ | — | $ | — | $ | 406,725 | $ | 406,725 | — | — | ||||||
| (1) | Fees earned or paid in cash consisted of: (a) annual retainer for each director of $20,000; (b) annual retainers for each committee chairperson of $15,000; (c) quarterly fees for each quarter of board service of $5,000; and (d) quarterly fees for each quarter of committee service of $3,750 for each of the Audit Committee, Compensation Committee and Nomination Committee and $3,000 for the Corporate Governance Committee. |
| (2) | For Mr. Cocchiaro, this amount includes cash compensation of $30,000 related to a pro-rated annual retainer and annual stock award for the first quarter of 2016 as a result of his retirement from Kforce in January 2016. |
| (3) | Stock Awards included a grant of 5,260 shares of restricted stock to each director, except for Mr. Sutter. The closing stock price on the grant date was $19.01 and the amounts in this column represent the aggregate grant date fair value in accordance with FASB ASC 718. |
| (4) | The amounts reported in this column for all directors except Mr. Sutter reflect the dollar value of dividend equivalents credited on unvested restricted stock in the form of additional shares of restricted stock. |
| (5) | During 2016, Mr. Sutter was employed by us and the amount reported in this column represents his compensation, which consisted of: $300,000 in salary, $105,000 in bonus, and $1,725 in matching contributions made by Kforce attributable to defined contribution plans. Mr. Sutter was not compensated for his service on the Board. |
| (6) | The beneficial ownership of common shares as of the Record Date for each of our directors is presented below under the heading of “Security Ownership of Certain Beneficial Owners and Management.” |
| David L. Dunkel | Age: | 63 | |
| Chairman and Chief Executive Officer | Mr. Dunkel has served as Kforce’s Chairman, Chief Executive Officer and a director since its incorporation in 1994. He previously served as President and Chief Executive Officer of Romac-FMA, one of Kforce’s predecessors, for 14 years. | ||
| Peter M. Alonso | Age: | 55 | |
| Chief Talent Officer | Mr. Alonso has served as Kforce’s Chief Talent Officer since January 2009. Mr. Alonso previously served as President of Health & Life Sciences and President of Technology Staffing, both former subsidiaries of Kforce, and has held several other positions of increasing responsibility within Kforce since 1985. Before joining Kforce, Mr. Alonso held positions at Zenith Electronics Corporation. | ||
| Michael R. Blackman | Age: | 62 | |
| Chief Corporate Development Officer | Mr. Blackman has served as Kforce’s Chief Corporate Development Officer since December 2009, prior to which he served as the Firm’s Senior Vice President of Investor Relations from 1999 to 2009 and Director of Selection and Senior Consultant in the healthcare services specialty from 1992 to 1999. | ||
| Robert W. Edmund | Age: | 43 | |
| Chief Legal & Compliance Officer | Mr. Edmund has served as Kforce’s Chief Legal Officer since February 2014 and as Chief Compliance Officer since July 2015. From 2009 to 2014, Mr. Edmund served as an attorney in the legal department at PetSmart, Inc., most recently as Vice President, Legal - Business Operations. He also previously served as a partner in the labor and employment department of Porter, Wright, Morris & Arthur from 2006 to 2008 and as Director of External Affairs and General Counsel for the Ohio Business Roundtable from 2008 to 2009. | ||
| Jeffrey B. Hackman | Age: | 38 | |
| SVP, Finance & Accounting | Mr. Hackman has served as Kforce’s Principal Accounting Officer since October 2015 and as Senior Vice President, Finance & Accounting since March 2015. He previously served as the Firm’s Chief Accounting Officer and Principal Accounting Officer from February 2009 until September 2013 and as Kforce’s SEC Reporting Director from September 2007 to February 2009. Mr. Hackman served as the Global Chief Accounting Officer of Cunningham Lindsey from September 2013 until he rejoined Kforce in March 2015. Prior to 2007 he was an Audit Senior Manager with Grant Thornton LLP. | ||
| David M. Kelly | Age: | 51 | |
| Chief Financial Officer | Mr. Kelly has served as Kforce’s Senior Vice President and Chief Financial Officer since January 2013 and Corporate Secretary since February 2013. Mr. Kelly joined Kforce in 2000 and has served as Senior Vice President, Finance and Accounting from February 2009 to December 2012, Corporate Assistant Secretary from October 2010 to February 2013, Vice President, Finance from January 2005 to February 2009, Chief Accounting Officer from November 2000 to January 2005 and Group Financial Officer from January 2000 to November 2000. Before joining Kforce, Mr. Kelly served in various roles with different companies that included treasury director, vice president, and controller. | ||
| Joseph J. Liberatore | Age: | 53 | |
| President | Mr. Liberatore has served as Kforce’s President since January 2013. He previously served as Corporate Secretary from February 2007 to February 2013, Chief Financial Officer from October 2004 to December 2012, Executive Vice President from July 2008 to December 2012, Senior Vice President from 2000 to July 2008, Chief Talent Officer from 2001 to 2004 and Chief Sales Officer from September 2000 to August 2001. Mr. Liberatore has served in various other roles in Kforce (and its predecessors) since he joined the Firm in 1988. | ||
| Kye L. Mitchell | Age: | 47 | |
| Chief Operations Officer | Ms. Mitchell has served as Kforce’s Chief Operations Officer since March 2016. Before her appointment as Chief Operations Officer, Ms. Mitchell served as Chief Operations Officer for the East Region from January 2013 to March 2016, Field President from January 2009 through December 2012, Market President from February 2006 to December 2008, and Market Vice President from February 2005 through January 2006. Ms. Mitchell joined Kforce in 2005 when Kforce acquired VistaRMS where she served as President. | ||
A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting to respond to appropriate questions and to make any other statements deemed appropriate.
Independent Registered Public Accountants—Fee Information
Audit Fees
Fees for audit services totaled $1,079,110 in 2013 and $1,145,078 in 2012, including fees associated with the annual audit and the review of our financial statements included in our Quarterly Reports on Form 10-Q.
Audit-Related Fees
Fees for audit-related services totaled $108,495 in 2013 and $18,250 in 2012. Audit-related services principally include assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements, or other filings that are not captured under “Audit Fees” above. These services included consultations as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, and other regulatory or standard-setting bodies; internal control reviews, including consultation, under Section 404 of the Sarbanes-Oxley Act of 2002; due diligence services and audits and accounting consultations related to dispositions.
Tax Fees
Fees for tax services, including tax compliance, tax advice and tax planning, to Deloitte & Touche LLP totaled $3,095 in 2013 and $48,069 in 2012.
All Other Fees
Fees for an annual subscription to a Deloitte & Touche LLP research database totaled $2,000 for 2013 and $0 for 2012.
The Audit Committee considered whether Deloitte & Touche LLP’s provision of the above non-audit services is compatible with maintaining such firm’s independence and satisfied itself as to Deloitte & Touche LLP’s independence.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
| Fee Type | 2016 | 2015 | |||||
| Audit Fees (1) | $ | 748,019 | $ | 759,679 | |||
| Audit-Related Fees (2) | $ | 11,500 | $ | 11,500 | |||
| Tax Fees (3) | $ | — | $ | 23,400 | |||
| All Other Fees (4) | $ | 2,895 | $ | 2,000 | |||
| (1) | Represents fees associated with the annual audit and the review of our financial statements included in our Quarterly Reports on Form 10-Q. |
| (2) | Includes assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements, or other filings that are not captured under “Audit Fees” above. These services included consultations as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, and other regulatory or standard-setting bodies; internal control reviews, including consultation, under Section 404 of the Sarbanes-Oxley Act of 2002; due diligence services and audits and accounting consultations related to dispositions. |
| (3) | Includes fees related to tax compliance, tax advice and tax planning. |
| (4) | Represents fees for an annual subscription to a Deloitte & Touche LLP research database and continuing education courses. The Audit Committee considered whether Deloitte & Touche LLP’s provision of the above non-audit services is compatible with maintaining such firm’s independence and satisfied itself as to Deloitte & Touche LLP’s independence. |
performed.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTEFORPROPOSAL 2. |
1. The Audit Committee has reviewed and discussed the audited consolidated financial statements with Kforce Inc.’s management;
2. The Audit Committee has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T;
3. The Audit Committee has received the written disclosures and the letter from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, and has discussed with the independent auditors the independent auditors’ independence; and
4. Based on the review and discussion referred to in the above paragraphs, the Audit Committee recommended to the Board that the audited financial statements be included in Kforce Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for filing with the SEC. The Audit Committee has also selected Deloitte & Touche LLP, subject to ratification by shareholders, to audit our consolidated financial statements for the year ending December 31, 2014, and to provide review services for each of the quarters in the year ending December 31, 2014.
| 1. | The Audit Committee has reviewed and discussed the audited consolidated financial statements with Kforce Inc.’s management; |
| 2. | The Audit Committee has discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard 1301; |
| 3. | The Audit Committee has received the written disclosures and the letter from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, and has discussed with the independent auditors the independent auditors’ independence; and |
| 4. | Based on the review and discussion referred to in the above paragraphs, the Audit Committee recommended to the Board that the audited financial statements be included in Kforce Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC. The Audit Committee has also selected Deloitte & Touche LLP, subject to ratification by shareholders, to audit our consolidated financial statements for the year ending December 31, 2017, and to provide review services for each of the quarters in the year ending December 31, 2017. |
W.R. Carey, Jr.
The following table shows the amount of Kforce common shares beneficially owned as of the Record Date by: (a) our NEOs; (b) our directors and (c) all of our directors and executive officers as a group.
| Shares of Kforce Common Shares Beneficially Owned | ||||||||
Name of Individual or Identity of Group | Number (1)(2) | Percent of Class | ||||||
John N. Allred | 35,413 | * | ||||||
W.R. Carey, Jr. | 59,875 | * | ||||||
Richard M. Cocchiaro | 1,870,246 | 5.50 | % | |||||
David L. Dunkel | 2,075,846 | 6.11 | % | |||||
Michael L. Ettore | 0 | * | ||||||
Mark F. Furlong | 52,511 | * | ||||||
David M. Kelly | 49,658 | * | ||||||
Joseph J. Liberatore | 322,003 | * | ||||||
Randal Marmon | 51,028 | * | ||||||
Kye L. Mitchell | 45,714 | * | ||||||
Jeffrey T. Neal | 59,523 | * | ||||||
Elaine D. Rosen | 41,411 | * | ||||||
Ralph E. Struzziero | 67,392 | * | ||||||
Howard W. Sutter | 1,515,480 | 4.46 | % | |||||
A. Gordon Tunstall | 7,725 | * | ||||||
All directors and executive officers as a group (18 persons) | 6,421,101 | 18.85 | % | |||||
Compensation Committee Report The Compensation Committee of Kforce (the Committee) has reviewed and discussed the |
Submitted by the Elaine D. Rosen (Chair) ¦ Mark F. Furlong ¦ Ralph E. Struzziero |
The following table shows the number of common shares held by persons known to Kforce, in addition to Messrs. Dunkel, Cocchiaro and Sutter (whose business address is c/o Kforce Inc., 1001 East Palm Avenue, Tampa, Florida 33605), to beneficially own more than 5% of our outstanding shares of Common Stock.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
T. Rowe Price Associates, Inc. (1) 100 E. Pratt Street Baltimore, Maryland 21202 | 3,893,066 | 11.46 | % | |||||
BlackRock, Inc. (2) 40 East 52nd Street New York, New York 10022 | 3,089,515 | 9.09 | % | |||||
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)18 of the Exchange Act, requires Kforce directors, executive officers and persons holding more than 10 percent of our Common Stockexcept to file reports of ownership and changes in ownership of the Common Stock with the SEC. The directors, officers and 10 percent shareholders are requiredextent that we specifically incorporate it by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file. The SEC has designated specific due dates for these reports and we must identify in this proxy statement those persons who did not file these reports when due.
Based solely on our review of copies of the reports received by us and written representations from certain reporting persons, we believe that all directors, executive officers and persons holding more than 10 percent of our Common Stock were in compliance with their filing requirements for all transactions that occurred during our most recent fiscal year except that Ms. Rosen had one Form 4 filing (related to two transactions) filed late by Kforce due to an administrative error.
reference into such filings.
Peter M. Alonso, 52, has served as Chief Talent Officer since January 2009. Prior to his appointment as Chief Talent Officer, Mr. Alonso served as President of Health & Life Sciences and President of Technology Staffing, subsidiaries of Kforce, since 2000 and has held several other positions of increasing responsibility within Kforce since 1985. Prior to joining Kforce, Mr. Alonso held positions at Zenith Electronics Corporation.
Michael R. Blackman, 59, has served as Kforce’s Chief Corporate Development Officer since December 2009. Prior to his appointment as Chief Corporate Development Officer, Mr. Blackman served as Senior Vice President of Investor Relations from 1999 to 2009 and Director of Selection and Senior Consultant in the healthcare services specialty from 1992 to 1999.
David L. Dunkel, 60, has served as Kforce’s Chairman, Chief Executive Officer and a director since its formation in 1994. Prior to August 1994, he served as President and Chief Executive Officer of Romac-FMA, one of Kforce’s predecessors, for 14 years.
David M. Kelly, 48, has served as Kforce’s Senior Vice President and Chief Financial Officer since January 2013 and Corporate Secretary since February 2013. Mr. Kelly joined Kforce in 2000 and has served as Senior Vice President, Finance and Accounting from February 2009 to December 2012, Corporate Assistant Secretary from October 2010 to February 2013, Vice President, Finance from January 2005 to February 2009, Chief Accounting Officer from November 2000 to January 2005 and Group Financial Officer from January 2000 to November 2000. Prior to joining Kforce, Mr. Kelly served in various roles with different companies that included treasury director, vice president, and controller.
Joseph J. Liberatore, 51, has served as Kforce’s President since January 2013 and served as Corporate Secretary from February 2007 to February 2013. Prior to his appointment as President, Mr. Liberatore served as Chief Financial Officer from October 2004 to December 2012, Executive Vice President from July 2008 to December 2012, Senior Vice President from 2000 to July 2008, Chief Talent Officer from 2001 to 2004 and Chief Sales Officer from September 2000 to August 2001. Mr. Liberatore has served in various other roles in Kforce (and its predecessors) since 1988.
Kye L. Mitchell, 44, has served as Chief Operations Officer for the East Region since January 2013. Prior to her appointment as Chief Operations Officer, Ms. Mitchell served as a Field President from January 2009 through December 2012, Market President from February 2006 to December 2008, and Market Vice President from February 2005 through January 2006. Ms. Mitchell joined Kforce in 2005 through the acquisition of VistaRMS for which she served as President.
Jeffrey T. Neal, 46, has served as Chief Operations Officer for the West Region since January 2013. Prior to his appointment as Chief Operations Officer, Mr. Neal served as Field President from January 2006 through December 2012, and Group President from June 2004 through December 2006. Mr. Neal joined Kforce through its merger with Hall Kinion (in 2004) where he served as Senior Vice President of National Accounts and the Central Region. Prior to joining Hall Kinion in 1994, he began his staffing industry career with Oxford and Associates in the Silicon Valley and held management positions at a consumer sales and marketing firm.
Sara. R. Nichols, 41, has served as Chief Accounting Officer and Principal Accounting Officer since September 2013. Prior to her appointment as Chief Accounting Officer, Ms. Nichols served as the Vice President, Finance from February 2009 to September 2013, Chief Accounting Officer from August 2007 to February 2009 and Director of Business Process Management from May 2005 to August 2007. Prior to joining Kforce, Ms. Nichols held positions with Arthur Andersen, LLP, TMP Worldwide’s eResourcing division and Cox Target Media, Inc.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis (“CD&A”) provides a detailed description of our executive compensation philosophy, our overall objectives, each element of our executive compensation and the underlying compensation framework. The CD&A contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs, which could differ materially based on actual results.
SUMMARY
| What We Do | What We Don’t Do | |||
l | Target Annual NEO Compensation at Market Median | l | Define Market Median by Comparison to Larger Companies | |
l | Ensure Performance-Based Compensation is the Largest Part of Total Compensation | l | Set Easy Financial Targets for Incentive Plans | |
l | Ensure Equity-Based LTI Compensation is the Largest Component of Performance-Based Compensation | l | Allow Repricing or Cash Buyouts of Previous Equity-Based LTI Grants | |
l | Provide Pay-for-Performance by Paying Higher Compensation for Above Median Performance and Lower Compensation for Below Median Performance | l | Allow Hedging or Pledging or Other Related Activities | |
l | Require Share Ownership | l | Create New Excise Tax Gross-ups | |
l | Maintain a Significant Clawback Policy | l | Provide Excessive Perquisites | |
l | Consider Tax Deductibility in Compensation Plan Design | |||
The Compensation Committee (“Committee”) employsPractices
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Attracting and retaining key executive talent is critical to the success of a staffing firm in which people represent the true “assets” of such a company. Understanding competitive market pay levels is essential to hiring and retaining qualified executives able to drive our long-term profitable growth. The Committee further believes it is important to be knowledgeable concerning best practices and how comparable organizations compensate their executives. The Committee reviews compensation data from several independent sources. Our competitive market for executive talent is primarily staffing organizations; however, the Committee also reviews pay data for other professional service and consulting organizations that we believe are of comparable size and with similar business models. | |
| ||
| Target Annual NEO Compensation at Market Median | The Committee believes executive compensation should be aligned with our financial and TSR performance. For the 2016 compensation program, we targeted the total pay level for our NEOs at the | |
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| The Committee designs the compensation framework with significant emphasis on performance-based compensation over fixed compensation, such as salaries, to motivate our NEOs to drive operational performance without encouraging unreasonable risk. Target performance-based compensation comprised 67-74% of target total direct compensation for our Active NEOs in 2016. | ||
| Ensure Equity-Based LTI Compensation is the Largest Component of Performance-Based Compensation | The Committee further believes equity-based LTI compensation should | |
| |||
| The Committee believes our compensation programs should provide superior cash and equity compensation opportunities | ||
| Require Share Ownership | The Committee believes our executives should have a personal financial stake in Kforce’s ongoing future success. Accordingly, equity-based LTIs play a significant role in our executive compensation program. In addition, all employees, including the NEOs, are eligible to purchase stock through the Kforce Inc. 2009 Employee Stock Purchase Plan. To further align the interests of executives and long-term shareholders, our Board has adopted formal ownership guidelines (see below). | |
| Consider Tax Deductibility in Compensation Plan Design | We consider possible tax consequences in the design of our executive compensation programs. However, tax consequences, including tax deductibility, are subject to many factors beyond our control. In addition, we believe it is important to retain maximum flexibility in designing compensation programs to meet stated corporate objectives. While we consider tax deductibility as one of the factors in designing our compensation programs, we do not limit compensation to those levels or types of compensation that will be fully deductible to Kforce. We will consider alternative forms of compensation, consistent with our compensation goals that preserve deductibility. | |
| Set Challenging Performance Objectives | We work to set difficult but attainable financial performance objectives for our NEOs in the context of the annual incentive plan. This is particularly illustrated in 2016, a year in which threshold financial performance objectives were not attained and no payouts were made to the NEOs for financial performance within the annual incentive plan. | |
| Minimum Stock Ownership | Our Corporate Governance Guidelines include a stock ownership policy for our directors and executives. The minimum level of holdings for each position is as follows: | |||||
| Target Holding Level (Lesser Of) | ||||||
| Position | Base Salary / Annual Retainer | Shares | ||||
| Director | 3x | 5,000 | ||||
| Chief Executive Officer | 5x | 200,000 | ||||
| President | 3x | 100,000 | ||||
| Chief Financial Officer | 2x | 50,000 | ||||
| Chief Operations Officer | 2x | 30,000 | ||||
| Other members of Kforce’s Executive Leadership Team | 0.5x | 10,000 | ||||
| As of the Record Date, all Directors, NEOs and other members of our executive leadership were in compliance with the | ||||||
| Clawback Policy |
| |
| Equity Plan Features | None of our Stock Incentive Plans (as approved by shareholders in 2006, 2013 and 2016 and pending approval of Proposal 5 in 2017) permit repricing or cash buyouts of underwater options or stock appreciation rights without shareholder approval. The Committee believes the Plans are structured to avoid problematic pay practices and do not contain features that could be detrimental to shareholder interests. | |
| Insider Trading, Anti-Pledging and Anti-Hedging | Our Insider Trading Policy governs the trading in our securities by directors, officers and employees and other persons who have or may have access to material, nonpublic information. The policy has the following restrictions: | ||
| s | No trading while in the possession of material, nonpublic information | ||
| s | No trading during designated black-out periods | |
| s | No trading without pre-approval (certain insiders) | ||
| s | No margin accounts | ||
| s | No pledging | ||
| s | No hedging (including prepaid variable forwards, equity swaps, collars and exchange funds) | ||
| s | No trading in any interest or position relating to future stock price , such as a puts, calls or short sales | ||
| In 2009, the Committee resolved to not enter into any new employment agreements, or materially amend any existing employment agreements with its executives that contain excise tax gross-up provisions in the event of a change-in-control event going forward. Since the Committee’s resolution, all new or amended executive employment agreements have excluded excise tax gross-up provisions; as a result, the only remaining employment agreements which continue to include excise tax gross-up provisions are with Messrs. Dunkel and Liberatore. | |
At the Annual Meeting of Shareholders held on April 5, 2013, Kforce’s “say-on-pay” proposal received substantial shareholder support with more than 97%
The redesigned NEO compensation framework for fiscal years 2013 to 2015 significantly reduced NEO compensation, further aligned NEO compensation with Kforce’s performance using longer-term measurement periods and targeted NEO compensation at the market median of similar positions within similarly sized companies. The significant adjustments to the 2013 to 2015 NEO compensation plan framework include the following:
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Targeted payouts of the NEO annual incentive plan was reduced to a range of 19% to 25% of base salary from 143% to 240% of base salary;
Maximum amounts that can be earned by each NEO in the annual incentive plan was reduced to 200% of base salary from 400% of base salary;
Eliminated the alternative relative revenue performance measure from the annual incentive compensation calculation;
Added an annual cash-based performance bonus plan for the CEO in lieu of an equity-based long-term incentive (“LTI”), with a maximum payout of $1 million, based upon Kforce’s three-year total shareholder return (“TSR”) relative to our
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Added an equity-based LTI awards for its NEOs, excluding the CEO, based upon a pre-defined dollar amount (a number of equity shares, if available, will be awarded equal to the pre-defined dollar amount divided by the share price on the date of grant) not to exceed the lesser of 2% of market capitalization or $9 million. The dollar amount of the LTI pool is to be based upon the three-year TSR performance of Kforce’s common stock relative to its industry peer group. The LTI pool is distributed as follows: (i) 33% of the LTI pool will be awarded to the NEOs, excluding the CEO; (ii) 45% is awarded to other non-NEO members of executive management; and (iii) the remaining portion of 22% will be reserved for potential grants to other employees. Previously, LTI grants were awarded using varying percentages (from 2% to 4%) of common shares outstanding based upon the annual performance of Kforce’s common stock relative to its industry peer group;
Ultimate awards earned for the CEO’s annual cash-based performance bonus and the LTI award for all other NEOs was changed such that they are to be determined based upon the three-year performance of Kforce’s common stock relative to its industry peer group or, where indicated above, a separately designated peer group that is representative of the broader market. Previously, LTI awards were based on a one-year TSR; and
CEO base salary for 2013 was increased from $750,000 to $800,000, which was the first increase in more than 5 years.
2013 Pay and Performance Alignment
The compensation components and results as they relate to the 2013 Active NEOs reflect the significant changes made by the Committee in designing the 2013 to 2015 compensation framework, which targets total annual NEO compensation at the median of Kforce’s 2013 Industry Peer Group (as defined below) and the 2013 Separately Designated Peer Group (as defined below) used to measure the performance of the CEO Cash-Based Three-Year TSR Bonus (as defined below). The compensation components include base salary, annual incentive compensation, discretionary bonuses, performance-based LTI and CEO Cash-Based Three-Year TSR Bonus. The following is a summary of the performance measurements and resulting pay for the Active NEOs:
Base salaries for Messrs. Dunkel, Liberatore, Kelly, Neal and Ms. Mitchell were set at $800,000, $600,000, $300,000, $300,000 and $300,000, respectively.
Annual incentive compensation was based on the measurement of three pre-established performance components including: (i) adjusted earnings per share (“EPS”); (ii) total firm revenue; and (iii) individual performance in the context of the achievement of management business objectives (“MBOs”) related to operational and business unit achievements.
The Firm achieved 2013 total annual revenues of $1,151.9 million, resulting in a payout of 39% for Messrs. Dunkel, Liberatore and Kelly and a payout of 30% for Ms. Mitchell and Mr. Neal.
Excluding goodwill impairment and realignment-related charges, Firm EPS of $0.84 for 2013 was below target and resulted in no payout.
MBO payout for Ms. Mitchell of 168% was achieved based on business unit performance.
No Individual Bonus (as defined below) was earned by Messrs. Dunkel, Liberatore, Kelly or Neal.
Total annual incentive bonus earned for 2013 for Messrs. Dunkel, Liberatore, Kelly and Neal and Ms. Mitchell was $124,800, $84,240, $35,100, $23,250 and $526,821, respectively.
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The grant date fair value of the equity awards for Messrs. Liberatore, Kelly and Neal and Ms. Mitchell was $480,003, $280,010, $280,010 and $280,010, respectively.
Mr. Dunkel received no performance-based LTI.
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Additionally, the Committee concluded in December of 2013 that considerable importance should be placed on the following key operational and financial achievements, which were determined by the Committee to be above and beyond the pre-established targets:
During October 2013, the Firm commenced a plan to streamline and realign its leadership and support-related structure to better align a higher percentage of personnel in roles that are closest to the customer. The new organization is intended to provide improved accountability and deliver better results for our clients, consultants and core personnel. Additionally, the Firm believes the new organization will help the Firm achieve, and potentially surpass, prior peak operating margins of 7.4% from 2007 through operating leverage growth which will ultimately drive increased value to our shareholders.
The Firm successfully implemented a plan designed to accelerate revenue growth. Beginning in the fourth quarter of 2012 and continuing throughout 2013, management made significant investments in the hiring of associates responsible for generating revenue in its staffing business to capture the current and expected future demand in the marketplace for the services provided by Kforce. Revenue generator headcount increased 10.3% in the fourth quarter of 2013 as compared to the fourth quarter of 2012. This increase in headcount resulted in total Firm revenue growth in our staffing business, including our Tech business (which represents approximately 64% of our total net service revenues) which grew 17.9% during the fourth quarter of 2013 as compared to the fourth quarter of 2012. We believe the investment strategy will continue to benefit the Firm as newer associates continue to increase their productivity over time, which will result in revenue growing faster than investments in headcount. Going forward, the Firm expects to continue to hire additional revenue generators in those lines of business, geographies and industries we believe present the greatest opportunity for growth. As a result of this investment strategy, management expects to increase revenues at levels near the best in industry.
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Net service revenues increased 6.4% to $1.15 billion in 2013 from $1.08 billion in 2012.
During 2013, the Firm effectively managed and used cash flows to return value to the shareholders. Management initiated a quarterly dividend program during the fourth quarter of 2013 of $0.10 per share resulting in a return to shareholders of $3.3 million (based on the closing stock price on the date the dividend was declared of $19.25, the quarterly dividend is expected to have an annualized yield of 2.1%) and repurchased 1.8 million shares of common stock on the open market at a total cost of approximately $27.3 million.
The CEO conducted and implemented what the Committee considers a transformational succession plan for the Firm with the following attributes: (i) all of the realigned executive leadership came from within the Firm indicating continuous strong development of existing leaders and (ii) the succession plan and organizational realignment was carefully planned and executed, resulting in limited business interruptions and minimal impact to employee morale. The Committee considered the succession planning as an addition to the accomplishments noted above.
With consideration of ensuring continued alignment of executive compensation with the Firm’s performance results, particularly with regard to the points above and most notably the realignment, the Committee approved a discretionary bonus for 2013 for each of the NEOs, including the CEO. The Committee believed the discretionary bonus was a result of factors that were not part of the formulaic component, but still within the general construct, of the annual incentive plan and deserving of financial recognition. For Messrs. Dunkel, Liberatore, Kelly and Neal and Ms. Mitchell, the discretionary bonuses were $1,075,000, $600,000, $300,000, $276,750 and $100,000, respectively.
2014 Executive Compensation Modifications
The Committee has continued to monitor the progress and results of the 2013 to 2015 NEO Compensation Framework to ensure continued alignment with its stated compensation philosophy and gave particular attention this year in light of the significance of the changes made in 2013. As previously mentioned, the 2013 to 2015 NEO Compensation Framework eliminated the CEO’s participation in the equity-based LTI plan because the Committee believed the annual performance-based cash award would have a greater motivational value than an equity-based compensation plan as the CEO beneficially owned greater than 5% of Kforce’s outstanding common stock. After review of the executive compensation and performance results for 2013, the Committee determined that certain pay practices included in the 2013 to 2015 NEO Compensation Framework were unfairly penalizing the CEO and, therefore, not consistent with all of the compensation philosophies outlined above. Specifically, the Committee determinedprinciples that the CEO Cash-Based Three-Year TSR Bonus was not resulting in the appropriate levelguide design of compensation commensurate with the Firm’s performance results and the Committee’s compensation philosophy. The Committee thought it was necessary to consider a rebalancing of the 2013 to 2015 NEO Compensation Framework to ensure performance-based compensation was being appropriately
allocated based on position. Additionally, the Committee reconsidered whether the CEO Cash-Based Three-Year TSR Bonus was maximizing the alignment of CEO compensation and shareholder value. The following factors were considered while contemplating a redesign of this program:
Management’s outreach to the top 15 institutional shareholders during December 2013 and January 2014 to get their perspective on the 2013 to 2015 NEO Compensation Framework for the CEO and whether a cash-based plan or equity plan is preferred. Based on the outreach, it was noted that, based on the CEO’s current significant equity holdings, most shareholders were generally indifferent about the form of compensation (cash versus equity) while a few shareholders preferred equity compensation.
The alignment of the CEO’s compensation with shareholder value.
The perceived greater motivational impact of equity versus cash.
The 2013 parameters to earn a bonus appeared to have been unfairly penalizing the CEO given the operational and financial achievements.
As a result of the actions and considerations above, the Committee resolved to eliminate the CEO Cash-Based Three-Year TSR Bonus and replace it with a modified long-term incentive. The modified long-term incentive will allocate 15% of the LTI pool to the CEO, which the LTI pool can range from $0 to $9 million based on the three-year percentile ranking of Kforce versus the industry peer group, and will include a performance multiplier (0 to 150%) based on the three-year percentile ranking of Kforce versus a separately designated peer group representing the broader market. Amounts up to a performance multiplier of 100% of the outcome compared to the industry peer group will be paid in equity while any amounts resulting from a performance multiplier of greater than 100% will be paid in cash. Inclusive of this change, the target and maximum 2014 Earned Compensation (which excludes the changes in pension value and nonqualified deferred compensation earnings and normalizes executive compensation for the misalignment between the performance period and grant date) is $2,500,000 and $4,425,000, respectively, which is consistent with the overarching compensation philosophy to target compensation at the market median within the broader market for similarly sized companies. The Committee believes these changes will: (i) effectively reward the CEO; (ii) strengthen the alignment between pay and performance; (iii) adjust the CEO’s pay program to be more consistent with the intent of the 2013 to 2015 Compensation Framework and the other NEOs; and (iv) be more consistent with our compensation philosophies as noted above. This modification was implemented in 2014 for the 2014 performance period, and therefore it did not affect the 2013 compensation shown below in the Summary Compensation Table (“SCT”) for the CEO. The Committee believes this adjustment to the compensation framework will continue to hold the CEO to a very high standard of performance and will enhance the alignment of CEO compensation with shareholder value.
Compensation Committee Roles and Responsibilities
The Committee is responsible for setting Kforce’s compensation principles to guide the design of its executive compensation framework. The Committeeprogram. It is also responsible for determiningreviewing and approving Kforce’s overall compensation and employee benefit policies and practices and has concluded that the annual compensation policies and practices of the CEO and the other executive officers, including the other NEOs. The practice of the Committee has beenFirm do not create risks that are reasonably likely to develophave a three-year NEO compensation framework, which was most recently performed during 2012 for the 2013 through 2015 period. In determining the NEO compensation framework, the Committee engaged an independent third party compensation consultant, PM&P, who assists in benchmarking Kforce’s NEO compensation framework against Kforce’s industry peer group as well as other peer groups using companies reasonably similar to Kforce and considered other shareholder information gathered by Georgeson, Inc. On an annual basis, compensation paid under the three-year NEO compensation framework is reviewed for: (i) compliance with the framework and alignment with performance; (ii) effectiveness of the compensation framework; and (iii) competitiveness of our executive compensation (including base salary and annual and long-term incentives) within our industry peer group and companies within a similar industry group using publicly available market data.
material adverse effect on Kforce.
Executive Compensation Philosophy
Kforce’sproviding guidance with respect to: compliance with the approved compensation framework and alignment with performance; effectiveness of the compensation framework; and competitiveness of our executive compensation philosophy is to attract, motivate(including salary and retain highly qualified executives who are able to maximize shareholder value. In seeking to carry out this philosophyannual and employ highly qualified executives, Kforce has embraced certain principles intended to guide compensation design and administrative decisions made by the Committee, the Board and management. Those principles include:
Alignment of Compensation with Performance
The Committee believes executive compensation should be aligned with Kforce’s performance and total shareholder returns. The Committee emphasizes the use of variable performance-based compensation over fixed compensation, such as base salaries, to effectively motivate our NEOs to drive operational performance without encouraging unreasonable risk. The Committee also recognizes, and considers in determining compensation levels, that disparities may arise between Kforce’s performance and shareholder returns at certain times due to, among other factors, market and economic conditions. As a result, in the 2013 to 2015 NEO compensation framework the Committee uses different performance measurements in its annual incentive, long-term incentive programs and CEO Cash-Based Three-Year TSR Bonus (or, in future years, a modified long-term incentive). Our annual incentive plan uses a combination of EPS and revenue metrics as performance measurements in addition to evaluating individual performance in the context of the achievement of MBOs. Both the LTI and CEO Cash-Based TSR bonus use a three-year TSRincentives) as compared to the industry peer group. For determining whethermarket.
The Committee believes the amount of performance-based compensation, or compensation “at risk,” that can be earned by its NEOs should align with the interests of our shareholders and is an integral part of Kforce’s business strategies.
The charts below show fixed compensation (represented by base salary) and performance-based compensation (including any earned bonus, annual incentive compensation and LTI compensation) as a percentage of total direct compensation (“TDC”) for the CEO and the other Active NEOs in the aggregate for 2013. Grants of restricted stock are made pursuant to the achievement of pre-established performance criteria and we include them in performance-based compensation for this reason. For purposes of the charts below, we have used TDC. We define TDCserve as the amount of totalCommittee’s executive compensation inadvisor. In determining the SCT less the amounts included in: (i) changes in pension value and nonqualified deferred compensation earnings column of the SCT (column (h)); and (ii) all other compensation column of the SCT (column (i)). We exclude these two columns because the figures are neither fixed (the value will fluctuate will over time) nor performance-based (changes are driven by factors other than performance, such as long-term interest rates).
Compensation and Plan Design should be Competitive with the Market
The Committee believes Kforce’s compensation programs should provide significant cash and equity incentives for superior performance, which also results in significant relative shareholder value, to attract, motivate and retain executive officers and to adequately compete with public and private company competitors. The Committee believes the 2013 to 2015 NEO compensation framework, achieves this result with the exception of the CEO LTI design noted above. Attracting and retaining key management talent is criticalPearl Meyer assisted in benchmarking Kforce’s NEO compensation framework against Kforce’s peer groups.
The Committee also takes into account Kforce’s complex operating model, where we compete for executive talent in an industry populated by many single-service private firms owned by entrepreneurial individualsbenchmarking data and firms financed by private-equity firms, which represent our most effective competition in many markets. Large financial rewards are frequently generated for owners of these private companies, and knowledge gained from Kforce’s past acquisitions has ledcomparisons to a desire to take into account such philosophies of superior pay for superior performance in order for our executive compensation program to remain competitive with the programs of these private companies.
The Committee reviews compensation data from several independent sources to determine whether Kforce’s executive compensation program continues to be competitive. Kforce’s competitive market for executive talent is primarily staffing organizations; however, the Committee also reviews pay data for other comparably sized professional service organizations because Kforce generally requires skills from a more varied set of backgrounds. For the 2013 compensation program, total pay levels, for our NEOs were targetedfurther insight into external compensation practices, and for determining specific performance-based compensation objectives.
Share Ownership should be Promoted
The Committee believes Kforce’s executives should have a personal financial stake directly aligned with the interests of our shareholders. As a result, long-term equity incentives, including stock options, stock appreciation rights (“SARs”) and full-value awards such as restricted stock, are included in Kforce’s executive compensation program. In addition, all employees, including the NEOs, are eligible to purchase stock through the Kforce Inc. 2009 Employee Stock Purchase Plan.
During March 2012, the Committee adopted more stringent executive share ownership guidelines and also expanded these guidelines’ applicability to include all members of the internal executive committee (a total of 14 executives, including the 5 NEOs). The previous share ownership guidelines required each NEO to hold the number of shares equal to two times their base salary divided by the stock price on the later of the date of election or April 4, 2006. The share ownership guidelines adopted in March of 2012 require a minimum level of share ownership, as follows:
For the Chief Executive Officer, the lesser of five times (5x) base salary or two hundred thousand (200,000) shares;
For the President and the Chief Financial Officer, the lesser of three times (3x) base salary or one hundred thousand (100,000) shares;
For the other NEOs, the lesser of two times (2x) base salary or fifty thousand (50,000) shares; and
For the other members of its internal executive committee (9 executives), fifteen thousand (15,000) shares.
As of the Record Date, all of our NEOs and other members of our internal executive committee were in compliance with this policy. The stock ownership policy is incorporated into the Corporate Governance Guidelines which is available on the Investor Relations section of our website atwww.kforce.com.
Kforce Considers the Tax Deductibility of Executive Compensation
Kforce considers the possible tax consequenceslargest staffing firms in the design of its executive compensation programs. However, tax consequences, including tax deductibility, are subject to many factors (such as changes in the tax laws and regulations, the interpretations of such laws and regulations, and the nature and timing of various decisions by executives regarding stock options and other rights) beyond Kforce’s control. In addition,United States, we estimate Kforce believes it is important to retain maximum flexibility in designing compensation programs to meet its stated objectives. While Kforce considers tax deductibility as one of the factors10 largest publicly-traded specialty staffing firms in designing compensation programs, for all of the above reasons, Kforce does not limit compensation to those levels or types of compensation that will be deductible. Kforce will consider alternative forms of compensation, consistent with its compensation goals that preserve deductibility.
We have structured the 2006 Stock Incentive Plan, and its subsequent amendments, as well as the 2013 Stock Incentive Plan, such that gains from the exercise of stock options and SARs will be fully deductible to Kforce for federal income tax purposes under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).United States. In addition to the extent they are performance-based, certainspecific staffing industry in which companies operate, other forms of compensation may be deductible. Kforce reserves the right to grant compensation that would not ordinarily be deductible, including salary, discretionary incentives, time-based (rather than performance-based) restricted stock and executive perquisites to the extent deemed to be in the shareholders’ interests even if such compensation may result in less than full tax deductibility to Kforce.
Other Compensation Practices
Elimination of Excise Tax Gross Up
In 2009, the Committee resolved to not enter into any new employment agreements, or materially amend any existing employment agreements with its executives that contain excise-tax gross-up provisions going forward. Since the Committee’s resolution, there have been 12 new or amended executive employment agreements, all of which have excluded excise-tax gross-up provisions.
Financial and Operational Summary
The Committee believes Kforce has an outstanding management team, which has produced strong financial results and shareholder returns in comparison to its industry peer group. The following are what the Committee believes to be the significant operational and financial achievements of Kforce from continuing operations, unless stated otherwise, and our management team over the last several years:
|
Net service revenues increased 6.4% to $1.15 billion in 2013 from $1.08 billion in 2012 and increased 7.7% in 2012 from $1.00 billion in 2011. Flex revenues increased 6.6% to $1.10 billion in 2013 from $1.03 billion in 2012. Search revenues increased 2.5% to $48.9 million in 2013 from $47.7 million in 2012.
The Firm successfully implemented a plan to accelerate revenue growth. Beginning in the fourth quarter of 2012 and continuing throughout 2013, management made significant investments in the hiring of associates responsible for generating revenue in its staffing business to capture the current and expected future demand in the marketplace for the services provided by Kforce. Revenue generator headcount increased 10.3% in the fourth quarter of 2013 as compared to the fourth quarter of 2012. This increase in headcount resulted in total Firm revenue growth in our staffing business, including our Tech business (which represents approximately 64% of our total net service revenues) which grew 17.9% during the fourth quarter of 2013 as compared to the fourth quarter of 2012. We believe the investment strategy will continue to benefit the Firm as newer associates continue increase their productivity over time, which will result in revenue growing faster than investments in headcount. Going forward, the Firm expects to continue to hire additional revenue generators in those lines of business, geographies and industries we believe present the greatest opportunity for growth. As a result of this investment strategy, management expects to increase revenues at levels near the best in industry.
During October 2013, the Firm commenced a plan to streamline its leadership and support-related structure to better align a higher percentage of personnel in roles closest to the customer through an organizational realignment. The new organizational design is intended to provide improved accountability and deliver better results for our clients, consultants and core personnel. Additionally, the Firm believes this organizational realignment will help the Firm achieve and potentially surpass prior peak operating margins of 7.4% from 2007. Management believes the organizational realignment along with the significant investments in revenue generator headcount made in late 2012 and throughout 2013 has set the stage for further revenue acceleration and operating leverage growth which will ultimately drive increased value to our shareholders.
Net income for 2013 of $28.2 million, which excludes a goodwill impairment and realignment-related charge, decreased 8.5% to $30.8 million for 2012, excluding a goodwill impairment charge. EPS of $0.84 for 2013, excluding a goodwill impairment and realignment-related charge, decreased 1.2% from $0.85 for 2012, excluding a goodwill impairment charge. Management believes both the investment in revenue generators and the organizational realignment, as discussed above, provide the Firm significant opportunity for net income and EPS expansion through accelerated revenue growth at or near the best in industry and the improvement of operating margins to prior peak levels.
During 2013, the Firm effectively managed and used cash flows to return value to the shareholders. Management initiated a quarterly dividend program during the fourth quarter of 2013 of $0.10 per share resulting in a return to shareholders of $3.3 million (based on the closing stock price on the date the dividend was declared of $19.25, the quarterly dividend is expected to have an annualized yield of 2.1%) and repurchased 1.8 million shares of common stock on the open market at a total cost of approximately $27.3 million.
Industry Peer Group and Benchmarking
The industry peer group is one of the building blocks of the executive compensation program because it provides the Committee with fact-based data and insight into external compensation practices. The industry peer group provides information about pay levels, pay practices and performance comparisons. The primary criteria for this peer group selection includes peer company customers, revenue footprint (i.e., revenuesrevenue derived from different industries as a percentage of total revenues)revenue), geographical presence, talent, capital, size (i.e., total revenues,revenue, market capitalization and domestic presence), complexity of operating model and companies with which we compete for executive level talent. FY 2013 revenuesMost importantly, we consider the companies in the industry peer group as our direct business competitors on a day-to-day basis and, market capitalizationas a result, their size and scope varies considerably.
2013 Industry Peer Group:
CDI Corporation | ||
| Robert Half International Inc. | |
Computer Task Group, Inc. | On Assignment, Inc. | TrueBlue, Inc. |
| Kelly Services, Inc. | Resources Connection, Inc. | |
| Revenue | Market Capitalization | |||||||
| 25th Percentile | $ | 835,333 | $ | 463,647 | ||||
| Median | $ | 2,595,527 | $ | 957,530 | ||||
| 75th Percentile | $ | 5,256,999 | $ | 3,233,853 | ||||
| Kforce Inc. | $ | 1,319,706 | $ | 619,057 | ||||
| Percentile Rank | 37 | 37 | ||||||
| Barrett Business Services, Inc. | Huron Consulting Group Inc. | On Assignment, Inc. | |
| CDI Corporation | ICF International, Inc. | Resources Connection, Inc. | |
| Insperity, Inc. | TrueBlue, Inc. | |
| FTI Consulting, Inc. | Korn/Ferry International | Volt Information Sciences, Inc. | |
| Heidrick & Struggles International, Inc. | Navigant Consulting, Inc. | ||
There was
| Revenue | Market Capitalization | |||||||
| 25th Percentile | $ | 839,191 | $ | 491,284 | ||||
| Median | $ | 1,109,789 | $ | 1,074,989 | ||||
| 75th Percentile | $ | 1,738,210 | $ | 1,640,382 | ||||
| Kforce Inc. | $ | 1,319,706 | $ | 619,057 | ||||
| Percentile Rank | 57 | 36 | ||||||
Kforce Stock Price Performance Graph
Operational Summary
| *Net service revenues for 2014 excludes HIM given its disposition in August 2014. | **EPS for 2014 excludes earnings and the gain on sale related to HIM, given its disposition in August 2014. |
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||||||
Kforce Inc. | 100.0 | 162.9 | 210.8 | 160.6 | 201.7 | 287.8 | ||||||||||||||||||
NASDAQ Stock Market (Composite) | 100.0 | 143.9 | 168.2 | 165.2 | 191.5 | 264.8 | ||||||||||||||||||
2013 Industry Peer Group | 100.0 | 141.0 | 163.2 | 125.4 | 149.9 | 234.8 | ||||||||||||||||||
Earned Compensation Table below.
Determinations
derived from salary, annual incentives and LTI. The charts below show the amounts for annual incentives and LTIs at target, based on the 2016-2018 framework:
| 2016 COMPENSATION AT TARGET |
| 2016 ACTUAL COMPENSATION PAYOUTS |
Base
| Name | 2015 Salary | 2016 Salary | 2017 Salary | ||||||
| David L. Dunkel | $ | 800,000 | $ | 800,000 | $ | 800,000 | |||
| Joseph J. Liberatore | $ | 600,000 | $ | 600,000 | $ | 600,000 | |||
| David M. Kelly | $ | 375,000 | $ | 480,000 | $ | 480,000 | |||
| Kye L. Mitchell | $ | 350,000 | $ | 480,000 | $ | 480,000 | |||
| Peter M. Alonso | N/A | $ | 375,000 | $ | 375,000 | ||||
| Jeffrey T. Neal (1) | $ | 350,000 | $ | 425,000 | N/A | ||||
| (1) | Mr. Neal did not receive a full annual salary due to his resignation effective August 31, 2016. |
Name (a) | Beginning Base Salary (1) (b) | 2013 Base Salary (c) | Compounded Growth in Base Salary (d) | |||||||||
David Dunkel, CEO | $ | 750,000 | $ | 800,000 | 1.3 | % | ||||||
Joseph Liberatore, President | $ | 450,000 | $ | 600,000 | 5.9 | % | ||||||
Michael Ettore, Chief Services Officer | $ | 335,000 | $ | 350,000 | 3.1 | % | ||||||
Randal Marmon, Chief Customer Officer | $ | 300,000 | $ | 350,000 | 3.9 | % | ||||||
(1) The beginning base salary for each NEO in the table above except Mr. Marmon is that which was earned in 2008. For Mr. Marmon, the beginning base salary is that which was earned in 2009, which was the first year in which he became a NEO.
Annual Incentive Compensation
Annual incentive compensation for 2013 is targeted at the median of Kforce’s 2013 Industry Peer Group and the 2013 Separately Designated Peer Group, at the time the compensation plan is approved. Actualannual incentive awards canmay be at, above or below target levels based on actual performance. In addition, our annual incentive awards require minimum performance with no payments made ifthresholds for any payout to occur for specific performance does not meet a minimum threshold level.measures and objectives. We believe the annual incentive, which consists of a performance-based incentive and an objective-based incentive, effectively motivates our NEOs to drive operational performance without encouraging unreasonable risk. Each award for the NEOs is subject to the discretion of the Committee. Our annual incentive plan uses a combination of EPS and revenue metrics as performance measurements in addition to evaluating individual performance in the context of the achievement of MBOs. The Committee believes the achievement of predetermined objectivesperformance goals related to these measurescertain business criteria determined at the beginning of the performance period will result in profitable year-over-year growth and ultimately, to increases insustainable long-term shareholder value.
value creation.
| 1. |
| 2. |
More specifically,
The 20132016 annual incentive awards were based on the following:
| Percentage of Annual Incentive Bonus based on: | ||||||||||||
Name | Earnings Per Share | Total Annual Revenues | Individual Performance and Achievement of Individual MBOs | |||||||||
David Dunkel | 40 | % | 40 | % | 20 | % | ||||||
Joseph Liberatore | 40 | % | 40 | % | 20 | % | ||||||
David Kelly | 40 | % | 40 | % | 20 | % | ||||||
Kye Mitchell | 25 | % | 25 | % | 50 | % | ||||||
Jeffrey Neal | 25 | % | 25 | % | 50 | % | ||||||
Michael Ettore | 25 | % | 25 | % | 50 | % | ||||||
Randal Marmon | 25 | % | 25 | % | 50 | % | ||||||
selected to align target pay to market median compensation for market median performance. The target base salary multiplier used to calculate the 2013 annual incentive awards forTarget Annual Incentive and allocation across each component of the Annual Incentive Bonus for the NEOs as a percentage of their respective 2013 base salaries were:
| Target Multiplier as a Percentage of Base Salary for Each Component: | ||||||||||||
Name | Earnings Per Share | Total Annual Revenues | Individual Performance and Achievement of Individual MBOs | |||||||||
David Dunkel | 100 | % | 100 | % | 100 | % | ||||||
Joseph Liberatore | 90 | % | 90 | % | 90 | % | ||||||
David Kelly | 75 | % | 75 | % | 75 | % | ||||||
Kye Mitchell (1) | 100 | % | 100 | % | 200 | % | ||||||
Jeffrey Neal (1) | 100 | % | 100 | % | 200 | % | ||||||
Michael Ettore | 75 | % | 75 | % | 75 | % | ||||||
Randal Marmon | 75 | % | 75 | % | 75 | % | ||||||
For the 2013 annual incentive compensation, the potential payout incentives for Messrs. Dunkel, Liberatore, Kelly, Ettore and Marmon are separate and distinct from that of Ms. Mitchell and Mr. Neal as detailed below.
| 2016 Target Annual Incentive | 2016 Target Annual Incentive Allocations | |||||||||||||||||||
| Name | 2016 Salary | % | $ | Revenue (40%) | EPS (40%) | MBO (20%) | ||||||||||||||
| David L. Dunkel | $ | 800,000 | 100 | % | $ | 800,000 | $ | 320,000 | $ | 320,000 | $ | 160,000 | ||||||||
| Joseph J. Liberatore | $ | 600,000 | 90 | % | $ | 540,000 | $ | 216,000 | $ | 216,000 | $ | 108,000 | ||||||||
| David M. Kelly | $ | 480,000 | 90 | % | $ | 432,000 | $ | 172,800 | $ | 172,800 | $ | 86,400 | ||||||||
| Kye L. Mitchell | $ | 480,000 | 90 | % | $ | 432,000 | $ | 172,800 | $ | 172,800 | $ | 86,400 | ||||||||
| Peter M. Alonso | $ | 375,000 | 50 | % | $ | 187,500 | $ | 75,000 | $ | 75,000 | $ | 37,500 | ||||||||
| Jeffrey T. Neal | $ | 425,000 | 85 | % | $ | 361,250 | $ | 144,500 | $ | 144,500 | $ | 72,250 | ||||||||
| Total Annual Revenue (in millions) | Payout % of Target | Diluted EPS | Payout % of Target | |||
| Threshold | $1,385 | 25% | $1.67 | 25% | ||
| Target | $1,425 | 100% | $1.75 | 100% | ||
| Maximum | $1,478 | 200% | $1.90 | 200% | ||
Total Revenue (in millions) | Payout % of Target for NEO Group A | Payout % of Target for NEO Group B | EPS | Payout % of Target for NEO Group A | Payout % of Target for NEO Group B | |||||||
| $1,145 | 25% | 25% | $0.94 | 25% | 25% | |||||||
| $1,148 | 39% | 30% | $0.95 | 45% | 33% | |||||||
| $1,152 | 54% | 36% | $0.96 | 65% | 41% | |||||||
| $1,155 | 68% | 42% | $0.97 | 85% | 49% | |||||||
| $1,159 | 82% | 48% | $0.98 | 105% | 57% | |||||||
| $1,163 | 96% | 54% | $0.99 | 125% | 65% | |||||||
| $1,166 | 111% | 60% | $1.00 | 140% | 72% | |||||||
| $1,170 | 125% | 65% | $1.01 | 155% | 79% | |||||||
| $1,174 | 136% | 70% | $1.02 | 170% | 86% | |||||||
| $1,177 | 146% | 75% | $1.03 | 185% | 93% | |||||||
| $1,181 | 157% | 80% | $1.04 | 200% | 100% | |||||||
| $1,185 | 168% | 85% | ||||||||||
| $1,189 | 179% | 90% | ||||||||||
| $1,193 | 189% | 95% | ||||||||||
| $1,197 | 200% | 100% |
a result, did not make annual incentive payments for Performance Incentive achievement.
For purposes of the calculation of the Individual Bonus, the Committee considered each individual’s accomplishments business unit performance and the overall performance of the Firm. Specifically for Ms. Mitchell and Mr. Neal, Kforce does not publicly disclose the business unit-specific performance goals that are used to calculate the Individual Bonuses. Our business unit plans are highly confidential and the disclosure of this information would likely provide third-parties and competitors with confidential insights into our internal planning processes, which would cause competitive harm to us. To illustrate the difficulty of meeting the performance goals for business unit revenue, only Ms. Mitchell of the NEO Group B members met her revenue target in 2013. Our business unit performance goals are based on two metrics: total annualmanagement business unit revenueobjectives and the maintenance of specific operating margins.overall operational performance. As with the other annual incentivePerformance Incentive goals, the Compensation Committee strives to set the business unit performanceindividual goals for NEO Group B members’ Individual Bonuses at levels intended to effectively motivate our NEOs to superior operational performance without encouraging unreasonable risk. We believeDuring 2016, the Firm undertook several actions to support our performance goals in recent years have been, and will continue to be, challenging.
No Individual Bonus was earned by Messrs. Dunkel, Liberatore, Kelly, Neal, Ettore or Marmon. Ms. Mitchell received a payout percentage of 168% based on her business unit performance.
The following table provides a summarylonger-term strategy. Some of the key actions driven by certain of our NEOs were: (1) to consolidate and streamline our sales and delivery organization, which has allowed us to more effectively deploy our talent to meet customer needs, (2) to rebalance our revenue-generating talent between sales and delivery to better position our sales and delivery teams to operate with greater consistency and discipline to improve the partnership with our clients, candidates and consultants, (3) to effectively focus on our sales transformation initiative through a significant investment to enhance our sales methodology and train our sales associates to engage in more strategic conversations and shape solutions with our customers. These achievements resulted in maximum MBO Incentive achievement for certain of our NEOs.
Name | Annual Incentive Compensation Earned | |||
David Dunkel, CEO | $ | 124,800 | ||
Joseph Liberatore, President | $ | 84,240 | ||
David Kelly, Chief Financial Officer | $ | 35,100 | ||
Kye Mitchell, Chief Operations Officer—East | $ | 526,821 | ||
Jeffrey Neal, Chief Operations Officer—West | $ | 23,250 | ||
Michael Ettore (1) | $ | 0 | ||
Randal Marmon (1) | $ | 0 | ||
|
| |||
| $ | 794,211 | |||
|
| |||
| 2016 Achievement as a % of Target | 2016 Incentive Payouts | ||||||||||||||||||||
| Name | Target Annual Incentive | Revenue (40%) | EPS (40%) | MBO (20%) | Revenue | EPS | MBO | Total | |||||||||||||
| David L. Dunkel | $ | 800,000 | —% | —% | —% | $ | — | $ | — | $ | — | $ | — | ||||||||
| Joseph J. Liberatore | $ | 540,000 | —% | —% | —% | $ | — | $ | — | $ | — | $ | — | ||||||||
| David M. Kelly | $ | 432,000 | —% | —% | 200% | $ | — | $ | — | $ | 172,800 | $ | 172,800 | ||||||||
| Kye L. Mitchell | $ | 432,000 | —% | —% | 200% | $ | — | $ | — | $ | 172,800 | $ | 172,800 | ||||||||
| Peter M. Alonso | $ | 187,500 | —% | —% | 200% | $ | — | $ | — | $ | 75,000 | $ | 75,000 | ||||||||
| Jeffrey T. Neal (1) | $ | 361,250 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||
| (1) |
Each component of the Annual Incentive Bonus is calculated as follows: [(Base Salary) x (Target Multiplier for the Component) x (Percentage of Annual Incentive Bonus Allocated to the Component) x (Payout Percentage of Target for the Component)]. The 2013 annual incentive awards for Messrs. Dunkel, Liberatore, Kelly, Mitchell and Neal as a percentage of their respective 2013 base salaries were 16%, 14%, 12%, 176% and 8%, respectively.
Discretionary Bonus
Name David Dunkel, CEO Joseph Liberatore, President David Kelly, Chief Financial Officer Kye Mitchell, Chief Operations Officer—East Jeffrey Neal, Chief Operations Officer—West Michael Ettore (1) Randal Marmon (1) The value of the LTI pool for the awards, as well as the percentage of the pool allocated to each of the NEOs was determined as described in the following chart. There was a change in the percentage of the pool allocated to Mr. Kelly and Ms. Mitchell from 2015 to 2016, which reflected updated market median data, as shown below: Name David Dunkel, CEO Joseph Liberatore, President David Kelly, Chief Financial Officer Kye Mitchell, Chief Operations Officer – East Jeffrey Neal, Chief Operations Officer – West Michael Ettore Randal Marmon TSR Percentile Ranking 0-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% 91-100% Name David Dunkel, CEO Joseph Liberatore, President David Kelly, Chief Financial Officer Kye Mitchell, Chief Operations Officer—East Jeffrey Neal, Chief Operations Officer—West TSR Percentile Ranking 0-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% 91-100% The As noted previously within the “Executive Summary” section above, to ensure continued alignment of executive compensation with the Firm’sLong-Term IncentivesLTI performance results and as a result of the organizational realignment and other significant operational and financial achievements in 2013, the Committee approved a discretionary bonus for the Active NEOs for 2013.The following table provides a summary of the discretionary bonus and the bonus as a percentage of base salary by NEO for FY 2013: Discretionary Bonus % of Base Salary $ 1,075,000 134 % $ 600,000 100 % $ 300,000 100 % $ 100,000 33 % $ 276,750 92 % $ 0 0 % $ 0 0 % $ 2,351,750 (1)Messrs. Ettore and Marmon received no annual incentive compensation as a result of their termination in November 2013.Performance-Based LTIKforce grants performance-based LTIs to its NEOs to help ensure Kforce’s long-term success andobjectives are set to align executive and shareholder interests. The LTIsinterests and are granted based on relative TSR performance against the achievement of pre-establishedtwo peer groups described above.1. For all NEOs, LTI performance objectives are based on Kforce’s TSR performance over a three-year measurement period relative to the Industry Peer Group; 2. For only the CEO and the President, LTI performance objectives are also based on Kforce’s TSR performance over a three-year measurement period relative to the Separately Designated Peer Group. LTI payouts for performance goals approvedrelative to the Industry Peer Group are awarded by the Committee relatingin the form of a restricted stock grant that has a five-year time-based vesting period. The CEO’s and the President’s LTI payouts for performance relative to the Separately Designated Peer Group are subject to a potential downward adjustment (reduction or elimination) to the value of the restricted stock award, or a supplement to their restricted stock awards with a cash component. Actual payout levels for the LTI may be above or below target based on actual performance, and require minimum performance thresholds for any payout to occur.The LTI restricted stock awards have historically been granted on the first business day of our Common Stock relative to our industry peer group in existence at the timeyear following the end of grant. As a result ofthe performance period, which has created a misalignment ofbetween the SCT’sSummary Compensation Table (SCT) presentation of NEO compensation and earned NEO compensation in any given year. Therefore, we include discussions around two years of LTI restricted stock awards (so that both the SCT presentation of equity awards granted during a given year and the following twoearned LTI compensation can be explained):1. Awards earned in 2015 related to the three-year measurement period January 1, 2013 through December 31, 2015, which were granted on January 4, 2016 and previously discussed in our 2016 proxy statement; and2. Awards earned in 2016 related to the three-year measurement period January 1, 2014 through December 31, 2016.In order to rectify the misalignment created by our historical grant date practices and to create a clearer and more transparent picture of our NEO compensation in the future, the Committee made a change in the timing of the grant date for the LTI restricted stock awards. Rather than granting the restricted stock awards are presented below: (i)for the January 2013 LTI which related to the 2012 performance period and was granted under the 2012 NEO Compensation Framework; and (ii) the January 2014 LTI which related to the 2013 performance period and was granted under the 2013 to 2015 NEO Compensation Framework.January 2013 Grants Based on Performance Period Ending in 2012As it relates to the 2012 NEO Compensation Framework approved by the Committee, the targeted LTI allocation, related to the 2012 performance period for Messrs. Liberatore, Ettore and Marmon, included a combination of stock appreciation rights, performance-accelerated restricted stock and restricted stock, which the Committee believes closely aligns with increases in shareholder value. For Mr. Dunkel, the Committee used its discretion in 2012 and eliminated the LTI award related to the 2012 performance period to conform to our objective of market median compensation. LTIs granted to our NEOs, excluding the CEO, in January 2013 as it related to the 2012 performance were tied directly to the performance of our Common Stock in relation to our industry peer group, up to a maximum of 4% of our common shares outstanding in order to limit potential shareholder dilution from our equity plans and better manage share reserves.For the non-NEO internal executive committee members, including Messrs. Kelly and Neal and Ms. Mitchell, the Committee based the LTI for the 2012 performance period on Kforce’s one year TSR percentile ranking as compared to the 2012 Industry Peer Group and a pre-established LTI pool ranging from $0 to $9 million. The ultimate award for each non-NEO internal executive committee member was based on the percentage of the LTI pool allocated to the member. The percentage of the LTI pool allocated to each of Messrs. Kelly and Neal and Ms. Mitchell was 7%.As part of the continuous review and comparison of NEO compensation to its industry peer group as it relates to the performance-based LTI grant made in January 2013, the Committee determined to add an additional limitation to that which already existed, in the form of a cap based on common shares outstanding, to the 2012 NEO compensation plan. The Committee placed a maximum cap on the value of long-term incentives (both in the form of equity and an alternative long-term incentive) that could be awarded in January 2013 based on 2012 performance. The cap further limits total compensation to be earned by the CEO and, in the aggregate, all members of its internal executive committee, including the NEOs. The maximum cap limits the value of long-term incentives to 0.50% of the market capitalization of Kforce Inc. for the CEO. In the aggregate, all internal employees, including the NEOs, will be restricted to a total of 2.00% of the market capitalization of Kforce Inc. For purposes of the January 2013 grant, the market capitalization was computed using the average daily closing stock price in December of 2012 and the shares outstanding using the latest publicly disclosed number of shares outstanding prior toending December 31, 2012.Any LTI grants ultimately awarded related to the 2012 performance period were granted in January of 2013.During 2012, the performance of our Common Stock ranked 6th within our 2012 Industry Peer Group, which resulted in a suggested equity grant pool of 2.00% of our common shares outstanding for our NEOs. The Committee authorized the grant at the 2.00% level based on this performance for Messrs. Liberatore, Ettore and Marmon. Based on 2012 performance, Mr. Dunkel was eligible to receive a grant having a value of $2,581,972; however, as previously discussed, the Committee used its discretion and eliminated the LTI award related to the 2012 performance. For the non-NEO internal executive committee members, including Messrs. Kelly and Neal and Ms. Mitchell, the Committee certified an LTI pool achievement of $4,000,000 for purposes of the allocation of the performance-based LTI grant.Grants made for 2012 shareholder return performance against our 2012 Industry Peer Group were made2016 on the first business day of 20132017, the Committee shifted the grant date forward to the last day of the performance period. This administrative change resulted in two annual LTI restricted stock grants being completed during the year ended December 31, 2016.Both the 2015 LTI awards and the 2016 LTI awards are shown as 2013 compensation (rather than as 2012 compensation)included in the Stock Awards column2016 SCT in this proxy statement despite the fact that the 2015 LTI awards were earned based on prior year performance objectives. This simple change caused all of our NEOs’ total compensation figures in the SCT to be higher in 2016 by the amount of the SCT (column (e))2016 LTI award. 2016 is the only year for such an occurrence as it is expected that future years, beginning in conformance with SEC rules, even though the grants are2017, will have only one LTI restricted stock grant.The LTI compensation was based on 2012relative TSR performance over the corresponding measurement period versus the Industry Peer Group (which had no changes between 2015 and 2016). The dollar amount of the payouts were calculated from a scaled LTI pool, which the Committee set at a dollar amount not to exceed the lesser of 2% market capitalization or $13 million in the aggregate. In essence, the Committee provides higher awards for better relative TSR performance and lower awards for lower TSR performance.Industry Peer Group Relative TSR Rank: 1 2 3 4 5 6-8 9 Industry Peer Group Relative TSR Percentile Ranking : 100 87 75 62 50 37-12 0 Total Value of LTI Pool ($ in Millions): $13 $12 $11 $10 $9 $8 None % of LTI Pool Based on TSR Rank/Percentile Ranking David L. Dunkel 16.7% 16.7% 16.7% 16.7% 16.7% 15.0% —% Joseph J. Liberatore 13.3% 13.3% 13.3% 13.3% 13.3% 12.0% —% David M. Kelly 2013-2015 Measurement Period 7.5% 7.3% 7.0% 6.6% 6.2% 5.6% —% 2014-2016 Measurement Period 8.3% 8.2% 8.2% 8.1% 8.1% 7.5% —% Kye L. Mitchell 2013-2015 Measurement Period 7.5% 7.3% 7.0% 6.6% 6.2% 5.6% —% 2014-2016 Measurement Period 8.1% 7.9% 7.7% 7.5% 7.2% 6.6% —% Peter M. Alonso 7.5% 7.3% 7.0% 6.6% 6.2% 5.6% —% Jeffrey T. Neal 7.5% 7.3% 7.0% 6.6% 6.2% 5.6% —% These percentages were selected to align target pay to market median compensation. The remainder of the LTI pool is allocated to other employees below the NEO level, depending on their level of management.In 2016, the LTI compensation for our CEO and President was also based on Kforce’s TSR performance relative to our 2016 Separately Designated Peer Group during a measurement period of January 1, 2014 through December 31, 2016. Based on this separate performance metric, there was a potential adjustment to our CEO’s and President’s respective LTI restricted stock awards, either by a reduction or elimination, or by a supplement to their restricted stock awards with a cash LTI component. The adjustment was based on a performance multiplier determined by our TSR performance percentile ranking within the 2016 Separately Designated Peer Group. This performance metric for LTI compensation was incorporated into the compensation framework for our CEO and President to align pay to the performance of a broader set of peers which are reasonably similar in terms of size but may not be in the same industry. Additionally, the LTI compensation at the highest performance achievement levels was intentionally structured to be paid in cash to preserve equity for grants to other key employees and in recognition that the CEO and President already have substantial equity holdings to align their interests with shareholders.The performance multipliers were structured as follows:Separately Designated Peer Group Relative TSR Percentile Ranking CEO Performance Multiplier President Performance Multiplier LTI Compensation Impact 0-25 0% 0% No Payout of Restricted Stock Award 26-50 50% 75% Reduction in Restricted Stock Award 51-75 100% 100% No Change in Restricted Stock Award 76-100 150% 125% Additional Cash LTI Payout The table below illustrates the key performance results and resulting grant information for each of the awards.Measurement Period TSR Performance Industry Peer Group Relative TSR Rank Separately Designated Peer Group Relative TSR Percentile Ranking Resulting LTI Pool Total Dollar Value of Pool Utilized Grant Date of Restricted Stock Award Grant Date Closing Stock Price 2013-2015 84% 3rd 81st $11 million $11 million January 4, 2016 $23.91 2014-2016 20% 4th 57th $10 million $9.2 million December 31, 2016 $23.10 The total dollar value of the pool utilized for the 2014-2016 measurement period was less than the full $10 million due to changes within the Firm’s allocation to other employees below the NEO level.The tables below illustrate the LTI restricted stock payout amounts (including the number of shares and the grant date fair value), which are included in the 2016 SCT. The Committee granted onlybelieves the restricted stock to Messrs. Liberatore, Kelly, Neal, Ettore, and Marmon and Ms. Mitchell. The restricted stock vestsawards’ vesting requirements of 20% annually over a period of five years with 20% of the award vesting annually, which the Committee believes further aligns compensation with our long-term performance and our shareholders’ interests, and acts as a retention vehicle for these executives.The actual equity grants relating to 2012 performance made on January 2, 2013, at a price of $14.58 (which represented the closing price on that date), were as follows: Type of Award # of Shares Grant Date
Fair Value Discretionary
Reduction (Value) N/A N/A $ 0 $ (2,581,972 ) Restricted Stock 80,624 $ 1,175,498 $ 0 Restricted Stock 19,204 $ 279,994 $ 0 Restricted Stock 19,204 $ 279,994 $ 0 Restricted Stock 19,204 $ 279,994 $ 0 Restricted Stock 45,223 $ 659,351 $ 0 Restricted Stock 45,223 $ 659,351 $ 0 January 2014 Grants Based on Performance Period Ending in 2013For the 2013 to 2015 framework, the Committee made significant modifications to the structure of the performance-based LTI. For the performance period ending in 2013, the performance-based LTIs were granted in the form of equity, excluding the CEO. The performance-based LTI awards were based on a pre-defined dollar amount not to exceed the lesser of 2% of market capitalization or $9 million, in the aggregate. The dollar amount of the performance-based LTI pool was based upon Kforce’s three-year TSR relative to the selected industry peer group. The performance-based LTI for 2013 was targeted at the median of competitive practices within the broader market for similarly sized companies, including Kforce’s 2013 Industry Peer Group and the 2013 Separately Designated Peer Group, at the time the compensation plan was approved.For the 2013 performance-based LTI, the pre-defined value of the LTI pool was based upon Kforce’s three-year TSR relative to our 2013 Industry Peer Group. The measurement period for the three-year TSR was from January 1, 2011 through December 31, 2013. Based upon the percentile ranking of Kforce within the 2013 Industry Peer Group, the value of the LTI pool (absent the 2% market capitalization limit falling below) was as follows: Total Payout Value of LTI
Pool $ 0 $ 4,000,000 $ 4,000,000 $ 4,000,000 $ 4,000,000 $ 5,000,000 $ 6,000,000 $ 7,000,000 $ 8,000,000 $ 9,000,000 While the ultimate award is subject to the Committee’s discretion, the percentage of the pool, as determined based on the table above, which was allocated to each of the NEOs, is as follows: 2013-2015 Measurement Period Awards (Granted January 4, 2016)Name # of Shares Grant Date Fair Value David L. Dunkel 76,746 $ 1,834,997 Joseph J. Liberatore 61,202 $ 1,463,340 David M. Kelly 32,100 $ 767,511 Kye L. Mitchell 32,100 $ 767,511 Peter M. Alonso 32,100 $ 767,511 Jeffrey T. Neal 32,100 $ 767,511 2014-2016 Measurement Period Awards (Granted December 31, 2016)Name # of Shares Grant Date Fair Value David L. Dunkel 72,294 $ 1,669,991 Joseph J. Liberatore 57,792 $ 1,334,995 David M. Kelly 35,173 $ 812,496 Kye L. Mitchell 32,468 $ 750,011 Peter M. Alonso 28,571 $ 659,990 Jeffrey T. Neal (1) N/A N/A Name%Mr. Neal received no award for the 2014-2016 measurement period as a result of LTI PoolDavid Dunkel, CEO0% Joseph Liberatore, President12% David Kelly, Chief Financial Officer7% Kye Mitchell, Chief Operations Officer—East7% Jeffrey Neal, Chief Operations Officer—West7% his resignation effective August 31, 2016The performance-based LTI grant generally consists of restricted stockFor 2016, Messrs. Dunkel and is allocated to the NEOs as noted above. The CEO did not participate in the equity-based LTI plan for the 2013 performance period and instead participated in a cash-based annual performance bonus plan as discussed in detail below.During the period from January 1, 2011 to December 31, 2013, the performance of Kforce’s TSR of 37.3% ranked 6th and achieved a percentile ranking of 37.5% versus our 2013 Industry Peer Group, which resulted in a formulaic LTI pool of $4,000,000. The Committee authorized the grant based on this performance. Grants made for the performance period ending in 2013 were made on the first business day of 2014 and are not shown as 2013 compensation in the Stock Awards column of the SCT (column (e)) in conformance with SEC rules even though the grants are based on a performance period ending in 2013.The Committee granted restricted stock to all NEOs. The restricted stock will vest over a period of five years with 20% of the award vesting annually, which the Committee believes further aligns compensation with our long-term performance and our shareholders’ interests, and acts as a retention vehicle for these executives.The actual equity grants relating to the performance period ending in 2013 were made on January 2, 2014, at a price of $20.12 (which represented the closing price on that date), were as follows: Type of Award # of Shares Grant Date
Fair Value N/A $ 0 Restricted Stock 23,857 $ 480,003 Restricted Stock 13,917 $ 280,010 Restricted Stock 13,917 $ 280,010 Restricted Stock 13,917 $ 280,010 CEO Cash-Based Three-Year TSR BonusAs noted previously, in lieu of an equity-based LTI award, the CEO participated in a cash-based long-term performance plan which provided for varying levels of payouts based on Kforce’s three-year TSR relative to its 2013 Industry Peer Group, up to a maximum payout of $1 million. In order for the CEO to receive any payout under this plan, Kforce’s three-year TSR must be at or above the 70th percentile ranking of a separately designated peer group, which was recommended by PM&P and approved by the Committee. The measurement period for both three-year TSR calculations was from January 1, 2011 through December 31, 2013. Theseparately designated peer group is intended to be representative of a broader competitive market. The payout schedule for the CEO based on Kforce’s relative three-year TSR percentile ranking versus the 2013 Industry Peer Group is as follows: CEO TSR Bonus $ 0 $ 200,000 $ 300,000 $ 400,000 $ 500,000 $ 600,000 $ 700,000 $ 800,000 $ 900,000 $ 1,000,000 As mentioned above, Kforce’s TSR must be at or above the 70th percentile ranking of a broader industry peer group, which was approved by the Committee in January 2013, and includes the following companies:2013 Separately Designated Peer Group:On Assignment, Inc.CBIZ, Inc.Maximus, Inc.ICF International Inc.Insperity, Inc.Hudson Global, Inc.CDI CorporationKorn Ferry InternationalTrueBlue Inc.Huron Consulting Group Inc.Dun & Bradstreet CorporationCiber Inc.Igate CorporationMantech International CorporationNavigant Consulting Inc.Sapient CorporationFTI Consulting, Inc.Heidrick & Struggles International Inc.2013 Cash-Based Three-Year TSR Bonus ResultsDuring the period from January 1, 2011 to December 31, 2013, Kforce’s three-year TSR ranked 6th achieving a percentile ranking of 37.5% versus our 2013 Industry Peer Group. This resulted in a potential cash-based TSR bonus for the CEO of $400,000. However, Kforce’s three-year TSR as compared to the 2013 Separately Designated Peer Group failed to achieve a 70th percentile ranking as required by the plan for payout of the 2013 cash-based long-term incentive. As a result, Mr. DunkelLiberatore received no payout under this plan.2013 cash LTI payout.Earned Compensation Table for Corresponding Year of Performance TableWe believe the SCT’s presentation in the SCT does not accurately reflectshow the actual compensation earned by the NEOs in any given year.year based on that year’s performance. We believe the misalignment between the disclosures in the SCT and the actual earned compensation results from the following:LTIs that are awarded annuallyLTI restricted stock grants historically occurring on the first business day of each fiscal year reflectwere based on our relative TSR performance versusfor a measurement period ending in the Industry Peer Group for the immediate prior fiscal year or prior three fiscal years.year. As a result, the value isof the awards are reflected as compensation in the SCT in the year of grant rather than in the performance year to which performance relates.On January 3, 2011, the 2011 annual incentive awards were granted in the form of performance-based restricted stock rather than in the traditional cash method. These performance-based restricted stock were granted at superior performance levels (400% of target for the bonus attributable to total Firm revenues and EPS and 100% of target for the Individual Bonus) with a premium of 110%, which were subject to forfeiture based on certain performance measures for 2011. In early 2012, more than half of the performance-based restricted stock originally granted in 2011 was forfeited based on the actual level of attainment of the 2011 performance measures certified by the Committee. Despite these large forfeitures, however, the gross grant date fair value of the performance-based restricted stock granted on January 3, 2011award is reflected within the SCT for 2011. As a result, we do not believe the value of the Stock Awards column of the SCT (column (e)) properly reflects the actual value earned for performance in 2011 because the forfeitures that occurred in 2012 are not permitted to be taken into account.We have excluded anyThe values from the pension and other compensation columns of the SCT because they are not performance-based and change based on factors unrelated to performance such as changes in long-term interest rates (a key factor in calculating retirement benefit outcomes)pension values).
As a result of the above, we
As a result of the significant actions taken by the Committee in 2012 on NEO compensation, as reflected within the 2013 to 2015 Compensation Framework, the ECT below shows a decline in NEO total direct compensation since 2011.
EARNED COMPENSATION FOR CORRESPONDING YEAR OF PERFORMANCE
For Fiscal Years Ended December 31, 2013, 2012 and 2011
| Earned Compensation for Corresponding Year of Performance | Financial and Shareholder Performance | |||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Annual Incentive and Bonus (1) | Long-term Incentive (2) | Total Direct Compensation (3) | Revenue (4) | EPS (4) | TSR (5) | Relative TSR Rank Vs. Peer Group | |||||||||||||||||||||||
David Dunkel | 2013 | $ | 800,000 | $ | 1,199,800 | $ | 0 | $ | 1,999,800 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
CEO | 2012 | $ | 750,000 | $ | 0 | $ | 0 | $ | 750,000 | $ | 1,194,479 | $ | 0.83 | 24.4 | % | 6th | ||||||||||||||||
| 2011 | $ | 750,000 | $ | 1,155,002 | $ | 4,155,763 | $ | 6,060,765 | $ | 1,110,919 | $ | 0.70 | (23.8 | )% | 5th | |||||||||||||||||
Joseph Liberatore | 2013 | $ | 600,000 | $ | 684,240 | $ | 480,003 | $ | 1,764,243 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
President | 2012 | $ | 450,000 | $ | 608,175 | $ | 1,175,498 | $ | 2,233,673 | $ | 1,194,479 | $ | 0.83 | 24.4 | % | 6th | ||||||||||||||||
| 2011 | $ | 450,000 | $ | 589,058 | $ | 1,468,564 | $ | 2,507,622 | $ | 1,110,919 | $ | 0.70 | (23.8 | )% | 5th | |||||||||||||||||
David Kelly | 2013 | $ | 300,000 | $ | 335,100 | $ | 280,010 | $ | 915,110 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
Kye Mitchell | 2013 | $ | 300,000 | $ | 626,821 | $ | 280,010 | $ | 1,206,831 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
Chief Operations Officer—East | ||||||||||||||||||||||||||||||||
Jeffrey Neal | 2013 | $ | 300,000 | $ | 300,000 | $ | 280,010 | $ | 880,010 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
Chief Operations Officer—West | ||||||||||||||||||||||||||||||||
Michael Ettore (6) | 2013 | $ | 350,000 | $ | 0 | $ | 0 | $ | 350,000 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
| 2012 | $ | 350,000 | $ | 364,875 | $ | 659,351 | $ | 1,374,226 | $ | 1,194,479 | $ | 0.83 | 24.4 | % | 6th | |||||||||||||||||
| 2011 | $ | 350,000 | $ | 216,559 | $ | 823,727 | $ | 1,390,286 | $ | 1,110,919 | $ | 0.70 | (23.8 | )% | 5th | |||||||||||||||||
Randal Marmon (6) | 2013 | $ | 350,000 | $ | 0 | $ | 0 | $ | 350,000 | $ | 1,151,887 | $ | 0.84 | 37.3 | % | 6th | ||||||||||||||||
| 2012 | $ | 350,000 | $ | 372,750 | $ | 659,351 | $ | 1,382,101 | $ | 1,194,479 | $ | 0.83 | 24.4 | % | 6th | |||||||||||||||||
| 2011 | $ | 350,000 | $ | 288,750 | $ | 823,727 | $ | 1,462,477 | $ | 1,110,919 | $ | 0.70 | (23.8 | )% | 5th | |||||||||||||||||
| Earned Compensation for Corresponding Year of Performance | Financial and Shareholder Performance | |||||||||||||||||||||||
| Name and Principal Position | Year | Salary | Annual Incentive (1) | Long-term Incentive (2) | Total Direct Compensation (3) | (Adjusted) Revenue (4) | (Adjusted) EPS (4) | 3 Year TSR Performance | TSR Rank in Industry Peer Group | |||||||||||||||
| David L. Dunkel, | 2016 | $ | 800,000 | $ | — | $ | 1,669,991 | $ | 2,469,991 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| Chief Executive Officer | 2015 | $ | 800,000 | $ | 940,000 | $ | 2,752,497 | $ | 4,492,497 | $ | 1,319,238 | $ | 1.52 | 84.0 | % | 3rd | ||||||||
| 2014 | $ | 800,000 | $ | 3,258,000 | $ | 2,360,001 | $ | 6,418,001 | $ | 1,319,937 | $ | 1.24 | 116.4 | % | 3rd | |||||||||
| Joseph J. Liberatore, | 2016 | $ | 600,000 | $ | — | $ | 1,334,995 | $ | 1,934,995 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| President | 2015 | $ | 600,000 | $ | 634,500 | $ | 1,829,173 | $ | 3,063,673 | $ | 1,319,238 | $ | 1.52 | 84.0 | % | 3rd | ||||||||
| 2014 | $ | 600,000 | $ | 2,152,400 | $ | 2,079,993 | $ | 4,832,393 | $ | 1,319,937 | $ | 1.24 | 116.4 | % | 3rd | |||||||||
| David M. Kelly, | 2016 | $ | 480,000 | $ | 172,800 | $ | 812,496 | $ | 1,465,296 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| Chief Financial Officer | 2015 | $ | 375,000 | $ | 330,469 | $ | 767,511 | $ | 1,472,980 | $ | 1,319,238 | $ | 1.52 | 84.0 | % | 3rd | ||||||||
| 2014 | $ | 375,000 | $ | 1,247,750 | $ | 1,451,498 | $ | 3,074,248 | $ | 1,319,937 | $ | 1.24 | 116.4 | % | 3rd | |||||||||
| Kye L. Mitchell, | 2016 | $ | 480,000 | $ | 172,800 | $ | 750,011 | $ | 1,402,811 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| Chief Operations Officer | 2015 | $ | 350,000 | $ | 257,344 | $ | 767,511 | $ | 1,374,855 | $ | 1,319,238 | $ | 1.52 | 84.0 | % | 3rd | ||||||||
| 2014 | $ | 350,000 | $ | 370,625 | $ | 1,451,498 | $ | 2,172,123 | $ | 1,319,937 | $ | 1.24 | 116.4 | % | 3rd | |||||||||
| Peter M. Alonso, | 2016 | $ | 375,000 | $ | 75,000 | $ | 659,990 | $ | 1,109,990 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| Chief Talent Officer | ||||||||||||||||||||||||
| Jeffrey T. Neal, (5) | 2016 | $ | 283,333 | $ | — | $ | — | $ | 283,333 | $ | 1,319,706 | $ | 1.25 | 20.0 | % | 4th | ||||||||
| Chief Marketing Officer | 2015 | $ | 350,000 | $ | 496,344 | $ | 767,511 | $ | 1,613,855 | $ | 1,319,238 | $ | 1.52 | 84.0 | % | 3rd | ||||||||
| 2014 | $ | 350,000 | $ | 783,125 | $ | 1,451,498 | $ | 2,584,623 | $ | 1,319,937 | $ | 1.24 | 116.4 | % | 3rd | |||||||||
| (1) | For |
| (2) | Reflects a realignment of equity LTI awards |
| (3) | Total direct compensation is the sum of salary, annual incentive and |
| (4) | Revenue presented in thousands ($000s). |
Modifications to the 2013 to 2015 NEO Compensation Framework
As discussed above, the Committee changed the NEO compensation framework as a result of the vote against Say-on-Pay during the 2012 annual meeting. These changes were reflected in the 2013 to 2015 NEO Compensation Framework and were effective for fiscal year 2013. After review of the final results for 2013, it was apparent to the Committee, while the overall changes achieved its goal of reducing compensation, the changes made to CEO compensation were unfairly penalizing the CEO and no longer competitive with market practices. As a result, the Committee reviewed the CEO compensation plan and determined a modification to the structure was necessary. The modification, as approved by the Committee in February 2014, eliminates the CEO Cash-Based Three-Year TSR Bonus and reinstates the equity-based LTI for the CEO similar to the other NEOs, but on a modified basis. Other than the customary review and increases in NEO base salaries, no other changes will be made to any other component of the 2013 to 2015 NEO Compensation Framework for any NEO.
In lieu of the CEO Cash-Based Three-Year TSR Bonus, the following equity-based LTI will be established for the CEO for 2014.
CEO Equity-Based LTI
The new CEO LTI plan will be will be granted primarily in the form of equity beginning with the 2014 performance period. The CEO award will include the following components:
A target allocation of 15% of the performance-based LTI pool, the value of which will be based upon Kforce’sthree-year TSR relative to the selected industry peer group;
A performance multiplier, ranging from 0% to 150%, based on Kforce’s three-year TSR percentile ranking versus a separately designated peer group; and
Amounts up to a performance multiplier of 100% of the outcome versus the selected industry peer group will be paid in equity, which is identical to how each of the other NEOs receives their equity grants. Any amounts resulting from a performance multiplier of greater than 100% will be paid in cash in order to preserve the shares under the 2013 Stock Incentive Plan.
The performance multiplier based on the three-year TSR percentile ranking of Kforce versus a separately designated peer group will be as follows:
| ||||||
The CEO’s potential maximum long-term incentive under the plan above would be $2,025,000, which would consist of $1,350,000 of equity and $675,000 of cash.
During 2013, the Committee decided to limit grants during
The Compensation Committee recognizes that it exceeded its targeted annual rate during the period from January 1, 2013 to December 31, 2013 as a result of a discretionary grant made to a larger group of Kforce management (non-NEOs) in recognition of their anticipated significant role in the newly realigned organization but fully expects to meet the commitment over the full three year commitment period due to the structure of its LTI plan which limits total annual grants to a maximum of $9 million or 439,883 full value awards (based on Kforce’s closing stock price $20.46 on December 31, 2013).
Information
Executive Benefit Plans
The following benefit plans discussed below are available to our NEOs. The Committee takes into account the benefits expected to be received under the plans described below when it calculates overall compensation for senior executives.
Kforce Nonqualified Deferred Compensation Plan
Kforce maintains a nonqualified deferred compensation plan in which eligible management and highly compensated key employees, as defined by IRS regulations, may elect to defer part of their compensation to later years. Amounts deferred are indexed to investment options selected by the eligible employees and increase or decrease in value based upon the performance of the selected investments. Eligible employees are permitted to change investment options and scheduled distributions annually. Kforce has insured the lives of the participants in the deferred compensation plan to assist in the funding of the deferred compensation liability. Employer matching contributions to the nonqualified deferred compensation plan are discretionary and are funded annually as approved by the Board of Directors. Only Messrs. Kelly and Neal and Ms. Mitchell, among the NEOs, made a new contribution to the deferred compensation plan during 2013 and received a matching contribution as shown in the Summary Compensation and Nonqualified Deferred Compensation Tables.
Kforce Inc. Supplemental Executive Retirement Plan
During 2006, Kforce adopted a Supplemental Executive Retirement Plan (“SERP”) for all NEOs. Of the Active NEOs, only Messrs. Dunkel and Liberatore participate in the SERP. The Committee has determined to not allow any additional participants into the SERP. The primary goals of the SERP are to provide for retirement benefits, create an additional wealth accumulation opportunity and restore lost qualified pension benefits due to ERISA limitations on the contributions that can be made by NEOs to Kforce’s 401(k) plan. The SERP is funded entirely by Kforce, and benefits are taxable to the executive officer upon receipt and deductible by Kforce when paid. Benefits payable under the SERP are targeted at 45% of the covered executive officer’s average salary and cash bonus from the three years where the executive earned the highest salary and bonus during the last ten years of employment, which is subject to adjustment for early retirement and the participant’s vesting percentage. Benefits under the SERP are normally paid based on the lump sum present value but may be paid over the life of the covered executive officer or 10-year annuity, as elected by the covered executive officer upon commencement of participation in the SERP. Normal retirement age under the SERP is defined as age 65. Vesting under the plan is defined as 100% upon a participant’s attainment of age 55 and 10 years of service and 0% prior to a participant’s attainment of age 55 and 10 years of service. Full vesting also occurs if a participant with five years or more of service is involuntarily terminated by Kforce without cause or upon death, disability or a change in control. Certain conditions allow for early retirement as early as age 55. The benefits under the SERP are reduced for a participant who has not either reached age 62 and 10 years of service or age 55 and 25 years of service. The NEOs were not credited with any years of service prior to December 31, 2006, the effective date of the plans. On each anniversary of the effective date, each NEO is credited with a year of service.
Kforce Supplemental Executive Retirement Health Plan
During 2007, Kforce adopted a SERHP for all NEOs. Of the Active NEOs, only Messrs. Dunkel and Liberatore participate in the SERHP. During 2010, Messrs. Cocchiaro and Sutter were added to the SERHP. The Committee has determined to not allow any additional participants into the SERHP. The primary goal of the SERHP is to provide postretirement health and welfare benefits to all NEOs, if qualified and elected. The vesting and eligibility requirements mirror that of the SERP and no advance funding is required by Kforce or the participants. Under the terms of their respective employment agreements, if an NEO retires while employed by Kforce, and qualifies for retirement benefits under the SERP, then he may elect, on behalf of himself and his spouse, to participate in the SERHP.
The Committee believes the SERP and SERHP provide significant retention benefits for our NEOs.
Employment, Severance and Change in Control Agreements
Kforce has employment agreements with each of its NEOs, which provide for severance payments under certain termination circumstances, including termination following a change in control, as defined in the employment agreements. The Committee has determined that it is in Kforce’s best interest and that of its shareholders to recognize the contributions of the NEOs to Kforce’s business and to continue to retain the services of the NEOs. These agreements have been amended from time to time, most recently in December 2008 for purposes of bringing them into compliance with the applicable provisions of Section 409A of the Code and the Treasury Regulations and interpretive guidance issued thereunder. The specific amounts the NEOs would receive under the employment agreements are described in the “2013 Potential Payments Upon Termination or Change in Control” section below. The Committee believes the employment agreements are an essential component of the executive compensation program and are helpful
in attracting and retaining executive talent in a competitive market. The Committee periodically reviews the benefits provided under the employment agreements to determine that they continue to serve Kforce’s interests in providing significant retention benefits to these key executives, are consistent with market practice and are reasonable.
In 2009, the Committee resolved to not enter into any new employment agreements, or materially amend any existing employment agreements, with its executives that contain excise tax gross-up provisions going forward.
Perquisites and Other Personal Benefits
As indicated in the “All Other Compensation” column of the SCT, Kforce does not provide any perquisites or other personal benefits to its NEOs.
Kforce Nonqualified Deferred Compensation Plan | Kforce maintains a nonqualified deferred compensation plan in which eligible management and highly compensated key employees, as defined by IRS regulations, may elect to defer all or part of their compensation to later years. Amounts deferred are indexed to investment options selected by the eligible employees and increase or decrease in value based upon the performance of the selected investments. Eligible employees are permitted to change investment options and scheduled distributions annually. Kforce has insured the lives of certain participants in the deferred compensation plan to assist in the funding of the deferred compensation liability. Employer matching contributions to the nonqualified deferred compensation plan are discretionary and are funded annually as approved by the Board. Only Mr. Neal contributed to the deferred compensation plan during 2016 and received a matching contribution as shown in the Summary Compensation Table and Nonqualified Deferred Compensation table. |
| Kforce Inc. Supplemental Executive Retirement Plan | During 2006, Kforce adopted a Supplemental Executive Retirement Plan (SERP) for all NEOs. Of the Active NEOs, only Messrs. Dunkel and Liberatore participate in the SERP. The Committee previously determined to not allow any additional participants into the SERP. The primary goals of the SERP are to create an additional wealth accumulation opportunity, restore lost qualified pension benefits due to government limitations and retain our covered executive officers. The SERP will be funded entirely by Kforce, and benefits are taxable to the executive officer upon receipt and deductible by Kforce when paid. Benefits payable under the SERP upon the occurrence of a qualifying distribution event, as defined, are targeted at 45% of the covered executive officers’ average salary and annual incentive, as defined, from the three years in which the covered executive officer earned the highest salary and annual incentive during the last 10 years of employment, which is subject to adjustment for retirement prior to the normal retirement age and the participant’s vesting percentage. Benefits under the SERP are based on the lump sum present value but may be paid over the life of the covered executive officer or 10-year annuity, as elected by the covered executive officer upon commencement of participation in the SERP. Normal retirement age under the SERP is defined as age 65. Vesting under the plan is defined as 100% upon a participant’s attainment of age 55 and 10 years of service and 0% prior to a participant’s attainment of age 55 and 10 years of service. Full vesting also occurs if a participant with five years or more of service is involuntarily terminated by Kforce without cause or upon death, disability or a change in control. Certain conditions allow for early retirement as early as age 55. The benefits under the SERP are reduced for a participant who has not either reached age 62 and 10 years of service or age 55 and 25 years of service with a percentage reduction up to the normal retirement age. The NEOs were not credited with any years of service prior to December 31, 2006, the effective date of the plan. On each anniversary of the effective date, each NEO is credited with a year of service. The Committee believes the SERP provides significant retention benefits for the participants. |
| Kforce Supplemental Executive Retirement Health Plan | During 2007, Kforce adopted a Supplemental Executive Retirement Health Plan (SERHP) for all NEOs. The primary goal of the SERHP was to provide postretirement health and welfare benefits to all NEOs, if qualified and elected. The vesting and eligibility requirements mirrored that of the SERP and no advance funding was required by Kforce or the participants. During 2014, the Committee determined that as a result of increasing costs and risks associated with the SERHP, as well as the changing healthcare environment, the Firm should no longer offer retiree benefits to retired executives pursuant to the SERHP. The Firm settled and satisfied all obligations related to the SERHP by making a lump sum payment to all participants based upon actuarial valuations of the present value of the currently anticipated future obligation. |
| Employment, Severance and Change in Control Agreements | Kforce has employment agreements with each of its NEOs, which provide for severance payments under certain termination circumstances, including termination following a change in control, as defined in the employment agreements. The Committee has determined it is in Kforce’s and its shareholders’ best interests to recognize the contributions of the NEOs to Kforce’s business and to retain the NEOs’ services. These agreements have been amended from time to time, most recently in December 2008 for purposes of bringing them into compliance with the applicable provisions of Section 409A of the Code and the Treasury Regulations and interpretive guidance issued thereunder. The specific amounts the NEOs would receive under the employment agreements are described in the “Potential Payments Upon Termination or Change in Control” section below. The Committee believes the employment agreements are an essential component of the executive compensation program and are helpful in attracting and retaining executive talent in a competitive market. The Committee periodically reviews the benefits provided under the employment agreements to determine that they continue to serve Kforce’s interests in providing significant retention benefits to these key executives, are consistent with market practice and are reasonable. In 2009, the Committee resolved to not enter into any new employment agreements, or materially amend any existing employment agreements, with its executives that contain excise tax gross-up provisions going forward. |
| Perquisites and Other Personal Benefits | Kforce does not provide any perquisites or other personal benefits to its NEOs. |
Name and Principal Position (a) | Year (b) | Salary (1) (c) | Bonus (2) (d) | Stock Awards (3) (e) | Non-Equity Incentive Plan Compensation (4) (g) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5)(6) (h) | All Other Compensation (7) (i) | Total (j) | ||||||||||||||||||||||||
David Dunkel, | 2013 | $ | 800,000 | $ | 1,075,000 | $ | 0 | $ | 124,800 | $ | 299,043 | $ | 0 | $ | 2,298,843 | |||||||||||||||||
CEO | 2012 | $ | 750,000 | $ | 0 | $ | 4,023,238 | $ | 0 | $ | 1,291,615 | $ | 0 | $ | 6,064,853 | |||||||||||||||||
| 2011 | $ | 750,000 | $ | 0 | $ | 9,078,115 | $ | 0 | $ | 1,909,811 | $ | 0 | $ | 11,737,926 | ||||||||||||||||||
Joseph Liberatore, | 2013 | $ | 600,000 | $ | 600,000 | $ | 1,175,498 | $ | 84,240 | $ | 0 | $ | 0 | $ | 2,459,738 | |||||||||||||||||
President | 2012 | $ | 450,000 | $ | 0 | $ | 1,421,732 | $ | 608,175 | $ | 447,504 | $ | 0 | $ | 2,927,411 | |||||||||||||||||
| 2011 | $ | 450,000 | $ | 0 | $ | 3,647,343 | $ | 0 | $ | 729,608 | $ | 0 | $ | 4,826,951 | ||||||||||||||||||
David Kelly, Chief Financial Officer | 2013 | $ | 300,000 | $ | 300,000 | $ | 279,994 | $ | 35,100 | $ | 0 | $ | 0 | $ | 915,094 | |||||||||||||||||
Kye Mitchell, Chief Operations Officer—East | 2013 | $ | 300,000 | $ | 100,000 | $ | 279,994 | $ | 526,821 | $ | 0 | $ | 1,750 | $ | 1,208,565 | |||||||||||||||||
Jeffrey Neal, Chief Operations Officer—West | 2013 | $ | 300,000 | $ | 276,750 | $ | 279,994 | $ | 23,250 | $ | 0 | $ | 1,750 | $ | 881,744 | |||||||||||||||||
Michael Ettore | 2013 | $ | 350,000 | $ | 0 | $ | 659,351 | $ | 0 | $ | 0 | $ | 1,072,750 | $ | 2,082,101 | |||||||||||||||||
| 2012 | $ | 350,000 | $ | 0 | $ | 797,459 | $ | 364,875 | $ | 349,751 | $ | 1,700 | $ | 1,863,785 | ||||||||||||||||||
| 2011 | $ | 350,000 | $ | 0 | $ | 1,965,291 | $ | 0 | $ | 756,755 | $ | 1,381 | $ | 3,073,427 | ||||||||||||||||||
Randal Marmon | 2013 | $ | 350,000 | $ | 0 | $ | 659,351 | $ | 0 | $ | 0 | $ | 1,464,875 | $ | 2,474,226 | |||||||||||||||||
| 2012 | $ | 350,000 | $ | 0 | $ | 797,459 | $ | 372,750 | $ | 243,668 | $ | 8,555 | $ | 1,772,432 | ||||||||||||||||||
| 2011 | $ | 350,000 | $ | 0 | $ | 1,900,322 | $ | 0 | $ | 333,614 | $ | 5,716 | $ | 2,589,652 | ||||||||||||||||||
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5)(6) | All Other Compensation ($)(7) | Total ($) | ||||||||||||||||
| David L. Dunkel | 2016 | $ | 800,000 | $ | — | $ | 3,504,988 | $ | — | $ | — | $ | 1,450,087 | $ | 67,289 | $ | 5,822,364 | ||||||||
| Chief Executive Officer | 2015 | $ | 800,000 | $ | — | $ | 1,835,001 | $ | — | $ | 1,857,500 | $ | 1,181,046 | $ | 34,471 | $ | 5,708,018 | ||||||||
| 2014 | $ | 800,000 | $ | 1,710,000 | $ | — | $ | — | $ | 2,073,000 | $ | 1,907,904 | $ | 328,274 | $ | 6,819,178 | |||||||||
| Joseph J. Liberatore | 2016 | $ | 600,000 | $ | — | $ | 2,798,335 | $ | — | $ | — | $ | 197,109 | $ | 88,151 | $ | 3,683,595 | ||||||||
| President | 2015 | $ | 600,000 | $ | — | $ | 1,469,993 | $ | — | $ | 1,000,333 | $ | 313,855 | $ | 71,746 | $ | 3,455,927 | ||||||||
| 2014 | $ | 600,000 | $ | 1,110,000 | $ | 1,090,003 | $ | — | $ | 1,042,400 | $ | 583,175 | $ | 539,025 | $ | 4,964,603 | |||||||||
| David M. Kelly | 2016 | $ | 480,000 | $ | — | $ | 1,580,007 | $ | — | $ | 172,800 | $ | — | $ | 50,220 | $ | 2,283,027 | ||||||||
| Chief Financial Officer | 2015 | $ | 375,000 | $ | — | $ | 767,498 | $ | — | $ | 330,469 | $ | — | $ | 41,148 | $ | 1,514,115 | ||||||||
| 2014 | $ | 375,000 | $ | 684,000 | $ | 964,010 | $ | — | $ | 563,750 | $ | — | $ | 21,292 | $ | 2,608,052 | |||||||||
| Kye L. Mitchell | 2016 | $ | 480,000 | $ | — | $ | 1,517,522 | $ | — | $ | 172,800 | $ | — | $ | 50,220 | $ | 2,220,542 | ||||||||
| Chief Operations Officer | 2015 | $ | 350,000 | $ | — | $ | 767,498 | $ | — | $ | 257,344 | $ | — | $ | 41,148 | $ | 1,415,990 | ||||||||
| 2014 | $ | 350,000 | $ | — | $ | 964,010 | $ | — | $ | 370,625 | $ | — | $ | 21,292 | $ | 1,705,927 | |||||||||
| Peter M. Alonso | 2016 | $ | 375,000 | $ | — | $ | 1,427,501 | $ | — | $ | 75,000 | $ | — | $ | 48,420 | $ | 1,925,921 | ||||||||
| Chief Talent Officer | |||||||||||||||||||||||||
| Jeffrey T. Neal | 2016 | $ | 283,333 | $ | — | $ | 767,511 | $ | — | $ | — | $ | — | $ | 1,377,849 | $ | 2,428,693 | ||||||||
| Chief Marketing Officer | 2015 | $ | 350,000 | $ | — | $ | 767,498 | $ | — | $ | 496,344 | $ | 5,370 | $ | 41,148 | $ | 1,660,360 | ||||||||
| 2014 | $ | 350,000 | $ | — | $ | 964,010 | $ | — | $ | 783,125 | $ | 6,471 | $ | 21,292 | $ | 2,124,898 | |||||||||
| (1) | Represents each NEO’s salary earned during the respective year. |
| (2) |
| (3) | As discussed in the CD&A above, the amounts reported for 2016 include two years’ worth of LTI restricted stock awards due to an administrative change in the timing of the annual grant date. The amounts |
| (4) | Represents annual incentive compensation earned by the NEOs during each of |
| (5) | For |
| (6) | For Mr. Neal, the amount in this column represents the matching contribution made by Kforce to the Nonqualified Deferred Compensation Plan for 2015 and 2014. Of the NEOs, Messrs. Dunkel |
| (7) | The “All Other Compensation” column includes: |
| Name | Year | Dividends (a) | Defined Contribution Plans (b) | One-Time Payouts (c)(d) | Total | |||||||||||||
| David L. Dunkel | 2016 | $ | 67,289 | $ | — | $ | — | $ | 67,289 | |||||||||
| 2015 | $ | 34,471 | $ | — | $ | — | $ | 34,471 | ||||||||||
| 2014 | $ | — | $ | — | $ | 328,274 | $ | 328,274 | ||||||||||
| Joseph J. Liberatore | 2016 | $ | 88,151 | $ | — | $ | — | $ | 88,151 | |||||||||
| 2015 | $ | 71,746 | $ | — | $ | — | $ | 71,746 | ||||||||||
| 2014 | $ | 43,208 | $ | — | $ | 495,817 | $ | 539,025 | ||||||||||
| David M. Kelly | 2016 | $ | 48,420 | $ | 1,800 | $ | — | $ | 50,220 | |||||||||
| 2015 | $ | 39,348 | $ | 1,800 | $ | — | $ | 41,148 | ||||||||||
| 2014 | $ | 19,542 | $ | 1,750 | $ | — | $ | 21,292 | ||||||||||
| Kye L. Mitchell | 2016 | $ | 48,420 | $ | 1,800 | $ | — | $ | 50,220 | |||||||||
| 2015 | $ | 39,348 | $ | 1,800 | $ | — | $ | 41,148 | ||||||||||
| 2014 | $ | 19,542 | $ | 1,750 | $ | — | $ | 21,292 | ||||||||||
| Peter M. Alonso | 2016 | $ | 48,420 | $ | — | $ | — | $ | 48,420 | |||||||||
| Jeffrey T. Neal | 2016 | $ | 24,939 | $ | — | $ | 1,352,910 | $ | 1,377,849 | |||||||||
| 2015 | $ | 39,348 | $ | 1,800 | $ | — | $ | 41,148 | ||||||||||
| 2014 | $ | 19,542 | $ | 1,750 | $ | — | $ | 21,292 | ||||||||||
| (a) | The amounts |
| (b) | The amounts reported in this column reflect the dollar value of matching contributions made by Kforce each respective year attributable to our defined contribution |
| (c) | For 2014, the amounts reflected in this column for Messrs. Dunkel and Liberatore are the payments received as a settlement of the SERHP in excess of the accumulated benefit obligation as of December 31, 2013. |
| (d) | The |
Name (a) Type of Award Grant Date David Dunkel Annual Incentive Award (1) 1/31/2013; 12/31/2013 Joseph Liberatore Annual Incentive Award (1) 1/31/2013; 12/31/2013 David Kelly Annual Incentive Award (1) 1/31/2013; 12/31/2013 Kye Mitchell Annual Incentive Award (1) 1/31/2013; 12/31/2013 Jeffrey Neal Annual Incentive Award (1) Michael Ettore Annual Incentive Award (1) 1/31/2013; 12/31/2013 Randal Marmon Annual Incentive Award (1) 1/31/2013; 12/31/2013GRANTS OF PLAN-BASED AWARDSFor Fiscal Year Ended December 31, 20132016
(b)
(c) Estimated Future Payouts Under
Non-Equity Incentive Plan Awards Grant Date
Fair Value
(k) Threshold
(d) Target
(e) Maximum
(f) $ 200,000 $ 200,000 $ 1,600,000 — $ 135,000 $ 135,000 $ 1,080,000 — Restricted Stock (2) 1/2/2013 — — — $ 1,175,498 $ 56,250 $ 56,250 $ 450,000 — Restricted Stock (2) 1/2/2013 — — — $ 279,994 $ 112,500 $ 112,500 $ 750,000 — Restricted Stock (2) 1/2/2013 — — — $ 279,994 1/31/2013; 12/31/2013 $ 112,500 $ 112,500 $ 750,000 — Restricted Stock (2) 1/2/2013 — — — $ 279,994 $ 65,625 $ 65,625 $ 525,000 — Restricted Stock (2) 1/2/2013 — — — $ 659,351 $ 65,625 $ 65,625 $ 525,000 — Restricted Stock (2) 1/2/2013 — — — $ 659,351 Name Type of Award Grant Date Estimated Future Payouts Under
Non-Equity Incentive Plan Awards All Other Stock Awards Number of Shares of Stock Grant Date
Fair ValueThreshold
($) Target
($) Maximum
($)David L. Dunkel Annual Incentive (1) 2/5/2016;
12/31/2016 $ 200,000 $ 800,000 $ 1,600,000 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 76,746 $ 1,834,997 Equity LTI (3) 12/31/2016 $ — $ — $ — 72,294 $ 1,669,991 Cash LTI (4) 2/5/2016;
12/31/2016 $ — $ — $ 1,085,000 — $ — Joseph J. Liberatore Annual Incentive (1) 2/5/2016;
12/31/2016 $ 135,000 $ 540,000 $ 1,080,000 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 61,202 $ 1,463,340 Equity LTI (3) 12/31/2016 $ — $ — $ — 57,792 $ 1,334,995 Cash LTI (4) 2/5/2016;
12/31/2016 $ — $ — $ 435,000 — $ — David M. Kelly Annual Incentive (1) 2/5/2016;
12/31/2016 $ 108,000 $ 432,000 $ 864,000 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 32,100 $ 767,511 Equity LTI (3) 12/31/2016 $ — $ — $ — 35,173 $ 812,496 Kye L. Mitchell Annual Incentive (1) 2/5/2016;
12/31/2016 $ 108,000 $ 432,000 $ 864,000 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 32,100 $ 767,511 Equity LTI (3) 12/31/2016 $ — $ — $ — 32,468 $ 750,011 Peter M. Alonso Annual Incentive (1) 2/5/2016;
12/31/2016 $ 46,875 $ 187,500 $ 375,000 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 32,100 $ 767,511 Equity LTI (3) 12/31/2016 $ — $ — $ — 28,571 $ 659,990 Jeffrey T. Neal Annual Incentive (1) 2/5/2016;
12/31/2016 $ 90,313 $ 361,250 $ 722,500 — $ — Equity LTI (2) 1/4/2016 $ — $ — $ — 32,100 $ 767,511 (1) These amounts represent the estimated future payouts under the 20132016 annual incentive bonuscompensation plan. The threshold, as defined in Item 402(d) of Regulation S-K, represents the minimum amount payable upon attaining minimum performance thresholds established by the Committee each year. If the minimum performance thresholds are not attained, there would be no payout under the Kforce Inc. Amended and Restated Performance Incentive Plan.payout. The maximum payout for Messrs. Dunkel, Liberatore, Kelly, Ettore and Marmon is 200% of the target multiplier while the maximum payout for Ms. Mitchell and Mr. Neal is 100%all components of the target multiplier for Firm revenues and EPS and 200% of the target multiplier for the MBO component of the2016 annual incentive bonus, which is disclosed in column (f).compensation plan. Actual payments for bonusesannual incentive compensation earned during 20132016 are listed in the “Non-Equity Incentive Plan Compensation” column (g) of the SCT.(2) The equity LTI awards granted in the form of restricted stock awards granted under the 20062013 Stock Incentive Plan on January 2, 20134, 2016 have a five-year vesting period with 20% of the award vesting annually. Restricted stock contain the right to forfeitable dividends in the form of additional shares of restricted stock at the same rate as the cash dividend on common stock and containing the same vesting provisions as the underlying award. The fair market value of restricted stock is determined based on the closing stock price of Kforce’s common stock at the date of grant. The stock price and grant date fair value for the January 2, 20134, 2016 awards was $14.58. See Note 14, Stock Incentive Plans, to Kforce’s consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2013 for the assumptions made in determining fair value.$23.91. The grant date fair value of the awards is included within the amounts presented in the “Stock Awards” column (e) of the SCT.
AT FISCAL YEAR-END Name (a) Joseph Liberatore David Kelly Kye Mitchell Jeffrey Neal(3) The equity LTI awards granted in the form of restricted stock under the 2016 Stock Incentive Plan on December 31, 2016 have a five-year vesting period with 20% of the award vesting annually. Restricted stock contain the right to forfeitable dividends in the form of additional shares of restricted stock at the same rate as the cash dividend on common stock and containing the same vesting provisions as the underlying award. The fair market value of restricted stock is determined based on the closing stock price of Kforce’s common stock at the date of grant. The stock price and grant date fair value for the December 31, 2016 awards was $23.10. The grant date fair value of the awards is included within the amounts presented in the “Stock Awards” column of the SCT.(4) As a result of achieving a 4th place ranking for TSR performance versus the 2016 Industry Peer Group and the 57th percentile ranking for TSR versus the 2016 Separately Designated Peer Group, Messrs. Dunkel and Liberatore received no LTI cash bonuses.OUTSTANDING EQUITY AWARDSAt Fiscal Year Ended December 31, 20132016 Option Awards Stock awards Number of
Securities
Underlying
Unexercised
Options
Exercisable
(b) (1) Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(c) Option
Exercise
Price
(d) Option
Expiration
Date
(e) Number of
Shares or
Units of
Stock
That
Have Not
Vested
(f) Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
(g)(4) — — — — 80,624 (2) $ 1,649,567 — — — — 399 (3) $ 8,164 — — — — 19,204 (2) $ 392,914 — — — — 95 (3) $ 1,944 9,315 — $ 11.00 3/17/2015 — — 685 $ 11.00 3/17/2015 — — — — — — 19,204 (2) $ 392,914 — — — — 95 (3) $ 1,944 — — — — 19,204 (2) $ 392,914 — — — — 95 (3) $ 1,944 Stock Awards Name Number of Shares or Units of
Stock That Have Not Vested Market Value of Shares or Units of Stock That Have Not Vested
($)(1)David L. Dunkel 72,294 (2) $ 1,669,991 78,654 (3) $ 1,816,907 63,559 (4) $ 1,468,213 Joseph J. Liberatore 57,792 (2) $ 1,334,995 62,723 (3) $ 1,448,901 50,914 (4) $ 1,176,113 19,808 (5) $ 457,565 15,242 (6) $ 352,090 34,502 (7) $ 796,996 David M. Kelly 35,173 (2) $ 812,496 32,897 (3) $ 759,921 26,583 (4) $ 614,067 22,211 (5) $ 513,074 8,894 (6) $ 205,451 8,220 (7) $ 189,882 Kye L. Mitchell 32,468 (2) $ 750,011 32,897 (3) $ 759,921 26,583 (4) $ 614,067 22,211 (5) $ 513,074 8,894 (6) $ 205,451 8,220 (7) $ 189,882 Peter M. Alonso 28,571 (2) $ 659,990 32,897 (3) $ 759,921 26,583 (4) $ 614,067 22,211 (5) $ 513,074 8,894 (6) $ 205,451 8,220 (7) $ 189,882 (1) The market value shown was determined by multiplying the number of shares of stock that have not vested by $23.10, which is the closing stock price of our common stock on December 31, 2016.(2) With respect to the optionsrestricted stock granted to Messrs. Dunkel, Liberatore, Kelly and Alonso and Ms. Mitchell on December 31, 2016, 20% of the vesting date fortotal shares granted vest on each of the options listed above was June 30, 2005.following dates: December 31, 2017, December 31, 2018, December 31, 2019, December 31, 2020 and December 31, 2021.(2)(3) With respect to the restricted stock granted to Messrs. Dunkel, Liberatore, Kelly and Alonso and Ms. Mitchell on January 4, 2016, and the resulting additional shares of restricted stock granted in lieu of cash due to Kforce’s quarterly dividends, 20% of the total shares granted vest on each of the following dates: January 4, 2017, January 4, 2018, January 4, 2019, January 4, 2020 and January 4, 2021. (4) With respect to the restricted stock granted to Messrs. Dunkel, Liberatore, Kelly and Alonso and Ms. Mitchell on January 2, 2015, and the resulting additional shares of restricted stock granted in lieu of cash due to Kforce’s quarterly dividends, 20% of the total shares granted vest(ed) on each of the following dates: January 2, 2016, January 2, 2017, January 2, 2018, January 2, 2019 and January 2, 2020. (5) With respect to the restricted stock granted to Messrs. Liberatore, Kelly and NealAlonso and Ms. Mitchell on August 25, 2014, and the resulting additional shares of restricted stock granted in lieu of cash due to Kforce’s quarterly dividends, 20% of the total shares granted vest(ed) on each of the following dates: August 25, 2015, August 25, 2016, August 25, 2017, August 25, 2018, and August 25, 2019.(6) With respect to the restricted stock granted to Messrs. Liberatore, Kelly and Alonso and Ms. Mitchell on January 2, 2014, and the resulting additional shares of restricted stock granted in lieu of cash due to Kforce’s quarterly dividends, 20% of the total shares granted vest(ed) on each of the following dates: January 2, 2015, January 2, 2016, January 2, 2017, January 2, 2018 and January 2, 2019. (7) With respect to the restricted stock granted to Messrs. Liberatore, Kelly and Alonso and Ms. Mitchell on January 2, 2013, and the resulting additional shares of restricted stock granted in lieu of cash due to Kforce’s quarterly dividends, 20% of the total shares granted vestvest(ed) on each of the following dates: January 2, 2014, January 2, 2015, January 2, 2016, January 2, 2017 and January 2, 2018.(3)On December 4, 2013, the issuer declared a dividend, payable to all holders of record of common stock on December 16, 2013. In accordance with the terms of the January 2, 2013 Restricted Stock Agreements, additional shares of restricted stock were received by the reporting person in lieu of cash in connection with the dividend. 20% of the total shares granted vest on each of the following dates: January 2, 2014, January 2, 2015, January 2, 2016, January 2, 2017 and January 2, 2018.(4)The market value shown was determined by multiplying the number of shares of stock that have not vested by $20.46, which is the closing stock price of our common stock on December 31, 2013.
Name (a) Michael Ettore Randal Marmon Name (a) Plan Name (b) David Dunkel Joseph Liberatore Name (a) David Dunkel Joseph Liberatore (5) David Kelly Kye Mitchell (5) Jeffrey Neal Michael Ettore (5) Randal Marmon Payments and Benefits Upon Termination (a) Compensation: Severance payment (1) Equity-based compensation (2) Benefits and Perquisites: Continuation of base salary (3) Continuation of health care benefits (4) Retirement benefit—SERP (5) Retirement health benefit—SERHP (6) Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (1) Equity-based compensation (2) Benefits and Perquisites: Continuation of base salary (3) Continuation of health care benefits (4) Retirement benefit—SERP (5) Retirement health benefit—SERHP (6) Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (1) Equity-based compensation (2) Benefits and Perquisites: Continuation of base salary (3) Continuation of health care benefits (4) Retirement benefit—SERP (5) Retirement health benefit—SERHP (6) Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (1) Equity-based compensation (2) Benefits and Perquisites: Continuation of base salary (3) Continuation of health care benefits (4) Retirement benefit—SERP (5) Retirement health benefit—SERHP (6) Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (1) Equity-based compensation (2) Benefits and Perquisites: Continuation of base salary (3) Continuation of health care benefits (4) Retirement benefit—SERP (5) Retirement health benefit—SERHP (6) Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (7) Equity-based compensation (8) Benefits and Perquisites: Continuation of base salary Continuation of health care benefits Retirement benefit—SERP Retirement health benefit—SERHP Outplacement services Payments and Benefits Upon Termination (a) Compensation: Severance payment (7) Equity-based compensation (8) Benefits and Perquisites: Continuation of base salary Continuation of health care benefits Retirement benefit—SERP Retirement health benefit—SERHP Outplacement services OPTION EXERCISES AND STOCK VESTEDFor Fiscal Year Ended December 31, 20132016 Stock Awards Number of
Shares
Acquired on
Vesting (1)
(d) Value
Realized
on
Vesting (2)
(e) 45,223 $ 902,651 45,223 $ 902,651 Stock Awards Name Number of Shares
Acquired on Vesting Value Realized
on Vesting (1)David L. Dunkel 15,502 $ 391,891 Joseph J. Liberatore 40,728 $ 994,102 David M. Kelly 20,698 $ 483,441 Kye L. Mitchell 20,698 $ 483,441 Peter M. Alonso 20,698 $ 483,441 Jeffrey T. Neal (2) 28,825 $ 640,698 (1)In connection with the organizational realignment, Messrs. Ettore and Marmon were terminated effective November 1, 2013. In connection with their termination and in accordance with the restricted stock agreement for the awards granted on January 2, 2013, the unvested shares vested immediately upon termination without cause.(2)(1)Value realized represents the market value of our Common Stockcommon stock at the time of vesting multiplied by the number of shares vested.(2) Mr. Neal resigned effective August 31, 2016. In connection with his resignation and in accordance with the restricted stock agreement for the award granted on January 2, 2013, the unvested shares associated with this grant vested immediately (8,127 shares valued at $157,257). Subsequent grants made in 2014, 2015 and 2016 did not have this feature. The remainder of the shares (20,698 shares) represent normally vesting shares in the first eight months of the year. PENSION BENEFITSFor Fiscal Year Ended December 31, 20132016 Number
of Years
Credited
Service (1)
(c) Present
Value of
Accumulated
Benefit (2)
(d) Supplemental Executive Retirement Plan 7 $ 5,829,723 Supplemental Executive Retirement Health Plan 7 $ 535,458 Supplemental Executive Retirement Plan 7 $ 1,210,945 Supplemental Executive Retirement Health Plan 7 $ 406,908 Name Plan Name Number of YearsCredited Service (#)(1) Present Value ofAccumulated Benefit($)(2) Payments During Last Fiscal Year($)David L. Dunkel Supplemental Executive Retirement Plan 10 $ 10,368,760 $ — Joseph J. Liberatore Supplemental Executive Retirement Plan 10 $ 2,305,084 $ — (1) The NEOs were not credited with any years of service prior to December 31, 2006, which is the effective date of the plans.plan. On each anniversary of the effective date, each NEO is credited with a year of service.(2) ActuarialRepresents the actuarial present value of accumulated benefit computed as of the same pension plan measurement date used for financial reporting purposes with respect to Kforce’s consolidated financial statements for fiscal 2013,year 2016, using 65 as the retirement age, which is the normal retirement age under the SERP. For a discussion of the assumptions used, see Note 12,9, Employee Benefit Plans, to Kforce’s consolidated financial statements,Consolidated Financial Statements, included in our Annual Report on Form 10-K for fiscal 2013.year 2016.NONQUALIFIED DEFERRED COMPENSATIONFor Fiscal Year Ended December 31, 20132016 Executive
Contributions
in Last FY (1)
(b) Registrant
Contributions
in Last FY (2)
(c) Aggregate
Earnings
in Last FY (3)
(d) Aggregate
Withdrawals/
Distributions
(d) Aggregate
Balance
at Last FYE (4)
(f) $ — $ — $ 33,378 $ — $ 136,932 — — — — — — $ 16,936 $ 24,062 — $ 221,538 — — — — — — $ 2,593 $ 44,051 $ (73,609 ) $ 260,281 — — — — — $ 31,436 $ 6,855 $ 55,730 $ (437,673 ) $ 399,143 Name Executive
Contributions
in Last FY
($)(1) Registrant
Contributions
in Last FY
($)(2) Aggregate
Earnings
in Last FY
($)(3) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance
at Last FYE
($)(4)David L. Dunkel $ — $ — $ 11,779 $ — $ 164,803 Joseph J. Liberatore (5) $ — $ — $ — $ — $ — David M. Kelly (5) $ — $ — $ — $ — $ — Kye L. Mitchell (5) $ — $ — $ — $ — $ — Peter M. Alonso (5) $ — $ — $ — $ — $ — Jeffrey T. Neal $ 9,538 $ — $ 24,787 $ (30,971 ) $ 396,194 (1) These amounts represent the NEOsNEOs’ pre-tax contributions made to the nonqualified deferred compensation plan for 2013.2016.(2) TheseAs there were no Registrant Contributions for 2016, there were no amounts were reported inwithin the “Changes“Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the SCT (column (h)).SCT.(3) The aggregate earnings for 20132016 represents appreciation or depreciation in the market value of the respective accounts’ holdings and interest and dividends generated thereon. These amounts were not reported in the “Changes“Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the SCT (column (h)) for 20132016 as there were no above-market or preferential earnings generated.(4) Included in the aggregate balance are amounts related to contributions made by Kforce that were previously reported in the SCTs for prior year.years.(5) Messrs. Liberatore, Kelly and EttoreAlonso and Ms. Mitchell dohave not or no longer participate in Kforce’s nonqualified deferred compensation plan.2013 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLThis section provides information ondescribes amounts that: (i)(1) were paid to Messrs. EttoreMr. Neal upon his resignation effective August 31, 2016 and Marmon upon their termination effective November 1, 2013 and (ii)(2) would have been payable to the Active NEOs assuming afor various service termination of employmentor change in control scenarios on December 31, 2013.2016.Jeffrey NealIn connection with Mr. Neal’s resignation effective August 31, 2016, he received payouts totaling $1,510,167. This amount includes severance (as described in Section 9 of his employment agreement) in the amount of $1,264,735 as well as $88,175 related to an accrued PTO balance as of August 31, 2016. Additionally, in accordance with his restricted stock agreement for an award granted on January 2, 2013, the remaining unvested shares vested immediately upon resignation; the $157,257 value realized represents the closing stock price of our common stock on August 31, 2016 of $19.35 multiplied by 8,127 shares vested.Active NEOsEmployment Agreement Severance Based on Termination By Employer For Cause or By Employee Without Good ReasonPursuant to the provisions of each Active NEOs’ respective employment agreement and of the SERP, upon a termination either by the employer for cause or by the employee without good reason, the Active NEOs would be eligible to receive all earned and accrued salary, bonus, and employee benefits such as paid-time off, as of the termination date and would also have the ability to exercise, if necessary, all plan-based awards that were vested as of the termination date. Under this scenario, none of the Active NEOs would be eligible for a severance payment or accelerated vesting of any unvested equity awards. As a result, a column for this scenario has been omitted from the table below.Employment Agreement Severance Based on Termination By Employer Without Cause or By Employee For Good ReasonPursuant to the provisions of each Active NEOs’ respective employment agreement, upon a termination by the employer without cause or by the employee for good reason, the NEO would be eligible for a severance payment. For Messrs. Dunkel and Liberatore, the severance is calculated as a factor (2.99 for Mr. Dunkel and 2.00 for Mr. Liberatore) of the sum of their salaries on the date of termination plus the average of their cash bonuses over a period of time (three years for Mr. Dunkel and two years for Mr. Liberatore). For Messrs. Kelly and Alonso and Ms. Mitchell, the severance is calculated as the sum of their salaries on the date of termination plus (1) the average of their cash bonuses over a period of two years and (2) the lesser of the average value of any stock, restricted stock, stock appreciation rights or alternative LTI over a period of two years, or $200,000.Pursuant to the terms of the restricted stock award agreements granted to Messrs. Liberatore, Kelly and Alonso and Ms. Mitchell on January 2, 2013, the remaining unvested restricted stock would immediately vest upon a termination without cause. Subsequent restricted stock grants made in 2014, 2015 and 2016 did not have this feature.Employment Agreement Severance Based on Termination By Employer Without Cause or By Employee For Good Reason - Following a Change in Control (CIC)Pursuant to the provisions of each Active NEOs’ respective employment agreement, upon a termination by the employer without cause or by the employee for good reason following a CIC, the NEO would be eligible for a severance payment, calculated differently from the scenario directly above. For Messrs. Dunkel and Liberatore, the severance is calculated as a factor of 2.99 of the sum of their salaries on the date of termination plus the average of their cash bonuses and the value of any stock, restricted stock or stock options over a period of three years. For Messrs. Kelly and Alonso and Ms. Mitchell, the severance is calculated as a factor of 2.00 of the sum of their salaries on the date of termination plus (1) the average of their cash bonuses over a period of two years and (2) the average value of any stock, restricted stock, stock appreciation rights or alternative LTI over a period of two years.Each of the respective employment agreements also provides for health care benefits after a CIC for a period of one year.Pursuant to the terms of all of the Active NEOs’ currently outstanding restricted stock award agreements, the remaining unvested restricted stock would immediately vest upon a change in control.Pursuant to the provisions of the SERP, Messrs. Dunkel and Liberatore are credited with up to 10 years of additional cumulative years of service upon a CIC.Change in ControlPursuant to the provisions of each Active NEOs’ respective employment agreement, there would be no severance payment subsequent to a CIC in the absence of a termination.Pursuant to the terms of all of the Active NEOs’ currently outstanding restricted stock award agreements, the remaining unvested restricted stock would immediately vest upon a change in control.Death or DisabilityPursuant to the provisions of each Active NEO’s respective employment agreement, none of the Active NEOs would be eligible for a severance payment upon death or disability.Each of the respective employment agreements provides for a continuation of salary under certain situations. Upon death, the NEOs’ beneficiary would continue to receive the NEO’s salary for a period of time (2.99 years for Messrs. Dunkel and Liberatore and one year for Messrs. Kelly and Alonso and Ms. Mitchell). Upon disability, the NEO’s salary would be continued until the earlier of (1) death, (2) the NEO’s 65th birthday or (3) 2.99 years for Messrs. Dunkel and Liberatore and two years for Messrs. Kelly and Alonso and Ms. Mitchell.Each of the respective employment agreements provides for health care benefits upon death (provided to the NEO’s family) for a period of one year and upon disability for a period of two years.Pursuant to the terms of all of the Active NEOs’ currently outstanding restricted stock award agreements, all unvested restricted stock would immediately vest upon death. Pursuant to the terms of the restricted stock award agreements granted to Messrs. Liberatore, Kelly and Alonso and Ms. Mitchell on January 2, 2013 and to the respective employment agreements, continuation of vesting for restricted stock would occur until the earlier of (1) death, (2) 2.99 years for Mr. Liberatore and two years for Messrs. Kelly and Alonso and Ms. Mitchell from the disability effective date (30 days after a termination notice is received) or (3) a CIC. As a result, the unvested shares related to these award agreements have been omitted from the disability column in the table below. For the remainder of the outstanding restricted stock award agreements, any unvested restricted stock would immediately vest upon disability.Pursuant to the provisions of the SERP, upon termination due to disability, Messrs. Dunkel and Liberatore would be entitled to a continuation of crediting of additional years of cumulative service for a period of 2.99 years. Upon death or disability, Messrs. Dunkel and Liberatore are entitled to continuation of base salary pursuant to their employment agreements. If this benefit is less than the benefit otherwise payable under the SERP, the SERP benefit is net of the related benefit under their employment agreements.RetirementPursuant to the provisions of each Active NEO’s respective employment agreement, none of the Active NEOs would be eligible for a severance payment upon retirement.Pursuant to the terms of all of the Active NEOs’ currently outstanding restricted stock award agreements, there would be no accelerated vesting of any unvested equity awards.Pursuant to the provisions of the SERP, certain conditions allow for early retirement as early as age 55 and vesting under the plan is defined as 100% upon a participant’s attainment of age 55 and 10 years of service. Since the SERP was adopted on December 31, 2006, Messrs. Dunkel and Liberatore have both attained the years of service requirement. At December 31, 2016, only Mr. Dunkel has attained the age requirement for vesting and could have been eligible for early retirement, which would be paid following a six-month period after retirement.As a result of no potential payments due to retirement at December 31, 2016, a column for this scenario has been omitted from the table below.At Fiscal Year Ended December 31, 2016The following table would have been payable to the Active NEOs for various service termination or change in control scenarios on December 31, 2016. The amounts that would actually would be payable to the Active NEOs if any such event occursemployment termination or a CIC were to occur in the future would be different than those set forth below, which are calculated under the assumption that the event occurred on December 31, 20132016 and based on the closing price of Kforce’s common stock on the last trading day of the year. We note that such payments are contingent upon various factors in place at the time of the occurrence of the assumed event, including, but not limited to:(1)each executive’s current salary rate, annual performance bonus awards, and annual LTIs;(2) each executive’s current salary rate, annual incentive bonus awards, and annual LTIs; the amount and type of unvested equity and other incentive awards held by the executive;(3)the trading price of Kforce’s common stock;(4)the cost of providing employee benefits;(5)the executive’s elections of employee benefits;(6)the executive’s age or years of service with Kforce;(7)the date of termination;(8)the circumstances of the termination; and(9)the executive’s historical salary, performance bonus awards, and LTIs.The following tables describe (i) payments made to Messrs. Ettore and Marmon upon their termination effective November 1, 2013 and (ii) potential payments to the Active NEOs upon termination or a change in control (“CIC”), each pursuant to their respective employment agreements, which were approved by the Committee. As mentioned above,executive; the amounts fortrading price of Kforce’s common stock; the Active NEOs assume that each NEO terminated employment on December 31, 2013. The footnotes referenced in eachcost of providing employee benefits; the executive’s elections of employee benefits; the executive’s age and/or years of service with Kforce; the date of termination; the circumstances of the tables follow the last table and relate to all tables.Pursuant to the provisions of the SERPtermination; and the Active NEOs’ respective employment agreements, upon a termination (i) “by the employee without good reason” or (ii) “by the employer for cause,” the Active NEOs would be eligible to receive all earnedexecutive’s historical salary, bonuses, and accrued salary, bonus, and employee benefits such as paid-time off as of December 31, 2013 and would also have the ability to exercise, if necessary, all plan-based awards that were vested as of December 31, 2013. As a result, these columns have been omitted from the tables below.Also, pursuant to the age and service provisions of Kforce’s SERP, none of the Active NEOs were eligible for “early retirement” under the SERP as of December 31, 2013; therefore, this column has been omitted from the table below.David DunkelLTIs. By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 3,587,801 $ — $ 15,133,067 $ — $ — — — — — — — — — $ 2,264,039 $ 2,264,039 — — — — — — — $ 9,680,904 $ 3,513,064 $ 3,513,064 — — $ 535,458 $ 535,458 $ 535,458 — — $ 20,000 — — $ 3,587,801 $ — $ 25,369,429 $ 6,312,561 $ 6,312,561 Joseph Liberatore By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 2,492,415 $ — $ 8,513,853 $ — $ — $ 1,657,731 — $ 1,657,731 $ 1,657,731 $ — — — — $ 1,698,029 $ 1,698,029 — — — — — — — $ 1,047,608 — — — — $ 406,908 $ 406,908 $ 406,908 — — $ 20,000 — — $ 4,150,146 $ — $ 11,646,100 $ 3,762,668 $ 2,104,937 David Kelly By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 793,005 $ — $ 1,746,014 $ — $ — $ 394,858 — $ 394,858 $ 394,858 — — — — $ 292,422 $ 571,304 — — $ 12,313 $ 12,313 $ 24,027 — — — — — — — — — — — — $ 20,000 — — $ 1,187,863 $ — $ 2,173,185 $ 699,593 $ 595,331 Kye Mitchell By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 1,059,235 $ — $ 2,278,474 $ — $ — $ 489,458 — $ 489,458 $ 489,458 — — — — $ 292,422 $ 571,304 — — $ 11,308 $ 11,308 $ 22,066 — — — — — — — — — — — — $ 20,000 — — $ 1,548,693 $ — $ 2,799,240 $ 793,188 $ 593,370 Jeffrey Neal By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 899,771 $ — $ 2,462,734 $ — $ — $ 394,858 — $ 394,858 $ 394,858 — — — — $ 292,422 $ 571,304 — — $ 11,587 $ 11,587 $ 22,610 — — — — — — — — — — — — $ 20,000 — — $ 1,294,629 $ — $ 2,889,179 $ 698,867 $ 593,914 Michael Ettore By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 1,072,750 N/A N/A N/A N/A $ 902,651 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A $ 1,975,401 N/A N/A N/A N/A Randal Marmon By Employer
Without Cause or
By Employee For
Good Reason
(b) Normal
Retirement
(c) By Employer
Without Cause or
By Employee For
Good Reason
Within 1 Year
Following CIC
(d) Death
(e) Disability
(f) $ 1,464,875 N/A N/A N/A N/A $ 902,651 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A $ 2,367,526 N/A N/A N/A N/A Name Termination By Employer Without Cause or By Employee For Good Reason ($) Following CIC - Termination By Employer Without Cause or By Employee For Good Reason ($) CIC - No Termination ($) Death($) Disability($)David L. Dunkel Severance payment (1) $ 6,576,007 $ 13,335,888 $ — $ — $ — Equity-based compensation (2) — 4,955,111 4,955,111 4,955,111 4,955,111 Continuation of base salary (3) — — — 2,264,039 2,264,039 Continuation of health benefits (4) — 6,636 — 6,636 13,011 SERP (5) — 14,400,864 — 10,084,688 10,084,688 Total $ 6,576,007 $ 32,698,499 $ 4,955,111 $ 17,310,474 $ 17,316,849 Joseph J. Liberatore Severance payment (1) $ 1,834,500 $ 9,798,289 $ — $ — $ — Equity-based compensation (2) 796,996 5,566,660 5,566,660 5,566,660 4,769,664 Continuation of base salary (3) — — — 1,698,029 1,698,029 Continuation of health benefits (4) — 9,761 — 9,761 19,141 SERP (5) — 3,134,530 — — — Total $ 2,631,496 $ 18,509,240 $ 5,566,660 $ 7,274,450 $ 6,486,834 David M. Kelly Severance payment (1) $ 931,635 $ 3,043,276 $ — $ — $ — Equity-based compensation (2) 189,882 3,094,891 3,094,891 3,094,891 2,905,009 Continuation of base salary (3) — — — 469,760 921,130 Continuation of health benefits (4) — 10,322 — 10,322 20,240 Total $ 1,121,517 $ 6,148,489 $ 3,094,891 $ 3,574,973 $ 3,846,379 Kye L. Mitchell Severance payment (1) $ 895,072 $ 2,907,666 $ — $ — $ — Equity-based compensation (2) 189,882 3,032,406 3,032,406 3,032,406 2,842,524 Continuation of base salary (3) — — — 469,760 921,130 Continuation of health benefits (4) — 9,761 — 9,761 19,141 Total $ 1,084,954 $ 5,949,833 $ 3,032,406 $ 3,511,927 $ 3,782,795 Peter M. Alonso Severance payment (1) $ 739,922 $ 2,507,345 $ — $ — $ — Equity-based compensation (2) 189,882 2,942,385 2,942,385 2,942,385 2,752,503 Continuation of base salary (3) — — — 367,000 719,633 Continuation of health benefits (4) — 9,761 — 9,761 19,141 Total $ 929,804 $ 5,459,491 $ 2,942,385 $ 3,319,146 $ 3,491,277 (1)The severance payment amount depends upon the type of termination. Under column (b), Messrs. Dunkel and Liberatore are entitled to a severance payment calculated as a factor (2.99 for Mr. Dunkel and 2.00 for Mr. Liberatore) of the sum of their salaries on the date of termination plus the average of their cash bonuses over a period of time (ranging from two to three years), as specified in their respective employment agreements. For Messrs. Kelly and Neal and Ms. Mitchell, the severance payment is calculated as one times the sum of (i) the average of total cash compensation (including base salary and cash bonuses) over a period of two years and (ii) the lesser of the average value of any long-term incentive (including restricted stock, stock appreciation rights or alternative LTI) over a period of two years or $200,000. Under column (d), the severance payment for Messrs. Dunkel and Liberatore would both utilize a factor of 2.99 and include cash bonuses and the value of stock options, restricted stock, stock appreciation rights and the alternative LTI in the calculation of the bonus whereas column (b) only includes cash bonuses. For Messrs. Kelly and Neal and Ms. Mitchell, the severance payment is calculated two times the sum of (i) the average of total cash compensation (including base salary and cash bonuses) over a period of two years and (ii) the average value of any long-term incentive (including restricted stock, stock appreciation rights or alternative LTI) over a period of two years. The severance payment would be paid to the NEO within 30 days of termination. No severance payment would occur under the following: (i) normal retirement (column (c)); (ii) death (column (e)) or (iii) disability (column (f)).(1) If any payment or distribution by Kforce to Messrs. Dunkel or Liberatore is determined to be subject to the excise tax imposed under Section 4999 of the Code, Messrs. Dunkel or Liberatore would be entitled to receive from Kforce a payment in an amount sufficient to place them in the same after-tax financial position that they would have been if they had not incurred any excise tax. The severance amount disclosed in column (d) doesamounts do not include any excise tax gross up for Messrs. Dunkel or Liberatore as each of the respective calculations resulted in no excise tax amount. Also, the Committee resolved in 2009 to not enter into any new employment agreements, or materially amend any existing employment agreements, with its executives that contain excise tax gross-up provisions going forward. Employment agreements with Messrs. Kelly and NealAlonso and Ms. Mitchell do not contain excise tax gross-up provisions and, thus, no amounts were included in the tables above.(2) Equity-based compensation, including stock options andThe amounts represent the number of applicable unvested restricted stock is treated differently depending on the type of termination, as follows:December 31, 2016 multiplied by $23.10, which was Kforce’s closing stock price on that date.Under columns (b), (d) and (e), all restricted stock, as reflected in the tables above, would immediately vest. Additionally, under columns (b) and (e), all stock options must be exercised, if necessary, within 90 days of termination or death (by NEO’s beneficiary). The amounts included in column (b), (d) and (e) represent the number of unvested restricted stock on December 31, 2013 multiplied by the closing price on such date, as well as the number of stock options on December 31, 2013 multiplied by the difference between the closing price on such date and the exercise price for such stock options.Under column (c), the NEO has the ability to exercise, if necessary, all awards that were granted and vested at the date of termination. No vesting acceleration occurs as a result of termination under column (c).•Under column (f), upon disability of the NEO, continuation of vesting for restricted stock would occur until the earlier to occur of (i) death, (ii) the NEOs’ 65th birthday, (iii) 2.99 years (2.00 years for Messrs. Kelly and Neal and Ms. Mitchell) from the Disability Effective Date (30 days after a termination notice is received) or (iv) a CIC. If the NEO dies or a CIC occurs within 2.99 years (2.00 years for Messrs. Kelly and Neal and Ms. Mitchell) after the Disability Effective Date all restricted stock would immediately vest. The benefit received upon CIC or death of the NEO is similar to that which is shown in columns (d) and (e) above.(3) Upon termination due to the death of the NEO, his/her salary would be continued to his beneficiary for a period of 2.99 years except for Messrs. Kelly and Neal and Ms. Mitchell for which the period is 2.00 years. Upon termination due to disability of the NEO, his/her salary would be continued until the earlier of (i) death, (ii) the NEO’s 65th birthday or (iii) 2.99 years except for Messrs. Kelly and Neal and Ms. Mitchell for which the term is 2.00 years. For purposes of this disclosure, Kforce haswe have used 2.99 years for Messrs. Dunkel and Liberatore and 2.00 years for Messrs. Kelly and NealAlonso and Ms. Mitchell as these are deemed to be the most probable outcomes if a disability occurred on December 31, 2013,2016, given their current ages. The annual payment amounts have been discounted at a rate of 4.75%4.00%, which is the lump sum conversion amountrate that was utilized for the SERP benefit at December 31, 2013.2016.(4) Although the employment agreements for Messrs. Dunkel and Liberatore specifies continuation of health care benefits upon CIC, death and disability, noThese amounts have been included in columns (d), (e) and (f) as each Messrs. Dunkel and Liberatore would be entitled to a benefit under the SERHP. For Messrs. Kelly and Neal and Ms. Mitchell, each of the respective employment agreements provides for health care benefits under CIC and death for a period of one year and disability for a period of two years. In the event of death, health care benefits would be provided to the NEO’s family. The amounts under columns (d), (e) and (f) represent the value of Kforce’s portion of the health care benefits provided to each Messrs. Kelly and Neal and Ms. Mitchellrespective NEO consistent with those benefits received as of December 31, 2013.2016. The annual benefit amounts have been discounted at a rate of 5.00%4.00%, which is the discount rate that was utilized for the SERHPSERP benefit at December 31, 2013.2016.(5) Upon termination due to disability, Messrs. Dunkel and Liberatore would be entitled to a continuation of crediting of additional years of cumulative service for a period of 2.99 years. In addition, Messrs. Dunkel and Liberatore are credited with up to 10 years of additional cumulative years of service under the SERP upon a CIC. The amount included in columns (d), (e) and (f) isThese amounts represent the lump sum present value of the future monthly vested benefit as determined pursuant to the SERP, document, using a lump sum conversion rate that was consistent with the assumptions used in our Annual Report on Form 10-K for fiscal 2013.of 4.00%. Upon death or disability, Messrs. Dunkel and Liberatore are entitled to continuation of base salary pursuant to their employment agreements. If this benefit is less than the benefit otherwise payable under the SERP, the SERP benefit disclosed in columns (e) and (f) is net of the related benefit under their employment agreements. Messrs. Kelly and Neal and Ms. Mitchell are not participants in the SERP.(6)Upon termination due to death or disability or upon the occurrence of a CIC, Messrs. Dunkel and Liberatore would be entitled to a benefit under the SERHP. The amount included in columns (d), (e) and (f) is the accumulated postretirement benefit obligation, as determined using the assumptions used in our Annual Report on Form 10-K for fiscal 2013. Messrs. Kelly and Neal and Ms. Mitchell are not participants in the SERHP.(7)The value represents the contractually obligated severance payment made to Messrs. Ettore and Marmon in accordance with their respective employment agreements in connection with their termination effective November 1, 2013. In addition to the contractually obligated amount due to Mr. Ettore, he received an additional $400,000.(8)In connection with Messrs. Ettore and Marmon’s termination effective November 1, 2013 and in accordance with their restricted stock agreement for the awards granted on January 2, 2013, the unvested shares vested immediately upon termination without cause. The value realized represents the closing stock price of our Common Stock on November 1, 2013 multiplied by the number of shares vested.
RISKS RESULTING FROM COMPENSATION POLICIES AND PRACTICES
The Compensation Committee does not believe that Kforce’s compensation policies and practices are reasonably likely to have a material adverse effect on Kforce, whether in the context of broad based Kforce-wide practices or related to executive compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2013, Kforce had no “interlocking” relationships in which: (1) an executive officer of Kforce served as a member of the compensation committee of another entity, one of whose executive officers served on the Compensation Committee of Kforce; (2) an executive officer of Kforce served as a director of another entity, one of whose executive officers served on the Compensation Committee of Kforce; or (3) an executive officer of Kforce served as a member of the compensation committee of another entity, one of whose executive officers served as a director of Kforce.
During 2013, the Compensation Committee consisted of Elaine D. Rosen (Chair), W.R. Carey, Jr., Mark F. Furlong and Ralph E. Struzziero. Mr. Struzziero served as the Chairman (1990-1994) and President (1980-1994) of Romac & Associates, Inc., a company we acquired in 1994. None of the other members of the Compensation Committee is currently or was formerly an officer or an employee of Kforce or its subsidiaries and none had any relationship with Kforce requiring disclosure in this proxy statement under Item 404 of Regulation S-K except Mr. Struzziero.
During 2013, Mr. Struzziero’s son was employed by Kforce Government Solutions Inc. (“KGS”), a wholly-owned subsidiary of Kforce. Mr. Struzziero’s son was hired by KGS leadership in a non-executive business development role based on his extensive experience and knowledge of sales within the government contracting industry. Mr. Struzziero’s son has no involvement in management decisions of KGS. Mr. Struzziero had no influence in the hiring of his son nor does Mr. Struzziero have any involvement in the ongoing compensation and performance-related decisions for his son. Total remuneration paid to Mr. Struzziero’s son was approximately $184,400, which consists of base salary and incentive-based compensation. The Nomination Committee specifically considered the employment of Mr. Struzziero’s son by KGS when determining whether to renominate Mr. Struzziero. It concluded that his son’s employment would not impair Mr. Struzziero’s independence.
The Compensation Committee of Kforce has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into Kforce’s Annual Report on Form 10-K for the year ended December 31, 2013.
Submitted by the Compensation Committee
Elaine D. Rosen (Chair)
W.R. Carey, Jr.
Mark F. Furlong
Ralph E. Struzziero
The information contained in the above Compensation Committee Report shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into such filings.
vote. Plan Category Equity compensation plans approved by shareholders Kforce Inc. 2013 Stock Incentive Plan Kforce Inc. 2006 Stock Incentive Plan Kforce Inc. 2009 Employee Stock Purchase Plan Kforce Inc. Incentive Stock Option Plan (5) Total 1001 East Palm Avenue, Tampa, Florida 33605. 18, 2017PROPOSAL 3. APPROVAL OF KFORCE’SADVISORY VOTE ON EXECUTIVE COMPENSATIONThe Dodd-Frank Act requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our NEOs, as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis and the related tables and narrative discussion.statement. At the 2011 annual meeting, a majority of the shares voted forin favor of holding this non-binding advisory vote on an annual basis. After due consideration, of these voting results and other factors, the Board decided that Kforce would conduct an annual, non-binding advisory vote on executive compensation until the next required vote on the frequency of the say-on-pay vote. Consequently, the Board will conductconsider the results of Proposal 4 (advisory vote on the frequency of future non-binding advisory votes on executive compensation on an annual basis. The annualcompensation) in determining the future frequency for this non-binding advisory votes on executive compensation will continue until the Board considers the results of the next shareholder non-binding advisory vote regarding the frequency of future shareholder non-binding advisory votes on executive compensation.As described more completely in the Compensation Discussion and Analysis and the related tables and narrative discussion,above, Kforce’s executive compensation program is designed to attract, motivate and retain our NEOs who are able to maximize shareholder value in an industry where we believe people represent the true “assets” of Kforce. The CommitteeOur Board believes that executive compensation levels are commensurate with Kforce’s performance and shareholder return, promote a pay-for-performance philosophy and are strongly aligned with the interests of our shareholders.We are asking our shareholders to indicate their support for our executive compensation. This proposal, commonly known as a “say-on-pay”“Say On Pay” proposal, 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 in accordance with the SEC’s compensation disclosure rules.This advisory vote on executive compensation is not binding, on Kforce, the Compensation Committee or the Board. However,however, the Board and Compensation Committee value the opinions expressed by our shareholders and will consider the outcome of the vote when making future decisions on our executive compensation.Accordingly, we ask our shareholders to vote on the following resolution at the Meeting:“RESOLVED, that the compensation paid to Kforce’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”THE BOARD UNANIMOUSLY RECOMMENDSVOTE REQUIREDApproval of this proposal requires the affirmative vote of a majority of the shares entitled to vote on the matter. An abstention is considered as present and entitled to vote and will have the effect of a vote against the proposal. A NON-BINDINGbroker non-vote is considered not entitled to vote and will not affect the voting.THE BOARD UNANIMOUSLY RECOMMENDS AN ADVISORY VOTE FOR PROPOSAL 3.PROPOSAL 4. ADVISORY VOTEFOR ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATIONThe Dodd-Frank Act also requires that we provide our shareholders with the opportunity to cast an advisory vote on how frequently future shareholder advisory votes on the Firm’s executive compensation should occur. Shareholders may indicate their preference for a vote every one, two or three years, or may also abstain from voting on this proposal if preferred.The Board believes that a say on pay vote every year is consistent with our corporate governance and compensation philosophies and allows shareholder to express their views on the Company’s executive compensation program annually in light of the fact that executive compensation disclosures and decisions are made annually.This advisory vote is not binding, however, the Board values the opinions that our shareholders express in their votes and will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation. The Board may decide that it is in the best interests of our shareholders and Kforce to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders.Shareholders may cast their vote on the preferred voting frequency of an advisory vote on executive compensation by choosing any one of the following options: (1) an advisory vote every one year; (2) an advisory vote every two years; (3) an advisory vote every three years; or (4) abstaining from voting. Shareholders are not voting to approve or disapprove the Board’s recommendation.VOTE REQUIREDThe time period that receives the highest number of votes cast (one, two or three years) will be considered the preferred frequency for future advisory votes on executive compensation. Abstentions and broker non-votes will not affect the voting.THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE OPTION OF ONE YEAR FOR PROPOSAL 4.PROPOSAL 5. APPROVAL OF KFORCE’S EXECUTIVE COMPENSATION.THE KFORCE INC. 2017 STOCK INCENTIVE PLANSince the completion of its Initial Public Offering in August 1995, Kforce has had a series of key employee equity incentive plans, with the most recent being the Kforce Inc. 2016 Stock Incentive Plan (the 2016 SIP). These plans were designed to provide an additional incentive to and for the retention of executives, employees and directors that we believe are key to the success of Kforce, especially given that we consider our people to be the true “assets” of Kforce. The Board believes these plans have been effective in providing such incentive and retention benefits. The Board also believes that for Kforce to continue to attract and retain outstanding individuals, it must continue to have incentive plans of these types in place. The remaining shares available for grant under the 2016 SIP are limited and will not satisfy Kforce’s needs over the next two to three years.CURRENT AWARDS OUTSTANDINGSet forth below is selected data for the 2016 SIP as of February 24, 2017 (in thousands, except price and average life amounts)Award Type Shares Outstanding Restricted stock outstanding (unvested) 1,512 Stock options outstanding 5 Weighted average exercise price $9.13 Weighted average remaining contractual life 1.41 Shares remaining for grant under the 2016 SIP (1) 1,198 (1) Under the 2016 SIP, each option or SAR granted reduced the share reserve by one share; each full value share reduced the share reserve by 1.58 shares. For additional information regarding stock-based awards previously granted, please see Note 11 to Kforce’s consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016.WHAT WE DO/WHAT WE DON’T DOWhat We Do What We Don’t Do lRequire Board Approval for Accelerated Vesting Upon a Change in Control lPay Out Dividends or Dividend Equivalents on Unvested Awards lRequire Minimum Share Holding lAllow Repricing or Cash Buyouts of Previous Equity-Based LTI Grants lMaintain a Significant Clawback Policy lAllow Hedging or Pledging or Other Related Activities lMinimum Vesting Period of One Year on All Award Types lAllow Liberal Share Recycling SUMMARY OF PROPOSALThe insufficiency of the remaining shares available for grant under the 2016 SIP would result in a critical element of our overall compensation structure either not being available or significantly limited. In addition, the Board believes that certain technical and design changes to the previous plans would be beneficial to the administration of the Plan. For these reasons, the Board believes it is in the best interests of Kforce and its shareholders to adopt a new 2017 Stock Incentive Plan (the 2017 SIP) rather than amending the prior plans. Accordingly, in March 2017, the Board adopted the 2017 SIP, subject to shareholder approval. Therefore, the 2017 SIP will become effective only upon the shareholder approval.The 2017 SIP includes provisions necessary to take advantage of the “qualified performance-based compensation” exception to the tax deduction limits of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m) of the Code prevents a publicly held corporation from claiming tax deductions for annual compensation in excess of $1,000,000 to certain of its senior executives unless the compensation is “qualified performance-based compensation.” The key senior executives who are subject to the compensation deduction limitation include any individual who, as of the last day of the Firm’s taxable year, is the Firm’s chief executive officer or among the three highest compensated officers other than the chief executive officer and the chief financial officer. Shareholder approval of the material terms of the performance goals under the 2017 SIP is required to allow the Firm to receive tax deductions for the full amount of performance-based compensation paid to key senior executives in the form of awards under the 2017 SIP. The material terms that must be approved include: (1) the employees eligible to receive the performance-based compensation; (2) the maximum amount of performance-based compensation that can be paid to any employee in a specified period; and (3) the performance criteria under which the performance-based compensation will be determined. Employees’ rights to payment of compensation under stock awards (such as restricted stock and restricted stock units) and other stock-based awards (other than stock options and stock appreciation rights) must be based on the achievement of specified performance goals in order for such awards to be exempt from the deduction limit under Section 162(m) of the Code. However, stock options or stock appreciation rights (SARs) with time-based vesting can qualify as performance-based compensation for purposes of the deduction limit if the shareholders approve a maximum limit on the number of shares covered by such awards that may be granted to an individual during any specified period, and if the exercise price or base price of the award is not less than the fair market value of the stock subject to the award on the date of grant. As stated above, the 2017 SIP will not become effective if the shareholders do not approve this Proposal 5. Therefore, no compensation will be paid under the 2017 SIP without the shareholder approval required by Section 162(m) of the Code.If the 2017 SIP is approved, the aggregate number of shares of common stock that may be subject to awards under the 2017 SIP (the Share Reserve) will be (1) 1,795,000 shares, plus (2) any shares of common stock that, as of the date this plan is approved by the shareholders of the Firm, are reserved and available for grant or issuance under the 2016 SIP, and are not issued or subject to outstanding grants (the 2016 SIP Reserved Shares). Upon the approval of the 2017 SIP by the shareholders of the Firm, no additional grants shall be made under the 2016 Plan. As of the date of the adoption of the 2017 SIP by the Board, the number of 2016 SIP Reserved Shares is 1,197,946 Shares. Therefore, as of the date of the adoption of the 2017 SIP by the Board, the Share Reserve is2,992,946, subject to adjustment to reflect the grant, termination, cancellation, or forfeiture of outstanding awards under the 2016 SIP after the date of adoption of the 2017 SIP by the Board and prior to the approval by our shareholders. Each option or SAR granted shall reduce the Share Reserve by one share; and each full value share shall reduce the Share Reserve by 2.43 Shares. The aggregate number of shares of common stock available under the 2017 SIP is expected to last between two to three years.DESCRIPTION OF THE 2017 SIP, SUBJECT TO SHAREHOLDER APPROVALThe following summary of the 2017 SIP is qualified in its entirety by the terms of the 2017 SIP as set forth in Appendix A.Purposes. The purposes of the 2017 SIP are to attract and retain highly qualified individuals for and in positions of substantial responsibility, to provide additional incentive to the Firm’s employees and consultants in contributing to the success and progress of the Firm, and to align participants’ interests directly to those of the Firm’s shareholders through increased stock ownership.Awards. The 2017 SIP provides for awards of incentive stock options, nonqualified stock options, stock awards (including restricted stock and restricted stock units), SARs, and other stock-based awards. The Board may adopt sub-plans applicable to particular foreign subsidiaries. With limited exceptions, the rules of such sub-plans may take precedence over other provisions of the 2017 SIP.Stock Subject to the 2017 SIP. The aggregate number of shares of common stock that may be subject to awards under the 2017 SIP, subject to adjustment upon a change in capitalization, is 2,992,946, which includes shares that are reserved and available for grant and issuance under the 2016 SIP, and are not issued or subject to outstanding grants under the 2016 SIP. If any portion of an award under the 2017 SIP or the 2016 SIP, for any reason expires, is terminated, is canceled or is forfeited, the shares allocable to the expired, terminated, canceled, or forfeited portion of the award will become available for future awards under the 2017 SIP at a rate of 2.43 shares for each expired, terminated, canceled, or forfeited share. Each option or SAR granted under the 2017 SIP will reduce the number of shares available for future awards by one share, and each full value award share will reduce the available shares by 2.43 shares. Such shares may be authorized, but unissued, or reacquired shares of common stock.Administration. The 2017 SIP will be administered by the Compensation Committee of the Board (the Committee). Subject to the other provisions of the 2017 SIP, the Committee has the power to determine the terms of each award granted, including the type of award, the exercise price of options, the number of shares subject to the award and the exercisability, vesting or settlement thereof.Eligibility. The 2017 SIP provides that the Committee may grant awards to associates of the Firm and its subsidiaries, and to consultants, including non-employee directors. The Committee may grant incentive stock options only to employees. There are currently approximately 2,800 associates and 11,800 consultants (including nine non-employee directors) who are eligible to receive grants of awards under the 2017 SIP. A grantee who has received a grant of an award may, if he or she is otherwise eligible, receive additional award grants. The Committee selects the grantees and determines the number of shares of common stock to be subject to each award.Maximum Awards for Non-Employee Directors. The 2017 SIP includes annual limits on the value of awards that may be granted to non-employee directors. A non-employee director may not receive options and SARs with an aggregate grant date fair value of more than $220,000 during any calendar year, and may not receive stock awards and other stock-based awards with an aggregate grant date fair value of more than $250,000 in any calendar year.Maximum Term and General Terms and Conditions of Awards. With respect to any grantee who owns stock possessing ten percent or more of the voting power of all classes of stock of the Firm, the maximum term of any incentive stock option granted to such grantee must not exceed five years. The term of all other awards granted under the 2017 SIP may not exceed ten years, except that permissible deferrals of awards may extend beyond ten years. Each award granted under the 2017 SIP is evidenced by a written or electronic agreement between the grantee and Firm.An award agreement may set forth the manner in which the grantee’s death or termination of continuous status as an employee or consultant and related events will affect the award. However, in the absence of an explicit provision in the applicable award agreement, the 2017 SIP provides the default manner in which the grantee’s termination will affect the grantee’s awards. The default provisions in the 2017 SIP provide that upon a grantee’s termination of continuous status as an employee or consultant for any reason, all of the grantee’s outstanding unvested awards will be forfeited. If the grantee’s continuous status as an employee or consultant is terminated for cause, all of the grantee’s unexercised options and SARs will be forfeited. In the event of the grantee’s death or termination of continuous status as an employee or consultant as a result of disability, the vested portions of the grantee’s outstanding options and SARs may be exercised within 90 days following the grantee’s death or termination, whichever is applicable. In the event of termination of the grantee’s continuous status as an employee consultant for a reason other than death, disability, or cause, the vested portions of the grantee’s outstanding options and SARs may be exercised within 30 days following the grantee’s termination. Except as described below, an award granted under the 2017 SIP is not transferable by the grantee, other than by will or the laws of descent and distribution, and is exercisable during the grantee’s lifetime only by the grantee. In the event of the grantee’s death, an option or SAR may be exercised by a person who acquires the right to exercise the award by bequest or inheritance. To the extent and in the manner permitted by applicable law and the Committee, a grantee may transfer an award to certain family members and other individuals and entities, but a transfer to a third party for value is not permitted.Minimum Vesting Requirement. Except with respect to a maximum of five percent (5%) of the shares subject to the 2017 SIP, and except for a provision in the 2017 SIP or an individual award agreement or an employment agreement with the grantee for an acceleration of vesting in the event of the death or disability of the grantee or a change in control, no award will provide for vesting that is any more rapid than vesting on the one (1) year anniversary of the date of grant or, with respect to a performance-based award, a performance period that is less than twelve (12) months.Options. The Committee will not grant to any employee in any calendar year options to purchase more than 500,000 shares of common stock, and will not grant to any consultant (excluding non-employee directors, who are subject to the annual limits on the value of options and SARs described above) in any calendar year options to purchase more than 100,000 shares. Each option granted under the 2017 SIP is subject to the following terms and conditions (the award agreement may contain other terms and conditions not inconsistent with the 2017 SIP, as determined by the Committee):Exercise Price. The Committee determines the exercise price of options to purchase shares of common stock at the time the options are granted. As a general rule, the exercise price of an option must be no less than 100 percent (110 percent for an incentive stock option granted to a grantee who owns stock possessing ten percent or more of the voting power of all classes of stock of the Firm) of the fair market value of the common stock on the date the option is granted. The closing market price per share of the common stock as of the Record Date was $24.95 per share. The 2017 SIP provides exceptions for certain options granted in connection with an acquisition by the Firm of another corporation.Exercise of the Option. Each award agreement specifies the term and vesting of the option. The vesting provisions are determined by the Committee, subject to the minimum vesting requirement described above. An option is exercised by giving written or electronic notice of exercise to the Firm, specifying the number of full shares of common stock to be purchased and by tendering full payment of the purchase price to the Firm.Form of Consideration. The award agreement specifies the option exercise procedures. Except as otherwise determined by the Committee in the award agreement, the acceptable form of consideration when exercising an option generally may consist of any combination of cash, personal check, wire transfer, other shares of Firm’s common stock, or net exercise.Value Limitation. If the aggregate fair market value of all shares of common stock subject to a grantee’s incentive stock option which are exercisable for the first time during any calendar year exceeds $100,000, the excess options will be treated as nonqualified options. For this purpose, fair market value is determined as of the grant date.Stock Appreciation Rights. The exercise of a SAR will entitle the grantee to receive the excess of the fair market value of a share of common stock on the date of exercise over the base price for each share with respect to which the SAR is exercised. The base price of a SAR must be no less than 100 percent of the fair market value of the common stock on the date the SAR is granted. The closing market price per share of the common stock as of the Record Date was $24.95 per share. The terms of the vesting of a SAR are determined by the Committee, subject to the minimum vesting requirement described above. During any calendar year, the Committee will not grant to any employee SARs covering more than 500,000 shares, and will not grant to any consultant (including non-employee directors) SARs covering more than 100,000 shares. Payment upon exercise of a SAR may be in cash, shares of common stock or a combination of cash and shares, as determined by the Committee. SARs may be exercised by the delivery to the Firm of a written or electronic notice of exercise.Stock Awards. A stock award may be made in shares of common stock or in units representing rights to receive shares. During any fiscal year of the Firm, no stock awards covering more than 500,000 shares of common stock may be granted to any employee, and no stock awards covering more than 100,000 shares may be granted to any consultant (excluding non-employee directors, who are subject to the annual limits on the aggregate value of options and SARs described above). Subject to the minimum vesting requirement described above, the award agreement will set forth any vesting, forfeiture, settlement, or payment conditions applicable to the stock award. Conditions for effectiveness or vesting may be time-based, performance-based, or both time-based and performance-based. A stock award made in shares may be designated as an award of restricted stock, and a stock award denominated in units may be designated as an award of restricted stock units or RSUs. An award of restricted stock generally entitles the grantee to voting rights, and may entitle the grantee to dividend and other ownership rights, during the period in which the award is subject to forfeiture conditions. Although an award of RSUs generally will not provide any shareholder rights to the grantee until such time, if any, as the underlying shares are actually issued to the grantee, the Committee may provide in a restricted stock unit award agreement for the payment of dividend equivalents. However, the grantee will not receive payment of any dividends or dividend equivalents unless and until the stock award has become vested.Other Stock-Based Awards and Cash-Based Awards. The Committee may grant other stock-based awards in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as the Committee determines in its discretion. Other stock-based awards may be denominated in cash, in shares of common stock or other securities, in units, in securities or debentures convertible into common stock, or in any combination of the foregoing, and may be paid in cash, in shares of common stock or other securities, or in any combination of the foregoing, all as determined in the discretion of the Committee. Subject to the minimum vesting requirement described above, the terms and conditions of any other stock-based award may include, without limitation, terms and conditions relating to dividend and voting rights, as well as time-based and/or performance-based, or other condition(s) on the effectiveness or vesting of the award. However, the grantee will not receive payment of any dividends or dividend equivalents unless and until the award has become vested. During any calendar year, no other stock-based awards covering more than 500,000 shares of common stock may be granted to any employee, and no other stock-based awards covering more than 100,000 shares may be granted to any consultant (excluding non-employee directors, who are subject to the annual limits on the aggregate value of stock awards and other stock-based awards described above). The maximum amount that a grantee may earn by satisfaction of performance goals during any calendar year under other stock-based awards that are denominated in cash or any medium other than shares or units representing rights to receive shares is $7,500,000. For purposes of the limitation stated in the immediately preceding sentence, the calendar year in which the applicable performance goal(s) is satisfied is the calendar year in which the limitation applies, without regard to the duration of the performance period or any additional time-based vesting conditions or other terms or conditions relating to the payment of the other stock-based award.Code Section 162(m) Provisions. For an award under the 2017 SIP that is intended to qualify for an exemption from the limit on tax deductibility under Section 162(m) of the Code, the lapsing of restrictions on the award and the distribution of shares or payment, as applicable, will be subject to satisfaction of one, or more than one, objective performance goal(s). The Committee will determine the performance goal(s) that will be applied with respect to each such award at the time of grant, but in no event later than 90 days after the commencement of the period of service to which the performance goal(s) relate (or 25 percent of the specified performance measurement period if such period is less than one year). The performance criteria applicable to such awards will be one or more of the following criteria: common stock price; shareholder value or total shareholder return; market value or market value growth; market or customer share; revenue or revenue growth; earnings per share or earnings per share growth; pre-tax net income, after-tax net income, net income margin or net income growth; net income from continuing operations, net income from discontinued operations; gain on sale of discontinued operations; return on assets, shareholders’ equity, capital employed, invested capital or other financial return ratio; operating expenses, operating profit, operating profit margins or operating profit growth; gross profit, gross profit percentage, flex gross profit, flex gross profit percentage, gross profit growth or flex gross profit growth; selling, general & administrative (“SG&A”) expense, SG&A expense percentage or SG&A levels; EBIT (earnings before interest and taxes) or EBIT growth; EBITDA (earnings before interest, taxes, depreciation, and amortization) or EBITDA growth; Earnings before Equity-Based Compensation Expense, net; working capital, debt, debt-to-equity or other liquidity measure; cash flow, cash levels, cash flow margins or cash flow growth; cost goals; budget goals; productivity measures; business expansion goals; goals related to acquisitions or divestitures; accounts receivable, accounts receivable aging or accounts receivable write-offs; or other financial, operational, measure or metric.The Committee will establish the performance goal or goals for the applicable performance period from among the measurement criteria listed above to apply to each award and a formula or matrix prescribing the extent to which such award will be earned based upon the level of achievement of such performance goal or goals. The Committee may establish different performance goals for different grantees and different awards. The performance goals with respect to such measurement criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. The performance goals may be established in terms of Firm-wide objectives or objectives that are related to the performance of the individual grantee or the subsidiary, division, department, or function within the Firm or subsidiary in which the Grantee is employed. Performance goals need not be based on audited financial results.The Committee may not increase the compensation payable, including the number of shares of common stock granted pursuant to any award, that would otherwise be due upon achievement of a performance goal under any award intended to qualify for an exemption from the limit on tax deductibility under Section 162(m) of the Code. Notwithstanding the achievement of any performance goal and any contrary provision of the 2017 SIP, the Committee may, in its discretion, reduce the amount of compensation otherwise to be paid or earned in connection with an award intended to qualify for an exemption from the limit on tax deductibility under Code Section 162(m). The Committee may determine performance before payment of bonuses, capital charges, non-recurring income or expense, items of an unusual nature or of a type that indicates infrequency of occurrence, or other financial and general and administrative expenses for the performance period, and may measure the attainment of the performance goal by appropriately adjusting the evaluation of performance to exclude the effect of any changes in accounting principles affecting the Firm’s or a business unit’s reported results. Prior to the payment of any award intended to be exempt under Section 162(m) of the Code, the Committee will certify in writing that the performance goal(s) applicable to such award were met.Adjustment upon Changes in Capitalization. In the event of changes in the common stock by reason of any stock splits, reverse stock splits, stock dividends, or other change in the capital structure of Firm or extraordinary dividend, spinoff, or similar event affecting the value of common stock, an appropriate adjustment will be made by the Board in the number of shares of common stock subject to the 2017 SIP, the number of shares subject to any award outstanding under the 2017 SIP, the exercise price of any such outstanding award, any share-based performance condition, and the annual per-person limitations on awards. The determination of the Board as to which adjustments will be made will be conclusive.Change in Control. In the event of a change in control of the Firm, then the following provisions apply:Vesting. In the event of a change in control of the Firm, the Board may accelerate the vesting of any outstanding award that is not fully vested on the date of the change in control.Dissolution or Liquidation. In the event of a proposed dissolution or liquidation of the Firm, all outstanding awards will terminate immediately before the consummation of such proposed action. The Board may, in the exercise of its discretion in such instances, declare that any option or SAR will terminate as of a date fixed by the Board and give each grantee the right to exercise his option or SAR as to all or any part of the shares covered by such award, including shares as to which the award would not otherwise be exercisable.Merger or Asset Sale. In the event of a merger of the firm with or into another corporation, the sale of substantially all of the assets of the firm or the acquisition by any person, other than the Firm or other named persons expressly excluded in the 2017 SIP, of 50 percent percent or more of the Firm’s then outstanding securities, each award will be assumed or an equivalent award will be substituted by the successor corporation; provided, however, if such successor or purchaser refuses to assume the then outstanding awards, the Board may accelerate the vesting of any outstanding award that is not fully vested on the date of the change in control.Restriction on Repricing. The 2017 SIP expressly prohibits any modification or amendment of an option or SAR that constitutes a “repricing” under the NASDAQ listing rules, unless the Firm’s shareholders approve the modification or amendment. For this purpose, a “repricing” is generally defined as lowering the exercise or base price of an option or SAR after it is granted, any other action that is treated as a repricing under generally accepted accounting principles, or granting a new award or cash in exchange for the cancellation of an option or SAR with an exercise price or base price that exceeds the current fair market value of the underlying stock, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction. The definition of “repricing” also includes any other action that has the same effect as one of these prohibited actions. Adjustments to the exercise price or number of shares subject to an option or SAR to reflect the effects of a stock split or other extraordinary corporate transaction will not constitute a “repricing.”Amendment and Termination of the 2017 SIP. The Board may at any time amend, alter, suspend or terminate the 2017 SIP. The Firm will obtain shareholder approval of any amendment to the 2017 SIP in such a manner and to such a degree as is necessary and desirable to comply with any applicable law or regulation, including the requirements of any exchange on which the common stock is listed or quoted. Under these laws and regulations, however, shareholder approval will not necessarily be required for all amendments which might increase the cost of the 2017 SIP or broaden eligibility. Unless terminated earlier by the Board, the 2017 SIP will terminate on April 18, 2027. Any awards outstanding under the 2017 SIP at the time of its termination will remain outstanding until they expire by their terms.Tax Consequences. The federal income tax consequences of participation in the 2017 SIP are complex and subject to change. The following discussion is only a summary of the general tax rules applicable to the 2017 SIP.Options. Options granted under the 2017 SIP may be either incentive stock options or non-qualified stock options. Options that are designated as incentive stock options are intended to qualify as such under Section 422 of the Code. With respect to incentive stock options, neither the grant nor the exercise of the option will subject the employee to taxable income, other than under the Alternative Minimum Tax (Section 56(b)(3) of the Code), which is not discussed in detail in this summary. There is no required tax withholding in connection with the exercise of incentive stock options. Upon the ultimate disposition of the stock obtained on an exercise of an incentive stock option, the employee’s entire gain will be taxed at the rates applicable to long-term capital gains, provided the employee has satisfied the prescribed holding periods relating to incentive stock options and the underlying stock. This treatment will apply to the entire amount of gain recognized on the sale of the stock, including the portion of gain that reflects the spread on the date of exercise between the fair market value of the stock at the time of grant and the fair market value of the stock at the time of exercise.The Firm does not receive a compensation deduction for tax purposes with respect to incentive stock options. However, if the employee disposes of the stock purchased on exercise of the incentive stock option prior to the expiration of the applicable holding periods required by Section 422 of the Code, the Firm will be entitled to a deduction equal to the employee’s realization of ordinary income by virtue of the employee’s disqualifying disposition.Non-qualified stock options granted under the 2017 SIP will not qualify for any special tax benefits to the option holder. An option holder generally will not recognize any taxable income at the time he or she is granted a non-qualified option. However, upon its exercise, the option holder will recognize ordinary income for federal tax purposes measured by the excess of the fair market value of the shares at the time of exercise over the exercise price. The income realized by the option holder will be subject to income and other employee withholding taxes.The option holder’s basis for determination of gain or loss upon the subsequent disposition of shares acquired upon the exercise of a non-qualified stock option will be the amount paid for such shares plus any ordinary income recognized as a result of the exercise of such option. Upon disposition of any shares acquired pursuant to the exercise of a non-qualified stock option, the difference between the sale price and the option holder’s basis in the shares will be treated as a capital gain or loss and generally will be characterized as long-term capital gain or loss if the shares have been held for more than one year at the time of their disposition.In general, there will be no federal income tax deduction allowed to the Firm upon the grant or termination of a nonqualified stock option or a sale or disposition of the shares acquired upon the exercise of a nonqualified stock option. However, upon the exercise of a nonqualified stock option by a holder, the Firm will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that an option holder is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Code.Stock Awards and Stock Appreciation Rights. With respect to stock awards and SARs that may be settled either in cash or in shares that are either transferable or not subject to a substantial risk of forfeiture, the grantee will realize ordinary taxable income, subject to tax withholding, equal to the amount of the cash or the fair market value of the shares received. The Firm will be entitled to a deduction in the same amount and at the same time as the compensation income is received by the grantee. With respect to restricted stock award shares that are both nontransferable and subject to a substantial risk of forfeiture, the award recipient will realize ordinary taxable income equal to the fair market value of the shares at the first time the shares are either transferable or not subject to a substantial risk of forfeiture. The Firm will be entitled to a deduction in the same amount and at the same time as the ordinary taxable income realized by the grantee.Some awards, such as restricted stock unit awards, may be considered to be deferred compensation subject to special federal income tax rules under Section 409A of the Code. Failure to satisfy the applicable requirements under Section 409A of the Code for such awards would result in the acceleration of income and additional income tax liability to the grantee, including certain penalties. The 2017 SIP and awards under the 2017 SIP are intended to be designed and administered so that any awards that are considered to be deferred compensation will not result in negative tax consequences to the grantees under Section 409A of the Code.All of the above-described deductions are subject to the limitations on deductibility described in Section 162(m) of the Code. Although the Firm intends that options and SARs and performance-based stock grants under the 2017 SIP will satisfy the “qualified performance-based compensation” exception under Section 162(m) of the Code and will be fully deductible by the Firm, several requirements must be satisfied for an award to qualify for this exception. Therefore, there can be no assurance that compensation attributable to 2017 SIP awards will be fully deductible under all circumstances. In addition, some awards under the 2017 SIP, such as non-performance-based stock grants, generally will not qualify for the “qualified performance-based compensation” exception and therefore may not be deductible by the Firm as a result of the limitations of Section 162(m) of the Code. In addition, as a result of the provisions of Section 280G of the Code, compensation paid to certain employees resulting from vesting of awards in connection with a change in control of the Firm also may not be deductible.The foregoing is only a summary of the effect of federal income taxation upon the award recipient and the Firm with respect to the grant and exercise of awards under the 2017 SIP, does not purport to be complete and does not discuss the tax consequences of the recipient’s death or the income tax laws of any municipality, state or foreign country in which a recipient may reside.New Plan Benefits. All awards under the 2017 SIP are made at the discretion of the Committee. Therefore, the benefits and amounts that will be received or allocated under the 2017 SIP in the future are not determinable at this time.RECOMMENDATION OF THE BOARDThe Board believes that the proposed 2017 SIP is necessary to ensure that a sufficient number of shares will be available to fund our compensation programs. If our shareholders do not approve this Plan, we will experience a shortfall of shares available for issuance that we believe may adversely affect our ability to attract, retain and reward NEOs and other key employees who contribute to our long-term success.VOTE REQUIREDApproval of this proposal requires the affirmative vote of a majority of the shares entitled to vote on the matter. An abstention is considered as present and entitled to vote and will have the effect of a vote against the proposal. A broker non-vote is considered not entitled to vote and will not affect the voting.THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 5.SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANSThe following table provides information about our common stock that may be issued under all of our existing equity compensation plans as of December 31, 2013: Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a) (1) Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) (2) Number of Securities
Remaining Available
for Future Issuance
Under
Equity Compensation
Plans (excluding
securities reflected in
column (a)) (c) (3) (4) N/A N/A 3,133,173 82,768 $ 12.49 34,425 N/A N/A 2,851,401 97,814 $ 10.79 — 180,582 $ 11.57 6,018,999 Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
(a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
(b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(c)Equity compensation plans approved by shareholders (1) 10,000 $ 11.79 1,224,539 Employee stock purchase plans approved by shareholders (2) N/A N/A 2,755,895 (1) In additionOn April 19, 2016, the Kforce shareholders approved the 2016 Stock Incentive Plan. The 2016 Stock Incentive Plan allows for the issuance of stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock units) and other stock-based awards. Each grant of options or stock appreciation rights reduces the available shares under the Kforce Inc. 2016 Stock Incentive Plan by an equal amount while each grant of stock awards reduces the available shares by 1.58 shares for each share awarded. As of the effective date of the 2016 Stock Incentive Plan, no additional awards may be granted pursuant to the numberpreviously approved 2013 Stock Incentive Plan and 2006 Stock Incentive Plan; however, awards outstanding as of securities listedthe effective date continue to vest in this column, 549,913 shares and 260,632 sharesaccordance with the terms of restricted stock granted under the 2013 Stock Incentive Plan and 2006 Stock Incentive Plan, respectively, have beenrespectively. As of December 31, 2016, the number of outstanding issued and are unvested as of December 31, 2013.(2)shares under the 2016 Stock Incentive Plan, 2013 Stock Incentive Plan and 2006 Stock Incentive Plan were 507,543 shares, 1,134,917 shares and 66,271, respectively. The weighted-average exercise price excludes these unvested restricted stockshares because there is no exercise price associated withfor these equity awards.(3)All of the shares of common stock that remain available for future issuance under(2) Includes the Kforce Inc. 2006 and 20132009 Employee Stock Incentive Plans may be issued in connection with options, warrants, rights and restricted stock awards. Each future grant of options or stock appreciation rights shall reduce the available shares under the Kforce Inc. 2006 and 2013 Stock Incentive Plans by an equal amount while each future grant of restricted stock shall reduce the available shares by 1.58 shares for each share awarded. In order to maximize our share reserves, the prevailing practice over the last few years has been for Kforce to issue full value awards as opposed to options and stock appreciation rights.(4)Purchase Plan. As of December 31, 2013,2016, there were options outstanding under the Kforce Inc. 2009 Employee Stock Purchase Plan (“2009 ESPP”) to purchase 8,3925,763 shares of common stock at a discounted purchase price of $19.44.$21.95.STOCK OWNERSHIP INFORMATIONSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Exchange Act requires Kforce directors, executive officers and persons holding more than 10 percent of our common stock to file reports of ownership and changes in ownership of our common stock with the SEC.Based solely on our review of copies of reports and written representations from the reporting persons, we believe that all directors, executive officers and persons holding more than 10 percent of our common stock timely met their reporting obligations.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTOWNERS OF MORE THAN 5%The following table contains information about the number of shares of our common stock held as of December 31, 2016 by persons we know to be the beneficial owners of more than five percent of our outstanding common stock. The percentage ownership is based on the number of shares of our common stock outstanding as of the Record Date.Name of Individual or Identity of Group Beneficially Owned Shares of Common Stock Percent of Class Invesco Ltd. (1) 1555 Peachtree Street NE, Suite 1800 Atlanta, GA 30309 2,645,643 9.9 % The Vanguard Group (2) 100 Vanguard Blvd. Malvern, PA 19355 1,959,380 7.3 % BlackRock, Inc. (3) 55 East 52nd Street New York, New York 10055 1,936,900 7.2 % (1) Based on Amendment No. 1 to Schedule 13G filed February 8, 2017 in which Invesco Ltd. reported that, as of December 31, 2016, it had sole voting power and sole dispositive power over all 2,645,643 shares.(5)Issuances(2) Based on Amendment No. 2 to Schedule 13G filed February 10, 2017 in which The Vanguard Group reported that, as of options underDecember 31, 2016, it had sole voting power over 48,606 of the Incentive Stock Option Plan ceased in 2005. The options issued pursuant to this plan will expire at various times through 2015.shares and sole dispositive power over 1,909,859 shares.Shareholders interested in presenting(3) Based on Amendment No. 8 to Schedule 13G filed January 25, 2017 in which BlackRock, Inc. reported that, as of December 31, 2016, it had sole voting power over 1,839,807 of the shares and sole dispositive power over all 1,936,900 shares.DIRECTORS AND NAMED EXECUTIVE OFFICERSThe following table shows the amount of Kforce common shares beneficially owned as of the Record Date by: (1) our NEOs; (2) our directors; and (3) all of our directors and executive officers as a proposal for considerationgroup. The percentage ownership is based on the number of shares of our common stock outstanding as of the Record Date.Name of Individual or Identity of Group Beneficially Owned Shares of Common Stock (1) (2) Restricted Stock Units (2) Percent of Class David L. Dunkel 1,245,248 — 4.6 % Joseph J. Liberatore 263,368 — 1.0 % David M. Kelly 147,631 — * Kye L. Mitchell 124,920 — * Peter M. Alonso 177,629 — * John N. Allred 33,018 — * Richard M. Cocchiaro 754,525 — 2.8 % Ann E. Dunwoody 5,355 — * Randall A. Mehl — — * A. Gordon Tunstall 12,955 — * Mark F. Furlong 57,741 — * N. John Simmons 15,138 — * Elaine D. Rosen 23,886 5,355 * Ralph E. Struzziero 60,251 5,355 * Howard W. Sutter 515,480 — 1.9 % All directors and executive officers as a group (18 persons) 3,570,717 10,710 13.3 % * Less than 1% of the outstanding common shares (1) Includes 889,175 shares as to which voting and/or investment power is shared or controlled by another person, as follows: Mr. Dunkel, 40,849 (shares held by the David L. Dunkel 2011 Irrevocable Trust over which Mr. Dunkel has shared dispositive power); Mr. Sutter, 5,000 (shares held by spouse), 398,516 (shares held by Sutter Investments Ltd. of which H.S. Investments, Inc. is the sole general partner) and 99,176 (shares held by the Dunkel Family Receptacle Trust of which Mr. Sutter is the sole trustee); Mr. Struzziero, 1,987(shares held by spouse); and Mr. Cocchiaro, 114,549 (shares held by the David Dunkel Jr Family Trust of which Mr. Cocchiaro is the sole trustee), 114,549 (shared held by the Matthew R. Dunkel Family Trust of which Mr. Cocchiaro is the sole trustee), and 114,549 (shares held by the Kristen A. Conner Family Trust of which Mr. Cocchiaro is the sole trustee). (2) Amounts in the Beneficially Owned Shares of Common Stock column do not include shares to be received upon settlement of deferred restricted stock units more than 60 days after the Record Date, which shares are reflected in this Restricted Stock Units column of the table. The deferred restricted stock units have no voting rights and are not included in the Percent of Class column calculation. GENERAL INFORMATIONWhy have I received this proxy statement?We sent you these materials because the Board of Kforce Inc. is soliciting your vote at ourthe Firm’s 2017 Annual Meeting of Shareholders on the proposals:The election of four Class II directors to the Board for a three-year term expiring in 20152020 and one Class III director to the Board for a one-year term expiring in 2018 (Proposal 1);Ratification of Deloitte & Touche LLP as the Firm’s independent registered public accountants for 2017 (Proposal 2);An advisory resolution on executive compensation (Proposal 3);An advisory resolution on the frequency of future advisory votes on executive compensation (Proposal 4); andApproval of the Kforce Inc. 2017 Stock Incentive Plan (Proposal 5).Will any other Business be conducted at the Annual Meeting?We do not know of any other business to be considered at the Annual Meeting. If any other business is properly presented at the Annual Meeting, the persons named on your proxy card will have authority to vote on such matters at their discretion.How does Kforce’s Board recommend I vote on the proposals?The Board recommends that you vote your shares as follows:FOR election of the director nominees named in this Proxy Statement (Proposal 1);FOR ratification of Deloitte & Touche LLP as the Firm’s independent registered public accountant for 2017 (Proposal 2);FORthe advisory vote on executive compensation (Proposal 3);FOR the option of one year as the frequency of future advisory votes on executive compensation (Proposal 4); andFOR approval of the Kforce Inc. 2017 Stock Incentive Plan (Proposal 5)Who is entitled to vote?Each share of Kforce common stock has one vote on each matter. Only shareholders of record as of the close of business on February 24, 2017 are entitled to vote at the Annual Meeting. As of the Record Date, 26,810,172 shares of common stock were outstanding.How do I vote?If your shares are registered directly in your name with Kforce’s transfer agent, Computershare Trust Company, N.A. (Computershare), then you are the shareholder of record with respect to those shares and you may do sovote your shares by any one of the following methods:Via the Internet. You may vote on the Internet at http://www.investorvote.com/KFRC. Please see your proxy card for more information and voting deadlines.By Telephone. You may also by calling (toll free) 1-800- 652-VOTE (8683) and following the procedures prescribedrecorded instructions. Please see your proxy card for voting deadlines.By Mail. Complete, sign and date the enclosed proxy card and return it promptly in Rule 14a-8 under the Exchange Act and our Bylaws. To be eligible for inclusion, shareholder proposalsenclosed postage paid envelope. Your proxy must be received by Kforce’sthe Firm before commencement of the Annual Meeting.In person. You may vote your shares in person at the Annual Meeting upon presentation of valid photo identification and proof of stock ownership as of the Record Date.If your shares are held through a bank, broker or other nominee then you are considered the “beneficial owner” of shares held in “street name” and your bank, broker or nominee is the shareholder of record, however, beneficial owner you have the right to direct your bank, broker or other nominee to vote your shares. If you hold your shares in street name then please refer to the instructions provided by your bank, broker or nominee when voting your shares. Please note, if you hold your shares in street name you must obtain a legal proxy in your name from your bank, broker or other nominee to vote in person at the Annual Meeting.Can I change my vote?You may change your vote at any time before the Annual Meeting by using the Internet or telephone methods described above, in which case only your latest submission will be counted. You may also change your vote by signing and returning a new proxy card with a later date, attending the Annual Meeting and voting in person, or sending written notice of revocation before the Annual Meeting to our Corporate Secretary at the Firm’s principal executive offices located at 1001 East Palm Avenue, Tampa, Florida 33605.What is the quorum requirement for the Annual Meeting?The presence at the meeting, in person or by proxy, of a majority of the shares entitled to vote will constitute a quorum. Broker non-votes (described below) and abstentions are counted for purposes of establishing a quorum but will not be counted for purposes of determining whether a proposal has been approved.How are my shares voted if I submit a proxy but do not specify how I want to vote?If you are the shareholder of record and you submit a valid proxy without specifying how you want to vote, then the person(s) designated as proxy holders will vote your shares as recommended by the Board on all matters presented in this Proxy Statement and at their discretion on all other matters properly presented. If you are the beneficial owner of shares held in street name and do not provide your bank, broker or nominee with specific voting instructions then the organization that holds your shares may generally vote in their discretion on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares in a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”Which proposals are considered “routine” or “non-routine”?Ratification of Deloitte & Touche LLP as the Firm’s independent registered public accountant for 2017 (Proposal 2) is considered a routine matter under applicable rules and each of the other proposals are considered non-routine. Therefore, if your shares are held in “street name” by your broker or other nominee and you do not provide instructions on how to vote your shares then your broker or nominee will permitted to vote its shares only with regards to Proposal 2 and will not be permitted to vote on the other matters.Assuming that a quorum is present at the Annual Meeting, what is the required vote for the proposals to pass?Please see the respective proposal for a description of the vote required for it to pass.Who will count the vote?A representative of Computershare, an independent tabulator, will count the vote and act as the inspector of elections.Who is paying the costs of this proxy solicitation?We will pay the costs of soliciting these proxies on behalf of the Board. We have engaged Georgeson Inc. to assist in the solicitation of proxies and we anticipate that the costs associated with this engagement will be approximately $12,500 plus out-of-pocket expenses. We will also pay brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our shareholders and obtaining beneficial owners’ voting instructions. In addition to mailing proxy solicitation material, our directors and employees, without additional compensation, may solicit proxies in person, by telephone or by electronic communication.How can I find the results of the Annual Meeting?Preliminary results will be announced at the Annual Meeting. Final results will be published in a Current Report on Form 8-K within four business days following the Annual Meeting.SHAREHOLDER COMMUNICATIONS, PROPOSALS AND OTHER MATTERSWe are committed to engaging with our shareholders and taking their feedback into consideration. Our shareholders are invited to communicate with our directors, either individually or as a group, by writing to the attention of our Corporate Secretary at Kforce Inc., 1001 East Palm Avenue, Tampa, Florida 33605. Such communications will be delivered directly to Kforce’s Board.All shareholder proposals to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-18 of the Securities Exchange Act of 1934, as amended, (the Exchange Act), must be submitted in writing to the Corporate Secretary at 1001 East Palm Avenue, Tampa, Florida 33605 no later than November 14, 2014.17, 2017. The Board will review any proposal from eligible shareholders that it receives by that date and will determine whether any such proposal will be included in our proxy materials for 2014.In addition, theour Annual Meeting of Shareholders in 2017. The proxy solicited by the Board for the next Annual Meeting of Shareholders in 2014 will confer discretionary authority to vote on any shareholder proposal presented at that meeting, unless we are provided with written notice of such proposal by January 28, 2015.As31, 2018. Pursuant to the Firm’s Articles of Incorporation proposals submitted other than pursuant to Rule 14(a)-8 or director nominations must be delivered to the Corporate Secretary no later than 60 days before the date of this proxy statement, we know of no businessthe meeting. The Nomination Committee will consider nominees for the Board that will be presentedare proposed by our shareholders. The same identifying and evaluating procedures apply to all candidates for director nomination, including candidates submitted by shareholders. Any shareholder who wishes to recommend a prospective nominee for the Board for the Nomination Committee’s consideration may do so by giving the candidate’s name and qualifications in writing to the Firm’s Corporate Secretary at the Annual Meeting other than the items referred to above. If any other matter is properly brought before the meeting for action by shareholders, proxies in the enclosed form returned to us will be voted in accordance with the judgment of the proxy holder.The material referred to in this proxy statement under the captions “Compensation Committee Report,” and “Audit Committee Report” shall not be deemed soliciting material or otherwise deemed filed, or subject to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by any general statement of incorporation by reference in any filings made under the Securities Act of 1933, as amended, or the Exchange Act.OnlyShareholders who share an address may receive only one copy of this proxy statement, and the accompanying Annual Report, is being delivered to shareholders who share an address, unless we have received contrary instructions by one or more of the shareholdersfrom a shareholder at that address. We will promptly deliverShareholders sharing an address who would like to receive a separate copy of this proxy statement andthese materials now or in the accompanying Annual Reportfuture may do so by mailing a request to any shareholder at a shared address to which a single copy of those documents has been delivered upon the written or oral request from that shareholder. Written requests should be mailed to David M. Kelly,Firm’s Corporate Secretary Kforce Inc.,at 1001 East Palm Avenue, Tampa, Florida 33605. Oral requests may be made33605 or by calling Kforce Investor Relations at (813) 552-5000. Any shareholder sharing a single copyAPPENDIX AKFORCE INC.2017 STOCK INCENTIVE PLAN1. Purposes of the proxy statementPlan. The purposes of this Kforce Inc. 2017 Stock Incentive Plan are to attract and Annual Report who wishesretain highly qualified individuals for and in positions of substantial responsibility, to receive a separate mailingprovide additional incentive to our Employees and Consultants in contributing to the success and progress of our proxy statementthe Firm, and Annual Report into align participants’ interests directly to those of Kforce’s shareholders through increased stock ownership. Awards granted under the future,Plan may be Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Stock Awards, and shareholders sharing an address and receiving multiple copiesOther Stock-Based Awards, any of our proxy statement and Annual Report who wish to share a single copy of those documents inwhich may be performance-based, as determined by the future, should also notify us in writing atCommittee.2. Definitions. As used herein, the foregoing address or by calling the foregoing telephone number.
(a) “Applicable Law” means the legal requirements relating to the administration of the Plan under applicable federal, state, local and foreign corporate, tax and securities laws, and the rules and requirements of any stock exchange or quotation system on which the Common Stock is listed or quoted, all as amended through the applicable date. The term “Applicable Law” includes laws and regulations that are not mandatory but compliance with which confers benefits on the Firm or Grantees (e.g. Code Sections 162(m), 409A, and 422, and Exchange Act Rule 16b-3), where such compliance is intended under the Plan.(b) “Award” means an Option, Stock Appreciation Right, Stock Award, or Other Stock-Based Award granted under the Plan, any of which may be performance-based.(c) “Award Agreement” means the agreement, notice and/or terms or conditions by which an Award is evidenced, documented in such form (including by electronic communication) as may be approved by the Committee.(d) “Board” means the Board of Directors of the Firm.(e) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Stock Appreciation Right.(f) “Cause” means the happening of any of the following:(i) the Grantee is convicted by a court of competent jurisdiction or enter a guilty plea or a plea of nolo contendere for any felony; or (ii) the Grantee breaches any provisions of this Plan or his/her employment agreement and the breach results in material injury to the Firm or its acquiring or surviving entity; or (iii) the Grantee engages in misconduct, a policy violation, dishonesty or fraud concerning the Firm or its acquiring or surviving entity’s business or affairs and this misconduct, policy violation, dishonesty or fraud results in material injury to the Firm or its acquiring or surviving entity. (g) “Change in Control” means the happening of any of the following, unless otherwise provided in an Award Agreement:(i) the acquisition by any person or entity, including a “group” as defined in Section 13(d)(3) of the Exchange Act (a “Person”) of beneficial ownership of fifty percent (50%) or more of the combined voting power of the then-outstanding voting securities of the Firm that may be cast for the election of directors; provided, however, that for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Firm or one of its affiliates, (B) any acquisition by the Firm or one of its affiliates, (C) any acquisition by any executive benefit plan (or related trust) sponsored or maintained by the Firm or one of its affiliates, (D) any acquisition by any corporation pursuant to a transaction that complies with clauses (A), (B) and (C) of clause (iii) of this section, or (E) any acquisition by David L. Dunkel or his family members; or (ii) individuals who, as of the date of this Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of this Plan whose election, or nomination for election by shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Firm (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the Persons who were the beneficial owners, respectively, of the Firm’s outstanding Common Stock and outstanding voting securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that as a result of such transaction owns the Firm or all or substantially all of the Firm’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Firm’s Common Stock and voting securities, as the case may be, (B) no person (excluding any corporation resulting from such Business Combination or any Executive benefit plan (or related trust) of the Firm or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, twenty-five percent or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by shareholders of a complete liquidation or dissolution of the Firm. (h) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation include regulations, proposed regulations and applicable guidance thereunder.(i) “Committee” means the Compensation Committee of the Board, which shall be appointed by the Board, and shall consist of members of the Board who are not Employees and who qualify as “outside directors” under Code Section 162(m).(j) “Common Stock” means the Common Stock, $0.01 par value, of the Firm.(k) “Consultant” means any person, including an advisor, engaged by the Firm or a Parent or Subsidiary to render services and who is compensated for such services, including without limitation non-Employee Directors who are compensated by the Firm for their services as non-Employee Directors. In addition, as used herein, “consulting relationship” shall be deemed to include service by a non-Employee Director as such.(l) “Continuous Status as an Employee or Consultant” means that the employment or consulting relationship is not interrupted or terminated by the Firm, any Parent or Subsidiary. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved in writing by the Board, an Officer, or a person designated in writing by the Board or an Officer as authorized to approve a leave of absence, including sick leave, military leave, or any other personal leave; provided, however, that for purposes of Incentive Stock Options, any such leave may not exceed 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract (including certain Firm policies) or statute, or (ii) transfers between locations of the Firm or between the Firm, a Parent, a Subsidiary or successor of the Firm; or (iii) a change in the status of the Grantee from Employee to Consultant or from Consultant to Employee (subject to Section 21 and other applicable requirements of Code Section 409A).(m) “Covered Stock” means the Common Stock subject to an Award.(n) “Date of Grant” means the date on which the Committee makes the determination granting the Award, or such other later date as is determined by the Committee on which the grant of the Award shall become effective, including the date of the satisfaction of one, or more than one, objective employment, performance, or other grant condition that the Committee requires to be timely satisfied before the grant of a Stock Award or Other Stock-Based Award will be effective. Notice of the determination shall be provided to each Grantee within a reasonable time after the Date of Grant.(o) “Date of Termination” means the date on which a Grantee’s Continuous Status as an Employee or Consultant terminates unless otherwise specified in an Award Agreement (subject to Section 21 and other applicable requirements of Code Section 409A).(p) “Director” means a member of the Board.(q) “Disability” means, unless otherwise provided in an Award Agreement, total and permanent disability as defined in Section 22(e)(3) of the Code.(r) “Dividend Equivalent” means a right to receive value equal to the amount of cash dividends and value of other distributions that would have been payable on Covered Stock during a period of time had such Covered Stock been issued to the Grantee during such period of time.(s) “Employee” means any person, including Officers and Directors, employed by the Firm or any Parent or Subsidiary of the Firm. Neither service as a Director nor payment of a director’s fee by the Firm shall be sufficient to constitute “employment” by the Firm.(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.(u) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:(i) If the Common Stock is listed on any established stock exchange or a national market system, including, but without limitation to, the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) System, the Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the day of determination. (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable; (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined by the Committee on a reasonable basis using a method that complies with Code Section 409A. (v) “Firm” means Kforce Inc., a Florida corporation.(w) “Grantee” means an individual who has been granted an Award.(x) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.(y) “Nonqualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.(z) “Officer” means a person who is an officer of the Firm within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.(aa) “Option” means a stock option granted under the Plan, which may be an Incentive Stock Option or a Nonqualified Stock Option.(ab) “Other Stock-Based Award” means an Award granted under Section 9 of the Plan.(ac) “Parent” means a corporation, whether now or hereafter existing, in an unbroken chain of corporations ending with the Firm if each of the corporations other than the Firm holds at least 50 percent of the voting shares of one of the other corporations in such chain.(ad) “Performance Period” means the time period during which the performance goals established by the Committee with respect to an Award that is performance-based must be met.(ae) “Plan” means this Kforce Inc. 2017 Stock Incentive Plan.(af) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.(ag) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.(ah) “Spread” means, in the case of a Stock Appreciation Right, the amount by which the Fair Market Value per Share on the date when the SAR is exercised exceeds the Base Price specified in the SAR.(ai) “Stock Appreciation Right” or “SAR” has the meaning set forth in Section 7 of the Plan.(aj) “Stock Award” means Restricted Stock or Restricted Stock Units granted to a Grantee under Section 8 of the Plan.(ak) “Subsidiary” means a corporation, domestic or foreign, of which not less than 50 percent of the voting shares are held by the Firm or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Firm or a Subsidiary.3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the aggregate number of Shares of Common Stock that may be subject to awards under this Plan (the “Share Reserve”) is (i) 1,795,000 Shares, plus (ii) any Shares of Common Stock that, as of the date this Plan is approved by the shareholders of the Firm, are reserved and available for grant and issuance under the Kforce Inc. 2016 Stock Incentive Plan (the “2016 Plan”), and are not issued or subject to outstanding grants under the 2016 Plan (respectively, the “2016 Plan Reserved Shares”). Upon the approval of this Plan by the shareholders of the Firm, no additional grants shall be made under the 2016 Plan. As of the date of the adoption of this Plan by the Board, the number of 2016 Plan Reserved Shares is 1,197,946 Shares. Therefore, as of the date of the adoption of this Plan by the Board, the Share Reserve is2,992,946, subject to adjustment to reflect the grant, termination, cancellation, or forfeiture of outstanding awards under the 2016 Plan after the date of adoption of this Plan by the Board and prior to the approval of this Plan by the shareholders of the Firm. In no event shall the number of Shares issued upon the exercise of Incentive Stock Options exceed the Share Reserve. Each Option or SAR granted shall reduce the Share Reserve by one Share; and each full value share (Stock Award) shall reduce the Share Reserve by 2.43 Shares. Such shares of Common Stock may be authorized, but unissued, or reacquired shares of Common Stock. The Shares issued by the Firm under the Plan may be, at the Firm’s option, either (i) evidenced by a certificate registered in the name of the Grantee, or (ii) credited to a book-entry account for the benefit of the Grantee maintained by the Firm’s stock transfer agent or its designee.If any portion of an Award granted under the Plan for any reason expires, is terminated, is canceled or is forfeited (including those forfeited as a result of not being earned pursuant to the Award’s performance criteria), then (i) with respect to Options and SARs, the Shares underlying such Award shall be restored to the Share Reserve on a one-for-one basis and shall become available for future Awards under the Plan (unless the Plan has terminated); and (B) with respect to each Award other than an Option or SAR, the Shares underlying such Award shall be restored to the Share Reserve at a rate of 2.43 Shares for each expired, terminated, canceled, or forfeited Share and shall become available for future Awards under the Plan (unless the Plan has terminated). If any portion of an outstanding award that was granted under the 2016 Plan or any other prior plan maintained by the Firm for any reason expires, is terminated, is canceled or is forfeited on or after the date on which the shareholders of the Firm approve this Plan, then (i) with respect to options and stock appreciation rights, the Shares underlying such award shall be added to the Share Reserve on a one-for-one basis and shall become available for future Awards under the Plan (unless the Plan has terminated); and (B) with respect to each award other than an option or stock appreciation right, the Shares underlying such award shall be added to the Share Reserve at a rate of 2.43 Shares for each expired, terminated, canceled, or forfeited Share and shall become available for future Awards under the Plan (unless the Plan has terminated). With respect to an Option and SAR, if the payment upon exercise of an Option or SAR is in the form of Shares, the Shares subject to the Option or SAR shall be counted against the Share Reserve as one Share for every Share subject to the Option or SAR, regardless of the number of Shares used to settle the Option or SAR upon exercise.4. Administration of the Plan.(a) Procedure.(i) Administration by Committee. The Plan shall be administered by the Committee.(ii) Rule 16b-3. To the extent the Committee considers it desirable for transactions relating to Awards to be eligible to qualify for an exemption under Rule 16b-3, the transactions contemplated under the Plan shall be structured to satisfy the requirements for exemption under Rule 16b-3.(iii) Section 162(m) of the Code. To the extent the Committee considers it desirable for compensation delivered pursuant to Awards to be eligible to qualify for an exemption from the limit on tax deductibility of compensation under Section 162(m) of the Code, the transactions contemplated under the Plan shall be structured to satisfy the requirements for exemption under Section 162(m) of the Code.(b) Powers of the Committee. Subject to the provisions of the Plan, and subject to the specific duties delegated by the Board to the Committee, the Committee shall have the authority, in its discretion:(i) to determine the Fair Market Value of the Common Stock; (ii) to select the Employees and Consultants to whom Awards will be granted under the Plan; (iii) to determine whether, when, to what extent and in what types and amounts Awards are granted under the Plan; (iv) to determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (v) to determine the forms of Award Agreements, which need not be the same for each grant or for each Grantee, and which may be delivered electronically, for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan (including the minimum vesting provision in Sections 5(c) of the Plan), of any Award granted under the Plan. Such terms and conditions, which need not be the same for each Award or for each Grantee, include, but are not limited to, the exercise price, the time or times when Options and SARs may be exercised (which may be based on performance criteria), the extent to which vesting is suspended during a leave of absence, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Committee shall determine; (vii) to construe and interpret the terms of the Plan and Awards; (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including, without limiting the generality of the foregoing, rules and regulations relating to the operation and administration of the Plan to accommodate the specific requirements of local and foreign laws and procedures; (ix) to modify or amend each Award (subject to Section 14 of the Plan). However, the Administrator’s authority to modify or amend an Award is expressly limited in accordance with NASDAQ Listing Rule 5635(c). Therefore, any modification or amendment of an Option or SAR that would be treated as a “repricing” under NASDAQ Listing Rule 5635(c) shall not be effective without the approval of the shareholders of the Firm. For purposes of this Section 4(b)(ix) of the Plan, “repricing” means any of the following or any other action that has the same effect: a. lowering the exercise price of an Option or SAR after it is granted; b. any other action that is treated as a repricing under generally accepted accounting principles; or c. canceling an Option or SAR at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in exchange for another Award or cash, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off, or other similar corporate transaction; (x) to authorize any person to execute on behalf of the Firm any instrument required to effect the grant of an Award previously granted by the Committee; (xi) to determine the terms and restrictions applicable to Awards; (xii) to make such adjustments or modifications to Awards granted to Grantees who are Employees of foreign Subsidiaries as are advisable to fulfill the purposes of the Plan or to comply with Applicable Law; (xiii) to delegate its duties and responsibilities under the Plan with respect to sub-plans applicable to foreign Subsidiaries, except its duties and responsibilities with respect to Employees who are also Officers or Directors subject to Section 16(b) of the Exchange Act; (xiv) to correct any defect or supply any omission, or reconcile any inconsistency in the Plan, or in any Award Agreement, in the manner and to the extent it shall deem necessary or expedient to make the Plan fully effective; (xv) to provide any notice, agreement or other communication required or permitted by the Plan in either written or electronic form; (xvi) subject to the minimum vesting provision in Sections 5(c) of the Plan, to determine the vesting period during which each Award shall be subject to a risk of forfeiture upon a voluntary termination of employment or service, or termination in other specified circumstances, and the terms upon which such risk will end (i.e., “vesting” will occur), at a stated date or dates or on an accelerated basis in specified circumstances; and (xvii) to make all other determinations deemed necessary or advisable for administering the Plan. (c) Effect of Administrator’s Decision. The Committee’s decisions, determinations and interpretations shall be final and binding on all Grantees and any other holders of Awards.5. Eligibility and General Conditions of Awards.(a) Eligibility. Awards other than Incentive Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. If otherwise eligible, an Employee or Consultant who has been granted an Award may be granted additional Awards. Modifications to outstanding Awards may be made without regard to whether the Grantee is then currently eligible for a new Award.(b) Maximum Term; Deferral. Subject to the following provision, the term during which an Award may be outstanding shall not extend more than 10 years after the Date of Grant and shall be subject to earlier termination as specified elsewhere in the Plan or Award Agreement. The Committee may permit or require a Grantee to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due by virtue of the grant of or the lapse or waiver of restrictions with respect to Awards other than Options and SARs. If any such deferral is required or permitted, the Committee shall establish such rules and procedures for such deferral, including rules and procedures implemented pursuant to Section 21 of the Plan for compliance with Code Section 409A. Any deferral of a cash payment or of the delivery of Shares that is permitted or required by the Committee may, if so permitted or required by the Committee, extend more than ten years after the Date of Grant of the Award to which the deferral relates.(c) Minimum Vesting. Except with respect to a maximum of five percent (5%) of the Share Reserve, as may be adjusted pursuant to Section 12 of the Plan, and except for the death or disability of the grantee, or a change in control, no Award shall provide for vesting that is any more rapid than vesting on the one (1) year anniversary of the date of grant or, with respect to a performance-based award, a performance period that is less than twelve (12) months. Treatment of Awards in cases of death, disability, and change in control may be specifically addressed in the 2017 SIP or an individual award agreement or an employment agreement with the grantee.(d) Award Agreement. To the extent not set forth in the Plan, the terms and conditions of each Award, which need not be the same for each Award or for each Grantee, shall be set forth in an Award Agreement. The Committee, in its discretion, may require as a condition to any Award Agreement’s effectiveness that the Award Agreement be executed by the Grantee, including by electronic signature or other electronic indication of acceptance, and that the Grantee agree to such further terms and conditions as specified in the Award Agreement.(e) Maximum Awards to Non-Employee Directors. Notwithstanding any provision to the contrary in the Plan, the following limitations shall apply to Awards granted to non-Employee Directors under the Plan: (i) the maximum number of Shares subject to Options and SARs granted under the Plan to any non-Employee Director during any calendar year shall not exceed $220,000 in total value (the “Non-Employee Director Option/SAR Limit”), and (ii) the maximum number of Shares subject to Stock Awards and Other Stock-Based Awards granted under the Plan to any non-Employee Director during any calendar year shall not exceed $250,000 in total value, excluding for this purpose the value of any dividends or Dividend Equivalents paid pursuant to any Stock Awards and Other Stock-Based Awards granted in a previous year (the “Non-Employee Director Full Value Award Limit”). For purposes of the Non-Employee Director Option/SAR Limit and the Non-Employee Director Full Value Award Limit, the value of any Award shall be its Date of Grant fair value for the Firm’s financial reporting purposes.(f) Termination of Employment or Consulting Relationship. In the event that a Grantee’s Continuous Status as an Employee or Consultant terminates (other than upon the Grantee’s death or Disability), then, unless otherwise provided by the Committee in the Award Agreement or an employment agreement with the Grantee, and subject to Section 12 of the Plan:(i) Subject to Section 5(f)(ii) below, the Grantee may exercise his or her unexercised Option or SAR within 30 days of the Date of Termination and only to the extent that the Grantee was entitled to exercise it at the Date of Termination (but in no event later than the expiration of the term of such Option or SAR as set forth in the Award Agreement). If, at the Date of Termination, the Grantee is not entitled to exercise his or her entire Option or SAR, the Shares covered by the unexercisable portion of the Option or SAR shall revert to the Plan and increase the Share Reserve. If, after the Date of Termination, the Grantee does not exercise his or her Option or SAR within 30 days, the Option or SAR shall terminate, and the Shares covered by such Option or SAR shall revert to the Plan and increase the Share Reserve. If a Grantee exercises his or her unexercised Option or SAR subsequent to the Date of Termination, the Grantee is not permitted to utilize Shares to cover the exercise cost of the Option or SAR or to cover their minimum payroll tax withholding obligations; (ii) in the event that a Grantee’s Continuous Status as an Employee or Consultant terminates for Cause, all of his or her unexercised Options or SARs shall terminate immediately upon the Date of Termination and the Shares covered by such Option or SAR shall revert to the Plan and increase the Share Reserve; (iii) the Grantee’s Stock Awards and Other Stock-Based Awards, to the extent forfeitable immediately before the Date of Termination, shall thereupon automatically be forfeited; (iv) the Grantee’s Stock Awards and Other Stock-Based Awards that were not forfeitable immediately before the Date of Termination shall promptly be settled in accordance with the terms of the applicable Award Agreement; and (v) any Stock Awards and Other Stock-Based Awards subject to performance criteria with respect to which the Performance Period has not ended as of the Date of Termination shall terminate immediately upon the Date of Termination. (g) Disability of Grantee. In the event that a Grantee’s Continuous Status as an Employee or Consultant terminates as a result of the Grantee’s Disability, then, unless otherwise provided by the Committee in the Award Agreement or an employment agreement with the Grantee:(i) the Grantee may exercise his or her unexercised Option or SAR at any time within 90 days from the Date of Termination, but only to the extent that the Grantee was entitled to exercise the Option or SAR at the Date of Termination (but in no event later than the expiration of the term of the Option or SAR as set forth in the Award Agreement). If, at the Date of Termination, the Grantee is not entitled to exercise his or her entire Option or SAR, the Shares covered by the unexercisable portion of the Option or SAR shall revert to the Plan and increase the Share Reserve. If, after the Date of Termination, the Grantee does not exercise his or her Option or SAR within the time specified herein, the Option or SAR shall terminate, and the Shares covered by such Option or SAR shall revert to the Plan and increase the Share Reserve. (ii) the Grantee’s Stock Awards and Other Stock-Based Awards, to the extent forfeitable immediately before the Date of Termination, shall thereupon automatically be forfeited; (iii) the Grantee’s Stock Awards and Other Stock-Based Awards that were not forfeitable immediately before the Date of Termination shall promptly be settled in accordance with the terms of the applicable Award Agreement; and (iv) any Stock Awards and Other Stock-Based Awards subject to performance criteria with respect to which the Performance Period has not ended as of the Date of Termination shall terminate immediately upon the Date of Termination. (h) Death of Grantee. In the event of the death of a Grantee, then, unless otherwise provided by the Committee in the Award Agreement or an employment agreement with the Grantee,(i) the Grantee’s unexercised Option or SAR may be exercised at any time within 90 days following the date of death (but in no event later than the expiration of the term of such Option or SAR as set forth in the Award Agreement), by the Grantee’s estate or by a person who acquired the right to exercise the Option or SAR by bequest or inheritance, but only to the extent that the Grantee was entitled to exercise the Option or SAR at the date of death. If, at the time of death, the Grantee was not entitled to exercise his or her entire Option or SAR, the Shares covered by the unexercisable portion of the Option or SAR shall immediately revert to the Plan and increase the Share Reserve. If, after death, the Grantee’s estate or a person who acquired the right to exercise the Option or SAR by bequest or inheritance does not exercise the Option or SAR within the time specified herein, the Option or SAR shall terminate, and the Shares covered by such Option or SAR shall revert to the Plan and increase the Share Reserve. (ii) the Grantee’s Stock Awards and Other Stock-Based Awards, to the extent forfeitable immediately before the date of death, shall thereupon automatically be forfeited; (iii) the Grantee’s Stock Awards and Other Stock-Based Awards that were not forfeitable immediately before the date of death shall promptly be settled in accordance with the terms of the applicable Award Agreement; and (iv) any Stock Awards and Other Stock-Based Awards subject to performance criteria with respect to which the Performance Period has not ended as of the date of death shall terminate immediately upon the date of death. (i) Nontransferability of Awards.(i) Except as provided in Section 5(i)(iii) below, each Award, and each right under any Award, shall be exercisable only by the Grantee during the Grantee’s lifetime, or, if permissible under Applicable Law, by the Grantee’s guardian or legal representative. (ii) Except as provided in Section 5(i)(iii) below, no Award (prior to the time, if applicable, Shares are issued in respect of such Award), and no right under any Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Grantee otherwise than by will or by the laws of descent and distribution (or in the case of Restricted Stock Awards, to the Firm) and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Firm or any Subsidiary; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. (iii) To the extent and in the manner permitted by Applicable Law, and to the extent and in the manner permitted by the Committee, and subject to such terms and conditions as may be prescribed by the Committee, a Grantee may transfer an Award to: a. a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Grantee (including adoptive relationships); b. any person sharing the employee’s household (other than a tenant or employee); c. a trust in which persons described in (a) and (b) have more than 50 percent of the beneficial interest; d. a foundation in which persons described in (a) or (b) or the Grantee control the management of assets; or e. any other entity in which the persons described in (a) or (b) or the Grantee own more than 50 percent of the voting interests; provided such transfer is not for value. The following shall not be considered transfers for value: a transfer under a domestic relations order in settlement of marital property rights, and a transfer to an entity in which more than 50 percent of the voting interests are owned by persons described in (a) above or the Grantee, in exchange for an interest in such entity.6. Stock Options. Subject to the terms of the Plan, including without limitation the minimum vesting provision in Section 5(c) of the Plan, the Committee may grant Options to Employees or Consultants from time to time upon such terms and conditions as the Committee may determine in accordance with the following provisions:(a) Limitations.(i) Options granted under the Plan may be Incentive Stock Options, Nonqualified Stock Options, or a combination of the foregoing. Each Award shall specify whether (or the extent to which) the Option is an Incentive Stock Option or a Nonqualified Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market Value of the Shares as of the Date of Grant with respect to which Options designated as Incentive Stock Options are exercisable for the first time by the Grantee during any calendar year (under the Plan and any other employee stock option plan of the Firm or any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. (ii) No Employee shall be granted, in any calendar year, Options to purchase more than 500,000 Shares, and no Consultant (other than a non-Employee Director, who is subject to the Non-Employee Director Option/SAR Limit in Section 5(e) of the Plan) shall be granted, in any calendar year, Options to purchase more than 100,000 Shares. The limitation described in this Section 6(a)(ii) shall be adjusted proportionately in connection with any change in the Firm’s capitalization as described in Section 12 of the Plan. If an Option is canceled in the same calendar year in which it was granted (other than in connection with a transaction described in Section 12 of the Plan), the canceled Option will be counted against the limitation described in this Section 6(a)(ii). (b) Term of Option. The term of each Option shall be stated in the Award Agreement; provided, however, that the term shall be 10 years from the Date of Grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10 percent of the voting power of all classes of stock of the Firm or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the Date of Grant or such shorter term as may be provided in the Award Agreement.(c) Option Exercise Price and Consideration.(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Committee and, except as otherwise provided in this Section 6(c)(i), shall be no less than 100 percent of the Fair Market Value per Share on the Date of Grant.a. In the case of an Incentive Stock Option granted to an Employee who on the Date of Grant owns stock representing more than 10 percent of the voting power of all classes of stock of the Firm or any Parent or Subsidiary, the per Share exercise price shall be no less than 110 percent of the Fair Market Value per Share on the Date of Grant. b. Any Option that is (1) granted to a Grantee in connection with the acquisition (“Acquisition”), however effected, by the Firm of another corporation or entity (“Acquired Entity”) or the assets thereof, (2) associated with an option to purchase shares of stock or other equity interest of the Acquired Entity or an affiliate thereof (“Acquired Entity Option”) held by such Grantee immediately prior to such Acquisition, and (3) intended to preserve for the Grantee the economic value of all or a portion of such Acquired Entity Option, may be granted with such exercise price as the Committee determines to be necessary to achieve such preservation of economic value. (d) Waiting Period and Exercise Dates. At the time an Option is granted, the Committee shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised. An Option shall be exercisable only to the extent that it is vested according to the terms of the Award Agreement.(e) Form of Consideration. The Committee shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Committee shall determine the acceptable form of consideration at the time of Award. The acceptable form of consideration may consist of any combination of cash, personal check, wire transfer or, subject to the approval of the Committee:(i) net exercise, in which case the Firm will not require payment of the Option exercise price from the Grantee but will reduce the number of Shares issued upon the exercise by the number of whole Shares that has an aggregate Fair Market Value that is equal to the aggregate Option exercise price for the portion of the Option exercised; (ii) pursuant to procedures approved by the Committee, (A) through the sale of the Shares acquired on exercise of the Option through a broker-dealer to whom the Grantee has submitted an irrevocable notice of exercise and irrevocable instructions to deliver promptly to the Firm the amount of sale or loan proceeds sufficient to pay the exercise price, together with, if requested by the Firm, the amount of federal, state, local or foreign withholding taxes payable by the Grantee by reason of such exercise, or (B) through simultaneous sale through a broker of Shares acquired upon exercise; or (iii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Law. (f) Exercise of Option.(i) Procedure for Exercise; Rights as a Shareholder.a. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. b. An Option may not be exercised for a fraction of a Share. c. An Option shall be deemed exercised when the Firm receives: i. written or electronic notice of exercise (in accordance with the Award Agreement and any action taken by the Committee pursuant to Section 4.b. of the Plan) from the person entitled to exercise the Option, and ii. full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. iii. Shares issued upon exercise of an Option shall be issued in the name of the Grantee or, if requested by the Grantee, in the name of the Grantee and his or her spouse (or other permitted transferee). Until the stock certificate evidencing such Shares is issued or delivery is otherwise effected by the Firm (as evidenced by the appropriate entry on the books of the Firm or of a duly authorized transfer agent of the Firm), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Firm shall issue (or cause to be issued) such stock certificate, or provide a commercially reasonable alternative means of delivery, promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued or delivery is otherwise effected by the Firm, except as provided in Section 12 of the Plan. iv. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 7. Stock Appreciation Rights. Subject to the terms of the Plan, including without limitation the minimum vesting provision in Section 5(c) of the Plan, the Committee may grant Stock Appreciation Rights to Employees or Consultants from time to time upon such terms and conditions as the Committee may determine in accordance with the following provisions. A SAR shall be exercisable only to the extent that it is vested according to the terms of the Award Agreement. A SAR is the right of the Grantee to receive from the Firm an amount in Shares equal to the Spread at the time of the exercise of such right. The term of each SAR shall be stated in the Award Agreement; provided, however, that the term shall be 10 years from the Date of Grant or such shorter term as may be provided in the Award Agreement.(a) Base Price. The Base Price shall be equal to or greater than the Fair Market Value on the Date of Grant.(b) Exercise of SARs. SARs shall be exercised by the delivery of a written or electronic notice of exercise to the Firm (in accordance with the Award Agreement and any action taken by the Committee pursuant to Section 4(b) of the Plan or otherwise), setting forth the number of Shares with respect to which the SAR is to be exercised.(c) Payment of SAR Benefit. Upon exercise of a SAR, the Grantee shall be entitled to receive payment in the form of Shares from the Firm in an amount determined by multiplying:(i) the Spread; by (ii) the number of Shares with respect to which the SAR is exercised; provided, that the Committee may provide in the Award Agreement that the benefit payable on exercise of a SAR shall not exceed such limit (which may be expressed as a percentage of the Fair Market Value of a Share on the Date of Grant or as a fixed value limit or otherwise) as the Committee shall specify. The payment upon exercise of a SAR shall be in Shares that have an aggregate Fair Market Value (as of the date of exercise of the SAR) equal to the amount of the payment. Until the stock certificate evidencing such Shares is issued or delivery is otherwise effected by the Firm (as evidenced by the appropriate entry on the books of the Firm or of a duly authorized transfer agent of the Firm), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Covered Stock, notwithstanding the exercise of the SAR. The Firm shall issue (or cause to be issued) such stock certificate, or provide a commercially reasonable alternative means of delivery, promptly after the SAR is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued or delivery is otherwise effected by the Firm, except as provided in Section 12 of the Plan.(d) No Employee shall be granted, in any calendar year, SARs with respect to more than 500,000 Shares, and no Consultant (other than a non-Employee Director, who is subject to the Non-Employee Director Option/SAR Limit in Section 5(e) of the Plan) shall be granted, in any calendar year, SARs to purchase more than 100,000 Shares. The limitation described in this Section 7(d) shall be adjusted proportionately in connection with any change in the Firm’s capitalization as described in Section 11 of the Plan. If a SAR is canceled in the same calendar year in which it was granted (other than in connection with a transaction described in Section 11 of the Plan), the canceled SAR will be counted against the limitation described in this Section 7(d). 8. Stock Awards.(a) Administrator Action. Subject to the terms of the Plan, including without limitation the minimum vesting provision in Section 5(c) of the Plan, the Committee, acting in its discretion, may grant Stock Awards to any Employee or Consultant from time to time, in such amount and upon such terms and conditions as shall be determined by the Committee. A Stock Award may be made in Shares or denominated in units representing rights to receive Shares. No Stock Award relating to more than 500,000 Shares may be granted to an Employee in any calendar year, and no Stock Award relating to more than 100,000 Shares may be granted to any Consultant (other than a non-Employee Director, who is subject to the Non-Employee Director Full Value Award Limit in Section 5(e) of the Plan) in any calendar year. Each Stock Award shall be evidenced by an Award Agreement, and each Award Agreement shall set forth the conditions, if any, that will need to be timely satisfied before the Stock Award will be effective, vested and settled, and the conditions, if any, under which the Grantee’s interest in the related Shares or units will be forfeited. Any such conditions for effectiveness or nonforfeitability may be based upon the passage of time and continued service by the Grantee, or the achievement of specified performance objectives, or both time-based and performance-based conditions. The Committee, acting in its discretion, may make the grant of a Stock Award to a Grantee subject to the satisfaction of one, or more than one, objective employment, performance, or other grant condition that the Committee deems appropriate under the circumstances for Employees or Consultants generally or for a Grantee in particular, and the related Award Agreement shall set forth each such condition and the deadline for satisfying each such grant condition. Either as an alternative to or in addition to a condition on the effectiveness of the grant of a Stock Award, the Committee may make a Stock Award (if, when, and to the extent that the grant of the Stock Award becomes effective) subject to one, or more than one, objective employment, performance, or other forfeiture condition that the Committee acting in its discretion deems appropriate under the circumstances for Employees or Consultants generally or for a Grantee in particular, and the related Award Agreement shall set forth each such condition and the deadline for satisfying each such forfeiture condition. A Grantee’s nonforfeitable interest in the Shares related to a grant of a Stock Award shall depend on the extent to which each such condition is timely satisfied.(b) Types of Stock Awards. A Stock Award made in Shares that are subject to forfeiture conditions and/or other restrictions may be designated as an Award of “Restricted Stock.” A Stock Award denominated in units that are subject to forfeiture conditions and/or other restrictions may be designated as an Award of “Restricted Stock Units” or “RSUs.” For the avoidance of doubt, the Committee is authorized to grant Shares as a bonus, or to grant Shares or other Awards in lieu of obligations of the Firm or a Subsidiary to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.(c) Dividend Rights.(i) Restricted Stock Award. Each Restricted Stock Award Agreement shall state whether the Grantee shall have a right to receive any cash dividends that are paid with respect to his or her Restricted Stock after the date his or her Restricted Stock Award has become effective and before the first day that the Grantee’s interest in such stock is forfeited completely or becomes completely vested and nonforfeitable. The Grantee shall not receive any payment of any dividends that are paid with respect to a Share of Restricted Stock unless and not earlier than such time as the Share becomes vested and nonforfeitable, and the Award Agreement shall (subject to Section 21 and other applicable requirements of Code Section 409A) set forth the conditions, if any, under which the Grantee will be eligible to receive payment(s) in the future of the cumulative cash dividends (without interest) payable on the Shares that become vested and nonforfeitable for the period beginning on the effective date of the Award and ending on the vesting date of the Award. If an Award Agreement calls for any such payments to be made, the Firm shall make such payments from the Firm’s general assets, and the Grantee shall be no more than a general and unsecured creditor of the Firm with respect to such payments. If a stock dividend is declared on such a Share after the Award is effective but before the Grantee’s interest in such Stock has been forfeited or has become nonforfeitable, such stock dividend shall be treated as part of the Award of the related Restricted Stock, and a Grantee’s interest in such stock dividend shall be forfeited or shall become vested and nonforfeitable at the same time as the Share with respect to which the stock dividend was paid is forfeited or becomes vested and nonforfeitable. If a dividend is paid other than in cash or stock, the disposition of such dividend shall be made in accordance with such rules as the Committee shall adopt with respect to each such dividend, which shall include a provision that the Grantee shall not receive any payment of any such dividends unless and not earlier than such time as the applicable Share becomes vested and nonforfeitable. For the avoidance of doubt, notwithstanding any provision of an Award Agreement or the absence of any Award Agreement provision relating to dividends, (a) no dividend or distribution declared with respect to a Share of Restricted Stock shall be paid to a Grantee unless and until the Share becomes vested and nonforfeitable, (b) a Grantee shall not have a vested and nonforfeitable right to any dividend or distribution declared with respect to a Share of Restricted Stock unless and until the Share becomes vested and nonforfeitable, and (c) a Grantee’s right to any dividend or distribution declared with respect to a Share of Restricted Stock shall be forfeited to the extent that the Grantee’s right to the Share is forfeited.(ii) RSU Award. Unless otherwise determined by the Committee, a Grantee shall not have any rights as a shareholder with respect to Shares underlying an Award of RSUs until such time, if any, as the underlying Shares are actually issued to the Grantee. The Committee may provide in an RSU Award Agreement for the payment of Dividend Equivalents to the Grantee at the time of vesting of the RSUs or other payout of the vested RSUs. The Award Agreement shall provide whether such Dividend Equivalents shall be paid in cash or converted into additional shares of Common Stock or RSUs by such formula and at such time and subject to such limitations as may be determined by the Committee. The Grantee shall not receive any payment of any Dividend Equivalent with respect to any RSU unless and not earlier than such time as the RSU becomes vested and nonforfeitable. The payment or crediting of Dividend Equivalents shall conform to the applicable requirements of Code Section 409A. For the avoidance of doubt, notwithstanding any provision of an Award Agreement or the absence of any Award Agreement provision relating to Dividend Equivalents, (a) no Dividend Equivalent with respect to any RSU shall be paid to a Grantee unless and until the RSU becomes vested and nonforfeitable, (b) a Grantee shall not have a vested and nonforfeitable right to any Dividend Equivalent with respect to an RSU unless and until the RSU becomes vested and nonforfeitable, and (c) a Grantee’s right to any Dividend Equivalent with respect to any RSU shall be forfeited to the extent that the Grantee’s right to the RSU is forfeited.(d) Voting Rights. A Grantee shall have the right to vote the Shares related to his or her Restricted Stock grant after the Date of Grant but before his or her interest in such Shares has been forfeited or has become nonforfeitable. A Grantee shall not have the right to vote the Shares related to his or her RSU grant until such time, if any, as the Shares are actually issued to the Grantee.(e) Satisfaction of Forfeiture Conditions. A Share related to a Restricted Stock Award shall cease to be Restricted Stock at such time as a Grantee’s interest in such Share becomes nonforfeitable under the Plan, and the certificate representing such Share shall be reissued as soon as practicable thereafter without any further restrictions related to Section 8(c) or Section 8(d) and shall be transferred to the Grantee.9. Other Stock-Based Awards.Subject to the terms of the Plan, including without limitation the minimum vesting provision in Section 5(c) of the Plan, the Committee may grant Other Stock-Based Awards to Employees or Consultants from time to time. Other Stock-Based Awards may be granted in such amounts, on such terms and conditions, including without limitation terms and conditions relating to dividend (including Dividend Equivalent) and voting rights, and for such consideration, including no consideration or such minimum consideration as may be required by Applicable Law, as the Committee determines in its discretion. The Grantee shall not receive any payment of any dividend or Dividend Equivalent with respect to the Award unless and not earlier than such time as the portion of the Award to which the dividend or Dividend Equivalent relates becomes vested and nonforfeitable, and the terms of the Award shall (subject to Section 21 and other applicable requirements of Code Section 409A) set forth the conditions, if any, under which the Grantee will be eligible to receive payment(s) of the dividend or Dividend Equivalent following the vesting of the applicable portion of the Award. If the terms of an Other Stock-Based Award calls for any such payments to be made, the Firm shall make such payments from the Firm’s general assets, and the Grantee shall be no more than a general and unsecured creditor of the Firm with respect to such payments. For the avoidance of doubt, notwithstanding any provision of an Award Agreement or the absence of any Award Agreement provision relating to dividends or Dividend Equivalents, (a) no dividend or Dividend Equivalent with respect to any Other Stock-Based Award shall be paid to a Grantee unless and until the portion of the Award to which the dividend or Dividend Equivalent relates becomes vested and nonforfeitable, (b) a Grantee shall not have a vested and nonforfeitable right to any dividend or Dividend Equivalent with respect to an Other Stock-Based Award unless and until the portion of the Award to which the dividend or Dividend Equivalent relates becomes vested and nonforfeitable, and (c) a Grantee’s right to any dividend or Dividend Equivalent with respect to any Other Stock-Based Award shall be forfeited to the extent that the Grantee’s right to the portion of the Award to which the dividend or Dividend Equivalent relates is forfeited. Without limitation, the terms and conditions applicable to an Other Stock-Based Award may include one, or more than one, objective time-based, performance-based, or other grant condition(s) that the Committee requires to be timely satisfied before the grant of the Other Stock-Based Award will be effective, and/or one, or more than one, objective time-based, performance-based, or other condition(s) that the Committee requires to be timely satisfied before the Other Stock-Based Award, or any portion or component of the Other Stock-Based Award, will be vested and nonforfeitable. Other Stock-Based Awards may be denominated in cash, in Shares or other securities, in units representing the rights to receive Shares, in securities or debentures convertible into Shares, or in any combination of the foregoing, and may be paid in Shares or other securities, in cash, or in a combination of Shares or other securities and cash, all as determined in the discretion of the Committee. No more than 500,000 Shares may be granted to an Employee in any calendar year under an Other Stock-Based Award that is denominated in Shares or units representing rights to receive Shares, and no more than 100,000 Shares may be granted to a Consultant (other than a non-Employee Director, who is subject to the Non-Employee Director Full Value Award Limit in Section 5(e) of the Plan) in any calendar year under an Other Stock-Based Award that is denominated in Shares or units representing rights to receive Shares. The maximum amount that a Grantee may earn by satisfaction of performance goals during any calendar year under Other Stock-Based Awards that are denominated in cash or any medium other than Shares or units representing rights to receive Shares is $7,500,000. For purposes of the limitation stated in the immediately preceding sentence, the calendar year in which the applicable performance goal(s) is satisfied is the calendar year in which the limitation applies, without regard to the duration of the Performance Period or any additional time-based vesting conditions or other terms or conditions relating to the payment of the Other Stock-Based Award.10. Code Section 162(m) Provisions.(a) In General. Notwithstanding any other provision of the Plan, if the Committee determines that it is desirable for compensation delivered pursuant to a Stock Award or Other Stock-Based Award to be eligible to qualify for an exemption from the limit on tax deductibility of compensation under Code Section 162(m), then the Committee may provide that this Section 10 is applicable to such Award under such terms as the Committee shall determine.(b) Performance Criteria and Performance Goals. If a Stock Award or Other Stock-Based Award is subject to this Section 10, then the effectiveness of the grant of the Award, or the vesting and nonforfeitability of the Award, or both the effectiveness of the grant of the Award and the vesting and nonforfeitability of the Award shall be subject to satisfaction of one, or more than one, objective performance goals. The Committee shall determine the performance goals that will be applied with respect to each Award subject to this Section 10 at the time when the Award is granted, but in no event later than 90 days after the commencement of the Performance Period (or 25 percent of the Performance Period if the Performance Period is less than one year). The performance criteria applicable to Awards subject to this Section 10 will be one or more of the following criteria:Common Stock price;shareholder value or total shareholder return;market value or market value growth;market or customer share;revenue or revenue growth;earnings per share or earnings per share growth;pre-tax net income, after-tax net income, net income margin or net income growth;net income from continuing operations, net income from discontinued operations;gain on sale of discontinued operations;return on assets, shareholders’ equity, capital employed, invested capital or other financial return ratio;operating expenses, operating profit, operating profit margins or operating profit growth;gross profit, gross profit percentage, flex gross profit, flex gross profit percentage, gross profit growth or flex gross profit growth;selling, general & administrative (“SG&A”) expense, SG&A expense percentage or SG&A levels;EBIT (earnings before interest and taxes) or EBIT growth;EBITDA (earnings before interest, taxes, depreciation, and amortization) or EBITDA growth;Earnings before Equity-Based Compensation Expense, net; working capital, debt, debt-to-equity or other liquidity measure;cash flow, cash levels, cash flow margins or cash flow growth;cost goals;budget goals;productivity measuresbusiness expansion goals;goals related to acquisitions or divestitures;accounts receivable, accounts receivable aging or accounts receivable write-offs; orother financial, operational, measure or metric.The Committee shall, for the Performance Period applicable to the Award, establish the performance goal or goals from among the foregoing measurement criteria to apply to each Award and a formula or matrix prescribing the extent to which such Award shall be earned based upon the level of achievement of such performance goal or goals. The Committee may establish different performance goals for different Grantees and different Awards. The performance goals with respect to such measurement criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. The performance goals may be established in terms of Firm-wide objectives or objectives that are related to the performance of the individual Grantee or the Subsidiary, division, department, or function within the Firm or Subsidiary in which the Grantee is employed. Performance goals need not be based on audited financial results. (c) Performance Measurement. The Committee shall have no discretion to increase the number of Shares granted pursuant to a Stock Award or Other Stock-Based Award subject to this Section 10, nor otherwise increase the compensation payable that would otherwise be due under any such Award upon achievement of a performance goal, nor may it waive the achievement of any performance goal established pursuant to this Section 10 after the performance goal has been established; provided however, that the Committee may specify that the Award may become payable in the event of death, Disability or a Change in Control to the extent permissible under Code Section 162(m). The Committee shall retain discretion to decrease the amount of the Award at any time through the date at which the Committee certifies the attainment of the performance goal(s), generally referred to as “negative discretion.” The Committee may determine performance before payment of bonuses, capital charges, non-recurring income or expense, items of an unusual nature or of a type that indicates infrequency of occurrence, or other financial and general and administrative expenses for the performance period, and may measure the attainment of the performance goal by appropriately adjusting the evaluation of performance goal performance to exclude the effect of any changes in accounting principles affecting the Firm’s or a business unit’s reported results.(d) Certification. Prior to the payment of any Stock Award or Other Stock-Based Award subject to this Section 10, the Committee shall certify in writing that the performance goals applicable to such Award were met. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 10 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Code Section 162(m).11. Tax Withholding. The Firm shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state, local or foreign government. Whenever the Firm proposes or is required to issue or transfer Shares under the Plan, the Firm shall have the right to require the recipient to remit to the Firm an amount sufficient to satisfy any federal, state, local and foreign withholding tax requirements prior to the delivery of shares. A Grantee may pay the withholding tax in cash, or a Grantee may elect to have the number of Shares he is to receive reduced by the appropriate number of whole Shares that, when multiplied by the Fair Market Value of the Shares determined as of the Tax Date (defined below), is sufficient to satisfy up to the maximum applicable federal, state, local, and foreign tax withholding obligation arising from exercise, vesting, or payment of an Award as may be permitted under applicable accounting standards that would not result in the Award otherwise classified as an “equity” award under FASB Accounting Standards Codification Topic 718 (“ASC Topic 718”) to be classified as a “liability” award under ASC Topic 718 as a result of the withholding of Shares with a Fair Market Value in excess of the minimum statutory tax withholding obligation (a “Withholding Election”). A Grantee may make a Withholding Election only if the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the “Tax Date”) by executing and delivering to the Firm a properly completed notice of Withholding Election as prescribed by the Committee. The Committee may in its discretion disapprove and give no effect to the Withholding Election.12. Adjustments Upon Changes in Capitalization or Change of Control.(a) Changes in Capitalization. Subject to any required action by the shareholders of the Firm, the number of Covered Stock, and the number of Shares of Common Stock that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan upon cancellation or expiration of an Award, and the annual per-person limitations on Awards, as well as the price per share of Covered Stock and share-based performance conditions of Awards, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Firm; provided, however, that conversion of any convertible securities of the Firm shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Firm of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Covered Stock. No adjustment shall be made pursuant to this Section 12 in a manner that would cause Incentive Stock Options to violate Code Section 422(b) or cause an Award to be subject to adverse tax consequences under Code Section 409A.(b) Change in Control. In the event of a Change in Control, then the following provisions shall apply:(i) Vesting. The Board may, in the exercise of its discretion, accelerate the vesting and nonforfeitability of any Award that is outstanding on the date such Change in Control is determined to have occurred and that is not yet fully vested and nonforfeitable on such date.(ii) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Firm, to the extent that an Award is outstanding, it will terminate immediately prior to the consummation of such proposed action. The Board may, in the exercise of its discretion in such instances, declare that any Option or SAR shall terminate as of a date fixed by the Board and give each Grantee the right to exercise his or her Option or SAR as to all or any part of the Covered Stock, including Shares as to which the Option or SAR would not otherwise be exercisable.(iii) Merger or Asset Sale. Except as otherwise determined by the Board, in its discretion, prior to the occurrence of a merger of the Firm with or into another corporation, or the sale of substantially all of the assets of the Firm, in the event of such a merger or sale each outstanding Option or SAR shall be assumed or an equivalent option or right shall be substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation or a Parent or Subsidiary of the successor corporation does not agree to assume the Option or SAR or to substitute an equivalent option or right, the Board may, in the exercise of its discretion and in lieu of such assumption or substitution, provide for the Grantee to have the right to exercise the Option or SAR as to all or a portion of the Covered Stock, including Shares as to which it would not otherwise be exercisable. If the Board makes an Option or SAR exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Committee shall notify the Grantee that the Option or SAR shall be fully exercisable for a period of 30 days from the date of such notice, and the Option or SAR will terminate upon the expiration of such period. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the merger or sale of assets and in a manner consistent with Code Sections 409A and 424, the option or right confers the right to purchase, for each Share of Covered Stock subject to the Option or SAR immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its Parent, the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share subject to the Option or SAR, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock in the merger or sale of assets.(iv) Except as otherwise determined by the Board, in its discretion, prior to the occurrence of a Change in Control other than the dissolution or liquidation of the Firm, a merger of the Firm with or into another corporation, or the sale of substantially all of the assets of the Firm, in the event of such a Change in Control, all outstanding Options and SARs, to the extent they are exercisable and vested, shall be terminated in exchange for a cash payment equal to an amount that does not exceed the Fair Market Value (reduced by the exercise price applicable to such Options or SARs). These cash proceeds shall be paid to the Grantee or, in the event of death of a Grantee prior to payment, to the estate of the Grantee or to a person who acquired the right to exercise the Option or SAR by bequest or inheritance. 13. Term of Plan. The Plan shall become effective upon its approval by the shareholders of the Firm. Such shareholder approval shall be obtained in the manner and to the degree required under applicable federal and state law. The Plan shall continue in effect until April 17, 2027, unless terminated earlier under Section 14 of the Plan.14. Amendment and Termination of the Plan.(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.(b) Shareholder Approval. The Firm shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section 422 or Section 162(m) of the Code (or any successor rule or statute) or other Applicable Law. Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the Applicable Law. Without the approval of shareholders, no amendment or alteration of the Plan or any outstanding Option or SAR will have the effect of amendment or replacing such an Option or SAR in a transaction that constitutes a “repricing.” For this purpose, a “repricing” means: (1) amendment the terms of an Option or SAR after it is granted to lower its exercise price or Base Price; (2) any other action that is treated as a repricing under generally accepted accounting principles (“GAAP”); and (3) repurchasing for cash or canceling an Option or SAR at a time when its strike price is equal to or greater than the fair market value of the underlying Stock, in exchange or substitution for another Option, SAR, Stock Award, Other Stock-Based Award, other equity, or cash or other property. A cancellation and exchange or substitution described in clause (3) of the preceding sentence will be considered a repricing regardless of whether the Option, SAR, Stock Award, Other Stock-Based Award, other equity, or cash or other property is delivered simultaneously with the cancellation, regardless of whether it is treated as a repricing under GAAP, and regardless of whether it is voluntary on the part of the Grantee. Adjustments of Awards under Section 12 will not be deemed “repricings,” however. The Committee shall have no authority to amend, alter, or modify any Award term after the Award has been granted to the extent that the effect is to waive a term that otherwise at that time would be mandatory for a new Award of the same type under the Plan.(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Grantee, unless mutually agreed otherwise between the Grantee and the Committee, which agreement must be in writing and signed by the Grantee and the Firm.15. Conditions Upon Issuance of Shares.(a) Legal Compliance. Shares shall not be issued pursuant to an Award unless the exercise, if applicable, of such Award and the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, Applicable Law, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Firm with respect to such compliance.(b) Investment Representations. As a condition to the exercise of an Award, the Firm may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Firm, such a representation is required.16. Liability of Firm.(a) Inability to Obtain Authority. The inability of the Firm to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Firm’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Firm of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.(b) Grants Exceeding Allotted Shares. If the Covered Stock covered by an Award exceeds, as of the date of grant, the number of Shares that may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess Covered Stock, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 14 of the Plan.17. Reservation of Shares. The Firm, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.18. Rights of Employees and Consultants. Neither the Plan nor any Award shall confer upon a Grantee any right with respect to continuing the Grantee’s employment or consulting relationship with the Firm, nor shall they interfere in any way with the Grantee’s right or the Firm’s right to terminate such employment or consulting relationship at any time, with or without cause.19. Sub-plans for Foreign Subsidiaries. The Board may adopt sub-plans applicable to particular foreign Subsidiaries. All Awards granted under such sub-plans shall be treated as grants under the Plan. The rules of such sub-plans may take precedence over other provisions of the Plan, with the exception of Section 3, but unless otherwise superseded by the terms of such sub-plan, the provisions of the Plan shall govern the operation of such sub-plan.20. Construction. The Plan shall be construed under the laws of the State of Florida, to the extent not preempted by federal law, without reference to the principles of conflict of laws.21. Certain Limitations on Awards to Ensure Compliance with Code Section 409A. For purposes of this Plan, references to an award term or event (including any authority or right of the Firm or a Grantee) being “permitted” under Code Section 409A mean, for a 409A Award (meaning an Award that constitutes a deferral of compensation under Code Section 409A and regulations thereunder), that the term or event will not cause the Grantee to be liable for payment of interest or a tax penalty under Code Section 409A and, for a Non-409A Award (meaning all Awards other than 409A Awards), that the term or event will not cause the Award to be treated as subject to Code Section 409A. Other provisions of the Plan notwithstanding, the terms of any 409A Award and any Non-409A Award, including any authority of the Firm and rights of the Grantee with respect to the Award, shall be limited to those terms permitted under Code Section 409A, and any terms not permitted under Code Section 409A shall be automatically modified and limited to the extent necessary to conform with Code Section 409A. For this purpose, other provisions of the Plan notwithstanding, the Firm shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Code Section 409A, and any distribution subject to Code Section 409A(a)(2)(A)(i) (separation from service) to a “specified employee” as defined under Code Section 409A(a)(2)(B)(i), shall not occur earlier than the earliest time permitted under Code Section 409A(a)(2)(B)(i). The Firm may adopt a specified employee policy that will apply to identify the specified employees for all deferred compensation plans subject to Code Section 409A; otherwise, specified employees will be identified using the default standards contained in the regulations under Code Section 409A.
IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., eastern time, on April 9, 2014.17, 2017.
Vote by Internet • Go towww.investorvote.com/KFRC Vote by Internet • Go to www.investorvote.com/KFRC• Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded messageUsing ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.ý x 
q6 IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q6A A Proposals — The Board of Directors recommends a voteFOR all nominees listed, andFOR Proposals 2, 3 and 3.5 and every 1 Year for Proposal 4.1. Election of Directors: For ForWithhold For Withhold +ForWithhold 01 - John N. Allred (Class II) o ¨¨o 02 - Richard M. Cocchiaro (Class II) o ¨o03 - Ann E. Dunwoody (Class II) o o 04 - A. Gordon Tunstall (Class II) o o 05 - Randall A. Mehl (Class III) o o ¨ For Against Abstain For Against Abstain 2. Ratify the appointment of Deloitte & Touche LLP as Kforce’s independent registered public accountants for 2017. o o o 3. Advisory vote on Kforce’s executive compensation. o o o 1 Year 2 Years 3 Years Abstain 4. Advisory vote regarding the frequency of future advisory votes on executive compensation. o o o o 5. Approve the Kforce Inc. 2017 Stock Incentive Plan. o o o 6. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournments of the Annual Meeting. 03 - A. Gordon Tunstall (Class II)¨¨ For Against Abstain 2. Ratify the appointment of Deloitte & Touche LLP as Kforce’s independent registered public accountants for the fiscal year ending December 31, 2014. ¨ ¨ ¨ 4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournments of the Annual Meeting. 3. Approve Kforce’s executive compensation. ¨ ¨ ¨ B Non-Voting Items Change of Address— Please print new address below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. ¨oC Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below NOTE: Please date and sign exactly as your name appears on your shares. If signing for estates, trusts, partnerships, corporations or other entities, your title or capacity should be stated. If shares are held jointly, each holder should sign. The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. Date (mm/Date(mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. / / ¢n 1 U P X + 01S96Cq6IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q6
Proxy — KFORCE INC.ANNUAL MEETING OF SHAREHOLDERSTO BE HELD APRIL 10, 2014THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned hereby appoints DAVID M. KELLY and MICHAEL R. BLACKMAN, or either of them, each with full power of substitution and revocation, as the proxy or proxies of the undersigned, to represent the undersigned and vote all shares of the common stock of Kforce Inc. that the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of Kforce Inc., to be held at Kforce’s corporate headquarters located at 1001 East Palm Avenue, Tampa, Florida, 33605, on April 10, 201418, 2017 at 8:00 a.m. eastern time, and at any adjournments thereof, upon the matters set forth on the reverse side and more fully described in the Notice and Proxy Statement for the meeting and, in their discretion, upon all other matters that may properly come before the meeting or any adjournments of the meeting.The Annual Meeting may be held as scheduled only if a majority of the shares outstandingentitled to vote are represented at the meeting in person or by attendance or proxy. Accordingly, please complete this proxy, and submit it promptly by mail (using the enclosed envelope), by telephone, or over the Internet.The shares of Kforce Inc. common stock covered by this proxy will be voted in accordance with the choices made. When no choice is made, this proxy will be voted FOR all listed nominees for director, FOR the ratification of the appointment of Deloitte & Touche LLP to serve as Kforce’s independent registered public accountants for 2017, FOR the fiscaladvisory approval of Kforce’s executive compensation, FOR a one year ending December 31, 2014,frequency of future shareholder advisory votes on executive compensation, FOR the approval of Kforce’s executive compensationthe Kforce Inc. 2017 Stock Incentive Plan and as the proxyholders deem advisable on such other matters as may properly come before the meeting.SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE